In the age of the customer, companies need to drive a new business agenda around customer engagement- and to achieve that level of engagement, software becomes critical. Software has become a strategic asset which sits at the intersection between companies and their customers and has become vital in enriching companies’ brands. For example, how you interact with a travel agency or retailer today is often through their mobile app – and the experience of using that app has a direct impact on how you perceive the company.
However, developing software-enabled products requires sophisticated technology and architectural design skills which presents tremendous challenges — even more so for companies for whom technology is not in their DNA. Reflective of this, already in 2012, 38% of the business budget decision-makers who indicated that improving their firm's ability to innovate was a top priority, expressed an increasing willingness to partner with other firms to address their innovation challenges.
The recently published Forrester Wave on software product development services (PDS) evaluated the leading providers who can partner with companies to help develop these software-enabled products (EPAM Systems, GlobalLogic, HCL, Infosys, Mindtree, Ness Technologies, Pactera, Persistent Systems, Symphony Teleca, TCS, and Wipro).
The next generation of product development will require wholesale change to the types of skills companies need. As my colleague James Staten recently wrote, an earthquake in Silicon Valley is turning every company into a software vendor. It is this notion, that every company becomes an ISV, that will profoundly change the nature of business, and in particular product development:
Software, and customers interaction with that software, now defines companies and their brands.
Developing software-enabled products requires sophisticated technology and architectural design skills. This presents tremendous challenges — even more so for companies for whom technology is not in their DNA.
Companies must look in the mirror and evaluate if they currently have the skills and expertise to navigate this new environment. In this new world where customers interact with you through software, do you have the skills to develop products and services which will create intense and enjoyable customer experiences?
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.
In 2011, Forrester first reported on a new breed of mature and collaborative product development services (PDS) offerings coming to market, which we called “product development services 2.0.” These services are a stark contrast to traditional staff augmentation engagements. How are they different? Providers take greater responsibility for the end-to-end life cycle of the product, promise a higher level of industry and domain expertise, and offer a value-add service addressing key client business concerns. The transition has been gradual up to now, but there are finally signs of a more rapid shift.
One of the key announcements made in recent months was HCL’s launch of its “Service Line Unit” (SLU) initiative. Here are the key elements of this initiative:
•SLUs are a packaged set of PDS offerings, bringing together relevant HCL tools, partnerships, processes, and delivery competencies to address specific pain points.
•In developing these offerings, HCL systematically investigated the white space and the key business challenges in its chosen target markets. In turn, it invested in building out its own IP and domain knowledge to address these challenges.
•Ultimately, these investments and the targeting of specific business concerns will help HCL frame its service offerings in the context of key business outcomes, such as time-to-market.