Cloud Trends: What Clients Want; What Providers are Delivering

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Cloud Trends: What Clients Want; What Providers are Delivering

  1. 1. Cloud ServicesWhat Clients Want; What Providers are DeliveringOutsourcing Institute Service Provider SummitJanuary 30th, 2013Stanton Jones, Analyst, Emerging Technology Copyright © 2012 Information Services Group, Inc. All Rights Reserved. No part of this document may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval devices or systems, without prior written permission from ISG, Inc.
  2. 2. Agenda 2 1. Cloud and the sourcing agenda 2. What we’re seeing in the market 3. RecommendationsCopyright © 2012 Information Services Group, Inc. All Rights Reserved 2
  3. 3. Cloud and the sourcing agendaCopyright © 2012 Information Services Group, Inc. All Rights Reserved
  4. 4. Cloud and the sourcing agendaCIOs are under pressure to reduce costs and move faster. Tacticalresponse is rapid functional out-tasking to ‘as-a-service’ models. Pressure to rapidly reduce cost/move faster Rapid/unstructured functional “as-a-service” out-taskingCopyright © 2012 Information Services Group, Inc. All Rights Reserved 4
  5. 5. Cloud and the sourcing agendaThe standardized nature of as-a-service models is creating dramaticchanges in external engagement models…  Contracting for IaaS, and especially SaaS, requires input from several traditional towers, usually including both BPO and ITO.  Features and service levels are highly standardized; creating a significant change in the traditional contracting process.  High level of interaction with legal and procurement; helping the client what can (and can’t) be negotiated.  Comparing business case often apples & oranges.  ITSM and DR often ignored.Copyright © 2012 Information Services Group, Inc. All Rights Reserved 5
  6. 6. Cloud and the sourcing agendaIncreasingly, we’re having contracting discussions with our clients, helpingthem to understand new options created by the movement to as-a-service. Transition & Contractual Relation Transformation Operations Cloud Client Provider Client* Cloud Integrator Provider Client* Cloud Integrator Integrator** Provider * Delivery of potential services that are not included in standard cloud offering ** Responsibility for full service, including elements not included in standard cloud offeringCopyright © 2012 Information Services Group, Inc. All Rights Reserved 6
  7. 7. Cloud and the sourcing agendaThe single most important discussion we’re having with clients is abouttransformation. If the platform is shared, provider won’t change – you will.Wave 1 (Traditional) Wave 2 (Shared)► Document current state via an RFP; ► Document requirements; determine fit supplier replicates ► SLAs and many terms generally non-► Negotiated terms and service levels negotiable► Volume = leverage for price and terms ► Volume = leverage for price discount; minimal impact on commercial terms► Contract for innovation ► Innovation inherent► Benchmark against years of data ► Shared systems► Contract commitments of 3, 5 or 7 years ► Limited data to benchmark► Dedicated systems ► Significant internal transformation may be requiredCopyright © 2012 Information Services Group, Inc. All Rights Reserved 7
  8. 8. What we’re seeing in the marketCopyright © 2012 Information Services Group, Inc. All Rights Reserved
  9. 9. Assessing the Level of Cloud Adoption 1 Percentage of ISG Advised Contracts with Cloud in Scope 27% 2 Number of Industrywide Contracts with Cloud in Scope* 20% ↑100% 300e 9% 220 110 2010 2011 2012 YTD 2010 2011 2012e ISG Quarterly Provider Survey: Cloud Computing 3 Provider Pipeline ► Half have cloud scope in 25% of their pipeline opportunities ► Cloud-based opportunities are up over previous periods ► All providers expect cloud services to grow faster than traditional ITO, predominantly in the U.S. market *ISG Contracts Knowledgebase®Copyright © 2012 Information Services Group, Inc. All Rights Reserved 9
  10. 10. Assessing the Level of Cloud Adoption: Your InputCopyright © 2012 Information Services Group, Inc. All Rights Reserved 10
  11. 11. Recognizing the Realities of Cloud Deployment Cloud Strategy Cloud Deployment Models Public Cloud Private Cloud Shared Infrastructure Dedicated Infrastructure Opportunity Perceived Risk Caution! • Economies Security & data Does not fully of Scale privacy realize cloud’s • Standard concerns promise • Modern Converged / Utility / Dynamic IaaS SaaS BPaaS Computing Cloud Service ModelsCopyright © 2012 Information Services Group, Inc. All Rights Reserved 11
  12. 12. Opportunities and Challenges in the Provider Community Traditional Multinational Providers Expansion of existing ITO business India-heritage Pure-play SaaS and IaaS Providers Integrating acquisitions Providers Application Unbound by legacy 1 transformation and constraints modernization 2 5 Security and privacy Solution Reliance on infrastructure concerns Assessment partners 4 Mid-market Traditional Software 3 Hosting Providers Companies Innovative shared hosting Existing relationship with platforms IT and procurement Supporting large, complex Cannibalization of license clients revenue streamsCopyright © 2012 Information Services Group, Inc. All Rights Reserved 12
  13. 13. What we’re seeing in the market Software-as-a-Service Infrastructure-as-a-ServiceCopyright © 2012 Information Services Group, Inc. All Rights Reserved 13
  14. 14. Cloud and the sourcing agenda: SaaSHR, CRM, ITSM and email lead the way; SAP as-a-service has movedinto the mainstream… ►Strong demand for Workday and Oracle Fusion (SaaS):  ≈75% of US HR clients using SaaS on periphery.  Half of HRO clients are evaluating Workday or Oracle Fusion – adoption still remains low however. Sunk cost in Oracle and SAP as well as immaturity of SaaS outside US are primary reasons. ►Demand for cloud-based email and collaboration picking up:  Microsoft 365 picking up steam over Google Apps.  More interest in contracting directly than via a SI. ►ServiceNow continues to displace traditional on-premises ITSM platforms; internal “all advisor” discussions picking up considerably. ►SAP as-a-service: client brings license, provider transforms to serviceCopyright © 2012 Information Services Group, Inc. All Rights Reserved 14
  15. 15. What we’re seeing in the market: SaaSMajority of time spent on SaaS deals today: feature comparisons,evaluating standard commercial terms, creating business case. SaaS Vision Value to ‘Buyer’ ISG Asks Rapid access to new capabilities High Who will test? Mobile enabled High Multi-device support? Decrease reliance on IT High What about ITSM? Eliminate upgrades Medium Are quarterly releases forced? Eliminate customizations Medium Will retained staff configure? Reduce TCO Medium Business case 5+ years? Faster to implement Medium Can legacy be sunsetted? Pay per user Low How much required up front? More secure than current Low Produce artifacts/auditable proof Easy to integrate Low Are external systems API enabled?Copyright © 2012 Information Services Group, Inc. All Rights Reserved 15
  16. 16. What we’re seeing in the market: SaaS Before PR, Comp, BPO HR: Sourced to Ben Client HR Provider X eBonded Tools Software: Run, Integrate ITO ADM: Sourced to Client- ITSM & Build Provider X Owned Tier 1 ERP Client IT Hosting ITO Infrastructure: & DR Sourced to Provider Y The pre-SaaS service model is typical for many multi-tower clients.Copyright © 2012 Information Services Group, Inc. All Rights Reserved 16
  17. 17. What we’re seeing in the market: SaaS After PR, Comp, Ben eBonded Tools BPO HR: Sourced to Client HR Provider Z Configure, DR SaaS Integrate, ITSM Provider Hosting & Run Client IT SaaS Provider The post SaaS model not only displaces providers, but functions shift as well.Copyright © 2012 Information Services Group, Inc. All Rights Reserved 17
  18. 18. Cloud and the sourcing agenda: IaaSWe’re seeing the promise of “as-a-service” giving way to gradualtransition to dedicated, standardized & virtualized infrastructures… ►Renew, restructure, recomplete infrastructure clients want to evaluate new delivery models and expect cloud-like features to be a significant portion of new service. ►Reducing provisioning times from weeks to hours/days is #1 priority. ►However, final agreement typically has very little cloud. Here’s why:  Apps not considered upfront ; significant modernization required for legacy apps to run on shared platforms.  Retained org does not have skills, or see value, in self-provisioning.  Lack of business case; clients don’t know how much they use today.  Inability of provider to educate client on strategic benefits of shared platforms, and the relationship between different delivery models.Copyright © 2012 Information Services Group, Inc. All Rights Reserved 18
  19. 19. What we’re seeing in the market: IaaSMajority of time spent on deals with IaaS in scope: determining whereapplications will land, rationalizing delivery models and service tiers,developing business case. IaaS Vision Value to ‘Buyer’ ISG Asks Pay only for what you use High* Do you know how much you use? Self-service provisioning High* Does retained org have skills? Rapid provisioning High SLAs for both dedicated & shared Lower TCO Medium Assumes large % of low tier storage? Transparent pricing Medium Unit pricing vs. summary Inherent modernization Medium Transformation required to get there Highly elastic Low Is there a RRC threshold? Robust service tiers Low What % of apps need platinum? Fewer maintenance windows Low Will standard work for client? * Initially high, then generally moves to medium or low during discoveryCopyright © 2012 Information Services Group, Inc. All Rights Reserved 19
  20. 20. What we’re seeing in the market: IaaSIn general, the provider approach we see with new infrastructuredeals is transition + transformation, using a tiered model… 1 x86 Applications Non x86 Applications Physical Virtual Physical Virtual Windows/Linux Windows/Linux Unix 2 Filter based on application, database, platform, utilization, etc. Determine service tier. 3 Platinum Gold Sliver Bronze Forklift Standardize Public Private Shared (no change) (virtualize) (IaaS or SaaS) Apps that require Virtualized infrastructure – Commodity applications Test/Dev for IaaS; HR, CRM, dedicated typically based on that can be modernized Email for SaaS infrastructure, or are VMWare reference and standardized too risky to transform architecture (e.g. SAP as a service) 4 % of portfolio % of portfolio % of portfolio % of portfolioCopyright © 2012 Information Services Group, Inc. All Rights Reserved 20
  21. 21. RecommendationsCopyright © 2012 Information Services Group, Inc. All Rights Reserved
  22. 22. RecommendationsCloud is a disruptive force; not a technology. Use this disruption tohelp clients move faster, and modernize. ► Clients do not yet understand the value of using a enterprise level partner for cloud; help them see significant value in exchange for Value marginal cost difference (e.g., Service Integration, SLAs, liability). ► Accept that hybrid, multi-sourced models are the new norm. Creating ITSM and orchestration layers to sit on top of this model is key. ► Clients do not yet fully appreciate the linkage between shared platforms and staying modern; key strategic benefit. Platform ► Analytics generally inherent in shared platforms; key strategic benefit. ► For shared platforms, full transparency is key; this applies to external audits, pricing and operations. Provide web 2.0 forum for customers. ► Provide tangible, client-driven examples of how cloud technology can speed up operations, especially in upgrade avoidance and OS References provisioning. ► Provide cost savings or cost avoidance case studies; reference-ready clients with production examples key.Copyright © 2012 Information Services Group, Inc. All Rights Reserved 22
  23. 23. Let’s Talk… ► stanton.jones@isg-one.com ► As long as we’ve met, I’ll accept! ► @stantonmjones ► Public decks and white papers ► Blog on Consider the Source focused on how emerging technology is impacting the broader sourcing marketCopyright © 2012 Information Services Group, Inc. All Rights Reserved 23
  24. 24. www.isg-one.com

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