Lars Janitz, Executive Vice President of Global Managed Services at NTT DATA Business Solutions, talks to Gernot Kapteina, Founder of OYSTEC, about the strategic importance of Managed Services for customers in the global IT industry and the deployment of new, digital technologies.
Lars, many thanks for making this interview a reality! You are Executive Vice President at NTT DATA Business Solutions; specifically responsible for the global "Managed Services" business, the area that now makes up the largest share of your organization's revenue. How did this come about; can you tell our readers something about your career path?
Janitz: With pleasure. I was able to learn the entire Managed Services business from the ground up, even though at the beginning there was not yet this eponymous term for it, but at that time people still spoke generally of service and support or IT outsourcing. After studying Information Technology at the Technical University of Chemnitz, I started working for SRS GmbH, a medium-sized software and system house in Dresden. It was a subsidiary of SAP AG, Siemens AG and Robotron Projekt Dresden GmbH. At first, I was even "annoyed" that I was assigned to the SAP area. Because I knew Siemens well, but SAP hardly at that time. In retrospect, I see it as a great advantage to have come into the SAP world in this way, not least because I was already able to gain international experience in this first job: for example, we were commissioned by SAP to help set up global support centers. I worked in China, India, Ireland and California, USA, among other places. Of course, I was also able to expand my technical knowledge by delivering SAP support services myself and gaining customer experience. This was a mixture of remote work and on-site assignments with customers, but also still a relatively new business at the time, where I was able to take on even more responsibility as a team and later department manager at a young age.
In 2000, SRS merged with two other SAP subsidiaries to form SAP SI AG, and a few years later was integrated into SAP, so that from then on I also got to know larger group structures and was able to expand my area of responsibility as Global Vice President. And this is similar at NTT DATA Business Solutions: in the past as itelligence AG focusing on the midmarket and now as NTT DATA Business Solutions under NTT DATA part of a large international group. And there are also parallels in terms of content: As in the past, I am now jointly responsible for complex, interesting transformation and integration projects in addition to my day-to-day operations. So, in summary, my career is based on various pillars: the SAP business, the service and support business, business responsibility, business transformations and, in particular, working with international customers from various industries. Last but not least, a trusting and close collaboration with employees is the fundamental basis for overall success. And to be completely honest here, too: Luck is also part of it: Not everyone who has a good education and does a good job achieves their professional goals. So much for my career and my role in NTT DATA Business Solutions.
A very interesting introduction to the topic based on your career path. "Managed Services" are an important pillar of the digitalization that everyone is talking about. What does digitization or digital transformation mean for organizations from your point of view, and what is its actual significance for society?
Janitz: First and foremost, digitization is a very broad term that is now being used in countless media and daily business in a wide variety of ways, not least alongside climate issues as a core topic in the election campaign we have just experienced (note: 2021 Bundestag election campaign in Germany). The topic is not new: Digitization has been around since at least 1960, when computing increasingly emerged in Germany, and again from the 1990s with the Internet and from the 2000s with the mobile revolution. However, it has currently gained a new dimension of dynamism with the topic of digital transformation and the Internet of Things or Industry 4.0.
In order to achieve a comprehensive digital transformation, I think of individual building blocks that have to work together in an integrative way: First, there is the customer experience, i.e., the front end from the customer's point of view, which defines how the customer can access his digital landscape. Closely linked to this is the digital workplace, which plays an important role for remote work and intelligent workplaces, as well as efficient support through smart tools. Thirdly, the topic of the cloud is a key point: hosting, i.e. the traditional data center business, has already been around for many decades. Since we have been using the term cloud for about 15 years, we describe this scenario as the so-called private cloud environment. In addition, there are other forms such as the public and hybrid cloud. In any outsourcing of IT to internal and external service providers, managed services are increasingly playing an essential role, e.g. for the networks, the IT infrastructure and the application. In addition to the cloud, there are other digital topics, for example that of artificial intelligence (AI): how can predictive analysis as well as intelligent, self-learning tools and machines or robots help us to use human experience, become better and more efficient and avoid mistakes. Or the relatively new blockchain technology; especially in the financial sector. And last but not least: DevOps. This latter approach as a further component of digital transformation is not at all new, but it describes very well and professionally how the collaboration between software development and the IT department can be sharpened, i.e., how to work together even more efficiently with the help of agile working methods.
With all these topics, digitization must always be seen in context. It really is a very broad term that generates a new dynamic in a new environment. Transformation is the key here: Together with our customers, we have to transform faster and in a goal-oriented manner and, moreover, become even more efficient, since resource bottlenecks - in the service business, especially human resources - are constantly increasing. Efficiency and automation are leading to new working models, the need for which has been further intensified during the pandemic we have just experienced.
Last but not least, society benefits immensely from digitization: let's imagine, for example, doctors who are localized in a university clinic in a city, but who can still provide care to people in the countryside via remote diagnosis and activities. Or if we think beyond our own horizons, e.g., to regions that are even less developed, such as in Africa, the richer and more highly developed countries can be pioneers in providing technological support to poorer countries in order to drive cultural and social developments as well.
With regard to digitization, you have addressed many topics that set the framework for my follow-up questions very well. Let's start with the term "Managed Services" - your main functional area. Can you explain to our readers what exactly is meant by Managed Services and why they are an important element of a digital transformation?
Janitz: There are already very good definitions regarding the subject matter of "Managed Services", e.g. from the world-renowned analyst firms Gartner and Forrester, but I would like to describe it additionally in my own words: It is concretely about a service delivery for a customer, for a specific product. This product can be software or hardware - what is important is the proactive, integrative and coordinated approach. In the past, the very first models focused solely on reactive support, i.e., the customer addressed a problem, created a ticket, and this was processed and resolved by the service provider. However, these beginnings were not yet true managed services. The latter must be defined more broadly - in addition to technical aspects, there are also strategic and business-related aspects: the topics of value-based and outcome-based also play an essential role - in other words, what is the real (added) value for the customer; what benefits the customer? While value-based refers to issues such as greater security, stability, efficiency and accessibility, outcome-based is aimed at concrete added value for IT-supported, industry-specific business processes. All in all, it is about the most effective and efficient use of software or hardware for the customer. In summary, Managed Services is a fully comprehensive, proactive service provision with a more or less strong industry focus for the productive use of software or hardware by the customer.
Managed Services were usually provided remotely before the start of the COVID pandemic, but not only. To what extent has Corona changed your business in the course of the pandemic, and have digital workplaces played a more significant role in this? And, is the environment currently changing again due to a possible easing as a result of the global vaccination campaigns?
Janitz: The topic of digital workplaces is closely linked to the respective work model. The current pandemic situation has shown that we need new and, above all, more flexible work models. To a large extent, the latter will outlast the pandemic. One example is digital, virtual collaboration models enabled by Microsoft Teams, Skype, Zoom and similar tools. These require high bandwidth, but also need to be efficient and inclusive; e.g., integrate filing. In the end, however, they will never be able to fully replace face-to-face contacts, even if a lot has been achieved with this digital setup, especially in times of pandemic. Last but not least, our environment will thank us if we retain some of this digitally supported remote activity even after the pandemic and do not travel to every meeting via car or plane. Moreover, the elimination of travel time also allows employees to spend more time both at work and in their private lives. For example, I have great respect for employees who homeschooled with multiple children at home during the lockdown in addition to their jobs.
From a pandemic standpoint, we are still in a fragile situation, but it is also true that business travel is on the rise again. I myself am a frequent flyer and travel a lot globally, but hadn't been on a plane for 16 months. It was only now in the summer that things started to pick up again. In doing so, you can see that airports and planes are getting fuller again with consolidated schedules, even if it's not nearly comparable to 2019 yet.
Two things are worth highlighting again from my perspective: First, the pandemic is not over. Some virologists are talking about a "Fourth Wave" this fall. The question is how intense it will be. Secondly, vaccination unfortunately does not provide 100% certainty that the disease will not be contracted or passed on. However, the vaccinations have contributed to a significant improvement and have at least brought back some of the "normality" we have come to love. We are not out of the woods yet, but everyone sees a little more light on the horizon. I am optimistic about the next weeks and months.
In preparation for our interview, you also mentioned the topic of "Extreme Remote Services" in this context. Can you describe to our readers what this is about?
Janitz: Extremely remote services do not mean that one works for one's own company from even further away, but that one operates remotely as much as possible. Even before COVID, our colleagues in the Managed Services area already worked 80%-90% remotely. In contrast, it used to be the case in Consulting that you were on site with the customer as much as possible. Now, however, we have learned that consulting services can also be provided remotely, at least in part. Virtual collaboration is on the rise. In addition to the health aspect of avoiding the risk of infection, there is also the issue of saving resources from a purely business perspective. In principle, I think it makes sense to do as much remote work as possible, but to find a good balance between remote and onsite work that is appropriate for the job and to maintain close contact with the customer.
So the human factor still plays the most significant role in the IT industry as well, which COVID has once again emphasized. You spoke earlier about AI and automation. To what extent do these elements play an increased enabling role?
Janitz: Machines that are built or programmed based on our knowledge and experience make fewer mistakes than humans who act emotionally according to nature. In autonomous driving, for example, we can see that a machine can drive better than any human driver, although this does not yet work 100%: If, for example, the sun stands low, a traffic sign may not be recognized, or full braking may be initiated because an object was not correctly interpreted. The purely rational decision is not always the better one, and in terms of the complexity of the thought processes, humans are usually still superior to machines. Nevertheless, machines will prevail in more and more processes in industry and in everyday life, making our lives even easier and freeing up resources. Once again, the topic of integration is important here: the communication and cooperation of machines with each other; for example, in the form of complex Internet of Things scenarios in so-called smart systems or smart cities.
Another element you mentioned earlier was the cloud. Large IT companies such as SAP have been trying for years to convince companies around the world to move their processes to the cloud. When does it make sense for an organization to move areas of its IT to the public cloud, and when is it perhaps better to choose the hybrid or private variant?
Janitz: "Cloud", like "digitization", is a broader term. The private cloud, for example, can be in a customer's data center or at a service provider, but is dedicated in each case to a specific customer. With public cloud, you have to look at the different - so-called XaaS scenarios, i.e. specific elements "as a service", such as IaaS (note: Infrastructure as a Service), PaaS (note: Platform as a Service) or SaaS (note: Software as a Service). In the case of IaaS, the major hyperscalers are playing an increasingly important role. And SaaS is about bringing business processes to the public cloud. There was a clear push here a few years ago: everyone should move to the public cloud as quickly as possible. But in the meantime I see a trend reversal or correction again: people prefer a hybrid approach: topics, i.e. business processes that are not business-differentiating, will be moved more and more to the public cloud. These include, for example, HR or controlling topics, or even the topic of sales control and reporting. But business-critical, diversifying processes, such as those within the logistics of automobile manufacturers, will not be outsourced to the public software cloud in the foreseeable future, in my view; other XaaS scenarios (e.g., IT infrastructure) may be more likely. In addition, there are IT security issues that are becoming increasingly important. All in all, a hybrid, flexible approach.
We will now talk about the topic of "global delivery" or "shoring", specifically nearshoring and offshoring. How should System Integrators position themselves globally in this respect?
Janitz: First of all, every System Integrator should look at how its own customer base is structured. The local, international or global positioning in service provision depends not least on this. There are SIs (note: System Integrators) whose customers are all in the same country and want purely local delivery for different reasons - in which case the question of shoring plays a subordinate role. Global-acting service providers, on the other hand, should also operate a global delivery approach, including near- and offshore, for several reasons.
To pick out a few of these reasons: The first is clearly cost efficiency, which also plays a major role for us as a company with headquarters in Germany and a parent company NTT DATA in Japan. There are fewer and fewer customers who accept cost rates from exclusively these high-cost countries. Then there is a need for support from a shoring perspective with resources that have cheaper labor costs. Second is the subject of scalability, where the "war of talents" also plays a role. In many high-cost countries, there is increasing competition for experts, not least in the SAP environment. Flexible access to multiple locations with different labor market conditions significantly increases scalability. And third point: flexibility. We can cover resource requirements 24 hours a day, 7 days a week, while also taking advantage of the time zones of locations in different time zones around the world.
A suitable mix of onshore, nearshore and offshore resources is a key to success here. Of course, this depends to a large extent on the service you want to deliver, i. e., which consulting or application management services you can and want to have performed by shoring capacities. The language of the customer plays just as important a role as the cultural and legal circumstances. I would also make a decision between onshore, nearshore and offshore dependent on the type and intensity of customer communication: the less, the higher the offshore share can be, since the aspects just mentioned are then less relevant. "Global capabilities, local proximity" is our shoring motto - in other words, globally standardized processes and tools, with flexible delivery resources from several regions, and still close to the customer. 100% offshore models are cheap, but rarely successful. The right balance is important.
You just mentioned the matter of acceptance. How do customers from high-price countries like Germany react to the shoring concept - is it more likely to be rejected or accepted, or even demanded?
Janitz: This is both industry and country dependent. The automotive industry has been accepting or demanding the use of shoring resources for many years. However, there are other industries where this is less the case, at least at present, such as the public sector. Geographically, it is completely normal in the Anglo-Saxon area, i.e. the USA or UK, to work with offshore locations such as India or the Philippines. Germany has some catching up to do in this regard.
Too often, shoring countries are seen exclusively as suppliers of low-priced resources. This is a mistake. Leading shoring locations such as India, Romania or Turkey score not only with great agility and flexibility, coupled with a strong enthusiasm for work, but also with high expertise in many specialist areas. Consequently, shoring locations should also be used as Centers of Excellence or experts from these countries should be entrusted with global responsibility for topics, e.g., in portfolio or delivery management. This has given us a significant boost in terms of expertise and agility, but we still need to develop this further.
Shoring also generates challenges, of course. High fluctuation and inflation rates are just a few examples. And the complexity of internal service management and customer interaction is also increasing. Efficient and global service and shoring management is an indispensable prerequisite.
Shoring is therefore no longer to be demanded solely from a cost perspective and communicated to the customer in this way; instead, the focus should be on the availability of experts in the context of a global portfolio. My second to last question now goes once again towards your main area, "Managed Services". How will these change and develop over the next 10 years?
Janitz: A good question. If I now look again at our entire Managed Services area, we are still in the process of becoming a highly efficient and integrated, innovative service provider that has anchored real customer benefits and added value - the keywords being "value-based" and "outcome-based" - at the heart of its service portfolio and delivery. In addition to constant contact with customers and analysts, this requires continuous investment in our business development and marketing in order to be able to address these added values transparently in the market. Our ambition is: If a customer has chosen us as a service provider, he should be able to experience real added value for selected areas of his business, in addition to security and stability as well as cost savings.
What will also become increasingly important in the Managed Services area in the next few years are the topics of customer success and service management, customer experience including access to the service systems, optimization of the technical infrastructure, and new technologies such as AI, e.g., how to become even more efficient and secure through preventive error analyses.
As just mentioned, we will also continue to develop the aspects of secure and efficient cloud management with a focus on SAP landscapes but also beyond, intensify our partnerships with the leading Hyperscalers and focus even more on our motto "We manage your cloud".
If you then push the horizon even further out - perhaps 5 years and more - the world will turn even faster in terms of IT and digitization. Managed services will play an even more integrative role in this. One example is the closely related topics of smart cities and connected cars: If, to put it bluntly, in a smart city the houses communicate with each other and with the energy suppliers, and the cars communicate with the roads and road signs as well as with each other, managed services will have to manage a much higher level of complexity here, but in particular they will have to be even more secure. By using AI, we must preventively ensure that as few mistakes as possible occur; cars, for example, do not make the wrong decisions and we do not wait - to put it somewhat exaggeratedly on purpose - until someone tries to solve a ticket when it is too late, i.e., when the accident has happened. Smart cities, climate or CO² control - all these things are not individual, detached blocks. No single company can deliver all the necessary managed services on its own here either; what is needed here are partnerships of several companies with specialist knowledge who can drive the issues forward together with their customers.
And what will you be doing in 10 years?
Janitz: We have already spoken a lot about the changing IT. Many scholars have said that the dynamics with which the world used to change in the course of 200-300 years is now happening in 2-3 years. What will the world look like in 10 years, and what impact will this have on me and my working life? To be fair, I would like to say that in 10 years I will probably already be in the final phase of my active working life. If I'm still active in 10 years, I expect to still be operating in the managed services environment, because that is and will continue to be an extremely exciting and ever-evolving topic. Beyond that, I would also like to get more involved regionally and locally, especially in my hometown of Dresden; for example, helping startups build new business models with my experience and supporting local initiatives. And last but not least, something personal: I have three sons. In 10 years, they will have finished university, have a good and interesting job, and be healthy and happy in their private lives. And, to put it plainly, I hope that we will all be able to live in an even more peaceful, fairer and healthier world.
Lars, thank you very much for the interview!
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