Seemingly out of nowhere, users hit enterprise IT spend on its blind side. Like a blitzing 265-pound football linebacker that the quarterback doesn’t see running up behind him to tackle him, business units and end users blitzed past the IT group and rapidly adopted cloud, mobile and other next-generation IT solutions wherever and whenever they could. Like the quarterback, enterprise management had a blind side and didn’t see or block the sudden force of the “consumerization of IT” coming to barrel through the sanctioned processes of purchasing IT. This blind side play changed the IT game in a profound way and has massive implications for all players.
In football, unblocked linebackers coming up on the blind side don’t just happen; several factors are necessary to create the right conditions for this disrupting phenomenon. The same is true for the recent blitz impacting enterprise IT spend.
Over the last few years, enterprises reacted to adverse and unpredictable economic conditions by reducing overhead wherever possible. This significantly constrained CIO budgets, forcing many IT departments to decrease their expenses year on year. The tactic reduced the IT group’s ability to drive change in the business and slowed the ability to respond to business needs.
Finally balance sheets improved and companies emerged from the belt-tightening period. Eager for growth, they now look favorably on business projects with strong ROI. However, IT is still slow to address new business needs, including the IT components of these initiatives. At the same time, business leaders and end users are exposed to, indeed inundated with, a new range of easy-to-access affordable, offerings that are readily available through channels other than their enterprise IT department. Voila — the right conditions for the blitz.
Let’s first consider the implications for the business stakeholders leading the blitz. Their new buying freedom combined with the easily accessible IT components creates refreshing and sorely needed agility and flexibility. Projects that, in the past, would have advanced slowly now race ahead at an ever-increasing pace.
Instead of detailed requirement documents and unending interdisciplinary team meetings, they can conceive, launch and evaluate pilots with minimal capital and time, allowing the business to experience the technology before making significant commitments. Business stakeholders’ perspective is that management’s forgiveness is easier than gaining up-front buying permission, and IT can work after deployment to address compliance issues.
Enterprise IT groups can’t deny the new reality and must lead, follow or get out of the way of the momentum and power of user-based IT buying. They cannot stand against the strong business cases for these business-driven initiatives. Many CIOs look the other way or add a team member to the program and claim victory.
Nevertheless, CIOs and top management eventually must address the complexity these solutions will add to the enterprise. We can only hope they start preparing for it more quickly than happened with the massive disruption caused by distributed computing, which took enterprise IT a decade to untangle.
The business users’ IT spending blitz also hit the blind side of IT providers, and the implications for providers are as significant as they are for consuming enterprises. Many traditional providers of IT and IT services are troubled by the fact that they are not reaping the significant growth opportunities resulting from the new spending on cloud, mobile and other next-gen IT products that other vendors are enjoying. Why not?
New game plan for IT providers
The enterprise IT market is obviously alive and well. But there are now two distinctly different markets for next-generation IT, so IT providers must change their marketing and sales tactics.
The first market segment accounts for 75 percent of the total spend and has all the traditional ROI buying characteristics. Value is tied to objectives such as as reducing enterprise cost.
To increase their share of the second segment (currently 25 percent of next-gen IT spend), enterprise IT providers must understand that the buyers’ perception of value has changed.
Although value is still wrapped in ROI, an important new criterion is whether the solution will meet the ROI objectives in a timely manner. In addition, the business stakeholder’s confidence in the solution’s success is more important than competitive pricing. These two characteristics drive business buyers to opt for pilots to learn more about the solution before they extend their commitment.
Clearly the ROI drivers differ for buyers in these two market segments. Therefore, IT providers seeking high growth must develop different marketing messages, pricing and delivery models for each segment.
Furthermore, as both segments often exist within an enterprise, it is unlikely that the same sales personnel can successfully sell to both markets.
IT providers that want to quickly move to capture the new opportunities in next-generation IT spend will be more successful if they fully understand buyers’ changed perception of value and approach the market in this fashion.
Migration to a cloud-based contact center model offers the potential to drive hard total cost of ownership (TCO) reduction and the flexibility to rework existing business models. And both cost savings and business agility are very timely for the contact center space, as more businesses continue to shift from a protectionist, recession-minded framework to actively looking to invest in customer relationships and growth strategies.
Recent Everest Group client work has demonstrated that TCO savings enabled by migration to next generation contact centers can be in the 20-30 percent range for some organizations. These cost savings are realized through several structures. Approaching a contact center as software-as-a-service (SaaS) provides optimal call center capacity in a pay-as-you-drink model wherein there is a dynamic and continuous balance of capacity and utilization. Converting the physical capacity of call centers and server space to a paid service in the cloud allows enterprises to shift expense from capital to operational. The digital nature of cloud contact centers can also reduce telecommunications costs, transforming expensive long-distance routing into the more cost effective Voice over Internet Protocol (VoIP) solution. Additionally, cloud contact centers shift the weight of software maintenance and feature development to the vendor.
Call centers have long taken the spotlight for their cost savings potential. The last decade has seen the popularization of outsourcing call centers to lower-cost geographies that offer savings in wages and capital expenditures. More recently, the technology landscape has sufficiently evolved for the next iteration of call centers – the contact center – to emerge. The contact center is driven by next generation technology that, through data enablement, allows for the retention and improvement of traditional voice service while embracing popular emerging communications such as email, chat, and text. While companies such as Liveops, Echopass, and inContact are on the forefront of the technology change, a wide range of legacy players such as Genesys, AT&T, and Avaya are also offering mixed solutions that embrace the move to cloud.
Data enablement provides a platform for several of the key features that define next generation contact centers. The data-enabled platform offers managers new levels of transparency of their contact centers, from high-level aggregations down to real-time, item-by-item granularity. The enabling tools include recording, quality monitoring, workforce management, talent management, surveys, and analytics. For example, a recent Everest Group provider client used cloud-based tools to more accurately forecast call volume and better manage utilization rates for its customers, and consequently improved its SLAs.
The benefits to the contact center workforce are no less substantial: increased automation, workflow scripting, security, and compliance management all contribute to a reduction in errors, reduction in cost, and, ultimately, an increase in customer satisfaction. No small part of next generation contact centers is the enhanced integration of today’s multi-channel communication environment. The fragmentation of communication through voice, text, chat, emails, etc., are all captured by cloud-based contact centers and refocused into simple, manageable, and transparent modes of communication for the workforce. For example, a buy-side Everest Group client was highly incentivized to move to a next generation IT platform for its call centers because the new technology in a digital environment allowed for future development of several services previously unattainable.
Many of the cost savings associated with next generation contact centers are rooted in virtualization and the ascension to the cloud. Converting physical call centers into virtual enterprises allows for decentralization of the workforce, which in turn provides access to pools of employees previously unavailable. The same phenomenon even allows for workforce sourcing to swing back domestically while maintaining cost savings. A key benefit of the cloud model is scalability; erratic call volumes, seasonal spikes, and disaster recovery can all be handled dynamically without down-time or volume-ceilings, and the pay-per-use element allows costs to reflect actual usage.
There are, however, several caveats that should be taken into account before certain cost savings can be realized. The cost of data-enabling a workforce must be balanced against the cost savings of closing physical locations, as well as against the increased revenue realized only through data enablement. For example, Everest Group recently conducted research for an enterprise in which the cost of maintaining call centers in other countries was less expensive than data-enabling the entire workforce. As a result, the firm recommend a phased approach wherein select call center workers were data-enabled, allowing them full use of the company’s new cloud platform to capture a new revenue source.
So, how can you tell which enterprises should shift to a cloud contact center model? Those that meet the following general criteria may be able to reap substantial savings:
- Possess numerous or expensive physical call centers
- Seek potential revenue from digital-based services
- Have a highly centralized workforce
- Desire to convert capital expenses to operational expenses
It’s not all roses and sunshine in the cloud. There’s cloudwashing. Vendors don’t always deliver what the customer thought they were promised. Deployment fail. People get fired. Randy Bias, cloud iconoclast and Co-Founder & CTO of Cloudscaling, moderated the True Stories from the Cloud session at Cloud Connect Silicon Valley in April 2013. Neal Sample, CIO, Enterprise Growth at American Express, and Thomas Barton, Global Enterprise Architect at Novartis Pharmaceuticals shared with the audience their experiences with moving their organizations toward transformation through cloud technologies. In this video, Randy talks to Everest Group’s Scott Bils about challenges and value creation in the cloud.
Originally posted on Leverhawk
It was an interesting week last week at Cloud Connect Silicon Valley. In addition to the keynotes and track sessions, we also saw the release of the summary results of the latest joint Cloud Connect / Everest Group survey on enterprise cloud adoption. Here are the seven things we took away from the conference, the survey results, and the discussions we had:
- The power shift from IT to business is real – one of the key findings from the adoption survey was that outside of dev test environments, disaster recovery (DR) and email / collaboration, business stakeholders are the primary drivers of enterprise cloud adoption. Anecdotal conversations with practitioners and vendors alike reinforced this idea that the cloud is permanently changing buying behaviors in the enterprise. This is bad news for many of the legacy enterprise IT players, who struggle with transitioning from a CIO-centric sales model to one focused on emerging business buyers.
- OpenStack is on a roll – one of the common themes in both the sessions and side conversations is that OpenStack appears to be gaining steam not just with the Foundation members but with enterprises as well. In fact one leading financial services player we met there has the target of moving half of their production workloads to OpenStack by the end of the year. We heard countless more examples of deployments that were in fact more than just pilots, and indications that OpenStack is starting to gain serious momentum.
- Cloudwashing is contagious – many legacy enterprise IT vendors have a lot to lose as their customer base migrates to the cloud. It’s probably not surprising that many of them are happy to have their customers mistakenly believe that virtualized environments = private clouds. As a result we have the unfortunate phenomena of organizations claiming and believing that they’re migrating to private cloud models, when in fact they’re really not.
- Cloud infrastructure can create competitive advantage – while applications, analytics and data are commonly seen as the source of IT-enabled competitive differentiation, we heard about how some enterprises are actually seeking cloud infrastructure as potential sources of business advantage. We heard from one other major financial services firm that the speed and agility benefits being provided by the combination of cloud and open source was in fact creating competitive business advantage in the marketplace.
- Shadow IT doesn’t always mean happy customers – a growing trend that we heard a bit about was the “lose / lose” dynamic that was being created in some organizations by shadow IT. The scenario goes like this: business buyer asks corporate IT for on-demand infrastructure services, with requirements that are perhaps a bit unrealistic. Unhappy with the response they hear, business buyer instead goes to a public cloud IaaS provider, but quickly realize requirements aren’t met there either, but for different reasons. The result is one unhappy customer and two unhappy service providers. While this is the exception not the norm today with shadow IT, it is a trend worth watching. Note to business buyers: with freedom comes responsibility, certainly at least to understand your real requirements.
- Compliance isn’t stopping adoption – conventional wisdom suggests that highly regulated verticals will be adoption laggards due to security and compliance concerns. A series of sessions with IT executives at Novartis, American Express and Fidelity proves that’s not the case. While in the most case they’re focus is on private cloud models, the motivation is still around business drivers – providing faster, cheaper and more effective applications and capabilities. The initiatives they’re driving are global in nature, and far from the ubiquitous proof-of-concepts that everyone seemed to be discussing last year.
- The tipping point is near – if it’s not here already, we’re close to the point where cloud becomes accepted as the primary IT delivery model going forward. The conference survey showed that the majority of enterprises now expect migration to some type of cloud model (public, private hybrid or other) across all major workload types. This isn’t to say that everything will migrate tomorrow, or that it will make sense to migrate everything to cloud models (it won’t), but it does say that market conversation around whether cloud makes sense for the enterprise may be close to over.
Interested in reading more about how cloud is driving enterprise transformation? Check out our recent post on how JP Morgan Chase is using PaaS to transform internal application development. Also read our guide on understanding the Great Tech War being fought across cloud, mobile, digital content and big data.
Photo Credit: Cloud Connect
Cloud Connect Silicon Valley is just around the corner. Once again we’re assembling a group of enterprise IT leaders and top thinkers in cloud to deliver current, unvarnished and useful information for companies mapping their strategies for organizational transformation through agile business models empowered by cloud computing.
And speaking of maps, this year’s theme for the Organizational Readiness and Business Cases track is “Time to pull over and check the map.” On our road to the cloud, enterprises have taken wrong turns, one-way streets and paid some hefty tolls. After all this exhausting traveling, where are we? So, we’re going to safely pull off to the service plaza and check the map.
The first session (Wednesday, April 3 at 9:00 am) will feature a keynote address from the IT leadership at a Fortune 500 enterprise that has made aggressive moves to push much of its workload portfolio to cloud infrastructure. Participants will learn how this enterprise made the business case for organizational transformation to cloud; what assumptions it made in building its strategy for migration; and where the organization is seeing early successes — and warning signs.
Session two (Wednesday at 3:45 pm) is called the “Cloud Witness Protection Program.” We’ll hear entertaining but serious insights from an enterprise IT executive whose identity we’re concealing. He (or she) will share with the audience hard-learned lessons and strategies for avoiding the same mistakes. A quiz session from a panel of experts will follow, digging deeper for keys as to what to look for in a cloud vendor; tough questions to ask before the contract is signed; and what terms to insist on — or walk.
The third session (Thursday at 2:30) is titled, “Disruptive Innovation in Cloud Technology and Tools.” Experts from technology providers, open source projects and enterprises will give participants a tour of new cloud technologies and tools that are available, proven in production environments and ready to deploy. Participants will leave the session armed with an understanding of which tools are the best choices for their enterprise cloud deployments.
The final session (Friday at 10:15) looks at disruption from a business models standpoint. I’ll lead a discussion with two enterprise executives who have used cloud to fundamentally disrupt organizational business models. Participants will hear how these leaders helped their organizations first understand and then embrace the agility, flexibility and dramatic time-to-market compression that cloud enables. Building sustainable competitive advantage through a transformation in business model assumptions is the goal of cloud, and this session will give participants new insights on how to help their organizations get there.
At last year’s Cloud Connect Chicago, we unveiled the results of the inaugural Enterprise Cloud Adoption Survey. Building on the success of that effort, we have launched the 2nd Annual Cloud Adoption Survey. The survey will help us track year-to-year adoption trends and drivers. Tell us about your journey to the cloud, and you could win a complimentary conference pass to Cloud Connect Silicon Valley. Take the survey now.
Hope to see you at this year’s Cloud Connect! Register using priority code DISPEAKER for 25% off.