The proposed acquisitions of SuccessFactors by SAP, and of Emptoris by IBM got me thinking about the impact on buyers of market consolidation, in respect of the difference between dealing with independent specialists versus technology giants selling a large portfolio of products and services. Sourcing professionals talk about wanting “one throat to choke,” but personally I’ve never met one with hands big enough to get round the neck of a huge vendor such as IBM or Oracle. Moreover, many of the giants organize their sales teams by product line, to ensure they fully understand the product they are selling, rather than giving customers one account manager for the whole portfolio who may not understand any of it in sufficient depth. Our clients complain about having to deal with just as many reps as before the acquisitions. They all now have the same logo on their business card, but can’t fix problems outside their area, nor negotiate based on the complete relationship. It seems that buyers end up like Hercules, wrestling either with a Nemean lion   or with a Lernaean hydra.

The acquirers' press releases tend to take it for granted that customers will be better off with the one-stop shop. Bill McDermott, co-CEO of SAP, said, “Together, SAP and SuccessFactors will create tremendous business value for customers.” While Lars Dalgaard, founder and CEO of SuccessFactors, talks about “expanding relationships with SAP’s 176,000 customers.” Craig Hayman, general manager of industry solutions at IBM, said, “Adding Emptoris strengthens the comprehensive capabilities we deliver and enables IBM to meet the specific needs of chief procurement officers."

I've had several conversations with Forrester IT clients in sourcing and vendor management and infrastructure and operations roles during the past few months about how-when-why-who to outsource mobility management. The top drivers identified are: 1) concerns over perceived and detected escalating international mobile roaming costs and how to avoid/stop/reduce them; 2) corporate-level sourcing strategies to consolidate vendors in order to reduce the burden on stretched IT and administrative resources responsible for telecom services contract negotiations, and invoice processing and chargeback; and 3) a need to understand whether a move to more individual-liable user (ILU) mobile services to respond to consumerization and user demand for more choice in smart connected devices (including personal) would erode corporate contract price benefits and also increase IT support burden. I generally recommend they start by conducting an audit of their mobile spend using a third-party service, and then poll heavy users and their managers about interest in, and support and subsidy expectations in bring-your-own-device (BYOD) programs. Next, firms should reach out to two or three of their main mobile service providers, like Vodafone, AT&T Mobility, Verizon, Orange, Sprint, and Telefonica about their telecom expense management (TEM) and mobile device management (MDM) capabilities, and about ILU programs that might even benefit rather than erode the company's price discounts for corporate-liable user (CLU) accounts, and even contribute to meeting overall telecom revenue commitments under a Master Service Agreement that includes fixed-line services (if they have any). There are several dozen (albeit mostly small and privately held) pure-play TEM providers that offer telecom audit consulting, either specifically focused on single-country or regional mobile services or more broadly on multicountry fixed-line and mobile telecoms. The large global systems integrators

Few would dispute that cloud computing has a huge potential for making IT service expenditures more cost-effective and flexible. But as is often the case, what is now possible is not necessarily practical or even desirable from the standpoint of the buying customer in terms of both accommodating longstanding preferences as well as specific contractual terms.

For example, consider these aspects of cloud computing:

• Variable pricing means unpredictable in spending. One of the lessons of the early utility models of the early 2000s was that customers’ preference for predictable expenditures often trumped variability based on consumption. The same is true today with even more inherently fungible cloud services. Moreover, a sudden, wholesale shift from capital spending to expense spending is impractical for many customers.
• Rapid provisioning taxes customer lead times. Rapid provisioning, one of cloud computing’s principal calling cards, presents huge advantages compared to server provisioning times measured in months, but customer provisioning systems cannot usually take full advantage of provisioning times measured in mere minutes.
• Pricing based on resource units can bring challenges. For example, testing-as-a-service allows customers to pay on the basis of test cases executed, but few customers are as yet ready or comfortable paying in this manner.

Anecdotal evidence from several dozen Forrester IT client inquiries and consulting engagements during the past two years suggests that large MNCs are almost always multisourcing their international WANs and other global telecom services. We estimate that more than nine in ten large user companies (firms with 1,000 or more employees in overseas offices) buy international WAN, Internet access, and fixed voice services from three or more network operators or specialists. The larger the firm, the more likely they are to use one and sometimes two top-tier global telecoms providers (like AT&T, Verizon, BT, Orange) for multiregional international telecoms, and additional — often smaller players or VPN specialists (e.g., Level 3/Global Crossing, Azzurri, Virtela, Masergy) — for important international markets, or regional providers such as in Europe (e.g., BT Global Services, Orange Business Services, T-Systems) and Asia-Pacific (e.g., NTT, SingTel, Telstra). Global firms also increasingly are interested in buying some services from emerging market players like Tata Communications and Reliance Globalcom.

Global enterprises’ rationale for multisourcing falls into two broad categories:

1)      Global telecoms — networks and comms apps running over them — are considered “too strategic” to entrust to just one service provider.  

2)      As we keep hearing over and over, “There’s not actually a truly global network operator — they all rely on others, sometimes many others.”