From Sand Hill to Signal Hill
The Startup Climate in 2014
Chris Howard
VP, Distinguished Analyst
Chief of Research
@chrishoward88
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Torrential Changes and a Confidence Crisis
Will Reshape the Service Provider Landscape
"My business and its IT organization are
being engulfed by a torrent of digital
opportunities. We cannot respond in a
timely fashion, and this threatens the
success of the business and the credibility
of the IT organization."
51%
Agree
n = 2,339
Note: Excerpt from "Taming the Digital Dragon: The 2014 CIO Agenda" (G261080).
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
70%
CIOs will change their
technology and sourcing
relationships in the next 2 to 3
years for a variety of reasons.
46%
Need to work with new
categories of partners, e.g.,
Mobility
Big Data
Cloud Digital Agency
Analytics Social
CEO
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
2
CEO
3
CEO
4
CIO
2014 CIO Spending Priorities (new $)
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
5
CIOs' Top Technology Priorities in 2014
Continue to Bridge Old and New Worlds
Ranking Based on How Many CIOs Cited Each
as a Top-Three New Spending Priority for 2014
BI/Analytics
Infrastructure and Data Center
Mobile
ERP
Cloud
Networking, Voice and Data Comms.
Digitalization/Digital Marketing
Security
Industry-Specific Applications
CRM
Legacy Modernization
Collaboration
n = 2,339
Note: Excerpt from "Taming the Digital Dragon: The 2014 CIO Agenda" (G261080).
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
1
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© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Your Cloud Use is Growing, but by 2016,
It Will Become the Bulk of New IT Spend
From Then to Now: Cloud Services in Use (by Organization Size)
90%
86%
87%
86%
SaaS
PaaS
86%
77%
43%
72%
40%
38%
35%
76%
40%
Today
2012
500 to 999
Today
2012
47%
43%
41%
88%
34%
122013
Months
82%
27%
78%
38%
31%
122013
Months
1,000 to 2,499
© 2014 Gartner,Gartner,
Inc. and/or its affiliates.
All rights
reserved.
Source:
Future
of IT
Survey, November 2012
Today
2012
76%
122013
Months
2,499 to 4,999
Today
2012
122013
Months
5,000 or more
IaaS
Reviewing Your Potential Route(s)
to the Cloud and Beyond
2014 and
Beyond
?
?
?
Replace
Multienterprise
Rebuild
Relink/
Recode
SaaS
BPaaS
PaaS
Rehost
IaaS
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Reimagine
Security & Brokerage
… And Embrace Intermediaries: Become or
Leverage a CSB (Cloud Services Brokerage)
Aggregation
Brokerage
Three Primary Roles
100%
75%
Definition:
CSB is composed of
three primary roles in which
an intermediary adds value
to one or more cloud services
on behalf of consumers of
those services.
50%
25%
Integration
Brokerage
See "Cloud Services Brokerage Is Dominated by Three Primary Roles," G00226509
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Customization
Brokerage
Providers of CSB compete
on the relative strengths
of the three CSB roles
• Are a brokerage
You • Enable brokerage
Either • Leverage brokerage
Philadelphia
patient-centered solutions:
Health IT,
mobile health processes
Boston
Life Sciences, Health,
IT, Green IT
NYC: Digital Media
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
11
Government Perspectives
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
12
Gov’t: Strategic Planning Assumptions
•
By 2017, as many as 35% of government shared-service organizations will
be managed by private-sector companies.
•
By 2017, public cloud offerings will grow to account for more than 25% of
government business services in domains other than national defense and
security.
•
By 2017, more than 60% of government organizations with a CIO and a
chief digital officer will eliminate one of those roles.
•
By 2017, more than 60% of government open data programs that do not
effectively use open data internally will be downscaled or discontinued.
•
By 2016, at least 25% of government software development positions will
be eliminated to fund the hiring of business intelligence and data analysts.
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
13
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
14
Government: Cloud
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
15
The Internet of Things: When Objects
Anticipate and Negotiate
The Internet of things is already here:
• Connections 2020: >230 billion permanent and intermittent
• Dropping costs: Audio, video, GPR, Wi-Fi
Connected devices everywhere:
• Cameras and microphones widely deployed
• Remote sensing of objects and environment
• Building and infrastructure management
More and more applications:
• Crime detection and prevention
• Public services via connected products
Smart Public Health Clinics
Smart Cities
M
I
Smart Emergency Response
C © 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Digital Differences
E-government
Digital government
Service centric
Data centric
Give staff more tools
Give citizens the tools
Optimize internal
processes
Redesign customer
centric processes
All services included
equally
High-value add services
first
Challenged to
integrate front and
back-office
Change management
and governance
challenges
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
IT Services Strategies
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
18
Key Issues Shaping IT Services Strategies
• In the face of digital business transformation,
where is the IT services market headed?
• What are the essential factors for building
winning service portfolios in:
- Business process services?
- Application services?
- Infrastructure services?
• How can IT services providers achieve
sustainable and profitable growth?
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
IT Services Market, 2014 and Beyond:
Keys to Thriving During Unprecedented Change
Industrialized
Outcome-based
Consumption
Capabilities
Access
New
World
Social
Mobile
Information
Cloud
Contracted
for Effort
Old
World
Labor-Based
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Dedicated Assets
The IT services market
will be reshaped by the
consumerization and digital
business transformation
opportunities. Winning
providers will find unexpected
sources of growth helping
clients exploit such
opportunities, enabled by the
Nexus of Forces.
Read the full research
document: "Agenda
Overview for the IT Services
Market, 2014" (G00259488)
Who’s the buyer?
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
21
Service Providers Must Expand Their
Sphere of Influence and Impact
38% of IT Spending Is Decentralized; 62% Is Centralized
Legal/Regulatory/
Other 9% Compliance, 1%
Customer Service and
Experience, 3%
Human Resources, 3%
Supply Chain/Logistics,
3%
Sales, 3%
Marketing and
Communications, 4%
CFO/Finance, 4%
Centrally Managed IT
Spending
62%
Chief Operating
Officer/Operations
8%
Note: Excerpt from "IT Metrics: A Critical Evaluation of Decentralized IT Spending and Digital Enterprise Readiness" (G00252797).
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
23
Cloud
Privacy and Security
Awareness
Cognitive Automation
Anti-Globalization
Policies and
Protectionism
IoT
Gen Y Leaders
Analytics
Economic Fluctuations
and Rise of Emerged
Emerging Markets
Mobile
Social
Portfolio
Rationalization
Business Buying
Center Shift
Just-In-Time Service
Supply Chain Ecosystems
Crowd Sourcing
Consumerization
Digital Business
Transformation
Reducing Labor
Arbitrage Advantage
Magnitude of impact
Business OutcomeBased Value and
Pricing Models
Re-Insourcing
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Disruptive New
Competitor Types
Top Three Recommendations for IT
Services Market Participants
IT Budget
Digital
Business
Differentiated
Value
Nexus
of Forces
IT Services Market
Opportunity
Need for
Speed
Innovation
Crisis
Competitive
Industrialization Rivalry
Substitutes
Driver
Constraint
1. Target new buying centers through the audacity of visionary thinking.
2. Articulate value in terms of business outcomes and KPI attainment.
3. Industrialize and productize, but don't lose sight of service value.
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
IT Services Research Road Map
• "Competitive Landscape: Cloud-Related
Consulting, Implementation and
Management Services" (G00248611)
• "Vendor Survey Analysis: Profitability Will
Be Essential for IT Services Provider
Survival Through 2015" (G00258524)
• "How Mobility Impacts and Challenges IT
Services Providers to Create Innovative
Business Models" (G00248608)
• "Information Scale Drives Market
Opportunity for IT Services Providers"
(G00248605)
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
• Exploring the Digital Business
Transformation Service Provider
Competitive Landscape
• Identifying How to Enhance Business
Buying Center Coverage
• Accelerating Business Outcomes in
Service Value Articulation
• Learning How Aggressive Public Cloud
Services Adopters are Different from
Everyone Else, and What it Means to
You
• Developing Services Pricing Models of
the Future
Business Process Services, 2014
Industry Specialization, Process Automation and Analytics
Digital Enterprise
Analytics
Cloud
Services
DESTINATION
Business Outcomes
Client Organizational Efficiency
and Effectiveness
Via better, faster, less expensive
strategies and operations
Customized
Service
Immature and mature clients
Industrialized
Service
Automation
Software
Assets
Read the full research document:
"Agenda Overview for Business
Process Services, 2014" (G00248926)
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Technology
Platform
Market Analysis for Business Process Services
Market Drivers
Market Inhibitors
Business buyers drive new approaches to
designing and supporting business process
including buying BPaaS
Analytics and knowledge insight are
Continued industrialization and
commoditization of delivery
Limited availability of business process
expertise at an optimal price for skill
embedded in services
Providers drive for high margins results in low
Digital business and the IoT activities
risk and limited investments
Blending remote delivery with automation and
assets
Market Opportunities
Market Threats
Platforms and solutions for selected market
segments
Alternative providers/new entrants
Service commoditization
Increased market from new business services Shortage of critical skills
supporting the digital economy and the IoT
Insufficient investment funds for new services
Vertical specific offerings
or potential differentiation
Regulation and risk management services
Increasing Impact
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Decreasing Impact
Continuing Impact
Artificial
Intelligence
Analytics
Digital
Forensic
Investigation
Corporate Social
Responsibility
Self-Service
Smart Cities
Risk
Management
Digitalization
Asset-Based
Consulting
Anti-Industrialization
Inertia
Mobile
Process
Enhancement
Technologies
and Services
Dashboards
Green and Sustainability
Social
Regulations
Robots
Generations X,
Y and Z
Platform BPO
Demand for Cost Savings
Better Process Improvement
Verticalization
BPaaS
Strategic
Partnerships
Total Cost of
Process
Consumerization of
Business Process
Increased
Competition
Provider
Consolidation
Hybrid SharedService Centers
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Business
Outcome
Pricing
Novice and
Advanced
Buyers
Industrialization
StalkingHorse
Entrants
Key Business Process Service
Predictions
"By 2017, cognitive artificial intelligence
technology will integrate into business
processes and will replace 30% of
business consulting resources."
Access
"By 2017, 75% of BPO deals will combine
software as a service and business process
as a service elements."
Note: Excerpts from "Predicts 2014: Talent and Technology Will Drive Business Process Consulting and Outsourcing Services "
(G00248937).
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Top Three Recommendations for
Business Process Service Providers
Processes
Modernization
Digital Change
and Regulatory
compliance
Commoditization
of Labor
Arbitrage
PETS and
Automation
Business Process
Service Provider
Success
Analytical
Insights
End-to-End
Process Redesign
Sustainability of
Differentiation
Verticalized
Solutions
Driver
Constraint
1. Instill confidence with prospects via excellent vertical insights.
2. Leverage process enhancement technologies and services, and assets: Put
together a dedicated team to build and promote repeatable tools.
3. Exploit and include analytics in every existing BPS client and new BPS deal.
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Business Process Service Research
Road Map
• "SWOT: Accenture, Business Consulting,
Worldwide" (G00248936)
• "Market Trends: Demonstrating
Significant Process Improvements Is
Now the Key Imperative in BPO"
(G00248921)
• "Competitive Landscape: Strategic
Sourcing and Procurement BPO Heat
Up" (G00248919)
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
• Market Trends: Business Consulting
• Exploiting Best Practices to Build Strong
BPO Sales Presentations
• Developing BPO Maturity Models in
Customer Management, Finance and
Accounting and Human Resources
• Forecasting BPO and Consulting Market
Growth
• Investigating Convergence of BPO and
ITO Sales Models
Application Services: Business Buying Centers
and Solutions Drive Profits and Growth
Shifting Buying Centers
IT
Buyer
Business
Buyer
Strategize
LaborCentric
Delivery
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Application
Modernization
New
Applications
Manage
Implement
Shifting Delivery Models
Application Solutions
Industrialized
Delivery Assets
Adaptable Components
and Accelerators
Integrated
Platforms
Market Analysis for Application Services
Market Drivers
Market Inhibitors
Business buyer demand for speed, agility,
innovation and impact
Limited availability of business and process
expertise
Shift from labor to solutions and platforms
that are specific to business buyer needs
Continued industrialization and competitive
price pressure
Buyers expecting analytics and mobility to be
Providers' drive for high margins results in
embedded within all applications
low risk and limited investments
Market Opportunities
Market Threats
Platforms and solutions for selected sectors
Alternative providers/new entrants
Increased wallet share from full life cycle
services and portfolio rationalization
Service commoditization
Onshore and nearshore delivery for agile
based business solutions
Digital business enablement integrating
Cannibalizing transition to IP-based solutions
and "as a service" models
Insufficient investment funds for new services
or potential differentiation
processes, technology and analytics
Increasing Impact
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Decreasing Impact
Continuing Impact
Digital Enterprise
Regulatory
Requirements
SaaS/BPaaS
Coalesce
Machine to Machine,
Social and Sensors
European
Recovery
Crowdsourcing
Cloud-Based
Testing
Globally Connected
Enterprise
Millennial Users
Analytics
IT Skills Gap
Application
Modernization
Analytic and
Big Data Services
Margin and Growth
Pressures
Full Life Cycle
Services Approach
Software/IP Expansion
by Service Providers
Onshore
Delivery
Provider Growth
Through Acquisitions
Magnitude of impact
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Agile
Development
Business Buyer
Funds Applications
Business
Solutions
Key Application Service Predictions
By 2018, 20% of spending on new
technologies will be on fully integrated
as-a-service platform solutions offered
by IT services providers.
Through 2017, buyers' utilization of
U.S. onshore low-cost delivery for
application services will increase by
20%.
Note: Excerpts from "Predicts 2014: Application Services' Alignment With Business Drivers Remains a Future Priority" (G00248708).
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Top Three Recommendations for
Application Service Providers
Cost-Focused
Buyer Behavior
Modernization
Commoditization
Mobility and
Analytics
Application
Service Provider
Success
Business
Buyers
Limited
Budgets
Hypercompetition
Digital
Transformation
Driver
1. Invest in industrialized assets, vertical solutions and platforms
Constraint
to enhance profitability.
2. Grow relationships with business buyers to expand in existing accounts.
3. Invest in new capabilities required to capitalize on the emerging digital
business opportunities.
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Application Service Research Road Map
• "Market Insight: Integrated Platform
Solutions Are the Next Frontier for IT
Services Providers" (G00253679)
• Prescriptive Analytics Embedded Within
Solutions as a Competitive Differentiator
• Market Opportunity Size and Growth for
Enterprise Application Services
• "Market Trends: How to Successfully
Navigate Intense Competition in Application
• Identifying How Small Application Service
Testing Services" (G00252620)
Providers Can Penetrate Mature Markets
• "Market Insight: Vertical-Specific Solutions
• Exploring the Customer Services
Shift Profitability of Application Service
Application Implementation Provider
Providers" (G00248719)
Landscape
• "Nexus of Forces: How Mobility Impacts
• Analysis of How Providers Adapt and
and Challenges IT Services Providers to
Organize to Address Digital
Create Innovative Business Models"
Transformation
(G00248608)
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Infrastructure Services, 2014:
Promote Your Value; Prevent Their Pain; Productize Your Portfolio!
Commoditization is driving
the need for differentiation
Value promotion and
prevention-based services
are critical success factors.
There are challenges but
also significant opportunities
Read the full
research document:
"Agenda Overview for
Infrastructure Services,
2014" (G00259677)
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Market Analysis for Infrastructure Services
Market Drivers
Market Inhibitors
Transition to "as-a-service" models
Poor service marketing and messaging
IoT-related hype
Overly reactive/passive portfolios
Demand for consumer-grade
experiences within the enterprise
Relationships confined to technical
ranks with customer organizations
Big data explosion and related analytics Low level of service innovation
increasing computing requirement
Large capital investment requirement
Market Opportunities
Market Threats
Prevention-based services
Advances in analytics/automation
Service advocacy initiatives
Differentiation via their pricing model
Redefining the TCO calculation to
include full life cycle operational costs
Increasing Impact
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Service commoditization
Increasing customer expectations
Alternative providers/new entrants
Insufficient investment funds
Reducing service lock-in potency
Spiraling delivery costs
Decreasing Impact
Continuing Impact
Hardware Reliability
Improvements
Green
Communities
and Forums
Artificial Intelligence
Real-Time
Telemetry
Automation
Generation Y
Predictive
Analytics
PreventionBased Services
Big
Data
Closed Systems
IoT
Diversity
Initiatives
Mobile
Virtualization
Data Residency Regulations
Globalization
Increased Competition
Changing
IoT Hype
Differentibuying modes
Cloud
ation
Adoption Is Difficult
Multisourcing
Shorter
Provider
Contracts Consolidation
Different Buyers
Magnitude of impact
BYOD
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Buzzword Fatigue
Demographic
Time Bomb
Demand for Cost Savings
Lock-in Fear
Generation Y + 1
Governmental
Austerity
Consumerization
"Good Enough"
Is Good Enough
Lower Barriers
to Trade
Expanding CSP Portfolios
Service Lines Are Blurring
Strategic
Partnerships
Cloud Service Brokerage
Portfolio
Multisourcing Rationalization
Service
Integrators
"StalkingHorse"
Entrants
Key Infrastructure Service Predictions
"By 2017, at least 25% of all infrastructure
management service decisions will be
made explicitly to optimize the total cost
of running a business process."
"By 2016, failure to complete a portfolio
rationalization plan will force 50% of
infrastructure outsourcing service
players to divest at least one key/core
service line."
Note: Excerpts from "Predicts 2014: Infrastructure Services Must Productize or Die" (G00259418)
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Top Three Recommendations for
Infrastructure Service Providers
Crippling
Cost Base
Inability to
Articulate
Value
Proprietary
Lockin/
Barriers to
Customer
Churn
Customer Adoption and
Acceptance of "As-aService" models
Infrastructure
Service Provider
Success
Price
Pressure
AutomationDriven Efficiency
Portfolio
Stagnation
New Entrants/
Alternative
Providers
Driver
Constraint
1. Describe activity in terms of benefits. Translate benefits into
tangible business value. Reinforce with customer references.
2. Rationalize your portfolio. If it's not growing, then it's holding you back.
3. Deploy automation and analytics to industrialize delivery.
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
Infrastructure Service Research
Road Map
• "Predicts 2014: Infrastructure Services
Must Productize or Die" (G00259418)
• "Best Practices for IT Services Reporting
and Analytics: Report Design,
Presentation and Usage" (G00255231)
• "Introducing the Key Ingredients for a
Next-Generation Industrialized Managed
Infrastructure Service Offering"
(G00248791)
• "Emerging Technology Analysis: Video
Chat Will Redefine the Enterprise
Support Experience" (G00247559)
© 2014 Gartner, Inc. and/or its affiliates. All rights reserved.
• Developing an End-User Services
Maturity Scale
• Unlocking Service Value Articulation Best
Practices
• Exploring Strategic Options for
Service Pricing
• Discovering Service Portfolio Design
Best Practices
• Identifying Implications of Key Market
Trends for Infrastructure Service Lines
• Building Value Articulation Best Practice
Toolkits
