A short talk with some Cap Gemini BPO execs at SuiteWorld last week and reading Phil Wainewright's post about Cloud SIs had me thinking how the global service firms are changing - and in many ways resisting change.
Most larger firms now have units like Deloitte Digital or Acccenture Interactive that are hip to social, cloud, mobile projects. But they are islands in a sea of old which still wants to sell multi-year hosting and application management deals around on-premise software. To them, the SaaS/cloud world is still anathema.
Think about it. Would you buy additional hosting from them when it is bundled in the NetSuite subscription price? Would you buy additional application management services when Workday tunes your database, fixes bugs, does upgrades as part of its contract to you? If you were them, would you sell storage or compute at cloud prices when you would rather convince even your mother your 15 year old data center is still "state of the art"?
The business model change is even more dramatic as I heard during the Cognizant BPO day a few weeks ago. Many customers still want to buy based on some headcount/FTE based model, even as Cognizant is experimenting with results-based models. Most outsourcers don't even try - they are comfortable with the old FTE model. The cloud, in contrast, has been pushing consumption based models for a while now.
Recognizing that these SIs have islands of hip, surrounded by seas of legacy thinking, is key. I see many SaaS vendors enamored with the big services brands who will soon grasp this reality. Similarly, customers evaluating these providers for their cloud, mobile, social, advanced analytical projects will need to make sure they are only sourcing from the "hip" slivers of these firms, not get spary-painted legacy staff, tools and methods. There are several techniques we have applied for clients to get appropriate teams and terms, but it takes plenty of diligence.
For many of them, as Phil says, boutique firms may be the better way to go. I had identified several in my note Outsourcing: The Siesmic Changes