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Magic Quadrant for Desktop Outsourcing, Europe |
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This Magic Quadrant examines the abilities of 14 companies to provide desktop outsourcing services in Europe, and their vision for these services. Use it when evaluating service providers.
Market Definition/Description
Europe: Countries and Subregions
In this Magic Quadrant, Gartner defines Europe as the combination of Eastern and Western Europe.
Western Europe includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the U.K.
Eastern Europe includes Albania, Bosnia and Herzegovina, Bulgaria, the Czech Republic, Croatia, Estonia, Hungary, Latvia, Lithuania, Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey and Ukraine.
We subdivide Western Europe into the following subregions:
- Northwest: Ireland and the U.K.
- Northeast: Denmark, Finland, Norway and Sweden
- Central West: Belgium, France and the Netherlands
- Central East: Austria, Germany and Switzerland
- South: Greece, Italy, Portugal and Spain
IT Outsourcing
IT outsourcing encompasses product support and professional services that provide the IT infrastructure and enterprise application services needed to help ensure the success of a client's mission. Outsourcing always includes some IT management services, and is further segmented into data center, desktop, network and enterprise application outsourcing.
Desktop Outsourcing
Desktop outsourcing services include services related to desktop computers, servers, underlying network infrastructure, processes and the organization.
They generally include:
- Asset procurement and financial management
- Desktop services backup and recovery processes
- First-level application support services
- Hardware break/fix
- Hardware standards establishment
- Hosted virtual desktop services (HVDS)
- Installations, moves, adds and changes, and disposal services
- IT asset inventory maintenance and process controls
- LAN/WAN support services (where applicable)
- Managed mobile device services
- On-site hardware support services
- Print and output management
- Patch fixes, updates and management
- Remote server support services (for example, for file and print, email and terminal servers)
- "Shrink-wrapped" software support services
Magic Quadrant
Figure 1. Magic Quadrant for Desktop Outsourcing, Europe
Source: Gartner (September 2012)
Vendor Strengths and Cautions
Atos
Atos Origin's acquisition of Siemens IT Solutions and Services (SIS), finalized in July 2011, made it the second-largest European-headquartered provider of IT services. Atos, the brand resulting from the acquisition, is estimated to have 420 desktop outsourcing clients in Europe, from which it generates about $1 billion (€830 million) in revenue. Atos aims to become a worldwide cloud-based business technology service provider, an objective reflected in its Adaptive Workplace service portfolio that has two focus areas: a core workplace offering, and cloud-based workplace services based on virtualization technology and reflecting a commercial and cultural shift in the market toward user-centric business services.
Strengths
- Desktop outsourcing is central to Atos's outsourcing portfolio. Its desktop outsourcing portfolio (Adaptive Workplace services), following the acquisition of SIS, is based on Atos's so-called smart profiling methodology, which focuses on mapping end-user demand to appropriate solutions. Atos has a broad footprint in Europe, where it manages 1.5 million end users. It recently announced the acquisition of blueKiwi, a social network platform provider, which strengthens its user-centric capabilities and accords with its "zero email" initiative, expected to start by the end of 2014.
- After acquiring SIS, Atos invested in standardizing its desktop outsourcing portfolio, as half of its large deals involve end-user device services. In 2011, Atos invested in its Adaptive Workplace Anytime offering, an evolution of its "Atos in a box" desktop offering, which is now ready for large enterprises. Atos's strong focus on virtual desktop solutions has led to a high adoption rate for these services among its clients. Atos also manages a low-five-digit number of productive bring-your-own-device (BYOD) desktops – which is more than its competitors manage.
- Clients praise Atos for its quality of service, based on a solid global delivery model, and its ability to access the wider company's resources for desktop outsourcing services. In addition, a few clients recognize Atos as offering good value for money.
Cautions
- Although the integration of SIS seems so far to have proceeded without major disruption to Atos's clients, it remains a work in progress, especially in terms of back-end delivery, where tools, processes and technologies have yet to be fully harmonized. Atos needs to manage this situation carefully, to avoid impairing customer satisfaction, which, according to Atos's internal measurements, fell slightly from 2010 to 2011.
- Following the acquisition of SIS, the vast majority of the deals Atos pursues are small or of medium size. So far, Atos's post-merger revenue has been merely stable, so it must continue to pursue bigger opportunities in order to restart growth in its desktop outsourcing business. Many deals involving transfers of assets and people add complexity where consolidation and rationalization initiatives are the focus – another issue that Atos needs to tackle carefully.
- Clients want Atos to be more proactive, not just in terms of innovation, but also of driving industrialization into their environments. Atos could also improve its process efficiency, especially for on-site processes.
Capgemini
Capgemini, a $10.5 billion IT services provider, achieved moderate organic growth in 2011, which it supplemented with acquisitions in Brazil (CPM Braxis) and France (Prosodie). In Europe, Capgemini generated over $60 million in desktop outsourcing revenue from around 80 clients, which it serves with about 730 desktop outsourcing staff. Capgemini's desktop outsourcing portfolio is structured around services for workplace strategy, design and transformation, and focused on enhancing the end-user experience by using an optimized platform including the cloud.
Strengths
- By winning new clients and achieving strong results in terms of incorporating Windows 7 migration services into its managed services, Capgemini's desktop outsourcing business grew by more than 10% in 2011. The company's focus on creating standardized desktop solutions is sound and linked to its global portfolio management process (solution design) and industrialized global delivery centers/factories (solution delivery). Capgemini's push for industrialization is also underpinned by the launch (in 1H12) of a strategic partnership with BMC Software to offer Remedy OnDemand, a highly standardized end-to-end ITIL-based services platform.
- Capgemini continues to invest in its desktop outsourcing services. In 2011, this resulted in initiatives such as its virtual office concept, automation of discovery, packaging, testing and remediation, a managed mobility solution and the improvement of its desktop life cycle management solution. Capgemini maintains a high percentage of managed virtual desktops, mostly from some of its leading U.K. deals.
- Clients praise Capgemini for its knowledge, experience and understanding of their environments. They also express high satisfaction with Capgemini's processes, such as those for support management, resource management and overall remote support.
Cautions
- Capgemini's European footprint remains strong in certain markets, such as the U.K., France and the Benelux countries, but there are gaps in other key countries. To generate the potential for continuous growth by competing more efficiently for large pan-European or global opportunities, Capgemini needs to improve its capabilities and visibility outside its strongholds. A speedier and wider rollout of offerings such as its virtual office (currently available in the Netherlands) would help it penetrate countries where it is less strong.
- Capgemini recognizes a junction between traditional workplace services and new requirements such as mobile Web applications. It has therefore started its journey toward making industrialized infrastructure as a service an enabler of innovation in the end-user experience. Nevertheless, Capgemini has been a conservative outsourcer and would benefit from accelerating the rollout of its investments to close the gap with major competitors.
- Clients report that Capgemini needs to improve its documentation for deals and the speed of its processes – coordination between Capgemini departments can take a long time, for example, as can getting an engineer on-site. Sometimes this mars clients' perception of Capgemini's otherwise good service.
Computacenter
Computacenter, a $4.4 billion IT provider headquartered in the U.K., reported healthy growth of 6.6% in 2011. Its managed services business contributes roughly 22% to its overall numbers. Germany and the U.K. are its strongest countries. It serves around 320 desktop outsourcing customers with its 5,000 staff. It is focusing its desktop outsourcing services on end-to-end services and positioning itself as an alternative to traditional large outsourcers for desktop outsourcing.
Strengths
- Computacenter grew its desktop outsourcing business by over 10% in 2011 by winning new customers and upgrading existing clients from a reseller/maintenance relationship to a desktop outsourcing service relationship. Computacenter's revenue comes mainly from Germany, the U.K., France and Belgium, and it maintains a large network of partners to deliver to the wider European market.
- Desktop outsourcing is a key focus area for Computacenter. In 2011, it invested in an automation approach called Synergy, a cloud-based managed workplace offering, and a scheduling and parts management toolset based on SAP technology. Computacenter's pragmatic, flexible and role-based Dynamic Workplace strategy makes it one of the few providers also to address the larger midsize businesses (those with around 1,000 users), which form an important part of the market in Europe.
- Clients praise Computacenter for the quality and extent of its standard processes (such as for remote delivery) and the seniority of its core team. They also appreciate its partnership attitude, which they generally perceive as client-oriented, flexible and agile.
Cautions
- To pay off, the company's investments in Computacenter cloud computing (C3) require much higher adoption of virtualized desktop service portfolios by its clients. Computacenter's partnerships with key technology suppliers might help achieve this in 2012 and 2013, but it still needs to invest in enhancing its brand and visibility.
- Although Computacenter won large deals in 2011 and maintains a healthy pipeline for large opportunities, its coverage of Europe remains patchy, and we don't see it competing systematically for pan-European deals. To balance its growth with smaller deals, which are likely to be required as it moves more determinedly into selling highly standardized and industrialized services, Computacenter should optimize its pricing and cost structure, potentially by relying more on offshore delivery possibilities.
- Clients want Computacenter to apply its generally agile approach to service enhancements and make its knowledge available more consistently in international deals. Clients are also starting to perceive that Computacenter's standardization of services is reducing its traditional strengths, such as flexibility and customization, and would prefer to see increases in options and flexibility.
CSC
CSC is a U.S.-headquartered IT services provider with $6.5 billion in global managed service revenue. It is a major player in the European desktop outsourcing market. Although CSC's portfolio and location profile are not uniform across Europe, it does have over 130 clients, which it serves with over 1,500 desktop outsourcing staff. CSC finds itself facing an uncertain market evolution in a weakened financial state and with a new CEO, but it is showing a strong focus on its desktop service strategy to enable end users to be efficient parts of virtualized enterprises by employing hybrid service models across traditional IT and cloud-based services.
Strengths
- CSC maintains a solid vision of the desktop outsourcing market and is undertaking a rapid rollout of its innovative and industrialized desktop outsourcing portfolio, which includes SmartWorkPlace assessment services, a role-based approach with five user styles. CSC's investment in virtualized desktop solutions has expanded to include the VMware Series. This aligns with its BizCloud initiative, traditional self-help automation and social collaboration-based self-help to reduce cost of support.
- CSC is ready to handle staff transfers in Europe in the large majority of its deals, and it has a clear preference for the largest and most complex deals. Potential clients should bear this in mind when looking to protect the jobs of their employees, although in the long run this may increase the cost of desktop outsourcing services.
- Clients praise CSC for its operational and contractual stability. They consider its remote support processes and desktop solutions robust and that they adhere closely to SLAs. They also highlight CSC's appropriate mix of on-site and remote staff for desktop outsourcing.
Cautions
- CSC remains strong in a few European markets but, despite improvements, still lacks the penetration of the larger Leaders. This could impair its ability to compete for the midsize end-to-end desktop outsourcing opportunities that are increasingly available. In particular, CSC needs to maintain a focus on midsize pan-European deals, especially as competitors are becoming more powerful through mergers and acquisitions in Europe's consolidating market.
- CSC's new CEO needs to define the company's growth direction in terms of geographies, vertical markets, service lines, and potential partnerships, mergers and acquisitions. To improve profitability, he might need to rethink CSC's approach to desktop outsourcing, as this is often an area of lower profitability. From a European perspective, CSC is expected to evolve quickly from a traditional outsourcer for large clients into a provider of an integrated collection of industrialized service capabilities, and to develop strong credibility as a service integrator and cloud broker for the value-added services needed to mitigate revenue cannibalization by low-cost services.
- Clients remark that CSC should reduce its bureaucracy, which reportedly slows project work. CSC could also be more proactive in introducing new technology and helping to reduce overall costs.
Dell
Dell is a $61.5 billion provider of hardware, software and IT services for consumer and business markets. Consumers' business represents roughly 20% of Dell's revenue, while services represent 12%. After declining in 2010, Dell's service business reported overall double-digit growth (16%) and a slight rise in margin (1%) in 2011. Dell supported around 300,000 end users in Europe in 2011, with around 540 desktop outsourcing staff. Its desktop outsourcing focus is on delivering efficient service solutions that provide long-term value to clients.
Strengths
- Desktop outsourcing services are strategic to Dell as a key part of its global infrastructure business and $1 billion investment in cloud computing. In 2011, Dell enhanced its service portfolio with extended desktop-as-a-service and desktop management capabilities for its vCloud Service. After integrating Perot Systems in 2011, Dell worked on integrating other acquisitions, such as SecureWorks and SonicWALL, which offered security and data protection technologies. It has also recently announced that it will acquire Wyse Technology, a company with virtualization and thin-client technologies. This acquisition strategy increases Dell's capabilities and credibility in Europe, although Perot's penetration was quite limited in this region.
- Dell's approach to desktop virtualization solutions is sound: it takes a tiered approach aimed at meeting the maturity and potential compliance requirements of individual clients. Consulting services are offered to scope deals and clarify clients' questions about costs and benefits. Large enterprises can purchase on-premises infrastructure, or can have Dell host and fully manage the solution. Smaller organizations can benefit from using Dell's shared cloud capabilities in a cost-efficient, self-managed way.
- Clients welcome Dell's flexible approach to IT services and the standardization of its support processes for hardware (for example, its break/fix support and provisioning processes and other processes designed to help clients in a rapidly changing environment). They also appreciate Dell's expertise and quality of resources.
Cautions
- Dell's marketing and communication effort is starting to change its image from a hardware manufacturer that also offers break/fix services to a service provider that is expanding its global capabilities (including support for multiple vendors' hardware). But although Dell's overall services business grew during 2011, its desktop outsourcing business in Europe declined slightly, which indicates that its European capabilities remain weaker than those in North America. Part of the European decline might be due to price erosion and the loss of some deals, but Dell also seems to lack the sales and marketing capabilities to deliver help desk and desktop outsourcing growth in Europe.
- Dell risks missing a window of opportunity in Europe as other large vendors are apparently reducing their focus on the desktop outsourcing market. Its traction in the virtual desktop technology business is less than the market average and weakened further in 2011. Dell recently announced a desktop-as-a-service cloud offering for midsize companies, but it is late with this in comparison with its competitors – it should therefore roll out this service determinedly now. Dell also seems not to be ready with a desktop-as-a-service cloud offering for midsize companies, a group that ought to be ideal for Dell's strategy and that it should pursue aggressively. The availability of new industrialized service offerings (Dell Simplified Service Desk and End User Managed Services), announced for Europe (the U.K., France and Germany) in mid-2012, is expected to reverse Dell's 2011 decline in European revenue.
- Clients indicate that Dell would benefit from improving its management of the third-party providers that contribute to its services. It also ought to improve its proactive communications with clients regarding internal changes, as some of them have experienced disruption. Nevertheless, Dell generally addresses the resulting challenges quickly.
Fujitsu
Fujitsu is a global IT services provider with global outsourcing revenue in 2011 of about $11 billion (Gartner's estimate). In Europe, Fujitsu generates over $650 million in desktop outsourcing revenue from around 1,100 clients, making this its strongest region after Japan. Fujitsu's strategy for desktop outsourcing services has a theme of flexibility, and it is moving away from its "one size fits all" approach to a role-based approach.
Strengths
- Fujitsu continues to invest in industrializing its desktop outsourcing portfolio by offering a "blended" service that reflects the diversity of business demands and by focusing on role-based desktop services. Furthermore, Fujitsu's desktop outsourcing investment includes a focus on Managed Mobile solutions, which encompasses all services associated with the Fujitsu Global Cloud Platform, the company's delivery platform for HVDS and cloud unified communications services.
- Fujitsu maintains an above-average share of managed virtual desktops in its installed base (with a pipeline of 1.5 million Virtual Client Services [VCS, a subset of HVDS] users on a Citrix stack) and continuously supports its virtualization agenda. In 2011 it acquired UniCon Software and the productive BYOD environments it manages.
- Clients praise Fujitsu for its approach to continuous improvement and for the high quality of services that results from having excellent technical skills. They also appreciate its broad portfolio of IT services and flexibility to adapt to new business challenges.
Cautions
- In 2011, Fujitsu's desktop outsourcing revenue fell slightly, mainly due to the loss of a major client in the U.K. As it strives to recover, Fujitsu needs to manage a complex set of individual customized engagements and shift them to a more standardized and industrialized model on the Triole platform, without reducing customer satisfaction. At the same time, it must take account of the increasing complexity, and the growing need for customization, associated with consumerization and BYOD trends.
- Fujitsu's low level of global profitability is likely to hinder its ability to reduce prices and compete in a commoditizing and hypercompetitive market, unless its new approach to virtualized desktop solutions (VCS) starts to reduce the total cost of ownership for clients and gains momentum. Growth will also require increased sales and marketing ability to generate business in noncore geographies and from differentiated targets such as large and midsize multinational and local clients.
- Clients would like Fujitsu to be more proactive and communicative about its desktop outsourcing innovations. It could also improve its industry and business awareness, willingness to take risks, focus on smaller, recurring problems and value-for-money ratio.
Getronics/GWA
Getronics is an information and communication technology (ICT) services company with direct presence in seven European countries. It covers another 20 countries in Europe, Asia/Pacific and Latin America through a mixture of direct sales (India, Malaysia, Singapore and South Korea) and, more often, indirect presence via the Getronics Workspace Alliance (GWA). In May 2011, amid a long series of dismissals of country operations, KPN announced the rebranding of Getronics as KPN Netherlands, with a more direct focus on becoming a leading business and ICT player in the Benelux countries. But in 2012, KPN sold Getronics International (which had operations in Europe, Asia/Pacific and Latin America) in two separate transactions: the Latin American business went to OpenGate Capital, while the European and Asia/Pacific divisions went to Aurelius, an industrial holding with a long-term investment horizon. Aurelius plans to merge its Getronics business with its earlier and smaller acquisition of connectis in Spain and Switzerland.
Strengths
- Getronics/GWA has strong expertise in the management of distributed desktop outsourcing engagements and their evolution. Its role-based approach to desktop outsourcing includes traditional services and cloud services, with a focus on emerging needs such as mobility and social networks. The recent acquisition by Aurelius, whose strategy focuses on investing in new solutions in selected industries (business services, industrial goods and consumer goods), positions Getronics for growth.
- Getronics/GWA has a sound, practical understanding of the evolving local and global needs of end users. It can use the support and investment of Aurelius to craft and deliver innovative desktop solutions underpinned by standard tools and processes that the nine GWA partners can easily adopt and deliver.
- Clients praise Getronics/GWA for its speed in responding to issues and requests, and for its general knowledge of the desktop outsourcing area. Some clients appreciate that Getronics meets their geographic requirements and that its approach to moving them into a standardized world is based on solid, standard processes for desktop outsourcing.
Cautions
- Getronics' strong focus on desktop outsourcing services for global organizations was diluted by a chain of dismissals while the core of the company was first absorbed and then spun off by KPN. Following a considerable amount of change, and considerable confusion among existing and potential clients, Aurelius looks to be the final opportunity to rescue this provider and give a long-term perspective to the GWA.
- Limited growth in the European market will have little overall impact on Getronics' organic growth, now that all international operations are handled through the GWA. The announced Getronics Innovation Model, which expects local operating companies to develop help desk and desktop offerings that Getronics can use through the GWA channel, is unlikely to generate tangible and repeatable benefits in the absence of continued investments by Getronics in service innovation. At present, most of Getronics' investment is still in areas such as customer satisfaction tracking and global delivery processes.
- Clients report that Getronics/GWA would benefit from more consistent availability of resources for out-of-hours work and work outside Getronics's core countries, which is often managed by third-party companies. Other areas that could be improved are the level of proactiveness and innovation regarding incident prevention, deal documentation and the first-call-resolution rate.
HCL Technologies
HCL is the only India-headquartered organization in this Magic Quadrant. It ended 2011 with $3.9 billion in revenue (up 26%), of which 27% came from Europe. HCL's worldwide infrastructure services business represents around 24% of its global total, and relies on about 5,000 employees to deliver end-user computing services to roughly 120 customers. In Europe, HCL generated approximately $100 million in revenue from desktop outsourcing in 2011, a year in which it had over 2,200 employees serving more than 40 clients.
Strengths
- For HCL, 2011 was another year of significant growth in its desktop services business. By attracting new customers and cross-selling to existing clients, it approached the $100 million mark. This confirms the validity of its approach to the European market, especially with regard to its core markets of the U.K., Germany and the Nordic countries. HCL has desktop outsourcing contracts with well-known brands and a solid network of partners for delivery.
- HCL understands well the main desktop outsourcing trends in terms of end-user demands and technology advancements. In 2011, it focused its investments on developing offerings such as its integration brokerage portal, MyCloud, which offers one management solution for all the cloud services that an organization purchases, as well as its virtual desktop services and mobile device management services.
- Clients praise HCL for its global reach, depth of knowledge and technical skills in desktop outsourcing. They also appreciate how it manages its subcontractors, the overall stability of its desktop services and its value-for-money ratio.
Cautions
- Although HCL is on course to take a strong position as a desktop outsourcing provider in Europe, it must extend its footprint and increase its marketing muscle in this region, as it still has to overcome cultural barriers in certain locations. HCL would benefit from investing further in sales and marketing capabilities and pursuing business in central and southern Europe more decisively. Its new approach to business marketing could help by increasing its visibility for large pan-European deals, consolidating momentum and supporting growth.
- Increases in scale and geographical diversity will strain HCL's ability to meet customers' requirements for industrialized/cloud desktop services delivered mainly in a private, unshared model. As well as improving the low rate of adoption of virtual desktops by its clients, HCL will need to increase its investment in industrialized workplace services, examples of which are Scale Services 2.0, an application packaging and compatibility factory, and three levels of user profiling.
- Clients would like HCL to reduce its layers of subcontracting in Europe for some countries and to increase its ability to manage staff attrition and people-related changes. Large projects, especially those reliant on subcontractors or hardware manufacturers, require much better coordination.
HP
HP is a $127.2 billion provider of hardware, software and IT services for consumer and business markets. HP's services business represented 28% of its global revenue in 2011, a year in which it reported challenges in terms of growth (up just 1%) and margin (down 1.6 percentage points). The desktop outsourcing business is a key component of HP's $15.2 billion in IT outsourcing revenue, and it draws on significant capabilities to serve 5.5 million or more end users and 2.5 million mobile devices globally. HP focuses on delivering highly standardized and industrialized desktop services.
Strengths
- HP has a clear vision of the trends shaping the market and directs its desktop outsourcing investment toward key themes such as IT service industrialization and aspects like messaging, collaboration and unified communications. A focus on standardization and industrialization is evident in the WorkPlace360 Services element of its desktop service portfolio, now globally available, which is offered on an "as a service" basis and complemented by virtual access options.
- HP has a comprehensive portfolio of infrastructure services and a strong footprint as a desktop outsourcing provider in Europe. It can draw on a large number of desktop technology and service staff with deep and broad expertise, and it maintains a large network of technology and delivery partners to complement its own capabilities. This makes HP a solid option for clients with broad European or global needs and wide IT infrastructure requirements.
- Clients praise HP for its quality improvement initiatives and highly standardized desktop outsourcing process. They also appreciate HP's knowledge of their business and flexible approach to management in light of changing business requirements.
Cautions
- In 2011, HP supported end users on a global basis but suffered a slight fall in client numbers. This was reflected in Europe, where HP's growth in desktop outsourcing remains under pressure and appears affected by a lack of clarity about the strategic direction of the company's enterprise services in the desktop outsourcing sector. HP is missing an opportunity to innovate here. It also needs to define more clearly the value of its services in relation to their price.
- Given HP's high level of investment in cloud computing across its IT services portfolio, adoption of its desktop cloud services (including virtualized solutions) could be higher. Also, HP should communicate more clearly its strategy for consumerization and mobility to explain how it addresses trends such as BYOD and approaches to mobility that rely on other vendors' devices.
- Clients think HP should improve its agility, resource management and ability to manage diverse environments. They also consider that HP's support model sometimes struggles to deal with countries and individual deals for which the numbers of desktops to be managed are very low.
IBM
Approximately 40% of IBM's $40.9 billion Global Technology Services revenue comes from outsourcing service arrangements. IBM supports almost 1 million users with its desktop outsourcing services in Europe. It maintains a comprehensive IT services portfolio that addresses the major end-user trends in relation to mobility and cloud services. IBM's status as a very large incumbent in a hypercompetitive market offers both opportunities and challenges, and the company is carefully evolving its services to address both.
Strengths
- IBM remains a strong outsourcing provider for end-user devices in Europe, with pervasive penetration, consolidated partnerships with field-service companies, strong technical skills and a broadening portfolio of IT services. IBM reported growth of over 10% in the number of devices it managed in Europe in 2011, but IBM's overall growth in outsourcing revenue was limited to a single-digit percentage. This indicates that most of IBM's unit growth stems from the appeal of its traditional desktop devices, but the recent acquisition of Worklight will provide a basis for mobile application management services.
- IBM continues to invest in its desktop outsourcing business with a focus on automation that encompasses a low-touch provisioning architecture to enhance its Smart Business Desktop Cloud services, automated service requests and "shift left" solutions. IBM's standardization of IT service components, continuous investment in global delivery infrastructure and related low-cost staffing are the main reasons why it is seeing improvement in its margin efficiency.
- Clients praise IBM for its global reach, deep technological skills and knowledge of their business. They especially appreciate the consistency of IBM's desktop outsourcing approach across Europe and its tools and capabilities for managing desktop hardware and software.
Cautions
- In terms of numbers of managed desktop users, IBM is only No. 6 in this European market, and its focus on this area has weakened over the years, perhaps due to the commoditization of services and the strong pressure to keep prices low. IBM's service industrialization strategy is delivering results as measured by efficiency indexes and number of SLAs achieved. At the same time, a lack of process flexibility, a perception among customers that its contracts are rigid, and an approach still designed for large clients and global deals are limiting IBM's outsourcing penetration of the small and midsize business sector. IBM needs to apply some of the best practices it follows in Eastern Europe to the Nordic region and Central Europe, as it has a better win rate in Eastern Europe than in Western Europe.
- IBM has the potential to use its well-defined processes and many internal metrics, which include data from diverse customer satisfaction measurement tools, to find areas for improvement in its services. But to boost adoption of its portfolio of industrialized desktop services, IBM needs to increase its direct dialogue with clients about the quality and value of its services, as buyers have diverse opinions. This would also aid IBM's efforts to ensure its internal measurement system keeps up with evolving business requirements.
- Clients want IBM to deliver more consistent quality across Europe, reduce the frequency of subcontractor changes and increase its standardization. Some think IBM should see SLAs more as bases for service improvement than as contractually agreed performance targets.
Logica
Logica is a $6.3 billion, U.K.-headquartered service provider. It is mostly active in Europe but also expanding in South America. Its overall outsourcing business grew by 23% in orders and 9% in revenue in 2011. Logica's slower growth in infrastructure outsourcing (1% for orders and 4% for revenue) shows that it needs to make some bold moves to stay competitive in a fast-changing market. The company's broad presence across Europe, end-to-end capabilities, restructuring charges and shrinking profit margin made it a candidate for acquisition in a consolidating and hypercompetitive market, and led to the recent announcement of its pending acquisition by CGI.
Strengths
- Logica maintains a pervasive pan-European presence and can support both local and pan-European requirements with a broad portfolio of services. It balances a focus on proactive solutions such as its self-service portal with an interest in client intimacy, and it has the potential to elevate the service desk's role to include multiple levels (infrastructure management, application management and BPO) and to extend to the sourcing integration role.
- Logica's strong focus in 2011 on investments in service excellence should start delivering results in the upcoming months. Help desk services are strategic to Logica, as shown by its investments in a global IT service management framework, a help desk technology back-end and a self-service portfolio (service portal, virtual hosted desktop service, personalized user environment and automated service provision).
- Clients praise Logica's ability to manage a high degree of hardware and software diversity. They also appreciate its deep and broad technical skills, local support capabilities and understanding of their business and industry.
Cautions
- Despite registering growth in managed calls and having staff in many European countries, Logica's percentage of offshore desktop support staff is small compared with its competitors. Also, despite investing in self-service capabilities that could mitigate this disadvantage, its ability to compete on price or improve margin may be limited in the midterm.
- Logica's investment plans for industrialization (increased automation and standardization), globalization (a single global delivery organization), restructuring and development are sound, but being implemented too slowly. Logica must quickly adopt a more global perspective and execute in a timely manner to achieve the productivity improvements it needs to handle a tough economic scenario, while minimizing disruption in order to avoid impairing clients' satisfaction.
- Clients want Logica to be more flexible and to take a more proactive approach to change and the replacement of support products. They also observe that Logica sometimes struggles to support small sites in remote locations.
SCC
Since its foundation in 1975, U.K.-headquartered SCC has grown both organically and through acquisitions in nearby European countries into a $4.2 billion value-added reseller and service provider. Its IT services business generates approximately $500 million a year, of which roughly 20% derives from desktop outsourcing and help desk services. Recent investments in U.K. data center capabilities and participation in the G-Cloud purchasing framework for the government sector show how SCC is increasing the industrialization of its service portfolio.
Strengths
- SCC's desktop outsourcing portfolio takes an end-to-end approach, linking vendors' logistics capabilities and extending its services within a data center virtual desktop infrastructure (VDI) that includes file, print, collaboration and help desk services. SCC positions itself as independent and customer-driven, and focuses on midsize businesses with requirements in European countries where it has a presence. After enhancing its managed print services through an acquisition in 2010, SCC is expanding into more cloud-based services (HVDS and G-Cloud) and working to develop more industrialized offerings to win smaller deals. SCC has a standard desktop offering with standard SLAs and a "cost plus" pricing model based on each client's situation and requirements.
- SCC focuses on maintaining a low level of subcontractor dependency and serves clients directly in its key countries. In addition, it uses a network of partners for hardware supply and to supplement or deliver field services in other areas. SCC also works as a subcontractor for larger vendors, system integrators and outsourcers for product support and desktop services. It has alliances with Microsoft and Citrix to develop software asset management, VDI and Windows 7 migration solutions that support both corporate IT and client devices.
- U.K.-based clients praise SCC for its ability to deliver services beyond the U.K. and its flexibility to adapt to changing client environments. Clients appreciate the quality and agility of SCC's reactive desktop outsourcing services.
Cautions
- Despite a strong presence in the U.K. and France, and a smaller presence in the Netherlands, Belgium, Italy and Spain, SCC's penetration of the European market has room for improvement. The company's low-cost delivery center strategy is limited to Romania and, compared with the approaches of other competitors, might not be enough to succeed at a time when customers want to reduce their infrastructure costs drastically and the focus of competition is shifting from low labor costs to industrialized low-cost services.
- SCC's flexible business model is under pressure as some deals require more customization and adaptation to clients' processes (often those involving midsize and large clients and subcontracted services), while many others require more industrialization (often those involving small and midsize clients, cloud delivery and low-cost services). SCC's strategic decision to address both industrialization and consumerization forces it to continue to align its service portfolio with the differing behavior of multiple clients. This will stress the company's investment and delivery capabilities, and might impair its win rate and operational margin.
- Clients want SCC to expand the scope of its service offering and take a more proactive approach to innovation in the area of desktop outsourcing. They would also like it to respond faster to RFPs, improve the communication skills of its on-site service engineers and address these engineers' occasionally perceived complacency.
T-Systems
T-Systems, which is fully owned by Deutsche Telekom, reported revenue of $5.5 billion from IT outsourcing services in 2011, of which 60% came from Germany. Its desktop outsourcing revenue has declined slightly during the past two years, as growth in its number of clients and managed devices did not fully compensate for the price decline in this market. Desktop outsourcing services represent a significant share of T-Systems' IT services revenue. Its complete IT services portfolio is following a strong industrialization path, and, as a telco, the company aims to integrate IT and telco services into end-to-end desktop and mobile services.
Strengths
- T-Systems is a strong desktop outsourcing provider with a large installed base in Germany and in Europe's automotive and telco sectors. The company's renewed desktop outsourcing strategy, with its strong focus on mobile device management, is sound. T-Systems can use its experience with industrialized services – dynamic services for SAP, for example – to help it make similar progress with its portfolio of industrialized desktop services. It should support this effort by adding network services to its standard virtual desktop services as a differentiator.
- Desktop outsourcing is a core element of T-Systems' ICT service portfolio. In 2011, the company focused its investments on strengthening the basics by introducing a standardized role model and extending its offering to small and midsize environments. It also invested in its portfolio of virtual desktop infrastructure services and strengthened its mobile device management capabilities by buying a share of VeliQ, a company focused on technologies for mobile device management.
- Clients praise T-Systems for its customer-friendly attitude, knowledge of their business and flexibility to adapt to their changing requirements. They also appreciate its high level of technical knowledge in the desktop outsourcing arena and its number of reference cases.
Cautions
- T-Systems' strong road map for cloud services has yet to translate into a high adoption rate for its virtual desktop services – it is currently below the market average – or better financial results. However, its focus on, and pilots of, BYOD services for desktops and mobile phones might improve matters. This could enable T-Systems to offer desktop outsourcing customers more flexibility at lower cost, as is necessary in the current economic climate.
- T-Systems' European presence is widening, but its German business remains by far the strongest (so much so that it is approaching the point at which we would not consider T-Systems a pan-European provider of desktop outsourcing services). In terms of T-Systems' number of desktop delivery staff, Germany is closely followed by Spain, which proves that the company sees nearshoring as a strong supporting element for the optimization of desktop outsourcing costs. To be consistently included on shortlists for pan-European desktop outsourcing deals, T-Systems needs to continue to expand its European and wider international footprint.
- Clients observe that T-Systems would benefit from being more proactive in accelerating the introduction of new technologies. They would also like to see better communications across all deal layers and less rigid SLAs.
Unisys
Unisys is a $3.85 billion, U.S.-headquartered IT provider that reported slight worldwide growth in 2011 (1%) and higher growth in Europe (estimated at 12%). Its overall IT services business grew by 3% and, within that, its IT outsourcing business by 9%. In Europe, Unisys supports over 650,000 end users with more than 900 desktop services staff. It is focusing its desktop outsourcing efforts on selling single-tower, end-to-end services to large multinational organizations, and taking a broader and more selective outsourcing approach to midsize organizations.
Strengths
- Unisys's financial challenges seem to be behind it, now that it has increased its profit to $206 million and reduced its debt by $464 million. In 2011 it increased both its help desk revenue and its desktop outsourcing revenue in Europe. Its go-to-market strategy focused on midsize and large multinationals has won it several new blue-chip clients in Europe, where it manages more (albeit smaller) desktop outsourcing clients than in North America.
- Desktop outsourcing is a significant part of Unisys's infrastructure services portfolio. Its MyWork Services portfolio is underpinned by a visionary shift toward end users, which offers them access to an integrated set of managed services that extends to data-center-based cloud services. Unisys's investments include virtual desktop, BYOD and mobility services, updated nearshore and offshore service factories, Windows 7 optimization services, and a new support program for user-centric computing to improve these services.
- Clients appreciate Unisys's approach to incident management in terms of response speed and availability. They also highlight its integration capabilities for help desk and desktop outsourcing, ability to manage SLAs and strong desktop outsourcing teams.
Cautions
- Unisys's tactical and pragmatic approach places it in a middleman position – it serves as a service provider to midsize and large multinationals, and as a subcontractor to its larger competitors. This raises a question mark about its long-term strategy, which should be based on growing its industrialized services business for midsize and large multinational clients and trying to overtake its competitors, especially when windows of opportunity open – for example, some of the larger outsourcers seem to have reduced their interest in serving desktops and delivering low-cost service desks.
- Although Unisys's reshaping of its portfolio is a positive step, and although its pipeline of desktop outsourcing opportunities looks promising, the company has yet to gain enough traction in cloud-based desktop services and virtualized and mobile solutions. Like other competitors, it is focusing on key themes that drive the desktop outsourcing industry, but the resulting changes and growth appear to be late in coming. Reasons for this include the still high number of traditional desktop services that Unisys delivers as a subcontractor to other vendors, and Unisys's penetration of the European market, which lags behind its competitors'.
- Clients think Unisys would benefit from a tighter link between its desktop outsourcing delivery operations and its other service areas. They also point to other things that Unisys could improve, such as its approach to innovation (it should be more proactive) and the high level of internal bureaucracy that they consider they have to contend with.
Vendors Added or Dropped
We review and adjust our inclusion criteria for Magic Quadrants and MarketScopes as markets change. As a result of these adjustments, the mix of vendors in any Magic Quadrant or MarketScope may change over time. A vendor's appearance in a Magic Quadrant or MarketScope one year and not the next does not necessarily indicate that we have changed our opinion of that vendor. It may be a reflection of a change in the market and, therefore, of changed evaluation criteria, or a change of focus by that vendor.
Added
Atos, the result of the merger of Atos Origin and Siemens IT Solutions and Services in July 2011, has been added to the Magic Quadrant.
Dropped
As noted above, Atos Origin and Siemens IT Solutions and Services merged in July 2011, and the resulting entity appears on the Magic Quadrant as Atos.
Inclusion and Exclusion Criteria
We asked each service provider included in this Magic Quadrant to declare that it satisfies certain criteria.
Each service provider had to:
- Demonstrate that it provides desktop outsourcing services as a core business offering, with limited subcontracting. In other words, each provider needed to use internal resources (not subcontracted resources) to deliver at least 50% of its desktop services.
- Deliver desktop outsourcing services to clients based in at least three of the European regions listed in the Market Definition/Description.
- Show that it did not generate more than 70% of its total European desktop outsourcing revenue from clients based in a single country.
- Generate at least 10% of its total European desktop outsourcing revenue in at least three European countries, each of which are in different regions. For example, a provider generating 65% of its desktop outsourcing revenue in Germany, 18% in the U.K. and 12% in Spain qualified for this study.
- Generate at least €30 million in annual desktop outsourcing revenue in Europe.
Evaluation Criteria
Ability to Execute
Gartner evaluated these providers on the quality and efficacy of the processes, systems, methods and procedures that enabled each provider's performance to be competitive and effective, while positively affecting revenue, retention and reputation. We also judged providers on their ability and success in capitalizing on their vision, as well as their European resources and coverage and seamless delivery in different countries to meet clients' requirements.
In addition, we factored feedback from client interviews into this evaluation.
Product/Service
This category, which we weighted as "standard," evaluated each provider's service delivery capabilities and the services it offers. We gave special consideration to service definition and service capabilities, effective resourcing and transaction management.
The subcategories for our study were:
- Overall Western European desktop outsourcing revenue, client numbers and number of staff allocated
- Desktop outsourcing delivery capabilities, sites, countries, languages and technologies
- Number of end users, devices, applications and users supported
- Management team and position in the corporate structure (we required providers to supply an organization chart)
- Core and ancillary IT outsourcing services
- Standard desktop outsourcing services – packages with standard service levels that providers can offer and sell to many clients
- Procedures for managing SLAs, such as penalties and incentives tied to SLAs, as well as other contract requirements that influence a service provider's behavior
- Resource and transition management, with a focus on the provider's ability to offer relevant resources for customers
Overall Viability
This category, which we weighted as "high," assessed the overall financial health of each service provider, the financial success of desktop outsourcing operations and the likelihood that an individual desktop outsourcing business unit will continue to invest to support state-of-the-art delivery within the organization's portfolio of products.
We also considered the growth of volumes/units and revenue in each service provider's desktop outsourcing segment during the past three years, and the outlook for this segment of each provider's business. In particular, we evaluated whether revenue and margins were likely to grow, decline or remain stable.
Sales Execution/Pricing
This category, which we weighted as "high," evaluated each provider's capabilities in all presales activities and the structure that supports them. In particular, we considered the team in charge of deal management, pricing and clarity of scope.
We assessed two subcategories in this section: contract/deal structure and pricing. In the contract/deal structure subcategory, we assessed the management of various contracts, and how the relationship is structured to meet the needs of both parties. For the pricing subcategory, we evaluated each provider's ability to manage prices and reduce costs (through new offerings, improved productivity, management tools, higher quality, resource allocation and staff reductions).
We also asked clients for feedback from a negotiation and pricing perspective.
Market Responsiveness and Track Record
This category, which we weighted as "standard," assessed providers' ability to respond and change direction, and their flexibility to achieve competitive success as opportunities develop, competitors act, customers' needs evolve and market dynamics change.
We considered how providers detect and react to global or local market changes and how much negotiating power is local, rather than centralized, in Europe or elsewhere. We evaluated how the providers measure the effectiveness of their sales and business development teams and how many desktop outsourcing RFPs or deal requests they had received during the previous 12 months in Europe.
Innovation for clients and the ability of the provider to meet clients' needs were important criteria in this section. We asked for examples of innovation that providers had brought to client engagements or to the market. We also asked clients for their feedback about each provider's flexibility and innovation.
Marketing Execution
This category, which we weighted as "low," assessed the clarity, quality, creativity and efficacy of programs designed to deliver providers' messages and influence the market, promote the brand and the business, and increase awareness of services. These programs also aim to create a positive association with services and brands in the minds of buyers.
We considered how providers evaluate and measure "mind share" – consumer awareness or popularity – for desktop outsourcing services in Europe, and how they increase their mind share through publicity, promotions, thought leadership, word of mouth and sales activities.
Customer Experience
For this category, which we weighted as "high," we asked each provider for five European references for desktop outsourcing services. We expected the references to follow the geographic distribution that was required to participate in the study and the different industries addressed. We also asked about customer satisfaction, the degree of automation and industrialization, and any other relevant changes during the past 12 months. We factored in overall customer satisfaction with the service and the relationship, based on the references and other Gartner client
interactions.
We also considered the important elements that create a successful customer experience, and how service providers manage and measure these elements for each account. We assessed continuous improvement processes, both centrally and in the account management team.
Operations
This category, which we weighted as "high," assessed each provider's ability to meet its financial and operational goals and commitments, while satisfying contractual obligations for service delivery to clients. Factors include the quality of the organizational structure, skills, experiences, programs, systems and other areas, such as human capital management plans, that enable the organization to operate effectively and efficiently on an ongoing basis.
We also considered formal communication processes, quality control and quality assurance processes, customer satisfaction measurements, service-level results, problems and incidents, and continuous improvement procedures. Providers were asked to describe relationship roles, contract management, and service delivery management for day-to-day deliveries, methodologies, and the operational and tools expertise they offer customers.
We evaluated the principal platforms, technologies, architectures and applications that each provider can manage in desktop outsourcing engagements and how each provider drives and executes consolidation and standardization decisions. We asked how many desktop outsourcing delivery entities are dedicated to clients, rather than open to all clients. We also assessed providers' global delivery models.
Table 1. Ability to Execute Evaluation Criteria
| Evaluation Criteria |
Weighting |
| Product/Service |
high |
| Overall Viability (Business Unit, Financial, Strategy, Organization) |
high |
| Sales Execution/Pricing |
high |
| Market Responsiveness and Track Record |
standard |
| Marketing Execution |
low |
| Customer Experience |
high |
| Operations |
high |
| Geographic Strategy |
standard |
| Source: Gartner (September 2012) |
Completeness of Vision
Gartner evaluates service providers on their ability to articulate logical statements about their current and future market direction, innovation, customer needs and competitive forces. We also assess how well each provider's vision matches Gartner's. Ultimately, the Magic Quadrant rates providers on how well they understand the market forces that they could exploit to create opportunities.
Market Understanding
This category, which we weighted as "high," assessed each provider's strategic plan and vision as they relate to the desktop outsourcing service market in Europe and the provider's commitment to align its services with future market needs. We evaluated how each provider is addressing the main requirements of its European clients and how it differentiates its strategic vision from those of its competitors.
We also considered each provider's ability to demonstrate a well-defined and articulated vision that helps clients link desktop outsourcing services to their business and technology strategies.
Marketing Strategy
This category, which we weighted as "low," looked at each provider's main strategy and approach to marketing IT desktop outsourcing services in Europe.
We considered the current and future value proposition for desktop outsourcing services and the importance of these services in each provider's broader IT services portfolio. We assessed each provider's go-to-market strategy, including its ability to articulate its value proposition and differentiate its services.
Sales Strategy
This category, which we weighted "standard," asked each provider to illustrate its overall sales strategy and its ability to sell desktop outsourcing services.
We considered each provider's methods of measuring sales effectiveness and its organizational setup in support of sales and marketing strategy.
Offering (Product) Strategy
For this category, which we weighted as "high," we asked each provider to specify the most important aspects of the service offering that differentiates it and offers value to clients.
We considered the practice area and evaluated its relative size, revenue, number of supported users and devices, geographic reach, management team and that team's position in the corporate structure. We also assessed each provider's operational/tool expertise.
Business Model
For this category, which we weighted as "high," we asked each provider for a high-level description of its business model for desktop outsourcing services and how this fits into its overall business model. We considered each provider's ability to address and satisfy two competing requirements: methodologies and management acumen.
For methodologies, we evaluated offerings based on their comparability to industry standards, such as ITIL. We also looked at how the methodologies that providers use are linked to or embedded in larger methodologies. We reviewed procedures provided to customers – for example, operational, transitional, program management, relationship management and change management procedures. We also assessed the effectiveness of each provider's sourcing management processes and the quality assurance methods it uses.
To assess management acumen, we looked into the management structure and experience of management personnel. We evaluated each provider's plans, people and focus on ensuring that deals meet clients' needs. We also asked clients whether they had access to the appropriate level of management to evaluate the experiences and skill levels of executive managers.
Vertical/Industry Strategy
This category, which we weighted as "low," assessed each provider's strategy to direct resources, skills and offerings to meet the specific needs of individual market segments, including industries.
We considered each provider's penetration of different industries for desktop outsourcing services, and ability to demonstrate expertise in vertical markets and business processes underpinned by desktop outsourcing services.
Innovation
This category, which we weighted as "high," evaluated each provider's position in the market as a thought leader and an innovator. We also evaluated each provider's leadership and investment to achieve its vision and develop innovative strategies in the desktop outsourcing market.
We considered each service provider's answers to these questions:
- What investment is your company making to sustain and enhance its vision for innovative desktop outsourcing services?
- How do you offer innovation to your established and new customers?
- How are you using cloud computing and HVDS to create new offerings and value propositions?
- What innovative solution have you provided to customers during the past 12 months in this area?
- What global alliances do you have with other leading suppliers (with proven investments)?
- Do you offer highly standardized services (utility-based offerings), processes and SLAs, utility pricing units, reduced baselines and increased flexibility?
We asked reference clients to determine how they judged their provider's ability to innovate, including technical aspects, proactive approaches, adaptability, service flexibility and ability to lower costs and improve service.
Geographic Strategy
This category, which we weighted as "standard," looked at each provider's regional capabilities, global consolidation processes, local alliances and partnerships, including the following criteria:
- Strategy to target different European markets with the appropriate resources, skills and offerings to meet specific client needs.
- Infrastructure consolidation processes and how these are affecting the market.
- Relationships with product and service providers that add value and provide full service solutions, or that make innovation more likely for clients.
- Ability and tendency to take responsibility for managing the service delivered, even when using subcontractors or partners.
We asked clients for their feedback on local capabilities as well as the current and potential effects of consolidation and global delivery processes.
Table 2. Completeness of Vision Evaluation Criteria
| Evaluation Criteria |
Weighting |
| Market Understanding |
high |
| Marketing Strategy |
low |
| Sales Strategy |
standard |
| Offering (Product) Strategy |
high |
| Business Model |
high |
| Vertical/Industry Strategy |
low |
| Innovation |
high |
| Geographic Strategy |
standard |
| Source: Gartner (September 2012) |
Quadrant Descriptions
Leaders
Leaders perform skillfully. They have a clear vision of the market's direction and are developing competencies to maintain their leadership. They shape, rather than follow, the market.
The Leaders are (in alphabetical order):
Challengers
Challengers execute well, but have a less well-defined view of the market's direction. They need to be more aggressive in outlining and communicating their strategies for the future to move into the Leaders quadrant.
The Challengers are (in alphabetical order):
Visionaries
Visionaries have a clear vision of the market's direction and focus on providing services to meet future needs. They need to improve their ability to deliver and penetrate the European market.
There are no companies in the Visionaries quadrant.
Niche Players
Niche Players focus successfully on a particular service or a limited number of European markets, or both. This can suggest a high degree of focus and even innovation, but it may also affect their ability to reach a broader base of clients.
The Niche Players are (in alphabetical order):
- Capgemini
- Computacenter
- Dell
- Getronics/GWA
- HCL Technologies
- SCC
Context
During the second quarter of 2012, Gartner interviewed the 14 service providers that qualified for inclusion in this Magic Quadrant and 64 client organizations to gain their input for this research. We asked the providers mainly to reflect on 2011, a year when the desktop outsourcing market in Europe was almost flat in terms of growth. This flatness resulted mainly from another year of falling prices as the number of supported desktops grew by 6% and the number of supported end users by 8%. The participating providers represented $5.4 billion, which equates to 42% of the total forecast for the desktop outsourcing market in Europe in 2012. As in 2010, some strong providers grew their businesses by double-digit percentages, while others experienced declines in growth.
Buyers can choose from a solid number of desktop outsourcing solutions, delivered traditionally or "as a service." In general, the growth of interest in desktop outsourcing services fueled by the recent economic crisis has declined slightly.
In a stalled market – one with little or no growth in revenue or delivery volume – it is important for buyers get a clear view of service providers, their vision (including service road maps), strategies, strengths and weaknesses, and overall stability. Although the concept of desktop outsourcing is mature, the market for these services has become hypercompetitive and will remain so for the next few years.
Gartner's Magic Quadrant research process includes evaluation criteria that together provide a comprehensive framework with which we analyzed the Ability to Execute and Completeness of Vision of 14 providers of desktop outsourcing services in Europe.
Market Overview
In Europe, desktop outsourcing is generally a mature sourcing option, though some of its newer elements, such as virtual desktop and mobility services, are less mature. It has a stable set of vendors, stable and standardized offerings, and predictable prices.
Most client organizations in this market are generally satisfied with the services they receive. The average satisfaction score of Gartner clients and service providers' reference customers (established during the reference-checking phase of our research for this Magic Quadrant) rose from 69.1% in 2010 to 72.3% in 2011, but with individual scores ranging widely from 43% to 90%. The average has not changed much for the past couple of years, so 70% seems to be the generally accepted level of customer satisfaction for the prices organizations are willing to pay for desktop outsourcing services.
The desktop outsourcing market continues to change as service providers invest in automation and virtual desktop offerings. Pressure for providers to offer cost-efficient solutions remains high, and many of their investments have been to improve in this area by supporting both price competitiveness and margin. This has included increasing their ability to shift tasks to remote locations by delivering desktop outsourcing services from nearshore and offshore sites. Providers have also increased the industrialization of their service delivery and desktop outsourcing offerings.
Providers investing in desktop outsourcing in 2011 focused on five key demand themes:
- Demand for higher service efficiency: From interviews with the reference clients, we learned that 2011 was another year of negotiations for cost reductions of, on average, 11%. Reductions of this size could not come from service providers' margins, but essentially required services that cost providers less money and that they could deliver more efficiently. In many situations, providers increased their percentage of offshore staff; in others, the level of automation. In the outsourcing world, we see two areas of automation activity. The first, and by far the larger, is provisioning. From moving orders and approvals through the system to rollouts of Windows 7, service providers have invested in minimizing human intervention in these activities. The second area, which is embryonic, is ticket resolution. Having machines take decisions instead of engineers requires more than a few scripts – it needs artificial intelligence. Providers made a start on this in 2011 and the next few years will bring many new solutions.
- Demand for BYOD support and more service flexibility: In the world of desktop services "flexibility" means the freedom to choose from a wide range of mobile devices (phones and media tablets) and notebook PCs. What are usually referred to as user-owned device or BYOD models allow users to bring their own equipment into corporate environments for use in productive work. Although there has been talk about these models for almost two years, and interest in them has steadily increased, adoption remains limited. Adoption is hindered by mostly non-technical issues such as a lack of commercial models, an absence of workers' council arrangements and taxation issues in some countries. We were able to collect many pilot examples, but only a handful of environments that were productive (the smallest with 50 users, the largest with 14,000). The BYOD adoption rate is higher for mobile devices than for notebook PCs.
- Demand for more mobility and related support: With the growing use of tablets and the increasing capabilities of smartphones, end users are demanding more services from their IT services providers. Connectivity to corporate environments is a must, but security is not yet a given. All service providers that participated in this Magic Quadrant invested in broadening their mobile service portfolios in 2011 to increase their support capabilities and automate some tasks. This trend will strengthen as the push toward more capable and comfortable end-user devices continues. The IT consumerization trend is pressing for more mobile applications, and this will ultimately increase the pressure from end users for more mobility services.
- Demand for a higher degree of standardization: Standard services are part of most desktop outsourcing service offerings. Buyers realize that most of these services are good enough and that they provide good quality for a good price. They want to be able to purchase services that can quickly adapt to business changes in terms of their ability to scale up and down. In 2011, the most important aspect was the cost benefit that more industrialized services bring. Already, 80% of the desktop outsourcing contracts in Europe have agreed variability – on average, 31%. This is of major importance given that most equipment is still owned by client organizations or service providers, and that used equipment cannot easily be transferred to different users or organizations (attempts to do so usually provoke highly emotional debate). With the growth of user-owned devices and the BYOD concept, the average variability percentage is likely to increase.
- Demand for better services: As mentioned above, customer satisfaction has been quite stable for the past two to three years. This is surprising as service providers are constantly investing in improvements to service consistency, tools for automation and virtualization, touch-free desktop services and service stability in order to deliver higher quality and more efficiency. So what offsets the service improvements? End users are constantly demanding more services and different services, the pressure to reduce the cost of desktop services remains high, and end users' expectations for desktop services are increasing.
In 2011, the 14 IT service providers featured in this Magic Quadrant generated combined revenue of almost $5.5 billion in desktop outsourcing services in Europe (roughly 40% of the world total). These providers supported almost 16 million desktop users and delivered almost 10.5 million installs, moves, adds and changes, spanning all European countries.
On average, the desktop service providers in this Magic Quadrant each generate approximately $390 million from this line of service. The providers vary significantly in size, staff numbers, client numbers and geographical coverage. In addition, the size of their clients varies significantly, from a minimum of 390 users per average client to a maximum of 12,000 users per average client.
The providers' approaches to desktop outsourcing also differ. For example, virtual desktops (thin clients and hosted virtual desktops) account for 3% to 20% of these providers' installed base of desktops (the average was 10%, which was much the same as in 2010, which shows that adoption of VDI is not increasing quickly). Gartner expects these figures to increase in the near future as organizations continue to adopt virtualized desktop products in Europe.
Buyers may find other viable providers that are not evaluated in this Magic Quadrant. Providers that did not meet Gartner's qualitative and quantitative criteria, and were therefore excluded from this Magic Quadrant, include Atea, Sopra Group, Wincor Nixdorf and Steria, as well as offshore providers such as Tata Consultancy Services, Infosys and Wipro.
Evaluation Criteria Definitions
Ability to Execute
Product/Service: Core goods and services offered by the vendor that compete in/serve the defined market. This includes current product/service capabilities, quality, feature sets and skills, whether offered natively or through OEM agreements/partnerships as defined in the market definition and detailed in the subcriteria.
Overall Viability (Business Unit, Financial, Strategy, Organization): Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood that the individual business unit will continue investing in the product, will continue offering the product and will advance the state of the art within the organization's portfolio of products.
Sales Execution/Pricing: The vendor's capabilities in all pre-sales activities and the structure that supports them. This includes deal management, pricing and negotiation, pre-sales support and the overall effectiveness of the sales channel.
Market Responsiveness and Track Record: Ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, customer needs evolve and market dynamics change. This criterion also considers the vendor's history of responsiveness.
Marketing Execution: The clarity, quality, creativity and efficacy of programs designed to deliver the organization's message to influence the market, promote the brand and business, increase awareness of the products, and establish a positive identification with the product/brand and organization in the minds of buyers. This "mind share" can be driven by a combination of publicity, promotional initiatives, thought leadership, word-of-mouth and sales activities.
Customer Experience: Relationships, products and services/programs that enable clients to be successful with the products evaluated. Specifically, this includes the ways customers receive technical support or account support. This can also include ancillary tools, customer support programs (and the quality thereof), availability of user groups, service-level agreements and so on.
Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure, including skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis.
Completeness of Vision
Market Understanding: Ability of the vendor to understand buyers' wants and needs and to translate those into products and services. Vendors that show the highest degree of vision listen to and understand buyers' wants and needs, and can shape or enhance those with their added vision.
Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and externalized through the website, advertising, customer programs and positioning statements.
Sales Strategy: The strategy for selling products that uses the appropriate network of direct and indirect sales, marketing, service and communication affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the customer base.
Offering (Product) Strategy: The vendor's approach to product development and delivery that emphasizes differentiation, functionality, methodology and feature sets as they map to current and future requirements.
Business Model: The soundness and logic of the vendor's underlying business proposition.
Vertical/Industry Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of individual market segments, including vertical markets.
Innovation: Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation, defensive or pre-emptive purposes.
Geographic Strategy: The vendor's strategy to direct resources, skills and offerings to meet the specific needs of geographies outside the "home" or native geography, either directly or through partners, channels and subsidiaries as appropriate for that geography and market.
Source: Gartner Research G00232526, F. Ridder, C. Da Rold, G.a Tramacere, 10 September 2012
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