The public sector is certainly hot these days – definitely in the hot seat, in hot water. Concerns about public sector finance persist, with the discussion in some cases targeting specific causes beyond just vague notions of overspending. The Economist recently came down pretty hard on public sector unions.
However, for some tech vendors, the public sector really is hot – as in a hot opportunity. Despite revised earnings and warnings about public sector forecasts by some tech vendors, others are instead optimistic. Steria, a French IT services company, is not too concerned about the lingering malaise of the public sector, although it has not been immune to the crisis. A UK public sector spending moratorium in 2010 brought all projects of more than £1 million to a temporary halt, for review. Steria and other suppliers and service providers held their breath through much of the fall.
Over the past few months I have had the opportunity to spend some quality time with a number of IT vendors such as HCL, Fujitsu, Oracle, and Dell. This has been some time coming, but over the next few weeks I am taking the opportunity to summarize the overall perceptions I have received from these vendors when evaluating them from a CIO perspective - i.e. as a potential partner for your IT organization and your business. Today I'll tackle HCL, and will move onto the other vendors throughout January. The goal of these blog posts is to give an overall perception of the vendors - something that we don't particularly capture so well in a Wave or vendor analysis where we are focusing on one particular capability of a large vendor. I am trying to capture the "culture" or "style" of the vendor, as this is something that is hard to include in a Forrester Wave, but it IS something that makes a significant difference to the partnership in the longer term.
HCL. A company that is comfortable in its own skin.
That is the way I would summarize HCL. They are a company that know where they have come from and know where they are now, and have a pretty good idea that in five years time they will be nothing like they were or are. They don't know what that future is, but they know they have to put the capabilities in place to ensure the organization can effectively morph into that future form in order to achieve longer term success. Employees First, Customers Second is the first step on this pathway, but it is only that. It will not shape the company that HCL is tomorrow, but it will probably provide the groundwork and internal culture to allow the smoother change.
Without a doubt, the tech industry’s new economics are creating major tumult in the marketplace. “Services,” not products, and “in the cloud,” not on the computer, are just two of the major trends forcing IT services providers to continually predict future market demand and adjust strategy accordingly. More than ever, it’s imperative to understand where firms will rely on third-party providers in the coming year . . . and also where they’ll increase spend.
As you may know, Forrester fields a 20-minute Web survey each year to commercial buyers of enterprise IT services as part of Forrester’s Forrsights for Business Technology (formerly named “Business Data Services”). This year, we’ll continue to collect responses from IT decision-makers at companies with 1,000 or more employees across the US, Canada, France, the UK, and Germany. As we’re designing the survey now, our commitment to strategists is that we’ll write the questions with your underlying need in mind: to predict and quantify tech industry growth and disruption.
Here are a few new questions you’ll be able to answer with our 2010 data insights:
Which areas of innovation are turned into business- or IT-funded projects? . . . How mature is vendor governance/oversight compared with three years ago? . . . How are firms dealing with the rising influence of Digital Natives? . . . What are the plans, strategies, and barriers for moving from a staff augmentation to a fully managed services model? . . . How will an uptick in selective sourcing strategies translate to you as the service provider tailoring your go-to-market plans according to current customer challenges?
And, of course, we’ll continue to ask traditional questions around services plans, budgets, and preferred vendors.
Last week, as part of the debate on the 600B border security bill, Senator Charles E. Schumer from New York reportedly called the Indian offshore IT firms in general and Infosys in particular “chop shops” — a reference to the locations where criminals dismantle stolen cars for spare parts. As always, the Indian press has immediately reacted. But let’s not take the comment out of context; US Senator Charles Schumer calls Infosys 'chop shop' - India Business - Business - The Times of India. Senator Schumer is showing that in an election year, he is “standing up” for American jobs.
But that said, as we head into the midterm elections with 9.5% unemployment and very little job growth, there will be more comments like this unfortunately, and the Indian firms and NASSCOM need to be prepared with their own PR counterattack and story. Offshore customers would also be advised to take the same advice and have a clear PR plan ready to go at a moment’s notice in case they get raked over the coals as part of the rhetoric.
On my current trip to India multiple Indian and multinational companies asked where we saw the future of a global delivery model headed. This caused me to reflect, and here is my formal answer: There are a number of areas where we expect to see changes that not only reflect the maturing of the market but also changes in buyer demand. Forrester expects that developments and investments will take place along four vectors.
A continued focus on building out domain and technology centers of excellence.To date, these activities have been fairly isolated to one or two technologies like SAP or the mainframe and one or two top verticals. That will continue to expand especially on the domain or industry side. The COEs will be required to support the greater focus on specific business process for application work and the need to build out a portfolio of solution accelerators with a high level of domain input.
Building out a network of centers with a new wrinkle.With every day, it is becoming clearer that no single country is going to match the scale and breadth of India. In many cases, expansion had been driven by one or more clients looking to expand in a particular market like Latin America or China. Forrester believes that there will be a greater focus over the next two to three years around turning each alternative geography center into a particular center of excellence to clearly differentiate its capabilities and cost structure from the India mother ship.
An extension of process investments into the multicenter world. The current process investments have been largely at a center-by-center level to improve an individual location’s consistency and predictability. The emphasis will now shift to the knowledge management, collaboration, and social networking tools to allow firms to tap into the COEs in the alternative geographies.
Forrester’s newest survey of the IT spending environment has encouraging news that underpins our forecasts of a rebound in industry fortunes after the nasty recession of 2008-09. The good news for tech vendors is that IT budgets and purchasing plans are starting to reflect an improving economy. Last week, Forrester released results from our “Global IT Budgets, Priorities, And Emerging Technology Tracking Survey.” Among the top-level results: just over 40% of the 2,800 IT decision makers surveyed expect to increase their organization’s overall IT spending in 2010, up from just 12% in 2009; another 33% expect to hold their spending steady. So the overall IT budget environment has turned positive.
Respondents identified the top business priorities supported by IT investments as: 1) grow company revenue, and 2) reduce operating costs. No surprises there. But we were intrigued to see that “Drive new market offerings or business practices” ranked number 4, indicating that respondents are looking to IT to support and enable new product innovation.
We also see an uptick in spending on offshore IT services in 2010 vs. 2009, across ALL geographies. Survey results also show that more than half of respondents have either implemented or are planning to implement SaaS, illustrating the tech industry’s continuing shift toward new purchasing models based on operating rather than capital expenditures.
I was recently asked about the importance of selling skills for CIOs - does a CIO need to be a good salesperson? It seems to me the answer to this should be a resounding yes. After all, IT executives need to be able to sell themselves effectively in order to attain the heights of the C-Suite. Great CIOs must be great communicators, capable of delivering a compelling presentation or a memorable speech, and inspiring others to follow them.
But what of sales skills beyond being a good presenter? Since many sales skills are focused on understanding people and connecting with them, I've found sales training to be highly effective on two levels:
Developing better listening skills. One of the first things you learn as a salesperson is not how to make a pitch, but how to listen to a customer - only by listening can a good salesperson effectively satisfy the needs of a prospect/customer.
Understanding how products/services meet the customer needs. Salespeople spend a lot of time learning about a firm's products and services; they learn how they meet the various customer needs and they learn how to present them in the best light.
Late last week, ExlServices acquired PDMA, Inc., maker of the LifePRO Insurance Policy Administration System. In his discussions with Forrester, Yogendra Goyal, VP & Global Head - Insurance Practice, was very clear on how the deal will help theBPO provider. He said the LifePRO platform will enable the company to move to a more sophisticated outcome pricing model as well as enable it to to cut costs and drive higher value and up the process stack. It's another clear example of how the BPO market is moving to have a standard software platform underpin its process work (see my report Platform BPO: Process Outsourcers Take A New Approach To Traditional BPO for more information).
Yesterday at its annual analyst meeting, Accenture unveiled its new software group. Yes, the company has formally set up a software organization to sell packages and SaaS offerings. The group was internally established back in September 2009, but publically launched this week. The group has 48 products, 36 of which are vertical packages that Accenture has done on its own; the remainder are enhancements to existing packages from vendors like Oracle and SAP. The vertical packages include freight and logistics, hotel property management, and a claims components solution. Sample “enhancements” cover P&C billing with SAP, banking with both SAP and Oracle, and a human capital management offering with SAP. The numbers on the group: the offerings cover 8 industry segments and it has 2,000 people and claims that it has signed 600 deals where there is an explicit software license. There are 12-15 software factories in support of 48 products. This is an extreme example of the standardized offerings that services vendors will bring out as the market evolves.
A combination of factors is combining to reshape and recast the IT services sector. These factors include the continued weak economic environment, the further development of a global delivery model (GDM), new uses of technology across clients’ go-to-market and supply chain ecosystems, the adoption of cloud and SaaS utility-based pricing and delivery models as well as the adoption of a selective sourcing model by buyers. Forrester asserts that these changes will have a dramatic impact on the make-up and dynamics of the IT services business just as the shift to PCs dramatically changed the minicomputer/hardware market in the late 1980s and early 1990s.
Over the past several weeks my colleague John McCarthy and I have conducted extensive research around the future of the IT services market which forms the basis of our forthcoming major research report to be published in June 2010. We talked to approximately 20 of the leading vendor strategists from both leading service provider organizations as well as other key market players like ISVs, SaaS providers and communication services firms. We now offer interested vendor strategists the unique opportunity to hear from us what the major outcome of the research was and what key implications and recommendations they draw for vendor strategists. For this we have designed a workshop format that will deal with the following key questions:
Will the emergence of cloud and SaaS impact the traditional IT services market?
When and how will that impact play out?
How will the economic slowdown and declining IT budgets impact users’ services spending?
What are the key attributes for success in the new services market?
If you are interested in such a workshop (either in person or via web conference) please let us know and we will be happy to schedule according to your needs.