Cool Vendors in IT Management, Sourcing and IT Services
09 March 2004
By Ben Pring, Robert H. Brown, Adam W. Couture, Michele Cantara, Rebecca S Scholl
Document Type: Commentary
Source: Research and Advisory Services
Note Number: COM-21-8010
Gartner profiles four IT management vendors that demonstrate how continuous innovation gives them a competitive edge.
What You Need to Know
CenterBeam, GlassHouse, ThoughtWorks and WNS have all demonstrated innovation and execution during the most difficult period in technology's history. With macroeconomic market conditions brightening, these companies are poised to make the difficult transition from promise to fulfillment.
Analysis
This research does not constitute an exhaustive list of vendors in any given technology area but rather is designed to highlight interesting, new and innovative vendors, products and services. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
The IT services marketplace has experienced the type of hype cycle normally applied to individual vendors. During the mid to late 1990s, the explosive popularity of IT services was driven by enterprises' burgeoning belief in the idea of core competency and pressing tactical skills requirements. With a combination of almost perfect market conditions (year 2000 [Y2K], enterprise resource planning [ERP] and the Internet), all types of IT services providers were seen as "part of the solution" and quickly jumped in to take advantage of the market conditions.
Since the turn of the millennium, however, the market has been far bleaker as post Y2K/ERP/Internet fatigue and skepticism resulted in waning popularity of services companies. Consolidation in the industry has been brutal. Many established providers have scattered "pink slips" around liberally and few venture-capitalist-funded startup companies have had an easy success. Although in 2004 the macroeconomic conditions appear to be strengthening, few IT services providers are willing to believe that a new boom is imminent.
The vendors highlighted in this document are succeeding amid tough times. Their strategies encompass many of the ideas and themes that are prevalent in the industry today: cost reduction, optimization and interoperability rather than integration. Although each provider is unique, Gartner has chosen to focus on these four cool vendors because they all have one thing in common: A belief that continuous innovation is the one real competitive edge of any company.
Vendors are in alphabetical order:
CenterBeam — San Jose, California (www.centerbeam.com)
IT managers at midsize businesses often find their staff mired in day-to-day "firefighting" roles with no chance to focus on strategic core objectives. However, most managers are inclined to view outsourcing as a threat. CenterBeam seeks to change that perception by liberating resource-strapped midsize business IT managers. CenterBeam focuses on remote help desk and infrastructure management by specifically targeting midsize and large customers with 100 to 2,500 users. Most midsize businesses will outsource incrementally over time, and CenterBeam's services are engineered to scale as customer needs evolve. For example, the company has added mobility services as a complement to its baseline IT infrastructure offerings, which can be added as mobility needs grow over time.
Since its founding in 1999, CenterBeam has had a first-rate track record of service delivery to established customers. In August 2003, CenterBeam announced its "Total Satisfaction Guaranteed" initiative for pay-as-you-go IT utility service delivery to differentiate itself from the usual multiyear "lock-in" of traditional outsourcing contracts. Also in 2003, CenterBeam opened a Canadian solutions center in Saint John, New Brunswick to ensure competitive pricing while recognizing the nearly complete aversion U.S. midsize businesses have to implementing outsourcing to locations such as India.
CenterBeam faces many challenges. Notably, outsourcing is not a mainstream practice among midsize businesses; CenterBeam and its competitors must continually educate a skeptical market about its value and benefit. Also, despite its track record of client satisfaction and a roster of financial backers that includes Microsoft, Electronic Data Systems (EDS), Intel and Dell, the company has struggled to attain profitability.
By Robert H. Brown
GlassHouse Technologies — Framingham, Massachusetts (www.glasshouse.com)
GlassHouse Technologies is a vendor-neutral storage consulting organization that helps clients optimize established infrastructure rather than invest in new infrastructure. GlassHouse recommends vendor solutions but does not resell them. The company has built an organization of storage experts with backgrounds in companies leaving the storage consulting business (Imation) or liquidating entirely (Auspex).
GlassHouse's approach includes a data classification structure that has certain similarities to information life cycle management initiatives being touted by major storage vendors. However, the approach is recognized as being so innovative that mainstream storage vendors such as Fujitsu Softek are licensing it to use with their customers.
GlassHouse was launched counterintuitively in the midst of the worst technology slowdown in history (2001). Co-founders Mark Shirman and Richard Scannell recognized that this slowdown would be just the time to launch a company predicated on the concepts of optimization and independence. Having persuaded venture capitalists of the logic, Shirman and Scannell have been vindicated by the presence on GlassHouse's roster of more than 300 blue-chip companies, including The Gap, Visa, Cisco and British Petroleum. GlassHouse is focusing on one of the most important market strategies today by doing more with less. Of course, GlassHouse’s success has not been lost on major storage original equipment manufacturers and service providers that are touting the same value proposition as GlassHouse, but with far more marketing capital and development dollars behind them. Potentially, GlassHouse could become an acquisition target. In the meantime, however, GlassHouse is in position to make high profits on its low profile.
By Adam Couture
ThoughtWorks — Chicago, Illinois (www.thoughtworks.com)
During the past two years, the technology slowdown and price erosion caused by the influx of offshore companies have led to a 7 percent shrinkage of the North American development and integration service market. During this two-year period, ThoughtWorks has grown organically by almost 30 percent. Although still admittedly small, ThoughtWorks is clearly doing something right. Gartner estimates ThoughtWorks' 2003 revenue to be just over $50 million.
Several key strategies are part of ThoughtWorks' success. First, rather than trying to be all things to all clients, the company focuses on highly complex mission-critical applications that have volatile or ill-defined requirements well-suited to its core competency in architected rapid application development (ARAD). Martin Fowler, chief scientist at ThoughtWorks, is a leading authority on ARAD for large enterprises. Fowler's evangelism of agile methods combined with pragmatic implementation in large enterprises creates capabilities that are both cool and credible. Second, ThoughtWorks is clearly identified with the open-source movement. ThoughtWorks developed CruiseControl, a framework for continuous build processes, and made this available to the open-source community. Because the community consists of hundreds of enterprises, many companies that were not ThoughtWorks clients were familiarized with the company through CruiseControl. Third, ThoughtWorks runs new employees through a rigorous gantlet of exercises designed to evaluate developer's technology expertise, comfort with ARAD methods, and cultural fit with the intent of producing a developer-centric culture of elite technologists.
ThoughtWorks intends to grow aggressively during the next few years. It's principal challenges will be to preserve its culture as it scales and to find a mechanism for capitalizing on its open-source capabilities, without alienating open-source purists. While other systems integrators have struggled to keep their application development and integration services from becoming commodities, ThoughtWorks has grown and maintained its differentiation through a combination of careful positioning, premium developer skills, thought leadership in Agile methods, open-source tools, Java 2 Platform, Enterprise Edition (J2EE) and Microsoft .NET.
By Michele Cantara
WNS Global Services — London, United Kingdom (www.wnsgs.com)
WNS Global Services is an Anglo-Indian company headquartered in London. It was created in 2002 as a spinoff of British Airways to focus on providing back-office services to the airline industry. By using a global delivery model (offshore resources), WNS leverages its experience within British Airways to understand the end-to-end process needs of the airline industry and has won contracts with six leading airlines.
Through the acquisition of a British healthcare and property and casualty business process outsourcing (BPO) provider, WNS has diversified into the insurance industry. Also, it has acquired offshore BPO experience by hiring a management team with offshore consulting and U.S. BPO industry experience. The company was established at the same time offshore BPO was becoming popular. WNS' traction can be attributed to a focused vertical and process strategy, domain expertise and a diversified delivery model, as well as favorable market conditions and good timing.
By aligning the processes with lower than incumbent pricing levels, WNS chooses to focus on high value-add processes within its target markets. The company expects to generate revenue of $80 million to $85 million in fiscal 2004, with about 20 clients in the United States and the United Kingdom.
WNS is still in the early stages of its development. It has pressing requirements to reinforce its global delivery model and its presence in the United States and in Europe to generate the sort of scale that will make it a serious rival to established BPO providers. WNS is, however, a good example of a captive center succeeding in becoming a commercial service provider — something that few companies attempting to do this have been able to execute against.
By Rebecca Scholl
This research does not constitute an exhaustive list of vendors in any given technology area but rather is designed to highlight interesting, new and innovative vendors, products and services. Gartner disclaims all warranties, express or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
Acronym Key
| ARAD | architected rapid application development |
| BPO | business process outsourcing |
| EDS | Electronic Data Systems |
| ERP | enterprise resource planning |
| J2EE | Java 2 Platform, Enterprise Edition |
| Y2K | year 2000 |
Key Issue
What are emerging enterprise solutions and strategies?
This research is part of a set of related research pieces. See AV-22-5273 for an overview.