Will customers buy CSC’s vision?

Euan Davis, Managing Director, European Practice, HfS Research

Many of you sent us mail today regarding the new HfS RAPIDInsight on CSC’s new services integration strategy (see earlier post). Our European research lead, Euan Davis, was at the unveiling of the new strategy in Prague a few days’ ago, and outlines his thoughts further...

I liked what I heard at CSC’s European analyst event. The provider outlined two strategies dealing with the short and long term realities of how you, the customer, buys IT and business services:

1. CSC’s cloud strategy is a short-term play, and I liked it because it recognizes the realities that many customers running down their existing contracts face today –i.e. to radically lower the cost of service delivery and create more flexible sourcing strategies. CSC offers a clear adoption path with lots of tools and support for its customers so they can begin shifting manageable chunks of their existing contracts to the great data centre in the sky. Nice.

2. The more intriguing long term play is CSC’s positioning to be your “Service Integrator.” As a service integrator, CSC would marshal an eco-system of IT/BPO providers on your behalf, setting predefined delivery roles, mutual commitments, swim lanes and incentives for all your providers. CSC sets the model up so each provider shares, collaborates and innovates together and then ensures everyone pulls in the same direction. Nice. Sounds great in theory, right? However, running this model is hugely complicated and it hardly pays out for a player the size of CSC. The revenues accrued for setting up and driving the model for example, can never match what one of CSCs smaller, profitable service lines delivers today, so it begs the question, why?  Because they want control and being a service integrator offers them a leg-up as a partner. Moreover, if CSC doesn’t step to the service integrator role, one of its competitors will, and it will get boxed-in as a second tier provider lower down the client food-chain and wind up scrapping for lower-value business with other second tier – and often cheaper – competitors.  The real question to ask, is will customers buy into it?

Many will see risks in handing CSC such a vital part of their governance function. Business processes underpinned by IT, need service orchestration to work, no doubt, but would you hand this over to CSC?  Some can – and will –  always want to do this piece themselves (read our earlier piece on different approaches to service cultures). Others think they have the skills and capabilities needed to quantify risk through an extended services supply chain,  and can manage all the moving parts but with cloud it’s only going to get harder and harder.

I do feel the wind is blowing in CSC’s direction however. My conversations with clients point towards more systematic sourcing models built around multiple providers emerging, a phenomenon that all things cloud will drive. Who, or what, does the service integration—in-house or outsourced—is the interesting question. Outsourcing service integration needs some guarantees (or policing) so customers know that the integrator isn’t going to feed its own business but mark my words with ever more sophisticated deal making and governance controls emerging on the buy-side and ever more risky services from the cloud we’re going to see some very interesting set ups emerge over the next few years.

Love to hear your views – either here, or you can email me at euan dot davis at hfsresearch.com

Posted in : Cloud Computing, Financial Services Sourcing Strategies, Healthcare and Outsourcing, IT Outsourcing / IT Services, Outsourcing Events, Sourcing Best Practises