Eric Goodness

I’m currently working to finalize the vendor criteria for the upcoming ‘Communications Outsourcing and Professional Services’ Magic Quadrants (for North America and Worldwide).  The name of these MQs have been changed from ‘Managed and Professional Services’.  We found that many users and vendors  were confused between the scopes of the MPNS and NSP MQs.  Thus COPS (acronym was not intentional) was born.

The challenge to creating MQ criteria is to make the field of vendors relevant to the greatest part of the market.  Generally we work to focus on providers that will openly bid, and service, mid size as well as large Enterprises.  Revenue is usually the most imposing impediment to entry for most providers.  I’d like to also apply a few filters to assure that we represent mid-market requirements and providers as well.

I’m offering the following criteria for your review.  One set is for the NA MQ and one set is for the WW MQ.  I’d love to hear your feedback and/or respond to requests for the rationale for the chosen (draft) criteria:

COPS MQ – North America

• In 2008, service providers recognized at least $200 million dollars in revenue in communications IT services. 
• Service provider competes for, and deliver, standalone COPS opportunities to address a growing need for communications selective sourcing.
• Service providers may not recognize more than 70 percent of COPS revenue from a single vertical market.
• Service providers must be able to demonstrate the ability to provides communications outsourcing services as a sole-source, direct provider (communications outsourcing delivered entirely by partners or subcontractors are excluded).
• Service providers must operate in at least 80 percent of the lower 48 states of the United States; and/or,
• Service providers must operate in 8 of the 10 provinces in Canada.
• Service providers must not recognize 80 percent, or more, of their revenue in a single business process or IT service category as the MQ seeks to exhibit broad value.

COPS MQ – Worldwide

• In 2008, service providers recognized at least $300 million dollars in revenue in communications IT services. 
• Service provider competes for, and deliver, standalone COPS opportunities to address a growing need for communications selective sourcing.
• Service providers may not recognize more than 70 percent of COPS revenue from a single vertical market.
• Service providers must be able to demonstrate the ability to provide communications outsourcing services as a sole-source, direct provider (communications outsourcing delivered entirely by partners or subcontractors are excluded).
• Service providers must operate in at least (4) of the (7) geographies tracked by Gartner.  The geographies are: Asia Pacific, Eastern Europe, Japan, Latin America, Middle East/Africa, North America and Western Europe.
• Service providers must not recognize 70 percent, or more, of their COPS revenue in a single geography as the MQ seeks to exhibit broad value.

I’m finishing up a User Wants and Needs survey instrument to test when large companies will adopt unified communications (UC) technologies and how they will manage and support their UC:  in-house (premise-based) or managed/outsourced (premise-based) or hosted/as-a-Service.  Other data points I’ll be looking for include:

• Reductions in capex and opex they expect to achieve through the use of 3rd party services and hosted solutions
• Importance of FMC in the adoption of UC
• Business model of their potential provider (e.g. NSP, outsourcer, niche hosting provider)

Please send along any ideas in terms of the type of information your company would like to glean from this report.

Yesterday, I finally pushed the revised forecast for Remote IT Management into the Gartner Editing queue.  To create the forecast I interviewed about 50 different companies that offer RIM services – large companies, small companies, manufacturers, SIs, outsourcers and carriers.  A few things are clear from this exercise: RIM services are finally impacting the market in a powerful way.   While the realization of their impact is about 5 years later than most predicted, RIM services really are changing the way vendors are delivering value and how users are able to improve service levels at reduced prices.  The forecast pegs RIM services growing at +30 percent CAGR rate through 2012. 

The real story is that the massive pricing pressure in RIM services has made the offerings much more attractive and available to SMBs.  In fact, most vendors will agree that the SMB is their fastest growing market segment….and their most profitable market segment.   The challenge for RIM service ‘factories’ will be pushing the cost of sale to the indirect channel. 

Anyway, look for my forecast in the next few weeks.  The initial forecast is simply a geographic and technology platform cut.  A few weeks after this forecast publishes, I’ll follow it with a business segment forecast (SMB, Enterprise).

Sprint’s planned reduction in force of 8000 workers, including chief network officer Kathy Walker, is a sure sign that the company must seek outsourcers to maintain operations. 

Outsourcing has been an accursed concept with carriers because the network is a core competency to the business. However, many would rightly argue that Sprint’s core competency should be customer acquisition. 

Change has slowly been creeping across the continents to the North American service providers.  Asia Pacific, Latin American and African operators have been the first adopters to outsource some carrier operations.  Companies such as Ericsson, Motorola, Alcatel-Lucent, Tech Mahindra and Dimension Data have made significant in-roads to become outsourcers of choice. 

To date, many of the outsourcing agreements with carriers are fairly simple instruments focused on multivendor maintenance of systems and staff augmentation in operations centers.  As more fixed and mobile providers look to become ‘acquirers of customers’ – business and consumer - instead of ’operators of networks’ the structure of these agreements will change more rapidly. 

My bet is that scope of most new agreements will not change too drastically too soon.  In fact, they will likely be band-aid approaches for cost reduction and avoidance.  Looking to third party services companies to help the carriers manage and operate networks more efficiently will be enough for most organizations.  There are certainly existing arrangements in the market that do incent outsourcers based on the success of new service creation initiatives; however, the operators generally still own the infrastructure and bear most of the risks. 

The market to outsource carrier operations will begin to kick into hypercompetitiveness in 2009 as many Enterprise outsourcers look to supplement underperforming Enterprise pipelines with new carrier-centric opportunities.  The main battle will be waged by the service organizations of manufacturers (e.g. Ericsson, Nortel, Motorola, Alcatel-Lucent), legacy outsourcers (e.g. IBM, CapGemini and EDS) and a hungry contingent of Offshore service providers (e.g. TCS, Wipro, Tech Mahindra).  Smaller, niche companies (e.g. Telent, ThruPoint, EFI Telecom) will be relegated to staff-augmentation roles.

This new wave of carrier outsourcing requirements just might coax Cisco from behind its curtain of clandestine operations to compete openly in a Services market without polarizing its legion of Enterprise focused partners.  The Cisco Advanced Services business unit already provides direct consulting and integration services to the carriers and Cisco is already managing Communications-as-a-Service platforms for carrier partners.

Anyway, this market is going to heat up fast and be very interesting.  I’d like to hear what the network IT services community sees happening.

I recently returned home from South Africa. I traveled there to attend Dimension Data’s global analyst conference. 

• Travel time was approximately 45 hours by plane and car to make the meetings and return home
• My luggage was lost by the airline for most of the visit
• Connectivity, to keep up with corporate communications, was dicey

It was the best analyst conference I’ve ever attended.

I offer this post as a best practice consideration for vendors planning their next analyst event.  What made the conference so valuable was its focus on 1-on-1 sessions.  Sure most conferences today offer 1-on-1s; however, Dimension Data clearly prepped for the conversations with analysts.  

Dimension Data is a very decentralized company. In addition to its corporate CEO, each major geography is managed by a separate chief executive that reports in to the corporate CEO.  All analysts were able to speak to Dimension Data CEOs - Corporate, Asia-Pac, Australia, Africa-MEA and Europe (unfortunately the Americas chief executive did not make the conference). 

The Dimension Data executives distinguished themselves by providing insight into country level, and solution set detail, in terms of market drivers and inhibitors rarely found at other analyst conference or in any other type of engagement…not even in Marketscope or Magic Quadrant conversations. 

Too often executives at analysts conferences practice their marketing-arts-of-obfuscation; either to maintain imagined competitive advantage or to mask a lack of knowledge of the market.  My advice to vendors scheduling 1-on-1s is: If your executives, and non-executives, can’t provide insight expressed as operations benchmarks, market drivers-and-inhibitors or prevailing trends for contract structure at analyst conferences – don’t bother.  

The information provided by Dimension Data was focused and straightforward to help the analysts community understand their operations and business direction.  Most impressive of all was the clarity of insight they brought to the table about small and mid size emerging economies. 

I regularly attend conferences and briefings by the top 30 outsourcers and I’ve never received information, or vendor opinion, to the level of detail as I did at this conference. 

The other attending Gartner analysts and I will likely create an Event note to talk about what we learned and our impressions of Dimension Data looking forward.  I offer this post simply as a well deserved ‘atta-boy’ to the Dimension Data team (take note Knowledge Capital, SageCircle et al!). 

Many thanks to Connie De Lange, Hillary King, Jeanne Day-Spriesterbach and Barbara  Beauchamp who sponsored and managed the event.

Gartner published a Marketscope on Remote Infrastructure Management (RIM) in the second half of 2008.  In 2009, Gartner plans a Magic Quadrant on the same topic.  However, we’re having some internal debate at Gartner as to whether RIM services is a discrete market, or simply an evolving mode of delivery for traditional change management and improved (proactive) service management.

I’ll admit it - I’m changing my opinion – I believe RIM is a Mode, not a Market.  I’ve been working with RIM services for nearly 10 years at Gartner.  I’ve also been responsible for Gartner’s forecasts on RIM services for the past 8 years.  All along, I’ve strongly believed that RIM services were a discrete market.  

Prior to my employment at Gartner, I was the product marketer a number of years ago for Bay Network’s ServiceLink RIM services.  If service providers think RIM is a tough sell now… they should have experienced selling RIM services in 1995.  Our best successes were follow on contracts cemented after our sales teams integrated core router management as a benefit within aloyalty program we built for Bay’s most strategic customers.   It was never profitable in that setting.  The principals of the ServiceLink offering left Bay Networks (John Igoe, Robert Klotz and Deb MacCallum) and started Silverback Technologies (now part of Dell).  They were trailblazers.

In the late 90s, private equity was pouring into standalone managed services providers (MSP) and life was good.  Netsolve (purchased by Cisco) at one time had a market cap of $1 billion on revenue under $50 million.  A niche MSP could command significant gross margin rates on their services.  They could also live on RIM services alone.  Then the bubble burst, customer acquisition models changed and user organizations never really returned to the boutiques. 

The days of MSPs are gone because pure, RIM-based MSPs don’t really exist anymore.  Most MSPs have been forced by their customers to expand their value.  They been asked to sell pass-through maintenance contracts or resell hardware or software or to offer professional services to prop up slumping monthly recurring charges (MRC).  In fact in the recent past, the first clear sign that an MSP was in trouble was when professional services revenue grew to more than 50 percent of overall revenue.  That’s because an MSPs business plan was predicated on recurring revenue.  Professional services are non-recurring.  There are a few significant standalone companies providing RIM services but those companies are outliers.  IPSoft remains one of the most compelling in the market.  

Anyway, I’d like to get the readers of this post to let me know their opinion about RIM services:  Market or Mode?  

Please reply to this post directly or you can also provide your opinion in this very, very short survey.  Paste this link into your browser:

I’ve read a lot in the past 48 hours about Nortel’s Chapter 11 filing and there is a lot of speculation about the future of Nortel and its next best steps.

A popular line of conventional wisdom emerging on the blogs and in the press is the possibility that Nortel be reinvented as an IT Services-led company.  Few companies have successfully managed that kind of transition.  There are a few network- and voice-OEMs currently working towards the same goal.  One example of success, particularly in the Americas, is NEC.  They’ve taken their lumps as a product company and really done a nice job creating a trusted, go-to organization to provide direct, or private-labeled, multi-vendor IT services to the market. 

The belief that Nortel can similarly reinvent the Company as an IT Services Provider is unrealistic. 

Nortel doesn’t have the bench strength to create, market, sell and deliver services for complex, multi-vendor environments.  The Services organization hasn’t been allowed to thrive and mature appropriately.  Nortel’s decades long recursive history of divestiture and re-investment in the Enterprise and Carrier services organizations is a case study for finger-in-the-wind management.  Of course, these mistakes are common in product-centric companies when they struggle to determine the strategic nature of Services. 

Compounding the problem, the Nortel’s services marketing organization only develops solutions appropriate for immediate plotting on the ‘Plateau of Productivity’ in Gartner’s Hype Cycles. Nortel services have consistently been devoid of innovation.  Most service products are released after Cisco and Avaya have brought them to market years earlier.  Subsequently, new service products are released into highly commoditized environments where no marketable differentiation is possible.  Additionally, the services marketing organization never appeared to actually market Nortel services. 

Gartner’s published Magic Quadrants and Vendor Rating documents have chronicled Nortel’s inconsistencies.  The Services organizations do not provide any foundational strength upon which ‘Nortel 2.0′ can be built.  The irony of course is that the IT services for Enterprise Communications will show good growth, relative to other industry segments, in a recessive economy.  Gartner’s inquiry requests from mid size and large companies looking at single-tower managed service/outsourcing projects are increasing.  Post-recessionary outlook for the market is even better as investments in Unified Communications are expected to show very strong growth.  IT Services is an important catalyst to facilitate market adoption and successful migration to Unified Communications.

If Nortel is going to survive as a Services-led company, then they will require a massive re-evaluation of executive and marketing talent charged to lead those services organizations. 

Today Tangoe, Inc. announced its acquisition of mobile device management (MDM) software vendor InterNoded, Inc.

The acquisition effectively enables Tangoe to deliver services in which it currently markets capabilities: Communications Lifecycle Management. Until now, Tangoe hasn’t actually provided Communications Lifecycle Management (CLM). That’s because the company has been missing a huge piece of the solution – IT management capabilities (which they now curiously call ‘3rd Generation TEM Services). The great promise of Telecom Expense Management has been that a bridge will be built to the values provided in communications infrastructure and applications management; that is, an integrated view of telecommunication’s impact on a company from a financial and technological perspective.

Mobile device management, provided as a service, has incredible potential from a user and a vendor perspective. The most crystallized value statement I can provide for MDM services is that the services provide centralized application and hardware resource control.  The centralized control of mobile devices is effected by remote, or over-the-air (OTA), capabilities.

For users, the OTA capabilities of MDM applies more sophistication to the management of devices beyond ordering and provisioning and other logistics services offered in traditional TEM contracts. For vendors, the OTA capabilities of MDM allow TEM vendors to extend into an adjacent market and increase their revenue per user. MDM services are more dynamic, and less reactive, than traditional, facilities-bound kitting, advance replacements and depot repair. MDM services also potentially offer the stewardship that has been lacking to improve the security and migration activities associated with the porting of key Enterprise Applications to the mobile environment. Tangoe, like service providers in general, faces a few challenges as it works to navigate and create an MDM services market:

First, Tangoe is entering an untested and uneducated market. Gartner believes that there is modest demand for service-based MDM solutions; however, hard work by more than a few companies is needed to condition the market to accept the value propositions of MDM services and to feel comfortable sourcing MDM services from a third party.  Right now, the data points are very meager in terms of case studies and the cost reductions promised are much ’softer’ than the hard dollar guarantees that TEM providers are used to selling.  Add to this that this is a service for smart phones which currently account for only 20 percent of existing Enterprise devices.

Second, pricing, and value-perceptions, may prove problematic. For a company with 1000 devices, they are likely paying $5 to $10 per device for their TEM services; depending on service levels.  A full lifecycle mobile device management solution for that same company is likely to be priced at $10 to $20 per user.  In this economic environment, that is no slam dunk.  Even if Tangoe enters the market with enhanced asset management for $1 to $2 per device; that’s at least a 10 percent increase in cost and the service doesn’t really advance the robustness of MDM services.  To date, Telwares is the only legacy TEM service provider that has announced MDM services for the market.  This service is predicated on leveraging the Perlego MDM platform.  There has been interest in the service, but the adoption hasn’t been noteworthy.

Third, the integration of Internoded and becoming an IT Outsourcer could cause hiccups. Tangoe has made a few acquisitions over the past few years. The integration of ISG has been seamless by all accounts. The integration of Traq Wireless proved problematic and it took a while for Tangoe to address problems arising from the acquisition. Tangoe does not have an IT outsourcing legacy and their services organization is not lead by an individual with significant IT outsourcing experience. In TEM, users have been gracious with service lapses and auditing errors because the net hard dollars recapture was irrefutable. They should be under no such delusion when it comes to IT management and outsourcing.

Ultimately, Tangoe’s acquisition of Internoded is an exciting new chapter in service delivery capabilities for legacy TEM vendors and the IT Outsourcing market in general. The key to Tangoe’s near-term success will be their execution and focus on packaging, pricing and how they sell the services (because the buying centers of TEM and MDM are different). An alternate channel to market, such as outsourcers, to bring them to market is a must.  Having big friends in big places reduces the cost of sales and opens doors.

The key to their long-term success is service delivery excellence. That will require a little on the job training and a lot of investment in resources with relevant skills and experience.

What do you think?  Are companies ready to purchase Mobile Device Management services?  I’d like to hear your opinions.  Please post to this blog, or weigh in on this survey I’m hosting:

https://www.surveymonkey.com/s.aspx?sm=_2b0ibX9_2bl2xi5_2b2mX3c4S4Q_3d_3d

Paste the URL above into your browser.  The aggregate survey results will be viewable to you immediately when you complete the survey.

Gartner has a growing body of work in the MDM space.  If there is interest, I suggest searching for related docs under the following analyst names:

I attended a managed services end-user event yesterday held in Cincinnati (birthplace of Kevin Youkilis, Red Sox first baseman extraordinaire).  The event was sponsored by Logicalis.  What really struck me about the event was how the Logicalis executives focused strongly on the their desire to sustain their customer’s business focus by supporting the tactical day-to-day operation of their underlying systems.   Michael Cox, Chairman of Logicalis’ US operations, led off the event by explaining how his company ‘inverts the pyramid’ for his customers (what presentation would be complete without a pyramid?).  The pyramid that Michael refers to is a representation of the operational requirements to support business IT where strategy, representing a small portion of investment and cost, sits atop the pyramid and operational expenses for day-to-day control lie beneath – and these responsibilities are best migrated to trusted partners.  Michael’s point, which is usually referenced obliquely in most managed services provider’s presentation as ‘maintaining strategic control’ was the center point of most of Logicalis’ presentation bolstered by good examples and references.

Andy Wood, the CIO of Wilton Re a life reinsurer based in Wilton CT, provided an interesting customer presentation validating Logicalis’ message from a user perspective.  Andy made some excellent points and validated my belief that managed services represent an intermediate step towards accepting ‘The Cloud’.  It is a point not well represented in the media, or in analyst presentations, that the drive towards Cloud services will require some intermediary step for user organizations to become familar, and comfortable, with IT resources that are shared and not owned, located or managed by the user.  

Andy made other interesting points supporting my belief that IT markets will not ’sublimate’ to cloud computing and indicated that his relationship with his managed services provider, Logicalis, will change as his company embraces maturing cloud offerings. 

Another reinforcing observation I took away from the Logicalis event is that the promise of ‘Managed Services’ is very interesting to small, medium and large companies without significant experience in traditional outsourcing relationships.  A noteworthy gating factor in their decision making is their lack of knowledge in structuring deals and underlying agreements such as statements of work, SLAs (including escalation policies and thresholds) and other Ts and Cs.

We in the IT Services and Outsourcing groups are hip deep in the forecast season.  I’m responsible for the forecasts related to communications IT services in North and Latin America. 

IT services in the communications market have been doing very well.  The adoption of IP communications has inserted complexity in businesses and as a result, user are requiring more third party services.  Given the economic pressures in the US (and the world) over the past months, I decided to reach out to 15 large multinational companies planning network outsourcing or managed services deals.

Their response didn’t reduce any concern that user demand for communications IT services will soften; however, their responses didn’t contribute to any prevailing FUD that the bottom will fall out.  All agreed that the drive for outsourcing deals will continue.  But, the complexion of most of these deals will change.  Two prevailing views came across in my conversations – Cost reduction is King and Time equals Money.   Focus on waste and execute as soon as possible.  Remote management and Telecom Expense Management will be key outsourcing tools to realize user expectations.

What was missing from my conversations was the users’ original desire for strategic, transformative initiatives focused on the integration of more communications services to create real Unified Communications.  I imagine that transformative initiatives will be pushed out past year 2 or 3; probably in a wholly separate agreement.  What was clear in my conversations is that these companies were not planning, or considering, to migrate to broader UC capabilities through hosted or, Unified Communications-as-a-Service.  Of course, these were only 15 companies, but they also represented the market’s next mega- or near-megadeals for communications outsourcing.

In separate conversations with smaller companies, it is clear that there will be more pricing pressure on managed services.  Managed services pricing in the communications sector has already been halved in the past 32 months. 

Hold on.