- Category: February 2011
In 2011, the emerging Asian enterprise customer will be actively enhancing its competitive position, according to IDC’s latest report on “IDC Asia/Pacific (Excluding Japan) IT Services Top 10 Predictions: ROI-Led Transformation in the Emerging Asia Enterprise to Drive IT Services Spend”.
As a result, IDC expects CEOs of these organizations to drive transformative business projects where IT will be a key enabling factor and successful IT delivery essential to achieving desired return on investment (ROI).
To address this strategic goal, IDC expects CIOs to exhibit an increased propensity to leverage external service providers, including alternative service delivery models, as viable alternatives to the use of internal IT, traditional outsourcing and managed services contracts. Increased ownership of capital expenditure (CAPEX) and operating expenditure (OPEX) budgets as well as the expansion of IT and business services sourcing will drive a change in the role of the CIO, the structure of the IT organization, and the profile of IT staff within the organization.
Mayur Sahni, Senior Analyst, IT Services for IDC Asia/Pacific says, "The increased responsibility of the CIO office to be more accountable for business outcomes will lead to a fundamental shift in focus from technical to commercial facets of IT operations. The ongoing trend to use more externally sourced services will bring the need for a high level of commercial understanding across contract management, service-level agreement (SLA) management and vendor management. Consequently, CIOs will need to reassess the capabilities of their current staff with a view to building an IT organization for the future wherein resource allocation towards sourcing and commercial management, customer (internal and external) service and IT management will be top of mind.”
Drawing from the latest IDC research and internal brainstorming sessions amongst IDC's regional and country analysts, the following are the top 10 IT Services Predictions for 2011. These represent major trends with either the most significant financial impact or long-term market impact across the APEJ region and IDC has them grouped under "New Buying Behavior", "New Delivery Models", "New Competitors" and "New Technology Shifts".
New Buying Behavior
ROI-Led Transformation Will Push the CIO to New Levels in the Business Hierarchy
IDC believes that ROI-led transformative business projects will eventually move the CIO up the corporate hierarchy. Transformative initiatives will bring about changes across the infrastructure and application layer of an organization’s IT built-up, create a shift in services sourcing and internal IT resource utilization as well as necessitate a re-assessment of vendor engagement models. The CIO will inevitably be tasked with a higher level of accountability and responsibility for driving successful outcome of these initiatives.
CSOs to Set Standards for Data Governance
In 2011, the CSO will become a de-facto entity in large organizations. In this role, the CSO needs to secure the enterprise environment externally and internally from threats such as security breaches or infrastructure outages to ensure business continuity. Business outages and security incidents in 2010 have led to a realization that a downturn can impact brand equity in a sensitive customer market. Hence, in 2011, governance and data protection will be areas of focus and will also manifest in vendor SLAs. IDC believes that CSOs will be demanding for SLAs to include business outcomes-based matrices instead of just technical parameters.
New Delivery Models
Federation of Internal and External Services Will Be Essential for Cloud ROI and Ongoing Market Growth
The ability to integrate, or federate, applications or services from the cloud with applications or services from an in-house IT environment or with services from another cloud service provider (SP) will be a key enabler or inhibitor for enterprise cloud adoption. Most businesses in Asia do not have significant experience toward adoption of cloud solutions and even fewer have a well-placed cloud adoption strategy. Businesses that do not conduct a robust assessment of their cloud adoption strategy will likely to find it difficult to achieve their desired ROI.
Business as a Service: The Next Level of Cloud
The existing breadth of public cloud services available are mainly centered on the infrastructure and application layer which are in the lower end of the value chain and have a high risk of being commoditized. This prospect of a quickly commoditizing market is fuelling the push for public cloud services to move up the value chain toward business oriented services that not only add more value but are also in less danger of being commoditized. The move will not only lead to the maturing of the cloud stack but also, change discussions between vendors and their customers from cost-savings to service delivery capabilities and their associated business value.
Ownership/Accountability to Drive Cloud SLAs
In the early days of cloud computing adoption, SLAs for public cloud services were very basic and customers accepted loosely defined service commitments from vendors. IDC observes that in 2009-2010, there was a push toward aggressive SLA commitments due to the increasing adoption of platform-as-a-service (PaaS), software-as-a-service (SaaS), infrastructure-as-a-service (IaaS) and the entry of telcos. As a result, in order to be competitive, service providers had to be committed to drive up SLA levels. As we enter 2011, the use of cloud services is now a common choice for regional CIOs. IDC predicts that cloud SLAs will evolve again further to recognize the federated cloud and in-house service environment. CIOs will seek to apply their IT governance processes to multiple external services and will exhibit demand for explicit SLAs that describe the boundaries of vendor responsibility for that service, the measurement metrics, and the penalties for non-achievement.
New Competitors Dynamics
Vendor-Partner Polarization in Datacenter Space
Ongoing adoption of virtualization and private cloud solutions is viewed by vendors and channels alike as a significant growth driver for their services business. However, with CIOs raising the bar for vendor selection, technology vendors and their channels now have to showcase capabilities to drive technical discussions at the CIO level. For channel partners, this fundamental shift to services has been slow to occur. Meanwhile, technology vendors are rolling out their end-to-end services engagement model to maintain the brand position in front of the CIO. Due to a conflict of interest, channels have two options if they want to continue to be in the game. They can either build their capabilities and partner closely with a vendor or, be a reseller of services. In contrast, IDC foresees that technology players will turn to acquiring either their own or competitors’ channel partners that have strong services capabilities and geographical reach.
Non-traditional Infrastructure Outsourcers to Ramp up Their Presence
From a competitive perspective, IDC expects 2011 to be the year when non-traditional IT services players (in particular, the Indian-based players, telcos and even niche cloud players) will cement their position in the infrastructure outsourcing marketplace. According to IDC's contracts database in 2011, US$2.61 billion worth of infrastructure led outsourcing contracts will be up for renewal in APEJ, of which 60% will be held by global IT SPs. IDC expects that there will be a shake-down as at least 30% of these renewals will be won by non-traditional players. This shift in sourcing, delivery, and pricing models will be in-line with the CIOs ROI-led transformation agenda, and the large IT SPs that are unable to shift their approach accordingly will find themselves under significant threat from these players.
New Technology Shifts
Intelligent X 2.0 Will Drive IT Services Spending in Emerging Industries
A key promising area for project oriented services will be Intelligent X, which in 2010 witnessed projects initiated across Australia, China, India, South Korea and some parts of Southeast Asia. The scale and budgets of Intelligent X projects are large as well as complex and therefore, a compelling business case or a legislative requirement will be essential for these projects to be adopted. In addition, while not all utilities and national or state governments have the financial capacity or resources to undertake such engagements, adoption of public/private partnership (PPPs) models to deliver these services for the public sector, or the use of standardized cloud-delivered services for specific industry needs, will gain traction in 2011.
The Appliance Will Threaten Data Warehousing Services Spend
Emergence of data warehouse appliances has gained significant traction with CIOs for a few reasons - it promises simplification, performance and lower cost of ownership. Since these appliances come preconfigured, the days of long-term data warehousing projects look to be numbered. In this context, IDC predicts that the data warehousing appliance market will cannibalize services spend but significant opportunities will continue to exist in the advanced analytics space.
Adoption of Collaboration and Socialytic Apps to Drive IT Services Spend
Adoption of collaboration and socialytic applications will witness increased level of traction from customers in 2011. The fusion of social or collaboration software and analytics with packaged applications will lead to popular applications being socialytic in nature. In the near term, enhancements across ERP, SCM, HRM and CRM applications that include socialytic features hold the promise of delivering external and internal collaboration with real-time business intelligence. In the long term, this trend has the potential to redefine the application landscape with inclusion of “mobility” features. The market will also be more innovative in its service delivery models. For example, socialytic applications may potentially be delivered "as-a-service". This will also have an impact on next generation service practices that vendors are building out, and drive premium for vendors' ability to link development and operations teams since the applications effectively run in the cloud.