A problem afflicts many companies undertaking transformation: they aren’t ready for innovation. But they need innovation to change their competitive positioning in the market. Today, many companies want their IT organizations to partner with the business to create opportunities for innovation and supportive services that drive transformation. And they look to their procurement chief or sourcing organization to ensure that any services they buy support innovation. How important is this? It’s critical. In fact, how your company leverages its IT organization and sourcing organization is a determinant of success in digital transformation.
I talked recently with Gopi Suri, an executive who has a background of successfully positioning IT organizations to be more transformational in nature to support their company’s business. Suri shared with me his four guidelines for a successful outcome in digital transformation.
In a recent blog post, I explained that companies need to reconceive their services as an evolving journey and need to rethink how they manage services. That’s because services are becoming more strategic in a digital environment and require ongoing commitment and focus to ensure they deliver on their promise. Their evolving nature makes services a cascading change management challenge that remains as long as the service remains. One of the most difficult aspects that companies struggle with is how to build conviction and sustain momentum that they are successfully moving toward delivering value in the services.
Buying services is no longer a matter of decisions that stand independently, like buying technology or products. In the past, many companies had the misconception that services are “one and done” or that they could be built and then be fine or at least fine for three or four years. But that’s not the case. Services are more of a journey – long-term commitments whose nature constantly evolves over time. It’s crucial that companies recognize this fact and that they rethink how they buy and manage services today. Why? Because the digital economy requires integrating more services into offerings, and they are becoming more integral to a company’s value proposition to customers and stakeholders.
Effective digital transformation requires a range of strategic, organizational, operational, cultural and talent-related actions to achieve business success. What are the necessary leadership dynamics and characteristics required to take on digital transformation?
Based upon insights derived from surveying over 500 senior IT leaders across the globe, covering topics such as next-generation infrastructure and cybersecurity, we’ve identified a handful of critical qualifications required to lead successful digital transformation journeys. And we’re going to share them with you in this fast-paced, information-packed session.
Who should attend, and why?
The webinar content is geared toward global enterprise stakeholders responsible for leading IT and related digital transformation efforts, including Chief Information Officers (CIOs), Chief Technology Officers (CTOs), Chief Digital Officers (CDOs), and Chief Information Security Officers (CISOs/CSOs). Attendees will walk away with five key traits required to lead successful digital transformations.
Attendees will walk away with five key traits required to lead successful digital transformations.
Why do digital transformations experience more failure and face more peril than companies anticipate? Why do they take far longer than anticipated? With apologies to Einstein, I believe we can understand the answers to these questions by viewing them through the lens of “GUT” – (General Unified Theory) of digital transformation – and how many related factors intertwine to increase complexity and complicate change. I’ll explain those factors in this blog and discuss how to navigate them so your company can minimize the perils of change and end up with a beneficial economic model.
Organizational exhaustion is the deadliest enemy of companies undertaking digital transformation. It may be hard to believe, but one reason this happens is that companies do a lot of work to prepare for an unknown objective. Therefore, they effectively dissipate their commitment, resources, money and energy in areas that don’t bring value. This exhaustion prevents companies from completing their digital transformation journey. Let’s look at why and how this happens, and I’ll share how to avoid it. The remedy likely will seem counter-intuitive, and it goes against all that technicians believe. But it works.
Unfortunately, two common situations in digital transformation cause CIOs (or others leading the transformation) to deliver little or no business value. An Everest Group study last year found that 73% of the digital transformations that we studied failed to provide any value whatsoever, and 78% failed to achieve their business objective. Put another way, only 22% achieved their business objective. In both common situations that lead to delivering little or no value, the executives leading the transformation took a technology-first approach. In this blog, I’ll explain how this leads to digital transformation failures and explain an alternative approach that succeeds in delivering value.
Technical debt is not necessarily all bad – depending on the type of debt. Because speed-to-value is critically important in digital businesses, organizations may intentionally take on debt to achieve their goals as quickly and responsibly as possible. As long as they understand the risks and compromises, and have responsible plans to address it, assuming this debt can be a smart move.
Offshore-heritage service providers’ cost arbitrage value proposition served them well in the outsourcing industry’s earlier days. But to gain competitive advantage in the digital age, clients’ expectations over the past several years have evolved to include value-add capabilities, innovation, industry-specific expertise and skill-sets, etc. In turn, offshore service providers increasingly lost market share to global service providers that made heavy inorganic M&A investments in these areas.
Following the global service providers’ lead, many offshore providers took the M&A path to growth. And the results have been astounding. In fact, our Q1 2019 Market Vista report shows that the offshore providers’ revenue grew by 8 percent in 2018, as compared to the global providers’ 2 percent growth.
Where have the offshore providers been investing their M&A dollars?
New technological capabilities
Because of clients’ digital-oriented mandate, the majority of offshore providers’ acquisitions have been to obtain new technological capabilities such as cloud, cybersecurity, analytics, and automation. For example, Wipro in 2018 acquired Cooper, a design consultancy firm, for US$8.5 million to expand its design and digital innovation capabilities in North America. And TCS acquired Bridgepoint Capital to expand its capabilities in the financial services and insurance domain, particularly in U.S. retirement services.
Due to lack of skills and knowledge about these next-generation digital technologies in the general workforce, offshore service providers are acquiring niche start-ups to:
plug gaps in their portfolios
quickly enter domains where sizable language and cultural barriers exist
improve their agility/flexibility
reduce their costs
access stronger and better insights
In fact, our most recent Market Vista report showed that start-ups accounted for as many as 50 percent of offshore players’ acquisitions in Q4 2018, compared to 42 percent in Q3 2018.
For example, Cognizant acquired Mustache, a creative content agency start-up, to expand its digital content capabilities by leveraging Mustache’s innovative approach to planning, producing, and distributing compelling video content and programming. Infosys acquired Fluido, a Salesforce Cloud consultancy start-up, for US$76 million to help clients in digital transformation and strengthen its position as a Salesforce enterprise cloud service provider.
Because offshore-heritage service providers’ initial reskill/upskill approach left them far behind global service providers’ inorganic approach, they’ve taken the leap and started acquiring companies to obtain direct access to already-trained talent. For example, Wipro acquired Syfte, a design firm, to strengthen its design and innovation capabilities in Australia and Asia Pacific. Under the agreement, Syfte’s talent will join Designit, a subsidiary of Wipro, to enhance the transformation services offered by Wipro Digital. Similarly, Genpact acquired Barkawi, a supply chain management consultancy, to add talent with consulting and digital technology capabilities in supply chain management and aftermarket services.
To learn more offshore providers’ M&A strategies, key market trends, global locations activity, and service provider activity in Q4 2018, please see our Market VistaTM: Q1 2019 report.