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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To Drive IT Spending, Target The Business!

Last week, Forrester hosted a breakfast roundtable in Sydney for approximately 20 tech vendors seeking to capitalize on current IT spending trends in Australia and New Zealand. With expected IT spending growth of nearly 4% in 2013, the A/NZ market is still going strong. However, this good health hides major shifts, including the increased role that business decision-makers (BDMs) are taking in direct IT purchasing in areas like staff, products, and services. As a matter of fact, Forrester expects the percentage of IT budgets that IT directly owns or controls to decrease by 2% to 5% between 2012 and 2014 in most A/NZ organizations.

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Cisco Services Leverages Software Assets To Transform Its Services Value Proposition

As you’re all well aware by now, a perfect storm of technology innovations — including cloud, analytics, mobile, and social­ ­— is fundamentally disrupting the way your company engages with its customers (as well as employees and partners). For service providers in particular, the main challenge is understanding how to best leverage these technology innovations to remain relevant and ultimately generate more business value. So it’s exciting to see a service provider like Cisco Services come up with new offerings that respond to this challenge in innovative ways.

I met with Cisco Services Asia Pacific Japan and China (APJC) executives last week in Seoul to discuss their strategy in Asia. I wanted to highlight a few takeaways that I believe will be important for sourcing professionals in Asia and beyond:

  • Cisco Services is a key enabler of Cisco’s overall transformation. Cisco Services used to be a captive consulting organization providing support and technology services for a product company. In a recent analyst call, John Chambers identified Cisco Services as one of the main levers that will help Cisco transition from a transaction-oriented to an annuity-based business model and help the company become the largest IT company globally. The company’s aim is for Cisco Services to represent 24-26% of total revenues in the next 3-5 years. These goals are extremely audacious; achieving them will require huge efforts from Cisco, including some targeted acquisitions in the services space.
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Asia Pacific Tech Market To Grow By 4% In 2013

The Asia Pacific (AP) growth engine did not fire on all cylinders in 2012, leading Forrester to revise its IT purchases growth forecasts for the year. While Australia, South Korea, and several ASEAN tech markets are showing continued solid growth, in other markets like China, India, Japan, Malaysia, and Vietnam, political leaders are struggling in the face of growing economic problems. My colleague Andy Bartels and I, with the help of Forrester’s AP analyst team, have recently published our revised IT purchase growth forecasts for 2013. Here are our key expectations by country:

  • 2012’s slowdown in China will be short-lived. Despite a slowdown in 2012, China continues to attract intense vendor interest because of its size and potential for further growth. The expected government stimulus efforts in the country will offset factors such as weak demand from businesses and governments. The slowdown in 2012 (+9%) is therefore likely to be short-lived, with stronger growth resuming in 2013 (+10%).
  • India’s IT growth will remain slower than expected through 2014. 2012 (+7%) was a relatively lackluster year for the tech market in India. Worse than expected economic growth, combined with political gridlock on economic reforms, kept the tech market from reaching its full potential in 2012. While we expect the public sector to drive India’s IT spending growth, the impact will be limited through 2014 due to the parliamentary elections scheduled for that year.
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HCL Technologies Is Coming Of Age In Asia

HCL is the fifth-largest India-centric IT service provider in terms of revenue (after TCS, Infosys, Cognizant, and Wipro). While it only derived about 15% of its global fiscal 2012 revenues from markets outside of Europe and the US — slightly lower than the four larger Indian firms — HCL has built a strong base in Asia and now boasts more than 300 customers served by more than 8,000 employees. I recently attended HCL’s Asian analyst event in Sydney; below are some key reasons why I believe that you should consider HCL on your shortlist of systems integrators (SIs) and outsourcing providers:

  • Flexibility. When I asked some of HCL’s Australian, ASEAN, and Indian clients what characterizes HCL’s approach to managing client relationships and delivering projects, most mentioned “flexibility” and “HCL is easy to work with,” particularly  during the transition phase in outsourcing contracts.
  • Co-innovation focus. HCL’s Asia growth strategy is both focused (on a limited number of vertical and horizontals) and pragmatic. Starting small with staff augmentation deals, the company invests in relationships to develop its presence and its expertise with its clients’ challenges — 2% of the revenue generated from clients is reinvested in the engagement as an innovation budget.
  • Local commitments. HCL has increased its regional presence via local management and delivery capabilities and local partners, including universities like Singapore Management University; IT companies like Lippo Group in Indonesia; and government, such as its work on the Mobility Lab initiative for EDB in Singapore.
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Asian Companies Will Give Outsourcing A Fresh Look In 2013

Forrester’s team of Asia Pacific (AP) analysts has just published its 2013 IT industry predictions in the IT Industry Disruptions Fuel Renewed Asia Pacific Market Growth report, which covers general IT spending and technology adoption trends. I’d like to call out the key 2013 IT services predictions in this post.

We expect more AP organizations to embrace outsourcing services in 2013 to help them leapfrog the traditional IT skills, process, and technology learning curves necessary to support their business objectives. Our recent Forrsights Budget & Priorities survey in AP shows a high interest for outsourcing services in countries like Indonesia, Malaysia, Singapore, and Japan (see figure below). As AP companies try to manage rapidly rising complexity in both their business strategies and their application and infrastructure environments, they are facing a growing disconnect between business expectations and internal IT capabilities. Senior decision-makers have begun taking a fresh look at outsourcing as a way to bridge this gap.

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Unisys Targets Changing End User Demographics Across Asia Pacific With Its Outsourcing Offerings

Launched earlier this year, Unisys’ People Computing initiative focuses on bringing a “people perspective” to its end user support and outsourcing service offerings. I recently attended Unisys’ Asia Pacific (AP) analyst event in Sydney and this initiative was presented as a key success factor in several infrastructure outsourcing wins in AP in 2011-2012. Case in point: we were given the opportunity to meet Henry Shiner, VP and CIO of McDonald’s Australia/New Zealand. McDonald’s signed an end user computing services contract in 2011 for the management of 43,000 end user devices in Australia and New Zealand. These devices include point-of-sale systems, back-office PC equipment, peripherals, wireless networks, customer order display units, and cameras. Unisys was selected to support the 125,000 people working at 1,060 McDonald’s restaurants. According to Shiner, Unisys’ end user-centric approach was one of the reasons McDonald’s selected Unisys:

  • Unisys approached service-level definitions from the end user point of view. While the right set of tools and processes are key to efficiently managing more than 60,000 support calls per annum, Unisys approached McDonald’s requirements by working directly with end users — store operators in franchised restaurants — by organizing focus groups to better define end user requirements.
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