Parallels Partners With Global SIs To Deliver SMB Cloud Services

Clement Teo

In business, it’s very rarely just about what you know, but also who knows you, that determines success or failure.

At their global analyst summit last week, Parallels’ CEO, Birger Steen, welcomed Cisco and IBM as new global systems integrator partners, joining the likes of Microsoft and Symantec. In fact, Cisco has even taken a small equity stake in the company, meaning they will jointly go to market to deliver cloud services. Parallels and Cisco also agreed to expand joint development, marketing, and industry initiatives. While there was no similar equity investment as part of the IBM deal, both companies will jointly engage with large telcos and service providers to offer an integrated IBM/Parallels solution.

Here are some other key takeaways from the event:

  • Parallels noted that the global SMB cloud services market grew to $45 billion in 2012 and will reach $95 billion by 2015, with a CAGR of 28% (see its SMB Cloud Insights research report). In fact, both Cisco and IBM view Parallels as a gateway to tap the growing SMB need for cloud services (see Tim Harmon’s report Opportunities In The SMB Cloud Services Market).
  • The momentum Parallels is gaining from expanded global SI partnerships is paralleled (pun intended) by its moves to better leverage the growing cloud investments being made by large telcos as they move from simply “getting into the cloud” to actively converting their customers from using on-premises apps to cloud apps. Already, companies like American Movil have started to offer SaaS and IaaS services to their Latin American users using the Parallels marketplace platform, thanks to a Cisco-led deal.
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SAP’s Maintenance Price Hike Should Concern Sourcing Professionals And Their CIOs

Duncan Jones

On Monday, SAP communicated that it will increase the price of standard support on new contracts by 5% from July 15, 2013, from 18% to 19%. SAP’s announcement claims that the increase is necessary: “In order to ensure the same high level of quality support in the future.” That justification is disingenuous, in my opinion. SAP already makes a very healthy profit on maintenance. (SAP does not report its margin on maintenance revenue. For 2012, it reported 81% gross profit on software licenses and maintenance combined.) Moreover, third-party support providers (3SP’s) like RiminiStreet can provide better support at half the price or less.

SAP’s other justification is equally unconvincing. It states that within the standard support package “there is ongoing expansion of value, for example a continuous flow of innovation through Enhancement Packs.” SAP reinvests 14% of its revenue in R&D, but I estimate that 90% of that goes on developing new products such as Hana that you have to pay again for if you want them. (SAP disputes this estimate but did not provide an alternative figure.) That would mean that Enhancement Pack development represents around 1% of revenue, insufficient to justify charging double what 3SP’s charge, let alone a 5% price increase.

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Telcos Aggressively Entering The IaaS Market In Asia Pacific

Clement Teo

Demand for infrastructure-as-a-service (IaaS) continues to grow strongly in Asia Pacific. In fact, our Forrsights Budgets and Priorities Tracker Survey, Q2 2012 found that 43% of Asia Pacific organizations had prioritized IaaS as an IT strategy, up from 33% in 2011.

This presents an opportunity for both established cloud service providers like Amazon Web Services (AWS) and Rackspace and new entrants such as telcos to offer IaaS to enterprises in the region.

While telcos have not typically been an obvious choice for enterprises considering IaaS in the region, they have introduced capabilities over the past 12 months that compete head-on with AWS and Rackspace — from entry-level “rent a virtual server” offerings to fully hosted and managed IaaS. As outlined in my “Telcos Are Lining Up Broad IaaS Offerings For Asia Pacific Enterprises” report, players in this space include AT&T, BT, NTT Communications, Orange Business Services (OBS), SingTel, Tata Communications, Telstra, and Verizon.

What does this mean for sourcing and vendor management professionals?

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Asia Pacific Tech Market To Grow By 4% In 2013

Fred Giron

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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New Year’s Resolutions For Sourcing Professionals: Eat Less, Exercise More, And Implement Strategic Software Sourcing

Duncan Jones

Avoid the 2013 holiday rush – start your year-end software negotiations now! Have you just about recovered from several adversarial, transactional software procurement negotiations last month? Have you resolved to avoid a similar situation next year? Then Forrester’s Strategic Software Sourcing Playbook can help you.

Apparently 38% of Americans made weight-related resolutions in 2012, and 67% of people with gym memberships never use them. So my advice is to shun anything you’ve seen in a TV infomercial (“we called it Lunacy because you’d have to be mad to buy it”) and instead make your New Year's resolution to be more strategic and proactive in your software buying in 2013. Our Playbook, launched today, explains how to do that.

Reactive, adversarial software buying is ineffective in the new business technology (BT) world of self-provisioning, cloud deployment, and mobile access. IT sourcing professionals' colleagues bypass them in the sourcing process, while powerful technology vendors expect more revenue from them than they can afford to provide. Software sourcing professionals rarely have alternative suppliers that they can use as negotiation leverage, so you need something more than your natural charm and belligerence if you are to be effective. Forrester's solution is a strategic approach that aligns the commercial model for each supplier with its place in the enterprise's software sourcing strategy.

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HCL Technologies Is Coming Of Age In Asia

Fred Giron

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

Fred Giron

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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New Year’s Resolution: Sharpen Your Skills To Keep SVM Relevant

Mark Grannan

 I needed to order a tool from Amazon.com recently, and I was greeted with a “New Year, New You” panel linking me to whole host of exercise equipment targeted to my lifestyle. Same old New Year’s resolution song-n-dance, right? Well, the idea of self-improvement in 2013 got me thinking:  We keep telling the SVM world that they need to stay relevant in a Business Technology world, so we’re now showcasing specific self-improvement tools to help you feel empowered stepping into 2013. In our recent “SVM Activities, Roles, And Skills Are Evolving” report, we have outlined the root rationale for SVM’s evolution and our prescription on how to move forward: 

  • Roles are becoming more complex. As technology spending habits change, and spending  ripples outward from IT to the business, classic SVM roles (e.g., sourcing; contracts; vendor management) are broadening and deepening to include skills related to strategy, governance, and business value (see top column labels). 
  • These roles require new skill sets and certifications. In order to fill out these new roles, SVM managers should encourage staff to grow their skill set with training and certifications in emerging categories including innovation, diversity, eco-friendly/green, globalization, and strategy (see left-hand row labels). There are a host of organizations and authoring bodies that can help you demonstrate credibility in SVM emerging impact areas.
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Microsoft Public Cloud Services Land In Mainland China

Gene Cao

with Rita Xia

On November 2 in Shanghai, Microsoft announced the availability of Office 365 and Windows Azure services for customers in mainland China; both have been available in Hong Kong for several years. Through its collaboration with 21Vianet Group and HiSoft (now part of PactEra, a merger of HiSoft and VanceInfo), Microsoft is the first multinational vendor to provide public cloud services in mainland China delivered through onshore cloud infrastructure.

Under the agreement, Microsoft has authorized 21Vianet Group, which has a “value-added telecommunications service” license, to operate Office 365 and Windows Azure in China. This is critical to Microsoft’s overall strategy in China, as only Chinese companies qualify for this government license, which is normally issued by ministry or provincial bureaus of MIIT (the Ministry of Industry and Information Technology). Under the terms of the agreement, Microsoft is sharing cloud services revenue with 21Vianet Group and in exchange is able to leverage 21Vianet Group’s license to operate cloud data centers in China.

Microsoft’s entrance into the public cloud services market in China will affect both local and multinational cloud services/technology vendors in a number of ways:

  • Government regulations restricting multinational companies from offering public cloud services in China are gradually loosening. We expect other multinational cloud providers to follow Microsoft’s approach of partnering with a local service provider that has the “value-added telecommunications services” license. The government’s primary objective with this license is to protect local providers and stimulate onshore cloud infrastructure investments, and this goal is met through partnerships like this.
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Unisys Targets Changing End User Demographics Across Asia Pacific With Its Outsourcing Offerings

Fred Giron

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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