I D C A N A L Y S T C O N N E C T I O N

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1 I D C A N A L Y S T C O N N E C T I O N David Tapper Vice President, Outsourcing Services H ow M a n a g ed Servi c e s C a n Optimize the B u s i n e s s Value of M i crosoft and non - M i c r o s o f t T e c h n o l o g y E n vi r o n m e n t s June 2013 Recent IDC research highlights that the top corporate imperatives for executives are focused on driving down operational costs, strengthening customer relationships, and improving financial management. These executives also indicate that their biggest challenges in executing their corporate strategy include the inability to focus the right people and resources on strategic initiatives, lack of available investment funds and resources, and inadequate linkages between their IT environment and how business processes are managed. Add to this that enterprises are adopting new technologies (e.g., virtualization, social media, mobile devices, analytics) and new delivery models (e.g., cloud, PaaS/SaaS, hosting), and their ability to meet these corporate objectives, optimize their IT capabilities, and ensure effective delivery of business processes is becoming increasingly complex. For enterprises, the result of these dynamic shifts in technologies and servicedelivery options is the need to assess not just how they can effectively manage their IT environments, but how they can leverage managed services to optimize the value of these investments across both Microsoft and non-microsoft environments to achieve their corporate imperatives. The following questions were posed by Avanade a provider of business technology solutions and managed services based on the Microsoft platform that was created by Accenture and Microsoft to David Tapper, IDC s vice president of outsourcing services, on behalf of Avanade's customers. Q. Why do organizations look to a managed service provider? A. Buyer feedback indicates that the value of managed services is centered on four factors that align with achieving corporate imperatives and executing corporate strategy. First is the issue of financial management for which buyers view managed services as a means of driving down both capex and opex costs, which help free up funds for investment. This is driven primarily by internal cost-savings initiatives and the potential high costs of upgrading to new infrastructure technologies. The second major factor involves talent and skills. Buyers view managed services as providing them with access to resources, staff, and capacity, as well as industry knowledge and expertise to support their ability to focus on core competencies. The impact of this will ultimately help enterprises focus their people on strategic initiatives that are critical to success while letting the managed service provider focus on managing their IT. The third major factor involves managed services as a means to help enterprises ensure greater agility as well as quality and consistency. Organizations believe managed services can enable time-to-market by speeding up implementation of applications across business

2 units; help achieve operational excellence by increasing operational efficiencies; and ensure consistency of service through standardized global delivery. Finally, buyers are looking to managed services to optimize current capabilities by improving existing processes and adding functionality to installed technologies. In addition, buyers are looking to managed services providers to help them adapt by fundamentally redesigning existing architecture using strategic technologies (e.g., virtualization) and emerging business models (e.g., SaaS/cloud services). Q. What are the key capabilities needed when choosing a managed service provider? A. Customer expectations for managed services providers are extensive. Buyers consistently say that they look for a provider with a full range of IT and business process services. What this means on the IT side is that the provider needs to support a full breadth of multi-vendor technologies from applications (e.g., custom and packaged) and infrastructure (e.g., servers, networks, storage, PCs/laptops/smart devices, service desk, security) to leading-edge technologies (e.g., virtualization, mobility, social media) and service delivery options (e.g., cloud, PaaS/SaaS). On the business process side, organizations look for providers that can run business processes (e.g., HR, procurement, finance and accounting), and do so largely as part of managing the IT environment. Coupled with this is that the provider has industry expertise to understand an enterprise's unique requirements that include knowledge of regulations and compliance. More importantly, providers must meet not just government regulatory requirements, but also those of customers and/or business partners. Finally, buyers expect providers to have global delivery capabilities to support them across multiple geographies. When it comes to financial management and operational excellence, buyers look for providers that have a proven record of delivering on service-level agreements (SLAs) and costs as buyers are increasingly looking to tie these to strategic business outcomes such as days sales outstanding, call resolution, percent cost savings. These issues of financial management and operational excellence are becoming increasingly important with the increased shift to technologies such as virtualization and cloud, for which customer expectation of service levels are becoming more stringent (e.g., 99.99% uptime) as indicated by recent IDC research. Finally, providers of managed services need to assure customers that they have a strong reputation, are financially stable, and for some industries, such as manufacturing, can deliver globally. As part of these expectations, when it comes to Microsoft-specific technologies, organizations look for even greater depth particularly with the proliferation of Microsoft technologies across the enterprise. In particular, enterprises seek capabilities that involve integrated solutions that support the "full stack" of Microsoft technologies (e.g., infrastructure and applications) needed to ensure consistency in technology interoperability; provide deep technical knowledge of Microsoft products (e.g., Exchange, Lync, Sharepoint, SQL, Dynamics) to gain access to specialized capabilities; and include the ability to tailor enterprise-specific solutions (e.g.,.net, VB.NET, BizTalk). Additionally, enterprises using a managed service provider for Microsoft technologies increasingly want to utilize key technologies (e.g., Dynamics, Office, Sharepoint) in a way that allows customers to define their own specific needs based on their business roles. For example, allowing sales, marketing, or manufacturing to use Dynamics, Office, or Sharepoint for their specific needs delivered via Dynamics, Azure, or Office365 to support business enterprise transformation IDC

3 Q. What benefits do organizations get from partnering with a managed service provider with deep expertise in Microsoft technologies? A. One of the biggest benefits is the ability to further optimize the ROI and quality of service across the full breadth of an IT environment that includes Microsoft technologies in conjunction with non-microsoft technologies. These benefits begin with the ability to access leading-edge innovation on Microsoft technologies to stay ahead of the market something most organizations agree is one of their greatest challenges in maintaining competitive advantage. Next is the ability to optimize the life-cycle management of technologies, which requires effective technology identification, transformation, and continuous improvement to help organizations optimize business opportunities and adapt to market conditions. When it comes to ensuring SLAs and costs both top requirements of managed services providers utilizing a provider with deep expertise of and a unique relationship with Microsoft can help further optimize these business benefits. By engaging with a provider such as this, organizations can leverage a set of integrated solutions utilizing common standards across the full breadth of Microsoft technologies. The impact of this is ensuring consistent technology alignment with the goal of delivering consistent quality of service to support effective delivery of business processes and operations. Further, organizations gain the benefit of a provider with highly tuned processes in managing across Microsoft s family of technologies that can accelerate problem identification and resolution, the result of which can further enhance the quality of service and lower the overall total cost of ownership. Q. How are enterprises using managed services as part of implementing new capabilities such as cloud, mobility, social media and analytics? A. Most enterprises look to managed service providers to do more than just operate technologies. Buyers expect providers to include professional services (consulting, integration) as well as extend their capabilities beyond just standardizing and optimizing their technology environments. Buyers want their providers to help them transform and fundamentally redesign their IT environments using new technologies (e.g., virtualization, mobile, analytics, social media) and business models (e.g., SaaS/cloud services). When it comes to mobility, buyers are looking for providers to deliver more integrated mobile services solutions that incorporate developing and integrating applications while also managing devices, which include the rapid adoption of bring your own device (BYOD). Additionally, buyers indicate that they would like to bundle different mobile services within a solution such as mobile application testing, application development, application management, and road map planning that support them across a broad set of mobile OS platforms and technologies (e.g., iphone, Android, Microsoft). Ultimately buyers are looking for providers to support their mobile needs across a diverse set of business processes and applications such as sales force automation, customer support, marketing, location-based services and more. On the cloud services side, buyers are looking both to bundle cloud, whether private or public, with managed services, and bundle the different cloud services in different combinations (e.g., IaaS, PaaS, SaaS). Further, organizations indicate that they are looking to utilize mobile and cloud for key business applications including business intelligence, CRM, sales force automation, data warehousing, and finance and accounting. For social media, organizations want managed service providers to incorporate such capabilities particularly as they relate to customer care services, whether for business processes (e.g., payroll, procurement) or technical support. The goal is to incorporate social 2013 IDC 3

4 media as part of a single view of the customer to support user needs across a set of multichannel options (e.g., Web chat, social, text, voice) in order to ensure top net promoter score ratings. Combine mobility, social and cloud together and buyer expectations are elevated even further with the need to utilize analytics to optimize the value of these capabilities while managing business risks that these disruptive technologies and services create. Most buyers are looking for providers that can provide a full array of technology services for business analytics. Q. How have managed services enabled organizations to deliver business value? A. The business value of managed services has dramatically changed over the past decade. It has moved from the historical "lift and shift" with the goal of driving down costs while standardizing technologies, to a goal requiring innovation and transformation. What does this mean? Starting with financial management, it means more than just driving down costs. It means optimizing ROI through combination of driving operational excellence; enabling enterprises to shift from capex to opex to pay-as-you-go capabilities (e.g., cloud/saas), implementing of critical technologies (e.g., virtualization, automation), and leveraging reusable IP/software assets, all of which can enable growth while driving down costs. As for demand for greater business agility, managed services can support enterprises by enabling access to innovation including key technologies (e.g., virtualization, mobile) and service delivery options (e.g., cloud) that can support developing new products and services as well as enabling organizations to change more quickly. Include strong change management and operational practices with this and managed services can further accelerate the pace of change enterprises need to make. Further, the incorporation of analytics can help enterprises optimize their managed services and provide predictive insight into potential changes in the market to ensure competitive advantage. On the employee side, managed services can enable greater productivity. Paramount is the increasing need to incorporate more collaborative environments, which include a full range of communication (e.g., IM, social, blogs, ) and sharing capabilities (e.g., document, information). This can also include enabling greater personalization of services through capabilities such as BYOD as well as incorporating capabilities such as virtualization and cloud services by which users can define their specific needs based on their functional roles (e.g., sales, marketing, R&D). Additionally, this involves gaining access to talent, intellectual property and capacity, which increasingly can be procured through both traditional means (global sourcing) and emerging service models (cloud). Finally, enterprises need to meet critical industry regulations which span governments, partners and customers. Just consider how many regulations firms need to consider in a world in which any organization, no matter how small, can compete in any market across the globe. The role of managed services can help ensure that firms comply with these regulations through a combination of global reach, industry knowledge, and new capabilities, such as cloud, that can ensure data compliance and portability. A B O U T T H I S A N A L Y S T David Tapper serves as program vice president for IDC's Outsourcing Services research team. Mr. Tapper manages a group of analysts dedicated to developing research for IT outsourcing, business process outsourcing (BPO), and global sourcing, also referred to as offshore/nearshore. Mr. Tapper also provides strategic thought leadership on the transformation of the services industry to newer models of delivery including cloud computing, SaaS (Software-as-a- Service) IDC

5 A B O U T T H I S P U B L I C A T I ON This publication was produced by IDC Go-to-Market Services. The opinion, analysis, and research results presented herein are drawn from more detailed research and analysis independently conducted and published by IDC, unless specific vendor sponsorship is noted. IDC Go-to-Market Services makes IDC content available in a wide range of formats for distribution by various companies. A license to distribute IDC content does not imply endorsement of or opinion about the licensee. C O P Y R I G H T A N D R E S T R I C T I O N S Any IDC information or reference to IDC that is to be used in advertising, press releases, or promotional materials requires prior written approval from IDC. For permission requests contact the GMS information line at or Translation and/or localization of this document requires an additional license from IDC. For more information on IDC visit For more information on IDC GMS visit Global Headquarters: 5 Speen Street Framingham, MA USA P F IDC 1522 IDC 5

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