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1
2 Speed IT
Confronting C-level Executives
Prepared By: Vishal, April 9, 2015
2
2 Speed IT
Evolution To Digital Business
• Ubiquity of internet has led to Digital
Transformation across vertical indust...
3
Bimodal IT
• Bimodal IT is the practice of managing two separate, coherent
modes of IT delivery :
• one focused on stabi...
4
Attributes
Mode 1 (Industrial IT) Attributes Mode 2 (Digital IT)
Reliability Goal Agility
Price for Performance Value Re...
5
Impact on Value
Source: Gartner.
Traditional Mindset IOT Mindset
Value Creation
Customer
Needs
Solve for existing needs ...
6
Impact on Sourcing Strategy
Source: Gartner.
Onshore Offshore
Captive
Location
ControlOutsource
Shared
Services
Vendor
C...
7
Impact on Sales Strategy
1 2 3 4 5 6 7 8 9 10Small Big
Scale
1 2 3 4 5 6 7 8 9 10Achievable Outperforming
Risk
1 2 3 4 5...
8 Source: HBR – Challenger Selling
• Under Digital IT selling is not about relationships. It's
not because relationships n...
9
Sales Strategy
Teach - Why Insight Driven
19%
Company and
Brand Impact
53%
% of Contribution to Customer Loyalty
19%
Pro...
10 Source: BCG
Impact on IT, Relationships and Stakeholders
Applications
Speed& Cycle
Time
Methodology
and Tools
Skills
Cu...
11
Cultural Havoc
Collaboration
Customer
Intimacy
Control
Operational
Excellence
Cultivation
Disruptive
Innovation
Compete...
12
Pricing - Mean Reversion
LowEarningsHigh
Time
Limits to Growth (?)
IT Services (cost is lowering)
• Traditional IT has ...
13
Pricing
Source: HBR, MIT, Gartner.
Time & Material
PAYG
Incentive
Shared Risk-Reward
Gain-Sharing/…
Open Book
Cost Plus...
14
Shift to IT aaS
Source: HBR, MIT, Gartner.
• Business leaders purchase IaaS with business budget.
• Typically the provi...
15
Impact on MSA
2 Speed IT
• MSA for Traditional IT and Digital IT requires different capabilities and commitments
• This...
16
2 Speed IT
IT Spending - Segmentation
Low Maturity Market Leader
CAPEX - 24%
OPEX – 76%
Industry Generic Industry Speci...
17
2 Speed IT
IT Spending by Departments
Source: Gartner
58 22 20
IT Spend Share
Funded by IT Budget Funded by Other Dept....
18
Understand Your Negotiation Goals
• Financial target, Scope change, Improvement needs
• Flexibility, Prioritise goals, ...
19
2 Speed IT
CIO’s Challenge
Source: EY, MIT, HBR
• How to ensure CIO is relevant as Business is spending more than 40% o...
20
2 Speed IT
Source: EY, MIT, HBR
• An ability to communicate the potential of IT to key business partners
 Need to get ...
21
2 Speed IT
CFO’s Challenge
Source: EY,MIT, HBR
• CFOs continue to struggle with balancing their responsibility to maint...
22
Thank you
Contact
For further information, please contact:
Name: Vishal
Title: Client Solutions Manager
Address: Telstr...
23
Appendix
24
Australian IT Industry
2015
I need to update this section and link it, in context of AP Account’s Growth
25
Australian
IT Industry – Financial Indicator
Australian Industry IT Spend - 2015 $ AUD in bn.
Total IT Spend 26.42 (+4%...
26
Australian
IT Industry – Static View 2015
• Govt. cloud computing strategy create
opportunity for vendors in the public...
27
Australian
IT Industry – Focus FY 2015
Verticals vs
Trends/Themes
Govt.
Travel,
Logistics, Hosp.
Resources Utilities
Fi...
28
Australian
IT Industry Competitive Position
Dominant
Strong
Tenable
Favorable
Weak
DeclineMaturity
Competitive
Shakeout...
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Two Speed IT

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Two Speed IT

  1. 1. 1 2 Speed IT Confronting C-level Executives Prepared By: Vishal, April 9, 2015
  2. 2. 2 2 Speed IT Evolution To Digital Business • Ubiquity of internet has led to Digital Transformation across vertical industries and merging the gap between physical and digital world. • Digital Transformation is driving fundamental shift in Business Model. This shift has led to deep impact on organisations operation, structure and, their culture. • This has created new opportunities for players like Telstra to engage Australia in their Digital Enablement.
  3. 3. 3 Bimodal IT • Bimodal IT is the practice of managing two separate, coherent modes of IT delivery : • one focused on stability • And the other on agility Governance Mode 1 Industrial IT Mode 2 Digital IT Change Core Run - Fullfillment Differentiator Demand Driven Innovation Outcome Driven Source: Gartner. • Traditionally, IT functions as a cost centre concentrating on fostering cost savings (efficiency), rather than spearheading initiatives that drive top-line revenue growth (effectiveness). Technology now needs to drive strategic growth, instead of just concentrating on business as usual. • Utility IT (Mode1) can continue to be measured and delivered with an eye on cost containment. • Treating Strategic IT (Mode2) the same way will result in lost opportunities, poor customer experiences, and a reputation for being slow to market—a sure way to lose the next generation of both customers and employees. 2 Speed IT
  4. 4. 4 Attributes Mode 1 (Industrial IT) Attributes Mode 2 (Digital IT) Reliability Goal Agility Price for Performance Value Revenue Brand, Customer Exp. Waterfall, V-Model, High Ceremony Approach Agile, Kanban, Low Ceremony Plan Driven, Approval Based Governance Empirical, Continuous, Process Based Enterprise Suppliers, Long Term Deals Sourcing Small, New Vendors, Short Term Deals Good at Conventional Process, Projects Talent Good at new & Uncertain projects IT Centric, Removed from Customer Culture Business Centric, Close to Customer Months Cycle Times Days/Weeks Status Quo is your Competitor Sales Challenge Agility and Innovation is a Must as shelf life is short Source: Gartner. 2 Speed IT
  5. 5. 5 Impact on Value Source: Gartner. Traditional Mindset IOT Mindset Value Creation Customer Needs Solve for existing needs & lifestyle in a reactive manner Address real time & emergent need in a predictive manner Offering Stand alone product becomes obsolete over time Product refreshes over the air updates & has synergy value Role of Data Single point data is used for future product requirements Information convergence creates the experience for current products and enables service Value Capture Path to Profit Sell the next product or device Enable Recurring Revenue Control Points Potentially included commodity advantages, IP ownership and brand Adds personalisation and context; network effects between products Capability Development Leverage core commodity competencies, existing resources & processes Understand how other ecosystem partners make money 2 Speed IT
  6. 6. 6 Impact on Sourcing Strategy Source: Gartner. Onshore Offshore Captive Location ControlOutsource Shared Services Vendor Captive Offshoring Onshore Outsourcing Traditional IT Digital IT Competence & Performance ValueandDifferentiation Buy, Outsource Make & Invest Retain, Spinoff Buy & Invest • Traditional IT has become a commodity. Hence sourcing has moved from in house to onshore. Digital IT is about innovation hence its about acquiring and building new capabilities and going to market to find nimble vendors. ….. ….. 2 Speed IT
  7. 7. 7 Impact on Sales Strategy 1 2 3 4 5 6 7 8 9 10Small Big Scale 1 2 3 4 5 6 7 8 9 10Achievable Outperforming Risk 1 2 3 4 5 6 7 8 9 10Following Leading Edge Innovativeness 1 2 3 4 5 6 7 8 9 10Easy Difficult Difficulty Source: KPMG, Neil Rackman Relationship Builder ChallengerPitch • Traditional IT requires traditional Sales approach like SPIN. CIO’s and respective stakeholders are used to this approach as this is about running the operations or keeping the lights on. • Digital IT requires Insight driven sales model. In a Digitally Connected World Information is readily available on all aspects of a sales cycle. Hence customers are looking for insights driven conversation. • Leveraging SAFE - BOLD framework, Challengers/Advisors can position their value proposition to be BOLD and mitigate moves by Relationship Builders to be SAFE. Traditional IT Digital IT 2 Speed IT
  8. 8. 8 Source: HBR – Challenger Selling • Under Digital IT selling is not about relationships. It's not because relationships no longer matter rather, what the data suggests is what matters is the nature of the relationships. • Challengers win by pushing customers to think differently, using insight to create constructive tension in the sale. • Relationship Builders, on the other hand, focus on relieving tension by giving in to the customer's every demand. • Challengers push customers outside their comfort zone, Relationship Builders are focused on being accepted into it. They focus on building strong personal relationships across the customer organization, being likable and generous with their time. • The Relationship Builder adopts a service mentality. While the Challenger is focused on customer value, the Relationship Builder is more concerned with convenience. • At the end of the day, a conversation with a Relationship Builder is probably professional, even enjoyable, but it isn't as effective because it doesn't ultimately help customers make progress against their goals. • This finding — that Challengers win and Relationship Builders lose — is one that sales leaders often find deeply troubling Impact on Sales Rep Profile 2 Speed IT
  9. 9. 9 Sales Strategy Teach - Why Insight Driven 19% Company and Brand Impact 53% % of Contribution to Customer Loyalty 19% Product and Service Delivery 9% Value to Price Purchase Experience Purchase Experience • Offers Unique and valuable perspective on the market • Navigate alternatives, Avoid potential Land Mines • Educates me on new issues and outcomes • Supplier is easy to buy from • Supplier has widespread support across my organisation Source: HBR, The Challenger Sales Model In a Digitally Connected World where Information is readily available on all aspects of a sales cycle (proposed solution or an initiative), it is the Purchase Experience of Stakeholders that drives the successful outcome.
  10. 10. 10 Source: BCG Impact on IT, Relationships and Stakeholders Applications Speed& Cycle Time Methodology and Tools Skills Customer to Business Business to IT IT to IT IT to 3rd Parties Mode 1 Traditional IT - Industrial (non Digital) Speed Mode 2 Web Scale IT - Digital Speed • Mature technologies with long life cycles • Emerging, short life time, built on fast changing technology with legacy technologies • Release cycle of 6 to 12 months driven by planned business needs • Quick cycles (<1 mth) from idea to deployment, driven by rapidly changing users needs and comp. • A hierarchical organisation using established frameworks and standardised approaches to design • Self organising teams using agile tools, fast evolving SDK and automated • Individuals with specialised skills • Jack of all trades who combines upto date knowledge of technologies and business • Predictable demand via established channels, products and processes • Unpredictable demands due to evolving trends, technologies and channels • Siloed and Fenced driven by mid and long term strategies • Highly collaborative and constantly changing • Siloed and Fenced, vertically integrated, tech stack is stable • Collaborative and horizontally integrated, tech stack is constantly evolving • Buyer – vendor relationship, IT controls the pace of interaction • Participating in 3rd party ecosystem, the ecosystem sets the pace 2 Speed IT
  11. 11. 11 Cultural Havoc Collaboration Customer Intimacy Control Operational Excellence Cultivation Disruptive Innovation Competence Product Leadership Competence Control Collaboration Cultivation Prioritises Work System People Idea Leads by Expertise Authority Process Charisma Organises As Work Projects Hierarchy Persistent Team Little as Possible Recruits For Competitiveness Loyalty Trustworthiness Brilliance Source: HBR, Executing Your Strategy • Under 2 speed IT, Traditional IT is predominantly ensuring to keep “lights on” and keeping a tight control on OPEX. This means taking the “Cost-Out” from every aspect of IT. This type of environment requires a culture driven by control and loyalty. People lead by Authority and hierarchy in organisation drives control. • Digital IT is predominately about agility and innovation. This means smartness and brilliance is promoted. People are always looking for new ideas to make a difference to the business. • These 2 different cultures requires varying structure and alignments, which is creating a lot grief for CIO’s. • Levering Traditional IT culture to expand across Digital IT operations will result in more chaos, pain and dissatisfaction in employees for a CIO. 2 Speed IT
  12. 12. 12 Pricing - Mean Reversion LowEarningsHigh Time Limits to Growth (?) IT Services (cost is lowering) • Traditional IT has now become a commodity. Barriers to entry are low and number of suppliers are selling similar (with minimal difference) products and services. • This has put enormous pressure on pricing of services and products, resulting in decline of prices and margins. • From a CIO’s perspective this is a welcome news as they need to free cash/equity from OPEX to acquire/build new capabilities, esp.; in digital space. • Digital IT is a high price and high margin services provided by new nimble vendors or start-ups as its predominantly T&M based and are short engagements. Since these vendors has no long term contracts like other vendors get in Traditional IT, hence a high price is commanded by them. • From a CIO’s perspective this is a welcome news as they need to free cash/equity from OPEX to acquire/build new capabilities, esp.; in digital space. • From a CIO’s perspective Digital IT enhances challenges in managing and forecasting budgets for rest of the business. 2 Speed IT
  13. 13. 13 Pricing Source: HBR, MIT, Gartner. Time & Material PAYG Incentive Shared Risk-Reward Gain-Sharing/… Open Book Cost Plus Fixed Price Pricing Options In Use Digital IT Traditional IT Min Max 2 Speed IT • Traditional IT has used various pricing options over the years from T&M to Fixed price as shown. As this become more and more commoditised options like Fixed price will be the norm for majority of engagements as most of the risk is carried by vendors. CIO’s will be tempted to go this path. • Digital IT's inherent nature and its shift to IT as a Service model (x-aas) makes its a prime candidate for PAYG/Unit based and T&M option. Ex - Using a Price per Call Pricing Model Leads to a 19% Increase in the Deal Cost. • Since engagements are short term, business have an appetite to approve these options and dictate the overall business transformation (Digital Enablement). • CIO’s have no option but to go by what business is saying as Traditional IT doesn't have the culture, expertise and resources to drive this segment.
  14. 14. 14 Shift to IT aaS Source: HBR, MIT, Gartner. • Business leaders purchase IaaS with business budget. • Typically the provider is found, researched and trialed online. • Contracts are simplified and favor Service Provider • Buyers forgoes —High-grade SLAs, transparency, console level access to VMs, global load balancing and others • One side effect of this is, it will become shadow IT in business. 2 Speed IT Workload Volume Terms & Conditions Support Environment Service LevelScope Technical Environment Labor Mkt Factors Scale • Instances • Images • MIPS • Storage • NW Cell • System Mgmt. • Security Svc. • DR • Facilities • Reporting • Availability • Response • Resolution • CSAT • Business Result • OS Standards • HW Standards • Contract Length • Penalty • Flexibility • Server IMAC • HW Refresh • DB Copies • On Site Locations • Data Center's • Unix Vendors • Winter Vendors Data Center - Under Traditional vs Digital IT
  15. 15. 15 Impact on MSA 2 Speed IT • MSA for Traditional IT and Digital IT requires different capabilities and commitments • This must be catered in mind when deal is being put together for a Digital IT landscape • Under IT aaS • 30% of existing categories are not required • 60% is greatly simplified • only 10% is retained MSA 4. Assets & 3rd Party Contracts 2. Services 1. Guiding Principles A. Reln. Integration 8. Rep. & Warranties 7. Record Keeping & Audit 6. Fees & Payment Terms C. Indep. Advisor. B. Strategic Obj. 5. Retained Authority D. Comm. Plan F. Demand Mgmt. 12. Propr. Rights 11. Limit. of Liabilities 10. Disentangl ement H. Key Personnel G. Human CapMgmt. 9. Term & Terminat. I. Contract Mgmt. K. Exit Plan 16. Insurance 15. Indemnific ation 14. Legal Compl. M. Measure. Chart L. Innov. Plan 13. Security & Confed. N. Sow, SLA, Price, OLA P. Equip.19.Misc. 18. Use of Sub Contractor 17. Dispute Resolution ATT. E. Trans. & Transf. J. Process Ownership O. Risk Framewk. 22. Accept. 21. Licensing 20. Definitions 3. Personnel RetainedLegend Not in aaS Contract Greatly Simplified Dictated
  16. 16. 16 2 Speed IT IT Spending - Segmentation Low Maturity Market Leader CAPEX - 24% OPEX – 76% Industry Generic Industry Specific Cross - Industry Transform - 14% Run – 66% Cross - Industry Private Education Financial Services Grow - 20% Efficiency – 17% Quality – 44% Customer - 25% Regulation – 8% Cost – 5 % Rev - 5% Reduce Cost – 18% Grow Revenue – 14% Protect Revenue - 54% Avoid Cost – 9% Risk - 5% • Leveraging this to get a view of current IT spending maturity. • It appears Auspost needs to grow and transform while keeping the lower OPEX. • OPEX of spend on legacy assets needs to be streamlined so that cash can be freed for integration of new capabilities acquired by acquisition or via JV. Source: Gartner
  17. 17. 17 2 Speed IT IT Spending by Departments Source: Gartner 58 22 20 IT Spend Share Funded by IT Budget Funded by Other Dept. Funded by Mktg & Comms. 67% 33% Funded by IT Non Cloud Cloud • 42% of IT spend is outside IT • 33% of IT spend is on Cloud
  18. 18. 18 Understand Your Negotiation Goals • Financial target, Scope change, Improvement needs • Flexibility, Prioritise goals, New service, Pricing models Establish a Timeline, but Don't Let It Rule You • Typical neg. takes 2 - 4 mths, Establishing a deadline is a disadvantage Manage the Negotiation Process. • Prep. a position paper or deal sheet. Neg. by provider objections. SR's legal should control the contract edits. Use an issue tracking table to manage neg. Negotiate Across All Critical Work Streams • Programme, perf., strategy, demand, svc, fin., people, relationship, legal Plan for the Cost of Negotiations • What are the costs during the negotiation process? • What issues directly affect the bottom line? Nego. with key Deal Drivers, Not just the Best legal terms • Business, Industry and IT drivers Prioritize and Negotiate the Top Issues First. • Termination, service credits, innovation, benchmarking, gain sharing, material breach events, default, SOW modification, performance & transition Don't Negotiate Transformational Terms in Outsourcing • Avoid introducing JV terms into an outsourcing agreement Plan and Be Prepared to Renegotiate For • Outsourcing deals aren't static. Clients must allow for renegotiation and build flexibility into their deals. Establish a Negotiation Strategy • Identify & prep. your nego. team, ask obvious Q’s, Expect the unexpected Negotiations Best Practice Source: HBR, MIT, Gartner. 2 Speed IT
  19. 19. 19 2 Speed IT CIO’s Challenge Source: EY, MIT, HBR • How to ensure CIO is relevant as Business is spending more than 40% of their IT budget outside the CIO organistaion • How to ensure that both modes work toward aligned priorities and have an open and collaborative style of working together • How to commit to all elements of the digital, more exploratory iterative mode, and not attempt a pick-and-mix approach • How to ensure core applications are digitally ready — configurable, flexible and no monolithic CIO’s Priorities • Articulate a vision and a roadmap of how their technology will transform their business • A relentless commitment to innovation  Constantly need to look-out for opportunities for IT to reduce costs, boost revenues, create efficiencies or facilitate the development of new products and services • A close focus on how IT can drive growth — and strong relationships with business partners, such as the front office, that enable this  In the past, CIOs have sometimes acted as gatekeepers, sanctioning projects, or not, on the basis of their technological viability and cost. CIOs’ recognise they need to be the ones pushing the projects — and to work more closely with business partners in order to turn their hopes into reality.
  20. 20. 20 2 Speed IT Source: EY, MIT, HBR • An ability to communicate the potential of IT to key business partners  Need to get into the front office and to the management team  inspiring the whole management group is going to be a vital role for CIOs in the future • Move beyond the operational elements of the CIO role  CIO’s role has moved beyond delivering the operational excellence. CIO’s need to be strategic and look outwards from the summit of IT, rather than at what lies beneath them. • The courage to take calculated risks  CIO’s need to step out of established comfort zones, learn new skills, forge new relationships and try to take advantage of opportunities that simply did not exist when most CIOs began their careers. For these reasons, CIOs are more likely to be risk-takers — and that is important, since many of the technologies they are now exploring are relatively new and untested. CIO’s Priorities
  21. 21. 21 2 Speed IT CFO’s Challenge Source: EY,MIT, HBR • CFOs continue to struggle with balancing their responsibility to maintain cost discipline with more strategic ambitions, such as setting the agenda for change. • Effective communication and understanding between CIO and CFO is a common problem. Insufficient understanding of IT issues for finance executives drives this disconnect. CFO’s Priorities • Ensure strategy drives IT and not the other way around - IT does not drive the enterprise’s strategic response • Plot a way out of the legacy trap  Organisations are not embarking on digital with a blank sheet of paper as they have legacy systems that are embedded in the business. Legacy IT and the “technical debt“ of unproductive and inefficient technology can be a significant barrier. It can prevent the organisation from gaining a SCV, because data is locked into various systems spread across organisation silos. • Shift the digital IT investment mindset from Capex to Opex.  This reduces TCO and increases bottom line. Digital IT provides greater flexibility and scalability, allowing companies to expand and contract more easily with changing demand. This provides a platform for growth. • Manage digital IT risk exposures as part of the enterprise risk framework • Unite against digital IT fragmentation
  22. 22. 22 Thank you Contact For further information, please contact: Name: Vishal Title: Client Solutions Manager Address: Telstra Client Services Unit Melbourne, VIC 3000 Australia Mobile: 0468 675 566
  23. 23. 23 Appendix
  24. 24. 24 Australian IT Industry 2015 I need to update this section and link it, in context of AP Account’s Growth
  25. 25. 25 Australian IT Industry – Financial Indicator Australian Industry IT Spend - 2015 $ AUD in bn. Total IT Spend 26.42 (+4%) • Services 10.8 (+5.8%) • Hardware 11.3 (+2.2%) • Software/Product/IP 4.3 (+2.2%) Share of Economy (%) 1.8 Software 16% Services 41% Hardware 43% Share of IT Spend in 2015
  26. 26. 26 Australian IT Industry – Static View 2015 • Govt. cloud computing strategy create opportunity for vendors in the public/SME sector. • High demand for cloud computing services. • Launch of Win8 to increase potential for for MSFT partners in hybrid (Tab/Lap) mkt. • 2nd Phase of schools project to generate an additional US $800mn. of spending. • Major projects in healthcare and smart cards. • High incomes and strong supporting infrastructure support high spending. • Strong government support for ICT programmes. • IT-literate population with high levels of PC ownership. • Strong financial sector. • Tablet sales are compensating for decline in desktop and notebook sales. • The biggest threat is of an economic slowdown in • 2015, leading to a scaling back of IT budgets. • A cheaper Aussie $ would affect consumer and business demand in the import-dependent IT mkt. • Vendors face threat of parliamentary enquiry into product pricing and are coming under pressure regarding tax arrangements. • Australia has a relatively mature domestic market, with relatively slow growth rates. • Sensitive to volatility in the global economy. StrengthOpportunities WeaknessThreats • SWOT provides a static view of Australian IT Industry. • Dynamic (VRIO or Capability based) view is not required at this stage.
  27. 27. 27 Australian IT Industry – Focus FY 2015 Verticals vs Trends/Themes Govt. Travel, Logistics, Hosp. Resources Utilities Financial Services Telecom & Media Health Retail ERP CRM Digital Enablement Cloud Enablement Social Mobility (M2M) BI/Analytics/Big Data Security BPO Extreme Rating Low Moderate High Consider ` • Following Heat Map highlights where CIO/CTO’s will focus in FY2015 across various emerging trends and themes.
  28. 28. 28 Australian IT Industry Competitive Position Dominant Strong Tenable Favorable Weak DeclineMaturity Competitive Shakeout GrowthIntroduction CompetitivePosition Wallet Share Capgemini HCL, CTSH Infosys, Wipro, TCS IBM, Accenture HP/EDS Satyam/ Mahindra, CSC Unisys, Fujitsu (In Between Strong and favorable) SMS, Oakton, DWS (Local vendors) • Following is the competitive position of various players in Australian market.

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