Solution accelerators: changing the IT services delivery model

There is no denying the fact that IT services firms are under immense pressure, hammered as they are by shrinking margins and intense competition. In response, these firms are adopting industry-specific solution accelerators and they expect to earn 30 to 40% of their revenues from these over the next five years says Abhinav Singh

Software services vendors are struggling to gain ground due to cut-throat competition and eroding margins. The days in which vendors commanded a premium for their work are long gone. Additionally, with the rupee rising, the IT services landscape has become even more challenging. Then there are vendors who are looking for non-linear delivery mechanisms to combat skill shortages, rising staffing costs and attrition and are looking for an opportunity to move up the value chain as the software market matures.

On the other hand, clients are also looking for domain-rich, quick-to-deploy solutions. Services companies are busy developing next-generation, business-pain-centric offerings built on domain and process expertise. Sudin Apte, Senior Analyst and Country Head -India Forrester Research, said, “These reusable offerings or solution accelerators will change the rules of offshore services, bolstering the attractiveness of offshore locations. We found that smart service providers, though quietly in the background, are building a focus on productivity and innovation, possibly setting off a change in the IT services world with solution accelerators.”

Companies such as Infosys Technologies and IBM have already benefited from solution accelerators and are expected to gain further from them. Forrester defines solution accelerators as internally developed software that technology services firms use to automate a particular business process or aspect of product development for a range of clients, where 30 to 70% of code can be reused across engagements. Apte added, “Infosys has earned 6-8% of its revenues from solution accelerators in the last two quarters. This proves the benefits, which software services companies are reaping even in the initial stages of adopting solution accelerators.” Express Computer discussed this trend with Forrester experts and also with IT services vendors such as Infosys and IBM and gained insights into the adoption of solution accelerators and the benefits that these are bringing to the table.

Evolution based on vertical focus

As IT services firms focused on industry vertical-specific solutions, they spotted patterns of common processes across client organizations and opportunities to capture those and gain in terms of productivity. However, they soon realized that it is not only important to build such productivity enhancing tools, but that competitive advantage will come from selecting the right spaces in which to build such tools and provide the maximum benefit to clients. Forrester Research analyzed that several software service providers had identified processes with the greatest impact on profitability or revenue growth. For instance, a leading Indian service provider analyzing the Profit and Loss accounts of Fortune 500 firms to identify value addition at each step as raw materials are converted to finished goods and then to cash identified underlying pains as well as technologies to solve the problems of these firms. Apte said, “Providers with strategic approaches in making choices will deliver higher value to clients and, in turn, build competitive advantage for themselves in the form of solution accelerators.”

Jeby Cherian, Head - Global Business Solution Center, IBM India, said, “From our own experience it has been found that clients are just not interested in replacing their IT systems; they would like to reuse their IT assets even if they have to adhere to new regulations.” IBM had started a business solutions program and developed solution accelerators based on its understanding of different domains and industry verticals that it had to deal with. “We have installed solution accelerators worldwide across client locations,” said Cherian. With a funding of $300 million in annual solution funding, the Global Business Solution Center of IBM in India is charged with developing and managing reusable, high-value consulting service assets across 50 key business areas globally from supply chain inventory optimization to banking risk and compliance. These end-to-end solutions, such as supply chain traceability or money laundering detection and prevention, will be configured and deployed by IBM consultants in client organizations worldwide. Developing solution accelerators tools is part of this initiative.

B. Pravin Rao, Senior Vice President - Retail, Distribution & Consumer Products Group, Infosys Technologies Ltd, said, “Over the next few years, the industry can expect many innovative offerings and pricing models from IT services firms like Infosys that leverage solution accelerators. Solution accelerators bring down the total cost of ownership through reduced time to market and lower deployment efforts through reusability.”

Solution accelerators vs. traditional tools

Solution accelerators are going to bring about a transformation in the way that services are delivered by IT services vendors as they have many capabilities. Apte said, “For two decades, consulting firms have used the umbrella term ‘frameworks’ to describe a combination of templatized workflows, loosely defined process maps, an approach or guideline to solve a particular problem and a commonly adaptable set of practices based on their experience with earlier installations. While solution accelerators aim to follow some of the principles of frameworks that consulting firms used in areas such as ERP deployment, there are many ways in which solution accelerators are different and provide multifaceted benefits as they can automate a specific business process as they are coded pieces of software that are granular enough to deploy in part or at the full process level and at the same time are not as rigid as the products.” In most situations, frameworks are documented methodologies to solve a particular task such as capturing a process in an application or redesigning the process to suit an ERP application workflow.

Similarly solution accelerators offer greater flexibility when it comes to customization, and each implementation can be unique. The custom development aspect of solution accelerators makes them reconfigurable based on the nature of a client’s unique processes, and they make every installation different from any other. On the other hand, frameworks are a means of boosting productivity and they follow principles such as standardization. The same framework is deployed at multiple client situations and does not provide any competitive differentiation. Solution accelerators are more agile than products as they are only partially finished and are completed based on the specific needs of a client. This sets them apart from off-the-shelf products, which are completely finished but then need to be changed or customized to match a client’s requirements. At the same time solution accelerators deliver more value than operations efficiency tools as typically, tools focus on increasing the productivity of a systems integrator itself and in turn, attempt to lower client costs.

Solution accelerators focus on processes that are outward-looking or client facing and attempt to address critical business issues such as supply chain management or RFID adoption. Rao said, “A typical solution accelerator will contain readily deployable process frameworks, templates, tools, partial code modules which enhance productivity as well as ensure getting the requirements right the first time itself. If the solution accelerator is robust, compared with the typical waterfall Software Development Lifecycle model, it is expected to bring about cost and time savings of 15-25%.”

Changing the IT services landscape

Although solution accelerators are expected to bring about a substantial change in the IT services landscape, their usage is restricted to a handful of IT services companies. Howsoever restricted their usage has been, they have been successful in bringing about a change in the business delivery models of many IT services vendors. This has largely been because they have the ability to address unique business challenges as they are built around a known business issue or challenge. The provider’s approach must clearly demonstrate its domain expertise, and because the solution includes sizable custom development, it becomes a unique proposition that is relevant to every client’s set-up. Also reusable coded components make solution accelerators easy to deploy and, as proven, they shorten the time it takes to go live as well.

As per Forrester more than a dozen solution accelerators save an average of 25 to 30% in a project implementation cycle for a client. This is because of the fact that solution accelerators are developed with the intention of deploying them at multiple client sites. Therefore they are well tested and can possibly be implemented sooner. This decreases risk because the outcomes (in terms of business benefits as well as timeframes required to roll them out) are predictable. In addition, the fact that these are built on a modular architecture, mostly based on Service Oriented Architecture (SOA), and that they can be deployed as Software-as-a-Service (SaaS) make solution accelerators compelling as firms can implement incrementally after already seeing the benefits.

Vendors testify to benefits

Vendors such as Infosys Technologies and IBM have benefited from using solution accelerators. As stated it has made a difference to their service delivery models. Infosys Technologies is using ACCORD, one of its horizontal solution accelerators for a large consumer products company for validating core business systems. ACCORD comes with set of accelerators; process and data models and pre-built test cases which have helped the client save 50% of the testing effort and reduced 44% of the release costs. Similarly the Infosys Procure-to-Pay Excellence (P2PE) solution is helping Fortune 500 clients improve their bottomline through savings of 5 to 15% in indirect procurement and management spend in the services procurement area. This solution was successfully deployed at a leading utility provider and is resulting in savings of $25 million per year for the company. Also for a leading consumer OEM, the requirement shrank from 9 persons per day to 1 person per day for one-time campaigns and to a few hours for recurring campaigns leading to a 200% rise in campaign volumes through the implementation of Infosys’ Customer Information Management Solution and its accelerators.

Infosys Technologies has a separate focus on IP-based solutions and accelerators. Rao said, “We have a platform-based solution group focusing on creating various solutions around IP-based frameworks. We constantly encourage innovation in IP creation. During the last quarter, Infosys applied for eight patents in the US and India. With this, Infosys has filed an aggregate of 94 patent applications in both countries. At Infosys, we are already realizing the value of IP in our horizontal accelerators like Radien and Influx in the marketplace.”

As far as IBM is concerned it has developed solution accelerators such as Secure Trade Lane, which is a collaboration between Heineken, IBM, Maerske Shipping and the University of Amsterdam to pilot a new intelligent shipping solution that tracks goods in real-time, eliminates paperwork and bureaucracy and monitors the condition of goods in transit. Cherian said, “This was a step forward for an industry that still operates on a decade-old, paper-based processes, and has the potential to radically transform the way in which goods are shipped and managed globally. Our Global Business Solutions Center in India is working on this solution to make it more robust.”

IBM has also developed a Fraud and Abuse Management solution acceleration tool, which automatically detects potentially fraudulent behavior in any manner of financial activity. IBM has deployed this tool with the counties of the State of New York, who are uncovering billions of dollars of potentially fraudulent medicare activity. Cherian said, “We have sold this tool to many insurance companies, and are looking at new markets for it. It’s a tool developed by our consultants, working with IBM Research, and is based on SOA. This makes the tool easy to repeat and deploy. For us we are taking a process that was once manual, labor-intensive, and automating it in a way that we can repeat easily and quickly. Our Global Business Solutions Center in India has had a role to play in this as well.” IBM has also developed a repeatable solution acceleration tool called DIOS, the (Dynamic Inventory Optimization Solution). This solution acceleration tool uses supply chain optimization methodologies from IBM consultants and from IBM’s own supply chain transformation, along with advanced research algorithms, and has been deployed at dozens of clients, most recently British Energy, who are using it to manage inventory of more than 360,000 items dynamically.

That said, the IT services vendors are on the path to innovation and want to utilize the solution accelerators fully which can help them differentiate their service offerings and will go a long way in offering better services to customers and help improve their bottomlines.

abhinav.singh@expressindia.com