- Enterprise IT As-A-Service™
- Strategic Sourcing
- Business Transformation
- Service Optimization
- Service Provider Consulting
Last week both Serco and Capita announced their interim results. Not only did the two companies show a widening gap in terms of financial performance, but they also highlighted diverging business strategies.
Firstly, their financial performance in H2 2014 to date was very different:
Secondly, the strategic directions of the two companies are diverging:
Interestingly, both companies have also announced changes to their boards:
Serco’s tale of woe began in 2013 when the British government discovered that it had been overcharged by Serco for offender tagging services to the Ministry of Justice (MoJ). The company is still recovering from the fallout more than a year after the issue first came to light, and having repaid more than £68 million of fees and gone through several reviews and management changes. It is ironic that Serco’s new board has chosen to focus on B2G services only, given that the troubles began in a government contract. That said, front line government services is and has always been at the core of the company’s business.
Serco has suffered from failures of governance and risk management. As it rebuilds itself, it will seek to enhance these significantly. In terms of business strategy, it will target growing opportunities in the government sector, as the pressures from aging populations and rising demand for services pushes governments to outsource more. Serco will seek to differentiate itself with its international approach, as part of which it will give its businesses a portfolio of services to go to market within specific regions of the world, to share experience and expertise.
Capita boasts of robust financial and governance structures and highly selective approach to opportunities that it pursues. Robust governance is highly needed given Capita’s aggressive acquisition strategy that has seen it take over more than a dozen companies a year for many years. Even with robust governance problems can still occur. For example, in its eagerness to win more government clients, in 2012 Capita acquired Applied Language Solutions (ALS), which had been awarded responsibility for courts interpreter services in England and Wales. For a while service delivery was less than smooth leading to the MoJ withholding fees in some instances and bad publicity in the press. Overall though Capita has benefited from many niche and strategic acquisitions that it has fully internalized, and which have largely created value and revenue.
There are lessons to be learnt from the performance of the giants of UK outsourcing. Today, one thing that is common to both is the belief that bid and governance structures have to be robust and maintained at all times.
The state of today’s enterprise mobile apps industry is akin to the dark side of a jungle: a dense forest and tangled vegetation, inhabited by hundreds of largely unfamiliar animals and plants that rely on its delicate ecosystem to survive, perhaps to thrive. This is creating frustration among stakeholders including the CIO, CFO, CMO, and CEO, who believe they might have over-invested in mobility initiatives.
However, this is far from the truth. Mobile apps have a long way to go in enterprise. Yet, to avoid the earlier pitfalls, enterprises and technology providers need to be fully aware of the following dangers in the mobile apps jungle:
Business process transformation: Few enterprises or technology providers even consider that enforcing mobile access to an existing business process may be a poor idea. Making the end-user consume the same business process albeit through a different, perhaps “cooler,” app is not true mobility. User interest will not last if the business process is itself unsuitable for mobile. At the same time, not all business processes require this change. Enterprises must be selective in changing business processes while undertaking the mobility journey. Consultants, vendors, and others with vested interests will always extol the virtue of business process transformation for mobility, but enterprises should be very wary of this aggressive spiel.
Line of business collaboration: In their desire to be the first movers, many line of business managers are creating all kinds of mobile apps with little collaboration with other business units. Given the increasing influence of non-CIO budget centers to approve technology funding, the tried and tested processes of application development are being compromised under a convenient, self-pleasing argument that mobile apps do not require a structured or “traditional” approach.
Will this ad-hoc development blow up in our faces? I think it will. Can we prevent this? Unfortunately not. Business users are happy getting the needed application functionality on mobile devices, yet no one is thinking about the mobile application lifecycle. A long-term technology adoption framework is an unthinkable thought for these budget owners. They do not believe collaboration is their mandate or their responsibility. Their KPIs are linked to business outcomes, not to channelizing or seamlessly introducing mobile technology, and thus they will rarely ever have an incentive to create the needed structure.
Cost of mobility: Enterprises and technology providers need to understand that while business agility, flexibility, and access is all good, the cost of these should not outweigh the rewards. Therefore, enterprise mobility should be viewed in its entirety to understand whether the incremental business has come at a greater cost of management and complexity. Yet the existing mechanisms across enterprises, where different unconnected lines of businesses are creating their noodly soups of mobile apps, does not engender great confidence that they will take a view of the broader picture any time soon.
So what can enterprises do to quash the mobile apps jungle’s beastly flora and fauna?
If you are undertaking an enterprise mobile application initiative and want to share your experiences and perspectives, please comment below or reach out to me directly at email@example.com.
Cloud-based services are distinctly different from traditional outsourcing not only because of the obvious cost and agility benefits but also because they fuel the need for a different kind of management of the services. From a management perspective the governance is transformational because it allows the governance team to change their focus on how they manage the services.
The distinction between managing cloud-based services and traditional outsourced services is critical to the outcomes and value achieved from the service.
In traditional outsourcing, the customer has a lot of say, particularly up front, in terms of designing the solution. The solution often starts with taking over what the customer currently has and then moves into a transformation journey. The customer is responsible for defining how the service components fit together and also is responsible for managing the use of those components.
But this tends to lead customers to overbuy. For example, in infrastructure the customer tends to buy more service space and more storage than is needed at any particular point in time just to ensure coverage for peak usage times and volume growth. Because it is cumbersome to contractually change the volumes, the customer ends up buying usage in step changes with the net result of overbuying.
But the real issue is how much time and effort it takes to manage this traditional kind of service. The governing cost in time and effort can overshadow the benefits of the service.
In contrast, the fundamentals of cloud-based or next-generation services are usage-based pricing combined with bundling. The customer buys bundled services rather than discrete components, and this impacts service management. For example, in traditional outsourced services, the customer manages how much capacity is needed for storage, how many licenses to purchase, etc. In the newer service models, the customer manages a few metrics around usage rather than managing the components that allow utilizing the service. The newer models enable customers to avoid the trap of overbuying.
But more importantly, cloud-based and next-gen service models profoundly change the governance aspect in the following ways:
The real issue of simplicity in governing cloud-based and next-gen services carries both good and bad news. The good news is that the simplification of management tasks means the customer will need a smaller management team. The bad news: The team will need a different set of skills. Instead of skills in managing vendors, purchasing, and invoice tracking, the governance team needs skills in change management, project management and business transformation.
At CloudConnect 2012, Everest Group’s Marvin Newell moderated a lively panel discussion on next generation IT governance. The panelists included Thomas Barton, Global Enterprise Architect at Novartis Pharmaceuticals; Jeromy Carriere, Chief Architect at X.commerce; and Erik Sebesta, Chief Architect and Technology Officer at CloudTP.
The panel focused on the governance concept of holding on loosely but not letting go. Though executive buy-in is important for cost-efficient and holistic migration to the cloud, the business unit knows operations and needs the best.
In the third CloudConnect video interview of the series, Erik Sebesta answers the question: How does one balance the decision-making between the executive team and the business unit?
In case you missed the first blog, this is the second video interview of a series we taped at CloudConnect 2012 in Santa Clara. Everest Group’s Scott Bils chaired the Organizational Readiness track and enlisted an impressive lineup of speakers.
Watch the first video, featuring Francesco Paola of Cloudscaling.
Watch the second video, featuring Simon Wardley of the Leading Edge Forum.
Watch the last video, featuring Clayton Pippenger of Quest.
In mid-February, I have the opportunity to join a great group of executives to debate how cloud computing will – nay IS – changing the way we need to think about IT governance. As you may know, Everest Group is chairing a track at CloudConnect in Santa Clara, CA, on Organizational Readiness. One of the sessions is slated to include Neal Sample of eBay, Bates Turpen of IHG, Thomas Barton of Novartis, and me discussing governance issues of today and tomorrow. We conducted a prep session last week, and I thought I’d share some of the topics we anticipate debating at CloudConnect.
With these topics in mind, the governance panel discussion at CloudConnect is certain to be lively and cover an array of challenging, if not controversial, issues.
If you have a particular area on which you’d like the panelists to share views, post a note to this blog and we’ll consider adding it to the list.