A famous teaching of Jesus explains that it’s a mistake to pour new wine into old wineskins because it will burst the skins and both the wine and the wineskins will be ruined. New wine belongs in new wineskins. I think we’re seeing this principle playing out in technology – where the consequences are profound.

New wine expands and grows fast; so it requires a supple, pliant container to allow for that expansion. Old wine is stable and mature; it does better in a stable, consistent environment.

For the most part, now that the cloud experiment is over, we see that new technologies and functionalities have many of the properties of new wine. They are effervescent, change continually, move quickly and often rely on heavy iteration. They constantly expand and change. They are best suited for new architectures such as cloud infrastructure and SaaS services. New technologies also have new requirements; thus, they require new structures, new and more flexible governance vehicles to allow them to capture their full value.

Legacy applications, the systems of records in which enterprises have invested hundreds of millions of dollars, are mature and were designed for their traditional environments, which tightly govern change. They are in data centers that have the requisite management support and requisite talent pools.

The services industry is starting to recognize the profound truth of the new and old wineskins: At this point in time, legacy applications are best left in their old, original containers where they can continue to operate in a mature fashion. Old applications or systems of record need to remain in their existing frameworks or architectures. They should be changed only slowly. Furthermore, new functionalities and technologies need to go into new wineskins, or architectures, that allow for and encourage agility and other attributes that support evolving change.

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tech in BPS I3

Digital solutions in BPS experienced 3X growth in recent years

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tech in BPS I2

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

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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.

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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.

The as-a-service path is a reorganization

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.

As a service

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:

  • How IT is organized
  • How assets, services and software are procured
  • How IT is measured and managed

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.

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