nasscom ilf 2015: enterprise of the future by mr. noshir kaka
TRANSCRIPT
Enterprise
of the Future:
Are the Providers
Ready?
2
Enterprise of the future and implications for the providers
Technology spending is now 40% of the total capital spend1
80% of incremental enterprise investment to be in digital; 50% to be
funded through reduction in legacy2
New attackers to comprise 20-25% enterprise revenue pools by 20253
Machine joins the workforce, knowledge workers to be impacted most4
Industry on track to achieve 2020 aspirations but with significant changes
to the business model5
Implications for the Providers
▪ Decline in annuity, explosion in new service lines
▪ 3-in-1 organization where traditional, transformative and disruptive co-exist
▪ Fundamentally different economic models
▪ 50% of talent will have to be reskilled to be relevant
6
3
Enterprise of the future and implications for the providers
Technology spending is now 40% of the
total capital spend1
80% of incremental enterprise investment to be in digital; 50% to be funded through reduction
in legacy2
New attackers to comprise 20-25% enterprise revenue pools by 20253
Machine joins the workforce, knowledge workers to be impacted most4
Industry on track to achieve 2020 aspirations but with significant changes to the business
model5
Implications for the Providers
▪ Decline in annuity, explosion in new service lines
▪ 3-in-1 organization where traditional, transformative and disruptive co-exist
▪ Fundamentally different economic models
▪ 50% of talent will have to be reskilled to be relevant
6
10
15
20
25
30
35
40
Technology moves from cost to capital
SOURCE: McKinsey & Company
$6 trillioncumulative tech capital
investment globally
1
Tech spend as percent ofU.S. capital investment (nominal) (%)
2014200019901980
Growing technology intensity of business
Return on
Technology
Investmenta critical metric for
enterprise performance
3xIncrease in technology
intensity of capex
5
Enterprise of the future and implications for the providers
Technology spending is now 40% of the total capital spend1
New attackers to comprise 20-25% enterprise revenue pools by 20253
Machine joins the workforce, knowledge workers to be impacted most4
Industry on track to achieve 2020 aspirations but with significant changes to the business
model5
Implications for the Providers
▪ Decline in annuity, explosion in new service lines
▪ 3-in-1 organization where traditional, transformative and disruptive co-exist
▪ Fundamentally different economic models
▪ 50% of talent will have to be reskilled to be relevant
6
80% of incremental enterprise investment
to be in digital; 50% to be funded through
reduction in legacy2
80% of incremental enterprise investment to be in
digital technologies, however 65% of legacy survives
SOURCE: McKinsey & Company
Global Enterprise IT spend (US$ billion)
Traditional Tech
Traditional
Tech
Digital Tech
Digital Tech
65%
35%
2020E
3,440-3,500
Traditional spend
evaporates
-450 - -650
2014
2,750
90%
10%
20%
80%
New Service Lines
750-950
15-25% of traditional spend
saved by going digital
80% of new spend around
digital technologies
Cloud (SaaS, IaaS,
BPaaS)
Social Media
Big Data/Analytics
Cyber Security
Internet of Things
Mobility
+25%-15-25%
2
7
Enterprise of the future and implications for the providers
Technology spending is now 40% of the total capital spend1
Machine joins the workforce, knowledge to be impacted most4
Industry on track to achieve 2020 aspirations but with far fewer people 5
Implications for the Providers
▪ Decline in annuity, explosion in new service lines
▪ 3-in-1 organization where traditional, transformative and disruptive co-exist
▪ Fundamentally different economic models
▪ 50% of talent will have to be reskilled to be relevant
6
New attackers to comprise 20-25%
enterprise revenue pools by 20253
80% of incremental enterprise investment to be in digital; 50% to be funded through reduction
in legacy2
SOURCE: McKinsey & Company
Digital attackers likely to capture 20-25% of total enterprise revenues
by 2025
Retail example
Incremental revenues N.A. -2012-13, USD billion
Incremental
industry
revenues
Top 10
traditional
players
Top 3 Digital
attackers
All others
Banking example
Incremental revenues 2012-13, USD billion
11.8
12.1
29.8
5.9
Incremental
industry
revenues
Top 20 global
banks
Top 6 Digital
attackers
All others
Top attackers
by revenue
Paypal
Alibaba
Tesco
NTT Docomo
Safaricom
1.2
4.1
- 3.2
6.1
Top attackers
by revenue
Amazon
CDW
Newegg.com
3
9
Enterprise of the future and implications for the providers
Technology moves from cost to capital1
New attackers to comprise 20-25% enterprise revenue pools by 20253
Industry on track to achieve 2020 aspirations but with far fewer people 5
Implications for the Providers
▪ Decline in annuity, explosion in new service lines
▪ 3-in-1 organization where traditional, transformative and disruptive co-exist
▪ Fundamentally different economic models
▪ 50% of talent will have to be reskilled to be relevant
6
Machine joins the workforce, knowledge
workers to be impacted most4
80% of incremental enterprise investment to be in digital; 50% to be funded through reduction
in legacy2
Machines join the workforce, knowledge workers to be impacted the
most
SOURCE: McKinsey & Company
Examples
350
150
300
800
Workers (mn)
2025
M/c replace/
augment (%)
12-15%
10-15%
30%
~20%
Driverless trucks
“Lights Out” Factory
An Algorithm gets a
seat at the BoardKnowledge
worker
Service
worker
Industrial
worker
4
11
Enterprise of the future and implications for the providers
Technology spending is now 40% of the total capital spend1
New attackers to comprise 20-25% enterprise revenue pools by 20253
Implications for the Providers
▪ Decline in annuity, explosion in new service lines
▪ 3-in-1 organization where traditional, transformative & disruptive co-exist
▪ Fundamentally different economic models
▪ 50% of talent will have to be reskilled to be relevant
6
Industry on track to achieve 2020
aspirations but with significant changes to
the business model5
80% of incremental enterprise investment to be in digital; 50% to be funded through reduction
in legacy2
Machine joins the workforce, knowledge workers to be impacted most4
Decoupling of revenue from head count has already begun
SOURCE: McKinsey & Company
0
80
160
240
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
0
1.5
3.0
4.5
6.0
7.5
9.0
Technology Services Revenues$ billion
Employeesmillion
Employees (mn)
Revenues ($ bn)
Services revenues on track to
touch $225 b by 2020, but
will add < 1 m people for the
next $100 b revenue
For the first 100 billion in
revenue, ~3 million peoplewere added
5
Many new business models are emerging, here are some examples
Emergence of new business models: Specialists, Service brokers,
Service factory, Enterprise platforms
SOURCE: McKinsey & Company
32
15
7
16
18
0
6
17
8
5
4
3
2
1
8887 91 11290891297 1365 142 3010
Sales$ billion
Market Cap/Sales
Specialists
Enterprise platforms
Service brokers
Service factory
Global
Top 3
Leading Indian
providers
Other Indian
providers
5
14
Enterprise of the future and implications for the providers
Technology spending is now 40% of the total capital spend1
Implications for the Providers▪ Decline in annuity, explosion in new service lines
▪ 3-in-1 organization where traditional, transformative and
disruptive co-exist
▪ Fundamentally different economic models
▪ 50% of talent will have to be reskilled to be relevant
6
80% of incremental enterprise investment to be in digital; 50% to be funded through reduction
in legacy2
New attackers to comprise 20-25% enterprise revenue pools by 20253
Machine joins the workforce, knowledge workers to be impacted most4
Industry on track to achieve 2020 aspirations but with significant changes to the business
model5
Key implications for the partners of the future
SOURCE: McKinsey & Company
1Decline in annuity,
explosion in new
service lines
▪ 20% decline in
maintenance and
BPO annuity
▪ 3x increase in SaaS
licenses, BPaaS,
Analytics and Cyber
security services
Invest in new
portfolio
▪ Pyramid to
Pentagon
– Sales and
marketing
(% of sales)
: ~30%
– R&D
(% of sales)
: ~15%
2
▪ New financial
models
3-in-1 Organisation
▪ Traditional,
transformative and
disruptive
organisation
co-exists
3
Reskilling of talent
▪ 50% of talent will
have to be reskilled
to be relevant
4
6