Information Technology Outsourcing (ITO) Market Update: January 2010 Preview Deck

Transcription

1 Information Technology Outsourcing (ITO) Market Update: January 2010 Preview Deck Topic: IT Consulting as a Catalyst of ITO The Pursuit of a Vague Synergy

2 Background and scope of the research Background of the research Consulting is a large (i.e., US$116 billion) and dynamic market at the high end of the overall IT services industry The consulting market is comple, with a variety of models and flavors, delivered by a large and diverse set of suppliers, ranging from IT services firms to technology product vendors to management consulting firms Historically, buyers and suppliers viewed the role of consulting in driving outsourcing contract very differently. Buyers realize that the outcomes or by-products of consulting may lead to a need for an outsourcing service, whereas suppliers maintained a premise that consulting engagements with buyers can lead to their subsequent winning of an outsourcing contract The scope of analysis includes Definition of the IT consulting market size, segments, and models Analysis of linkage between drivers of consulting and IT outsourcing Recommendations for buyers and suppliers to carve out a winning strategy 2

3 Table of contents Topic Background and scope 4 Summary of key messages 5 Overview of IT consulting 6 Summary 7 IT consulting taonomy 8 IT consulting market size 10 Buyer s view of the consulting-outsourcing linkage 11 Summary 12 Comple relationship of consulting and outsourcing 13 Buyer s view of the relationship 15 Supplier s view of the synergies between consulting and outsourcing 18 Summary 19 Supplier s philosophy towards consulting 20 Common supplier approaches to utilizing the linkage 24 Sources of consulting-outsourcing synergy disconnect 26 Summary 27 Factors driving indirect correlations 28 Root causes of consulting-outsourcing synergy disconnect 30 Recommendations for buyers and suppliers 32 Appendi 35 Glossary of terms 36 References 38 3 Page no.

4 Overview and abbreviated summary of key messages (page 1 of 2) This report eamines the purported linkage between consulting and IT outsourcing as ehibited by the IT services market. However, the linkage is comple and indirect. It can be beneficial for buyers through creation of downstream opportunity. Suppliers see the linkage and try to go after it through investment in consulting services. The report eamines how both parties deal with the linkage and elaborates on the best practices both buyers and suppliers should follow in a consulting and an outsourcing engagement. Some of the findings in this report, among others, are: Some of the findings in this report, among others, are: Overview of IT consulting IT consulting is a large and dynamic market within the IT services industry; it has multiple flavors and goes by multiple names We estimate that total consulting market is US$116 billion with package implementations driving nearly 40% of it Buyer s view of the consulting-outsourcing linkage The relationship between consulting and outsourcing is comple and therefore subject to interpretation A linkage between consulting and outsourcing leads to downstream opportunities for buyers. IT consulting is often a cathartic event for a buyer, enabling readiness for further transformation that may lead to outsourcing 4

5 Overview and abbreviated summary of key messages (page 2 of 2) Supplier s view of the synergies between consulting and outsourcing Suppliers realize that buyers ehibit this linkage and often try to leverage it, which is evident from ITO suppliers acquiring consulting companies or investing into building a consulting arm The most common notions we observe in supplier strategies are that business consulting increases chances of winning outsourcing deals and IT consulting leads to downstream outsourcing work. However, few suppliers have been successful in grabbing the purported benefits Sources of consultingoutsourcing synergy disconnect The consulting-outsourcing synergy disconnect is manifested in the fact that while consulting often leads to outsourcing within buyers, there is no evidence that suppliers with consulting units perform any better than those who don t have consulting units We can eplain this disconnect by lack of trust and conflict between the two models. Buyers and suppliers can take advantage of the evident synergies, provided they follow a set of rules 5

6 This study offers 4 distinct chapters providing a deep dive into key aspects of the ITO market; below are four charts to illustrate the depth of the report ILLUSTRATIVE IT Consulting Market Investments in consulting services IT consulting market 2008; US$ billion 100% = XX Bundling characteristics in ITO deals 2008; Number of deals Scope of the IT consulting deals 2008; Number of deals Others 100% = XX 100% = XX IT strategy consulting IT infrastructure consulting X% Package implementation (e.g., ERP services) Deals without consulting in scope Deals with consulting in scope BPO in scope Pure % consulting % IO and ADM in scope % % ADM in scope System integration Share of consulting in deal scope Acquisition of consulting companies by ITO suppliers Number of deals Recent announcement of growing consulting business organically Company A Company B Year Announcement EXAMPLES 2009 Company A opened a consulting academy in the United States to train front-line employees in consulting skills Company A announced plans to increase hiring into its growing consulting practice 2009 Company B restructured its consulting workforce into a dedicated consulting business, Company B Consulting company B aims to address emerging client needs through this move Comple linkage between consulting and outsourcing Consulting segment 1 Segment 1 Outcome 1 Outcome 2 2 Segment 2 Outcome 3 Outcome 4 Outcome 5 3 Segment 3 Outcome 6 Outcome 7 Outcome 8 4 Segment 4 Outcome 9 5 Segment 5 Outcome 10 Outcome 11 Low High Typical outcomes of consulting engagement ILLUSTRATIVE Likely linkage to outsourcing Source: Everest Research Institute (2010) 6

7 Appendi: Additional ITO research recommendations The following documents are recommended for additional insight on the topic covered in this Research Report. The recommended documents either provide additional details on the topic or complementary content which may be of interest 1. Reading the Alphabet Soup: SI, PI, ERP, Etc. The Changing Drivers Of IT Consulting (ERI R-0262); This joint project with Bernstein Research provides an understanding of the key drivers that influence the IT consulting market. It also provides detailed description of consulting market models and supplier landscape, with profiles of 15 leading suppliers of IT consulting 2. ITO Request for Information 2009 A Market Insights Report (ERI R-0373); 2009: The Everest ITO Request For Information (RFI) eercise was conducted in Q2, We analyzed a representative sample of responses from leading ITO suppliers. These included large multinational suppliers with headquarters in Europe, North America, and India For more information on this and other research published by the Everest Research Institute, please contact us: Ross Tisnovsky, Vice President: Shiraz Ritwik, Research Director: Soumit Banerjee, Senior Research Analyst: rtisnovsky@everestgrp.com sritwik@everestgrp.com sbanerjee@everestgrp.com Everest Research Institute Two Galleria Tower Noel Road, Suite 2100 Dallas, TX Phone: info@everestresearchinstitute.com 7

8 Get the answers today that lead to tomorrow s success Everest has the resources, eperience, and capabilities to provide companies with the strategic intelligence, analysis, and insight that are crucial to making the right decisions in today s outsourcing marketplace. With the vision of our leadership team, the personal commitment, and indeed, the passion of our professionals to deliver real value to our clients, our organization is unsurpassed in its ability to guide your company s future success. Everest Research Institute Two Galleria Tower Noel Road, Suite 2100 Dallas, TX U.S.A info@everestresearchinstitute.com Everest Group 150 E., 52 nd Street, 16 th Floor New York, NY U.S.A Everest India Ground Floor, Tower A Unitech Business Park South City - I, Gurgaon National Capital Region India Everest Australasia 409a Wattletree Road East Malvern VIC 3145 Australia Everest Canada The Echange Tower 130 King Street West, Suite 1800 Toronto, ON Canada M5X 1E Everest UK 1 st Floor, Accurist House 44 Baker Street London, W1U 7AL United Kingdom Everest Netherlands & Continental Europe Atrium Building 3 rd Floor Strawinskylaan ZX Amsterdam Netherlands Everest Australia Level 6, 90 Mount Street North Sydney NSW 2060 Australia