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<?xml version="1.0" encoding="utf-8"?><rss xmlns:a10="http://www.w3.org/2005/Atom" version="2.0"><channel><title>ISG RSS feed</title><link>https://isg-one.com/</link><description /><category>ISG Index Insider</category><category>Third-Party Risk Management</category><category>ISG Governx</category><category>Sourcing</category><category>Supplier & Contract Management</category><category>Manufacturing</category><category>Banking & Financial Services</category><category>Future of Work</category><category>Digital Engineering</category><category>Artificial Intelligence</category><category>Network Advisory & Select</category><category>Media, Technology and Communications</category><category>Retail</category><category>Consumer Packaged Goods</category><category>UK</category><category>Smart Industry</category><category>Aerospace and Defense</category><category>Emerging Technology</category><category>Metaverse</category><a10:link rel="self" type="application/rss+xml" href="https://isg-one.com/feeds/isg-rss-feed" /><item><guid isPermaLink="false">urn:uuid:4b7bc195-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/index-insider--transformation--cost-optimization-making-deals-longer</link><a10:author><a10:name> </a10:name></a10:author><category>ISG Index Insider</category><title>Index Insider: Transformation, Cost Optimization Making Deals Longer</title><description>Deals durations are up across the industry as technology and operating model transformation drive more complexity into managed services awards.</description><pubDate>Fri, 22 Nov 2024 18:09:34 Z</pubDate><a10:content type="text">Hello. This is Stanton Jones and Sunder Sarangan with what&rsquo;s important in the IT and business services industry this week. If you&rsquo;d like to read this on the web,&nbsp;<a title="View as Web Page" target="_blank" href="https://info.isg-one.com/index.php/email/emailWebview?mkt_tok=MjU3LVNUQi0zNzkAAAGW9AIckwtBA8yURELGYJ-kUiXKI1z4RS2n7ZewpvurvgB6R6S5CmKxHsbFF93355ASrNFHqo56a8q41YiJlYZKXjHXoA">click here</a>.&nbsp;If someone forwarded you this briefing, consider subscribing&nbsp;<a title="https://isg-one.com/isg-index-insider" target="_blank" href="https://isg-one.com/isg-index-insider?utm_source=marketo&amp;utm_medium=isg_insider&amp;utm_campaign=isginsider174">here</a>.&nbsp;<h2>Deal Durations</h2>Deal durations are up across the industry as technology and operating model transformation drive more complexity into managed services awards. Data Watch<img alt="Cost Optimization Transformation Are Making Deals Longer Chart" src="https://info.isg-one.com/rs/257-STB-379/images/Cost-Optimization-Transformation-Are-Making-Deals-Longer-Chart-4.png?version=0" />Background Cost optimization continues to be the primary driver for global outsourcing activity. That activity was quite robust in Q3, with a record $10.9 billion in annual contract value. That said, savings generated by cost optimization-focused agreements are not from process improvements and labor arbitrage alone. They are increasingly also coming from transformation. For example, moving from a waterfall, on-premises infrastructure model to a modern DevOps, cloud-based model can significantly reduce the costs of operating the environment. This means that enterprises are relying on their managed services providers to make big changes to their environment. And not just to the underlying technology, but to the operating model as well. These are enterprise-wide changes that often have very complex scopes and transitions. The result of this is a boom in large-deal activity that often has&nbsp;<a href="https://isg-one.com/articles/index-insider--will-the-bundled-deal-boom-continue?utm_source=marketo&amp;utm_medium=isg_insider&amp;utm_campaign=isginsider174" target="_blank" title="link to article">multiple towers in scope</a>. All of these factors together are why deals are getting longer across the IT and business services industry (see Data Chart). It also represents a change from what we have seen over the last five to 10 years when deals were getting shorter. The Details<ul><li>On average, managed services contracts are 20% longer in 2024 than they were in 2023.</li><li>Awards with $100 million of ACV or more are 40% longer in 2024 than they were in 2023.</li></ul>What&rsquo;s Next While we don&rsquo;t believe deal durations will lengthen much more in 2025, we do believe enterprises will continue to focus on cost optimization. Enterprises that are in their second-, third- or even fourth-generation sourcing agreements have, for the most part, already used all the levers a provider can pull to reduce costs: labor arbitrage, process improvements, workflow, automation, etc. The way firms will get to savings in 2025 will be through technology modernization, which usually means transformation. We expect to continue to see longer awards, especially larger, longer awards, as enterprises bank on fast-track transformation programs to drive year-over-year savings that they can then redeploy into &ndash; you guessed it &ndash; AI.</a10:content></item><item><guid isPermaLink="false">urn:uuid:f174c195-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/the-new-urgency-of-supply-chain--resilience</link><a10:author><a10:name> </a10:name></a10:author><category>Third-Party Risk Management</category><category>ISG Governx</category><category>Sourcing</category><title>The New Urgency of Supply Chain Resilience</title><description>The multitude of foreseeable and unforeseeable events require attention, and – depending on your enterprise supply chain strategy – plans for both mitigation in the short term and prevention in the long term.</description><pubDate>Wed, 20 Nov 2024 13:28:24 Z</pubDate><a10:content type="text">We know supply chains and global business are vulnerable to world events. IT outages, cybersecurity incidents, economic volatility, disrupted transport routes, geopolitical tensions and conflicts have significant and often lasting impacts. The multitude of foreseeable and unforeseeable events require attention, and &ndash; depending on your <a href="https://isg-one.com/advisory/supplier-contract-management">enterprise supply chain strategy</a> &ndash; plans for both mitigation in the short term and prevention in the long term. At the same time, regulations around the world are constantly adding complexity to supply chain management. Organizations need to invest considerable time and effort into understanding requirements and how different laws and standards across the globe overlap. How can organizations brace themselves for the growing tide of challenges to their supply chains? Of course, technology can and should be a critical part of the solution. But disruptive technologies in particular, which are most promising in helping to reduce complexity and effort, can pose risks of their own. The key to any leadership team tasked with enhancing supply chain resilience is careful evaluation, thoughtful orchestration and speedy decision-making.<h2>What Do We Mean by Supply Chain Resilience? </h2>Resilience in this context is an enterprise&acute;s ability to identify, respond to and successfully overcome adverse events and crises impacting the supply chain. In principle, enterprise challenges are similar across industries, therefore the approach to tackle them can be based on the same principles. To be resilient is to understand and effectively manage the <a href="https://isg-one.com/platforms/isg-governx/isg-governx-capabilities/isg-governx---third-party-risk-management">risks to your supply chain and supplier ecosystem</a>, including ensuring adequate resources and being prepared to execute appropriate measures. The first step is to structure and segment the supply chain to identify and fully understand the risks posed. This requires bringing together many and varied sources of information &ndash; and constantly monitoring them. Figure 1 illustrates how complex it can be to capture all relevant sources of information at the same time.<img src="https://isg-one.com/images/default-source/default-album/understanding-all-the-risks-to-your-supply-chain-requires-a-comprehensive-look-at-all-sources-of-information.png?sfvrsn=5430ab31_2" alt="Understanding All the Risks to Your Supply Chain Requires a Comprehensive Look at all Sources of Information" />Figure 1: Understanding All the Risks to Your Supply Chain Requires a Comprehensive Look at all Sources of Information<h2>5 Core Steps to Increase Resilience in Your Supply Chain</h2>Building resilience is an ongoing exercise with a moving target. The following five steps serve as a starting point.<ol><li>Design a clear resilience strategy: begin by evaluating your business objectives and translating them into operational requirements for the supply chain. The strategy will provide guardrails for decision-making and resource allocation, for protective measures as well as agile and adequate responses. Be sure to clearly define objectives and priorities for supply chain management. Create decision guidelines that ensure transparency, consistency, speed and effectiveness. Sound decision-making can be an enterprises&rsquo; resilience secret weapon.</li><li>Understand the risk portfolio: create a detailed view of the different types of risks from all angles and requirements across relevant corporate functions and map them to the end-to-end supply chain as well as to the suppliers that would be impacted by or be the cause of such risks. &nbsp;</li><li>Define who does what: clearly identify the processes, roles, responsibilities and accountabilities for different risks. Hold stakeholders &ndash; both internal and external &ndash; accountable by managing their performance and risks.</li><li>Establish controls: Build, assess and regularly review a <a href="https://isg-one.com/platforms/isg-governx/isg-governx-capabilities/isg-governx---third-party-risk-management">third-party risk framework</a> with performance indicators to enable (automated) identification and reporting of risks. Build and maintain holistic supplier risk profiles and compliance requirements. Be sure to integrate them into sourcing, risk monitoring, mitigation and prevention activities.</li><li>Leverage technology: define, capture, synchronize, evaluate and leverage required data &ndash; from internal sources, suppliers and other external sources &ndash; and connect stakeholders in automated workflows to facilitate fact-based evaluation and response to risks.</li></ol>To achieve these five action steps, organizations need a structured approach that spans multiple enterprise functions, data sources and business processes. It&rsquo;s important to involve relevant stakeholders so they can provide insights, accept accountability and become an integrated part of the ongoing risk management mechanics &ndash; and to move quickly to minimize risk exposure. The result should be a comprehensive risk framework that integrates the above components into a continuously managed supply chain resilience strategy.</a10:content></item><item><guid isPermaLink="false">urn:uuid:486bc195-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/index-insider--how-provider-ecosystems-will-evolve-in-2025</link><a10:author><a10:name> </a10:name></a10:author><category>ISG Index Insider</category><title>Index Insider: How Provider Ecosystems Will Evolve in 2025</title><description>IT spending patterns are evolving in 2025. Our latest study highlights opportunities for providers to benefit from their incumbency with their existing clients and use specialized capabilities to engage with new clients.</description><pubDate>Fri, 15 Nov 2024 13:01:55 Z</pubDate><a10:content type="text">Hello. This is Michael Dornan with what&rsquo;s important in the IT and business services industry this week. If you&rsquo;d like to read this on the web,&nbsp;<a href="https://info.isg-one.com/index.php/email/emailWebview?mkt_tok=MjU3LVNUQi0zNzkAAAGWzt2l8KpbqPyJQw7xbHsAdOhYdj4IbAdZhQXJ5K2zHwu2i4M77pveRWi14M5Rwja4ax3so1_xJEAGK7SMED3A03WLGQ" target="_blank" title="View as Web Page">click here</a>.&nbsp;If someone forwarded you this briefing, consider subscribing&nbsp;<a href="https://isg-one.com/isg-index-insider?utm_source=marketo&amp;utm_medium=isg_insider&amp;utm_campaign=isginsider174" target="_blank" title="https://isg-one.com/isg-index-insider">here</a>.&nbsp;<h2>Provider Ecosystems</h2>IT spending patterns are evolving in 2025. Our latest study highlights opportunities for providers to benefit from their incumbency with their existing clients and use specialized capabilities to engage with new clients. Data Watch<img src="https://info.isg-one.com/rs/257-STB-379/images/How-Industries-Will-Change-Their-Sourcing-Behavior-In-2025.png" alt="How Industries Will Change Their Sourcing Behavior in 2025" />BackgroundOur 2025 IT budgets and spending study shows that enterprises are continuing to focus on cost optimization and efficiency programs to fund transformation and customer experience&nbsp;<a title="Link to article" target="_blank" href="https://isg-one.com/articles/index-insider-enterprises-to-nearly-double-ai-spend-in-2024?utm_source=marketo&amp;utm_medium=isg_insider&amp;utm_campaign=isginsider174">enabled by AI</a>. This will impact how they manage their provider ecosystem and&nbsp;<a title="link to article" target="_blank" href="https://isg-one.com/articles/index-insider-adm-buyers-want-more-expertise-from-providers?utm_source=marketo&amp;utm_medium=isg_insider&amp;utm_campaign=isginsider174">how they source the skills</a>&nbsp;they need for these new investments.The Details<ul><li>For most enterprises, the overall number of providers engaged will stay the same, with more provider consolidation than expansion.</li><li>Over one-third of organizations we talked to expect to expand engagement with their largest provider.</li><li>Around half the enterprises expect to engage with new providers for niche projects or related skills and capabilities.</li></ul>What's NextWe see two major vectors of opportunity for service providers in 2025:<ul><li>As strategic partners for transformation work across multiple towers that can add further streams of work, especially where a good business case exists (e.g., around cost optimization).</li><li>As sources of innovation around niche capabilities, for example in relation to the&nbsp;<a title="link to article" target="_blank" href="https://isg-one.com/articles/index-insider--move-fast-and-make-things--why-businesses-are-leveraging-msps-for-genai?utm_source=marketo&amp;utm_medium=isg_insider&amp;utm_campaign=isginsider174">burgeoning number of AI use cases</a>.</li></ul>The number of providers in a typical enterprise ecosystem that is neither strategic nor niche will likely shrink next year. Providers caught between these extremes have two clear options to ensure they are not squeezed out:<ul><li>Focus on strengthening their incumbency and strategic relevance with each client by&nbsp;<a title="link to article" target="_blank" href="https://isg-one.com/articles/index-insider--will-the-bundled-deal-boom-continue?utm_source=marketo&amp;utm_medium=isg_insider&amp;utm_campaign=isginsider174">shaping opportunities</a>&nbsp;around business imperatives such as cost optimization and digital transformation.</li><li>Focus on niche capabilities that will differentiate them and increase their relevance to clients.</li></ul>We&rsquo;ll be diving into more detail from this study at our&nbsp;<a title="Link to event website" target="_blank" href="https://sicuk.isg-one.com/2024/?code=MK1111">UK Sourcing Industry Conference</a>&nbsp;next week in London. We hope you can join us.</a10:content></item><item><guid isPermaLink="false">urn:uuid:456ac195-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/divestiture--serious-considerations-for-it-separation</link><a10:author><a10:name> </a10:name></a10:author><category>ISG Governx</category><category>Supplier & Contract Management</category><title>Divestiture: Serious Considerations for IT Separation</title><description>In a divestiture, it’s after the signing of the separation agreement that the real work for the IT organization begins.</description><pubDate>Thu, 14 Nov 2024 18:02:36 Z</pubDate><a10:content type="text">In a divestiture, it&rsquo;s after the signing of the separation agreement that the real work for the IT organization begins. Separation, in whatever form it takes &ndash; spin off, split off, sell off or carve out &ndash; requires a complex set of activities to officially separate services and contracts, replicate systems, transfer and transition application portfolios and stand up new infrastructure environments and teams. All this work needs to be done while both the legacy and the newly separated companies continue to support their businesses and work to achieve other strategic objectives. This requires both sides to recognize the elevated cost of capacity, with both human and physical assets needed to support separation activities.The newly divested firm will need to build and manage a plan to ensure each team has the people, process, technology and contracts in place before services are fully transitioned. It has to ensure the new company can operate on its own.The legacy entity will need to build and manage the plan to fully transition the systems and services to the divested firm, ensuring a seamless handover while maintaining business continuity.<h2>5 To Dos When Separating IT in a Divestiture</h2><div style="overflow:auto;"><table cellpadding="12" border="1"><colgroup><col /><col /><col /></colgroup> <thead><tr><th style="background-color:#29497b;color:#ffffff;">&nbsp; </th><th style="background-color:#29497b;color:#ffffff;">New Company </th><th style="background-color:#29497b;color:#ffffff;">Legacy </th></tr></thead><tbody><tr><td>Primary Goal </td><td>Be ready to transition and assume the work to stand alone.</td><td>Be ready to support the transition and let go.</td></tr><tr><td valign="top">People </td><td valign="top">Get the right resources in the right place:<ul><li>Stand up the new organization from the top down aligned to the transitioned and supporting service</li><li>Hire and onboard new teams</li><li>Understand R&amp;R within the new teams</li><li><a href="https://isg-one.com/advisory/organizational-change-management">Manage organizational change</a> (OCM) with communication across both organizations</li></ul></td><td valign="top">Plan for transition capacity and downsizing:<ul><li>Prepare for changes in the organization (before, during and after); consider who goes where</li><li>Plan for badge transitions and reductions</li><li>Update processes</li><li>Use OCM to manage the change</li></ul></td></tr><tr><td valign="top">Process </td><td valign="top">Port the processes from the legacy company or develop new:<ul><li>Carefully document processes</li><li>Allow timing for shadow support from legacy organization</li></ul></td><td valign="top">Support both legacy and NewCo processes:<ul><li>Update processes to accommodate the shift or reduction in work</li><li>Plan for resources to support training, transition and shadow support &nbsp;</li></ul></td></tr><tr><td valign="top">Technology </td><td valign="top">Ensure the right hardware and capacity are in place:<ul><li>Acquire and align the right hardware and the right capacity at the right time</li><li>Consider archived and historical information for how much you are bringing over; put steps in place to access legacy information</li><li>Plan for network interconnectivity (and managing access to legacy)</li><li>Consider new and legacy systems</li></ul></td><td valign="top">Plan for reductions in capacity:<ul><li>Retire hardware and software</li><li>Consider archived data</li><li>Ensure interconnectivity to new company</li></ul></td></tr><tr><td valign="top">Contracts </td><td valign="top">Ensure the right contracts are in place:<ul><li>Manage the timeline to assume the services</li><li>Buy the right stuff at the right time</li><li>Get clear on what to purchase</li><li>Understand license transfer rights</li><li>Establish new supplier relationships</li></ul></td><td valign="top">Plan for contract separation:<ul><li>Align separation and contract renewal dates and prepare for when they don&rsquo;t align</li><li>Validate volume reductions</li><li>Understand notice period and transfer rights</li><li>Support stranded costs</li><li>Make changes to existing supplier relationships </li></ul></td></tr><tr><td valign="top">Finance </td><td valign="top">Manage the timing of services and the costs:<ul><li>Develop new budgets</li><li>Costs are not just cut in half </li></ul></td><td valign="top">Charge for services during transition:<ul><li>Adjust budgets</li><li>Plan for bubble work </li></ul></td></tr></tbody></table></div><h2>Divestiture Requires Smart Governance</h2>A smooth divestiture starts by establishing strong and effective two-in-a-box governance. Two-in-a-box governance pairs individuals with the same role in each company to ensure the work is transferred appropriately. This will ensure all hand-offs, coordination, financial transfer and approvals occur in lockstep. The creation of two separate entities necessarily requires independent meetings with controlled access, but establishing a joint core team between the two entities can help identify planning dependencies and ensure effective communication and decisioning throughout the separation process.&nbsp; The essential elements of a successful divesture program include careful planning and consideration of the potential challenges that arise with the separation. ISG helps enterprises build a plan for a separation program, from the strategic approach to the very detailed activities. We have the experience required to manage the interrelated IT projects within a separation program for both firms, provide the right process structure and report and conduct the due diligence necessary to achieve divestiture-ready objectives. ISG understands the market norms for establishing and realigning budgets. ISG&rsquo;s <a href="https://isg-one.com/advisory/supplier-contract-management">Contract Lifecycle Management Services</a> (CLMS) and <a href="https://isg-one.com/advisory/software-advisory-services">Software Advisory Services</a> can manage and offload the work for renewals and negotiations to achieve optimal savings.</a10:content></item><item><guid isPermaLink="false">urn:uuid:5265c195-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/top-4-actions-to-achieve-dora-compliance-before-it-s-too-late</link><a10:author><a10:name> </a10:name></a10:author><category>Sourcing</category><category>Supplier & Contract Management</category><category>Banking & Financial Services</category><title>Top 4 Actions to Achieve DORA Compliance Before It’s Too Late</title><description>Here are the top four ways to achieve DORA compliance for contractual arrangements with ICT third-party providers</description><pubDate>Tue, 12 Nov 2024 17:29:55 Z</pubDate><a10:content type="text"><h2>The EU&rsquo;s Digital Operational Resilience Act (DORA)<a id="_anchor_1" name="_msoanchor_1"></a></h2>January 17, 2025, is the deadline for entities in the financial sector to <a href="https://isg-one.com/research/articles/full-article/how-to-ensure-dora-compliance-in-your-third-party-contracts">comply with the EU's Digital Operational Resilience Act (DORA)</a>. The legislation requires across member states to unify and standardize information and communication technology (ICT) risk management, especially for ICT services supporting critical functions. This broad-reaching regulation requires categorization for internal ICT, risk management policies, incident reporting, third-party risk management, digital resilience testing and more. DORA includes specific additional requirements, such as key contractual provisions to be included in contractual agreements with third-party service providers and stricter IT security requirements.Since the publication of DORA, many enterprises have struggled with the specific key contractual provisions stipulated in DORA Article 30.<h2>Achieving DORA Compliance in Your Third-Party Contracts</h2>Here are the top four ways to achieve DORA compliance for contractual arrangements with ICT third-party providers:<h2>1. Spend the time needed to adequately prepare sourcing contracts. </h2>According to DORA, financial entities must determine which of the ICT services they receive from third-party service providers support critical or important functions. While this information is required as part of the official Register of Information until January 2025, financial entities must determine this information much earlier to achieve DORA compliance. DORA provides a definition only for &ldquo;ICT services&rdquo; and &ldquo;critical or important functions&rdquo; and does not provide detailed information or guidelines about the process to determine it. Therefore, it&rsquo;s easy for enterprises to underestimate the time and effort needed to execute the classification process for DORA, <a id="_anchor_3" name="_msoanchor_3"></a>which can delay the start of the assessment process by weeks or months. ISG uses customized questionnaires and process templates to help clients classify their services and functions and accelerate the compliance process. <h2>2. Assess current contractual arrangements for DORA compliance. </h2>On a high level, the process to achieve DORA compliance can be described in two steps: 1) assess current DORA compliance and identify gaps, and 2) resolve gaps. Especially for larger financial entities, assessing potentially hundreds of contractual arrangements can be a challenging task. An assessment requires all contractual arrangement documents to be in an organized filing system. The use of standard processes and tools, such as compliance checklists and workflows, can help financial entities significantly reduce assessment efforts. ISG uses a standardized toolset to assess DORA compliance for outsourcing contracts; the toolset can easily be extended to include additional national or individual requirements based on the financial entity&rsquo;s policies. <h2>3. Aim for standard solutions instead of individual approaches. </h2>&nbsp;Enterprises using a standardized contract framework will minimize the effort required to create and maintain contract documents. Even where such a fully-fledged framework does not exist, some organizations have developed standard attachments for specific topics, such as cybersecurity, data privacy, IT service management or governance. This will help make contract adjustments easier and faster and improve the enterprise&acute;s ability to control compliance with contractual stipulations. Be sure to create a compliant and standardized template for subcontracting terms and obligations that outline DORA requirements for subcontracting. Similar standard templates can also be used for other cases, such as information security or sustainability requirements. <h2>4. Do not reinvent the wheel. </h2>DORA includes many requirements that are already part of existing EU or national legislation. For example, the definition of &ldquo;critical or important functions&rdquo; is almost identical to the definition in the <a href="https://www.eba.europa.eu/activities/single-rulebook/regulatory-activities/internal-governance/guidelines-outsourcing">EBA Guidelines on outsourcing arrangements</a>. To avoid wasting time and effort on reinventing the same processes again, financial entities should thoroughly analyze and align their approach for DORA with the existing implementations for other legislation. Using existing processes and templates as starting points can also reduce efforts in the future because national financial authorities, such as the Federal Financial Supervisory Authority (BaFin) in Germany, have already expressed their intent to unify existing legislation and guidelines in accordance with DORA. <h2>Leveraging DORA Compliance Projects for Long-term Benefits<a id="_anchor_5" name="_msoanchor_5"></a></h2>When investing significant time and effort into <a href="https://isg-one.com/articles/are-you-working-on-the-right-things-for-dora-compliance">becoming compliant with DORA</a> contract requirements, financial entities should think about how to generate additional value from the effort. After all, IT operational resilience is the intended objective.Financial entities should evaluate the following options:<ul><li>Review the sourcing strategy</li><li>Standardize sourcing processes and procedures</li><li>Optimize service management processes</li><li>Refine the target operating model</li><li>Implement a third-party risk management framework and methodology</li></ul>With the DORA compliance deadline approaching, it's crucial to act swiftly and methodically. Prioritize your ICT contracts, develop comprehensive governance frameworks and ensure clear communication across your organization.For more detailed guidance on DORA compliance, read our recent white paper <a href="https://isg-one.com/articles/how-to-ensure-dora-compliance-in-your-third-party-contracts">How to Ensure DORA Compliance in Your Third-Party Contracts</a> and get in touch with us!</a10:content></item><item><guid isPermaLink="false">urn:uuid:ab61c195-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/index-insider--is-the-uptick-in-it-services-hiring-a-signal-of-demand-recovery</link><a10:author><a10:name> </a10:name></a10:author><category>ISG Index Insider</category><title>Index Insider: Is the Uptick in IT Services Hiring a Signal of Demand Recovery?</title><description>Employee headcount increased in the IT and business services industry 3Q24. Is this a sign that demand is growing?</description><pubDate>Fri, 08 Nov 2024 12:49:14 Z</pubDate><a10:content type="text">Hello. This is Stanton Jones and Sunder Sarangan with what&rsquo;s important in the IT and business services industry this week. If you&rsquo;d like to read this on the web,&nbsp;<a title="View as Web Page" target="_blank" href="https://info.isg-one.com/index.php/email/emailWebview?mkt_tok=MjU3LVNUQi0zNzkAAAGWqsfk5eKMRj1Z_QzW8F-raAaOz4-G9N5O9n_0Nz0GRxwLh5ZHmXOdq8prJSIUFNTtyWusChKaF9nMjxxMTc97iM3WOA">click here</a>.&nbsp;If someone forwarded you this briefing, consider subscribing&nbsp;<a title="https://isg-one.com/isg-index-insider" target="_blank" href="https://isg-one.com/isg-index-insider?utm_source=marketo&amp;utm_medium=isg_insider&amp;utm_campaign=isginsider174">here</a>.&nbsp;<h2>Hiring</h2>Employee headcount increased in the IT and business services industry 3Q24. Is this a sign that demand is growing?&nbsp; Data Watch<img src="https://info.isg-one.com/rs/257-STB-379/images/IT-and-Business-Services-Hiring-Returns-Chart.png" alt="IT and Business Services Hiring Returns Chart" />Background You may recall that, back in August, we asked the question: is the IT and business services industry at a growth inflection point? We asked this question because, in 2Q24, revenue growth&nbsp;<a title="Link to article" target="_blank" href="https://isg-one.com/articles/index-insider--is-industry-growth-at-an-inflection-point?utm_source=marketo&amp;utm_medium=isg_insider&amp;utm_campaign=isginsider174">passed headcount growth</a>&nbsp;for the first time since 2021. Our POV was that, yes, the industry is at an inflection point. But not necessarily a revenue growth inflection point &ndash; more of a service delivery inflection point. The idea here was that providers had been relying on the capacity built up after the pandemic to support the low single-digit growth in the industry. That capacity was &ldquo;at capacity,&rdquo; so that&rsquo;s why we indicated that hiring was likely to pick back up. And, as you can see in this week&rsquo;s Data Watch, that&rsquo;s exactly what happened in Q3. The Details<ul><li>Headcount increased by 52,000 in 3Q24, which was a significant change from the decrease of 4,100 in the prior quarter.</li><li>The last Q/Q headcount increase was in 4Q22, when it grew by 14,500.</li></ul>What&rsquo;s Next So, does the biggest headcount increase in almost two years mean that demand is picking back up? Possibly. As we discussed on LinkedIn a couple weeks ago, several providers saw&nbsp;<a href="https://www.linkedin.com/feed/update/urn:li:activity:7254873092039090177/" target="_blank" title="link to article">growth in their banking and financial services</a>&nbsp;in Q3. That&rsquo;s a great sign for the industry because BFSI makes up around 25% of the annual contract value in the IT and business services market.However, when you dig into the most recent data, a couple of things pop out:<ul><li>Most of the headcount increase was concentrated in a few providers.</li><li>Some of the increase was related to M&amp;A activity that closed during the quarter.</li></ul>Given this, we think the Q3&nbsp;uptick was a result of providers keeping up with existing demand and attrition. And this is one of the key reasons we continue to hold our full-year forecast at 2%.</a10:content></item><item><guid isPermaLink="false">urn:uuid:ba55c195-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/how-to-ensure-dora-compliance-in-your-third-party-contracts</link><a10:author><a10:name> </a10:name></a10:author><category>Sourcing</category><category>Supplier & Contract Management</category><category>Banking & Financial Services</category><title>How to Ensure DORA Compliance in Your Third-Party Contracts</title><description>January 2025 marks the deadline for financial firms in the EU to comply with DORA requirements. Are you ready?</description><pubDate>Tue, 05 Nov 2024 19:50:28 Z</pubDate><a10:content type="text">January 2025 marks the deadline for financial firms in the EU to comply with DORA requirements. Are you ready?<h2>The EU&rsquo;s Digital Operational Resilience Act (DORA)</h2>By January 2025, enterprises in the finance sector must strengthen their operational resilience in information and communication technology (ICT). This includes addressing the risks introduced by third-party providers that deliver digital services in your sourcing ecosystem. In just a few short weeks, the <a href="https://isg-one.com/articles/are-you-working-on-the-right-things-for-dora-compliance">Digital Operational Resilience Act (DORA)</a> will be law.As we&rsquo;ve been covering for more than a year, <a href="https://isg-one.com/articles/decoding-the-digital-operational-resilience-act-(dora)-for-financial-institutions-and-their-service-providers">DORA is a standardized framework</a> with broad-reaching regulations that apply across EU member states, including requirements for internal ICT risk management policies, incident reporting, third-party risk management, digital resilience testing and more. And for ICT services supporting critical functions, DORA specifies additional requirements, such as key provisions in contractual agreements with third-party service providers and stricter IT security.What are the key contractual provisions for third parties in DORA? Financial services firms are increasingly outsourcing and integrating external partners into their ecosystems; DORA lays out contractual provisions precisely for managing this kind of risk. <h2>Specific DORA Requirements for Contractual Agreements </h2>A great deal of work goes into <a href="https://isg-one.com/advisory/supplier-contract-management">managing the lifecycle of sourcing contracts</a>; DORA adds another layer of complexity. Specific requirements that enterprises need to include in their contractual agreements with third-party ICT services providers are listed in Article 30, titled &ldquo;Key Contractual Provisions,&rdquo; in DORA&rsquo;s Chapter V &ldquo;Managing of ICT Third-party Risk.&rdquo; The list includes 16 topics, including specific stipulations for services supporting critical functions (figure 1). <img src="https://isg-one.com/images/default-source/default-album/overview-of-requirements-for-contractual-arrangements-on-the-use-of-ict-services.png?sfvrsn=eb10ab31_1" alt="Overview of Requirements for Contractual Arrangements on the Use of ICT Services" />Figure 1: Overview of Requirements for Contractual Arrangements on the Use of ICT ServicesFinancial entities need to approach DORA compliance in a structured way and assess the degree to which they are meeting or not meeting requirements in existing contracts. ISG leverages a three-step approach to support clients.</a10:content></item><item><guid isPermaLink="false">urn:uuid:4650c195-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/the-big-benefits-of-small-language-models</link><a10:author><a10:name> </a10:name></a10:author><category>Artificial Intelligence</category><title>The Big Benefits of Small Language Models</title><description>While large language models (LLMs) like GPT-4 excel in versatility and power, small language models (SLMs) are in some cases more efficient, cost-effective and better suited for specific tasks.</description><pubDate>Mon, 04 Nov 2024 23:24:37 Z</pubDate><a10:content type="text">While large language models (LLMs) like GPT-4 excel in versatility and power, small language models (SLMs) are in some cases more efficient, cost-effective and better suited for specific tasks. SLMs provide high-quality language understanding and generation with significantly lower resource consumption, making them ideal for enabling digital work. Here&rsquo;s how SLMs differ from LLMs and the types of digital work they can enable. <h2>Real-Time Applications and Privacy Enhancements of SLMs</h2>Faster Inference and Lower Latency: SLMs, due to their smaller size, can generate responses faster than LLMs, enabling real-time applications that require immediate feedback. This is critical in sectors like customer service, gaming or AI-powered writing assistants. For live customer service domain-specific applications, an SLM can power AI-driven chatbots that respond instantly to customer inquiries, improving customer satisfaction through quick, seamless interactions. And in AI-powered writing assistants, SLMs provide real-time grammar and style suggestions without the latency that can interrupt the writing flow. Enhanced Data Privacy: SLMs can be deployed locally, enabling on-device data processing. This reduces the need to send sensitive data to cloud-based systems, offering privacy advantages for industries like healthcare, finance and personal devices. Additionally, their smaller size means they are more controllable and less likely to encounter problems with bias, toxic poisoning and other challenges commonly faced by LLMs. In healthcare, for example, a mobile app powered by an SLM can analyze patient health data directly on the device, offering real-time health insights without transmitting sensitive medical information to the cloud. Financial apps using SLMs can provide budgeting or spending analysis without needing to send personal financial data off-device, ensuring enhanced privacy for users. <h2>Cost-Effectiveness and Scalability for SMEs</h2>Affordable AI Solutions: SLMs require less computational power to train, less energy to operate and can frequently run on a more traditional chipset, lowering operational costs. This is especially beneficial for small and medium-sized enterprises (SMEs), allowing them to implement AI solutions like chatbots, customer service automation and content generation without the heavy infrastructure costs associated with LLMs. A small e-commerce company can use an SLM to power product recommendations or customer support chatbots without needing expensive cloud infrastructure, enabling AI adoption even on a limited budget. A local restaurant chain can use an SLM to automate its reservation system, reducing staffing costs and improving customer service without needing large-scale AI servers. A marketing agency can employ an SLM for content creation tasks, such as generating email campaigns or social media posts, offering AI-driven solutions at a fraction of the cost of larger systems. Scalability for Businesses: SLMs make it possible for startups and SMEs to scale AI solutions affordably. These businesses can adopt AI for internal workflows or customer-facing applications, even with limited computational resources. A small legal firm, for example, could use an SLM to automate contract analysis and review, allowing them to scale their services without the need for significant computational infrastructure. A regional retail chain can scale customer support by using SLM-driven virtual assistants that handle basic inquiries across multiple stores without additional server investments. <h2>Task-Specific Optimization and Industry-Specific Applications</h2>Specialized Performance: SLMs can be fine-tuned for specialized tasks, making them well-suited for handling domain-specific data without overfitting. This results in better accuracy for focused tasks. In healthcare, an SLM trained on medical texts can assist in diagnosing rare conditions by quickly analyzing patient symptoms and comparing them to medical literature. In logistics, an SLM can optimize supply chains by analyzing real-time traffic, weather and shipping data, ensuring that deliveries are routed efficiently and cost-effectively. Industry-Specific Use Cases: SLMs are ideal for applications requiring deep, narrow expertise. They can be optimized for specific tasks, making them more efficient than generalized models. In financial services, for example, an SLM can be deployed to monitor transactions for fraud detection, focusing on specific transaction patterns unique to the financial sector, ensuring real-time alerts for suspicious activity. In legal tech, an SLM fine-tuned on contract law can help lawyers quickly identify key clauses and risks in legal documents, streamlining the review process for contracts and agreements. And, in agriculture, SLMs can help farmers by analyzing crop conditions, soil data and weather forecasts, providing tailored recommendations to maximize yield without needing the complex computational power of an LLM. <h2>Edge AI and Offline Capabilities</h2>Deployment on Edge Devices: SLMs can operate on edge devices like smartphones, IoT devices and industrial sensors where LLMs would require much more processing power. This allows AI to be embedded in everyday devices without needing a constant connection to high-powered servers. A smart thermostat using an SLM can analyze household patterns and adjust temperatures accordingly without relying on cloud servers, improving energy efficiency. In agriculture, an SLM deployed in a remote area can process sensor data to monitor soil quality or crop conditions on site, providing actionable insights to farmers without internet connectivity. Offline Capabilities: Many SLMs can run offline, making them valuable in areas with limited or unreliable internet connectivity, such as remote fieldwork, environmental monitoring or industrial applications. Field researchers working in remote areas, for example, can use SLM-powered language translation tools to communicate with locals or translate field data, all without needing an internet connection. In industrial settings, an SLM-powered device can monitor machinery performance in real time, even in factories where internet connectivity is spotty, reducing downtime by providing immediate feedback on operational health. Emergency responders can use SLM-powered communication tools during disaster relief operations to translate languages and provide on-the-spot data analysis without relying on cloud services. <h2>What Is the Future of SLMs in AI Development</h2>SLMs are expected to play a larger role in AI development as hardware advances, enabling even more sophisticated applications in edge computing and real-time processing. Future SLMs will likely become more efficient in resource usage, further improving their deployment in low-latency environments like autonomous vehicles, real-time surveillance and personal assistants. As researchers continue to explore more efficient training methods, SLMs may also evolve to handle more complex tasks without needing the computational power of LLMs. <h2>Working through the Challenges to New Solutions </h2>While SLMs are efficient and cost-effective, they do face limitations. Their smaller size means they may struggle with more complex tasks that require deep contextual understanding, such as those involving nuanced reasoning or creativity. Additionally, while SLMs are excellent for specialized tasks, they may not be as flexible or adaptable as LLMs, which can handle a broader range of functions with less fine-tuning. However, ongoing advancements are helping to mitigate these challenges, making SLMs more powerful and versatile over time. SLMs have the potential to revolutionize digital work by making AI accessible, affordable and efficient for a wide range of industries and businesses. From real-time edge applications to highly specialized industry solutions, SLMs enable AI deployment in environments where LLMs may not be practical, offering more tailored, secure and resource-efficient solutions. As technology advances, SLMs are poised to unlock even more opportunities for digital innovation. ISG helps enterprises understand how and when SLMs may be the right fit for them &ndash; and how they <a href="https://isg-one.com/advisory/ai-advisory">integrate into their AI strategy</a>. Contact us to find out how we can help you get started. </a10:content></item><item><guid isPermaLink="false">urn:uuid:d243c195-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/how-do-we-define-industry-5.0</link><a10:author><a10:name> </a10:name></a10:author><category>Manufacturing</category><title>How Do We Define Industry 5.0?</title><description>Industry 5.0 is a relatively new concept, originating from Japan's Society 5.0 initiative, and has been adopted by the European Commission's Community of Practice.</description><pubDate>Fri, 01 Nov 2024 16:06:05 Z</pubDate><a10:content type="text">Industry 5.0 is a relatively new concept, originating from Japan's Society 5.0 initiative, and has been adopted by the European Commission's Community of Practice. Despite its growing prominence, Industry 5.0 lacks a clear and unified structure, leading to ongoing debates around its definition. Unlike Industry 4.0 &ndash; which focuses on shopfloor connectivity and automation &ndash; Industry 5.0 emphasizes human-centric innovation, with overlap occurring only with specific emerging Industry 4.0 technologies.<img src="https://isg-one.com/images/default-source/default-album/evolution-of-industry-5-0.png?sfvrsn=f306ab31_1" alt="Evolution of Industry 5.0" />Figure 1: Evolution of Industry 5.0Human-machine collaboration is the hallmark of Industry 5.0, marking a pivotal shift toward fully automated physical processes. Industry 5.0 includes the following defining characteristics:<ol><li>Human-machine collaboration: Successful tech enhances human capabilities rather than replacing them, using connected tools to boost productivity and quality while eliminating dangerous tasks to reduce injury risk. </li><li>Disruptive AI: Operational leaders are riding the GenAI wave to accelerate product time-to-market by investing in their technology literacy. GenAI is inherently human-centric, translating natural language into structured outputs like code and media content. The next innovation on this level is expected to be private AI, with localized and secure large or small language models hosted on personal devices.</li><li>Sustainability and environmental considerations: Eco-friendly Industry 5.0 practices are guided by environmental consciousness and regulations, with world leaders committing to industry-specific carbon footprint reductions (and eventually net-zero carbon) through waste management and energy efficiency. This approach recognizes the human factor as both an output of industrial manufacturing and as a driving force.</li><li>Customization of craftsmanship: In Industry 5.0, personalized, high-quality production replaces mass production. It is focused on tailored solutions that meet individual needs and preferences, thereby enhancing customer satisfaction and product relevance.</li><li>Quality and precision manufacturing: The use of edge AI in IIoT, enhanced human-machine interfaces, predictive maintenance and other advanced innovations leads to higher-quality products built with better and more accurate processes.</li><li>Supply chain resilience: Manufacturers can now rapidly adapt, recover and maintain operational continuity in the face of global logistics disruptions. This also means risks are mitigated through flexible and sustainable production processes.</li><li>Model infrastructure: Thought leaders are slowly coming together to assess, design and agree on a model infrastructure specific to the new set of technologies. While the characteristics defined in the figure below don&rsquo;t rigidly define Industry 5.0, they&rsquo;re identified by their direct impact of Industry 4.0 innovations, which are considered the building blocks of Industry 5.0. <ul><li>Based on these industry guidelines, there is a need to adapt and invest in new infrastructure to support the expansion of technologies such as 6G and GenAI. </li><li>Cybersecurity is a key component of this model infra and is considered as one of the required guardrails.</li></ul></li><li>Dark factories and cobots: Cobots, or collaborative robots, are revolutionizing modern manufacturing by integrating fully automated processes with tasks that still require human skills and judgment. These cobots handle repetitive, mundane tasks, allowing human workers to focus on more complex activities, which leads us into compartmentalized manufacturing such as robotic welding cells &ndash; they are also key to decentralized dark factories (DDF), where modular facilities can be deployed with little to no human interaction. </li><li>Scalable local production: Increasing production capacity at the local level usually comes at the expense of quality and cost. However, by adopting highly responsive and adaptive manufacturing, manufacturers can quickly adapt to market demands, reduce supply chain dependencies and maintain reduced carbon footprints. </li><li>Decentralization of intelligence: The decentralization of intelligence shifts decision-making from centralized systems to distributed nodes, allowing human-driven responses that are scalable. For example, edge computing and GenAI allow democratized access to legacy information that was once deemed too expensive to consume.</li><li>Industry 4.0: Technologies focused on connectivity and automation have found success in this industrial revolution and have been tagged as the next generation of long-lasting components of the manufacturing.&nbsp; &nbsp;</li><li>Innovation: Human creativity within industrial automation is focused on creating more efficient and personalized processes, moving beyond simple machine learning into self-empowering innovative spaces. </li><li>6G: As 5G is slowly being adopted, the availability of this technology is still lacking. It is, however, a cornerstone of connectivity for shop floors and smart cities.</li><li>Safety: All roads lead to Rome. All technology is built with human safety in mind. </li></ol><img src="https://isg-one.com/images/default-source/default-album/key-characteristics-of-industry-5-0.png?sfvrsn=4d07ab31_1" alt="Key Characteristics of Industry 5.0" />Figure 2: Key Characteristics of Industry 5.0Industrial IoT has played a significant role in Industry 4.0 innovations with moderate success in 5G and edge computing; it highlights the connected nature of this next industrial revolution. Thought leaders have identified three phases of Industry 4.0. Smart manufacturing is in the third wave. Although it is still maturing, this third wave is focused on making advanced tech more available for quantum computing, neurotech and bioinformatics. Notably, these innovations are quite separate from the human-augmenting capabilities of Industry 5.0.Enterprises should prepare for rapid growth and breakthroughs in the smart manufacturing space. That is what will take them from Industry 4.0 to Industry 5.0.<h3>How Can ISG Help you?</h3>ISG specializes in helping businesses adopt new technologies such as Industrial IoT, GenAI and digital twins. With our expert consulting services, we provide tailored strategies with a robust vendor sourcing approach. We guide enterprises through the complexities of Industry 4.0/5.0 governance, digital transformation and implementing sustainable practices that ensure they stay ahead in the competitive landscape.</a10:content></item><item><guid isPermaLink="false">urn:uuid:c542c195-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/index-insider--move-fast-and-make-things--why-businesses-are-leveraging-msps-for-genai</link><a10:author><a10:name> </a10:name></a10:author><category>ISG Index Insider</category><title>Index Insider: Move Fast and Make Things: Why Businesses Are Leveraging MSPs for GenAI</title><description>In late 2023, enterprises indicated that AI projects were a top priority for them, limited mostly by a serious shortage in AI skills.</description><pubDate>Fri, 01 Nov 2024 15:17:58 Z</pubDate><a10:content type="text">Hello. This is Alex Bakker with what&rsquo;s important in the IT and business services industry this week.   If you&rsquo;d like to read this on the web,&nbsp;<a title="View as Web Page" target="_blank" href="https://info.isg-one.com/index.php/email/emailWebview?mkt_tok=MjU3LVNUQi0zNzkAAAGWh0OiKZcrmTXnlSBgXCcYoz0VcHKUlsaxDXwdzULFNDbI7apUDyFTyfuYSVGurHyqFZe_aNTH91oXne0r2_uX2YUYKw">click here</a>.&nbsp;If someone forwarded you this briefing, consider subscribing&nbsp;<a title="https://isg-one.com/isg-index-insider" target="_blank" href="https://isg-one.com/isg-index-insider?utm_source=marketo&amp;utm_medium=isg_insider&amp;utm_campaign=isginsider174">here</a>.&nbsp;<h2>Enterprise GenAI Projects</h2>In late 2023, enterprises indicated that AI projects were a top priority for them, limited mostly by a serious shortage in AI skills. Almost a year later, what we find in our latest study on generative AI use cases is that about two-thirds of enterprises are using managed service providers (MSPs) to help them build their AI projects. That means 35% are going it alone. Data Watch<img alt="To Use or Not to Use an MSP For GenAI Projects" src="https://info.isg-one.com/rs/257-STB-379/images/To-Use-or-Not-To-Use-an-MSP-For-GenAI-Projects-2.png?version=0" />Expertise, Capacity and Cost How are enterprises making the decision to use an MSP on their GenAI projects? They are applying their own version of the engineer&rsquo;s triangle concept &ndash; trying to find a balance between expertise, cost and capacity. When we look at the 65% of companies in our&nbsp;<a href="https://isg-one.com/advisory/ai-advisory/state-of-the-generative-ai-market-report-2024?utm_source=website&amp;utm_medium=banner&amp;utm_campaign=state-of-the-generative-ai-market-report-2024-homebanner">State of the GenAI Market Report</a>&nbsp;that are using MSPs, we see that they are doing so to access the expertise in technology tools and capacity. These companies say they need speed to market in the face of limited in-house skill and expertise. And they say they expect&nbsp;provider teams will help them gain skills internally. While organizations often view outsourcing as a transfer of expertise to a provider, it is clear in these cases that outsourcing is perceived as a two-way street, gaining access to skills they don&rsquo;t yet have from the provider and building them internally at the same time. For the businesses that are not using MSPs for GenAI projects, the priorities are also expertise and cost. These organizations are focused on avoiding cost and building on expertise internally. Many of the enterprises in this group believe they have unique business requirements and need to build their AI solutions on top of their specialized knowledge. Because of this, they are&nbsp;foregoing the opportunity to learn from MSPs. Both groups are prioritizing spending on essentially the&nbsp;<a href="https://isg-one.com/research/isg-index-insider/articles/index-insider--generative-ai-use-cases---where-s-the-top-line">same use cases</a>&nbsp;&ndash; but those that are choosing to engage MSPs are a bit more focused on the IT testing. Those that are going it alone are focused a bit more on Contact Center and CX. What&rsquo;s Next? About half of the enterprises we spoke to expect ROI on their GenAI initiatives by the end of 2025. The problem is that the average business is only&nbsp;<a href="https://youtu.be/4vKosT8taVM?si=M1j7Hw4H9UkOCzRG&amp;t=1250" target="_blank">spending an average $2.6 million</a>&nbsp;on each use case. Enterprises are hoping for big productivity, efficiency and cost gains, but, at this pace, it appears they will need more scaled projects to hit their goals. For the foreseeable future, we believe the growth of GenAI and the associated talent shortage will continue to drive growth in MSP contract activity.</a10:content></item><item><guid isPermaLink="false">urn:uuid:1a54c095-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/the-path-to-sustainability--innovations-and-initiatives-for-manufacturers</link><a10:author><a10:name> </a10:name></a10:author><category>Manufacturing</category><title>Innovations and Initiatives for Sustainable Manufacturing</title><description>Discover how manufacturers can achieve sustainability goals through effective strategies and innovative practices. Learn more with ISG.</description><pubDate>Thu, 08 Aug 2024 18:08:25 Z</pubDate><a10:content type="text">Nearly 95% of decision-makers interviewed in our most recent <a href="https://isg-one.com/docs/default-source/default-document-library/2024-isg-sustainability-study.pdf?sfvrsn=4439d531_1">ISG Digital Sustainability Study</a> told us their external mission statement includes some kind of sustainability goal. We found companies are supporting these commitments by spending one out of every $500 on sustainability technologies. Today, we&rsquo;re seeing that most of this spending is going toward compliance and reporting solutions rather than on digital programs that drive actual business benefits. And while 74% of the enterprises we interviewed have set net-zero emissions decarbonization targets, only 20% are consistently meeting them.How should enterprises address gaps between sustainability goals and execution?<a href="https://www.forbes.com/sites/tonybradley/2023/11/09/reimagining-sustainable-manufacturing/">Sustainability</a> is an important consideration in all industries today, but manufacturers are under even more pressure to adopt sustainable practices due to their use of physical resources and their by products. <a href="https://isg-one.com/industries/manufacturing">Manufacturing enterprises</a> are using four key principles as a framework for sustainability solutions: reduce, reuse, recycle and recover. We&rsquo;ll share example use cases of each of these principles below.<h2>Sustainability Investments that Drive Product and Service Adoption</h2>A best practice we are seeing is when companies embed a sustainability initiative &ndash; and related goals of decarbonization and achieving net-zero status &ndash; into their organizational culture, innovation framework, governance structures, reporting systems and overall mission. Rather than viewing it solely as an initiative that raises operating costs, these companies see sustainability as an investment that creates value and delivers better outcomes in both the short and long term. For instance, cement manufacturer LafargeHolcim is merging sustainability and innovation into a single C-suite role.When ISG asked our top manufacturing clients about their plans to incorporate sustainability across the design and manufacturing value chain, 50% said their companies have set sustainability targets as key performance indicators and are making investments to meet the targets.<img src="https://isg-one.com/images/default-source/default-album/how-companies-are-incorporating-sustainability-across-the-design-and-manufacturing-process-value-chain.png?sfvrsn=a711aa31_1" alt="Companies have set sustainability targets as KPIs" />Source: ISG Digital Engineering and Manufacturing Transformation Survey 2023<h2></h2><h2>Tackling Scope 3 Supply Chain Emissions</h2>Our research also found that 85% of enterprises have engaged managed services providers in relation to their environmental, social and governance (ESG) goals, whether directly on an ESG project or woven into existing engagements or partnerships. Companies prefer to engage with providers that demonstrate a strong commitment to supply chain sustainability, so they can position themselves as leaders in this domain. They seek strategic collaborations with partners that possess the appropriate technological expertise. Regardless of company size, prevalent practices include supplier audits, supply chain mapping and adherence to codes of conduct.To mitigate the risk of supply chain emissions, manufacturers are investing in <a href="https://isg-one.com/industries/utilities">energy-efficient technologies</a> within their facilities. Some are also embracing renewable energy sources, diminishing reliance on fossil fuels and reducing emissions. Transportation and logistics present an opportunity for companies to minimize emissions with fuel-efficient or electric vehicles and streamline delivery routes. By embracing circular economy models, as mentioned above, manufacturers and their providers can reduce waste and extend product lifecycles by recycling, reusing materials and designing products for easier disassembly. </a10:content></item><item><guid isPermaLink="false">urn:uuid:e812c095-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/industry-40-and-the-smart-factory--why-are-we-still-talking-about-it-ot-convergence</link><a10:author><a10:name> </a10:name></a10:author><category>Digital Engineering</category><category>Manufacturing</category><title>Industry 4.0 and the Smart Factory: Why Are We Still Talking about IT-OT Convergence?</title><description>Learn how successful manufacturers achieve Industry 4.0 benefits through IT-OT convergence and holistic transformation.</description><pubDate>Tue, 25 Jun 2024 18:56:35 Z</pubDate><a10:content type="text">In 2020, the World Economic Forum stated that a majority of the largest manufacturing organizations were stuck in <a href="https://initiatives.weforum.org/global-lighthouse-network/home">pilot purgatory</a>. When companies can&rsquo;t move their most transformative ideas out of the pilot phase, they never realize the value of the pilot. Four years later, this is still the case. The aspirations and full benefits of Industry 4.0 are not being realized for at least 70% of manufacturers and their respective supply chains. Our own research at <a href="https://isg-one.com/">ISG</a> has shown this number may be closer to 80%.What are the manufacturers that are successfully applying and gaining value with <a href="https://isg-one.com/advisory/digital-engineering?searchTerms=Industry+4.0">Industry 4.0</a> doing? These companies are referred to as Lighthouse Factories &ndash; and they are attributing their success to two things. One is their ability to leverage digital implementations and technological advancements. And the second is their ability to manage a truly holistic transformation that incorporates humans, data and processes while keeping their brand identity authentic.As of April 2024, the majority of these Lighthouse Factories are found in Asia and, more specifically, China. To date, there are 22 different maturity and capability standards for Industry 4.0, with no single one being widely accepted. The investment required for a manufacturer to become a Lighthouse Factory is in the billions of dollars and potentially years of time. The market is full of service providers and technology players trying to sell piecemeal solutions; the way forward can be confusing.One key problem the manufacturing industry needs to solve is the divide between <a href="https://isg-one.com/advisory/emerging-technology-innovation">information technology (IT)</a> and operational technology (OT). Companies need to finally accomplish the long-awaited IT-OT convergence. This concept originated in 2011, focusing on the cognitive shop floor and smart production enabled by:<ul><li aria-level="1" dir="ltr">Flexibility of mechanical procedures</li><li aria-level="1" dir="ltr">Feedback loop for true closed-loop manufacturing</li><li aria-level="1" dir="ltr">Digital twin capabilities</li><li aria-level="1" dir="ltr">Smart and sustainable operations and production</li></ul>This is not a pipedream, as successful examples exist. Most if not all OEMs are developing products using this approach. BMW and Mercedes factories in Regensburg and Sindelfingen are recognized Lighthouses. In BMW&rsquo;s case, the factory was aided by the close alignment of its strategic plan to improve operating performance with its Strategy Number One program. At the Mercedes factory, the modern working practices include production staff in the design. This is a form of industrial democracy seen at the long-time manufacturing leader Semco, among other places.<a href="https://isg-one.com/industries/manufacturing">Manufacturers</a> will be left behind without the principles of IT-OT convergence. Without it, OEMs will face serious impediments that will result in slower production and the inability to be agile for new features and services.</a10:content></item><item><guid isPermaLink="false">urn:uuid:2defbf95-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/understanding-the-risks-of-insourcing-helps-unlock-the-rewards</link><a10:author><a10:name> </a10:name></a10:author><category>Sourcing</category><title>Understanding the Risks of Insourcing Helps Unlock the Rewards</title><description>Insourcing can take many forms. Here we are discussing insourcing as a means to move work in house from a managed services provider.</description><pubDate>Wed, 05 Jun 2024 16:07:07 Z</pubDate><a10:content type="text"><h2>What Is Insourcing? </h2>Insourcing can take many forms. Here we are discussing insourcing as a means to move work in house from a <a href="https://isg-one.com/advisory/organizational-change-management">managed services</a> provider. But, just as business services come in a wide variety of functions, structures and purposes, insourcing procedures can vary wildly from case to case. Be aware that other forms of insourcing&mdash;for example, temporary staff augmentation&mdash;can imply different risks. The first thing to understand is that <a href="https://isg-one.com/articles/how-to-build-an-effective-it-sourcing-strategy-5-crucial-insights">insourcing is a means to an end</a>. Deciding to insource is neither right nor wrong; choosing to do so should be based wholly on what an enterprise is trying to accomplish. If an organization chooses to insource, it should be aware there are inherent consequences, many of which are not related to cost, and it is critical to think through these consequences as part of the decision-making process.It's also important to note that insourcing may mean bringing work back in-house temporarily and then subsequently and selectively sourcing pieces of the scope to niche providers to complement the new retained team. Your <a href="https://isg-one.com/advisory/sourcing">insourcing/outsourcing strategy</a> should be a journey that continuously shifts and evolves.<h2 dir="ltr">To Insource or Not to Insource</h2>Pulling <a href="https://isg-one.com/advisory/emerging-technology-innovation">IT and business services</a> back from a managed service provider and insourcing them with full-time employees can be a double-edged sword. It turns out that many of the benefits of insourcing are mutually exclusive of the benefits of outsourcing. And enterprises that insource may very well find themselves struggling with the same burdens that spurred them to seek a service provider in the first place&mdash;most commonly, high labor costs, lack of skilled resources, quality issues and organizational complexity.But, it&rsquo;s also possible, with careful accounting for the costs, to use insourcing as a powerful method for optimizing an organization. With greater control, flexibility and visibility of their processes, enterprises can use insourcing to create multiple avenues to realize high-level efficiencies.Of course, the decision to insource is wholly dependent on an enterprise&rsquo;s very specific needs and goals. Before deciding whether to insource or not, an enterprise should consider both the risks and rewards: <table style="border:1px solid;"><colgroup><col /><col /></colgroup> <tbody><tr><td style="background-color:#29497b;color:#ffffff;padding:10px;">Rewards of Insourcing</td><td style="background-color:#29497b;color:#ffffff;padding:10px;">Risks of Insourcing </td></tr><tr><td valign="top" style="border:1px solid;padding:10px;"><ul type="disc"><li data-list="0" data-level="1">Efficiency gains from optimized operating models</li><li data-list="0" data-level="1">Flexibility gains from eliminating a layer of contract governance and management</li><li data-list="0" data-level="1">Ease of eliminating tasks associated with employee lifecycle management</li><li data-list="0" data-level="1">Improved alignment of services with the business&nbsp;due to increased scrutiny of labor rates</li><li data-list="0" data-level="1">Tax advantages in certain countries that may be worth investigating</li></ul></td><td valign="top" style="border:1px solid;padding:10px;"><ul type="disc"><li data-list="0" data-level="1">Switching from variable labor costs to fixed costs, which requires high resource utilization</li><li data-list="0" data-level="1">Limited resource pool and skillset gaps</li><li data-list="0" data-level="1">Absence of service-level rigor provided by third party</li><li data-list="0" data-level="1">Inefficiencies caused by trading contractual commitments for managerial ones</li></ul></td></tr></tbody></table></a10:content></item><item><guid isPermaLink="false">urn:uuid:4a47bf95-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/the-secret-to-elevating-the-hybrid-work-employee-experience</link><a10:author><a10:name> </a10:name></a10:author><category>Future of Work</category><title>The Secret to Elevating the Hybrid Work Employee Experience</title><description>Discover how to elevate the hybrid work employee experience by transforming traditional onboarding into meaningful interactions.</description><pubDate>Wed, 20 Mar 2024 16:21:21 Z</pubDate><a10:content type="text">Imagine a new hire, Sarah, who joins your organization to <a href="https://isg-one.com/advisory/future-of-work">work remotely</a>. Her version of her <a href="https://isg-one.com/advisory/future-of-work/articles/future-workplace-vs.-future-of-work-what-s-the-difference">onboarding process</a> might be something like: &ldquo;As a new employee, I need to complete the onboarding process so I can start contributing to the team.&rdquo; Let&rsquo;s call this Sarah&rsquo;s onboarding &ldquo;user story.&rdquo;Like the user stories of Agile software methodology, this statement outlines a basic need. And, also like other user stories, it falls short of capturing the full spectrum of Sarah's onboarding experience &mdash; the excitement, apprehensions and aspirations that come with a new role, especially in a remote setting. This gap between a traditional user story and the holistic employee experience is where many organizations miss the mark in balancing expectations and experience, crucial elements in attracting and retaining top talent.This ISG whitepaper shows how transitioning from traditional user stories to user experience statements can transform employee touchpoints into more meaningful interactions.<img src="https://isg-one.com/images/default-source/default-album/key-stakeholder-groups-that-create-influence-and-drive-the-employee-s-experience.png?sfvrsn=3910d531_3" alt="Unlocking the Hybrid Work Experience" />Figure 1: Key Stakeholder Groups that Create, Influence, and Drive the Employee&rsquo;s Experience In the rapidly evolving landscape of <a href="https://isg-one.com/docs/default-source/default-document-library/isg-predicts---10-key-trends-radically-reshaping-the-future-of-work(shaqat-azim).pdf?sfvrsn=f789d331_0">hybrid work</a>, where employee engagement is fueled by emotional connections and supported by a conducive environment for productivity, user experience statements can play a crucial role in crafting the roadmap for enhancing the employee experience.By downloading this whitepaper, you will uncover strategies to enhance your organization's employee interactions, ensuring touchpoints are not just transactions but transformative experiences that foster long-term loyalty and satisfaction.Don't miss the opportunity to redefine your approach to employee experience and start creating a workplace where every interaction is an opportunity to inspire and engage.</a10:content></item><item><guid isPermaLink="false">urn:uuid:25e0be95-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/7-tech-and-business-predictions-for-the-telecom--network-and-media-industries-in-2024</link><a10:author><a10:name> </a10:name></a10:author><category>Network Advisory & Select</category><category>Media, Technology and Communications</category><title>7 Tech and Business Predictions for the Telecom, Network and Media Industries in 2024</title><description>We are in an era brimming with technological potential, and the most amazing innovations are yet to come. What will happen in the global Telecom, Network and Media and Entertainment industries in 2024?</description><pubDate>Mon, 05 Feb 2024 17:10:57 Z</pubDate><a10:content type="text">Heiko Henkes, Jeff Cosby and Jon Harrod also contributed to this article. We are in an era brimming with technological potential, and the most amazing innovations are yet to come. What will happen in the global Telecom, Network and Media and Entertainment industries in 2024? And how do enterprises in these industries need to prepare?Let&rsquo;s explore the top seven tech trends and their business implications. &nbsp;<ol><li>Enterprises will demand efficient network capacity for better return on investment. Global mobile data traffic is expected to grow by 54% annually from 2020 to 2030, according to ITU forecasts. Growth in 5G private networks is continuing to fuel small-cell densification across Manufacturing, Mining, Healthcare, Shipping, along with the public sector and many other industries. Operators are focusing on standalone 5G deployments for security, compliance, high throughput and ROI. With integrated SIMs or eSIMs, differentiated pricing tiers for roaming, retail, interconnect&nbsp;and wholesale businesses will also allow providers to offer options in network slicing&nbsp;on 5G SA networks. With open APIs and further collaboration, Public Sector enterprises, Manufacturers, Healthcare organizations and Retail enterprises will drive deep efficiencies to bring down costs by more than 20% via tried-and-tested use cases. Overall, these private 5G sites and network slicing approaches will add broadband push-to-talk, collaboration and messaging with other services such as simultaneous voice translation. Rich communication&nbsp;suite (RCS)&nbsp;-interoperable messaging services between Android and iOS ecosystems will further drive the platform-centric interoperability. What are the business implications? The majority of B2B2X relationships (in which telcos contract services with businesses that own the final relationship with customers) or B2B applications in private networks will see a continued dependence on video-centric solutions in 2024. This will be especially true across factory vision inspection, environmental monitoring and surveillance, intelligent transport solutions, remote collaboration, live immersive broadcasting and personalized advertisements via short form videos and video on demand.&nbsp;Further, in 2024, in-building 5G solutions will remain an apparent extension for operators and neutral host providers to improve their ROI in dense urban environments via increased public-private participation. The ROI will be supported via location-based ads and e-commerce-backed streaming on portable gaming and lightweight AR-enabled&nbsp;devices for enhanced engagement. OTTs and operators will continue to bundle services beyond video-only content to include telephony, conferencing, voice and chat. ISG predicts these trends will propel acquisitions in the midmarket within the TME industry. 5G, gaming, eSports, ad-supported streaming, TV commercials, digital media, retail media networks and international productions will remain hot in 2024.</li><li>Companies will continue to simplify their networks for better customer experience (CX). As the adoption of <a href="https://isg-one.com/articles/time-to-consider-managed-services-for-your-sd-wan-transformation">SD-WAN</a> and <a href="https://isg-one.com/articles/why-sase-matters-to-your-organization-now-more-than-ever?searchTerms=SASE">SASE</a> continues to fuel global expansion for enterprises, automation, AI and cost optimization will drive network simplification for better CX. Demand for end-to-end security for remote access encourages providers to support SASE, SD-WAN, wireless WAN and platform-based managed network services with enhanced broadband offerings in a hybrid cloud environment. With developments in virtual/cloud network functions, this year will bring about the perfect fusion of security, network as a service (NaaS), decentralized edge networking and AI. What are the business implications? The technological evolution of the software-defined layer paves the way for scalable, adaptable and efficient business models. Cloud operations, platform ecosystems and applications, together with cloud-native deployments, are expected to grow in the context of edge-based network applications, which are tuned toward resiliency, security, self-healing via automation, latency and reliability. Therefore, the triad of platform, ecosystem and edge will not only ease the bottlenecks to provide a guaranteed delivery and QoS to businesses but also form the mainstream components of network transformation projects in 2024.</li><li>Fresh open RAN approaches will help simplify networks, avoid new forms of vendor lock-ins, streamline processes, reduce risks and enhance security. In a multi-cloud, multi-vendor and multi-network environment, radio access networks (RAN) are entering new territory, dubbed &ldquo;Open RAN 2.0,&rdquo; with the adoption of select-vendor-focused open RAN&nbsp;approaches to align better with open network frameworks. With this approach, automation in radio interface controllers could bring better quality of service (QoS) and spectrum optimization. Further, with the increasing adoption of open APIs, open networks are showing promise in providing low-cost rural connectivity options that are technologically advanced in terms of satellite access, broadband and Wi-Fi. This could be a critical year with open RAN, open access points and open-source networks gaining popularity as more than 80% of Tier 1 operators deploy open constructs across wireline and wireless infrastructure. What are the business implications? Amid an evolving regulatory environment, higher competition and greater degrees of innovation, there will remain increased scrutiny over vendor flexibility and cost benefits. Open Ethernet/optical networking and internetworking consortiums are expected to bolster network disaggregation initiatives supporting higher throughput and better efficiency. However, in a broader ecosystem with nuanced security threats, operators need agile technological architecture and managed security services support to respond proactively. The Open RAN 2.0 acts as a catalyst for telecom operators to simplify, secure and hasten their open network journey. This will, in turn, support the NaaS movement highlighted in prediction #1.</li><li>The need for superior CX will drive services focused on automation with end-to-end observability across the core and edge of the network. In a multi-cloud and multi-vendor environment, unified management systems&nbsp;that can be deployed across clouds, edge, networks and data centers will enhance technological agility, reliability and security. In 2024, we will see at least half of the top 1,000 global enterprises leveraging SD-WAN with a unified end-to-end single-pane-of-glass view to reduce costs by more than 10%.&nbsp;Customers are expecting improvements related to latency, jitter, throughput, path optimization, device CPU usage and threat detection. What are the business implications? The rise in adoption of autonomous observability tools and solutions for security, customer ops, network troubleshooting and performance will encourage the adoption of a unified data strategy. This kind of strategy will combine data-for-all initiatives with all-for-data initiatives, which democratizes data-led initiatives beyond data scientist teams. However, equating data to generative AI (GenAI) could be a big surprise for Telecom and Media enterprises that might require far broader governance and oversight, especially in <a href="https://isg-one.com/articles/the-countdown-begins-how-enterprises-can-prepare-for-the-eu-artificial-intelligence-act">Europe under a developing EU AI Act</a>. Leveraging biased algorithms to increase the conversion rate in advertising could lead to fines.&nbsp;Handling customer inquiries and optimizing network operations is vastly different from handling personal data for monetary gains. In this case, investments in unified management platforms will not only reduce operational complexity and costs for CTO/CIO teams, but will also need to be balanced with privacy by design principles.</li><li>The cost of cybercrime will continue to increase. In 2024, ISG expects more than 90% of large global enterprises to name network security as their number one network priority, compared to 75% at present. As threats rise in tandem with developments in AR/VR/MR&nbsp;technology, expanded reality (XR) engineering and XR-supported applications need to balance ease of use with the elements of security, sustainability and privacy. As a result, ISG expects to see an increasing number of blockchain use cases to improve attribution and compliance and to automate contracts. What are the business implications? With the rising adoption of GenAI, regulatory and compliance requirements in most geographies need to be balanced with ROI for use cases. As the world&rsquo;s two biggest democracies India and the U.S. go into elections in 2024, trust, regulatory and safety teams will be under scrutiny. The emerging use of Web3 media platforms and applications will combine a multitude of applications for users to combat misinformation and threats emanating from a Web2 world. We expect to see some new state and country regulations around data security, compliance and privacy.</li><li>Private satellite communications players will flood the non-terrestrial communications market. We are likely to see technical advances in high throughput low-earth-orbit (LEO) constellations, inter-satellite connectivity for low latency as well as payload. We will also see increased adoption of AI and ML for maintenance and remote-sensing for enhanced security. The price of bundled satellite connectivity offerings will continue to be high. In this scenario, satellite-to-phone connectivity will need amplifiers and antenna equipment to be increasingly software-defined, compact and power-adaptable. We expect some consumer-centric innovations in 2024. What are the business implications? Leaving aside regulatory and financial hurdles, collaborations by way of joint ventures and IP acquisitions ― between telecom operators, satellite operators, space alliances, solution integrators, launch companies and semiconductor players ― are expected to solve challenges in the context of reliable power, cost and pricing, security and quantum cryptography, and navigation and inter-constellation collaboration.&nbsp;The cost and profitability of downstream internet connectivity will propel &ldquo;satellite launch&rdquo; businesses to decouple from (or reduce their dependence on)&nbsp;the main internet provider businesses.&nbsp;Deep coordination and collaboration among QUAD (the U.S., India, Japan and Australia), NATO, Five Eyes Alliance (Australia, Canada, New Zealand, the U.K. and the US), ITU, the U.N. and national space agencies could spark innovation in earth observation, situational awareness, semiconductors (with an overall push of $65 billion across QUAD group alone), space policy and exploration as well as defense markets. The year could also see a convergence of space policies with terrestrial regulations to attune to global geopolitics.</li><li>Sustainability will be a key theme for innovation and infrastructure development in 2024. Even though 6G remains a distant technology, PoCs for satellite-to-terrestrial networks will become increasingly commonplace with high altitude platform systems (HAPS), propelled by the increasing use of solar energy or green hydrogen to push 5G connectivity. This will be a key year in which sustainability ― sustainable development goals for innovation and infrastructure, reduced inequality, partnerships and quality education ― will be a key theme. As solar energy or green hydrogen spurs PoCs supporting HAPS, sub 6GHz will be the central pillar for enhancing connectivity in remote areas. Further, more than half of Tier 1 operators and top Media organizations will adopt sustainable practices to reduce scope-three emissions by collaborating within their supply chains. What are the business implications? In conjunction with AI, the increasing adoption of green practices, such as using renewable resources for data centers and distributed ledger technology for green bonds, will lead to meaningful progress in terms of sustainability in 2024. Demand for skills in emerging and deep technologies, including <a href="https://isg-one.com/articles/how-to-secure-digital-assets-in-the-quantum-era">quantum computing</a> and photonics, continues to outpace supply as the innovation trajectory takes a non-linear and sustainable approach. Collaboration between computing and telecom ecosystems is set to increase, with a rise in platform adoption as well as demand for government-backed&nbsp;innovation driven by regulatory, social and economic enablement.</li></ol><h2>What Does It Mean for Service Providers in 2024?</h2>According to <a href="https://isg-one.com/providers/star-of-excellence/2023-awards">ISG Star of Excellence&trade; 2023</a>, the satisfaction score for the Telecom, Media and Network industry remained high for analytics, ADM and contact center functions. The results reflect the industry's commitment to delivering superior services, embracing technological advances and maintaining a customer-centric approach. In 2023, enterprises also showed a high degree of satisfaction in the categories of &ldquo;execution and service delivery&rdquo; as well as &ldquo;business continuity.&rdquo; Top Telecom and Media enterprises (TME) will continue to prioritize innovation and resilience in service delivery ― for outsourcing business and IT operations ― over cost considerations. That said, some in-house functions will depend on captive center delivery, which will balance risk, cost and a design-led strategy. As enterprises seek partnerships to handle decentralized and dynamic operations, the year will see a paradigm shift in outsourcing among Telecom enterprises in these two key areas. Satisfaction rates in the categories of &ldquo;people and culture&rdquo; and &ldquo;governance and compliance&rdquo; in 2023 were lower for Telecom and Network enterprises than they were in 2021 and 2022. We expect providers will need to meet demand for higher levels of innovation, collaboration and governance in IT projects in 2024. With collaboration among many industries and impending consolidation within the Telecom and Media industry, we expect systems integration efforts to rise in 2024. And, with the rise in demand for managed services, the key focus area will remain on client satisfaction with a safe adoption of new technologies that provide clear return on investment.AI, multicloud/hybrid cloud, engineering and related ADM projects remain center stage. Service providers will likely use robust technology ecosystems and edge-related AI solutions to bolster their positions in the industry. In 2024, AI spending is anticipated to focus on projects related to elevating CX, enabling nimble software engineering, fostering smarter product R&amp;D, as well as ensuring smooth marketing and sales thus displacing some of the spending from other technology areas. We also expect productivity gains from GenAI to reinforce spending on cybersecurity projects &ndash; more so in the public sector or region-specific programs. Tier 1 IT service providers will also likely embed sustainable IT practices to help TME enterprises reduce their scope-three emissions. The adoption of code reviews and tools and frameworks designed to optimize resource use is also likely to find continued appreciation among enterprises in 2024 and the years to follow. Service providers will seek differentiation in 2024 along the following lines: consolidation of operations, M&amp;A, strong collaboration with partners for interoperability and revenue assurance, decentralization for operations with hyperpersonalization for customers, and automation for achieving cost-efficiencies supported by rapid innovations. Collaborative governance and a risk-sharing culture are expected to drive ecosystem synergies further.Given the intense competition, we expect CX scores to dip marginally in 2024 since several multi-year contracts are set to expire and renewals will likely be more competitive. Enterprise expectations of providers in the context of governance and compliance will continue to rise for ensuring network security, navigating regulatory complexities, protecting consumers, ensuring data privacy and managing risks effectively.ISG helps enterprises in the Telecom, Network and Media industries navigate a fast-changing technology market. Contact us to find out more.</a10:content></item><item><guid isPermaLink="false">urn:uuid:bb12be95-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/how-to-revolutionize-the-automotive-industry-with-connected-ecosystems</link><a10:author><a10:name> </a10:name></a10:author><category>Manufacturing</category><category>UK</category><title>How to Revolutionize the Automotive Industry with Connected Ecosystems</title><description>Just as other industries are being transformed by digitization, automation and innovative business models, the automotive sector is undergoing a similar paradigm shift.</description><pubDate>Wed, 20 Sep 2023 21:02:09 Z</pubDate><a10:content type="text"><div class="videoWrapper"> <iframe width="560" height="315" src="https://www.youtube.com/embed/LjVuXD712VM?si=2sJ-ThIOPil3wTWD" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share"></iframe> </div> Just as other industries are being transformed by digitization, automation and innovative business models, the automotive sector is undergoing a similar paradigm shift. A convergence of new technologies, sustainability policies and evolving consumer preferences is propelling the market toward a new future for automobiles. Where will it go? There&rsquo;s no doubt we are headed toward new ways of thinking in the industry, including diverse mobility, autonomous driving, electrification and connectivity. First, it&rsquo;s important to understand how vehicle ownership models are changing. <h2>Vehicle Ownership Models Are Changing </h2> Consumers are moving away from full vehicle ownership toward a more collaborative model that focuses on shared access rather than ownership. Studies in Germany show membership of vehicle-sharing models increased more than 15-fold in the last 10 years. These changes in consumer habits are being seen across geographies, including North America. Add to this a ban in the European Union on the sale of any new petrol and diesel cars after 2035, and original equipment manufacturers (OEMs), which have traditionally dominated the automotive sector, are struggling to adapt to these changing conditions. The industry requires a new, more collaborative approach and a truly connected ecosystem. Early examples of these kinds of ecosystems have already been announced, including Mercedes and Microsoft (2022), Stellantis and Amazon (2022), Mercedes and Google (2023) and Volkswagen and Google (2023). <h2>The Challenges and Opportunities for the Future of Automotive</h2> Regardless of where automotive companies are on their transformation journey, there are three key challenges and opportunities for which to prepare. <h3>1. Putting passengers and drivers at the center.</h3> Challenge: To date, OEMs and manufacturers have been product centric. A pedestrian-, passenger- or driver-first mentality is yet to fully develop. Yet drivers and passengers are key in causing the shift toward these latest changes. One such example is the growing preference for renting and on-demand services. In North America and the U.K., the number of teenagers obtaining driver's licenses is lower than figures in the 1980s. MIT projects that, by 2050, use of the car will go down in North America and Europe. Opportunity: Not all regions are seeing the same dynamics. The Middle East, Latin America, Asia and Africa see an increase in car usage. In particular, Asia is expected to see 12% growth in car usage by 2050. Truly embracing customer-centricity means orchestrating digital platforms and services that are tailored for personal interests and behaviors. An immersive customer experience will be interwoven with digital technologies such as the metaverse to meet the needs of future drivers and passengers. As drivers increasingly contribute and invest in shared systems of ownership and access, different revenue models will emerge, similar to timeshares and other sharing models in real estate. The following questions will help steer you toward becoming more user-centric: <ul> <li>Does your company understand whether you have more passengers or drivers of the future by region, age group and personal needs? Do you understand what customers want, what they own and what experience they are seeking? Are you currently designing from a user perspective?</li> <li>Have you mapped how you plan to support the end-to-end experience of passengers and drivers of the future, including infrastructure, integrated energy, fleet management, insurance needs and end-of-destination services? </li> <li>How are you designing for end-to-end safety, sustainability and comfort?</li> </ul> <h3>2. Building an ecosystem that puts passengers and drivers at the center.</h3> Challenge: The complexity of legacy systems is a major challenge to smart manufacturing programs (<a href="https://isg-one.com/docs/default-source/default-document-library/2023-isg-smart-manufacutring-study.pdf?sfvrsn=4f64d731_0">ISG Smart Manufacturing Survey 2023</a>). Customer-centric services rely on multiple providers to deliver the necessary products and services for the manufacture, quality control, design, R&amp;D, sales, after-sales support and maintenance. Managing this growing ecosystem involves changing the revenue model beyond sales of the vehicle and toward services. Opportunity: By 2030, subscription services related to the automotive industry &ndash; including leasing and rentals &ndash; are expected to be up to $40 billion in Europe and the U.S. alone. The <a href="https://www.statista.com/statistics/830986/value-of-the-global-sharing-economy/">total</a>&nbsp;value of the global sharing economy in five years is estimated to be up to $113 billion, a potentially untapped market for OEMs.&nbsp; &nbsp; In 2012, the British Royal Automobile Club (RAC) commissioned a study that found that cars were being <a href="https://www.racfoundation.org/research/mobility/still-standing-still">driven only 4% of the time</a>. This means there is room for a greater network of charging stations and a greater ecosystem of products and services. No longer do automotive manufacturers rely on a single party. They need many, small partnerships, whether it be consortiums or academic institutions, to build an ecosystem that will support the customer of the future. Engagement in the ecosystem will need to be about performance and outcomes for customers rather than delivery of sub-component tasks. <img src="https://isg-one.com/images/default-source/default-album/automotive-front-end-back-end.png?sfvrsn=3956d431_0" data-displaymode="Original" alt="Automotive-Front-End-Back-End" title="Automotive-Front-End-Back-End" /> Some questions to ask: <ul> <li>Whether you are tackling the problem as a single OEM or connected with partnerships, are you qualifying, agreeing upon and defining a business model? </li> <li>Have you defined the handover points between providers in the ecosystem to create a full end-to-end experience? </li> <li>Have you defined the revenue model and pricing strategy for all the players involved?</li> </ul> <h3>3. Building a blueprint of the ecosystem that prioritizes connectivity and security.</h3> Challenge: Current electric and smart vehicles rely on data, algorithms and insights to provide their services, but customers only need one interface to their mobility experience. Without the right architecture and blueprint, there is no means of coordinating and delivering a sound structure to provide a seamless and safe customer experience. Imagine a situation where electric chargers are out of service because of a security flaw, and customers are stranded in far-flung places. Will you tell them this is out of scope? No, you will present a unified experience they can rely on and hold your energy and fueling stations accountable on the back end. Autonomous cars available for use today are configured with partial automation and are already generating around 25 gigabytes of data per hour, circa 300 terabytes per year. This does not include data across the full production, manufacturing and sales supply chain or partner ecosystems, such as the fueling stations, energy providers, fleet management systems and traffic systems. An OEM must build a blueprint that allows for this explosion of data. Some services like fleet management and energy integration already exist, but an ecosystem that provides the necessary mobility, electricity, connectivity and autonomous services will need to be dramatically expanded. A key factor in creating a blueprint for an expanded ecosystem will be defining what different parties provide and what they do not provide. This is what ISG Partner for Smart Manufacturing Philip Glatz refers to as &ldquo;a force of creating order.&rdquo; Opportunity: Ensuring connectivity in the environment requires integrating multiple services across the ecosystem. With the volume of data and the number of integration points, understanding what data to collect, manage, store and analyze is especially important. To manage this much data &ndash; and to supply the power and energy it requires &ndash; you must be able to confidently explain how the data is being used. The architecture, data patterns and security can help solve the management and supply of the data. A connected vehicle will likely have access to information about changes on the roads, changes in traffic, peak demand for car sharing and real-time vehicle decision-making. With the increased number of sensors in vehicles and environmental surrounds, the data volumes could present an invasive experience that could expose individuals to security and privacy risks. Being connected can exacerbate issues of data theft, manipulation of data and citizen rights. While ecosystems should aspire to be open, creating secure connectivity to such platforms can be a challenge. Be sure to create a blueprint that defines the interfaces between parties. The architecture needs to connect energy and electricity sources to fleet management and the driver and passenger experience via a full 360-degree view. <img src="https://isg-one.com/images/default-source/default-album/360-vehicle-view.png?sfvrsn=5656d431_0" data-displaymode="Original" alt="360-Vehicle-View" title="360-Vehicle-View" /> To prepare for a comprehensive blueprint, start by answering the following questions: <ul> <li>Can you test and integrate all existing systems to provide a connected autonomous outcome?</li> <li>Have you built the organization to deliver this new ecosystem model?</li> <li>Do you have the mindset to develop a &ldquo;learning vehicle&rdquo; that can continuously adapt to the latest information? Are you sharing it with your partners and suppliers? </li> <li>What open architecture and technology ecosystems are you leveraging or planning?</li> <li>Have you established the custodian of the data, insights and products? </li> <li>Would everyone in the ecosystem be comfortable with IP being shared with OEMs for the purpose of achieving the vision of mobility as a service? </li> <li>In your model, do passengers and drivers have the right to collaborate, inform and lead the requirements of the future?</li> </ul> ISG helps enterprises navigate the changing automotive market and responsibly implement digital technologies and ecosystems to support your future mobility goals. Contact us to find out how we can help. </a10:content></item><item><guid isPermaLink="false">urn:uuid:4f1ebd95-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/how-digital-transformation-is-propelling-the-aerospace-industry</link><a10:author><a10:name> </a10:name></a10:author><category>Manufacturing</category><category>Aerospace and Defense</category><category>Digital Engineering</category><category>UK</category><title>How Digital Transformation Is Propelling the Aerospace Industry</title><description>There is no doubt digitalization increases productivity and provides visibility into requirements that impact downstream engineering and manufacturing.</description><pubDate>Mon, 15 May 2023 15:42:46 Z</pubDate><a10:content type="text">This paper benefited from the contribution of Rohit Bhatt, Director, Digital Engineering <h2>Why the Aerospace Industry Needs Digitalization</h2> <div style="float:right;margin-left:20px;margin-right:20px;">{{cta:sice-2023}}</div> There is no doubt digitalization increases productivity and provides visibility into requirements that impact downstream engineering and manufacturing. Increased visibility can be achieved by using a comprehensive digital twin and digital thread. Digital thread-based solutions enable multi-disciplinary processes and stitch together multiple data streams to present a rich and holistic view of products, processes and production. A digital thread enables greater productivity and innovation and integrates solutions and software to provide better visibility, collaboration, automation and traceability within a key domain and between multiple digitized domains. Currently, manufacturing in the aerospace industry is fragmented with little connection between products, processes and production. These are all disparate with no digital thread connecting them. Digitalizing aircraft helps manufacturers collect real-time data, which they can leverage to implement predictive and corrective maintenance. Corrective maintenance involves analyzing the maintenance process and determining the most effective way to execute it. This promotes proactive maintenance of aircraft, which helps avoid unexpected repair costs and minimize aircraft downtime, leading to time and cost savings. By collecting and analyzing real-time data during the initial manufacturing process, manufacturers have more control over data, so they can use it to improve processes as needed, identify areas that can be altered to increase efficiency or change a process to enhance product quality. <img src="https://isg-one.com/images/default-source/default-album/new-secure-connected-ecosystems-answer.svg?sfvrsn=eb59d731_2" data-displaymode="Original" alt="New-Secure-Connected-Ecosystems-Answer" title="New-Secure-Connected-Ecosystems-Answer" /> <h2>Manufacturing Value by Weaving the Digital Thread in the Aerospace Industry</h2> In the aerospace industry, the demand for quality, budget and time of delivery is high; introducing new technologies into this environment can be daunting. Enterprises attach great value to data security and production downtime, so manufacturers need to ensure reward and contain risk at the same time. Many leading aerospace companies are making investments in technologies that leverage cloud, big data and internet of things (IoT) capabilities with a digital thread manufacturing strategy that has the potential to deliver enormous benefits in many key operational and financial areas. Digital thread is helping the aerospace industry seamlessly integrate information throughout the value chain &ndash; from design to engineering, supply chain, production, quality, delivery, service and so on. A digital thread helps all these functions share contextualized information in a bi-directional flow that facilitates manual reporting and analysis. For manufacturers that are implementing digital thread in operations, it&rsquo;s important to simplify the system architecture and eliminate the duplication of systems that is typical of legacy growth. Many companies are enabling integration with other enterprise systems like ERP or PLM and supporting the visibility of universal metrics and standardization of processes. <blockquote>This new ecosystem connects the people, systems and data that are required for creating an intelligent factory that can deliver the capabilities of the future.</blockquote> While it is exciting to see these technologies create new opportunities, they also can lead to new challenges. Enterprises need a seamless back-and-forth flow of data between engineering and manufacturing. Digital thread creates one ecosystem in which everything exists. This includes the process from model-based system engineering to program planning, product design, verification management, supplier management, intelligent manufacturing and product support (maintenance, repair, overhaul). This new ecosystem connects the people, systems and data that are required for creating an intelligent factory that can deliver the capabilities of the future. Creating a digital twin and leveraging a digital thread from design to manufacturing reduces the cost of changes and shifts &ldquo;left&rdquo; maintenance and manufacturing factors into earlier stages of product development. Shifting left also allows for changes in the design and manufacturing at an early stage without causing any delay in the program. This flexibility reduces risks and costs, increases the productivity and efficiency of the workforce and enables powerful data analytics in service of continuous improvement of the production line. Manufacturing organizations in the aerospace industry should start by evaluating their current software and strategy to identify potential areas where they can incorporate new technologies. <h2>How Manufacturing Companies Are Connecting and Centralizing Data</h2> Aerospace companies are facing challenges in managing the enormous quantity of data they produce. There&rsquo;s product design data, manufacturing process data, updates on supply chain data, IoT data from products in the field and customer and client feedback data. All these data need to be analyzed, managed and made available across departments and throughout the organization. Most of the data are managed by independent and unconnected software packages; these processes and distinct systems need to be streamlined and consolidated. One way to simplify the process is by finding a software solution to centralize and coordinate all the data. One example is Airbus&rsquo; data platform called Skywise, which provides suppliers, OEMs and airlines with an industry platform to address aircraft operations challenges. This helps and allows operators across the world to take advantage of a better aircraft experience based on data insights and make sustainable decisions on their operations. Likewise, Boeing came up with Boeing AnalytX, a collection of software and consulting services that transform raw data into efficiency, resource and cost savings. Boeing AnalytX helps customers with real-time maintenance and engineering support necessary to make operations decisions for their Boeing aircraft, execute crew-management strategy and increase operational efficiency. <h2>How Digital Transformation Can Help Achieve Net-Zero Emissions by 2050</h2> Every industry is facing pressure from investors, regulators and consumers to incorporate more ESG and sustainability into their daily operations. According to ISG&rsquo;s Smart Manufacturing Survey, sustainability is a major objective for Global 2000 manufacturers (see chart below).&nbsp; <img src="https://isg-one.com/images/default-source/default-album/isg-smart-manufacturing-pulse-survey-2022.png?sfvrsn=fa59d731_2" data-displaymode="Original" alt="ISG-Smart-Manufacturing-Pulse-Survey-2022" title="ISG-Smart-Manufacturing-Pulse-Survey-2022" /> ISG Smart Manufacturing Pulse Survey 2022 The commercial aerospace sector can make an immense impact on its carbon emissions through operational changes, sustainable aviation fuel (SAF), new propulsion technologies (such as electric and hydrogen) and global market-based measures like carbon offsets. Companies achieving carbon neutral growth through 2030 would need billions of funding annually. Maximum investment should go toward SAF, and the remainder should be used to develop electric batteries, hybrid electric, hydrogen aircraft, renewal electricity and greenhouse production plants. Long-haul flights are responsible for the majority of global aviation emissions, and SAF is the only viable option for decarbonizing. SAF is an underutilized resource that will be critical to achieving the industry&rsquo;s net-zero emission goal by 2050. SAF is made from agriculture, household, forestry and industry wastes and delivers carbon emission savings of 70% or more. Developing countries with large agriculture sectors can benefit from establishing themselves as suppliers to this market, increasing their energy independence. In October 2022, at a meeting for the United Nations governing body for aviation ICAO, governments around the world reached a landmark agreement to aim for net-zero international aviation by 2050. The U.S.&rsquo;s pioneering use of SAF is achieving impressive results. Airlines have set ambitious targets to buy three billion gallons of SAF by 2030 &ndash; over 10% of total usage (as per World Economic Forum). Although aircraft are more fuel-efficient and greener than before, the industry still relies heavily on fossil fuels. For a greener future, it is important to transition to hydrogen fuel cells that work by converting stored chemical energy into electricity, much like a battery. The benefits of hydrogen have been in the spotlight for some time. A complete hydrogen fuel cell propulsion system can hold three to five times more energy than the equivalent mass battery electric system. A battery-electric flight is limited to short-range hops of 20-150 miles. A hydrogen fuel cell propulsion system can expand this reach by three to five times. Higher energy density, lower weight, greater reach and faster turnaround times can translate into big savings. The high energy density of hydrogen fuel cells allows them to compete directly with combustion solutions. <h2>What the Aerospace Industry Needs to Do to Digitalize</h2> Product transformation is a priority for the aerospace industry. Since Covid, the industry has accelerated its digital transformation programs to modernize operations. The digitization programs are highly fragmented due to the complexity of products, government and regulatory approvals, financial investments and technology modernization. ISG observes a great many digital thread investments are still in proof-of-concept stages and are reshaped midway due to a fragmented approach from OEMs to supply chains and unstructured data lying across them. The current scenario demands a single ownership of a digital thread across the value chain by the aerospace OEMs, which would be the single source of truth for the organization and its ecosystem. This could only happen if aerospace OEMs take the lead in addressing both the upstream and downstream challenges and requirements in their digital transformation journey. Many manufacturers have already embarked on their own fragmented digital transformation initiatives but few have connected those initiatives via digital thread into a comprehensive, end-to-end, digital transformation strategy. A robust digital thread solution would seamlessly connect engineering, manufacturing and after-market maintenance with a bi-directional data flow that would help aerospace manufacturers increase revenue streams, reduce time to market, diminish product modifications and defects, increase customer satisfaction and achieve carbon neutral growth.&nbsp;ISG can help manufacturers on this journey by using our experienced subject matter experts to build and implement a robust digital thread strategy for your company.</a10:content></item><item><guid isPermaLink="false">urn:uuid:4718bd95-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/trends-and-predictions-for-retail-and-consumer-packaged-goods-enterprises-in-the-u.k-and-emea</link><a10:author><a10:name> </a10:name></a10:author><category>Retail</category><category>Consumer Packaged Goods</category><category>UK</category><title>Trends and Predictions for Retail and Consumer Packaged Goods Enterprises in the U.K. and EMEA</title><description>The Retail and Consumer Packaged Goods (CPG) industries continue to be in a recovery phase following two very challenging years.</description><pubDate>Wed, 10 May 2023 17:55:48 Z</pubDate><a10:content type="text">The Retail and Consumer Packaged Goods (CPG) industries continue to be in a recovery phase following two very challenging years. While there is no doubt the three macro headwinds &ndash; inflation, interest rates and the war in Ukraine &ndash; will continue to have an impact in 2023, ISG sees a path to recovery. Growth is on the horizon, and we advise companies to embrace the situation and plan for the future. It is important to distinguish between three key sub-sectors: 1) Retail 2) Fashion Retail and 3) CPG. Retail and the CPG sectors are traditionally very low-margin businesses; Fashion Retail has a wide range of margin outcomes. Let&rsquo;s first look at some common trends that apply across all three: <ul> <li>Modernizing infrastructure and applications: &nbsp;Retail and CPG companies traditionally have struggled with legacy infrastructure and disjointed solutions that have grown over the years in both organic and inorganic ways. This has meant that CIOs and CDOs have had to look at strategic solutions to align with the wider business goals of enhancing customer experience and increasing agility, resilience and scalability. Given the current headwinds and impact on profit margins, it has become increasingly important to simplify, consolidate and modernize as a way to optimize spend and increase productivity for the business. Strategic simplification and consolidation programs can drive significant cost optimization; we&rsquo;ve seen 30% - 80% savings for fully in-sourced organizations and upwards of double-digit savings for mature client organizations. ISG is seeing a huge trend toward digitization and, with it, a rise in cloud and ERP adoption. To achieve these kinds of outcomes, the business and technology teams need to work collaboratively to define the overall strategy. We continue to see disjointed technology teams, which can delay major simplification programs.</li> <li>Investing in sustainability and ESG: We know now that consumers increasingly feel purpose in their purchasing decisions, but brands are struggling to put purpose first. Consumers today are conscious of sustainability and happy to pay a premium (up to 5%) for sustainable packaging and goods in general. They are also happy to wait to receive packages that are shipped together if they know it has an impact on the carbon footprint of their purchase. Companies need to adapt and respond to these changing consumer needs to be relevant and improve their brand recognition in the marketplace. This is an area that continues to require attention not only in terms of packaging but also in much wider terms, including ethical supply chains, impact to society, social values and overall governance.</li> <li>Simplifying the supply chain: Enterprises need to simplify and modernize the supply chain. They are increasingly looking at enterprise supply chain solutions with increased automation, digital engineering, digital threads and connected technology. Investments in the back office are now mandatory to stay relevant and competitive.</li> <li>Creating a customer experience strategy: Ultimately, Retail and CPG are all about the customer. They must reach the right customer at the right time, using the right channels. This requires a business-wide strategy with technology as an enabler and must be driven from the CEO office. We strongly believe that digital transformation, customer strategy and customer experience are interwoven, which is why companies are looking at a product-centric focus. The product-centric mindset requires a fundamental change in ways of working, bringing more accountability to technology teams to drive a mentality of &ldquo;one product, one business.&rdquo;</li> <li>Enhancing security: The growing number of security threats and the increasing complexity of security technologies are driving the need for Retailers to invest more in cybersecurity measures to protect their customers, employees and sensitive information. CIOs and CDOs continue to invest in cybersecurity by adopting DevSecOps to ensure security is at the heart of the product vision. The amount that Retail companies spend on cybersecurity can vary greatly but is estimated to be 4% - 6% of their overall IT budget, with larger retailers spending several million dollars per year and smaller retailers spending several hundred thousand dollars per year or less. Moreover, the increasing adoption of digital and online retail practices, such as e-commerce, mobile commerce and cloud-based services, is creating new security challenges and risks that must be addressed. As a result, retailers are expected to spend more on cybersecurity technologies, such as firewalls, intrusion detection and prevention systems, security information and event management (SIEM) solutions and multi-factor authentication. In addition, regulations such as the General Data Protection Regulation (GDPR) and the Payment Card Industry Data Security Standard (PCI DSS) are driving retailers to invest in compliance solutions and services that also contribute to the increase in cybersecurity spending.</li> <li>Enabling the contact center: The contact center is evolving fast to bridge the vital needs of both customer and employee engagement. Companies are increasingly adopting chatbots that are capable of conversational AI. With the right implementation partner, chatbots can contribute to upwards of 20% savings in human productivity. Enterprises must carefully evaluate use cases and work closely with the business to drive adoption of AI in the contact center. If implemented poorly, this technology can drive customers and employees away rather than retain them and increase loyalty. There is a clear need to balance self-service capability with the right mix of human touch to ensure companies satisfy their customers and employees and gain and retain new customers.</li> </ul> <img src="https://isg-one.com/images/default-source/default-album/trends-retail-consumer-packaged-goods-enterprises-uk-emea-1.png?sfvrsn=5753d731_0" data-displaymode="Original" alt="Trends-Retail-Consumer-Packaged-Goods-Enterprises-UK-EMEA-1" title="Trends-Retail-Consumer-Packaged-Goods-Enterprises-UK-EMEA-1" style="vertical-align: middle;" /> <h2> Retail Sector</h2> The Retail sector continues to be the most adversely affected by macro headwinds, rising inflation and energy costs. Running a store is more expensive than ever before. Although revenues have been rising year on year since the pandemic, profits are diminishing and most business are in a state of net loss. There are three key themes Retailers should consider: <ul> <li>Frictionless and automated store experience: This is the single biggest area of focus for traditional retailers. It is about enabling a checkout-free and cashier-less experience for customers who would like to shop and go about their life quickly. The traditional human checkout will continue to thrive but will be complemented by the shop-and-go technology in larger outlets. Companies need to carefully evaluate and ensure a balanced approach between the human cashier experience and the fully automated digital checkout experience. Retail stores of the future, especially big stores, will have a good balance of human and digital frictionless experiences. Consumers today are technology savvy and are looking for quick shop-and-go experiences. This can be made possible only with increased automation, digitalization and a connected-systems approach across the store from cart to exit.</li> <li>Omnichannel one experience: Consumers are opting for hybrid shopping experiences with online and store channels being equally attractive. The pandemic has accelerated the move toward the e-commerce experience, with most traditional retailers adopting this channel only in the last few years. Enabling an omnichannel experience and providing a seamless customer experience requires business and technology teams to work holistically and with a product mindset.</li> <li>Home delivery service: Home delivery service continues to be a challenge given most grocers continue to find this a loss-making channel. There is a need for increased investment to improve the delivery distribution network to make this channel a more profitable one. If enterprises focus on solving this, it will be a differentiator for them in the marketplace.</li> </ul> <img src="https://isg-one.com/images/default-source/default-album/trends-retail-consumer-packaged-goods-enterprises-uk-emea-2.png?sfvrsn=8453d731_0" data-displaymode="Original" alt="Trends-Retail-Consumer-Packaged-Goods-Enterprises-UK-EMEA-2" title="Trends-Retail-Consumer-Packaged-Goods-Enterprises-UK-EMEA-2" style="vertical-align: middle;" /> <h2> Fashion Retail Sector</h2> Different Fashion Retailers come in different shapes and sizes and tend to face similar issues. Luxury Fashion Retailers have greater margins than low-cost Fashion Retailers, which allow them to focus more on customer experience and quality. Inflation has reduced consumers&rsquo; disposable income for fashion goods; they are increasingly looking for value purchases through sales and offers. There are three key trends Fashion Retailers should be aware of: <ul> <li>Digital brand experience: the pandemic has accelerated the move toward the digital shopper. Although consumers today are pivoting back to the hybrid shopping experience of both online and in-store, it is clear the biggest challenge will be to ensure the brand feel and experience flows seamlessly across stores through to the digital channels. Enabling an omnichannel experience across the wider channels and bringing a seamless customer experience requires business and technology teams to work holistically and with a product mindset. </li> <li> Hyper-personalization: We are seeing increasing investment into the potential of using data for hyper-personalization. Data is only useful if companies can harness it and make practical sense of it. Companies must design a data strategy that helps them with product differentiation and adaptation to changing consumer needs. A data strategy should be thought through from the ground up and use microservices, API-led, cloud-first and headless (MACH) architecture to allow a seamless data layer to act as a single source of truth. Knowing consumer behavior trends is the single biggest differential in this space. We are seeing increased investment in data ecosystems, smart analytics &amp; AI/ML at scale and connected ecosystems that leverage IoT to enable and empower the era of hyper-personalization. </li> <li> AR/VR and the metaverse: Augmented reality (AR) and virtual reality (VR) bridge the digital and physical worlds and are being adopted more and more by Fashion Retailers. The future trend is toward a full 360-degree digital experience, in which a shopper can embrace AR/VR capability to carry out their shopping in a fully virtual metaverse. Retailers are adopting these technologies. With new technology come new changes; it is important that businesses put in place KPIs and customer loyalty programs that ensure they reap the full benefits from these new channels. </li> </ul> <img src="https://isg-one.com/images/default-source/default-album/trends-retail-consumer-packaged-goods-enterprises-uk-emea-3.png?sfvrsn=b553d731_0" data-displaymode="Original" alt="Trends-Retail-Consumer-Packaged-Goods-Enterprises-UK-EMEA-3" title="Trends-Retail-Consumer-Packaged-Goods-Enterprises-UK-EMEA-3" style="vertical-align: middle;" /> <h2> Consumer packaged goods (CPG) Sector</h2> CPG has seen a great deal of merger-and-acquisition activity that requires standardization and integration to reap the benefits of scale and size. There continues to be value in simplification, consolidation and modernization in creating a global business model that can scale to meet strategic business objectives. Standardization will be a key theme that continues to resonate across this sector. CPG companies often face challenges such as sales optimization, operational efficiency, supply chain efficiency and sustainability. CPG companies should enable the direct-to-consumer channel as this is an untapped and lucrative product channel. <center><img src="https://isg-one.com/images/default-source/default-album/trends-retail-consumer-packaged-goods-enterprises-uk-emea-4.png?sfvrsn=e253d731_0" data-displaymode="Original" alt="Trends-Retail-Consumer-Packaged-Goods-Enterprises-UK-EMEA-4" title="Trends-Retail-Consumer-Packaged-Goods-Enterprises-UK-EMEA-4" style="vertical-align: middle;" /></center> &nbsp; While ISG sees a continued period of pain for Retailers and CPG companies through the current macro headwinds, we also see a path toward long-term recovery and growth. There are many opportunities to optimize costs across the sector to fund future modernization and customer programs. ISG works with enterprises to review their IT and business strategies and lay the foundation for future success. It is no longer an option to just keep the lights on; it is necessary to invest in modernization and customer-centric programs.</a10:content></item><item><guid isPermaLink="false">urn:uuid:8d15ba95-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/ready-or-not-the-industrial-metaverse-is-here-(and-you-may-already-be-in-it)</link><a10:author><a10:name> </a10:name></a10:author><category>Emerging Technology</category><category>Metaverse</category><category>Manufacturing</category><category>Digital Engineering</category><category>UK</category><title>Ready or Not, the Industrial Metaverse Is Here (and You May Already Be in It)</title><description>The industrial metaverse is the ultimate environment in which all digital engineering transformation and digital thread initiatives come to fruition.</description><pubDate>Tue, 12 Jul 2022 20:03:49 Z</pubDate><a10:content type="text"><div style="float:right;margin-left:20px;margin-right:20px;">{{cta:sice-2022}}</div> There is a lot of talk about <a href="https://isg-one.com/articles/how-business-should-think-strategically-about-web3-and-the-metaverse">the metaverse as an integrated network of 3D virtual worlds</a> &ndash; and its impact on life and business. The industrial metaverse doesn&rsquo;t generate as much attention, but it is still surrounded by misunderstanding among many manufacturers. Manufacturers that are giving it serious consideration are positioning themselves to lead in what is becoming a multibillion-dollar business opportunity &ndash; an opportunity that offers nonlinear revenues, savings and efficiency improvements and does not depend on selling virtual products to avatars. Successfully commercializing the metaverse will enable manufacturers to maintain their assets and products for much longer and lengthen their monetization timeline. An <a href="https://www.pewresearch.org/internet/2022/06/30/the-metaverse-in-2040/">article from the Pew Research Center</a> defines the metaverse as &ldquo;the realm of computer-generated, networked extended reality, or XR, an acronym that embraces all aspects of augmented reality, mixed reality and virtual reality (AR, MR and VR).&rdquo; ISG finds this definition somewhat limiting. We start from a different definition, one that expands the focus from business-to-consumer interactions to a broader business-to-business-to-consumer perspective. <h2>How to Define the Industrial Metaverse</h2> ISG defines the industrial metaverse as the realm of all resources that can be digitally accessed by a company and the entire ecosystem of suppliers, partners and customers in a secure, intelligent and connected environment. Based on this definition, the industrial metaverse is the ultimate environment in which all <a href="https://isg-one.com/advisory/digital-engineering">digital engineering</a>&nbsp;transformation and digital thread initiatives come to fruition, not only from the social and consumer perspectives but from a business and operating model perspective as well. These digital threads can connect suppliers, partners, production and distribution facilities, dealers, distributors, company or third-party service agents, customers and other stakeholders. The connections and beneficial use cases don&rsquo;t need to have anything to do with the &ldquo;traditional&rdquo; view of the metaverse, where people connect for gaming or to buy, sell or trade virtual products. These same opportunities exist for manufacturers as way to monetize their goods, but there are also better, industrial-specific use cases. If you&rsquo;re still unsure about what the industrial metaverse is, consider this: if your company has done anything with robotics, <a href="https://isg-one.com/articles/digital-twin-a-foundation-for-a-secure-intelligent-and-connected-enterprise">digital twins</a>, simulations enhanced with <a href="https://isg-one.com/advisory/automation">AI and analytics</a>, IoT, <a href="https://isg-one.com/advisory/digital-engineering">immersive engineering design</a>, augmented or virtual reality (AR/VR) for training or <a href="https://isg-one.com/research/podcasts/isg-blockchain-now-podcasts">blockchain</a>, then you already have experience with one or more elements of the industrial metaverse. Many of its building blocks are not new. What&rsquo;s new is how they are being combined and applied in new use cases. What sets industrial metaverse apart from earlier and, in some instances, still-evolving technologies like IoT, AR/VR, digital twin and others is the emphasis on collaboration. One of the best examples is of designers, engineers, dealers and selected end customers coming together from remote locations to collaboratively design and test new products; they can view 3D models and simulations in the industrial metaverse and discuss them in real time. <h2>Collaboration as a Goal of the Industrial Metaverse</h2> Harnessing collaboration &ndash; whether it is within the company, with suppliers, distributors, other partners or customers &ndash; is a leading value lever for the industrial metaverse. This focus on collaboration is what makes Web3 and blockchain valuable components of the industrial metaverse. Blockchain offers a way to provide a unique, unalterable digital identity and record that can be securely accessed by stakeholders without relying on a central authority or clearinghouse. The industrial metaverse provides a way to securely link the physical and digital worlds, often using event data and other input captured through IoT. By applying AI and other software to this data, many use cases are possible related to planning, real-time response, maintenance and OT optimization, agile product development, improved quality, customer engagement and more. Many of these use cases can be scaled and commercialized through as-a-service models, creating new revenue stream opportunities. Many enterprises do not have the infrastructure or vision to take full advantage of the metaverse, but they are moving there. Energy companies are currently directing 18% of their digital investment budgets to metaverse, according to <a href="https://www.pewresearch.org/internet/2022/06/30/the-metaverse-in-2040/">the Pew Research study</a> that also found automotive, machinery and assembly companies are budgeting 17%. Those industries all exceed the level of investment from the media and entertainment industry (15%), which is seen as the leader in metaverse development and commercialization. Among all industries, 57% of companies that consider themselves &ldquo;metaverse aware&rdquo; are adopting the technology. If manufacturers link their building blocks into digital threads across the extended value chain, the industrial metaverse will ultimately be the business environment from which all new products, services and customer experiences will be envisioned, designed and tested, and where the physical world will be governed. It&rsquo;s time to start putting the strategy, infrastructure and governance building blocks into place at your company. ISG is helping enterprises understand, appreciate and strategize how they can prepare for Web3 and the industrial metaverse.&nbsp;<a href="https://isg-one.com/contact-us">Contact us</a>&nbsp;to talk about next steps.</a10:content></item><item><guid isPermaLink="false">urn:uuid:9daab995-f644-6a14-bdc7-ff0100f6f5b0</guid><link>https://isg-one.com/articles/lets-talk-about-partner-ecosystems-with-lois-and-ant</link><a10:author><a10:name> </a10:name></a10:author><category>Sourcing</category><category>ISG Governx</category><category>UK</category><title>Let's Talk About Partner Ecosystems with Lois and Ant</title><description>In this video conversation, ISG's Lois Coatney and Anthony Drake discuss sourcing models, risk profiles, the value of niche vs. strategic partnerships and more.</description><pubDate>Fri, 20 May 2022 20:16:45 Z</pubDate><a10:content type="text">In this video conversation, ISG's Lois Coatney and Anthony Drake discuss evolving sourcing models, how to understand and manage risk profiles, the value of niche vs. strategic partnerships and more. Watch below! <iframe width="560" height="315" src="https://www.youtube.com/embed/4Mn6uKjzD8Y" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture"></iframe>&nbsp; </a10:content></item><item><guid isPermaLink="false">urn:uuid:1601b995-f644-6a14-bdc7-ff0200f6f5b0</guid><link>https://isg-one.com/articles/evolution-of-the-data-center-how-to-modernize-your-it-infrastructure</link><a10:author><a10:name> </a10:name></a10:author><category>Smart Industry</category><category>UK</category><title>Evolution of the Data Center: How to Modernize Your IT Infrastructure</title><description>This ISG white paper Evolution of the Data Center: How to Modernize Your IT Infrastructure explores how data centers are changing to support the enterprise of the future.</description><pubDate>Tue, 29 Mar 2022 19:16:53 Z</pubDate><a10:content type="text"><h2>Next Generation Data Center</h2> As companies have grown more and more dependent on technology and data to connect with and serve their customers, demand on IT has skyrocketed. Technology organizations have responded to rising client demands and showcased huge innovations and solutions to cater to customer needs and challenges. With the growth of technology solutions and increasing reliance on technology, the need for next-generation data centers has also grown. ISG believes roughly 2% to 3% of the world's energy utilization comes from data centers alone, and that this number will only grow with the increased reliance on technology and data. Of course, data centers today are no longer constrained by brick walls. Let&rsquo;s take cloud as an example. Cloud should be thought as an overlay service with a physical data center underlay that resides somewhere or might even be spread across the globe. This means the interpretation of what constitutes a data center is evolving rapidly and can now be seen as a dynamic collection of cloud and traditional server resources that reside in disparate physical locations and have a smart service wrapper that brings them together. This is where the next-generation data center begins. <img src="https://isg-one.com/images/default-source/default-album/evolution-of-the-data-center.png?sfvrsn=56cad731_0" data-displaymode="Original" alt="Evolution-of-the-Data-Center" title="Evolution-of-the-Data-Center" /> Figure 1: The Evolution of the Data Center <h2>Challenges Facing Traditional Data Center</h2> In a holistic sense, data centers face a number of issues. These include: <ul style="list-style-type: disc;"> <li>High cost of maintenance and management with major focus on fixed costs </li> <li>High cost of energy consumption (and increase of tariffs) </li> <li>High dependency on local human labor </li> <li>Latency issues giving rise to relatively poor client experience </li> <li>High initial capital investment with long depreciation periods </li> <li>Slow pace of and limited potential for scalability</li> </ul> How is the next-generation data center solving these important issues? One of the biggest challenges with the traditional data center is the pain of managing a large infrastructure estate with high dependency on human involvement. Historically, management of IT infrastructure has been a tedious and labor-intensive manual process, which caused errors and inefficiencies that then required even more human intervention. Labor and estate costs could not be easily adapted to volatile demand or business development needs and incurred a consistently high expense. This ISG white paper Evolution of the Data Center: How to Modernize Your IT Infrastructure explores how data centers are changing to support the enterprise of the future. <a href="https://isg-one.com/docs/default-source/default-document-library/isg-white-paper-evolution-of-the-data-center.pdf">Download this white paper.</a> {{INLINE}} </a10:content></item><item><guid isPermaLink="false">urn:uuid:669bb895-f644-6a14-bdc7-ff0200f6f5b0</guid><link>https://isg-one.com/articles/infographic-the-three-pillars-of-a-successful-digital-twin-program</link><a10:author><a10:name> </a10:name></a10:author><category>Manufacturing</category><category>Digital Engineering</category><category>UK</category><title>Infographic: The Three Pillars of a Successful Digital Twin Program</title><description>To ensure your digital twin initiatives achieve business outcomes, we suggest building three essential pillars.</description><pubDate>Mon, 28 Feb 2022 16:30:49 Z</pubDate><a10:content type="text">To ensure your digital twin initiatives achieve business outcomes, we suggest building three essential pillars. 1. Identify the value proposition of a digital twin initiative. This is a cornerstone of your digital twin program, as it affects the subsequent components. It is often neglected in many organizations, especially in environments where digital twin applications have proliferated from the &ldquo;bottom up.&rdquo; Typical blind spots in achieving this goal include: <ul> <li>Missing a wider stakeholder alignment on business value</li> <li>Failing to identify which processes and workflows are affected; which new roles, skills and governance mechanism are needed to track the progress/ value realization</li> <li>Identifying and involving too late external partners that can provide solutions regarding data collection, storage, analysis and the software and platforms for data management.</li> </ul> Recommendation: Whether you are addressing greenfield or brownfield scenarios, start by focusing on three to four use cases in which businesses and customers would appreciate the value, and build a &ldquo;minimum viable digital twin.&rdquo; This allows an incremental approach, by demonstrating the benefits and thus delighting stakeholders and continuously improving. Involving players in the ecosystem early in the solution design is critical here. 2. Address the magic trio upfront and create a stage for continuous deployment. Digital twins combine data, connectivity and processing. It&rsquo;s critical to address this trio upfront at the solution design stage. Typical blind spots include:&nbsp; <ul> <li>Neglecting the data diversity, integration and privacy/cybersecurity issues that can pose critical challenges</li> <li>Locking the solution early with little-to-no room for a continuously evolving digital twin solution.</li> </ul> Recommendation: A common approach is to&nbsp;<a href="https://isg-one.com/articles/digital-product-it-a-new-responsibility-for-manufacturers-on-the-iot-journey">standardize the data structure and communication layers to tie diverse data</a>&nbsp;across IT, operational technology (OT), <a href="https://isg-one.com/advisory/digital-engineering">engineering technology</a>&nbsp;(ET) and consumer technology (CT). A unified, developer-friendly data model is the backbone of all digital twin implementations. For cybersecurity, in addition to deploying internal safeguards, be sure to assess what security responsibility the partners are owning and ensure the digital twin implementation will not endanger enterprise systems. Another critical step is to establish a mechanism for continuously updating the high-fidelity digital twin model from the beginning. In scenarios in which knowledge of the digital twin deployment environment is unknown, you want an incremental approach to improve digital twin maturity, as more real-world data is integrated into it. 3. Enable a connected organization and ecosystem. Digital twin technology can be a game-changer in today&rsquo;s secured, intelligent, connected economy. It does so by creating value for end users and finding business models that allow profit-making for various ecosystem players. A typical blind spot here is the lack of a standardized and proven mechanism for secure data-sharing across ecosystem players, including companies, customers, suppliers and contractors. While digital twin standards are emerging, the required pull / acceptance from the end-users and markets will determine which standards bring business value. Companies tend to make the mistake of getting engineers and data scientists into a room, focusing on digital twin standards and protocols and then writing custom code. Recommendation: While exploring emerging innovative and sometimes open-source technological solutions in the market, especially in the data management and integration space, can be helpful, the integration platforms need to go one level deeper. Work to unify and automate the integration process to make it future-proof. Results here are made better by trying to make the least possible number of assumptions about the evolving use cases in the secure, intelligent, connected economy. Don&rsquo;t forget that it requires fundamental change management to break up siloes within the organization and beyond, in the ecosystem, to impart new skills, processes and governance required for digital twin deployments. To learn more about Digital Twin, its evolution journey and its use cases, read more in our article &ldquo;<a href="https://isg-one.com/research/articles/full-article/digital-twin-a-foundation-for-a-secure-intelligent-and-connected-enterprise">Digital Twin: A Foundation for a Secure, Intelligent and Connected Enterprise</a>&rdquo; and download our full report. <img src="https://isg-one.com/images/default-source/default-album/three-pillars-digital-twin-program.png?sfvrsn=dfd231_2" data-displaymode="Original" alt="Three-Pillars-Digital-Twin-Program" title="Three-Pillars-Digital-Twin-Program" /> </a10:content></item><item><guid isPermaLink="false">urn:uuid:f99ab895-f644-6a14-bdc7-ff0200f6f5b0</guid><link>https://isg-one.com/articles/infographic-digital-twin-use-cases</link><a10:author><a10:name> </a10:name></a10:author><category>Manufacturing</category><category>Digital Engineering</category><category>UK</category><title>Infographic: Digital Twin Use Cases</title><description>No matter the industry, most organizations are aiming to take the lead in a “secure, intelligent and connected economy.”</description><pubDate>Mon, 28 Feb 2022 16:26:33 Z</pubDate><a10:content type="text">No matter the industry, most organizations are aiming to take the lead in a &ldquo;secure, intelligent and connected&nbsp;economy.&rdquo; In this economy, <a href="https://isg-one.com/research/articles/full-article/the-arrival-of-digital-engineering-megatrends-driving-engineering-services">the future of product development/engineering, manufacturing, supply chain and aftermarket systems</a> hinges on companies&rsquo; abilities&nbsp; to build and exploit information models.&nbsp;With IIoT and real-time analytics, we have a wide range of adaptive machines and systems capable of automatically transmitting information about their status, performance and usage. This can create new levels of operational and strategic business value with real-time data that feeds decision-making across the organization. It is here that digital twin technology becomes an absolute game changer. The pandemic has only accelerated the awareness of and the interest in investing in a holistic digital twin program. Business value for digital twin implementations can be found across the end-to-end business value chain of plan-build-operate-maintain. The benefits typically revolve around new business models, faster product launches and operational efficiency and resiliency. Most digital twin use cases fall into one of the following six categories. <ul> <li>Customer Proximity </li> <li>Speed &amp; Agility</li> <li>Operational Excellence &amp; Resilience</li> <li>Appreciating Assets</li> <li>Customer Experience</li> <li>Navigate Complexity in Connected Economy</li> </ul> To learn more about Digital Twin, its evolution journey and how to implement a successful Digital Twin program, read more in our article &ldquo;<a href="https://isg-one.com/research/articles/full-article/digital-twin-a-foundation-for-a-secure-intelligent-and-connected-enterprise">Digital Twin: A Foundation for a Secure, Intelligent and Connected Enterprise</a>&rdquo; and download our full report. <img src="https://isg-one.com/images/default-source/default-album/six-digital-twin-use-cases.png?sfvrsn=95ded231_0" data-displaymode="Original" alt="Six-Digital-Twin-Use-Cases" title="Six-Digital-Twin-Use-Cases" style="vertical-align: middle;" /></a10:content></item><item><guid isPermaLink="false">urn:uuid:869ab895-f644-6a14-bdc7-ff0200f6f5b0</guid><link>https://isg-one.com/articles/digital-twin-a-foundation-for-a-secure-intelligent-and-connected-enterprise</link><a10:author><a10:name> </a10:name></a10:author><category>Manufacturing</category><category>Digital Engineering</category><category>UK</category><title>Digital Twin: A Foundation for a Secure, Intelligent and Connected Enterprise</title><description>Digital twin technology has generated a remarkable amount of attention in the past few years.</description><pubDate>Mon, 28 Feb 2022 16:00:42 Z</pubDate><a10:content type="text"><h2>Digital Twin &ndash; the Heat, the Noise and the Myths</h2> Digital twin technology has generated a remarkable amount of attention in the past few years. A simple Google search on digital twin gives over 2.4 billion results! What was once considered as a &ldquo;nice to have&rdquo; initiative by R&amp;D departments is now fast becoming a &ldquo;must have&rdquo; initiative with a wider scope, in the context of a connected enterprise. There are new digital twin standards emerging such as <a href="https://www.nist.gov/">National Institute of Standards and Technology</a> (NIST), <a href="https://www.digitaltwinconsortium.org/">Digital Twin Consortium</a> and <a href="https://www.iso.org/home.html">International Organization for Standardization</a> (ISO). Some industrial players are investing heavily to drive standardization efforts on their own. Definitions for digital twin abound. For example, the Digital Twin Consortium defines a digital twin as &ldquo;a virtual representation of real-world machines and processes, synchronized at a specified frequency and fidelity.&rdquo; But no matter which definition or standard appeals you, when there is heat and noise, there are bound to be myths surrounding it. Here are a few of the most common myths we hear about digital twin technology: <ul style="list-style-type: disc;"> <li>Digital twin is an off-the-shelf and plug-n-play technology; I will cross this bridge when I get there.</li> <li>Digital twin is only for Aerospace and asset-heavy industries, and I don&rsquo;t have to worry about it for the next five years</li> <li>Digital twin is only for engineering and can be implemented for new product design / greenfield applications.</li> <li>If I simply update my PLM system, I can reap the benefits of a digital twin technology </li> <li>We have a Data Lake project running, let&rsquo;s rename it &ldquo;digital twin&rdquo; and reap the benefits</li> <li>Digital twin is the same as model-based systems engineering (MBSE)</li> </ul> <h2>What Is the Promise of Digital Twin in Today&rsquo;s Market?</h2> No matter the industry, most organizations are aiming to take the lead in a &ldquo;secure, intelligent and connected&nbsp;economy.&rdquo; In this economy, <a href="https://isg-one.com/research/articles/full-article/the-arrival-of-digital-engineering-megatrends-driving-engineering-services">the future of product development/engineering, manufacturing, supply chain and aftermarket systems</a> hinges on companies&rsquo; abilities&nbsp; to build and exploit information models.&nbsp;With IIoT and real-time analytics, we have a wide range of adaptive machines and systems capable of automatically transmitting information about their status, performance and usage. This can create new levels of operational and strategic business value with real-time data that feeds decision-making across the organization. It is here that digital twin technology becomes an absolute game changer. The pandemic has only accelerated the awareness of and the interest in investing in a holistic digital twin program. <h2>Which Are Early-adoption Digital Twin Successes?</h2> Business value for digital twin implementations can be found across the end-to-end business value chain of plan-build-operate-maintain. The benefits typically revolve around new business models, faster product launches and operational efficiency and resiliency. Most digital twin use cases fall into one of the following six categories. Figure 1: Digital Twin Use Cases <img src="https://isg-one.com/images/default-source/default-album/digital-twin-use-cases.png?sfvrsn=f2ddd231_0" data-displaymode="Original" alt="Digital-Twin-Use-Cases" title="Digital-Twin-Use-Cases" />&nbsp; Source: ISG <h2>How is Digital Twin Technology Evolving?</h2> We see digital twin technology evolving across four dimensions: coverage, definition, technology and scalability. <ol> <li>Digital twin coverage has expanded from cradle to grave, infusing the full lifecycle of a product from inception across the product&rsquo;s value chain.</li> <li>Digital twin definitions have evolved by swinging from basic to esoteric and then to more practical and &ldquo;hybrid&rdquo; definitions in between.</li> <li>Digital twin scalability is expanding from a focus on increasing functionality to encompass increasing integration, interoperability and data exchange within the ecosystem. </li> <li>Digital twin technology has evolved from on-prem simulation tools to combine the power of digital twin functionality with cloud/big data, cognitive, AI and mixed AR-VR reality.</li> </ol> Figure 2: Digital Twin Evolution <img src="https://isg-one.com/images/default-source/default-album/digital-twin-evolution.png?sfvrsn=23ded231_0" data-displaymode="Original" alt="Digital-Twin-Evolution" title="Digital-Twin-Evolution" />&nbsp; Source: ISG A digital twin maturity assessment can offer a multi-pronged look at a company&rsquo;s a) value-based strategy, b) architecture, technology and tools, c) data and models, and d) organizational and ecosystem aspects. <h2>The Three Pillars of a Successful Digital Twin Program </h2> To ensure your digital twin initiatives achieve business outcomes, we suggest building three essential pillars. 1. Identify the value proposition of the digital twin initiative. This is a cornerstone of your digital twin program, as it affects the subsequent components. It is often neglected in many organizations, especially in environments where digital twin applications have proliferated from the &ldquo;bottom up.&rdquo; Typical blind spots in achieving this goal include: <ul> <li>Missing a wider stakeholder alignment on business value</li> <li>Failing to identify which processes and workflows are affected; which new roles, skills and governance mechanism are needed to track the progress/ value realization</li> <li>Identifying and involving too late external partners that can provide solutions regarding data collection, storage, analysis and the software and platforms for data management. </li> </ul> Recommendation: Whether you are addressing greenfield or brownfield scenarios, start by focusing on three to four use cases in which businesses and customers would appreciate the value, and build a &ldquo;minimum viable digital twin.&rdquo; This allows an incremental approach, by demonstrating the benefits and thus delighting stakeholders and continuously improving. Involving players in the ecosystem early in the solution design is critical here. 2. Address the magic trio upfront and create a stage for continuous deployment. Digital twins combine data, connectivity and processing. It&rsquo;s critical to address this trio upfront at the solution design stage. Typical blind spots include:&nbsp; <ul> <li>Neglecting the data diversity, integration and privacy/cybersecurity issues that can pose critical challenges</li> <li>Locking the solution early with little-to-no room for a continuously evolving digital twin solution.</li> </ul> Recommendation: A common approach is to <a href="https://isg-one.com/articles/digital-product-it-a-new-responsibility-for-manufacturers-on-the-iot-journey">standardize the data structure and communication layers to tie diverse data</a> across IT, operational technology (OT), <a href="https://isg-one.com/advisory/digital-engineering">engineering technology</a>&nbsp;(ET) and consumer technology (CT). A unified, developer-friendly data model is the backbone of all digital twin implementations. For cybersecurity, in addition to deploying internal safeguards, be sure to assess what security responsibility the partners are owning and ensure the digital twin implementation will not endanger enterprise systems. Another critical step is to establish a mechanism for continuously updating the high-fidelity digital twin model from the beginning. In scenarios in which knowledge of the digital twin deployment environment is unknown, you want an incremental approach to improve digital twin maturity, as more real-world data is integrated into it. 3. Enable a connected organization and ecosystem. Digital twin technology can be a game-changer in today&rsquo;s secured, intelligent, connected economy. It does so by creating value for end users and finding business models that allow profit-making for various ecosystem players. A typical blind spot here is the lack of a standardized and proven mechanism for secure data-sharing across ecosystem players, including companies, customers, suppliers and contractors. While digital twin standards are emerging, the required pull / acceptance from the end-users and markets will determine which standards bring business value. Companies tend to make the mistake of getting engineers and data scientists into a room, focusing on digital twin standards and protocols and then writing custom code. Recommendation: While exploring emerging innovative and sometimes open-source technological solutions in the market, especially in the data management and integration space, can be helpful, the integration platforms need to go one level deeper. Work to unify and automate the integration process to make it future-proof. Results here are made better by trying to make the least possible number of assumptions about the evolving use cases in the secure, intelligent, connected economy. Don&rsquo;t forget that it requires fundamental change management to break up siloes within the organization and beyond, in the ecosystem, to impart new skills, processes and governance required for digital twin deployments. Most organizations we speak to are dabbling in digital twin initiatives in some shape or form and have experienced the first taste of success. However, enterprise&rsquo;s ability to implement digital twin technology on a&nbsp; large scale is still at a nascent stage. This is not just because of the technological advances but because business value from digital twin initiatives is realized only with changes on the organizational and ecosystem levels as well. ISG helps enterprises assess, design and source for digital twin capability. <a href="https://isg-one.com/advisory/digital-engineering">Learn more</a>&nbsp;to find out how we can help you. Listen to the podcast:&nbsp;<a href="https://isg-one.com/research/articles/full-article/isg-imagine-your-future-podcast-episode-27-what-is-digital-engineering-and-why-does-it-matter">ISG Imagine Your Future&reg; Podcast &ndash; Episode 27: What Is Digital Engineering and Why Does It Matter?</a> <a href="https://isg-one.com/docs/default-source/default-document-library/isg-white-paper_digital-twin_a-foundation-for-sice.pdf">Download this white paper</a> {{INLINE}}</a10:content></item><item><guid isPermaLink="false">urn:uuid:599bb795-f644-6a14-bdc7-ff0200f6f5b0</guid><link>https://isg-one.com/articles/the-arrival-of-digital-engineering-megatrends-driving-engineering-services</link><a10:author><a10:name> </a10:name></a10:author><category>Smart Industry</category><category>Manufacturing</category><category>Digital Engineering</category><category>UK</category><title>The Arrival of Digital Engineering: Megatrends Driving Engineering Services</title><description>As we look back over the past decade from what is now a networked, intelligent and connected economy, we see the field of engineering as a transformed field.</description><pubDate>Wed, 08 Dec 2021 20:03:20 Z</pubDate><a10:content type="text">As we look back over the past decade from what is now a networked, intelligent and connected economy, we see the field of engineering as a transformed field. People used to equate engineering with the act of designing a product. Now it&rsquo;s a means to a converged digital transformation in a connected enterprise and a way to stay relevant in a fast-changing market. <a href="https://isg-one.com/advisory/digital-engineering">Digital engineering</a>&nbsp;has gone beyond the engineering department to enable new business models, deliver superior customer experiences and realize operational efficiencies. We see this trend cutting across multiple industries. John Deere, the tractor company, has launched what is essentially a software business. Schindler and KONE have gone beyond elevator manufacturing to sell mobility solutions. Bosch no longer just makes appliances; it taps into IoT, monitoring and analytics tools. Verizon doesn&rsquo;t just sell &ldquo;network pipes&rdquo; but offers additional services to enable a connected enterprise. A Tier-1 aerospace company no longer sells only landing gear or braking systems; it sells numbers of landings. <h2>Engineering transformation: Engineering is not the same anymore</h2> Engineering has changed in many ways. For instance, the cycle of delivery used to end with the point of sale. Now, the original equipment manufacturer (OEM) has to keep a product relevant for years through small, continuous releases that keep it aligned to consumer behavior. This has changed the way <a href="https://isg-one.com/research/articles/full-article/where-manufacturers-are-investing-in-technology">manufacturers think about sunset and capitalization</a>&nbsp;by extending the life of the product. Over-the-air (OTA) updates are deployed not only by companies like Tesla. They are finding their way in the industrial industries to keep the equipment current and sustainable over years. <img src="https://isg-one.com/images/default-source/default-album/digital-engineering-services-1.png?sfvrsn=f4dedd31_0" data-displaymode="Original" alt="Digital-Engineering-Services-1" title="Digital-Engineering-Services-1" style="vertical-align: middle;" /> Figure: Engineering is not the same anymore Also, the way businesses capture profits has changed. Selling hardware and products used to be the dominant way of realizing profit. Now, additional profit streams come from services, software and data insights that allow enterprises to get closer to their customers. Schindler still sells elevators, but insights from the use, maintenance and operations data can result in more revenue streams. Engineering has become a means to a converged digital transformation across multiple domains of an enterprise. <h2>COVID acts as a catalyst </h2> The global pandemic hastened the digital engineering uptake. According to the <a href="https://isg-one.com/research/articles/isg-index">3Q 2021 Global ISG Index</a>&trade;, the annual contract value (ACV) for engineering services in the third quarter of 2021 rose 40 percent from the prior quarter and grew 300 percent from a year prior. Consolidation, another measure of a red-hot industry, has increased significantly. Six of the top 26 engineering firms have been acquired since 2019, and industrial companies have spent more than $20 billion on software- and engineering-related acquisitions in the past 18 months. Organizations had already begun moving toward digital transformation when COVID hit and knocked supply chains offline. COVID acted as a catalyst towards a converged and a top-down, bottom-up approach to transformation. Use cases such as digital twins came down from PowerPoint slides and into reality as a way to ensure sustainability, resiliency and predictability of events and to make value chains more transparent. Companies tried to bridge the gap between information technology (IT) and operational technology (OT) &mdash; essentially, between computers and industrial machinery &mdash; to be able to predict failure in their operations and find solutions that would enable remote access and thus remote maintenance and autonomous operations. Similarly, enabling remote working was not limited to &ldquo;office IT,&rdquo; but enterprises needed to enable globally distributed product development that leverages remote/extended teams and virtualization and cloud technologies. In this context, we see a few key megatrends emerging that will drive the engineering services industry over the next three to five years. <h2>1. IT, OT, ET and CT converge for improving the odds of transformation success</h2> Over the last few years, many companies faced the compulsion to &ldquo;do a transformation,&rdquo; most of which were driven in siloes, by either IT or OT leadership. This resulted in millions of dollars spent on transformation initiatives with few being scaled up or fully realizing the intended business value. There is a clear realization now that digital engineering-led transformation must be looked at holistically across IT, OT, engineering technology (ET) and consumer technology (CT). To avert this disconnect, four levers come into play. They include: 1) realigned data, 2) a reimaged organization, 2) a redesigned ecosystem and 4) reshaped security. <ol> <li>Realigned data means information flows across multiple domains of the connected enterprise and even beyond, within a connected ecosystem. </li> <li>A reimagined organization blurs the roles of COO, CIO, CDO and CTO, with a new split of responsibilities, know-how and reskilling across organizational domains. Those looser boundaries will blur ecosystem boundaries, too, to enable sell-to and sell-with opportunities. </li> <li>A redesigned ecosystem effectively manages the split between hardware and software responsibilities and flexible and modular contracts so multiple players can provide services. </li> <li><a href="https://isg-one.com/industries/manufacturing/articles/ot-security-vulnerability-the-enterprise-s-achilles-heel">Reshaped security</a> will address vulnerability to cyberattacks, especially in companies where OT is full of legacy systems. Organizations need a business continuity plan for critical functions and enterprise security alone will no longer suffice.</li> </ol> <h2>2. Industry 4.0 matures, augmented by digital twin/digital thread, IoT and edge computing</h2> Industry 4.0 is maturing on multiple fronts. Companies are increasingly adopting digital twin and digital thread technologies to manage the &ldquo;system lifecycle&rdquo; and improve services revenue, supply chain traceability and connected product offerings. Traditional product lifecycle management (PLM) solutions were designed for a single company department working in isolation and are not efficient in extracting value from data that lies at the essence of Industry 4.0. Digital PLM, connected PLM, digital twins, <a href="https://isg-one.com/articles/digital-product-it-a-new-responsibility-for-manufacturers-on-the-iot-journey">and IoT solutions</a> are combining networking, software, data and analytics to enable new use cases, such as improved asset utilization, enhanced asset performance, predictive maintenance and resilient and demand-driven supply chains. While the cloud is a key enabler for these use cases, &ldquo;cloud only&rdquo; solutions may turn out to be expensive (e.g., network bandwidth and data storage options) or may fail to meet the latency and security/privacy requirements in some mission-critical cases. Connected systems are now no longer &ldquo;cloud only&rdquo; but necessitate optimization of cloud-edge as one continuum. <h2>3. Software and data-driven capabilities become table stakes.</h2> Enhanced customer experience, agility and new business models lie at the heart of the third megatrend. Software excellence and data insights allow the enterprises to tune their products, services and business models to customer needs. This has some fundamental repercussions. Companies will likely need to unbundle hardware, software and industrial DevOps and increase virtualization and cloudification, which will spur a dramatic shift in skills and talent. Talent acquisition and retention become big obstacles to transformation as enterprises increasingly take greater control of the software domains inhouse. Managing the software development lifecycle also has some specific requirements, such as maintenance/management over long lifecycles and continuous development methodology. This calls for a revising the operating model toward a software and data-driven organization. The way businesses design, deliver, consume and partner to source will never be the same. Given these three trends, what should organizations do next? Mastering the new rules of the game for a networked, intelligent and connected economy include designing a new software operating model, optimizing a cloud-edge continuum and establishing digital twin/thread capabilities. Companies must manage quality and security &ldquo;by design,&rdquo; build resilient operations and supply chains, revitalize legacy applications and collaborate with the right ecosystem partners. ISG helps enterprises navigate the fast-changing digital engineering market. <a href="https://isg-one.com/contact-us">Contact us</a> to find out how we can help yours. Listen to the podcast:&nbsp;<a href="https://isg-one.com/research/articles/full-article/isg-imagine-your-future-podcast-episode-27-what-is-digital-engineering-and-why-does-it-matter">ISG Imagine Your Future&reg; Podcast &ndash; Episode 27: What Is Digital Engineering and Why Does It Matter?</a></a10:content></item></channel></rss>