A three-ringed circus

By, Chris Lewis, David Mitchell & Dr Katy Ring

Ovum recently held an event in London on 5 April 2006 called 'A three-ringed circus' covering IT services, software and telecoms industry convergence.

The event came about as we have been having lots of internal debate about the relative roles of the software, telecoms and IT services industries as they all converge. We weren't disappointed by the debate.

The discussion during the Q&A time and with individuals afterwards was a good indication of the interest that this subject has stirred up within the three industry sectors.

Some of the key themes that came up included the following:

• The CIO. We discussed the different roles and types of people occupying the CIO position in large companies today. This was referred to as 'birds and lizards': lizards staying down at lower level issues and birds flying high above the issues (and often using it as a stepping stone to board-level positions). We also began to develop this evolutionary theme and started talking about subsets of each: snakes, eagles, humming birds, parrots, seagulls, sheep, wildebeest and crocodiles. We obviously see the CIO as many different things and this represents a major challenge for the industry trying to sell into them!
• Sourcing - single and multi-sourcing definitions. This is an area that generated much discussion. The single sourcing of the late 1990s has, in many cases, given way to multi-sourcing, where CIOs and IT directors are choosing not to put all their eggs in one basket, but are attempting to get the benefits of best practice, without going over the top in terms of the total number of suppliers being managed. The issue was also raised about some CIOs making high-level decisions without adequate consultation with the people looking after infrastructure, services and applications; this almost inevitably results in poor sourcing for the company.
• Looking over the ICT fence. Everyone seems to think that the grass is greener in the other parts of the ICT sector. The reality is that all three sectors are looking for incremental revenue and need to look over the fence into adjacent areas for any hope of growth. Unfortunately, crossing the fence seems to imply accepting lower margins!
• Product to service to architecture. The move from product to service to solution seems to be common for the software and telecoms companies. IT services have already made the move over the last few years, some simply doing a search and replace on their product brochures to turn them into services. What this suggests is that a focus on what the user really wants and how the user would like the solution to be delivered is still somewhat lacking.
• Small and medium-sized enterprises (SMEs). The assumption seemed to be that this is an untapped market. Telcos appear to see it as a great hope for the future, and for managed/hosted services especially. Some of the larger IT players also think they can move down market to embrace the SME. Unfortunately, as was pointed out during the discussion, the SME market is already addressed very happily by the plethora of smaller integrators who work on a more localised or vertically oriented basis.
• Next-generation network (NGN). NGN is seen as much more of a supply-side issue for the telecoms industry. Yes, it will enable telcos (and other ICT players) to deliver a more homogeneous series of building blocks which can be stitched together by telcos, systems integrators or indeed the individual end-user companies, but it doesn't bring anything new to the table yet. Large and small companies alike need the final 10% of customisation around their particular needs. Unfortunately, like the PBX world, even though everyone needs a handful of features, nobody needs the same set of features!
• Channels to market are a critical factor. Telcos think they own the customer, software vendors don't care as long as they get their pound of flesh and IT service providers know they own the customer because they are closest to them in terms of running services within the companies. As all the industries come together, shouldn't the power really be in the hands of the end user? They will decide at what level they wish to work, with how many partners and on what basis. Don't the laws of supply and demand apply to the ICT sector?
• Utility computing. The move towards grid is naïve at the moment, as the real utility engineering is not yet out of nappies.
• Service-oriented architectures (SOAs). There is a danger of focusing on yesterday's bandwagon. The ICT industry is good at creating architectures, but users want solutions that address their needs. The interesting question is whether we map the various issues around SOA to the emerging position of companies like Cisco who are trying to create an architecture/platform around the networking environment. And, further, map the communications collaboration and messaging applications suites from the PBX players and Microsoft etc onto both?
• Scenarios. The worst case scenario embracing all three areas is that the convergence of all three areas is driving price pressures into markets that were already under pressure. Telcos do stand a chance of being reduced to mere utility bandwidth providers, software players reduced to per-seat considerations and IT service providers tying the two together for a management fee. The more optimistic scenario is that users are increasingly looking to third parties to manage more of the risk/sophistication of the modern ICT infrastructure within enterprises.

The debate involved Chris Lewis, David Mitchell and Dr Katy Ring who are practice leaders of Enterprise, Software and Outsourcing respectively.