Avanade laid out its strategy and roadmap for growing its business over the next three years at a recent analyst day. Avanade is an Accenture/Microsoft joint venture providing enterprises with IT services. In the 25 years since its founding, Avanade has delivered 37k projects to 5k clients. Its staff holds over 60k Microsoft certifications, including 68 employees with the Microsoft MVP designation. Currently, Avanade sources the majority of its business leads from its owners.  

New Horizon targets mid-market

The company is launching a new strategy, New Horizon, to grow its business faster and become operationally more independent of its parents. It plans to focus its direct business development efforts on middle-market enterprises. Currently, Avanade’s client base includes middle-market clients, most of whom are direct-source clients. It defines middle-market enterprises as having revenues between $500m and $5bn. The market of mid-tier firms has thousands of enterprises and should offer Avanade faster growth opportunities than tier-one enterprises outside Microsoft and Accenture’s target markets. If the strategy is successful, it will grow to four times its current size in the next three years.

To accomplish these goals, Avanade is hiring salespeople to identify mid-market prospects and bring on 1k new clients annually. Engagements will start with 4-to-6-week projects, Halo Offers, which will identify Microsoft opportunities within an enterprise. These engagements will be expanded into Solution Plays, implementing templated solutions, or as-a-service engagements. By employing standardized delivery and rapidly scaling best practices across markets, Avanade will be able to deliver quality engagements while growing its sales faster than it scales its workforce. It will also need to shift its mix of full-time/contractor employees towards more contractors to be able to scale delivery to clients with higher sensitivity to seasonal and cyclical economic conditions.    

Scaling sales and delivery will only be possible if Avanade’s offerings meet client requirements. Avanade’s mid-market clients prioritize:

• Onshore/nearshore delivery to enable mid-level managers to communicate requirements that enable their differentiated value proposition to the market and maximize client/vendor trust
• Defined solution frameworks to enable rapid deployment and scalability
• SaaS, cloud, and managed service delivery to allow them to reduce their commitment to internal resources.

Avanade is investing in building services for emerging technologies, with a focus on AI, including:

• Engineering services across emerging Microsoft technologies:
  • Co-pilots and agents
  • AI design and engineering
• Innovating customer experiences:
  • Hybrid experiences
  • Search (collective intelligence)
• Emerging disruptive technologies:
  • Data fabric and core
  • AI infrastructure and Edge
  • Security and identity.

At this stage, Avanade’s offerings for the Biz Apps suite are its most industrialized offerings.

Financial services clients

The financial services industry is Avanade’s largest industry today, its client base consisting primarily of tier-one banks. The New Horizon strategy will look to grow in BFS in the U.S., Europe (UK, France, Iberia, ASG), APAC (Australia, Singapore), and Brazil marketplaces. Avanade can provide industry domain knowledge, which Microsoft does not offer. It can access Accenture’s industry capabilities and has a cost structure that allows it to deliver cost-effectively to mid-tier banks. To date, Avanade’s engagements with mid-tier banks have primarily been AI-based, cloud migration work, and application development modernization.

Key examples provided were AI-assisted customer contact use cases. For example, responses to customer inquiries must be highly accurate according to regulations. The AI contact agent can deliver high accuracy with ChatGPT 4.0-based technology or somewhat lower accuracy with ChatGPT 3.5-based technology. However, the license costs make 4.0 uneconomic for the client's use case. Avanade was able to engineer improved accuracy into the 3.5 technology to meet the high accuracy requirement. The client was able to save on licensing costs and make its use case highly cost-effective.

Conclusion

In summary, Avanade is looking to grow into the mid-market enterprise at a breathtaking pace. For perspective, the New Horizon initiative will grow its direct business revenues faster than Avanade grew its direct business in the first 25 years. Its best opportunities for success will be in regulated industries where competitors do not have the luxury of putting off decisions until it is economically convenient to implement disruptive technologies. Regulations in BFS are tightening with new regulations that shorten settlement times, increase risk management requirements, and require greater customer data protection. The pace of new compliance adoption provides a generational opportunity for a large services vendor like Avanade to enter the mid-tier market and gain market share with a strong value proposition. To succeed, Avanade will need to consistently deliver successful engagements while innovating new offerings and best practices across geographic and sub-industry markets.