Information Services Group, Inc. (III) Earnings Call Transcript & Summary

Thank you for joining the ISG Smartalks, How to Drive Savings, Reduce Spend and Increase IT's Value. Our hosts for today's talk are ISG Chief Data and Analytics Officer, Kathy Rudy; ISG Principal Consultant, Chris Karalis; and ISG Product Director, Tom Werner. This ISG Smartalk is being recorded. [Operator Instructions] With that, I will hand things off to Kathy to kick off today's ISG Smartalks.

Thank you, Jillian, and thank you for everyone who's attending today. We're really happy to be here and excited to give you an overview of ISG Inform. Wanted to start out by just giving you a high-level view of what ISG Inform is, and then we're going to dive right in to just giving you some views of the product and how it works. And then at the end, we'll talk a little bit about the use cases that our clients have found for the product as well as the type of people within their organization that have found the results and output really useful sort of the personas of who has been able to leverage the information out of ISG InformX. So what is ISG InformX? It is a data-as-a-service or Software-as-a-Service on-demand tool that is available for access to our users through the web. And what it brings to life is the data that we've collected over the years from our clients from a price as well as the total cost of ownership of IT services. It's fairly easy to use. Our clients have told us that it's really intuitive in terms of inputting their data and then getting the results out from a pure comparison basis. And it's divided into a set of different views. One view being a view of metrics that a CIO might be interested in from a IT as a percent of revenue compared to his industry or her industry, IT spend per user, CapEx versus OpEx spend. So just those higher level metrics that would really be meaningful from a comparison perspective from your industry or your revenue size. Then we move into other dashboards that will show you from a services area or a tower perspective, those key cost quality and productivity measures as well as then a digital framework that allows you to understand the value that you're deriving from your digital initiatives. And we'll talk a little bit about these as we move through the presentation. But really at the crux of it, allowing you to understand where you compare to your peers from different perspectives, gives you powerful information and making new decisions and driving change in IT as well as articulating the value of IT to your business. We found that it's a great tool for you to help optimize the solutions that you're bringing to the business as well as helping to track and manage where your productivity, your quality as well as your review. So what we wanted to do first is give you just a quick polling question, make this a bit interactive. And Jillian is going to explain to us how we would move into the first polling question.

Yes. Thank you, Kathy. I am sending the first polling question to the audience now. You will hear an audible alert when it pops up on your screen. And we'll give you guys just a few seconds to answer. But the first question we have for you is, do you currently measure and report the cost, quality and efficiency of your IT operations?

So this is really sort of a core question. Are you able to report the cost by service area? Do you have quality measures that you're reporting? And in terms of efficiency, when I think of that, I think of that as being the productivity of your teams and delivering the products and services back out to your business. So thinking about that, are you currently measuring cost, quality and productivity or efficiency? And see what sort of results we're getting.

Yes. We'll give everyone just a few more seconds, but it looks like we're leaning toward, yes, they do currently measure.

Good. So yes, most people are measuring in some way. The cost, quality and efficiency of their IT operations. So as we go through this, it will be interesting for you to start to think about how you're measuring it compared to the way we're looking at the world in ISG Inform. Okay. I'm going to turn it over to Chris Karalis now. And Chris is going to take us through some of the ways that we use Inform as well as give you some of the views of the dashboards and how it is applied in real life. So Chris, do you want to take it away?

Yes. Thanks, Kathy. So ISG Inform can transform your IT financial data into a market aligned model with metrics and KPIs that you can review, whether you're running through TBM or you have your own Excel workbooks or other tools that are collecting and sort of managing your own IT financial data. ISG Inform can take that data and transform it through IT financial data, different service breakdowns which are standardized, defined and segmented, and then we go and collate that data into a standard model and buckets. And so once you combine sort of your IT financial data with volume and personnel information and input that into the ISG Inform tool, you can hit the save and display button and the data is then translated into these market-aligned metrics and KPIs. And so you can see your data after you hit save and display compared to industry and market data, which is on the left and calculated variances either above or below the market, all across the industry aligned metrics that we have in ISG Inform. So this screen here is showing our CIO dashboard. This view covers about 10 different key performance indicators that are intended to measure overall performance across information technology. Typically, this is going to be the -- like the name intends, the CIO view of the IT environment. And from there, you can drill down into other service areas, you can even drill down within the CIO dashboard itself to get further information on some of these metrics that you're seeing. Things like IT spend as a percent of revenue is a really desired and interesting metric that we see across a number of industries and a number of advisers that really look to sort of defined costs, overall IT, in terms -- compared to other market comparators. But we also have in here breakdowns between different services, different cost pools, CapEx versus OpEx or unchange transform. And all of that is shown on that easy to view and consume dashboard.

Chris, do you want to talk a little bit about where the data comes from that's in the dashboard?

Sure. So the data gets populated and refreshed with validated benchmarks that we perform across a number of different industries and across the globe. So ISG has been doing benchmarking for over 30 years now. We have a global practice. We have a lot of really great large companies and Fortune 500, Fortune 1000, and we take all of that data as we go through those individual benchmark projects. We validate it. We compare it to the market. And then that data gets input into our database, which then feeds the dashboard views.

Thanks.

So the market data, just to give a bit more information on that can be filtered a number of different ways. So as I mentioned, we do a lot of work across different industries, across different regions and different revenue sizes. And so for each of those in the CIO dashboard, specifically, there are different filters that will update the market data. And so for example, you can collect an industry, and it will update the industry data on the dashboard screen along with the calculated variances. And as you're in the tool, you can review those different filters, you can click-through and the numbers compared to your scenario data will seamlessly change and update as you wish. Beyond the CIO dashboard, ISG Inform has additional drill downs that go into other information technology services, and they have a similar structured format that we saw on the CIO dashboard. So for instance, we have an IT infrastructure view, that goes into standard IT service areas and has more detailed metrics that drill down into the cost, performance, quality, efficiency of the organization. Same thing in the application space. We look at maintenance and development and again different ways to look at your unit cost, different cost breakdowns. There's different productivity and activity measures that can be compared to market to understand how I'm doing in relation to my development, hours versus my testing hours, things like that. And then we also have a digital dashboard, which measures the capabilities, the value and benefits that you're seeing from your digital initiatives. So digital is really big right now. Everyone is trying to digitize their data, digitize their services, digitize their workforce. And so this dashboard is intended to give you an idea of how you're looking, say, on the continuum within artificial intelligence or cognitive or machine learning and digital marketing. All those areas are captured in this dashboard to provide you a view of your performance within those digital transformation initiatives.

And what I think is kind of interesting here, Chris, is that it helps you understand where your peers, your industry peers are placing their bets. So where are they spending their time, money in dollars in their digital transformation? Is it Internet of Things? Is it automation? Is it cloud? So where are they really focusing their dollars and their teams and their people. But it also because the number of responses that are in the tool itself, it helps you understand where they're also seeing that value. And when I say value, has it improved their efficiency or their margins? Has it increased our customer -- their client satisfaction with their products and services? And has it, I mean, increased their revenue? And it gives you those perspectives based on the responses that we've had to the digital framework already. So it's pretty interesting in that it shows you by industry or revenue size that a lot of folks are really concerned about what are others in my industry doing and where are they seeing the value and the benefits. And that's what this digital dashboard will show you.

Yes. Definitely. Yes. And for example, we had within the digital dashboard center of excellence summary. So we asked companies that did a digital transform benchmark where they have centers of excellence formally set up and they have teams that are running those areas. And digital marketing was one where the vast majority of companies have a center of excellence in digital marketing and have capabilities there, which makes sense because we've seen a lot of digital marketing within the last 5, 10 years, especially with social media and other initiatives that are going on. But when it comes to more emerging technologies like blockchain or artificial intelligence, AR/VR, those types of center of excellences are in the minority. And so if you're working in those spaces, you may have a specific industry business need for that or it may just be that you're ahead of the pack when it comes to those technologies.

Definitely.

So now Jillian, we have another polling question that we wanted to get to. And so I'll hand it back to you.

All right. Thank you very much. I am sending that to the audience now. Again, you'll hear an alert when it does pop up on your screen. And this question is what area is most important to you and your organization to track and report? And there are several answers to choose from.

Thanks. So we'll take about 20 or 30 seconds to see what type of answers we get back. But essentially, this question is going to depend on each organization's environment and the different priorities that -- in organization they have. So for instance, if you have heavily outsourced environment, you may not be as interested in how productive your workforce is because the remaining workforce may be minimal, whereas the service provider spend maybe of more interest. So ISG Inform allows us to look at a number of these different areas, but it should be interesting to see what sort of the mix is?

Yes. The answer is seem to be a little spread across the board. But the winner -- I will send the results to everyone, but it looks like the winner is a, with b as a close second.

Yes. And that makes sense. Unit cost and overall IT spend is going to be driving a lot of the conversations coming down from leadership, from the CIO, CFO. So it's really important to get a handle on that and understand the gaps to market.

I think, seriously, Chris, from the experiences we have with clients who were in there, supporting them is that service levels are not always well defined. Maybe a lot of the times they're just implied. And productivity, I think a lot of our clients don't really understand or know the best way to measure productivity. So you're right. It makes sense that the first 2, especially with the cost being such a big focus in IT.

Yes. For sure. So just a bit more on ISG Inform. We wanted to also show how you can drill down in 2 different service areas. And so for this example, across the top, we're showing the IT infrastructure dashboards, and you can see the different service areas that can be selected. And even within those service areas, in servers and network, we have further drop-downs where you can select by platform, by network service, LAN/WAN/voice, and see those individually compared to, again, different market data and different filters. Here, the filter is scale. And so what we found in -- as you start to drill down into specific service areas, it's really not the industry that's driving the comparison, but the scale. And so as you get higher scale, you're going to see better productivity and efficiency and lower unit costs. You can also input and model different scenarios. So if you're looking to compare between the different market filters and different scenarios, you can take that -- take each of the scenarios and hit the compare button in the top right. And what you'll see on screen are the different compare scenarios and the different market data that you can select. So anything that shows up in the dashboard as a filter is market data that you can compare to and select within the compare screen, and then you can also select your own scenarios. So in this example, we have current state and future state, but that could be maybe 2019 and 2020, if I'm looking at how I'm performing against last year and this year or I can look at 2020 versus 2021, if I want to look at maybe my forecasted budget and my trajectory towards either reducing costs or implementing new services and technologies. But it also can do scenario modeling around mergers and acquisitions or maybe I'm changing my strategy, IT strategy, and I'm moving to a cloud implementation on outsourcing or offshoring, all of those sorts of scenarios and models can be input into the tool and then compared against different filters. So now I'm going to hand it off to Tom, and he's going to show how ISG Inform can address specific business solutions, that may be affecting you today.

I think that, actually, I'm going to do this with Tom. So this is Kathy.

That's correct. Yes.

So let's bring this together for you. Chris gave me a really good segue there at the end, where he talked about how you could use ISG InformX to help you think through an impending merger or an acquisition or even a divestiture. We have one client that knew that they were going to be going through a acquisition. And so they were able to load in their current IT spend and then the credit scenario, so current co, and then they created a scenario for the acquisition. And then they created the combined co. And they were able then to look at not only the IT performance of the current company with the company they're acquiring to see where were some benefits on either side. So who had better unit costs, different service levels, but can create the combined view to understand where the efficiencies and synergies would be of the newly combined organization. It then help them lay out some plans for areas to decommission quickly. So for example, they had multiple storage environments. They needed to figure out which storage environment was the best one to keep and which one was going to be the one that they wanted to decommission. So those types of things were available to them in viewing against those different scenarios. They are also able to understand from a market perspective, what should their productivity look like, where were the market service levels and decide on which service levels they may go forward with for their business. So it gave them that insight on where could they reduce costs, where could they improve productivity and what kind of headcount would they need. It also let them have a view between the organizations who are very different and makeup between contractors, managed services and FTEs, what was going to be the best mix of their teams going forward. So great use case there or a super solution. In terms of portfolio comparison, so let's jump over out of -- into the application space. We had one client who was really curious to see how their application teams performed against one another. So they created scenarios of each of their different application portfolios, setting the information. And then we're able to see what type of quality they were receiving, what kind of velocity in terms of releases, what kind of staffing mixes they had. And then in terms of that staffing mix, how did that then drive their overall unit cost as well as what was the differences in the onshore and offshore mixes between those portfolio teams as well as giving them the market view or market perspective on where they should be in terms of the performers that were loaded into them as a data set. One thing that we're also able to do is to provide customized reference comparison. So there is a universe of data that's already in ISG Inform. But through working with ISG, we can also help build out a very customized reference group for you, if you're looking for specific peers or specific sizes or specific industries and views. Chris talked a little bit about how you might use this for budgeting or base lining. So it's going to help you look at your -- what was my 2019 budget, what's my 2020 budget, and then where am I to my estimate to actual, so where am I trending compared to last year and where am I trending in terms of my budget commitment into my actual spend and can help you make some course corrections if you see something that's out of -- that's not trending the way that it should be. Another client was very interested in building up and understanding how to look at some pricing in terms of a charge back or show back. So they were able to load their information into InformX and get some unit pricing as well as an understanding of what was underlying that unit price. So they could explain in a service catalog view the services that they're offering and at the price that they were offering it as well as understand where the market was so that they could understand if there is areas that they could drive further efficiencies and continue to drive greater benefit to the business by reducing their overall run cost and potentially moving that into transformational or change types of activities. And then there's just the overall performance optimization. So many of our clients are really looking to understand just the brass tacks, where do I compare in terms of cost, quality and productivity? How does my IT spend as a percent of revenue? Am I spending enough per employee on IT? Where are opportunities to improve our efficiency and effectiveness? And what are we doing really well? So where are we really providing value and strength back to our business in terms of the IT services that we deliver? So lots of different ways to use the tool, lots of different views and ways to solve some of your challenges, but I think really what a lot of people find in terms of value is just getting that external market perspective. It's -- many of you mentioned earlier that you're looking at your IT spend as a percent of revenue, you're looking your IT spend per service tower which is great. But then you need that external perspective to say, is this good or should it be better? And that's what this can give you right at your fingertips. And it's really cool in the sense that you can also go in and then make some changes. So if you say, well, what if we -- what if we divested this area or what if we sourced this area? What if we changed our onshore/offshore mix? What happens to our price point? And how does that then compare to the market? So I think this scenario modeling is also an innately effective tool. In terms of who would use the tool, a lot of people say to us...

Kathy, if I could [indiscernible], I can go back to that piece.

Sure. Yes.