Horses for Sources | Perusing the Progression of Integrated Global Services

The Digital Transformation Services Blueprint Primer is unveiled: Accenture, Cognizant, IBM, Infosys and TCS are the front runners

July 29th, 2014

2014 has shaped up to be the year Digital Transformation took root as a unifying theme for IT and business services. What’s been exciting about Digital is much of the technology is already available, and it’s the digitization of business processes to enable plug-and-play services, more meaningful data and more seamless business models designed for mobile and cloud business environments.

Digital is not really about digitizing the way we’ve always done things, it’s about digitizing the way things need to be done to be more competitive and effective in the future. Digital is also about progressing our talent to operate with digital mindsets, by adopting analytical, creative approaches to help their enterprises progress from creaking, legacy business practices.

Nearly every major IT and business services provider is now using the term Digital in its go-to-market messaging today. But that level of activity and interest means the phrase has taken on an extraordinary breadth of meaning. So much so, perhaps, that one might argue it is becoming increasingly meaningless as a descriptor of activity.

HfS’ Ned May recently set out to clarify our definition of Digital Transformation and to explore the positioning of the leading IT and business services providers in the today. Rather than narrowly define and coral the topic, he cast a wide net with the goal of highlighting the full range of activity currently underway. His rationale for this approach being that Digital Transformation does not merely represent a new external market opportunity for service providers, but it is also a major catalyst to reconfigure the very markets in which they are operating.

To this end, we have published what we are calling a Blueprint Primer Report that evaluates this emerging Digital Transformation services landscape, the significant participants and their early positioning and achievements as they vie to take many of their clients into this digital dimension of service delivery and capability. So how did the early front runners shake out?

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Ned, let’s start with what you mean by Digital Transformation. Can you elaborate?

Thanks, Phil. As you are aware, it can mean many things but in its purest sense we see Digital Transformation as the changes that must occur when a business moves away from a physical task. For example, the shifts that occur in underlying processes and infrastructure when one sells goods Read More »

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Yes, it’s true… one in three Apple engineers is really Indian

July 28th, 2014

We have heard a lot about Apple’s manufacturing outsourcing, where the firm has ~500,000 people subcontracted via Foxconn in China to crank out its iPhones, but very little about its IT outsourcing habits.

So… does Apple also leverage large scale IT outsourcing? If answer is yes, then what kind of IT outsourcing is done by Apple, and how it has been changing with time?

With these questions in mind, our ever-curious India-based analyst (note: also keen novelist now seemingly developing a penchant for investigative journalism), Pareekh Jain, started studying Apple’s IT outsourcing initiatives, and the results surprised us: Apple doesn’t outsource its core software technologies that go into its products, but it does outsource Enterprise Applications, Business Intelligence, ADM and other software initiatives to a combination of TCS, Infosys, Wipro, TechMahindra and Exilant (which we know of). Quite simply, as Apple is growing, so is the scope of its Indian-centric IT outsourcing to support it’s ever-increasing needs.

Another related aspect that cropped up during Pareekh’s research, is the increasing use of global engineering talent by Apple. According to our estimates, Apple leverages Indian engineering talent heavily as indicated from its sizable H1B and GreenCard applications.

We shared our research findings with Times Of India (The World’s largest English daily newspaper), which went as far as a story on this interesting little topic on today’s front page.

We’ll be sharing our research report on Apple’s outsourcing strategy with our readers shortly….

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Accenture makes significant As-a-Service play by bringing together Operations, Cloud and Infrastructure

July 20th, 2014

It’s time to wake up and smell the roses, people. The services industry is going through its most seismic challenge as increasingly sophisticated enterprise clients are looking to reduce their reliance on labor-based services and clunking archaic on-premise technology. While some services and consulting firms have their heads buried in the sand, clearly in denial that the services model has already entered into a fundamental shift, others are recognizing that they need to get ahead of this – and fast.

The services industry is going through a secular change and it will never be like it was, where trillions of dollars were spent maintaining dysfunctional systems and funding huge armies of staff to fumble their way through managing non-standard and often obsolete processes. Those days are fading fast and that pie is shrinking for providers and consultants still feeding off the legacy enterprise operations beast.

We ran a study earlier this year that explored the role of technology when enterprises outsource their business operations, and the findings from almost 200 major enterprises couldn’t be clearer: half of today’s enterprises are expecting to take the leap to enable their business operations with new technology tools and platforms in barely a two-year time-frame.

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Operations leaders don’t have the luxury of ten-year improvement programs anymore – corporate leadership expects to see tangible results in much shorter timeframes. You only have to look at the growing number of unemployed CIOs to understand what happens when functions become overly-operational and limited value and innovation is achieved.

It’s the same for CFOs, CPOs, supply chain heads and other function leaders – most are under a renewed pressure to continue driving out costs, while delivering ongoing improvements to data quality and having greater alignment with front-office activities. The old “we need to fix our ERP first” excuse just isn’t cutting it as much these days.

This is why 49% of today’s enterprise buyers expect to move to a “wide-scale transformation of Read More »

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A few HfS memories for the summer

July 17th, 2014

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

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Apple goes all corporate on us

July 17th, 2014

Ned May, SVP Enterprise Mobility and Digital Services Research, HfS

Remember the days when standard corporate issue to enterprise staff was the monster-sized Dell laptop that only seemed to be made for the mass-market corporate crowd and needed a huge ugly Targus case to lug it around… and a low-end Blackberry, where the only redeeming feature was brickbreaker that could keep your brain amused for hours on those middle seats at the back of coach?

In fact, it was for these very reasons that executives slowly came around to realizing that the only cool technology they could get access to would come from their own personal investments, which is how Apple crept into the executive suite. Apple was just so anti-enterprise; YOU were in control and YOU could develop you whole digital persona using your iPad and iPhone.

There have been some insightful pieces penned on the landmark IBM/Apple alliance signed this week – notably from Larry Dignan and Peter Allen that go into the far-reaching potential consequences of this deal, notably the potential of providing iOS apps and embedded analytics tools to enterprises and disrupting traditional services models, potentially not too different from Workday’s impact on HR.

However, I wanted to draw your attention to HfS’ enterprise mobility analyst, Ned May, who focused on the simple fact that this alliance finally gets Apple into the enterprise through the front door…

“Apple has never understood the enterprise very well. While it has attempted to become ‘more friendly’ over the years and extended a few fig leafs in the terms of iOS updates that address enterprise grade concerns like security, Apple’s success in the enterprise has mostly been driven by its success as a consumer device. It has largely entered the enterprise through the front door in an executive’s purse or pocket not via a box on the loading dock that was backed up to IT. Further, Apple has been notoriously difficult to work with often to the frustration of a CIO. In short, while Apple’s support might be “legendary” it has not been the type of story that ends with someone riding off into the sunset. Which brings us back to the impetus behind this deal. At its core, it is about Apple realizing it will never understand the enterprise and that there is no better partner to get them over that challenge than IBM.

“In exchange, IBM gets to offer a message of safety to anxious IT departments who nervously watched iOS devices sweep into their formerly locked down playgrounds and ultimately opened them up to the chaos known as BYOD. As we pointed out in our Enterprise Mobility Services Blueprint (see link), the market is now reaching a stage of maturity where IT departments are being asked to rationalize the disparate mobile activities underway around the enterprise. As they do, many are looking to apply their traditional approaches to managing the challenges these new environments brings.”

Click here to access the full complimentary POV “The Day Apple’s Enterprise Strategy Came in from the Cold”

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Announcing our North American 2014 Blueprint Summit… we’re hitting Chicago this November

July 16th, 2014

After our widely successful European summit at Cambridge University, we’re back stateside to rattle the global services and outsourcing industry like never before…

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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Capgemini, Accenture, HAVI and Entercoms make up the first-ever Winner’s Circle for Supply Chain BPO

July 12th, 2014

When we look at the future potential of BPO, one of the markets with the most untapped potential is that of supply chain services, which could be as large as $300 Billion in annual expenditure when today’s emerging offerings really begin to mature, and an increasing number of buyers have to tap into third party technology and services specialization.

When you think about the scope of this space, we’re talking about the management of orders, inventory, manufacturing and transport to get products to market, and then the whole additional services tied to after market needs, master data management and sustainability management:

The need for supply chain process, domain and analytics expertise, supported by the necessary technology tools platforms – at a global scale and depth – has never been as intense it today’s buoyant and globalized market place, where decisions needs to made faster than ever to keep many companies in business. So HfS analysts Pareekh Jain and Charles Sutherland set about the analyst industry’s first-ever attempt to flesh out the leading providers in this market with the 2014 Blueprint Report in Supply Chain Management BPO Services:

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So, Charles and Pareekh, what is driving buyer interest in Supply Chain Management BPO today?

For most enterprises the costs of goods sold is the vast majority of their income statement and the with SG&A having in many cases being squeezed extensively over the last decade they are looking for new ways to both reduce COGS but also to improve performance of their supply chains as well. As the world continues to globalize and both suppliers and customers become more distributed and Read More »

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Sometimes the best strategies are the most obvious…

July 12th, 2014

This was an actual bank robbery in Detroit…

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Steps the outsourcing industry needs to take to survive

July 4th, 2014

Outsourcing: Making the same mistakes over and over and expecting people to stop moaning

One of the the core issues we discussed at last week’s Blueprint Sessions was the frustrating and seemingly never-ending issue of providers over-promising delights to clients to win engagements and then failing to deliver on them. However, the group of 45 industry stakeholders all agreed that all of the entities are at fault in setting up too many of these engagements to fail:

Buyers: Thinking that they are going to get wads of free transformational consulting that will miraculously appear from the provider – even thought they haven’t actually paid for any;

Providers: Promising wads of free transformation consulting to augment their operational obligations, even though they probably will not really give the client any (but who cares, as it’ll be too late for the client to back out in two years’ time and they aren’t contractually obliged to provide it);

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.

So what happens when you look at a culmination of many buyers’ first five years’ experiences after signing a contract? Let’s take a look at some collective journeys:

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Four steps this industry needs to take to avoid engagement failure in the future

1) Less focus on the deal, more on the relationship. Providers are all-too-frequently being forced in the position of saying what they need to win the deal, as opposed to having a structure to propose a realistic partnership that works for both sides, with specific milestones and balanced delivery expectations.

Possible Solutions: Advisors need to create a more collaborative RFP process that allows for more interaction between the buyer and interested providers. Advisors also need to set better expectations for their clients and potentially get their governance consultants involved earlier in the Read More »

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The new table-stakes: Fixing the Analog Present for a Digital Future

June 29th, 2014

As we digest the incredible dialog from the HfS Cambridge University blueprint summit this week, the overwhelming mood from enterprises is one of frustration to get beyond this tactical status quo of legacy operations, in which so many find themselves wedged.

And most services providers aren’t going to come to the table with the technology and talent until their customers clearly dictate and demand what they need to cross this chasm. And those providers which simply do not have the Digital capabilities their clients demand to address these gaps, run the risk of being relegated to the class of legacy staff augmentation provider that performs only the low-value grunt work, or ditched from many client provider rosters altogether. And this is already happening with some ambitious determined clients.

When we surveyed 312 enterprise buyers on their two-year expectations from their current outsourcing relationships, it becomes abundantly clear that those desired business outcomes from yesterday’s outsourcing era have quickly become today’s table-stakes:

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Clients are rapidly losing patience with services providers that aren’t working proactively with them to provide more value than the basic terms of the original contract. I feel like we’ve had this conversation before, but this time many clients are doing a lot more than having a quiet moan that they aren’t really getting value beyond very basic service provision. This time, many are actively Read More »

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HfS Cambridge University Blueprint Sessions: In Good Company!

June 25th, 2014

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The HfS Cambridge University Blueprint sessions: Where “Rubber Chicken” and “Orlando” are foreign concepts…

June 25th, 2014

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And the HfS roadshow hits Cambridge University

June 24th, 2014

Looking forward to a phenomenal couple of days… a great opening buyers session was enjoyed by all!

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Outsourcing and shared services investment intentions at record high as the Integrated Global Services model takes center stage

June 22nd, 2014

It’s official: outsourcing is not dying – it’s simply become a key part of a broader enterprise operations strategy: Integrated Global Services. 312 buyers recently shared their investment intentions over the next two years during our 2014 State of Outsourcing study, conducted with support from KPMG, and their operations strategy clear: one in four are reinvesting heavily in their global shared services operations, while seven-out-of-ten are continuing to make (largely moderate) investments in their outsourcing delivery.

The long and short of this is that 93% of enterprises today have shared services and 96% are outsourcing some element of their back office IT and business operations, while 27% are actually reducing their investments in their own internal business units. What’s more, 56% are already increasing investments in their centralized hybrid governance function to manage their mix of service delivery models. To this end, the increasing majority of enterprise buyers today are investing in an integrated global services model that orchestrates their process delivery across all available vehicles of sourcing:

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Let’s delve a bit deeper here and view how these investment intentions have shifted over the last three years, comparing this with the 2011 and 2013 State of Outsourcing studies:

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Shared Services makes its strongest re-emergence as a delivery model for a decade. While the broad number of firms increasing their focus on both the outsourcing and shared services models is relatively consistent over the past 3 years, the difference today is the intensity of investment. Outsourcing has slowed to a more moderate pace, while a number of large-scale enterprises are focusing on moving more work into their internal shared services centers – the first time in a decade we are really seeing shared services making a reemergence of this magnitude.

Buyers are shifting more of their higher-value work into their offshore shared services operations. It’s become abundantly clear that buyers are now aggressively globalizing their Read More »

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Parikh preaches, prophesizes and prognosticates… Part 2

June 18th, 2014

As with the airline industry, consulting firms have become highly commoditized with little client service and the willingness to serve others

-Kevin Parikh, Avasant, June 2014

In Part 1, Avasant’s CEO Kevin Parikh talked about his emerging advisory firm and how it intends to help its clients tackle digital transformation. In Part II we warm up the talk to cogitate the impending talent crunch, the democratization of sourcing and the new levers enterprises can pull in their relentless quest to find new productivity… so without further ado, here’s Part 2:

Avasant CEO Kevin Parikh addresses some big industry issues with an ambitious consulting approach

Phil Fersht, CEO, HfS Research: Kevin, traditionally outsourcing advisors were focused primarily on reducing labor cost more than anything else. But now it looks like the decisions of driving out labor costs are democratized within companies. Let’s say they came out to look at Cloud; they can look at crowd sourcing type solutions. They can look at robotics. They can look at a lot of things and not just outsourcing. In fact, in many cases outsourcing is like a band-aid. Do you feel today’s advisors are really equipped to help their clients think through all these variables?

Kevin Parikh, CEO and Senior Partner, Avasant: Phil, I love how you put it—the democratization of sourcing selection. We all have a vote. We can take what we want.

Phil: Exactly…

Kevin: And I think Cloud has enabled us to do that. Are the typical advisors prepared to enter this market? Absolutely not. The traditional outsourcing advisor is focused on towers of service, offering templates and financial models. This really requires a strategy-oriented Read More »

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Can Infovish disrupt the Indian services model and rediscover its mojo?

June 12th, 2014

Wow. When the rumors leaked out about Vishal Sikka being tapped up for the Infosys CEO job, we thought this idle speculation, but a possibility that Vishal could have some role where he could absorb the nuances of the services business to potentially take over in a couple of years.

But – lo and behold – the old guard have decided it’s time to make a dramatic change and a big bold statement to the world by placing the popular tech innovator, Vishal Sikka, in charge of rediscovering that elusive Infosys mojo that has been absent for some time now. So… is the Infosys monarchy behaving like a Premier League soccer club and making a panic play to stave off relegation to the second tier of providers, or is this the boldest move yet from one of the TWITCH* provider family to make a late run at the Champions League?

Infovish Pros

Vishal is a technologist and much admired by technology-driven executives. His recent departure at SAP demonstrated how loved he was by the techno-purists and was seen by many as SAP Read More »

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The digital failure of today’s operations talent: two-thirds of enterprises are falling short

June 10th, 2014

As we peruse the results of our soon-to-be-released State of Outsourcing 2014 study, one of the core elements that jumps out at us is the widespread dissatisfaction of enterprises in their own internal operations talent to change the processes, automate them, analyze them… or come up with creative thinking on how to improve things in general. The talent dearth is so bad that barely a third of buyers from the 312 enterprises we surveyed has seen any positive impact on their own talent with their current outsourcing relationships using their own internal talent:

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Organizations clearly cannot reach their state of Digital nirvana without professional help. “Digital” capabilities, in this context, relate to the acumen of operational services talent to understand the interplay between their applications and processes to achieve better automation and more productive workflows that can ultimately lead to better analytics to base future business decisions. In addition, these capabilities also relate to the creative flair of staff to align their services with the core business and come up with new ways of doing things to drive value, new ideas for business improvement and, in short, to behave more like a “front office” employee than transactional operator.

Bad IT can be even more culpable than bad BPO. Let’s not throw all the blame for this talent failure at the doorstep of the business operations staff. In so many cases, enterprises would have much more effective process capability if corporate IT wasn’t so constipated with maintenance and infrastructure. In so many client cases, IT still can’t figure out how to code without error, and they’ve done it for decades… at least processes change, but IT continues to be stuck in the dark ages for so many organizations.

The Bottom-line: A Digital talent crunch is coming and this could get ugly for some

At HfS, we predict a major talent crunch coming to the vast majority of ambitious organizations who are struggling to find or retrain their back office staff to be more front office staff and “Digitally savvy” with their approach to services. Two thirds of outsourcing clients are happy with how their internal teams manage costs, keep the basics ticking over (“lights on”) and respond to compliance needs. But, as these “light on” capabilities become increasingly commoditized through more sophisticated global delivery and standardized technology platforms, the need for these armies of back office operators is steadily decreasing.

What is clear is that technology has become a major component for future value of the enterprise (read our earlier study on this topic) and one avenue for operations staff to increase their future value is to train in areas like analytics and process automation where they can add whole new echelons of value to their organizations. Sadly, many of the two-thirds we identify above are not going to make it, and others are simply not going to be needed – the relentless pursuit of increased value and decreased labor costs will see to that. Less is more is the brutal rule for the future of the enterprise operations function.

For forward looking service providers and consultants, these clients are becoming rich hunting grounds for valuable partnerships in the future as the need for the Digital skills and new talent exacerbates. Most clients will find their need to develop or acquire better talent a fruitless exercise and will look to their external partners to plug these operational gaps that will drive future value.

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Parikh preaches, prophesizes and prognosticates… Part 1

June 9th, 2014

Kevin Parikh is Global CEO and Senior Partner at Avasant (click here for bio)

Isn’t is just so exciting to work in an industry where we are constantly seeing new competitors emerge, seemingly boundless innovation from enterprise clients pushing their capabilities to the limit… and all with such a refreshing lack of confusing verbiage.

OK – I was dreaming there for a moment, but one company we have seen emerge from the ground up in just a few short years to challenge the top advisory firms is Avasant. And most of this is credited to one man and the team he has built since he left Gartner, where he led the firm’s sourcing practice: Kevin Parikh.

So we managed to catch Kevin at his Manhattan Beach home, where he resides with his wife and two daughters, to talk to us about what makes him tick, how his firm is disrupting the advisor space (in dire need of disruption) and how he is intends to tackle clients needs around Digital transformation that is so high on enterprise agendas today…

Phil Fersht, CEO, HfS Research: Good afternoon, Kevin – thank you very much for your time today. You’ve been quietly empire-building in the advisory space for a few years now – I think I first met you about seven years ago when you’d just left Gartner to set up your own shop. Please share with our readers a little bit about your background, how you got into this space and the journey you are on today.

Kevin Parikh, CEO and Senior Partner, Avasant: Yes, we have known each other for several years now. I started my career as an attorney in Washington, D.C., during the Clinton years. I was in the Clinton administration with the United States Environmental Protection Agency. This is pre-Y2K, pre-IT outsourcing transactions, and in many cases, it was just the beginning of when the advisory space really started.

After the EPA, I moved to KPMG to join their LLP assurance practice, continuing my focus on contractual and litigation work that I had performed while at the EPA. During the 1990s, I became increasingly engaged in KPMG consulting activities, including reviews of some of the very first outsourcing transactions. I found myself sitting on panels with John Halvey and Bob Zaylor debating Read More »

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Is a new breed of analyst finally arriving to disrupt the legacy model?

June 4th, 2014

Firms like HfS Research, Constellation and GigaOm have built their brands very quickly, in just a few years, and are now more visible than more established firms.

–Duncan Chapple, Influencer Relations, June, 2014

As if by some freak of nature, the very next day after we stirred the pot questioning whether analysts needed regulating (or self-regulating), the industry’s leading analyst/influencer observer, the venerable Duncan Chapple of Influencer Relations and Kea Company fame, penned a blog that clearly demonstrates the sands are shifting in the analyst world when it comes to wielding influence over enterprise buying decisions:

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Several analyst boutiques are out-influencing their much larger competitors

As these results reveal from Analyst Equity and Kea’s recent Analyst Value Survey of several hundred research consumers, Chapple states that “Firms like HfS Research, Constellation and GigaOm have built their brands very quickly, in just a few years, and are now more visible than more established firms. A great example of this is shown by the Net Influence Score from our survey, shown above.”

The Net Influence Score shows, for each firm, the net percentage of the respondents mentioning a firm as having rising or falling influence. This chart shows the percentages for the firms about which the most respondents had an opinion. Chapple continues, “Newer firms like HfS and GigaOm are coming from a lower base of awareness: that makes it all the more remarkable that HfS was not Read More »