Now that WeChat has more than 100 million overseas subscribers, Tencent, China’s leading web content provider, faces a new challenge: improving the experience of its customers outside of China. Steep rises in content consumption — largely driven by the increasing use of mobile devices to access services and information — represent a significant opportunity for content companies like WeChat to go global. To achieve this, Tencent has made positive steps in boosting its investment in data centers and networking outside of China.
To improve its user experience in the rest of Asia, Tencent recently announced that it will colocate one data center in Hong Kong and has chosen Equinix to operate it. This is already the second node that Tencent has built outside of mainland China; the first was implemented in Canada to serve North American users.
As an Internet company that operates its own large data centers in mainland China, Tencent has deep experience in data center construction and management and has leveraged this experience to develop best practices and key criteria for data center provider selection. These include:
Networking and interconnection options. As Tencent intends to rapidly expand its business into more countries, it needs carrier-neutral data center providers to offer the necessary connectivity options. For its Hong Kong implementation, Tencent used Equinix to optimize transit routes to achieve lower latency and better connect users inside and outside of mainland China; the data center provider can access multiple networks and peer with members of the Equinix Internet Exchange.
Many of you will be in the midst of a negotiation with SAP at the moment, because SAP does about 40% of its license deals in the October to December quarter. It’s a sourcing cliché that software companies give their best discounts at their fiscal year end, but just because you are making a purchase in month 12 doesn’t mean that you are getting a good deal. I see a lot of SAP proposals and contracts, and I’m often surprised by the gulf between the actual deal on the table and what I would consider to be an acceptable proposal – one that sets the relationship up for mutual success, balancing price, flexibility and risk.
Buying software from powerful providers such as SAP 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 expert help to coach them during a negotiation, but it isn’t a question of haggling skills, it’s a question of deep, current market knowledge. Unless you have that, you risk:
ASEAN IT spending will grow by 7% in 2014. A weak global economic recovery and unstable domestic spending led to slower 2013 economic and tech industry growth in China and directly or indirectly affected export-oriented economies in the Pacific and ASEAN. This combined with ongoing structural problems in India and dwindling foreign direct investments in ASEAN to produce slower than expected IT spending growth across Asia Pacific in 2013. Forrester expects IT spending growth in the broader Asia Pacific region to improve slightly in 2014 versus the prior year, with regionwide growth of 4%, while IT spending in ASEAN will grow by about 7%.
Transformation projects are the main drivers of IT spending. Debt levels in countries like Malaysia and Indonesia will continue to be a major source of concern for foreign investors, whose lack of investment will in turn limit growth in these countries. Vietnam, the Philippines, and Indonesia will lead the ASEAN region in terms of IT purchase growth, most of which will come from companies undertaking large IT transformation projects and implementing best practices to improve their competitiveness in a slower, more uncertain economy. Thailand’s ongoing political uncertainty may also affect how IT investments flow into the country, and hence its IT spending growth rate in 2014.
salesforce.com’s 100,000+ customers now have a new option for streamlining SaaS sourcing across the enterprise: Private AppExchange. And, the price is right at $0. Free? Yes, free(!) but, don't assume this won't impact your costs.
Last week at salesforce.com's massive Dreamforce event, Forrester had the opportunity to learn more about some of salesforce.com's recent announcements -- including the Private AppExchange. This free add-on feature for salesforce.com users lets companies set up an AppStore that is private, personalized, and custom populated for their own company. The Private AppExchange lets organizations “distribute any app, to any user on any device through a central, secure store, using Salesforce Identity to grant employees instant access to the apps they need. Organizations can customize the store with own categories and branding.”
The Private AppExchange could help sourcing executives address goals for enabling SaaS sourcing that we frequently hear about, such as:
Lets users quickly discover and deploy solutions that meet their business needs
Supports collaboration and idea-sharing across all users at all levels of the company
Adheres to corporate standards (integration, data rules, security, contracting, and more)
Ensures favorable pricing based on overall corporate relationships and usage
Showcases the specific SaaS solutions already in use within the company
I’ve just returned from SAP’s 2013 SAPPhire China user conference; with more than 17,000 attendees, it’s still the largest SAP event on the planet. The vendor has recently launched new offerings, like HANA enterprise cloud and extended ERP solutions for new industries; it has also extended its China strategy by announcing SAP Anywhere, a bundle of cloud-enabled mobile CRM services, which it has just begun piloting here.
At the event, clients presented their feedback on SAP services, particularly rapid deployment solution (RDS) services. Ever since their launch two years ago, SAP has extended RDS services to more than 150 software applications. The RDS concept aims to provide everything out of one box; clients buy a bundle of application and implementation services. RDS services have brought tangible benefits to clients that want to quickly start their SAP journey or begin with pilot implementations before going for a full-scale rollout.
However, RDS does not apply to all SAP application implementations; it primarily depends on the client usage scenario. Forrester believes that RDS will not be an attractive choice in a few instances:
Large enterprises using SAP core ERP systems as a mission-critical application. Large enterprises normally make huge investments in these projects. Their primary focus is not on saving time or money; instead, their top priority is ensuring that the project is a complete success and that all functionality is rock-solid: well-developed and thoroughly tested. RDS services, which can cover up to 80% of ERP system functionality, may not be the best choice in this scenario. We’ve seen this happen in China and Southeast Asia time and time again over the past two years.
Chinese manufacturers are repositioning. They’re willing to invest more in improving their core competencies, like R&D and design capabilities, by using outsourcing providers that have successfully served foreign peer companies in the same industry. They must dedicate all their resources — including internal IT systems and solutions like ERP — to meeting this goal.
We recently published a case study on Tagal, a joint venture of ThyssenKrupp Steel Europe and Angang Steel in China. The company was finding it difficult to face up to new business challenges; not only was its infrastructure aging, but its original outsourcing services agreement was constraining business development.
To solve these problems, Tagal changed its sourcing strategy and successfully migrated its ERP system to an Itanium x86 platform to accelerate business processes. The resulting ERP efficiencies enabled employees to process orders and reports twice as fast as before. This has improved Tagal’s relationships with its customers, which are some of the world’s largest automakers. Tagal also reduced its total cost of ownership by 20% in the first nine months alone, primarily due to the simplified sourcing strategy.
How did Tagal achieve these tangible outcomes? It redesigned its service contract and employed three key principles when re-evaluating vendors:
Modifying sourcing governance. Tagal drew on lessons that it learned from 10 years of outsourcing. Its new service provider contract contains more penalty terms; for instance, the provider now must refund the outsourcing fee in any month in which it does not fix two system errors within an agreed time period.
SAP is betting that its future lies in the cloud. While the company still books just 5% of its global revenue from cloud services, SAP is putting the cloud at the center of its growth strategy, unveiling new business models and initiatives aimed at increasing the cloud consumption of its applications. To facilitate this, SAP is making it easier for clients and partners to embrace the cloud. For example, its cloud extension policy allows customers to reallocate existing license seats to a cloud subscription. Clients can unlock the stored value of unused licences and put it to work, giving end users access to meaningful applications in the cloud.
What It Means
SAP has a number of cloud services on offer, and the changes the company is making to pursue its high-growth strategy in Asia will not only transform SAP’s business model, it will also change how its partners do business. Client organizations in Asia will also have to adapt and:
Telstra hosted its annual analyst event in Sydney on October 23 and 24. In his keynote address, CEO David Thodey compared Telstra’s customer advocacy journey to a triathlon that the firm has just begun, which we believe it a fitting analogy for Telstra’s progress on the path it has set for itself. The company is clearly in the race and making progress, but still has many miles to go.
While the company shared a broad spectrum of initiatives, our main observations are that Telstra:
Has made clear progress since our check-in last year, but its transformation remains a work in progress. Telstra is no different than other incumbent telcos working to transform beyond traditional — and declining — sources of revenue. Its dominant position in Australia is secure, but its prospects in new market categories inside and outside of Australia are less certain. We do not believe that Telstra is particularly innovative compared with service providers in the US or Europe, but we do believe that it has a viable transformation strategy and is making progress. Its progress in the Australian media and entertainment industry, including its Foxtel investments, is impressive — it has built a large IP-based digital media file exchange platform to serve global broadcasters and content providers.
Carrier Ethernet aims to provide users with a wide-area service to connect sites, in the same way that asynchronous transfer mode (ATM), Frame Relay, and X.25 services from carriers have done in the past. While end user demand for carrier Ethernet services in Asia is relatively small, it’s growing year over year and is having an impact on service providers’ bottom lines: Carrier Ethernet services currently account for 8% to 10% of service providers’ total connectivity revenues in the region.
Over the past few months, SAP Services has embarked on a major software-enabled services transformation of its offerings and operating models. The strategic intent is to increasingly rely on IP-based solutions (including SAP’s Rapid Deployment Solutions portfolio and assemble-to-order methodology) to deliver outcomes faster, with lower risks for clients and, eventually, support value-based pricing. Next on SAP Services’ transformation road map? I believe that the organization needs to quickly change the perception of the rest of the SAP ecosystem, which still views SAP Services as a competitor.
SAP Services’ business model used to merely rely on staffing “rock star” consultants on client projects in order to facilitate the implementation of complex solutions. The new strategy aims at positioning the 15,000 service professionals on SAP’s newer solutions (e.g., cloud, mobile, HANA . . .) in order to ensure that early projects generate the promised outcomes. In order to achieve this goal, the delivery teams need to be much more focused on collaborating internally (with the R&D team, for instance) as well as externally (with clients). SAP Services will also need to increasingly work collaboratively with its partners in order to ensure the success of the overall SAP-as-a-Platform strategy.