“X-as-a-Service”Impact on the Global Sourcing MarketPrepared for Dr. Dwayne Whitten, Texas A&M UniversityPresented by Stan...
Agenda                                                                  2            1. About ISG            2. State of t...
About ISGCopyright © 2012 Information Services Group, Inc. All Rights Reserved               3
The Power of One: ISG-One                                                                              ISG   Services   To...
Unrivaled Depth of Experience                                                             ISG   Services   ToolsISG focuse...
State of the MarketCopyright © 2012 Information Services Group, Inc. All Rights Reserved               6
At A Glance                                                                        3Q12 ACV 3Q Y/Y   3Q Q/Q   YTD ACV    Y...
Top Service Providers Year-to-date                  The 15 top service providers based on YTD 2012 ACV* awarded globally. ...
Multi-sourcing is now the normOver 80% of companies that source ITO on a significant scale do so withmulti-sourcing strate...
Delivery ModelsIncreasingly, both clients and providers want to move to morestandardized delivery models…Copyright © 2012 ...
“X-as-a-Service” and the sourcing agendaCopyright © 2012 Information Services Group, Inc. All Rights Reserved   11
X-as-a-Service and the sourcing agenda                                        InSourcing                           Selecti...
X-as-a-Service and the sourcing agendaThe answer first…      ► Cloud technology is evolutionary – the democratization of I...
X-as-a-Service and the sourcing agendaThe standardization and hybrid nature of cloud is creating dramaticchanges in extern...
X-as-a-Service and the sourcing agendaIncreasingly, we’re having contracting discussions with our clients, helpingthem to ...
What we’re seeing in the marketCopyright © 2012 Information Services Group, Inc. All Rights Reserved   16
Assessing the Level of Cloud Adoption          1             Percentage of ISG Advised                        Contracts wi...
Recognizing the Realities of Cloud Deployment                                                                          Clo...
Opportunities and Challenges in the Provider Community                                                                    ...
What we’re seeing in the market                     Software-as-a-Service                                                 ...
What we’re seeing in the market: SaaSHR, CRM, ITSM and email lead the way; SAP as-a-service has movedinto the mainstream… ...
What we’re seeing in the market: SaaSMajority of time spent on SaaS deals today: feature comparisons,evaluating standard c...
What we’re seeing in the market: IaaSWe’re seeing the promise of “as-a-service” giving way to gradualtransition to dedicat...
What we’re seeing in the market: IaaSIn general, the provider approach we see with new infrastructuredeals is transition +...
What we’re seeing in the market: Adoption BarriersWhile clients desire ‘x-as-a-service’ models, and providers aredeliverin...
Where we’re headedCopyright © 2012 Information Services Group, Inc. All Rights Reserved          26
Where we’re headed: SaaS Before                                                                                           ...
Where we’re headed: SaaS After                                                                                            ...
Where we’re headedCloud’s disruptive effects on sourcing will accelerate, especially for the sourcingmarket’s traditional ...
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X-as-a-Service: Impact on the Global Sourcing Market

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X-as-a-Service: Impact on the Global Sourcing Market

  1. 1. “X-as-a-Service”Impact on the Global Sourcing MarketPrepared for Dr. Dwayne Whitten, Texas A&M UniversityPresented by Stanton JonesOctober 24, 2012 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. About ISG 2. State of the Market: Q312 TPI Index 3. “X-as-a-Service” ► Impact on the sourcing agenda ► What we’re seeing in the market ► Where we’re headedCopyright © 2012 Information Services Group, Inc. All Rights Reserved 2
  3. 3. About ISGCopyright © 2012 Information Services Group, Inc. All Rights Reserved 3
  4. 4. The Power of One: ISG-One ISG Services ToolsISG is a leading technology insights, market intelligence and advisory servicescompany, offering clients one source for support in driving operational effectiveness. The world’s leading sourcing data and advisory firm. the power A premier of One independent technology The premier independentadvisory serving the TM provider of business and IT U.S. public sector benchmarking, performanc e improvement, data and analytics services.Copyright © 2012 Information Services Group, Inc. All Rights Reserved 4
  5. 5. Unrivaled Depth of Experience ISG Services ToolsISG focuses exclusively on helping clients achieve operational excellence.Our depth of experience is unrivalled. scale We advise on over 25% of the Sourcing Markets Annual TCV Awarded. Having advised on over $330 billion in contract value, no other advisory firm comes close to our level of market engagement and experience. value 75% of our clients are either repeat or direct referrals. Our clients come back to us time and time again for critical market insight and advice around their strategic operational imperatives. clients 75% of the Forbes Global 100 are ISG clients. We advise the world’s largest blue chip firms through some of their most critical business operations transformation projects. market voice The TPI Index® is the premier source of quarterly insight and is considered the authority on trends and developments in the global sourcing industry.Copyright © 2012 Information Services Group, Inc. All Rights Reserved 5
  6. 6. State of the MarketCopyright © 2012 Information Services Group, Inc. All Rights Reserved 6
  7. 7. At A Glance 3Q12 ACV 3Q Y/Y 3Q Q/Q YTD ACV YTD Y/Y Scorecard ($B)* Change Change ($B)* Change Global Market $ 4.8 -6% -10% $ 14.8 3% New Scope $ 3.2 16% -19% $ 9.8 2% Restructurings $ 1.6 -33% 17% $ 4.9 6% Mega-Relationships $ 1.5 1% -26% $ 4.5 51% ITO $ 3.2 -13% 8% $ 9.2 -3% BPO $ 1.6 12% -32% $ 5.6 17% Americas $ 1.6 -11% -8% $ 5.4 2% EMEA $ 2.5 -12% 14% $ 6.9 -8% Asia Pacific $ 0.7 55% -51% $ 2.4 72%Copyright © 2012 Information Services Group, Inc. All Rights Reserved 7
  8. 8. Top Service Providers Year-to-date The 15 top service providers based on YTD 2012 ACV* awarded globally. ITO Providers BPO Providers ACV ACV Accenture Accenture CGI CGI HCL HCL HP HP IBM IBM Infosys Infosys Mahindra Satyam Mahindra Satyam Atos Genpact BT ISS Capgemini Johnson Controls CSC Jones Lang Lasalle Dell Mitie Fujitsu Serco TCS Sodexho T-Systems Xchanging Note: Service providers in alphabetical order; no rankings implied. Placements based on 2012 YTD commercial contract awards sourced from ISG contracts database.Copyright © 2012 Information Services Group, Inc. All Rights Reserved 8
  9. 9. Multi-sourcing is now the normOver 80% of companies that source ITO on a significant scale do so withmulti-sourcing strategies; this significantly increases the complexity throughincreased technical and relationship interfaces. Increase in multi-sourcingCopyright © 2012 Information Services Group, Inc. All Rights Reserved 9
  10. 10. Delivery ModelsIncreasingly, both clients and providers want to move to morestandardized delivery models…Copyright © 2012 Information Services Group, Inc. All Rights Reserved 10
  11. 11. “X-as-a-Service” and the sourcing agendaCopyright © 2012 Information Services Group, Inc. All Rights Reserved 11
  12. 12. X-as-a-Service and the sourcing agenda InSourcing Selective Strategic Gain Sharing Sourcing Sourcing Q: Where Does “X-as-a- Function Strategies InSource Optimization Single Broad Scope Value Sharing Service” Fit? Supplier Single Vendor Joint Venture Multi-vendor Subsidiary Tiered-vendor Model Single Geography Multi-geography Rural Staff Augmentation Project Based Managed Service Contractor Onshore Near Shore Offshore Hybrid Tactics Assumed Risk Shared Risk Source the Risk Maintain Complete Control Shared Control Relinquish Operating Control Operating Outsourced Models Staff Augmentation Model Insourced Models Models Target Global Extended Operations Centre of Virtual Traditional Centre Captive Sourcing Onsite Offshore Captive Insourced Centre Excellence Transition Transformation Realignment Scope & Models Change Applications Infrastructure Processes Hybrid Sourcing Model Centralized Organization Decentralized Organization Shared Services Hybrid Model A: It doesn’t! Bundling Options Development Technology Business Development & Maintenance Technology Tower Lifecycle Platform ProcessCopyright © 2012 Information Services Group, Inc. All Rights Reserved 12
  13. 13. X-as-a-Service and the sourcing agendaThe answer first… ► Cloud technology is evolutionary – the democratization of IT, via standardized and shared platforms, is revolutionary. ► This revolution is having an increasingly dramatic impact on the sourcing agenda: both external engagement models and internal operating models. ► SaaS is rapidly entering the enterprise via HR, sales and corporate email; the promise of IaaS is losing ground to utility infrastructures. ► SaaS buyers value: features and mobile, with unintended consequence of decreased reliance on IT; IaaS buyers value: provisioning speed with unintended consequence of modernization. ► Security, commercial terms and business case are key adoption barriers.Copyright © 2012 Information Services Group, Inc. All Rights Reserved 13
  14. 14. X-as-a-Service and the sourcing agendaThe standardization and hybrid nature of cloud 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 base to business case often apples & oranges.  ITSM and DR often ignored.Copyright © 2012 Information Services Group, Inc. All Rights Reserved 14
  15. 15. X-as-a-Service 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 15
  16. 16. What we’re seeing in the marketCopyright © 2012 Information Services Group, Inc. All Rights Reserved 16
  17. 17. 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 3 ISG Quarterly Provider Survey: Cloud Computing 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 17
  18. 18. 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 concerns realize cloud’s • Standard promise • Modern Converged / Utility / Dynamic IaaS SaaS BPaaS Computing Cloud Service ModelsCopyright © 2012 Information Services Group, Inc. All Rights Reserved 18
  19. 19. 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 19
  20. 20. What we’re seeing in the market Software-as-a-Service Infrastructure-as-a-ServiceCopyright © 2012 Information Services Group, Inc. All Rights Reserved 20
  21. 21. What we’re seeing in the market: 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 21
  22. 22. 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 22
  23. 23. What we’re seeing in the market: 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 23
  24. 24. 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 Physical Virtual Physical Virtual Windows/Linux Windows/Linux Unix Filter based on 2 application, database, platform, util ization, 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 24
  25. 25. What we’re seeing in the market: Adoption BarriersWhile clients desire ‘x-as-a-service’ models, and providers aredelivering standardized, shared platforms, key challenges exist: ►Security  IT organizations are not ready to let go; multi-tenant platforms remain a huge hurdle.  Policies and guidance have not yet caught up. ►Commercial Terms  Standard outsourcing terms around audit and liability may not apply.  Compliance with EU Data Privacy Directive another huge hurdle. ►Financials  Implementation costs may be similar to on-premises.  TCO benefit does not kick in until a major upgrade is avoided.Copyright © 2012 Information Services Group, Inc. All Rights Reserved 25
  26. 26. Where we’re headedCopyright © 2012 Information Services Group, Inc. All Rights Reserved 26
  27. 27. Where we’re headed: SaaS Before PR, Comp, BPO HR: Sourced to Ben Client HR Provider X eBonded Tools Software: Run, Integrate ITO ADM: Sourced to Client- & Build ITSM 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 27
  28. 28. Where we’re headed: SaaS After PR, Comp, Be n eBonded Tools BPO HR: Sourced to Client HR Provider Z Integrate, Con SaaS figure, DR 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 28
  29. 29. Where we’re headedCloud’s disruptive effects on sourcing will accelerate, especially for the sourcingmarket’s traditional IT providers. Less Disruptive Trends IaaS will lag in favor of dedicated, standardized and virtualized infrastructure services Cloud growth will be choppy at the enterprise level with SaaS leading the way in HR, CRM and collaboration Traditional IT providers face significant pressure from well- known software vendors, nimble mid-market players and emerging pure-play infrastructure and SaaS providers Buyer type shifting from the IT department to the functional business units, especially SaaS-based HR and CRM Highly Disruptive TrendsCopyright © 2012 Information Services Group, Inc. All Rights Reserved 29
  30. 30. www.isg-one.com

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