Infosys Automates its Services with IPsoft

18 months ago, my first blog post at Forrester discussed industrialization trends in the IT services industry globally. I suggested then that IT services providers would have to focus their industrialization efforts on shared resources, self-service and automation capabilities.

On the automation front, most efforts till date have been incremental in nature – mostly focused on removing redundant and mundane tasks via process redesign and/or tools implementations. The recently announced Infosys partnership with IPsoft is taking these automation efforts to a whole new level. Infosys will leverage IPsoft’s autonomic based automation capabilities as part of its effort to improve the performance of its infrastructure services delivery capabilities.

Why is this partnership important?

From an operations perspective, this technology is expected to improve the competitiveness of Infosys’ infrastructure services offering. In a nutshell, the scripts used in traditional tools to automate a particular task are replaced by self-learning, self-optimizing software agents, which yield much faster time to resolve. According to IPsoft, such technology can automate at least 60% of level 0 and level 1 issues in a support environment by automating time-consuming labor such as diagnostics.

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Reconsider Outsourcing To Accelerate IT Maturity

Organizations in growth markets across Asia have not traditionally been heavy consumers of outsourcing services. Having lots of on-premises hardware still carries some prestige for local CIOs, particularly in China and India. The availability of relatively inexpensive IT staff in local markets has also helped them deliver acceptable service levels to the business. Until now, that is. The combination of quickly rising IT salaries, increased competition from regional and even global expansion, and growing demands among business stakeholders to more effectively engage customers has put pressure on CIOs to increase the performance of their organizations.

More and more CIOs I speak with are struggling with how best to effectively transform their IT capabilities and meet fast-changing business requirements. In particular, whether to embark on this transformation journey alone or leverage outsourcing partners. In a recent report, I profiled organizations in Asia that are leveraging external service providers to accelerate their IT maturation. One example is a manufacturer with 10,000 employees and operations across Asia that outsourced its entire IT infrastructure environment to improve and homogenize service levels. Another is a large Indian bank that outsourced its entire IT department to a service provider and improved its maturity level from a 3 (on a scale from 1 to 10) to a 6 in less than a year.

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To Drive IT Spending, Target The Business!

Last week, Forrester hosted a breakfast roundtable in Sydney for approximately 20 tech vendors seeking to capitalize on current IT spending trends in Australia and New Zealand. With expected IT spending growth of nearly 4% in 2013, the A/NZ market is still going strong. However, this good health hides major shifts, including the increased role that business decision-makers (BDMs) are taking in direct IT purchasing in areas like staff, products, and services. As a matter of fact, Forrester expects the percentage of IT budgets that IT directly owns or controls to decrease by 2% to 5% between 2012 and 2014 in most A/NZ organizations.

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SOURCING BUSINESS OUTCOMES REQUIRES A SEA-CHANGE IN THE WAY SOURCING BUYS AND SELLERS SELL

Over 40% of senior business executives are looking to suppliers and external parties to co-develop and deliver measureable business outcomes. Telling suppliers to forget their old pricing metrics and focus instead in delivering value while also sharing risks and rewards requires a new set of skills on both sides of the negotiating table. This is a real challenge for both suppliers and buyers, and it takes both parties out of their comfort zones into new territory for risk management, project control and revenue sharing.

Forrester’s Forrsights data reveals business executives want to see more value delivered from IT projects and more outcome-based contracts. This is a priority for them in the next few years and sourcing professionals must develop and enhance their skills in this key area or risk getting left behind.  

Whether it’s increasing revenues, driving more client subscriptions, cutting costs, facilitating more paperwork processing in less time or driving up customer satisfaction and retention, some IT companies are now offering outcome based contracts and are happy to be paid purely on the results.

Unfortunately for some of today’s technology giants, clients don’t want to pay anymore for software licenses, hardware products or time & materials staffing. They want the suppliers to have ‘skin in the game’ and want to pay based only on the value delivered and the outcome achieved.   

To help their organizations navigate through the emerging world of business outcome based contracts, we have identified three key principals of change that both suppliers and buyers will need to address:

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Optimize Telecommunications And Mobility Sourcing

 

Telecommunications and mobility (T&M) technologies will play a critical role in the success of geographically distributed companies during the next ten years. Business professionals need their IT organizations to keep pace with their requirements related to globalization, virtualization, and bring-your-own technology. At the same time, the demand for unified communications (UC), collaboration (including room-based telepresence and desktop and video), and mobility is exploding (both in and out of the office). These business technology trends create a vortex of new challenges for business technology/IT sourcing and vendor management (SVM) professionals, who will need new skills to keep pace with everything from crafting technical and service-level specifications in RFPs covering multiple services to negotiating and governing complex service contracts to managing overlapping and interrelated vendor relationships.

Forrester’s Telecommunications and Mobility Sourcing Playbook provides insights about the "art" and the "science" of T&M sourcing in the rapidly changing technology environment. It explores the interplay of trends in technology adoption and management and also provides tactical advice for SVM pros regarding how-to build and review/revise your corporate sourcing strategy regarding advanced communications applications such as unified communications and collaboration, including accessibility using corporate-liable and personal (BYOD) connected mobile devices, selecting vendors and service providers, and achieving continuous improvement beyond cost savings.

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Tier II and Alternate Locations Present Fresh Outsourcing Avenues

One of the major concerns of the sourcing community is that suppliers are unable to deliver the cost and service benefits that had been agreed upon at the start of the contract. As outsourcing contracts become more specific in requirements, clients expect their suppliers to possess intimate knowledge about the industry they operate in — apart from being well-versed in specific technology areas. This is over and above the constant and overarching need to keep costs down. It’s a constant point of pain and one that I’ve seen frequently in my five years as an outsourcing analyst.  

Although outsourcing, especially to India, remains an attractive option for deriving cost savings, I see increasing concerns about the quality of the services. As the Indian economy strengthens, the currency arbitrage that the Indian IT Services vendors used so heavily to their advantage is eroding. Moreover, the rising cost of living across major IT hubs in India is fueling wage inflation and attrition, and squeezing the margins for the suppliers. For example, between 2006 and 2012, Infosys’ operating margins have fallen from about 33% to 29%, TCS’ from around 30% to 27%, and HCL’s from around 24% to 15% (all revenues considered in Indian Rupees) in the same time frame.

In this environment, I am often asked about three things: 1) the technical and delivery capabilities of smaller Tier II Indian vendors, 2) the viability of engaging with them, and 3) the feasibility of outsourcing to alternative offshore locations (other than India). To answer these questions:

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Are you ready to source digital disruption?

Digital capability – social, mobile, cloud, data & analytics – disrupts business models, introduces new competitive threats, and places new demands on your business. Highlighting this fact: Forrester’s 2012 “Digital Readiness Assessment” survey found that 65% of global executives say they are “excited about the changes that digital tools and experiences will bring” to their company.

While most people know these digital trends are coming, however, far fewer know how to purchase these cutting-edge digital capabilities. What companies will you rely on? Where are the new risks? What are the pricing models?  In the survey mentioned above, only 32% of the same sample agreed that their organization “has policies and business practices in place to adapt” to those digital changes.

This is important, since developing the breadth of digital capabilities your company needs cannot all be done in-house. To succeed, your company will need to access the strengths of its supplier ecosystem, maximize value from strategic partners, and leverage emerging supplier models.  

This is a tremendous opportunity for sourcing and vendor management professionals to increase the strategic value they provide to their business. But to do this, you’ll need to balance your traditional cost-cutting goals with demands for business expectations for growth, innovation, and value.

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The Forrester Wave™: Managed Global MPLS Services, Q1 2013

Customers Have A Range Of Strong Options In This Mature Service Category

In Forrester's latest deep-dive Forrester Wave™ evaluation of facilities-based managed global MPLS service providers, we identified and qualified 11 major international network operators that offer fully managed on-net MPLS wide-area networking services to multinational user companies. Our report details our evaluation of AT&T, BT Global Services, Cable & Wireless Worldwide, Level 3 Communications, NTT Communications, Orange Business Services, Sprint, T-Systems, Tata Communications, Telefónica, and Verizon. The aim of our evaluation is to help enterprise telecom sourcing and vendor management (SVM) professionals select the right supplier(s) for provider-managed multiregional/global MPLS VPN services. In this very mature service category, barriers to entry are low; as a result, key differentiators are increasingly limited but they emphasize delivery scale, flexibility, and overseas local “badged” technical and administrative support capabilities. Each provider has particular strengths, which bodes well for distributed enterprises seeking new choices for both primary and backup third-party managed WAN services.

The key differentiators we identified are global delivery scale of on-net, facilities based MPLS service including provider managed customer edge routers; flexibility of their network, services, and pricing; and technical and technical and commercial support capabilities.

We thoroughly researched, analyzed, and scored them across 55 high-level evaluation criteria related to their current offer, strategy, and market presence:

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