ISG Provider Lens™ Digital Business - Solutions and Service Partners - U.S. 2020 - Digital Customer Experience Services
Digital Business Solutions and Service Observed Trends & Overview
ISG rated 48 providers for the “Digital Business Solutions and Service Partners 2020” report across five quadrants for the U.S. market. A higher number of vendors participated in this year’s study, indicating a stronger push for digital services. The changing priorities of businesses during the COVID-19 pandemic is a major factor driving the overall growth of digital services in the U.S. In addition to analytics, cloud and cybersecurity, other trends such as the connected ecosystem, integration platforms based on application programming interfaces (APIs), implementation of digital solutions using low-code/no-code platforms, and multi-cloud environments will further fuel the growth of digital transformation in the region.
According to ISG Index, global sourcing slowed in the second quarter of 2020 as enterprises sharply reduced their managed services spending under the impact of the pandemic while still investing in ongoing digital transformation and service efforts. According to Steve Hall, president, ISG EMEA, and partner, Digital Advisory Services, “Forecasting what’s ahead of this year remains a challenge given the unknowns of the pandemic and the impact of a potential second wave.” Adding to this, Hall also mentioned that the tailwinds of digital business adoption are stronger than the headwinds of macroeconomic forces, and companies that are well along in their digital transformation journeys may recover more quickly. He added that those that are less digitally mature may be more motivated now to accelerate their digital investments. Over the last few months of the pandemic, digital transformation roadmaps that spanned years were compressed into days and weeks in order to adapt to the new normal. The crisis has induced a shift in focus from growth strategies to sustainability, cost savings, remote collaboration, automation and resilience, with major companies deciding to accelerate digital projects that had been planned for implementation in a couple of years to just two months.
Enterprises have started making significant efforts to reimagine the customer, employee and supplier journeys. They are choosing continuous design thinking, Agile, Lean and DevOps methodologies over the traditional waterfall approach to quickly adapt to changing market dynamics and build innovation across the organization and the ecosystem where it operates and functions. They are increasingly learning and building agility, formulating data and analytics strategies to encourage the culture of data-driven insights and decision-making, and creating transparency and collaboration inside and outside the organization. These will be the key principals of successful leadership that will enable an organization to identify and overcome any roadblocks.
Digital transformation is driven through the virtualization of technologies and the convergence of the virtual and physical worlds. From the systems and IT infrastructure perspective, "virtual" refers to running workloads remotely on the cloud and includes software-defined architecture and infrastructure. The digital transformation of functions and operations includes automation, AI and cognitive technologies. These are coupled with analytical capabilities that can be applied in both the real world – including production facilities, customer contact centers, retail environments and other customer interaction points, as well as mobile – and the virtual world by automating responses and interaction with clients, partners and governments.
Digital transformation allows organizations to tackle risks and handle disruptions such as market fluctuations, corporate restructurings and an unstable geopolitical environment. The digitalization of traditional business models also promotes the development of more technologically advanced products and services. Digital transformation services help businesses to realign their processes and technologies and obtain a competitive edge in the market.
This study is divided into five quadrants as follows:
Digital Business Consulting Services
Consulting service providers have now modified their pandemic-specific offerings to help clients remain sustainable and capture new opportunities that arose during the crisis. They offer services such as digital strategy design, organization change management, collaboration tools, digital culture consulting, process automation and omnichannel experience, along with support for digitalizing the supply chain and maintaining cash flow. To achieve this and speed up digital transformations, providers are adopting accelerators such as DevOps and DevSecOps methodologies for agility and security, as well as APIs to boost efficiency and facilitate innovation. ISG observes that more consulting players are building greater capabilities in artificial intelligence (AI), machine learning (ML), analytics, security, the Internet of Things (IoT), design thinking and prototyping to support clients in their digital transformations. Other services include benchmarking, digital maturity assessments and strategic research around market dynamics. Supply chain design, supply chain consulting, supply chain analytics, predictive analytics and related technologies such as blockchain and IoT are in high demand among clients. This market segment is expected to see greater traction and growth in the next 12 to 18 months as companies revamp their strategies to deal with the post-COVID-19 environment.
Digital Customer Experience Services
Digital customer experience is a process companies follow to differentiate their business and understand of the customer journey by using new business models and technology frameworks. The adoption of digital technologies to change the customer journey and improve business agility creates a digital disruption across all business processes by removing silos. With the growing need to know how an ideal customer interacts with a brand or product across channels, companies are using a collaborative design thinking approach that involves sales, marketing, technology and design. Service providers are increasingly adopting technologies such as cloud, AI, analytics and automation to create a better digital customer experience for customers. They are building digital labs and studios to develop in-house tools, platforms and frameworks for deploying customer services for clients in a short time by deploying teams of experienced digital professional. Customers are rapidly turning to digital, driven by the significant growth in this space. To efficiently address their needs, most service providers are incorporating AI/ML, analytics, chatbots, IoT and other exponential technologies. In the next 18 to 24 months, technologies such as augmented reality (AR), virtual reality (VR) and robotics are expected to see greater traction.
Digital Product Lifecycle Services
The digital product lifecycle is defined by the following phases: i) new product development that includes ideation, conceptualization, prototyping and core development; ii) product sustenance for maintenance and change management; iii) product testing for automation and security; iv) product deployment that covers build and release management, customization and integration of technologies; v) a delivery model that consists of Agile, DevSecOps and upgrades and vi) product management for customer relationship management (CRM) and customer experience. To develop digital products that can operate and be integrated across several clouds, companies are increasingly using containers across industries − particularly during the COVID-19 pandemic − to push for digital initiatives starting with cloud. The use of containers is gaining traction for their utility in carrying out multi-cloud deployment with consistent repletion and a reduced failure rate. Service providers are developing and applying low-code/no-code, microservices-based applications, APIs and serverless, and DevSecOps strategies to deliver digital applications for clients. They are offering DevOps automation, container configuration, test automation, security testing, event tracking and rollbacks. Other services include continuous integration and delivery (CI/CD) pipeline management, tools integration and DevOps operation, including artifacts and repositories.
Providers in this space are transforming their product lifecycle service offerings by integrating the latest technologies, such as AI, analytics, IoT, automation, AR/VR, and digital twin tools and accelerators. These technologies are instrumental in supporting the overall customer journey and providing a competitive advantage, user experience and other business outcomes. Service providers are developing strong expertise in these emerging areas. Another trend is the emergence of co-investment-led businesses for creating co-developed products and go-to-market strategies. Providers have increased their efforts to develop domain-specific expertise along with vertical knowledge for addressing customer requirements. Providers are also using more outcome-based pricing models, putting more skin in the game with a risk-sharing model across the development phase, to keep hold of all important/major accounts due to the COVID-19 pandemic. ISG observes that the proportion of outcome-based projects ranges mostly between 10 percent and 15 percent.
Blockchain Services
The adoption of blockchain has increased this year, with many early blockchain initiatives and use cases going from proof-of-concept (PoC) to the pilot or live-in-production stage. Given its transformational digital capabilities, blockchain is an attractive market opportunity for many vendors and remain one of the fastest-growing markets. Based on their qualifications and expertise in platforms, prominent platforms in this space are Hyperledger Fabric, Ethereum and R3 Corda. Blockchain is increasingly being integrated with other emerging technologies, such as IoT and AI, to create a connected ecosystem that delivers a better user/customer experience. Based on responses shared by all vendors qualified for this quadrant, more than 1,000 engagements were tested, in which nearly 50 percent of use cases proved to be of value for clients and nearly 15 percent of these use cases went into production. On average, a PoC exercise costs between US$150,000 and US$200,000. Projects take 24 to 32 weeks on average to go into production, and ROI is obtained in about 15 months. Blockchain projects have low cost and can be quickly executed, which indicates the need for only small or midsized teams.
Together with AI, blockchain technology can deliver new levels of data access, trust and security. Several organizations are already experimenting and working with this combination of technologies, but initiatives largely remain in test mode. Adoption and use cases have increased across industry verticals, primarily banking, financial services and insurance (BFSI), which has an early-mover advantage, followed by manufacturing, energy and utilities, retail and government. Supply chain use cases such track and trace and logistics have emerged as the fastest-growing use cases, followed by smart contracts, digital authentication, identity, payment solutions and trading. The top service providers are members of multiple consortiums and have an established presence across industries, which help clients to participate in a network where decentralized applications (Dapps) are deployed. Blockchain service providers are offering services to design and develop blockchain applications and manage them after deployment. Most of them have established centers of excellence (CoEs) that are focused on innovation around blockchain applications.
Digital Supply Chain Transformation Services
Supply chains are increasingly becoming volatile due to trade wars, pandemics and geopolitical instabilities. Many manufacturers and suppliers are considering digital transformation and technology to operate in the new uncertainty arising from the pandemic. Digital technologies such as blockchain, IoT, AI, analytics and robotics were earlier considered for driving efficiency but are now seen as integral for developing strategy and increasing resiliency in disruptive times. Digital technologies offer a holistic platform for collaboration and connection across different disparate systems and siloed processes, thus offering better visibility across the supply chain. Significant developments and advancements have taken place in a short time. These involve the implementation of automated data analysis focused on market changes and of automation solutions and services in distribution and fulfillment centers for reliable and safe operations and delivery. Companies are looking into solutions such as industrial products that enable a connected ecosystem, and manufacturers are focusing on smart factory and connected system initiatives. Consumer-centric companies are considering demand-sensing and omnichannel experience technologies and solutions as part of their offerings. The pandemic has forced organizations to change their operation strategies and diversify their supply chains instead of relying on one major production and supply-chain hub. This has elevated the use of predictive analytics to tackle external risks and has raised the need for a strong governance framework. Most service providers are offering a minimum viable product (MVP)-based agile approach that covers major user stories across sprints, thus delivering the incremental value of working software, with delivery focused on the engineering foundation as well as the feature release to the market. This approach gives clients a better understanding of the potential of leveraging and integrating the latest digital technologies with the client’s digital supply chain. Digital supply chain providers use various methodologies and delivery methods, such as Agile, DevSecOps, hyperpersonalization, digital supply chain twin (DSCT), governance, design thinking and user experience (UX) to help clients in their digital supply.
Access to the full report requires a subscription to ISG Research. Please contact us for subscription inquiries.