Murphy’s BPO Law

The more time I spend with some of the top services account leads for providers, the more impressed I become with how some of them manage incredibly complex client relationships, which only seem to be getting even more complex in today’s climes.

Carole Murphy is Capgemini's Head of BPO Business Transformation Services

The good account managers literally have to know everything about their clients, from their quirky custom built systems, their internal politics, their process flows, their changing directives from leadership, and so on. And when you get into BPO, it’s not like consulting where you can parachute into clients, devise impressive roadmaps for them to follow and make a hasty exit before the real work begins. Nope – in BPO you need to craft the game-plan and handhold your client through the quagmire for many years to come. As someone one told me, “you’ve got to eat what you kill”…

One person who lives and breathes these complex client transformations is Capgemini’s Carole Murphy, who today heads up the firm’s BPO transformation services. When we managed to drag her away from her reserved seat at the Tottenham Hotspur stadium  (a team which can certainly benefit from her transformation skills), we managed to pose some questions on where this BPO business is heading and what she’s experiencing with her clients…

Phil Fersht, HfS: Carole, it’s great to have you on our interview docket today. You’ve been in the BPO industry for quite some years now and are very hands-on with several clients I know. Would you give us a little more color on your background and how you’ve found yourself so involved int he BPO industry?

Carole Murphy, Capgemini: Like many of us in Capgemini BPO, I started off as an accountant. I worked for British Steel and for Kraft Foods, and in about 1996 I joined what was then Ernst & Young Consulting because I was really interested in finance and accounting and transformation. Finance transformation has been the core of my career since then. Five or six years ago I started exploring how we could use Capgemini BPO’s assets to best help our clients to transform, delving deeply into how transformation really works and how we could bring more impactful transformation to our clients. As time went on, I got increasingly interested in how BPO delivers the promise of transformation. I think there’s something quite exciting about the BPO industry in that you’re able to help clients not only make transformation happen, but also sustain that transformation because it’s part of what we do every day.

Phil: We’ve had countless discussions over the years about how clients can achieve operational results with BPO and meeting their core performance metrics. Suddenly, many buyers we speak with expect transformation, and if a provider can’t bring that to the table, it’s not going to last very long. Do you feel that client expectations are a lot higher than they were three or four years ago?

Carole: I’m finding it surprising that some clients’ expectations of what a BPO can deliver is still limited to the simple lift and shift, or just transactional activities, or the impression that ‘surely the Read More »

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Deconstructing your manual BPO activities for the As-a-Service Economy

With the increasing momentum of Robotic Process Automation and comprehensive business platforms solutions in BPO, it seems like a good time to step back and take a look at what really occurs “under the covers” of most BPO delivery.  Let’s hear what HfS’ Charles Sutherland has to say about deconstructing those “human” elements of processing work – and how they will evolve with all the technology-enablement underway…

HfS' Charles Sutherland (pictured right) and Tom Ivory deconstruct BPO in a Dallas parking lot

When you get right down to it, BPO isn’t all that complex and, regardless of whether it is a horizontal or industry vertical based process solution, there are only a few basic components that are used to construct a solution.   Understanding this will be critical to making BPO work in the new “As-a-Service Economy”.

Architecting a BPO solution is not all that different from being a writer of a comedy movie, whether that writer happens to be based in Hollywood, London, Paris or Mumbai.  If you watch closely, most comedies are based on the interweaving of a few recurring plots involving the key cast members.   These might include:

  • Mistaken identity (in all forms)
  • Boyfriend/girlfriend that got away returns to town
  • A couple works together for the first time
  • Eccentric in-laws come for a visit
  • Friends feel that someone is hiding something and decide to investigate
  • A family vacation
  • Dad gives horrible advice to son/daughter about dating/relationships
  • A protagonist suffers accidental memory loss
  • Competition for a prize
  • Unexpected arrival of a windfall of $
  • A surprise party/birthday/pregnancy
  • Accidental ingestion of a mind-altering substance

The only difference, therefore, between most generic comedies, whether they involve Kate Hudson, Peter Sellers, Jacques Tati or Priyanka Chopra, is which mix of these plots is involved.

And it’s the same with BPO – when you deconstruct the actions in a BPO process, what you will generally find is that they comprise some combination of these human elements:

  • Opening an envelope
  • Answering the phone to interact with customers/suppliers/partners
  • Keying or scanning in data
  • Repurposing content
  • Starting or closing a case
  • Comparing data fields on screen and or on paper
  • Identifying an exception to a process and flagging it for remedy
  • Making a decision based on a business rule
  • Requesting/Authorizing/Making a payment
  • Updating status field in a system

Hopefully by now you recognize the repetition of the elements, both in comedy movies and, more importantly, in your business processes.   But why does this matter, why should I even think about deconstructing a process into its human elements at this point in time?

It’s useful to do, because the way that you will need (or want) to combine those elements together in your BPO process, is going to change in the next few years, if not already for you today.

We believe that with robotic process automation, the digitization of previously “analog”, or paper-centric processes, enabled by  the advent of As-a-Service intuitive solutions, will result in many of these 10 human elements being less critical to the “plot”, if not being eradicated outright.

Therefore, if you aren’t already thinking about what you really have in your business process and what your people are really doing, you aren’t going to be as prepared for this new disruptive world as you will need to be.

In short, we believe that process automation is going to impact dramatically these human process activities over the next 5 years:

  • Keying or scanning in data
  • Repurposing content
  • Starting or closing a case
  • Comparing data fields on screen and or on paper
  • Identifying an exception to a process and flagging it for remedy
  • Making a decision based on a business rule
  • Updating status field in a system

The Bottom-line:  The roots of the As-a-Service Economy have already been planted – and BPO is taking on a very different solution form

The broad-based adoption of As-a-Service business platforms will radically impact how these 10 human process elements are transacted  tomorrow, compared to how they  they are transacted today.

This is our future for BPO, which will likely not even be called BPO for much longer as more and more processes are digitized and technology-enabled to form components of automated solutions where the outcomes of these processes are taken for granted.   For example, does anyone with half a digital brain cell even think about photocopying receipts for their expense submissions anyone when a quick scan onto your mobile in the taxi will be only “manual” component necessary?  And why will be we need to employ call center reps to prepare auto-insurance quotes once all the data points can be pulled together and a computer generated quote can be automated for the customer in seconds?

This is the future that HfS is researching to understand how it will turn out and by when.   That’s, at least, what keeps us up at night rather than watching re-runs of “Being There.”  We’ve already been here and we want to see where we all end up before long.

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Are you really getting value beyond cost from your sourcing strategy?

Are you still flailing in a world of transactional purgatory, despite signing up to the incredible innovative delights with your local friendly service provider?  Or have you now crossed that chasm and reoriented your governance team into a super-high performing unit that services your own organization like a top-notch service provider?  Or are you stuck somewhere in the middle?  Please take our short survey to air your views and experiences.

At the same time, are you an advisor frustrated with the lack of progress you’re seeing from your clients, or are they all scaling new heights of innovation and next-gen capability, based on your wondrous advice?

And providers – what do you make of it all? Are you really the best at what you do, and it’s somehow the fault of advisors and buyers when your clients fail to find much value beyond making a few savings on their expensive onshore labor costs?

On behalf of HfS and KPMG, we very much appreciate your participation in this pivotal research study that will help gauge the current level of progression with organizations’ operations strategies and their alignment with corporate goals – whether you are managing business / IT operations, shared services/Global Business Services (GBS), governance practices or outsourced business functions. We would also like to hear from provider-side and advisor executives on these issues.

This survey should take no more than 15 minutes to complete, and we will share an exclusive executive report of the findings for your time and you can also enter into our prize draw for an iPhone 6…

Please note that your contact details will only be used for the purposes of sending you the executive report and entering the prize draw for an iPhone 6, and will be treated with the strictest of confidence. The deadline for response is Friday October 31. The executive report of the survey findings will be sent to you in November.

Please take our short survey to air your views and experiences.

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HfS leads analysts firms for value both in Europe and globally

We really didn’t want to over-toot our horn with regards to our performance with the recent excellent 2014 Analyst Value Survey, which canvassed the views of 1093 enterprises, analysts and vendor consumers of research. However, we were extremely excited (and proud) to see how effectively our research has penetrated European organizations:

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We’ve been trying very hard to increase our readership and client uptake in Europe and this really validates our open model for getting our research into the nooks and crannies of global enterprises.  It also goes to show how much noise you can make with a “Born in the Cloud” business model these days, when a small boutique like HfS can outperform a host of firms many times our size, because of our ease of access and quality of work. It’s also a great validation for the services industry when we have firms like ISG, Everest and NelsonHall also outperforming many of the mainstay traditional analyst firms.  This is also very apparent when we look at the rankings global for “Value for Money”:

Well, that’s the last of our horn-tooting for now, but a special shoutout to the team at Kea, especially Duncan Chapple, Bram Weerts and Derk Erbe, for doing such a tremendous job pulling off this innovative and unprecedented research.  Oh – and people can purchase a full copy of the data for a few shekels here.

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How successful do you think you really are?

My word is this a frightening way to look at yourself… but how much of you is really more left than right here?

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More hope less fear, please – Digital is not only changing the way we work, it’s improving it

I don’t know about you, but I’ve been getting really tired of people lamenting that jobs are being robotized, our operations talent is too transactional and we’re all, basically, screwed.

I’ve also been guilty, in the past, of preaching the doom and gloom scenario for the workforce, as our enterprises find new ways and means to improve efficiencies and effectiveness, however, as business models evolve, so do our labor needs – and this often translates into an even greater need for talent.  I also have an increasing amount of faith in the capability of most workers to evolve and adapt, and our new research supports this theory.

In short, industry has been striving to minimize the reliance on manual labor to support processes for centuries, since the invention of the water wheel, the steam engine, the spinning jenny, the Read More »

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1093 research influencers have spoken: HfS leads the analyst industry for growing influence

And finally, the results of the Analyst Value Survey, which canvassed the views of 1093 enterprises, analysts and vendor consumers of research, have been released. This is – by some margin – the largest study ever conducted to gauge the influence and value of the industry technology analyst firms, and even the most optimistic followers of HfS couldn’t have expected this result:

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And not only did we enjoy a huge uplift in influence of the last 12 months, this also also builds on our influence increase over buyers and providers the previous year (see last year’s results):

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I really don’t want to bore you with a sales pitch as to how we have been achieving this recognition (hopefully you have your own ideas, and if you were one of the nice people who voted for us, I thank you personally – and owe you a drink).

All I will say is “thank you” to the HfS team for working their socks off and making this all possible.  And also a thank you to YOU for reading our stuff, saying great things about us and believing in our approach and determination to change the face of the analyst industry forever.

I would also like to thank the hard-working people at Kea Company, which today has adopted the mantle of “analyst of the analysts” for pulling off such a terrific and comprehensive study.

If you would like to purchase a full copy of the results, you can access them here.  If you are a provider marketer who needs some conclusive data and a decent steer where to invest your analyst relationship time, you could to a lot worse than spend some time with these guys.

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Cooking up NASSCOM’s $50 billion Bangalore biryani

Last week, HfS attended and presented at NASSCOM’s buzzing BPM Strategy Summit 2014 in Bangalore.

We asked our EVP of Research, Charles Sutherland, to share the team’s thoughts on the event and what were the key themes that came out during the various sessions and how those relate to NASSCOM’s ambition to grow Business Process Management (BPM) exports from $20 Billion in 2014 to $50 Billion by 2020.  The simple fact that Charles actually shaved for this conference tells you in was quite the big deal…

Charles Sutherland closes out this year's Nasscom BPM Summit in Bangalore

Phil, let me begin by first acknowledging strong attendance (~500 people) for this year’s Summit and the high level of engagement from across the NASSCOM membership during the day and a half of sessions.  The theme of the Summit was what NASSCOM member’s could be doing to drive hyper-growth to bring the exports of BPM services from India to $50 Billion by 2020 a CAGR of  ~16.5% which really is hyper-growth by anyone’s calculations especially for an industry with 25+ years of history in India.

To borrow a metaphor provided before to HfS by Anantha Radhakrishnan, SVP and Global Head of Enterprise Services at Infosys BPO, we liken the final goal that NASSCOM wants to create with this $50 Billion to the equivalent of an especially tasty meal of an Indian Biryani (a mixed rice dish comprised of many different ingredients that also has many different regional variants across India) made up of various existing ingredients that the BPM industry has at its disposal today, plus a few that are just now emerging. Based on the panel discussions and all of the hallway conversations during the Summit, we identified the following as being the key ingredients that most NASSCOM members believe will comprise the final dish.

The existing base ingredients in this Bangalore Biryani:

»    Analytics. Perhaps the most recurring topic through the Summit was whether analytics could be the driver for BPM growth through 2020 that Y2K was for the Indian IT industry in the late 90′s. We sat in on discussions around pricing models and operating models in analytics along with whether clients would be most interested in offerings based on descriptive or predictive analytics solutions. Some panelists stated that analytics could be the second biggest area in Indian BPM export mix by Read More »

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Have most analysts completely given up doing “research”?

Authors: Phil Fersht and Ray Wang:  Industry Analysts who still give a sh*t

(This is a collaboration and represents our individual points of view and not necessarily our employers. Oh wait, that’s us…. moving on…)

Is the analyst business stuck in its own trough of disillusionment?

We called it three years’ ago and we can now officially proclaim that the industry once known as “research” is close to meeting its maker.

Okay, the reality is it’s rare these days for analysts to comb for obscure facts, ask the hard questions, reach out to customers, dig deep with the system integrators, and circumvent corporate communication teams by going direct to employees for the inside scoop.

In fact, the alarming observation of analysts, especially in the large firms, is that most of them are spending all their time on evaluation matrices (e.g. MQs, Waves, Marketscapes, etc.).  There seems to be precious little (or any) research coming out of these places anymore.  Where are the big ideas? Where’s the insight? Where’s the thought leadership? What do these people stand for anymore?

When we sat down to talk to our client base, our analysts, and our clients, we determined that there were eight common reasons, namely:

1. Legacy business models are built on scare-to-play.  The only way the legacy firms are making money is through selling reprints of vendor positionings. Sales folks tell vendors that if they don’t pay for briefing hours and advisory time, analysts will ignore them.

2. Tele analyst approach reinforces an ivory tower image.  Today’s legacy analysts have no other means of getting data.  Sadly, most rarely ever talk to buyers of services  or users of technology.  The situation is so bad, that many vendors are forced to provide 15 to 50 customer references because the analyst has no means to reach out to real customers.

3. Stone soup research model reflects the laziness of analyst firm methodologies.  They are essentially having the vendors do their “research” for them.  Another way to look at this, legacy analyst firms are strong-arming vendors into providing references as their primary method of reaching out to customers.  Some analysts today are demanding three hour briefings with vendors to educate them – they are essentially making vendors pay to give them the knowledge they need to appear smart.

4. Egotistical narcissism drives power trips in evaluations.  Legacy analysts love the attention of vendors pandering to their demands.  In one case, a legacy analyst asked for 35 client references for Read More »

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Cognizant’s CEO Frank D’Souza talks to us about his recent $2.7bn shopping trip

Francisco D'Souza, Cognizant CEO (Click for bio)

After SAP lashed out $8.3 billion on Concur, it’s making Cognizant’s flagship acquisition of TriZetto look like the bargain of the decade.  So we grabbed a few minutes with Cognizant’s CEO, Frank D’Souza, to talk about why the US-headquartered company made this move and what we can expect to see unravel as a result…

Phil Fersht, HfS: Frank, in a nutshell, why did you make this investment?

Frank D’Souza, Cognizant: Hi Phil – the acquisition of TriZetto is in response to some powerful trends that are fundamentally changing the U.S. healthcare industry today—including the Affordable Care Act, shifting responsibilities between payers and providers, and the desire for employers to contain risk and reduce cost. By combining technology and operations, we have a phenomenal opportunity to build ‘the winning business model of tomorrow’ and play a key role in keeping people healthy and well.

Today, approximately half of the U.S. insured population have their health benefits managed by TriZetto software, and we see tremendous synergy opportunities to join that with our $2.5 billion healthcare and life science practice. By marrying TriZetto’s world class products with Cognizant’s consulting, IT and business process services, we are confident that we can capitalize on opportunities that neither company could access individually.

This move is also consistent with our overall three-horizon strategy, and brings new markets, new technologies and new delivery models to our portfolio. It moves us very significantly in the direction of adding non-linear, IP based revenue.

Phil, HfS: How will this change Cognizant? Doesn’t this turn you into a software firm, in addition to services? How will this impact your culture and they way you work with clients? Will you need to bring in new skillsets of sales/marketing/engineers, etc.?

Frank, Cognizant: We are committed to offering services across a range of products and technologies.  We also believe that there is a growing demand for fully-integrated technology and operations using newer delivery models made possible by Cloud and digital technologies. These so called BPaaS or utility models are very powerful and this is what TriZetto represents for us in healthcare.

Our approach has always been to start with the market and focus on how best to satisfy our clients’ Read More »

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Cognizant makes the biggest bet ever by an Indian services provider. This is a big bloody deal…

What ever happened to the days of the tiddly little sub-$10m “tuck-in” acquisitions that Indian providers used to make (and we all forgot about pretty quickly afterwards)?  Well, the game has changed forever as Cognizant shelled out a whopping $2.7 Billion on healthcare technology firm TriZetto (read our research POV here).

This wasn’t only Cog’s largest acquisition – it’s the largest one – by a country mile – from any Indian IT/BPO services major.  Ever:

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Four reasons why this changes the game for services:

1. Cognizant becomes a true BPaaS, software and services firm.  Most of the pureplay services firms buy little technology tucks-in to improve their services, and have technology tools and platforms that differentiate them with proprietary workflow and IP.  However, services firms have always sold services first and foremost, with software as the value differentiator that creates client stickiness and allows greater scalability of skills and standard processes.  By acquiring a platform the size and scale of TriZetto, suddenly Cognizant is adapting to selling software, and not just service provision. In my opinion, the only way true BPaaS will ultimately be successful is when the services firms elect to sell the software first and then figure out with the client how to implement it, redesign the processes, do the change management etc.  I call this the “Workday effect”.  Essentially, have the client fall in love with the software, slam it in, then figure out the rest afterwards. It’s like buying Google – they just force you to figure it all out after you’ve been bought into using their platform.

2. BPaaS will replace legacy outsourcing – it’s just a matter if time.  As our new State of Outsourcing data illustrates, close to one-in-three enterprises are already using (or about to use) BPaaS / cloud as an alternative to legacy outsourcing in areas such as HR, industry-specific operations (such as TriZetto), finance and accounting and procurement:

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Having a provider which understands – and can implement – a cloud platform, support the transformation and provide the necessary services that add real value to the front-office is the Holy Grail for many buyers.  With half of today’s outsourcing contracts potentially up for grabs, those providers with genuine platform plays are in pole position to pick off legacy outsourcing contracts that have hit the wall, in terms of finding future value.

3. Healthcare becomes the new “financial services” for IT/BPO.  In the past, most of the big bucks in industry-specific IT/BPO was in sorting out the quagmire of complexity, dysfunction and legacy in the banking and financial services space. Now, with the ACA hitting us in full-force, it’s plainly apparent that there’s a ton of opportunity taking healthcare payers and providers into BPaaS and sophisticated outsourcing models.  Watch this space for further acquisitive moves in this sector, where tech-centric healthcare suppliers, such as Emdeon and McKesson, are becoming increasingly attractive targets.

4. The BPaaS gauntlet in thrown down to Accenture, TCS, Infosys and Wipro to respond.  Cognizant’s main competitors are rocked by this one – and they need to figure out how to raise the ante with their own BPaaS plays. Infosys is enjoying a return of its mojo, with a software innovator Vishal Sikka now at the helm and figuring out its EdgeVerve strategy, Accenture has brought together Operations (including BPO) and Cloud Infrastructure to form a super group of BPaaS potential, Wipro has enjoyed a solid rebirth under TK Kurien and has been doing some cool things with Base))) and its mortgage platform play,  while TCS has long been a pioneer of “PlatformBPO” with a series of developing offerings, notably in the insurance and banking space.  Oh – and let’s not forget dear old IBM, who’s off trying to cure cancer with Watson

The Bottom-line:  Cognizant has upped the ante… Now it’s time for the ambitious providers to open their war-chests

You can just feel it in the air, can’t you?  The global economy’s buzzing again, ambitious enterprises are willing to spend again.  Meanwhile, the ITO labor arbitrage game is finally showing signs of drying up – and Cognizant, a major bell-weather for the health of offshore services, has responded with a massive, massive bet on the future of the industry – and few would dare to fault this move.

Now the winners need to place their bets on the solutions and industries where they can find new growth opportunities – they all have serious funds available, and can likely get access to even more capital if they need to.  There are clear yawning gaps in the market for (more) winning BPaaS offerings in areas such as finance and accounting, supply chain, retail and manufacturing… not to mention healthcare, life sciences and financial services.  The future path for BPaaS is really starting to unravel and we’ll likely know in the next 18 months who’s willing to make the investments and business model changes needed to evolve with it.

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The C-Suite sourcing elite gathers in Chicago this Fall… let’s meet the providers

Yes folks, we’ve unveiled our agenda for the Eighth Blueprint Summit this November, which includes C-Suite executives from all the major service providers and sourcing advisory firms, in addition to a host of speakers from leading buy-side enterprises.  So let’s take a peak at the providers putting themselves in the firing line…

 

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Shamelessly Shamus: Why Europe is positioned to leapfrog the United States

This man founded WNS, built up IBM's Middle East and African Practice and today leads KPMG's European shared services and outsourcing advisory. He also cycles a lot...

Did you hear the one about the Mamil (middle aged man in lycra), who got off his bike, donned a suit and tie and joined a Big 4 consulting firm to wax lyrical about sourcing strategy?  And not only that, he is called Shamus Rae, the shameless sourcing strategist from Islington…

Shamus has been in the sourcing business since 1993, where he started off working with British Airways and overseeing a lot of outsourcing of IT services to India. This is when he came up with the idea to build a company to act as an offshore BPO for the airline industry, which became WNS. In addition, Shamus built IBM’s BPO Service from zero to 17,000 people in MEA (Middle East and Africa). In total, he’s had 21 years in the industry working for suppliers, including 13 years working with clients on multi-functioned shared services and outsourcing around the world. And all this in addition to his 120 km a week cycling addiction.

So let’s hear from KPMG’s European Partner for Operational Transformation and Advisory Leadership, Shamus Rae.

Phil Fersht, CEO, HfS Research: Good afternoon, Shamus, and thank you very much for taking the time with us today. Let’s cut to the chase – are US enterprises ahead of the British/Europeans with sourcing?

Shamus Rae, Partner at KPMG, London: Categorizing “Europe” as one homogeneous region is too generic. The United Kingdom, plus Switzerland, are as sophisticated as the United States, and sometimes more cutting edge. However, other European countries are in catch-up mode. We’ve been doing some work recently for a large French bank helping them build a global sourcing strategy for their finance function. I asked the CFO whether he wanted to simply do a strategy or whether he was actually going to execute. We get many requests for sourcing strategies for organisations, of which a high number are never executed, but take up a significant amount of time for my team. To be fair to this client, he said that this time the bank is going ahead, and in fairness to him, he’s now built an offshore center of excellence on a global basis. In a nutshell, Europe is in catch-up mode but they’re positioned to leapfrog the United States.

Phil: At our recent UK Blueprint event at HfS, attendees were more open with their issues than many of the Americans that we regularly deal with…

Shamus: The fashionable trend is talking about robots in shared services. The way these concepts are branded is a bit too much sometimes. If you talk about operational efficiency and the future of robotics with French and German colleagues or clients, it can be too American. The best approach is to engage different countries in the right way for them and ensure there are relevant discussions on all of these topics and trends that are emerging

Phil: Is the industry vastly different from five years ago when we were going into the recession? Has there been a lot of shift, or is it more noise?

Shamus: There’s been a massive shift. I’ve been through a few recessions but none quite as significant as 2008. Previously companies were mostly focusing on straightforward labor arbitrage Read More »

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The 2014 HfS Blueprint for SAP Services: who’s leading this $156 Billion market?

We can debate for days the impact SAP has on the ability of corporations to evolve into cloud-based “As-a-service” models and break from dysfunctional operations practices of the past, but one thing is clear – it’s very big business today, and its ecosystem continues to grow. Last year, we (conservatively) calculated the entire spending corporates made to maintain their SAP ecosystems, including inhouse staff, totaled $156 Billion – and this continues to increase at a 5% clip this year.

Yes, the amount of money being spent to keep this SAP ecosystem ticking along is greater that the annual GDPs of Morocco and Tunisia combined, and still provides the gravy train for a host of leading incumbent service providers to employ armies of sales executives, consultants, developers and help desk staff.  I actually recall one global enterprise dedicating an entire 50 story building to house all the people required for a major SAP rollout.

So let’s take a look at how the 2014 SAP Services HfS Blueprint has evolved since we released the 2013 Blueprint. The capabilities of providers of SAP Services are assessed along the whole SAP Services value chain, ranging from SAP strategy consulting through planning and implementation of an SAP solution to managing and optimizing existing SAP environments. Providers are also assessed in terms of coverage of the SAP Solution Categories namely business apps, analytics and BI, mobile, database and cloud.

For this HfS Blueprint, more than 850 data points were collected in Q1 and Q2 of 2014, covering 740 buyers, providers, and advisors/influencers of SAP Services. 31 providers of SAP Services were evaluated.

We asked our SAP Services expert, Dr. Thomas Mendel, to explain the evaluation results and market dynamics:

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Thomas, now that you have done this for the second time, what are the key changes from a market perspective for 2014-15?

Clients seem to be gravitating towards four key themes:

  1. One global SAP system, SAP consolidation & SAP upgrades. Many clients told HfS in 2013 that they are investing in the traditional way of trying to contain SAP costs—through consolidation. This trend is becoming a wave in 2014, with three of the top five investment areas falling into Read More »

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Welcome to the era of churn, where 50% of outsourcing contracts are at risk

We’ve been calling it for seven years now, and finally the chickens are coming home to roost for the outsourcing business:  clients are genuinely walking away from outsourcing relationships which provide mediocre value.

And, while some savvy providers are sensing the defections with a few notable re-bid wins of late, many still have their heads in the sand and hoping that once they win a new client, they’ll never leave them… oh how wrong they could be, as revealed by 312 enterprise buyers during our new State of Outsourcing study with KPMG:

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So, why are so many outsourcing relationships hitting the skids?

While we’re at pains to point out that relationships fail to deliver innovation where buyers lack the skills and capabilities, it’s also blindingly obvious that many providers are not coming to the table with the goods either:

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As you can see, it’s the same old story – in fact, buyer satisfaction has actually got worse over the last three years (see our 2011 State of Outsourcing results).  At least, back then, the large majority of enterprise clients enjoyed some degree of value from their relationship, while today, barely a third of buyers are seeing positive impact in terms of having improved strategic talent, better operational analytics support, better technologies, process transformation, automation… the list goes on.

The three main issues driving this churn problem – and how providers can address them more effectively

1) Buyers’ expectations – and impatience levels – have markedly increased.  The world of business operations has evolved at an almost alarming clip over the last five years – it’s as if the recovery from the worst recession in living memory has driven an impatience from business leaders to advance their capabilities and cost efficiencies much faster than the snail’s pace of yesteryear, when ERP rollouts were calculated by the decade and outsourcing evaluations took three years just to get a meeting together. Suddenly, buyers want to talk about where they expect to be in a couple of years, they’re asking questions about robotic automation and developing meaningful analytics capabilities, they’re asking how their provider can help them improve the way they do things – not merely manage their legacy processes at cheaper rates.

How providers need to respond: Prepare more diligently to manage your clients over the longer-term.  You know many are going to start asking for the “what’s next?”  quicker than you expected, so be prepared with a plan to deliver it.  Otherwise, they may no longer be your client when the re-bid process kicks in….

2) Most providers are still obsessing with the next deal, as opposed to cementing their existing relationships.  The real “tangible” money on the table for providers today, is when they win a brand new deal that adds to their win-rate, their Wall Street scripts and feeds their PR machine.  However, the cost of losing a client is far, far worse – the lost income, the ignominy, the negative perception from the industry.  As more deals begin to churn, the focus will shift to protecting the base, and not just pursing the new.

How providers need to respond:  Start replacing the old-school sales guys with the fat expense accounts and standard issue BMWs or Jags (you know the type) with operationally-savvy account managers who understand how operations need to be run.  While they may be less fun on the golf course, they’ll be much better-placed to develop your clients down the road. 

3) Buyers still think that innovation should be free, despite the fact they bought labor arbitrage.  If you didn’t pay for it, why should you get any? The perennial problem with outsourcing is the fact that low-cost still wins the day, with most sourcing advisors strong-arming providers to respond to RFPs in three weeks and allowing very little (if any) interaction time for providers to interact with their clients in advance to develop the right solution and get a stronger balance between delivery capability and desired outcomes.  In most these cases, the buyer and provider teams brokering the deal hand them off to the operations teams on both sides to manage, with little room for investment on either side to do anything more than basic delivery with low-end resources.

How providers need to respond: Invest in more direct communications and sales cycles with clients, and be less reliant on the advisor channel for your future business.  You need to develop relationships where you can spend more time with your clients to get this right, not second guess their needs and rely on some fudged math to get a deal done.

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Welcome to the being-disrupted IT Outsourcing provider landscape

During the recent 2014 State of Outsourcing mega-study, conducted with the support of KPMG, we polled 312 enterprise outsourcing buyers and 347 outsourcing advisors on how they perceived each of the major 19 IT outsourcing services providers across our Execution and Innovation categories (click here for the full definitions).  And the ultimate results might not be quite what you expect:

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HfS’ Charles Sutherland, takes a deeper dive into these results, to understand better the reasons why these IT Outsourcers are being perceived this way:

With 50% of IT outsourcing deals at risk, how are IT Outsourcing providers being perceived?

The fact that Amazon and Google were the highest perceived ITO service providers on Innovation doesn’t come as a huge surprise, after all they are continually lauded for innovation in the press and don’t carry the breadth of “legacy” service offerings that the other ITO service providers do. However, they were also perceived as being at the top for Execution; in fact just 4 of the other 18 ITO service providers were perceived as well or better than they were for Execution capabilities.

What we also see, when we look at these results, is that the best Executors of IT Outsourcing Read More »

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The powerhouses of global sourcing are meeting in Chicago this Fall… can you really afford not to be there?

Yes, the HfS Blueprint Sessions are coming back to North America for an eighth installment this November, at Chicago’s famous Drake Hotel, for the biggest naval-gaze yet at our analog present and digital future of global services.

This will be the most intimate and significant gathering yet of enterprise buy-side operations leaders, who will come face-to-face with the prominent thinkers and operators from the service provider and advisory world. This will be the time when the global services and outsourcing industry takes a collective long-hard look at itself to develop a future roadmap that is sustainable and value-driven; where operations executives can progress their careers, and challenge themselves to stay ahead of the changing needs and skills demanded by today’s ambitious enterprises.

We are on a mission to legitimize the industry of services professionals and break from the bad-old habits that have been plaguing us for far too long. We need you to be part of this with us – and have some fun in the process.

We’ll be tackling two key themes throughout the two days:

1) Resetting the Analog table-stakes of today: Where are today’s global services relationships succeeding and failing – and how can both buyers and providers work towards collectively realistic and meaningful expectations. What needs to change with the way buyers operate, providers deliver, and advisors advise?  Click here and hereto cogitate some of the key takeaways from Cambridge.

2) Envisioning the Digital stakes of tomorrow: Recent HfS research (click here) shows that enterprise buyers are falling short with their own “digital talent” and need real help from providers and advisors to develop the analytical and creative skills they need to take full advantage of plug-and-play “as-a-service” models, process automation and other digital solutions. How can buyers break from legacy on-premise ERP models and tired, stagnant FTE-based outsourcing relationships to lay the framework for their digital operations of the future?

Roy Barden, who has taken on the role of Head of Next Generation Shared Services, Cabinet Office, Her Majesty’s Government, said of his recent experience at the European HfS Blueprint Sessions, “I found the summit as one of  - if not the – most valuable events of its type I have attended”.  So if we’re good enough for the Queen’s service delivery, we should be good enough for yours :)

On behalf of the HfS team, we sincerely hope to meet many of you in Chicago.

Email us at blueprintsessions@hfsresearch.com for more information 

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ISG, Enlighta and KPMG make the Winner’s Circle for Governance Solutions

The act of “outsourcing” is really only that initial phase of activity where an organization takes a technology/business process or function and transfers the management responsibility over to a third party to ensure the smooth running of said process or operation.

Once the outsourced processes are running functionally with the third party, the “outsourcing” is now complete and those activities on the buy-side become “service governance” activities, and the third party provider is delivering a “service” or an “operation” to its client.

The clients’ needs now fit into a set of governance functions that are centered on managing the provider relationship(s); communicating with – and reporting to – the internal business units and various stakeholders; aggregating, analyzing and reporting the appropriate performance and process metrics; managing risk, compliance and issue escalations.  The more sophisticated and experienced the governance unit becomes, the more of a high value consultative entity the team can become for their organization as it seeks to centralize more operations under the governance function and align them to the business goals.

Simply put, an increasing number of mature enterprises governance teams are doing a lot more than managing vendors and periodically bashing them up to lower their rates – they are using advanced software platforms that help drive real value, continuous improvement and insight from the operations under their oversight. Most clients need realtime support to help them do this, and a small handful of ambitious advisors are developing managed governance services functions to support this need.

So we tasked our resident governance guru, Mike Beals, to venture in into the post-outsourcing transaction services industry to develop an HfS Blueprint Report that evaluates the managed services and software solutions available today that support clients managing their global shared services and outsourcing operations.  And here is how they shook out:

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So, Mike, what exactly are these Governance Solutions providers?

HfS Research defines Governance Solutions as the set of software applications or managed services focused on the management and optimization of shared services and outsourcing service delivery environments for business service functions.

These software applications and/or services are one level of management removed from Read More »

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Time for the HfS summer chillax movie… go on, you know you want to see it

Time to crack open a cold one, turn up the volume… and relax!

 

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How can we re-humanize the enterprise with two-thirds of staff becoming irrelevant, a similar number sick of their employers

Our new research reveals the majority of enterprises are failing to develop the talent they need to be effective in the Digital Economy.

Working environments have become increasingly difficult to manage and too many staff are simply not motivated to drive value to their firms. Simply put, the old way of managing staff in today’s self-entitled employment world is just no longer working, and there needs to be a significant mindset change from both employers and their staff to re-humanize the enterprise.  Otherwise, the ROI of hiring people will really become unattractive.

When I penned the now-infamous post “Welcome to the age of Digital cruelty, where two-thirds of operational jobs are under threat“, I was thinking about how enterprises can develop change programs to reorient staff to add more “Digital Value” to their organizations, and how they can leverage their partner relationships to help plug the Digital gaps and improve their existing talent potential.

Then HfS’ workforce and talent analyst, Christa Degnan Manning, shared her insights with her new Talent Acquisition Services Blueprint, which brought forward many of the issues surrounding talent retention and creating a work environment where (motivated) staff can develop their careers with their employers with a long-term goal in mind.

So we revisited our recent workforce study which covered 5,000 enterprise employees globally, to understand how motivated today’s talent is to stick with its current employers:

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Barely 4 out of 10 staff intend to stick with their employer for more than a couple of years

Ouch. Yes, people, the day of the long term company job is truly dying on the vine, where close to half of today’s workers are already looking for a new employer, while another third are readying to move on in another year or two. At the same time, as our recent State of Outsourcing Study fleshed out, two-thirds of enterprises feel their existing operations talent is falling well short in “Digital” areas such as analytical capability, being creative with new ideas, driving better automation etc.  So what does all this mean?

Poor talent leadership and unmotivated staff is a recipe for corporate failure

It’s becoming abundantly clear that many staff that stay with a single employer for too long are losing relevancy, when it comes to delivering new value and insights.  This is because most Read More »

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