Alisha Mittal, Author at Everest Group

Real IoT Value Requires a System of Technologies | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Our latest enterprise survey revealed that more than 40 percent of large enterprises have already implemented IoT and another 25 percent have piloted IoT use cases and will likely make meaningful investments in the technology in near future. All these enterprises have invariably invested in building an ecosystem of partners, made technological and business process changes, and trained their talent to sustain the investment.

However, 75 percent of these enterprises are realizing benefits limited to cost reduction, better visibility at the operational level, and access to more data for better decision making. This, unfortunately, is a massive underestimation and under-utilization of the potential of connected ecosystems.

IoT Innovators

On the other hand, the other 25 percent of the enterprises, we call them “Innovators,” are realizing IoT-driven outcomes with substantially greater business impact, such as identifying alternate revenue sources, offering new products and services, and increasing customer intimacy. These enterprises have undertaken a holistic approach to technology adoption, and have designed connected systems with in-built cognitive capabilities and next generation technologies such as machine learning, augmented reality, virtual reality, natural language processing, and blockchain.

The convergence of these technologies with IoT has created a multiplier effect by building further strength and adding new capabilities in the connected ecosystem, thereby, enabling these enterprises to re-visualize their businesses.

Achieving transformational impact with IoT

IoT benefits

Leveraging next generation capabilities with IoT

A noteworthy 45% of these Innovators are exploring these next generation capabilities to derive higher value from their IoT investments. Some model transformational use cases by leading industries have paved the way for others to make higher bets in IoT. For example:

Blockchain, in combination with IoT, is being used extensively by the logistics industry to achieve a low power secure network for transaction recording and timestamping. The insurance industry is set to be disrupted once the supply chain network reaches its desired level of transparency with accountability with this application.

Augmented reality, in combination with IoT, is recognized as the crucial technology to attain the “factories of the future” objective. Remotely accessing a visual overlay of the connected asset enables real time issue identification, remote service provisioning, and an exponential increase in operational efficiency.

Machine learning has enormous applications, many of them yet to be identified by enterprises. Enabling continuous process improvement, customization of services or messages, and helping experts take the most suitable action are the known use cases being implemented today. ML with IoT can be the defining moment for personalized service provisioning for every enterprise in the services industry.

Natural language processing can help enterprises deliver on customers’ expectations for connected devices to be interactive and intuitive. The world would be a different place if this technology were used in parallel with connected devices for meaningful value delivery.

With macro-economic changes and massive financial pressure to ensure sustainability, the travel & transportation and manufacturing sectors have been at the forefront of conceiving new revenue streams and launching products in as-a-service mode with IoT adoption. Changing customer preferences and competition from players across industries have pushed retail enterprises to adopt IoT with AR/VR technology to enable delivery of interactive and personalized experiences to customers. Infusing data security with blockchain adoption has enabled healthcare & insurance and energy & utilities enterprises to bring about continuous process improvement and ensure business sustainability.

To sustainably implement these systems of technologies, leading IoT adopters are building technology adoption roadmaps with an enterprise-wide view aligned to a unified vision. Their clarity in their business objective/s has helped them extract more from their IoT investments. These innovators have also laid considerable focus on transforming their people in tandem with the technology transformation, and have placed organizational change management at the core of IoT adoption.

For more insights on the possibilities and value potential offered by IoT, read our latest report “IoT Services PEAK Matrix™ Assessment and Market Trends 2017: Have You Taken the Plunge in IoT Yet?”

Reality Check on the Top 5 IT Innovation Myths | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

How do Amazon, Apple, and Tesla keep innovating? What do they do differently than many others do not, or cannot, do? And how many industry leaders can say their organization is truly innovative?

To get answers to these and other pressing questions, we conducted a focused research study with more than 100 application service executives – approximately 50 percent of whom were CXOs – in North America-based enterprises engaged in IT outsourcing programs. The research revealed startling insights. For example, only 30 percent of study participants felt their companies were somewhat innovative, even though all of them realized the importance of innovation and had made strategic investments in it.

And from defining it and its objectives, to funding it, to defining and institutionalizing the process to drive it, innovation has remained an elusive concept both for enterprises and service providers.

The study also busted innumerable myths associated with IT innovation. Let’s look at the top five.

IT Innovation Myth 1: Innovation is abstract and cannot be measured

But, over 75 percent of the study participants already have a highly effective mechanism to measure the impact of innovation. Linking the investment made to measurable results and desired benefits has enabled them to devise a formal approach for impact assessment.

IT Innovation Myth 2: Innovation should result in a disruptive idea

In reality, this is the last priority for executives of best in class enterprises! A siloed disruptive idea that does not impact the business model or enhance customer experience is the least appreciated outcome, and does little to serve the purpose of innovation. Instead, transformation is the primary lever deployed by enterprises to identify disruptive innovation. Moreover, the overall approach to it and the returns derived from it are considered more significant for driving innovation than the idea itself.

IT Innovation Myth 3: Episodic initiatives such as “idea of the month” and “innovation events” can deliver innovative results

Unfortunately, such sporadic investments have a probability of less than 10 percent to deliver innovative outcomes. Though used by most service providers, these are the least preferred approach to innovation from the enterprise executive’s perspective. Continuous innovation with prototyping and demonstrations/MVPs are far more likely to deliver on customers’ expectations.

IT Innovation Myth 4: Large scale investment is required from the enterprise or service provider to fund innovation

Though investment is required, 65 percent of the study participants with high satisfaction with their innovation program believe in shared responsibility and co-funding. Their belief is that shared responsibility spreads the risk involved, and reduces the investment required, thereby attracting the best-in-class capabilities from both sides.

IT Innovation Myth 5: A dedicated centralized team/CoE should be set up to drive innovation

Rather, best-in-class innovative businesses embed a culture of innovation across their enterprises to encourage the concept of continuous and crowdsourced innovation.

To enable enterprises to adopt a systematized innovation approach and achieve their desired outcome, Everest Group designed a unique framework on which to base their innovation strategy. We also used the framework to identify the 14 most innovative service providers in the industry.

Application Services IT Innovation Maturity

IT-Innovation-Myths-Application-Services-Maturity

For more information and insights on this research, please refer to our reports, “How to innovate – A Comprehensive Guide to Innovation in Application Services,” and “Cracking the IT Innovation Code.”

The Widening Gap between Customer Satisfaction Perception and Reality | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Not surprisingly, every service provider claims to have exceptionally high customer satisfaction ratings from their enterprise clients. Yet, we see anti-incumbency rising and deal size dwindling.

To assess enterprises’ satisfaction levels in IT services engagements, we conducted a deep dive study of 30 service providers and 130+ of their clients. We largely focused our analysis lens on six vital parameters of service delivery – technical expertise, domain expertise, talent management, commercial models, client management, and strategic partnership.

Enterprise customers are dissatisfied with service providers

The results, presented in our recently published report entitled, “Customer (Dis)Satisfaction: Why Are Enterprises Unhappy with Their Service Providers?” were quite disturbing. They indicated that nearly 50 percent of IT service buyers are not satisfied with their providers, feeling that they fall short in many areas of service delivery.

enterprises not satisfied with service provders 1

We investigated the reasons behind the huge gap between buyer expectations and current service delivery and arrived at the following insights:

  1. Early-stage differentiating factors have become table stakes: The value propositions of labor arbitrage and low-cost delivery are no longer compelling. Instead, enterprises want service providers that can create a positive impact on their core business functions.
  2. Inability to meet the unspoken demands of customers: Enterprises expect their service providers to have evolved from “order takers” to “collaborators” capable of effectively partnering with them in strategic decision making. They want their providers to go beyond the project ask and demonstrate transformative skills, even though such expectations are largely unspoken.
  3. Limited understanding of clients’ businesses narrows down business opportunities: Visibility into enterprises’ business dynamics and priorities are critical for service providers to align their offerings and strategy to client needs. Yet their margin obsession and hesitation to make new technology investments have precluded them from taking a futuristic approach to IT engagements.enterprises not satisfied with service providers 2

How service providers can turn the tide

So how can service providers turn the tide to have a more positive impact on existing and future engagements? Here are Everest Group’s top three recommendations.

  1. Shift from an operational to a strategic mindset: Service providers need to go the extra mile to proactively identify enterprises’ business drivers and must develop capabilities to offer innovative solutions. Just delivering on the agreed upon SLAs does not elevate service providers to the level of service partners.
  2. Innovative engagement: With rising competition, it is imperative that service providers walk the talk. While they cannot avoid investing in new technologies, they can share the adoption risk with their enterprise clients. Newer engagement models like outcome-based, risk-reward sharing, and output-based give enterprises the necessary confidence to take the leap and engage service providers for a next generation technology adoption initiative.
  3. Invest. Automate. Improve: Two-thirds of the enterprises are gearing up for large scale process digitalization, and they expect their service providers to be able to technologically support their objectives. Service providers must strategically invest in automation to improve efficiency, reduce costs, enable faster time-to-market, and deliver process improvements in order to offer a compelling solution.enterprises not satisfied with service providers 3

With anti-incumbency risks, anti-offshoring rhetoric, and clients’ propensity to adopt a digital arbitrage model looming large, service providers cannot afford to lose customer confidence. They must, today, start looking through a clearer lens to evaluate where their relationships with their enterprise clients stand.

For details on the areas in which service providers must smooth their rough edges, polish their existing skills, and develop new skill sets, please read our report, “Customer (Dis)Satisfaction: Why Are Enterprises Unhappy with Their Service Providers?

Seize the IoT Opportunity | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

A leading car manufacturer dispensed a spare part even before the customer knew it was needed. A doctor knew precisely when a patient took a vital medication. A metro city police department accelerated crime response time. A retailer designed its offerings based on dynamic in-store customer behavior.

Three in every four enterprises have a similar type of story to share about connecting to the “things” of interest and digital enablement of businesses. Recognized as the next big opportunity, the Internet of Things (IoT) is being embraced by enterprises to generate greater value and achieve their business objectives. Indeed, more than 50 percent have already piloted IoT, and the majority are highly optimistic about its returns.

Despite the high level of optimism, there exist numerous unanswered questions and concerns about IoT. Is it being used to the full potential, or are we just scratching the surface so far? Where is industry adoption headed? What risks should an enterprise take? What should an organization do to extract the most out of this investment?

Everest Group’s recently published PEAK Matrix™ report on IoT Services reveals intriguing industry trends, enterprise adoption patterns, probable future developments, and services expectations based on extensive discussions on all things IoT with 30+ enterprises.

IoT is no longer a buzz term
Currently, organizations are leveraging IoT to achieve agility, flexibility, customer centricity, and cost reduction. We identified four types of IoT adopters, based on the adopting organization’s desired outcomes: Optimizers, Engagers, Integrators, and Innovators. Most enterprises are categorized as Optimizers. That is, they focus on solving their operational issues and on infusing efficiency with IoT. Integrators and Innovators – which collectively equal less than 20 percent of IoT adopters – focus on enterprise growth or invest to seize larger benefits from the opportunity.

IOT Adoption Trends

From an industry perspective, the leading beneficiary of IoT to date has been manufacturing, primarily focused on bringing efficiency to the shop floor. Customer-centric industries such as telecoms and retail are investing to improve ecosystem efficiencies and enhance end-user engagement. Other industries such as agriculture, BFS, and mining are expected to make considerable investments in IoT in the near future.

Substantial hurdles stall rapid adoption
Hype aside, the majority of the enterprises are taking cautious steps and embracing IoT in small, incremental stages only. A multitude of challenges such as data security and privacy, storage and rapid analysis of large volumes of data, and availability of a high-speed network at all locations are impeding large scale investments in IoT. Another major hindrance is change management that necessitates significant investment in talent, infrastructure, and processes.

Enterprises need to collaborate with a variety of partners from the vast IoT ecosystem to design, implement, and manage an IoT system. The service provider landscape itself is segregated at this stage, and players across the value chain are trying to capture a larger share of the pie by expanding their partner ecosystem and their internal delivery capabilities.

But you can’t afford to miss the bus!
Despite the challenges, IoT remains among the top three investment priorities for a majority of organizations. To be front runners in the race, they must strategize their IoT adoption in a phased process for enterprise-wide benefit. And they need a transformational vision, investments in innovation and R&D, and a good partner ecosystem to maximize ROI.

The action is equally intense in the service provider camp. While some have up to 20 partners to complete their portfolio, others have acquired up to as many. Players with expertise in operational technology, engineering capabilities, and industry partnerships are best positioned to define success in the IoT services market. We anticipate large-scale convergence and new partnerships to cater to the services demand, which is expected to double by 2020.

Interested in learning more about IoT? Our PEAK Matrix™ report on IoT Services provides deep insights on IoT market trends, expected service market size, implications for enterprise and the service providers, and a detailed evaluation of 16 major IoT services providers.