Gartner Briefing: The Future of I & O. David Ackerman March 18, 2014 Tweet: #GartnerLOC

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1 Gartner Briefing: The Future of I & O David Ackerman March 18, 2014 Tweet: #GartnerLOC Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not be reproduced or distributed in any form without Gartner's prior written permission. If you are authorized to access this publication, your use of it is subject to the Usage Guidelines for Gartner Services posted on gartner.com. The information contained in this publication has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartner's research organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner's Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see "Guiding Principles on Independence and Objectivity."

2 I&O Perspective 1

3 The Market Will Not Grow Uniformly Market Segments Collide and Cannibalize 2012 Market Size ($Millions) $300,000.0 Implementation Infrastructure Outsourcing Expanded 2012 Market Size ($B) CAGR (%) $250,000.0 $200,000.0 Infrastructure Outsourcing Data Center Outsourcing $ % Enterprise Network Outsourcing $ % End-User Device Outsourcing $ % Hosting $ % $150,000.0 $100,000.0 $50,000.0 Hardware Support Traditional BPO Consulting Software Support Help Desk Outsourcing $ % Colocation $ % Infrastructure Utility Services $ % BPaaS IT Services Market 4.5% CAGR Applications $0.0 Outsourcing IaaS 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% CAGR Cloud Services Outsourcing Projects Product Support Size of bubble = $4 billion in absolute growth Source: Gartner (February 2013) 2

4 Most Important Infrastructure Services Sourcing Strategy Objectives Q02A. What are your organization's top three most important Infrastructure Services (or any subset of infrastructure) sourcing strategy objectives? n=383 Most important 2nd most important 3rd most important Top 3 Reducing costs 21% 11% 10% 43% Improving competitive position 11% 9% 9% 29% IT process improvement 10% 10% 9% 29% Consolidating IT or business process operations (shared service centers) 8% 10% 8% 26% Business process improvement 8% 8% 9% 24% Allowing IT to focus on key business initiatives 5% 12% 7% 24% Improving IT governance 7% 5% 8% 20% Overcoming staff shortages 7% 7% 5% 19% Enabling revenue enhancement 5% 6% 7% 17% Strategic determinations for use of cloud services 5% 6% 5% 16% Convergence of IT & operational technologies 5% 4% 7% 16% Moving Capex to Opex Shifting mix of sourcing choices (from T&M to fixed fee to managed services) 4% 3% 3% 5% 4% Base: 2013 Organization Gartner, Inc. and/or its outsources affiliates. All rights reserved. Infrastructure services (any subset ) 4% 14% 10%

5 CIO Technology Priorities Represent Two Complementary Goals Ranking Based on How Many CIOs Cited Each as a Top-Three New Spending Priority for

6 Organizations are Looking to New Providers for the Next Generation of Innovation OTHER/ TBD Which technology company has been most influential over the last 10 years? And which will be in the next 10 years? Source: Gartner 2014 annual CIO survey 5

7 Cloud Is Being Deployed to Support Agility Have made significant cloud investments Main Reason Other 12% Quality 10% Innovation 13% Cost 14% Payback Agility 50% 17

8 Private Cloud Still Gets a Lot of Attention Cloud Deployment Preferences (all applications) Hybrid, 8% Not Cloud, 11% Public Cloud, 12% Private Cloud, 33% Community Cloud, 12% Hosted Cloud, 24% Source: Gartner Cloud Survey, July

9 Sourcing: Time for Change 70% will 57% Price/ Price Structure 55% Service Quality 46% need change their technology and sourcing relationships in the next 2 to 3 years for a variety of reasons: 52% Flexibility 46% Ability to Partner 45% Innovation 28% Scale to work with new categories of partners, e.g.: Mobility Big Data Cloud Digital Analytics Social "IT sourcing strategies must be structured to enhance IT agility and address the needs of digital business. Organizations that don't adapt their strategies, will fail to achieve the value opportunities presented by a highly digitalized future." Ian Marriott, Gartner Research VP 21

10 Nexus of Forces 9

11 CIO Ranking CIO Technology Priorities recession Gartner introduces "Nexus of Forces" at Symposium 2011 Analytics and BI Mobile Cloud Social

12 Evolution of the Nexus of Forces BYOD Tech-centric BYOx Business-centric Isolated technical strategies Acceleration of mobile Internal cloud Advanced analytics splits from traditional Vendors and service BI approaches providers build NOF strategies Mobile+cloud+info End Users put NOF into solutions gain traction five-year plans Mobile reference architecture Increased integration of social into traditional work Increased decoupling of device and function More data in the cloud Mobile for Information Mobile for Transaction Physical+Virtual Convergence

13 Market Views Opportunity Presented by the Nexus of Forces

14 Big Disruptive Vendors Align With Disruptive Forces 13

15 Digital Is Upon Us "My business and its IT organization are being engulfed by a torrent of digital opportunities. We cannot respond in a timely fashion, and this threatens the success of the business and the credibility of the IT organization." "The IT organization has the right skills and capabilities in place to meet upcoming challenges." "There is a growing disconnect between our increasingly nonlinear world and the linear mindsets, practices and institutions that we deploy in our work." John Hagel, co-chairman, Deloitte Center for the Edge 4

16 The Chief Digital Officer Role Is on the Rise "If the CEO asks 'Who is in charge of digital?' and gets multiple responses, then there is no digital leadership." Baron Concors, CIO of Yum Restaurants International, former CIO and CDO of Pizza Hut No. Am.: 5% EMEA: 6% Lat. Am.: 7% Asia/Pac: 11% Industry %CDOs Media 21% Communications 13% Services 11% Banking 10% Insurance 9% Retail 9% Healthcare Providers 5% Government 5% Manufacturing & Natural Resources 5% Wholesale Trade 3% Education 3% Transportation 4% Utilities 1% Gartner predicts a tripling of the CDO role by "For the CIO, there is a strong opportunity, and also a responsibility, to be part of this new digital game. However the organizational model plays out, there will be a strong push for the digital future." Gianni Leone, CIO and CDO, Miroglio Group Mythbuster: The CDO role is not limited to media or information-intensive industries. 9

17 Providers Not Yet Engaged in Strategy Despite Having Capabilities and Intentions Provider role in your BYOD initiative Managing end user identity Managing break/fix of mobile/byod 30% 25% 26% 20% 20% 20% 21% 15% 14% 10% 5% 0%

18 Competitive Landscape A Cloud Journey 18

19 The Promise of Cloud Services??? Rebuild Replace Reimagine Multienterprise Relink/ Recode SaaS Rehost PaaS IaaS

20 Disruption in the Vendor Landscape Services Led Business Value Message Enterprise One-to- One Shared One-to- Many Technology Led IT Efficiency Message Note: vendors shown here are representative of the broader market. This view is not intended to be comprehensive.

21 Plan Beyond Cloud Services to the Next Generation An integrated, wellmanaged Hybrid IT environment Traditional IT Hybrid IT Private Cloud(s) Cloud Service Brokerage Hybrid Cloud Public Cloud(s) lays the foundation for the next-generation solutions based on the Nexus of Forces. 21

22 New buying trends and behaviors Business line managers have increasing influence over cloud purchasing decisions (~40%) RFIs/RFPs are increasing dramatically for cloud services (including public cloud) 2-3 year contracts are common, often with demand guarantees (paradoxically violating one of the core tenets of cloud computing elasticity) SLAs and risk management are top-line factors Regulatory compliance and security are still the factors that hold people back from public cloud. This continues to drive private cloud purchases. Cloud-related services are almost always part of the largest deals (consulting, implementation, management) 22

23 Infrastructure Services 23

24 Key Infrastructure Services Predictions Due to increased automation and reducing incremental benefit from labor arbitrage, the total employed global labor pool for infrastructure outsourcing services will decrease by 15% through 2016.

25 Key Infrastructure Services Predictions "By 2016, a legal test case will challenge the bundling patches, upgrade rights and technical assistance that constitute today's software support monopolies." "By 2016, megadata center "hijackings" will force governments to regulate facility operators to assure minimum physical and virtual security levels." (Extracts from "Predicts 2013: Infrastructure Services Threatened as New Structural., Political, Competitive, and Commercial Challenges Emerge )

26 Provider level Analysis for Infrastructure Services Market landscapes IBM Global Services IBM SmartCloud Desktop Infrastructure offers IBM SmartCloud virtual desktop solutions while reducing IT Desktop Infrastructure complexity and simplifying security and compliance. IBM SmartCloud Desktop Infrastructure solutions powered by IBM PureFlex System and IBM Flex System support a wide range of hardware, software and hypervisor platforms to seamlessly integrate into IT environment. It comprises of VDI middleware, servers and storage devices HP HP Workplace360 Provide full desktop management of devices including hardware and software for physical or virtual desktop support Logistics of acquiring and distribution of devices based on customer persona. Provides Win7 and user segmentation assessments to drive efficiency in the environment. Dell Dell Desktop as a Service (DaaS) Published Application Dell DaaS On Demand, allows users to manage their virtual desktops (user profiles, operating system and applications) with a self-service portal. Dell manages the rest as a monthly subscription service, including data center hardware and facilities, VDI software and security. Users can connect to full-featured virtual desktops from anywhere, at any time. The key components of Dell DaaS are as follows: 1) Shared Desktop, 2) Virtual Desktops, 3) The solution allows users to choose from variety of Virtual desktops including: 1) Standard 2) Professional 3) Premium 4) Shared DVS pre-configured and pretested bundles include: Dell PowerEdge servers, Dell Fluid Data Architecture storage and Dell Force10 datacenter switches and routers that support highperformance, virtualized and dense computing

27 Provider level Analysis for Infrastructure Services Market landscapes CompuCom CompuCom Desktop Virtualization Solutions Desktop & Application Virtualization services include: leverage integrated Infrastructure Management Desktop & Application 1) Virtual Desktop Infrastructure 2) Server based (IIM) framework to deliver technology and Virtualization computing 3) Application virtualization 4) Virtual process transformation and improvements Desktop Security 5) Desktop optimization in IT infrastructure maturity RedHat Red Hat Enterprise Virtualization Red Hat Enterprise Virtualization offers enterprises the base for large-scale virtualization initiatives and internal/private cloud deployments. The enterprise management system allows management of virtual datacenters, clusters, hosts, guest virtual servers and desktops, networking, and storage. The product is build on a Kernel-based Virtual Machine (KVM) hypervisor and the ovirt open virtualization management project. Red Hat allows users to virtualized desktops on the same infrastructure as servers. Red Hat Enterprise Virtualization Manager is a feature-rich desktop virtualization management system with advanced capabilities for physical host servers and virtual desktops to VM guests. Zerigo Zerigo Hosted VDI Zerigo Hosted VDI combines inherent scalability, on-demand provisioning, and best of breed hardware. Our user interface allows you to access your hosted virtual desktops from a wide range of end-user devices for the ultimate end-user experience in the cloud. Zerigo's custom interface provides all the features and benefits of hosted VMware View while eliminating the complexity of provisioning, scaling, and deployment. Scale your VDI deployment, on-demand, access from anywhere in the world with a network connection. Monitors hosted virtual desktop pool and regularly updates admin. with system health.

28 Provider level Analysis for Infrastructure Services Market landscapes Amazon Amazon Workspaces Amazon WorkSpaces is a fully managed desktop computing service in the cloud. Amazon WorkSpaces allows customers to provision cloud-based desktops that allows end-users to access their documents, applications and resources. Integration works via a secure hardware VPN connection to your on-premises network using Amazon Virtual Private Cloud (VPC) or with AWS Direct Connect. Further, Amazon WorkSpaces incorporates PCoIP technology from Teradici. which compresses, encrypts, and encodes the users desktop computing experience and transmits pixels only across any standard IP network to users thin clients, PCs, laptops and mobile devices. Unisys Virtual Office as a Service VoaaS Virtual Office as a Service (VoaaS) offering provides a virtual desktop infrastructure in the cloud. It simplifies desktop maintenance and reduces support costs, provides virtual desk top solution aligned with the client defined persona. Unisys offerings include a "drop box" for mobile enterprise storage with technologies that include the VantagePoint service, which helps clients understand service performance with a service monitor portal. A patent is pending on data integration with customized use of products including Liferay, Portal and Proshare Axciom Audience Operating System The AOS platform runs applications developed by Acxiom and its partners. (including facebook) A software-as-a-service offering that combines It presents marketers with a comprehensive view data from multiple sources and that enables of an audience: 1) Across channels, devices and digital marketers to run analytics and media sources 2) With unduplicated data, enriched applications against this data to segment by detailed demographic, contextual, behavioral and target audiences across channels. and social profiles 3) From both online and offline activities

29 Data Center Outsourcing 29

30 "Data Center" Sourcing Is Happening Outside the Data Center Tower Apps Data Center End User Network Apps Data Center End User Network Vendor Management Service Management Multi-sourcing Integration Service Brokerage Towers Cloud Utilities Towers Apps XaaS BPaaS Data Center Network SaaS PaaS IaaS

31 Near Term Trends: A Buyer's Market Automation Virtualization Cost reduction focused Cloud adoption Anti-industrialization inertia Demographic time bomb Limited provider differentiation Greater number of choices

32 Midterm Trends: Market Disruption Predictive analytics Service optimization tools Service configurators Big data Converged infrastructure Power price fluctuation Compute futures markets Data residency regulations Shorter contracts Labor arbitrage diminishes Multi-sourcing New and different buyers Provider consolidation

33 Long Term Trends: Accelerated Externalization Prevention-based services Green "License to operate" requirements Lower barriers to trade Compute de-dupe TCO redefinition Workload portability Over capacity resale Strategic partnerships Risk optimization Capacity management 2.0 "war on waste"

34 Top Buyer Insights from the MQ Research Buyers are reviewing multiple DC delivery offerings in a progression. (CoLo, Utility, managed services) Anticipate costs continue to go down year over year. Looking for innovation in the DC services with continued maturity and added solutions. Linkage to and bundling of DC services (thin client virtual desktops with DC support) 34

35 End User Services (Desktop, Service Desk and Mobility) 35

36 End User Services: Near Term Market Radar Mobility Desktop as a Service Global delivery/shared service Centers Willingness to sacrifice service levels for cost reduction BYOD Paranoia/Protectionism Differentiation is difficult Poor margins High cost, Low value ITIL apathy

37 End User Services: Mid Term Market Radar Predictive analytics Social networking Machine translation Profile-based services User IT competence assessments Proactive education outreach User and agent personality profiling Social media Portals and dashboards Generation Y Persona based user segmentation Local dialect preference Labor arbitrage advantage neutralized HVD/VDI rollback vs. diagnostics Service scope expansion Rejection of transactional pricing models Provider inertia

38 End User Services: Long Term Market Radar Benchmarking Agent avatars Preventionbased services Internal support communities and forums Business process improvement enabler Intonation analysis/emotion detection Service desk 2.0 Productivity loss limitation Business focused SLAs Net contribution based pricing Non-IT focused entrants The thing after ITIL The "shift left" backlash/ Selfservice rebellion Bundled education services Software vendors begin supporting end users Field assignment optimization White-label service desk providers

39 Top Buyer Insights from the MQ Research Organizations are looking for service in all three areas of EUS from a single vendor. Organizations demand is driving all vendors to work on developing mobility solutions. Looking for a simple, seamless, repeatable and integrated solution. Looking for pricing that will motivate the provider to work in the interest of the organization. See higher end technical resources retiring and need this capability via outsourcing. 39

40 Recommendations Focus on business priorities: Clearly defined purpose of Infrastructure and how it serves business. Maintain governance to keep business and IT syncronized Identify key initiatives and related time tables for: Nexus of forces impact on business. Plan for I&O changes: To include technology and ability to access and retain skills. Understand the current cost and level of services: Benchmark to peers and anticipate budget needs to meet the goals of business.