IT Service Providers Will Soon Face Operating Model Mayhem

Several recent Forrester reports, including “Mobile Is The New Face Of Engagement,” have shown how new business success imperatives are pushing clients to change the way they leverage IT solutions. In my report “The Move To An Asset-Based Services Play,” I describe how IT service providers will have to adapt to these new rules of engagement if they want to stay relevant to their clients in the long run. In particular, the increased focus on business innovation will push service providers to invest more in the development of software assets — or solution accelerators (SAs) — that provide strong business value to multiple clients.

The move to asset-based services will force service providers to invest in new operating models that differ significantly from their traditional models and are closer to the ones leveraged by software providers. In my next report, I will cover some of the associated best practices in terms of the organization, people, processes, and tools that IT services firms need to implement to make this shift happen internally. Service providers will need, among others, to recruit new skills such as product and portfolio managers, incentivize the creation of software assets, fund and incubate the creation of solution accelerators, and overhaul their partnership management processes.

I also believe that service providers will pursue an increasing variety of business models for their solution accelerators in order to offer the flexibility clients are demanding and achieve scale objectives. Here are four examples of business models and the solution accelerators associated with them, going from the traditional project-centric model to the more emerging business process-centric model:

  • Project-centric model. In this model, the value of the solution accelerator is embedded in the value of the projects, generally following a fixed-price approach. For instance, CSC’s Petroleum Enterprise Intelligence solution accelerator is delivered to clients on premises.
  • Hosted model. The solution accelerator is hosted on a dedicated or shared infrastructure and provided via multiyear or on-demand engagements. NIIT Technologies delivers the Bank Easy core banking solution to small banks in India on an ASP model or as SaaS.
  • BPaaS model. In this model,the IT services firm combines the hosted solution accelerator with the human resources operating the solution and vertical industry best practices. Cognizant offers Intellipeak, a business process-as-a-service offering aimed at improving sales effectiveness.
  • Business process-centric model. This model remains at an early stage of development, even though IT services firms like Capgemini have already taken steps in this direction. Capgemini Immediate offers an end-to-end eCommerce platform to its clients. The platform integrates Capgemini’s own software assets with the assets of an ecosystem of best-of-breed software providers like salesforce.com, Venda, and Kognitio. With the Immediate platform, Capgemini composes and orchestrates the delivery of end-to-end business process-centric solutions to its clients. Infosys recently launched a similar digital marketing offering in partnership with Fabric: Infosys BrandEdge.

Service providers that pursue these multiple business models will face a rapid and significant increase in the number and complexity of their operating models. In this new reality, strong governance in addition to stringent portfolio management processes will be key success factors for the leading asset-based IT services firms of the future.

Comments

Cognizant is the player to watch

I worked with Cognizant until fairly recently and having changed two jobs in the past 2 years I have come to believe that Cognizant is the player to watch. They had solution accelerators since at least 2002 when I started working there. Business units (BUs) there were always looking to create these little toolkits that they could deploy on multiple client projects. I think they started this with the Y2k problem where most of the people who are now BU delivery heads cut their teeth. I found them really smart at noticing patterns where different customers in the same industry faced the same problem. So they found ways to exploit these patterns. Back then the company was pretty small..one tenth its current size.

But even as they grew, I found they were always thinking about customer problems the same way. When they did BPO they wanted to do high-value stuff and they started talking about BPaaS really early. When I left they were launching Cognizant Capital to support projects that would generate what they called "non-linear revenue" through accelerators and other IP, even if it cannibalizes their existing business. I realize now how that last part of investing in the future even at the cost of current sacred cows was such a bold and gutsy move. You mentioned Intellipeak but they have many more such offerings - cloud 360, assetserv, couponserv, all these "serv"-branded solutions are basically their play in this exact space.

I've worked with some of their competition and now I am on the other side of the fence. But Cognizant is who I was impressed with and I'd keep an eye on.

Disclaimer: I still own stock in the company.

IT services

Correct, IT face soon Operating Model Mayhem. Thank you very much