I've just published a Quick Take report that explains why the Nevada District Court’s recent decision on some of the issues in the four-year-old Oracle versus Rimini Street case has significant implications for sourcing professionals — and, indeed, the entire technology services industry — beyond its impact on the growing third-party support (3SP) market.
Data center procurement approaches have significantly changed in the past five years. While many CIOs are following a cloud-first approach to commissioning new services, most enterprises struggle to move the majority of their infrastructure to public clouds due to application interdependencies and legacy infrastructure silos.
As profiled in my recently published case study, in 2008 News UK was one of a few news media companies embarking on infrastructure transformation. The firm’s data center transformation delivered a modern, agile, lean, and resilient infrastructure in a colocated data center with automated disaster recovery and business continuity. The case study highlights the significance of migration and consolidation as a step towards collocating your data center or migrating services to the cloud. Below are some highlights from the report:
Transformation areas: virtualization, compute, storage, and network. News UK had an aggressive timetable to review public cloud offerings and make strategic investments to help it smoothly transition to delivering IT infrastructure via the public cloud. The firm considered all aspects of IT infrastructure delivery and implemented the latest technologies to achieve its transformation goals. Key areas of focus included virtualization, compute and operating systems, and storage and networking.
I recently had a meeting with executives from Tech Mahindra, an Indian-based IT services company, which was refreshing for the both the candor with which they discussed the overall mechanics of a support and integration model with significant components located half a world away, as well as their insights on the realities and limitations of automation, one of the hottest topics in IT operations today.
On the subject of the mechanics and process behind their global integration process, the eye opener for me was the depth of internal process behind the engagements. The common (possibly only common in my mind since I have had less exposure to these companies than some of my peers) mindset of “develop the specs, send them off and receive code back” is no longer even remotely possible. To perform a successful complex integration project takes a reliable set of processes that can link the efforts of the approximately 20 – 40% of the staff on-site with the client with the supporting teams back in India. Plus a massive investment in project management, development frameworks, and collaboration tools, a hallmark of all of the successful Indian service providers.
From a the client I&O group perspective, the relationship between the outsourcer and internal groups becomes much more than an arms-length process, but rather a tightly integrated team in which the main visible differentiator is who pays their salary rather than any strict team, task or function boundary. For the integrator, this is a strong positive, since it makes it difficult for the client to disengage, and gives the teams early knowledge of changes and new project opportunities. From the client side there are drawbacks and benefits – disengagement is difficult, but knowledge transfer is tightly integrated and efficient.
Earlier this month The Information Technology & Innovation Foundation (ITIF) published a prediction that the U.S. cloud computing industry stands to lose up to $35 billion by 2016 thanks to the National Security Agency (NSA) PRISM project, leaked to the media in June. We think this estimate is too low and could be as high as $180 billion or a 25% hit to overall IT service provider revenues in that same timeframe. That is, if you believe the assumption that government spying is more a concern than the business benefits of going cloud.
Having read through the thoughtful analysis by Daniel Castro at ITIF, we commend him and this think tank on their reasoning and cost estimates. However the analysis really limited the impact to the actions of non-US corporations. The high-end figure, assumes US-based cloud computing providers would lose 20% of the potential revenues available from the foreign market. However we believe there are two additional impacts that would further be felt from this revelation:
1. US customers would also bypass US cloud providers for their international and overseas business - costing these cloud providers up to 20% of this business as well.
2. Non-US cloud providers will lose as much as 20% of their available overseas and domestic opportunities due to other governments taking similar actions.
Let's examine these two cases in a bit more detail.
I concluded my March 2013 report on the role of software assets in business innovation by proposing that “The combination of software assets, strong domain expertise, analytics, and as-a-service delivery models will increasingly allow traditional service providers to reinvent the way they deliver business value to their clients.” I was glad to hear that IBM recently announced a deal with L’Oréal that directly supports this position. The announced engagement actually includes all these components:
The procurement domain expertise of IBM Global Business Services addresses business pain points. L’Oréal USA grew rapidly over the past few years via an aggressive acquisition strategy that caused indirect procurement processes to remain highly disparate. The company knew that there was a significant gap between negotiated savings and realized savings in its indirect procurement operations. IBM GBS consultants brought strong procurement expertise to work with L’Oréal’s existing sourcing team to transform existing processes. IBM Global Process Services (GPS) category experts are working with L’Oréal to develop and implement category sourcing strategies.
I am just back from the whirlwind that is Nasscom India Leadership Forum 2013 in Mumbai, India. The Nasscom event is the premier event for the Indian IT services marketplace. Besides meeting great people, eating too much wonderful Indian food, and seeing action star and local legend AmitabhBachchan in-person, the event provides a chance to check the pulse of the most important geographic hub for the IT services marketplace.
How do you choose the right customer service solution for your needs? It’s always best to take a systematic approach: (1) benchmark your current operations using our Assessment Framework to pinpoint areas for opportunity and (2) pragmatically investigate options to source your missing capabilities. Options range from repurposing technologies used elsewhere in your company, to outsourcing, to purchasing suites or vendor point solutions. I recommend using the following process to step through the choices:
Step 1: See if your company is using similar technologies that you can leverage. Web self-service, mobile, social, email, and chat solutions, for example, are often deployed by sales and marketing. If you choose to leverage existing technologies, make sure that they can scale and operate at the level of performance and reliability to support customer service operations. Also make sure that the experience that the customer receives when interacting with these technologies is consistent across functional organizations.
Step 2: Consider outsourcing. If there are no existing technologies that you can leverage, consider outsourcing this entire capability, or perhaps a portion or all of your customer service operations, to a third-party organization. In a recent Forrester survey, we found that 10% have already outsourced some or all of their operations or are very interested in doing so. Outsourcing can help reduce cost of operations, but can also improve the quality of services delivered and allow you to focus on core business activities that are mission-critical to your company.
Network infrastructure is the basis for all funding of telco activities; as such, telcos must not only keep the cash cow alive, but also strengthen it. Management of network infrastructure is easily belittled as a subject for engineering nerds — but it must be treated as a key strategic matter.
Outsourcing the management of or sharing network infrastructure delivers many benefits, and we expect telcos to do this more and more in the years ahead. Telcos need to balance the simultaneous requirements of cost control, enhanced business flexibility, and innovation to incorporate the right approach to external network infrastructure management into their future strategies. Equipment vendors, meanwhile, must adjust their business to keep up and partner with traditional IT services providers.
Many more telcos are moving toward sharing or outsourcing some or all of their network assets and operations to partners or suppliers, becoming “telcos without networks.” This provides an opportunity for some telcos to shift their focus and resources to:
Cost control and transparency. The decision to share or outsource network assets and their operation is primarily driven by financial needs, in particular to bring the total cost of ownership down, spread expenditures over time, and allocate costs in a more transparent manner.
A better customer experience. Increases in data traffic require telcos to enhance their network and service delivery infrastructures and improve network coverage in order to maintain the quality of the customer experience. Moreover, telcos face regulatory requirements for improved rural network coverage, which can be more readily satisfied by network outsourcing.
I would like to take couple of minutes to introduce myself and the research topics I’m working on. I came to Forrester through the acquisition of Springboard Research and specialize in helping Vendor Strategy Professionals understand trends in IT services and outsourcing in Greater China.
With my latest research paper, “Driving Outsourcing Success In China,” I want to help vendors raise awareness on the Chinese outsourcing market, which will grow at 17% CAGR over the next five years. Nonetheless, entering this lucrative market will pose several challenges for international newcomers. In my research, vendor strategists will find insights about:
Introduction to the market dynamics with drivers and inhibitors.
Possible go-to-market approaches for outside vendors entering into China's IT services market.
I'd love to hear from you. Feel free to share your own experiences and ideas with me. Are there other questions that you would like me to address in my upcoming research?
The past few years haven’t been kind to software developers. Having the equivalent of a US master’s in computer science and having spent the first 20+ years of my professional life developing mission-critical software products and applications, I have had a hard time adjusting to the idea that developing software applications is a cost to avoid or a waste of time for many CIOs and application development leaders. It seems to me that we have been giving more emphasis to contracts, legal issues, SLAs, and governance concerns but forgetting about how IT can really make a difference – through software development.
Nevertheless, outsourcing kept increasing, and packaged apps exploded onto the scene, and software developers “outplaced” from enterprises. People started to believe they could get more value and good-quality software cheaper…but could they really?
With BT, digitalization, and customer centricity exploding, today is the perfect moment for application development leaders to review their application development sourcing strategy and align it to their BT strategy.
Why? Many reasons, including:
Software is the most important enabling technology for business innovation.
Clients use software every day. It’s become part of their life, and they enjoy the experience. Better software makes a better experience.