Equipment Vendors-The Move from Service to Services

12 Pages·1993·0.7 MB·English

February1993
INPUT Vol.IV,No.1
lEU-CSP
Routeto:
Research
Bulletin
APublicationfromINPUT'SCustomerServicesProgramme—Europe
A Professional Services Profile of ICL Pic
DespiteitsEuropeanambitions,themajorityof Exhibit1outlinesICL'sMarketStrategyforthe
ICL'srevenuescontinuetocomefromtheU.K. U.K.
wherethebulkofitsservicedevelopment
activityistakingplace. TotalEuropeanservice Cross-industryservicesincludebusiness
revenuesin1991werealmost$1.3billion,of consultancy,processengineering,design,
which$790millioncamefromhardware development,implementation,supportand
maintenance. operations,withAssociatedServicesDivision
largelyactive'upstream'ofimplementation.
Positioning Exhibit2summarisesthemainactivitiesof
ASD. CustomerServiceDivisionisactivein
ICL(U.K.)claimstobetheU.K.'slargestIT bothimplementationandsupport,andCFMand
servicesprovider,withservicerevenuesin1991 Guardianinoperations.
estimatedat$765million. Ofthis,$430
millioncomefromhardwaremaintenance, ICL'sCustomerServiceDivisiondefinesits
leavingabalanceof$335millionfor professionalservicesas'non-remedial'services
professionalservices. Therearetwoprincipal thatsupportacustomerindeveloping,
outletsfortlieseservices: operating/managing,improvingthe
productivityof,andmigratingtoandfrom
• CustomerServiceDivision(CSD) informationsystems.
• AssociatedServicesDivision(ASD)
BycontrastwithASD,whichclaimsthatits
However,theindustry-relatedsalesand servicesarenothardware-vendororiented,
marketingdivisionsalsoprovidesoftware CSDpositionsitsservicesrelativetospecific
developmentandsupportservices,forexample, hardwareandsoftwareplatformssuchasVME
inverticalmarketsectors. ICL(U.K.)alsohas andUNIX,anduptothegenericapplication
separatesubsidiaries,providingfacilities level. Itdoesnotaddresscustomerspecific
management(CFM)anddisasterrecovery applications. CSD,likeBullandanincreasing
services(Guardian). SorbusEurope,ICL's numberofothersystemsvendors,positionsits
51%owned'jointventure'withBellAdanticin servicesrelativetothesystemslifecycle
multi-vendormaintenance,reportstoICLat throughembracingconsulting,design,
boardlevel,butwithdirectlinkswithICL implementationandmaintenance.
CustomerServiceattheoperatingcountry
level.
©1993byINPUT.Reproductionprohibited.
RESEARCHBULLETIN
Exhibit1 ICL(U.K.)MarketStrategy
Tosupply:
Commodity Industry CrossIndustry
Products Solutions Services
Deliveredthrough:
Technologypic Industry ASD,CSD,CFM
Divisions Guardian
Source: INPUT
Exhibit2 AssociatedServicesDivisionActivities
ConsultancyandTechnical -Consultancy(technicaland
Services ITexploitation)
- Projectservices
- Networkservices
-CPS(remotedevelopment
anddocumentation)
PeritasLimited - Educationandtraining
WorkplaceTechnologyLimited - Environmentalservices
ICLSecureSystems -Systemsintegrationand
secureUNIX
CHOTSProject -Governmentproject
FarEastOperations -Airlinesystems
LITSProject - Logistics(bidstage)
BusinessOperations -Serviceactivitystart-ups
Source: INPUT
2 e1993byINPLTT.Reproductionprohibited.
RESEARCHBULLETIN
WithinEuropeprofessionalservicesactivities Itsresearchhas,however,alsoshownthat
areprincipallyfocusedonconsultingand customersliketobeabletobuyprofessional
systemsintegration(SI). Thereisaseparately servicesonan'asandwhen'basis,andthatitis
identifiedserviceentity,ICLEuropeServices. necessarytoprovideunbundledcomponent
levelservicesaswellasserviceandsystems
FutureDirections managementpackages.
ICL'sfuturestrategyistofirmlypositionitself AkeyelementinICL'sOpenSystemsstrategy
asamajorforceintheEuropeanSoftwareand istheconceptofOpenServices,i.e.services
Servicesmarket. Initsownwords,itisaiming thatcanbeappliedacrossmulti-vendor
tobecomeoneofthetopfivevendorsinthis networksandcanbespecifictooneormore
market. AsamemberoftheFujitsu'family'of proprietarycomponentsofanopennetwork,
companies,ICLisworkingtoimplementthe whileatthesametimeenhancingthe
Fujitsupolicy,whichistobenefitfromthe 'openness'oftheoverallsolution. The—concept
globalisationoftoday'smarkets. Inthefirst extendstothedesignandconstruction within
instance,however,ICLisconcentratingon theframewor—kofanOpenServices
increasingitspenetrationoftheEuropean Architecture ofarenewableandupdateable
market. portfolioofservicesthatcanprovideservice
acrossaheterogeneousnetworkofsystemsina
Tofurtheritsobjectives,ICLispursuingatwo- buildingblockfashion.
prongedstrategy:
Inthisway,ICLhopesandplanstoextendits
• Useservicestodrawinequipmentsales servicesuserbaseawayfromitsownhardware
• Useequipmentsalestodrawinservices sitesandintothesiteslargely'owned'byits
competitors. Thebuildingblockmethod
Thisapproachisbasedonspanningtheservice impliesthattheproductisingofindividual
andtechnologyspectrumbysettingup, serviceswillbeseenasbuildingblock
acquiring,orspinningoffserviceactivities modules. Thesemodulesmaybespecificto
basedonquasi-autonomouslimitedcompanies, oneormoreplatforms(hardwareorsoftware)
whichcanacquireand/orparmerintheirturn. andmaybeintegratedusingthestandard
TheseunitsareexpectedtoreportintoICLon interfaceofthearchitecturetoprovideseamless
aboardtoshareholderbasis. Theirservices serviceinheterogeneousnetworksituations.
portfoliosaretargetedatICLandnon-ICL ICLwouldnotclaimtohaveachievedthis
users. objectiveyet,butithasclearlyidentifiedthis
setofgoalstoitselfandhasputinplacean
Extensivemarketresearchhasbeenconducted ongoingdevelopmentprogrammethatwill
byASDandCSDtoestablishmarketneedsby bringalltheserviceproductsforitstarget
servicearea,verticalsectorandplatform. marketsectorson-streaminatimelymanner.
Acknowledgingthathardwaremaintenance
revenuesarenowindecline,CSDparticularly Aswithanumberofothercustomerservice
seekstoprovidefullsupportatuserlevel, organisationsinterviewed,CSDisinvestingin
includinggenericandcustomerspecific technologiesthatwillallowittoprovidea
applications,forthePCandUNIX greaterrangeofremotesupportservices. Itis
environments. Italsopromotestheconceptof alsowillingtoactasaservicesbroker,pulling
providingaTotalManagedServicewithin inservicesfromoutsidetheICLgroup,ifthisis
multi-vendorenvironmentsbydrawingin thebestwaytomeetcustomerneed.
experienceelsewhereinICLandfromSorbus.
©1993byINPUT.Reprcxluctionprohibited. 3 INPUT
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RESEARCHBULLETIN
StrengthsandWeaknesses • EducationandTraining
ICLperceivesthatitskeystrengthsarethe • ContingencyPlanningandDisasterRecovery
breadthandlongevityofitsserviceofferings, services
whichhavegivenitasubstantialtrackrecord
andstrongskillsbaseacrosstheservice • EnvironmentalServices(includingboth
spectrum. Itsknowledgeofandcommitmentto designandHealthandSafetyactivities)
openandnetworkedsystems,andparticularly
UNIX,isseenaskeytoitsfuturegrowthoutof • SystemsIntegration(atboththetechnical
itsownproprietarybasebecauseeachnew integrationandsystemsintegrationlevels)
UNIXshipmentisanopportunitytoextendits
serviceaswellasitsequipmentsales. • Documentation
Itsprincipaldifficultyisperceivedtobe • Multi-MediaServices
changingitsimagefromthatofavendorof
equipment,tothatofasolutionsandservices TheservicedeliverystructureforASDwas
supplier. Itwasthisdifficulty(whichitshares giveninExhibit1. ThatforCSDisasshownin
withtheothersystemsvendors)thatbrought Exhibit3.
aboutthedemiseofITPartners:itsforayinto —
businessconsulting. Again,likeother Byadoptingamatrixapproach inwhichany
equipmentvendors,ICLstillfeelsexposedto servicecanbemarketedforanyplatform
competitioninthisarea. ICLalso CSDisabletopromotespecificpackagesof
acknowledgesthatitwillneedtoworkon servicesfordifferentenvironments;for
gettingitssaleschannelsforservicesright,and example,CAREWAREservicesforPC's,
onobtainingtherightdeliveryskillsmixasit NetworkingServices,OFFICEPOWER
movesintothenon-ICLmarketplace. services,UNIXServerservices,INGRES
services.TotalManagedServiceetc.
ProfessionalServicesProvided
Pricing
Throughitsvariousservicedelivery
mechanisms,ICLprovidesafullrangeof Services,suchastrainingandsomeaspectsof
servicesincluding: systemsmaintenance,arepricedonamodule
basis. Fixedpriceperassignmentisbecoming
• Consultancy(largelytechnicalbutincluding thepreferredformofpricing,withtheemphasis
qualityandchangemanagement) onaddedvalueindeliveringapre-agreed
result. Discountingisusedonavolumebasis,
• NetworkandComputerOperations andsomeservicesmaybediscountedifsoldon
tliebackofotherswithinservicepackages.
• SystemsSoftwareServices
Organisation
• ConfigurationandCapacityPlanning
Asthisprofileshows,thereisnosingledistinct
• NetworkDesignandManagement professionalservicesunitwithinICL,although
itisplarmedtogivetheprofessionalservices
• SoftwareDevelopment providedwithinCSDamoredistinctidentity.
• ResourcingServices(includingthe Atpresent,servicesalesarechanneledtlirough
outsourcingofrecruitmentandpersonnel theprincipalvertically-orientedsales
activities) organisations,withindividualaccount
4 e1993byINPUT.Reproductionprohibited.
RESEARCHBULLETIN
CustomerServiceDivision
ProfessionalServiceMatrix
Platform Services
VME Start-up
UNIX Remotesupport
DOS Software:
Networks • install
Officesystems • upgrade
Relationalproducts •update
Teamware •support
Security •develop
OpenFoundation Systems:
MlolIILCOLU1c • review
iniegraiion . •tuning
ncdlllldflUbdlciy • administration
•design
• planning
• migration
•transition
Help-desks
Documentation
Projectmanagement
Workshops
Source: INPUT
managersresponsibleforscopingand SupportManagers,whomapontotheaccount
resourcingtheserviceneedsoftheircustomers. salesteamsonapost-salesbasis.
Itisacknowledgedthatissuessuchastargeting
andrewardingmustbeaddressedifthe Thereareplanstoidentifydistinctservicesales
traditionalbiastowardsystemssalesistobe specialistswithinCSD,andthevarious
corrected. CSDalsoworkthroughtheAccount businesseswithinASD,toworkwithand
©1993byINPUT.Reproductionprohibited.
INPUT
RESEARCHBULLETIN
independentlyofthemainsaleschannel; servicebusinessesisalsoseenasgivingthese
particularlyonwinningbusinessoutsidethe differentunitsgreaterflexibilityinresponding
ICLbase. tochangingmarketconditions.
Thereisaservicemarketingfunctionwithin ICL'sViewontheMarketplace
CSDandmarketingactivitywithineachofthe
mainbusinessesofASD. CSDiscurrently ICLseesitsprincipalserviceopportunitiesas
runningamajorservicescampaignbasedonthe beingintlieareasofsystemsintegrationand
systemslifecycleconceptandthegroupingof management,securesystems,servicesrelated
servicesbytechnologyplatform. tooptimisingsystemsperformanceand
environmentalservices. ForICL,itsfocus
Resourcing uponopenenvironmentshasincreasedits
competitiveness,andUNIXistheareathatis
Partneringandacquisitionaretheprincipal nowprovidingtheengineforrevenuegrowth.
mechanismsbeingusedbyASDandCSDto Itthereforeseestheincreasedpenetrationof
extendtheirserviceskills. CSD,forexample, openandnetworkedsystemsasamajor
hasaPreferredServicePartnersprogramme, opportunitybycreatingdemandfornew,and
andalsorunsaserviceaccreditationschemefor moreintegrated,services,andbyprovidingthe
externalsuppliers. meansbywhichgreaterserviceproductivity,
usingremotetechniques,canbedelivered. Its
Trainingisbeingusedtopromotetheservices OpenFrameworkServicesgroupwithin
messageinternally,toprovidenewskills,andto ProductOperationsisworkingwithCSDand
addresssomeoftheculturalissuesfacedby Sorbusinthisarea.
ICL. Recruitmentandsub-contractingareused
asappropriatetoresourcespecificskills. Othertechnologydevelopmentsseenas
impactingICL'sfuturebusinessareclient/
CompetitivePositioning servercomputing,improvedstorageandchip
technologies,anddevelopmentsinCASEand
ICLseesitsgrowthinservicescomingasmuch ArtificialIntelligence.
fromtheoutsourcingofactivitiespreviously
donein-house,asfromtakingmarketshare INPUT'SAssessment
fromcompetitors. Itacknowledges,however,
thatitsprincipaldirectcompetitionislikelyto ICLhasdecidedtotackletheimpasseonhow
comefromsystemshousesandprofessional- tobreakoutofitsownuserbasebyadoptingan
servicecompanies. Otherhardwarevendorsare aggressiveacquisitionandpartneringstrategy
notperceivedasmajorcompetitors,anddealers baseduponOpenSystemsandOpenServices.
anddistributorsareseenaspotentialpartners. Itisspendingagreatdealoftimeandeffort
Low-levelattritionfromarangeofsmall,niche positioningitselfasaservicessupplier. By
companiesisrecognised. tradingunderavarietyofnon-ICLcompany
names(Technologypic,Peritas,CFM,
CompetitivedifferentiationisbaseduponICL's Guardian,WorkplaceTechnology,Sorbus,etc.)
clearunderstandingofrelevanttechnologies ICLisseekingtoweakenthelinkinthemind
suchastheUNIXandPCenvironments,the ofthemarket-placewithitssystemssupply
breadthofitsserviceofferinglending'strength activities.
indiversity',anditsabilitytointegrateits
differentservicestreamswithinasingle ThedilemmaICLfacesisthatitsownsales
customerenvironment(asintheCHOTS channelsandmanyofitsexistingworkforceare
project). Its'arms-length'approachtoits findingithardtokeeppacewiththerateof
transition. Openingupalotofnewsales
INPUT 6 1993byINPUT.Reproductionprohibited.
channelsenlargesthemarketopportunity,butis • Retailing
likelytocreateconfusioninitscorporate • Manufacturing
customerandprospectbase. Brandingservices • Financialservices
andsegmentingtheirsupplymakesiteasierfor • Publicadministration
salespersonnelandcustomerstofindtheirway
aroundtheservicesportfolio,yetmakesthe ICL'scorporateobjectivesaretoincrease
processofserviceintegrationthatmuchharder. turnoverandmarketshare,principallywithin
Europe,throughapolicyofacquisitions,
Atatacticallevel,serviceintegrationbecomes mergersandjointvenmres. OutsideEurope,
harderstillbecausetheneedtomeetrevenue localICLoperationsareincreasinglybeing
targetsmakescompetitionamongservice mergedwiththoseofFujitsuundertheFujitsu
activitiesaslikelyascooperation,andissues banner.
suchasinter-companytradingarebarriersto
co-working. ICLisstronglycommittedtoopensystemsand
particularlyopensystemsnetworking. Inthe
However,ICL'sstance,unlikethatofanumber foreft-ontofOSIfromitsinception,ICLwas
ofvendors,isoffensiveratherthandefensive, instrumentalintheestablishmentofUNIX
anditscommitmenttoopensystemsandthe InternationalandX/Open,andhasparticipated
conceptofopensupportisnotanadd-on. Ifit enthusiasticallyinstandardssettingactivities.
cangetthesalesanddeliverymechanismsas
clearastheconcept,ICLcouldoutperformthe
restofitscompetitors,asithasalreadydonein
termsofprofitabilityduringthepastdecade.
CompanyDetails
ICLisregisteredintlieUnitedKingdom(U.K.)
asapubliclimitedcompany(pic). Its
headquartersareinPutney,south-westLondon.
ICLemployssome21,000employeesand
operatesinover70countriesworldwide.
EightypercentownedbyFujitsu,theJapanese
electronicsgiantthatissecondonlytoIBMby
sizeofrevenuesobtainedintheworldwideIT
market,ICLspecialisesintheprovisionof
integratedbusinesssolutionstomeetthe
informationtechnologyneedsofspecific
verticalmarkets,principally:
ThisResearch—BulletinisanexcerptfromafullresearchreportissuedaspartofINPUT'S
CustomerServicesProgramme Europe. Ifyouhavequestionsorcommentsonthisbulletinorwishtopurchasethereport,
pleasecontactPeterLinesatINPUT,17HillStreet,LondonWIX7FB,England.
Tel.[phone],Fax[phone] , ,.
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INPUT May1993
Vol.IV,No.9
lEU-CSP
Routeto:
Research
Bulletin
Af»ubiicationfromINPUT'SCustomerServicesProgramme—Europe
—
Equipment Vendors The Move from
Service to Services
Forseveralyearsmanyoftheleading expenditureonsoftwareandservices. The
equipmentvendorshavedeclaredtheir opensystemsmovementhadalargeroletoplay
intentionsofre-orientingtheirbusinessaway inlliisre-balancingofITspending,asithas
frompureequipmentmanufactureandits encouragedhardwarepricewars. Examplesof
servicing,towardtiiesoftwareandservices unbundledsoftwareandservicesare:
market. AccordingtoINPUT'Sanalysisoftheir
Europeanrevenuestreamsin1992,thespeedof • Operatingsystemssoftware
makingthischangevariesconsiderablyfrom • Systemssoftwareoptions
vendortovendor. Overall,thereisastrong • Systemssoftwaresupport
trendtoincreasesoftwareandservicesrevenue, • Pre-salessystemsengineering
particularlyforthosefacedwithashrinking • Systemperfonnanceaudits.
shareofthehardwaremarket.
Genuinedevelopmentofnewsoftwareand
Thechangeistakingplacetliroughtwodistinct servicesbusinesstakestheformofvarious
activities. Thefirstisaformoffinancialre- typesofdiversification. Herethevendorsare
engineering. Thesecondisgenuine lookingforalargershareoftheircustomer'sIT
developmentofnewbusinessrevenues. spend. Thiscanbeforservicesnotpreviously
bought,oritcanbeasaprimecontractorfor
Thefinancialre-engineeringwithinthe productsandservicesboughtfromavarietyof
equipmentvendorshastakentheformof sources. Forexample,thetraditional
unbundlingsoftwareandservicesfrom equipmentvendorsaremakinginroadsinto
hardwarepricesandcosts. Lowerequipment marketsin:
priceshavebeenachievedbyseparatingoutthe
chaigesforsoftwareandforsupporting Cablenetworkdesignandinstallation
services,andthenbyincreasingthese Disasterrecoveryservices
unbundledpricestoreflectthecustomer's Multivendormaintenance :
perceptionoftheirvalueratherthantheircost. Outsourcedsystemsoperations
Therefore,ashardwarepricescontinuetofall Systemsintegration
therehasbeenasignificantincreaseintheuser Managemen.tconsultancy
©1993byINPUT.Reproductionprohibited.
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RESEARCHBULLETIN
Exhibits1and2showINPUT'Sanalysisand AT&T,composedmostlyoftheNCRandIslel
estimatesofthebusinessmixforthe1992 acquisitions,showsthelargestproportionof
EuropeanrevenuesoftheleadingfiveU.S.and softwareandservicesbusinessamongtlieU.S.
fourEuropeanequipmentvendorsrespectively. vendorsinExhibit1
Theirtotalbusinessisheresplitinto:
ICLhasaclearleadovertheotherEuropean
• Softwareproductsandtlieirsupport vendorsinExhibit2withalmost60%ofits
• Equipmentmaintenanceservices revenuesgainedfromsoftware,servicesand
•• AOltlheorthreervesenruveisc—esp(reixmcaerpitlyfienqaunicpimngenstersvailceess) mMauicnhteonfantlciiesrhaatsliebreetlniaancehqiueivepdmebnyttshaeles.
acquisitionofsoftwareandservicevendors
Eachequipmentvendorhasauniqueblendof overthepastfiveyears. InlimeICLissetto
revenues. Exhibit3tabulatesthebaseratios become/perceivedinthemarketasan
usedtocreatethesecharts. The"Other "independentvendor". Allthesevendors,
Revenues"categoryshowsthecontinuing however,willfinditdifficulttoshedtheir
dependenceofeachvendoronequipment presentdayimageasa"manufacturer".
revenues.
Exhibit! •
EuropeanRevenueMix,U.S.EquipmentVendors
1992
I I I I \ i I I i I I
0 20 40 60 80 100
ProportionofEuropeanRevenues
(Percent) Source: INPUT
INPUT 2 e1993byINPUT.Reprcjiictionpfohibiled.