July 4, 2012
I recently finalized a report* on software asset (SA) based IT services, this time looking at vendors’ best practices in terms of governance, organization, skills, tools, and processes. Needless to say, the move to software asset-based services will have a huge impact on the traditional operating models of IT services firms.
Obviously, IT services firms need to learn from their large software partners to understand and implement specific software asset management processes such as product sales incentive schemes, product management, product engineering, and release management.
This will induce a formidable cultural change within the IT services vendor’s organization, somewhat similar to the change Western IT service providers had to undergo 10 years ago when they finally embraced offshore delivery models.
I see a few critical steps that IT services firms need to take in order to facilitate this shift towards software asset-based business models:
- Build a client-relevant SA strategy. Building an SA base offering is not (only) about doing an inventory of the existing intellectual property (IP) that you have on employee hard drives and team servers. More importantly, it’s about making sense of this IP and building strategic offerings that are relevant to your clients by centering them aounrd your clients’ most critical business challenges.
- Set up a dedicated SA organization. SA-based offerings are very different from existing traditional time and materials (T&M) and project-based services. You will require a different governance model, skills, and sales organization as a baseline starting point. Having a dedicated organization will help you roll out your SA strategy and keep track of progress while not disrupting existing delivery operations.
- Build strong ties with the other business units. While it is important to have a dedicated SA organization, the ties with the traditional part of your business are at least equally important. This relationship must start from an asset creation perspective, with delivery teams given incentives to build reusable software assets. Secondarily, the ties must extend to the go-to-market teams for the SA organization to leverage existing client relationships.
- Make your SA reference architecture “new business model-ready.” As explained in a previous blog post, your SA organization will be confronted with a collection of delivery models, such as on-premises, hosted, software-as-a-service (SaaS) and business process-as-a-service (BPaaS). These offerings need to leverage a common reference architecture that is based on open standards, enabling you to build offerings that are cloud- and multichannel-ready and which can be easily integrated into the client’s legacy environment.
Accenture took many of these steps when it started Accenture Software (ASW) about two years ago. This software organization, today composed mostly of software professionals — not consultants — produces commercial software and licenses it leveraging on-premises, hosted, and SaaS delivery models based on a cloud-ready architecture. Independent of the other Accenture business units, it targets niche market segments — mainly within the insurance, banking, CPG, and transportation sectors — where it can bring differentiated business value to its clients. This is a good example of how a service vendor can operate a successful shift to software asset-based business models.
*The report, “Asset-Based IT Services Shift Service Vendors’ Operating Models,” will be published in late July.