Author: Yugal Joshi

Service Provider Cloud Strategies – Differentiated? Appropriately Focused for Success? | Sherpas in Blue Shirts

As Unique as Everyone,” the title of Everest Group’s just completed research study on service providers’ cloud computing strategies, tells a large part of the current story. Indeed, after exhaustive discussions with 14 major outsourcing service providers – a mix of multinationals and offshore providers – we found little differentiation among their cloud strategies. Most of them have broadly similar offerings that we segment as:

  • Cloud Advisor, where the provider engages with buyers to help with business case development, planning, roadmap, security, and governance
  • Cloud Enabler, where the provider typically does not offer a homegrown solution but instead sells cloud services offered by industry partners, and usually takes care of implementation and maintenance of the solution
  • Cloud Orchestrator, where the provider acts as an integrator/broker of a buyer’s hybrid infrastructure environment
  • Cloud Provider, where the provider either offers the infrastructure engine to run cloud applications, or homegrown cloud solutions in any of the cloud layers.

Against this backdrop, where are the major players seeing cloud computing potential, and where are they focusing their efforts?

While most of the known providers have entrenched partnerships with known cloud application vendors such as Google, Amazon and Microsoft, what they are doing with these partnerships, apart from implementing their cloud services, is not yet clear. Most of the multinationals are focused on leveraging their technology competence to enhance their hosting offerings. In this scenario, for example, an HP may use its infrastructure and technology power to customize the hosted Microsoft Exchange platform, or an Atos Origin may provide global agreements to buyers per its own agreement with a cloud application vendor partner.

All the providers with which we spoke for this research study have standard offerings for cloud business case development, ROI analysis, third-party cloud implementation, and some business utilities as a service. And while serving as an orchestrator is the most lucrative segment in which providers can play, the absence of comprehensive management platforms, and challenges with cloud-to-cloud integration challenges, are holding service providers back in this area. They believe orchestration eventually will be the winner, but the industry needs to develop the needed tools, processes, and standards for seamless management.

Asset heavy players are touting their infrastructure competence by building private clouds hosted on their premises, whereas asset light players are focusing on private clouds from the design and management perspectives. Most of the providers do not believe a pure infrastructure-as-a-service (IaaS) play is going to lead them ahead, and, as such, they want to provide value-added services and differentiate on provisioning, management, and governance.

Do you see any demonstration of differentiation here among these major providers? Neither do we. While there is excitement about the promise of cloud computing in both the buyer and provider communities, our research found that many (nay, most) of the service providers are unclear and unfocused – especially in that their offerings span all cloud layers, which we believe is an untenable proposition – about the path they need to take to tap the market’s potential. To truly cash in on cloud computing, providers need to significantly change their business strategy. Will be able to do it? Only the time will tell.

For more details, please see Everest Group’s research report on Service Provider Cloud Strategies – “As Unique as Everyone.”

Capgemini Buys Thesys – Why Should the Outsourcing Industry Care? | Sherpas in Blue Shirts

Capgemini on November 24, 2010 announced it had acquired Thesys Technologies, a small, India-based IT services company. While little known, Thesys is a Temonos Certified Services Partner that provides banking implementation solutions to the global financial services industry. Temonos is a leading provider of banking software, serving over 1,000 financial institutions in more than 125 countries around the world. In May 2010, Capgemini and Temenos formed a strategic relationship to expand global delivery and sales capabilities.

With that background . . . why should the outsourcing industry care about Capgemini’s acquisition of Thesys? Actually, there’s ample reason for providers, buyers, analysts and market watchers alike to take note of this acquisition.

Capgemini didn’t buy Thesys to build its revenue base but rather to gain access to Thesys’ market base and its delivery of the Temenos banking solution, which is primarily in the relatively untapped IT markets of West Asia, Asia Pacific and Latin America. Further, in Capgemini’s and Temenos’ strategic alliance announcement mid 2010, they stated they were aiming to have more than 300 Temenos subject matter experts. Tidily, Thesys employs more than 300 people, so that component of the partnership goal has already been achieved. All this, coupled with Capgemini’s acquisition of Kanbay in early 2007 makes Capgemini a highly formidable competitor in the financial services outsourcing space.

Buyers stand to gain from this acquisition as it couples Thesys’ Temenos service delivery expertise and its specialized service delivery infrastructure for Temenos’ T24 system with Capgemini’s capabilities as a leading core banking and wealth management service provider.,This should accelerate clients’ speed to market, assisting in risk mitigation, and enhancing operational efficiency.

However, the most interesting aspect of this acquisition is the willingness of a major MNC with ~25,000 employee base in India to buy out a company operating in a smaller niche segment, especially given that Thesys is a service focused firm rather than a software developer. This deal helps Capgemini to be perceived as a leader in banking solutions, filling in service and footprint gaps. But even more so, it could signal a trend wherein more MNCs  end up adopting similar strategies to expand their businesses in less penetrated regions and fill the competence gap in their service portfolio. Should this ring some warning bells for Indian service providers, who normally have championed the cause of small acquisitions? I think it should !

Simplicity – the Emerging New Normal in IT Consumption | Sherpas in Blue Shirts

Several weeks ago, I took my brand new smart phone to the service center for repair. Even though it’s one of the most advanced and sought after handsets, its performance was horrible. After hours of testing, the technician said the root of the performance problem was that too much complexity and too many features were built into the phone. At that moment I realized that while I had paid a fortune for the phone, I wasn’t aware of 50 percent of its features, 30 percent of its capabilities were useless to me and the 15 percent I really wanted didn’t work! Perhaps I should have bought a simple phone that worked, had the features I needed and was easier to manage.

In a déjà vu type of moment, a week later I attended two large IT service providers’ briefings where the focus was on their ITO transformation strategy. They spoke about various aspects of the IT landscape, yet I couldn’t escape the consistent theme in their discussions… simplicity.

For years the ITO industry has allowed complexity to breed complexity. Many CIOs believed – and many still do – that their businesses were so unique that they needed custom applications and systems. And the outsourcing service provider community played to this belief in order to seal large, complex, customized transformation deals when the reality is that high level of customization wasn’t, and isn’t, necessarily required. Moreover, with highly complex and customized outsourced IT environments, project management, vendor management, execution risks and other issues related to business applications support become highly challenging and extremely costly to develop and maintain.

However, the recession and continuous pressure on internal IT teams to show value are now forcing many CIOs to pick and choose the services they want from their outsourcing provider. In their smart unwillingness to tinker too much with their current IT systems and environments, they are instead increasingly asking for plug and play services, especially those where they can pay by the drink.  Moreover, the general acceptance of the fundamental principles of cloud computing, especially the SaaS model, are also impacting the approach of CIOs towards consumption of simpler, off the shelf IT assets.

Granted, outsourcing providers will need to develop appealing solutions that are modular, standardized and consumed on a pay per use basis. But it is high time for both buyers and providers to open up, see beyond the traditional ways of sourcing IT systems and leverage the power of modularization and productization of services. While this will require a great deal of unlearning, relearning and resetting of current skill sets, it is critical if buyers and providers want to adopt the emerging new normal in IT consumption.

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