Outsourcing T's And C's: Will Cloud Suppliers Act More Like Outsourcing Suppliers Or Vice Versa?

Bill Martorelli

Corporate customers of cloud services are not having much fun when negotiating with emerging cloud suppliers.

Forrester clients seeking support for their longstanding contractual preferences ranging from access to supplier data centers for due diligence to more robust terms for liability and mutual indemnity, just to name a few examples, are facing frustration when cloud suppliers refuse to accommodate them. While cloud suppliers themselves are mindful of their need to be more flexible for large enterprise customers in theory, actual concessions are few and far between, and in some cases customers either grin and bear it or walk away.

Is it only a matter of time before cloud suppliers accommodate the same kinds of concessions and flexibility routinely accommodated by traditional outsourcing firms? Not necessarily. It is tempting to think that increased flexibility on the part of cloud providers will inevitably grow as a consequence of greater maturity; the reality is more complex. The very outsourcing suppliers that have routinely accepted these requests are becoming less anxious to take additional risk in client engagements, especially while cloud suppliers are allowed to skate around potentially thorny issues like liability. Yes, the outsourcing suppliers are willing to provide an indirect contracting model for cloud services while taking on additional service delivery risk in many cases, but there are limits to their forbearance.

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Enabling The Shift to Software Assets: Accenture Software Shows Progress

Fred Giron

I recently finalized a report* on software asset (SA) based IT services, this time looking at vendors’ best practices in terms of governance, organization, skills, tools, and processes. Needless to say, the move to software asset-based services will have a huge impact on the traditional operating models of IT services firms.

Obviously, IT services firms need to learn from their large software partners to understand and implement specific software asset management processes such as product sales incentive schemes, product management, product engineering, and release management.

This will induce a formidable cultural change within the IT services vendor’s organization, somewhat similar to the change Western IT service providers had to undergo 10 years ago when they finally embraced offshore delivery models.

I see a few critical steps that IT services firms need to take in order to facilitate this shift towards software asset-based business models:

  • Build a client-relevant SA strategy. Building an SA base offering is not (only) about doing an inventory of the existing intellectual property (IP) that you have on employee hard drives and team servers. More importantly, it’s about making sense of this IP and building strategic offerings that are relevant to your clients by centering them aounrd your clients’ most critical business challenges.
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CGI’s Logica Buy Should Benefit Both Suppliers And Customers Of Both

Bill Martorelli

CGI’s plan to acquire Logica for approximately $2.6 billion, amounting to the combination of two distinctly regional entities into a single “global” provider, offers further proof of a consolidating globalized service industry — as if we needed any after the series of service industry consolidations during the last few years. This acquisition makes sense for several reasons:

  • Geographic synergies: In terms of complementary regional strengths, the two entities could hardly be better paired. CGI is well established in selected vertical domains such as government, financial services, telecom/utilities and others, but it remains a mystery to many customers outside of its native Canada and the DC beltway. Although present in several European locations, CGI registers only 6% of its revenues from Europe, while Logica does not play in the North American market. Not only is Logica strong in its native UK and in governmental circles like CGI, but it also has strong Pan-European presence. Once complete, CGI can legitimately claim to be a global player, although presence in Asia/Pacific remains limited for both entities. 
  • Competitive benefits: With strong capabilities in both ADM and infrastructure services, Logica’s ongoing financial weakness made it an attractive acquisition candidate. Part of this was due to the unique challenge facing European services players that must fend off not only global players, but also the India-based suppliers, who are active primarily in the English-speaking nations such as Logica’s native UK. Existing Logica customers can take comfort that it will not likely face intensifying financial challenges, while CGI’s customers can take comfort from a generally positive reaction from the investment community. 
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From Jugaad To Reverse Innovation

Fred Giron

Next month, I will be relocating to Singapore after two years in India. These two years have been an amazing learning experience for me, both from a personal and professional point of view. A very intense experience too! Of the few Hindi words I learned during my stint in India, there is one that I am particularly fond of: “jugaad,” which can be translated as “making things work.” This is one way to summarize what India is all about — and why India works as an economy, in spite of the gods and despite all of the challenges that India currently faces as a society.

This concept has taken on a lot more importance on the global scene in recent years from an innovation management point of view. A former Forrester colleague has recently coauthored a book about the concept and how it could “reignite American ingenuity.” The economic and ecological crises that we have been through over the past few years call for new ways of approaching economic development and growth. And the “jugaad” concept could bring interesting solutions to our modern societies.

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SAP Rapid Deployment Solutions (RDS) Address Cost And Speed Of SAP Deployment

Liz Herbert

At SAP SAPPHIRE (SAP’s biggest user conference, May 14–16), SAP announced that it has deployed more than 1,400 instances of Rapid Deployment Solutions (RDS) at more than 1,000 unique customers. These solutions help customers deploy SAP modules in as short as a few weeks at a reduced price point by productizing typical configurations. SAP boasts cost savings typically in the 20% to 40% range versus similar deployments that do not utilize RDS.

SAP has more than 70 of these solutions currently available. Additional solutions are available through partners like Accenture and TCS. RDS solutions are available in a wide range of areas like CRM, Sourcing, Financials, and even SAP HANA.

SAP positions these solutions as “lego-like,” meaning that customers can build one on top of the other and can customize and extend as much or as little as they want.

Our take? These RDS solutions are a great way for companies to quickly realize value out of SAP, an issue which has long plagued the SAP community. Even clients who need to go far beyond what an RDS offers and create a much more customized deployment might be able to jump-start their project with an RDS. However, these offerings are not available in all horizontal or vertical areas. SAP customers who want a complete solution heavily tailored for their industry-specific needs will likely need to turn to SAP’s ecosystem of pre-built solutions, rather than lighter-weight RDS offerings. 

See more at www.sap.com/rds/.

Are you using RDS solutions? Considering them? We would love to hear your thoughts!

Liz Herbert

@lizherbert

Clients Demand Business Innovation From Services Partners

Liz Herbert

Innovation is again the hot topic for clients, as it was before the economic downturn. Clients have a renewed interest in innovation and business growth, and they seek services partners who can help. But what is innovation in this context?

In this context, clients seek business innovation. They want a provider who delivers new ideas and insights that will change business processes to drive revenue or improve business processes (for example, through product innovation, customer process innovation, supply chain innovation). They do not mean delivery innovation or continuous improvement, where the provider improves service delivery efficiency to drive lower IT cost and/or higher quality of IT service to clients (for example, through improved delivery processes, shared services, reusable assets). (Of course, they usually do want this as well — but this will not necessarily drive business innovation such as new products and processes.)

What do leading firms do to drive ongoing business innovation from services providers?

1) Put process around innovation. Organizations who successfully get innovation from their services providers put processes in place, from idea discovery to incubation to implementation to measurement. They also select services providers who have codified the innovation process. Ongoing innovation cannot happen by accident.

2) Use social media to collaborate at fast paces with customers, partners, and employees. Tools such as social networking sites, microblogs, and collaboration sites let firms gather ideas, evolve ideas, and rank ideas with a wide audience. 

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IT Service Providers Will Soon Face Operating Model Mayhem

Fred Giron

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.

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It's Time To Get Serious About Services Innovation

Christopher Andrews

Year over year, Forrester hears from clients who are frustrated with their providers’ inability to provide innovation. In 2011, 60% of respondents to Forrester's Sourcing and Vendor Management Survey cited "Limited ability to define or provide innovation" as one of the top complaints when evaluating their suppliers. The frustrations behind these numbers include:

  • “I have to push my suppliers for every bit of innovation they provide outside of the contract.” 
  • “Vendors consider 'innovation' anything that involves selling me more stuff.”
  • “They say it's innovation, but it’s not even specific to my business.”

Service providers, of course, are eager to market themselves as innovative. They’re competing in a market filled with scrappy upstarts — and they’re all striving to differentiate offerings. Yet they are also frustrated with innovation — the innovation demands of clients. The common complaints we hear from them include:

  • “It’s rare that clients can define what they want when they ask for innovation.”
  • “Our clients always tell us they want innovation. They are just not willing to pay for it.”
  • “We can’t provide innovation for clients if they won’t put us in touch with their business.”
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Should You Be Using Service Level Management Tools?

Bill Martorelli

A couple of years ago, my then-colleague Patrick Connaughton wrote a market overview about service-level management tools, which included a discussion of specific toolsets intended to help customers manage both internal and external services-based relationships. Among the technologies in this space include Digital Fuel, Oblicore, Compuware’s APM, Enlighta, Appirio, and others. Such service-level management tools, as we described them then, reflects one key aspect of toolsets like Digital Fuel and Oblicore, to monitor service levels for both internal and outsourced delivery. But the technologies also have other capabilities, including the ability to create catalogs and manage financial implications of services consumption, both internal and external.

Since that time, challenges in service consumption, including measuring and managing services relationships, have only gotten harder, complicated by the widespread trend toward multisourcing and multi-supplier relationships and new categories of cloud-based services like IaaS on the other. Given these challenges, tools like those described above would seem to have some possible value. Big industry suppliers sure seem to think so: Since we wrote our last report, NewScale has been snapped up by Cisco and Digital Fuel was bought out by VMware, with the goal in part to help customers of virtual solutions and cloud services meter their usage and help charge back for consumption. In addition, KPMG acquired Equaterra, meaning that KPMG also took ownership of Equaterra’s EquaSiis, an outsourcing governance suite developed in conjunction with Microsoft. Oblicore was acquired by Computer Associates just months prior to our report. The acquisitions have in some cases meant a change in focus for the technologies acquired, to fit more cleanly to the broader product and services agenda of the acquirer.

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Deloitte To Acquire Workday Implementation Specialist Aggressor

Liz Herbert

Deloitte continues to ramp up its software-as-a-service (SaaS) consulting practice, both through organic growth as well as acquisition. Today, Deloitte announced plans to acquire Workday implementation specialist Aggressor. Aggressor has been one of a very small set of Workday integrators (along with Deloitte), which means Deloitte now further boosts its already-impressive Workday practice.

This move furthers Deloitte’s Workday practice, as well as Deloitte’s overall practice in SaaS implementation and integration work. Deloitte also has strategic partnerships with other leading SaaS vendors, most notably salesforce.com.

For buyers, this means a stronger and deeper bench of consultants at Deloitte. But, on the downside, it removes a boutique/specialist option from the market, which appealed to some because of its laser focus, smaller size, and (perceived or real) ability to be more nimble, flexible, and price competitive.

Are you an Aggressor or Deloitte client or prospect? We would love to hear your thoughts!

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