GM’s recent decision to initiate a ‘multisourcing’ strategy that will result in it parceling out its IT outsourcing responsibilities to multiple solution providers has gained a lot of attention within the IT industry, as well as among corporate management and business publications.

Maybe I’ve been in the IT industry too long, but I don’t get what all the commotion is about.

‘Multisourcing’ has been a part of the IT industry since the landmark Eastman Kodak outsourcing agreement in 1989. For anyone who doesn’t go back that far, the Eastman Kodak deal was the first mega-outsourcing contract to generate headlines inside and outside the IT industry. The company decided to outsource its data center operations to IBM, its network operations to Digital Equipment Corporation–remember them?–and outsource its desktop operations to BusinessLand–remember them also?

Not only did the Eastman Kodak deal represent a multisourcing arrangement, … Read More »

According to most of the IT market research firms, managed services is one of the fastest growing segments of the IT/networking industry. THINKstrategies’ own research and consulting engagements also confirm greater interest and receptivity to managed services among enterprise decision-makers in both large-scale organizations and small/mid-size businesses (SMBs).

Yet, every managed service provider (MSP) that I talk to admits that the business is a lot harder than they expected. They are struggling with longer sales-cycles, smaller scale contracts and less up-selling opportunities than they anticipated.

The struggles of the MSPs to gain broad-based market penetration is also obvious when you compare the customer lists of the Software-as-a-Service (SaaS) providers vs. the MSPs listed on THINKstrategies’ SaaS Showplace and Managed Service Showplace online directories. Many of the SaaS providers boast an impressive assortment of Fortune 500 and other brand-name companies among their customers, … Read More »

SAP’s decision to enter the software-as-a-service (SaaS) is a victory for the SaaS industry and enterprises of all sizes that are fed up with the frustrations of traditional, ‘shrink-wrapped’, software applications.

Prior to today’s much-anticipated announcement, SAP had publicly questioned the long-term value of SaaS and the viability of the SaaS business model. By adding its name to the growing list of SaaS providers, SAP has acknowledged that its customers deserve an SaaS option and the SaaS market is more than just another over-hyped, short-term fad.

SAP’s entry into the SaaS market will certainly accelerate industry growth and maturation. SAP refers to its new offering as the beginning of a third generation of SaaS solutions. The first generation was the ‘single-tenancy’ hosting model that emerged during the dot.com era and was pioneered by Corio and USinternetworking. The second generation has … Read More »

One of the myths about software-as-a-service (SaaS) is that it is primarily geared toward small and mid-size businesses (SMBs). While SMBs may feel the most immediate benefits from SaaS, large-scale organizations have become big beneficiaries of SaaS as well.

Just as Internet leveled the playing field for many SMBs competing with major corporations by giving them instant access to global markets via eCommerce, SaaS has done the same by giving SMBs equal access to many of the enterprise applications which big companies have relied upon for years to manage their businesses.

However, SMBs aren’t alone in recognizing the business benefits of SaaS.

Fortune 500 companies and other brand-name corporations are showing up on the customer lists of many of the SaaS providers that are now listed on THINKstrategies’ online SaaS Showplace directory.

These companies have found that many of today’s SaaS solutions are … Read More »

“Mash ups” has become a popular term in the rapidly changing IT industry. It generally refers to the convergence of divergent technologies and markets to create new solutions.

For example, we are currently seeing a surge of mash-ups that are bringing together digital content and mobile communications to create new media alternatives such as a variety of ‘on demand’ music and movies now readily available on your Ipod or cellphone.

The merging or “mashing” together of disparate markets is also occuring in the outsourcing and software-as-a-service (SaaS) markets.

The prime example of this new trend is the recent announcement of a strategic alliance between Tata Consultancy Services (TCS) and Salesforce.com.

Under this agreement TCS will use many of the SaaS solutions in Salesforce.com’s AppExchange as the basis of new outsourced services. Instead of relying entirely on traditional long-term outsourcing contracts, TCS intends to … Read More »

The cover-story of this week’s issue of BusinessWeek sings the praises of the rapidly expanding outsourcing business. The article points out that corporations of all sizes are leveraging services from a myriad of providers in India, China, Eastern Europe and beyond to satisfy nearly every aspect of their R&D, manufacturing, distribution and support needs.

Yet, today’s outsourcing business hasn’t been kind to many of the traditional industry leaders. IBM announced on 1/17/06 that its Global Services division had another disappointing quarter because of rising competition in its core outsourcing business. Even one of its primary offshore competitors, Wipro, reported on the same day that it was having trouble matching the margins of its India-based peers despite a 25% rise in its fiscal 3rd quarter net profits.

Given these discouraging financial results, it is not surprising that the deal to sell Affiliated … Read More »

The January 11th issue of the Wall Street Journal included an interesting article entitled, “Bertelsmann AG Repairs Phones? Yes to Diversify.” The article described how the world’s fourth largest media company is building one of the fastest growing services organizations that is providing call-center services, repairing mobile phones, running printing presses and even storing medical supplies for companies such as Nokia, Microsoft, MacDonald’s and BG Group Healthcare SAS.

The service division, called Arvato, isn’t a new venture but a longstanding and major component of Bertelsmann’s business, generating an estimated $5 billion in revenue in 2005 via 250 operating units in over 30 countries. Arvato’s origins stem from Bertelsmann’s success outsourcing printing services as an extension of its core publishing business. It has leveraged its technical skills to generate over $500 million repairing mobile phones, and is now reselling its warehouse facilities … Read More »

THINKstrategies research has found that enterprises of all sizes are rapidly adopting software-as-a-service (SaaS) and managed services to overcome the hassles and costs of implementing traditional packaged applications and administering their IT/network systems.

A recent THINKstrategies survey, conducted in conjunction with the Cutter Consortium, found that almost a third of the respondents are already using SaaS and another third are considering SaaS, with the vast majority expecting to adopt SaaS in 2006. The survey also found over 90% of the current SaaS users are satisfied with this new application delivery model, 86.5% expect to acquire additional SaaS offerings, and almost 92% would recommend SaaS solutions to others.

Despite this ‘out-tasking’ trend, there is still plenty of confusion among enterprise decision-makers regarding the difference between SaaS and managed services.

Part of the problem stems from the efforts of various SaaS and managed service providers … Read More »

Salesforce.com, the poster-child of the software-as-a-service (SaaS) movement, experienced two periods of “intermittent access” of approximately three hours each on December 20.

While the company blamed the problems on an outside provider’s database cluster error in one of its four global nodes, this event frustrated the SaaS provider’s customers and could seriously hurt overall user confidence if it happens again anytime soon.

One of the primary reasons that web-enabled SaaS has gained user acceptance over the past year is because of the reliability of the various new services. Ease of implementation and use have certainly drawn users to SaaS solutions, but being able to access SaaS applications anytime/anywhere has been a key driver of customer adoption. Any suggestion that SaaS isn’t easy to access or readily available will significantly reduce its appeal.

Another hiccup at Salesforce.com will not only tarnish its reputation and … Read More »

Software-as-a-Service (SaaS), managed services, service-oriented architectures (SOA), utility computing, hosting and offshore services are relatively new concepts that are already fundamentally changing how organizations operate and serve their customers.

At the same time, more traditional aspects of the IT service business are also gaining greater attention. For instance, Cisco Systems’ executives admitted that the depth of Scientific Atlanta’s systems integration skills was just as important as the quality of its Internet Protocol TV (IPTV) products when Cisco decided to acquire Scientific Atlanta in November 2005.

Wall Street is also recognizing the escalating value of IT services as exemplified by the acquisition of Affiliated Computer Services (ACS) just before Xmas by a consortium of private equity firms, following the lead of a similar investment group that acquired Sungard in June 2005.

These are trends that I’ve been commenting on in various trade publications for … Read More »