Whether starting an urban garden somewhere on a deserted industrial plot or setting up a local power station in a housing estate: due to pressures caused by the crisis, scarcity and rapidly changing technology, more and more things are nowadays being shared in our society.
Inspiring people like Daan Roosengaarde and Jan Rotmans are shaking things up with their fresh and innovative visions of society. People are thinking differently about energy, waste, living, working and, in particular, about innovating, with or without the aid of technology. The popularity of a Singularity University shows that technology will be one of the engines driving further change in years to come. In addition, the role of the consumer is set to increase. Through the availability, mobility and accessibility of new technology, many innovations will already have been widely used in everyday life before being put to use within businesses and organizations.
Implications for the market
The rate at which the energy industry is changing reveals that existing business models are being overtaken and even becoming redundant, and government can scarcely keep up with all the movements and changes. Frequently, this results in spastic behaviour by the government and industries in question. The thing is that customers and consumers can no longer wait. Transparency and decreasing investments – often influenced by technology – allow changes to get underway more quickly and easily.
A parallel can also be drawn in the IT-sourcing industry. For example, in 2012 and 2013, a great deal was being said and written about the deployment of cloud technology. In 2014 a definitive breakthrough of ‘shared’ technology and solutions is about to take place. Among small and medium enterprises 35% of IT solutions, no matter how they are used, are neither owned nor purchased; in this respect they are more advanced than 75% of the larger organizations. Technology supplied as a cloud solution, be it infrastructure, platform or service related, is the driving force behind this. From test & development environments, data archiving and software solutions to entire mail infrastructures: everyone has either made use of cloud solutions or is about to do so.
Benchmarking and IT sourcing market
2014 offers terrific opportunities for IT service providers as well as software suppliers. In many cases, however, it will not be easy to make the transition. Existing infrastructures and data centres, legacy knowledge and, in particular, the speed at which customers switch to the use of new solutions, form the greatest challenges. Even if we leave companies such as Amazon, Google, Microsoft and Rackspace aside for the time being, the area of IT service providers is becoming increasingly more complex.
Moreover, customers want more transparency and openness in matters of IT expenditures. They are increasingly moving their Capex (investments) to their Opex (operational expenditures). Consequently, the role of Benchmarking and Performance Management will also change in 2014. More and more these activities are seen as part of a complete IT sourcing ecosystem; less and less as a one-off, stand-alone, clause in a contract but instead increasingly as a process through which the customer and supplier are continuously able to manage qualitative and quantitative knowledge through proper consultation. Why not have a benchmark process just like we have done with incident, problem or change processes?
Implications for IT service providers and customers
This development will also demand a greater sense of reality from customers in 2014. It will become less simple to enter into a long term contract with a supplier, negotiate hard on price and conditions, only to (want to) remove substantial parts of the contract a year later because technology has made it possible.
Thinking about future innovations, estimating their consequences, daring to discuss them and translating them into reality is going to require more openness and transparency than ever before. All this is going to present major challenges to both the customer and the IT provider in 2014.
Translated into the IT-sourcing Lifecycle
When translated into the Sourcing Lifecycle we can identify the following significant developments:
In the Plan phase (strategy) it will be diminishingly necessary to help large customers with the basic do’s and don’ts of the sourcing process. They are often faced with their third or fourth sourcing contract renewal. The smaller SME companies, that started sourcing their IT services more recently, want more concrete and quick strategic advice. Vertical sourcing developments, involving customers which purchase the entire stack, ranging from infrastructure up to the functionality of a solution as a service (SaaS), will continue in 2014. Many IT providers actively started promoting this already in 2013. Traditional pricing models, which required knowing how much you paid for each service component, will disappear.
In the Build phase (selection) it is becoming increasingly clear that both the customer and supplier want to get together early on in the process to discuss the ‘how’ of the sourcing process. Shorter, differently organized processes. Best Value Procurement, Competitive Dialogue and Fast Track approach can be expected to grow fats in the coming years. Both sides will have to ensure that the process and shared information are as transparent as possible. However, this is currently not happening. We are happy to talk about it, but when it comes down to negotiation, we often cramp up again.
IT service providers are no longer able to do everything themselves. More focus is required. Initiatives to share deals with smaller and often more specialised partners is a significant evolution that has long been ignored. The IT provider needs to be able to react quickly otherwise the customers will take this kind of initiative themselves. Business involvement in the Build phase as well as in the Plan phase will need to be much more emphatic, not in the least because in many cases the business will have more contacts with the IT provider or software vendor than the IT department itself.
The Run phase (transition, implementation) was already extremely important; however, increasing the number of suppliers and partial solutions will only cause the complexity of transitions to increase and 2014 will see more emphasis being placed on integration. The availability of knowledge at the IT provider’s as well as the customer’s is often insufficient. The support of smaller, specialised IT suppliers, freelancers or consultants is essential. Knowledge will have to be shared more quickly. Operating in a spastic manner or giving in to the urge to keep all knowledge to yourself is less and less a sign of power. This especially so in the case of transitions. In 2014, will IT suppliers finally understand that a re-transition is just as important as a proper initial transition?
In 2014, the Optimize phase (recalibrating and testing, benchmarking and performance management) will increasingly become an integral part of the sourcing life cycle. For years this part has been a little makeshift. There will be implications for the sourcing contracts as well as for the behaviour and the way in which a contract is managed and controlled. From one-off tests and benchmarks, we are heading towards a continuous process that can be properly monitored and which will put the customer and supplier in a better position to determine their tactics and strategy together. This has already been discussed for years, but often it is quickly forgotten, despite all the good intentions.
Finally, the Governance phase (managing IT processes and setting up an IT organization). Under the influence of all above-mentioned developments, the customer’s IT organization and the manner in which it works together with the business on one hand and IT service providers on the other are on the verge of huge changes. The business gets an (even) bigger share of the pie, the new generation of users is IT native; i.e. they have grown up with IT from an early age. They themselves know what they want and don’t need anyone translating their needs into requirements and then developing them further. The number of suppliers will increase sharply. On the one hand, they will get into bed with large (cloud) parties, which are almost completely closed off to any outside influence and on the other hand they will partner with small specialised parties. Finally, there will also be room for ‘new’ IT suppliers who will assume a much greater role as (cloud) service integrator and cloud broker. Why do this yourself if someone else can do it for you quicker, better and without major investments?
The customer’s IT department is increasingly a (market) knowledge facilitator. The tactical and strategic role is becoming more powerful. The role of implementer is being outsourced more frequently. In order to optimally facilitate the link between business and supplier, the emphasis more often lies on the strategic coherence to support the overall business strategy. Value creation architecture and service delivery management are therefore key domains. What is also required is specific knowledge of managing supplier relationships, together with the knowledge and experience needed to be able to change, and careful attention to regulations and compliance. Emphasis will be placed on roles such as Enterprise Architect, Chief Technology Officer, Program/Transition Manager, Vendor Manager, Service Delivery and Contract Manager, Security and Compliance Officer.