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The Gartner Scenario for Application Software Providers: Building Digital Transformation The Gartner Scenario for Application Software Providers: Building Digital Transformation

The Gartner Scenario for Application Software Providers: Building Digital Transformation - PowerPoint Presentation

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The Gartner Scenario for Application Software Providers: Building Digital Transformation - PPT Presentation

Bianca F Granetto Chris Howard Daryl Plummer Claudio DaRold Robert Anderson Chad Eschinger Joanne Correia Nigel Montgomery Jim Hare Chris Pang Neil McMurchy January 2016 Primarily Written for Business Unit Leaders ID: 679095

digital business software application business digital application software market mode providers cloud bimodal 2015 survey applications growth analytics gartner

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Slide1

The Gartner Scenario for Application Software Providers: Building Digital Transformation in a Bimodal World

Bianca F. Granetto, Chris Howard, Daryl Plummer, Claudio DaRold, Robert Anderson, Chad Eschinger, Joanne Correia, Nigel Montgomery, Jim Hare, Chris Pang, Neil McMurchyJanuary 2016

Primarily Written for Business Unit LeadersSlide2

Growth and Profit Will Come From Leveraging the Bimodal Dynamics Set in Motion by Your Customers

Digitalization/

Digital Business

Digitization

Modernization

Window of opportunity 2010-2030+

Mode 1

Window of opportunity

is open!

2015-2030+

Mode 2

The world we know

The world in the making!Slide3

Where Will the Growth Come From? How Can the Application Software Providers Seize That Growth?

How will the buyers behave?What do successful competitive and go-to-market strategies look like?How can providers differentiate? Unique selling points?Action Plan for Next Six Months: Develop a bimodal strategy to leverage the dynamics being set in motion by your customers.

Key IssuesSlide4

Where Will the Growth Come From? Slide5

Key Competitive Factors: Analytics, SaaS, SMBs, Digital Applications, Business Outcomes

By 2020 Key Application Software Adoption Predicts:By 2020, 80% of enterprise application vendors will compete on the sophistication of advanced analytics offered in their solutions.By 2020, 60% of business users will be provisioned, in whole or in part, with office system capabilities from the

cloud.

By 2020, for the first time, cloud-based growth will propel North American small or midsize businesses (SMBs) to a leadership position over large enterprises in total ERP new product

revenue.

Digital Business:

By 2020, 75% of application purchases supporting digital business will be "build," not "buy."

By 2020, LOBs will drive 50% of new IT spending decision making, half of which will be expensed for software directly out of their budgets.Slide6

On average percentage of revenues being spent on IT = 3.2%

2016 CIO Survey: +2.2% average increase in IT spending17% of IT spending happens outside of the IT budget on average40% is directly influenced or paid for by LOBs

On average percentage of revenue that will be spent on digital business = 10%*

The average proportion of investments being handled in a Mode 2 manner is 25%

SMB companies reported that on average 28% of their revenue comes from digital sales, expected to increase above 40% next five years**

95% of global businesses are, in fact, SMBs

New Resources Are Being Mobilized for Digital

* = Digital Business Survey (number of respondents = 304); ** = Gartner 2014 CEO survey (number of respondents = 64)Sources: IT Key Metrics; Gartner elaboration of shadow IT spending 2015 (based on forecasting data); 2016 Gartner CIO Survey (2,944 CIO respondents)Digital Transformation Initiatives will generate new revenue streams in the next two years and beyondFollow the Money!+ x3Slide7

Global Application Software Providers

SMB Application Software ProvidersRecommendations by Market Segment

Sunset Old Offerings

Diversify

Embed Analytics

Pursue Digital Opportunities

Plan Realistically

Specialize and SimplifySlide8

Cloud-Native Application Software Providers

On-Premises Application Software ProvidersRecommendations by Deployment Model

Bundling for Essentials

Focus on Customer Service

Comparative and Competitive Entrants

Offer Subscription

Agile Development

Have a Roadmap to Transition Customers to SaaSSlide9

How Can the Application Software Providers Seize That Growth?

How will the buyers behave?Slide10

Buying Behavior: Digital Gets Strategic Attention and Sense of Urgency

Compete Globally

A source of competitive differentiation and advantage

Attain Operational Excellence

Improve the efficiency and effectiveness of business operations

Implement Business Diversification

Allows

embracing new business opportunities, reaching new targetsSource: Gartner Digital Business Document Collections; Digital Business Survey 2015 (total number of respondents = 210)Top Five Highly Relevant Factors to Organizations Definition and Execution of Digital BusinessCreation of client value and new revenue streams (66%)Focus on new front-office strategies to reach the customer or change the customer experience (this includes improving the end-to-end product visibility) (61%) Creation and introduction of new business strategy/models (56%)Clearer understanding of clients' requirements to launch new products or services (55%)Focus on new back-office strategies to change and enhance or modernize business processes (47%)GROWTHSlide11

Bimodal IT is the practice of managing two separate, coherent modes of IT delivery within the same enterprise, with one mode focused on stability and the other focused on

agility, predictability and experimentation or uncertainty. Mode 1 is sequential, emphasizing predictability and accuracy; Mode 2 is exploratory and nonlinear, emphasizing agility and managing uncertainty.Each mode has specific requirements for people, resources, partners, structure, culture, methodologies, governance and metrics, as well as different attitudes toward value and risk. New investments are deployed through one of the two modes, depending on the balance of business priorities. When the balance changes, investments and operations move seamlessly between modes as the situation dictates (see "Kick-Start Bimodal IT by Launching Mode 2" [G00273955]).

Buying

Behavior

:

Bimodal IT Practice for IT Delivery Will Extend and Change the Decision-Making Structures

Source: 2016 Gartner CIO Survey (948

CIO respondents represent 32%)64%Slide12

Buying Behavior: Many More and New Decision Makers to Align

Digital Business Decision Makers Versus Application Ones

The CIO is still in the lead of most

d

igital business efforts.

The

fastest-rising

single job title in digital business leadership is the VP of digital business.The chief digital/innovation officer has slowed down in comparison — growing but not as much as the other titles.Powerful stakeholders: CEO and CFO.Many others are involved: COO, CxOs.Sources: Digital Business Survey (number of respondents = 304; Digital Business Application Fulfillment Survey, October 2015 (number of respondents = 167 IT and business leaders).Slide13

Business applications fulfilling digital business initiatives:

1. Mobile applications

2. Enterprise software applications

3. Business analytics applications

4. SaaS applications

5. Digital marketing applications

Most influential in evaluation and selection of application provider:

1. Has a demonstrated understanding of the business/industry/business process2. Has openness, integration and interoperability standards3. Is a trusted brand with credibility in my organization4. Offers a choice in delivery, pricing and licensing options5. Has a center of excellence and/or innovation centerBuying Behavior: Top Five Applications Priorities in 2016Source: Digital Business Application Fulfillment Survey, October 2015 (number of respondents = 167 IT and Business leaders)Slide14

Buying Behavior: Looking for New Sources of Help

From an application perspective, which of the following have you been using in order to fulfill your digital business initiatives and which ones will you add in order to support your digital business initiatives for end of 2015/early 2016?

Source: Digital Business Application Fulfillment

Survey,

October

2015

(number of respondents = 167

IT and business leaders, excludes don't knows)Slide15

Global Application Software Providers

SMB Application Software ProvidersRecommendations by Market Segment

Accelerate Modernization

Unique Advanced Analytics

Value Creation

Value Prop: CxO, CIO, CFO

Realistic and Impactful ROI

Co-createSlide16

Cloud-Native Application Providers

On-Premises Application ProvidersRecommendations by Deployment Model

Customer Satisfaction

Integration in Mode 2 POCs, Pilots

How Cloud Changed the Business

Easy Adoption for Mode 2

Hybrid

Enter Near

M

arketsSlide17

How Can the Application Software Providers Seize That Growth?

What do successful competitive and go-to-market strategies look like?Slide18

Mode 1

Digitization

Commercial Reinvention — Bundling SaaS

Transition Services

Enabling Components

Mode 2

Digitalization

Business Co-creation — Shared Risk ModelsBring Insight, Vision, Clarity, RigorTransforming

Application Software Providers Also Must Develop a Bimodal Strategy and Bridge the Gap Between the Two ModesOffer the right bimodal mixReplacementsRapid ModernizationLegacy TransitionSaaSEnabling PlatformsIndustrializationNew Designs New SkillsNew ApproachDigital EcosystemsDigital PlatformsShaping the FutureSlide19

Legal entity created in June 2013, with goal to play a leading role in digital transformation initiatives of its customers (B2B), their industries and their customers (B2B2C)

Platform-based E2E solution providerCommercial operations expanding to selected countries by opportunity (South America, EMEA …)CAGR +75% by LOBs; profitability target CAGR +23%; partner business development: CAGR +13%Case Study Snapshot: Telecom Italia Digital Solutions — Exemplifies Mode 2 Strategy

Accountability:

Dedicated and accountable LOB/company for each digital offering: cloud; IoT; analytics; security and identity; customer data monetization; and verticals

Decisional and executional autonomy:

Each LOB runs its operations autonomously including platforms, sales and marketing

Multifaceted partner ecosystem:

Developed partnerships and reseller agreements with traditional IT value networks, global-scale cloud providers, developers and governmental agencies (provisioning to citizens of digital identities)Slide20

GE's Digital Reinvention

"On our current trajectory, GE is on track to be a 

Top

10 software company

."

Jeff Immelt, CEO, 2015Slide21

How Can the Application Software Providers Seize That Growth?

How can providers differentiate? Unique selling points?Slide22

In the Digital Realm, Ecosystems Are Foundational, Not Optional

Enterprise Internal Domain

External

"

Digital

"

Domain

New Value Networks, Opportunities, Competition

.com

Business

Applications

Partner

Government

Agency

What to What?

What to Whom?

By Whom?

With Whom?

Headquarters

ECM

Office

SCP

ERP

CRM

BI

AffiliateSlide23

Digital Supplier Value Network: Buyers Get More Choice! Add to Your Unique Selling Points

Web

Mobile

Things

Cloud-Based SaaS Provider

IaaS/PaaS Provider

Developer

Start UpISVOSSThings ProviderMobile Device Provider

Digital PlatformsDigital Solutions

Digital Transformation InitiativesNew MarketEntrants/CreatorsDigital Builders' Most Valuable Contributors

CSPs

The Essentials to Connect and Work

Cloud Provider: Contender/Partner

Cloud Providers

New Paradigm

Service ProvidersSlide24

Global Application Software Providers

Don't lock in your customer; instead, position to create business value through your offerings and those of your ecosystemSeek and align to consulting and system integration partners who are able to deliver the vision you are creating (these may not be same partners that you have today) Even your customers may transform into digital suppliers and be part of a wider and differentiated value network

Consider acquiring, merging, and/or partnering with communications service providers and native dot-com businesses

SMB Application Software Providers

Show how you can be more focused and deliver more appropriate solutions to a smaller customer than global application competitors

Establish a presence in the most influential apps stores for SMBs

Expand your mobile development and UX design skills

Partner/develop with a traditional business services company looking to digitalize its services Recommendations by Market Segment: Unique Selling PointsSlide25

Cloud-Native Application Software Providers

Offer a holistic experience versus a fragmented oneShow openness and choice when it comes to integration strategiesDevelop and allow for extensive configuration so end customers do not feel it is your way or not at all

On-Premises Application Software Providers

Offer a hybrid deployment opportunity; show how adopting a hybrid solution from a single vendor benefits the user in terms of process and data integrity

Ensure and demonstrate how your application stack can be functionally modified without sacrificing on upgradability by protecting the core yet allowing for custom processes and features that do not interfere with the core application

Recommendations by Deployment Model: Unique Selling Points Slide26

Action Plan for Next Six Months

Develop a bimodal strategy to leverage the dynamics being set in motion by your customers.Slide27

1. Launch Mode 2

Structure to respond to any size digital business innovation initiatives

Identify where you can create value, where there is the greatest cultural fit and profit potential

Identify where you have gaps: talent, knowledge and skills

2. Transform Mode 1

Propel your marketing, sales and channel efforts to create a sense of urgency and convenience to accelerate legacy modernization

Be aggressive; aim at displacing the competition

Develop talent and foster continuous learning culture

3. Bimodal in ActionLet Mode 2 drive and transform Mode 1, and let Mode 1 industrialize rapid innovation

Systematize the emerging bimodal practices to establish a new order of things (business model)Focus on differentiation and competitive advantageThree Steps to Start Off Your Bimodal Strategy: Use It as an Organizing PrincipleSlide28

Mode 1

Market Share — Market Entry Replacement Markets

Train and Coach; Rotate Jobs — Interdisciplinary Teams

Focus on Market Share and Increasing Brand Recall Value

Commercial Reinvention — Shift to Subscription

Innovative Contracting

Develop Services for Transition Strategies Away From Legacy — Develop Holistic Approach

Out With the Old and in With the New!

Mode 2

Commit to a Business Model Innovation

Build the Team and Provide Funding

Brand Building/Understanding the New Competitors

Insight/Consultative Selling/Performance-Based Contracting

Build New Service

M

odel

Create a Co-creation Lab; Iterative Process; Development and Design Skills

Work Through This Organizational Framework to Start Your Bimodal Strategy Roadmap

Leadership

Operations

Marketing

Sales/Channel

Services Delivery

Product Development

Step 1

Step 2

Step 3Slide29

Complementary and Recommended ResearchSlide30

Gartner Research Addresses Specific Roles

Business Unit Leaders

Strategic Planners

Product Leaders

Marketing Leaders

Sales Enablement

Roles We Address

Enterprise Applications Software — Cloud-Based SaaS"Forecast Analysis: Enterprise Application Software, Worldwide, 2Q15 Update" (G00279474)"Competitive Landscape: Public Cloud Business Application Marketplaces, 2015" (G00262514)"Market Trends: Prepare Now to Smooth the Inevitable Transition to a Subscription-Based Business Model" (G00290238) "Market Trends: Move Beyond Homegrown Licensing and Entitlement as the IoT Creates New Revenue for Software" (G00277387)

Market Segments: BI and Analytics, CRM, ERP, SCM, Office, ECM"Market Trends: Business Intelligence Tipping Points Herald a New Era of Analytics" (G00264016)"Ten Reasons to Reach Beyond Basic Business Intelligence" (G00227064)"Emerging Provider Executive Insights: Move Now to Seize the Opportunity in the Personal and Ecosystem Eras of Analytics" (G00278429)"Strengthen Your Sales Analytics Initiative With These Six Best Practices" (G00274949)"Using Mobile Geoconquesting to Steal Customers From Competitors" (G00278576)"Forecast Overview: CRM Software, Worldwide, 2015" (G00275913)"Market Trends: Digital Commerce Platform Software Opportunities in Southeast Asia" (G00274134)"Market Snapshot: Customer Relationship Management, Worldwide, 2014" (G00275912)"Technology Overview for Travel Expense Management Applications" (G00272872)"Technology Overview for Employee Recognition and Rewards

Software" (G00275498)"Market Trends: SAP Service Provider Opportunities in a Postmodern ERP World" (G00270342)"Market Guide for Contract Life Cycle Management" (G00276707)"Survey Analysis: SaaS Trends Providing Opportunity in the Supply Chain Market" (G00275970)"Market Snapshot: Supply Chain Management Software, Worldwide, 2014" (G00275972)"SWOT: Google Apps for Work, Worldwide" (G00270208)"Competitive Landscape: Cloud-Based Office Productivity Tools, Worldwide, 2015" (G00271898)"Market Trends: New Mandates and Market Structures for Content Management Drive Growth in 2015 and 2016" (G00277482)

Examples of Recently Published 2015 Research

Key Initiative Primer:

Build

and Market Digital Application Offerings Primer for 2016

Key Initiative Primer: Exploit Application Software Dynamics

Key Initiative Primer: Shift On-Premises Offerings to Cloud-Based SaaS

Software Adoption Predicts

Upcoming

Research 2016Slide31

Appendix: Gartner DefinitionsSlide32

Gartner Definitions

Digital Business: The creation of new business designs by blurring the digital and the physical worlds.Digital Transformation: The execution of a digital business strategy.Digitalization:

The

use of digital technologies to change a business model and provide new revenue and value producing

opportunities.

(

It

is the process of moving to a digital business.)Digitalize: To move a business or process toward digitalization.Digitization: The process of changing from analog to digital form.Digitize: To change from analog into digital form.