The thirty-fourth meeting of CMAG was hosted by IBM at it - IPR ...

Minutes of the 34 th meeting of the Computer Market Analysis Group (CMAG)
The thirty-fourth meeting of CMAG was hosted by IBM at its Palisades facility in New
Jersey on March 17-18, 2005. The theme of the meeting was Researching IT Services:
How to Successfully Overcome Widespread Methodology Challenges.
CMAG members attending the meeting or participating remotely included:
Laurie Henneborn, Accenture
Maia Jin, Accenture
Arthur Rangel, Apple Computer
Lidia Huk, AT&T
Sherry Sumits, Cisco Systems
Atul Sahni, Computer Associates
Ruxandra Golea, Dell
Mary Jane Monsivais, Dell
Jack Lamey, Epson America
Marsha Haugen, Hewlett-Packard
Mary Kulas, Hewlett-Packard
Regina Ramos, Hewlett-Packard
Liz Vugrinecz, Hewlett-Packard
Cynthia Wolfe, Hewlett-Packard
Cynthia Armstrong, IBM
Tim Bohling, IBM
Tim D'Souza, IBM
Laura Fonda, IBM
Thomas Galloway, IBM
Carol Galvin, IBM
Andrea Goldberg, IBM
Dan Greene, IBM
Kenneth Klee , IBM
Shari Morwood, IBM
Mark Pandick, IBM
Josita Tascione, IBM
Dan Whysong, IBM
Olga Hewitt, Intuit
Sue West, Intuit
Jeff Coldwell, IPR
Joe Gatto, IPR
John Hagens, IPR
Edward Crowley, Lexmark
Wendy White, Lexmark
Daragh Gallagher-Carpenter, Lucent
Barbara Ivey, Microsoft
Inga Vailionis, NVIDIA
Tricia Cummings, Sun Microsystems
Robin Yarmovsky, Sun Microsystems
Ralph Mahoney, Unisys
Wes Osborn, Unisys
Guests making presentations at the meeting included:
James Alexander, Alexander Consulting, LLP
John Willmott, NelsonHall
Liam Fahey, Leadership Forum, Inc.
Lynne Weber, Standard & Poor’s Corporate Value Consulting
John Gantz and Bob Welch, International Data Corporation
Thursday, March 17
Winn Brown, Vice President, Corporate Market Intelligence, IBM welcomed the group and
briefly described IBM’s experience with MI. Initially the focus was on building skills and
gaining trust. IBM’s focus next moved to building trust on MI’s insights and recommendations.
The current focus for MI at IBM is on driving action and being accountable. Winn believes that
IT services are ripe for strong market intelligence work, but pointed out the difficulties as a result
of the large number of competitors and the fact that services are hard to count and measure.
Wes Osborn of Unisys introduced the day’s first invited speaker, James Alexander of Alexander
Consulting. The theme of Jim’s presentation was “Marketing IT Services and Solutions.” After

introducing the group to his recent book, S-Business: Reinventing the Services Organization, with
copies provided to all meeting attendees, Jim began his talk by tackling some definitions.
Products are tangible offerings, while services are intangible offerings, with the latter usefully
split between break/fix services and professional services. Jim defines a solution as a bundle of
products and services in which the combination is greater than the sum of its parts (1+1=3) and a
total solution covers the entire need with respect to an important business issue. Finally, Jim has
developed the concept of an S-Business as an organization that “pushes” services that “pulls” in
products. Jim is very bullish on IT services since the technology assimilation gap, a measure of
the demand for services, continues to grow rapidly. Services companies fall within one of four
quadrants: vendors selling commodity services who need to be lean and mean to be competitive,
specialists who provide world class capabilities in niche areas, total solution providers who offer
one-stop shopping, and game changers who are the thought leaders and who can earn the greatest
returns. Each service strategy can be successful. Jim next summarized his recent study of 157
service organizations. He found that professional services are gaining share from products and
break/fix services. In contrast to the past, Jim found that professional services now generate
gross margins in line with those earned by products and break/fix services and that their growth
rate is 2-3 times greater. He next turned to the challenges of marketing professional services,
stating that the marketing and selling skills needed are different from what is needed in selling
products. He observed that firms attempting to grow their service businesses in response to the
great opportunity often do not put in place effective marketing and sales plans. He identified key
elements of such plans by summarizing the practices of the top performers. In depth research
with the key accounts by senior management (and an experienced MI staff person) is a key
recommendation.
The morning’s second speaker was John Willmott of NelsonHall. John was introduced by Shari
Morwood of IBM and spoke on the topic of “Meeting the Challenges of BPO Market Research.”
John covered four areas: defining BPO, segmenting and sizing the BPO market, researching
customer requirements from BPO, and the future of BPO. After providing a straightforward
definition of BPO (the outsourcing of business functions or processes to a third party), John
reviewed several items that make the application of this definition challenging, to say the least.
Taken to its logical extreme, almost all intermediate transactions can be viewed as BPO.
Definitional conventions have been used to reign in the boundaries of BPO. For example,
NelsonHall excludes stand-alone consultancies, IT services and IT outsourcing, helpdesk
services provided for the client’s internal personnel, captive centers, and business services. John
next discussed NelsonHall’s BPO segmentation structure. NH groups these into blue and white
collar services, with white collar services split into front-office, middle-office, and back-office
categories. Each of these categories is further divided and sub-divided. To size the BPO market
John strongly recommends that a supply-side approach be used despite the fact that the leading
vendor in a typical BPO market has only 5-20% share. NelsonHall also gathers contract
information to gain more insight on the BPO market. As an example, John reviewed
NelsonHall’s estimates of the HR outsourcing market. He summarized his views on BPO market
sizing with the following principles: define the market tightly, identify the leading vendors, don’t
believe the size unless the identified vendors make up 50%+ of the market and the leading vendor
has more than 5% share, and user-based market sizing doesn’t work. John next turned to
researching customer requirements and suggested several principles including understanding the
customer’s business issues, process strengths/weaknesses, investment priorities, management
capability, and views on outsourcing. NelsonHall’s research identifies several benefits sought
from BPO, with lower cost for transactional services being the more frequently mentioned. John
concluded his presentation by summarizing his views on the future of BPO.

Following lunch, John Hagens of IPR introduced the afternoon’s first speaker, Liam Fahey of
Leadership Forum, Inc. who spoke on “Getting Inside the Customer’s Mind: Capturing,
Aggregating and Leveraging Customer Emotions.” Liam motivated the need to capture and
analyze emotions by illustrating their role in customer behavior. Given the apparent importance
of emotions, he next listed several questions that need to be addressed to make the understanding
of customer emotions operational: defining what we mean by emotion, how do they connect to
business issues, how can they be captured and analyzed, what outputs are possible and how can
they be used in decision-making, and how can the results be tracked. After reviewing several
methodological challenges surrounding these questions, Liam presented his emotion-mining
pyramid of four layers. At the top of the pyramid are simple top-of-mind emotions that Liam
believes do not drive behavior. Moving down through the emotion layers (from “top-of-mind”, to
“I think it, but I don’t say it”, to “I sense it, but I can’t express it”, and finally to “I am not aware
of it, but I can recognize it”) one obtains a clearer understanding of behavior drivers. This is the
essence of emotion mining – an understanding of what the customer feels. Liam next explained
his “emotion bridge” between a customer’s needs and the experience provided by the company.
Several examples of the applications of emotion mining were provided covering positioning, ad
testing, and competitor analysis. Liam next used an online video to present his method of
capturing customer emotions in a web-enabled application. After illustrating the range of uses of
emotion mining, Liam presented a detailed example of a recent IT services project that employed
his technique.
Ed Crowley of Lexmark delivered the meeting’s first “War Story”, which was entitled “Building
a New Organization with Caffeine and Sleep Deprivation.” Ed described his role in building
Lexmark’s market intelligence capability, which is now a key part of executive decision making.
He decided to start a new venture, Photizo Group, on his own after-hours time to share his
learning and passion for enhancing the IT market intelligence vision. Started in early 2004,
Photizo has released five issues of its magazine and has built a website which has grown
continuously in visits. Ed believes that he has identified a need and a vision, pulled together the
right team, and is constantly striving to improve Photizo’s offerings. He’s learned some good
lessons as well: it’s easier for a company to “like the product” than to actually buy it, you should
estimate the amount of time for a project and double it, you need to identify which of several
opportunities to pursue, and you can’t give up since success takes time. Photizo’s biggest
challenges are building credibility, creating awareness, selling the bigger MI concept instead of
MR, and, in his case, managing two jobs (with the benefits of caffeine and late nights). In
addition to providing copies of the February/March issue of the Photizo Intelligence Briefing to
meeting attendees, Ed is offering CMAG members a special price ($99 instead of the regular
$199) for a one-year subscription of six issues. Please contact Ed for details:
eacrowley@photizogroup.com.
Tommy Galloway of IBM followed with the second CMAG “War Story”, entitled “Is Your
Market Intelligence Ready to Support and Industry Focus?” With overall IT growth in the midsingle
digits, Tommy believes that an industry focus for MI is necessary to identify the pockets of
stronger growth companies are expecting. Market intelligence at IBM mostly supports industries
in an ad hoc fashion, with full coverage for market opportunity analysis, partial coverage for
other areas, and little to no coverage for competitive intelligence. Tommy reviewed a number of
examples for select industries (government, pharmaceuticals, education, and healthcare) to show
how specific needs differ significantly across industries. He then discussed how IBM is “building
a bridge” to get to a higher level of industry market intelligence.
Andrea Goldberg and Tim Bohling of IBM presented the third war story which focused on
“Measuring Market Share.” As a result of the Sarbanes-Oxley legislation, IBM implemented

Project Magellan to develop specific guidelines for the reporting and measuring of market share.
Several issues were addressed including treatment of internal vs. external sales (green vs. blue
dollars), the identification of reporting confidence tiers, and share variability analysis. Cisco
commented that it uses secondary vendors and it doesn’t report market share. Hewlett-Packard
stated that it uses common definitions, external sources, and consistent methodologies in
reporting market share in a well-documented process. Andrea agreed to look into whether she
could share the IBM market share guidelines with the other CMAG companies.
To complete the first day, John Hagens of IPR led a discussion of CMAG business. It was
announced that Hewlett-Packard had offered to host the next CMAG meeting at one of its
facilities in Silicon Valley. It was agreed that the meeting would be scheduled for September 15-
16, 2005. The group brainstormed on several subjects for the next meeting (summarized below).
After the meeting adjourned for the day, the group enjoyed a relaxing and convivial reception and
dinner at the Palisades.
Friday, March 18
Shari Morwood of IBM introduced Friday’s first speaker, Lynne Weber of Standard & Poor’s
Corporate Value Consulting (CVC) who spoke on “Optimizing the Design of Services
Businesses.” After briefly discussing where her group fits within S&P, Lynne discussed how
market intelligence, primary research, and modeling can be used to improve the profitability of a
service business. She first focused on projecting the demand for a service to support investments,
transactions, design, and planning. The standard demand questions need to be addressed: what is
the size of the opportunity, what share can be achieved, how do we price to balance share and
profit, how quickly will customers adopt, and what are our most profitable market segments for
targeting. Different situations require different demand projection techniques. Lynne focused on
one case study covering hardware maintenance/service contracts. In this case a model of
individual customer preferences was the best approach to projecting demand. The model
included a number of service “levers” such as contract length, response time, and customer
training. Based on the study, the client introduced an after-hours service and the model predicted
the results with high accuracy. Next Lynne turned to a service design example in which the client
wanted to rework its existing tiers of service. In this case an OpenFraming approach was used to
identify a broad set of alternative strategies, which were then integrated into a market model
using a value-based segmentation scheme. The result was a major redesign of the company’s
service portfolio and a very successful introduction of a new offering which has attracted the
most desirable sub-population, per the prediction of the model. Finally, Lynne described how
CVC’s approaches have been used to address key service staffing issues. A set of models were
developed to project service contract demand, service incidents, and staffing requirements.
Several operational questions were answered by this modeling system.
Robin Yarmovsky of Sun introduced the meeting’s final speakers, John Gantz and Bob Welch of
IDC. John and Bob focused on “IT Services Faces the New Age.” John spoke first on several
technology transformations ahead that would present new opportunities for IT services. These
included diversifying offshoring, voice over IP, mobility, invisible computing, and interactivity.
John identified specific impacts on services from each of these transformations. Next Bob
summarized several other observed trends in IT services. Winning in services requires choosing
the profitable sectors and deals; enabling real business performance at the lowest possible cost;
using outsourcing as a channel for delivery of consultative or transformational services; having
“verticalized” solutions encompassing business process, applications, IT and BP infrastructure;
commoditizing special capabilities to lower cost; and partnering as a core competence. Finally,

John reviewed IDC’s approach to market description and sizing for services. He emphasized the
need for a well founded market taxonomy which is mutually exclusive, collectively exhaustive
(MECE). Based on this approach, IDC has a number of views of services (activity based,
foundation markets, extraction markets, and business functions). IDC’s primary method of sizing
services is to utilize end-user surveys on spending by vertical and size class by country/region.
This approach captures both internal and external services spending and is validated/reconciled
with supply-side data. John walked through IDC’s method of collecting and analyzing both
demand size and supply size data that is reconciled to produce its services estimates. He also
identified a number of issues to worry about: vertical/size class splits, revenue classification,
revenue by geography, captive revenue, pass-through revenue, exchange rates, and size of the
“other” vendors.
John Hagens wrapped up the thirty-fourth meeting of CMAG by resuming the discussion of
CMAG business. The group reviewed, extended, and consolidated the topics for the next meeting
that were brainstormed the previous day. Seven potential topics were identified: customer
research, international research, segmentation research, channel/partner/SMB research,
forecasting, market intelligence efficiency/innovation, and market intelligence customers. After
further discussion and two rounds of voting, the group settled on market intelligence
efficiency/innovation as the theme for the thirty-fifth CMAG meeting. Individuals who
volunteered for the agenda committee are: Marsha Haugen/HP, Shari Morwood/IBM, Ed
Crowley/Lexmark, Inga Vailionis/NVIDIA, Robin Yarmovsky/Sun, and John Hagens/IPR.
Information for this upcoming CMAG meeting on September 15-16 at HP will be out by early
summer.
Many thanks to Shari Morwood and Kerry Ponce for making the thirty-fourth meeting of CMAG
such an enjoyable experience!