Lower upfont cost.
Lower technology risk.
More advantageous accounting (i.e., OpEx vs. CapEx).
So I ask: why only 20% in 5 years?
Emphasis in red added by me.
Brian Wood, VP Marketing
20% of new IT spending will go to as-a-service solutions
By the year 2018, 20 percent of IT spending on new technologies will be for integrated as-a-service platform solutions, Gartner predicts.
Susan Tan, research director at Gartner, recently provided advice on the firm’s blog on how these integrated ready-to-deploy solutions stacks provide enterprises with an easier way to consume new technologies for growth and innovation.
“New technologies–such as cloud, mobile, analytics, social, sensors and in-memory computing–offer the promise of innovation and creation of competitive advantages,” Tan noted. “However, enterprises face challenges to their adoption. Organizations still struggle with tight budgets and inflexible legacy systems, and many organizations lack resources, skill sets, appetite and time to adopt these new technologies in a conventional manner.”
According to Tan, many of the new opportunities lie in innovations in processes and business models. These include digital marketing, mobile wallet, white-label app stores, e-commerce, multichannel customer experience, sustainability solutions and data-intensive applications.
Investments in as-a-service solutions hold the promise of benefits in several areas, Tan believes. They include:
Lower up-front investments: Tan notes that initial project costs are typically lower than a traditional implementation, and some vendors can amortize the initial costs over the length of the contract. She says organizations can find it easier to obtain approval for the investment in this fashion.
Consumption-based pricing limits risks: By contracting on a pay-on-usage basis, the company can link costs to business outcomes. This enables the organization to reduce the risk of trying a solution, and scale it up as the solution proves itself.
Quicker time to market and reduced implementation costs: By implanting a solution quickly, the time to value is much faster, and implantation costs can be reduced.
No operating headaches: These solutions may involve technologies that change quickly, Tan notes. The client avoids having to train and maintain a staff to develop, maintain and upgrade the new solution. The client also avoids the risk of being stuck with a quickly-outdated system as technologies change.
Gartner Predicts that 20 Percent of Spending on New Technologies Will Be On Fully Integrated as-a-Service Platform Solutions by 2018
Organizations’ need to drive innovation and growth, coupled with a limited budget and the mainstreaming of consuming technology “as-a-service”, is creating the perfect condition for integrated platform solutions.
In today’s blog post, Susan Tan, research director at Gartner, provides advice on how these integrated ready-to-deploy solution stacks provide enterprises with an easier way to consume new technologies for growth and innovation.
Ms. Tan said:
New technologies — such as cloud, mobile, analytics, social, sensors and in-memory computing—- offer the promise of innovation and creation of competitive advantages. However, enterprises face challenges to their adoption. Organizations still struggle with tight budgets and inflexible legacy systems, and many organizations lack resources, skill sets, appetite and time to adopt these new technologies in a conventional manner.
Traditional implementations that take months and years to build cannot be agile enough to keep up with changing technologies or respond quickly to fleeting market opportunities. Besides, there are so many new technologies coming down the pike — many of which are promising but still unproven — and with limited capital, organizations find it hard to build a case for adopting such technologies. This is where integrated platform solutions come in.
Integrated platform solutions are integrated ready-to-deploy solutions offered by IT service providers, and they provide as-a-service solutions to specific business problems. They typically target processes aimed at growth and innovation, rather than cost savings, and are delivered in a software-as-a-service (SaaS) or business process as-a-service (BPaaS) manner.
As IT service providers look at offering more of these solutions, Gartner predicts that by 2018, 20 percent of spending on new technologies will be on fully integrated as-a-service platform solutions.
Mature processes (such as payroll, order to cash, procure to pay and hire to retire) and some vertical processes (such as insurance claims processing, financial trade settlements and airline reservations) are already offered by some providers in a platform-enabled BPaaS manner; however, these tend to be mature back-office processes that are focused on cost savings rather than on growth and innovation.
New opportunities lie in innovations in processes and business models, such as digital marketing, mobile wallet, white-label app stores, electronic commerce (e-commerce), multichannel customer experience, sustainability solutions and new data-intensive applications that produce real-time insights.
Benefits of Integrated Platform Solutions to Organizations Include:
Lower upfront investments. Clients typically pay an initial implementation and migration project cost, along with ongoing consumption fees. The initial project cost is lower than a traditional implementation, and some service providers can amortize the initial costs over the period of the contract. This operating expense (opex) model allows for a lower upfront investment and variable pricing. Also, clients typically find it easier to obtain approval for opex-as-a-service offerings, as opposed to larger upfront capital expenditure.
Consumption-based pricing limits risks. Clients often pay on a usage basis, and as integrated platform solutions often address front-office processes, these transactions can be linked to business outcomes, such as number of coupon redemptions. Clients can thus lower their risk to try a solution and scale up with growth when the solution is proven.
Quicker time to market and reduced implementation costs. The solution can be implemented relatively rapidly, often in days and weeks, rather than months or years; thus, the time to value is much faster, and implementation costs are reduced.
No operating headaches. The client does not need to hire and train a staff and build an IT group to develop, maintain, and upgrade the new solution. As these solutions may include technologies that change quickly — such as different mobility platforms or devices — clients do not need to worry about keeping up with rapidly changing technologies or risk being stuck with a legacy system.
More detailed information can be found in the report “Integrated Platform Solutions Are the Next Frontier for IT Services Providers.” The report can be found on Gartner’s website at http://www.gartner.com/document/2623317?ref=QuickSearch&sthkw=G00253679.