- Enterprise IT As-A-Service™
- Strategic Sourcing
- Business Transformation
- Service Optimization
- Service Provider Consulting
Digital solutions in BPS experienced 3X growth in recent years
Service providers are responding to buyers’ demand for “low-intrusion” technology options by focusing on new augmentation (versus standalone) solutions, increasing the share of augmentation solutions significantly over the past several years
At Everest Group we’ve noticed a growing trend in our client base. As I’ve blogged before, business stakeholders have become increasingly independent and make independent decisions. Mostly they have adopted point solutions, standing up functionalities and making decisions to use SaaS products and developing their own skunk works, agile teams to develop fast functionality. The implications for the services industry are interesting.
We’re now seeing that, as these point solutions embed themselves, they flourish and become more ubiquitous. They then need to stretch and integrate into legacy systems as well as affect multiple stakeholder groups.
At the same time, we see the CIOs upping their game. They no longer resist these new technologies and are willing to embrace them.
Here’s the growing trend: increasingly organizations make decisions in a collaborative group with business stakeholders and CIO groups working together to initiate, plan and execute these activities.
Using a skiing analogy, as point solutions grow beyond the capability of business stakeholders to appropriately manage, they get in over their skis, which opens the door for partnering with IT. We see IT eager to take advantage of this opening and forging effective partnerships going forward.
This is an encouraging trend, but it presents a more complicated selling picture for service providers. They can be easily confused as to buyers’ decision-making rights, which necessitates reaching out to each stakeholder to make sure they leave no one out. That’s the downside – increased selling costs and complexity.
But there’s also an upside: as these collaborative partnering opportunities grow, we observe they are well worth a provider’s sales effort.
Photo credit: Flickr
One of the great struggles in today’s enterprises is the ongoing shift of influence from the CIO community into other stakeholder groups. I’ve blogged about this before. An important aspect of this influence shift is the fact that IT has increasingly become unaligned with business goals. But the pendulum is now swinging back. The mechanism the pendulum is using is the as-a-service offer set.
During the recession, companies focused on cost reduction and operational excellence, and IT increasingly lost touch with the business. Purchasing departments focused relentlessly on driving up unit costs and countless operational process improvement vehicles to further lean out organizations. As a result, IT organizations became more efficient — but also less aligned with business needs.
Business users reacted by demanding greater focus on business outcomes and began taking things into their own hands and purchasing as-a-service offerings.
One of the benefits of the as-a-service model is that it creates a seamless linkage between business functionality and delivery. And it cuts through layered IT organizations, reorganizing according to business functionality.
The benefits that an organization extracts once it goes down this path is tight alignment by business functionality — close to functionality on demand — and far more flexibility. It enables focusing on the business impact of technology. Businesses can move more quickly and flexibly to adopt the functionality and also scale their consumption to usage.
The implications for IT are enormous in that it requires a rethinking of the classic IT functional organization, which has been in place for the last 15 years. It requires a reconceptualization of the following aspects:
The benefits of the functionality and scaled consumption to usage are extremely powerful and can only continue to reshape how IT is delivered. But the reconceptualization of IT is far from trivial. It is not just a new pose for IT. The as-a-service model fundamentally reshapes the IT philosophy on how it’s organized, procured, measured and managed.
Too much. That’s an accurate assessment of IT environments in most, if not all, enterprises. They have more data center space than they need and more servers than they can use at any point in time. They have more software operating systems, middleware, and enterprise licenses than necessary. They also have more of the wrong resources and never enough of the right resources in application development and maintenance. The as-a-service movement seeks to address this, but the journey to get there isn’t as simple as it appears.
So how much overcapacity is present in enterprises? At every level there seems to be a 25-50 percent overcapacity in IT. Since IT varies from 1-7 percent of revenues, the 25-50 percent overcapacity is in the range of 40 percent overcapacity overall.
As we at Everest Group look at applying as-a-service principles into IT environments, we see an opportunity to remove 40 percent of the IT cost by eliminating the wastage in service capacity. But the journey to achieve this as-a-service cost benefit is neither quick nor easy.
Renegotiating enterprise licenses takes time and often requires waiting until they expire. Reconceptualizing the infrastructure and application support is also complicated and requires a resolute effort and substantial patience.
It can take a year to three years to complete the journey. But the benefits are very substantial, starting with a 40 percent cost reduction in IT — a heady prize for the journey. In a future blog I’ll discuss other benefits.