2009-2011 - IT and telecom transformation trends in global Fortune 1000 companies
Global companies weigh and assess IT and telecom technologies and decide how best to leverage them into long lasting competitive
advantage
This white paper explores the drivers of IT and telecom transformation in global Fortune 1000 companies
in the next two years, how these are evolving and how companies are adapting their own organizations to undertake these challenges.
The paper examines the current and future state of technology adoption (VoIP, ToIP, virtualization) and assesses what domains
of IT and telecom transformations will be impacted the most.
C-level executives (CEO, CIO, CTO, CFO, COO, CPO) of
81 Fortune 1000 companies, with revenues above three billion U.S. dollars, on all continents and sectors, were interviewed.
Interviews were conducted in October and November 2008, taking into account the impact of the financial crisis, already largely
assessed by global Fortune 1000 top management and integrated into financial and operational strategies.
The interviews
were in different sectors (figure 1) and included companies based on several continents: United States (14), Europe (53) and
Asia Pacific (14).
what are the key factors driving IT and telecom transformation in the next two years?
Three out of four companies see cost reduction as a driver for IT and telecom transformation in the next two years.
The
reasons for this are primarily the importance of cost reduction in operations due to margin improvement commitments, as well
as many global Fortune 1000 companies' strong drive to reduce IT and telecom expenditures on a global basis after the proliferation
of these costs in formerly decentralized IT and telecom operations.
The second key driver of IT and telecom transformation in the next two years is global expansion and mergers and acquisitions, according to CxOs of many of these companies. This is due to the immense size of these companies and their ambitious growth and market share objectives for the next three years. Expansion into countries such as China, Russia, India, Brazil and Australia was often cited as a priority. IT and telecom are considered strong enablers for successful expansion into new markets and growth via mergers and acquisitions: bringing corporate processes and applications to new subsidiaries across the world, unifying global operations seamlessly with those of newly acquired subsidiaries or sharing companies' best practices in a merger of equals. IT and telecom are the backbone of integration of global operations.
what organizational changes are driving IT and telecom transformation?
Centralization is dominant. We find that IT and telecom is a very centralized function within Fortune 1000 companies, with
53% of them having fully centralized their decision-making process, vendor management, infrastructure design and operations.
So how does the dominance of IT and telecom centralization shape global Fortune 1000 companies' sourcing strategies for their
major IT and telecom needs and transformation projects? What policy do they adopt regarding external IT and telecom service
providers and partners? Our interviews with global Fortune 1000 CxOs show that multi-sourcing represents the vast majority
(90%) of sourcing strategies of companies surveyed in the United States, Europe and Asia Pacific.
IT and telecom
selective sourcing (41%) is often assessed as the most advantageous. Here the choice of a reduced number of suppliers to cover
all company IT and telecom needs can be on a global or regional scale. It is an optimized approach, having each supplier cover
a different IT and telecom domain, and resulting in gaining the appropriate expertise, assets and scale; it reduces administrative
supplier management tasks and avoids vendor lock-in.
which IT and telecom domains are CxOs targeting for transformation?
With convergence technologies and products advancing in maturity, the adoption and use of these in global Fortune 1000 companies is a big driver for IT and telecom transformation.
In coherence with the centralizing approach, selective sourcing and outsourcing policies, some CIOs deploy telephony over
IP like a corporate application: the telephony service runs in a data center and the phone device is deployed like a computer
to its user. These CIOs overcame the weakness many others identified but did not resolve: "a negative return on investment
on telephony over IP" due to existing non-amortized assets (PBXs), significant initial capital expenditures and low added
value to users.
Companies that now benefit from global telephony over IP usually planned the global roll-out in sync
with the end of life of existing infrastructure, equipped new sites with the new solution and avoided initial investments
with “pay-as-you-grow” financial agreements. They also “sold” the solution to their internal users by bundling it with collaborative
and unified communication tools to provide more value in one change to end users.
Collaborative tools, such as videoconferencing and document sharing and editing among teams, have arrived at such maturity
that they do help executive decision making and team working across geographies and time zones. Companies in business-to-business
(B2B) activities, such as re-insurance, that work on global client matters with specialist teams disseminated around the world,
or capital goods companies, which share best practices for their factories, constitute the largest part of the companies (32%)
that deployed these solutions.
Global IP VPNs will grow to support centralized applications and data centers, real-time
collaboration tools and telephony over IP. And mobile telephony is increasingly under central IT responsibility and multi-country
in scope. 39% of companies have centralized the sourcing policy and budget of mobile telephony under the central IT organization,
and the trend of Fortune 1000 companies is toward this kind of organization for mobile services.
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expert analysis: in the wake of the current credit crunch is outsourcing back on the agenda?
Khaled Khondker,
head of Solutions Integration for Large Projects management
the people behind large projects
Robert Hodgkinson, head of practices and training, Large Projects
