What's the future of pureplay cloud IT services firms?
- Summary:
- Pureplay cloud IT services firms face stiff competition from the mainstream global systems integrators. We look at how Appirio aims to stand above the crowd
It may have been the smaller firms that helped build market presence for the likes of Salesforce and Google Apps at a time when the established SIs thought cloud applications were beneath them. But that history counts for little when big bucks are at stake. Now that the global SIs are taking cloud seriously, the vendors are not only happy to work with them but often eager to leverage their existing client relationships.
No return to the old ways
To ensure they don't get muscled aside, the cloud pureplays have to continue to offer something distinctive to the market. In a blog post in the run-up to Dreamforce last October, Appirio CEO Chris Barbin argued there's a danger the established firms will import ingrained and outdated practices into cloud deployments that mark a return to the "old ways" of costly, long-term contracts. In A Plea to the Cloud Industry — Demand Competitiveness, he wrote:
With the big GSIs investing big in 'the cloud' and selling their overhead, excessive processes and bloated models to customers in an attempt to retool their existing Oracle and SAP practices, I fear the disruption [of the professional and business services industry] will be a blip and not a seismic shift. I fear that we'll be stuck with more of the status quo wrapped in cloud imagery and fancy terms like 'digital transformation.'
We need a seismic shift in IT services, not just a better way ... Three year, $100M 'transformation' initiatives are great for vendors and service providers (us included). But rarely are they good for customers.
Barbin's call for more disruption of the conventional approach to professional services served to emphasize Appirio's differentiation. Its target prospects are precisely those companies that proactively want to do things differently, rather than end up with more of the same relocated to a different platform.
Crowdsourced development
The most distinctive part of Appirio's offering is its crowdsourced application development community, topcoder. This has a registered global community of around two-thirds of a million developers, designers and data scientists, who compete for recognition and financial rewards in return for their contributions to project contests. Appirio has been using crowdsourced work as part of its offering since 2011. It remains an important element and the company is aiming to build enterprise appetites for its use.
Even financial services is an important target market for topcoder, I was surprised to learn when I met Appirio's SVP international Tim Medforth yesterday. This is an industry you might expect would be last in line to crowdsource development, due to fears over security and intellectual property ownership. But the value is the ability to tap into new ideas, said Medforth.
There's an awful lot of innovation going on in many organizations. [But] it's a struggle, isn't it? How do you innovate? I think it creates an opportunity for us.
At a recent off-site meeting of top IT management at a large global bank, Appirio demonstrated the power of crowdsourcing by posting a contest to design a mobile application that would engage young people. Within 48 hours, three dozen concepts had come back from participants spread across eight different countries and "these C-level executives were blown away by what it showed about the potential of crowdsourcing," said Medforth.
Appirio is also seeking to encourage its GSI rivals to become a channel for topcoder, he added. It's a little ironic given Barbin's longstanding criticisms of the global giants. Medforth explained the rationale:
We're taking it to market into, if you like, our competitors, with the idea those organizations really can be powered up by that. We want it to be a material part of the technology ecosystem in the 21st century.
Just like their clients, the GSIs are struggling [to innovate], they have to deliver the next idea. There's an opportunity for us in helping those organizations seize the power of the cloud.
Taking Workday into Europe
Another source of differentiation is Appirio's Workday practice, bolstered after its acquisition in 2012 of strategic HCM consultancy Knowledge Infusion. Workday represents around a third of Appirio's revenues in EMEA and is expected to grow around 80 percent this year. That could be boosted when Workday brings its financials offering to EMEA, said Medforth.
Once we get Workday financials active, that will give us a further multiplier on that number.
Customers are spread around a number of industries, including pharmaceuticals, professional services, online, telecoms, and media and entertainment.
A typical Workday buyer for Appirio is an enterprise that is looking to do things differently, said Medforth:
The CHRO is keen to transform the enterprise and sees HR as an enabler. We're working with a leadership that understands the opportunity to transform the role of HR in the enterprise.
There's probably another agenda involved, that they need to stay nimble and keep their employee proposition active and up-to-date.
In Europe, SAP's SuccessFactors cloud offering is a significant competitor for Workday. Appirio's HCM strategy consultancy is bringing it into contact with many SAP customers who are evaluating which vendor to adopt when moving HCM to the cloud, said Medforth.
Successfactors have an awful lot of momentum. They've caught up a lot in the marketplace. But I think there's a lot of fatigue with SAP in the marketplace in terms of the kind of organization they are.
[Many customers] are wedded to SAP as a brand but they're concerned to open their eyes about what the next step is. That's very interesting to see how that evolves over time. They're saying that it's not an automatic decision.
Helping customers implement "cross-cloud" projects that involve more than one cloud vendor is Appirio's other strong point. Its HCM practice works with Cornerstone OnDemand as well as Workday, while its largest practice is for Salesforce projects. Google and Amazon have also been a longstanding part of the offering.
Nearly every conversation we have [with customers] starts with one product solution and ends with another. Once you go cloud, you build confidence to go in other directions. There's an appetite to go beyond the entry point.
Medforth joined Appirio last year after an extensive career with Accenture, where he sat on the UK and Ireland board at the time of his departure.
My take
As Appirio co-founder Narinder Singh frequently reminds me, I gave the company its first mainstream media coverage in a 2007 ZDNet blog post. This is a company I've watched grow up, have occasionally worked with, and have appreciated its anti-establishment thinking.
The competition today is probably tougher than it's ever known and that puts headwinds in its path as it seeks to maintain a rapid growth path. Scaling professional services is always a challenge. But it has some strong points of differentiation, especially the crowdsourcing piece, which Medforth at one point called "the jewel in the crown."
This I think is the key for all of the pureplay cloud SIs. They need some point of differentiation that continues to make them stand out from a billowing crowd of cloud practices. Those that don't on the other hand may well find they simply get acquired by the more established companies who are also seeking to scale and skill up for the cloud.
Disclosure: Salesforce, SAP and Workday are diginomica premier partners. Appirio has in the past been a consulting client of the author and provided hospitality during Dreamforce.
Image credit: © alphaspirit - Fotolia.com; headshot courtesy of Appirio