Eric GoodnessWe 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.
Category: Uncategorized Tags: communications-as-a-service, managed services, outsourcing
3 responses so far ↓
1 David, Business Technology Roundtable September 24, 2008 at 2:35 pm
Eric,focus on the asset being reclaimed (time) is the first step in a multi-step game plan. My point: it’s how you choose the re-invest that regained time that’s the key to substantive change.
If a CIO, and their leadership team, merely finds more typical “busy work” to keep them occupied then this is clearly not progress.
In contrast, those that are very decisive and invest in business impact-oriented activity will succeed. Perhaps asking the right questions will expose why “cost reduction is still king.”
CEO’s Perspective: if you ask your CIO for innovation, and even after the gift of time, all they come back with is “more of the same” then you need to raise the talent bar of expectations for that role.
2 egoodnes September 25, 2008 at 8:19 am
David thanks for the response.
The conversations with CIOs and their leadership team were meant simply to understand if any of the current market pressures would lead them to recharacterize the focus of their original strategy. It was not a formal survey. They were ad hoc and quite informal.
Your ‘CEO Perspective’ is interesting because it is contrary to what was yielded in these conversations. Of the 15 companies I spoke with, 10 were directed by the CEO to make cost reduction the priority.
I guess one person’s busy-work is another’s business-impact-oriented activity…
3 David, Business Technology Roundtable October 6, 2008 at 5:01 pm
Eric,understood, the focal point of cost-reduction is part of every CIO’s agenda — especially given the current economic environment.
That said, I recall that in the last related CEO survey — sponsored by The Economist — they identified that the reason that many CIOs are “displaced” was that over time they’re not able to move beyond the minimum requirements for the role, or find the time to contribute to forward-looking business-impact activity.
According to the CEOs interviewed, it was common that their CIOs invest 80 percent of their personal time in routine operations and management issues, and 20 percent on strategic business impact. The CEOs apparently wanted to flip that model.
Again, it just occurred to me that *perhaps* a different line of questioning might expose a different set of otherwise hidden reasons.