Sourcing Trends

Conclusion: This month, discussions regarding managed service provider expansion plans, both locally and globally, have been prominent. A number of vendors are expanding bases and offerings, and acquiring skills in preparation for heightened customer demand across areas in the Asia-Pacific region, with a particular focus on digital transformation initiatives. The need for customers to transform and optimise operational frameworks as well as transition workloads has driven a range of mergers, acquisitions and site establishment projects in new markets. Customer demand for assistance with navigating and transitioning during difficult periods is high, but vendors must also prepare to accommodate shifts in buying behaviour resulting from the market growth which is expected to follow.

Conclusion: This month, discussions regarding a heightened demand for managed security services have been prominent – in particular, around vulnerability and penetration assessments, mitigation frameworks, response and recovery protocols, as well as response consolidation and training. Customers have long recognised the need to ensure systems are protected from inappropriate access. However, internal business preparedness, recovery and continuity plans have caused vulnerabilities in the past. A greater number, frequency and awareness of security incidents have prompted vendors to integrate security services with a customer’s business operations and business preparedness plans, with a focus on response and continuity. This has resulted in the provision of high-quality offerings, delivery models and ongoing support, with an increased customer adoption and integration with existing business operations.

Conclusion: This month, there has been an increased focus on the impact of external environments and customer demands on managed services providers and their offerings. An increased demand for hybrid working solutions, remote operations and connectivity solutions has driven a greater demand for associated services such as security, Cloud and platforms. Customers have been searching for targeted and combined solutions to help address business needs and increase operational efficiencies. For those vendors that put an emphasis on meaningful customer relationships and interactions, maintaining open and clear communications and the capacity to adapt to client needs is critical. A customer with a heavy reliance on legacy systems for key business processes may find this raises challenges or is simply no longer feasible in the current climate. Service providers must be ready to work with clients that need to adapt or completely overhaul in order to provide the necessary support in difficult times. 

Conclusion: This month has seen a rise in mid-high level IT management appointments and departures. These types of shifts are especially prominent in times of change and uncertainty when companies search for staff to provide new skills, experiences to support critical IT and business operations. With an impetus to expedite digital transformation and other projects, companies must focus on increased standards for selecting, deploying and managing infrastructure and highly skilled professionals to implement plans. Vendors must be prepared to support customers when leaders with different priorities or focused on streamlining and enhancing business operations are brought in.

Conclusion: This month, the first anchor tenant signed up to the new Sydney Innovation and Technology Precinct. The NSW Government first announced plans for the Tech Central precinct, located in Sydney’s CBD, in 2018. The precinct is expected to provide 50,000 square metres of space for startup and scale-up businesses and promote industry expansion, innovation and collaboration. These types of initiatives are critical to stimulating the ICT service industry, and ensuring the ongoing development of offerings and delivery models that shift quickly and are sensitive to external influences, such as new technologies or the pandemic. The Tech Central precinct is expected to facilitate the evolution of the industry in Australia and allow for high quality and advanced products and services that customers demand, and vendors require to remain relevant in a highly competitive environment.

Conclusion: This month there have been increased discussions regarding the security services sector, marketplace expansion and triggers for growth. New market conditions, operating frameworks and the rapid adoption and integration of new services and technologies have resulted in a demand for security offerings that cater to the new environment. However, it has also given rise to new threats posed by new offerings and technologies, such as ageing devices which can cause vulnerabilities with changed operations, configuration changes and under-skilled staff. Security service vendors need to target offerings to individual company needs and strategic objectives as well as specific industry needs.

Conclusion: This month there has been a focus on the impact of the current economic environment on managed service providers. Declines in vendor service uptake, or difficulties experienced by existing customers, have resulted in the need for providers to adapt in an uncertain environment. New measures adopted by vendors when dealing with customers have included the revision of traditional business and payment models, increased flexibility with service contracts, and client support packages. Internally, vendor strategies include tightened cashflow management and regular communication with suppliers to mitigate disruptions that can have flow-on effects to their own customers. Whilst there has been a growth in demand for vendors to provide new and more complex solutions to cater to new work practices and business operations, vendors must work to maintain the integrity of their services. The re-diversion or loss of staff can impact on a vendor’s capacity to provide quality managed services, resulting in vulnerabilities. Vendors must adapt customer engagement practices in order to cater to both internal and external pressures caused by the highly variable and uncertain economic environment.

Conclusion: This month, there has been a particular focus on business continuity plans amidst COVID-19-driven uncertainties. Businesses are updating and activating, or establishing business continuity plans to minimise operational disruptions. Broad-based business continuity programs to ensure solid internal operations, avoid supply chain disruptions, support customer liquidity needs and mitigate risks associated with a volatile industry have become critical. Vendors must focus on managing partner and customer relations during market shifts and changes to strategic plans which are expected to be ongoing.

Conclusion: This month, discussions regarding the COVID-19 outbreak and the range of impacts on industry have been prominent. While extreme and unforeseen impacts of seemingly small events have been common for vendors and their customers in the past, this pandemic has triggered a wide range of effects, with potentially long-term implications. In all circumstances, vendors need to have strong, yet highly adaptable foundations to accommodate sudden shifts in the market, and adequately support their customers. The outputs and responses to this pandemic will be unique; however, customers will still require experienced vendors to provide services which support changes to business operations, long-term strategies and external issues, such as fluid supply chains, new government regulations/frameworks and economic uncertainties.

Conclusion: This month has seen a surge in merger and acquisition transactions, and discussions regarding the increased level of acquisitions in the past year. A growing trend of private equity firms investing in service providers was also flagged. This represents a shift in the market, as vendors become more established, profitable and more attractive to private equity investors. The opportunity to drive greater profitability, and demand for specialised technologies and services, also act as incentives for investment and provide vendors with resources to develop and offer a wide range of targeted, high-quality services to their customers.

Conclusion: This month, security issues that concern businesses have been prominent. In particular, high profile security incidents in 2019 have resulted in a greater awareness of challenges faced by vendors and businesses when preparing for and responding to security concerns. One particular vulnerability flagged is that security initiatives and responses have trouble keeping step with new threats, technologies and security frameworks. It is necessary for both vendors and customers to view security as part of a framework that can adapt to change quickly, and accommodate challenges that arise with highly unexpected variables. Security specialists and frameworks can provide a good basis for strategies and response measures, but the capacity to recognise and respond to unforeseen incidents and threats is also critical.

Conclusion: This month, regulatory frameworks for the ICT industry and their interaction with IT businesses and customers have been prominent. The private sector has been more vocal about the need for government involvement and the government has been searching for industry input in areas of interest. Areas that are vulnerable and require government protocols and standards, as well as regulations, must be flagged. In addition, frameworks that may have negative impacts on local industry or global trade efforts if other market standards conflict must also be considered. It is critical that vendors, agencies and advocacy groups work together when setting frameworks in order to produce new and better business outcomes, as well as support government regulatory functions.

Conclusion: This month, the launch of plans to develop new data centres have been prominent. The market has experienced a heightened demand for storage and associated services, with adoption driven by increased awareness amongst business users and evolving technologies specifically targeted to perform functions, such as the protection of critical assets and data. New unified technologies to meet a higher demand for the integration of applications, data and management solutions have also prompted growth. It is necessary for vendors to identify market gaps and offer new solutions to customers to stay relevant in an environment that is constantly changing. The development of new solutions to cater to customers who demand new ways to store, manage and use their data is essential, and an ongoing process.

Conclusion: This month, discussions regarding partnerships and acquisitions with the specific aim of expanding reseller businesses to include managed services have been prominent. Specifically there have been a number of investments, acquisitions and partnerships to transition resellers into service providers. This type of consolidation can be beneficial by enhancing offerings, assisting with collaboration and evolution, as well as providing access to new skills and products vendors have been lacking. Investments have also been made to educate traditional resellers on the benefits of becoming managed service providers with a focus on obtaining new customers and channel distribution of managed services. This flags a shift in customer demand for service-based value models which can be specifically targeted to individual business needs, and will ultimately be positive for both vendors and their clients.

Conclusion: This month, discussions regarding technologies used to facilitate highly specialised business functions have been prominent. Tailored solutions which focus on the performance of tasks, such as case outcome predictions, automated insurance claims, water monitoring for farms, sensors in apartment foundations to identify faults early and health risk identification, are amongst those discussed. These new solutions and frameworks can be beneficial for customers by automating tasks to address resource and skills shortages, as well as being cost-effective. However, these can be sensitive markets, performing very delicate functions that do warrant a certain degree of caution for vendors and customers when adopting, and a great deal of diligence afterwards. Investment in infrastructure because of expanding platforms, networks or associated equipment, training and consolidation with existing business operations are amongst the issues that may arise. Wrapping new solutions and service elements around other core services and operations can become a complex task. While customers do demand advanced offerings, vendors must find ways to increase value to clients by ensuring they acquire or have access to resources and skills that can be leveraged to support these new function-based solutions and associated issues.

Conclusion: Since the advent of the title of chief information officer (CIO), the reporting line for this critical role and those it has since spawned, such as the chief technology officer and chief digital officer, has been the subject of debate. The reality is that there is no right or wrong answer, but rather the reporting relationship of the CIO and his or her IT organisation is a function of the current value of IT to delivery of outcomes at a particular given point in time.

The reality is that the value of IT to delivery of business outcomes, despite the pervasiveness of technology in the modern enterprise, is not static and changes over time. Yet many CIOs and aspiring IT leaders see IT value as a function of organisational or IT maturity, relying on capability maturity models (CMM) to demonstrate value by looking ‘internally’ within the IT function. Instead, contemporary savvy IT leaders must look for alternative models that explain the organisational context external to IT itself and use that to align services that will be valued now such as the “IT Hierarchy of Needs”¹.

Conclusion: This month, there has been increased discussion regarding security services; in particular, the growth of the Australian security service provider industry and benefits associated with procuring locally. Now that customers recognise security as a basic function, a strong local security services sector has evolved. Local vendor expertise within the Australian market, regulations, customer demands and the security environment as it pertains to Australian businesses is invaluable when establishing mechanisms to avoid and respond to security incidents. Security is a necessity, but vendors must be prepared, and more importantly understand the local market, as well as businesses, to ensure customers can avoid, continually educate staff about and respond to security incidents effectively.

Conclusion: This month, attention has been drawn to vendors and managed service providers requiring customer transformation or migration to new frameworks and associated customer reluctance to do so. For instance, platform enhancements may necessitate migration to new systems or upgrades because of an inability to support ageing systems. Old platforms may simply not be compatible with newer resources, technologies or procurement models. However, these types of enhancements can be disruptive or costly for customers if they are not prepared for changes. Further difficulties can arise with existence of intertwined, hybrid systems within enterprises or systems which perform critical functions if changes interfere with business operations. Simply removing the capacity to access ageing systems and associated support is not sufficient. Businesses must prepare in advance when investing in products and services, in conjunction with vendors. The development of strategies and sharing responsibility for forward planning, education and engagement, as well as support for shifts, are necessary. The provision of other resources or advice from vendors, or obtaining services from third-party specialists dedicated to transformation strategy development and implementations, can also be beneficial. Whilst vendors must evolve, customers must also be prepared to make these changes and understand what kind of impact it can have on their operations.

Conclusion: This month, the high activity in mergers and acquisitions has continued. However, there has been additional discussion on the impact of these acquisitions on the industry in general, as well as the high volume, and whether this type of activity could have a negative effect on the Australian market – in particular, if the current regulatory frameworks governing mergers and acquisitions are sufficient to protect competition and avert potential misuse of market power. It is critical that regulators are aware of industry trends and how new practices may affect the market, as well as be open to feedback from vendors that have direct experience with circumstances regulators may not be familiar with.

Conclusion: This month, a number of failures due to external vendor systems performing essential functions have been prominent. Disruption caused by these types of outsourced solution failures become disproportionate when they facilitate critical tasks conducted by consumers. Similarly, reactions can be disproportionate when tasks are deeply intertwined with others, such as government agencies requiring submissions of consumer information or reports to set schedules. These types of failures highlight the fragility of systems and the need for sturdy response measures in case of disruption – responses which must extend beyond technical and local issues, but also cater to practical matters. For instance, an acknowledgement from certain government agencies that consumers depend on vendors to fulfil regulatory requirements, and allowances from agencies when failures interfere with customers meeting their responsibilities to these agencies. Vendors require different layers of protection and responses. This includes dealing with externals and their associated issues that can increase difficulties of failures if not identified and factored into vendor response measures.

Conclusion: Finding superior talent has always been a challenge, even more so now. Traditional attraction and retention strategies still have value in most situations. However, there are novel ways to think about attracting talent in a digital world, including rethinking the need to attract talent at all by rethinking the business problem.

In many cases, technical skills can be taught on the job. What is harder to teach – and is therefore highly sought after – is the triple-crown of critical thinking, creativity in problem solving and curiosity. Consider putting those three characteristics at the top of the talent wish list and adapt existing recruitment practices to identify, attract and retain the right talent.

Conclusion: With both the NSW and commonwealth parliaments passing respective Modern Slavery Acts in 2018¹, there are now real implications and consequences for business leaders and their suppliers who ignore the risks of slavery within their supply chains.

Unlike the California Transparency in Supply Chains Act 2010 which applies to tangible goods offered for sale, Australian firms will need to disclose their efforts to eradicate slavery and human trafficking from their supply chain of both goods and services. This means at least 2,100 public and private firms² have until 1 July 2019 to ask explicitly of suppliers, whether local or foreign, off-premise Cloud or on-premise device manufacturer: What are you and your organisation doing with respect to modern slavery risks?

For many organisations in Australia this will mean more than just adding new evaluation criteria to be applied to current and potential suppliers. Rather it requires providing an accurate attestation on the issue of modern slavery which will require lifting the hood on all manner of “as-a-Service” offerings. Thereby exposing aspects of service delivery that the majority of firms previously thought they no longer needed to concern themselves with, having “transferred” risks, such as those found in supply chains, to their vendor partners.

Conclusion: This month, the number of tenders and plans has continued to grow, highlighting the important role projects play when it becomes necessary to replace legacy systems, capitalise on new or evolving solutions or simply adapt to changed business operations or environments. Customers understand that avoiding complacency and market disconnect is critical, yet this still exists, with project plans to replace technologies such as paper-based messaging or tape data storage being announced just this month. It is critical for vendors to provide advice and ongoing support for customers in order to strengthen and simplify migrations and transformation, and more importantly, identify project objectives and final goals when replacing legacy systems.

Conclusion: This month, discussions regarding rising costs associated with outsourcing have been prominent. Whilst benefits from outsourcing in the form of efficiency and financial savings have been clear for some time, customers can find that savings are not as high as expected due to increased complexities associated with new offerings and associated implementation. For instance, customers that moved to the Cloud for storage and compute solutions benefited from the large number of vendors in the market and more competition. However, as the market has matured, customers demand more sophisticated offerings to leverage new technologies such as artificial intelligence and machine learning. As a result, infrastructure and associated services have become more costly, coupled with add-ons and Software-as-a-Service costs. Whilst cost benefits remain a priority for customers, it is also important for thorough cost optimisation reviews, and the engagement of specialist services to rationalise and assist with the management and restraint of outsourcing expenses.

Conclusion: This month, discussions regarding offshoring initiatives have been prominent following announcements by two vendors that plans are in progress to send work overseas. Though offshoring can be beneficial in terms of cost and the ability to obtain talent not available in the local market, the approach can cause difficulties for organisations. For instance, local protest or a loss of customer confidence can arise due to perceptions that offshoring practices are simple cost-cutting efforts which come at the expense of quality service. However, offshoring initiatives can be critical to meet demands for vendors to provide new, quality offerings in a highly competitive environment. The need to go beyond the local market is driven by more than mounting staff costs. Although risks associated with cultural barriers or customer backlash exist, benefits can be significant when providing unique and high-quality offerings. Vendors must achieve a balance between local and overseas services, as well as maintaining a positive view of offshoring as more than a simple cost-cutting exercise which results in low quality service, to an exercise that can enhance offerings resulting in improved services.

Conclusion: This month, security issues and responses to threats specific to managed service providers have been discussed. Attacks on vendors can be particularly serious because of provider interaction with customer environments and access to information. These difficulties can be exacerbated by other issues facing vendors, such as obtaining additional resources from contractors, inexperience or lack of expertise with complex, unfamiliar environments. Recent attacks on service providers have raised concerns because of threats to customer environments, as well as flow-on effects such as uncertainties relating to vendors and difficulties establishing trust with customers. New programs, education and vendor collaboration have been launched to address provider-specific security issues. It has been recognised that establishing best practices and protocols to help avert, detect and respond to security threats is required in the industry.

Conclusion: This month, there has been a range of company acquisitions, consolidations and partnerships in the managed services industry. These types of purchases can allow vendors to obtain resources necessary to adapt to emerging industries and new offerings. Purchasing providers can be beneficial, expanding and enhancing a firm’s products and services with the successful integration of companies. This has resulted in trends including more targeted purchases such as company assets, or the amalgamation of a number of vendors with very different specialties to provide new offerings and adapt to market shifts. Failure to adapt offerings and business structures which allow for these changes can impact on vendor credibility and is critical in a market where proactive, innovative and highly specialised providers are required by customers.

Conclusion: This month, discussions regarding the need to strengthen security and recovery solutions have been prevalent. The increased number of breaches which compromise private user data and interfere with business operations has become apparent. While technologies and frameworks can assist with avoiding and recovering from security events, weaknesses still exist when integrating security strategies with company structures and culture. Human error, and the failure to educate or provide all employees with skills to avoid, detect or respond to security events, has been flagged as a particular concern. Any security structure must provide resources that can support employee vigilance and slot into a company’s culture.

Conclusion: This month, IT vendor acquisitions and partnerships have been prominent. The incentive for companies with disparate products and services to consolidate has increased, resulting in strategic arrangements aimed at expanding offerings and future company developments. However, this kind of consolidation can result in difficulties when separate entities make efforts to integrate. This type of integration requires an orderly transition and establishing a solid foundation for ongoing operations to maximise benefits associated with new resources. Detailed planning and execution is necessary to establish direct relationships and better understand the resources available, customer base and externals from both companies and allow for a more consistent fit between internal departments as well as a framework for practical and flexible implementation of plans.

Conclusion: This month, discussions regarding enterprise agreements combining products and services to provide highly tailored solutions have been prominent. In particular, market transformation with smaller vendors offering new products, different enterprise consumption models, collaboration and new capabilities have driven growth in this area. A greater demand for flexible customisation and configuration of offerings has also driven growth, as well as vendors offering incentives to utilise products and services, or establishing partnerships in order to support organisations when developing solutions.

Conclusion: This month, discussions regarding data-driven products and associated services have been prominent. There has been an increased interest in offerings that facilitate the collection, measurement and quantification of useful data, then translation to optimise business operations or internal processes. These types of offerings are particularly useful when automating functions, identifying and tending to inefficiencies and resolving intractable problems. New regulatory standards, increased competitive pressures, growth opportunities in evolving markets and responding to customer behaviours and preferences are critical issues for clients. Managed service providers need to be sufficiently flexible when providing offerings that incorporate data-driven services that can support changes in a company’s organisational culture, business processes and internal management frameworks.

Conclusion: This month has seen a high number of security incidents globally. The high demand for security services requires vendors to provide transparency with service offerings, implementation and management. While security provider offerings must cater to a changing environment and support the protection of critical information and business functions, it is also necessary for vendors to foster trust with customers and within individual markets. Difficulties experienced by security service provider Kaspersky Lab in the United States have resulted in a range of issues, particularly when establishing trust in global markets. This month, Kaspersky Lab has been in discussions with the Australian Government to avert these types of difficulties, and foster trust in both public and private sector customers, which is especially critical for security service providers.

Conclusion: This month, discussions regarding critical security issues have continued to be prominent. In particular, an increase in the ineffective management of security threats and incidents was flagged. A high proportion of companies have cited a preference for paying off ransomware demands due to a perception it is a cheaper and less complex resolution to security incidents. These types of short-term solutions often produce other risks and create larger, associated problems in the future. A growing trend to under-report security incidents and a lack of cyber threat intelligence has left many companies exposed. Customers often deprive themselves of opportunities to improve cyber security controls and processes when they do not adopt long-term mitigation strategies to reduce risks and enhance response measures.
Such long-term and consolidated efforts allow customers to take advantage of all resources available to the company, founded in threat intelligence. Accessing a wide range of cyber threat intelligence and establishing ways to obtain this information is particularly critical. Plans must include ways to identify and assess security incidents, how staff communicate and share information regarding incidents, as well as harnessing data from external sources such as service providers and other tailored data specialists. Whilst complex, establishing sturdy threat identification, protection, response and recovery frameworks will improve a company’s capacity to manage security risks, utilising all resources and information available.

Conclusion: This month there has been an especially visible increase in managed service provider offerings and expansion globally. With the wide range and increased release speed of new technologies in the market, greater emphasis has been placed on adopting new technologies in business to support evolution and cost reduction. Approximately 70% of business leaders involved in company digital business transformation ranked new technology adoption as the top priority in a survey this month, resulting in an increased demand for tailored solutions with effective implementations in complex ICT environments.

Conclusion: This month, Fujitsu and Link Group announced a five year extension to their current ten year managed services agreement, which is founded on a combined on-site, on-shore and offshore delivery model for the provision of a variety of services. This is indicative of an increase in further alignment between IT spending and business strategic priorities utilising complex and evolving delivery models. The agreement highlights the need to provide a wide range of resources which cater to business needs, whilst managing them as one. In order to do this, a cohesive management strategy and the capacity to accommodate increased IT proliferation, new technologies, and associated security risks, must be carefully integrated into outsourcing plans during vendor engagement and contract performance. 

Conclusion: Especially interesting this month was a Trial Services Agreements (TSA) between SkyFii and Wests Ashfield Leagues Club. The agreement spans four weeks, with very specific deliverables and KPIs. In IT outsourcing, where agreements and relationships can become difficult to manage or collapse due to a wide range of unforeseen complexities, TSAs are emerging as a solid review process to measure vendor skills and capacity to service specific customers. These TSAs are also an attractive avenue for vendors to display competencies sought by customers and a precursor to possible long-term relationships. Such arrangements can also provide a greater clarity when setting terms and establishing final agreements as well as clearer and sturdier ongoing vendor/customer relations.

Conclusion: This month, there have been increased discussions regarding highly targeted, industry-specific security threats. Security issues for managed service providers can be especially complex due to the nature of the industry and delivery frameworks. Targeted attacks on vendors that support a large and diverse client base, utilising intricate, often intertwined solutions which cater to a wide range and large number of business functions, can result in difficulties when security issues arise. Problems such as theft, malicious attacks, denial of service and framework collapses can cause added risks because of vendor/client structures in this sector. For vendors, attacks can result in difficulties such as managing security issues over a large number of clients or associated entities which provide services. For clients, outsourced networks spanning different sites and critical functions are amongst the variety of threats which can leave clients exposed. Responses for vendor co-ordination with clients, as well as associated service providers and partners, must be considered and thoroughly planned when developing response measures for service providers. Measures must be as robust as possible, as well as sufficiently flexible to cater to unforeseen events and the complex nature of the managed services sector, where threats can be highly variable in nature, volume and extremities.

Conclusion: This month, discussions regarding ICT outsourcing project completion and outcomes have been prominent. Whilst project successes outweigh those which are still struggling, the results make it clear that the capacity to develop and implement a strategic approach to the adoption of managed services is critical. Projects experience difficulties due to failures to stay within budget, set timeframes or providers cannot meet basic milestones. Difficulties are also experienced when unforeseen problems arise because of miscalculations regarding the size or complexity of a project, as well as technical issues. Project successes, which provide a stable working relationship and added value to customers are the result of clear strategies, allow the services to facilitate business objectives, and a thorough consideration of adoption barriers during a project, including administrative, technical, legal and regulatory.

Conclusion: IT teams across government and industry are facing resource challenges including hiring the right resources with the right skills to add value to the team and support the organisation’s future needs.

Conclusion: This month, the large outsourcing agreement between Thales and the Department of Defence/Airservices Australia has been the subject of discussion. Whilst the contract value is high, more significant are the complex project objectives which resulted in a lengthy contract negotiation period. Initially, agencies involved anticipated an off-the-shelf solution to replace national air traffic control systems. However, it became apparent that a customised solution to support system functions was required, given the large and technically complex nature of the project. In order to reduce risks associated with contract failure, a two-year negotiation period was undertaken to ensure delivery responsibilities and specifications were well-defined. Project oversight and monitoring frameworks, vendor incentives to stay within project budgets and meet fulfilment targets were also described in detail within agreements. Although concerns were flagged regarding the delay in finalising this agreement, extra care was warranted given the critical functions the system will support, as well as the high value and complex system foundations. By adopting this approach, all parties have a sturdier agreement which can provide value for money, performance incentives, frameworks for contract execution as well as a better chance of project success.

Conclusion: This month, discussions regarding digital transformation efforts have been prominent. Plans to upgrade, improve and modernise internal ICT frameworks are critical for effective value creation and faster results delivery. Customers need to invest in technological change in order to establish a set of digital products which address stakeholder needs and integrate with business operations and functions. Customers often struggle with identifying and evaluating vendor risks and establishing appropriate audits and controls for service providers. Whilst customers are familiar with issues such as contract compliance and security, obtaining a managed service provider with a deeper understanding of business requirements can be difficult. However, this understanding is critical when developing digital transformation solutions, and vendors need to augment skills, develop more detailed strategies and address concerns specific to particular customers in order to deliver business value during digital transformation efforts.

Conclusion: This month has seen a focus on ICT 2018 forecasts and 2017 reviews. These types of analyses are important for vendors in order to strike a balance between providing new, high quality service offerings customers’ demand and traditional concerns, such as privacy and legislative compliance. It is critical that new offerings are carefully planned so they align market drivers such as cost savings, utilising new technologies and business improvements with basic needs that are common to all customers and integral to establishing, managing and completing outsourcing agreements.

Conclusion: This month has seen an increase in activity for public sector outsourcing. While reports this year have flagged sector growth, with more diverse offerings and a greater uptake of smaller providers, difficulties with contract performance in this area are still clear. While the size and complexities associated with these projects can present serious problems, they are aggravated by issues that are especially prominent in the public sector. For instance, running critical functions such as financial management, customer service and human resources, on disparate, large or obsolete systems, can result in a wide range of vulnerabilities for government agencies. These can interfere with business continuity, pose security threats, hamper disaster recovery or prevent appropriate skills development. As vendors evolve to offer more specialised services that cater to customers’ requirements, it is important for the public sector to continue to review and analyse its outsourcing projects because of serious consequences associated with catastrophic failures, outages and exploitation of government systems.

Conclusion: Discussions regarding the increased presence of small-to-medium businesses (SMBs) and start-ups in the IT industry have been prominent this month. Initiatives aimed at generating growth in the sector, such as funding for smaller providers, information exchange and facilities which allow for access to government contracts, are showing clear results. Support for smaller providers that offer specialist services are in high demand, as well as resources and information regarding sustained growth, product development and consumption frameworks. Both vendors, and customers seeking tailored and competitive offerings in a market traditionally dominated by large vendors as well as smaller customers hoping to access quality services, have benefitted.

Conclusion: This month has seen an increased focus on security threats posed by managed service providers and associated vendors. ICT service providers are attractive targets because they can provide access to a wide variety of customer networks, or can be used as a starting point for other malicious attacks. Compromised commercial or government data, or products which facilitate vendor service provision, can result in serious breaches and unexpected losses. More in-depth reviews of vendor security protocols, products and response measures to threats are required for customers to obtain the best possible protection against attacks launched through their managed service providers.

Conclusion: This month, there has been an increase in the launch of digital communities or marketplaces which facilitate partner access to resources, information and collaboration in specialist areas. These types of initiatives can be beneficial to both vendors and customers, providing the capacity to identify disparate services and combine them for specific needs or develop new tailored vendor offerings. Products, service offerings, project delivery, financial models and contract structures can be enhanced by targeting individual needs. In an environment where innovation is critical to remain competitive and relevant, these types of initiatives are valuable. They also allow for a clearer and broader perspective when developing solutions.
This kind of transparency can help to address some of the challenges associated with complex outsourcing agreements which result in technical or contract management difficulties. Allowing this kind of exchange can help drive fresh ideas and new approaches to IT outsourcing, as well as more effective customer and partner engagement.

Conclusion: In the last few years the structure and shape of ICT investment have undergone a series of shifts. The results are varied and complex and they reflect wider changes in the investment and use of ICT products.

It is important for organisations to take note of these transitions and to adapt and utilise methods which can improve the efficiency of their ICT portfolios.

Conclusion: This month, discussions around the difficulties associated with establishing and maintaining managed services agreements have been prominent. Contract or service failures typically cannot be attributed to one issue, but are usually the output of a number of underlying factors. Inherent technological flaws, security attacks, human error, configuration errors, management procedures and delivery delays amongst a wide range of other factors often combine to result in contract failures and disagreements. These types of complexities and variables, which are often unforeseen, require stronger foundations between vendors and customers when establishing agreements.
More simplistic, outcome-based targets, as opposed to a focus on technological solutions, can often provide a beneficial framework for providers and their clients. Establishing and implementing complex agreements from this perspective can help provide the flexibility required to avoid disagreements as well as resolve problems which do arise.

Conclusion: This month has seen increased discussions regarding systems integration service uptake and service range. Outsourcing agreements, partnerships and new vendor offerings indicate a heightened demand for services to consolidate disparate software systems and data sets, allowing for greater efficiencies, high-quality information access and analysis. Both customers and vendors have seen value in integrating multiple subsystems and data sets to function as a whole, and the trend towards systems integration service adoption and expanded offerings is expected to rise.

Conclusion: This month, a number of high-profile systems outages were reported, again flagging risks associated with operating complex IT environments and business functions which rely on these systems. Seemingly minor incidents, or a combination of disparate problems, can result in serious and costly system failures. These problems are exacerbated when issues impact on a company’s service delivery mechanisms and their own customers. This month, a power surge which triggered a global systems outage at British Airways left 75,000 customers stranded, at an estimated cost of $135M. A failure at Westpac left online users unable to access funds for 24 hours, following a similar week-long online and mobile banking failure in November 2016. The Australian Taxation Office has experienced serious service disruptions as a result of three outages in recent months, related to two separate service providers. A review of two failures by service provider Hewlett Packard Enterprise found a number of issues contributed to ATO system collapses and an inability to respond to them, including monitoring systems used to detect operating errors that were not activated, and access to recovery tools required to resolve problems being stored on the network which failed. These types of incidents highlight the impact of unexpected failures and inadequate response measures as well as the need for both vendors and customers to prepare for such events.

Is a return to the high period of IT investment likely? The same conditions of the long IT investment boom are not present today. This infographic reveals the trends over the next 3 years.

Conclusion: This month, discussions regarding skills gaps and talent shortages in ICT services have been prominent. Difficulties obtaining staff with specialist skills are expected to be apparent throughout 2017, and managed service providers are adopting a more strategic approach to obtaining and retaining qualified staff in key industry areas. The past year has seen a noticeable increase in acquisitions and collaboration between firms to provide services in high demand and maintain market relevance. However, vendors have recognised the need for long-term and strategic solutions to avert, rather than respond to, expected skills gaps. This has resulted in new positions being created dedicated to sourcing and further developing workforce capabilities that are sufficiently flexible to cater to a highly volatile and fluid industry, while providing environments that attract staff. A shift in perceptions of talent acquisition from an expense to a long-term asset investment is also required to ensure vendors can maintain a quality skills base.

Organisations can select a model for a particular need however, it is fundamental that the assumptions and the factors that construct the model are realistic and clearly understood. Furthermore, the models should be comprehended by other departments within an organisation, such as finance. A model that is only applied within, and solely has merit for IT, is generally not an altogether useful tool. The outputs and the inferences drawn from them may not convince other parties if the tool is not compatible with cross-department interpretation.

Conclusion: This month has seen a sharp increase in outsourcing agreements and a broader range of services adopted by customers. Due to globalisation and thus access to new markets and overseas resources through collaboration, vendor offerings are becoming more diverse and tailored to individual customers. This allows for the adoption of stronger digital models from diverse markets, not focused on particular technologies but on business processes and changing customer experiences (CX). This pattern is emerging globally, spanning both large and small businesses. Worldwide, there has been an increased emphasis on CX and recognition that a focus on customer needs as well as a capacity to adapt is necessary to maintain customer engagement and remain competitive in the industry.

Conclusion: Technologies which improve the efficiency of the marketing value chain will grow in importance because they can enhance productivity. The technologies are more developed and easier to access. In the mixed conditions of the current business environment squeezing more value is a basic imperative.

The constant themes of marketing, resource allocations and targeting also apply, and with better data tools and analytics it should be easier to gain insights which can be used commercially.

Conclusion: This month, strategic focuses and plans for managed service providers have been prominent. As the current market remains highly flexible and prone to change, vendors must plan ahead while providing customers with tangible business responses to evolving markets. In particular, areas such as security, analytics and digital transformation are set for increased growth this year, as well as associated, offshoot industries that support areas in high demand.

Conclusion: This month, financial results reporting for the first half of the 2017 financial year have shown steady growth for many IT managed service providers. Vendors that have acquired other companies to enhance or expand service offerings often report positive outcomes, provided those businesses can be successfully integrated with existing operations. Without carefully assessing potential acquisitions and developing a solid transition plan, difficulties can arise because of unsuccessful integration and restructuring efforts. A stringent consolidation plan is required for vendors to incorporate acquisitions and fully exploit specialist products and skills obtained from these investments. It is critical for vendors to assess their own service capacities, capabilities of potential business acquisitions and determine how they can be consolidated to improve service offerings.
In addition, careful planning is required for acquisitions that require business transformation, as well as other potential shifts, such as different target markets or strategic objectives. These efforts can be complex and expensive, but highly beneficial for vendors. There is a need to provide unique, innovative and efficient solutions to customers in a fast-paced and competitive industry, and acquisitions can facilitate this type of market differentiation.

Conclusion: Prominent this month were agreements and discussions that highlight shifts in the ICT outsourcing market, with increasing demand for targeted solutions to support business functions and long-term goals. These types of offerings have become more common, and are no longer niche services. Set solutions, which are sufficiently flexible to be tailored to individual customers, have become the norm. These solutions bundle a wide range of technologies, associated services and specialist staff, while utilising new business models for the provision of end-to-end services. In order to remain competitive, and facilitate the adoption of new solutions such as the Internet of Things (IoT) vendors are bundling offerings which go beyond the performance of business functions or expanding existing functionality.
Catering to specific goals such as increased customer engagement or the need for monitoring and analysis systems to help with business evolution or protocol development are becoming increasingly popular. Vendors have recognised the importance of portfolios which include extensive suites of strategic managed services that are efficient, diverse and easily customised to individual needs.

Conclusion: This month saw a focus on the development of improved controls over vendor activities due to the high number of recent outsourced solutions failures and serious impacts on customers. In particular, establishing internal early threat detection teams for initial development phases and more stringent, ongoing reviews. These types of activities flag a change in the outsourcing environment, with increased customer involvement in contract execution throughout all phases of an agreement and set processes to assist with technical issues that may arise before implementation as well as basic contract management. This type of involvement can help minimise risks associated with the adoption and consumption of new technologies and business models, with a greater emphasis on frameworks to circumvent threats as well as respond to them.

Conclusion: This month saw a focus on customer priorities and greater demand for niche or highly specialised IT services. In particular, there was a shift in IT investment centred on cost savings to ongoing strategic initiatives which facilitate innovation and expansion to maintain competitive advantage. These types of priorities can be advantageous for enterprises hoping to increase operational efficiencies or avoid irrelevancy in changing markets. However, without adequate preparation and thorough assessments of existing and potential environments, large-scale alterations to business operations can be hazardous, negating potential benefits. Risks associated with unforeseen skills deficits, complexities associated with consolidating or replacing environments and business process changes must be considered carefully. An increased uptake of business consultancy services to manage high-level alterations and avert or respond to difficulties indicates an awareness of the necessity to establish solid plans in conjunction with vendors that can be flexible and sensitive to customer needs.

Conclusion:

Prominent this month were reports of outages and system failures which impacted on critical operations for several businesses and government agencies. These types of failures can become costly with the increased reliance on technology and more complex environments that underpin many basic business processes. Outsourcing agreements and protocols can provide frameworks for averting or responding to service interruptions, but cannot cater to all variables that cause unexpected problems which are difficult to resolve. Triggers for serious disruptions this month have included human error, software misconfiguration, failed fire alarms, contravention of standard consultant protocols and ISP failures which had flow-on effects for large companies which rely on networks. It is not always possible to prepare effective responses for the types of disruptions that are not predicted, making it essential for both vendors and customers to conduct more thorough and regular reviews of environments, as well as establish strict protocols for public responses to avoid further damage to vendors or clients depending on outsourced services.

Conclusion: The Australian Bureau of Statistics’ annual innovation survey gives financial evidence to the rhetoric on innovation. The data presents strategic directions which could produce wider changes too, such as full casualisation in employment, coupled with technology investment by large businesses and structural underutilisation and deskilling, although more trend data is required to qualify such a view in future.

Senior technology executives ought to take note of this economy-wide picture of investment strategies in order to understand their own initiatives in a wider context. It may help with policy setting, with business cases, and provide a better view of planning evolution over the next two years.

Conclusion: This month, the integration of businesses and expanded service offerings has been especially prominent. In particular, the combination of technologies and managed services to provide more variety and highly specialised IT service offerings targeted to customer strategic initiatives. Vendors are reaching beyond service implementation to deliver full, high-value solutions in innovative ways, including partnering with competitors to expand capabilities and improve service quality. This type of flexibility is critical and indicative of an environment where delivery models, innovations and offerings change at a fast pace and underpin high customer demand for new solutions.

Conclusion: This month, online Census solutions failures prompted the government to launch a review into outsourcer IBM’s performance. Debate regarding causes for the outages commenced, and uncertainties again highlight the need for a solid and structured framework to be established in contractual arrangements, as well as protocols for implementing services and responding to difficulties encountered. Frameworks are more critical now as rapidly changing technologies and solutions are in high demand, combined with the new, often complex customer environments vendors must cater to. Problems can be compounded by an under-appreciation of costs, different vendors working together and time overruns. It seems as though a higher number of contract failures are being reported, but it is a natural output of outsourcers delivering hybrid solutions in large, complex and foreign environments with evolving technologies and solutions. These types of factors that can result in problems for both customer and vendor necessitate a solid legal and operational framework for conducting the contract.

Conclusion: Communications vendors’ product shipping reports show that a disappointingly large number of Australian enterprises continue to re-invest in obsolete telephony solutions. In most organisations, this approach is a major waste of business opportunity and a misdirection of communications responsibilities given that popular and effective alternative unified communications and collaboration (UCC) solutions are so readily available.

UCC has become known as simply ‘collaboration’ and telephony needs to be seen as a supported part of the collaboration environment rather than as a first choice communications technology.

Do not re-invest in obsolete telephony solutions. Strong collaboration solutions abound.

Conclusion: Discussions regarding new executive appointments, acquisitions and partnerships have been prominent this month with managed service providers adopting a more calculated approach to reformation. In order to meet emerging challenges and demands, vendors must match both operations and offerings to provide solutions which can cater to new customer priorities. These priorities have increasingly dictated vendor investment decisions to build capabilities and portfolios through acquisitions and partnerships with specialist service providers. Heightened demand for industry-specific digital business models has driven much of the investment and transformation; in particular, end-to-end business solutions, digitally unified systems or the provision of new solutions that cannot be obtained using existing customer systems.

Conclusion: This month, IT Outsourcing (ITO) industry analyses for the Asia Pacific region were released. Whilst figures show a decline in ITO spend in the region, the trend towards Cloud adoption and new service models that result in cost savings has driven this decline, not the demand for external services. As vendors shift to cater to this new market and provide more specialist services, ITO sector growth is expected. These types of changes in the ITO industry have been seen in the past, as service providers adapt to accommodate customer demands and new services and technologies. These market shifts are typically beneficial for customers, vendors and business operations providing a greater range of services, higher quality service delivery and cost savings.

Conclusion: This month has seen a high level of activity in tender issues, funding allocations and new ICT projects by government agencies seeking to reap the benefits offered by emerging technologies, ongoing innovation and digital transformation. This follows general trends in outsourcing because of the advent of new technologies, contract structures and solutions that can be tied directly to fulfilling business objectives. Whilst the technologies exist, a report issued this month regarding CIO concerns has flagged difficulties still prevalent when attempting to take advantage of innovations, attributed to outdated existing technologies, policy and budgetary constraints. As the ICT outsourcing industry continues to evolve at a fast pace, organisations must adapt their inner workings to suit new technologies and business structures before they can take advantage of benefits, and avoid project failures because contracts and businesses are misaligned.

Conclusion: This note seeks to analyse two questions: Is a return to the high period of IT investment likely? And what were the conditions surrounding the last one?

The answer to the first question is, currently at least, of a very low probability. The conditions or background that produced the long IT investment boom are not seen today and are not likely to provide the same business environment in the near-term either.

Conclusion: This month there have been a high number of new senior appointments and workforce expansions in the IT service industry, flagging the need to monitor and change resources which support businesses if required. Whilst strategic planning and initiatives are central to business development, the need for an effective skills base to successfully implement plans in increasingly complex and unique environments, which change quickly, is clear. Both the skills base and the framework to maximise benefits are required. Regular assessments of a company’s human resources, and structures in place to utilise them to achieve business objectives, have also become crucial. Structures need to be sufficiently flexible to accommodate new and targeted skills required to support both business and fluid IT environments.

Conclusion: The analysis of various and complex data sets could provide a catalyst for team collaboration. One of the challenges organisations will face in combining teams is setting out the conditions in which they will work together. Looking past obvious differences in background, or so-called professional culture, will be necessary to organise roles with the talents available.

Initially devise pilots to assess teams and roles and the value of the output. The development of data projects should produce quick benefits in terms of output and team cohesion. Understanding of the analytical insights should be shared widely in order for the benefits to reach as many within an organisation and bring change where it is needed.

Conclusion: This month there has been a focus on supplier governance models based on the service integration and management (SIAM) approach which can improve the effectiveness and efficiency of IT environments. By establishing converged and hybrid technical foundations and utilising multiple suppliers significant benefits can be achieved. However such an approach may be problematic if disparate arrangements and processes for contract execution are employed. The SIAM approach provides a single and end-to-end user experience, despite multiple suppliers’ underlying IT functions. This type of model allows for greater efficiency and cost benefits, as well as faster IT overhauls for companies needing to increase capacity, upgrade, or wishing to access new technologies and solutions. However, the model also requires strong implementation partners for analysis and a strict system definition combined with strong management capabilities, to support a very tightly integrated environment where many components can operate as one entity.

Conclusion: This month, the Queensland government’s action against IBM for the failed Health payroll system was dismissed, with the liability waiver upheld despite assertions the government was misled by IBM regarding its capabilities during the tender. The Australian Federal Police also announced it has cancelled two five-year outsourcing contracts with Eldbit Systems because of project failure. This underscores the need for clarity during the negotiation phases and establishing clear contract terms such as liability waivers and exit clauses to cater to project failures and disagreements, as well as fostering an environment for positive client/supplier relationships even when projects fail.

Conclusion: This month, discussions regarding a number of failed public sector outsourcing projects, which resulted in significant cost overruns have been prominent. Weaknesses were identified in a range of areas, from inappropriate vendor engagement processes to insufficient monitoring and response measures to problems that were identified during the course of a contract. It is critical for clients to establish protocols for contract management as well as frameworks to ensure these protocols can be followed.