Digital labor will trim 1.4 million global services jobs by 2021

It’s time we dispelled the scaremongering and hype and gave you the true picture of how advances in automation tools and methodologies, such as RPA and autonomics, will impact the global IT services and BPO industry over the next five years.

The current debate on these issues is as polarizing as it is confusing. On the consumer-facing side of technology, we have a fervent and far-reaching debate about the ethics of artificial intelligence and automation, led by executives from the likes of Google and Facebook. On the enterprise side, we frequently see quotes from studies from firms such as McKinsey and Gartner predicting seismic job losses through the impact of disruptive technologies that could have a devastating impact on the global economy and society in the next few years.

Yet, many of the leading stakeholders much closer to the true deployment of emerging enterprise Intelligent Automation tools and platforms—namely the service providers, the ISVs and the sourcing advisors—remain on the sidelines when it comes to discussing the true impact of automation as it’s adopted by many enterprises today.

We’ve been talking, for the best part of two decades, about how to “transform” business and IT processes after the cost benefits of labor arbitrage have been maximized. Well, the simple fact is that much of these arbitrage costs are close to optimization for mature services providers that have well-honed global delivery machines. As enterprise clients demand further cost advantages, and as competitors become increasingly aggressive with their service pricing, the focus shifts toward clients attaining outcomes that are not always directly linked to lower headcount rates.

“Intelligent Automation-as-a-Service” is a genuine lever for enterprises to pull for further productivity gains beyond low-cost offshore labor

Consequently, many enterprises that have chosen to externalize their service delivery can enjoy even more cost effective services, as ambitious service providers further rationalize their delivery organizations by taking advantage of automation to standardize and scale service delivery to their clients.  In short, while many enterprises can invest directly in Intelligent Automation into their own processes, they can also simply outsource those processes to service providers, which can embed further productivity gains tied to automation, in addition to labor arbitrage.  “Intelligent Automation-as-a-Service” is quickly emerging as a significant productivity option for enterprises as part of their service delivery.

Sadly, greater productivity and effectiveness through “digital labor” comes at a societal cost—jobs that were once required are no longer needed. However, we would point out that the jobs that are being phased out are no longer being recreated in any case, and much of this shrinkage will likely come from natural attrition as some people leave the service industry for more relevant jobs in other industries.

The Impact of Automation on Services Jobs

The following graphic shows three Automation Impact Scenarios for the IT and BPO services industry, ranging from a modest/conservative prediction which is a continuation of current RPA use to a scenario we consider more likely where adoption of RPA and more Intelligent Automation increases to an aggressive scenario, where automation adoption hits a broader range of the skills. If we examine the most likely outcome, Scenario 2, we see strong growth for highly and medium skilled personnel—with highly skilled positions in our industry increasing by 56%, and medium-skilled by 8%. However, low skilled, routine jobs drop 30% as many of these roles get phased out over the next 5 years, resulting in a net loss of 9% of jobs, totaling 1.4 million:

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The following graphics shows Scenario 2, the Likely Scenario, in more detail, outlining the number of workers being affected within each skill category over the next 5 years:

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So what does this mean for the future of the global services industry?

The business and IT services industry has grown rampantly since the early service deals in the 1960s (with the likes of EDS, IBM and Hewitt Associates) and has reached a colossal scale we estimate close to 16 million workers across the prime delivery locations. Like any major industry that reaches a saturation point, as technological and operational methods improve, the need to continue adding staff will decrease once customer demand slows to modest levels. Just look at the evolution of automotive, aerospace and general manufacturing industries; now the same is finally happening to white collar industries where it is now very feasible to digitize work that was previously manually driven. Finally, automation has truly reached “swivel chair” business processes where manual interventions to process chains can be mimicked into software “recordings” to conduct said sub-task. While smoothing out various processes has the impact of freeing up time for existing office workers to focus on other (possibly higher value) activities, the ultimate effect, besides “human augmentation” is to enable businesses to conduct more of the routine work with less human effort and, potentially, less headcount.

How enterprise buyers and service providers of IT and business services will adopt digital labor

Most buyers are constantly investigating how to improve processes and where automation makes sense for them. It’s simply not possible to automate every flawed process chain—the cost and time is simply not worth it, so they need to select processes that warrant the Intelligent Automation investment—usually ones with high intensity repetition and throughput (and lots of paperwork that can be digitized), where RPA has a sizeable positive ROI. In most cases, Intelligent Automation potential is overlooked because the buyer just didn’t have enough financial incentive to make the investment.

However, on the sell side, the more service providers can deliver standard process delivery models to their clients, the more cost effective they become and the more price competitive they can be. Hence, smart automation is critical to their business models and competitiveness, and this is where we see most of the impact in the services industry in the coming years. The service providers will delivery efficiently automated services and then be able to pass on these “savings” from “digital labor” to their clients. This is why we envisage significant updates from the service provider community as Intelligent Automation capabilities quickly get embraced and embedded in service models across all core business and IT processes.

The Bottom Line: Automation and digital labor are increasingly pivotal elements of service delivery—we need to be smart about increasing human value in services

The choice will largely be down to the workers figuring out whether they want to stay in this industry and learn new skills and ways of working, in order to continue to be effective. As the data plainly shows, the services industry, from an employee standpoint, is likely to be 10% smaller in five years’ time. That may be a significant number of workers, but this reduction is gradual and gives ambitious workers the chance to reorient their skills and job focus. Our industry will likely lose that number (or more) through natural attrition over a five-year time period, so the core issue here is to embrace the value of making processes run better and how this helps us focus on growth initiatives and customer-aligned initiatives. As the head of a call center recently declared to us: “As long as we touch the customer in a valuable way, we can’t be automated.” That says a great deal about where we need to focus as this industry goes though this evolution.

HfS subscribers can click here to download the full POV, which details the HfS sizing and forecasting methodology for the impact of digital labor

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Can HPE + CSC dominate the digital underbelly, or has that ship sailed?

Digital Underbelly

Just stare at that digital underbelly… there’s a lot of work needed down there!

When the news broke last month about the second largest IT services merger of all time (after the 2008 HP-EDS whopper), the reaction among the services cognoscenti was – and has continued to be – one of confusion.  Big services mergers have just not done very well over the years. HP/EDS was a culture clash of immense proportions – and occurred right before the great recession, while other mergers, like Dell’s acquisition of Perot, has resulted in the old Perot business being flipped over to NTT Data at a significant loss, and the Xerox/ACS merger has been shaken up and spun off and needs a major reinvention under new CEO Ashok Vemuri to get the company back on track.  Meanwhile, Capgemini and IGATE are still figuring out the best pieces of each other to mesh together, while not taking their eye off the ball, during the services industries’ most cut-throat transition phase.

We heard HPE CEO, Meg Whitman, excitedly address the firm’s key clients and industry analysts at HP’s recent Discover event in Las Vegas, with an obsessive focus on “digital transformation” and the impending impact of “digital disruption”.  However, the real opportunity for HPE isn’t really in the design of digital business models for clients, it’s the enablement of them – it’s the provision of the agile “digital underbelly” to make digital change really happen for enterprises.

It’s easy to be cynical about legacy IT services, but there’s an awful lot of it to scrap over as enterprises are forced to fix their plumbing

Digesting the merger of these two struggling services giants has resulted in more rumination than most, considering the timing, sheer scale, transitional uncertain market and motivation. This is not a time when most traditional service providers are looking to add more global delivery scale to already large foundations – most are trying to slim down their delivery armies and sales forces, choosing to focus on new and emerging areas for growth and getting more services delivered for less FTEs by taking better advantage of automation technologies, standard SaaS platforms and more affordable cloud provision.

However, when you consider only $15 Billion is being spent on public cloud services (IaaS) this year and $ 1 trillion being spent on services tied to traditional services delivery, there is a huge amount of “legacy” IT and BPO business in play – for another decade and beyond – to enable the enterprise digital experience. Hence, the opportunity HfS sees for Newco, is to attack the IT and operations plumbing necessary to enable the fast-emerging Digital enterprise, and take on the likes of IBM, NTT/Dell, Atos, Capgemini and the Indian-heritage majors.

Why the Digital underbelly poses a massive opportunity for cost-effective agile IT infrastructure providers, such as the HPE+CSC Newco

The onset of digital and emerging automation solutions, coupled with the dire need to access meaningful data in real-time, is forcing the back and middle to support the customer experience needs of the front. Our new study on achieving Intelligent Operations (see link), which canvassed 371 major buyside enterprises, reveals two key dynamics that are unifying the front, middle and back offices:

  • A “customer first mindset” is the leading business driver driving operations strategies. Over half of upper management (51%) view their customers’ experiences as impacting sourcing model change and strategy, which is placing the relevance and value of the back office in the spotlight.
  • Three quarters of enterprises (75%) claim digital is having a radical impact. We can debate the meaning and relevance of digital forever, but the bottom line is that enterprise leaders need to (be seen) to have a digital strategy – and a support function that can facilitate these digital interactions and data needs. The old barriers, where staff in the back office don’t need to think and merely oversee operational process delivery, and those in the middle, which only venture a part of the way to aligning processes to customer needs, are fading away.

Consequently, we’re evolving to an era where there is only “OneOffice” that matters anymore, creating the digital customer experience and an intelligent, single office to enable and support it:

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The Digitally-driven Front Office drives the Digital Transformation

Digital, in its purest form, is all about transforming the business to create, support and sustain the digital customer experience. It’s about leveraging the omnichannel (mobile, social and interactive technology) and accessing meaningful analytics to make it happen. Digital enterprises need a support function to service those customers, get their products/services to market when they want them, manage the financial metrics, understand their needs and future demands and make sure they have got the talent which truly understand the outcomes of their work.

In their current forms, HPE+CSC has some real capabilities in industries like travel and insurance to lead the market here, but is its stated digital focus is going to be in the operations and infrastructure rather than on design and industry expertise; it will struggle in markets against service providers with very strong digital design practices, such as Accenture Digital and Deloitte Digiday.  In fact, Newco would be smart to partner with these firms to provide the digital underbelly capabilities at scale.

The Digital Underbelly creates the building blocks

Digitally-driven enterprises must create a Digital Underbelly to support the front office by automating manual processes, digitizing manual documents and leveraging smart devices and Internet of Things, where they are present in the value chain.  Smart enterprises have realized they simply can’t be effective with a digital transformation without automating processes and fixing manual interventions and breakages in their process flows.  Service providers can get ahead by working with their clients to make their processes run digitally so they can grow successfully their digital businesses and create new growth for themselves. Think about a central nervous system that incepts and processes all the elements necessary to make the enterprise function.

This is where HfS views the sweet spot for Newco, provided is can really optimize the economies of scale with the merger to be price competitive with the Indian heritage majors, such as TCS, Wipro, HCL, Infosys and Cognizant.  It also needs to convince clients it brings world class engineering talent, security and automation expertise to the table.

Intelligent Digital Support breaks down the legacy functional silos

Enterprises need their support functions (like an enterprise circular system), such as IT, finance, HR and supply chain, to be aligned with supporting the customer experience, as opposed to operating in some sort of vacuum, hence, we are terming this “Intelligent Digital Support”, where broader roles can be created.  HPE and CSC together have tremendous depth in areas like finance and accounting, contact center and HR from HPE’s traditional services business, while CSC brings it’s newly acquired procurement capabilities from its Xchanging acquisition.

Newco’s focus needs to shift towards creating a work culture where its delivery staff are encouraged to spend more time interpreting data, understanding their clients’ needs at the front end of their businesses, and ensuring the support functions keep pace with the front office. This is especially the case in industries that are more dependent than ever on real time data, using multiple channels to reach their customers and being able to think out-of-the-box with disruptive business models.

Intelligent Digital Processes must help enterprises predict and orchestrate, as opposed merely to react and maintain

Newco much focus on enabling business processes that align with their clients’ desired digital customer experiences.  It’s not about throwing off historical data just to discover what went wrong, it’s about being able to predict when things will go wrong and finding clever ways to get ahead of them. It’s about embedding smart cognitive applications into process chains, about learning from mistakes and new experiences along the way.  This is the enterprise neural system.  Several of HPE’s IT service competitors have already made strides here with autonomics platforms, such as IBM’s Watson, TCS with its Ignio , Wipro with Holmes, Infosys with Mana and Accenture’s evolving partnership with IPSoft’s Amelia. Without a genuine story in service orchestration and autonomics, Newco could quickly fall behind, as its customers become increasingly eager to embed cognitive and self-learning elements into their business and IT processes.

However, one key service orchestration platform where we see some real growth potential for Newco is with CSC’s industry-leading ServiceNow practice, which has enjoyed continued growth, especially following its 2015 acquisition of Fruition Partners.  As CIOs increasingly seek ServiceNow implementations on their CVs (in a Workday-esque manner), Newco should be able to divert many existing HPE clients onto its newly-acquired managed service.  Newco just needs to figure out how to grow that competency as two forces coming together, as opposed to ending up with competing P&Ls.

The Bottom-line: The industry is in transition and the winners are those which can pivot and focus fast.  Those which can’t will fail

Let’s cut to the chase here – we’re operating in a services world obsessed with preserving the past and ignoring the new.  The past was all about predictable revenue and highly-visible cost reduction opportunity – there was a method to the madness.  But this was because the true value was about doing things slightly better, but at much cheaper costs.  The future is not so predictable – it is about being smarter, more business aware, and technically superior to piece it all together for clients.  Oh, and without increased investments.  It’s hard, and requires a very different focus, which is one of developing talent to learn on the job, one of evaluating experiences professionals to assess their ability to change, of being able to learn new tools and platforms, which require a mixture of process and business understanding to align with real business outcomes.

The Newco that is HPE+CSC has as good a shot as most to survive the impending service industry carnage, as growth flattens and prices hit the floor for anything that is a mainstream service.  It’s sheer size and client portfolio should help it absorb the blows as the market shakes out and the need for increasingly complex “digital underbelly” services proliferates.  As we evolve the levers for the survivors to pull are the right combination of labor arbitrage, automation enablement, cognitive understanding and digital enablement.  But spending years constantly reorganizing internally to create the beast to deliver all of this with the speed, affordability and agility needed will not work.  These two firms need to be slammed together with an urgency and focus not yet seen in our industry. This won’t be pretty and needs to be like a very sticky BandAid being ripped off very, very quickly…because their biggest threat is within themselves.

For a deeper dive into the nuts and bolts of the HPE+CSC merger, download our POV now!

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Accenture, TCS, Wipro, Tech Mahindra and Infosys lead the 2016 Telecom Operations As-a-Service Blueprint

HfS Telecom guru, Pareekh Jain, is back with his second blueprint looking at service provider capability delivering telecoms business services, following his debut analysis at the end of 2014:

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Pareekh, how would you describe the current state of Telecom Operations As-a-Service?

We describe this market as a under-penetrated market. Our research suggests the current global telecom operations market (i.e., business processes under network, fulfillment, assurance, and billing) is perhaps one-third of $10 billion potential.

The telecom market is perhaps only vertical market with the dubious distinction of both enabler and victim of the digital transformation. Telcos have enabled cost-effective communication with likes of WhatsApp, Skype and in turn, they have eaten telco’s lunch. Telcos worldwide are struggling to find their right place in the digital world. As-a-Service solutions can enable service providers to help telcos to prepare for the digital era.  The As-a-Service is the model today and for the future in telecom operations services.

Tier 1 telcos have generally been early adopters of telecom operations services. Now, there is an opportunity to provide services to Tier 2 and Tier 3 telcos, too leveraging As-a-Service solutions. As-a-Service solutions are driving growth in this market.

The eight service providers we evaluated for this Blueprint approach this market in essentially two ways. Service providers with strong IT offerings focus more on non-voice solutions whereas pure-play BPO service providers focus more on voice-based solutions. Service providers with strong IT offerings have taken the lead in platforms replacing legacy stack, plug and play business solutions, intelligent automation, holistic security, design thinking, and collaborative solutions while analytics and social is on the agenda of all telecom operations service providers.

How has that changed since our inaugural Telecom Operations Blueprint in 2014?

Pareekh Jain is Research Director, HfS (Click for Bio)

Even back in 2014, we could see many ideals of As-a-Service present in service providers’ offerings. In the last two years, As-a-Service momentum has accelerated.

Compare to our analysis couple of years back, we see the rise in collaborative engagements driving business outcomes. Analytics is now embedded in most of the engagements. Service providers are launching new services incorporating design thinking. We see more examples and use cases of automation. Also, telecom operations service providers are becoming effective brokers of capability by partnering with IT, platforms, local construction companies and telecom domain experts.

We see industrialization of few new service offerings such as network rollout management, revenue assurance in last two years. Also, service providers are constantly innovating with Read More »

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Futurist Gerd Leonhard to keynote at HfS Cognition this September

Futuring Gerd Leonhard will keynote at HfS' Cognition Summit this September

Futuring Gerd Leonhard will keynote at HfS’ Cognition Summit this September

Now we have finally managed to get past that frightfully riveting conversation about doing some rudimentary process automation with our invoice processing and customer collections (aka RPA 1.0), we can finally get to the heart of what new technology capability  – much of which is already here – is really doing to our world.

With human brain power and computing power on collision course to become one, the enmeshing of human behaviour and thought processes with self-learning and self-remediating cognitive systems is set to confuse, frighten and – ultimately –  inspire us to change our whole approach to managing our technology investments, making data meaningful, collaborating with work colleagues and creating new business models.

This is our goal, this September, in White Plains, New York, where we are, once again, bringing together the diverse stakeholders of the operations and services industry to get past the fear, and find the inspiration to drag us out of this transition phase, in which we currently find ourselves.

To this end, at HfS we are thrilled to have persuaded Gerd Leonhard, CEO of The Futures Agency, to keynote our HfS Summit, “Cognition: Welcome to the Future of Services”, September 14 – 16, 2016 in White Plains, New York. So we sat down with Gerd to get his critique of the future of technology, the emerging quagmire surrounding Digital Ethics and the true potential of Artificial Intelligence..o and how this will all potentially impact our jobs, our societies, our lives, and our humanity…

Phil Fersht, CEO and Chief Analyst, HfS: Good evening, Gerd. Great to have you on the HfS platform today! We’re very excited to have you join us at Cognition, our coming flagship event in New York this September. But maybe before we start, could you give me just a little bit about your background and how you’ve ended up as such a visionary in the Artificial Intelligence (AI) Space these days?

Gerd Leonhard: CEO of The Futures Agency: It’s a long story. I’m a futurist. But I started as a musician and producer, and then in the late ’90s I went on the Internet and I did a bunch of music startups. It was an interesting time, but I was too early and ahead of my days. I think I realized in Read More »

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HfS adds a new twist to Digital and IoT coverage with Oliver Marks

Oliver Marks is Research Vice President, Digital and Internet of Things, HfS (Click for bio)

Oliver Marks is Research Vice President, Digital and Internet of Things, HfS (Click for bio)

You may have seen we’ve been busy expanding our research team to make sure we can help executives pull all the right value levers to take their enterprises into the As-a-Service Economy. In the old days we put a lot of focus into outsourcing services, until we really made a statement being the first analyst to introduce Robotic Process Automation to the analyst and advisory industry in 2012, before priming the Digital transformation services pump in 2014 and IoT in 2015.

So, we thought it high time we recruited one of the industry’s most respected authorities on the digi and IoT topics, Oliver Marks… so without further ado, let’s hear a bit more about HfS’ newest recruit…

Welcome Oliver!  Can you share a little about your background and why you have chosen research and strategy as your career path? 

Thanks Phil! I’ve got quite an interesting past: I started out in the UK design and advertising business having done a graphic design degree which was remarkably similar conceptually to the current vogue for ‘design thinking’ in the tech world. We ran a ‘concepts & copy’ creative shop on Read More »

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Meet the Dinamo driving TCS’ business process services impressive growth

Dinanath (Dina) Kholkar is Vice President and Global Head of BPS at Tata Consultancy Services

Dinanath (Dina) Kholkar is Global Head of Business Process Services at Tata Consultancy Services

As we endlessly debate the future of the global IT service delivery in the wake of advances in automation, digital disruption and the ability to maintain double digit growth rates, one area that has steadfastly kept to respectable growth and improved delivery confidence is our beloved business process outsourcing services.

In fact, we are about to reveal to all of you that the growth in Indian-heritage BPO has been consistently out-performing IT services over the last year.  Why?  Because BPO is several years behind IT in terms of widespread adoption, but is now coming to the forefront as processes can be better-enabled by cloud platforms and maturing global delivery models.

In this vein, I thought it timely to interview Dina Kholkar, TCS’ global head of BPS, who has helped steer his division to $1.9 billion at a 6% growth clip… making BPS now represent 12% of the total TCS business…

Phil Fersht, CEO and Chief Analyst, HfS: Good evening, Dina. It’s great to have you on HfS for the first time. You’ve been one of the best kept secrets behind the exciting growth in the Business Process Services (BPO) team at TCS. Maybe you can share a little bit about yourself, your own background and how you ended up leading the highest-growth division in TCS today.

Dinanath (Dina) Kholkar, Vice President and Global Head of BPS at Tata Consultancy Services:  Sure, Phil. I’ve been at TCS for a very long time. This is my 27th year in TCS! I started in 1990 as part of the IT business. I managed a few IT projects, went on to manage accounts across different geographies, different types of roles. The longest stint I had was in the capital markets area. I also spent a few years in TCS’ R&D unit, predominantly focusing on data warehousing and data mining. Those were the years when data had started becoming a focus in many organizations. I did have a stint in operations when I was managing customers, but I never really managed the business of running operations until I got the opportunity to manage e-Serve, which TCS had acquired from Citibank. After a few years, when it was integrated into TCS, I took on the role of the overall head of the TCS BPS business. So we’ve had quite an exciting and an interesting journey, a journey filled with lot of learning and a lot of customers we’ve been able to positively impact over the years. And I feel quite proud about the type of opportunities that I have gotten and the way I have delivered on the objectives that TCS has laid out for itself.

Phil: So what can you share with us then about the secret sauce at TCS? What is it that makes you guys really tick?

Dina: One thing which I have always seen probably over multiple generations—and all three CEO leaders of TCS—really strikes me is the customer centricity. We go the distance, which means we do whatever we need to do for the customer. We do the right things and ensure that we are taking care of the customer’s business, bringing all we have as an organization to solve problems that the customer has. I think that customer centricity is paramount in the organization. I think we also Read More »

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Robotic Process Automation has now penetrated a third of enterprises. Time to advance the conversation…

RPA 1.0 is a done discussion. We know what it is, we know what it can do, we know how it can augment operations and help digitize broken processes.  To this end, our brand new study on Intelligent Operations, which canvassed the dynamics of 371 global enterprises, already shows a third of them are very active with RPA within their IT and finance and accounting processes:

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RPA is here and being adopted at a fast clip

All the incessant RPA hype has done its job – it has literally dominated IT services and BPO conversations at every conference, provider strategy deck, advisor “new practice” press release and many buyer converations.  Indeed, we can even forgive those cheesy sales presentations from guys who suddenly claimed to have 20 years’ experience as automation pioneers and talked about bot farms as if they were actually hand-raised on one…

The overwhelming conclusion is that a large chunk of enterprises are actively implementing it, and Read More »

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The new HP Enterprise is now the #3 high value IT services provider

Love this merger or loathe it, the marriage of HPE and CSC has just spawned the third-largest high value IT services provider in the world – and happened just in the nick of time for our 2016 HfS IT Services Top 25:

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So, let’s ask HfS’ lead analyst for market sizing and forecasting, Jamie Snowdon (bio), how we fleshed out “High Value IT Services” from the general morasse of IT services:

We estimated all this data from services provider financials. Revenues are fitted to nearest calendar year. We attempt to make the IT services numbers as close to HfS definition as possible—as part of this exercise we exclude revenues from subcontracting, we don’t include BPO or business services revenues in this definition and some product services revenues were classified out of scope, if the equipment serviced is not IT – for example, telephony related equipment. These numbers do not include software-as-a-service, unless included within a broader managed services agreement.

Jamie, how did you come up with the $26 Billion number for the new HPE?

The merger of HPE Enterprise Services and CSC, brings together the high value services of HPE and the commercial revenues of the old CSC business. The $26 Billion revenue figure takes $8 Billion as CSC without the hived-off public sector business, and $18 Billion from HPE Enterprise Services division, much of which was the acquired EDS business unit.

And what’s your initial take on the merger, before we get deep into the weeds of the broader implications?

This deal brings together two of the original outsourcing behemoths EDS and old rivals CSC. The reasons for the merger given by management focus on the scale of the new company. Certainly scale was an important requirement for IT outsourcing providers in the past, as it gave flexibility and economies to these asset and labor intensive businesses. However, in asset light world of modern IT managed services and the increased use of automation – scale is not a vital component. It does give them access to the very largest of global deals, but HPE, and depending on location, CSC, would have been able to handle anything that crossed its desk. What we have is two large services businesses that have spent the last 3 years hemorrhaging revenues, because they weren’t offering what many enterprise clients wanted or there was another provider able to do the same task cheaper and more nimbly. This issue is not going to be resolved by this merger. The two firms have to reinvent themselves as a modern services firm when contracts are more open-ended, value is counted in revenue growth, not just cost savings and scale is replaced by other features such as agility and innovation as the key differentiators.

Well, good timing indeed, Jamie, with the new Top 25. Interested readers can download their complimentary POV on the HfS website here.

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When did employees become “costs”?

Stapler - Office MovieIt suddenly dawned on me what the core issue is with the future of the workplace: the simple fact that company leaders and their stakeholders started viewing employees as walking costs at some stage over the last 30 years, and have devoted a huge amount of focus and energy trying to figure out how to remove as many of them from their business as possible… without it impacting the top line.

Surely, people, human labor should be viewed as a valuable commodity that adds value to a business, not some burden on the profit margin that needs to be eliminated at all costs?  So what’s really gone amiss here?

Enterprises hired people into jobs they no longer value. Over the decades, our enterprises have ballooned with staff hired to provide inputs into process chains to keep them ticking over – whether they were writing lines of spaghetti code to make processes flow from one subtask to the next, or producing reports out of SAP for a historical view of the business some manager will archive away Read More »

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Accenture, Xerox, NGA HR, Aon Hewitt and ADP make the HR Operations-as-a-Service Winner’s Circle

The market for talent has seen massive fluctuations over the last eight years. The 2008-9 global recession caused massive employment contractions across all major regions, however, the tide has really turned to turn after one of the longest sustained periods of economic growth in the last 200 years, with the need for fresh talent is on the rise.

Coupled with the rise of the intelligent digital business, these dynamics have forever changed the way organizations have to approach their HR function as seek new expertise and mindsets. As such, optimization and smart thinking across the entire HR stack is a critical requirement to attract, onboard and nurture talent within organizations.

As more and more millennials enter the workplace (now making up a third or staff), employee interaction has to change. The always-on, always-connected workforce is here. Organizations need to adapt HR functions accordingly and embrace mobile and cloud technology that can be accessed anyway and anytime.

Cloud HCM platforms have developed user interfaces that speak to this new workforce, but with ~50% of buyer organizations still using on premise legacy HCM systems, there is still a long way to go for many organizations. By partnering with proven service providers, organizations can now make the migration to the cloud quickly and efficiently. Also by leveraging the managed service expertise of these providers, organizations are more enabled to focus on key moments of truth with employees thereby reducing employee churn and having a more aligned, motivated and focused workforce. 

Knowing the importance of these solutions for the very future of HR, we put our best and brightest on this. And the result is HfS Human Resource Services Research Director Mike Cook’s first Blueprint for HfS: HfS Blueprint: HR Operations As-a-Service 2016. So we invited him in to tell us all about it.

HR Ops_Axis

How did this Blueprint take shape, Mike?

In this HR Operations HfS Blueprint, we take a look at the evolution of MPHRO to “As-A-Service”–a services market that is increasingly agile, collaborative and employee-centric. HfS considers this transition in outsourcing a move to the As-a-Service Economy, placing increasing value on diverse Read More »

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The back office is dead… long live OneOffice

Intelligent OneOfficeIf someone called you “back office”, I’d imagine you’d be a little bit offended.  It’s probably not much worse than being called “useless”, or “about to be automated out of existence”…

But I have good news for you back-office rebels – your time spent festering in the backend of yonder is finally coming to an end. Why?  Because the onset of digital and emerging automation solutions, coupled with the dire need to access meaningful data in real-time, is forcing the back and middle to support the customer experience needs of the front.

Our soon-to-be released study on achieving Intelligent Operations, which canvassed 371 major buyside enterprises, reveals two key dynamics that are unifying the front, middle and back offices:

  1. A “customer first mindset” is the leading business driver driving operations strategies.  Over half of upper management (51%) view their customers’ experiences as impacting sourcing model change and strategy, which is placing the relevance and value of the back office in the spotlight.
  2. Three quarters of enterprises (75%) claim digital is having a radical impact. We can debate the meaning and relevance of digital forever, but the bottom line is that enterprise leaders need to (be seen) to have a digital strategy – and a support function which can facilitate these digital interactions and data needs. The old barriers where staff in the back office don’t need to think and merely oversee operational process delivery, and those in the middle, which only venture a part of the way to aligning processes to customer needs, are fading away.

Consequently, we’re evolving to an era where there is only “OneOffice” that matters anymore, Read More »

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Buyers perceive Accenture, Deloitte and KPMG as the most trusted consultants for achieving Intelligent Operations

john-lylyIn 1588, the English dramatist John Lyly, in his Euphues and his England, wrote:

“…As neere is Fancie to Beautie, as the pricke to the Rose, as the stalke to the rynde, as the earth to the roote.”

In other words, “Beauty is in the eye of the Beholder”, which just about sums up how buyers perceive consultants when they need some serious rethinking and rewiring done to their operations to make them more intelligent:

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So what’s actually surprising here?

In the past, you may have expected to see the pureplay strategy houses rule the roost, however, when we break down the Change Management and Solution Ideals enterprises need to achieve more Intelligent Operations, the focus shifts much more to using consultants with real change management, process transformation, analytics and automation chops… this is less about strategy, and more about just driving through the changes. Most company leaders know where they want to go – it’s now more about executing a plan to get there:

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The Bottom-line: We’re moving to a world where the expertise enterprises need to be successful is really changing 

One of the above firms asked me recently if it should start an automation practice.  My response was “If you’re only asking me this now, then you’re already too late to the game”.  In a nutshell, enterprise operations functions need genuine expertise in adopting a mindset to write off their legacy systems and obsolete processes – and a real understanding of how to approach automation and embrace digital opportunities.

A lot of this is about prioritizing what not to automate and learning where digital transformation actually makes business sense. This is about creating an operations function that can pivot and support the rapid changing needs of the front office with actionable data, that is secure and available in real-time.  This is about defining and devising a digital strategy that has the customer at the forefront of the business and an operational support function that has the customer experience at its core.

Hence, consultants need talent that can not only think creatively with their clients, but also create an ongoing environment for writing off legacy, embracing change and being smart and proactive about leveraging automation and real digital strategies effectively. The speed at which some of these advisors must make the pivot from merely brokering transactional contracts, or spouting off some high level fluffy strategy, to supporting real change is critical – I’d imagine we’ll know in the next 9-12 months which ones will genuinely be helping their clients achieve these ambitious ideals.

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Teleperformance, Concentrix and Sutherland lead the HfS Contact Center Operations Blueprint

Our latest research into intelligent operations reveals a customer first strategy is the biggest driver for C-Suite leaders today, so where more important to focus than what’s going on at the call center?  Has there ever been a more compelling time for call center service providers to step up and prove to their clients they can do a whole lot more than execute basic customer services?

Call center services have matured significantly in recent years, where you can find a plethora of providers doing a masterful job managing resources all over the world to deliver affordable voice services – but choosing between them has often never been so difficult.  However, with the need for so many enterprises to focus on the omnichannel customer experience to differentiate themselves, we’re now in a critical bake-off between those call center providers delivering real customer value versus those still walking the treadmill of proving legacy voice services at ever-cheaper rates.  Plus, we still have many enterprise buyers who squeeze the life out of their providers on cost, and then expect the provider’s A team to show up. Hence, there is a fine balance between the value clients need, the investments they are prepared to make to achieve this value, and the ability of smart providers to invest in As-a-Service models that take advantage of talent, digital technology and automation to deliver high value, without huge increases in headcount investments. Sounds easy, right?

In this vein, we’re excited to announce the release of our first Contact Center Operations Blueprint, authored by HfS Research Director and contact center veteran, Melissa O’Brien, the only contact center analyst who’s actually lived in the Philippines running a call center operation herself. Melissa’s been exploring the cluttered competitive landscape, talking to a huge number of clients and leading providers, to help shed some light on the competitive landscape and where this market is truly heading:

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Melissa, please give us a flavor for the current state of the contact center operations market

This is a market undergoing a pretty dramatic transformation, in part due to increasing end-customer expectations – ambitious service providers are looking Read More »

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The future of work is about capabilities you (should) already have

Fries with that?Soon there will be nowhere left to hide. Everyone’s value is under the microscope from colleagues and management alike.  Whether you turn widgets, manage a process, a set of processes, lead teams or manage team leaders leading teams… or run a whole division… or even an entire organization, you are under constant scrutiny in today’s open workplace.

Everyone has to prove they are useful, add real value and are worth their salaries… or they are toast.  But most importantly, people need to prove they can be trusted.  Employee trust in today’s workplace is about proving you are doing more than just enough not to get fired.

Loyalty is legacy

Most heritage enterprises no longer want to give out gold watches for your turning up everyday for last 30 years… I mean, “thanks for showing up and coasting here for 30 bloody years and making it really hard to fire you”.  I don’t think so… Loyalty means little, but value means everything. The more legacy work we automate/digitize, outsource, replace with software, or just write-off, the more we have to focus on our human skills to justify our existence in today’s workplace.

Tomorrow’s successful workers are those who use their initiative to perform activities, on their own volition, to find new value for their enterprises.  You can’t get any progress or value from methods like Design Thinking if your staff are only checking the boxes to perform their rudimentary employment functions. Design Thinking is about going beyond the norm to challenge the status quo, to think outside the boxes, not just checking them.

You are who you are – your reputation is everything, your ability to forge relationships with colleagues, peers, industry influencers and company leaders who appreciate your value, your perspective and your personality is, really, all you have.  The days when you could get away with hopping from job to job because you were great at bullshitting your way through interviews are dying – any employer with half a brain isn’t recruiting through traditional channels any more.  It’s all about people engaging with people who have established a reputation for adding value, going beyond the basics, and being great to work with.

You need to find new problems, not just solve old ones

But adding value is not just about solving known existing problems, it’s about finding new ones to solve in the future.  You can always find a contractor or an outsourcer to fix a broken set of processes, or correct lines of badly written code. But finding people which can challenge whether those processes or lines of code are even still relevant to meeting your desired outcomes… people who care enough about their jobs and their company’s success to go beyond performing “just adequately enough not to get fired” is the secret sauce for future value.   And that is what new workforce trust is all about – initiative, attitude, personality and trust.

The Bottom-line: There is no secret sauce to staying relevant – it’s about putting our egos aside and becoming students again 

Frankly, I’m sick and tired hearing about “Digital Skills” and “Creative Capabilities” being some far-flung capabilities which you need to go to Millennial school to develop (whatever that is). Digital skills are about understanding your customers’ current experiences and intelligently leveraging every traditional, social and mobile channel touching your business to make them richer. Creative capabilities come from collaborating and challenging yourself with your colleagues and partners.

So correct me if I am wrong, but being successful today is about using capabilities we already have. It’s simply making ourselves students again, finding that hunger to learn about what’s out there and engaging with everyone around us to prove and challenge our theories.  We must ditch this sense of entitlement that dictates we don’t need to go back to basics and force ourselves to think, collaborate and learn all over again – or we’re going to be done before we know it.

Enterprises need to behave like start-ups, where their people group together for the common cause of making their collective group successful – only willing collaborators with a desire to learn and challenge need apply. We’re all part of the Digital Generation – we just need put our egos to one side and own up to the fact we’re all students rediscovering what we’re all about and what we’re capable of…

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Accenture, Genpact, IBM, EXL, TCS, Capgemini and WNS lead the first As-a-Service lens of Finance and Accounting

Growth in offshore-dominated services may be slowing for traditional IT support services, but for multi-process Finance and Accounting (F&A) services engagements, 2015 saw the market continue to grow at  a 10% clip.

Why? Because F&A outsourcing is about 10 years behind IT outsourcing – in terms of adoption – and is a market that can quickly take advantage of more experienced governance executives, capable service providers that have ironed out many of their past mistakes, and notable advances in analytics, robotic process automation (RPA) and digital technologies.

In short, the shift from enterprise clients approaching F&A engagements largely as a labor-obsessed cost-driven solutions towards outcomes-centric value-obsessed solutions, is now really happening. Yes, we’re finally starting to talk about F&A being delivered “As-a-Service”.  To this end, for 2016’s F&A Blueprint, which covers over 1500 multi-process F&A relationships, we’ve reoriented the performance innovation and execution scores to reflect each service provider’s alignment with the HfS As-a-Service Ideals:

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So, what’s new about this year’s F&A Blueprint?

We’ve gone deeper than ever before in really getting to the essence of buyer/provider F&A relationships.  In the past, we were as guilty as the rest of the industry of focusing too much on engagements being operationally effective, when we should have placed even greater emphasis on Read More »

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Rescuing BPO from its trough of directionless boredom: Make jobs challenging and creative

Bored BPO CatWhen your enterprise is increasingly dependent on hiring “Millennials” with digital skills and lower wage needs, you’d better figure out a plan for creating exciting, challenging career paths, or you’re pretty much already doomed.

Sadly, our Talent in BPO study from last year tells a very depressing tale when you ask BPO delivery executives what they think of their BPO career:

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What’s alarming is the failure of enterprises to create and communicate a viable BPO career path for seven-out-of-eight professionals with under two years’ experience.  And – while 63% of newbies strongly agree their job is vital to business performance, a depressing one-in-eight are actually excited by their career choice.  When people get past the first couple of years, their experience clearly improves, but the concern here is how can we attract top (or even middling) talent into BPO careers, when there is such a negative perception of the potential of the job.  If we can’t attract the talent, the industry will never progress beyond a cost/efficiency play.

What can we do to attract the “Digital Generation” into the BPO business?

Start new hires on activities that require creativity and critical thinking. Working in BPO has to be about delivering capabilities beyond rote, operational processes.  Today’s college graduates are simply not coming out of school willing to perform mundane routine work.  Just look at the new WEF jobs report to see how skills requirements are quickly shifting, as business needs evolve – especially the need for creative skills, going from number ten to number three in merely five years:

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In the past, for example, an accountant would often earn his/her chops processing accounts and doing routine GL work, before progressing to controllership activities, such as budgeting, quality audits, FP&A, forecasting and risk assessment work.  With much better technology and offshoring Read More »

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Let’s get lean digital with Shantanu

Shantanu Ghosh, SVP CFO Services and Consulting, Genpact

Shantanu Ghosh, SVP CFO Services and Consulting, Genpact (Click for bio)

Digital, digital everywhere, but what about the finance function? It took a decade for accountants to make the seismic shift from Lotus 1-2-3 to MS Excel… so how much focus is our favorite business function putting on today’s advances in analytics tools, interactive and collaborative solutions, mobility and automation?

Can finance executives really embrace digital to break away from some of the legacy mindsets, processes and technologies that have plagued the function for decades?

Not too many people have been driving the digital agenda as aggressively with the CFO’s office than Genpact’s Shantanu Ghosh, with his firm’s own methodology “lean digital,” so we thought it high-time we caught up with him to get his viewpoint on the impact of digital o the finance function.

Phil Fersht, CEO and Industry Analyst, HfS: Shantanu, it’s been a couple of years since we’ve had you on here. Can you tell us a bit about what you’re up to in Genpact today?

Shantanu Ghosh, Senior VP & Business Leader – CFO Services and Consulting, Genpact:  Actually, my remit remains pretty similar to what it was two years back. I lead the financial accounting, sourcing and procurement service lines, globally. I also lead consulting across Genpact.

But I’ll tell you, the complexities, the scale and the type of solutions involved in all three have changed pretty dramatically in the last two to three years. So it feels like I’m doing a new job every day, even though broadly the remit remains the same.

Phil: I’ve seen Genpact has been on a real tear, particularly over the last 12 to 18 months. I’ve seen a real uptick, especially in Europe, where you’re winning a lot of deals. What’s going on? What are you doing differently?

Shantanu: I think there are four things at play, Phil. One, I think it’s a result of there or four years of sustained investment in our domain capability and our front-end capability. Obviously, in this business it takes a little bit of time for that to result in winnings in the marketplace, because you have to start engaging with clients at a different level. Then you get into a virtuous cycle, because Read More »

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Twelve ways to survive the race to irrelevance – download your life jacket now!

If you weren’t able to make our excellent buyers summit at our research partner Cambridge University, we managed to crack the code (finally) on surviving in these disruptive times – in twelve simple steps.  Just download our report and all will become crystal clear:

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How digital is transforming finance – Exclusive insights from our latest study

75% of finance executives agree that the new wave of digital technologies is fundamentally changing the way that the finance function operates. So what will the finance function of the future really look like?

Join us on April 21st to be part of this exclusive webinar and find out!

Digital Finance Webinar Blog

Join these experts from HfS Research, Genpact, Mondelez and KPMG as they discuss the findings from recent research that shows how digital technologies are delivering competitive advantage. They will share their insight on the future of F&A and explore:

  • What are the key drivers for F&A leaders to embed digital technologies, such as SaaS platforms, analytics, mobility tools, RPA, and machine learning, into their operations?
  • Where are most F&A organizations in their digital journeys and what lessons have they learnt?
  • What are the talent requirements and skill sets that finance leaders need in their functions to take advantage of digital technologies?
  • Where are digital pioneers investing and what challenges are they experiencing?

REGISTER NOW!

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Accenture, Cognizant, EXL, Genpact, IBM, Infosys and TCS Top the Winners Circle for BFS Analytics

The BFS industry is completely dependant on data and analytics and the services to provide these analytics are critical. These services enable analytics data preparation and management, routine business intelligence reporting and dashboarding, advanced analytics modeling and ongoing decision-making for industry-specific use cases, including customer and marketing analytics, fraud, risk and compliance, and portfolio analytics.

To this end, we’re excited to announce the release of our latest Blueprint Report–this one on BFS Analytics Services, authored by HfS Research Director Reetika Joshi‘s exhaustive research to arrive at this comprehensive view of the market. So let’s get an up-close view from Reetika on the Blueprint Report:

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Reetika, why have we undertaken an HfS Blueprint on analytics services specifically in banking and financial services?

The BFS industry is heavily reliant on the use of data, and yet the potential for embedding analytics-driven insights into operations is still far greater than adoption. The last few years have seen their focus on risk analytics intensify as regulatory changes and government scrutiny continue to mount. Along with balancing this growing compliance work, banks have also found a renewed interest in customer analytics to orient their growth initiatives. Most banks are not set up to meet digital consumer needs and are now embarking on digital transformation, powered by customer and marketing analytics.

Major banks and financial institutions are once again focusing on the next generation of analytics models, tools, and skillsets. We see demand from BFS clients across fraud, risk and compliance, AML/KYC, and customer and marketing analytics. Enterprise buyers in this industry are either unable to find the talent they need, for areas like specialized fraud, risk and compliance, or technology platform expertise, or are unable to afford it at the level of scale needed today—leading us to undertake this Blueprint to understand market direction. We see BFS clients trying to balance and complement their internal analytics teams with the global talent access that some service providers can bring them.

Report author Reetika Joshi, HfS Research Director (click for bio).

Report author Reetika Joshi, HfS Research Director (click for bio).

So how would you describe the current state of BFS analytics services?

For most service providers, big data and analytics services are the fastest-growing businesses in their portfolios, with significant revenues coming from BFS clients. This is due to the growing adoption of data-driven decision making within different parts of the enterprise for BFS buyers, and the need for more analytical support than internal staff can support.

Service providers have doubled down on BFS verticalization in their analytics portfolios, turning initial work with clients for analytics modeling and reporting into portfolios of pre-packaged industry-specific use cases and catalogues. As service buyers consistently stress the need for domain expertise from service providers, we see service providers strengthening industry training programs and hiring professionals from BFS industry backgrounds to increase contextual understanding and allowing for more meaningful analysis. We see the types of BFS analytics solutions changing today, with the next level of analytics use case development. BFS analytics services buyers seek the following:

  • The application of cross-vertical learnings to banking, especially from other consumer-facing industries that have progressed in customer experience analytics (e.g., from telecom to retail banking)
  • The incorporation of newer sources of data into existing analytical models to gain new insights into fraud, risk, and marketing (e.g., sensors, geolocation mobile data, and web and social data)
  • The exploration of modern business intelligence and reporting applications and tools, big data infrastructure, and advanced analytics platforms (e.g., cloud-based data warehousing, the mobile delivery of reports, and insights)

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