Sage Summit am 7. und 8. März 2017 in Berlin: Vollgas in die Cloud!

Vergangene Woche war Experton Group / ISG wieder Gast des Sage Summits, der in diesem Jahr erstmalig nicht zentral und international an einem Ort, sondern gesondert an mehreren Weltmetropolen wie London, Johannesburg oder Melbourne stattfand und stellenweise noch stattfinden wird. Die Besonderheiten der jeweiligen lokalen Märkte sollten dadurch thematisch besser berücksichtigt werden. Für Deutschland wählte […]

Insights at the Outsourcing World Summit – Digital Change, Uncertainty, and Speed

Bruce Guptill, Todd Lavieri Research Alerts

What is Happening?

ISG Americas president Todd Lavieri used his keynote presentation at the IAOP Outsourcing World Summit (OWS17) to highlight not only the changing state of outsourcing, but also its critical effects on user enterprise and IT provider digital transformation. His net message: There is more change underway than meets the eye, creating confusion and opportunity for enterprises and providers.

Lavieri used data and insights from the 57th Quarterly ISG Index (4Q16) to identify and reinforce three key factors shaping digital transformation trends as we move into and through 2017: Change, uncertainty, and speed. The key change is the shift in outsourcing away from traditional IT toward more “as-a-service” capabilities. This is not only reshaping providers’ business strategies and models, due in large part to user enterprises looking for rapid deployment of advanced capabilities as they pursue transformation initiatives. The uncertainty comes from enterprises’ often still-nascent digital transformation plans and initiatives, and the resulting provider-side uncertainty about which capabilities will be most valued – and therefore should be invested in. Finally, the speed aspect reflects the accelerating pace of digital business technology adoption, adaptation, and innovation, which spurs similar acceleration of even more digital business initiatives and expectation.

The results: As Lavieri highlighted in his talk, 65% of enterprise clients feel disrupted, and express substantial uncertainty about what to do, where to go, and how to do it. We see IT providers expressing similar uncertainty – even while leaders position themselves to create opportunity from the chaos.

Why is it Happening?

Digital business transformation implies new processes and new outcomes, enabled by new ways of using information technologies. It is a series of fundamental changes that may be approached incrementally or as “big bang” projects. In either case, we are seeing more and more enterprise business and IT leaders impatient for change. They fear not being able to find and take advantage of new opportunities; they worry about falling behind competitors. They seek ever-improving means of trialing new capabilities and either succeeding or “failing fast” with reduced risk to the business. They push for more rapid adoption of digital business capabilities.

Meanwhile, digital transformation is still early enough in most firms’ agendas to lack cohesive, coordinating strategy and management. And we are seeing absorption of more digital business transformation plans, initiatives, and spending into ongoing business organizations and operations. On the plus side, this implies that more and more, “digital business” is more and more becoming just “business.” On the negative side, this suggests that digital plans and initiatives may be being spread more widely, away from centralized, coordinating governance.

On the provider end of the spectrum, developing and delivering new technologies for new services that enable new enterprise-side capabilities – often for clients that do not yet know their long-term needs – is very different than providing mature services to knowledgeable clients was just 5 to 10 years ago. As noted above, enterprise clients are really still becoming aware of what can be done, and taking early steps toward translating that into longer-term business planning and strategy. And enterprise investments in “as-a-service” IT are helping to provide most of the growth in outsourcing business today, but the applications of these capabilities are far more likely to be point- or group-solution types with dynamic demand and utilization than more traditional, steady-state, division- and enterprise-wide IT services outsourcing. Couple this rapidly-evolving new IT consumption model with mid-term uncertainty about digital transformation, and the enterprise-side uncertainty quickly translates into provider-side uncertainty.

Net Impact

In evolutionary theory, it’s not the strongest species that survive, but those that adapt the best and most rapidly to their environments. In a business IT environment rife with uncertainty, change, and speed, enterprises and providers both need to enable adaptability in order to survive and prosper. Three key actions to do this are as follows:

1. Understand that “change” really means “improvement.” Digital is not about raw change; it is about improvement. And as there are always too many opportunities for improving business and IT, look for the most valuable business improvements feasible. A first place to look is where current systems most inhibit the improvement of business and IT operations.

2. Reduce and manage the uncertainty. Identifying and implementing changes that improve the ability of the firm to do business will significantly reduce uncertainty about what to do, how to do it, and when. This simple, first organizational step enables vision and planning based on a path of measurable, incremental improvements that lead to strategic transformation.

3. Adjust your speed accordingly. It’s easier to travel faster (and farther) on a long journey when you are not distracted by constantly repairing and fueling the vehicle. Improving operational efficiency is like improving fuel efficiency. Your vision down the road is much improved, and you can avoid more traffic problems and accidents, when you do not have to constantly monitor dashboard gauges and lights for problems. In short, you can go faster with fewer stops and reach your digital destination with more resources and ability.

Simplifying the change+uncertainty+speed problem in this way also enables enterprise IT and business leaders to better identify the most valuable IT providers and capabilities. As improvements occur over time, the mix of suitable providers and capabilities (and solutions) will change. Insights and guidance such as those in our 2016 i3 and 2017 Market Lens reports, our ongoing Automation Index and Cloud Comparison Index research, and associated research and briefing notes, will help to identify and manage these changes as they emerge and evolve.

Providers need to understand these changes because there is great opportunity in helping client enterprises understand and scope possible improvements. We see surging uptake of such services among user enterprises, and this will accelerate and grow through the next 24 months at least. Providers also need to understand their own need for speed. Enterprise-side IT business changes are occurring quarterly, or even faster. Awareness of client enterprise business change – and the flexibility to adapt to that change and its accelerating pace – will be key to the ability of IT providers to compete.

Harnessing the Power of Disruption – IAOP State-of-the-Industry Survey

Jan Erik Aase Research Alerts

What is Happening?

Results from the latest IAOP State of the Industry survey, co-presented by ISG at the Outsourcing World Summit (OWS17) in San Antonio, TX last week, indicate that enterprises and providers alike are awash in uncertainty driven by disruption in technology and in business. And both the choice of dealing with, or managing, disruption.

The survey and the Summit centered on themes directly impacted by or have disruption at their core: Outsourcing Market Trends, Enabling the Digital Economy, Influences of New Business Models, The Rise of Robotics, and Impacts of Various Populist Elections. Key highlights include the following:

  • The traditional outsourcing market is getting upended by the dramatic increase in IaaS and SaaS contracts, mostly led by the US market – but EMEA and APAC are showing signs of following suit.
  • The success of digital innovation and transformation is demanding increased engagement from service providers.
  • Enterprise clients are hungry to be “uberize” but are reliant on service providers to bring industry expertise and solutions to change their existing business models.
  • Automation brings threats of job losses but also hope of new key roles for employees and providers.
  • And finally, the geo-political environment has the greatest chance of disrupting the entire outsourcing eco-system that we’ve seen in the last 20 years. The anticipation of the unknown could be a bigger disruption than the actual policy changes.

Our conclusion: Disruption is needed to meet consumer demand, remain competitive and increase revenues. Avoiding disruption will not create stability and strengthen a firm’s position in the market, but will instead guarantee that they will lose market share and a segment of their customers.

Why is it Happening?

“Dealing with” vs. “managing” disruption is an important distinction. The response to this year’s survey was unique in that there was a record number of incomplete and abandoned surveys, and all were connected to the section on disruption. ISG and IAOP have speculated that this is symptomatic of what we are seeing in the market. Most clients admit that they don’t know what they will do, nor how they will react to many of the disruptions in their industries and in technology. They are being disrupted in multiple ways and are overwhelmed. This aligns with the top four disruptions that were identified by enterprise clients, service providers, and advisors in the survey, as shown in Figure 1.

Disruptions

Figure 1: Top Four Disruptions for Enterprises, Providers, and Advisors Source: 2017 IAOP State of the Industry survey.

Those enterprise clients who responded to the survey confirm that the impact of new government policies, different market demands, and changing consumer behavior is driving disruption. This in turn disrupts enterprise expectations and dependencies on service providers and third-party advisors. The need is no longer for “lift and shift” or “shift left” types of engagement. There are few if any within most enterprise client environments who have experience in dealing with the current level of business and technology disruption. So it isn’t surprising that, according to the survey results, the greatest dependency by enterprise clients on service providers is around both business and technology expertise and associated solutions.

Expectations

Figure 2: “What are your disruption-related expectations for your service providers?” Source: 2017 IAOP State of the Industry survey.

Additionally, 89% of enterprise clients indicate that their top dependencies for third-party advisors is “Bring the Right Vendors,” and 84% said “Identify the Solutions that Drive Disruption.” This confirms the dilemma facing enterprise clients: how to manage disruption while also creating their own disruptions. Both require key partnerships with service providers and advisors – and ISG is finding that enterprises are impatient for solutions. Todd Lavieri, ISG President Americas, speaking about client expectations said in his keynote speech at OWS17, “They want to move faster, but they are cautious of the impacts to their various business lines. They are looking for service providers and vendors to react to their changing requirements – and to bring insights and innovation every quarter and quality every day.”

Net Impact

These survey results align with the advice that ISG and many others are giving to enterprise clients and providers as they deal with and manage disruption. Three key themes that stood out in the survey results, and reiterated throughout OWS17 presentations and breakout sessions, can be translated to three key actions to manage disruption as follows:

1. Embrace new business models. The survey indicates that 78% of enterprise clients feel that the adoption of new business models will be the key to their success. An audience poll conducted with the 300 attendees of the OWS17 keynote presentation asked “Are providers providing technologies which enable the new business models?” An average of 47% of enterprise clients and advisors indicated that “Providers are behind where we want them to be,” while 21% of the providers in that same audience poll said “We are completely ready” and 59% said “We are preparing and building competencies.” It appears that enterprises seeking to “uberizing” their business or embrace other key business models will rely heavily on themselves for the near term at least.

2. Remain flexible to best practices in digitization efforts. In the survey results, 66% of service providers indicated that the expectations of their clients around various digital initiatives is more complex due to relationships that are more directive vs. collaborative. And in response to another audience poll question, “Which disruption is impacting your business the most,” 40% of enterprise clients, providers, and advisors agreed that it was Technology Driven Disruptions. With most companies relying heavily on providers for technology-centric solutions, a trusted collaboration with key providers is critical.

3. Proactively plan for geo-political business impacts. Clients are banking on advancements in automation that will enable them to reduce dependencies on offshore resources and replace them with automated processes. Both enterprise clients and service providers are exploring new in-sourced and nearshore options as well as deferring their sourcing decisions pending policy changes. In an online poll that was conducted during the keynote presentation, the audience was asked, “Do you believe that the current global political environment will impact your sourcing strategy?” 66% said Yes, 20% said No, and 14% said Not Sure. We believe that “Not Sure“ is typically the best answer. Proactively planning for various contingencies is always a good approach, with speculations left to others.

Enterprise clients need to be willing to “show their hand” if they also hope to learn from others. Where the disruption creates competitive advantages, it’s obvious why some clients are keeping quiet. But most clients are entering a new frontier and a collective and collaborative approach will be the most effective way to get everyone to a solid foundation. At that point natural selection will separate the wheat from the chaff.

Providers need to be more prescriptive in how they’ve seen the consumption of the various disruptive technologies and business models happening in key industries, different regions and around the world. The uncertainty of enterprise clients engenders disruption but awareness of best practices and case studies will greatly reduce elements of the disruption.

NRF 2017 – Four Critical Digital Developments for Retail Success

What is Happening?

Several ISG advisors participated in the annual NRF Retail’s Big Show, January 15 to 17, 2017 in New York City. The conference showcased how retail technologies and innovations are core to the industry. The show also highlighted disruptions – not only technological but also political – and how they form a challenging environment for retailers. But it’s clear that customers are the source of the most disruption – they expect a connected, fun, consistent brand experience.

ISG came away from the NRF show with four main themes that retailers and their technology partners should consider, as follows:

  1. Retailers need customer-centric and integrated digital platforms;
  2. The store still matters (as long as it’s connected);
  3. Analytics must drive actionable insights; and
  4. Blockchain is significant beyond payments.

Why is it Happening?

Today’s customers need new ways of engaging with buying and digital technologies have raised the stakes for the customer experience. These pressures are driving change within retail business models, forcing retailers to create new customer-centric operating models, and make dramatic shifts to technology investment strategies. These strategies connect and cross customers, the supply chain, and retailer departments, forming a “Digital Fabric” (Figure 1).

ISG Digital Fabric

Figure 1: ISG Digital Fabric. Source: ISG

1. Retailers need customer-centric and integrated digital platforms. While front-end digital user interfaces garnered much attention from their “cool” factor, there was less buzz around such “bright shiny objects” at this year’s show than in the past. Retailers and vendors all recognize what goes into the effort to implement an omni-channel digital platform: it requires implementing a customer-centric technology platform.

Intel’s introduction of its new Responsive Retail Platform (RRP) reflects the need for integrated digital platforms. At the show, Intel announced plans to invest more than $100 million over the next five years in RRP. The platform connects disparate islands of in-store technology and makes it easier to develop and deploy Internet of Things (IoT) software and services by bringing together retail hardware, software, APIs, and sensors.

2. The store still matters (as long as it’s connected). The continued growth of online purchasing at the expense of physical stores seems irreversible. But retailers are once again recognizing stores for what they can be – a valuable asset for differentiating their brands. The emphasis at the show was not about transforming the brand to become an online retailer, but rather about the convergence of the brick-and-mortar and the digital worlds and the breaking down of barriers between channels. To address that need, Samsung and SapientRazorfish introduced IoT tools to bridge online and in-store shopping activities.

We talked with many vendors showcasing facial recognition technology, interactive store applications, Augmented Reality (AR), Virtual Reality (VR), and wearables. ISG’s research shows that these solutions are gaining faster adoption in enterprise applications. But while these emerging technologies all fit into the category of capabilities that improve the consumer experience and employee productivity, retailers need to focus their investments on consumer engagement technologies that blend the physical and digital touch points along the customer journey.

3. Analytics must drive actionable insights. Session presentations and our other interactions at the show indicate that retailers are getting smarter about Big Data. Top priorities include better data management, improved and actionable analytics, and leveraging sensors to better engage consumers and improve productivity of employees and assets. But the deluge of data makes actionable insights difficult to obtain. We heard from many at the show that integrating artificial intelligence (AI) in systems is the next logical action for retailers looking to deliverable actionable insights and improve performance across customer engagement, omni-channel commerce, and supply chain. Some of the providers with predictive analytics and AI-based offerings for the Retail sector include BlueYonder, Jetlore, CognitiveScale, and r4 Technologies.

IBM via its Watson cognitive computing / AI suite continues to deepen its capabilities and extend them across its commerce, marketing, and supply-chain applications. Other companies also offer credible AI systems to market – and not just traditional software providers. For example, Cognizant’s Intelligent Process Automation Framework applied to its RetailMate, HCL DRYiCE, Infosys Mana, TCS Ignio, and Wipro HOLMES AI platforms are from the outsourcing community. AI also has a clear role in customer engagement (e.g. chatbots) and insight as well as in support of knowledge worker productivity and efficacy.

4. Blockchain is significant beyond payments. Blockchain has the potential of having a significant impact on the retail industry well beyond secure transactions. Today’s “always on” consumer brand loyalty is directly impacted by their appetite for information and a demand for transparency. Blockchain can enable this transparency, allowing all parties—supplier, manufacturer, retailer, and end consumer—to trace a product’s journey. In addition to traceability, connecting all members of a supply chain to the decentralized blockchain allows for a direct exchange of bill of lading documentation between parties, potentially solving one of the shipping industry’s largest problems. There are also applications in warranty claims and counterfeiting.

As an example of a potential use of Blockchain in retail, Microsoft hosted a solution from partner Mojix at its NRF booth. The Mojix RFID and IoT platform solution, based on Microsoft’s Azure Blockchain-as-a-service, automates a retailer’s supply chain enabled by blockchain-based smart contracts between the retailer, its suppliers, and logistics providers.

Net Impact

An integrated digital platform – for retailers can and must provide an integrated infrastructure, and a set of core digital business processes in which common tools, capabilities, and data are transparent and shared, not duplicated. Such a digital fabric for back-end services allows a retailer to create a digital consumer engagement seamlessly across all channels. But putting the pieces in place requires making sense of the many choices of platforms, tools, and services.

Blockchain’s chain-of-custody record will aid in tracking product journeys as well as reducing counterfeiting for luxury items. Goods can be certified with a Blockchain’s digital ledger record, to more easily identify stolen merchandise. But Blockchain is still poorly understood and not widely trusted. So we think broad market adoption is beyond 2017, but Blockchain’s future applications will sweep across many aspects of Retail. Clients of ISG’s subscription research services will see further analysis of business uses of Blockchain and examinations of leaders and disruptors in future research publications.

To varying degrees, the analytics vendors at the show demonstrated capabilities to understand varied content and then reason through disparate data to draw conclusions and recommendations, learn as they go, and interact with knowledge workers and customers. In upcoming research we will cover more about the importance of advanced customer analytics and the role of AI.

Lastly, retailers should make sure emerging technologies under consideration have staying power, and determine whether they fit within the strategy for an end-to-end customer-centric operating model. Instead of being about disconnected or loosely connected, as we discussed about the innovations showcased at the CES 2017 show, retail technologies are bellwethers of where user experience technology innovation is going, using the convergence of data, devices, immersive connectivity, and artificial intelligence to improve customer engagement. Look for additional ISG research about the digital fabric of retail business.

Save the Date: Expertonale 2017

Jürgen Brettel

Jürgen BrettelUnsere diesjährige Jahreskonferenz, die Expertonale 2017, am 24. Oktober im Hilton Frankfurt Airport, The Squaire, Frankfurt/Main, richtet sich an ICT-Anwender, -Hersteller und -Dienstleister.

Im Laufe der Expertonale werden wir über die aktuellen Trends und Best Practices berichten, einen Ausblick auf die Kernthemen für 2018 geben und themenübergreifend neutrale und unabhängige Handlungsempfehlungen aussprechen.

Die Veranstaltung soll Ihnen als Informationsplattform dienen und zusätzlich den Kontakt und Austausch mit anderen ICT-Verantwortlichen ermöglichen.

Im Rahmen der Konferenz haben Sie zudem die Möglichkeit, mit unseren anwesenden Advisorn Einzelgespräche zu Ihren Themen und Fragestellungen zu führen. Nutzen Sie die Gelegenheit für kurze, intensive Beratungssessions.

Hilton Frankfurt Airport

Veranstaltungsort:

HILTON FRANKFURT AIRPORT THE SQUAIRE
Am Flughafen
60549 Frankfurt

t: +49 (0)69 2601 200 2253  f: +49 (0)69 2601 200 6020

hilton.de/frankfurtairport

Klicken Sie hier, um den Termin direkt in Ihren Kalender einzutragen:

24.10.2017, 09:00 bis 18:00 Uhr

Drivers of SaaS Adoption in HR Differ by Growth Profile

Alex Bakker

What is Happening?

In our 2016 HCM Adoption Survey we examined whether companies are moving their HCM solutions to SaaS / Cloud (they are), and we also looked into what was driving that shift. As we have seen over the last several years, vendors are increasingly shifting focus to their cloud systems, leaving the fate of many on-premises software applications on an inevitable upgrade path. However, many customers aren’t waiting until the last minute – the HCM suite has been a leading category for enterprise SaaS adoption for several years.

Why is it Happening?

Figure 1 shows what companies indicated were their top three drivers for selecting to move their HR systems to SaaS over the next few years.

Reducing TCO easily tops this – which is somewhat intuitive, because HR software tends to have high total costs. Many systems rely on manual workarounds, have high customization costs, and require 3rd party add-on functionality. Downtime, errors, and maintenance also have costs across the organization and tend to be reduced with SaaS applications. Finally, HR apps and data have high compliance and privacy risks. PII laws often protect the data, and legislation on benefits such as the ACA can also impose significant costs on HR processes.

SaaS Adoption

Figure 1: Top 3 Drivers of SaaS Adoption. Source: ISG Inc., 2016 HCM Adoption Survey, Global n = 206.

After that, reduced demand on IT is seen as a major driver for SaaS deployments – both to avoid configuration and deployment delays, but also to reduce reliance on in-house support. This driver is one that we see often in our consulting engagements in addition to HCM systems typically being lower on IT’s priority list after client facing services and other business systems.  It is also closely related to the TCO question as well, since by sourcing HR functions to SaaS providers it also reduces the helpdesk, hosting and applications development and maintenance burden. Finally, while infrastructure costs are rarely the driver of high total cost of HCM systems, the reduction in human costs associated with the shift of on-premises applications to SaaS has follow-on importance to cost reduction.

However, cost management is far from being the complete story here. Figure 2 looks into the drivers across various company growth profiles. In the fastest-growing companies, the shift to SaaS is driven mostly by the need to increase employee engagement, likely focused on retention and fast onboarding needed by companies that are rapidly adding headcount. For those same companies, user experience is also of high importance.

Companies whose business is shrinking/contracting are looking for benefits that immediately enable them to leverage best practices – often a critical area of liability coverage when reducing headcount. After that, they also seem the most critically focused on reducing their need for IT. We see a strong trend that the faster-growing companies are not as worried about the performance of their IT departments. This reflects a dichotomy in IT that shrinking businesses recognize that their IT departments are holding them back, while fast growing companies often are able to grow quickly because their IT delivers above-average capabilities to the business. IT can be the cause of the fast or slow growth, as well as a symptom of either.

SaaS Adoption 

Figure 2: Top 3 Drivers of SaaS Adoption – By Company Growth Profile Source: ISG Inc., 2016 HCM Adoption Survey, Global n = 206.

Market Impact

While cost management remains overall top-of-mind for the majority of companies selecting HR SaaS, these goals are not uniform across all growth profiles. In our experience, the primary benefit that companies receive from SaaS is seldom true reduction of total cost, at least in the short term. While the lack of costly upgrades can have real impact on the long term total cost, we find that in the shorter term, the primary benefits to the organization are softer, e.g., improved agility, faster time to value, easier data integration, and improved employee experience.  These issues still ranked lower in the survey overall than costs, despite showing up often.

We believe that this indicates a mismatch between what customers really need, vs. what SaaS helps them achieve. For example, they want a reduction in cost, but they are more likely to get improved agility. To truly achieve lower total costs, the organization typically needs to look beyond their basic software implementation toward specific processes and operations that can be streamlined to actually reduce overhead and costs. SaaS sets companies up well to have the flexibility to reduce or avoid costs, but it doesn’t necessarily reduce costs by costing less.

2017 – An Inflection Year for Digital Labor in Enterprise IT?

Bruce Guptill, Ron Exler Research Alerts

What is Happening?

A review of both enterprise client hiring plans and third-party insights indicate a significant and accelerating information technology skills shortage that will continue, and likely grow, through 2017. And unfortunately, that shortage looks to be worst among skills critical to the development and growth of digital business – i.e., IT security, Cloud, and data analytics and management.

Our net take: These shortages will hasten enterprise moves toward more, and more advanced, methods of staff augmentation, including more aggressive outsourcing, more and better skills training, and greater deployment of digital labor in IT through 2017. In some places, governments are stepping in to fund technology training.

Why is it Happening?

Our ongoing research among C-level business and IT leaders clearly indicates the significance of Digital Business development and improvement, as well as the challenges in finding necessary skills such as advanced IT security, data science, and associated analytics and data management. It’s becoming clear that business and IT leaders alike face a skills shortage that threatens their enterprises’ ability to develop and grow Digital Business initiatives.

Figure 1: Digital Business Signposts

Digital Business Signposts

Source: ISG Insights Digital Business Survey among C-level Business/IT Leaders, Nov. 2015 (n=129), & Sept. 2016 (n=141)

Meanwhile, our assessment of hiring plans among enterprise clients, supported by analysis of published third-party research, indicates stagnant IT hiring through 2017. The majority of market data highlight limited (and limiting) technology hiring expectations amongst IT leaders. For example, TEKsystems’ annual IT Forecast reports that 63% of IT leaders expect 2017 IT salaries to stay the same overall compared to 2016. The Robert Half Technology’s IT Hiring Forecast and Local Trends Report says that only 16% of CIOs plan to add more IT staff in the first half of 2017, and 69% plan to hire only for open IT roles. Economic factors exacerbate the flat IT hiring projections, with some economists saying that 2017 will see flat or low growth accompanied by global political and economic uncertainties.

Net Impact

We believe that this stagnation (or at best, very limited growth) in IT hiring will help make 2017 an inflection point in the growth of digital labor adoption, especially within enterprise IT organizations. We already see a clear influence of automation on the cost of IT outsourcing (ITO) and business process outsourcing (BPO) services. Providers’ automation of several traditional aspects of IT operations and management is increasing sharply, leading to upwards of a 50 percent reduction in the number of resources required to support core IT operations services. This, in turn, is leading to significant cost reductions for data center, application management, service desk, and network services customers. We see these approaches both (1) increasing some enterprises’ ability and desire to outsource, and (2) providing examples to enterprises as to how they can address hiring needs when budgets fall short.

2017 will not be the year that software and robots replace highly-skilled IT staff, however. The state-of-the-art in IT automation replaces people in some of the more simplistic IT areas, such as operations monitoring and help desk. Extending automation to more intricate tasks requiring greater skill levels is complex, and outside of today’s capabilities. That being said, we see rapidly increasing use of Robotic Process Automation (RPA) in both provider and enterprise IT; RPA supports additional complexity, and will be key to extending automation beyond the simple tasks.

Digital labor will not only be deployed in IT operations. Our work with clients in areas such as Finance, Human Resources, and Contact Center suggests that more than two-thirds of these business areas will see significant RPA adoption by 2020.

While automation can reduce staffing and associated costs, it doesn’t directly solve the problem of lack of people with expertise in required technology domains. Enterprises can resolve the lack of expertise through training or by hiring beyond current sources.  For that, we see 2017 also being an inflection year in the growth of advanced IT skills training in security and data science.

Some governments are stepping in to help with technology training. The U.S. White House TechHire initiative is a campaign to expand local tech sectors by working with companies in building technology-talent pipelines in communities across the country. There are now more than 50 TechHire communities in the U.S. and the government recently released $150 million in new Department of Labor TechHire grants for training.

Programs such as TechHire should close some of the skills gap and address concerns many companies have in light of some of the populist attitudes in many regions against corporations that outsource work to offshore locations.

CES 2017 – Bellwether of Next-gen Enterprise IT User Experiences?

Bruce Guptill, Jim Hurley, Ron Exler Research Alerts

What is Happening?

CES – formerly known as the Consumer Electronics Show – now underway in Las Vegas, traditionally has been a conference about consumer gadgets and gizmos, and not about enterprise IT. But we see this year as different; it is the year CES transitions from largely disconnected or loosely-connected gadgets and gizmos, to one where devices from augmented reality systems to drones to autonomous vehicles to sensors and controllers become interconnected via 5G and immersive broadband, and utilize context-led data mining and machine learning, and degrees of cognitive capabilities, to transform end-user experiences.

What is important for ISG Insights clients is that the immersive, user-centric IoT experiences being showcased at CES this week are going to create new demands for customer, employee, and partner experiences in the workplace; the use cases showcased at CES are early indicators of where user experience for enterprise IT is headed, and its inherent IT management challenges.

Why is it Happening?

In addition to being a coming-out party for new gadgets and consumer services, CES is an indicator of what is just around the corner involving user-oriented technology innovation. In and among the technology provider announcements, sessions introduce, explain, and demonstrate incredibly diverse consumer and commercial IT as diverse as artificial intelligence, autonomous vehicles, 5G and ATSC broadband, connected cars, entertainment, healthcare, IoT, mobility, public safety, smart cities, transportation and wearables.

But this year is a bit different than past years at CES. This year’s focus on the interconnection between people and their experience with interconnected devices, data, and applications indicates that a new era is underway in the innovative consumer electronics industry. Instead of being about disconnected or loosely connected, the innovations being showcased at CES are forecasting where user experience technology innovation is going, using the convergence of data, devices, immersive connectivity, machine learning and emerging uses of cognitive artificial intelligence.

We see strong focus on the interconnection between voice activation and the command and control of devices and associated services, including messaging, calendaring, device or system access, streaming content, and environmental controls, including those in automotive vehicles. Use cases are being demonstrated this week for all of these interconnected user-controlled-and-customized capabilities across automotive, entertainment, healthcare, transportation, and smart city / public safety applications and environments. This is an important aspect of the growing trend toward greater adoption and adaptation of more immersive user experiences (including wearables, augmented reality, and social IT) in more environments.

Net Impact

In much the same way as the PC, laptop and then smartphones redefined the user experience in the past few decades, we expect this year’s CES will be the beginning act of a longer-term evolution that will again redefine customer experience for enterprise IT. Our experience suggests that key developments demonstrated at CES this year becomes what individual users expect in their business IT environments within the next two years.

The immersive, highly-integrated, voice-commanded environments showcased at CES 2017 are unlikely to make strong commercial showings immediately, but the users will be bringing them in to the enterprise very soon. The most likely early areas of enterprise adoption will be in systems or processes with multiple sets of relatively simple tasks that utilize readily-available information services of some type.  But these early initiatives will help to rapidly develop and refine an increasing range of business environment use cases through 2018. Much of this will be disruptive to enterprise IT management, driven by individual and small group initiatives similar to early Cloud adoption instances.

The net problem to be anticipated and addressed is as follows: An unpredictable mix of traditional and nontraditional devices used by a rapidly-growing number and range of users in nontraditional ways to access and control both traditional and nontraditional (and likely non-approved) services will test resource management and system security at tens of thousands of intersecting points daily – while creating massive amounts of user/device/resource data. Clients of ISG Insights will see continuous updates and guidance on all aspects of this combined burgeoning problem and innovative adaptation of consumer IT for enterprise business.

Grußwort zum Jahreswechsel

2016 war ein äußerst ereignisreiches Jahr. In der Weltpolitik zeigten sich Umbrüche, die auch voraussichtlich unsere Märkte beeinflussen werden. Hierzu passt, dass die Unternehmen in Europa die allergrößten Herausforderungen im Rahmen der Digitalisierung primär nicht nur bei IT-bezogenen Themen, sondern besonders in der (Führungs-) Kultur und der Bereitschaft zum organisatorischen Wandel sehen. Nichtsdestotrotz war der ICT-Markt deutlich in Bewegung. Dies zeigte sich nicht zuletzt an zahlreichen milliardenschweren Übernahmen, mit denen sich viele Anbieter für die Herausforderungen in rasant sich wandelnden Märkten wappnen wollen. Sei es etwa, indem die Möglichkeiten des Internets der Dinge angestrebt werden, der Wandel zum Dienste-Provider vorangetrieben wird oder das Momentum einer gewaltigen Netzwerk-Community dem Geschäft zu Gute kommen soll.

Auch für Experton Group selbst war 2016 ein sehr bedeutendes Jahr. Im März wurde unser Unternehmen von der Information Services Group (ISG) übernommen. ISG ist eines der führenden Marktforschungs- und Beratungshäuser im Informationstechnologiebereich und weltweit aktiv. Die Dienstleistungsangebote unserer beiden Unternehmen sind komplementär und ergänzen sich sehr gut. Der Marktforschungsfokus von Experton Group passt zu den immer wichtiger werdenden Digital Services von ISG. Durch unsere Vendor Benchmarking Services erhält ISG zudem ein neues Standbein, welches weltweit genutzt werden kann. Ein erstes gemeinsames Portfolio haben wir bereits auf unserer Hauskonferenz „Expertonale“ zusammen mit ISG vorgestellt. Unser Ziel dabei ist, für Sie die Markttrends auch 2017 mit zeitgemäßen, innovativen Beratungs-, Analyse- und Research-Methoden zu begleiten.

Zum Ausgleich des in unserer Branche vorherrschenden Innovationstempos wünschen wir und das gesamte Team der Experton Group Ihnen ruhige und erholsame Festtage, einen guten Jahreswechsel und viel Glück, Erfolg und Gesundheit im neuen Jahr.

Frank Heuer Frank Heuer Frank Heuer Frank Heuer

Jürgen Brettel
Vorstandsvorsitzender

Nils Bachmann
Vorstand
Bernd Schäfer
Managing Director
ISG Germany
Barbara Florschütz
Partner ISG Germany

AOP/ISG State of the Industry Survey – Does Digital Require Outsourcing?

Ashish Chaturvedi, Jan Erik Aase Research Alerts

What is Happening?

Digital adoption is accelerating, clients are still heavily dependent upon outsourcing providers, and the use of new business models is impacting the success of digital-centric initiatives. These are three key initial findings from the current State of the Industry survey being conducted by the IAOP in partnership with ISG (and part of the keynote at the IAOP European Outsourcing Summit week in Amsterdam). The survey was distributed to over 12,000 European IAOP members and affiliates as well as over 20,000 global enterprises. An additional section of the survey will be released worldwide to over 100,000 enterprises, advisors, and service providers next week. These findings were focused on the European markets but ISG has observed that they apply globally.

One data point really stands out above the others: Almost two-thirds of enterprises are relying on external providers to implement their Digital projects. Moreover, enterprises tend to completely rely on external service provider whenever Digital projects involve augmented reality, IoT, or robotics. Thus, it appears that the more complex and somewhat uncharted initiatives have the highest probability of being outsourced.

Technology models are playing a more prominent role in the delivery of digitally-focused initiatives. The survey identified Agile as the preferred development model. Agile fulfills critical business requirements such as improved speed-to-market and continuous software delivery, which is core necessities of all digital projects. SOA was rated as the most popular development architecture. SOA is also among the most stable operating models.  It is known to enable operational efficiency, provide agility, and enable more accurate project scheduling.  And test automation tools are the most widely used automation tools in the development process followed by build orchestration and containerization.

The combination of these three circumstances forms the perfect storm – enterprise clients have the will and they are acquiring the skill in order to use the methodologies and tools that enable digital projects to succeed.

Why is it Happening?

Our ongoing work with enterprise and provider clients indicates that enterprise Digital business strategy and execution are heavily dependent upon service providers. The survey data confirms this, indicating that an average of 65% of enterprises rely on service providers to make Digital happen.

This is because effectively and efficiently “going Digital” is hard work and beyond the capabilities of practically any single entity. Properly planned and managed sourcing is critical to making Digital work. This is because all existing and upcoming enterprise business technologies, along with the frameworks and methodologies being used to work on these technologies, must be evaluated from the lens of the overall business impact.

The ability to leverage the technical and technological expertise in the market to improve innovation, flexibility and time to market have all increased in importance. And with the business side typically driving the funding, oversight, and schedule of most Digital projects, reliance on external providers is only going to increase.

This high reliance on external providers also increases the complexity for internal IT and Vendor management organizations, who must manage the project costs, scope and schedule. Proper management does enable the advantages of improved flexibility, increased access to skilled resources and custom solutions. But this is only possible if enterprise (internal) IT is tasking ownership of these projects and driving the digital agenda on behalf of the business.

Net Impact

Collaboration between business and IT leaders through the digitization of business models is making IT as an enterprise function more important and impactful than ever before. Restructuring of the business process landscape and development of technology roadmaps are some of the biggest impacts that digitization will create for Enterprise IT. Through Digital projects, we see enterprise IT forming strategic partnerships with service providers to support growth and internal process transformation rather than just cost reduction. Additionally, digital labor (and not cost arbitrage) has become the primary driver to achieve productivity, speed and quality improvements.

Service providers will require new skills to cater to the demand of the digital economy. They must improve their abilities to provide solutions to enterprise IT, that are business-centric and not just technology based. Additionally, incumbents will be challenged to move from T&M to outcome based models and put more skin in the game. This is what enterprise IT will be expected to do and therefore their “partners” will have to follow suit. It is becoming more apparent that no enterprise IT team can do everything by itself. Hence, the success of a these new digital initiatives will be a direct function of the strength of the ecosystem it works in including start-ups, technology partners, software vendors, system integrators, and the various internal teams.

Within 2 years, we expect a high level of productization of Digital services. This will primarily be driven by start-ups and niche providers. As a result, these players will experience high growth. ISG anticipates that many of them will be acquired by large legacy providers that are already in the process of re-structuring their teams and service offerings to meet the demand of the digital customer. Join me at the ISG Digital Business Summit (DBS2016) in Chicago IL to hear my presentation on these topics and the preliminary results of our survey.

This Research Alert was originally published by ISG Insights, our ongoing globally-focused premium subscription research service. To learn more about ISG Insights, go to http://insights.isg-one.com where you can register for a Research ID that will provide access to some of our complementary content.