The impact of cloud and COVID on the Spanish IT Professional and Managed Services market (interview)

Versión en castellano haciendo clic en la imagen que aparece debajo.

• So when it stands to you knowledge area. I understand that you are Product Manager in Managed Services. What types of managed services are most in demand from customers today?

Actually, the way we are seeing it, it is that there are two big groups. One it has to do with connecting clouds. The mono-cloud strategy I think it's over, and it is not about connecting Amazon, Azure, IBM Cloud with on premises. That was at the very beginning, but now people is evolving, not just SaaS or infrastructure.

I believe most of my clients recognise that they are going to use many different clouds, and they need to be interconnected with the onprem and between themselves. And now, they are trying to leverage that advantage where the communications have evolved, SD-WAN for example is helping to make this connectivity, and the communication brokers are also helping a lot to get Azure and OCI (Oracle Cloud Infrastructure) already pre-connected or to be able to connect IBM Cloud with Azure and with Salesforce.

So these projects about interconnecting things it's growing. Definitely a trend here. There is also a second trend that it has to do about how to move to the cloud and that means not only lift and shift, but big projects regarding consolidation, trying to move everything into the public clouds. It's one one at strategy and other one just try to simplify their IT and put things in order like the one you make when you relocate to a different country.You take the chance to get rid of the things you you know, you are not going to use anymore. We try to put the house in order while you get everything into to move.

And this is a basic thing, kind of a sanity checking, but there is a more profound transformation if we want to have the native workloads working there. The ones that are born into the cloud natively. So instead of simply doing a lift and shift for this 80% of the workloads or applications that are not cloud native, they need to be transformed. We have seen a tremendous traction for containers. The platform as a service (PaaS) is still in early adoption, and I do not see a lot of adoption in my market for cloud foundry or even serverless which is more for cloud native [workloads].

Moving purely lift and shift is ok. There's people that move everything to lift and shift and then transform, and there are others people that prefer to transform directly to containers. I'd say that's the main picture, and the third trend it's that in this multi-cloud world, we are leveraging the licensing advantages of each cloud service provider, their abilities for example of blockchain in IBM, or Watson or AI capabilities from Azure... but making all this work together and make it worth it's not easy.

It's a shift in technology, it's a shift in organisation, and in procedures; they way we have to work. It's not simply escalating, we can't create a SRE model from Google for operating, integrating people into development: the DevOps team working all team together, that's not escalating so well when we have to work in 100 applications when we have to transform and modernise the core of their IT.

So for the satellites it's going to be alright. It's easy for the visual customer engagement, the customer experience, but when you go to the back-office and you need to make things work in a smooth manner and consistent, that's when issues start rising. The people needs control, a single plain of glass, where they can see everything, a unique provider instead of niches.

You remember the dot com bubble? There was no omni-channel, everything was going to be web and no brick and mortars, and that suddenly changed, and the IT needs to be flexible enough to be on the mobile, on the website and in the banking branch or in a retailer shop. That's the kind of thing that it's happening now with the multi-cloud.

It's not just Amazon, it's not Amazon and On Prem, and building all this together and having one guy for each niche player having to manage each of piece, that's from where the complexity is coming.

• So there must be a set of professional and consulting services to aid customers to build those clouds. How advisory services are packaged and being delivered? A separate organization? Cloud consultants? How professional services teams work?

At the beginning there was a cloud practice, we had a more functional, development oriented organization called GBS and a more infrastructure oriented one called GTS, and we had separate bodies in order to provide advisory about how to move to the cloud from the functional standpoint of view and from the infrastructure standpoint of view.

This melted into one, in a way we so we can provide an end to end experience to our customers in our organization so we can provide advisory services not only for migration but also from the strategy decisions and also to build the architecture and a follow on with project office that can create the kind of Center of Excellence on Cloud to guide them through the Cloud journey. So now they are all that blended together in a mixed team where everyone have brought their own expertise and their own background in order to serve the client. So this is what we are seeing from a year ago. 

• How client would like to pay for those advisory services?

Spain is a particular market compared to what I've seen in Australia for example. The market is so mature, the competition is so intense that somehow with fewer exceptions from strategic consultancies such as McKinsey, Boston Consulting Group (GCG), client perceive cloud advisory services sometimes as a presales effort, and that's is making quite difficult to bring value when you are still competing with others.

And also keep in mind that our Spanish customers love proofs of concept that are basically minimum viable products in production, so the time for paper is gone. People do not want advisory from Deloitte, from other consultancies, that it's a great work in a wonderful paper that they put in a drawer. That could be in 2009, 2010, 2011, people do not want pitches or Powerpoints anymore.

People is now interested in teach me how, show me how. Let's run pilots, let's do something. Join me in a transformation for one piece, if that's successful, we can make it grow. The customers are a bit fed up of the traditional consulting. There is a new way of a kind of consultant startups.

So it's in our market and we are also trying to adapt including Design Thinking practises. Trying to do a new kind of advisory, less consulting, less agnostic and making them work close to the customer and make the stakeholder in the customers embrace this new way of working, because they need to change on their organizations too, like we did it. They also change that, it's changing the way they take their decision.

In terms of payments it means making these small projects, and not big five-year transformation projects its healthy. It's a kind of win-win short-term with return of investment in three or six months that is usually working. Otherwise, when there are more strategic goals, what are proposing is let's do this project, because sometimes they are afraid that the consulting guys and the execution guys are not the same people.

Let me do this piece. If you believe that I have the widen information and knowledge to put some of value on you, I'll do it. And when I deliver, you chose. You chose, if you want me to engage and execute, or if you want to do you want me to leave. And if you want me to leave, you pay for the project, but if you want me to stay, I somehow will absorb, because that will be a multi-year contract, and I had somehow will absorb my investment, because this is about business. 

• It's somehow you are converting a project into a managed services contract?

Right. It's a kind of feed the funnel of managed services through the consulting practice. 

• When you are doing small projects, proof of concepts, weather are they paid or not. How does the customer measure success for a project? Are there SLAs or business outcomes in the to be?

Usually, the acceptance has to do about some specific SLAs. We try to skip subjective or personal opinions in order to asset the engagement and it's deliverables. At the beginning, we try to setup what we call the conditions in order to get the acceptance. Sometimes you have to do about SLAs, most of the reluctancies that we have found, it has to do regarding networking problems over four months longs projects. That what they are more concerned about. 

Okay, good. Let's do it. Let's do this. But if this is not working, I mean if the latency is too big in the customer side and the end user needs to get responsiveness for this number of seconds in their application. Then in this situation, you have to guarantee a roll back, so I can go back to my previous situation, and if we are already the incumbent, if we are providing already the service, we are in position to do it. Otherwise is a bit difficult, because that will reduce our fees.

• Absolutely. Are there any particular sector that require professional services more than other sectors? Is there a lack of professional skills that are on demand?

In professional services, I separate two big blocks. One is the project oriented as I called it, and another one is the time and material environment. I'm looking for someone with this is specific skills. I want that number and name and I want them here in my office. And I will check the performance by myself rather than based on SLAs, or project milestone and executions.

In terms of of projects, I see a lot of activity in utilities, the energy sector in particular, [and also] in financial sector. There is a low margin at the moment in financial sector, and because it's low margin, the merge and acquisition is in the air. We saw that in 2009, due the big crisis, and we are envisioning this again. And so there is a big demand, to be in a good position to be the prime in a merge operation. So there are many many projects in that sense, that are coming to the market. 

In other sectors due COVID which have been heavily impacted such as airlines, tourism, hotels,... There have already taken all the tactical projects the could in order to reduce costing. It is not the value proposition about transformation, digitalization, kind of blurred ones. I am losing money, and I have my baseline is sinking. I cannot stand to pay my employees at the end of the month. We need projects, and they desperately need projects like wo months ago, to execute things very practical, very quickly, in a matter of weeks. Nothing else.

And now they have stopped. They've exhausted that path. Now some of them are looking for more ambitious transformation projects. Some of them, looking for outsourcings. Some say, I cannot stand any more. This is so precarious, so this is what it had to be done in a two months period. I need to do something, I cannot stay this way, and many look for some exit.

Public sector is funneled basically by public employees in Spain. There are semi-public companies, such as credit rating companies with mix capital of public and private companies. And these companies have in IT, they have very good talent some of them in-house, but they are not allowed to grow in headcounts. So this model of time and materials. We need someone, who can package it or put it in a nice way in order to pass the approvals, but at the end that's what they need to. They need more the people to keep growing, to make the business that sometimes is successful and it works well, but because they have some links to the public sector they can't hire so expansively.

• When it comes to managed services, how are you teams organized for delivering? Managed Services in operations, maintenance and support services as well.

Actually, from the infrastructure stand point of view for management, we have a journey to cloud where we envision with the advisory services, the build area where we really construct the solution for them, the migration is another pillar to populate that that has been built, and in the final stages the management, so now I run it, and we became the incumbent.

What we have seen it's that, it's no longer about cloud or not cloud. It's like networking, that is now part of IT, that what we are perceiving in many of our customers. The squads do not have people from storage, people from compute and people from networking working separately in siloes. They are working all together and they are delivering solutions to the clients like the hyper-convergent infrastructure (HCI) in physical terms, they are doing that from the management standpoint of view. So from the delivery we are doing it that way.

Regarding maintenance that you mentioned, obviously in those engagements sometimes it's embedded maintenance. If there are IBM products, that's easier, sometimes customers wants to incorporate other manufacturers maintenances, but that's basically something that it's evaporating quickly now that they are moving to the cloud. The issue is not about including Oracle maintenance, it's about putting Weblogic into Oracle Cloud Infrastructure (OCI).

It's a different mix now. I'm not saying maintenance is being irrelevant, because there are customers that are looking for multi manufacturer support, kind of a single point of contact for maintenance, but they have their own go to market, their own flow, their own timing and when there is a chance we really glue them together, but it's not really mandatory. It's something we may decouple if we need to.

• So you offer this kind of multi-vendor service integration if the customer demands it.

Yeah, these offerings have been in the market for 3-4 years in IBM.

• So, are there any particular... I asked you about the success of projects, how about the success of managed services contract. How do you do that?

The way we usually operate and I think it's a practice worldwide, not just in IBM, it is there some drivers that there are common. One obviously has to do with the profitability of the contract. It's not just a matter of selling a lot, it's a matter of execute a lot, and do it efficiently. So a key driver it is, and it will always will be the margin. There is a huge demand in managed services to be efficient, and that is why we incorporate automation, in order to be more efficient, and why we incorporate cloud to do more things with less people. So that's definitely a driver that is measured.

A second driver that it's important is the customer engagement. Know how are we perceived. Are we perceived as slow, are we perceived as rigid. We're perceived as flexible and innovative. So there is the Net Promoter Score (NPS), it's now a kind of mantra. A bit later than in other companies, but we have now regular NPS's reviewing sales of the engagement and in the contract of managed services itself to try to understand how are we perceived, and try to anticipate problems before they arise.

In general terms and also in the country we are measured in terms of market share. Are our managed services practice working in terms of market share compared with other players? We especially for top products we measure the growth. how a product is growing compared with the market that we envision, to which have a forecast. 

A product is serving multiple clients, so we need to understand not only how we are giving value to each engagement, where we are just a building block in terms of service we are providing to that count; but we also in general terms, we need to figure it out how we're doing, if we are growing according to a business plan and if that growth is aligned, above or below the market? That's that's basically the key indicators we used.

• That gives a good understanding about how do you measure success internally in managed services. How about for the client, how do they measure the success the contract with you. Are there any particular SLAs or business outcomes that these days they want to deliver?

Ok, that's a fair point. Beyond the overall NPS that is more subjective, they incorporate different KPIs, and the KPIs are usually translated into SLAs. The traditional SLA it usually has to do with availability, about time of response and they also incorporate sometime personal interviews with the final users, not the IT guy but the guys that grab the phone and say 'my laptop is not working'. So that's the kind of thing that has been in the market for a long, long time.

Now what we are perceiving is more it's a 'I want to end to end' SLA, I'm not as interested anymore in see if the database is down, or the server is down, or Azure is down or it's the communication telco the one that it's not working. I want to give key drivers that I can show to my business and show to them how are we doing in IT like IT as an internal provider. I'm relying on you Mr. DXC, Mr. IBM or whoever integrator to do that part.

So we are seeing more proactiveness. It's not just about failures. It's about taking preventing actions. Show me that you are doing your work, and you're anticipating some behavior that could have impact in my business. Don't replace the server when the server is down, help me to proactively find out when the server is going to be down potentially or with a high probability by using some AI Ops to work it out, so we can recommend replacement.

Or how the behaviour of the patterns that your IT is following make me recommend you something that it's not strictly a baseline of a capacity plan, but I am capable to anticipate, because you made this new announcement, so it's going to be a lot of activity in this area, there'll be many calls because of COVID and they want to understand if they can reduce the bill because they are not using anymore print or whatever, and we can recommend what it's going to happen and make the IT more responsive and evolve the model.

But this is a journey that in my point of view, and that's absolutely personal, it'll take time and it won't be so easy to implement, to do the model to do that. People have the need, and stress their need. That's what I want, but it's not that easy to model in a contract.