The Future of IT Services

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June 2014

The Future of IT Services

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Torrential Changes and a Confidence Crisis will Reshape 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

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.:MobilityBig Data

CloudAnalytics

Digital AgencySocial

Taming the Digital Dragon: The 2014 CIO Agenda (G2643926)

Source: Gartner December 2013) n = 2,339


IT Craftsmanship IT Industrialization Digitalization

Focus Technology Processes Business Models

Capabilities Programming, system management

IT management, service management Digital leadership

Engagement Isolated, disengaged internally and externally

Treat colleagues as customers, unengaged with

external customersTreat colleagues as partners, engage external customers

Outputs & Outcomes

Sporadic automation and innovation, frequent issues

Services & solutions, efficiency & effectiveness

Digital business innovation, new types of value

The 3rd Era of Enterprise IT

© 2013 Gartner, Inc. and/or its affiliates. All rights reserved. 4

Digital Business Transformation

Internet of Things

Cloud

Analytics

Mobile

Social

Cognitive Automation

Reducing Labor Arbitrage Advantage

Crowd Sourcing

Business Outcome-Based Value and Pricing Models Disruptive New

Competitor Types

Economic Fluctuations and Rise of Emerged Emerging Markets

Privacy and Security Awareness

Anti-Globalization Policies and Protectionism

Re-Insourcing

Business Buying Center Shift

Gen Y Leaders

Portfolio Rationalization

Just-In-Time Service Supply Chain Ecosystems

Magnitude of impact

Consumerization

Top Trends


New World Providers will Win

Social

Information

Digital

Bus

iness

Tran

sform

ation

Cons

umer

izatio

n

Unex

pect

ed S

ourc

es o

f Gro

wth

Industrialized

CapabilitiesAccess

NewWorld

Dedicated Assets

Labor-Based

Contracted for Effort

OldWorld

Mobile

Cloud

Outcome-based Consumption


CIO’s 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

Exploitthe New

Renovate the Core

15

Taming the Digital Dragon: The 2014 CIO Agenda (G2643926)

Source: Gartner December 2013) n = 2,339


Waterfall development

Known vendors

Strong governance

Minimized risk

Technology teams

Traditional Mode Nonlinear Mode

Stuck in the middle"Fit for no one"

Agile development

Innovative partners

Lightweight "Just good enough" governance

Managed risk

Multidisciplinary teams

27

Bi-Modal IT Emerges


Service Providers Must Expand their Sphere of Influence and Impact

Other; 8% Legal/Regulatory/Compliance; 1% Customer Service and

Experience; 3%

Human Resources; 3%Supply Chain/Logistics;

3%

Sales; 3%

Marketing and Com-munications; 4%

CFO/Finance; 4%

Chief Operating Officer/Operations; 8%

Centrally Managed IT Spending; 62%

38% of IT Spending is Decentralized; 62% is Centralized

IT Metrics: A Critical Evaluation of Decentralized IT Spending and Digital Enterprise Readiness (G2529215)

8

Source: Gartner (June 2013) n = 1,523


Physical “things” exploding growth into 2020

Internet of Things

Personal Devices

30B

7.3B

Installed “things” by 2020Assumption: The component cost of

IoT-enabling consumer things will approach $1, and "ghost" devices with unused connectivity will be common.


Digital Business Scenario: The Car Crash

1.Smart Phone detects sudden deceleration.

2. Smart phone interrogates

passenger clothing for vital signs.

3. Smart phone sends information to medical

emergency first responders and opens up communications lines

for survivors..

4. Smart phone interrogates vehicle systems for damage

report.

5. Damage report sent to fire, police, towing, and insurance companies.

6. Estimates for repairs sent to smart phone from different companies.

Negotiations ensue to get best price and delivery.

7. Meanwhile, smartphone interrogates nearby video cameras to collect digital

evidence of the car crash as it occurred.

8. Smart phone notifies next of kin via text

messages and Facebook.

9. Smart phone sends information portfolio to law

firms for assessment.


Service Provider Approaches to Digital Business

• Digitization through technology- Nexus of forces applied to add value- Evolution of “Renovate the Core” from a technology perspective

• Run to Digital Transformation- Evolutionary approach to business transformation- Renovate the core to achieve business operational improvement

to improve profitability of business operations

• Advise to Digital Transformation- Business strategy transformational approach to Digital Business- Top down redesign of entire functional areas to achieve

competitive business differentiation and grow revenue

11


By 2017, over half of consumer goods manufacturers will employ crowdsourcing to achieve fully 75% of their consumer innovation

and R&D capabilities.

What to do?CIOs must focus on building the right culture to support bottom-up contribution. Without

it — and without employees who care — these initiatives are likely to fail.

Digital Use of "Crowds" as an "Accessory"

Authors: Don Scheibenreif and Michael Shanler

• Consumer goods companies in touch with customers

• Better crowdsourcing technology

• Affinity for culture and style of the consumer

• Increase in crowdsourcing applications in online consumer goods platforms in 2014

• Crowdsourced revenue boost

Why

?

Flag

s


By 2020, the labor reduction effect of digitalization will cause social unrest and a quest for new economic models in several

mature economies.

What to do?CEOs and boards must avoid using old economic models in the new digital reality.

Digitalization's Effect on Labor Grows

Authors: Gregor Petri

• Digitization <> more jobs

• Kodak's 130,000 people versus Instagram's 13

• Lower labor Content

• Lower pay per hour

• Another "Occupy Wall Street" type of movement by the end of 2014

• Bartering-based systems and voluntary roles rise by 2015 in areas such as patient care.

Why

?

Flag

s


2

PmProcess Maturity

3

AuAutomation

5

AiAdvanced Insights

7

PePersonalization

Cost Reduction Enablement

Added Benefits Enablement

Service Industrialization Meets Consumerization


YourNeeds

OthersLike You May We

Suggest

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? ??

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?

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Prevention-Based Mass Configurability

2

PmProcess Maturity

3

AuAutomation

5

AiAdvanced Insights

7

PePersonalization


2008

2018 2025

2

PmProcess Maturity

3

AuAutomation

5

AiAdvanced Insights

7

PePersonalization

2013

Next Generation Industrialization Future Advancements in the Next, Next Gen

The Next “Next Gen” of Managed and Professional Services

11

DpDynamic Pricing

17

SbSub-branding

13

JtJust in Time Supply

19

MtMicro-transactions


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The Future of IT Services