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APIs

Retrospective on the 2017 Global Services Market | Sherpas in Blue Shirts

By | Blog, Shared Services/Global In-house Centers

As I look back on this year, it’s impossible to unplug digital from the determinants of the year’s most significant business changes. A review of how the rotation to digital impacted the global services market in 2017 provides a glimpse of factors that will be at play in 2018 as companies seek to be more competitive. In this blog, I’ll focus on three of the top factors that affected businesses this year.

Global Services Market Deceleration

Both the global services market and the Indian sector further decelerated this year. When we made projections for 2017, Everest Group was the only firm to make that call. In fact, although we were overly criticized for being overly pessimistic, the market decelerated even more than what we forecasted.

Deceleration is not the same as shrinkage. In the legacy space, the offshore labor arbitrage talent factories went from a growth space to a three percent contraction this year. Also, there has been portfolio rationalization and industry consolidation in that space. As the space shrinks, the larger firms do better than the smaller firms.

Related: 2018: The Year When Faking Digital Won’t Work Anymore



This year brought the rotation to digital with companies moving from services based on labor arbitrage to services based on disruptive digital technologies. The digital space now constitutes 25 percent of the overall market and is growing at 20 percent. The legacy arbitrage factory is 75 percent of the overall market and it’s shrinking at three percent. Within the shrinking, the big five Indian players are consolidating the market to take share; so they eked out a 1.5 percent growth while other providers shrank.

Interestingly, the compression driven by the cannibalization of digital and legacy environments is partially offset by new workloads coming into the legacy environment due to changes in market segmentation.

Market Segmentation Changing

A major factor at play in the services market in 2017 is the market beginning to segment between (a) digital transformation and (b) modernization of IT and business process services (BPS).

The digital market began splitting this year into two pieces: digital transformation vs. modernization. We clearly see two distinct, separate markets emerging in digital. This year we also saw digital transformation pilots go into programs. Pilots that ranged in size from $500,000 to $2 million in size now consistently hit between $50 million to $500,000,000 billion.

The legacy environment is also splitting into two markets: work that will be modernized and work that is too risky or expensive to modernize. We’re now 30 years beyond the inflexion point of where the market began moving from mainframe to client-server environments. Many companies still have a portfolio of applications remaining on mainframes. This is a classic example of legacy work that is too expensive or risky to modernize. As a result, companies are content at this point to let that work remain in the legacy structure. However, this year clearly brought movement in this space of companies building APIs and microservices to connect with that work, whether it is in an internal legacy infrastructure or in an outsourced legacy talent factory. This enables the companies to turn their attention to the work that they need to modernize.

What we haven’t seen is business process services (BPS) modernization take hold. IT is leading the pack currently. At the beginning of the year, we thought that BPS might lead the modernization, but it turns out we were wrong. The IT segment is moving much faster than the BPS segment in modernization work.

Rise of Small Firms

Also in 2017, we saw the rise of small provider firms. Where we see industry consolidation on the legacy side, we see vendor proliferation on the digital side. We believe this proliferation is because companies are looking to new firms to do new work. They believe the incumbent service providers are distracted and have a conflict in interest in moving to digital – a self-interest in preserving their profitable legacy arbitrage-based work. Consequently, this year brought a surge in companies looking to smaller, new service provider firms to help them understand and drive both digital transformation and IT modernization.

How Cloud Impacts APIs and Microservices | Sherpas in Blue Shirts

By | Blog, Cloud & Infrastructure

Companies considering moving workloads to cloud environments five years ago questioned whether the economics of cloud were compelling enough. The bigger question at that time was whether the economics would force a tsunami of migration from legacy environments to the cloud world. Would it set up a huge industry, much like Y2K, of moving workloads from one environment to another very quickly? Or would it evolve more like the client-server movement that happened over 5 to 10 years? It’s important to understand the cloud migration strategy that is occurring today.

We now know the cloud migration did not happen like Y2K. Enterprises considered the risk and investment to move workloads as too great, given the cost-savings returns. Of course, there are always laggards or companies that choose not to adopt new technology, but enterprises now broadly accept both public and private cloud.

The strategy most companies adopt is to put new functionality into cloud environments, often public cloud. They do this by purchasing SaaS applications rather than traditional software, and they do their new development in a Platform-as-a-Service (PaaS) cloud environment. These make sense. They then build APIs or microservices layers that connect the legacy applications to the cloud applications.

Read more at my CIO Online blog

Google acquires APIGEE – APIs to Overhaul Enterprise Technology | Sherpas in Blue Shirts

By | Blog

APIs have been around for a long time; however, the hyper-connected convergence of digital technologies and the increasing maturity of the digital ecosystem as a business model have made APIs a priority across industries. They have become the keys to unlocking a digital ecosystem (also commonly known as an API economy) that includes digital value chain, digital manufacturing, digital marketplaces, and an ecosystem of connected devices as adoption and advancement of technologies such as cloud, IoT, mobile, and analytics continue to increase.

The chart below explains a basic API value chain

Google acquires APIGEE

API management plays a critical role to help enterprises get maximum value out of their API strategy, hence we are witnessing an increase in activity in the API management space.

As enterprises accelerate their journey to build a digital ecosystem, technology companies like AWS, Dell, IBM, and Microsoft among others are helping enterprises on their digital transformation journey with tools and technology platforms. APIs and API management play a critical role here, with examples of investment that include IBM API Connect, Azure API Management, Oracle API manager, CA API management, and Amazon API Gateway among others. Recently Google announced its plan to acquire APIGEE, an API management company. The deal, for US$17.40 per Apigee share in cash for a total of US$625 million, is subject to shareholder and regulatory approvals. This is a significant acquisition for Google as it looks to enhance its enterprise cloud offerings. Adding APIGEE’s technology to its Cloud Platform provides Google with a more compelling value proposition for enterprise customers looking to move IT to the cloud.

Key benefits for Google:

  • API management as a differentiator/value-add for its enterprise cloud offerings
  • APIGEE acquisition brings tools that will help Google better manage its own set of APIs
  • Enhance experience for developers on its platforms
  • Enhance Google’s play in the container market, with its planned Integration of Apigee tools with Kubernetes

In the API management space, several specialist API management firms have been acquired by bigger technology firms looking to offer integrated (value add) services to their customers.

  • In June 2016, Red Hat acquired 3Scale, an API management firm
  • In January 2016, Axway acquired Appcelerator, which provides a framework for building and running APIs called Arrow
  • In April 2013, Intel acquired Mashery, a firm specializing in API management. However, Intel sold Mashery to Tibco in August 2015

We wonder what would happen to other API management specialists such as Akana, Cloud-Elements, Pokitdok, and WSO2 among others – will these also be scooped up by larger technology companies?

API management platforms are used by enterprises to manage their burgeoning need to open up their systems and expose functionality to the outside world due to digital transformation and the need to leverage innovation outside enterprise boundaries. Some implications of the increased activity in the API management space are listed below:

  • Consumer technology firms are pivoting their offerings to target the enterprise market
  • Enterprises need to look at API management as a separate stack in their IT systems
  • A key differentiator for enterprises in the age of connected digital ecosystem is the ability to offer high availability, security, and scalability of its APIs
  • Enterprise technology teams with modern infrastructure and strong API culture are able to attract better talent
  • Increased competition among technology firms that promise to play the role of efficient enablers in the enterprise digital transformation journey – leading to a wave of acquisitions and consolidation as technology firms look to become one-stop shops for all the technology requirements
  • Containers take API design, deployment, management, and integration to the next phase
  • Enterprises can accelerate their DevOps journey with APIs – API management embodies core DevOps principles of continuous delivery by modeling and governing the lifecycle of an API and provide developers and administrators with the needed tools and transparency

Are there other implications you believe should be considered? How do you see the API management landscape shaping up?Google acquires APIGEE