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ITonDemand:WhyIntegratedServicesAreExplodingPredictable,utilitypricingformobile,networkservicesdrivedemand
ByRobinGareissPresident,NemertesResearch
Compass Direction Points:
± DigitaltransformationischangingIT.Digitalstrategiesarepullingmorepeopleintotechnologydecisions,whilechangingtheskillsneededinIT.Yet51.5%ofcompaniescan’tfindtherightpeople.
± Capitalexpensesareshiftingtooperational.Morethantwo-thirdsofcompaniesarespendingmoreonopex,includingcloud,managed,andprofessionalservices,tooffloadfunctionsfromIT.
± Partners,trustedadvisorskeytoITsuccess.ITleadersincreasinglyarerelyingontheirtrustedadvisorstohelpthemdevelopandexecuteontechnologystrategy.
± As-a-serviceofferingsprovidesimplification.Integrated,packagedsolutionstakesignificantburdenoffofITtodeliverhardware,devices,services,apps,andsupportservicesforapredictable,per-usermonthlyfee.
Q415
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Executive Summary
Digitaltransformationischangingeverythingaboutinformationtechnology,andeventhebusinessitself.AsITmorphsfromaback-officefunction,toaknowledge-workerenabler,toanall-encompassing,integratedpartofeveryemployeeandmostthingsinacompany,thetraditionalITstaff’sroleischangingrapidly.Ratherthanfunctioningasa“keep-the-lights-on”department,successfulITteamsarebecomingcoretobusinessandtechnologystrategy.Theyarehelpingtheircompaniesbuildadigitalstrategy—includinginternalITcapabilities,suchasnext-generationcollaborativemobileenvironments;digitalmarketingstrategies,suchasthecompany’sonlinepresence;anddigitalbusinessstrategies,ortheintegrationoftechnologyintoproductsthecompanysells.That’snotaneasytransition,particularlyasmostcompaniesarehavingtroublefindingpeoplewiththeskillsetstheyneedtoexecuteonthenewbusiness-technologyfunctions.
Asaresult,theymustrelyontheirpartnersandtrustedadvisorstooffloadselectITfunctions,withflexiblerolloutschedules.InsteadofrunningeveryITcapability,ITstaffmemberswillmanagetheirpartners,whointurn,willhandleavarietyofcapabilities—frommobiledeviceprogrammingandmanagement,toLAN/WANmanagement,tosecuritycapabilities,toapplicationdevelopment.Thedemandforintegrated,packagedserviceportfolios,withflexible,utility-basedpricingwillcontinuetogrowinsupportofthechangingITenvironment.
The Issue
Severalmajorshiftsareunderwayinbusinessestoday,mostofthemdrivenbydigitaltransformationinitiatives.Exactlywhatisdigitaltransformation?Inshort,it’srevisinghoworganizationsoperateinaworldinwhicheverythingisdigital.InnovativeCIOswillfighttoleadthiseffort—orexecutiveswillcreateanewposition(typicallyaChiefDigitalOfficer)totakeonthetask.OneinnovativeITleader,theCIOofapopularprofessionalsportsteam,nowfocusesonhowtechnologycanoptimizethefanexperienceinthestadium—andhowanalyticscanhelpcoachesevaluateoptimalplayerperformance—ratherthanday-to-daytechnologyfunctions.Hereliesonpartnersforthat.Enablingadigitaltransformationmeansputtinginplaceastrategyforconductingbusiness,inaworldwhereconnectedsensorsdeliverinformationonappliances,cars,andevengymshoes.Italsomeanscontrollingthecompany’simage,whenthebrandcangofromzerotohero(orviceversa)inminutesonsocialmedia.Inmostcompanies,digitalstrategycomprisesthreemainareas.(PleaseseeFigure1):
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Figure1:WhatisaDigitalStrategy?
• DigitalIT–Thiscoverswhat’straditionallybeenknownasIT,suchastheinternaluseof
technologyforemployee-to-employeecommunicationsandcollaboration.Italsoaddresseshowtocopewiththeacceleratinginfluxofinformationfromsensors,socialmedia,andothernewsourcesonexistingresources(ie,networks,servers,security,managementtools,etc.).TheCIOorCTOrunthisfunction.
• Digitalbusiness–Thisencompasseshowbusinessmodelsevolveasdigitizationchangesthevaluepropositionofproductsandservices,evaluatingwhen,where,why,andhowtechnologyshouldbeintegratedwithwhattheorganizationsells.Thebusinessunitleaders,CIOs,CFOs,ornewlycreatedpositions(ChiefDigitalOfficer,ChiefInnovationOfficer)areresponsibleforthisarea.
• Digitalmarketing–Thisdefinesandleveragesacompany’sdigitalbranding,communications,interaction,andadvertisinginitiativesonsocialmedia,Websites,andsearchengines,andreconcilesitwiththenon-electronicworld.Italsoevaluateshowtobetterinteractwithcustomers,prospects,andpartnersinanonline,always-connectedworld.TheCMOorChiefDigitalMarketingOfficerrunsthisgroup.
Aspartofthedigitaltransformation,amajorshiftisunderwayregardinghowcompaniesbuytechnology:Spendingismovingfromcapitaltooperationalexpenses.Amongthemanydriversarepredictable,utility-basedcoststhatincreaseordecreasebaseduponbusinessrequirements.Additionally,buyingservicesvs.productsmakesITstaffsmoreagiletorespondtobusinessneedsandleveragetechnologyintheproductsandservicessold.
Digital Transformation
Strategy
Digital IT
Digital Marketing
Digital Business
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Atthesametime,mostITstaffsareflatorshrinkingwhiledemandsfromthebusinessareincreasingandchanging—requiringnewskillsetswithoutnewheadcount.Asaresult,theymustturntotheirpartnerstotakeovermanytacticalfunctions,whileITleadersretrainorreplacestaffmemberssotheyhavenewskillsetsrequired.X-as-a-ServiceofferingshelpITorganizationsmeetbusinessdemands,whilefreeingITleaderstomeetburgeoningstrategicplanninginitiatives.
IT Spending Changes
TwothirdsofcompaniesareshiftingtheirITspendingfromcapitaltooperational.(PleaseseeFigure2.)In2015,theymoved15.9%oftheircapitalexpenditurestooperational,andin2016,theyexpecttomoveanother19.4%.About54%ofcompaniesstartedthisshiftbetween2012and2015,sothetrendandassociatedresultsarerelativelynew.
Figure2:BudgetChange[NemertesITOutlookbenchmark,2015]Theincreasedoperationalspendingisgoingtowardservicesfrompartners—cloud,managed,andprofessionalservices,primarily.Only21%ofcompaniesplantousethespendingtoincreasetheirinternalITstaffs,and15%willspendmoreontraining.(PleaseseeFigure3.)ThespendingshiftputsnewpressureonITleaderstodemonstratesuccessofeachITinitiative.Inthepast,mostnewtechnologiescameintothecompanyascapitalinvestments.ITstaffswouldcreateabusinesscaseshowingcompellingmetricstohelpselltheproject.Butonceimplemented,thedeploymentsweresunkcostsandrarelyweretheyreviewedagain.Withmoreoperationalprojects,financialleadersreviewbudgetsannuallywithmorescrutiny.Anyunderutilizedservicesorappsareatriskforbudgetcuts—abigdriverformoreinternalITmarketingandtrainingtoincreaseuseradoption.Additionally,eventhoughITstaffsarenot
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managingasmuchtechnologyday-to-day,budgetandresourcesmuststillbedevotedtomanagingtherelationshipwiththepartners.
Figure3:SourcesofOperationalSpending[NemertesITOutlookbenchmark,2015]
Drivers of Change
Driversbehindthegrowthinoperationalspendingoverallvarybyorganization.AccordingtoNemertes’2015-16ITOutlookbenchmark,ITleadersidentifiedthefollowingdrivers:
• StrategicmovetocloudormanagedservicestomakeITmoreagile• AugmentITstaff,sinceITheadcountisnotincreasing• Buyservicesthatofferexpertisenotavailablein-house• Intentionalmovementawayfrommanaginginfrastructureandhardwareinternally• Servicesprovideeaseofuseforremotelocations• Financialortaxbenefits
Oneofthefinancialbenefitsofoperationalspendingispredictability.Utility-basedpricingstructures,whichincorporateanycombinationofhardware,software,services,implementationsupport,security,andongoingtroubleshooting,aregainingsteamamongITandbusinessleaders.Byviewingnewtechnologiesassolutions,ITstaffscanbuyofferingsthatcombineamultitudeofcapabilitiesintoone,predictablemonthlyfee,peruser.Whenadevicebreaks,appsneedanupgrade,bandwidthneedsaboost,oremployeesneedhelp,ITmanagersdon’thavetofindbudgetortimetoaddresstheissue;thepartnerhandlesit.Meanwhile,theITstaffbecomesmorestrategic,helpingthecompanyleveragetechnologytogrowthebusinessandrevenue.
51%
30% 28%
21%
15%
0%
10%
20%
30%
40%
50%
60%
Cloud Managed Services
Professional Services
More Internal Staff
Training
Increases in Operational Spending
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Onewordofcaution:ITleaderswhoadoptthemantra:“Outofsight,outofmind”willnotfindsuccess.Theymustfostertherelationshipwiththeprovider.Forexample,eventhoughtheydonothavetoworryaboutupgrades,theywouldbenefitfromregularcommunicationswiththepartnerinanefforttoalignpriorities.Thatway,whentheprovidermustprioritizewhichupgradestodowhen,chancesaregreaterthatthosedecisionswillbenefitthecompany.
Transitioning IT Staff
Successinmanagingpartners,aswellassupportingthecorporatedigitalstrategy,requiresdifferentskillsetsthantypicallyexistsinthetraditionalITstaff.TheDNAofITischangingtosupportnewrequirements,and51.5%ofITleaderssaytheyarehavingtroublefindingtherightpeople.AmongthosehavingtroublefindingITstaff,76.5%areshiftingcapitaltooperationalspendingand60%arespecificallymovingtothecloud.
Figure4:ChangingDNAofITStaffsTherealwayswillbeaneedfortechnicallysavvypeoplewithinIT—justnotasmanyasinthepast.Manyofthoseinterestedinrunningatechnologyplatformwillprimarilytransitiontoaserviceprovider,cloudprovider,orsystemsintegratorinthecomingyears.ThemakeupoftheITstaffwillsteadilyshifttoneworretrainedpeoplewithdifferentstrengthsandskillsetsandbackgroundsinbusiness,marketing,andcommunications.(PleaseseeFigure4.)Forexample,marketingexpertisewillhelpgetthewordoutaboutnewcapabilitiessoemployeesactuallyusethemandunderstandhownewappsortechnologieswillmakethemmoreproductive.Similarly,businessleadersmustincorporatetechnologyintotheirproductsandservicestomaintaincompetitiveness;thosewithbusinessandtechnologyexpertise—whoalsoaregoodcommunicators—willbecrucialinconnectingthedots.
Legacy Emerging
Technology expertise Technology + business expertise
Tactical Strategic
Focus: Product/app works
Focus: Users like interface
Whiz-bang coder Manage partner, who employs whiz-bang coder
Focus: Bits and bytes Focus: Solutions
Often introverted Solid communicator
Industry knowledge not required
Industry knowledge preferred or required
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Figure5:NewSkillsetsinDemandforIT[NemertesITOutlookbenchmark,2015]AsITleaderslooktowardthefuture,theywanttechnologistswhounderstandthebusiness,alongwithanycombinationofexpertiseincontracts,specificindustries,regulatoryissues,andprojectmanagement.(PleaseseeFigure5.)Indeed,thenew-agebusiness-technologyprofessionalisbeingpulledindifferentdirections.ITleaderswhoemergesuccessfulinthistransformationmustspendmoretimeandenergyonbusiness-unitstrategydevelopments,whilestilloverseeingtacticaltechnologyfunctions.That’swherepartnerscomein—alongwithintegratedproductsandservicesthatareeasytobuyandimplement.
‘As a Service’ Addresses Multiple Needs
Theas-a-servicemodelisgainingfavorwithITleadersbecauseittakesthepressureoffofITtoputallthepiecestogethertodeliverasolution,andinsteadreliesonpartners.Varioustechnologiesareappropriateforas-a-serviceofferings,thoughcommononesincludewirelessandmobility,networkinfrastructure,UCandcollaborationapps,andcloud-basedenterpriseapps(ie,CRM,ERP,documentsharing,etc.)InNemertes’benchmarkresearch,ITleaderssaythekeydriversfortheseservicesareagility,technicalexpertise,predictablepricing,andkeepingupwiththelatestupgradesandfeaturesets.Predictable,structuredpricingcertainlyisadraw,butactualratesmatter,too.Atfirstglance,ratesmayappeartobehigherthanthehardcostsforprovidingthesameserviceinternally.Butwhenfactoringstaffingandotheroperationalcosts,as-a-servicemodelsoftenareless
0.8%
1.7%
20.8%
28.3%
28.3%
30.8%
30.8%
33.3%
37.5%
40.8%
Understands Security and Compliance
Bridges Old, New Technologies
Evaluates Risks and Rewards
Project Management
Understands Technology Integration
Has Industry Expertise
Can Analyze SLAs
Understands Regulatory Environment
Understands Contracts
Understands our Business
What Skillsets Are You Seeking in New Hires?
DriversforX-as-a-Service
ü Agilityü Technicalexpertiseü Predictablepricingü Up-to-datafeaturesü Predictablepricing
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expensivethanrunningtheservicein-house,particularlyforsmallandmidsizebusinessesthatdonotalreadyprovide24x7support.Takemobility,asanexample.Companiestypicallybudgetbetween$50and$100permonthperemployeeforasmartphoneandassociatedservices.Thosewhopayforemployee-owneddevicesreimbursethemabout$70permonth,accordingtoNemertesbenchmarkdata.Costsvarybasedonthedeviceselected,thedatarequiredandtheinternationaltravelingrequirements.Thetruevalueofas-a-serviceplans,however,isintheimplementationandsupportservices,devicewarranty,andexecutivecare.Figure5illustratestheactualcostofcapabilitiestypicallyfoundinas-a-serviceofferings.Withas-a-serviceofferings,monthlypricesrangefrom$30to$75permonthperemployee—comparedto$233tobuythedeviceandserviceseparatelyfromanysupportandimplementation.(PleaseseeFigure6.)Oneengineeringfirmestimatesitsaved$50to$120perpersonbymovingtoamanagedmobilityservice.Thekeydriverswerepredictableprices,streamlineddevicestorunengineeringapps,and24x7supportfortravelingemployees.
Figure6:MobilityCostBreakdown[NemertesMobility,UCTCObenchmarks,2014,2015]Theabilitytooffloadallofmobility,ornetworkfunctionsatabranchlocation,orcollaborationappsenterprise-wide,forexample,easestheburdenonITstaffs.What’smore,theas-a-servicemodeltypicallyallowsforgradualmigration,soITstaffsdon’tneedtodoaflashcutoverthatimpactstheentireenterpriseatonce.Theycanmoveattheirownpace,bygeographyofjobfunction.Asstated,effectivepartnermanagementiskeytosuccess.Workingwithacompanyconsidereda“trustedadvisor”correlateswithsuccess.TrustedadvisorsdifferfromstrategicpartnersorcommodityprovidersinthattheyhelptheircustomersdevelopeffectiveITstrategiesandthenexecuteonthem.
Conclusion and Recommendations
Asthemake-upofITchanges,leadersmustlooktowardnewsolutionsandnewpartnerstofillthegaps.InternalITstaffswillbecomemorestrategicandlesstacticalregardinghowthecompanyleveragestechnology.Theyneedpartnerswhocanhelpthemnotonlybetheirsoundingboardsonnewtechnologystrategies,butalsohelpthemexecuteonthosestrategieswithofferingsthataresimpletobuy,implement,andmanage.
1000#person*company Per*employee NotesDevice&lease 25.00$&&&&&&&&&&&& Assume&243month&termUnlimited&voice,&text 15.00$&&&&&&&&&&&&Unlimited&data 50.00$&&&&&&&&&&&&International&roaming 20.00$&&&&&&&&&&&& Base&plan&plus&usage24&x&7&support 83.00$&&&&&&&&&&&& Average&compensation&of&$83,200On3site&implementation 20.80$&&&&&&&&&&&& Average&of&15&minutes&per&deviceConcierge&service&for&executives 19.20$&&&&&&&&&&&& 20&executives&x&2&hours&per&monthTotal*monthly*cost 233.00$**********
Often&combined&plan
Typical*Costs*for*Mobile*Capabilities*#*Internal*Support
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Nemertesrecommendsthefollowing:
! Shiftstooperationalspendingwillresultinannualreviewsofspendingforeachservice.First,makesuretheservicesIToffersalignwithemployees’demands(thoughdiscussionsandperhapssurveys).Then,makesureemployeesknowwhat’savailableandunderstandhowtheappsorserviceswillhelpthemdotheirjobs.Lowuseradoptioncouldspelldeathforthetechnologyinquestion.
! Planforfuturestaffingchanges.EvaluatehowthecompanyischangingitsuseoftechnologyandhowITwillbeinvolvedindigitaltransformation.Hirepeopleorretrainexistingstafftohavetheskillsetsrequiredforsuccess.
! Evaluate“as-a-service”offeringsthatcombineequipment,apps,andserviceinone,monthlyper-userfee;providepredictable,flexiblepricingmodels;andoffloadimplementationandtroubleshooting.NotonlywilltheseserviceseasetheburdenforITstaffs,theyoftenwillsavemoneywhenfactoringthestaffingcoststoprovidethesamelevelofservice.Theyalsoenableflexibilitybyallowingcompaniestoaddtheservicesasneeded,perhapsstartingwithspecificlocationsandscalingwhenthetimeisright.
! Outofsiteshouldn’tbeoutofmind,though.WhenusingpartnerstoprovideXasaservice,makesuretomanagetherelationshipsoprioritiesarealigned.
! Workwithcompaniesyouidentifyas“trustedadvisors”togainnewperspectives,developsuccessfulstrategies,andexecuteontechnologyplans.
AboutNemertesResearch:NemertesResearchisaresearch-advisoryandstrategic-consultingfirmthatspecializesinanalyzingandquantifyingthebusinessvalueofemergingtechnologies.YoucanlearnmoreaboutNemertesResearchatourWebsite,www.nemertes.com,[email protected].
