1089RA New Saugatuck Report on Managing Risk / Reward in the Boundary-free Enterprise™

What is Happening?  Right now, IT markets, buyers, users and providers are in the midst of one of the most significant transformations in their history, the emergence of the Boundary-free Enterprise™. Cloud business and technology solutions – including platforms for Collaboration, Mobile, Social and Analytics – are completely and fundamentally changing what IT is acquired, what it costs, how it is acquired, how it is used, and by whom. Yet traditional assessment and evaluation models still focus on comparing and positioning providers and their solutions without specifically the context into which they will be placed and the environments in which they have to deliver value. In fact, these traditional models completely ignore the potential for Risk and Reward that buyers will have to manage in acquiring and implementing and using these solutions.

Why is it Happening?  There is no shortage today of models for positioning and considering IT providers. Some are very well-known and widely used. The Gartner Magic Quadrant, for example, has dominated IT business and technology buying for over twenty years. It maps a provider’s vision against its perceived ability to execute upon that vision as independent orthogonal variables in a vendor’s approach to the market and plots selected providers, as leaders, challengers, niche players and visionaries, in the four quadrants of a matrix.

However, this way of viewing a market space says nothing at all about how well-considered and / or well-managed are the risk mitigation elements of the solution, nor how well a technology solution can deliver reward, or business value, to the buyer as an investment over time. This does an unfortunate disservice to buyers who acquire technology solutions using evaluation techniques that neither addresses the potential for reward, nor the risk they will be undertaking.

Market Impact  On Wednesday, June 27^th, Saugatuck published an important new 14-page Research Report entitled “1088CLR Managing Risk and Reward in the Boundary-free Enterprise™” (ongoing Saugatuck CRS-CLS subscription research clients can access and download the full report by clicking here; non-subscribers can purchase the report here).

The Saugatuck Risk / Reward Assessment in the report encompasses ten categories of risk and reward as the key variables that buyers should consider, and vendors should address, when considering IT business and technology solutions to enable the Boundary-free Enterprise. There are some important challenges in assessing both the Risk and Reward sides, as follows:

Evaluating Risk. There are five areas of risk involved in this transformation that must be evaluated and managed as challenges enterprises will face. These key challenges include: managing functionality in the present and into the future; managing security, privacy and regulatory compliance; managing performance, outages and service levels; managing platform compatibilities and integration; and managing provider relations.

Evaluating and managing risk, however, is only one half of the complete picture. While risk mitigation is essential, reducing risk exposure is not the same thing as realizing reward or business value.

Evaluating Reward. On the reward side, the key challenges enterprises will face are: managing financial returns and returns from work productivity; managing pro-active competitive positioning enabled by solutions; managing synergies across the solution portfolio of the Master Architecture; managing a solution’s potential for agile, adaptable responses to competitive initiatives; and, finally, managing the ongoing benefits of partnerships with providers. These are the key areas in which reward may be realized, independently of risk reduction, in alignment with the strategic objectives of the enterprise.

While there is enormous value in the Risk / Reward Assessment process itself, understanding clearly the potential for risk and the separate potential for reward of a proposed solution, the real value arises in mapping the solution, whether alone or alongside others, in the Saugatuck Risk/Reward Assessment Matrix (See Figure 1 below).

Figure 1: Managing Risk / Reward in the Boundary-free Enterprise™

Source: Saugatuck Technology, Inc.

Aggregating the Risk scores and the Reward scores will yield a coordinate pair that can map into the Risk/Reward Assessment Matrix in one of four possible quadrants, as follows:

Star Quadrant. A medium-to-high reward score and a medium-to-high score on risk management (both reward and risk management between 50and 100) will map to the upper right quadrant. This is, of course, the ideal situation: well-managed risk and high reward potential.

Lightning-Bolt Quadrant. A medium-to-high reward score and a low-to-medium score on risk management (reward between 50 and 100, risk management between 0 and 50) will map to the upper left quadrant. This may be a positive choice for a buyer comfortable with uncertain or high levels of risk, should the reward potential be high enough – or should the enterprise be an aggressive adopter of new technology.

Sideways Quadrant. A low-to-medium reward score and a medium-to-high score on risk management (reward between 0 and 50, risk management between 50 and 100) will map to the lower right quadrant. This describes the profile of the cost-effective utility solution, which may not yield great reward potential, yet will reliably manage a function that is essential without significant challenges.

Do-Not-Enter Quadrant. A low-to-medium reward score and a low-to-medium score on risk management (reward between 0 and 50, risk management between 0 and 50) will map to the lower left quadrant. This is to be avoided.

A few concluding comments:

For Solution Providers. Marketing solutions via Risk and Reward is an approach that transcends the sales pitch with a feature-function recitation, hockey-stick bar chart of revenue growth or crowded slide of customer logos. None of these traditional appeals to the prospect provides any assurance that the solution can be successfully managed for risk, nor that it would deliver the potential for reward to a buyer. Moving beyond these to a discussion of how risk is managed and reward is delivered is a more direct appeal to the buyer’s sense of value.

Especially as buyers are assembling a new Master Architecture to enable the Boundary-free Enterprise, these are the important considerations. It is unknown territory, by and large, and building new business capability using Cloud solutions, including platforms for Collaboration, Mobile, Social and Analytics exposes IT organizations and their business users both to opportunity and the potential for disaster.

For Buyers. In the transformation currently underway to the Boundary-free Enterprise, no two set of Clouds will be exactly alike. All will combine capabilities as necessary to achieve the business value dictated by any particular enterprise business strategy. Thus all enterprises will share a common goal of aggregating capability that enables their business strategies to succeed and, over time, to evolve either proactively, by launching competitive offerings, or in an agile response to a competitor’s move.

However, many of these business and technology solutions – whether they are Cloud business, platform or technology solutions, or more specifically Collaboration, Mobile, Social and Analytics – are still emerging and in the process of maturing. And many IT organizations are still maturing their own expertise in relationship management with Cloud providers and their solutions. Thus, it will be no easy task to build and manage this new Master Architecture, selecting and integrating inter-dependent solutions that demand new management approaches based on risk and reward.

At Saugatuck’s upcoming 2012 Cloud Business Summit (to be held November 14 at the Westin Times Square in New York City), distinguished presenters from Saugatuck and from leading businesses will present and discuss some of the key concerns and best practices for managing risk and reward in this transformative process.

In addition to learning more about Managing Risk and Reward in the Boundary-free Enterprise, attendees to the conference will experience a powerful networking environment for the conference delegates to learn firsthand from their peers and from Saugatuck about how large enterprises are applying Cloud and related technologies, platforms and solutions to their advantage, and building winning business strategies.

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