Earlier this week, Saugatuck published an extended deep-dive interview with Malcolm Frank, Chief Strategist and Chief Marketing Officer at Cognizant Technology Partners (through our premium subscription research service CRS).

As a courtesy to our broader readership, we are republishing an edited down / extracted version as our weekly Research Alert, as we thought that many would gain value from the interview insights and discussion. Key topics explored include: the evolution toward, and implications of, the “SMAC” stack (as in social, mobile, analytics and Cloud); the changing nature of ITs contribution to the business; and how SMAC is helping to change the value proposition to the customer (across a variety of industry use cases), as well as in the creation of “smart products.”

Bill McNee: Malcolm, thank you so much for spending some time with us today . . . I'm sure you're on the road as much if not more than I am these days – in your travels with customers, both business and IT executives, what are you hearing from them in terms of their top priorities today? What's bubbling up? Is driving innovation at the top of their agendas?

Malcolm Frank: The short answer is innovation is absolutely a top tier item.  But at the same time, they haven't flexed those muscles in the last 10 years. And many firms need help understanding how best to organize around that – what process should they use exactly? What are they innovating for?

It is a super interesting time because we are experiencing a Category 5 hurricane, in terms of the secular change in business. We don't need to spend too much time on it now because I think everyone is familiar with globalization, the credit crisis, et al. At the same time, there is a Category 5 hurricane in terms of a secular shift with technology.  And it's clear that we are leaving what we think of as the fourth master architecture of IT, and entering the fifth one – which is based upon social, mobile, big data and Cloud.

Our clients are trying to manage in between the shifts in the business and the shifts in technology at the same time, and it's creating a gamut of emotions from fear, uncertainty and doubt right through to opportunity and optimism. 

Bill McNee: There are many catalysts that are driving firms to rethink their business strategy and their technology strategy. But you raised four key technologies in particular – social, mobile and big data and Cloud. I believe Cognizant refers to these technologies as the SMAC stack. Tell us a little bit about that and whether you think this is aligned with Saugatuck’s vision of the Boundary-free Enterprise™?

Malcolm Frank: Absolutely, I think we are very much aligned. Remember back to '92-'93 when we were rolling out PCs and relational databases and TCIP and UNIX machines – and nobody knew what it was called at the time. Ten years later we could look back and say it was client server. I think we are in a similar period.

Bill McNee: We've heard many CIOs and CTOs say that they don't want to build any more data centers. Is this what you are hearing? Do you believe that this is a realistic vision? Will existing data center assets merely become part of a new hybridized IT architecture?

Malcolm Frank: I firmly agree with the second part of that. The first part I am not so sure is going to manifest itself, specifically around what they're doing in the data center. But . . . the larger trend is that the role of IT is evolving very, very quickly and CIOs are recognizing that their budgets are flat at the same time that the demands on them are going up, and in some cases going up exponentially. What the SMAC stack is doing is changing the nature of IT's contribution from focusing on the back office and support functions – to where IT is actually infused into the product itself and it becomes central to the customer experience.

Bill McNee:  Recently, the Harvard Business Review has been doing some interesting work focused on how the pace of business is changing and accelerating, and companies are becoming more nimble due to a wide variety of factors, including some that you raised in globalization etc.

In this environment, the need to establish an agile, flexible and adaptable business architecture is critical for success.  One of the key inputs is technology, and the shift toward the SMAC stack. But in some ways the IT organization (as well as the Finance organization) has been a laggard relative to other business functions, such as sales and marketing, product development and operations. How do you see this evolving and changing?

Malcolm Frank: I think you are really onto something in outlining Harvard's analysis on things. We've done something quite similar. We kept looking over the past 10 years at these industries that have gone through massive transition. A great example is what's happened in mobile telephones – where Nokia and Motorola were just dominating the sector, and then you have this PC company [Apple] that was on it's back and a software company [Google] that was started by 2 Stanford graduates who have gone in and swept up that entire marketplace. Of course there is the story of Amazon versus Borders or Netflix versus Blockbuster.

In each of those cases, we have often been dismissing them as germane to those industries. However, we are now seeing a larger pattern, and the pattern is this – the winners have been those that have adopted SMAC technologies not just at the core of their IT operations, but as the core of an entire business model.

Bill McNee:  In many ways I completely agree with you, but these technologies are also helping to change the customer experience. Companies are rethinking their value propositions and how they gain, engage and renew their customers. Let's talk a little bit about the key industries you focus on at Cognizant.

Malcolm Frank: At Cognizant we focus on just a few key industries [Financial Services, Life Sciences / Healthcare, Media / Entertainment / Info Services, and Manufacturing / Retail].  What we are seeing across all of them, and you just touched upon it, is that the tip of the spear around SMAC is currently how does that change the value proposition to a customer. What is fascinating is that the discussion often starts around how you interact with a customer. However, it is also starting to shift to a discussion around how the SMAC stack is helping transform the nature of what those firms sell, which is where it really starts to get interesting.

Bill McNee:  Let's dig into a couple of these industries and how these SMAC technologies are being applied in different ways.

Malcolm Frank: Okay, first of all we are starting to see the customer perspective becoming greatly influenced by some of the more consumer-based industries that made the shift.  Why is it that Pandora so deeply understands my musical tastes? And yet then I go down to the ATM – and the bank that I have gone to for 20 years – and the first thing it asks me is whether I speak Spanish or English?

There is this juxtaposition between what can be delivered in highly tailored environments using SMAC technologies, and the more traditional business models and technologies. Sticking with the banking example, we think that the race is going to be around how do you build that virtual customer experience? So instead of interacting in the physical sense with cash that comes from the ATM, or going down to the retail branch, or having that paycheck go to the branch twice a month, and having them say no on a mortgage or deal with a car loan – there will actually be a more constant presence in their life, because money is a constant presence in your life.

Bill McNee: Our sense is that the big banks are terrified by Square.

Malcolm Frank: Exactly. That is why I said there is this combination of fear, uncertainty, and doubt; and also optimism. It just depends on where a company might be on that journey. But that is clearly starting to occur where they are asking “are we going to be dis-intermediated at that client interface,” or that “this will be the client interface, and we're just the back office function for how people manage their money on a daily basis.”

There is a second shift that is taking place. I think it is probably a year behind the customer interface shift, but it's around building “smart products.” This is sometimes called the “internet of things,” but how do you deliver this is critically important. We are helping a number of customers do this, building information halos around the products that they sell, and it can be something as simple as your toothbrush . . . all the way up to a smart car where there is 20 plus IP addressable systems where you can connect your next generation GPS with your Outlook or your home security system. In the future, all of these things will start to work in concert.

Bill McNee: Talk to us a little bit about Healthcare and what's going on there in terms of a changing customer experience and the evolution of various products and services.

Malcolm Frank: It's obviously an extraordinarily tough environment. If you look at the pharmaceutical landscape most of those firms are dealing with a patent cliff. They have been able to build their business model around blockbuster drugs for the past 20 years. But suddenly there are fewer and fewer of them. So they've got this dual mandate of how do they drive significant cost out of the system number one and then number two, how do they innovate? The cost one is quite clear, but on the innovation side it's around processes, it's around business model but it is also around the product. Some really interesting things around the product...

Similar to the banking problem that we talked about, the question is how do you truly personalize that health care scenario? I'll give you an example. Compliance is usually the biggest issue when it comes to somebody with prescription drugs. It turns out that you will have much more compliance if you are with a community of people who have the same aliment, as you just cheer one another on. A second one is to create a community with your family members and friends ... In these situations, compliance starts to go through the roof. These are things that we are really thinking through.

Bill McNee: Let's talk a little bit about the services provider business – and how it is going through a significant change itself. How do you see the landscape shifting? How has the Cloud changed the business model for traditional services providers as well as offshore firms?

Malcolm Frank: I think, first of all, that we are in a shift where it's going to come out thatwe don't know that we are in a shift. If you look historically, winning services provider models often align very closely to the master technology platforms. So what I mean by that is when we had the mainframe model, it was the EDS model. And then when we went to the client server for example, that's where Accenture (back when they were Anderson) really grabbed share. We also saw firms like Cambridge Technology Partners and Sapient and American Management . . .

When the sector moved to the internet-model of computing, that was really the platform that allowed offshore delivery and global delivery to take hold. Remember back in the time of the “great happiness” – which is what we sometimes call the internet bubble. We thought the internet was about what you delivered, and so there were agencies and the Razorfishes . . . but I think the ultimate internet service firms are called TCS and Wipro and Infosys and Cognizant because it is not what you deliver but how you deliver to a client and it completely changed the price point and the delivery capability. The SMAC wave I think is going to have a similar impact on services provider models.

Bill McNee: This has been a terrific interview Malcolm. I thought that we might wrap up with some guidance that you could provide to our readers. Perhaps you could share a couple of pieces of practical advice, based on your travels, with our large enterprise CIOs and senior business leader readers about the journey to the Cloud and the SMAC stack?

Malcolm Frank: I think that there are a number of them. The first is to jump in with both feet! The reason I say that is that some firms will hem and haw, “we shouldn't do this, because we don't know the architecture.” Or “We shouldn't do this because of security concerns.” And so on. You can have this whole list of reasons why you shouldn't move forward. In such cases, we are often seeing the hesitancy ending in tears, because a competitor has cracked the code in some part of the business – be it on the customer side or the employee side or the partner side. So this is no longer elective; it is core curriculum. Business and IT leaders have to jump in and get deeply immersed in these different areas. I think that is number one.

Number two is to understand that there are a number of case-studies that already exist. So it may be new to you, but it may not be new to somebody else. And here's what interesting – we're seeing how a lot of the exciting action is often vertical in nature, and the trailblazers are people outside your industry.

Bill McNee: Thanks so much for your time today, Malcolm.

Click here for Saugatuck's market impact and three key findings and best practices from this interview.

Premium subscribers can gain access to the full-length Strategic Perspective version of the interview (“Executive Insights: An Interview with Malcolm Frank, Chief Strategist and Chief Marketing Officer at Cognizant Technology Solutions” 1252CIO, 13Aug2013) by clicking here. Non-subscribers can purchase and download by clicking here.

This blog originally appeared at Saugatuck Lens360. Published with permission.

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