DefCon 2: Cloud and Digital Service Providers

Wipro is acquiring Appirio. Congratulations to my friends at Appirio which I have profiled in many of my blog posts and books as a cloud pioneer.

But the move needs to come with a warning.

The Appirio deal is the latest of cloud acquisitions by large, legacy outsourcers including as Phil Fersht says

“Accenture’s acquisition of DayNine last month, IBM picking up Meteorix and KPMG’s acquisition of Towers Watson’s Workday practice in the Workday services ecosphere, and Accenture/Cloud Sherpas, IBM/Bluewolf and Capgemini/Oinio in the Salesforce market. “

Here’s the concern. Most of the large outsourcers depend heavily on ‘post-live” services that came with on-premise systems – application management, systems management, hosting, BPO, upgrades. In cloud world, many of those services are provided by the “as-a-service” vendor. The Appirios of the world focused on implementations and crowdsourcing of resources. Will the larger outsourcers buy into these principles or will they try to sell those large post-live staff even around cloud systems?

In my recent book on automation, I profiled man and machine transforming work in over 50 industry settings. Surprisingly, little automation is happening in the outsourcing world

“Wipro is using machine learning algorithms to help with its internal help desk support. The firm has now created an AI platform called HOLMES that uses computer algorithms to reduce human effort in many of its customers’ industries. Tata Consultancy Services is working on an AI platform called ignio to help build applications quickly and get more out of its infrastructure management capability. Infosys has announced a major investment in automation capabilities as well.

However, given how labor-intensive these firms are, such automation efforts will only have a tiny impact. A few good operations research experts could easily reduce the insane amount of travel endured by their staff.”

When you look at automation in the Amazon, Microsoft, Google and other cloud data centers and compare that to relatively tiny investments the major outsourcers have made in their hosting infrastructure,  it provides more proof they want to continue their large labor based model.

Last year, in a post titled  Barbarians at the Cloud Gate I warned

“In the last year, as I built the model for SAP Nation, I have had conversations with several cloud vendors and shared my view that outsourcers/SIs from the on-premise world are looking for new parking places for their massive workforces and infrastructures. Cloud software vendors should leverage this bounty but be careful of the baggage many of those providers may bring along.”

That’s the reason for my increasing the warning level. Buyers need to press cloud vendors to restock their ecosystem with smaller, implementation focused SIs. They also need to push for more automation at the larger outsourcers.

Finally, these cloud acquisitions and references are being used by some of the outsourcers as proof of their “Digital Transformation” prowess. As I wrote recently in “Digital Rookies” it takes a lot more than cloud project experience.

In 1998, at Gartner, I saw the hype around ERP systems integration in the run up to Y2K and co-authored a fairly influential research paper which was titled “Application- Implementation Consultants — Overpriced, Overhyped, Overworked”

If I were at Gartner today, I would be starting to work on a similar report today about cloud and digital service providers.