Following my research on software asset enabled services, I will start a new research stream in 2014 focused on business services: a new breed of managed services leveraging software assets, BPM and analytics focused on delivering business outcomes to clients. This post introduces this research and summarizes the drivers and enablers of such business services.
As organizations enter the age of the customer we see business leaders controlling more of the technology purchases. But as their business processes become more technology dependent I believe they will move away from technology sourcing to pursue business capabilities such as digital customer engagement. For example, Forrester recently learned of a vice president of online channels at a luxury brand who decided to leverage a mobile center of excellence from an external managed service provider to help the brand accelerate its revenue growth in a multichannel environment. As business decision-makers look to build capabilities that help improve business outcomes, I believe that they will move away from procuring technology to sourcing a new breed of managed services to complement their strategic capabilities. This new breed of services will combine:
Often I hear from clients or read in industry publications (including those by my Forrester colleagues) that the business is spending more on technology. They almost always refer to this spend as “rogue” or “shadow.” But this phrasing shows a perspective from sourcing and other IT professionals that is parochial and, worse, dangerous to their ability to collaborate with those business stakeholders.
Why? Because saying that the business’ IT spend is shadow spend implies that they are taking something from the IT group. However, the reality of the situation is that business buyers like CMOs are buying what they always bought – advertising, marketing tools, database list management, for example. The difference now is that all of those things are now technology-dependent. Any CMO or other executive buying these offerings has a very logical question when asked about bringing in IT – “what makes IT think they know more about this stuff than I do?"
Still not sure if the business is actually engaging in “shadow IT spend?” Here are a few questions to ask yourself:
Is this a product category or supplier IT has experience with? Most IT SVM teams haven’t negotiated with digital agencies like Ogilvy or TribalDDB before. Also, note that if it’s a division you haven’t worked with, the answer to this question is still “no.” – such as when your company’s supply chain team is working with PwC’s risk team – but you’ve only ever worked with PwC’s IT strategy group. This then validates the business users’ view that they’re better placed than IT SVM to do the negotiation because of their knowledge of the vendor and its solution.
I attended Dell’s third annual global summit last week at the company’s headquarters in Austin, Texas to get an update on the company’s progress since it went private. The event demonstrated Michael Dell’s passion to transform a hardware company into an end-to-end solution provider. Dell highlighted five key investment priorities in 2014, including expanding its sales coverage and enhancing its relationship with partners; it also wants to increase its investments in emerging markets, with China atop the list.
The success of these investment plans hinges upon highly efficient execution across the organization. We’ve already seen one example that Dell has increased its executive capability since it went private: Its partnership with open source software provider Eucalyptus to put preinstalled and pretested Eucalyptus software on Dell VRTX servers. This project was ready just three weeks after CEOs of Dell and Eucalyptus decided to go forward with the partnership.
On one hand, the improved execution capability and more flexible service delivery model will strengthen the competitive position of Dell’s services. On the other hand, these changes will also provide benefits to end user organizations, including:
Much has been written and debated about the rising popularity of bring-your-own-device (BYOD) throughout the world. The subject continues to cause headaches for European companies. Our latest research with HR professionals, IT professionals, and suppliers in Europe reveals that:
The business climate in Europe does not favor BYOD deployment.The threat of cost explosions due to cross-border data roaming inhibits BYOD programs; mistakes like putting a BlackBerry SIM into an unauthorized smartphone can cause massive bill shock. Employment regulations, data protection laws, and tax laws inhibiting flat budget models also raise barriers. Finally,asking employees to shoulder responsibility for security andlimited support for private devices endangers business continuity.
BYOD in Europe is happening by accident. European employees are unsatisfied with corporate devices and want to use their own — but according to the Forrsights Telecom And Mobility Workforce Survey, Q2 2013, only 6% of them are willing to pay the full cost of a mobile or smartphone used for business purposes. Official BYOD policies remain the exception rather than the rule. Only 15% of European mobility officers surveyed have gone beyond a pilot phase; fewer than 9% include tablets.
Now that WeChat has more than 100 million overseas subscribers, Tencent, China’s leading web content provider, faces a new challenge: improving the experience of its customers outside of China. Steep rises in content consumption — largely driven by the increasing use of mobile devices to access services and information — represent a significant opportunity for content companies like WeChat to go global. To achieve this, Tencent has made positive steps in boosting its investment in data centers and networking outside of China.
To improve its user experience in the rest of Asia, Tencent recently announced that it will colocate one data center in Hong Kong and has chosen Equinix to operate it. This is already the second node that Tencent has built outside of mainland China; the first was implemented in Canada to serve North American users.
As an Internet company that operates its own large data centers in mainland China, Tencent has deep experience in data center construction and management and has leveraged this experience to develop best practices and key criteria for data center provider selection. These include:
Networking and interconnection options. As Tencent intends to rapidly expand its business into more countries, it needs carrier-neutral data center providers to offer the necessary connectivity options. For its Hong Kong implementation, Tencent used Equinix to optimize transit routes to achieve lower latency and better connect users inside and outside of mainland China; the data center provider can access multiple networks and peer with members of the Equinix Internet Exchange.
Many of you will be in the midst of a negotiation with SAP at the moment, because SAP does about 40% of its license deals in the October to December quarter. It’s a sourcing cliché that software companies give their best discounts at their fiscal year end, but just because you are making a purchase in month 12 doesn’t mean that you are getting a good deal. I see a lot of SAP proposals and contracts, and I’m often surprised by the gulf between the actual deal on the table and what I would consider to be an acceptable proposal – one that sets the relationship up for mutual success, balancing price, flexibility and risk.
Buying software from powerful providers such as SAP is very different from buying hardware, services and non-IT categories. Unfortunately, many sourcing professionals seem to think that they’ll look weak if they engage expert help to coach them during a negotiation, but it isn’t a question of haggling skills, it’s a question of deep, current market knowledge. Unless you have that, you risk:
We’re seeing an increasing interest by Forrester’s enterprise clients to issue RFPs for telecom services. In a review of customer interviews for a Forrester Wave™ study published earlier this year, we learned that just one in five reference customers didn’t expect to issue an RFP for those services when their current contract comes due; more than three times as many expect to do so. The most often cited reasons for issuing an RFP for network and telecom services include:
· An expired or soon to expire large-scale service contract. When a big contract is approaching expiration, it’s always an opportunity to rethink your overall sourcing strategy for telecoms. Do you want to benchmark the incumbent on pricing models and service delivery alternatives? Do you think you might be better served by multisourcing where you sole-sourced before, or challenging the incumbent to defend their turf against transfer of more of your wallet to another, possibly smaller and lower-margin provider you’re using already for backup or other services? “We haven’t done an RFP for these services since I can remember – maybe 12 years. The provider is also a big customer of ours. But other providers also are big customers. They do a good job, but we’re probably paying too much (a financial services firm).”
Telefónica invited us recently to its European Analyst day at the headquarters of Telefonica UK (O2) in Slough. Jose Luis Gamo Global Solutions CEO Multinationals started off the day with an ambitious outlook on strategy and revenue growth. He highlighted Telefónica plans to deepen customer engagements by addressing their needs for global contract consolidation, as well as demands for M2M solutions, big data & s analytics and cloud services. Telefónica certainly has a lot to offer. But is Telefónica doing enough to position itself well in the evolution to markets driven by customer experience? We believe that there is potential because:
Telefónica is increasingly competitive in winning global enterprise network contracts. After the global landmark deal with DHL, Telefónica has added large companies including Ferrovial to its customer base. Telefónica, the largest European operator by capitalization, is increasing contract values with existing customers through cross selling activities. Their ability to do so is enabled by a demonstrable focus on the following initiatives: Strengthening professional account management, increased commitment by Telefónica group to the enterprise market, as well as initiatives to improve service management, the technical architecture, customer services and the terms and conditions.
ASEAN IT spending will grow by 7% in 2014. A weak global economic recovery and unstable domestic spending led to slower 2013 economic and tech industry growth in China and directly or indirectly affected export-oriented economies in the Pacific and ASEAN. This combined with ongoing structural problems in India and dwindling foreign direct investments in ASEAN to produce slower than expected IT spending growth across Asia Pacific in 2013. Forrester expects IT spending growth in the broader Asia Pacific region to improve slightly in 2014 versus the prior year, with regionwide growth of 4%, while IT spending in ASEAN will grow by about 7%.
Transformation projects are the main drivers of IT spending. Debt levels in countries like Malaysia and Indonesia will continue to be a major source of concern for foreign investors, whose lack of investment will in turn limit growth in these countries. Vietnam, the Philippines, and Indonesia will lead the ASEAN region in terms of IT purchase growth, most of which will come from companies undertaking large IT transformation projects and implementing best practices to improve their competitiveness in a slower, more uncertain economy. Thailand’s ongoing political uncertainty may also affect how IT investments flow into the country, and hence its IT spending growth rate in 2014.