Deloitte’s Two Recent Acquisitions Highlight Broader Market Changes

Deloitte recently made two acquisitions that may not make front-page headlines, but for sourcing professionals, they are noteworthy.  In February/March Deloitte announced the acquisition of 1) dcarbon8, a carbon and sustainability consulting company that specializes in supply-chain management and carbon benchmarking and 2) Simulstrat, a company that pioneers “wargaming” and a spinoff from the department of war studies at King’s College in London. The acquisitions are small, but they highlight some interesting trends in the technology marketplace:

  • Before the recession of 2008, high oil prices pushed interest in “going green” to a peak, but the economic recession cooled some of the green fever --  and many “clean tech” companies we track started repositioning themselves more as enablers of cost savings and efficiency.  The acquisition of a sustainability consultancy like dcarbon8 highlights the fact that the interest in green continues – and companies like Deloitte view the green focus as more than a passing fad.  
  • Simulstrat offers sophisticated risk mitigation consulting to companies – all posited at a simulation or “game-like” setting. In this case, Deloitte looked to the capabilities of an academic institution to bring an innovative risk services offering with its private sector clients.  While simulations have traditionally been applied in government settings (e.g., war games) the potential for businesses (who are increasingly interested in risk mediation strategies to deal with macro-economic shifts) is strong. 

 

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Jugaad and Your Global Innovation Strategy

A recent post on BusinessWeek explored an “emerging” concept in Western-style innovation management -- one that has deep roots in India - called Jugaad.  The article mentions a meeting led by my former colleague (and still friend) Navi Radjou, and notes that jugaad is “an improvisational style of innovation that’s driven by scarce resources and attention to a customer’s immediate needs.”

Explore the term “jugaad” and you will find a range of enthusiasts and detractors.  Many - particularly those more intimately familiar with the terminology -- argue that jugaad is not, by its very definition, a robust innovation solution to complex business problems.  Rather, its just another way of saying “get it done whatever it takes” – meaning that innovation is done in an inexpensive manner, “on the fly”.   In this context, it seems like a tough way for a multi-billion dollar company to build an innovation practice.

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IT Service Customers Need More Effective Ways To Contract For Innovation

Take a look at Forrester’s recent Enterprise IT Services Survey and you will find a data point that highlights an interesting challenge in the IT services marketplace.  When we asked North American and European IT services clients about their biggest challenges with existing IT services and outsourcing relationships, 52% said that “cost savings are lower than expected and 40% said “inconsistent or poor quality service”.   No real surprises here:  given the large number of companies that partner with service providers in an explicit effort to lower costs, many IT professionals simply underestimate the time and resources it takes to define and manage these relationships. 

But look at the #3 and #4 responses, and the data gets more interesting.   33% of respondents said that their biggest challenges were “lack of innovation and or/continuous service-level improvements” and 35% cited “inability of vendor/contract to respond rapidly to changing business needs”.   Don’t the first two responses, in some ways, conflict with the latter two?

These data point to a complaint Forrester hears all the time from professionals within the technology industry:  they know that their clients want a proactive business partner – one who can help the client drive innovation and business results – but they don’t know how to charge for innovation in a way that clients will be willing to pay for it.  Clients say they want greater level of business innovation from their IT service providers, but prioritize cost-reductions – which are more easily measured and which justify the investment in the IT services relationship.

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In 2010, your clients will care about more than just cutting costs

Ask any business professional whether, as they look to 2010, they care more about cutting internal costs or whether they care more about driving new business-focused innovations, and you’re likely to get the response “yes…to both”.  In the wake of the 2009 recession, companies are struggling with these sometimes conflicting objectives – on one hand they know that cost cutting and operating efficiently is a mandate.  On the other, they must develop new technology –enabled product, service, and business model innovations or they risk falling behind. 

For vendors in the B2B technology marketplace, this means balancing the need to communicate the cost-effectiveness of your product or service with messages that stress the business value you provide.   I believe that far too many vendors think that only the lowest-cost provider can succeed right now, when proving strategic business value is still a critical priority for all professionals - particularly IT professionals.

For a company that gets it, look to GlobalLogic, the offshore product development firm.  Their Vice President Milind Patwardhan recently told me “cutting costs for clients is the ‘table stakes’ right now.  The best technology companies focus on reducing costs, but also seek to partner with clients to enable business results.”  While many vendors talk this talk, one of their client references confirmed the value: He told me that GlobalLogic worked with business executives on strategic planning, was willing to take on risks in order to strengthen the relationship, and proactively looked for ways to create innovation. 

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The leading innovation management firms understand the need to generate business value

Everyone seems to understand that social computing is a hot technology these days, and at Forrester we get plenty of questions from companies trying to understand how they can access the power and benefits of social computing into their own companies.

But before companies consider which technology platforms they should use, they should be carefully considering for what business purpose they need social computing tools. In my view, technology is a powerful lever in solving business problems, but it is not a solution in itself. For example, I know a lot of people who spend a lot of time on Facebook, but I can’t see much business value in it (unless looking up former high school classmates counts as business development). The same is true for far too many (but not all) of the social technology tools hitting the market today. <

This is where innovation management tools come in. While many community platforms are great at providing technology for internal collaboration, the best innovation management companies are taking the power of technology one step further -   they are using social technologies, to help companies generate a response to specific business problems.

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CSC looks well positioned for current spending patterns

I recently attended a CSC analyst event in which they described several of the wins and initiatives that they have experienced over the past year.   Like many services companies Forrester speaks with, the company is taking a heavy vertical (industry-specific) market strategy and positioning itself in hot markets related to government spending, healthcare, and energy.

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Tech Mahindra Prepares for Success in 2010

I had an interesting briefing with L. Ravichandran, the Executive Vice President and COO of Tech Mahindra this week.  This was quite a nice briefing to have from the company, given the dramatic changes that have taken place over the last year.  In January, Forrester analyst Sudin Apte and I wrote about the drastic consequences of the accounting fraud at Satyam (“What the Events at Satyam Mean For Service Providers”). Sudin has continued to write about the subject with great research that would interest virtually anyone in the IT services industry (clients and tech professionals) on Forrester.com.

 

Mr. Ravichandran stressed a few key points to me:

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Creating business focus needs to be more like golf, less like skiing.

I grew up skiing in great skiing states like Colorado, Maine, and Wyoming. When I was in my mid-20’s I realized a funny thing about skiing -- that just about everyone who has ever made it down a black diamond ski slope fancies themselves to be a good skier. I’ve been skiing with all different types of skiers, and they all think they’re experts.   

Contrast that to the game (or sport) of golf. In golf, unlike skiing, there are clear standards, rules, and a score. At the end of my golf game, when I end up with a 110 and three triple-bogeys, I can’t claim I’m an expert golfer. There are people all around me who can prove to me, in their scores, that they are far better than I am. But rather than get me discouraged, their scores serve as a model for me, and they motivate me to get better.

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Does Social Technology Matter For The Enterprise?

At Forrester we get a lot of questions about the use of social technology within the enterprise.  IT organizations are trying to uncover successful ways to apply social technology for their business customers – looking for the new solution will be the “Facebook for the enterprise”. We also know that many technology companies think this will be a crucial development in the market:  a recent survey indicated that 74% of technology marketers and strategists believe web 2.0 tools will be important or very important to their business strategy over the next 1-3 years.

I personally believe that innovation tools have the best potential in the application of social technologies within businesses.  What is innovation if not the ability to source ideas from disparate sources, manage those ideas through a commercial development process, and evaluate their success?

 

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Preliminary results from the 2009 Strategy Professional Survey

I just received preliminary results back from my 2009 strategy professional survey, which is an annual survey of senior level technology marketers, strategists (people with “strategy” in their title) and C-level executives. This year, I decided to focus a good portion of the survey on the effects of the recession…My sense is that after the tech industry underwent a period of shock at the beginning of the year, conditions have stabilized, and tech companies have incorporated the marco-economic conditions into their strategy.  We have 112 responses so far, but this may increase if we keep it in the field.

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