the shift to product development services 2.0 is...

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The Shift To Product Development Services 2.0 Is Onby John C. mcCarthy and Charles green, may 4, 2012

FOR: Vendor Strategy Professionals

Key TaKeaWays

pressure Continues To Build For The Move To pds 2.0Th e dynamics driving the product development services 2.0 (PDS 2.0) shift continue to develop. Th ese services provide a fundamentally diff erent value proposition to traditional staff augmentation or capacity-led services that currently dominate the market.

industry dynamics Will dictate adoption and The Nature of pds 2.0Specifi c industry dynamics play a signifi cant role in the adoption of product development services. For example, in the automobile sector, growth is driven by the rapidly increasing proportion of embedded soft ware in infotainment systems and active safety initiatives.

providers Must Make signifi cant go-To-Market and delivery investmentsPDS 2.0 will grow at a CAGR of 29% between 2011 and 2016. Services fi rms will need to make a set of strategic investments. For go-to-market, investments in sales and marketing and forming key partnerships will be required. On the delivery side, investments in domain knowledge and solution accelerators are crucial.

© 2012, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. To purchase reprints of this document, please email [email protected]. For additional information, go to www.forrester.com.

FOR VEndOR STRATEgy PROFESSIOnAlS

Why Read This RepoRT

The product development services market is currently undergoing a fundamental move to a more proactive, solution-based approach, which Forrester defines as product development services 2.0 (PDS 2.0). This report examines this ongoing evolution and identifies the key challenges providers face in pivoting to this new model successfully. It assesses the best practices and strategic investments required in areas such as IP and solution accelerator development, new sales practices, and domain-led solution engineering. And finally, we’ve provided a self-assessment tool that will help services firms understand their evolution as well as the sophistication of their PDS 2.0 offerings.

Table Of Contents

product development services 2.0 emerge

Best practices help Knock down pds 2.0 hurdles

assess your Readiness For pds 2.0

RECOmmEndATIOnS

scoring dictates investment strategy

supplemental Material

notes & Resources

Forrester interviewed 28 vendors and several end user companies, including Accenture, Altran Technologies, Aricent, Auriga, CSS, defiance Technologies, dell Services, EPAm Systems, geometric, globallogic, HCl Technologies, igATE Patni, Kelly Services, KPIT Cummins, luxoft, mindTree, ness Technologies, Persistent Systems, QuEST global, Sasken Communication Technologies, Symbio, Symphony Teleca, Tata Consultancy Services, Three Pillar global, Tieto, VanceInfo, Wipro IT Business, and Withings.

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The shift To product development services 2.0 is onVendors need To make Key Investments In go-To-market And Solution-Based Approaches To Emerge As leadersby John C. mcCarthy and Charles greenwith Sarah musto and michael yamnitsky

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The Shift To Product development Services 2.0 Is On 2

© 2012, Forrester Research, Inc. Reproduction Prohibited may 4, 2012

pRodUCT deVeLopMeNT seRViCes 2.0 eMeRge

In June 2011, Forrester identified a new model of mature and collaborative product development services, which we called product development services 2.0 (PDS 2.0). We used this term to describe the evolution to more sophisticated and value-added product development service offerings. Forrester defines PDS 2.0 as a:

Proactive, solution-based, domain-led offering based on a portfolio of internally and externally developed assets and aimed at improving the client’s ability to innovate and cut time to market.

These characteristics provide a fundamentally different value proposition to customers and stand in stark contrast to services dominated by today’s pervasive staff augmentation mindset (see Figure 1). Exemplary of these more advanced offerings, HCL Technologies partnered with Ford Motor Company to develop mobile applications based on Ford’s OpenXC, an open engagement platform for developers. By using existing internally developed resources, HCL rapidly developed innovative applications, such as its late arrival notification app, which monitors the location and speed of a car to determine if the driver is running late and then automatically sends a notification to other meeting attendees. However, despite such examples, the move toward PDS 2.0 will be a gradual evolution, dependent both on the increasing maturity of clients and on the growing sophistication of providers. But without doubt, the pressure is rising, and the move is on.

Figure 1 Product Development Services (PDS) 2.0 Represents A Fundamental Change

Source: Forrester Research, Inc.72401

Di�erentiation

Margin

Span of control

Value

Pricing

Marketing

High

High

Entire product life cycle

Time-to-market, asset-based solutions

Fixed price/outcome-based

PDS 2.0

Strategic/portfolio-centric

Proactive/domain-ledsolutions

Sales model

Low

Low

Sub processes/projects

Basic staffing

Time and materials

Traditional sta�-augmentation-based PDS

Tactical/poorly articulated

Reactive order-taking




pressure For Customers/Vendors To embrace The pds 2.0 Model Continues To Build

Increased customer expectations, an intensifying pace of technological and business change, and evermore intense global competition define the reality within which companies operate. At the same time, companies face increased pressure to cut costs and a shortage of talent (see Figure 2). This vortex of pressures and demands is leading companies to look outside their own walls and leverage the broader ecosystem of partners for product development. Propelled by these drivers, Forrester has seen an increasing number of product and service announcements, which inherently reflect this fundamental shift to PDS 2.0. Of particular note, we see:

■ That smart products and software-based differentiation drive the innovation agenda. At the Consumer Electronics Show (CES) in 2012, companies such as Samsung and LG Electronics announced an array of washing machines, refrigerators, and other typically Android-enabled, smart appliances. Driven in particular by the intersection of mobile and smart technologies, these announcements reflect a changing product environment — one in which to compete successfully, companies will require a whole new skill set. In the machine tools segment, commoditization at the hands of Chinese manufacturers forces firms to build computer aided design (CAD)-like applications to stand out in the market. Withings, for instance, reinvented the bathroom scale by enabling it with Wi-Fi and an application programming interface (API) and by creating a 30+ app ecosystem. From consumer electronics to industrial controls to medical devices, software provides the value add in the eyes of the customer, and that skill set most likely does not exist in many traditional product companies

■ That Apple helped raise product expectations to a whole new level. Consumers now expect to receive total product experiences.1 For this to occur, there needs to be, in the case of devices for example, a fundamental shift from hardware to software because the experience has come to be defined through the software, not the performance of the hardware. A new bar for product development visualization has been set — a cool user interface (UI), new features, or extra components are no longer enough. Rather it is the holistic, integrated nature of the product, the apps and the ecosystem, which differentiates the offering. For instance, while Xbox hardware has not significantly changed since its release in 2005, the continual updates delivered to Xbox Live have dramatically altered and improved the experience.

■ An increasing diversity of target markets with new product design requirements. Economic growth in emerging markets continues to significantly outpace growth in the West.2 Service providers have helped clients develop products to meet the different price points of emerging markets. Wipro IT Business enabled Cisco Systems to design and develop a mobile wireless router using a dedicated team for R&D based in India. The team developed the new, lower-price product targeted at emerging markets. Utilizing a risk-reward contracting model for hardware development, Wipro achieved superior functionality while attaining aggressive time to market goals and lower production costs.




■ Pressures for change driven by industry-specific dynamics. The factors driving adoption of PDS 2.0 in the automotive sector will be different from those driving adoption in the telecom sector (see Figure 3). The rate of business and technological change will vary not only between companies, but also between industries. The competitive landscape, industry dynamics, and product life cycles will all have an impact on adoption. Meanwhile, industries with a higher level of average governance maturity will be better positioned to adopt PDS 2.0.3

Figure 2 Companies Face A Range Of Business Issues


Rising regulations in your industry

Accelerating rate of technology change

Changing demographics of your workforce

Competition for our products/services

Pressure to reduce costs

Increasing expectations from customers

Improve the capabilities of your products/services

High priority Critical priority

“How concerned is your firm with the following business issues?”

Source: Forrsights Business Decision-Makers Survey, Q4 2011

Base: 1,001 North American and European business-decision makers in �rms with 1,000 or more employees

56%

55%

50%

42%

50%

41%

32% 27%

16%

16%

31%

39%

33%

33%

34% 9%Reduce IT costs to free up money for new techdevelopment and product/service innovation




Figure 3 Key Vertical Drivers For PDS 2.0


Vertical Key drivers for engagementAerospace • Advanced composites and the move to more lightweight aircraft drive innovation and growth.

• Mechatronic talent is in high demand; manufacturers look to third parties for these skills.• As aerospace manufacturers, beyond the leaders of Boeing and Airbus (EADS), gain maturity with outsourcing, design ownership will be pushed down toward suppliers.

Automotive • Embedded applications, electronics, and software are becoming an increasing proportion of the value of the car. This requires new skill sets beyond traditional manufacturing, which in many cases need to be sourced from new places.

• Extreme business pressure for innovation — for example in electrical cars, or fully connected carswith embedded entertainment and electronics (e.g., smartphone integration)

• Regulation, for example in the European Union with active safety initiatives, leads to investments

Consumerelectronics

• Smart TVs, printers, and other appliances are rapidly increasing in complexity. A smart TV mayhave 10 million lines of code. Traditional manufacturers of these devices are not used to dealingwith the code, functionality, or connectivity to the broader ecosystem.

• Consumer expectations are increasing and they expect to receive total product experiences. There is severe business and technological pressure for innovation.

• The service (the electronics and the software) becomes the di�erentiator, not the hardware.

Energy • Focus on product enhancements in areas around infrastructure and alternative energy.• Industry is moving beyond smart meter deployments to assess the data being generated.• Oil and gas companies are increasingly focused on reliability and compliance, which led to TCS,

for instance, launching a reliability center of excellence to help with the design anddevelopment work for compliance documents.

ISV • Many ISVs are su�ering from “not-invented here” syndrome and are fearful of opening up to third parties

• Most ISV clients are small startups, which prevents providers from generating scale.• However, ISVs need to re-engineer o�erings for the cloud, which provides some growth.• PDS providers are increasingly looking to o�er IT service capabilities as they struggle with the

lack of demand from ISVs for product development.

Information services/contentproviders

• Software development is becoming core for information service providers. It is the softwarethat now di�erentiates many of these companies. For example, in education, providers ofschool materials are realizing that the content is no longer sold as a book, but rather as software.

• PDS providers struggling with the temperate climate in the ISV space are looking to informationservices or content providers as the next avenue of growth.

Medicalequipment

Scientific/industrialcontrols

Telecom(includesequipmentandhandsets)

• Increasing pressure to evolve devices to the latest standards and technology; the proportion ofsoftware within the device is increasing rapidly.

• In the past, medical devices were characterized by proprietary, closed systems. The closedsystems are now opening up with open devices, utilizing high connectivity. This is helping toovercome the challenges of interoperability with other devices.

• Re-engineering of products for di�erent price points or feature sets to match the target market.

• Entire factory floor is becoming connected. There is a move to a more plug-and-play approachfor industrial controls.

• Long product life cycles and lack of extreme business pressures will temper the large potentialopportunity for growth and innovation.

• Although profitability has returned to equipment providers, this is largely coming from costconsolidation rather than innovation and new business.

• Meanwhile handset manufacturers are involved in a fight to the death.• Growth will come from the handset ecosystem, a new generation of devices, and from the huge

growth in data coming from smart devices.




despite This potential For growth, providers Face Challenges in Moving To pds 2.0

Despite these pressures for change, four key factors keep vendors and accounts stuck in the old staff augmentation way of doing business:

1. Sales suffering from the Stockholm Syndrome. We have seen cases where sales becomes so hostage to this staff augmentation mindset that they can’t engage in a more proactive manner. They struggle to communicate the value of internally developed assets, as well as the ability of the service provider to take over a broader part of the product life cycle. The value proposition of PDS 2.0 requires a different mindset, as well as a much more consultative skill set. More than one vendor spoke to us of the importance of moving away from the classical sales model.

2. A shortage of onshore domain capabilities. In many cases, providers lack scale in their local industry and architecting skill sets. This is problematic because clients require help identifying innovations and help crafting a go-to market strategy for new products. Without this ability to demonstrate a higher-value industry-specific expertise, providers can’t escape from the staff augmentation ghetto and will continue to see their margins squeezed.

3. A clearer and more defined value proposition and focus required. The PDS market comprises a cornucopia of services, verticals, and capabilities. With no clear focus, services firm end up with an overabundance of clients, industries, and different product development services. For example, we came across vendors where nearly 80% of revenue came from their top 10 clients, but they had close to 150 additional clients. As a result, they cannot see the key industry dynamics or the need for repeatable solution accelerators, the knowledge of which would drive credibility and margin.

4. Governance maturity of clients varies significantly. The move to PDS 2.0 requires sophisticated processes and governance capabilities. However, firms that don’t have experience outsourcing will struggle to manage these projects. Providers that lack consulting offerings to help improve governance capabilities won’t be able to help their customers develop improved processes and capabilities to better manage the relationship.

BesT pRaCTiCes heLp KNoCK doWN pds 2.0 hURdLes

To overcome these challenges and tap into the fast-growing PDS 2.0 segment, vendors have to make a range of front- and back-end investments (see Figure 4 and see Figure 5). From our interviews with services providers and buyers, we identified key best practices along two key vectors: 1) Go-to-market efforts concentrate on sales, marketing, and forming key partnerships, and 2) delivery investments focus on domain expertise and solution accelerators.




Figure 4 Forecast: Global Product Development Services Revenue, 2012 To 2016


PDS 2.0 Product development services

CAGR: 29%

CAGR: 1%

*Forrester forecastNote: Revenue from pure sta� augmentation providers have been excluded from this forecast.

PDS 2.0Product

developmentservices

Global product development services revenue, 2011 to 2016(US$ millions)

2011 2012* 2013* 2014* 2015* 2016*

$10,200 $10,300 $10,500 $10,600 $10,800 $10,500

$1,200 $1,700 $2,000 $2,600 $3,300 $4,500

$0

$4,000

$8,000

$12,000

$16,000

The spreadsheet associated with this �gure contains details about this forecast.




Figure 5 Forecast: Global PDS Revenue By Vertical In US$ Millions, 2012 To 2016


Global product development servicesrevenue by ISVs

5-2Global product development servicesrevenue by telcos

5-1

$0

$700

$1,400

$2,100

$2,800

$3,500

CAGR: 22%

CAGR: -1%

Product developmentservices

PDS 2.0

2011 2012 2013 2014 2015 2016$0

$500

$1,000

$1,500

$2,000

CAGR: 20%

CAGR: 1%


PDS 2.0

2011 2012 2013 2014 2015 2016

Global product development servicesrevenue by automotive

5-4Global product development servicesrevenue by consumer electronics andhigh-tech

5-3

$0

$500

$1,000

$1,500

$2,000

CAGR: 29%

CAGR: 2%


PDS 2.0

2011 2012 2013 2014 2015 2016$0

$600

$1,200

$1,800

$2,400

$3,000

CAGR: 35%

CAGR: 3%


PDS 2.0

2011 2012 2013 2014 2015 2016

Global product development servicesrevenue by industrial equipment andcontrols

5-6Global product development servicesrevenue by medical equipment

5-5

$0

$300

$600

$900

CAGR: 30%

CAGR: -1%


PDS 2.0

2011 2012 2013 2014 2015 2016$0

$500

$1,000

$1,500

$2,000

CAGR: 29%

CAGR: 5%


PDS 2.0

2011 2012 2013 2014 2015 2016Note: Forrester forecast for 2012 to 2016

The spreadsheet associated with this �gure contains details about this forecast.




go-To-Market efforts Concentrate on sales, Marketing, and Forming Key partnerships

It’s not enough to double down on the delivery side and just build more solution accelerators. Vendors have to invest equally in their sales and marketing capabilities to more effectively engage customers and tell a more cohesive story. The following elements constitute best practices from a go-to-market perspective in the move to PDS 2.0:

■ A reorganization and restructuring of sales. Typically, just 15% to 20% of salespeople can maintain a solutions-focused dialogue with key stakeholders. To improve this, internal reorganization is required to help develop the vertical knowledge needed to foster the development of a more consultative sales approach. In turn, this enables sales to maintain a conversation with architects or leading stakeholders, such as the head of engineering. HCL realigned its go-to-market organization so that a salesperson only sells into one dedicated vertical and is only responsible for one element of product development. So an individual would only be responsible for product launch and acceleration, while another would be responsible for cost optimization services. GlobalLogic has also realigned and invested in its sales force to include more individuals with vertical expertise and domain knowledge:

“We have consciously recalibrated our sales force to include more subject matter experts. We want to move away from the classical model of sales. Moving instead to people who can get into an advisory capability and have a solutioning dialogue with buyers.” (Milind Patwardhan, SVP, advisory services, GlobalLogic)

■ Innovative marketing that understands and articulates the value proposition of PDS 2.0. iGATE Patni has, for instance, created an advisory board for its medical devices business unit. The board consists of doctors, surgeons, and chief research officers to help bring in expert clinical knowledge. This ongoing dialogue with key stakeholders in the industry helps build credibility and marketing for the product. Other providers take part in industry standard associations, as well as leading industry events. KPIT Cummins runs an annual event called

“CarNAMA,” where clients, industry experts, and universities come together to discuss the future of the automobile industry, as well as opportunities for collaboration. Ultimately this all helps drive a different level of conversation with clients, elevating it above discussing number of engineers or prices on a rate card.

■ Proactive governance consulting that enables clients to move up the governance curve. Clients have historically lacked the governance expertise to take advantage of more sophisticated service offerings. To help overcome this problem, HCL launched an engineering consulting organization, which works with its customers on engineering process change management or process development. Ness Technologies meanwhile has updated its




NessSMART best practices framework of processes, tools, and metrics to help clients increase their productivity and the predictability of the software release. In particular, this helps its independent software vendor (ISV) clients transition to the brave new worlds of mobile apps and software-as-a-service (SaaS), where seven to eight releases per year and overnight builds are the norm.

delivery investments Focus on domain expertise and solution accelerators

These go-to-market investments help providers in developing their customer base and articulating a more coherent value proposition focused on specific industry challenges. But the second key vector in which investments are being made is in provider delivery capabilities. As the evolution to PDS 2.0 plays out, investments will be required in program management, IP, and new organizational structures. In particular, we see that:

■ The program management office becomes a key constituent in the move to PDS 2.0. Program management skills will become crucial in the shift to PDS 2.0, because product development shifts to incorporate a broader orchestration of the partner ecosystem. Dell Services created its own proprietary program management tool. This tool can now work as a predictive model to determine where shortfalls will exist and, in turn, help run a higher utilization. And when customers are looking for a fast product launch, Dell can ramp up rapidly. Meanwhile, Tata Consultancy Services (TCS) uses a formalized methodology to determine which assets should be developed, updated, or retired.

“The program management skill set is quite different from the client, project skill set because there is a greater need to deal with uncertainty on both the technology front and from market trends. However, there is a balance — we still want the same rigor and follow-through that we have on projects. And ultimately we are looking for a mix of a project management and architect role, where we have the program management skills combined with the technical know-how.” (Regu Ayyaswamy, vice president/global head, engineering and industrial services, TCS)

■ Partners are developed to address the expansion of responsibilities. As clients increasingly expect the provider to take responsibility for the full product life cycle, the need to build strong service aggregation and orchestration skills to govern ecosystem-based delivery grows.4 Reflecting this need for providers to take more responsibility, GlobalLogic acquired Method in September 2011 to help bring design and innovation capabilities to its core technology R&D offering. Service providers have also partnered with contract manufacturers to source key skills or expertise. Co-innovation with a greater number of specialist partners will become a key requisite driven by the accelerating rate of technological and business change.




■ The creation of an R&D/portfolio management group to manage the shift in skills. The head of R&D needs to have responsibility for both the development of solution accelerators and for working with marketing on portfolio management of these assets and the necessary capabilities. This organization will reflect the shift to a solution-focused mindset required for PDS 2.0. The realignment is one where you decide what to do and accept the risk that what you develop may not always succeed. For instance, TCS established its innovation labs for solution accelerator development because they have a different mindset than the regular delivery teams — the R&D work is less defined and less procedure-based. HCL also recognized the shift it needed to make, investing for example in hiring highly qualified product managers and making them an integral part of the solution development teams.

“There is an internal mindset change that needs to be made, especially if you are a services company. There is a shift from someone telling you, “here is a piece of work — go and develop it” versus you deciding what you want to do in developing proactive solutions. You have to accept the risk of failure. And importantly, that it is ok if some of the solutions don’t see the light of day, or fail.” (Sandeep Kishore, executive vice president, engineering and R&D services; global head, sales and practice, HCL)

■ The creation of unique solution accelerators that solve the core pressures that clients face. Perhaps the most telling question from our expert interviews was the following: What percentage of revenues can be wholly or partially attributed to your asset investments? We estimate that the specific percentage of revenue attributable to physical or software investments remains well below 10% on average. But the pull-through effects of these solution accelerators can increase the attributable revenue to up to three times this amount. In developing these assets, providers need to target explicit business issues that a particular vertical faces. In addition, the use and development of these assets will provide a push factor away from time and materials and toward more value-price engagements.

“We are simply driving better business through our asset investments. The credibility we drive from these investments in particular helps makes sales easier and significantly reduces the sales cycle. The use of IP in engagements has resulted in a 50% increase in profitability, increased stickiness with the client, a doubling of the average SOW size in 2.5 years, and a reduction in opex by 50% in four years.” (Michael Harmon, director of engineering services, Dell Services)

“Our solutioning focus helps build in repeatability, which builds predictability, which in turn drives margins, efficiency, and quality.” (Sanjay Gupta, senior vice president and global head, product engineering and mobility solutions, Wipro)




assess yoUR ReadiNess FoR pds 2.0

With this understanding of the key investments that providers are making, Forrester developed a self-assessment model for providers to determine their progress toward PDS 2.0. The results will help you identify the key investments you need to make in the future. The level of maturity of providers will determine what types of investments are required. The model is based on the interaction between two key vectors:

■ Delivery readiness. This vector assesses the sophistication of product development solution accelerator investments, domain investments, onshore capabilities, and portfolio management (see Figure 6-1).

■ Go-to-market effectiveness. This vector assesses sales and marketing capabilities, vertical expertise, as well as the willingness to engage in more sophisticated contracting models and to take greater ownership of projects (see Figure 6-2 and see Figure 7).




Figure 6 PDS 2.0 Maturity Assessment Tool


Does your company have a formal strategy and governance program inplace around solution accelerators for product development?

We have no coherence strategy or governance program in place

1. Do you have a strategic marketing group responsible for imperatives like market segmentation,portfolio management, and solution governance?

1 = We don't have a strategic marketing group and we haven't focused on those capabilities.2 = Yes, we have formed a strategic marketing group but we are still building out capabilities and

expertise.3 = Yes, we have a strategic marketing group that reports directly to the CEO with full responsibility

for portfolio management, IP development, and partner management.

2. Do you provide a formal consulting o�ering to help clients improve governance maturity?1 = We have no formal o�ering. 2 = We have done one-o� workshops.3 = We have a formal o�ering including workshops, templates, tools, and best practices.

3. Is your company actively involved in creating thought leadership for clients, andparticipating in industry associations and/or standards bodies?

1 = No formal program or active involvement.2 = We undertake minimal activities, for example occasionally publishing thought leadership papers.3 = We have a formal program/commitment around publishing thought leadership

papers, attending/hosting industry forums, and standards bodies.

4. How di�used is your revenue by service line (the number of horizontal servicesdivided by product development revenue)?

1 = Less than $5 million per average service line. 2 = $5 to $20 million per average service line.3 = $20+ million per average service line.

5. How di�used is your revenue by vertical industry (number of verticals dividedby product development revenue)?

1 = Less than $5 million per average vertical. 2 = $5 to $20 million per average vertical.3 = $20+ million per average vertical.

6. Is your go-to-market strategy focused by vertical?1 = No, we go to market predominantly by horizontal.2 = We go to market sometimes by vertical and sometimes by horizontal capabilities.3 = Yes, we go to market by vertical and have a verticalized sales force.

7. What percent of your accounts spend more than $1M per year?1 = Over 70% spend less than $1M per year. 3 = Less than 40% spend under $1M per year.2 = Between 40% and 70% of our accounts spend less than $1M per year.

Score:

8. In what percent of engagements have you proposed an outcome based contracting model?1 = We have proposed in less than 30% of engagements.2 = We have proposed in 30% of engagements but less than 10% of clients used the model.3 = We have proposed in at least 30% of engagements and

10% or more of these clients use this model.

9. What percent of projects are �xed price?1 = 10% or less. 2 = Between 11% and 30%.3 = 30% or more.

Company go-to-market readiness total:

Go-to-market readiness6-1

The spreadsheet associated with this �gure is interactive.




Figure 6 PDS 2.0 Maturity Assessment Tool (Cont.)


Does your company have a formal strategy and governance program inplace around solution accelerators for product development?

We have no coherence strategy or governance program in place

1. Does your company have a formal strategy and governance program in placearound solution accelerators for product development?

1 = We have no coherent strategy or governance program in place.2 = We are working on creating a formal strategy and governance program.3 = We have a formal strategy and a well-orchestrated solution accelerator governance program in place.

2. In how many engagements have you formally deployed your solution accelerators for product development?

1 = 10 or less 2 = Between 10 and 303 = 30 or more

3. How much product development revenue of your company is in�uenced by solution accelerators?

1 = We don’t have any solution accelerators/don’t measure2 = 1 to 10%3 = Greater than 10%

4. Does your company have a product development center of excellence (COE) strategy?1 = We have no formal strategy. 2 = We have a strategy in place, and the �rst center is ramping up.3 = We have 3+ centers of excellence around either particular industries or service lines.

5. Do you have onshore domain/consulting experts to help your clients with their go-to-market and innovation activities?

1 = We have no onshore capabilities or capabilities to support less than 10% of accounts.2 = We have onshore capabilities to support 20% to 50% of our accounts.3 = We have domain/architectural solution-focused experts onshore to support more than 50% of our accounts.

6. How mature are your program management capabilities?1 = We have limited or no program management capabilities.2 = We have identi�ed program management as an area of investment that we are just starting.3 = Program management is a core competency, and we are continuing to build out our capabilities in this area.

7. For what percentage of engagements are you leveraging an ecosystem of one or more partners on behalf of the client or in order to deliver the appropriate solution?

1 = 0% of engagements. 2 = 1% to 10% of engagements.3 = More than 10% of engagements.

Score:

8. For what percentage of your engagements do you play a product architecture role as a co-innovation partner (involved in strategic planning and the product architecture road map?)

1 = Less than 5%.2 = Between 6% and 15%.3 = More than 15%.

9. For what percentage of your engagements do you have overall product life-cycle management responsibility (from product conceptualization through to delivery and maintenance)?

1 = 5% or less. 2 = Between 5% and 20%.3 = 20% or more.

Company delivery readiness total:

Delivery readiness6-2




Figure 7 The Different Phases Of PDS 2.0 Development

R e c o m m e n d at i o n s

sCoRiNg diCTaTes iNVesTMeNT sTRaTegy

Based on the scoring achieved in the self-assessment model, providers’ evolution to PDS 2.0 can be categorized in one of three phases. And depending on where the provider is placed, this determines the types of investments that need to be made.

phase 1: providers Need To Focus and Jettison Non-Core Work

Firms in this phase are typically categorized as having scattershot go-to-market strategies and providing predominantly staff augmentation type services. Such a broad array of services and


Phases in evolution to PDS 2.0

Vendors have establishedthemselves as proper

PDS 2.0 players.

Phase 3

Firms have developed basic domain-ledstrategy and skills.

Phase 2

Phase 1

Providers need tofocus and jettison

noncore work.

Delivery readiness for PDS 2.0

Go-to-marketreadiness for

PDS 2.0

High

HighLow

Low




capabilities prevents the development of the necessary focus for more sophisticated offerings. This fragmented base of work and clients hinders strategic investments in core verticals or service capabilities. Potential steps and investments include:

■ Rationalizing service offerings. Perhaps the most crucial of the steps to take is to start the move from a jack of all trades and master of none body shop, to a more vertical-/segment-specific domain model. And this can only be done by first divorcing clients and poorly developed services capabilities.

■ Starting investments in centers of excellence (COEs). Following the rationalization, determining the services, capabilities, or verticals on which to build the COEs will be crucial.

■ Using the center of excellence strategy to see patterns in client requirements. Recognizing the key patterns in technological requirements, as well as business needs, helps further develop the level of focus required for PDS 2.0. This knowledge in turn lays the foundation for investing in greater domain knowledge and the go-to-market strategies that build off it.

phase 2: Firms have developed Basic domain-Led strategy and skills

Providers in this stage of development have many of the capabilities required to move to PDS 2.0, but they may be inconsistent in application or development. In particular, providers can look to taking the following steps:

■ Continue to build out the COE strategy. The COE strategy enables the development of core expertise and IP in specific focus areas, for instance in mobility or cloud computing. In turn, this fosters the development of solution accelerators.

■ Develop a coherent strategy for managing and creating IP in core verticals or service lines. To follow best practices, you should set up a separate R&D group/innovation lab. Knowledge management tools and social technologies can help manage and foster these asset and knowledge-based engineering initiatives.

phase 3: Vendors have established Themselves as proper pds 2.0 players

At this level, firms are already well positioned to emerge as a leader in the PDS 2.0 space. These providers are able to engage with clients with full IP-domain-led capabilities. These providers should continue on their current path, as well as taking the following steps:

■ Maintain investments in product marketing. Targeting investments in product marketing contributes to focused service offerings and a clear value proposition for clients.




■ Continue to build out and solidify the COE strategy. The maintenance and development of best practices, training, and core skill development should all be a part of the COE strategy. But just as, or perhaps more, importantly, you should also build organizational competence in the focus areas, building out leadership, governance, and process quality. The COE should also be responsible for managing the strategic development and maintenance of IP and domain skills.

sUppLeMeNTaL MaTeRiaL

Methodology

Forrester’s Forrsights Business Decision-Makers Survey, Q4 2011, was fielded to 3,534 business decision-makers located in Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Japan, Malaysia, Mexico, New Zealand, the Philippines, Russia, Singapore, the UK, and the US from small and medium-size business and enterprise companies with 100 or more employees. This survey is part of Forrester’s Forrsights for Business Technology and was fielded from September 2011 to December 2011. LinkedIn Research Network fielded this survey online on behalf of Forrester.

Each calendar year, Forrester’s Forrsights for Business Technology fields business-to-business technology studies in more than 17 countries spanning North America, Latin America, Europe, and developed and emerging Asia. For quality control, we carefully screen respondents according to job title and function. Forrester’s Forrsights for Business Technology ensures that the final survey population contains only those with direct oversight of their team’s or group’s budget. Additionally, we set quotas for company size (number of employees) and job function as a means of controlling the data distribution. Forrsights uses only superior data sources and advanced data-cleaning techniques to ensure the highest data quality.

We have illustrated only a portion of survey results in this document. To inquire about receiving full data results for an additional fee, please contact [email protected] or your Forrester account manager.

Companies interviewed For This Report

Accenture

Altran Technologies

Aricent

Auriga

CSS

Defiance Technologies

Dell Services

EPAM Systems

Geometric

GlobalLogic

HCL Technologies

iGATE Patni




Kelly Services

KPIT Cummins

Luxoft

MindTree

Ness Technologies

Persistent Systems

QuEST Global

Sasken Communication Technologies

Symbio

Symphony Teleca

Tata Consultancy Services

Three Pillar Global

Tieto

VanceInfo

Wipro IT Business

Withings

eNdNoTes1 Forrester defines total product experiences as the following: “A total product experience employs digital

technology to extend a product or service beyond its traditional boundaries so that people can experience the benefits of the product or service in more ways and to greater levels of satisfaction than before.” See the October 27, 2011, “The Disruptor’s Handbook” report.

2 For example, China’s real GDP, while slowing, is still expected to be a robust 8.5% in 2012, while India will see 7.5% growth. All the Asian economies of Hong Kong, Indonesia, Malaysia, Singapore, South Korea, Taiwan, and Thailand will all see growth ranges in 2012 of between 2.5% and 6.3%. For more on the market growth in Asia Pacific, see the January 10, 2012, “Asia Pacific Tech Market Outlook For 2012” report.

3 Clearly, individual accounts may differ widely from the industry average regarding the level of governance maturity, either because of leadership or past experience.

4 As clients increasingly selectively source their services, providers’ ability to aggregate and orchestrate services from across a partner ecosystem will become critical. See the July 29, 2010, “The Coming Upheaval In Tech Services” report.





Forrester Research, Inc. (nasdaq: FORR) is an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. Forrester works with professionals in 19 key roles at major companies providing proprietary research, customer insight, consulting, events, and peer-to-peer executive programs. For more than 28 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. For more information, visit www.forrester.com. 72401

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