by Frank Ridder | April 17, 2013 | Comments Off
By 2025, up to 75 percent of an organization’s workforce will come from what sociologists call Generation Y. Sourcing executives need to start now to plan for changes coming from the Generation Y who has different habits and requirements when it comes to technology and services, as well as their way of working.
In my latest research note entitled “Generation Y Will Reinvent Outsourcing” I reported that Generation Y has a higher appetite to look externally when seeking a new IT solution. To leverage those solutions, they are willing to take some risks and to give some trust to the quality of an externally provided service such as the cloud. This can impose risk to the organization; risks that have to be balanced with end-user desire together with real business benefits such as speed and flexibility. Understanding this new balance between demand and business risks/benefits is, more than ever, paramount to the success of sourcing organizations. Sourcing organizations have to get insights from Generation Y and include them in their governance models.
Generation Y is also changing old paradigms. It turns the make versus buy trend around by 180 degrees – it looks first into what is available on the market before deciding to build anything, especially with highly commoditized services. Today’s sourcing executives have to prepare a strategic approach that allows that shift to happen seamlessly and with optimized risk.
Sourcing managers and contract managers should understand that Generation Y values different things and has a higher degree of trust toward what external sources can deliver. While the demand for low-cost and high-quality services is not any different from today’s purchasing attributes, the demand for speed is much higher with today’s impatient Generation Y workers, and customer experience is joining the list of key purchasing attributes. This requires new evaluation criteria and a new set of information to collect during request for proposal phases. This also increases the importance of the “try before you buy” purchasing approach.
I do not expect Generation Y impacts will come overnight, and organizations have up to 12 years before 75 percent of their workforce will come from this generation. However, it is crucial for organizations to understand their own impact timeline so that they can prepare, plan and start implementing initiatives early enough.
I will discuss this topic in more detail and where outsourcing meets the Nexus of Forces at the Gartner CIO & IT Executive Summit 2013, taking place from June 17-18, in Frankfurt, Germany. For more information on the Summit please visit http://www.gartner.com/technology/summits/emea/cio-executive/. Information from the Summit will be shared on Twitter at http://twitter.com/Gartner_inc using #GartnerCIO.
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by Frank Ridder | October 4, 2012 | 2 Comments
Buyers: Cloud has an Offering Issue!
Over the weekend I was reading some articles on the cloud. And there was not only one graphic showing a huge number of cloud service provider logos with an as huge number of offerings – almost all of them did. These graphics grow and grow over the years, so we move into a great world of huge choice. Do we? Well, I guess not so soon. Because what I also did over the weekend was summarizing the results of two cloud workshops I did with buyers at our US and Brazil summits (Topic: How to calculate a cloud business case). One part of those workshops was a quick reality check survey, and that reality check showed me that the number of cloud offering is not at all at a satisfactory level today:
The cloud provider market still needs to evolve a lot. The only number above 6 was the SaaS number in Brazil, saying that 7 out of 10 buyers are satisfied with the number of offerings out there. But in some categories not even half of the buyers are happy with what the market provides. The market needs more choice – buyers fear lock-in and the ability to benchmark and negotiate.
60% of the workshop participants in both regions buy cloud services because they provide better functionality compared to their current solution (50% list cost as a key driver). This means that buyers appreciate the innovation coming from the cloud. And while innovation in tradition outsourcing relationships is mostly something buyers need to demand and push for, it is a “by design” thing in the cloud. Competition in the highly industrialized world is requiring providers to innovate – that is why choice (competition) is important for buyers of cloud services.
Beware the too positive messages – there is a way to go!
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by Frank Ridder | September 14, 2012 | 5 Comments
When Eric Schmidt, Google CEO, started a few years back to tell everyone a focus on the cloud, the term was not defined (until then it was a regularly used symbol on network charts). That was a great moment for many marketers in the industry. Finally someone came up with a cool non-IT word into the IT world. And those marketers started to tell cloud stories – in all flavors, matching their own organizations portfolio and not a concept – as there was none. And because of these different flavors of stories, the market got confused about what cloud really means (this confusion is still there).
Now – there is high interest in the cloud and cloud starts to deliver good value to organizations – but the term itself is too broad to survive, it is connected to too many values, it means too many things to too many people. This to me could result in a potential sunset for the term cloud – in fact some service provider’s marketers plan already campaigns beyond the cloud. Maybe it is now the right time to think about the value cloud generates; and describe those with new terms and offerings.
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by Frank Ridder | August 28, 2012 | Comments Off
The Olympics in London are over and from an outside view (I was not there in person) – it was a really fantastic event. Not being there means you get all information from the Internet or the TV. And beside all the great news about records, medals, teamwork and fairness, I also read about the dark side of this sports event – mostly about doping.
Many bloggers and journalists elaborated potential reasons for doping. There are many, but one reason seems to be always on the list: the limitations of a human body. The pressure is high to win, and to create another world record, to be faster, to jump higher than anyone before. And the best training in the world, the best food and the best conditions are often not enough – and people look for doping.
This reminded me on sourcing organizations that do sourcing for many years and that optimize their way of sourcing constantly – it seems to be very hard to become better. Every year we ask sourcing organizations if they would classify themselves as master, intermediate, practitioner or beginner of sourcing. Just look at the number of organizations that say they are master: 2011-6%, 2010-9%, 2019-10%, 2008-5% and 2007-10%. It is safe to say that since 5 years they are stuck – they do not get any better compared to the market evolution.
I am sure these sourcing organizations could benefit from some doping. Now, in sourcing we only want good doping (good initiatives that lead to positive results):
Improve your general physics (beef up your outsourcing competencies): It is important that organizations have the right skills and the appropriate level of sourcing competency. Even for masters there is a “good enough”, but this is only connected to the business outcome of the sourcing eco system. Sourcing strategy processes need to run more frequent, as the market changes rapidly and sourcing management needs to be prepared to handle a larger number of vendors (see my previous blog). Training and investment in people, processes and technology is a good way to spend doping money.
Improve your specific abilities (the way you handle the deals): Once organizations have a good strategy and management approach in place, they can focus on improving their outsourcing deals. They should implement business outcome measures, updating contracts so that they support innovation, continuous improvement and relationship evolution. Also the vendor selection process could benefit from some doping, as it needs to consider increasingly services from non-traditional vendors. Learning from best practices, external advice or consultancy, improving deal governance are good ways here to spend doping money.
But – identifying the starting point and the roadmap (what organizations want to improve to) is not easy. For that, organizations could spend a few days on one of our outsourcing summits (the US Outsourcing Summit in Orlando in September or the European Outsourcing Summit in London in October) to catch the latest evolutions and best practices from the outsourcing market.
That at least would be a totally legal doping option.
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by Frank Ridder | August 15, 2012 | Comments Off
… is the average number of service providers on an IT value chain (global sourcing survey). No wonder why we discuss vendor consolidation methods so often. To me this is evidence the cloud like solutions enter IT value chains more and more. Various end-2-end solutions now play a role in IT, many of them addressing only a small portion of an organizations solution demand.
But cloud is new compared to the traditional sourcing market. The adoption rate is growing and many organizations find benefits here and there with their purchased cloud solutions. Sounds good – no reason to change – really? No.
As companies enjoy some of the benefits of the cloud, they realize that having many cloud service providers requires something they mostly don’t have. A conductor; thinking about each solution being a great musician with great individual performance, they all together do not necessarily make a well performing orchestra. Sure this is an old thought – but unfortunately it is more current than ever. Cloud service providers are focused on themselves – getting the own solution good and optimized – that is the norm. But how those solutions fit in a broader IT shop is not their business.
Cloud returns with its benefits a problem, that in the past decade (pre-cloud, fewer providers) was not a super big issue. And many organizations face that – and ask for help. There are three basic questions we always discuss:
- Do I need to be the conductor? Or can I outsource it?
- If outsourced, is it neutral enough? If I outsource it, can I give that work to one of my existing suppliers, or do I need yet-another-one?
- What is the long term picture? If cloud is here to stay, can I avoid being an integrator myself in the long run?
One thing is clear: If organizations want the ultimate output of their IT value chain, they need to master the integration layer, wither themselves or with an outsourcer. Reaping benefits from complex vendor eco-systems becomes a very difficult activity and is a skill that is high in demand from sourcing organizations.
Next to a solid sourcing strategy, organizations need a solid sourcing management strategy to make a 31-environment efficient. Both takes time and doesn’t come over night, so I recommend that organizations observing a trend towards more service providers in their organization, start preparing for the after-signature time early.
There is no such thing like a “standard governance method” across cloud service provider and there will likely never be one.
Category: Cloud IT Governance sourcing Tags: Cloud, sourcing, vendor management
by Frank Ridder | July 6, 2012 | 4 Comments
Social Media is not my home base – I am a user of it – And I love it. Therefore I am supporting all people and opinions that vote for social media in enterprise organizations.
Using a few tools myself and discussing this topic with friends who work in other technology and non-technology companies, it becomes clear that there is a long way to go before organizations can leverage the full power of social media.
Most organizations that I know and that leverage social media for collaboration purposes. But powerful collaboration is inclusive and does not leave people behind. For example if you use a discussion board in your group to discuss thoughts and ideas, it is only producing super great results if all members of the group participate. And here in my opinion we can find two key reasons for slow adoption of social media in enterprises.
Adding instead of replacing: Why are not all the group members using the collaboration platform? Because it comes on top – it often gets implemented and employees can use it but at the same time have to feed the old channels as well. So if I am 100% busy (or 120% as we all think we are) there needs to be a very good reason to use something in addition. Of course, these new tools are nice and can often save a lot of time but only if everyone is on them – so adding instead of replacing might not be an ideal approach today.
Motivation: Now, if replacing is not an option, because a large part of the workforce doesn’t trust that social media can improve things and fear large inefficiencies (big problem in my friend’s industrial technology company) then employees need to be motivated to try social media as add-on. Waiting – as time will increase the level of self-motivation for this (just waiting for enough Generation-Y and Generation-Z employees entering the company), putting measures on people and ding them for not using the great new social media tools or celebrating a Social-Media-Employee-Of-The-Month are some of the ideas we discussed (me and my friends). But I guess all of that deserves more thoughts.
Here is my favorite idea: Let’s implement a Social Media day (monthly, bi-weekly, weekly) – on that day we cut access to traditional collaboration channels (phone, email) and only allow the usage of Social Media platforms. Maybe that helps to overcome some of the hesitance and skepticism which is still out there. And maybe it will proof to more people how valuable social media can be (I think I already said that I love these tools ).
Category: Cloud sourcing Tags: Social Media
by Frank Ridder | June 28, 2012 | 3 Comments
I just got back the results from our I Services Sourcing survey. Interesting fact number one is that almost three quarters of respondents came from business functions, 44% C-level. Keen to see the difference to more IT weighted surveys; I quickly flipped through the pages. Here just very few findings as we will publish more details in the upcoming weeks.
Order: Looking to traditional models, the lowest numbers of companies have outsourced their business process. More organizations outsourced their infrastructure and most companies outsourced their application (but the number is very close to the infrastructure number. Overall the number of organizations that outsource increased, one key driver are utility services.
Cloud: The number of organizations purchasing private cloud services is twice as high as the number of buyers that invested in public cloud services.
Offshore: The dominance of India is shrinking, in fact not just other countries in Asia become more attractive, also countries in Europe and the Americas.
Number: The number of providers is now double digit in average across all services lines (business process, application and infrastructure services.
Maturity: We asked many questions to understand the maturity of sourcing departments in organizations. For example there seems to be a way to go for the negotiation process. Other areas are not much better.
Vendor Management: Next to Cloud this is one of the hottest topics in the outsourcing market these days. We captured some interesting data on where vendor managers spend most of their time.
Why Outsourcing: Well, cost is still the most dominating factor. But a higher share of business and C-level respondents brought some interesting followers.
Stay tuned – we will publish the official results soon.
Category: Cloud sourcing Strategic Planning Vendor Management Tags:
by Frank Ridder | April 11, 2011 | Comments Off
It’s out! We just published a spotlight on Cloud Sourcing. This research project includes 14 research notes covering the sourcing strategy and the contracting areas. The Cloud Sourcing Special Report discusses that exciting opportunities and costly challenges which buyers face considering services from the cloud. It is written for enterprises clients as well as service providers to understand these changes and develop realistic cloud sourcing strategies and contracts that can reduce risk.
There is also a nice audio piece from my colleague Alexa Bona, addressing the negotiation side of cloud sourcing deals. Alexa and I co-authored five notes that are part of this project covering especially the contracting side.
We also included some research around industrialized Low-Cost Services, a theme that we maintain since last year’s sourcing conference series and that addresses the fact that the continuous cost pressure in IT will lead to something that can be directly compared to the low cost airline industry.
Category: Cloud sourcing Tags:
by Frank Ridder | June 24, 2010 | 2 Comments
There are not much topics that are discussed as heavily as cloud computing these days. Many organizations and service providers talk about clouds, but they often mean very different things. In my discussions with sourcing executives around Europe I have learned that there is one key question that occupies their minds:
Where is the business value for me?
This is a question that has at the same time “many“ and “no” answers. Many answers come from marketing and sales people of cloud solution providers: According to them, cloud solutions are flexible, high quality and cost effective. It sounds like a great alternative for sourcing executives. But key questions remain unanswered, e.g. “Where are the real risks?” and “How to I integrate cloud services?”. Help and answers do not come from the cloud service providers. Processes, workflows, behavior and expectations of buyers have to adapted. This is often huge and long lasting effort. Therefore it is very hard for the buyers to understand the net value coming from the cloud.
In fact, I am writing this blog in train back from an event where I met 18 CIO’s – none of them believes that they can find real business value in the cloud today. They rather leverage utility solutions (often called cloud as well) as they are apparently more transparent, less risky and easier to integrate.
Considering the investment into cloud services that we observe, it is likely that the picture changes over time. It has to – if cloud providers want to sell into larger enterprise organizations. Until then, utilities seems to be a great alternative.
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by Frank Ridder | May 3, 2010 | 1 Comment
During 2009 and the beginning of 2010 – the economic rollercoaster – many organizations looked into their vendor relationships. Well they said they do, but in reality they only looked into the price they have to pay for the service they get. Goal: Getting the same for less, or worse, getting less for far less, accepting a drop in service quality. Short sighted thinking as a survival act. It is already clear that the changes made under these specific circumstances will lead to further necessary changes once the economic pendulum returns.
It was those organizations experiencing problems that had established rigid, inflexible relationships with their vendors; tactical relationships (do just what I asked you to do). Quickly changing relationships like this is very though, and the possible scope of those changes is very limited. But good vendor relationships should work in good times as well as in bad times. And as those come and go and every time in a different shape, vendor relationships have to be open and flexible, strategic relationships (help me facing my challenges).
In well managed relationships between vendors and organizations, the economic challenges were faced collaboratively with a short term and a long term thought; allowing changes that helped not just meeting the short term requirements (cutting cost) but also preparing for the next crisis (increasing variability). This is how vendors reach trusted advisor status – and long term success.
The recent crisis has shown – the Ying-Yang of great relationships between a vendor and an enterprise is based on strategic thinking – not tactical thinking. Vendors that aim for long term trusted advisor level relationships have to say good-bye to multi year steady revenue guarantees. They need to allow prepare for more flexibility. And Enterprises have to implement strategic vendor management for that – facilitating a much better alignment between demand and supply.
Category: sourcing Vendor Management Tags: