Tag: IT transformation

Groundbreaking Rio Tinto and Accenture As-a-Service IT Deal | Sherpas in Blue Shirts

Rio Tinto, a global diversified mining company, recently announced a groundbreaking initiative they are undertaking with Accenture. This can best be described as moving Rio Tinto’s enterprise IT function into an as-a-service model. Game-changing benefits permeate this deal, and it’s an eye-opener for enterprises in all industries.

Let’s look at what Rio Tinto gains by pulling the as-a-service lever to achieve greater value in its IT services.

First, it changes the relationship between the business and IT. It breaks down the functional silos of a traditional centralized IT organization and aligns each service. In doing so, it creates an end-to-end relationship in each service, whether it be SAP, collaboration or any other functional services.

Second, this initiative moves Rio Tinto’s entire IT supply chain to a consumption-based model. This is incredibly important for a cyclical commodity industry, where revenues are subject to the world commodity markets. Rio Tinto’s core product, iron ore, is a commodity that can result in revenues slashed in half in the course of a year, leading to the need for cost reduction initiatives. Correspondingly, in boom times, commodities can double and triple in price, resulting in frenetic energy to expand production. The as-a-service model ends this commodity whiplash impact. It gives Rio Tinto a powerful ability to match costs to their variable consumption patterns.

This move will change the pace of innovation within Rio Tinto, allowing it to future proof its investments in IT. As many enterprises discover, multi-year IT projects often end up being out of date by the time they are implemented. Rio Tinto sought to shorten the IT cycle time so it can take full advantage of innovations the market generates. In the as-a-service model, it can pull those innovations through to the business quickly – which is a struggle for traditional siloed centralized IT functions.

These are game-changing benefits. It’s important to recognize that the journey to capture these benefits required a complete rethinking of how Rio Tinto’s IT (applications and infrastructure) is conceived, planned, delivered, and maintained. Moving from a siloed take-or-pay model to an integrated consumption-based model required wide-ranging re-envisioning and reshaping the ecosystem for deploying its technology; it touched IT talent, philosophies, processes, policies, vendors, and partners.

Clearly this journey will be well worth the effort given the substantial game-changing benefits. Challenging times call for breakthrough answers. The cost benefits alone are significant; but even more important is the ability of this approach to accelerate the transformation of the company into a more digital business. Rio Tinto chose to partner with Accenture to move its organization to this fundamentally different action plan for delivering and consuming IT and meeting the rapidly evolving needs of the business.


Photo credit: Rio Tinto

Why Hasn’t Cloud Had a Bigger Disruption on the Services Industry? | Sherpas in Blue Shirts

If you read the technology news in the press and social media sites, it’s apparent that we’re in the midst of a big sea of change in which the as-a-Service and public cloud models are transforming the services industry. HP and IBM’s travails and Oracle’s slowdown are laid at the feet of the SaaS providers. But when you pile all the current cloud activity together, it amounts to a hill of beans, not a mountain. Why aren’t we seeing evidence that disruption from these models is happening on a significant scale?

The buzz

In the famous words of an American hamburger TV commercial several years ago: “Where’s the beef?” Everyone is talking about big agendas to rework workload portfolios and making big efforts to to do that. Yes, Accenture has invested well over $1 billion around cloud and several Indian providers have invested $100+ million a year in mobility and cloud work. And the HCL-CSC alliance is predicated on the fact that there will be a huge cloud sandwich for which they want to position themselves.

If you give providers half a moment, they’ll wax with great eloquence and excitement about the prospects for the cloud model as a high-growth area in services. But if cloud disruption is coming to the services industry, it must be walking; it sure isn’t running.

Where are the billion-dollar practices that do cloud? Why don’t we see service providers launching entire new practices or start-ups reworking applications so they work in the cloud? Who is doing all the work?

The reality

The answer to the above questions is that disruption to service providers is happening occasionally but not en mass.

It reminds me of a conversation I overheard around the impending revolution about self-driving cars. Supposedly a Google executive was saying that it’s not likely that new self-driving car will come on the market and people will buy them when they arrive. Instead, he believes the more likely scenario is that we’ll find ourselves using cars that park themselves and then over time become incrementally more capable and eventually driving themselves. But we won’t have gone through that aha moment where we went out to buy a self-driving car.

I think the same thing is happening with cloud disruption. There just doesn’t seem to be a lot of evidence that companies are driving huge transformations to the cloud right now. Maybe it’s a timing issue in which CIOs and large enterprises will become comfortable enough with the technology that they’ll move en mass to rework their ecosystems to embrace this model. But maybe they won’t embrace it like this and, instead, the industry will wake up one day and find that we’ve incrementally adopted SaaS, public cloud and private cloud.

Perhaps the tide bringing cloud disruption is coming in slowly rather than in as a tsunami. What do you think?

Changing Influence in Tech Spend | Sherpas in Blue Shirts

Recently I had a conversation with an executive at a large software house known for its ERP. One of many things that struck me in our conversation was the change in whom the sales team targets. Their primary target is no longer the CIO; now it’s the CFO.

Apparently, in today’s business outcomes-driven world, CIOs are no longer authorized to drive tech spend decisions of this type, nor do they have the ability to write the check.

As I reflect on this change in decision rights and executive focus, I don’t find it at all surprising; after all, it is consistent with what I’ve blogged about several times. As she put it, the reasons for buying technology today are driven much more by business need and the impact that the technology can drive; it’s increasingly less about the technology itself. In this shift in mindset, the CFO and senior business stakeholders have become more influential because they have the best understanding of the business impact needed from the technology.

The lesson for a global services business

If the technology players are shifting their focus to the CFO as the influencer of tech spend, I think this underlines the changing dynamics or decision rights for the global services industry and the imperative to engage with and serve others outside of the CIO.

Why the Avon – SAP News is Important for Your Business | Sherpas in Blue Shirts

Did you see the news earlier this week about the Avon – SAP relationship in Canada? The eye-grabbing headline, “Avon halts work on big SAP implementation, cites lack of ROI,” thrusts the deal to the attention of both service providers and enterprises planning or in the midst of business transformation deals. The services industry has decades of piercingly clear evidence that large-scale implementations can be problematic and disruptive, and Avon stated that its decision to halt the further roll-out was to stop further disruption to its business.  But I believe we can conclude much more than that from this news. In short, this action by Avon suggests that a good deal of change is happening in the services market.

In uncovering what is behind the headlines in the Avon – SAP relationship, let’s start with the fact that both Avon and SAP affirmed that the products company will continue using the SAP system in Canada, the system is working as designed, and their relationship “remains solid.” And they had experienced an earlier successful pilot of the project. So what sparked this recent decision to end the full-scale implementation?

As the saying goes, often what you don’t know will cost you. Here’s what you need to know about this deal.

We see this as a shining example of a phenomenon we are observing in the marketplace. The SAP implementation was part of a broad-based business transformation Avon was trying to drive. But in today’s market companies now are skewing away from the $100 million-plus or large-scale ERP implementations and instead look to buy outcomes and functionality or capability on as as-needed basis.

Fundamentally companies don’t want to spend hundreds of millions of dollars on transformative IT implementations because it’s too expensive, takes too long, and usually the return isn’t there. However, they still need new functionality or capability for competitive advantage so they can drive their businesses forward. This is where the as-a-service models come in; these models allow them to get the new capability without replacing their entire ERP system.

We see a significant movement in this direction. It manifests itself sometimes by companies asking for outcomes. (“We need these results.” “Just give us the insight from the analytics.” “Give us this new market access.” “Allow our retail business to deal with stock-outs.”) They are willing to pay good money for these capabilities, but they want to pay for it in this manner:

  • On a consumption basis, paying for it as they use it
  • In a phased adoption or in incremental phases where they experiment with it and then drive more into it in subsequent phases
  • As a way to avoid buying huge server farms and signing up for licenses, many of which they don’t use
  • As a tactic for loosely coupling the solution with their existing ERP or IT systems.

We find that the as-a-service models open opportunities for a different kind of sale. It allows a new breed of vendor or new breed of offering to get the customer out of the complexity of buying the component parts of a solution and focuses purely on the outcome of what the company is trying to accomplish.

Avon is happy with its existing ERP vendor, SAP; but it no longer wants the cost and time of the large-scale transformation project and replacement of its ERP system. We see the Avon decision as important.

Buyer and providers, take note: Avon’s action heralds a new set of industry offers that allow organizations to buy parts of ERP as a service and layer it on top of existing ERP implementations. How will the as-a-service models impact your business?


Photo credit: Marlon Malabanan

Is Budget Leakage Sinking Corporate IT’s Boat? Enterprise Cloud Adoption Update | Gaining Altitude in the Cloud

A lot has changed in the short six months since our initial blog on on the emerging enterprise cloud adoption paths. Recent discussions with cloud infrastructure service providers clearly show that  CIOs and corporate IT seem to be interested in talking about cloud, and RFP flow is definitely increasing, but we’re not seeing conversion to contracts and revenue. One statement by a leading cloud service provider was particularly interesting:

“The cloud RFPs we’re seeing from enterprise IT are really strange, and poorly thought out. It’s like they’re just going through the process to get someone off their back…”

At the same time, there does appear to be an acceleration of enteprise spend on cloud, including SaaS, PaaS, and IaaS.

So what gives?

While there are a number of factors in play, we’re finding the biggest one is the role of the business user, and how cloud is eroding the monopoly corporate IT has traditonally had over information technology, services, and even infrastructure. People tend to forget that developer teams are frequently embedded in business units and deparments. They have budget approval limits, but typically high enough that they can spin up dev / test environments on Amazon AWS, for example, with no flags being raised. They no longer have to go to corporate IT to get a server provisioned, or a test environment setup. This is IT budget now flowing through the business, though through technical and not business resources.

As a result, IT is under significant pressure as it sees its budget dollars being threatened. It hasn’t fully figured out the implications of cloud for its IT organization, but can’t appear to be a roadblock to the business. What we see, although not in every enterprise IT organization, is a pretty substantial increase in tire-kicking, pilots and “RFPs” to give the illusion of  progress.

Based on an additional set of conversations, analyses, and insights from recent client work, we’ve updated our enterprise cloud adoption framework to more strongly reflect the business buying dynamic. This new framework is defined by two major dimensions:

  • Change Agent – is the primary driver of cloud adoption led by business or IT?
  • Adoption Approach – is the organization looking at how cloud and next generation platforms could fundamentally transform its business or IT environment? Or is it looking at more tactical, incremental opportunities being presented by cloud applications, platforms, or infrastructure?

Based on these factors, here’s our new framework and overview of the different ways we’re seeing enterprises migrating to the cloud:

Enterprise Cloud Adoption Paths

Enterprise Cloud Adoption Paths

A quick note on the different models:

Innovators

By far the most common enterprise adoption model we’re seeing is driven predominantly by business users implementing cloud solutions for new business capabilities, improved agility, flexibility, or reach. This adoption is coming in several flavors:

  • SaaS – in the majority of cases, business users are directly deploying SaaS business or collaboration apps at the individual, departmental, or business unit level.
  • PaaS / IaaS – for deploying new custom apps, or in some cases replatforming existing apps, developers with reporting lines into the business are deploying cloud with limited involvement from corporate IT.

Adoption is largely driven by individuals, departments, or functions around and outside of IT (even in the case of IaaS and PaaS). Business users want to innovate, recognize they can do it themselves, and feel empowered to do so.

Opportunists

The next most common model is corporate IT driving cloud adoption, albeit for specific, focused use cases. The goal is not broad transformation for “how IT does business,” but targeted adoption to prove the model, or to demonstrate improvements in efficiency and cost. Some of the most frequent use cases include:

  • Test / dev environments (under IT control)
  • Corporate and marketing websites
  • Backup and archival
  • Email and collaboration
  • Virtual desktop infrastructure (VDI)

The private cloud is still the preferred model for corporate enterprise IT, with most CIOs looking to play it safe with known enterprise vendors like IBM, VMware, or VCE. Note that the 20 percent in the Cloud Adoption Paths graphic above does not refer to the percentage of enterprise IT organizations that are pursuing cloud, but rather the number of companies in which cloud adoption is being driven predominantly by an “IT opportunist” model.

Modernizers

While they are the exception, a few enterprises’ CIOs are using next generation IT platforms to drive wide-scale modernization and transformation of their environments. These CIOs are viewing private, public, and hybrid cloud models as vehicles for fundamentally changing their infrastructure strategy, and are actively seeking to get their organizations out of the data center business. Although  rare, two of the more interesting examples we’ve recently seen include:

  • State Street – Chris Perretta, CIO at State Street, is seeking to drive $600 million in cost reduction by 2014 by leveraging private clouds to streamline application development. State Street historically has relied heavily on internally developed, custom software, with app dev representing 20-25 percent of the total IT budget. Through standardizing on common, private cloud developments platforms (based on x86-based public cloud models) and encouraging code sharing and reuse, State Street believes it can reduce test times by 30 percent, and the overall amount of code written by 30-40 percent. As with other examples we’re starting to see, standardization and simplification is being leveraged to drive significant improvements in process and cost efficiencies.
  • CP Rail – finding itself unable to keep pace with user demands, CP Rail launched a broad, multi-year infrastructure transformation initiative to dramatically reduce cycle times and costs, while still supporting increasing volumes. It has already developed a global hybrid cloud dev/test network across operations in Canada, India, and Singapore, which relies heavily on AWS. Interestingly, CP Rail places as much emphasis on process (agile development) and organizational transformation as it does on technology. For those interested in more of the details, a great presentation describing the initiative is available here.

Transformers

These are enterprises using cloud and other next generation IT platforms to create new disruptive business models, transformational improvement in growth and profitability, and strategic advantage. The starting point for their discussion is not around cloud technology, but how to use the agility, flexibility, reach, and cost effectiveness of cloud to enable new business strategies. Business executives are typically the emerging change agents. The best example in the public domain is:

  • Netflix – the classic example of a transformer is Netflix, which cannibalized its highly profitable DVD-by-mail model with an online subscription-based streaming model. After concluding it couldn’t build data centers and infrastructure quickly enough to meet user demand, the company famously leveraged AWS to scale its streaming and back-end operations. Netflix has not added data center capacity since 2008, and currently runs all streaming apps, infrastructure and back-end applications in the cloud. Those interested in learning more should check out a great recent presentation from Adrian Cockcroft, Netflix’s Cloud Architect.

While Transformers is the rarest adoption path today, we do believe it will become far more frequent as the market matures, and as cloud changes the competitive dynamic in some industries.

Note that there are still a small (and shrinking) number of enterprises that are still purely in “Observer” mode, and not actively deploying SaaS, Paas, IaaS, or private clouds anywhere across their organizations. We haven’t reflected them in our framework, and struggle to see any enteprises where at minimum there isn’t at least an individual or department using a cloud-based collaboration or productivity app.

Stay tuned, as we’ll soon be posting more here about implications for both enterprises and the cloud service provider community.

Offshore Providers and the Cloud – No Datacenter Is Not a Choice! | Gaining Altitude in the Cloud

As large IT services buyers increasingly embrace cloud-based delivery, offshore IT services providers are being forced to innovate beyond their traditional strengths of labor arbitrage, process excellence, and delivery maturity. Indeed, as these providers witness their application services reaching wallet share saturation in the large buyer market, there is growing perception in the industry that if they do not offer “next generation” services they risk losing even their traditional business.

Granted, these providers are not sitting idle. They have created “cloud advisory” teams and executed multiple application migration/porting engagements as part of their global services contracts. But the crux of cloud opportunity lies in the transformational nature of these engagements, which invariably involves owning IT infrastructure.

Our discussions with enterprise IT services buyers point to three types of roles for offshore providers, which extend beyond typical SaaS implementation and integration. These roles will also require services related to consulting, architecture, application migration, etc.

Cloud Offshore Providers

Offshore providers possess varying degrees of competence for these roles, but to remain relevant, they must continue to invest in newer capabilities. Today, a select few are investing in areas such as cloud management platforms, consulting services, readiness assessments, and migration services to move beyond simplistic cloud engagements. However, most lack a comprehensive datacenter-driven cloud infrastructure service, which is needed to drive transformational engagements.

One of the key findings in Everest Group’s recently released Cloud Vista research study was that more than 50 percent of large cloud-related engagements – and even most application transformation deals – contain a significant amount of infrastructure transformation, but offshore providers have scant presence in these engagements.

Cloud Adoption Drivers

It is becoming abundantly clear that offshore providers need to swiftly tackle the area of cloud infrastructure services. One of the biggest challenges they must overcome is their lack of willingness to invest in owning datacenters, instead opting to relegate core datacenter operations to the partners. Many buyers convey their disappointment with this type of partnership model, believing it can at best support running IT operations, but that it is not appropriate for enterprise class cloud infrastructure services that can assist them to variabilize their costs and access self-service, consumption-linked infrastructure.

Given their general reluctance to own large scale datacenters, offshore providers may at least evaluate “white labeling” hosting providers’ datacenters so that they can offer cloud infrastructure services which will allow them to calibrate their investments while simultaneously serving their buyers. Given that white labeling of datacenters is an accepted practice and even large scale datacenter service providers white label datacenters from other core datacenter operators (e.g., Equinix), this model will find acceptance with the buyers.

Offshore providers need to understand that for a game changing paradigm such as cloud, there always will be a risk associated with investments. The days of cherry picking attractive contracts are over, and they can no longer walk away from complex deals that do not meet their sweet spot. Therefore, they must inculcate a culture of risk taking, and invest in areas outside their comfort zone, especially in cloud infrastructure services. The cloud is changing buyers’ sourcing strategies, and offshore providers that fail to change accordingly risk losing their relevance and even their traditional business.

How can we engage?

Please let us know how we can help you on your journey.

Contact Us

  • Please review our Privacy Notice and check the box below to consent to the use of Personal Data that you provide.