To survive IT services vendors must develop a multi-brand strategy

No-one will argue that the level of disruption for technology buyers and sellers is at an all time high. Everything is up for the disruption and will be for the foreseeable term in business time-frames. Therefore every option to win needs to be considered.

Multi brand approaches are real. They work for airlines, retail, hotel chains, auto manufacturers and many other sectors of the economy so why have IT solution providers not considered a multi-brand approach. The Gap group has Old Navy, Gap and Banana Republic, Qantas has Qantas and Jetstar, Volkswagen Group has VW, Skoda Audi amongst many examples. The time has come for IT Solutions vendors to meet distinct client requirements and frankly not let revenue walk out to competitors.

Let’s take a look at the model enjoyed by leading Asia Pacific airlines such as Qantas, and Singapore Airlines. These three airlines, whilst more than capable of frustrating their frequent fliers, have a very strong premium brand. When you fly them you know what you will get. The schedule is usually robust, and if there is a problem it can be resolved, you get experienced crew, and an overall premium experience (I know, a little idealistic perhaps).

If you fly Jetstar, or Scoot you know that you still get from A to B, it is just with less frills and services, and often some tears, but of course, all things being equal, you play less money.

From a car perspective, even though they can share the same platform the experience and cost outcomes between an Audi and Skoda is considerable

The legacy IT solutions vendors need to adopt this model if they are to stay relevant in what is of course an exceptionally disruptive environment. Maintain the premium brand for those organisations who need the full service and can invest the resources. Then create a tiered brand that services those clients who do not want bespoke solutions, rather those who want faster deployments.

The tiered model opens up the smaller sized organisations, specific industry offerings and partnering opportunities that are not always available to the premium model. Just as Qantas found with Jetstar it introduces new economics for potential customers that were either untapped or just went to the other competitors.

A key point is that some will say that this is the role of partners, but it is not as simple as letting the no frills work go to the channel. The partner environment is important but cannot please every engagement or client.

Characteristics of the premium services brand

  • Integration depth and testing across Applications, processes etc.
  • Availability of premium resource level
  • Bespoke service provision
  • Core business processes

Characteristics of the no frills services brand

  • Stand alone project engagement
  • Strong asset and automated solution base
  • Inability to significantly modify or customise
  • Secondary business processes

The core point is that currently there is not the flexibility to provide such a model. Vendors get themselves caught up in being both premium and no frills. This is where it gets difficult. The success of Qantas, Gap et al is because they know where one brand begins and the other ends. They price and deliver consistently to this benchmark. They also value customer experience and outcomes, just in different ways. 

The other area of debate relates to core versus secondary business processes. This is of course debateable, but it is clear that some processes need more technology investment focus than others.

Focus Point

The IT market is undergoing extreme change. The services market is no exception. Whilst it met the challenge of offshore, this is no guarantee that it will meet the challenge of cloud and digital more broadly.

Legacy vendors must consider the multi-tier model that has been so successful for the business model of brands such as Gap, Qantas and Volkswagen. This enables the opportunity to change the dynamics of the services market and have a better chance of winning during the disruption.

If you require further information, please contact Phil Hassey,  Founder capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology as the world becomes Digital. Phil may be contacted by email below,

phil@capioit.com

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Want digital employees – hire graduates, retrain existing employees

Graduates and graduate recruitment programmes have never been more important in enabling the Digital outcome for both providers and users of digital solutions in all measures. 

Rampant short term thinking in organisations has mean that many graduates were traditionally looked down upon because of “a lack of experience” and the time required for productivity factors. Certainly over the past 20 years I have noted many organisations have cut back on graduate programs, or narrowed focus.

Now we are accelerating through the digital age the tide has turned rapidly. Graduates are Digital Natives. They live act and breathe the new economy more than any jaded worker with 25 years of experience.  Social media, analytics, mobility are second nature in professional and personal capacities. Imagine the skills that the next generation of workers will have in say 10 years as they come through knowing absolutely nothing else but integrated digital functions.

Clearly this has resulted in a significant reduction in time to productivity for graduates, in fact the model may well have been turned on its heads. Arguably the existing long term employees are the ones who need to realign skills due to the time required to make them more productive.

One point, whilst the suitability of new graduates for the new economy cannot be questioned, it would be naïve to think that academia has caught up with the shifting skill base and requirements. In general it hasn’t so more transformation is required.  From a technology graduate point of view the problem becomes the choice between training a general graduate in technology, or training a technology graduate in business.

Capture Point

Graduates have never been more important, subsequently, nor has a revitalised graduate recruitment program. Focus on training will increasingly be needed to reskill older legacy workers not younger Digital Natives.

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A Unique Leadership Perspective defines Dimension Data

Dimension Data has always been distinctive amongst the overcrowded IT infrastructure services market place due to the simple fact that it is the only global player to stake a leadership position that has originated from an emerging market.

From humble beginnings in South Africa in 1983, where it was rightly limited to operating only in the domestic market due to the political environment Dimension Data has thrived through partnerships and global acquisitions as the barriers of Apartheid were lifted.

It was one of the first 6 global partners of Cisco (who naturally refused to do business with it during apartheid) and has grown to arguably become Cisco’s strongest partner. All that is history, it is now a strong subsidiary of NTT employing 28,000 people.

In May this year, Dimension Data held the Perspective 2015 Industry Analyst Event in Prague, Czech Republic. Like the location, the event was a unique experience. When analyzing the various market players, capioIT has always believed that the strength of culture is critical from the leadership to the delivery teams.

In light of this understanding of the importance of culture, it is clear that Dimension Data has an executive team that is unique in the tech industry, particularly in the global IT firms. The leadership team of Dimension Data largely consists of South African, Australian and British nationals. It does not have a large number of Americans the top leadership roles.

This in itself is so differentiated from the US, European or Asian based vendors. The key determining factor of Dimension Data is the revenue split is well spread geographically. Because no one region dominates it has appeared to have developed an egalitarian approach. The level of executive team professional and social rapport that I have observed over the years is much more collegial and positive than virtually any other firm that I know.

It was amusing to watch the US and European based analysts try to understand the culture and ribbing or gentle mocking that went back and forth between the Dimension Data leadership team particularly around cricket and rugby results. No New York Yankees or Lionel Messi references at this event, it was all about Australia’s Cricket World Cup success.

Clearly NTT have identified the management approach, and the contrast with the NTT approach. It appears that the mother ship has rightly decided to leave it alone. The challenge for Dimension Data will be if the management team is disrupted. If the CEO Brett Dawson were to retire, and the successor come from within, then this of course could have a disruptive impact on the overall culture

Capture Point

What does this really mean? – Without attracting suggestions of naivety, the management team appears to work for each other and have each-others back. This is more than I can say for many more traditional management teams particularly those that are dominated by one geography or service line. The benefits for clients, employees and partners that flow from a cohesive aligned management team is significant, highly valued, yet difficult to find.

If you require further information, please contact Phil Hassey,  Founder capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology as the world becomes Digital. Phil may be contacted by email below,

phil@capioit.com

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The Czech Republic – Proof independence is possible in a disruptive world

The Czech Republic is one of the most proudly and clearly independent countries and cultures in the world.  The 10.5 million residents have suffered from limited historical buffers from the German and Russian Empires. Of course, last century both decided to forcefully manage the affairs of the Czech (and Slovak) people, and it was only with the fall of the Iron Curtin and the subsequent Velvet Revolution and divorce (peaceful and positive split of Czechoslovakia in two the Czech and Slovak Republics) in 1992/93 that stable long term independence was a real outcome for Czech.

In 2015, Czech has overcome this past to be a benchmark of independence in Europe despite the ongoing political and economic disruption. Not only has the magnificent city of Prague been able to avoid destruction either culturally or architecturally, the language of Czech is dominant in the country. Travel through it and the street signs are in Czech. Proudly, there is no concession to German, Russian or English, it is virtually all in Czech except in the most tourist based centres of Prague.

This for me is such a strong indicator of a strong proud culture. There is a lot to admire about a country who is prepared to lay the country on the line and find a differentiated culture amongst aggressive neighbors (more economically, than military in 2015).

Capture Point

Without stretching the analogy too far, organisations can take inspiration.  There is hope for those companies, particularly mid-sized ones, who are being crunched from all sides as Digital Innovation takes hold. There is always an opportunity to find a niche, and to act as a bridge between organisations, processes and outcomes.  Just as the Amish still find a small niche in the US and the Czech Republic  has carved out a niche in the crowded European market, organisations that have a strong desire and culture will find their niche in the new economic landscape.

If you require further information, please contact Phil Hassey,  Founder capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology as the world becomes Digital. Phil may be contacted by email below,

phil@capioit.com

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Cost increases due to currency will accelerate asset based services in Europe and Australia

The shift towards asset based services, IP, or automation has finally accelerated. This has been a long time coming, and the slow pace of change has been an ongoing frustration for capioIT. Many SI and services organisations have finally begun to apply the required innovation and change in business process that clients have been demanding for way too long. That is, services configured at speed with prime cost considerations. Virtually every acquisition by a services organisation now is expected to provide the scalability and “hustle” on offer for asset services.

Concurrently one of the major shifts in the broader global economic viewpoint has been the relative readjustment of currencies, in particular the return of the US dollar. Against the US dollar, the Euro has fallen approximately 30% in the last 12 months, and the Australian dollar, by 20%. This clearly has had a major impact on everything from fuel prices, to the price of a new iPhone. Clearly it has a material and significant impact on the economics of offshore service delivery (or any transaction priced in US dollars). The economic goal posts have shifted substantially.

At the same time, in certain key sectors of the technology services market, particularly around skills in analytics, cloud and mobility there are defined shortages of available skills increasing pricing and delivery model pressure.

For a range of reasons offshore services delivery is the current optimum model with most significant SI engagements having a majority of resources offshore or nearshore depending upon the geographic perspective and definition. Of course, Western Europe, and Australia has been one of the largest adopters of offshore outsourcing. When the Euro and Australian dollar was so high, In US$ terms there was limited incentive to focus on asset based and non-labour service delivery. A vendor could afford to simply throw more labour at the problem and not execute on improved process.

With the increased cost for service deliver, if offshore based vendors are to keep their margins (aside from the inevitable reduction in pure headcount) they need to focus on productivity and efficiency to drive successful customer outcomes. Clearly this is an increased acceleration of IP or asset based services. Finally economic factors will lead to an increase in automation, and faster outcomes to clients without having to rely on an old and increasingly broken model of headcount after headcount increase.

The final thought is that not every vendor will be able to make that shift. Whilst it is accelerating, just as there were laggards to offshore outsourcing, there will be many existing providers who either cannot make the shift, or like Fujitsu, CapGemini, EDS et al as offshore outsourcing accelerated,  have to spend significant capital to still fail to play catch up.

Capture Point

The acceleration towards asset based service delivery is starting to live up to the promise. This changes the economics of services delivery. Currency shifts are going to only accelerate this and change the service delivery landscape in markets such as Australia and Europe.

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Digital Disruptors hustle, innovate and execute leaving legacy IT behind

Hustle is a word that means a range of intentions in different countries. But the core theme of moving quickly and getting it done (sometimes “it” may be ambiguous or up to generous interpretation) is central to how capioIT views the requirements of organisations who will drive the shift towards a true digital future.

The ability to capture innovation, and execute on change may be less ambiguously defined, but is of equal criticality. For those companies that are creating the digital world, and by extension, those that will define the future for enterprises, government and consumers the ability to provide leadership in innovation, execution and the ability to drive change with speed, aka hustle, is absolutely essential.

That leads to the need to understand who is providing this leadership, and pointedly, who isn’t. Independent emerging technology research and advisory firm capioIT undertook an at times overwhelming but always independent study to rank 60 vendors on the basis of their ability to innovate, execute and hustle in the new world of the Digital Economy. These 60 technology based companies ranged in size from Bluewolf to Apple and originated in 12 countries. All have been leaders in their field at one stage in their lifecycle, be it in the modern economic era, or in the age of the typewriter and electronic calculator. Some have yet to fully reach potential, for others the glory days may have past them by.

The fifty companies included in the study were classified into five different types of organisations as follows (% indicates proportion of total companies)

  • Disruptor (20%)
  • Diversified (25%)
  • Legacy Services (30%)
  • Software (12%)
  • Telco (13%)

Each firm was ranked based upon global capability based on a weighted list of 10 variables. These variables or capabilities were split between Innovation and execution. Both are critical for transformation, and both require hustle.

 

Innovate  
Attribute Weighting
Internal Innovation 15%
Ecosystem Innovation 10%
Customer Centricity 30%
Hustle 20%
Digital Investment 25%
Total 100%

 

Execute
Attribute Weighting
Client Outcomes 30%
Global Integration 20%
Workforce Engagement 20%
Partner Investment 15%
Hustle 15%
Total 100%

Disruptors lead across virtually every metric. They are able to innovate and execute better.  It is not surprising that the ability to innovate is even proportionally stronger than the execute rating. That is the upside of being a disruptor, innovation leads execution. At the same time execution is essential. If you cannot execute on innovation you will not last long.

Of the legacy firms, the best placed are software firms. The successful software firms (and software components of the diversified technology providers) have been able to innovate in particular. There is a lag in execution, but unlike some of the other vendors the base has established.

Key Strengths of Disruptors

  • Seed and create change
  • End to end culture of innovation
  • Creation and significant enhancement of emerging business models
  • Ability to fail and rebound
  • Understand processes where value is created and those that are less valuable
  • Employee empowerment
  • Knowledge that the market is never won
  • Hustle Hustle Hustle
  • Passion Passion Passion

Key Weaknesses of Laggards

  • Organisational silos
  • Culture of holding onto what used to work
  • Inability to evolve at speed
  • Management by control
  • Lack of hustle
  • Follow not lead

Top 60 Vendors

The sixty vendors are highlighted in the chart above. Clearly with 60 vendors this is a busy  chart. But what it does highlight is that being a disruptor and a legacy vendor is difficult. Disrupters make new markets, fail fast and have ample passion and the ability to hustle. Twitter, Facebook, Amazon and Apple have created new markets. Salesforce, Google et al did not create markets as much as revoutionalise and democratize existing innovation at scale other entrants cannot match.

The disruptors are also differentiated within and between their ecosystem. Overwhelmingly the traditional vendors included in the study are basically clumped in undifferentiated glue. Escaping is difficult. Arguably, only Microsoft has escaped the wrath of the legacy bear trap.

Why has Microsoft escaped? – It acquired what it needed, it had a hustle culture, embraced passion and regained the ability to seed and create change. Compare this to a firm such as HP who has struggle to shift beyond organisational siloes, operate at speed and is following the market.

In general, Indian based services providers are reinforced as part of the legacy, not as the disruptors they once were.  They have failed to shift onto the next big plays in the market, and are heavily reliant on labour based activities, and acting too slowly in the shift to automation. CSC, CGI, Fujitsu et al are even more challenged as they have not properly adopted services to the Indian provider market game, let alone the newest challenge of automation and as-a-service services.

IBM is a company struggling with a dual identity. On one hand, investments in Bluemix, Watson, Analytics and Cloud make it a clear innovator and market creator. Balancing this out is challenges with legacy services and software business that are driving so many internal and client challenges. HP is struggling on many fronts, but has the hope of a breakup presenting the best structure for it to hustle.

Capture Point

Transforming organisations is difficult. Only a small number of firms can have the culture, opportunity and gravitas to really transform an industry and be a true disruptor.  IT related firms are struggling significantly with the global shift towards a Digital environment. Whilst some are enjoying more success than others the path is exceptionally difficult and competitive across all parameters.

 

If you require further information, please contact Phil Hassey,  Founder capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology as the world becomes Digital. Phil may be contacted by email below,

phil@capioit.com

Please see below for details of methodology, definitions etc for this study.

Included Vendors

The following vendors were included in the report.

Disruptor

  • Amazon
  • Apple
  • Bluewolf
  • Facebook
  • Google
  • McKinsey
  • Netsuite
  • Rackspace
  • Salesforce
  • TenCent
  • Twitter
  • Workday

Diversified

  • Cisco
  • EMC
  • Fujitsu
  • HP
  • Intel
  • Huawei
  • IBM
  • Juniper
  • Lenovo
  • NEC
  • NetApp
  • Oracle
  • Dell
  • Samsung
  • Siemens

Legacy Services

  • Accenture
  • ADP
  • Atos
  • Capgemini
  • CGI
  • Cognizant
  • CSC
  • Deloitte
  • Genpact
  • HCL
  • Infosys
  • Pactera
  • PwC
  • TCS
  • Unisys
  • Wipro
  • Xerox

Software

  • CA
  • Informatica
  • Microsoft
  • SAP
  • SAS
  • Tableau
  • Vmware

Telco

  • AT&T
  • BT
  • Deutsche Telecom
  • NTT
  • Singtel
  • Telefonica
  • Telstra
  • Verizon

Vendor Selection

The sixty vendors were selected for a range of factors. The majority “self-selected” as being legacy vendors or clear innovators. Some such as Tableau (analytics) and Bluewolf (Cloud based Services) were chosen to highlight the leading providers in emerging markets.

The telecommunications providers were chosen to represent both regional and global providers.  Tencent was selected as a leading disrupter from China.

Disrupter (20%) – Typically a comparatively new company, not always aligned as an enterprise IT company, but providing true disruption to the sector

Diversified (26%) – Legacy IT company offering a range of capabilities such as hardware, services, software etc

Legacy Services (28%) – Pure play services firms, either from an IT, BPO, Applications and consulting perspective

Software (12%) – Enterprise software provider

Telco (12%) – Telecommunications services provider

Methodology

Due to the extensive nature of the research and the inclusion of 60 global vendors, clearly data and process integrity is a critical component of a report of this type. It is fundamental that the data be valid and untarnished. To help ensure this, all information for the measurement and assessment of these attributes comes from a range of sources to ensure a range of opinions. Sources of information include clients of firms included, partners of the firms included, regulatory and government bodies, vendor briefings and meetings, media sources, the IT ecosystem and any other relevant source.

Ranking Variable Definitions 

Innovation

Internal Innovation – This is research undertaken within the organisation, or under the direct control. It included such functions as product development, research labs and other sources of IP

Ecosystem Innovation – This primarily relates to innovation driven by the ecosystem external to the selected vendor, be it partners, clients or other relevant groups.

Customer Centricity – The ability to act in such a way to ensure that the customer is the centre of engagement and activity

Hustle – Ability to move with speed urgency and purpose as a corporate entity

Digital Investments – Direct investments in digital capabilities, across the spectrum from legislative to security and social media.

Execution

Client Outcomes – Focus on executing to ensure client outcomes are met, directly, or by partners

Global Integration – The ability to offer similar levels of capability across global marketplaces, without a reliance upon small numbers of markets.

Workforce Engagement – To act as an employer of choice, and provide capacity for a globally empowered workforce

Partner Investment – Direct investment in new and existing partners, in addition to transformation of partner ecosystem to enable ecosystem to meet changing requirements.

Hustle – Ability to move with speed urgency and purpose as a corporate entity Continue reading

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Think the Digital Economy is just a Technology Play – Prepare to fail

The rise of the digital economy is of course an era of global development that will transform all. Nothing new or controversial with that. It will also lead to the overwhelming and never ending pervasiveness of technology in all that society does as consumers, enterprises and governments.

capioIT has long been concerned that the most commonly accepted definition of Digital based around SMAC (Social, Mobile, Analytics and Cloud, for some, security) is a technology based construct.

Quite simply until the impact of a governance and regulatory framework, and consumer behaviour is included in the definition of Digital, the benefits and value cannot be fully realised.

The importance of the regulatory environment should be clear to all that are looking to transform or innovate from the business model level through to basic employee level. Governments have not been able to catch up with legislative requirements across the board, from inadequate Privacy and Metadata legislation, to consumer rights, IP, and data location considerations. As a result technology based solutions that work in one jurisdiction may be illegal in another. This even occurs within a countries border. New consumption options such as Uber are illegal (if not tolerated) in some states within a country and legal in others. The total industry needs to strive for consistent (and fair) legislative and regulatory environment. Without the environment too much innovation will be caught short.

In this context we are defining consumer, as the beneficiary or user of the ecosystem. This can be an individual or communities of customers, employee or other “users” of the service provision.

Building a “Digital Ecosystem” without understanding, engaging and including the consumer is another rapid path to failure. Change is difficult for many individuals and communities; failure to account for this is clear in a range of industries, from fashion retail, personal accounting, banking and internet services. At the same time, many organisations have quickly learnt that the consumer is able to hijack and come together using mobile and social media to form a rapid and highly influential view on the provider of the services.

Just ask airlines, governments and other groups who have naively asked for an opinion on their customer satisfaction, services or other related and visible failures to understand how their consumer will operate. Reliance on a build it and they will come approach is also another doomed to failure, you need to have the consumer on side from day 1 regardless of the audience.

Capture Point

Whilst technology is the central driver for the global transformation that is impacting every facet of our professional and personal lives, this shift is more than technology. Legislative and consumer responses will ultimately drive the success or failure. Organisations cannot just rely on technology alone, nor can technology capabilities live outside the organisation.

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