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As CIOs and business leaders try to create a modern infrastructure that can support today’s challenging IT environment, they may find themselves taking wrong turns or pursuing approaches that lead to dead ends. Here’s a technology roadmap for 2012 — one that highlights useful landmarks and identifies areas to steer clear of – that you can refer to as you explore today’s challenging IT environment. Read Now.
Rethink Your Mobility Strategy Legacy desktop and mobile strategies are likely to become obsolete, i.e., inadequate of handling the changing enterprise mobility landscape in 2012. E nterprise mobility is not a strange element to modern en- Android devices. Bring your own device and employee-liable terprises. It has been in the limelight for quite some time programs are common, and we expect that 80% of organi- and has been making enterprises (and the workforce) zations will have tablets by 2013. These deployments bring a more agile, efficient, and competitive. However, as a disruptive range of new challenges, from security, compliance and man- trend, mobility has its own setbacks. While on one hand, it em- agement, to cost and human capital management. Organiza- powers the users, on the other, it jeopardizes enterprise security tions address these challenges by defining policies that regulate and takes away control (over users as well as costs) from the the usage of consumer and personal mobility for employees, hands of enterprise IT. and they need the appropriate tools to enforce policies, regu- late behaviors, contain costs and manage risks, across multiple Stemming challenges in the full swing are device platforms.”1 • Mobile-device and operating-system fragmentation However, charting out a mobile strategy requires a long-term vision. • Bring-your-own-device (BYOD) revolution and employee- liable programs • Mobile data and applications explosion Best Practices: Given these challenges, it is evident that organizations need • Define the category of mobile devices and platform users a sophisticated mobile device management strategy to handle that your IT can support. the mobile-device proliferation. A Mobile Device Management • Redefine a mobile policy that enables new busines devices (MDM) strategy can help enterprises regulate the use of mobile and mobile applications in the existing environment. devices by employees, regain control over users, and at the • Invest in an MDM solution that supports multiple platforms, same time, ensure security of corporate data. enforces mobile policies, regulates behavior, mitigates risk, and controls cost. According to Gartner’s report Critical Capabilities for Mobile Device Management, “IT organizations are forced to create Note: Enterprises are advised to turn to an IT service firm that mobility programs to support corporate email and other ap- has relevant expertise in mobile device management. plications on consumer products, such as iPhone, iPad and FIGURE 1 MOBILITY MANAGEMENT BEYOND MDM SOURCE: HCL3
Success Cases:A Fortune 500 Firm Turns to MDM for Security A Leading Electrical Retailer Optimizes its Business for MobilityA Fortune 500 U.S. beverages manufacturer with 19,000 Europe’s largest electrical retailer and services company withemployees and 200 distribution centers has implemented an operations in 26 countries is optimizing its business for mobilityeffective MDM solution that secures all mobile devices and and mitigating business risk across corporate and employee-lia-platforms. The customer implemented HCL Enterprise Mobility ble devices. The customer is leveraging HCL’s Enterprise Mobil-Services to see the desired results. The HCL MDM solution gives ity Services — powered by MobileIron, a virtualized smart deviceIT and users real-time intelligence and control over smart de- management platform — that can address prime concern areasvice content, activity, and applications in order to secure data, of enterprise mobility: mobile device security, enterprise mobilityreduce wireless cost, and improve user experience. management and wireless expense management. Source: HCL1 Gartner Inc., Critical Capabilities for Mobile Device Management, G00213877, 29 July 2011 4
Boost Your Security Network To thwart the security threats and vulnerabilities that arise as your organization takes advantage of the ongoing trends in IT consumerization, virtualization, and Cloud Computing. A s enterprises continue to unleash the power of the Gartner’s MarketScope for Managed Security Services in Asia/ latest technology trends such as ubiquitous data ac- Pacific states, “The continuing global economic turmoil has cess, technology as a service, next-generation work- discouraged enterprises from capital investment in security in- force, social media, and IT consumerization, they are frastructure and additional personnel costs for new security opening up their networks to new vulnerabilities and staff. Gartner does not anticipate strong growth in overall IT attacks — with maximum threats coming from the Web. spending in client organizations in the next 18 months (see “Forecast Alert: IT Spending, Worldwide, 3Q10 Update”). Information gathered from existing HCL customers suggests This fiscal conservation has motivated a number of enter- that enterprises are ill-equipped to cope up with the growing prises to leverage MSS to support security improvements, threat of cybercrime. continuing regulatory compliance and service expansion for business operations. Gartner expects that continuing uncer- • Handheld devices pose the major security risks. tainties in the global economy will reinforce this trend, with • Compliance adherence (17%) and Cloud security (17%) the direct result of stronger growth in MSS client numbers are two major high-priority security issues. and revenue.”1 • Other security challenges faced by the enterprises include data protection (10%), virus/botnet attacks (13%), and Even though many services are part of the managed security proactive security alerting (9%). service portfolio, we see the rush toward Cloud-based service offerings. Among Cloud-based security service offerings, we be- Dealing with these newly found threats demands a paradigm lieve Network Security, Identity as a Service (IDaaS), and Cloud- shift in the security strategy. Enterprises need to evolve their based Managed Authentication Services (MAS) will be much in security defenses and radically change the way IT is managed demand. We also anticipate high adoption rates for Distributed and secured. Highly constrained security budgets of enterprises Denial-of-service (DDoS) attack, Security Information and Event could be a bottleneck, though. Management (SIEM), and log management, ensuring a proac- tive security framework. Under economic pressure, enterprises can adopt man- aged security services to achieve high level of security and However, the challenge at hand is to choose the right man- strike the perfect balance between security expertise and aged security services provider (MSSP) and devise an ideal service innovation. security strategy. FIGURE 2 FIGURE 3 VERTICAL BREAKDOWN OF CUSTOMERS TOP SECURITY PRIORITY FOR 2012 DDoS Prevention SOURCE: HCL5
Best Practices: ever-changing threat environment posed. HCL’s balanced approach, proactive security stance, technophobic-to-techno-• First, define the scope of security services and the level-of- centric focus, and employed flexible delivery model helped the service expectations. stock exchange develop an organization-wide IAM policy and• Then, evaluate the prospective MSSPs based on the follow- process; design and re-architect the data center from a secu- ing parameters: adherence to local compliance laws, geo- rity standpoint, and address its (the exchange’s) business- and graphic delivery capabilities, staff augmentation, device compliance-related requirements. This resulted in a 20-22% management, real-time monitoring, and security expertise. reduction in IT administration costs, a 45% fall in password reset• Finally, map the service delivery capabilities and security efforts, and establish tamper-proof logs and audit trails. expertise of your managed security service provider and align them with your requirements and expectations. This A Communications Service Provider Optimizes its IT Security will always result in a successfully managed security en- gagement. A large South Africa-based telecom service provider optimized its IT security by moving to HCL’s collaborative value framework (spe-Success Cases: cifically designed by HCL for telecom service providers). Leveraging HCL’s existing robust service delivery framework, the telecom organ-Asia’s Largest Exchange Firm Derives Enhanced Business Value ization scaled up the security services for its existing customer base,with MSS which brought in more revenues. This business model also reducedA Singapore-based, large stock exchange turned to HCL for the operational challenges by using HCL’s large pool of certifiedmanaged security services to reduce security risks that today’s resources and OEM partnerships with leading security vendors. Source: HCL1 Gartner Inc., MarketScope for Managed Security Services in Asia/Pacific, G00217190, 30 September 2011 6
Evolve Your Data Center Strategy To improve business responsiveness, lower costs and consolidate your data center. A s enterprises continue to face increased pressure from revolutionary technologies of today — such as Cloud Comput- the global economy to reduce costs, they will be looking ing and next-stage virtualization. It will help enterprises consoli- at data centers as the starting point for reducing costs date better and achieve superior business results. and complexity, and improve manageability. Companies from various industries have already discovered the merits of trans- The next-generation data center of the future must essentially forming their data centers and harnessing new technologies have Cloud embedded in its architecture, besides Ethernet fab- and innovations such as Cloud and Infrastructure Utility Ser- rics, high-density multi-core server hardware, high-bandwidth vices (IUS). networks, and virtualized servers and storage. A Cloud-ready data center infrastructure can both support new service models at According to Gartner’s Magic Quadrant for Data Center Out- the scale necessary to meet demand and operate at an efficiency sourcing and IUS, North America, “In North America, increas- level that ensures profitability and support full virtualization. ing volumes of storage, high-density computing technologies versus rising energy costs and green concerns, and the need to However, this will require CIOs to move to the next level of consolidate for efficiency and security often show the physical IT sourcing — source the best IT services from the available limitations of existing data centers. At the same time, higher service providers operating in the market. The service providers service requirements such as 24/7, continuous data replica- must be evaluated on the basis of their ability to offer a dynamic tion, fast delivery of new capabilities, high flexibility and low- and ready-to-deploy infrastructure, and the capability to cope cost delivery challenge the internal IT management capabilities up with IT complexity as the requirements from their business of many organizations. As a result, increasing industrialization, processes increase. consolidation and global delivery, and utility and cloud ap- proaches characterize the global and North American data Enterprises must follow a phased methodology to devise a suc- center infrastructure outsourcing market.”1 cessful data center strategy. One of the HCL clients implement- ed a step-wise methodology that was cost-effective and ensured Radical business and technical changes demand that CIOs a healthy bottom-line. Data center infrastructure restructuring and leaders overturn older practices; adopt new strategies and service management fundamentally must be a part of data and technologies for data center initiatives; and build a next- center transformation projects to ensure that organization’s generation data center. Before CIOs embark on a data center data center can readily adapt to constantly changing service project or devise a data center strategy for the future, they demands. Also, green initiatives are a must-have for the next- must gain some insights into the potentially disruptive and generation data center. FIGURE 4 BUILDING BLOCKS OF THE NEXT-GENERATION DATA CENTER SOURCE: HCL7
Leveraging its over three decades of experience in the IT ser- one of the facilities; multiple server and storage technologies,vices industry, HCL has devised a data center transformation operating system versions and standards that were complex andmethodology for its customers. It is a structured approach to costly to deliver and support; and limited lifecycle management,build a future-ready data center infrastructure (see Figure 5). leading to out-of-date technologies being maintained.Best Practices: The project was conducted in three phases in partnership with HCL. In the first, completed in the first half of 2010, Old Mutual• Engage all stakeholders and apply appropriate cost implemented structured cabling and resilient UPS. The second modeling after analyzing latest data center technologies. phase, completed in March 2011, involved core infrastructure• To build an optimized data center strategy, evaluate your components such as storage consolidation, server virtualization, capacity needs, your budget constraints, and the capabili- network consolidation, backup and enhanced disaster recovery. ties you would like to have in your modern data center. The final phase, which is ongoing, involves the implementation of standards and tools such as monitoring, software and patchSuccess Case: management, and database consolidation. Skandia says the transformation has resulted in 80% of non-production environ-Old Mutual’s Data Center Strategy is Paying Off ments being virtualized; 40% of production environments virtu- alized; and high-density usage of server infrastructure, reducingInvestment specialist firm Skandia, part of the Old Mutual power, cooling and use of space in the data center.Group, needed to upgrade an aging IT infrastructure, so in2009 it began planning a transformation program to update In addition, 20% of servers have been upgraded, and Skandia nowtwo key data centers. The transformation addressed several has the ability to provide seamless recovery of critical virtual hostsproblems, including limited space in the data centers; a leg- in its disaster recovery site. Another benefit is reduced data centeracy environment that constrained the reliability and growth of complexity, with the move from three storage technologies to one. FIGURE 5 Source: HCL HCL’s DATA CENTER TRANSFORMATION METHODOLOGY SOURCE: HCL1 Gartner Inc., Magic Quadrant for Data Center Outsourcing and Infrastructure Utility Services, North America, G00213700, 20 July 2011 8
Adopt Industrialized, Low-Cost IT Services (ILCS) ILCS model is set to disrupt the existing IT services industry with its new service value proposition in 2012. Get ready to adapt! I ndustrialized, Low-Cost IT services (ILCS) are the managed, Gartner’s Top Predictions for IT Organizations and Users, 2012 multi-tenant, ready-to-use IT services (infrastructure, appli- and Beyond: Control Slips reveals “Despite a limited direct mar- cations or business processes), which gives organizations a ket impact (~$20 billion by 2015), ILCS offerings will reset the chance to introduce a transparent and predictable cost model. ITO market price in the next five years. We expect to see market- The service providers offering ILCS implement standardized but ing messages like “We manage your SAP infrastructure for less high-quality, automated, configurable and scalable services in than $10 per user per month. Why are you spending more?” to the client environment and charge them on a monthly basis. increasingly fuel CFOs’ and CEOs’ interest, further pushing IT Prices are expressed either as price per user per month or price spending as an operating expense externally delivered and no per unit per month. longer a capital expense internally managed.”1 An ILCS model could result in potential savings of 50- 80% on Some of the common low-cost offerings that enterprises can the entry-level prices — against the 20-30% savings that or- readily take advantage of include: Cloud email (BPOS, IU4Ex- ganizations have been achieving by leveraging the traditional change, IU4Lotus etc.), Infrastructure Utility for SAP (IU4SAP), offshore and outsourced IT services — without compromising IaaS, SaaS and more such. IU4SAP represents one of the service quality. most important cases of ILCS for business-critical and core functions, while collaboration and messaging in the Cloud are ILCS are still embryonic. Yet, it is an emerging market force in the emerging. the IT services industry. Organizations are slowly-yet-steadily embracing this alternative low-cost IT services/business model “Figure 6 represents the overall trend toward ILCS. During the over the traditional IT services to reduce the cost of “running last decade the high cost of corporate IT ($1,000 to $2,000 per the business”. And we believe that this adoption will reach an user per month) has fallen due to traditional outsourcing and all-time high in 2012 and beyond. offshoring. Now, thanks to new delivery models, industrialized services and Cloud Computing, we are seeing increasing num- The emerging ILCS model will transform and disrupt the exist- bers of low-cost offerings in which the price of a specific unit or ing IT services landscape by altering people’s common percep- function (such as IU4SAP e-mail and SaaS) is instead measured , tions of pricing and value of IT services. in a few dollars per user, or unit, per month.”2 FIGURE 6 THE SHIFT TO HIGHER SAVINGS FROM INDUSTRIALIZED, LOW-COST IT SERVICES2 Cost Corporate IT per Outsourced IT unit -20% LOW-COST Offshored IT IT -30% Small Fixed Server, Vendor $800 pm Small Virtual Server, Vendor Industrialized, HIGH-COST $400 pm Low-Cost IT IT -50% to -80% SAP Infr. Client Salesforce.com $20 to $30 pupm $75 IU4SAP BPOS/Gmail $10 to $20 $2 pupm pupm 2000 2010 Time Source: Gartner (January 2011) *BPOS = Microsoft Business Productivity Online Suite; IU4SAP = Infrastructure Utility for SAP; pm = per month; pupm = per user per month; 1 Gartner Inc., Gartner’s Top Predictions for IT Organizations and Users, 2012 and Beyond: Control Slips Away, G00226767, 23 November 20119
HCL is helping many of its clients reduce their operational costs Global Firms Migrate to Greater Flexibility and Lower Costs withthrough its standardized, high-quality, low-cost services. How- HCL SAPoDever, a word of caution for all the organizations adopting ILCSwill be: Be wary of the turbulence that ILCS model can cause. A leading pharmaceutical company in the US ($3.4 billion reve- nue) and a leading manufacturer in Denmark ($4.7 billion reve-Best Practices: nue) opted for HCL’s SAP-on-Demand (SAPoD), an efficient and secure Cloud ERP solution falling under the IU4SAP category,• Remember, not all corporate IT can be delivered through and reduced their infrastructure costs by 30%. SAPoD is HCL’s ILCS. transformational service that provides customers a technology-• Before embracing ILCS, first conduct an appropriate level aligned, reference-architecture based, ready-to-implement SAP of due diligence and risk analysis specific to your organi- solution. The solution is hardware vendor neutral and is flexible zations’ risk profile and act accordingly. enough to adapt to new technology trends.• Become proficient at multi-sourcing, since adoption of ILCS increases the challenge of managing the Global Leader in Sports, Fashion & Media Scales its IT costs with co-existence within an ecosystem of different kinds of IT Standardized, Low-cost IT Services services delivered. A leading conglomerate, based out of U.S., put a cap on itsSuccess Cases: burgeoning costs of operations by leveraging HCL’s SCALE Ser- vices — Standardized, Cost-optimized, Agile, Leveraged andA Manufacturing Industry Leader Turns to Cloud for Savings Enhanced services. The customer is a leader in sports, fash- ion and media, and has been connecting brands and audi-A leading supplier of analog interface components for com- ences through sponsorships, licensing media, and consultingmunication, industrial and consumer applications devised a with unparalleled client services for more than 50 years. It usedCloud strategy to reduce its IT spending and meet its organi- the combination of HCL SCALE services, dedicated offshore &zational goal of building an agile IT organization. It leveraged onsite resources and re-badged resources that resulted in 15%HCL’s Cloud-based Collaboration and Messaging Services to reduction in operational costs. Moreover, HCL successfullymigrate its messaging data and mailboxes to the Cloud envi- managed the disparate IT environments across the customer’sronment. This resulted in $1.6 million annualized savings and diverse business units and helped it [organization] achieve truesignificant improvement in collaboration among employees business agility and scalability through its high-quality, stand-distributed across the globe. ardized low-cost offerings. Source: HCL2 Gartner Inc., Behind the Cloud: The Rise of Industrialized, Low-Cost IT Services, G00209857, 1 February 2011 10
Conclusion In the preceding pages, we have attempted to chart the broad contours of the emerging IT landscape. Of course, more detailedmaps will be needed as you explore particular regions – for example, mobility, security or cloud computing – of the new environ-ment. But this article hopefully provides a helpful overview and suggests some areas worthy of further exploration. Source: HCL 11
From the Gartner Files: Gartner’s Top Predictions for IT Organizations and Users, 2012 and Beyond: Control Slips Away These top predictions herald changes in control for IT organi- In 2013, the investment bubble will burst for consumer social zations when budgets, technologies and costs become more networks, and for enterprise social software companies in 2014. fluid and distributed. By 2016, at least 50% of enterprise email users will rely primarily on a browser, tablet or mobile client, instead of a desktop client. Overview By 2015, mobile application development (AD) projects target- ing smartphones and tablets will outnumber native PC projects The continued trends toward consumerization and cloud com- by a ratio of 4-to-1. puting highlight the movement of certain former IT responsibili- By 2016, 40% of enterprises will make proof of independent se- ties into the hands of others. As users take more control of the curity testing a precondition for using any type of cloud service. devices they will use, business managers are taking more con- At YE16, more than 50% of Global 1000 companies will have trol of the budgets IT organizations have watched shift over the stored customer-sensitive data in the public cloud. past few years. Loss of control echoes through several predic- By 2015, 35% of enterprise IT expenditures for most organiza- tions in this report. This comes with the necessary result of more tions will be managed outside the IT department’s budget. focus on certifications and a relentless attention to security in a By 2014, 20% of Asia-sourced finished goods and assemblies changing world. As the world of IT moves forward, it is finding consumed in the U.S. will shift to the Americas. that it must coordinate activities in a much wider scope than it Through 2016, the financial impact of cybercrime will grow once controlled. 10% per year, due to the continuing discovery of new vulner- abilities. Key Findings By 2015, the prices for 80% of cloud services will include a global energy surcharge. • IT budgets are moving out of the control of IT departments, Through 2015, more than 85% of Fortune 500 organizations which means IT must reach out to the business. will fail to effectively exploit big data for competitive advantage. • Cloud models are forcing changes onto internal IT depart- ments and onto traditional outsourcers, but security asser- Analysis tions and certifications for cloud providers are still lacking What You Need to Know in completeness and availability. • Mobile devices continue to outgrow PCs as preferred pri- Gartner’s top predictions for 2012 showcase the trends and events mary computing devices. that will change the nature of business today and beyond. Selected • The availability of large amounts of data will from across our research areas as the most compelling and critical overwhelm most companies’ ability to understand that data. predictions, the trends and topics they address this year speak to the reduction of control IT has over the forces that affect it. The move- Recommendations ment to cloud computing and mobile devices highlights the reduc- tion of control as consumers demand mobile devices increasingly • End-user organizations must establish a discipline of rela- over PCs. This leads to the natural desire to reduce gaps in security tionship management in their IT organizations to handle the where possible, and to gain some certification of outcomes where influx of service providers. it’s not. Lack of control is a difficult prospect for IT departments, • IT departments must become coordinators (or brokers) of which must now adapt or be swept aside. IT-related activities (across their companies) that were not specified by the IT organization originally. In addition, IT budgets, while on a slight rise, are at risk as • Design of new applications must leverage rich browser and more of the money formerly allocated to IT projects begins to mobile devices to support end-user demands for a move- be directed through the hands of non-IT managers. This leads ment from PCs to mobile devices. to increased speculation that trends such as outsourcing and • Budget management for IT projects must be an activity shared cloud computing will not only grow, but will accelerate through across multiple business units, which will control IT spending. the next five years. This growth will not come without risk or po- tential added costs. The price of generating cloud services for Strategic Planning Assumptions large numbers of consumers can lead to increased power and By 2015, low-cost cloud services will cannibalize up to 15% of cooling costs for service providers that are likely to pass them top outsourcing players’ revenue. on to consumers.12
Let us not ignore the effect of cloud computing on outsourcers follow each prediction and its effect on areas of interest.themselves. The phenomenon of cloud computing not only cutsinto the activities of IT departments, but also into the revenue of These top predictions are for general technology areas, rather thanoutsourcers that must contend with commodity cloud services being specific to industries (see “Top Industry Predictions 2011: Theand cloud pricing. Even though the cloud revenue models are Recession’s Aftermath Proves Challenging”). In reading these pre-not all established as successful, they provide a rich field for dictions, it will become apparent that our top predictions are pulledspeculation, and traditional outsourcers must respond to this directly from research that is topical and ongoing. They include im-movement just as IT organizations are doing. Alongside this is plications and recommendations for organizations seeking changea bit of a countermovement that sees certain goods and servic- opportunities. IT professionals must examine these predictions fores moving back toward the Americas, rather than in continued opportunities to increase their support for cost control, revenue gen-movement to Asia. This, in combination with a cannibalization eration and business transformation initiatives.of some outsourcer revenue, may provide an opportunity forsome businesses to gain more cost-effective services. Strategic Planning Assumptions IT ServicesWe will enter 2012 with an increase in the amount of informationavailable to us, but with a shortage of the ability to understand Strategic Planning Assumption: By 2015, low-cost cloudit. Given the shifts in control of systems that IT organizations services will cannibalize up to 15% of top outsourcing players’are facing, the loss of the ability to guarantee the consistency revenue002Eand effectiveness of data will leave many struggling to preventtheir organizations from missing key opportunities or from using Analysis By: Claudio Da Rold and Sandra Notardonatoquestionable information for strategic decisions. No regulatoryhelp is on the near horizon, and this leaves each business to de- Key Findings:cide for itself how to handle the introduction of big data, the adhoc collection and dissemination of data in social communities, • Industrialized low-cost IT services (ILCS) sit at the crossroadsand the proliferation of data across the cloud. between ITO (a $315 billion-plus market in 2011, up to almost $500 billion when considering business process out-Any organization that wishes to excel in 2012 must establish in sourcing [BPO]) and the rising cloud computing externalitself a significant discipline of coordinating distributed activi- service market (forecast to reach $150 billion by 2015, ofties. It must establish relationship management as a key skill, which more than $60 billion represents services such as soft-and train its people accordingly. The reason for this is that the ware as a service [SaaS], infrastructure utility services [IUS],lack of control can only be combated through coordinative ac- infrastructure as a service [IaaS] and platform as a servicetivities. The IT organization of the future must coordinate those [PaaS] that compete with traditional IT outsourcing [ITO]),who have the money, those who deliver the services, those who and $56 billion represents business process services thatsecure the data and those consumers who demand to set their compete with traditional BPO services.own pace for use of IT. • ILCS is an emerging market force that will alter the common perceptions of pricing and of the value of IT services. In theSelecting Predictions next three to five years, this new model will reset the value proposition of IT.The selection process included evaluating several criteria that • Low-cost cloud services will cause the cannibalization of cur-define a top prediction. The issues examined included rele- rent and potential outsourcing revenue through two differentvance, impact and audience appeal. More than 137 of the effects: direct (e.g., substitution of services that would havestrongest predictions across all research areas were submitted been delivered in-house or through traditional outsourcing)for consideration this year. and indirect (e.g., the reduction of the price at which tra- ditional outsourcing services are renewed, renegotiated orOur top predictions are intended to compel readers to ac- outsourced for the first time).tion and to position them to take advantage of the coming • In terms of the direct effect of ILCS, we are focused on thechanges, not to be damaged by them. Clarity and conciseness market size of ILCS as a segment of the broader IT serviceare also essential characteristics of our top predictions; the av- marketplace, and specifically the ITO market. Gartner be-erage reader of “The Wall Street Journal” should be able to lieves that ILCS can reach 2% of the $1 trillion~ IT service market in 2015, representing a $20 billion market. This is still 13
a relatively small size, compared with cloud services (20% of • The lower IT prices will of course also create additional, non-advertising-based services) and the ITO market. new business (especially in the small or midsize business • In terms of the indirect impact of ILCS on ITO, we are fo- [SMB] segment) from clients that would not be in a posi- cused on the ongoing price reduction driven by the com- tion to outsource or buy these services before and within petition of low-priced services and the reset of what is new service areas (IT/operational Technology [OT] con- perceived as the fair market price for specific IT services vergence, ubiquitous IT appliances, mobility, etc.). Nev- by business and IT buyers. In our assessment, the indirect ertheless, such traditional streams of outsourcing revenue impact is more than double the direct impact, due to the will be cannibalized as cloud computing, industrialized large ITO installed base, the effect of intense contract rene- services and low-cost business models are adopted. gotiations at a faster velocity resulting from shorter contract • Similar to what happened with the adoption of offshore terms, and the increased use of volume-based pricing for- delivery, it will be incumbent upon vendors to invest in mulas (price equals volume times the unit price). and adopt a new cloud-based, industrialized service • As a proxy to this prediction, we turned to the IT offshore strategy either directly or indirectly, internally or exter- delivery model (e.g., the low-cost IT skills model) and its nally. Additionally, it will be incumbent upon customers to cannibalizing effects on the traditional delivery of staff- align themselves with the service providers making those based IT services. An analysis of the past 10 years shows investments in order to ensure an IT strategy that is cost- the emergence of a group of India-based providers captur- competitive, and that has the potential to positively contrib- ing revenue from clients and existing and traditional provid- ute to cash flows. ers (the direct effect, ~4.9% of market share in 2010). This • Service providers not active enough on these new service created dramatic pricing pressure and the forced adoption models or trying to leverage the service industrialization of the global delivery model by traditional providers in or- only from a profitability perspective are likely to see their der to remain competitive (the indirect effect is estimated to growth seriously limited, and are at risk of getting mar- be roughly double the direct effect). ginalized by new entrants to the market or consolidated • As another proxy to this prediction, in early 2009, Gartner due to a decline in financial metrics. Again, using the forecast a future reduction of ITO prices for the 2009 to offshore impact as a proxy for this statement, we have 2011 time frame due to the macroeconomic environment seen roughly 25% of the most meaningful players (by and service industrialization. This reduction in price (more size and geography) in the market being acquired in last than 10% compound annual growth rate [CAGR] per year, three years due to slower revenue growth and/or operat- with peaks at more than 20% per year on some specific ing margin underperformance. On a positive note, the service offering) did come to fruition, as forecast. risk of revenue cannibalization is offset by the potential • We forecast now that ILCS is the market benchmark that will to increase operating margins as investments achieve cause ITO unit price reductions to remain an ongoing trend economies of scale. for at least the next five years. • Buyers of services (either already outsourced or in-house) will operate in a market where traditional outsourcing deal unit Market Implications: prices will decline. Although outsourcing contracts are typi- cally three to five years for an average term, we see multiple • Despite a limited direct market impact (~$20 billion by entry points for price renegotiation: 2015), ILCS offerings will reset the ITO market price in the • Annual discussions, based on best-practice benchmark- next five years. We expect to see marketing messages like ing clauses. “We manage your SAP infrastructure for less than $10 per • Through renewals, extensions and renegotiations (most user per month. Why are you spending more?” to increas- organizations renegotiated their deals in 2009 to 2011). ingly fuel CFOs’ and CEOs’ interest, further pushing IT • At the end of the term through market bid, RFP or tender. spending as an operating expense externally delivered and In this case – almost by definition – the new deal is signed no longer a capital expense internally managed. at a fair – often near to the lowest – market price. • This sort of external benchmark – regardless whether the • With exit clauses that allow the client to leave a contract advertisement is entirely applicable or not – will accelerate and sign a new one. the transition toward industrialized, cloud-based services, • Despite the long-term nature of outsourcing deals, the reality and will heavily impact the renewal of ITO contracts in the is that the price can change over time, and will be influenced next five years. Clients will either migrate toward new pro- directly or indirectly by market prices. viders or ask their traditional outsourcers to deliver these • Importantly, macroeconomic trends will have a significant services at the right service quality and price points. impact on the outcome of this transformation. A reaccelera-14
tion of global economic growth would reduce the negative management and governance. Expect market turbulence and effect of ILCS (due to higher general IT service market growth provider troubles in the planning period. and the growth of IT service volumes), while a long-term • Don’t sign outsourcing deals that are too long in term (three stagnation or a double-dip would depress the IT years is the norm now), exclusive or broad in scope to limit service market growth in advanced economies, and would your ability to leverage on new service offerings and declin- potentially accelerate the adoption of ILCS (see “Uncertainty ing prices. and Low Prices Could Stall the Growth of the IT Services • In addition to traditional benchmark approaches, measure Market by 2013”). the cost per unit, per month of your infrastructure and ap-• Assuming the continued decline in market prices, we see plication delivery to prove your efficiency as a provider or the adoption of industrialized services having a significant broker of cloud services. impact on client sourcing strategies. Buyers of services must be aware that the cultural change from made in-house IT Social Networks services into industrialized, external services is not a small step, and a new culture of adapt to/adopt and outside/in Strategic Planning Assumption: In 2013, the investment bub- must apply. Leveraging the ILCS wave is much more than ble will burst for consumer social networks, and for enterprise a procurement ability to buy at the lowest price. It involves social software companies in 2014. a business-driven sourcing strategy, the ability to manage a multisourced environment and to integrate industrialized Analysis By: Michael Gartenberg and Matt Cain services into end-to-end business processes.• All in all, Gartner believes that the projected $1 trillion IT Key Findings: service market is at the beginning of a phase of further dis- ruption, similar to the one low-cost airlines have brought • Vendors in the consumer social network space are compet- in the transportation industry. There will be a near-term to ing with each other at a rate and pace that are unusually midterm onslaught from innovators on the revenue/growth/ aggressive, even in the technology market. In an attempt to margin of established businesses, causing the restructur- win new users and keep existing users engaged, new ser- ing of the industry (consolidations, merger and acquisition vices, interfaces and partnerships are accelerating, with an [M&A], restructuring, failures, etc.). This will create disrup- emphasis on capturing the entirety of a consumer’s social tion, then new value for clients, with new demands and new experience. The net result is a large crop of vendors with services available at lower price points to/from emerging overlapping features competing for a finite audience. and advanced economies. • In the enterprise market, we see many small independent social networking vendors struggling to reach critical mass atRecommendations: a time when market consolidation is starting, and megaven- dors, such as Microsoft, IBM, Oracle, Google and VMware,CIOs, CFOs, business unit managers, sourcing heads, vendor have made substantial efforts to penetrate the enterprise so-managers must: cial networking market.• Take ILCS and service price trends into account when • Success breeds success in the consumer social ecosys- refreshing your sourcing strategy, retendering your tem. The network effect – a network becomes more desir- service deals or evaluating the in-house versus outsource IT able as the number of users grows – has been the key in trade-off. driving social network growth, which makes it harder for• Understand what services you are buying and the new players to enter and compete against larger estab- value proposition of ILCS (that is, parity IT services and not lished players. differentiating business value services [DVBS]). • In the enterprise space, megavendors are, or will be, pro-• Understand that the apparent low price and ease of use viding social capabilities as horizontal platform services is not always real. An IT professional analysis of risk and consumable by applications, making it difficult for small advantages, retained cost and transition/integration invest- vendors to sell stand-alone products that provide simi- ment must be done. Despite low prices, the total cost of lar services. Google, for example, will add Google+ to sourcing can be even higher than current costs. Google Apps for Business, Microsoft added social net-• Exercise due diligence in selecting and managing vendors working to SharePoint, and Oracle will provide social in- and providers, and manage risks through disciplined sourcing frastructure services to be used by its Fusion applications. 15
• The majority of social networking interactions through independent vendors will diminish as recognition sets in that 2013 will migrate to mobile devices from PCs, creating new the opportunities for market differentiation and fast growth opportunities for consumer social networks. Established have eroded. These diminished valuations – reflected in the social networking players may not lead in mobile acuity, but slowing of new investments – will curtail the fervor to fund will be fast-followers, thereby removing a point of differen- new social networking. We expect this recognition of dimin- tiation potentially available to new entrants. ished opportunities to take slightly longer be reached in the • In the enterprise space, the same dynamic exists, and megav- enterprise space, where the market dynamics are not as clear endors, with significant investments in secure mobility services, at present. will have a substantial advantage over smaller, stand-alone vendors struggling to keep pace with mobile developments. Recommendations: • There is a wide variety of business models for consumer so- cial networks and services, but the majority will be advertis- For the consumer space: ing-driven. The result is that a limited amount of advertising dollars will be available for new players in the market. • Existing consumer social networking services must incorpo- • In the enterprise space, megavendors are in a position to rate new, value-added features and services in an attempt to subsidize social networking investments for years. Smaller, keep users engaged longer, and to prevent defections. independent vendors have no such luxury. • Brands looking to engage with consumers via social net- • Future growth in the consumer and enterprise social net- works must take care in evaluating how their budgets will working market will depend on how well current players be spent, and the likely success of new entrants versus exist- can expand market share. Vendors that have the resources ing players. While it will be easier to stand out on a newer to challenge the status quo will likely be other large compa- service, that service will likely have fewer users and greater nies looking to expand in the social space and not smaller difficulty keeping them engaged. startups, which lack the substantial capital to challenge the • Partners of consumer social networks and organizations that established players. depend on social networks for their marketing, branding or • Consumers and enterprise users are wary of changing sales platforms must use social analytics tools to monitor and/or rebuilding social graphs. Data portability is limited, their customers’ reactions and use of social networks, and at best. Consequently, the longer a user participates in a must be prepared to follow their customers if they begin to social network, the more difficult it is to migrate to a new migrate to other social technologies and services, and to platform. This creates barriers to entry for new entrants. evaluate new entrants into the market. • Newer and niche vendors must provide a differentiated ex- Market Implications: perience in order to capture new users. This can be through features and services not currently offered by dominant play- • Social networking is one of the top activities on the Inter- ers, or by targeting more niche demographics and markets. net. The overall number of users continues to rise, but the • New entrants into the social networking market must make overall growth rate will slow over the next two years as the it easier for consumers to integrate existing social graphs number of unaffiliated consumer declines. New entrants, into their services. Investors in new services must consider therefore, will have a much smaller pool of consumers to that consumers will not continue to recreate their social target, making the staggering growth rates of established graphs repeatedly with each new service that emerges networks difficult to reproduce. without ease and strong product differentiation. • Penetration rates for social networking in the enterprise are still less than 15%, so there is substantial room for growth. For the enterprise space: But the delta between best-of-breed independent vendors and megavendors has diminished substantially over the past • Carefully weigh the benefits versus risks of using a small sup- two years, and will continue to erode, making it difficult for plier with a richer feature set against a large, incumbent sup- organizations to justify an investment with a small supplier. plier with emerging social networking ambitions. • The maturing of the market for consumer and enter- • Understand the financial status of smaller players, and what prise social networking will impact the amount of capital the exit strategy is likely to be. available for startups in the space. While substantial • Understand the potential benefits of integrating social net- excitement will be raised by private firms going public (e.g., working over an existing vendor stack versus the benefit of a Facebook and Jive), we believe that valuations of smaller lightly coupled social networking service.16
• We expect the impending Windows 8 (by YE12) from Micro-Social Software and Collaboration soft to contribute to the trend. This OS will run on ARM pro- cessers (in addition to Intel processors), and will be touch-Strategic Planning Assumption: By 2016, at least 50% of enabled for deployment on tablets, accelerating the uptakeenterprise email users will rely primarily on a browser, tablet or of Outlook running on tablets and smartphones. We alsomobile client, instead of a desktop client. believe it is inevitable that Microsoft will release versions of Outlook running on Android and iOS devices sometime inAnalysis By: Matt Cain the next year or two. Finally, the near-universal acceptance of the Exchange Active Sync protocol for mobile access toKey Findings: email – and the rise of rich mobile device management tools – facilitates the broad use of mobile devices for email ac-• While the rise in popularity of mobile devices and the grow- cess. However, users will still have access to a desktop client, ing comfort with browser use for enterprise applications in addition to mobile access mechanisms. preordains a richer mix of email clients and access mecha- nisms, we believe the pace of change over the next four Market Implications: years will be breathtaking.• Most organizations routinely enable browser access to • We expect mobile device manufacturers – Apple, Nokia, email and calendars, but the vast majority of email read/ Samsung, LG, Motorola, etc. – to enter a new phase of com- writes are done with a traditional desktop client. The grow- petition to offer rich email clients to maintain rough parity and ing parity between desktop clients and browser functionality, to establish competitive differential. Email system vendors – however, coupled with an IT group desire to reduce desktop Microsoft, IBM, VMware and Google – are also likely to build complexity via the removal of the PC client, is rapidly accel- mobile clients for diverse set of devices for the same reason. erating browser access to email. The growing popularity of • Market opportunities for mobile device management plat- Google Gmail – which is optimized for browser access – as form vendors will soar. Increased pressure will be on those an enterprise email supplier will accelerate email browser suppliers to accommodate an increasing portfolio of col- dependency, as will the uptake of HTML5, which will supply laboration services, including IM, Web conferencing, social much-needed offline and drag-and-drop support. Micro- networking and shared workspaces. soft, too, is likely to release rich HTML5 browser support for Exchange over the next year or two. Recommendations:• Migration away from local email archives/folders to very large, centralized mailboxes (particularly in the cloud) will Enterprises should: decrease the need for a desktop email client, as will the use of Microsoft’s personal archive feature in Exchange • Develop policies governing the use of corporate- and em- 2010, which offers a server-side alternative to client-side ployee-supplied devices, and should implement rich device archives. Research In Motion’s (RIM’s) intention to offer no- management applications for controlling and securing re- fee BlackBerry Enterprise Server services to Microsoft Office mote access. 365 cloud email customers (expected in 2Q12) may help • Upgrade email systems to versions that support rich browser Office 365 maintain its presence in the enterprise. and mobile device access to email services.• Lifestyle changes will also accelerate the trend. There is a grow- • Investigate opportunities to eliminate desktop email clients ing expectation on the part of businesses that employees will to reduce PC complexity and eliminate local email archives. be available during nonwork hours, and that location should • Work with HR resources to optimize life/work balances and de- not be a barrier to communication. Furthermore, users will no crease employee stress due to growing availability expectations. longer have a primary device for corporate collaboration, but • Ensure that the remote email access infrastructure has a will rely on a fleet of self- and business-provided devices with high degree of redundancy at all points to ensure continu- the expectation of a largely uniform user experience. We ex- ous availability. pect Google and Apple to increase the sophistication of native • Plan to extend email mobility to adjacent collaboration ser- Android and iOS email clients. Rapid and deep penetration of vices such as IM, shared workspaces and social networking. tablets – with Amazon’s forthcoming $200 Android-based Kin- • Train users on best practices for email communications in a dle Fire expected to be a fast-follower to the iPad – will increase mobile world (better, shorter subject lines, shorter messages, demands for mobile email access. clear action requests, etc). 17
Strategic Planning Assumption: By 2015, mobile AD pro- applications on tablets – employees are accustomed to the jects targeting smartphones and tablets will outnumber native app store provisioning model, and the consumerization of PC projects by a ratio of 4-to-1. IT is raising expectations around mobile application experi- ence. Consumerization and the scale of the smartphone and Mobile and Wireless Communications media tablet market are also causing organizations to con- sider consumer-grade devices for things like field sales, field Analysis By: William Clark service, survey taking, analytics and inventory. In contrast, in B2E, many enterprise application vendors are moving toward Key Findings: portals that adapt, further reducing the number PC-targeted, client-side projects. • Smartphones and tablets represent over 90% of the net-new • B2B mobile applications are very important for many en- growth in device adoption for the coming four years, and in- terprises, and present a unique challenge – B2E-type re- creasing application platform capability across all classes of quirements for security and functionality that can exceed mobile phones is spurring a new frontier of innovation, particu- what Web/portals can achieve, but B2C-type require- larly where mobile capabilities can be integrated with location, ments, in that, in most cases, organizations cannot dictate presence and social information to enhance usefulness. the devices being used for mobile applications. • Mobile AD is rapidly moving through its adolescence, trig- • The fact that the definition of applications is changing to a gered by a broad increase in demand for all categories hybrid model of Web and native functions wrapped together of mobile applications: business-to-consumer (B2C), busi- lowers the barriers to creation. The bottom line is that inno- ness-to-employee (B2E) and B2B. vation is moving to the edge for mobile devices; whereas, in • The very definition of applications is changing – many mobile 2011, Gartner estimates app development projects target- applications are mere shells (or hybrid) apps or applets – Web- ing PCs to be on par with mobile development, future adop- technology-oriented, but wrapped in native device code. tion (e.g., the installed base of smartphones and tables) will triple from 4Q10 to 1Q14, and will result in the vast major- Market Implications: ity of client-side applications being mobile only or mobile first for these devices – a ratio that Gartner estimates at four • Smartphones and tablets represent over 90% of the net-new new mobile AD projects for each PC-oriented project. growth in device adoption for the coming four years, and the increasing application platform capability across all classes of Recommendations: mobile phones is spurring a new frontier of innovation, particu- larly where mobile capabilities can be integrated with location, • AD organizations should perform a mobile-only, mobile- presence and social information to enhance usefulness. first, or legacy assessment of AD. Too many developers still • Web enablement, especially with the advent of HTML5, is a assume that desktop applications are needed, or that legacy key part of mobile application strategy, native or rich mo- applications need to be moved forward. bile AD demands are being triggered in all three areas: • Virtualization (Citrix Receiver and Wyse PocketCloud) is be- • In B2C, due to the marketing/advertising impact of ing used to project PC applications to tablets today, and app stores, as well as the huge financial potential of while the user experience is, in many cases poor, there are targeted context-aware advertising and offers, most cases where this approach can be used to avoid further in- CMOs are demanding applications, which can add vestment in those projects. even greater value or opportunity if they are resident • Complement tactical investments in mobile AD tools (which and provide stickiness to consumers. In addition, many will remain volatile through 2015) with an understanding of media-rich or gaming applications require native mobile the trade-offs of six styles of mobile application architecture development. For consumer-facing enterprises, such (thick, thin, rich, streaming, messaging and no client). as retailers and consumer packaged goods, mobile consumer application strategies cover Web, native and Cloud Security messaging (SMS/MMS) channels, and comprehensive strategies are linking these together. Strategic Planning Assumption: By 2016, 40% of enterprises • In B2E, bring your own device (BYOD) is having a major im- will make proof of independent security testing a precondition pact on user demand, especially in requests for supporting for using any type of cloud service.18
Analysis By: Joseph Feiman • Gartner believes that inspectors’ certifications will even- tually – around 2016 – become a viable alternative orKey Findings: complement to third-party testing. This means that instead of requesting that a third-party security vendor conduct• Cloud systems, and the interfaces through which they service testing on the enterprise’s behalf, the enterprise will be their clients, can often be exploited by such attacks as SQL in- satisfied with a cloud provider’s certificate stating that a jection, cross-site scripting and cross-site request forgery, which reputable third-party security vendor has already tested its could result in the loss of sensitive information, unauthorized applications. asset transfer and system behaviors that endanger system users (individuals and enterprises, humans and equipment). Recommendations:• Conventions have not yet been developed for the appropri- ate level and form of security testing of cloud providers’ • Demand assurances from cloud providers that their software technologies, and expectations for provider transparency has been tested for security vulnerabilities. Security testing of have not been well-established. cloud providers’ systems conducted by reputable independ- ent application security testing vendors is a preferred option.Market Implications: An alternative is security testing conducted by the cloud pro- vider itself.• Cloud providers of all kinds – including providers of appli- • Accept security certificates issued by trusted security vendors if cation operations, data management, infrastructure man- they meet your industry’s and enterprise’s security standards. agement and security – will become top targets for hackers • Seek cloud services brokerages that demonstrate a profi- from all over the world. This is because cloud providers ciency in security inspection, auditing and certification. store critical data from a large number of cloud clients, which, from the hackers’ viewpoint, is worth stealing, and Content Management run applications that are worth abusing. For this reason, while enterprises are evaluating the potential cloud benefits Strategic Planning Assumption: At YE16, more than 50% of in terms of management simplicity, economies of scale and Global 1000 companies will have stored customer-sensitive workforce optimization, it is equally critical that they care- data in the public cloud. fully evaluate cloud services for their ability to resist security threats and attacks. Analysis By: Gavin Tay• Enterprises will be unable to test cloud providers’ systems themselves for a number of reasons. The applications the Key Findings: cloud provider uses to service its clients are its most valu- able intellectual property, and the provider will likely be • With the current global economy facing ongoing financial reluctant to grant access to them for inspection purposes. pressure, organizations are compelled to reduce operational Moreover, even when inspection is authorized by the cloud costs and streamline their efficiency. Responding to this im- provider, most enterprises do not have the necessary skills perative, it is estimated that more than 20% of organizations or resources to conduct such security testing. For this rea- have already begun to selectively store their customer-sensi- son, many enterprises will use cloud services brokerages as tive data in a hybrid architecture that is a combined deploy- the inspecting agency. ment of their on-premises solutions with a private and/or• Vendors of application security testing technologies – both public cloud provider in 2011. static application security testing (SAST) and dynamic ap- • In 2010, more than 40% of data archiving deployments plication security testing (DAST) – will play a critical role that contained sensitive data were to the cloud. Many CIOs in the third-party independent testing and compliance veri- rank the improvement of their agility very high, but fear fication of outsourced, packaged and cloud applications. the trade-off in introducing greater risk, such as lapses in Most of these vendors have already begun to deliver their security, compliance, audit, availability, reputation or, im- capabilities as services, offering them alongside their portantly, custody of their critical data. Leaders of organiza- application security products. Some startup vendors have tions must realize that by going to a hybrid architecture, not focused exclusively on security as a service and do not offer only will they add significant complexity, but they will also products at all. This is further advancing SAST and DAST continue to bear both the tangible and intangible costs of vendors’ capability to test cloud providers’ systems. running multiple environments. 19
Market Implications: of their adoption, for example, disaster recovery, high-avail- ability SLAs, authentication vulnerabilities, in-country regula- • As global organizations commence a progressive journey to tions for data retention and application compatibility. the public cloud, their primary objectives to consistently de- • Weigh the tangible and intangible costs of each risk. Exam- light patriotic and new customers, as well as improve busi- ples of questions to ask include: ness performance, will continue to remain a priority. In so • How much does it cost to migrate from one public cloud pro- doing, organizations will reduce operational costs, gain ef- vider to another (traces of intellectual property left behind)? ficiency, increase business agility and attain regulatory com- • How much money and/or reputation will the organization pliance. This journey to the public cloud will take organiza- suffer from downtime (unrecoverable data)? tions to the next level to fulfill these objectives; however, it • Legal counsels of organizations should assess the jurisdiction will inevitably prove to be one with its fair set of challenges. of data ownership in the event of a liquidation or seizure, They include: especially when operating on a global platform. • Organizations operating in countries that require data resi- • Network and security specialists should conduct a walk- dency, each with its distinct laws. through of the vendor’s data center for compliance or audit • The data privacy laws of world governments, for example, checks as they would their organization’s infrastructure. intrusion of privacy by mining data of public clouds. • Security risk and vulnerabilities (e.g., physical, network, IT and Operational Technology software platform and auditing/governance policies) of the public cloud infrastructure will change as the cloud evolves. Strategic Planning Assumption: By 2015, 35% of enterprise • Lack of standards for intercloud dependency or integration. IT expenditures for most organizations will be managed outside • Organizations will recognize the need to re-engineer their the IT department’s budget. business processes and governance/data retention policies as they embark on the public cloud. The growth of organi- Analysis By: Brian Prentice zational roles such as legal counsel, infrastructure planning engineers, and network and security specialists will be in Key Findings: much greater demand. • Most IT organizations are allocating 80% their budgets to Recommendations: “keep the lights on” expenses. The other 20% of IT spending is for activities that grow and transform the business. For international information communication authorities: • Next-generation digital enterprises are being driven by a new wave of business managers and individual employees who • Governing bodies from all countries should collaborate on no longer need technology to be contextualized for them by a mutually developed cloud standard and framework of an IT department. These people are demanding control over operation, such as the Cloud Data Management Interface the IT expenditure required to evolve the organization within from SNIA. the confines of their roles and responsibilities. Numerous ex- • Harness their efforts in being an advocate for greater regu- amples of this pressure exist today: lation in public clouds, and examine providing legal as- • Cloud computing is expected to grow to 20% or more of the sistance, particularly smaller organizations that have pro- total IT budget by 2013. Our research indicates there is al- ceeded with initial adoption. ready significant non-IT involvement in decision making with finance, marketing, HR and other business, acting as key For organizations: stakeholders between 25% to 30% of the time and funding computing services between 10% to 30% of the time. • Continue pilots and active projects using public cloud offer- • Global spending on media tablets is forecast to increase ings with less sensitive data before progressing to customer- at an annual average rate of 52% through 2015. That is sensitive data, such as finance/accounting, CRM, project set against a backdrop of weakening demand for traditional management, supply chain management, HR, manufactur- PCs in developed economies. These devices will have an ing, business partner management, etc. increased impact on the enterprise, yet it is users who are • IT leaders should examine the nuances and risk of a public driving both the purchases and, as a result, the platform sup- cloud or, conversely, should prepare better in anticipation port decisions required by the IT organization.20
• Aligning physical-equipment-oriented technology (opera- spending will continue to increase, but CIOs will have dimin- tional technology), developed, implemented and supported ished control over it. A majority of organizations – between separately from the IT groups with traditional IT systems is 50% and 60% – will see IT expenditures managed outside surfacing as a general management concern. While an in- the IT department growing to 35% of total spending. By and tegrated approach is required, IT organizations must ulti- large, this will not be offset by equivalent reductions in the IT mately recognize that line-of-business managers are in the department’s budget, as Gartner sees an ongoing increase best position to steer the practical application of building in IT budgets of 1.5% to 2.5% over the next four years. How- control systems, geological modeling tools, automated pro- ever, this extent of IT expenditure within the business is not duction and broadcasting equipment or warehouse auto- universal. More conservative organizations – roughly one- mation systems. quarter – will see a lower level of IT expenditure outside the IT department. This will more likely be 20% to 25%. The re-Market Implications: maining one-quarter, with highly conservative IT and non-IT professionals, will see little to no IT expenditure outside the• A constant refrain from CIOs has been the desire to drive IT department. greater alignment between the IT organization and the rest • Ultimately, CIOs will find themselves faced with an existential of the business. Underlying this wish was the hope that the question – are they ultimately being asked to do the same business would better understand the inherent potential of IT. or more with less, or do they need to recast their organiza- That wish is rapidly coming true, but not necessarily in the tion’s value proposition in the context of a changed business way most in the IT profession would have imagined. Rather landscape and funding assumptions. than seeking IT professionals help to apply established IT products within established IT practices, non-IT professionals Recommendations: are understanding the transformative potential of digitization and are applying these ideas in their own way. • CIOs should increase their focus toward connective technol-• The modern marketing organization is a perfect example. ogy – the enabling tools that tie business solutions together. As recently as 15 years ago, marketing was dominated Connective technologies include master data management, by creative thinkers who obsessed over ephemeral brand business intelligence (BI) and analytics, business process messages, while taking great pride in a 5% response rate management (BPM) suites, composition technology, process on direct mail campaigns. Today’s marketing profession is and data integration, service-oriented architecture (SOA) obsessed with gathering and analyzing information. They governance technology, and identity and access manage- have an increasingly nuanced understanding of social me- ment architectures. dia borne from constant trial and error. They are driven by • Put the “I” back in IT. Many IT organizations are skewed to- a direct and quantifiable impact on revenue. The modern ward technology when the emerging digital enterprise thrives marketing managers’ understanding of the role technology on information. While individual lines of business will gener- plays in achieving each of these results has eclipsed that ate and analyze large volumes of data, it is the IT organi- of the average IT professional. This dynamic is playing out zation that is best positioned to act as the data caretaker. across departments – from supply chain managers to HR Central to achieving this outcome is to recognize that data directors. Even individual employees are applying technol- is an asset in its own right – not a theoretical asset, but one ogy to improve personal productivity more rapidly than IT that should ultimately be accounted for in the organization’s organizations can keep up with. balance sheet.• As business managers and employees see the increased value in IT and a diminishing value proposition from IT de- Supply Chain partments, the resulting dynamic will play out for the fund- ing processes. CIOs will see some of their current budget Strategic Planning Assumption: By 2014, 20% of Asia- simply reallocated to other areas of the business. In other sourced finished goods and assemblies consumed in the U.S. cases, IT projects will be redefined as business projects, with will shift to the Americas. line-of-business managers in control. More organizations will find themselves exploring employee-funded devices. IT Analysis By: Michael Dominy 21