What’s Next for Innovation and Transformation Centers?

Gimme 3 — Insight Interview with TBR’s Subject-matter Experts

In TBR’s new blog series, “Gimme 3 — Insight Interview with TBR’s Subject-matter Experts,” Principal Analyst Patrick M. Heffernan discusses our latest and most popular research with our analyst team. This time Principal Analyst Bozhidar Hristov turns the tables on Patrick and asks him about trends and emerging ideas coming from TBR’s March 2023 Innovation and Transformation Centers Market Landscape.

 
Boz: So tell me, with all the news around macroeconomic volatility and buyers reassessing their budget priorities, how are vendors handling investments in innovation and transformation centers? In the report you wrote, ‘Vendors will try new strategies to make innovation and transformation centers essential again.’ Are there any vendors that stand out, and what makes them special?
 

Patrick: Just like children, every vendor shows specialness in its own unique way. Consultancies with the most developed centers — the Big Four, essentially — have already started trying some new approaches. EY has walked us through the metaverse in its wavespaces. KPMG’s Ignition Centers increasingly include technology partners front and center, something we at TBR have been advocating for years. And I’m expecting PwC will tap into its deep talent pool and find some creative approaches to bring the firm’s Experience Centers closer to clients.

 

It’s also worth watching how the technology vendors bring their consulting and SI partners into their spaces, expanding from tech showrooms into true innovation and business transformation centers. That’s all client-facing. Internally, I think the arguments for more investments will come down to making the best case for the broader benefits of these centers, including talent attraction, retention and training, as well as knowledge-sharing and brand improvement.

 

 

Boz: That makes me wonder what is the future of innovation and transformation centers? How much are vendors thinking about these physical locations as a touch point to drive managed services? Or even further, do you see vendors using managed services as an entrée to consulting/innovation workshops

 
Patrick: A thousand percent, yes. Enhancing stickiness with clients and exposing clients to the breadth of services were two of the fundamental motivating factors behind setting up these centers a decade ago, and those challenges remain.
 
The Big Four naturally use consulting to drive managed services opportunities. Making that pivot toward introducing new consulting opportunities to managed services clients requires a firmwide cultural shift — and that’s something these centers can provide: a catalyst for internal change, not just helping clients transform.
 
More fascinating, and maybe where you were going with your question, is will the traditional, managed services-heavy IT services vendors get into this game, building up innovation and transformation centers as a way of speeding up their penetration into consulting?
 
If I were advising an India-centric vendor right now, I’d tell it to create a Venn diagram of industry strengths, top clients and strategic technology alliances and note the cities that excel in each area. The cities that offer all three areas — the middle of the Venn diagram — should be considered as candidates for new innovation and transformation centers. Some have started, to a degree. Tata Consultancy Services (TCS) has its Pace Port in New York City, which we visited, and has opened a new one in Pittsburgh. I think it needs to triple its investment in people for these centers and then use them to introduce established managed services clients to the broader expanse of TCS’ offerings, including consulting around innovation and transformation.
 
Boz: So connect that to our ongoing research in digital transformation and IT services: What would be the role of the partner ecosystem in such a model? Are there vendors that are making these bold moves and trying to leapfrog the competition and monetize these facilities through different lenses
 
Patrick: Perhaps inadvertently you’ve raised one of the trickiest elements: measuring success. Everyone we’ve spoken to over the last eight years or so has described some way of “monetizing” these facilities, often coming up short because the financial impacts and the nonfinancial benefits — like building talent, firmwide knowledge sharing and brand awareness — are so difficult to measure. So I don’t expect bold moves, but I think we will see three trends mature and evolve in new ways.
 
First, hybrid will die. No one perfected bringing balanced and equally optimal experiences to in-person and virtual attendees at the same time. What was a tolerable fix from 2020 to 2022 just won’t be acceptable much longer. Second, vendors’ new centers — and there will be newly launched centers — will be localized, industry-centric and fully staffed, as well as cobranded with technology partners. Some centers with those characteristics exist now, and every new center opening this year and next will follow that broad blueprint. A great example right now is EY’s wavespace at Nottingham Spirk.
 
Third, you said, “leapfrog the competition,” and I think that was a mindset in the early stages of these centers, when PwC and Deloitte set the example and others tried to emulate and accelerate past them. But now I think IT services vendors and consultancies will look less at leapfrogging the competition and more at ensuring these centers reflect core competencies, ecosystem alliances and customer focus.
 
On that last element, IBM and Accenture have both brought “customer” or “client” explicitly back into the names for their centers, and among the issues I’ll be tracking closely this year is how those new centers evolve.
 

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