2010 is the Year of Transition, Gartner Says

On the threshold of the publication of the 2010 edition of Gartner’s annual CIO Survey, where 1600 of CIOs were asked about their plans and priorities for the year, Mark McDonald, GVP of Gartner Executive Programs, shared some of its findings.

According to the survey, 2010 will be a time of transition from recession to recovery economically, strategically from a focus on efficiency to productivity, and technically speaking from heavyweight to lightweight technologies. But all the while IT budgets will remain tight. Only 6% of the polled CIOs see actual real growth coming in 2010.

Leading CIOs are inventing new rules for the new economy with the focus on productivity, collaboration, and innovation. Strategically CIOs are reshaping their focus from cost efficiency to productivity. This shift is critical for capturing customers and market shares. Additionally, business leaders are reconnecting IT with business performance.

Interesting is the 3-year forecast: by 2013 CIOs see technology as transitioning their role from technology service provider to a source of competitive advantage. This trend is also observed by Zinnov in the outsourced product development space we discussed earlier.

Technology choices are transforming as well. CIOs predict a shift to lightweight technologies that can be implemented quickly without significant expense. For instance, virtualization is the top technology, followed by cloud computing and social tools. Virtualization investment expenses are expected to accelerate in 2010 as Gartner estimates that until now only about 1 in 5 services has been virtualized.

Based on the results of the survey, Gartner recommends CIOs to concentrate on operational results and relationships as well as to focus more on raising productivity than on cutting costs as raising productivity increases opportunity to create value while cutting costs doesn’t drive growth.

2010 should be a year of the transition from IT being a resource based, back office function to a result-based source of innovation and advantage.

Source: Gartner

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R&D Partnerships Should Become More Strategic

A recent study conducted by Zinnov on Software R&D globalization revealed that only 5% of this R&D spend is currently being spent on outsourced partnerships, which means about 95% of the R&D is made by companies in-house. This presents a tremendous growth opportunity for companies providing Outsourced Product Development services.

We attended the webinar on 'Globalization Opportunities in Software Development for Enterprises and ISVs' where Zinnov experts shared further research results.

Vamsee Tirukkala, Co-Founder & Managing Principal, Zinnov, commented on the trend that companies leverage 3rd party global centers mainly for cost savings and access to relevant talent. 83% of the audience confirmed the increasing importance of OPD by answering affirmatively to one of the audience poll’s questions (“Are companies increasingly looking at OPD service providers for global RnD and product development?”).

With a freeze on spending in the face of recession and plans to optimize on investments made over the past 12 months, companies need to rapidly evolve and transform their emerging location centers to increase their innovation capabilities.
Mr. Tirukkala also advised software producers to rapidly their OPD partnerships to the next level with more engineering and product leadership and strategic responsibility. Another audience poll showed that customers consider China and Eastern Europe to be the next most attractive locations for R&D investment, following India that leads in resource volumes, while Eastern Europe is a hot spot of software engineering talent.

Globalization opportunities for enterprises and ISVs seem bright, according to Zinnov, with several small and medium sized companies beginning to work directly with 3rd party providers. “A huge trend we are seeing in the industry in the last 18 months is what we call as the 'go to market' strategy. It’s what vendor partners can bring to the table. If you are a partner in a well-known reputed company, they have the capability to take your product to multiple markets," commented Mr. Tirukkala.

The new pricing models (outcome based pricing, revenue share pricing and risk reward pricing) offered by vendors to clients are adding to the attractiveness of partnerships, he said.

Source: Global Services

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Software R&D globalization

Zinnov, meaning Zeal in Innovation, the leading management consulting company, has recently provided a study - “Software R&D and Globalization Insights”. The scope of the study is to conduct a global software R&D spend analysis across a group of software product companies. To gain insights on the topic multiple stakeholders such as Vice Presidents, Senior Directors, General Managers, were interviewed.

Some of the findings of the survey are:

• The impact of the economic uncertainty was visible on R&D budgets as companies planned to optimize on the investments over the last 12 months. Some of the small to midsized companies (less than USD 1 bn in revenue) have been able to keep the R&D investments low, as they offshore a significant portion of their R&D to low cost destinations such as India and China. For larger companies, most of the R&D investments (about 80%) are kept in the US.

• Most large companies are now looking towards keeping R&D budgets flat while increasing their investment on new products. This has led companies to invest more on new development related activities in the product development life cycle. As a result, the quality of talent has become critical and companies are now laying emphasis on hiring talent so as to maintain effective staffing ratio. The focus on quality mandates increased investments on R&D related workforce for a majority of companies.

• More development and QA/testing related work is expected to be sent to offshore locations hence reducing the total investment on mature products

• Most large companies are now looking towards maximized value, rather than a pure cost arbitrage in terms of their relationships with product development service providers. However, the percentage of outsourced projects is still pretty low meaning there’s a bright future awaiting outsourced product development (OPD) industry.


Source: Zinnov

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