Accelerating the digital enterprise

8/11/2019 Accelerating the digital enterprise

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Accelerating the Digital

Enterprise

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company is strictly prohibited

NASSCOM Infrastructure Management Summit

Andrea Del Miglio, McKinsey

Bangalore, September 4th, 2014


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McKinsey & Company |

Introductions

Andrea Del Miglio, McKinsey & Company

Partner, Milan office - Italy Leader of McKinsey IT infrastructure and

Cybersecurity Practices in EMEA

Extensive experience in supporting largeorganizations with IT strategic sourcing

7 years of experience before McKinseywithin the IT sector within specialized

consulting firms and large IT vendors

1


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What is a Digital Enterprise?

Digital Enterprise

Enterprise configured to deliver maximum

strategic and operational value fromestablished and emergent technologies

and associated shifts in customer behavior

and competitive landscape

2


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5/15McKinsey & Company |

Five year run-rate

A successful digital transformation can deliver up to 40% increase in

revenues and significant cost benefits

4

Pharma

Health-care

Insurance (P&C)

TIL (Rail)

Telco

CPG

Retail Banking

40

30

19

17

8

6

25

19

9 5

4

6

2

4

ThreatOpportunity

16

8

18

16

13

6

1

3

1

1

1

10

Percent

Projected impact

RevenueIndustry Cost

SOURCE: McKinsey analysis


6/15McKinsey & Company | 5

yet many organizations, especially in developing markets are currently

unable to assess progress on digitization

SOURCE: McKinsey Quarterly Survey on Digital Business practices, April 2013

23

36

Named a

metric

41

None being

used

Dont know

44

37

Asia-pacEurope

25

North America

Percent of respondents (N = 789) reporting a

metric used to measure the progress of their

digital programs

Two thirds of organizations express no clear

view on the most important metrics to

measure progress of their digital programsA significant share of organizations are

sceptical of the value from digitization

Percent of respondents reporting Unknown / Zero

/ Negative Operating Income impact from

digitization spend (N = 850)


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Digital leads to a rapid change in foundational IT disciplines

From toProcess

1-size SDLC methodologies Tailored methodologies, e.g.,

agile, iterative "Big project" management

focused on day-to-day PM

activities and low-level metrics

Leadership-level monitoring,course correction, and value

tracking for critical IT projects

Application

development

and

maintenance

1

Complex, unmanagedapplication and data

architectures with point-to-point interfaces and data silos

Application/

data archi-tecture2

3

Managed services or portfoliocarve-outs with open partnerships

Selective partnering for hard-to-build skills

Partner and

vendor

management

General focus on pure scale Limited understanding of infra

spend by towers and users

Applications tied to boxes

Increased focus on enablement Transparency into cost and usage Virtualization and cloud services

increasingly separates boxes from

apps

Infra-

structure/

data center

management

4

Detailed next

6

Planned, SOA-based architecture Underlying enterprise master data

strategy with effective governance Increasing importance of Chief

Data Officer role

Large SI projects for bigdevelopments

Loosely managedprocurement and staff

augmentation


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and require new capabilities in IT infrastructure to match the flexibility

needs of digital applications

7

Integrated appliances

Open-design general-purpose stacks

Cloud orchestration platforms

Application management and automationtools

Software defined networking and storage


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Setting up and delivering new IT infrastructure digital capabilities poses

three key challenges for large organizations

8

A

B

Significant digital talent gap

C

Coexistence of next generationtechnologies with legacy infrastructure,

often outsourced to traditional vendors

More fragmented vendor landscape and

need of new collaboration models


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The digital talent gap is significant across many IT disciplines

9

77% of executives weinterviewed mentioned skillsgaps as a hindrance to

driving digitaltransformation. The skillsneeded go beyond pure IT to includespecific technologies such as socialmedia or mobile, as well as the analytic

skills to drive value from big data. The Digital Capabilities your Company needs, MIT

Sloan Management Review

The rapid adoption of the agile

development methodologyhas created a sizable talent gap ()Demand outstrips supply by

nearly4xagiletalentstudy.com1

Demand for Big Datatalent in the United States could be

50 -60% greaterthan its projected supply by 2018

McKinsey Global Institute Big Data report

SOURCE: MIT Sloan Management Review, agiletalentstudy.com; McKinsey

1 Study conducted by Yoh from 2010 and 2012 for the US job market

A


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and often outsourced

to traditional vendors

Percent of total IT infrastructure spend

New digital capabilities in IT infrastructure must coexist with

traditional assets, which are often outsourced to traditional vendors

44

Internalspend

56

Outsourced

spend

Spend on "traditional" IT

infrastructure is sizeable

27

8

10

3

Data center

End user support

48

Networking

Other

Indexed to total IT spend (average), percent

Banks mostly outsource to traditional

vendors, e.g.

IBM owns > 80% of datacenteroutsourced spend

BT owns > 60% of networkingoutsourced spend

10

B

SOURCE: Gartner, IDC

EMEA BANKING EXAMPLE


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Having traditional IT infrastructure outsourced makes the digital

transformation more challenging, but can also provide benefits

11

Challenges Benefits

Traditional vendors are often not

perceived as the most natural

owners of next-generation IT

infrastructure services

A close integration of traditional and

new infrastructure stacks is required

to enable the digital transformation

Rigidity and complexity of outsourcing

arrangements can hinder the pace of

the digital transformation

Many contracts fail in delivering the

expected benefits and drain

managerial resources due to aconflicting interaction with the vendor

Good contracts can free up

resources and management share

of mind for the digital transformation

Outsourcing provides full flexibility

to ramp volumes up and down,

supporting the trial-and-error mode

that many digital projects require

B
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Dynamic vendor landscape for Next Generation Infrastructure calls for

assessment criteria beyond priceExamples

C

12

New entrants and repositioning of incumbent playersresult in a diverse and very dynamic vendor landscape Careful assessmentof vendors required

Flexibility ofinfrastructure solutions

and fit to agile

development needs

Avoidance oftechnological silos with

proprietary

technology

Proprietary

Virtualization

Cloud

orchestration

Cloud

management

Open source
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Description

Contracting

model

Challenges

for Digital

While staff augmentation and managed service models continue to

apply, the demand and project management model needs rethinking

Staff augmentation Work-package

arrangements

Managed services

Support of defined deliv-erable or application area Ownership for a service orproduct lies with provider

Per-use or fixed price for

using platform / service

Time and materials Fixed price Time and materials

Involvement of businessManagement of supplier

and contract over fast

cycles

Loss of proprietary know-

how at end of projects

Suited to fill short-term

knowledge gaps

Suited to leverage out-of-

the-box solutions and

supplier expertise in digital

services

C

Provision of specific re-source with a specific skill set

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There is therefore a window of opportunity (or threat) as enterprises will

ramp up their digital programs

14

Enterprises are looking for support

on their digital programs beyondtraditional vendors

Entry barriers are less evident,

as the digital infrastructure is kept

separate from the legacy stack

Talent gap may further widen in

the short term, potentially leading

to a talent war

Enterprises will negotiate contract

terms and conditions better

supporting their digital needs

Clear window of

opportunity for attackersand new entrants, but

capturing it is not trivial and

require a step change

Serious threat for

incumbent players andtraditional vendors, which

are in any case repositioning

fast

Uncertainty for

organizations looking for a

strategic partner, as the

selection is performed on a

fast changing landscape

Documents

Accelerating the digital enterprise