2. 2
2 Speed IT
Evolution To Digital Business
• Ubiquity of internet has led to Digital
Transformation across vertical industries
and merging the gap between physical
and digital world.
• Digital Transformation is driving
fundamental shift in Business Model.
This shift has led to deep impact on
organisations operation, structure and,
their culture.
• This has created new opportunities for
players like Telstra to engage Australia
in their Digital Enablement.
3. 3
Bimodal IT
• Bimodal IT is the practice of managing two separate, coherent
modes of IT delivery :
• one focused on stability
• And the other on agility
Governance
Mode 1
Industrial IT
Mode 2
Digital IT
Change
Core
Run - Fullfillment
Differentiator
Demand Driven
Innovation
Outcome Driven
Source: Gartner.
• Traditionally, IT functions as a cost centre concentrating on fostering cost savings (efficiency), rather
than spearheading initiatives that drive top-line revenue growth (effectiveness). Technology now needs
to drive strategic growth, instead of just concentrating on business as usual.
• Utility IT (Mode1) can continue to be measured and delivered with an eye on cost containment.
• Treating Strategic IT (Mode2) the same way will result in lost opportunities, poor customer experiences,
and a reputation for being slow to market—a sure way to lose the next generation of both customers and
employees.
2 Speed IT
4. 4
Attributes
Mode 1 (Industrial IT) Attributes Mode 2 (Digital IT)
Reliability Goal Agility
Price for Performance Value Revenue Brand, Customer Exp.
Waterfall, V-Model, High Ceremony Approach Agile, Kanban, Low Ceremony
Plan Driven, Approval Based Governance Empirical, Continuous, Process Based
Enterprise Suppliers, Long Term Deals Sourcing Small, New Vendors, Short Term Deals
Good at Conventional Process, Projects Talent Good at new & Uncertain projects
IT Centric, Removed from Customer Culture Business Centric, Close to Customer
Months Cycle Times Days/Weeks
Status Quo is your Competitor Sales Challenge Agility and Innovation is a Must as shelf life is short
Source: Gartner.
2 Speed IT
5. 5
Impact on Value
Source: Gartner.
Traditional Mindset IOT Mindset
Value Creation
Customer
Needs
Solve for existing needs & lifestyle in a reactive
manner
Address real time & emergent need in a predictive manner
Offering Stand alone product becomes obsolete over time Product refreshes over the air updates & has synergy value
Role of Data
Single point data is used for future product
requirements
Information convergence creates the experience for current
products and enables service
Value Capture
Path to Profit Sell the next product or device Enable Recurring Revenue
Control Points
Potentially included commodity advantages, IP
ownership and brand
Adds personalisation and context; network effects between
products
Capability
Development
Leverage core commodity competencies, existing
resources & processes
Understand how other ecosystem partners make money
2 Speed IT
6. 6
Impact on Sourcing Strategy
Source: Gartner.
Onshore Offshore
Captive
Location
ControlOutsource
Shared
Services
Vendor
Captive
Offshoring
Onshore
Outsourcing
Traditional IT Digital IT
Competence & Performance
ValueandDifferentiation
Buy,
Outsource
Make
&
Invest
Retain,
Spinoff
Buy
&
Invest
• Traditional IT has become a commodity. Hence sourcing has moved from in
house to onshore. Digital IT is about innovation hence its about acquiring and
building new capabilities and going to market to find nimble vendors.
…..
…..
2 Speed IT
7. 7
Impact on Sales Strategy
1 2 3 4 5 6 7 8 9 10Small Big
Scale
1 2 3 4 5 6 7 8 9 10Achievable Outperforming
Risk
1 2 3 4 5 6 7 8 9 10Following Leading Edge
Innovativeness
1 2 3 4 5 6 7 8 9 10Easy Difficult
Difficulty
Source: KPMG, Neil Rackman
Relationship Builder ChallengerPitch
• Traditional IT requires traditional Sales
approach like SPIN. CIO’s and
respective stakeholders are used to this
approach as this is about running the
operations or keeping the lights on.
• Digital IT requires Insight driven sales
model. In a Digitally Connected World
Information is readily available on all
aspects of a sales cycle. Hence
customers are looking for insights
driven conversation.
• Leveraging SAFE - BOLD framework,
Challengers/Advisors can position their
value proposition to be BOLD and
mitigate moves by Relationship
Builders to be SAFE.
Traditional IT Digital IT
2 Speed IT
8. 8 Source: HBR – Challenger Selling
• Under Digital IT selling is not about relationships. It's
not because relationships no longer matter rather, what
the data suggests is what matters is the nature of the
relationships.
• Challengers win by pushing customers to think
differently, using insight to create constructive tension
in the sale.
• Relationship Builders, on the other hand, focus on
relieving tension by giving in to the customer's every
demand.
• Challengers push customers outside their comfort zone,
Relationship Builders are focused on being accepted
into it. They focus on building strong personal
relationships across the customer organization, being
likable and generous with their time.
• The Relationship Builder adopts a service mentality.
While the Challenger is focused on customer value, the
Relationship Builder is more concerned with
convenience.
• At the end of the day, a conversation with a
Relationship Builder is probably professional, even
enjoyable, but it isn't as effective because it doesn't
ultimately help customers make progress against their
goals.
• This finding — that Challengers win and Relationship
Builders lose — is one that sales leaders often find
deeply troubling
Impact on Sales Rep Profile
2 Speed IT
9. 9
Sales Strategy
Teach - Why Insight Driven
19%
Company and
Brand Impact
53%
% of Contribution to Customer Loyalty
19%
Product and
Service Delivery
9%
Value to
Price
Purchase
Experience
Purchase Experience
• Offers Unique and valuable perspective on the market
• Navigate alternatives, Avoid potential Land Mines
• Educates me on new issues and outcomes
• Supplier is easy to buy from
• Supplier has widespread support across my organisation
Source: HBR, The Challenger Sales Model
In a Digitally Connected World where
Information is readily available on all aspects
of a sales cycle (proposed solution or an
initiative), it is the Purchase Experience of
Stakeholders that drives the successful outcome.
10. 10 Source: BCG
Impact on IT, Relationships and Stakeholders
Applications
Speed& Cycle
Time
Methodology
and Tools
Skills
Customer to
Business
Business to IT
IT to IT
IT to
3rd Parties
Mode 1
Traditional IT - Industrial (non Digital) Speed
Mode 2
Web Scale IT - Digital Speed
• Mature technologies with long life cycles • Emerging, short life time, built on fast changing
technology with legacy technologies
• Release cycle of 6 to 12 months driven by
planned business needs
• Quick cycles (<1 mth) from idea to deployment,
driven by rapidly changing users needs and comp.
• A hierarchical organisation using established
frameworks and standardised approaches to design
• Self organising teams using agile tools, fast
evolving SDK and automated
• Individuals with specialised skills
• Jack of all trades who combines upto date
knowledge of technologies and business
• Predictable demand via established channels,
products and processes
• Unpredictable demands due to evolving trends,
technologies and channels
• Siloed and Fenced driven by mid and long term
strategies
• Highly collaborative and constantly changing
• Siloed and Fenced, vertically integrated, tech stack
is stable
• Collaborative and horizontally integrated, tech
stack is constantly evolving
• Buyer – vendor relationship, IT controls the pace of
interaction
• Participating in 3rd party ecosystem, the ecosystem
sets the pace
2 Speed IT
11. 11
Cultural Havoc
Collaboration
Customer
Intimacy
Control
Operational
Excellence
Cultivation
Disruptive
Innovation
Competence
Product Leadership
Competence Control Collaboration Cultivation
Prioritises Work System People Idea
Leads by Expertise Authority Process Charisma
Organises As Work Projects Hierarchy Persistent Team Little as Possible
Recruits For Competitiveness Loyalty Trustworthiness Brilliance
Source: HBR, Executing Your Strategy
• Under 2 speed IT, Traditional IT is predominantly ensuring to keep “lights
on” and keeping a tight control on OPEX. This means taking the “Cost-Out”
from every aspect of IT. This type of environment requires a culture driven by
control and loyalty. People lead by Authority and hierarchy in organisation
drives control.
• Digital IT is predominately about agility and innovation. This means
smartness and brilliance is promoted. People are always looking for new
ideas to make a difference to the business.
• These 2 different cultures requires varying structure and alignments, which is
creating a lot grief for CIO’s.
• Levering Traditional IT culture to expand across Digital IT operations will
result in more chaos, pain and dissatisfaction in employees for a CIO.
2 Speed IT
12. 12
Pricing - Mean Reversion
LowEarningsHigh
Time
Limits to Growth (?)
IT Services (cost is lowering)
• Traditional IT has now become a commodity. Barriers to
entry are low and number of suppliers are selling similar
(with minimal difference) products and services.
• This has put enormous pressure on pricing of services and
products, resulting in decline of prices and margins.
• From a CIO’s perspective this is a welcome news as they
need to free cash/equity from OPEX to acquire/build new
capabilities, esp.; in digital space.
• Digital IT is a high price and high margin services provided
by new nimble vendors or start-ups as its predominantly
T&M based and are short engagements. Since these vendors
has no long term contracts like other vendors get in
Traditional IT, hence a high price is commanded by them.
• From a CIO’s perspective this is a welcome news as they
need to free cash/equity from OPEX to acquire/build new
capabilities, esp.; in digital space.
• From a CIO’s perspective Digital IT enhances challenges in
managing and forecasting budgets for rest of the business.
2 Speed IT
13. 13
Pricing
Source: HBR, MIT, Gartner.
Time & Material
PAYG
Incentive
Shared Risk-Reward
Gain-Sharing/…
Open Book
Cost Plus
Fixed Price
Pricing Options In Use
Digital IT Traditional IT
Min Max
2 Speed IT
• Traditional IT has used various pricing options over the
years from T&M to Fixed price as shown. As this
become more and more commoditised options like
Fixed price will be the norm for majority of
engagements as most of the risk is carried by vendors.
CIO’s will be tempted to go this path.
• Digital IT's inherent nature and its shift to IT as a
Service model (x-aas) makes its a prime candidate for
PAYG/Unit based and T&M option. Ex - Using a Price
per Call Pricing Model Leads to a 19% Increase in the
Deal Cost.
• Since engagements are short term, business have an
appetite to approve these options and dictate the overall
business transformation (Digital Enablement).
• CIO’s have no option but to go by what business is
saying as Traditional IT doesn't have the culture,
expertise and resources to drive this segment.
14. 14
Shift to IT aaS
Source: HBR, MIT, Gartner.
• Business leaders purchase IaaS with business budget.
• Typically the provider is found, researched and trialed online.
• Contracts are simplified and favor Service Provider
• Buyers forgoes —High-grade SLAs, transparency, console level access to VMs,
global load balancing and others
• One side effect of this is, it will become shadow IT in business.
2 Speed IT
Workload
Volume
Terms &
Conditions
Support
Environment
Service LevelScope
Technical
Environment
Labor Mkt
Factors
Scale
• Instances
• Images
• MIPS
• Storage
• NW Cell
• System
Mgmt.
• Security
Svc.
• DR
• Facilities
• Reporting
• Availability
• Response
• Resolution
• CSAT
• Business
Result
• OS
Standards
• HW
Standards
• Contract
Length
• Penalty
• Flexibility
• Server
IMAC
• HW
Refresh
• DB Copies
• On Site
Locations
• Data
Center's
• Unix
Vendors
• Winter
Vendors
Data Center - Under Traditional vs Digital IT
15. 15
Impact on MSA
2 Speed IT
• MSA for Traditional IT and Digital IT requires different capabilities and commitments
• This must be catered in mind when deal is being put together for a Digital IT landscape
• Under IT aaS
• 30% of existing categories are not required
• 60% is greatly simplified
• only 10% is retained
MSA
4. Assets &
3rd Party
Contracts
2. Services
1. Guiding
Principles
A. Reln.
Integration
8. Rep. &
Warranties
7. Record
Keeping &
Audit
6. Fees &
Payment
Terms
C. Indep.
Advisor.
B. Strategic
Obj.
5. Retained
Authority
D. Comm.
Plan
F. Demand
Mgmt.
12.
Propr.
Rights
11. Limit.
of
Liabilities
10.
Disentangl
ement
H. Key
Personnel
G. Human
CapMgmt.
9. Term
&
Terminat.
I. Contract
Mgmt.
K. Exit
Plan
16.
Insurance
15.
Indemnific
ation
14. Legal
Compl.
M.
Measure.
Chart
L. Innov.
Plan
13.
Security &
Confed.
N. Sow,
SLA, Price,
OLA
P. Equip.19.Misc.
18. Use of
Sub
Contractor
17. Dispute
Resolution
ATT.
E. Trans. &
Transf.
J. Process
Ownership
O. Risk
Framewk.
22.
Accept.
21.
Licensing
20.
Definitions
3.
Personnel
RetainedLegend Not in aaS Contract
Greatly Simplified
Dictated
16. 16
2 Speed IT
IT Spending - Segmentation
Low Maturity Market Leader
CAPEX - 24%
OPEX – 76%
Industry Generic Industry Specific
Cross - Industry
Transform - 14%
Run – 66%
Cross - Industry Private Education Financial Services
Grow - 20%
Efficiency – 17%
Quality – 44%
Customer - 25%
Regulation – 8%
Cost – 5 %
Rev - 5%
Reduce
Cost – 18%
Grow
Revenue – 14%
Protect
Revenue - 54%
Avoid Cost – 9%
Risk - 5%
• Leveraging this to get a view of current IT spending maturity.
• It appears Auspost needs to grow and transform while keeping the lower OPEX.
• OPEX of spend on legacy assets needs to be streamlined so that cash can be freed
for integration of new capabilities acquired by acquisition or via JV.
Source: Gartner
17. 17
2 Speed IT
IT Spending by Departments
Source: Gartner
58 22 20
IT Spend Share
Funded by IT Budget Funded by Other Dept. Funded by Mktg & Comms.
67% 33%
Funded by IT
Non Cloud Cloud
• 42% of IT spend is outside IT
• 33% of IT spend is on Cloud
18. 18
Understand Your Negotiation Goals
• Financial target, Scope change, Improvement needs
• Flexibility, Prioritise goals, New service, Pricing models
Establish a Timeline, but Don't Let It Rule You • Typical neg. takes 2 - 4 mths, Establishing a deadline is a disadvantage
Manage the Negotiation Process.
• Prep. a position paper or deal sheet. Neg. by provider objections. SR's
legal should control the contract edits. Use an issue tracking table to
manage neg.
Negotiate Across All Critical Work Streams • Programme, perf., strategy, demand, svc, fin., people, relationship, legal
Plan for the Cost of Negotiations
• What are the costs during the negotiation process?
• What issues directly affect the bottom line?
Nego. with key Deal Drivers, Not just the Best legal terms • Business, Industry and IT drivers
Prioritize and Negotiate the Top Issues First.
• Termination, service credits, innovation, benchmarking, gain sharing,
material breach events, default, SOW modification, performance &
transition
Don't Negotiate Transformational Terms in Outsourcing • Avoid introducing JV terms into an outsourcing agreement
Plan and Be Prepared to Renegotiate For
• Outsourcing deals aren't static. Clients must allow for renegotiation and
build flexibility into their deals.
Establish a Negotiation Strategy • Identify & prep. your nego. team, ask obvious Q’s, Expect the unexpected
Negotiations Best Practice
Source: HBR, MIT, Gartner.
2 Speed IT
19. 19
2 Speed IT
CIO’s Challenge
Source: EY, MIT, HBR
• How to ensure CIO is relevant as Business is spending more than 40% of their IT budget outside the CIO organistaion
• How to ensure that both modes work toward aligned priorities and have an open and collaborative style of working together
• How to commit to all elements of the digital, more exploratory iterative mode, and not attempt a pick-and-mix approach
• How to ensure core applications are digitally ready — configurable, flexible and no monolithic
CIO’s Priorities
• Articulate a vision and a roadmap of how their technology will transform their business
• A relentless commitment to innovation
Constantly need to look-out for opportunities for IT to reduce costs, boost revenues, create efficiencies or facilitate the development
of new products and services
• A close focus on how IT can drive growth — and strong relationships with business partners, such as the front office, that
enable this
In the past, CIOs have sometimes acted as gatekeepers, sanctioning projects, or not, on the basis of their technological
viability and cost. CIOs’ recognise they need to be the ones pushing the projects — and to work more closely with business partners
in order to turn their hopes into reality.
20. 20
2 Speed IT
Source: EY, MIT, HBR
• An ability to communicate the potential of IT to key business partners
Need to get into the front office and to the management team
inspiring the whole management group is going to be a vital role for CIOs in the future
• Move beyond the operational elements of the CIO role
CIO’s role has moved beyond delivering the operational excellence. CIO’s need to be strategic and look outwards from the summit
of IT, rather than at what lies beneath them.
• The courage to take calculated risks
CIO’s need to step out of established comfort zones, learn new skills, forge new relationships and try to take advantage of
opportunities that simply did not exist when most CIOs began their careers. For these reasons, CIOs are more likely to be risk-takers
— and that is important, since many of the technologies they are now exploring are relatively new and untested.
CIO’s Priorities
21. 21
2 Speed IT
CFO’s Challenge
Source: EY,MIT, HBR
• CFOs continue to struggle with balancing their responsibility to maintain cost discipline with more strategic ambitions, such as
setting the agenda for change.
• Effective communication and understanding between CIO and CFO is a common problem. Insufficient understanding of IT
issues for finance executives drives this disconnect.
CFO’s Priorities
• Ensure strategy drives IT and not the other way around - IT does not drive the enterprise’s strategic response
• Plot a way out of the legacy trap
Organisations are not embarking on digital with a blank sheet of paper as they have legacy systems that are embedded in the
business. Legacy IT and the “technical debt“ of unproductive and inefficient technology can be a significant barrier. It can prevent
the organisation from gaining a SCV, because data is locked into various systems spread across organisation silos.
• Shift the digital IT investment mindset from Capex to Opex.
This reduces TCO and increases bottom line. Digital IT provides greater flexibility and scalability, allowing companies to expand
and contract more easily with changing demand. This provides a platform for growth.
• Manage digital IT risk exposures as part of the enterprise risk framework
• Unite against digital IT fragmentation
22. 22
Thank you
Contact
For further information, please contact:
Name: Vishal
Title: Client Solutions Manager
Address: Telstra Client Services Unit
Melbourne, VIC 3000 Australia
Mobile: 0468 675 566
25. 25
Australian
IT Industry – Financial Indicator
Australian Industry IT Spend - 2015 $ AUD in bn.
Total IT Spend 26.42 (+4%)
• Services 10.8 (+5.8%)
• Hardware 11.3 (+2.2%)
• Software/Product/IP 4.3 (+2.2%)
Share of Economy (%) 1.8
Software
16%
Services
41%
Hardware
43%
Share of IT Spend in 2015
26. 26
Australian
IT Industry – Static View 2015
• Govt. cloud computing strategy create
opportunity for vendors in the public/SME sector.
• High demand for cloud computing services.
• Launch of Win8 to increase potential for
for MSFT partners in hybrid (Tab/Lap) mkt.
• 2nd Phase of schools project to generate an
additional US $800mn. of spending.
• Major projects in healthcare and smart cards.
• High incomes and strong supporting infrastructure
support high spending.
• Strong government support for ICT programmes.
• IT-literate population with high levels of PC
ownership.
• Strong financial sector.
• Tablet sales are compensating for decline in
desktop and notebook sales.
• The biggest threat is of an economic slowdown in
• 2015, leading to a scaling back of IT budgets.
• A cheaper Aussie $ would affect consumer and
business demand in the import-dependent IT mkt.
• Vendors face threat of parliamentary enquiry into
product pricing and are coming under pressure
regarding tax arrangements.
• Australia has a relatively mature domestic market,
with relatively slow growth rates.
• Sensitive to volatility in the global economy.
StrengthOpportunities
WeaknessThreats
• SWOT provides a static view of Australian IT Industry.
• Dynamic (VRIO or Capability based) view is not required at this stage.
27. 27
Australian
IT Industry – Focus FY 2015
Verticals vs
Trends/Themes
Govt.
Travel,
Logistics, Hosp.
Resources Utilities
Financial
Services
Telecom &
Media
Health Retail
ERP
CRM
Digital Enablement
Cloud Enablement
Social
Mobility (M2M)
BI/Analytics/Big
Data
Security
BPO
Extreme
Rating
Low
Moderate
High
Consider
`
• Following Heat Map highlights where CIO/CTO’s will focus in FY2015
across various emerging trends and themes.
28. 28
Australian
IT Industry Competitive Position
Dominant
Strong
Tenable
Favorable
Weak
DeclineMaturity
Competitive
Shakeout
GrowthIntroduction
CompetitivePosition
Wallet Share
Capgemini
HCL, CTSH
Infosys,
Wipro, TCS
IBM, Accenture HP/EDS
Satyam/
Mahindra, CSC
Unisys, Fujitsu
(In Between Strong and favorable)
SMS, Oakton,
DWS
(Local vendors)
• Following is the competitive position of various players in Australian market.
