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Sourcing Trends: What is Next?
Outsourcing Institute Service Provider Summit
January 30th, 2013
Stanton Jones, Analyst, Emerging Technology
Challenges and Opportunities Facing Service
Providers
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Over the past decade, many sourcing decisions and projects have evolved to from the strategic to the tactical.
Sourcing and the CIO
CIO
N-1
N-2
Sou
rcin
g R
elat
ed P
roje
cts Strategic
Tactical
Fewer
More
Deals 2002: 377 2011: 933
Lower
Higher
Competition 2000: 32% TMS 2010: 64% TMS
Ge
ne
ral T
ren
d
Longer
Shorter
Duration
1999: 6.5Y 2012: 4.8Y
TMS: True Multi-Source where no one provider has more than 80% of spend
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As technologies evolve, Functional Out-Tasking and Service Integration will emerge as the growth areas for Third Party Services. SI Management is strategic.
Trends in the Technology Sourcing Market
Multi- Tower
One Neck To Choke
Model
Tower 2
Tower 3
Tower 4
Out-Tasking Players
► EMC
► Akamai
► VMWare
► Hitachi
► iPSoft
► Oracle
► SFDC
► Rackspace
► Amazon
► Workday
► Etc.
Importance of Labor Arbitrage
Importance of Software, Platforms, Labor Automation,
Scalability
Strategic Tactical
Tower 1
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Wave 2 Characteristics Wave 1 Characteristics
Functional Out-Tasking: What is the big deal?
Think of the market progression from the left hand side of the chart to the right in two waves: Wave 1: Labor Arbitrage; Wave 2: Labor Automation
► 15%-30% cost take out
► Model is scalable to the extent that you can scale labor
► Custom/complex, legacy :“Your mess for less”
► Access to Low Cost Labor necessary to provide continuous value
► Revenue/Profit correlated to People
► Projecting 40%-60% cost take out for automated functions (need more data)
► Model is scalable and is largely independent of labor growth
► Transformative – New way of doing business
► Access to “Rocket Scientists” who can codify manual processes
► Revenue/Profit NOT correlated to People
Wave 1 Labor Arbitrage
Wave 2 Labor
Automation
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Research: Is the Automation Trend Real?
Most providers feel that labor is likely to decrease in favor of automation over the next three years…
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Live Poll: Instructions
You can also use Twitter: send a Tweet to @Poll with the code (vote)
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Live Poll: What do you think?
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Transaction Services
Operational Services
Strategic Services
ADM is a mature outsourcing market offering both on and offshore service providers. Solutions include multi-sourcing models with on and offshore business models.
Process Level Perspective: ADM Services
Version Control
Requirements Definition
Application Architecture Application QA
Application Testing
Application Build
Application Design
Performance Testing
Application Coding
ADM Strategy Development
Configuration Management
Technical Training Security Administration
2nd Level Technical Support
Application Maintenance
User Training
1st Level Technical Support
Hig
h
Ente
rpri
se V
alu
e A
dd
ed
Basic High Complexity of Interaction
Strong retained candidate
Possible outsourcing candidate Strong outsourcing candidate
Suitability For Sourcing
Tower 1
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Transaction Services
Operational Services
Strategic Services
IT is a mature outsourcing market that offers top global service providers and evolving offshore services in remote monitoring and administration services.
Process Level Perspective: IT Infrastructure Services
LAN Management
Integration Services
Optimization Services
Disaster Recovery
Data Center Management
Data Backup & Recovery
Security Administration Network Administration
Technical Training
Strategy Development
Desktop/Mobile Device Management
Server Administration 2nd Level Technical Support
Desktop/Mobile Device Administration 1st Level Technical Support
Systems Monitoring Network Monitoring
Hig
h
Ente
rpri
se V
alu
e A
dd
ed
Basic High Complexity of Interaction
User Training
Data Administration
Systems Administration
Production Control / Scheduling
Service Management Strong retained candidate
Possible outsourcing candidate Strong outsourcing candidate
Suitability For Sourcing
Tower 2
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Transaction Services
Operational Services
Strategic Services
EUC is a mature outsourcing market that offers top global service providers and evolving offshore services in remote monitoring and administration services.
Functional Perspective: End User Computing (EUC) Services
IT Strategy Development
Business Continuity Management
Service Management Operations Site Operations (IMACs, Deskside Support)
Risk Management Disaster Recovery
VIP/Executive Support Remote Access Services
Access Control Infrastructure Administration Video Conferencing
Virtual Platform Operations (Citrix)
Peer to Peer Messaging 2nd level Technical Support
Platform Strategy Development
Directory Services (DHCP, DNS, Active Directory)
Software Distribution
Shareware (WebEx, SharePoint, etc.)
Platform Engineering
Email Services (Email Servers, Blackberry Servers) Asset Management
Technical Training Mobile Device Support (Client side, PDA/Blackberry/iPhone support)
Printer
User Training 1st level Technical Support
Hig
h
Ente
rpri
se V
alu
e A
dd
ed
Low High Complexity of Interaction
Systems Monitoring
Strong retained candidate
Possible outsourcing candidate Strong outsourcing candidate
Suitability For Sourcing
Tower 3
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Comprehensive
Credibility
Capability
Functional Out-Tasking: What is the catch?
There is a market void in the area of Service Integration. Without robust Service Integration, Out-Tasking will have limits as organizations struggle to govern.
► Service Providers who pursue Service Integration as a strategy need to have both Credibility and Capability
Credibility: Will the C-Suite “let you drive”
Capability: Solutions have to be “Wow”, no retreads
► Service Integration by its very nature covers “end-to-end”.
► Service Providers must provide comprehensive solutions in logical groups – no sub-optimization.
Solutions will vary by industry and major process grouping
Independent
► The role of Service Integrator will necessarily deal with multiple independent parties, both internally and externally.
► To be successful, a SI Provider must demonstrate a level of independence with respect to the underlying work functions
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The “CIO Agenda” is a narrative to move Sourcing and back to the CIO office and has three majors themes.
Sourcing: Getting Back to CIO Office
CIO
N-1
N-2
Strategic
Tactical
CIO Agenda
CIO Agenda Themes
Market is Changing Rapidly
Sourcing New Technology Services
is more Nuanced
CIO’s need to get back to First
Principles
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Sourcing New Technology
Services is more Nuanced
Market is Changing Rapidly
CIO Agenda Highlights
Each theme has a myriad of topics to discuss and will vary from company to company and firm to firm, however, the major elements are the same.
► Big Data driving analytics and business predicative models.
► Software defined ______. Bots, Droids, Algorithms replacing human labor.
► Exponential rate of change challenging humans linear paradigms.
► Technology is impacting all functions in businesses.
► Because of the rapid change, 5, 7 and 10-year contracts are dated.
► Static operating models (and contracts) are aging quickly.
► RFP is morphing into transformation projects.
Getting Back to First Principles
► CIO – Chief Information Officer. Key Word: Information
► CIO’s need to embrace “Information” as their primary agenda.
Real Time, reliable, predictive, relevant, and democratic.
► Style and Design of Information/Data platforms are key to success.
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Sourcing New Technology
Services is more Nuanced
Market is Changing Rapidly
Next Steps: CIO Agenda In Action
CIO’s are hungry for thought leadership and education in this dynamic market. The myriad of choices can at times be paralyzing to organizations as they consider their strategic direction with respect to the Service Delivery models.
► Develop a quarterly briefing package for the C-Suite for all major clients
Cover major technology, business, financial, political trends
► NO Selling this is an educational opportunity and meant to build the relationship, credibility, and jointly developed visions for the future
► Let the client pull – don’t push. If the briefings are good, you will not need to push.
► The RFS is gaining traction as alternative to RFP; be prepared for more open-ended responses and presentations based on standard platforms.
► Help clients understand what they need to change and the benefits when adopting standard services/platforms.
► Unlike Wave 1, Innovation is inherent in shared platforms!
Getting Back to First Principles
► Organized data is the key to actionable information.
► Follow Apple’s design lead for this area:
Cool sells – Easy connected ecosystems sell – Design sells
► Focus on design of Big Data and Presentation formats. Design for the end user, not the operations manager. (video)
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Hans Rosling: Stats that reshape your worldview
Source: http://www.ted.com/talks/hans_rosling_shows_the_best_stats_you_ve_ever_seen.html
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Let’s Talk…
►As long as we’ve met, I’ll accept!
►@stantonmjones
►Blog on Consider the Source focused on how emerging technology is impacting the broader sourcing market
►Public decks and white papers
www.isg-one.com
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Service Delivery
ISG Operating Model - Services Framework
Service Strategy, Planning & Control (Governance) Architecture & Standards Mgt
(Design Authority)
Sourcing Strategy & Lifecycle
Management
Service Portfolio Management
Organizational Change &
Communications
Policy & Standards (e.g. Security,
Processes)
Programme Management
Corporate Support Functions
Compliance Legal/ Regulatory
Audit Procurement Corporate
HR/Finance/IT Risk
Management
Service Towers
Network
Mobile Voice
AMS
AD
HR
F&A
Other
EUC
Hosting
Serv
ice
De
sk
Service Integration Business Demand
Business Units
Requirements Definition
Budgeting & Forecasting
Requirements Definition
Budgeting & Forecasting
Business Unit n
Requirements Definition
Budgeting & Forecasting
Man
agem
ent
of
Pro
vid
ers
& V
en
do
rs A
lignin
g Services to
B
usin
ess Need
s
Customer Satisfaction Mgt
Demand Mgt
Financial Mgt & Chargeback
Business Service Catalog Mgt
Business Relationship Mgt
Risk Mgt & Controls Assurance
Cross-Provider Service Management for IT and Business Process Services: • Service Component Catalog • Service Level • Capacity • Availability • Service Continuity • Information Security & Access • Event • Incident & Problem • Service Request • Change • Service Asset and Configuration • Release & Deployment • Service Validation & Testing • Evaluation • Knowledge
Project Mgt (incl. Transition & Transformation)
Measurement & Reporting
Syst
em
s In
tegr
atio
n