Link Pricing To Business Drivers To Take Services Partnerships To The Next Level

Liz Herbert

Clients and services partners have talked for years about linking services partner pricing to business goals. However, traditional pricing models such as time and materials and fixed fee still dominate in services partnerships; examples of truly innovative pricing models are rare. Despite the rarity of these outcome-oriented pricing models, interest remains high. Clients frequently ask Forrester for examples of next-generation, innovative services pricing models. So, I’m writing this post to highlight two recent examples (showcased at March customer and analyst events) that truly push the envelope for services pricing models linked to business goals.

Example 1: Venture-based

At BearingPoint’s recent analyst summit, the EMEA-centric business consulting provider showcased multiple examples of venture-based engagement. The examples showcased go beyond the typical “VC fund” that we see at other services providers (in which an arm of the services vendor operates like a venture capitalist by doling out funds to a set of early-stage companies). Instead, BearingPoint gives consulting time and tools to select clients or alliance partners in return for equity. For example, Bearingpoint has a services-for-equity partnership with tracekey, an early-stage company focused on track and trace functionality for pharmaceutical companies. This means that Bearingpoint’s financial rewards are directly tied to tracekey’s results, without getting tangled up in managing to the contract terms or project dashboards.

Example 2: Consumption-based

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Build 2016 - Day 2: Walking out of the wilderness

Jeffrey Hammond
"The journey of a thousand miles begins with one step." - Lao Tzu
 
Today’s Build keynote felt a bit like the final steps of a thousand mile journey for Executive Vice President of the Cloud and Enterprise group Scott Guthrie, if not the larger Microsoft. It’s been a multi-year journey, forging a cross-platform, cross-language and open source culture at Microsoft, and it was by no means a sure bet. Let’s review some of the history:
 
  • If you can’t beat cancer, join it. Steve Ballmer’s 2001 statement that “Linux is a cancer” is an almost mythic meme 15 years later. But it clearly articulates the corporate attitude of Microsoft toward open source at that time. Old attitudes (and cultures) die hard. That’s why yesterday’s announcement of Bash support in Windows was not just good for cross-platform developers, but symbolic of the now firmly rooted cultural transformation at work in Nadella’s Microsoft. We noted it years ago, but it’s pretty clear that the change is sticking.
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Accelerating Digital Business And Innovation In Financial Services

Fred Giron

From discussions with our clients in the financial services industry (FSI) in Asia Pacific, we’ve noticed that their digital agenda has changed dramatically over the past 18 months, shifting from a consideration of acquisitions and distribution channels to a broader business transformation imperative.

In fact, leaders at banks and insurance firms are increasingly realizing that:

  • Customer experience is fast becoming the only competitive differentiator.
  • Banks and insurance have to accelerate their ability to innovate and deliver new sources of value to customers faster. 
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Build 2016 - Day 1: Windows without windows

Jeffrey Hammond
The big number at this year’s Build: 270 Million. That’s the number of copies of Windows 10 that consumers and enterprises have purchased or upgraded to since Microsoft’s latest flagship launched last year. And the message that Executive Vice President of Microsoft’s Windows and Devices group Terry Meyerson sent to developers at the Build conference was that Windows is very much alive and well, and that it’s a great platform for them to build on (pun intended).
 
But there’s another not so obvious theme in Microsoft’s messages to developers at Build. Satya Nadella painted a picture of the longer term future of operating systems in general and Windows in particular: The decomposition of monolithic OSes that served consumers well when our digital interactions were confined to one or two devices. As devices multiply and input/output mechanisms broaden, it can’t help but affect the underlying services that operating systems have traditionally provided, especially as entirely new categories of connected devices emerge. Here’s how:
 
  • Cortona is ready for deep developer integration. In my opinion, the biggest change at Build is the emergence of natural language processing as a first class input/output mechanism for. Conversations as a platform (CaaP) takes the power of human language and applies it to digital interactions. Microsoft’s CaaP framework layers in context about people, places and things to enrich the conversations. With CaaP, human language joins window chrome and widgets as a core UI element. And developers can now layer in their own extensions to Cortana via “bots”. 
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What Comes After The Unicorn Carnage?

Ted Schadler
According to CB Insights (thanks, guys!), by the end of 2015, investors had given 152 tech startups “unicorn” valuations of more than $1 billion.  But now, valuations are deflating for many private and public tech companies. Is this 2000 all over again? No. The bubble popping over the next two years will mean job loss in Silicon Valley and a pullback in disruptor investment but not a collapse of tech spending or of the wider economy. CIOs and CMOs should seize this small window of opportunity to hire or acquire talent for digital transformation to serve customers in the digital channels of their choice.
 
That’s our conclusion (24 analysts contributed to this analysis, with special thanks to Chris Mines and James McQuivey) in new Forrester reports for CIOs and for CMOs. We present the full analysis there, but here's a (long) summary.
 
 
1. The Unfolding Carnage Of Unicorns -- There’s Blood In The Water
 
Private investors dramatically drove up the number of unicorns -- private tech companies they valued at more than $1 billion -- from 31 in 2012 to 152 in 2016. But down rounds and post-IPO stock collapses have begun. Accel Partners’ Jim Breyer, believes 90% of unicorns will be repriced by investors or die. He called it “blood in the water.”
 
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Your Business Technology Strategy: Go Fast Or Go Home

Sharyn Leaver

CEOs and their leadership teams are at a crossroads as technology underpins virtually all customers’ expectations and unlocks new sources of customer value. The choice is rather straightforward: invest heavily in business technology (BT) to win, serve, and retain customers, or flounder under the weight of legacy IT.

The choice is obvious, isn’t it? We know and have proven that a better customer experience correlates with higher revenue growth. And what firm can claim immunity from the pressure of increasingly powerful customers wielding unbelievable technology power? 

This is no time to hedge. Strategies like bimodal IT that advocate for silos and two operating speeds may appeal to risk-averse leaders, but bimodal won’t get the job done. In fact, it works directly against the key operating principles of customer-obsessed firms in B2B and B2C industries like General Electric, Netflix, and USAA. These firms and other leaders use the customer as the central design point for their business technology strategy and strive to be:

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Managers Must Understand The Differences From Past Ways Of Doing Business

Dan Bieler

Photo: Bergmann

At Mobile World Congress 2016, GE outlined some fundamental insights about the digital transformation efforts of industrial businesses. William Ruh, CEO for GE Digital, a US$6 billion business of General Electric, shared valuable insights about the digital transformation process that industrial businesses need to tackle.

Industrial companies are very different from consumers: They don’t want to buy a great mobile or social experience; they care instead about business outcomes, such as lower energy consumption, faster cash cycles, or higher employee productivity. Digital transformation means that industry will do things differently than in the past.

  • Industrial firms will learn from the consumer world only up to a point. Industrial products are not developed, designed, and sold like consumer products. Uptime and longevity are critical in the mechanical-electrical world. Industrial products often have lifetimes spanning decades, rather than being replaced every two years like smartphones. Often, industrial equipment is not turned off for years, making ongoing software upgrades difficult. Moreover, the results of faulty industrial equipment like aircraft engines can be much more serious than for consumer products.
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The Next Decade Will Be About The Industrial Internet

Dan Bieler

Photo: Bergmann

“The industrial companies that can bring together cloud, open source, and real-time process management with industrial product cycles will be the ones that will win in the digital transformation process.”

William Ruh, CEO for GE Digital

At Mobile World Congress 2016, GE outlined some fundamental insights about the digital transformation efforts of industrial businesses. William Ruh, CEO for GE Digital, a US$6 billion business of General Electric, shared valuable insights about the digital transformation process that industrial businesses need to tackle.

Digital Transformation Is Happening And Offers New Opportunities

Companies that fail to embrace digitization won’t be able to compete in the next decade. William Ruh stressed that while the past decade was primarily about the consumer Internet, the next decade will be about the industrial Internet. Digitization offers one of the biggest opportunities in many decades to companies that are willing to change:

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Digital Innovation Labs For Customers: Do They Inspire?

Nigel Fenwick

EinsteinMany technology vendors tell me they have established digital innovation labs as a place to bring customers and inspire them. So I was wondering, have you and your leadership team visited such a lab? If so, I'd like to hear from you:

  • What did you like? 
  • What didn't work so well?
  • Were any of your expectations not met?
  • Did your team come away inspired?
  • If so, what did you do differently as a result?
  • What would you like to see more of?

Drop me a confidential note via Twitter @NigelFenwick, LinkedIn or email me (or simply comment below - not confidential).

(If you're a vendor with an innovation lab, send me a factsheet about your lab(s)). 

Thanks.

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Forrester’s FSI Summit In Singapore: Accelerating Digital Business And Innovation In Financial Services

Dane Anderson

A recent Forrester survey found that business leaders in the financial services industry (FSI) saw 34% of revenues in 2015 generated through digital products and services or products sold online. Their expectation is that this digital quotient will surge to more than half of their business by 2020, leading to a digital arms (and capabilities) race against a new breed of competitor. JP Morgan CEO Jamie Dimon accurately sums up the new competitive dynamic when he notes that “there are hundreds of startups with a lot of brains and money working on various alternatives to traditional banking.”

Our inaugural invitation-only summit in Singapore on Friday, April 15 will bring together an intimate group of senior executives from banks, insurance companies, and fintech firms to share Forrester’s latest FSI digital business research and facilitate a discussion with industry leaders. Our team of esteemed analysts will lead the discussion; here is a snapshot of the topics that will be presented on the morning of the summit:

  • Frederic Giron (Vice President and Research Director serving CIOs – Singapore): Accelerating Digital Business In Financial Services
  • Oliwia Berdak (Senior Analyst serving eBusiness and channel strategy professionals – London): How To Organize For Digital Financial Innovation
  • Randy Heffner (Vice President and Principal Analyst serving application development and delivery professionals – Dallas): APIs Take Center Stage In Financial Services
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