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Transcript of Digitalization/ Digital Business Digitization Modernization
Primarily Written for Business Unit Leaders
The Gartner Scenario for Application Software Providers: Building
Digital Transformation in a Bimodal World The Gartner Scenario
forApplication Software Providers:Building Digital Transformation
in aBimodal World Bianca F. Granetto, Chris Howard, DarylPlummer,
Claudio DaRold, RobertAnderson, Chad Eschinger, JoanneCorreia,
Nigel Montgomery, Jim Hare,Chris Pang, Neil McMurchy January 2016
Primarily Written for Business Unit Leaders Bianca F. Granetto,
Chris Howard, Daryl Plummer, Claudio DaRold, Robert Anderson, Chad
Eschinger, Joanne Correia, Nigel Montgomery, Jim Hare, Chris Pang,
Neil McMurchy January 2016 Growth and Profit Will Come From
Leveraging the Bimodal Dynamics Set in Motion by Your
Customers
Digitalization/ Digital Business Digitization Modernization Window
of opportunity Mode 1 Window of opportunityis open! Mode 2 The
world we know The world in the making! Many IT organizations around
the world are implementing a bimodal approach to managing
effectively the ongoing operationalrequirements of their businesses
with the innovative ones driven by digital business initiatives.
Gartner has already published forservice providers a series of
documents to analyze the implications of this demand-side trend
onto their suppliers of services (see"Vendors Must Become Bimodal
to Survive the Flip to Digital Business" [G ] and "Technology
Service Providers MustImplement a Bimodal Roadmap or Risk
Irrelevance and Decline" [G ]). With this scenario, we are advising
a similar approach to guide application software providers and more
specifically their businessunit leaders to consider implementing a
similar approach in the form of a strategy. We believe this is
important to allow to developthe necessary vision, investment
decisions, new roles, skills, competencies, methods, acquisitions
and models that will: Defend and build competitiveness in the
short-term Position for long-term gains Generally all existing
providers know about their marketplace and what worked for them for
the past 20 years can be located withthe Mode 1 definition. This is
what is enabling businesses to operate and where the essential run
of the business is supported withthe long-established requirements
of stability, reliability and security. On the contrary, Mode 2 is
in the making and consequently itrepresents a developing
marketplace with new buying and competitive dynamics that is yet to
establish its everyday paradigm. Inaddition, it looks to and is
inspired by the rapid and disruptive impact of the technologies
that power the digital industrial economy. Mode 2 initiatives and
their related wants and needs are the direct consequence of the
digital dimension being crucial for theattainment of the desired
business goals. This creates a sense of urgency and a new kind of
attention on delivering new digitalbreakthroughs that will create
competitive advantage differentiation and new operating models.
Mode 2 vision and executionhave the intrinsic ambition to enact a
transformation that will bring entirely new possibilities for the
business to diversify andimplement new competitive cost-profit
business models. Technology and more so application software, as it
lies at the forefront of the user experience within the digital
realm oftechnologies (Web, mobile and things) is taking on a "new
business role" in addition to or in replacement of others. With the
next slides, we reflect on how business budgets are making more
space for technology and software expenses and how thischange is
driving the organizational and decision-making shifts observed
outside the IT department. Key Issues Where Will the Growth Come
From?
How Can the Application Software Providers Seize That Growth? How
will the buyers behave? What do successful competitive and
go-to-market strategies look like? How can providers differentiate?
Unique selling points? Action Plan for Next Six Months: Develop a
bimodal strategy to leverage the dynamics being set in motion
byyour customers. This scenario looks at the opportunities and
threats that come with digital transformation in a bimodal world
and provides initial planning guidance for application software
providers. Where Will the Growth Come From?
The word "growth" here is used purposely as a general term to
indicate that there is a wider opportunity to go after that is
being driven by digital transformation initiatives. By 2020 Key
Application Software Adoption Predicts:
Key Competitive Factors: Analytics, SaaS, SMBs, Digital
Applications, Business Outcomes By 2020 Key Application Software
Adoption Predicts: By 2020, 80% of enterprise application vendors
will compete on the sophisticationof advanced analytics offered in
their solutions. By 2020, 60% of business users will be
provisioned, in whole or in part, with officesystem capabilities
from the cloud. By 2020, for the first time, cloud-based growth
will propel North American small ormidsize businesses (SMBs) to a
leadership position over large enterprises in totalERP new product
revenue. Digital Business: By 2020, 75% of application purchases
supporting digital business will be "build,"not "buy." By 2020,
LOBs will drive 50% of new IT spending decision making, half of
whichwill be expensed for software directly out of their budgets.
Our top predictions and forecast assumptions in "Predicts 2016:
Software Adoption" (G ) and in ourForecast Overview research
clearly establishes where the market will focus on in the coming
years. These Predictsare not exhaustive and only cover in parts the
dynamics being analyzed in our research and that can be exploited
byour customers' strategies and plans. The Predicts do identify the
key factors creating value and competitiveness inthe forthcoming
years. These Predicts are briefly described here: Analytics will
continue to play a leading role in differentiating and adding value
to all application softwareproviders. A "new legacy" for essential
business applications will emerge in the cloud, having by then
established a newcompetitive order as well as an entire new way of
consuming and valuing these services. The SMB market segment will
play a more significant role in favoring new applications adoption,
becoming anessential pillar of any successful SaaS and/or
application provider's strategy. Business plans to digitally
transform are leading to new buying and spending dynamics that will
mostly benefit themarket for business applications. Digital
business initiatives draw their funding from both the IT budget and
non-IT budgets, from operational costexpense pools and from brand
new investments. Thus generating a potential wider addressable
market that values upto three times more the current IT spending
(Gartner IT Key Metrics Data). Indeed, current IT spending as
aproportion of revenue on average equals 3.2%, while based on our
digital business Survey of Business and ITExecutives (concluded in
June 2015), organizations using digital marketing or with planned
digital businessactivities and above $250 million in revenue expect
to spend 10% of their revenue in investments for digitalbusiness in
2015 (number of respondents = 304). New Resources Are Being
Mobilized for Digital
On average percentage of revenues beingspent on IT = 3.2% 2016 CIO
Survey: +2.2% average increasein IT spending 17% of IT spending
happens outside of theIT budget on average 40% is directly
influenced or paid for byLOBs + x3 On average percentage of revenue
that willbe spent on digital business = 10%* The average proportion
of investmentsbeing handled in a Mode 2 manner is 25% SMB companies
reported that on average28% of their revenue comes from
digitalsales, expected to increase above 40%next five years** 95%
of global businesses are, in fact,SMBs Digital Transformation
Initiatives will generate new revenue streams in the next two years
and beyond Follow the Money! All the evidence collected by Gartner
research clearly indicates that there is additional demand and
consequently spending being planned outside the regular IT planning
cycle. In addition, this trend is even stronger among SMBs, which
play an increasingly important role in driving IT adoption as well
as in generating "greenfield" market opportunities. New investments
are being planned to finance Mode 2 initiatives for digital
transformation; respondents to our CIO Survey tell us that they are
working toward doing more Mode 2 based on funding and maturity
considerations. Organizations using digital marketing or with
planned digital business activities expect to spend on average 10%
of their revenue on digital business, and 71% of these surveyed
organizations are self-described as either actively experimenting
(36%), piloting (14%), deploying (13%) or fully deployed (8%)
digital business. Spending will be even higher than the average 10%
of revenue in the industries of communications, media and services
(13%) and retail (12%), followed by banking and healthcare (10%)
(Digital Business Survey; number of respondents = 304). Midsize
businesses are firmly on the digital business path. More than a
third of all SMBs have adopted cloud and mobility technologies as
business accelerators and show more agility and openness toward
adopting even business-critical cloud applications such as CRM and
BI and security as a service. According to Gartner's 2014 CEO
survey, almost a quarter of SMB companies say 30% to 50% of their
revenue already comes from digital sales. The key finding is that
budgets that typically expense physical assets and human capital
expenses are making space for IT ones. These most likely to
complement but also increasingly replace those existing expenses as
the digitalization process progresses toward a full business
transformation. These IT expenses will increasingly focus on
replacing core applications with new digital ones. Arguably IT has
always competed to some degree with replacing physical and human
capital. Only now does it become significantly more pervasive
within; more importantly, it enables the business to successfully
make its way into and compete within the digital industrial
economy. * = Digital Business Survey (number of respondents = 304);
** = Gartner 2014 CEO survey (number of respondents = 64) Sources:
IT Key Metrics; Gartner elaboration of shadow IT spending 2015
(based on forecasting data); Gartner CIO Survey (2,944 CIO
respondents) Recommendations by Market Segment
Global Application SoftwareProviders SMB Application Software
Providers Sunset Old Offerings Diversify Embed Analytics Pursue
Digital Opportunities Plan Realistically Specialize and Simplify
Global Application Software Providers: Consider sun setting or
selling less profitable or noncore parts of your business so you
can invest in growth markets or product innovation Diversify by
building extra services solutions alongside your core ones to
differentiate and accelerate your customer's business
transformation, using either/or: All-in-one business operating
essentials to accelerate modernization/digitalization Services
solutions offerings for business transformation Increase the
sophistication of embedded advanced analytics
(predictive/prescriptive) in your solutions promote how your
solution helps digital businesses improve decision-making by making
contextualized analytic insights available to information workers.
SMB Application Software Providers: Assess the impact that digital
transformation is having in your geographical markets and align
your growth strategy you could discover you actually have a greater
opportunity to pursue! Be realistic about growth and expansion
plans. The largest markets may appear to provide the biggest
opportunity. But in most cases, it will also be the most
competitive and expensive to establish a presence. Offer packaged
SaaS solutions that can be quickly deployed to address tactical
business problems with a minimum of implementation services and
customization. Specialize, specialize, specialize (industry;
compliance; innovative development skills; and business
contextualization). Assess how your customers can benefit from
innovation in areas such as the Internet of Things (IoT) and
digital business. Create product offerings which simplify and make
affordable such projects to SMBs. Recommendations by Deployment
Model
Cloud-Native Application SoftwareProviders On-Premises Application
SoftwareProviders Bundling for Essentials Focus on Customer Service
Comparative and Competitive Entrants Offer Subscription Agile
Development Have a Roadmap to Transition Customers to SaaS Cloud
Native Application Software Providers Extend your bundling for
software and telecommunications business essentials to reduce your
customer's vendor management and procurement overhead. Service your
customer or someone else will. Keep a good eye out for comparative
and competitive entrants; markets are moving quickly. On-Premises
Application Software Providers Consider offering subscription
on-premises agreements to new customers where they are able to have
fully customized solutions but also allow for easy price
comparisons to native SaaS offerings. Use SaaS development
practices such as agile development so you can better compete on
faster innovation releases. Use caution if transitioning to a SaaS
business, and have a planned roadmap because it will be a change
management exercise (sales, development, channel and management)
and it will require expertise in managing the financial transition
of your company. How Can the Application Software Providers Seize
That Growth
How Can the Application Software Providers Seize That Growth?How
will the buyers behave? The following slides will run through a mix
of buying behaviors and trends that are universal to IT buying. It
is important to understand that the new business requirements and
related decision makers will look more at the business outcome of
what they are evaluating and less at the individual technologies
and the underlining complexities that are needed to achieve the
desired result. In addition, these trends reveal that there is a
far greater opportunity for application software to be adopted
and/or extended beyond its traditional markets and market segments.
Buying Behavior: Digital Gets Strategic Attention and Sense of
Urgency
GROWTH Compete Globally A source of competitive differentiation and
advantage Attain Operational Excellence Improve the efficiency and
effectiveness of business operations Implement Business
Diversification Allows embracing new business opportunities,
reaching new targets Top Five Highly Relevant Factors to
Organizations Definition and Execution of Digital Business Creation
of client value and new revenue streams (66%) Focus on new
front-office strategies to reach the customer orchange the customer
experience (this includes improvingthe end-to-end product
visibility) (61%) Creation and introduction of new business
strategy/models(56%) Clearer understanding of clients' requirements
to launchnew products or services (55%) Focus on new back-office
strategies to change and enhanceor modernize business processes
(47%) Digital business directly impacts the company's ability to
make money, which makes it in the principal strategic reason for
taking this trend very seriously and urgently. Based on the
responses of 609 participants of Gartner 2016 CIO Survey, revenue
from digital sales is expected to increase from an average of 16%
today to 25% in two years to 37% in five years. Our CIO Survey 2016
sees digitalization/digital marketing now as the No. 5 priority for
2016 priorities. The Digital Business Application Fulfillment
Survey (concluded in October 2015 with 167 respondents between IT
and Business executives) shows for the majority that both CIOs and
IT people are primarily responsible for driving digital business
initiatives and application selection, procurement and
implementation for end of 2015 and early However, the same study
also shows that decisions are being driven from across the
enterprise, with a higher proportion in digital initiatives being
driven coming directly from business executives, CMOs, innovation
committees and individual business units. It requires a different
ability to execute as well as more composite application software
solutions or digital platforms. For example, it is one thing to
know your customer, and it's another to be able to move products
"profitably" to ensure delivery expectations are met and that the
business is profitable in doing so. For example, allocating
merchandise in the right location such as in store or warehouse so
that it can be delivered how the customer wants it implies a closer
integration between SCM and CRM. Consequently while the customer
experience is a driver, in the application realms, it involves much
more than just the CRM solution. Similarly, creating a compelling
customer experience will inevitably drive convergence and tighter
integration between Web content management, e-commerce, portals,
user experience (UX) design, analytics and CRM. In turn, this
convergence will drive a reinvention of the back-office
applications that will need to adjust to the expanding
transactional activity occurring through multiple digital means.
Source: Gartner Digital Business Document Collections; Digital
Business Survey 2015 (total number of respondents = 210) Buying
Behavior: Bimodal IT Practice for IT Delivery Will Extend and
Change the Decision-Making Structures Bimodal IT is the practice of
managing two separate,coherent modes of IT delivery within the same
enterprise,with one mode focused on stability and the other
focusedon agility, predictability and experimentation or
uncertainty. Mode 1 is sequential, emphasizing predictability
andaccuracy; Mode 2 is exploratory and nonlinear,emphasizing
agility and managing uncertainty. Each mode has specific
requirements for people,resources, partners, structure, culture,
methodologies,governance and metrics, as well as different
attitudestoward value and risk. New investments are deployed
through one of the twomodes, depending on the balance of business
priorities.When the balance changes, investments and operationsmove
seamlessly between modes as the situation dictates(see "Kick-Start
Bimodal IT by Launching Mode 2"[G ]). 64% Bimodal IT practice will
drive out Mode 2 programs and initiatives through which the
business will learn and determine the broader transformational
direction. Consequently, as the bimodal IT practice learns its way
through the exploratory and experimentation phases, it will assign
a value and establish a practice to the enabling technologies it
identifies and more so to related providers. This is why
application software providers must play a role in supporting these
programs and initiatives. More importantly, application software
providers must find ways to accelerate the transition to modern
application software designs and deployment options to increase the
agility and speed expected to respond to their business
stakeholders' craving for successful business outcomes. Source:
2016 Gartner CIO Survey (948 CIO respondents represent 32%) Buying
Behavior: Many More and New Decision Makers to Align
Digital Business Decision Makers Versus Application Ones The CIO is
still in the lead of most digitalbusiness efforts. The
fastest-rising single job title in digitalbusiness leadership is
the VP of digitalbusiness. The chief digital/innovation officer has
sloweddown in comparison growing but not asmuch as the other
titles. Powerful stakeholders: CEO and CFO. Many others are
involved: COO, CxOs. The intermix between IT, business and digital
leadership will need suppliers to rethink how they position and
sell into their target accounts. Sources: Digital Business Survey
(number of respondents = 304; Digital Business Application
Fulfillment Survey, October 2015 (number of respondents =167 IT and
business leaders). Buying Behavior: Top Five Applications
Priorities in 2016
Business applications fulfilling digital business initiatives: 1.
Mobile applications 2. Enterprise software applications 3. Business
analytics applications 4. SaaS applications 5. Digital marketing
applications Most influential in evaluation and selection of
application provider: 1. Has a demonstrated understanding of the
business/industry/business process 2. Has openness, integration and
interoperability standards 3. Is a trusted brand with credibility
in my organization 4. Offers a choice in delivery, pricing and
licensing options 5. Has a center of excellence and/or innovation
center Mode 2 initiatives create positive dynamics for installed
and new application software: Modernizing and digitalizing Mode 1
IT delivery dynamics. The growth curve of modernization driven by
digital business initiatives starts with functionally extending
existing enterprise application software particularly ERP, CRM and
SCM and developing mobile applications and business analytics
applications. Accessing and/or building new skills for mobile
application development and business analytics applications and
models. Contextualizing application capabilities and
functionalities for specific business use cases Extending
integration and interoperability, especially to unlock information
held inside siloed applications, create flow streams and end-to-end
processes inside-out and outside-in. Source: Digital Business
Application Fulfillment Survey, October 2015 (number of respondents
= 167 IT and Business leaders) Buying Behavior: Looking for New
Sources of Help
From an application perspective, which of the following have you
been using in order to fulfill your digital business initiatives
and which ones will you add in order to support your digital
business initiatives for end of 2015/early 2016? Diversification is
desirable at such a time to create new economies of scale at the
lower end of the market while investing to increase the value for
business at the top end of the value chain. Application providers
and in particular those targeting digital workplace investments
have the opportunity to diversify by bundling together the
telephony/Internet/mobile services with essential productivity
applications. These business essentials can open a natural
cooperation or merger opportunity between communications service
providers and independent software vendors. Source: Digital
Business Application Fulfillment Survey, October 2015 (number of
respondents = 167 IT and business leaders, excludes don't knows)
Recommendations by Market Segment
Global Application Software Providers SMB Application Software
Providers Accelerate Modernization Unique Advanced Analytics Value
Creation Value Prop: CxO, CIO, CFO Realistic and Impactful ROI
Co-create Global Application Software Providers Accelerate the
dynamics for enterprise application software replacement and/or
modernization to support business process digitalization: Make sure
your value proposition is aligned to the business goals of your
customers not only in words but also by means of commercial
reinvention and new ecosystem offerings. Separate out and define a
new organization to pursue Mode 2 type opportunities (see
concluding slides for the initial roadmap). Ensure consistency of
customer service and messaging consistency between yourself (as the
OEM) and your system integration and business consulting partners.
Identify and communicate what unique advanced analytics
capabilities are in your platform that differentiate your offering.
Promote how your solution will help organizations become digital
businesses and support a bimodal approach. SMB Application Software
Providers Work on refining, differentiating and aligning your value
proposition for the CxO; the CIO and the CFO. Focus on delivering
and proving your ability to provide a realistic and impactful ROI.
Highlight any specialized business knowledge you have: industry
focus, process/domain specific. Co-create with your customers.
Launch your digital lab! Recommendations by Deployment Model
Cloud-Native Application Providers On-Premises Application
Providers Customer Satisfaction Easy Adoption for Mode 2
Integration in Mode 2 POCs, Pilots Hybrid Cloud Native Application
Providers Emphasize customer satisfaction (enterprise buyers and
employee users) with your services and your partner ecosystem.
Maximize the ease of integration and user experience of your
application in Mode 2 proofs of concept and pilots. Promote
evidence of what business changes came about as a direct impact of
shifting to the cloud. On-Premises Application Providers Develop
solutions that can be easily tested or adopted during Mode 2
engagements and delivered through SaaS. Plan for a hybrid
on-premises/SaaS business as a way of protecting and extending your
penetration with existing customers. Enter adjacent, converging
markets to create and deliver a full user experience benefits and
support your customers as they execute on becoming digital
businesses. How Cloud Changed the Business Enter Near Markets How
Can the Application Software Providers Seize That Growth
How Can the Application Software Providers Seize That Growth?What
do successful competitive andgo-to-market strategies look like?
Offer the right bimodal mix
Application Software Providers Also Must Develop a Bimodal Strategy
and Bridge the Gap Between the Two Modes Mode 1 Digitization
Commercial Reinvention Bundling SaaS Transition Services Enabling
Components Mode 2 Digitalization Business Co-creation Shared Risk
Models Bring Insight, Vision, Clarity, Rigor Transforming New
Designs New Skills New Approach Digital Ecosystems Digital
Platforms Shaping the Future Replacements Rapid Modernization
Legacy Transition SaaS Enabling Platforms Industrialization
Application providers must adopt a bimodal go-to-market strategy to
align with demand-side needs and practices (see "Vendors Must
Become Bimodal to Survive the Flip to Digital Business" [G ] and
"Technology Service Providers Must Implement a Bimodal Roadmap or
Risk Irrelevance and Decline"[G ]). There is a window of
opportunity that opened in 2015 to learn Mode 2, while
transitioning and industrializing Mode 1. This period will attract
new competitors that will inevitably disrupt and challenge the
status quo even further and will require change management to be
systematized within your business. Adopting a bimodal strategy
allows to identify and run differently (with different financials
and performance metrics) the dedicated organizations and their
related professionals to ensure speed of innovation. More
importantly, a bimodal strategy allows for the ability to explore,
experiment and fail, to identify and rapidly industrialize the
lessons learned on Mode 2 projects, and transfer those back to the
rest of the company. Adopting Mode 2 operational and go-to-market
strategies, to respond to the demand side's equal initiatives will
create the necessary freedom to think, decide and act differently,
to disrupt the internal conventions (for example, developing
disrupting but fitting new partnerships) and shape the operations
and go-to-market required to help your customer on the path to
transition and to transform. Mode 2 initiatives will increasingly
drive Mode 1 opportunities to modernize, and suppliers must plan to
accelerate this transition. Offer the right bimodal mix Case Study
Snapshot: Telecom Italia Digital Solutions Exemplifies Mode 2
Strategy
Accountability: Dedicated and accountable LOB/company for each
digital offering: cloud; IoT; analytics; security and identity;
customer data monetization; and verticals Decisional and
executional autonomy: Each LOB runs its operations autonomously
including platforms, sales and marketing Multifaceted partner
ecosystem: Developed partnerships and reseller agreements with
traditional IT value networks, global-scale cloud providers,
developers and governmental agencies (provisioning to citizens of
digital identities) Legal entity created in June 2013,with goal to
play a leading role indigital transformation initiatives of
itscustomers (B2B), their industries andtheir customers (B2B2C)
Platform-based E2E solution provider Commercial operations
expanding toselected countries by opportunity(South America, EMEA )
CAGR +75% by LOBs; profitabilitytarget CAGR +23%; partner
businessdevelopment: CAGR +13% Most communications service
providers have already identified the opportunity of climbing up
the value chain and provide application services alongside their
traditional communication ones that are serviced through the cloud.
However, the communications business model operates in a very
different way than a software one and even more so than an
application software one. This quick case study exemplifies how to
rapidly gain the experience into a new business and operating model
and organizing principles. By creating an entirely separate legal
entity, the large incumbent (Telecom Italia) provided the new
company (Telecom Italia Digital Solutions TIDS) the necessary
levels of accountability, decisional and executional autonomy and
ability to look to and develop new nontraditional partners that
would otherwise very rapidly come against established practices. It
also provided a clear profit-and-loss organization to account for
independently and objectively for its successes, thus making its
"change and transformation" unbiased and publicly visible. Recent
announcements by Telecom Italia see TIDS being incorporated back
into the group's IT company Olivetti to transfer in the innovative
experience and practices to increase the group's overall
competitiveness and ability to respond to the developing
opportunities and challenge of their customers becoming digital
businesses. GE's Digital Reinvention
"On our current trajectory,GE is on track to be aTop 10 software
company." Jeff Immelt, CEO, 2015 GE is the epitome of a big
traditional company it has been part of the Dow Jones Industrial
Average since 1907 and is ranked No. 8 on the 2015 Fortune 500 list
with about $148 billion in revenue. GE is a conglomerate with a
huge range of businesses, from jet engines to wind turbines to
oil-drilling equipment. About five years ago, GE began to focus on
future opportunities associated with what it dubbed "The Industrial
Internet" and "Industrial App Economy." It was based on the idea
that companies have software running on all kinds of machines used
in the workplace. If these devices could collect data, then
transmit it to a central location where GE's software could analyze
it, that data analysis could be useful to businesses. GE's pitch
was predicated around the huge economic gains that even a 1%
improvement in efficiency might bring to a number of industries
amounting to many millions of dollars if they used its software.
The company went on to develop an entirely new common platform
called Predix, which acts as a bridge for its analytics and
applications in order to transform its business and "reimagine its
overall service portfolio." Today Predix, GEs cloud-based analytics
software that the company just opened to outside developers earlier
this year, will surpass $6 billion in revenue. GE CEO Jeff Immelt
says that he expects the software business to grow to $15 billion
by GE is highlighting how every company is becoming a digital
business that revolves around software and delivering a whole new
set of outcomes that are specific to the business applications of
its customers. Even the most traditional businesses should have
strategies for harnessing the power of data, analytics and mobility
to deliver valuable new business applications to customers or risk
disruption. This analysis is based entirely on publicly available
research. Sources: M. Rosoff. "Jeff Immelt: GE Is on Track to
Become a 'Top 10 Software Company.'" Business Insider. 29 September
P. C. Evans and M. Annunziata. "Industrial Internet: Pushing the
Boundaries of Minds and Machines." GE November 2012. How Can the
Application Software Providers Seize That Growth
How Can the Application Software Providers Seize That Growth?How
can providers differentiate? Unique selling points? In the Digital
Realm, Ecosystems Are Foundational, Not Optional
Enterprise Internal Domain External "Digital" Domain New Value
Networks, Opportunities, Competition .com Business Applications
Partner Government Agency What to What? What to Whom? By Whom?With
Whom? Headquarters ECM Office SCP ERP CRM BI Affiliate To digitally
transform means to expand your presence and footprint online, on
mobile devices and increasingly in things, to connect and be
connected with other players of the digital realm. To do so,
companies need enabling technologies and also a great degree of
reinvention, re-engineering, ideation and creative thinking.
Moreover, they need to establish new business ecosystems because
customers and citizens experience the digital dimension
holistically for a variety of reasons not merely just to buy goods
and services. Creating value in the digital dimension goes beyond
monetization. It requires the continuation of experience across a
variety of touchpoints and with a life cycle approach, paralleling
information and participation, and creating conveniences with the
services being offered and delivered. In the digital realm,
business ecosystems are foundational, not optional. Digital
Supplier Value Network: Buyers Get More Choice
Digital Supplier Value Network: Buyers Get More Choice! Add to Your
Unique Selling Points Web Mobile Things Cloud-Based SaaS Provider
IaaS/PaaS Provider Developer Start Up ISV OSS Things Provider
Mobile Device Provider Digital Platforms Digital Solutions Digital
Transformation Initiatives New Market Entrants/Creators Digital
Builders' Most Valuable Contributors CSPs The Essentials to Connect
and Work Cloud Provider: Contender/Partner Cloud Providers New
Paradigm Service Providers The consequence of ecosystems being
foundational means two things for application providers: They must
design their applications to work with others, open, interoperable,
agile, flexible, standards compliant and secure. Their applications
must enable their customers in creating and developing their
business ecosystems beyond their intranets in support of their
unique business operational and/or distinctive requirements. They
must develop a digital supplier value network in support of their
own application software offerings to support their customers'
experiences and create experiences for their customers that deliver
value (such as, facilitating participation and creating convenient
ways of doing things). In the traditional value networks based on
enterprise application software licensing and projects, the roles
of players were well-defined and driven by the demand of the
project. The buyer defined and procured directly or through a main
contractor what it required. The cloud paradigm forces the players
to organize themselves in taking the solution to market and in
delivering the experience to their customers. Four very significant
players are leading the new digital supplier value networks: Cloud
Providers These lead the paradigm shift and have implemented
enterprise application marketplaces as a means to develop their
ecosystems and deliver value to the end customer. "Digital
Builders" These are the professionals that have the modern
programming skills to fulfill digital projects of both technology
companies and nontechnology companies. They are masters of new
technologies such as application architectures, app development
software, mobile application development, smart machines and IoT
applications. New Market Entrants/Creators These players can be
technology companies, Web natives (such as Apple, Google, Amazon,
Alibaba and Salesforce) or increasingly end-user companies, such as
large utility and services companies. These players will not be
selling or delivering the applications as their products or as a
service but rather provide a business experience
(transactional/collaborative) and information-based offerings.
Communication Service Providers (CSPs) CSPs have a major
opportunity to become an essential player in the digital realm,
primarily because any player needs their essential technologies for
connecting and communicating. CSPs in the last several years have
been developing upward into the value-add network to provide
essential applications for the businesses together with their
networking, connectivity and communication services. They are
equally a contender and a partner for cloud service providers. (See
"Market Trends: Worldwide, Five Essential Activities for CSPs in
the Digital Era, " [G ]. Recommended Reading: "Tech Go-to-Market: A
Definition Guide for Technology Sales and Channels" (G ); " Tech
Go-to-Market: European Channel Trends, 2016" (G ). Recommendations
by Market Segment: Unique Selling Points
Global Application Software Providers Don't lock in your customer;
instead,position to create business value throughyour offerings and
those of yourecosystem Seek and align to consulting and
systemintegration partners who are able todeliver the vision you
are creating (thesemay not be same partners that you havetoday)
Even your customers may transform intodigital suppliers and be part
of a wider anddifferentiated value network Consider acquiring,
merging, and/orpartnering with communications serviceproviders and
native dot-com businesses SMB Application Software Providers Show
how you can be more focused anddeliver more appropriate solutions
to asmaller customer than global applicationcompetitors Establish a
presence in the most influentialapps stores for SMBs Expand your
mobile development and UXdesign skills Partner/develop with a
traditional businessservices company looking to digitalize
itsservices Recommendations by Deployment Model: Unique Selling
Points
Cloud-Native Application SoftwareProviders Offer a holistic
experience versus afragmented one Show openness and choice when
itcomes to integration strategies Develop and allow for
extensiveconfiguration so end customers do notfeel it is your way
or not at all On-Premises Application SoftwareProviders Offer a
hybrid deployment opportunity;show how adopting a hybrid solution
froma single vendor benefits the user in termsof process and data
integrity Ensure and demonstrate how yourapplication stack can be
functionallymodified without sacrificing onupgradability by
protecting the core yetallowing for custom processes andfeatures
that do not interfere with the coreapplication Action Plan for Next
Six MonthsDevelop a bimodal strategy to leverage the dynamics being
set in motion by your customers. Three Steps to Start Off Your
Bimodal Strategy: Use It as an Organizing Principle
1. Launch Mode 2 Structure to respond to any size digital business
innovation initiatives Identify where you can create value, where
there is the greatest cultural fit and profit potential Identify
where you have gaps: talent, knowledge and skills 2. Transform Mode
1 Propel your marketing, sales and channel efforts to create a
sense of urgency and convenience to accelerate legacy modernization
Be aggressive; aim at displacing the competition Develop talent and
foster continuous learning culture 3. Bimodal in Action Let Mode 2
drive and transform Mode 1, and let Mode 1 industrialize rapid
innovation Systematize the emerging bimodal practices to establish
a new order of things (business model) Focus on differentiation and
competitive advantage Business unit leaders should consider this
advice as an organizing principle to help them identify the gaps
and what needs addressing, changing and developing in order to
position themselves as credible counterparts to the building of
digital business constructs and projects' fulfillment plans. The
term and Gartner advice on bimodal is here repurposed and proposed
as an organizing principle to develop a strategy for the different
types of application software providers and to commence organizing
and visibly planning for success in supporting their customers
become digital businesses or partners in delivering to that same
goal. Mode 2-type initiatives are already visibly demanding a
different approach to their providers and are driving decisions
dynamics on existing applications portfolios. Teams in charge of
fulfilling these initiatives often rely more heavily on their own
internal development capabilities and skills, turn more often to
startups, and in fact have all created organizations that have the
objective of scouting and monitoring startups. These teams look
more often to open-source software building blocks and evaluate how
and in what direction to evolve existing applications before they
commit to buying any new one. Application architectures also are
being innovated, and more commoditized applications such as Office
are being shifted from on-premises to cloud-based SaaS. There is
also an extreme but very important chain of initiatives and related
activities that see experimenting and exploring use of emerging
technologies. Most application software providers find it very hard
under their current operating model and practices to step in,
support and deliver upon these projects, yet it is from these
experimentations that breakthrough solutions will emerge. Actively
participating to these projects requires a different way of
measuring the performance, of allocating the required resources, of
selecting and sourcing the right partners, of managing the right
mix of teams, and of managing the account. It is for all these
reasons that a bimodal strategy can help at least logically to
separate out what needs to be done differently, by whom, with whom
and through whom. A bimodal strategy can reveal what gaps need
bridging, where they are in the organization, and what investments
are worth taking and in what directions. Work Through This
Organizational Framework to Start Your Bimodal Strategy
Roadmap
Mode 1 Market Share Market Entry Replacement Markets Train and
Coach; Rotate Jobs Interdisciplinary Teams Focus on Market Share
and Increasing Brand Recall Value Commercial Reinvention Shift to
Subscription Innovative Contracting Develop Services for Transition
Strategies Away From Legacy Develop Holistic Approach Out With the
Old and in With the New! Leadership Operations Marketing
Sales/Channel Services Delivery Product Development Mode 2 Commit
to a Business Model Innovation Build the Team and Provide Funding
Brand Building/Understanding the New Competitors
Insight/Consultative Selling/Performance-Based Contracting Build
New Service Model Create a Co-creation Lab; Iterative Process;
Development and Design Skills Step 1 Step 3 Step 2 Complementary
and Recommended Research Gartner Research Addresses Specific
Roles
Business UnitLeaders Strategic Planners Product Leaders Marketing
Leaders Sales Enablement Roles We Address Enterprise Applications
Software Cloud-Based SaaS "Forecast Analysis: Enterprise
Application Software, Worldwide, 2Q15 Update" (G ) "Competitive
Landscape: Public Cloud Business Application Marketplaces, 2015" (G
) "Market Trends: Prepare Now to Smooth the Inevitable Transition
to a Subscription-Based Business Model" (G ) "Market Trends: Move
Beyond Homegrown Licensing and Entitlement as the IoT Creates New
Revenue for Software" (G ) Market Segments: BI and Analytics, CRM,
ERP, SCM, Office, ECM "Market Trends: Business Intelligence Tipping
Points Herald a New Era of Analytics" (G ) "Ten Reasons to Reach
Beyond Basic Business Intelligence" (G ) "Emerging Provider
Executive Insights: Move Now to Seize the Opportunity in the
Personal and Ecosystem Eras of Analytics" (G ) "Strengthen Your
Sales Analytics Initiative With These Six Best Practices" (G )
"Using Mobile Geoconquesting to Steal Customers From Competitors"
(G ) "Forecast Overview: CRM Software, Worldwide, 2015" (G )
"Market Trends: Digital Commerce Platform Software Opportunities in
Southeast Asia" (G ) "Market Snapshot: Customer Relationship
Management, Worldwide, 2014" (G ) "Technology Overview for Travel
Expense Management Applications" (G ) "Technology Overview for
Employee Recognition and Rewards Software" (G ) "Market Trends: SAP
Service Provider Opportunities in a Postmodern ERP World" (G )
"Market Guide for Contract Life Cycle Management" (G ) "Survey
Analysis: SaaS Trends Providing Opportunity in the Supply Chain
Market" (G ) "Market Snapshot: Supply Chain Management Software,
Worldwide, 2014" (G ) "SWOT: Google Apps for Work, Worldwide" (G )
"Competitive Landscape: Cloud-Based Office Productivity Tools,
Worldwide, 2015" (G ) "Market Trends: New Mandates and Market
Structures for Content Management Drive Growth in 2015 and 2016" (G
) Examples of Recently Published 2015 Research Key
InitiativePrimer: Build andMarket DigitalApplicationOfferings
Primer for2016 Key InitiativePrimer: ExploitApplicationSoftware
Dynamics Key InitiativePrimer: Shift On- Premises Offeringsto
Cloud-BasedSaaS Software AdoptionPredicts Upcoming Research2016
Gartner has research that addresses and spells out all the key
points touched up in this application scenario presentation
document. Application software providers (ASPs) should also note
that our research is now directed specifically at roles within ASPs
organizations. We advise that ASP take advantage of inquiry to
discuss published and upcoming research with application software
analysts. Appendix: Gartner Definitions Gartner Definitions Digital
Business: The creation of new business designs by blurring the
digitaland the physical worlds. Digital Transformation: The
execution of a digital business strategy. Digitalization: The use
of digital technologies to change a business model andprovide new
revenue and value producing opportunities. (It is the process
ofmoving to a digital business.) Digitalize: To move a business or
process toward digitalization. Digitization: The process of
changing from analog to digital form. Digitize: To change from
analog into digital form.