Look Beyond Traditional Service Providers For Your Digital Transformation Journey

In a recent report on next-generation services, I give several examples of how tech services firms are reinventing their operating models and value propositions to provide a new path to digital transformation to their clients. Interestingly, many such initiatives are coming either from very large service providers like Accenture or from small specialists like VMob, Bluefin Solutions, or Point of Origin. Small service providers’ next-gen service value proposition is starting to catch the interest of large clients too. A few weeks ago, VMob announced a major deal with McDonald’s in Japan wherein the company will leverage the VMob solution for its 3,200 restaurants in Japan.

The next-generation services report highlights the key tenets of these new digital transformation offerings. In this customer-controlled, digital world, successful tech services companies will bridge the gap between technology and business outcomes for their clients. In other words, it is not just about implementing a new technology solution anymore. It is about helping clients harvest the power of digital technologies and achieve specific business outcomes like growing revenues, reducing operating costs, or mitigating risks. This is where next-generation service providers like VMob, Bluefin, and Point of Origin get it. As leaders in the new services world, their approach is fundamentally different from the traditional tech service providers, as they:

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Bridging The CIO/CMO Disconnect In Asia

It’s a fact: Marketers in Asia purchase digital technologies without involving the tech management department. They do it because they believe that:

  • Digital technologies are key enablers of successful marketing strategies. Customers in Asia Pacific in general, and in Singapore in particular, are always connected and empowered by technology to access the right information in their moments of need. They increasingly value — and do business with — organizations that provide them with experiences that are effective, easy, and emotional across all customer touchpoints. It’s not a surprise, then to see marketing professionals — just like their colleagues in sales, product management, and customer service — source digital technologies to enable such experiences.
  • The tech management department hinders their business success. This is the more worrying part, but if you take a step back, as a technology management professional, you understand why. You work with technology life cycles that are oriented toward core business, back-end systems like enterprise resource planning and therefore are risk-averse and slow. However, marketers need tech management professionals who are open to innovation, experimentation, and moving toward a risk-tolerant, agile life cycle that supports digital experience delivery.
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Next-Generation Services Create New Sources Of Competitive Advantage

Companies understand the urgency of ramping up their business technology (BT) capabilities to help the business innovate and grow. Increasingly, they realize that they cannot do this alone and firms will require partners that can help deliver agile services that bring fast and predictable outcomes to the business. For instance, Bharat Light and Power (BLP), one of the largest clean energy generation companies in India, signed in late 2013, a 10-year engagement with IBM to build a new business capability that aims at nothing short of transforming the utility sector in India. In a few words (more details are available in this report), BLP and IBM are creating an open energy service platform that will help BLP understand how to optimize the utilization of its wind turbines. The really interesting part for me lies in the way the company intends to leverage the information generated by this platform as the basis of its competitive advantage. The energy service platform will indeed act as an expertise repository that BLP can leverage to:

  • Increase the value of its own assets. As the company operates, grows, and optimizes its own asset efficiency, it learns how the climate, power grid, and wind turbines influence a vital business metric for a utility company: the plant load factor (PLF). This will allow the company to generate more revenues from its existing assets.
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Banks In Singapore And Hong Kong Must Step Up To The Cloud Challenge

Last week I presented an overview of cloud adoption trends in the banking sector in Asia to a panel of financial services regulators in Hong Kong. The presentation showcased a few cloud case studies including CBA, ING Direct, and NAB in Australia. I focused on the business value that these banks have realized through the adoption of cloud concepts, while remaining compliant with the local regulatory environments. These banks have also developed a strong competitive advantage: They know how to do cloud. Ultimately, I believe that cloud is a capability that banks will have to master in order to build an agility advantage. For instance, cloud is a key enabler of Yuebao, Alibaba’s new Internet finance business. 80 million users in less than 10 months? Only cloud architecture can enable that type of agility and scale (an idea that Hong Kong regulators clearly overlooked).

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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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