Lenovo recently announced record results for the third quarter of the 2013/14 fiscal year: the first time that the firm has exceeded US$10 billion in revenue in a single quarter. Lenovo has continued to prioritize maintaining or increasing its share of the PC market — the majority of its business. This strategy has paid off: Lenovo’s PC business (laptops plus desktops) grew by 8% year on year — in stark contrast to its slumping rivals. Lenovo can attribute its success to a strategy that sacrifices profit to keep prices competitive, maintains a direct local sales team, and retains channel partners after acquisitions.
Forrester believes that the mobile mind shift is one of four key market imperatives that enterprises can use to win in the age of customer. Lenovo has gotten a good start on this journey with its effort to enhance its mobile-related capabilities. Although the coming Motorola deal may have a negative impact on Lenovo’s performance over the next three to five quarters, the firm believes that mobile can change its business — and not just its digital business. In the next two to three years, Lenovo’s key strategy will be to provide customers with mobile devices and related infrastructure that will address their mobile mind shift. In particular:
Many of you will be in the midst of a contract negotiation or maintenance renewal with BMC and/or CA at the moment, because both software vendors do a large proportion of their license deals in the January to March quarter as it’s their financial year ends on March 31. It’s a sourcing cliché that software companies give their best discounts at their financial year end, but just because you are making a purchase in month 12 doesn’t mean that you are getting a good deal. Through client interactions, I see a lot of software deals and I am often surprised by the gulf between the latest deal on the table and what I would consider to be a market best deal – one that sets the relationship up for mutual success, balancing price, flexibility and risk.
Buying software from powerful providers such as BMC and CA is very different from buying hardware, services and non-IT categories. Unfortunately, many sourcing professionals seem to think that they’ll look weak if they engage external expert help to coach them during a negotiation, but it isn’t a question of just buying additional haggling advice (although that can sometimes help), it’s really a question of buying deep, current market knowledge. Unless you have that, you risk:
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.
In the Age of the Customer, it’s vital that your hard-pressed IT budget is spent wisely and is refocused into areas of the business that can help improve client acquisition, retention and profitability. Negotiating better deals with your legacy incumbent software vendors is a great way to free up cash to spend on innovation.
If you have an upcoming contract negotiation with Microsoft, Oracle or SAP then let’s schedule a call to discuss how you can gain greater pricing and contract concessions by working with Forrester’s dedicated Software Contract Negotiation experts. With the costs of software licenses and annual maintenance going up each year and vendors providing limited transparency into licensing options, it’s critical you know which discounts to target and what negotiation tactics have worked well for other businesses.
Having worked with thousands of clients, Forrester has built up significant market intelligence on what’s achievable and how to get it. As a result, we are often able to show our clients how to negotiate additional savings on their license and on-going maintenance/support costs. And our success-based fee model means you only pay us if our advice helps you save you money.
We can help you and your negotiating team:
● Review the competitiveness of your software vendor’s proposals and renewal contracts.
● Refine your negotiation strategy and tactics so that you target the most valuable concessions, improve contractual terms and maximize savings.
● Optimize your time at the negotiating table by helping you prepare for, and react to, your software vendor’s sales tactics and objections.
VMware recently announced that it has signed a definitive agreement to acquire AirWatch, a leading provider of enterprise mobile management and security solutions. The acquisition is expected to provide customers with the most complete solution to manage users, devices, and applications across server, desktop, and mobile environments.
VMware obviously has had to expand its penetration beyond the server-centric virtualization market. So far, it has had mixed success with selling virtualization as a platform in the region, even though it has successfully entrenched itself as a leading hypervisor provider (unfortunately, VDI has proved a difficult sell for VMware in AP). In order to gain much deeper penetration and traction, VMware needed to add an end user computing offering to its portfolio. The pairing should result in:
Transformation Should Focus On Improving Outcomes, Not Merely On Increasing Competition
I’ve spoken with many IT Procurement leaders in public sector organizations ranging from US county schools districts to national governments. Most are prevented from applying best practices such as Strategic Software Sourcing by their politicians’ ill-conceived edicts and directives, such as those included in this announcement by the UK’s Cabinet Office that optimistically claims “Government draws the line on bloated and wasteful IT contracts”. In related press interviews the relevant minister Francis Maude complained that “a tiny oligopoly dominates the marketplace” and talked about his intention to encourage use of open source alternatives to products such as Microsoft Office, to increase competition and to divert more spend to small and medium-sized IT companies. The new edicts include bans of contracts over £100 million or 2 years’ duration and of automatic renewals. Mr. Maude claims these rules “will ensure the government gets the best technology at the best price”.
Mr. Maude and his team have a laudable and important goal but their approach is misguided, in my opinion. Short term contracts, indiscriminate competition and avoiding sole source category strategies will deliver neither the best technology nor the best price, because:
Although Forrester expects China’s public cloud market to show solid growth through 2020, we have observed that organizations face barriers to adopting public cloud. Survey results indicate that data privacy, residency, loss of control, and security remain the top barriers for organizations adopting public cloud in China. This shows that Chinese customers are getting more knowledgeable about cloud and would like to understand cloud players’ offerings in more detail.
To ease concerns about public cloud usage, in mid-2013 the Chinese government and some leading cloud and data center service providers in China initiated an industry standard to evaluate cloud service offerings. After six months of discussion, they agreed upon version 1.0 of the industry standard, which includes three categories and 16 detailed SLAs:
When I interviewed clients for a recent telecom sourcing best practices report, I heard a recurring refrain: “We need to drive down costs.” Both CIOs and sourcing and vendor management (SVM) professionals measure the health of their department with the amount of annual cost savings they can achieve. While this is a laudable metric, over time it can skew SVM pros’ perspectives and cause them to miss an opportunity to provide value to the business in the form of a vital “always-on” service.
SVM pros should:
Accept that cost savings are limited and short-term. Telecommunications is highly regulated in Asia Pacific; local competition is limited and governments own significant stakes in incumbent telcos. While cost savings can be had, they will diminish over the lifespan of a contract. SVM pros must understand how to work with lines of business and suppliers to create more value for the organization.
Focus instead on always-on service availability. Firms must focus on the fundamentals: ensuring that their communications services push toward always-on service availability. Getting the right price for services is important, but SVM pros in Asia Pacific must align business needs to service sourcing and ensure that the service delivers the expected value in terms of availability and quality.
Engender trust with providers with long-term commitments. View service providers as long-term partners; this will take the uncertainty out of the relationship and engender trust. One company was happy to lock in a five-year rental with an equipment supplier, eliminating a source of business risk in a volatile Asian economy. Focusing on long-term contracts gives providers the impetus to serve you well.
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:
I attended Dell’s third annual global summit last week at the company’s headquarters in Austin, Texas to get an update on the company’s progress since it went private. The event demonstrated Michael Dell’s passion to transform a hardware company into an end-to-end solution provider. Dell highlighted five key investment priorities in 2014, including expanding its sales coverage and enhancing its relationship with partners; it also wants to increase its investments in emerging markets, with China atop the list.
The success of these investment plans hinges upon highly efficient execution across the organization. We’ve already seen one example that Dell has increased its executive capability since it went private: Its partnership with open source software provider Eucalyptus to put preinstalled and pretested Eucalyptus software on Dell VRTX servers. This project was ready just three weeks after CEOs of Dell and Eucalyptus decided to go forward with the partnership.
On one hand, the improved execution capability and more flexible service delivery model will strengthen the competitive position of Dell’s services. On the other hand, these changes will also provide benefits to end user organizations, including: