ISG Market Update

© 2015 Information Services Group, Inc. All Rights Reserved.

© 2015 Information Services Group, Inc. All Rights Reserved.

Preparing for the Future Smart ISG Market Update

Harvey Gluckman

© 2015 Information Services Group, Inc. All Rights Reserved 3

Chasing Future Smart


Future Smart: Hanna-Barbera

Drones 3-D Printed Food

Flying Cars Jet Packs Robotic Help Holograms

Smart Shoes Smart Watch


Looking back at 2014 …

Replacement Automation

Continuous Contracting

Enterprise Analytics

Service Integration

Internet of Things

Crowd Sourcing

Outcome-based Pricing

Hybrid IT

Global Business Services


Only some service providers are achieving digital maturity …

The GOOD Market aggressive in productizing offerings & services “as-a-service”

What we are seeing now

Enterprises want to go faster … with or without IT.

DIGITAL SOLUTIONS

The BAD Packaging confusion: Is it a product, a service or a solution?

The UGLY Many can’t articulate: How does it change your customer’s business model?


Rise of Bimodal IT

Mode 1 – Systems of Record Mode 2 – Systems of Differentiation

Examples:

o  ERP, CRM, DW, Trading platforms

Characteristics:

o  “Bullet proof”

o  Operational rigor

o  Often with regulatory/compliance implications

Examples:

o  Analytics, Big Data , IoT, Mobile, Social apps

Characteristics:

o  Experimental

o  Trial and error/“Fail Fast”

o  Speed, speed, speed

o  Customer-focused

&


Bimodal IT Challenges

o  How to synchromesh the 2 operating modes?

o  How to integrate infrastructure, applications and business processes?

o  Where to find the required skills?


Opportunity of Digitization

IT $ spend

APIs & complexity

Integration in/of products & services

Future Smart

Internet of Things

Analytics & Big Data

Social Media

Cloud

Mobility

Automation


Internet of Things

It’s not “Big Brother” … it’s “Big Mother”

o  More embedded systems and smart metering

o  Insights into user behavior o  Focus on collaboration with

customers o  Renewed focus on customer service

to define next wave of business innovation


Impact of Digitization

PROVIDER TECHNOLOGY WAVE

Stirring up the status quo

Cloud

Automation

Robotics

A Buyer’s Market

Most recent ISG BENCHMARK DATA reveals price declines more than 20% in some cases

20% - 50%



ARC leads CLIENTS to EXPECT NEW COMMERCIAL MODELS Not just short-term contracts, but effectively pay-as-you-go and outcome-based models to ensure flexibility

DYNAMIC ON-DEMAND MODELS Supplant on premises, fixed-pricing models

Significant Provider Challenge MIGRATION TO CLOUD SERVICES = LOSS $3 to $4 dollars in hardware/software revenue is replaced with only $1 to $2 of cloud-based revenue

$4

$2

?



Percentage of total number of ITO contracts awarded: TCV > $10M

-5%

5%

15%

25%

35%

45%

55%

Big 5 US Big 4 Europe Big 5 Indian Others

2011

2012

2013

2014

2015e



-5%

5%

15%

25%

35%

45%

55%

Big 5 US Big 4 Europe Big 5 Indian Others

2011

2012

2013

2014

2015e

Percentage of ACV of ITO Contracts Awarded: TCV > $10M


à

à

à

How do I provide a stable environment?

IT is the owner of services

Plan, Build, Run o  Run/Change the business

How do I enable business objectives?

IT is the broker of services

Dev/Ops o  Bimodal

What are clients thinking?

Old World: process-focused

New World: outcome-oriented



Old World: process-focused


à

à

à

Customer centricity: cost optimization bricks, clicks, rings, knocks

Back-office efficiency

ITIL rigor Regulated cadence

Customer centricity: revenue expansion information, reaction, promotion

Mid/front-office to drive revenue expansion and new revenue models

Agility, flexibility Continuous development / releases



Old World: process-focused Old World: process-focused


à

à

à

Formal governance

Optimizing current state; lower costs

IT & corporate business processes

Flexible governance with heavy use of analytics & dynamic decisioning

Flexibility to create new capabilities; Elastic, self-service, auto provisioning

Integrated Global Business Services; process, cost, customer insight benefits




à

à

Broad-scale contracts; generalized scope

Long-term commitments; 1/2 devoted to transformation

Small arrangements for specialized point solutions

Transactional modularity for maximum flexibility; rapid adoption of new service platforms

Transaction Structure





à

Economies of standardization; focus on unit costs of effort

Economies of automation; focus on productivity and effectiveness

Transaction Structure


à Transition & termination complexity;

fear, uncertainty & doubt Plug & play mindset


Where to invest?

o  Data analytics o  Product engineering o  Software-defined everywhere o  Automation o  Hybrid IT management o  Cyber security & risk management

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