Look Outside Of Indonesia To Fill Skill Gaps

Our global clients are increasingly inquiring about the capabilities of their preferred service providers in ASEAN and Indonesia in particular. I recently spent some time in Indonesia and met leading local and global service providers there. The key takeaways from these meetings? Not surprisingly, the strengths and weaknesses of IT service providers in Indonesia differ by industry, domain, and service line. As a result, clients need to be careful and orient their vendor selection process toward the right set of service providers. Depending on the requirements, the right provider might be based in Indonesia — and it might not. More specifically, sourcing professionals should realize that:

  • MNCs looking for traditional infrastructure services can rely on a good availability of skills. Most MNCs setting up shop in Indonesia are looking to replicate the enterprise architecture defined at their headquarters in the US, Europe, or Japan. The presence of local and foreign SIs in Indonesia with solid infrastructure skill sets across major technologies means that they won't face too many challenges finding the right partner at the right price point.
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Organizations Will Look To Source Business Capabilities, Not Technology

Following my research on software asset enabled services, I will start a new research stream in 2014 focused on business services: a new breed of managed services leveraging software assets, BPM and analytics focused on delivering business outcomes to clients. This post introduces this research and summarizes the drivers and enablers of such business services.

As organizations enter the age of the customer we see business leaders controlling more of the technology purchases. But as their business processes become more technology dependent I believe they will move away from technology sourcing to pursue business capabilities such as digital customer engagement. For example, Forrester recently learned of a vice president of online channels at a luxury brand who decided to leverage a mobile center of excellence from an external managed service provider to help the brand accelerate its revenue growth in a multichannel environment. As business decision-makers look to build capabilities that help improve business outcomes, I believe that they will move away from procuring technology to sourcing a new breed of managed services to complement their strategic capabilities. This new breed of services will combine:

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Asia Pacific IT Spending Growth Will Remain Flat In 2014

A weak global economic recovery and unstable domestic spending slowed economic and tech industry growth in China in 2013, affecting export-oriented economies in Asia Pacific. Combined with ongoing structural problems in India and dwindling foreign direct investment in ASEAN, IT spending growth slowed across the region in 2013. Japan was the only exception; IT spending growth there was faster than expected. Forrester expects overall IT spending growth in Asia Pacific to remain at 4% in 2014. In particular:

  • Japan’s IT purchasing growth will slow as stimulus effects fade. Government reforms and stimulus packages have had a positive effect on the macroeconomic environment. But those will wane in 2014; we expect Japan’s IT spending growth to slow to around 2% next year, propped up by large application modernization projects in banking, professional services, and retail.
  • Chinese growth will mostly benefit local vendors. Forrester estimates that China’s IT purchases will grow by 8% in 2014. Local vendors have recently strengthened their capabilities, primarily in the hardware space, while multinational vendors face challenges meeting Chinese government security requirements. As a result, we expect most of China’s 2014 growth to benefit local vendors; foreign vendors face dwindling market shares.
  • Australia/New Zealand’s shift to systems of engagement will continue its fast pace. Slowing economic growth in 2013 led to an acceleration of the move from capex to opex IT models in ANZ, driven by the need for improved agility in systems of engagement projects. The transformation of systems of record leveraging virtualization and automation approaches has started to erode a lot of the value of the overall IT market. So while the overall ANZ economy should improve, we don’t expect IT spending growth to exceed 3% in 2014.
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SAP Services Will Make Or Break SAP's Platform Strategy

Over the past few months, SAP Services has embarked on a major software-enabled services transformation of its offerings and operating models. The strategic intent is to increasingly rely on IP-based solutions (including SAP’s Rapid Deployment Solutions portfolio and assemble-to-order methodology) to deliver outcomes faster, with lower risks for clients and, eventually, support value-based pricing. Next on SAP Services’ transformation road map? I believe that the organization needs to quickly change the perception of the rest of the SAP ecosystem, which still views SAP Services as a competitor.

SAP Services’ business model used to merely rely on staffing “rock star” consultants on client projects in order to facilitate the implementation of complex solutions. The new strategy aims at positioning the 15,000 service professionals on SAP’s newer solutions (e.g., cloud, mobile, HANA . . .) in order to ensure that early projects generate the promised outcomes. In order to achieve this goal, the delivery teams need to be much more focused on collaborating internally (with the R&D team, for instance) as well as externally (with clients). SAP Services will also need to increasingly work collaboratively with its partners in order to ensure the success of the overall SAP-as-a-Platform strategy.

SAP Services needs to:

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HP Enterprise Services in Asia: Strong Message for IT, But Not for the Business

HP recently hosted its Asia Pacific (AP) and Japan analyst event in Singapore. The company presented its “New Style of IT” value proposition and how it intends to position a combined HP hardware, software and IT services stack to deliver client value. After the Boston event back in February, I was particularly interested to see how HP Enterprise Services (ES) is positioning itself as the tip of the spear of the “one HP” messaging and offering in Asia.

When assessing service providers’ relevance to customer needs, I focus on two major areas:

  • Red ocean offerings – where service providers need to help their clients build scalable, flexible, secure and cost efficient technology foundations around cloud, mobility and analytics.
  • Blue ocean offerings – where service providers need to help the CIO engage business stakeholders to drive better business outcomes in areas like customer experience, for instance.
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ORANGE BUSINESS SERVICES ANALYST EVENT 2013: THE COBBLER STICKS TO HIS LAST

Brownlee Thomas, Ph.D., Dan Bieler, Henning Dransfeld, Ph.D., Bryan Wang, Clement Teo, Fred Giron, Michele Pelino, Ed Ferrara, Chris Sherman, Jennifer Belissent, Ph.D.

Orange Business Services (Orange) hosted its annual analyst event in Paris July 9th & 10th. Our main observations are:

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IBM Delivers Replicable Business Innovation Services Across Clients

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.
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A New Service Architecture For Business Innovation

The IT services industry is being challenged on two opposite fronts. At one end, IT organizations need efficient, reliable operations; at the other, business stakeholders increasingly demand new, innovative systems of engagement that enable better customer and partner interactions.

My colleagues Andy Bartels and Craig Le Clair recently published thought provoking reports on an emerging class of software — smart process apps — that enable systems of engagement. In his report, Craig explains that “Smart process apps will package enterprise social platforms, mobility, and dynamic case management (DCM) to serve goals of innovation, collaboration, and workforce productivity.” In other words, smart process apps play a critical role in filling gaping process holes between traditional systems of records and systems of engagement.

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Infosys Automates its Services with IPsoft

18 months ago, my first blog post at Forrester discussed industrialization trends in the IT services industry globally. I suggested then that IT services providers would have to focus their industrialization efforts on shared resources, self-service and automation capabilities.

On the automation front, most efforts till date have been incremental in nature – mostly focused on removing redundant and mundane tasks via process redesign and/or tools implementations. The recently announced Infosys partnership with IPsoft is taking these automation efforts to a whole new level. Infosys will leverage IPsoft’s autonomic based automation capabilities as part of its effort to improve the performance of its infrastructure services delivery capabilities.

Why is this partnership important?

From an operations perspective, this technology is expected to improve the competitiveness of Infosys’ infrastructure services offering. In a nutshell, the scripts used in traditional tools to automate a particular task are replaced by self-learning, self-optimizing software agents, which yield much faster time to resolve. According to IPsoft, such technology can automate at least 60% of level 0 and level 1 issues in a support environment by automating time-consuming labor such as diagnostics.

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Reconsider Outsourcing To Accelerate IT Maturity

Organizations in growth markets across Asia have not traditionally been heavy consumers of outsourcing services. Having lots of on-premises hardware still carries some prestige for local CIOs, particularly in China and India. The availability of relatively inexpensive IT staff in local markets has also helped them deliver acceptable service levels to the business. Until now, that is. The combination of quickly rising IT salaries, increased competition from regional and even global expansion, and growing demands among business stakeholders to more effectively engage customers has put pressure on CIOs to increase the performance of their organizations.

More and more CIOs I speak with are struggling with how best to effectively transform their IT capabilities and meet fast-changing business requirements. In particular, whether to embark on this transformation journey alone or leverage outsourcing partners. In a recent report, I profiled organizations in Asia that are leveraging external service providers to accelerate their IT maturation. One example is a manufacturer with 10,000 employees and operations across Asia that outsourced its entire IT infrastructure environment to improve and homogenize service levels. Another is a large Indian bank that outsourced its entire IT department to a service provider and improved its maturity level from a 3 (on a scale from 1 to 10) to a 6 in less than a year.

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