Are you ready to source digital disruption?

Christopher Andrews

Digital capability – social, mobile, cloud, data & analytics – disrupts business models, introduces new competitive threats, and places new demands on your business. Highlighting this fact: Forrester’s 2012 “Digital Readiness Assessment” survey found that 65% of global executives say they are “excited about the changes that digital tools and experiences will bring” to their company.

While most people know these digital trends are coming, however, far fewer know how to purchase these cutting-edge digital capabilities. What companies will you rely on? Where are the new risks? What are the pricing models?  In the survey mentioned above, only 32% of the same sample agreed that their organization “has policies and business practices in place to adapt” to those digital changes.

This is important, since developing the breadth of digital capabilities your company needs cannot all be done in-house. To succeed, your company will need to access the strengths of its supplier ecosystem, maximize value from strategic partners, and leverage emerging supplier models.  

This is a tremendous opportunity for sourcing and vendor management professionals to increase the strategic value they provide to their business. But to do this, you’ll need to balance your traditional cost-cutting goals with demands for business expectations for growth, innovation, and value.

Read more

Sourcing Strategies To Drive Digital Disruption: Early And Fast-Evolving

Liz Herbert

Leading-edge executives at organizations drive growth, innovate, and disrupt industries through emerging technologies: social, mobile, cloud, analytics, sensors, GIS and others. 85% of executives in a recent survey shared that “the need to drive innovation and growth” would have a moderate or high impact on IT services spending. But, today’s technology buyers face a fragmented, fast-moving landscape of niche technology and services providers in newer spaces (social, mobile, cloud) as well as new offerings from their largest global partners.

Often the leading- and bleeding-edge disruption comes from business stakeholders, rather than IT or sourcing executives; sourcing executives struggle to keep up with the fast pace of change that business demands. Our research shows that this fragmented, divisional, silo approach to buying (often under the radar screen) can create risk and go against enterprise IT strategy decisions.

To help their organizations navigate through these emerging options, we have identified three key principles of IT sourcing strategy:

  1. Change the rules for working with vendors and partners. To thrive in the world of digital disruption and to enable sourcing of emerging technologies and services that drive digital disruption, sourcing strategists must create new rules for working with technology partners. They must increase the emphasis on innovation and differentiation and treat partners who excel in these dimensions differently from other tiered suppliers.
Read more

Disaggregating “SMAC” is the First Step In Sourcing Digital Business Outcomes

Christopher Andrews

Much has been made over the past few years about the “new” digital technology imperatives – social, mobile, analytics and cloud (collectively referred to as “SMAC”). Though the IT industry is flush with reports about SMAC, lumping these technology capabilities together is both helpful -- because they do represent a collective “what’s hot” in IT -- and misleading, because each technology has a different level of maturity, complexity, and business impact.

I often say that that sourcing professionals are “where the rubber hits the road” with new technologies.  That is, the technology industry can hype a new technology all it wants. But until someone makes a strategic sourcing decision -- one that carefully examines costs, risks, and benefits of these offerings for enterprises, it’s mostly just hype.

And when you peel back the layers of the SMAC acronym, what you see are four unique solutions, each with different levels of complexity which are highlighted in the sourcing process:

Read more

Cisco Services Leverages Software Assets To Transform Its Services Value Proposition

Fred Giron

As you’re all well aware by now, a perfect storm of technology innovations — including cloud, analytics, mobile, and social­ ­— is fundamentally disrupting the way your company engages with its customers (as well as employees and partners). For service providers in particular, the main challenge is understanding how to best leverage these technology innovations to remain relevant and ultimately generate more business value. So it’s exciting to see a service provider like Cisco Services come up with new offerings that respond to this challenge in innovative ways.

I met with Cisco Services Asia Pacific Japan and China (APJC) executives last week in Seoul to discuss their strategy in Asia. I wanted to highlight a few takeaways that I believe will be important for sourcing professionals in Asia and beyond:

  • Cisco Services is a key enabler of Cisco’s overall transformation. Cisco Services used to be a captive consulting organization providing support and technology services for a product company. In a recent analyst call, John Chambers identified Cisco Services as one of the main levers that will help Cisco transition from a transaction-oriented to an annuity-based business model and help the company become the largest IT company globally. The company’s aim is for Cisco Services to represent 24-26% of total revenues in the next 3-5 years. These goals are extremely audacious; achieving them will require huge efforts from Cisco, including some targeted acquisitions in the services space.
Read more

Mobile World Congress 2013 Barcelona: Cheaper, Better, Faster, Broader

Clement Teo

My trip to the Mobile World Congress in Barcelona this year drew mixed emotions: excitement over the vast changes in the mobile world, followed by frustration at having my laptop bag stolen. The last time I was there, in 2008, Motorola was a phone and infrastructure manufacturer, Nortel Networks was still in business, and Nokia Siemens Networks was barely a year into its merger.

Today, Nortel (and my bag) is but a distant memory, Motorola Mobility is part of Google, and others, like Alcatel Lucent, have battled to stay relevant in an age of cheaper products and services. Nokia Siemens Networks, for instance, is today a more focused, leaner company, recently announcing a return to profitability after quarters of losses. Even the venue has shifted from the old grounds to a newer, larger facility.

The GSM Association (GSMA) projects in a global report that developed economies will save US$400 billion in healthcare costs from mobile health services by 2017, and a reduction in carbon emissions of 27 million tons (the equivalent of planting 1.2 billion trees) via smart metering technology in the same period. 

Read more

Nasscom 2013: Real Changes To Indian IT Services Are Underway

Christopher Andrews

I am just back from the whirlwind that is Nasscom India Leadership Forum 2013 in Mumbai, India. The Nasscom event is the premier event for the Indian IT services marketplace. Besides meeting great people, eating too much wonderful Indian food, and seeing action star and local legend Amitabh Bachchan in-person, the event provides a chance to check the pulse of the most important geographic hub for the IT services marketplace. 

Here are some of my key findings from the trip:

Read more

Local Outsourcing Providers Should Be On Your Radar In China

Gene Cao

Over the past three years, multinational companies’ (MNCs’) approach to outsourcing in China has steadily matured as they seek to leverage broader outsourcing models and source from a combination of global providers and local Chinese providers.

In my latest report, Lessons Learned From Outsourcing In China: Part 2, I analyze the key outsourcing trends and approaches to help sourcing and vendor management (SVM) professionals at MNCs select the right local outsourcing suppliers. As part of this analysis, I’ve highlighted the main service capabilities of local Chinese vendors broken down by service model and profile the different types of service providers that currently operate in China.

Key findings from the report include:

  • MNCs are adopting sophisticated outsourcing approaches in China. Many MNCs are shifting away from a pure global service provider approach to a broader shortlist that also includes Chinese providers. SVM professionals at MNCs appreciate local providers’ broader geographic coverage, lower outsourcing cost and more flexible service deliverables.
  • MNCs are also diversifying their outsourcing requirements. After signing the first wave of outsourcing contracts in the past five to 10 years, MNCs are becoming increasingly comfortable considering more sophisticated outsourcing contracts, such as best-of-breed selection, vertical outsourcing, etc.
  • Local outsourcing service providers are continually improving their capabilities. To approach more MNC clients in China, local providers have enhanced their geographic coverage in remote cities, accelerated consolidations, recruited senior talent for improved depth at key positions and aggressively recruited fresh graduates to manage costs.
Read more

Categories:

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.
Read more

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.

Read more

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?

Read more