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Services trends 2019

Dan Greengarten

SVP, Sales, Managed & Cloud Services, Dimension Data

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The market is shifting towards outcome-based services

Enterprise clients increasingly want service providers to deliver defined business outcomes. They are no longer satisfied with not being able to reconcile traditional service level performance metrics against the outcomes they wanted from the service.

This is forcing providers to re-think the way they take managed services to market. Being held accountable for a business outcome requires a fundamental shift of risk for the provider and an evolution of their capabilities.

This trend is manifesting in the way clients are looking to partner with service providers. They are moving away from single-tower services towards full-stack services. Clients expect the service to include service integration and management to ensure a consistent client experience, regardless of the number of technologies in the service.

Adoption-based contracts are also getting more popular. This style of engagement holds the provider accountable – not just for the sale, provision, and implementation of services – but for ensuring the services are adopted so that the client achieves their desired outcome.

These trends are forcing service providers to evolve the style of engagement and the functions they offer. They now have to be able to offer consulting services to articulate the desired business outcomes in measurable terms. They have to focus on transition management to on-board clients swiftly and smoothly, and to ensure users actually utilise the service so that desired outcomes are achieved.

We’re also seeing the rise of the client success management function, a form of enduring engagement between client and service provider also designed to ensure that the service is fully adopted and the desired outcomes are achieved.

Organisations are teaming up to #innovate, rather than just #cooperate – and the market is now shifting to outcome-based services. Discover 5 trends primed to transform technology services next year in @DimensionData's Technology Trends 2019 report. Tweet this

Organisations are partnering to innovate as well as operate

Clients expect service providers to include innovation in their services. Beyond simply delivering a service ever-more cost effectively, they want the provider to co-create innovation, in both market-facing and internal operations.

The need varies according to the size and profile of the client. Clients with strong internal capabilities want to focus their resources on activities that constitute a source of competitive advantage in their market. These clients want their service provider simply to deliver excellence in operations.

 Mid-sized enterprises tend to have a greater need to partner for the technology platform for the future of their digital business. They want a service provider to help design the digital customer engagement and then create and operate the technology platform necessary to execute it.

This is not to say that large enterprises don’t also partner for their innovation. Together with our parent company, NTT, we’re working with some of the world’s largest automakers on things like the infrastructure for autonomous vehicles and the aftersales experience for the connected car.

The right operational capabilities are essential to monetise innovation
A company’s ability to monetise innovation is dependent on its IT service management capabilities. In the digital world, companies have to bring innovations to market quickly in order to combat disruption and preserve market share. To monetise its digital innovation at speed, a company needs access to an IT service management capability with:
  • high degrees of automation based on standardised operational processes, as well as suitably skilled operators
  • IT service integration, where the systems of the service provider, client, and vendor are linked to enable seamless cross-party processes.

Developing a service management capability with these characteristics is extremely onerous so most companies access them by partnering with service providers. Dimension Data's Managed Services Platform possesses all the required characteristics to accelerate and de-risk the commercialisation of digital innovations for our clients.

Platform-delivered services are critical for speed, standardisation, and scale

Hybrid IT has become the de facto operating model for almost every enterprise. While it promises many positive benefits, it also brings complexity in terms of interoperability and management. Trying to address these issues by investing in more tools only adds to the complexity.

As their IT environments become more diverse, companies need more standardisation in service management – and they’re increasingly achieving this by using partners who deliver services from platforms.

Platform-based service delivery is a faster, more reliable, and cost-effective way to set up and manage services than custom-built solutions. Platform-delivered services are more standardised and hence more automated, making management processes faster and delivering more predictable outcomes.

They enable the consistent, scalable, and repeatable processes which are critical to both the client and the provider. They’re also the prerequisite for consuming everything as a service (XaaS) and for the automated service management capabilities the market wants.

They enable the provider to drive automation to keep service costs low, and give them the agility to co-innovate, something which was not possible with traditional, FTE-style service delivery. Platform-based services also dramatically reduce onboarding times, accelerating the benefits of the service, while making the provider accountable for the adoption of the service.

The Dimension Data Managed Services Platform

Dimension Data has invested strongly in our Managed Services Platform to help our clients achieve the business outcomes they need. We are continually evolving our platform to meet market desire for XaaS, and enhance its automated service management capabilities.

Our platform uses the best industry tools, adapted with the benefit of 30 years’ experience and it includes some very clever abstraction and integration coding of our own which enables faster onboarding and more automated orchestration of services.

The platform has a micro-services architecture which enables it to integrate with both new- age tools and our clients’ service management systems. This enables effective decoupling of workloads from the underlying infrastructure, giving us the ability to manage workloads across disparate hybrid IT environments.

The platform includes pre-built, scalable, vendor-validated reference architectures for several types of workloads (productivity, collaboration, cloud, and back-up) which enable us to scale workloads automatically across hybrid IT infrastructures. The platform contains a wealth of data that yields rich analytics to inform service improvement and further automation. And it’s global – meaning clients get the same great service experience everywhere.

Companies are increasing their use of consultants to help them align technology with business strategy

Aligning technology to business strategy has always been important and companies often use the services of independent third-party consultants to help them do this.

We see this trend increasing due to the continuous change and increasing complexity in both business strategy and technology.

Practically every company has a strategy to digitalise its business, either to improve the customer experience or achieve greater efficiencies in business processes – sometimes to develop an entirely new business model.

At the same time, the technologies they’re using to execute these strategies are themselves evolving at breakneck pace: containers, programmable infrastructure, blockchain, AI, IoT, and automation all offer a myriad of choices and can be difficult to navigate – let alone master – at pace. And if that wasn’t enough, competition is intensifying, regulation is tightening, and security threats are getting more sophisticated.

As a consequence of this convergence of forces, we anticipate increasing demand for consulting services – both pure advisory services, and consulting-led managed services. In particular, we expect more demand for consulting services that help clients achieve flexible technology capabilities that allow them make strategic course alterations quickly in response to changes in their environment.

Transformative services are emerging as the preferred route to rapid digital transformation

One of the main issues for enterprise IT departments is that they can’t transform fast enough. The business often sees IT as a brake on digital innovation and goes around it to procure their own shadow IT, which raises governance and security issues.

It’s a complex issue, because most established organisations have an existing, large-scale, relatively stable business model which they need to run as efficiently as possible, and a new digital business that they’re developing in parallel that needs to flex and scale much more dynamically.

We believe the root cause of the issue for these companies is their current service delivery model. By using a mixture of DIY and point solution providers, they’ve ended up with a fragmented estate which isn’t programmable and can’t support the DevOps strategy they need in order to transform.

Essentially, they’ve been slowing themselves down by trying to do too much themselves. The trend we see is that clients will look to consume modern managed services to accelerate and de-risk transformation. Today’s generation of transformative managed services is emerging as the preferred route to rapid digital transformation.

Dimension Data’s Digital Means Business report of 2018 found that the clear majority (60%) of organisations choose to execute their digital transformation through outsourcing and partnering.

Modern managed services accelerate and de-risk digital transformation by transforming not just the technology but commercial structures, business processes, and if necessary the business model itself.

They provide companies with access to technical capabilities and scarce skillsets that would take them much longer to develop themselves. They offer economies of scale and degrees of automation necessary to run the existing technology estate more efficiently – while at the same time giving access to end-to-end programmable infrastructure necessary to support their digital business DevOps strategy.

Managed services also transfer more of the commercial risk to the service provider by allowing companies to pay for services on a more balanced part-fixed, part-flexible basis.

Clients are transferring commercial risk to the provider

The commercial models that traditionally underpinned the delivery of services, in particular managed services, have evolved significantly in recent years.

Previously, services were sold by the provider on commercial models that were almost entirely at the client’s risk. The service provider built the service, transitioned the client onto the service, then the onus shifted the client to utilise the service and start paying for it.

With today’s services, the service provider carries significantly more commercial risk. Providers must now make massive forward investments in platforms and differentiated commercial offerings ahead of any revenue from their clients. They have to build before they sell, and only generate income when clients start consuming the service.

Today’s commercial models revolve around the concept of a ‘consumable resource unit’ in some form or other. This could be ‘per user’, ‘per GB of RAM or CPU’, or even ‘per client interaction’. This shifts risk to the provider who not only has to build the service platform, but also ensure that the client adopts the service and consumes it as intended.

Instead of simply collecting a monthly fee for providing availability, service providers are increasingly becoming responsible for delivering a business outcome against a contract containing outcome-based SLAs.

This paradigm shift in the market dramatically reduces commercial and operational risk for the client.

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