Tag: IT service providers

Surprise As Cognizant Tops List of IT Leaders | In The News

“This week, Everest Group published its latest ranking of top IT service providers. Contrary to what might have been expected, IT powerhouses such as IBM and HP did not top the list. Instead, New Jersey-based Cognizant took the crown followed by Accenture and, coming in third place, IBM.” Read more.

The Top 10 IT Outsourcing Companies | In The News

blue angled highlight strip saying 2018 Service Providers of the Year

“Research firm Everest Group announced its top IT outsourcing companies, and there is a surprise in pole position. ‘Our assumption would have been that Accenture would be No. 1 and IBM would be No. 2,’ Abhishek Singh, practice director at Everest Group, told CIOmagazine. ‘But as we began to consolidate and analyze the data, it was clear that Cognizant had upped their game by way of year-on-year growth. That’s what landed them on top.'” Read more.

DevOps: Disruptive and Changing the Purchase of IT Services | Sherpas in Blue Shirts

Businesses now demand that IT departments dramatically change the velocity of the cycle time it takes to take ideas from concept to production – often from as long as 12-18 months to only four to six weeks. Organizations can’t achieve a change of this magnitude with just a change in methodology. To do this, they must move to DevOps – a disruptive phenomenon with immense implications for the enterprise IT ecosystem and the service providers that support it.

Put another way, many IT firms batch or create software releases once or twice a year in which they bring out updates to their enterprise platforms. Businesses now demand a cycle time of one to two times a month for updates. What they want and need is a continuous-release construct.

Methodology alone cannot create the conditions in which organizations can form ideas, build requirements, develop code, change a system and do integration testing in the new timeframes. Hence the DevOps revolution.

DevOps is the completion of the Agile methodology. It builds the enabling development tools, integrates test conditions, and integrates the IT stack so that when developers make code changes, they also configure the hardware environment and network environment at the same time.

To do this, an organization must have software-defined data centers and software-defined networks, and all of this must be available to be tested with automated test capabilities. By defining coding changes with network and system changes all at the same time and then testing them in one integrated environment, organizations can understand the implications and allocate work as desired. The net result is the ability to make the kind of cycle time shifts that businesses now demand.

DevOps implications

DevOps enables IT departments to meet the cycle time requirements. But the implications for how organizations buy services and how providers sell services are profound. Basically the old ways don’t work as well because of the new mandate for velocity and time. This causes organizations to rethink the technology, test beds, and service providers; and then manage the environment on a more vertical basis that cuts across development, maintenance, and testing, and allows the full benefit of a software-defined environment.

Let’s examine pricing, for example. Historically, coding and testing are provided on a time-and-materials basis. The productivity unleashed in a DevOps environment enables achieving approximately a 50 percent improvement in efficiency or productivity. Therefore, it is as cannibalistic or as disruptive to the development and maintenance space as cloud is to the infrastructure environment.

Furthermore, organizations can only operate a DevOps environment if they have a software-defined hardware environment – aka a private or cloud environment. This forces production into ensuring they perform all future development in elastic cloud frames.

Enterprises today are reevaluating where they locate their talent. Having technical talent in a remote location with difficult time zone challenges complicates and slows down the process, working against the need for speed.

So DevOps is a truly disruptive phenomenon that will disrupt both the existing vendor ecosystem and also the software coding and tool frames. Testing, for example, has been a growth area for the services industry, but DevOps environment largely automate testing services.

Another disruption is that DevOps takes a vertical view of the IT life cycle. It starts to integrate the different functional layers, creating further disruption in how organizations purchase IT services.

DevOps offerings are a new development among service providers, but the services industry to date has been slow to adopt the movement. DevOps is an internal threat to their existing business and requires providers to rethink how they go to market.

Customers Changing Core Objectives for Services Industry and IT Delivery | Sherpas in Blue Shirts

There is a secular shift occurring within IT services. Many businesses are shifting from functional orientation – where cost and reliability are the key objectives – to a new focus where business value and cycle time are the new objective functions. This shift has big and very serious implications for organizations that encompass the technologies they use and the third-party services ecosystem they use to meet these needs. Accommodating these needs requires a significant rethink of traditional IT delivery, whether it’s through internal centralized IT services or third-party IT services.

Cost and reliability are still important; but these are now secondary issues and no longer dominant issues. C-level executives now drive IT spend. They increasingly focus on aligning IT and business value with the voice of the end user/customer as well as the speed at which IT can make changes and respond to the business needs.

I’ve blogged many times over the last few years, observing this shift of influence out of centralized IT into the rest of the organization (business units, CFO, CMO, etc.) These powerful stakeholders now believe technology more than ever is central to their moves to change the game. They want better value – technology that meets their needs and also responds far more quickly to their needs.

Functional IT structures has disciplines that frustrate these stakeholders because:

  • Projects or initiatives take too long (often a year to 18 months) for them to get the functionalities/capabilities
  • IT often focuses on how to do those functionalities cost-effectively instead of focusing on the customer or user experience and the value derived from that.

Therefore, their requirements can’t be met through a traditional structure of IT where technology orientation is based on functions (data centers, applications maintenance, application development, etc.).

To accommodate the change in demands – the new core objectives – enterprise IT must realign by service lines and have persistent teams that align from end to end on the service lines that focus on achieving business value instead of aligning on performing excellence in a functional way.

Therefore, organizations are rethinking their IT services and a new Enterprise IT-as-a-Service model is taking off. I’ll discuss this new model in upcoming blog posts. The implications are profound for internal services as well as third-party IT services.


Photo credit: Flickr

Who Will Win the Prey Game in the US$76 Billion IT Deal Renewals Market? | Sherpas in Blue Shirts

With the rise of smart machines and robotic technologies replacing labor arbitrage, multi-sourcing becoming a norm, and “as-a-service” models increasing in adoption, the IT services (ITS) market is undergoing radical change. And it could wreak havoc on – or mean opportunities for – ITS providers nearing deal renewal time.

Contract Renewals

It’s abundantly clear to us that multiple hunters over the last few months have been eyeing big portions of the US$76.3 dollars in IT services contracts soon to be up for renewal. And if they’re not careful, it could mark the end of millions or billions worth of business for several companies. The verticals primarily at stake are BFSI, Healthcare, and Energy and Utilities, which have a combined share of more than 55 percent of the total pie.

But before we talk about how these providers can fend off their attackers, let’s take a quick look at the state of the market, per our recently released Report on Upcoming Contract Renewals (ITS) – 2015:

  • BFSI continues to remain the dominant vertical in the total value of deals expiring in ITS; 94 percent of the deals in this sector are with large service providers (with revenue of greater than US$5 billion)
  • Western Europe is the dominant market for expiring high value IT deals, accounting for 55 percent of the total number of expiring billion dollar deals
  • Infrastructure services are included in the scope of more than 77 percent of the total value of ITS deals, and 55 percent of these deals are due to expire over the next year. Data center and network services are the primary components in more than 70 percent of the total expiring ITS contracts
  • Pure application services (AS) comprise 25 percent of the total value of the entire ITS pie. Large service providers of BFSI and Travel and Transport support services will drive 60 percent of the total AS renewal spend over the next two years, concentrated primarily in North America and Western Europe. In fact, the highest valued IT deal expiring in the next two years is a pure AS deal with a French Travel and Transport provider

With so much renewal money up for grabs, who will win the hunting game? A David versus Goliath story is currently playing out in the deal renewal industry. Incumbent service providers want to expand their footprints across clients and fend off the attacking competitors. Attackers are desperate to penetrate newer opportunities by eating away share from the incumbents.

The reality is, the incumbents have a lot more to lose than the attackers. Given high anti-incumbency sentiment in the deal renewal market (~40 percent of deals are not renewed with incumbents), these providers need to take a serious look at their traditional deal renewal strategy, taking into consideration:

  • Enterprises are no longer willing to sign up large IT services deals spanning multiple years due to factors such as vendor lock-in and lack of transparency; as a result, best-of-breed solutions may emerge as the better option
  • These massive service contracts have tapered off over the last decade, since customers are now more willing to disaggregate the requirements into different IT towers or services
  • Enterprises realize that these large deals may not be able to flex to changing business requirements.

Contract Renewals

At the same time, attackers can’t reduce their efforts and investment in winning new clients. Despite all the challenges with incumbents, enterprises typically default to them fearing cost of change management and disruption. The onus lies on the attackers to demonstrate value beyond niche positioning or price aggression. Attackers need to invest early in building credibility with the enterprises. They need to communicate value in tangible terms beyond cost savings. And they need to make themselves visible to gain mindshare of their target clients. It’s a cultural overhaul where attackers must promote both their vision and their delivery capabilities in the market.

It is difficult to predict what lies ahead in this hunting game. But there will certainly be winners and losers. If you’re an IT service provider, will you be one of the winners?

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