Digital Business and the Boundary-free Enterprise™

Bruce Guptill Research Alerts

What Is Happening?

As we get ready for the 2017 Digital Business Summit events in London and Dallas, it is easy to be reminded that Digital transformation, for enterprises and for IT providers, is increasingly about the re-invention of at least some of every aspect of the business. This includes the company’s technologies, its organization, its functional areas, and its culture, as the boundaries and barriers that have grown from each of these begin to shift and even disappear.

That’s not to say that everything needs to get blown up and rebuilt. But when long-standing business barriers and boundaries shift or disappear, everything that works now should be reconsidered or re-invented to work better in a boundary-less, or even boundary-free, business environment.

Why Is It Happening?

Our Boundary-free Enterprise™ (BfE) concept provides a useful model for identifying and understanding how and why each aspect of the business is changing and will change. The BfE model identifies and explains four areas where boundaries and barriers have traditionally developed and been maintained within and between enterprises – and which today limit and inhibit the ability of enterprises to compete in the new digital business environment. We briefly examine below how each is changing, and why.

Technology. Most technology barriers that inhibit an enterprise’s digital growth have arisen from its business software. Widespread use of open, agile, and Cloud-based development approaches, along with more reliance on and innovation in APIs, have helped reduce or eliminate the OS/platform-enforced technological boundaries between many enterprise IT stacks and systems. Meanwhile, increasingly flexible business models have been enabled by, and driven by, the resulting flexible approaches to development and integration/interoperability. This in turn brings increasing expectations of faster times-to-market, which in turn engender even shorter development and release cycles, which in turn both require and promote faster and more efficient development approaches.

Results: Traditional enterprise technological barriers are much more readily overcome today. Disparate business systems are more likely to be linked more effectively. Traditional OS-based or architecture-based technological barriers are fading. This enables reduction of boundaries elsewhere that inhibit digital growth within and between enterprises. Meanwhile, business expectations of what IT can do are rising – with expected shorter timeframes for results.

Culture. Cultural barriers within the enterprise tend to arise based on organization, function, and technologies used. The technological changes noted above reduce many of the most restrictive and inhibitive boundaries built up by and around cultural structures. Interconnectivity and integration from technology layers up through business processes, and across functional siloes, reduce cultural barriers. In such environments, positive and useful aspects of different cultures are more likely to be shared between organizations, helping to improve communication, collaboration, and the creation of new types of business.

Results: Cultural boundaries within enterprises (e.g., between IT and Marketing) are fading – especially as digital shifts push firms to add, or change to, a service focus versus a product focus. Widespread use of cloud has helped catalyze a rethinking of most organizational roles and responsibilities, while enabling and requiring IT and business leaders to work more and more closely. Note that cultural change strongly affects how, and why, the enterprise engages with other businesses.

Functional. Well-defined sets of data, systems, responsibilities, and functions are increasingly blended, typically by implementing Cloud-based systems that enable vastly improved sharing of information and functionality in more standardized ways. We also see more blending of data and functionality across formerly defined lines of responsibility and function. Leaders and users have access to more and better business data from all areas of the enterprise than ever before. Barriers based on worker and technology function fade as a result.

Results: The extent of inter-enterprise functionality and data sharing is unprecedented, and increasingly widely adopted and adapted. We will see more and better communication between those groups, enabling more and better cooperation, and, if adequately managed, improved sales effectiveness.

Organizational. There are still (and always will be) important departmental boundaries regarding responsibility, reporting, compliance, and function, but communications boundaries are fading fairly quickly. This enables greatly improved operating efficiencies, with much more business and technological innovation at a faster pace with wider reach.

Easier, more secure, and less expensive sharing of data and access makes it more natural to share tasks and functions. Tasks, functions, and workflows increasingly become intertwined, leading to rethinking and redefining business operations into more flexible and efficient constructs.

Results: Important and significant distinctions between businesses and groups within businesses will always exist. But the reduction of technological, cultural, and functional barriers enables the dissolution of many formerly strict boundaries that separated work groups, workflows, and workers.

Net Impact

All of the above changes are occurring everywhere. Practically every business enterprise can and will be transformed to some extent into a boundary-free enterprise. We spend quite a bit of time and effort helping our clients – enterprise and IT provider alike – understand the scope and impact of these changes on their own business, and on their customers, partners, channels and competitors. While every situation is somewhat unique, seven aspects always surface, and must be understood and addressed. These are as follows:

  1. Business strategies need to be reviewed and rethought in the context of more highly-interactive, boundary-free environments.
  2. Success in many markets will require multiple-path, simultaneous approaches that vary based on relative availability and adoption of different enabling technologies.
  3. Speed to market, and speed of response, will become more variable and more critical in many industries. The value of „agility“ will be judged based on a relative ability to reach and match differing business velocities in different relationships and markets.
  4. Business structures, organization, and management need to adapt, and become more flexible, or they will disintegrate. Note: Hierarchical and centralized organizational models cannot be effectively applied where worker autonomy is expected and partner/provider/customer relationships are increasingly dynamic.
  5. Provider and partner relationships must be re-examined and rebuilt, because we are increasingly likely to rely on new and different types of technologies and providers. Enterprises will establish and rely more on new relationships with new providers.
  6. Procurement, security, compliance, and other aspects will need to be re-examined as a result. Software/SaaS providers that excel in this area will be more and more important and valued partners.

Security, especially data security, needs ongoing and continuous reexamination and re-engineering. There are more than adequate security technologies available, but these will need to be adapted in new ways. For example: worker /user security and compliance training and management will have to be rethought and rebuilt for “free-range” worker/user business models in a dynamic IT-as-a-service environment.

SapphireNow 2017: Intelligent Apps – Beginning of an Inflection Point?

Bill McNee Research Alerts

What is Happening?

Earlier this week, ISG Insights attended SAP’s annual SapphireNow conference in Orlando, Florida, along with 30,000 other senior executives, partners and ecosystem players.  Front and center during the opening-day keynote by CEO Bill McDermott was SAP Leonardo, SAP’s new / updated brand that is becoming its de facto next-generation platform and toolkit for building intelligent applications. SAP Leonardo integrates not only SAPs emerging Internet-of-Things (IoT) positioning, but likewise incorporates a design-thinking methodology that leverages machine learning and blockchain technologies, and a range of business analytics functionality.

Why is it Happening?

A key theme that McDermott emphasized was that data is the new “gold” in the digital revolution – a theme further emphasized by Hasso Plattner, Chairman of the Advisory Board, in the Day 2 keynote. In fact, Plattner’s emphasized two key new directions for the firm – the need to be faster and better at rapid application prototyping (emphasizing the role of the UI in this endeavor), and his vision to make all applications intelligent.

In this regard, Leonardo is SAP’s next big thing – and central to the way it will help customers build and deploy next-gen style applications and the services that will surround them. Long an advocate for in-memory approaches and architectures that deliver a single version of the truth, Plattner led SAP to its current “no-aggregates” framework as S/4 HANA evolved over the past few years. In this regard, Leonardo is the next crank of the wheel, and the foundation for the building of a new class of intelligent application layered on top of the SAP Cloud Platform, inclusive of its emerging IoT, AI and machine learning capabilities.

While an event as large and broad as SapphireNow can’t be covered in a single research piece, other key moves by SAP included:

  • SAP Digital Twin, providing digital inspection for the Leonardo IoT platform (leveraging sensors to create real-time digital representations of physical assets). Interesting case studies shared in these regards.
  • SAP Cloud Platform to now run on AWS and Cloud Foundry, as it ups its game to further support a multi-cloud environment.
  • SAP Machine Learning (ML) now available now only as part of Leonardo platform but SAP is launching its own ML technology on a digital platform, called SAP Machine Learning Foundation. A host of SAP offerings are also getting machine learning updates, including SAP 2/4 HANA Cloud for Finance.
  • Significant upgrades to a range of analytic offerings, including SAP Analytics Cloud (formerly Business Objects), SAP Digital Boardroom, SAP Predictive Analytics, among others.
  • SAP Ariba and IBM are partnering together to transform procurement with SAP Leonardo and IBM Watson

Market Impact

As shared in my Lens 360 blog post recap published May 18 on Workday’s recent Tech Summit, it is clear that the major ERP players are dramatically upping their games and advancing strategies that go well beyond their historical strength in developing and delivering core systems of record. In the case of both SAP and Workday, layering in advanced analytics, AI and IoT technologies that access real-time financial and non-financial data, combined with other internal and external information, is significantly extending the value-proposition of both providers – whether rank and file managers, all the way up to the boardroom.

While SAP’s various cloud-based offerings were emphasized throughout the event – front and center was a vision of SAP delivering a next-generation of intelligent apps that have the potential to enable enterprise to better navigate their digital transformations and journey. No doubt that we are early in this journey, but the knee may be in the curve where the emphasis will be less on core systems of record and more on data and executive intelligence as the cornerstones of tomorrows ERP.

While no doubt SAP has a compelling next-generation vision, a big question is how many S/4 HANA customers are far enough along in their journey to take advantage of the new capabilities – and how rapidly will SAP lay out some very actionable, compelling, and high-value ML-based solutions around specific process or executive leadership issues, to accelerate adoption?

But what is clear is SAP is thinking out of the box, as it moves to go beyond its initial S/4 HANA application vision – and sets its sights on helping clients advance their digital journeys. We like that SAP is setting new frontiers and challenges in front of itself.

New ISG Insights Digital Disruptors Report – Cyber Deception Platforms Show Promise

Bruce Guptill, Jim Hurley Research Alert

What is Happening?

Digital cyber deception changes the traditional enterprise security approach from (possibly) learning about compromises months after they occur, toward definitively seeing and handling cyber-attacks that are underway. It helps to put the enterprise back in charge of its own cyber-defenses. However, as with any new disruption, there will be obstacles on the way to mainstream adoption.

A new ISG Insights report – Digital Disruptors in Digital Cyber Deception – from ISG Insights reviews how cyber deception works (and why), and looks at five providers of digital cyber deception platforms. These providers are helping to define and drive the agenda of digital cyber deception, and the way we will think of and practice, defensive cyber-security in the future.

Digital Disruptors in Digital Cyber Deception examines offerings from five providers that we see helping to shape the cyber deception marketplace while disrupting traditional cyber security approaches. The five – Acalvio Technologies, Attivo Networks, Cymmetria, Illusive Networks, and TrapX Security – are profiled by functionality, relative strength, and challenges, with our recommendations as to where each is best suited.

In addition to the five providers of digital cyber deception highlighted in this report, other providers include CounterCraft, CyberTrap, Javelin Networks, Smokescreen Technologies, Thinkst, and Topspin Security. Other providers claiming to field products with similar features include Guardicore, Shape Security and vArmour. Clients of ISG Insights can look forward to examinations of these in future Research Notes and reports.

Why is it Happening?

As we have long maintained, the nature of interconnected systems means that there really cannot be an effective IT security perimeter. And the more users, devices, and software are linked, the less effective are traditional practices focused on boundaries and barriers to stop intrusion and loss.

The impetus driving adoption of digital cyber deception comes from enterprises in industries where cyberattacks are continuous, where the frustration of cyber-defenders is high, where the cybersecurity culture is open to new approaches, and where dealing with new and small providers is not anathema to IT and security leadership – or procurement organizations. Integration with security incident and event management/security operations center (SIEM/SOC) processes will speed enterprise adoption.

Instead of emplacing more barriers to stop cyber-attackers, digital cyber deception lures them into one-way traps. The bait of digital cyber deception helps to maneuver attackers into what appear to be real systems, while keeping them away from operations and digital crown jewels. It plants deceptions – e.g., breadcrumbs, lures, and tokens – throughout the network that attackers expect to find and use to move about in search of digital booty. It transports attackers into a range of decoy systems ranging from database stores, Linux and Windows servers, domain name servers, Active directory servers, point of sale (POS) and industrial control systems (ICS) among others. Once lured, attackers are kept bottled-up in digital honeypots and away from anything that will result in harm.

Anything touching a digital deception is considered a valid attack. Users so far report complete accuracy regarding attacks, with no false positives. Its track record indicates that cyber-defenders are notified as soon as digital deceptions are touched, while the movement of cyber-attackers is monitored in real-time. Better yet, users say its decoys are keeping invaders occupied in virtual environments that are easy to get into, and very difficult to escape from – a little like a digital jail.

Net Impact

Digital cyber deception is the new paradigm for defensive cybersecurity. It stops cybercriminals and attackers by fooling them. It does this by inviting attackers using deceptions, it lures attackers and then traps their lateral movement into mirage kingdoms of shiny fools-gold. Instead of old-world brute-force security that is losing its oomph, this smarter approach to cybersecurity changes the rules of the game in favor of the enterprise.

Readers of Digital Disruptors reports should of course make their own determinations and assessments regarding potential providers, based on their unique requirements, relative priorities and evolving strategies specific to the business or IT challenge at hand. Those requirements should form the criteria for evaluation and selection of providers and solutions.

ISG Insights’ Digital Disruptors are not meant to be complete or exhaustive lists of all technology vendors, solution providers or offerings in a particular area of Business IT. Inclusion in a Digital Disruptors report is not limited to clients of ISG, and implies no endorsement with respect to the providers, nor a warranty of provider suitability or viability. The source of Digital Disruptors content is based on a combination of non-confidential information and analyst insight, supported by fact-based research and analysis and ongoing engagement with both enterprise leaders and providers.

The report is available immediately to ISG Insights subscription clients by clicking here. Clients may also simply log in and download a PDF of the report. Non-clients may obtain copies of the report by contacting ISG Insights at

ISG Provider Lens – Germany 2018 – SAP Hana Services (ehemals Experton Vendor Benchmark): Research-Phase beginnt

Rainer Suletzki

Rainer SuletzkiIn den letzten Jahren wurde von verschiedenen Datenbank-Anbietern die sog. In-Memory-Technologie etabliert, bei der im Unterschied zu herkömmlichen Technologien ein großer Teil oder alle relevanten Anwendungsdaten im Hauptspeicher der eingesetzten Hardware vorgehalten werden. Der unmittelbare Nutzen besteht darin, die Geschwindigkeit der Datenzugriffe und somit der jeweiligen Anwendungen drastisch zu verbessern. Die ersten Anwendungsbeispiele bezogen sich daher häufig auf Data Analytics-Anwendungen. Inzwischen rücken auch die durch drastisch verbesserte Performance möglichen völlig neuen Geschäftsprozesse in transaktionalen Anwendungen in den Fokus. In diesem Kontext hat das entsprechende Angebot der SAP, die HANA-Technologie, vermutlich die bedeutendsten Auswirkungen, weil sie über die Infrastrukturaspekte hinaus auf das breite Anwendungsportfolio von SAP abgestimmt ist, mit der Optimierung des Datenmanagements (Data Aging) kombiniert werden kann und das Zusammenwirken von Data Analytics und transaktionalen Systemen verbessert. Mit dem neuesten Produkt S/4HANA bietet SAP ferner eine radikale Vereinfachung der Datenbankstrukturen innerhalb der SAP Business Suite an („Run Simple“). Die publizierten Verkaufszahlen von SAP legen nahe, dass in vielen Unternehmen der Übergang auf diese Technologie konkret geplant und vielfach auch bereits begonnen wird.

Die zu erwartenden vielfältigen Auswirkungen werden die Nachfrage nach kompetenter Unterstützung bei Konzeption und Implementierung von SAP HANA durch geeignete Services voraussichtlich stetig und signifikant erhöhen.

ISG evaluiert und differenziert im Jahr 2017 erneut alle relevanten SAP HANA Services-Anbieter für Deutschland und synchronisiert dabei Anforderungen auf Anwenderseite mit Angeboten auf Anbieterseite.

Die Studie gibt CIOs, IT-Managern und Pressevertretern auch 2017 einen detaillierten und differenzierten Überblick zu den wichtigsten SAP HANA Services-Anbietern im deutschsprachigen Markt. Zudem werden Pressevertretern ausgewählte Ergebnisse der ISG Provider Lens-Studie für deren Publikationen zur Verfügung gestellt.

Die Research-Phase zur Studie umfasst:

  • Herstellerbefragungen
  • Expertengespräche mit unseren Advisors
  • Bewertung von Produktunterlagen und Referenzen
  • Das Testen und die Bewertung der jeweiligen Angebote


Milestones Beginn Ende
Projekt Kick-off 09.05.2017
Herstellerbefragung 01.06.2017 06.07 2017
Sneak Previews 04.09.2017 09.10.2017
Bereitstellung der Studie 17.10.2017
Presseveröffentlichung 25.10.2017

Um IT-Verantwortliche bei der Vorauswahl ihrer möglichen Partner zu unterstützen, führt die ISG eine umfassende Provider Lens Studie über die Leistungsfähigkeit der in Deutschland aktiven Dienstleister durch.

Die folgenden Bereiche sind Gegenstand der Analysephase für Deutschland:


Die Positionierung der Anbieter erfolgt im Rahmen eines neutralen und unabhängigen Research- und Bewertungsprozesses. Die Teilnahme an der Studie ist KOSTENFREI. Anbieter können lediglich NACH Erstellung des Benchmarks Zweitverwertungsrechte an der Studie zum Gebrauch in Marketing, Presse und Vertrieb erwerben.

Die ISG wird die Auswahl der zu untersuchenden Unternehmen und Services im Rahmen der ISG Provider Lens-Analyse unabhängig von einer aktiven oder passiven Teilnahme vornehmen. Um jedoch unseren Advisors eine möglichst vollständige Bewertung der SAP HANA-Angebote Ihres Unternehmens zu ermöglichen, möchten wir Sie (als Anbieter) bitten, sich aktiv an der Studie zu beteiligen. Bitte reservieren Sie Ressourcen in Ihrem Haus, so dass die Einreichung der Fragebögen und die Terminierung der Briefing-Interviews pünktlich vor Abschluss der Research-Phase stattfinden können.

Um den Fragebogen und weitere Informationen ab Beginn der Research-Phase zu erhalten, senden Sie bitte eine E-Mail an

Eine Informationsbroschüre zum Projekt finden Sie unter diesem Link

Mehr Informationen zur unserem Research im Bereich SAP HANA finden hier.

Wir freuen uns auf Ihre Teilnahme!

ISDN: Der All-IP-Countdown läuft, rechtzeitig die Weichen stellen – aber wie?

Frank Heuer, Wolfgang Heinhaus Kommunikationslösungen waren früher in vielen Unternehmen ein Randthema, das häufig nur alle paar Jahre aufkam, wenn der Mietvertrag der Telefonanlage auslief. Mit der Ankündigung, dass 2018 die Umstellung von ISDN auf das All-IP-Netz abgeschlossen sein soll, stellen sich viele Unternehmen die Frage, wie man sich generell hinsichtlich der Kommunikationslösungen in Zukunft […]

Wie positionierten sich die Anbieter von Big Data Social Analytics in Deutschland im letzten Jahr?

Oliver Giering, Holm Landrock: In der Studie „Experton Big Data Vendor Benchmark 2017“ wurde im letzten Jahr die Anbieterlandschaft für Big-Data-Lösungen und -Services in insgesamt sieben Kategorien untersucht. Eine Kategorie betrachtete dabei die Anbieter von Big Data Social Analytics Lösungen. Die meisten relevanten, sozialen Netzwerke (wie LinkedIn, Xing, aber auch Facebook) sind nicht einmal 15 […]

Improving the Customer Experience Takes More Than Technology Innovation

Ron Exler Research Alert

What is Happening?

Over the past few weeks, Customer Experience (CX) has been in the limelight because of publicized airline incidents as well as CX technology announcements from major providers. As enterprises focus on improving the experiences of their customers, it’s important to recognize the complexities of serving them. Customer expectations and experiences vary but in some industries satisfaction is high, while in others frustrations continue to mount. While it’s tempting to lean on technology to address CX shortcomings, working solutions can include technology but can’t rely solely on it. Enterprises also need the right policies, organization structure and methodologies. For example, airlines are longtime users of advanced technologies – especially for reservation systems – but recent events show it’s often the human element that determines the most critical customer experiences.

On the technology front, several recent announcements highlight the expanding focus on CX. Oracle held a conference called Modern Customer Experience 2017 April 25-27. At the conference, Oracle added to its Customer Experience (CX) Cloud Suite. The goal is to reduce IT complexity, improve customer experiences, and better business outcomes. Oracle’s technology innovations come in the form of chatbots and artificial intelligence as well as enhanced messaging, mobile, and video capabilities.

Another indicator of focus on CX amongst technology companies is mergers and acquisitions. This week Deloitte said it would acquire Web Decisions LLC, an omni-channel data management and marketing services company. Deloitte Digital plans to add this to its Customer Experience Value (CXv) offering that is both a solution and a set of services that provides marketers with a customer strategy that is aligned with their business strategy. Other services providers are adding CX-focused capabilities via acquisition or partnerships.

Yet the path to improved CX runs through Digital Transformation, which relies on changing processes and methods. The use of Agile methods intend for team sizes to be smaller and allow those teams to deploy more features into production earlier – many of which can improve CX – which can increase revenue. For example, Australia and New Zealand Banking Group (ANZ) recently said it will be adopting Agile methods to quickly respond to changing customer expectations, engage and empower staff, and to improve efficiency within the bank.

So technology has a role in CX across industries. In healthcare there’s much action around improving the patient experience by evaluating the entire patient journey. As they were grilled in Congressional hearings this week about recent events, several airline executives touted that they offer “in-the-moment” apps for mobile devices that assist employees to help solve issues on the spot. Such digital workplace solutions that empower the workforce and treat employees as individuals can improve CX.

Why is it Happening?

Today’s customers expect new ways of engaging, and digital technologies have raised the stakes and the bar for the customer experience. These pressures are driving change within enterprise business models, forcing creation of new customer-centric operating models, and make dramatic shifts in technology investment strategies. These strategies connect and cross customers, the supply chain, and enterprise departments, forming a Digital Fabric (Figure 1).

Figure 1: ISG Digital Fabric

ISG Digital Fabric

Source: ISG

We think several realities contribute to the confluence of technology and customer experience.

  • Competition. There’s increasing competition for customers in some industries, decreasing competition in others – both affect CX.
  • Customer expectations. Expectations change for a variety of reasons. We see more digital experiences with instant information and on-demand capabilities from some services. Those experiences raise the bar for all businesses.
  • Recent incidents. Highly visible incidents shine a spotlight on poor CX, while the ability to record and report incidents becomes ubiquitous.
  • Agile methods. There’s a growing acceptance of Agile methods, for IT as well as other parts of business – even in large enterprises.
  • Maturing technology. Customer Experience Management (CEM) solutions include sentiment analysis deriving insights from enterprise systems combined with data from social media and contact center interactions.
  • Emerging technology. Newer technology advances include some innovations that can scale and integrate with existing systems, e.g. cognitive computing, video, virtual reality / augmented reality, and wearables.

CX is a 360-degree model of engagement with many linked elements. Technology has an important and growing role in capturing and measuring those experiences; however, it can only supplement an underlying culture of service.

Net Impact

Because of mobile phones, brands are on display 24x7x365 with global reach within minutes. So while most enterprises do a good job most of the time, social media can highlight rare disconnects to overshadow those positive experiences. Enterprises need to recognize the new digital reality and plan accordingly.

An integrated approach to CX should include asking and answering these questions:

  • Which technologies help and in what parts of the customer journey? Do customers want or need all these technologies?
  • What’s the right combination of technology, policies, processes, and training to address ongoing problems affecting CX?
  • What’s the best approach to prevent problems by having systems not only enforce policies but also predict issues?
  • How can Agile approaches improve how the enterprise deliver services?
  • How can the enterprise use CEM to better gauge customer sentiment while also supporting marketing initiatives?
  • How can the enterprise help its customers feel better about their brands and improve CX with personalization?
  • How can the enterprise prepare for the inevitable viral video and follow-on backlash?

Enterprise might be willing, but are not yet ready, to address all elements of improving CX. Empowering employees is tricky but necessary. Often a customer service department is disconnected from the department responsible for employee training, for example. Outsourcing of such functions can lead to further disconnects, requiring oversight to ensure common focus on customer needs and desires across the customer engagement value-chain. Integrating CX with marketing seems obvious, but very few companies — perhaps as few as one in ten — are currently equipped to blend their marketing and customer experience processes, according to a recent observation from Oracle CEO Mark Hurd.

In summary, enterprises should focus on understanding the experience that the customer wants delivered. Do not get distracted or focused solely about what various technology solutions can accomplish. In other words, focus on the problem from all perspectives – that 360-degree view. The tools that might be available to help fix the problems will naturally follow suit.

ISG Index™: As-a-Service Growth Signals Shift to Platform-Based Sourcing

Stanton Jones Research Alerts

What is Happening?

On April 12th, we held our 58th quarterly Index call summarizing the state of the combined sourcing and as-a-service industry for global, commercial, and public sector contracts over $5 million in Annual Contract Value (ACV). Key takeaways from the call included the following:

  • First-quarter ACV for the combined global commercial market (including both as-a-service and traditional sourcing) reached $10.5 billion, up 12 percent over the first quarter last year and up 13 percent from the fourth quarter of 2016.
  • In the public sector, the combined market ACV, at $12.9 billion, was down 21 percent year-over-year, yet rose 17 percent from the 2016 fourth quarter. Traditional sourcing, which still represents the lion’s share of spending in the public sector, was $12.5 billion, down 22 percent, while as-a-service ACV in the public sector, at $0.4 billion, was up 31 percent.
  • Human Resources Outsourcing (HRO), a leading indicator for the sourcing market, is seeing a shift from services-led sourcing to platform-led sourcing, whereby companies are place bets on cloud platforms (e.g., Workday or Amazon Web Services), then sourcing implementation and managed services to fit their technology strategy.

With a combined ACV of $23.4 billion this quarter for both commercial and public sectors, performance was a full 15 percent higher than the prior period – but did not quite meet the level of a year ago. From a trailing 12-month perspective, the combined market ACV contracted somewhat as traditional sourcing settled down after a very strong prior period and returned to what it was two years ago. As Figure 1 illustrates, as-a-service ACV continues on a fairly steep upward trajectory.

Global Commercial and Public Sector Quarterly ACV

Figure 1: Global Commercial and Public Sector Quarterly ACV ($B). Source: Q1 2017 ISG IndexTM

As seen in Figure 2, financial services companies generated $8.4 billion in ACV during the trailing 12 months, a 15 percent increase over the prior 12 months. The rapidly increasing as-a-service market comprises 29 percent of total financial services ACV this year. Business Services emerged as another strong performer with an increase in ACV of 26 percent over the prior like period, and a considerable 80 percent increase from two years ago. As-a-service contracts account for 63 percent of Business Services ACV, indicating this industry’s particular reliance on the cloud.

Industry Details

Figure 2: Industry Details for Trailing 12 Months ($B). Source: Q1 2017 ISG IndexTM

Meanwhile, the gap in contract value between traditional sourcing and as-a-service continues to close. The left bar chart in Figure 2 delineates the difference between the commercial and public sector markets, in which the gap in contract value has not yet emerged.

Why is it Happening?

In the commercial sector, the gap between traditional sourcing and as-a-service sourcing differs by industry vertical. While the financial services industry generated $3.8 billion in total ACV during the prior 12 months, which is a steady rise over the past two years, as-a-service accounts for more than a third of its total market ACV, up from 25 percent two years ago. This activity confirms the fact that this industry has typically been the fastest adopter of new technologies and solutions.

Cloud infrastructure providers such as Amazon and Google serve this specific market segment across a broad base of customers, from startups to midsize businesses and large enterprises.

Telecom and Media use of the cloud is also on the rise, despite short-term uncertainties due to industry consolidation. As-a-service ACV accounts for more than half of its total market ACV, up from 31 percent two years ago. In Manufacturing, digitization of the supply chain may account for some of the strength in as-a-service spending, which now accounts for 41 percent of total market ACV.

For the public sector in the U.S., transitions after two-term presidents generally involve disruption, so we expected ACV over the past several months to be subdued. And, indeed, the number of large deals dropped from 75 in 2015 to 55 in the current trailing 12-month period. Public sector ACV in EMEA has traveled a bumpy road over the past three years, bottoming out in the past 12 months. For both the U.S. and EMEA public sector, enterprises can embrace as-a-service offerings only as quickly as they meet regulatory and compliance requirements.

Market Impact

Commercial IT services spending is shifting rapidly. In 2014, 30 percent of spending was on as-a-service. Today, that number is nearly 46 percent. This rapid shift in spending from traditional sourcing to as-a-service signals that generation-three relationships are in full swing. These next-generation relationships leverage software in favor of labor arbitrage, use agile delivery models to increase speed and reduce risk, and rely on standardized, massive-scale clouds as the underlying delivery platform.

For example, automation will continue to drive up service provider productivity levels, drive down delivery costs, and encourage buyers to adopt more standardized as-a-service offerings all while increasing service provider profitability (assuming they choose not to pass this on to customers in order to win work). Cloud will be the future delivery model of choice, as 50 percent or more of enterprise workloads move to the public cloud by 2020. This once-in-a-generation shift will force large Indian and Western heritage service providers to shift their delivery model from managing assets to managing services. It will also favor leading SaaS and IaaS vendors, who are quickly cementing their market dominance as companies increasingly move to a platform-based sourcing model.

In the public sector, the story is somewhat different. At only 3.1 percent of public sector spending, the as-a-service segment still represents a small share of the total market, as governments have yet to embrace cloud-based services as strongly as the commercial market. As more massive-scale clouds become certified by federal governments, we expect healthy growth in public sector as-a-service adoption. For example, the U.S. Department of Defense recently granted Level 5 accreditation to Microsoft for its Azure and Office 365 offerings, making it the only commercial cloud provider operating at that security level. As other providers gain similar accreditations, platform-based sourcing will increase dramatically in the public sector.

Wie positionieren sich die Anbieter von Big Data Transformation Consulting & Integration in Deutschland?

Dr. Andreas Gadatsch, Holm Landrock, Steffen Nolte Der Big-Data-Beratungsmarkt hat sich in den letzten Jahren kontinuierlich in Richtung Strategie-Consulting verändert und eine gewisse Reife und Stabilität erlangt. Waren in der Anfangsphase noch überwiegend technische Beratungsleistungen und Informationen im Hinblick auf die potenziellen Einsatzmöglichkeiten von Big-Data-Technologien gefragt, benötigen die Kunden heute eine strategische Unterstützung im Hinblick […]

Public Cloud Use Grows While Providers Contract

Charlie Burns, Doug Pollei, Stanton Jones Research Alerts What is Happening? Our ongoing Cloud use research indicates two seemingly opposite trends occurring simultaneously: Accelerating increase in the use of public Cloud for enterprise infrastructure, while the number of public Cloud providers is contracting. ISG research programs confirm that the movement of traditional, on-premises infrastructure to […]