A Z K R e s e a r c h W h i t e P a p e r

December 2017

DIGITALTRANSFORMATION

SERVICES ARE CRITICAL TO BUSINESS SUCCESS

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TABLE OF CONTENTS

Introduction: Digital Success Depends on IT Modernization 3

Exhibit 1: Digital Transformation Is Widely Adopted 4

Section II: The Challenges Associated with Becoming a Digital Company 5

Exhibit 2: Digital Technologies Are Creating a Growing Skills Gap 7

Section III: Introducing Digital Transformation Services 8

Exhibit 3: Business Outcome Services Life Cycle 13

Section IV: Cisco Is the Right Services Partner for the Digital Era 16

Section V: Conclusion and Recommendations 22

Exhibit 4: Digital Transformation Services Offer Many Benefits 23

ABOUT THE AUTHOR

Zeus Kerravala is the founder

and principal analyst with

ZK Research. Kerravala provides

tactical advice and strategic

guidance to help his clients in

both the current business climate

and the long term. He delivers

research and insight to the

following constituents: end-user

IT and network managers; vendors

of IT hardware, software and

services; and members of the

financial community looking

to invest in the companies that

he covers.

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Introduction: Digital Success Depends on IT Modernization

Digital transformation is now a critical initiative for almost all companies. The ZK

Research 2017 IT Priorities Survey found that 84% of organizations now have digital

initiatives underway (Exhibit 1). Company and IT leaders recognize that business

disruption is happening faster than ever, and those that can move quickly have an excellent

opportunity to sustain market leadership. However, those that can’t do so will fall behind and

struggle to survive. Indeed, a recent report from SAP found that 80% of companies that have

undergone digital transformation efforts reported an increase in profitability, compared to

only 53% of other companies.

Digital disruption will affect every industry vertical, including the market leaders. In fact,

business leaders responding to a 2017 survey from IMD felt that four out of the top 10 compa-

nies in every vertical will be disrupted within the next five years. This is why businesses must

focus on becoming a digital company. Waiting will only cause them to fall behind their more

aggressive peers.

It’s important to understand that success in the digital era does not need to come from

intimidating “moon shots”; rather, it can come from a series of smaller initiatives that trans-

form the business over time. For example, an established retailer does not need to become

Amazon overnight. It can start by implementing guest WiFi and a mobile application and then

Digital disruption

will affect

EVERY

industry vertical,

including the

market leaders.

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digital signage to comple-

ment it. These changes are

non-disruptive to the busi-

ness, can be implemented

quickly and can be part of

a larger digital mandate.

However, this piece-

meal approach is difficult

to implement with legacy

IT infrastructure and pro-

cesses. If businesses are to

succeed in the digital era,

their technology infrastruc-

ture needs to be mod-

ernized and skills upgraded. This undertaking can be quite daunting even for the largest, most

technically savvy companies.

Digital transformation services are a new category of services that can help companies of

all sizes evolve from what they are today to successful, thriving digital businesses capable of

competing both now and into the foreseeable future.

Yes

Does your organization currently have adigital transformation initiative underway?

13%

3%

Unsure

No

84%

Exhibit 1: Digital Transformation Is Widely Adopted

Source: ZK Research 2017 IT Priorities Survey

If businesses are to

SUCCEED

in the digital era, their

technology infrastructure

needs to be modernized and

skills updated.

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Section II: The Challenges Associated with Becoming a Digital Company

Although digital transformation efforts appear to be well underway, several barriers are pre-

venting companies from moving faster. During the last 12 months, ZK Research has conduct-

ed one-on-one interviews with more than 50 business and IT leaders to better understand

the status of their digital initiatives and what their main challenges are. The following are the

issues that came up most often:

LACK OF IT AGILITY | This was by far the most common concern reported by interview-

ees. In the digital era, companies must be able to experiment quickly and roll out new services

to keep ahead of their competition. Legacy IT infrastructure and processes are far too rigid to

enable organizations to achieve the level of dynamism required by digital businesses. There-

fore, they must focus on modernizing the underlying infrastructure to realize the level of agility

required today.

INABILITY TO WORK ACROSS BUSINESS AND IT SILOS | In today’s businesses, the lines

of demarcation separating responsibilities are clear. Lines of business, application develop-

ment, IT operations, network engineering, security and others each exist in their own silos.

Businesses need to strive for line-of-business outcomes where everyone in the company is

responsible for the success of digital initiatives. However, this is difficult to do when every

Lack of agility was the

MOST COMMON concern reported by

interviewees.

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department is looking at the business through its own lens. A common set of data is required

to ensure every group has the same view of the key performance metrics that fuel the compa-

ny’s success.

RISK AVERSE | Digital transformation can be intimidating to many companies, as is the

fear of spending money on new technology and not knowing what the return on investment

(ROI) will be. This happens when a company lacks data and the ability to analyze processes

before and after implementation. A lack of data leads to a lack of insights, which increases the

level of risk that businesses encounter regarding digital transformation.

LACK OF TALENT AND SKILLS | The skills and technology required to run a digital busi-

ness are significantly different from those needed in the past. A recent IDC report found that

69% of businesses lack the right people, knowledge and technology to transform. The danger

for businesses is that the rate of technology innovation is accelerating, which is widening the

complexity chasm (Exhibit 2).

CYBERSECURITY | Historically, securing a business meant implementing high-perfor-

mance firewalls and other devices at a well-defined boundary between the internet and the

enterprise. However, the ZK Research 2017 Security Survey found that 90% of security spend

69% of businesses lack the right

people, knowledge and

technology to transform.

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is still focused at the perimeter even though only 27% of breaches occur there. New digi-

tal-enabling technologies such as the Internet of Things (IoT) and the cloud are creating new

entry points that hackers are exploiting at a furious pace. Also, the increased complexity of IT

En

dp

oin

ts o

n th

e N

etw

ork

Time

Internet of Things

Digital Transformation

Containers

Complexity Chasm

IT Budgets

DevOps

Mobility

Cloud

Virtualization

Source: ZK Research, 2017

Exhibit 2: Digital Technologies Are Creating a Growing Skills Gap

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has made it significantly more difficult to secure the environment.

LACK OF BUDGET | The ZK Research 2017 IT Priorities Study found that 83% of IT bud-

gets are used to maintain the current environment, leaving only 17% for innovation—far too

little to modernize the infrastructure. If businesses are going to become digital organizations,

it’s imperative that they reduce the overall cost of running the infrastructure so more budget

can be allocated to modernization.

Section III: Introducing Digital Transformation Services

As the name suggests, digital transformation services are a set of technical and professional

services focused on helping businesses become digital organizations. While legacy services

are geared more toward maintaining the status quo, digital transformation services are de-

signed to optimize the current environment to maximize investments in current infrastructure

and accelerate the journey to becoming a digital company.

“Digital transformation services” is an umbrella term for two categories of services that fo-

cus on business outcomes and technical expertise. The combination of the two can close the

widening skills gap that companies are facing with respect to transforming themselves.

Business Outcome Services

These services can be thought of as the evolution of optimization services that tackle the

Digital transformation services

are a set of technical and

professional services

FOCUSED

on helping businesses become

digital organizations.

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challenges associated with continually optimizing performance, securing the environment

and accelerating the transition to new technology. Additionally, the services will reduce the

operational expenses (opex) associated with running the IT environment, which is badly

needed by many companies. For example, ZK Research has calculated that opex accounts for

60% of the overall total cost of ownership (TCO) of running a data center. Therefore, if compa-

nies want to allocate more resources to innovation, the first step is to lower their opex.

Outcome-based services are a broad set of services that enable businesses to both maximize

the value of their infrastructure via alignment to business outcomes and prepare for the future.

ANALYTICS | IT infrastructure generates massive amounts of data, and it’s critical that or-

ganizations are able to interpret the data to gain new insights. However, the process of man-

ually inspecting data is too slow because of the volume being generated today. Therefore,

machine learning should be used to monitor key performance indicators (KPIs), set baselines,

monitor anomalies, view trends and correlate data. Analytics services should include access to

experts who can help interpret the data and relate it to business outcomes. The insights gen-

erated by analytics services can be used to create a common set of data that all departments

in a company can leverage to tear down the silos. Also, analytics can be used to help measure

the success of digital initiatives, alleviating the risks that so many businesses fear today.

Machine learning

should be used to

MONITOR

key performance indicators

(KPIs), set baselines, monitor

anomalies, view trends and

correlate data.

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AUTOMATION | Digital businesses require IT to operate faster and with more accuracy.

Given that 35% of downtime is due to human error, according to the ZK Research 2017 Network

Purchase Intention Study, it’s not realistic to expect the IT staff to do the same tasks in a shorter

period of time with fewer errors. Instead, businesses should automate the critical tasks associat-

ed with supporting the infrastructure. This includes creating trouble tickets, testing infrastruc-

ture and alerting operations of issues. Automating day-to-day tasks improves the agility of the

infrastructure and frees up time for IT and network engineers to develop new skills.

COMPLIANCE AND REMEDIATION | Complying with industry and internal company

regulations can be a slow, painful and arduous process for most organizations. Companies

need a set of services that automate audits and associated remediation for software upgrades

and configuration changes, as well as enable businesses to meet regulatory and indus-

try-standard compliance and security requirements.

ARCHITECTURAL SERVICES | Digital transformation does not need to revolve around

large “moon shot” projects. Instead, companies should focus on tackling smaller projects that

can improve a specific process. For example, a bank could use video terminals to allow remote

agents to talk to specialists located at the company headquarters. IT operations needs to

make sure the technology foundation is ready—and that requires taking an architectural ap-

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proach to deploying the infrastructure. It’s important to note that there isn’t one “super archi-

tecture” for all of IT. Rather, there should be architectural services for different domains such as

the cloud, data center, campus network and wide-area network (WAN). The right architectures

can improve security and IT agility and lower the overall cost of running the infrastructure.

SECURITY SERVICES | The ZK Research 2017 IT Priorities Survey found that cybersecurity

is the top IT and business initiative. This should not be a surprise, as breaches are now highly

publicized and can damage a company’s reputation. Simultaneously, securing the environ-

ment is becoming more difficult as the number of exploitable entry points into a business

has grown by an order of magnitude. Security services can ensure the right technology is

deployed in the right places, which can decrease the overall cost of security but also shorten

the time to detect and remediate breaches. Services can augment an organization’s current

security staff and fill in gaps where talent may be lacking. It’s important to note that although

security is listed as a separate bullet here, it’s a component of all the services.

TRANSFORMATIONAL SUPPORT SERVICES | At the 2016 World Economic Forum in

Davos, Switzerland, Dan Schulman, the CEO of PayPal, was quoted as saying, “The biggest im-

pediment to a company’s future success is its past success.” With regard to digital transforma-

tion, the more successful a company has been, the harder it is to disrupt its current processes.

“The

BIGGEST

impediment to a company’s

future success is its past

success.”

—DAN SCHULMAN, CEO, PAYPAL

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However, organizations should always be challenging the status quo and finding newer and

better ways of operating. Transformation support services use industry and other best practic-

es, combined with a proven methodology, to develop digital services and drive them through

completion quickly and successfully. By putting a digital transformation plan in place, these

services can bridge the widening gap that exists between lines of business and IT as well as

the different IT silos.

Business outcome services should be thought of as a set of iterative services that start

with the infrastructure foundation, then enable business agility, and then set a transformation

agenda. It’s critical to understand that digital transformation is not a one-time event; these

services constitute a continuous life cycle (Exhibit 3) that constantly optimizes infrastructure

to support new digital initiatives. Also, the services should be customized on a per-company

basis. Historically, services organizations used a set of standardized offers for every customer,

but digital services need to be personalized today.

Digital Technical Services

Technical services that focus only on product support are no longer sufficient to support digital

businesses. Digital services are highly dependent on infrastructure—particularly, the network—to

be successful. Therefore, digital technical services must evolve beyond traditional support to offer

prescriptive and proactive services options at the software, system and network level.

Digital services are

HIGHLYdependent on

infrastructure—

particularly, the network.

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TECHNICAL SOFTWARE SERVICES | This area likely has the largest technical talent gap

in most organizations. Network professionals in particular have worked very little with soft-

ware over the years. Technical software services provide the necessary support required to

build out software-defined networks and optimize the use of software tools in the areas of

the data center, collaboration, security and others.

INFRASTRUCTUREFOUNDATIONAL

SERVICES

BUSINESSACCELERATION

SERVICES

DIGITALENABLEMENT

SERVICES

Source: ZK Research, 2017

Exhibit 3: Business Outcome Services Life Cycle

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TECHNICAL SYSTEM SERVICES | System support services address the needs of a data

center that is becoming increasingly converged, hyper-converged and virtualized.

TECHNICAL NETWORK SERVICES | These services are required to understand the end-

to-end network rather than just the individual components, which include the data center,

campus, WAN and wireless network.

By moving past basic technical support, these advanced services bring together technolo-

gy innovation and deep expertise to help companies drive better business results specifically

by accomplishing the following:

> Maximizing infrastructure uptime

> Resolving complex problems

> Masking the underlying complexity of IT infrastructure

> Enabling the shift to an increasingly software-centric world

Many choices are available to businesses looking for a digital transformation services part-

ner. A partner must be able to deliver the following five components to meet the demands of

a digital organization:

Advanced

SERVICES

bring together technology

innovation and deep

expertise to help companies

drive better business results.

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BROAD AND DEEP EXPERTISE | Partners should have broad expertise that includes

applications, systems and the network, but also the ability to go deep in each of these levels.

Having both is necessary to optimize the performance of digital services.

PROVEN METHODOLOGY | Closing the talent gap requires an experienced services

partner that has “been there, done that.” A proven, repeatable methodology is needed to en-

sure predictable results so the return on investment that is expected is actually achieved.

PERSONALIZED SERVICES | Although a repeatable methodology is necessary, the services

partner should have the ability to personalize services for each company. A standardized foun-

dation with personalization for the unique needs of each customer will yield the best results.

STRONG SECURITY CAPABILITIES | Regardless of the digital initiative, security will be a

key component. The services partner needs to have best-in-class security skills to ensure that

the business, its employees and its customers are protected.

SUBSCRIPTION PRICING | A wide range of pricing models are available, but subscrip-

tion pricing brings a level of predictability to help companies budget better—leading to

consistently strong results.

Subscription

PRICINGbrings a level of predictability

to help companies budget

better.

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The right services partner can deliver digital transformation services that enable compa-

nies to become digital organizations quickly while minimizing security and business risks.

Section IV: Cisco Is the Right Services Partner for the Digital Era

Cisco is best known as a provider of IT infrastructure. However, it also has a strong services

business that is currently used by more than 75% of the Fortune 100, and the vendor has

more than 12,000 expert engineers, architects and advisors with over 87,000 collective hours

of experience. Its services organization operates in more than 180 countries and has 170 labs

across every region of the globe.

Cisco utilizes automation across its portfolio of services and currently performs more than

16,000 system checks to quickly diagnose, resolve and preempt problems. The vendor has

won 30 TSIA STAR Awards from 2011 to 2016 and has 10 consecutive years of J.D. Power certi-

fication for excellence in customer service.

Recently, Cisco evolved its services to meet the ZK Research definition of digital transfor-

mation services with the introduction of its Business Critical Services and High-value Services.

Cisco Business Critical Services

Business Critical Services are built on Cisco’s network optimization services but now

focus on the transformation of business operations by delivering even more capabilities in an-

Cisco currently performs

more than

16,000 system checks to quickly

diagnose, resolve and

preempt problems.

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alytics, automation, compliance and security. The services provide baseline deliverables and

customizable capabilities to accomplish the following:

> Deliver near–real-time analytics and continuous visibility

> Speed case submission from hours to minutes without human intervention

> Quickly test and deploy features to IT environments with new automation capabilities

> Automate compliance and remediation for recommended software and configuration

upgrades

> Drive fast emergency response during a breach as well as proactive defense

Cisco segmented the Business Critical Services deliverables into the following three

themes:

> Foundation services deliver innovative capabilities to help strengthen the founda-

tion, increase availability and securely stabilize the network. Key components include

the following:

>> Foundational Analytics

>> Compliance and Remediation

>> Threat Mitigation

>> Reliability Engineering

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> Acceleration services provide core capabilities to help speed up the business by

ensuring the infrastructure designs are compliant and ready for the future. Key compo-

nents include the following:

>> Design Engineering

>> Application Support

>> Security Protection

>> Orchestration and Automation

> Transformation services ensure the architecture aligns to meet short- and long-term

goals so customers can be ready to change the way they do business. Critical capabili-

ties include the following:

>> Adoption Strategy

>> Transformation Engineering

Business Critical Services are focused on more than just Cisco technology and are mul-

tivendor in nature. They can be used by companies of all sizes to augment their current IT staff

and fill in the talent gaps.

Business Critical Services can

be used by companies of

ALL SIZES

to augment their current IT

staff and fill in the talent gaps.

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Cisco High-value Services

High-value Services focus on the technical challenges associated with running infrastruc-

ture. These services build on Cisco’s industry-leading product-support services and add addi-

tional analytics, automation, expertise and scale. They deliver more proactive and prescriptive

services options at the software, solution and network levels to accomplish the following:

> Improving efficiency via better decision making through analytics, best practices and

tailored guidance

> Assuring business continuity by maximizing uptime with proactive support and faster

issue resolution

> Unlocking IT value through expertise to close the talent gap, improve technology

adoption and more effectively use technology solutions

The High-value Services portfolio includes the following offers:

> Software Support maximizes uptime and helps users integrate new technologies to

ensure they are taking full advantage of software capabilities. Key components include

the following:

>> Designated experts for case and change management

>> Software consumption analysis to drive greater technology adoption

>> Workflow integration, proactive notifications, onboarding and training

High-value Services

FOCUS

on the technical challenges

associated with running

infrastructure.

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> Solution Support delivers centralized support across Cisco solution ecosystems. Cus-

tomers have access to a team of Cisco engineers who are experts in specific solutions

and are the primary point of contact. Key components include the following:

>> Accountability for case management and resolution, no matter where it

resides

>> Onboarding sessions to accelerate adoption of this service and new

technologies

>> An average of 43% faster issue resolution versus product support alone

> Technical Services (TS) Advantage improves customer network management to

increase operational efficiency and minimize disruption. Tiered offerings are built to

support operational outcomes. Critical capabilities include the following:

>> Customer benchmarking, which includes peer-to-peer key performance

metrics to ID differentiators and areas to drive operational improvements

>> KPI scorecard, which tracks performance trends by time period

>> Service-level agreements (SLAs) for response and restoration times to

help maximize uptime

> Service Provider (SP) Advantage helps service providers extract more value from

Technical Services (TS)

Advantage improves customer

network management to

INCREASEoperation efficiency and

minimize disruption.

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their voice and data networks, lower costs, and drive simplicity and profitability.

Critical capabilities include the following:

>> Designated and dedicated experts who provide problem resolution and

incident review

>> Actionable analytics, customer benchmarking and KPIs to improve

efficiency

>> SLAs for response and restoration times to help maximize uptime

> Managed Services provide Cisco-led proactive monitoring, management and optimi-

zation of IT infrastructures and processes for the customer network, collaboration, data

center and security operations. Key components include the following:

>> Dedicated expert technical staff that supports multivendor technologies

>> Predictive network analysis, remote monitoring and automated incident

detection

>> Technical adoption, onboarding and high SLAs/service-level objectives

(SLOs)

These Cisco services cover every element of Cisco’s broad portfolio including collabora-

tion, data center, Internet of Things, networking, service provider and security.

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One unique feature of the High-value Services is that Cisco offers benchmarking where

the digital solutions can be compared to those of peer organizations. This capability can be

used to facilitate continuous improvement and enable better business decisions and compet-

itive differentiation.

Cisco’s Business Critical Services and High-value Services are available directly from Cisco

or through one of its many channel partners.

Section V: Conclusion and Recommendations

The digital business era has arrived, and it has forced organizations to be more agile and

adapt to market changes quickly. Those that become dynamic organizations capable of rec-

ognizing industry transitions and moving faster than the competition will be able to sustain

market leadership. Those that cannot will struggle to survive, and many will likely be acquired

by stronger companies or even go out of business.

Making the shift to a digital organization certainly requires a change in company culture, as

digital initiatives need the support of corporate leaders, line-of-business managers and the IT

organization. However, many companies risk failing with respect to digital transformation—not

because of a lack of will, but more because of a lack of IT agility, a shortage of IT skills, security con-

cerns and other issues that can be hard to overcome without the assistance of a services partner.

The best way to address the barriers to digitization is to use digital transformation ser-

THOSE that become dynamic

organizations capable of

recognizing industry

transitions and moving faster

than the competition will be

able to sustain market

leadership.

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vices. These services are composed of business outcome services and digital technical services

that together close the skills gap most organizations are experiencing today, enabling them

to rapidly become digital companies. Businesses that choose to leverage digital transforma-

tion services will realize several business and technical benefits (Exhibit 4).

The adoption of digital transformation services should be a top priority for IT and business lead-

ers. To help companies with this transition, ZK Research makes the following recommendations:

> Make digital transformation a top priority. Change is difficult, particularly for com-

panies that have had a high level of success. However, change is happening faster than

TransformThrough

Innovation

IncreaseROI

IncreaseSecurity

MitigateRisk

CloseTalent

Gap

LowerComplexity

Source: ZK Research, 2017

Exhibit 4: Digital Transformation Services Offer Many Benefits

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ever, and it’s critical that all organizations embrace the concept of digital transforma-

tion, challenge the status quo and change faster than their competition.

> Augment current skills with digital transformation services. No organization can

acquire the skills necessary to become a digital business overnight. Digital transfor-

mation services can be used to augment the current skill set so the shift can be made

quickly, securely and with minimal risk.

> Strive for constant improvement. As the organization implements digital initiatives,

it’s important to develop benchmarks, conduct periodic measurements and strive for

constant improvement. If the company does not have the skills to tackle these tasks,

leverage a digital transformation services partner, such as Cisco, to accomplish them.

Learn more about Cisco Services.

© 2017 ZK Research: A Division of Kerravala ConsultingAll rights reserved. Reproduction or redistribution in any form without the express prior permission of ZK Research is expressly prohibited.

For questions, comments or further information, email zeus@zkresearch.com.