Monday, December 16, 2013

Heed the Role of Dev/Ops - Another Proxy for Industry Revolution

My postings are centered on the shifting sands of the outsourcing and shared services industries.  So, why is the title of this one promoting a little-known role in the bathwater of corporate organizations?
It’s a matter of symptom and significance.

Two weeks ago I wrote about The Outsourcing Industry’s Need for Renewed Relevance.  Last week the topic that motivated me was Overcoming Inertia.
I try, to the best of my ability, to share observations that are grounded in reality.  Not wishes and hopes, but facts of substance and significance.

There’s a thesis at the center of my “world view” that says companies are moving to “spot buying” of services, and unifying these service providers through platforms that provide the framework for scalable business.  I’ve seen a few progressive companies run ahead of the pack with this strategy, and more than a few innovators bring essential components of this strategy to the market.
Amazon Web Services Elastic Beanstalk is a utility perfectly suited to enabling applications being provisioned “as a service” at the whim of a savvy enterprise architect.

Companies like Gravitant are positioned to enable the brokerage of the provisioning process.
I spent time last week with a progressive CIO of a major US energy utility.  His top three issues:

1)     Engineering a services integration framework to allow for modular provisioning of business services;
2)     Enabling acquisitions and divestitures much more efficiently, predictably, and cost-effectively; and
3)     Helping to devise new sources of revenue through monetizing the “big data” that is the exhaust from his core business.
I shared with him my observation of ROIC as a key proxy for efficiency and a lever for driving the restructure of legacy business models – beyond the back-office.  He was intrigued and readily agreed that executives remain focused on ROIC as a measure of strategic performance.  He also validated that the cost-cutting which occurred during the recession has emasculated any capacity for innovation or even organic growth.

As the tides turn, companies will need to support growth by finding new ways to provision the basic operating capacity that sustains day-to-day business.

Hence, the emergence of the Dev/Ops role in the enterprise.  I view this to be just as significant an indicator of the shifting sands in our industry.
If you haven’t yet encountered a Dev/Ops persona, you may be bewildered.  A great description of the role is found here.

Companies that are committed to breaking through the status quo, determined to behave with a sense of energy and urgency, and embracing the “as a service” mantra … those are the companies that are empowering the Dev/Ops community.
Agility, speed to capability, surviving chaos … those are the attributes of a business model attuned to operating in the “as a service” economy.  Does your outsourcing or shared services operation feel like a Dev/Ops environment?  Heed the role of the connector-of-dots.


Tuesday, December 10, 2013

Overcoming Inertia / ROIC As a Proxy for Innovation in Business Models

It’s the greatest power in the universe.  Inertia.  Resistance to change.
Applied in the context of today’s business world, it can seal the fate of any company.

Look at the life of Blockbuster – a market leader in retail rental of movies.  Tell me that the executives couldn’t see the threat from nimble competitors on their horizon.  Surely they could.  Yet, the change in Blockbuster’s business model was too little, too late.
There exists an abundance of pundits who can write more eloquently than me about how difficult change is to deploy, and how important it is to survive.  My point-of-view is informed by working with those who are either so desperate, or so ambitious, to do something to control their own destiny.

Change in business models – the very nature of what a company sells, to whom, and with what form of delivery – is at the heart of the revolution in the outsourcing and shared services industry.  My post of last week outlined the need for renewed relevance among both outsourcing service providers, and enterprise shared services practitioners.
The conception and deployment of new business models frame the penultimate opportunity for the “as a service” ecosystem.  Let me outline how I see this playing out.

·       By driving commoditization of the lower-end of the business process stack, we release investment that was previously dedicated to inefficiently-deployed capital;

·       That investment allows for the rationalization of the applications layer to retire bespoke services and migrate to as-a-service solutions for common business services;

·       It also motivates the adoption of a common platform for services integration and services brokerage/orchestration;

·       Making the shift to a focused portfolio of applications enables streamlining of the operations staff;

·       These efficiencies, in turn, serve as the funding source for applying the same modernization techniques for business-oriented applications and operations.
The journey towards reinvention of business processes is self-funded through driving from commodity upwards to business-facing operations.  I also believe that a fair measure of a company’s execution on a strategy of business model reinvention is the trend in Return on Invested Capital.  ROIC portrays efficiency and effectiveness in achieving results from the investment in the business.  It’s a great proxy for leverage.

In my view, this roadmap for enterprise transformation relies on the collaboration of three executive roles to serve as the nucleus for change.  The CIO, the head of Shared Services, and the head of Supply Chain must come together to form the central point of enablement for transforming the business operations.  These are the roles with the resources, and functional responsibility, to materially adjust the operating cadence of the business through policy, partners, and funding.  Together, they can engage the business around a roadmap for transformation.  They are the stewards of ROIC and innovation.
Progressive outsourcing service providers and enterprise shared services organizations will see themselves in this roadmap for transformation.  Most, I fear, do not. 

Ultimately, fortune favors the bold, and control of one’s destiny demands courage to change the status quo.  Creativity in the restructure of a legacy business model (comprising the people/process/technology) demands new ways of thinking – beyond the back-office.

Wednesday, December 4, 2013

The Outsourcing Industry's Need for Renewed Relevance

I spent today at the Horses for Sources (@horses4sources) Blueprint 3.0 event.  Thanks to Phil Fersht (@philfersht) for the gracious invitation.  This was my return to an outsourcing-oriented industry forum and I enjoyed seeing so many old friends.

The experience motivates me to re-start my blog postings on the trends and dynamics of the outsourcing and shared services industry.  So, here we go.

My thoughts are numerous ... and pivot around a central theme of how the service providers in the global outsourcing industry seem to be stuck in an antiquated view of their relevance to their Clients.

I sat on a panel session comprising leading Advisors and my parting comment was about the fact that most larger companies (buyers of outsourcing) appear to have abandoned hope for innovation through these relationships and are moving towards a strategy of self-determination.

From my own dialogues with many Clients, I sense an accelerating strategy for platform-based services integration strategies.  These strategies allocate service responsibility to those service partners which are world-class in their particular function.

Some might call this "multi-sourcing," but I think it's an entirely new paradigm for the industry.  I am wondering how many of the "traditional" service providers have internalized this. 

Former models of staff augmentation, governance, contracting processes, benchmarking, service level management, and the like ... these are all shifting.  (Go ahead, try to apply traditional outsourcing contracting processes and terms to Amazon Web Services.)

I cited the fact that SAP, Oracle,, and VMware, among many others, are positioning themselves as the integrators of services.

This calls to question the strategy of the traditionalists ... are they intending to offer their own platforms as an alternative to the ERP narcotic that has cascaded across so many companies?  Or, are they advocates of PaaS integration strategies that place the burden of integration and interoperability on the backs of the Client?

For many of the well-established service providers, I think there's an awakening happening - or should be happening.  The definition of relevance is changing dramatically.  Clients aren't looking for "partnerships" as much as they are wanting best-in-class functions knitted together through nimble integration technologies.

The implications to the service provider community are extensive.  Further, the implications to Clients is even more extensive - to the CIO, Shared Services, and Supply Chain leaders. 

I have much more to say on this, and will post over time.  The pages in the outsourcing industry are turning, and the move towards Client-driven enterprise services integration (including "spot buying") are moving the cheese of many companies on the buy and sell side of the "as a service" ecosystem.