Download - IT on Demand: Why Integrated Services Are Exploding · appropriate for as-a-service offerings, though common ones include wireless and mobility, network infrastructure, UC and collaboration

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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.

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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].