Telstra Global Is An Emerging Network Services Challenger

Telstra’s recent FY13 earnings announcement recorded a strong showing of its Network Application and Services (NAS) division, which saw a 17.7 per cent increase in revenue to A$1.5 billion from the previous year. Its international business delivered a combined Global Connectivity and NAS revenue of A$566 million, or a growth of 11.4 per cent from the previous year. Telstra also plans to continue to build out its NAS division, particularly in Asia.

What It Means

A beneficiary of the NAS investment is Telstra Global, nestled under its International division, offering network connectivity and services to enterprises in Asia. In my recent report, I argued that Telstra Global is a well-placed partner for medium-size to large companies in sectors like transportation and logistics, shipping, manufacturing, and professional services looking to expand their operations out from Hong Kong, Australia, and Singapore into Southeast Asia and China. While this looks rosy, there are areas that require closer attention:

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With Frederic Giron

SAP officially started its first business operations in 1995 in China. Prior to that, several Chinese end-user organizations like Shanghai Machine Tool Works Ltd. tried to implement SAP through partners based outside China.  Through discussions with CIOs who have experience in such projects, all agree that these early  SAP projects did not meet expectations. During this first decade of SAP in China (1995-2005), aka the 1st wave of SAP implementations in China, many SAP projects either failed outright or continued to fall short of expectations, primarily due to shortage of local SAP skills and cultural misalignment. China is not a unique in Asia and early adopters in Indonesia and Thailand faced similar challenges since the early 2000s.

As Chinese organizations continue to rapidly grow their activities, one of their major IT challenges is shifting from legacy to more standard information systems – and SAP solutions remain a key option in this shift. But today, experienced CIOs are also setting more realistic expectations regarding business outcomes for these SAP projects. For instance, they now consider SAP as a tool to automate some of their organization’s business processes rather than misinterpret it as a primary mechanism to drive revenue growth or improve profitability – which was a rather common misconception in the past. Chinese organizations have also modified their views on external service providers and are now much more open to leveraging these providers to bring additional value to their SAP implementation projects.

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Huawei’s New Switch Looks Promising, and its Storyline Needs Reinforcing

by Clement Teo, Bryan Wang, Katyayan Gupta

We recently met with Huawei executives during the launch of its latest product in China, the S12700 switch.  The product, which ships in limited quantity in Q1 2014 is designed for managing campus networks, and acts as a core and aggregation switch in the heart of campus networks. While wired/wireless convergence, policy control and management come as standard features, the draw is the Ethernet Network Processor (ENP). The ENP competes against merchant silicon in competitive switch products, and Huawei claims to be able to deliver new programmable services in six months, compared to one to three years for competitive application-specific integrated circuit (ASIC) chips. This helps IT managers respond quicker to the needs of campus network users, especially in the age of BYOD, Big Data, and cloud computing.

While it is a commendable product in its own right, Huawei will need to position its value more strategically against IT managers that have technology inertia, especially in ‘Cisco-heavy’ networks:

  • Tying the value of the switch to existing and future enterprise campus needs. In the age of cloud computing, big data, mobility, and social networking, IT managers need to solve network challenges like insufficient service processing capability and slow service responses. Huawei says the new switch is able to provide agile services and respond flexibly to changes in service requirements, on demand. For example, the switch has access control built in for wired/wireless access management. This is a good start. Enterprises will need to understand how the switch plays a central role in a campus network, and Huawei should continue to reinforce its agile network architecture’s storyline.
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Non-Tech Companies Emerge As A Critical New Market For Software Product Development Services

Historically, one of the main segments of the product development services (PDS) market has been software product development for independent software vendors (ISVs). My colleague John McCarthy and I have just published a report that outlines how this market is undergoing a significant shift as it splits between serving the traditional ISVs and serving what Forrester refers to as “software-is-the-brand” companies.

Software-is-the-brand companies are those firms in industry sectors like financial services, retail, information services, and media and entertainment that are seeing more and more of their business value coming from their software-based products and services. This new segment will comprise the majority of growth in the software PDS market over the next four to five years.
This growth will occur as these companies increasingly require high-end product development capabilities for what, in many cases, were seen as traditional IT projects. My colleague Christine Ferrusi Ross recently wrote how technology has become the supply chain for these software-is-the-brand companies because it is the “raw material” that allows today’s products to be built. Frequently, however, these companies need help from service providers to acquire the appropriate skills and expertise to handle the current complexity and speed of technological change.
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Strengthening The Link Between Software Sourcing And Supplier Management

I’m part of a team called “sourcing and vendor management” (SVM). Forrester organizes its research teams by individual client roles, so my teammates and I all focus on helping clients who are sourcing and vendor management professionals. Wait a moment. Should that read “helping clients who are sourcing or vendor management professionals”? Aren’t they separate functions within a client’s organization? This is a frequent question from our clients, and one that causes a lot of internal debate within our team.

My view, formed from witnessing the experience of hundreds of enterprises, is that, at least in the software category, sourcing and supplier management should be very closely linked, but not via org structure and reporting lines. This is because:

·         It is impossible to manage software suppliers effectively unless you can influence sourcing. The major players are so big and powerful that they usually have the upper hand in discussions about maintenance renewals and service levels. Even small software providers can build immovable, entrenched positions in their chosen niches. To have sufficient negotiation leverage to do a good job, the supplier manager must be able to credibly threaten to negatively impact the supplier’s ability to win future business.

·         Sourcing is infrequent but intensive, whereas supplier management is continual. The former consumes huge amounts of time and effort for a relatively small period, which risks dropping the ball on monitoring while you’re immersed in a big negotiation, or missing opportunities on the sourcing side due to distractions from the ‘day job’. You therefore need different people handling each side, but collaborating closely with each other.

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For "Software-Is-The-Brand" Companies, Technology Is The Supply Chain

There isn’t an IT sourcing and vendor management (SVM) client that I’ve spoken with in the past seven years – Forrester explicitly started writing for SVM professionals in 2006 – that hasn’t mentioned gaining more influence with executives as a key priority for their teams. A key reason for this lack of stature with the business, and often the resulting lack of promotion opportunity, is that IT's SVM staff are seen as focusing on an “indirect” spend category; they’re not responsible for buying/managing relationships for the core commodities that are used to make their company’s products (“direct” spend). However, that is about to change, as software and application development services are becoming direct spend for many companies.  

Until recently, most companies made physical products by purchasing raw materials and building the products in factories. The factory operations were the heart of the business, supported by the sourcing of the raw materials needed to make the products. But more and more, physical products depend on software and other technologies to be viable. And while we traditionally thought of only high-tech companies as making software-dependent products, nontechnology companies of all kinds – retailers, banks, automotive companies, and others – rely on software as the key interface of their products. For example:

  • Technology defines how customers feel about their banks. Checking accounts are commodity products, where most customers interact with the product online – either through an ATM, a web browser, or a mobile app. The effectiveness of a bank’s apps will mean the difference between satisfied customers and those who choose to take their money elsewhere.  
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Infosys reloading


Infosys held their 3rd annual analyst meet in Boston on the 30th of July. There was none of the usual hullabaloo about growth in revenues or the usual marketing speech that characterizes such events. Instead, Infosys focused on talking about initiatives around Agile, updates about their Edge portfolio and Cloud-based offerings. So, where are they on their 3.0 journey? What have they got right? What more needs to be done?

3.0 update

Infosys’ 3.0 strategy stretches over at least 7 years (both 1.0 and 2.0 lasted about 15 years each) and they are at the tail end of year 2 of the journey. Infosys 3.0 is driven by a focus to be more client-centric by focusing on non-linear growth and increasing stickiness through a vertical-specific go-to-market strategy. This will be supplemented by increasing geographical closeness to clients and supported by a deepening of their horizontal technology portfolio. The ultimate aim is to totally revamp their revenue mix with a heavy focus on driving growth through consulting and products, with objectives to derive 40% revenues from consulting & SI, 20% from products, and the remaining 40% from their traditional basket of business IT service offerings.

What we heard and how that reflects in the Annual Report for the FY ended March 2013:

  • Consulting & SI is doing remarkably well and contributed about a 30% of Infosys’ revenues for FY13. The addition of Lodestone has added muscle to their consulting business and this service line may well cross the target of 40% revenue contribution within the next year or so.
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