IT Services Archives - Page 5 Of 7

The Impact of New Digital Business Models on IT Services | Sherpas in Blue Shirts

February 27, 2017

Suddenly, on-shoring is becoming more in vogue. Like many U.S. CIOs and their C-suite colleagues, you may be actively exploring how to duplicate or offset the loss of cost benefits from offshore/labor-arbitrage services. I have good news for you, along with a crucial tip.
Four primary factors are driving U.S. companies to make the move to onshore service delivery … Read more at Peter’s CIO online blog

U.S. Domestic Locations for IT Services Delivery: Your Trump Card amidst H-1B Uncertainties | Sherpas in Blue Shirts

February 20, 2017

As part of President Donald Trump’s immigration reform efforts, the recently introduced legislation could make hiring H-1B visa holders significantly more expensive. The legislation calls for more than doubling the minimum salary of H-1B visa holders to $130,000.

The technology sector is the largest consumer of the visa. And about 70 percent of the 85,000 visas issued every year go to Indian workers employed by technology and outsourcing service providers to provide IT services to leading American enterprises.

Such a massive hike in the proposed minimum salary for H-1B visa holders is forcing enterprises and service providers alike to rethink their talent strategy from offshore to onshore. Factors such as adoption of agile methodology and regulatory requirements are also driving up the demand for onsite resources, and those will likely need to be sourced locally from within the U.S. as the landed resource model become challenged.

This increased focus on onshore resources has both enterprises and service providers alike considering the merits of potential U.S. locations. The landscape of IT services delivery from within the U.S. is complex, with more than 150 leverageable locations. The help simplify the view, Everest Group has classified delivery locations in the country into various tiers based on socio-economic status, maturity of IT services delivery, talent availability, and operating costs.

Deciding on the best location for U.S.-based IT services delivery must be based on a business case that considers multiple factors, and perhaps some trade-offs. For example, Tier-2 locations offer the twin advantage of moderate operating cost and breadth and depth of skills, but you might have difficulty attracting resources with extremely specialized skills to move from a Tier-1 city such as San Francisco to Dallas or Atlanta. And although Tier-3 and 4 locations are suitable for low-cost transactional IT services delivery, they may not be appropriate options if you need, or anticipate needing, more advanced skills.

While the proposed legislation hasn’t yet become law, turbulence and disruption of this potential magnitude demands significant research and pre-planning. As Benjamin Franklin, one of the founding fathers of the United States said, “By failing to prepare, you are preparing to fail.”
For more information on this topic, please read the following Everest Group reports.

Why Infosys Needs to Figure out the Best Way to Utilise $5Billion It is Sitting On | In the News

February 14, 2017

Under the arbitrage model, “Infosys will build on its reputation for premium services to protect its industry-leading margins and offset impact on share price by returning cash to shareholders,” said Peter Bendor-Samuel, CEO, Everest Group.

Everest Group Announces Winners of 2017 IT Service Provider of the Year Awards | Press Release

February 14, 2017

Accenture, Cognizant, IBM, TCS and Wipro again top the list of IT service providers who consistently place among top performers in Everest Group’s PEAK Matrix™ reports.

Everest Group—a consulting and research firm focused on strategic IT, business services and sourcing—today announced the winners of the 2017 PEAK Matrix Service Provider of the Year™ awards for IT services. The awards, now in their second year, recognize IT service providers who have demonstrated consistent leadership in the PEAK Matrix reports issued by Everest Group in the previous year.

In 2016, Everest Group published 21 PEAK Matrix reports, evaluating a total of 73 service providers in various segments of the IT services market. Twenty of the 73 providers are recognized in the 2017 PEAK Matrix Service Provider of the Year Awards.

“Our PEAK Matrix reports evaluate market success—using factors like revenue growth, deals won or renewed, margins generated, and so forth—as well as service capabilities, where the emphasis is on innovation, because that is how providers are differentiating themselves in the eyes of enterprises today,” said Jimit Arora, partner at Everest Group. “Throughout the year, Everest Group examines what providers are investing in, what type of intellectual capital they have, how they’re devising their sourcing strategies, and whether they are experimenting with new service models or engagements with their customers. By taking all of that into account, these PEAK Matrix Service Provider of the Year awards recognize the IT providers that truly set themselves apart.”

The 2017 PEAK Matrix Service Provider of the Year Awards for IT Services comprise:

The ITS Top 20 list—recognizing the top 20 providers of IT services (ITS) based on a consolidated scoring of rankings within the 2016 PEAK Matrix reports.

Accenture, Cognizant, IBM, TCS and Wipro won the top five spots (in that order). Accenture (which held the second position in 2016) has moved to the top of the list above Cognizant.

Top Leaders and Star Performers—Awarded to IT service providers who appeared in “Leader” or “Star Performers” positions most prevalently within five market segments: IT Services (overall), Healthcare and Life Sciences (HLS); Banking, Financial Services and Insurance (BFSI); Cloud and Infrastructure Services (CIS); and Application and Digital Services (ADS).

Companies recognized either as Leaders of the Year, Star Performers of the Year, or both, include Accenture, Atos, Capgemini, Cognizant, HCL, Hewlett Packard Enterprise, IBM, Tata Consultancy Services, VirtusaPolaris, and Wipro.

Accenture had a dominant presence in the 2017 honors, claiming the No.1 spot in the ITS Top 20 list as well as being “Leader of the Year” in the Overall IT Services and ADS categories. Accenture shared “Leader of the Year” honors with Cognizant in the HLS category.

Cognizant once again made a particularly strong showing, earning the No. 2 spot in the ITS Top 20 list as well as sharing “Leader of the Year” honors in two categories: BFSI and HLS. In addition, Cognizant was named “Star Performer of the Year” in the ADS category.

Capgemini and VirtusaPolaris shared the Star Performer of the Year award in the Overall IT Services category.

Five service providers improved their rankings:

Accenture moved from #2 to #1
Atos moved from #15 to #10
Capgemini moved from #9 to #7
CSC moved from #10 to #8
VirtusaPolaris moved from #16 to #15

New entrants to the ITS Top 20 list include Syntel (#17), Hexaware (#18) and NTT DATA (#20). Conversely, Fujitsu, Luxoft and Unisys dropped out of the Top 20 leaderboard.

***All winners are listed in the report, “2017 PEAK Matrix Service Provider of the Year Awards” available for complimentary download here.***

“Today’s enterprises must navigate a complex landscape of next-generation and legacy technologies, a global business footprint, and a complex provider portfolio,” said Abhishek Singh, practice director at Everest Group. “The PEAK Matrix Service Provider of the Year Awards are designed to help enterprise buyers identify the best of the best – the IT service providers with strong, broad-based capabilities and successful service strategies that align well with the evolving enterprise IT demand.”

Deep Discounts in IT Infrastructure Services Pricing – Is This the New Normal? | Sherpas in Blue Shirts

February 8, 2017

The IT services industry is going through a tremendous change with the onset of new technologies, geo-political uncertainty, and disruption of traditional business models.

Deal renewals have fallen significantly, leading to intense price competition among service providers trying to meet their top-line revenue expectations. As expected, the pricing pressure is higher in some of the more commoditized services such as IT Infrastructure operations. Indeed, recent Engagement Reviews for numerous North American clients suggests that pricing for some mature services within the IT infrastructure domain, such as storage and backup management, server management, and database management, has fallen significantly. Our analysis suggests that the Indian service providers have upped their ante, and have become even more competitive in terms of pricing.

As a case in point, the per instance pricing for virtual server management has fallen by 25-35 percent over the last 12 months. The fall in pricing for some other resource units has been even steeper.

What’s driving these deeply reduced prices? Numerous solution-related changes have impacted pricing dynamics in this market.

Maturity of internal automation/autonomics capabilities of service providers
While these have largely been buzzwords in the last 12-18 months, we believe that the impact of some of these investments has finally started to show up in deals.
Further improvement of internal productivity
Just when we thought that the solution effort ratios such as servers managed per FTE, databases managed per FTE, etc., had reached their true, optimum levels, we have seen instances of further changes in some of these solution metrics. Some of these can potentially be attributed to the above point.
Complete offshore operations
We are seeing more and more deals where 100 percent offshore delivery is the norm. This enables service providers to quote very competitive per unit pricing. It will be interesting to observe how this metric changes going forward if new regulations come into play by the new U.S. president’s administration.
Increased competition, smaller deal sizes, and deal durations
The past 12 months have been difficult for most IT service providers, with increasing competitive intensity and delayed enterprise decision making due to geo-political uncertainty. As a result, they are going all guns blazing to win new accounts.

Most of this low pricing has been observed in new deal situations. We have seen very few occurrences of providers proactively reducing prices in existing deals, unless faced with the threat of the deal going into a competitive situation. Of course, it would be unfair to expect service providers to reduce unit prices significantly in all deals, since each deal level pricing scenario is very contextual and a deeper analysis of the underlying environment is warranted.

Have you had discussions with your infrastructure provider about recalibrating prices?

IT May Struggle to Maintain Higher Margins as Uncertainty Looms Large | In the News

February 6, 2017

The $108 billion Indian IT services industry is bracing for tough times ahead as potential visa restrictions add to their troubles such as a shift towards automation and pressure on margins in traditional services. Technological disruption and faster-than-expected adoption of technologies like artificial intelligence, robotics and the cloud platform are other major challenges for the industry.

Trump’s Visa Reforms: The Bitter Pill IT Needed | Sherpas in Blue Shirts

February 2, 2017

The Trump administration’s move to table H1-B visa bill in the house has led to a bloodbath for IT services stocks. While there appears to be near unanimity on the “absurdness” of the move, there is a silver lining most experts seem to have missed. I’ll explain this through two acts that have played out.

Act #1: Old Wine in New Bottle
In a November 2015 blog (“My Digital is Bigger Than Yours” and The Technology Pulp Fiction), I explained the rationale behind my cynicism for buzzwords that were driving the discourse on IT services. The story being told was that IT services was undergoing a paradigm shift in innovation. However, instead of witnessing a real shift in strategy, talent model, and offerings, what we have seen is a largely marketing driven illusion of change. Digital, cloud, automation, and cognitive are terms that are being thrown around without caution, giving an impression of disruption in services delivery. In reality, it’s just the natural course of progression in IT services getting embellished by these buzzwords. Analysts know it, service providers know it and – no prizes for guessing – buyers know it too.

As our January 2017 enterprise pulse report on buyer (Dis)satisfaction highlighted:

Buyers are unhappy
They aren’t enamored by these buzzwords
While they consider their existing IT services mediocre, they are still hanging on to it.

Point 3 above is the reason why, as much as I would like to take service providers to task on this pretense of transformation, I believe that enterprise IT must take its fair share of the blame. They have been running mediocre, unimaginative, and long past use-by-date procurement practices. There are two primary reasons behind this inertia:

There aren’t any better services options at comparable current prices. Sure, they would love to get something like IBM Watson for infrastructure automation, but their annual IT budgets won’t allow for it. Pretty much a thought process like, “Why buy a Ferrari to run a NYC yellow cab?”
The opportunity cost of letting go of something that has been working fine for a decade and a half is huge. Enormous bureaucracies have been created around services procurement, and they are almost impossible to dismantle.

Net-net, labor arbitrage, offshoring, and time & materials still continue to drive the lion’s share of IT services. In the current scenario, despite all the “digital” and “cognitive” washing, there is no way this reality can be swept under the rug. Does this mean that services transformation is a lost cause?

Act #2: And then Trump happened….
All this is getting Trumped now. Visa regulations mean less access to the same cheap labor. Now, instead of paying lip service to service delivery automation, enterprise IT and providers will actually have to think about hyper-automation to keep the lights on and manage margin improvement expectations. Things will have to move faster towards autonomics and/or cognitive for service providers to stay afloat and enterprise IT to stay relevant for CFOs.

My message to the ecosystem to which I belong? – It’s time to put your money where your mouth is!

Changing Times for Governance in IT Services | Sherpas in Blue Shirts

December 5, 2016

The first visual that probably comes to a buyer or service provider’s mind when they think of governance is the 3 tier governance pyramid that had been around for many years. The structure of this pyramid, as well as the nature and number of the meetings/forums conducted around it between provider and buyer stakeholders have remained more or less consistent. While over the years some modifications have been made to the structure, many ideas have been more ”lip service” than reality, and most are yet to be institutionalized.

However, as business gets to have a greater say in the transformational agenda of the IT landscape, Everest Group is witnessing some prominent changes in the governance structure when governance is being delivered as a managed services. These enhancements include:

Involvement of the CMO/CHRO/CXO – In the current digital arena, as application and infrastructure modernize, we are increasingly seeing the business heads from both the buy and supply sides proactively participating in decisions on large transformational initiatives. These executives are involved in bi-monthly/monthly meetings during the initial stages, and directly provide oversight on the key projects being undertaken.
Billable domain SMEs – The domain SMEs, which have so far been corporate funded and working in an ad hoc manner, are now being included as part of the billable price to the buyer. The value they bring to the engagement is being measured in terms of IT-influenced business outcomes.
Joint ownership of service – There is a clear shift to buyer and supplier stakeholders jointly owning SLAs, as compared to the service provider being accountable to the buyer. One such example is the application services head from both organizations being responsible for answering to the CXO in the quarterly and half-yearly meetings.
The Watermelon effect – There has been upswing in this phenomenon, in which buyers say that even though each provider might be individually meeting its own SLAs, the end user experience is not rich or up to satisfactory levels. The momentum is shifting to the overall experience as evidenced by end user satisfaction scores. The primary providers are taking on overall experience responsibility by formalizing the OLA agreement levels, with penalties and service credits linked to each individual service provider.
Impact of the complex SaaS landscape – The role of the Service Integration and Management (SIAM) provider has become all the more important as buyers are moving from a two or three prime SI supplier landscape to multi-vendor SaaS environments. The SIAM supplier is becoming a critical function for managing end-to-end delivery of IT services.
Innovation fund –Service providers are committing to an innovation fund as a percentage of the overall total contract value of large outsourcing deals. This innovation fund is being used to run proof of value for next generation levers such as automation, DevOps, design thinking, digital, business intelligence, and data lakes, the outcome of which can be used to run full-fledged projects.

While the above are the most prominent changes happening to outsourcing governance models today, Everest Group foresees many more significant changes at individual layers of the 3 tier governance model, with tighter controls and higher business involvement becoming part of the routine.

San Jose, Monterrey & Buenos Ares Leading the Latin American IT Services Market | In the News

October 11, 2016

As costs remain low and digital services continue to expand across the region, the Latin American IT services market is on track to grow at a steady rate. According to Prashray Kala, Practice Director at research firm Everest Group, the highest growth in the region is coming from the local, homegrown operations, while the second-highest is coming from global service providers, such as Accenture, HP, Infosys, and IBM. Global In-house Centers (GICs) are also seeing a little growth as they explore Latin America, but this is purely on a headcount basis. Read more.

Autonomics: A Step Change in Business Value | Market Insights™

September 8, 2016

Autonomics offers the potential to automate complex IT operations functions, delivering a step change in business value delivered

Visit the report page

Announcing our inaugural conference: Everest Group Engage, The Pragmatic Edge: Designing Your Future. Learn more.

Tag: IT services