ICT-News Dach

Insights at the Outsourcing World Summit - Digital Change, Uncertainty, and Speed

Bruce Guptill, Todd Lavieri Research Alerts

What is Happening?

ISG Americas president Todd Lavieri used his keynote presentation at the IAOP Outsourcing World Summit (OWS17) to highlight not only the changing state of outsourcing, but also its critical effects on user enterprise and IT provider digital transformation. His net message: There is more change underway than meets the eye, creating confusion and opportunity for enterprises and providers.

Lavieri used data and insights from the 57th Quarterly ISG Index (4Q16) to identify and reinforce three key factors shaping digital transformation trends as we move into and through 2017: Change, uncertainty, and speed. The key change is the shift in outsourcing away from traditional IT toward more “as-a-service” capabilities. This is not only reshaping providers’ business strategies and models, due in large part to user enterprises looking for rapid deployment of advanced capabilities as they pursue transformation initiatives. The uncertainty comes from enterprises’ often still-nascent digital transformation plans and initiatives, and the resulting provider-side uncertainty about which capabilities will be most valued - and therefore should be invested in. Finally, the speed aspect reflects the accelerating pace of digital business technology adoption, adaptation, and innovation, which spurs similar acceleration of even more digital business initiatives and expectation.

The results: As Lavieri highlighted in his talk, 65% of enterprise clients feel disrupted, and express substantial uncertainty about what to do, where to go, and how to do it. We see IT providers expressing similar uncertainty - even while leaders position themselves to create opportunity from the chaos.

Why is it Happening?

Digital business transformation implies new processes and new outcomes, enabled by new ways of using information technologies. It is a series of fundamental changes that may be approached incrementally or as “big bang” projects. In either case, we are seeing more and more enterprise business and IT leaders impatient for change. They fear not being able to find and take advantage of new opportunities; they worry about falling behind competitors. They seek ever-improving means of trialing new capabilities and either succeeding or “failing fast” with reduced risk to the business. They push for more rapid adoption of digital business capabilities. 

Meanwhile, digital transformation is still early enough in most firms’ agendas to lack cohesive, coordinating strategy and management. And we are seeing absorption of more digital business transformation plans, initiatives, and spending into ongoing business organizations and operations. On the plus side, this implies that more and more, “digital business” is more and more becoming just “business.” On the negative side, this suggests that digital plans and initiatives may be being spread more widely, away from centralized, coordinating governance.

On the provider end of the spectrum, developing and delivering new technologies for new services that enable new enterprise-side capabilities - often for clients that do not yet know their long-term needs - is very different than providing mature services to knowledgeable clients was just 5 to 10 years ago. As noted above, enterprise clients are really still becoming aware of what can be done, and taking early steps toward translating that into longer-term business planning and strategy. And enterprise investments in “as-a-service” IT are helping to provide most of the growth in outsourcing business today, but the applications of these capabilities are far more likely to be point- or group-solution types with dynamic demand and utilization than more traditional, steady-state, division- and enterprise-wide IT services outsourcing. Couple this rapidly-evolving new IT consumption model with mid-term uncertainty about digital transformation, and the enterprise-side uncertainty quickly translates into provider-side uncertainty.

Net Impact

In evolutionary theory, it’s not the strongest species that survive, but those that adapt the best and most rapidly to their environments. In a business IT environment rife with uncertainty, change, and speed, enterprises and providers both need to enable adaptability in order to survive and prosper. Three key actions to do this are as follows:

1. Understand that “change” really means “improvement.” Digital is not about raw change; it is about improvement. And as there are always too many opportunities for improving business and IT, look for the most valuable business improvements feasible. A first place to look is where current systems most inhibit the improvement of business and IT operations.  

2. Reduce and manage the uncertainty. Identifying and implementing changes that improve the ability of the firm to do business will significantly reduce uncertainty about what to do, how to do it, and when. This simple, first organizational step enables vision and planning based on a path of measurable, incremental improvements that lead to strategic transformation.

3. Adjust your speed accordingly. It’s easier to travel faster (and farther) on a long journey when you are not distracted by constantly repairing and fueling the vehicle. Improving operational efficiency is like improving fuel efficiency. Your vision down the road is much improved, and you can avoid more traffic problems and accidents, when you do not have to constantly monitor dashboard gauges and lights for problems. In short, you can go faster with fewer stops and reach your digital destination with more resources and ability.

Simplifying the change+uncertainty+speed problem in this way also enables enterprise IT and business leaders to better identify the most valuable IT providers and capabilities. As improvements occur over time, the mix of suitable providers and capabilities (and solutions) will change. Insights and guidance such as those in our 2016 i3 and 2017 Market Lens reports, our ongoing Automation Index and Cloud Comparison Index research, and associated research and briefing notes, will help to identify and manage these changes as they emerge and evolve.

Providers need to understand these changes because there is great opportunity in helping client enterprises understand and scope possible improvements. We see surging uptake of such services among user enterprises, and this will accelerate and grow through the next 24 months at least. Providers also need to understand their own need for speed. Enterprise-side IT business changes are occurring quarterly, or even faster. Awareness of client enterprise business change - and the flexibility to adapt to that change and its accelerating pace - will be key to the ability of IT providers to compete.