By Harvey Gluckman. The explosion of digital solutions and emerging technologies is disrupting the sourcing market and the way clients procure managed services. This session will provide an overview of the changing world of outsourcing and define the key success factors in an increasingly dynamic environment.

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Preparing for the Future Smart
ISG Market Update
Harvey
Gluckman

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Chasing Future Smart

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Future Smart: Hanna-Barbera
Drones3-D Printed Food
Flying Cars Jet Packs Robotic Help Holograms
Smart Shoes Smart Watch

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Looking back at 2014 …
Replacement Automation
Continuous Contracting
Enterprise Analytics
Service Integration
Internet of Things
Crowd Sourcing
Outcome-based Pricing
Hybrid IT
Global Business Services

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Only some service providers are achieving
digital maturity …
The GOOD
Market aggressive
in productizing
offerings & services
“as-a-service”
What we are seeing now
Enterprises want to go faster … with or without IT.
DIGITAL SOLUTIONS
The BAD
Packaging
confusion:
Is it a product,
a service or
a solution?
The UGLY
Many can’t articulate:
How does it change
your customer’s
business model?

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Rise of Bimodal IT
Mode 1 – Systems of Record Mode 2 – Systems of Differentiation
Examples:
o ERP, CRM, DW,Trading platforms
Characteristics:
o “Bullet proof”
o Operational rigor
o Often with regulatory/compliance
implications
Examples:
o Analytics, Big Data , IoT, Mobile, Social apps
Characteristics:
o Experimental
o Trial and error/“Fail Fast”
o Speed, speed, speed
o Customer-focused
&

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Bimodal IT Challenges
o How to synchromesh the 2 operating modes?
o How to integrate infrastructure, applications
and business processes?
o Where to find the required skills?

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Opportunity of Digitization
IT $ spend
APIs & complexity
Integration in/of
products & services
Future
Smart
Internet of Things
Analytics &
Big Data
Social
Media
Cloud
Mobility
Automation

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Internet of Things
It’s not “Big Brother” …
it’s “Big Mother”
o More embedded systems and smart
metering
o Insights into user behavior
o Focus on collaboration with
customers
o Renewed focus on customer service
to define next wave of business
innovation

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Impact of Digitization
PROVIDER
TECHNOLOGY
WAVE
Stirring up the
status quo
Cloud
Automation
Robotics
A Buyer’s Market
Most recent ISG
BENCHMARK DATA
reveals price declines more
than 20% in some cases
20% - 50%

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Impact of Digitization
ARC leads CLIENTS to
EXPECT NEW COMMERCIAL MODELS
Not just short-term contracts, but effectively pay-as-you-go
and outcome-based models to ensure flexibility
DYNAMIC ON-
DEMAND MODELS
Supplant on premises,
fixed-pricing models
Significant Provider Challenge
MIGRATION TO CLOUD
SERVICES = LOSS
$3 to $4 dollars in
hardware/software
revenue is replaced
with only $1 to $2 of
cloud-based revenue
$4
$2
?

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Impact of Digitization
Percentage of total number of ITO contracts awarded: TCV > $10M
-5%
5%
15%
25%
35%
45%
55%
Big 5 US Big 4 Europe Big 5 Indian Others
2011
2012
2013
2014
2015e

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Impact of Digitization
-5%
5%
15%
25%
35%
45%
55%
Big 5 US Big 4 Europe Big 5 Indian Others
2011
2012
2013
2014
2015e
Percentage of ACV of ITO Contracts Awarded: TCV > $10M

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à
à
à
How do I provide a stable
environment?
IT is the owner of services
Plan, Build, Run
o Run/Change the business
How do I enable business objectives?
IT is the broker of services
Dev/Ops
o Bimodal
What are clients thinking?
OldWorld:
process-focused
NewWorld:
outcome-oriented

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What are clients thinking?
OldWorld:
process-focused
NewWorld:
outcome-oriented
à
à
à
Customer centricity: cost optimization
bricks, clicks, rings, knocks
Back-office efficiency
ITIL rigor
Regulated cadence
Customer centricity: revenue expansion
information, reaction, promotion
Mid/front-office to drive revenue
expansion and new revenue models
Agility, flexibility
Continuous development / releases

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What are clients thinking?
OldWorld:
process-focused
OldWorld:
process-focused
NewWorld:
outcome-oriented
à
à
à
Formal governance
Optimizing current state; lower costs
IT & corporate business processes
Flexible governance with heavy use of
analytics & dynamic decisioning
Flexibility to create new capabilities;
Elastic, self-service, auto provisioning
Integrated Global Business Services;
process, cost, customer insight benefits

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OldWorld:
process-focused
OldWorld:
process-focused
NewWorld:
outcome-oriented
à
à
Broad-scale contracts; generalized
scope
Long-term commitments; 1/2 devoted
to transformation
Small arrangements for specialized
point solutions
Transactional modularity for maximum
flexibility; rapid adoption of new
service platforms
Transaction Structure
What are clients thinking?

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OldWorld:
process-focused
OldWorld:
process-focused
NewWorld:
outcome-oriented
à
Economies of standardization; focus
on unit costs of effort
Economies of automation; focus on
productivity and effectiveness
Transaction Structure
What are clients thinking?
àTransition & termination complexity;
fear, uncertainty & doubt
Plug & play mindset

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Where to invest?
o Data analytics
o Product engineering
o Software-defined everywhere
o Automation
o Hybrid IT management
o Cyber security & risk management

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