HfS Network

The FORA Council has assembled the industry's leading minds in cognitive automation

May 17, 2017 | Phil Fersht

When an industry is enduring a secular shift that is literally redefining how we do work, it's pretty important to get some real, unfettered dialog going among all the key stakeholders this impacts. We need to break free from the glitzy paid-for sales presentations, robot keyrings, stress balls, nasty logo-ed leather notepads and greedy events firms vying for a quick buck from vendors eager to part with cash to promote themselves to all their competitors.

That's why we're assembling 75 of the industry's finest leaders in a single room for a whole afternoon to thrash out the mandate for the future of operations in the robotic age for our inaugural FORA council session in Chicago, 19th September.  And promise no sponsors, stress balls or bad white papers to take away...

Here's just a sample of the industry robo dignitaries who've already committed:

  • Alastair Bathgate, CEO, Blue Prism
  • Chetan Dube, CEO, IPsoft
  • Chip Wagner, President, Emerging Business Services, ISG
  • Cliff Justice, Partner, US Leader, Cognitive Automation and Digital Labor, KPMG
  • David Poole, CEO, Symphony Ventures
  • Jesus Mantas, Managing Partner and General Manager, IBM Business Consulting, IBM US
  • Lee Coulter, Chair for the IEEE Working Group on Standards in Intelligent Process Automation
  • Dr. Mary C. Lacity, Curators' Distinguished Professor of Information Systems, UMSL, and Visiting Scholar MIT
  • Max Yankelevich, CEO, WorkFusion
  • Mihir Shukla, CEO, Automation Anywhere
  • Peter Lowes, Partner, and Head of Robotics & Cognitive Automation, Deloitte US
  • Shantanu Ghosh, SVP, CFO Services and Consulting, Genpact
  • Thomas Torlone, U.S. Leader of Enterprise Business Services, PwC
  • Weston Jones, Global RPA Leader, EY

We also have leaders of cognitive and automation initiatives from the following buyside firms already signed up to get stuck into the debate:

So let's cut to the chase - it's time to have the real, hard conversation about where we really are as an industry. Why aren't those 40% cost savings happening, each time someone slams in some software and hope it somehow eliminates manual labor because they can access a bot library? In fact, why are a third of RPA pilots just left hanging with no result?  Yes, people, it's time to wake up and smell those robotic roses and have those really tough conversations about what is real, versus why so much of this stuff just isn't working - and why we're not putting together properly governed RPA rollout plans like we do with ERP software and SaaS platforms.  Why are we making such a mess with this, when we could have so much to benefit from?

So join us in Chicago this September 19th for FORA the inaugural council meeting that finally debates the true Future of Operations in the Robotic Age

FORA is the very first industry council is established to bring together buyside operations leaders, service providers leaders, expert advisers and technology developers to steer industry’s transition to the Digital OneOffice™.  

FORA’s mission is to bring together the leadership from senior buyside operations leaders, service provider leadership, expert advisers, and technology developers to set the agenda for the transition to the Digital OneOffice™, and to develop an industry mandate for navigating and managing the creative destruction that looms. Supporting the FORA initiative is the IEEE’s Intelligent Process Automation Standards initiative that will encourage further research and investment, leading to powerful and attractive new service offerings. But the commercial frameworks needed to encourage and sustain wider deployment of these technologies are lagging because they fundamentally threaten established models.

In order to communicate the learnings from the FORA meetings, the group will produce a quarterly “FORA Mandate” that communicates core recommendations to the industry from the group meetings that will be held at quarterly HfS Summits.

So how can you get considered for Council Membership?

HfS will consider applications to the FORA Council based on seniority and relevance. Are you interested in participating? Just email us at [email protected]

This is a really important development as we consider the future of services and operations amidst all this creative disruption. I hope to greet many of you personally in Chicago this September.

Cheers,

Posted in: Outsourcing Events

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Frank D'Souza: We're now experiencing the biggest shift since the Internet

May 12, 2017 | Phil Fersht

 

It's always more fun to be the disruptor than the disrupted in markets where innovation is the key differentiator and commoditization the curse. The world of technology is a constant challenge as programming languages become commonplace, processes increasingly standardized and automated, and global service delivery efficiency a bread-and-butter offering. How can you continue to grow at a double-digit clip, while maintaining profit margins of 20%+ amidst cut-throat competition and clients forever eager to batter down their costs?  

Fortunately, the entire role technology plays is changing at a pace that is faster than most industries that can barely tolerate, which keeps driving new opportunities for smart firms with a disruptive appetite at their core and a willingness to live outside of their comfort zones. Today, enterprises are asking for business problems to be addressed and simply expect their service partners to get the job done. It's no longer "Provide me with 50 developers for this amount of time to perform these tasks", it's more, "We need to redefine our healthcare insurance business to be more competitive in the market to survive - come help us do that", or "These new banking regulations are crippling our ability to remain viable - what can we do to get ahead of these and operate effectively in this environment, faster than our competitors?"

Hence, it's up to the ambitious service providers to pivot how they address their clients' needs by redesigning business operations through smarter automation, process design and a much more proficient understanding and orchestration of their critical data sets. This is what digital is really all about - and this is where Cognizant CEO, Francisco "Frank" D'Souza is determinedly taking his organization. Cognizant has been Wall Street's golden child of IT services growth over the past decade, the firm ballooning from $2bn in 2007 to $13.5bn exactly a decade later, and last week announced 11% year-on-year revenue growth and a 26% increase in year-on-year net profits to $557m. Cognizant continues to outperform the market with relentless growth and appears to be on a new upward growth trajectory after a challenging 2016, which saw the whole IT services industry tackle this new secular shift, which Frank believes if the most pivotal transition since the onset of the Internet itself.

I caught up with Frank this week in London to get a little deeper into this pivotal industry shift and learn more about how he intends to keep disrupting his market.

Phil Fersht, CEO and Chief Analyst, HfS Research: Frank – great to see you again. Was good for the whole industry to see you guys announce strong results last week – is the gloomy cloud that’s been hovering over our industry lifting, from Cognizant’s vantage point?

Francisco D'Souza, CEO Cognizant: Phil, last year was an important foundational year in our pivot to digital. I think we were ahead on some of the digital thinking, code halos and SMAC (social, media, analytics and cloud), we have been talking about those for many years. I think last year was the year that picture, at least in our minds, and our clients’ minds, crystallized around what are the specific opportunities around digital. Prior to last year, digital was the typical catch-all term used for lots of different things.

I think it’s become very clear, Phil, with every day that goes by, is the notion that if you think about a company’s enterprise model (what is the business model, what’s the operating model and what’s the technology model) it’s now become clear what is the implication of digital technology at each layer in that stack and by industry. What does that mean for financial services, what does that mean for healthcare, what does it mean for insurance?

Last year was about crystallizing around that – we reorganised the business we took all our capabilities, we grouped them into three big practice areas: digital business, digital operations, digital systems and technology. Within that we really focused and emphasized the key digital themes and trends in each of those areas. If you think about the technology space we built and emphasized the cyber security aspects, we built and emphasized performance and scalability,

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Posted in: Digital TransformationIT Outsourcing / IT ServicesOutsourcing Heros

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Is your current job the end of the line?

May 06, 2017 | Phil Fersht

 

A new trend is developing in the tech and business world and the speed at which it is happening is alarming. The need for people is waning as companies seek to scale themselves profitably on a digital backbone - and it's having a serious impact on our career paths.

When companies historically did layoffs, it was because they were in financial peril and had no choice but to saw off costs to stay solvent on the balance sheet. It was always painful, because you needed people to grow your business. Sacking people was not a good thing to do.

Suddenly it’s in vogue to shed people

However, if you were unfortunate enough to get caught in a layoff, you dusted off your CV, went out on the job market and (usually) found yourself something pretty quickly. Companies needed people – whether they were superstars, or solid foot soldiers; when you needed an employer, you would always find something.

Now something different is happening in the mindsets of business leaders – companies which are doing really well are in the process of proactively removing staff – both at junior and senior levels. You really don't want to get caught up in one of today's layoffs if you're eager to stay in a similar job in future, because the modern business is adopting a new mentality - cut costs and scale profitably with a digital backbone.  Adding armies of people is no longer the order of the day when you peer into an uncertain future, and many savvy businesses are eagerly looking to

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Posted in: Cognitive ComputingRobotic Process AutomationGlobal Workforce and Talent

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The Real Purpose of #Digital: Bringing it all together in OneOffice™ with Five Fundamentals

April 30, 2017 | Phil Fersht

Whenever anyone utters the term “digital”, please do me one favour: Ask them to define what they mean by “digital” and send me their response.

What I love about the Digital OneOffice is the simple fact it not only defines "digital", but also provides a meaningful framework of five fundamentals that must come together to create a real-time flow of data across customers, partners and employees:

Fundamental 1) - Fostering genuine Digital Customer, Partner and Employee Engagement

A genuine “digital” organization has the ability to take all the cool social, mobile and interactive tech we use in our personal lives and create that experience for all the people in its environment - its employees, customers, and partners – and empower them to interact with each other seamlessly, and in real-time.

The outcome is all about creating, supporting and sustaining an immersive customer experience, where all touchpoints across an organization are tied to serving the customer as effortlessly and seamlessly as possible (and often not necessitating any actual human to human interaction). These “immersive” customer experiences are about leveraging these omnichannels (typically mobile, social, interactive technologies) and creating meaningful analytics from these converged datasets that make this real-time digital experience happen for the organization and its customers, its employees and its partners, right up and down the supply chain. The OneOffice organization needs a support function to service those customers, get its products/services to market when they want them, manage the financial metrics, understand their needs and future demands and make sure it has the talent which truly understands how to meet the desired outcomes of their work.

Fundamental 2) - Embedding Design Thinking Techniques to achieve Continuous Digital Outcomes

Design Thinking offers an approach for a diverse group of people to work together to identify and articulate a common problem, brainstorm ideas for addressing it, quickly prototype/wireframe/storyboard and test it, and continue to iterate on the idea as it takes shape into a proposed solution. A Design Thinking led approach to designing a Digital OneOffice framework moves the focus of the operations executive and service provider partner away from the process itself, and the internal, “what’s wrong inside of what we do” to “what do we actually want to achieve” (the business outcome), and what do we want people to feel and do naturally that will lead to further engagement and new—and different—results. 

At HfS, we are finding that Design Thinking is actually changing the way many clients and service providers work, that there is a real complement between designers, consultants, engineers, and service delivery as organizations seek to bring the front, middle and back offices closer together to achieve common outcomes. Moreover, it’s vital that Design Thinking is firmly embedded as the method for ongoing engagement across all organizational stakeholders, as outcomes constantly evolve as markets evolve and business needs change.

Fundamental 3) - Building a Scaleable Digital Underbelly that Automates and Digitizes

Every siloed dataset restricts the analytics insight that makes process owners strategic contributors to the business. You can’t create value or transform a business operation without converged, real-time data. Digitally-driven organizations must create a Digital Underbelly to support the front office by automating manual processes, digitizing manual documents to create converged datasets, and embraces the cloud in a way that enables genuine scalability and security for a digital organization. Organizations simply cannot be effective with a digital strategy without automating processes intelligently - forget all the hype around robotics and jobs going away, this is about making processes run digitally so smart organizations can grow their digital businesses and create new work and opportunities. This is akin to a “central nervous system” that incepts and processes all the elements necessary to make the organization function. 

Fundamental 4) - Achieving an Intelligent Digital Support Function without Hierarchies and Silos

Enterprises need their support functions such as IT, finance, HR and supply chain, aligned with supporting the customer experience, as opposed to operating in a “vacuum”. We are terming this ”Intelligent Digital Support,” where broader roles are created and human performance is aligned with the achievement of common business outcomes. With the Digital OneOffice, the focus needs to shift towards creating a work culture where individuals are encouraged to spend more time interpreting data, understanding the needs of the front end of the business 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 to get ahead of disruptive business models.

Progressive OneOffice enterprises prefer flat structures, where staff naturally collaborate in autonomous, cross-functional teams motivated by shared outcomes. They look towards much more dynamic management, where managers and staff constantly interact to fine-tune performance against evolving outcomes and manage diverse workforces across global cultures.

Fundamental 5) - Establishing Intelligent, Cognitive Processes that Promote Predictive Decision Making

The Digital OneOffice is not about collecting and archiving historical data simply to discover what went wrong, it's about being able to predict when things will go wrong and devising smart strategies to get ahead of them. The Digital OneOffice is about embedding smart cognitive applications into process chains and workflows, it’s about learning from mistakes and new experiences along the way. This is the “organization neural system”. Cognitive technologies, advanced analytics and automation help create the capability necessary to operate in digital environments by automating and extracting the data needed real-time to respond to markets, support critical decisions and stay ahead of the game.

The Bottom Line: The secret sauce of the Digital OneOffice is the sum of the Five Fundamentals as one integrated experience, not merely the quality of individual fundamentals themselves

When we conducted the Digital OneOffice Premier League earlier this year, we focused on the ability of service providers to deliver each fundamental, and the winners were those who scored highest as an aggregate across the five. When we re-run this in the future, the Digital OneOffice framework should be mature enough to evaluate outcomes based on the ability of providers and their clients to create the most effective real-time digital experience, by managing the five fundamentals as one integrated organization unit, where teams function autonomously across front, middle and back office functions and processes to promote real-time data flows and rapid decision making, based on meeting defined outcomes.

And front, middle and back offices will cease to exist, as they will be, simply, OneOffice.

Posted in: Digital OneOffice

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Why even the Beeb needs sourcing standards

April 24, 2017 | Phil Fersht

 

When you're one of the last vestiges of commercial-free television trying to compete in a media world gone mad on digital and traditional advertising, you need to be pretty savvy when it comes to managing the coffers when you're still reliant on public TV license frees each year to maintain your program quality.  So who better to talk with than the Beeb's Jim Hemmington, who sits on the corporation's external expenditure on goods and services, which includes several key outsourcing relationships. We also invited Chris Halward of the Global Sourcing Association (which engages with HfS as its preferred research partner), who leads the GSA's global standards accreditation program to the conversation...

Phil Fersht, Chief Analyst and CEO, HfS Research: Good morning gentelmen. Let's get started with the introductions, shall we?          

Jim Hemmington, Director of Procurement, BBC: Yes, of course, Phil. I’m Jim Hemmington, Director of Procurement at the BBC. I am responsible for external spending on goods and services. That’s about 1.4 billion pounds a year. It's about 19% of the BBC 's licensing. I look

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Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT ServicesGovernance Practices and Tools

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By golly, HfS hires Ollie...

April 22, 2017 | Phil FershtOllie O’Donoghue

From staring at his fish tank to working on an IT service desk... to becoming an analyst, then ending up at HfS.  Now that is unlearning personified for Ollie O'Donoghue (see bio), our latest recruit covering the IT services landscape from the UK.... so let's learn a bit more about this curious fellow...

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

Hi Phil! My career started in IT Services after I graduated from University with a History degree. Luckily for me, by the time I graduated, IT organisations had become more focused on service as opposed to technical ability – of which I have none.

I joined a large public sector organisation and moved around to a few different positions in the three years I was with them. I thoroughly enjoyed my time there, but my real passion lies in research, so I jumped at the opportunity to join an organisation as an Industry Analyst covering IT services. After a year or so, I made the jump to Head of Research and Insight which allowed me to develop and drive the research agenda. 

It was around this period I started on the IT Service speaker circuit. At the time, the industry was particularly concerned about the impact of automation, so I tailored my presentations to bring data and research to the party which, at the time, was being overrun with sensationalism from the mainstream media. Finding good data and sources for my sessions brought me into contact with HfS who, unlike some of the other analyst firms, were mirroring what I saw taking place in the industry. 

Why did you choose to join HfS... and why now?

As they say, all good things come to an end. Covering the service and support industry was great fun, and I made some amazing friends and contacts. But after a few years, I felt the need to expand my coverage to encapsulate a lot of the other key areas and trends at play in the wider business landscape.

When it came down to it, moving to HfS was an easy decision, I just asked the question: Do I want to join the Blockbuster of the analyst industry, or the Netflix?

HfS have been busily disrupting the industry for years with their freemium model and high

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Posted in: IT Outsourcing / IT Services

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Automation will destroy, then save outsourcing: The industry has spoken

April 15, 2017 | Phil Fersht

For those of you who made our New York Digital OneOffice Summit a couple of weeks ago, we had a rumbustious mix of seasoned outsourcing buyers, service provider leaders, advisors and robo vendors under one roof to cogitate, discuss and argue where the hell the industry known as outsourcing and operations is truly heading. Let's just lay down what the hell is really happening in the only unvarnished way we know how...

There is a fast realization that the outsourcing industry has reached a phase of almost insufferable tension.  Why?

Several of the RPA (Robotic Process Automation) solutions vendors are painting an over-glamorous picture of dramatic cost savings and ROI. RPA software firms are claiming - and demonstrating - some client cases where ~40% of cost (or more, in some cases) is being taken off the bottom line. While some of these cases are genuine, there are many RPA pilots and early-phase implementations in the industry that have been left stranded because clients just couldn't figure out the ROI and how to implement this stuff. This isn't simply a case of buying software and looping broken processes together to remove manual efforts... this requires real buy-in from IT and operations leaders to invest in the technical, organizational change management, and process transformation skills.

Buyers are backed into a corner with broken delusions of automation grandeur as their CoEs fail. Buyer leaderships are being fed all this rosy information and are under incredible pressure to devise and execute an RPA strategy, with some sort of set of metrics, that they can demonstrate to their operations leadership.  Many are quickly discovering they simply do not have the skills inhouse to set up automation centers of excellence and are frantically turning to third parties to help get them on the right track.

Outsourcing consultants are selling RPA before they can really deliver it. Sourcing advisors are claiming they are now "RPA experts" who can make this happen, while struggling to scale up talent bases that can understand the technology and deal with the considerable change management tensions within their clients.  RPA is murky and complex, and not something you can train 28-year-old MBAs to master overnight.  Meanwhile, we are seeing some advisors simply do some brokering of RPA software deals for small fees, only to make a hasty exit from the client as they do not have the expertise to roll-out effective implementation and change management programs. 

RPA specialist consultants few and far between. Pure-play RPA advisors are explaining this is not quite so easy and requires a lot more of a centralized, concise strategy.  There are simply not enough of these firms in the market, especially with Genfour having been snapped up recently by Accenture. With only a small handful of boutique specialists to go around, these firms can pick and choose their clients and command high rates.

Service providers will set the pace, but many will destroy each other in the process. Service providers are claiming they can implement whatever RPA clients need, but are not willing to do it at the expense of reducing their current revenues. Meanwhile, smart service providers are aggressively implementing RPA into their own operations to drive down their delivery costs and reduce their own headcount.  So we can expect to see providers aggressively attacking competitive clients with automation-led solutions that should create unbearable pricing pressures for service providers looking to retain the talent they need to implement this stuff. Hence, services providers will be hell bent on destroying each other and the winners will be those who eventually succeed in winning more work than they lose amidst all the destruction. This is a war of many battles being fought - and the winners will be those who are in this for the long haul, who can absorb some short-term losses to pick up the larger spoils further down the road when they have a fully equipped intelligent automation delivery capability that can deliver highly-competitive and profitable As-a-Service offerings.

The good news is that half of today's buyers want to turn to service providers to make this work

When we privately polled 60 senior outsourcing buyers, at the recent HfS New York Summit, on what would improve the quality and outcomes of their current services relationships, the answer was pretty conclusive - half want to work with their providers to rollout their automation and cognitive roadmaps, while only a third think they should pull back work in-house to figure this stuff out for themselves:

The Bottom-line: The automation gauntlet is now in full effect and the casualties will mount up as the outsourcing industry plays out its most perilous battle for survival yet.  But all is not lost if we eye a longer-term prize...

So we've reached crunch time. Whichever way we look at it, RPA has created a lethal environment, which was only just coming to terms with providers and buyers working together to get the basics of delivery right. Most outsourcing buyers have to look to automation to save their jobs and please their ambitious leaders, no longer content with the ~30% they saved on offshore-centric outsourcing just a few short years ago (see our recent State of Outsourcing and Operations data on 454 major buyers). 

So, in the meantime, for all the reasons outlined above, this industry will literally go into a destructive war over automation. The skills to make automation a massively profitable reality are few and far between, while greedy corporate leaders demand cost savings that simply are not achievable if their organizations fail to make the necessary investments and partnerships to make this achievable. Did companies become world class at HR overnight because they bought an expensive Workday subscription?  Or stellar at sales and marketing because they slammed in a Salesforce suite?  So why should they become amazing at cost-driven automation simply because they went and bought some licenses from an RPA vendor promising bot farms and virtual labor forces?  

RPA and Intelligent Automation have sparked a major war in the worlds of outsourcing and operations, where many battles are being fought - and the winners will be those who are in this for the long haul, who can absorb some short-term pain in order to benefit from the larger spoils further down the road. While automation is killing outsourcing today - costing many people their jobs, their reputations and destroying the profitability of legacy engagements, those who can hunker down, focus on self-contained projects where they can fix one broken process at a time, can get stakeholders onside by demonstrating meaningful, impactful outcomes without major resource investments, will be the winners.  Start with one process at a time, prove how to fix in, then onto the next, then the next... that is the only true way to be successful in this destructive automation-infested world. 

Posted in: Cognitive ComputingRobotic Process Automation

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With reckless abandon, here's Manish Tandon

April 14, 2017 | Phil Fersht

In today's perilously paranoid services industry, many ambitious executives are resurfacing in smaller sized service providers, which can compete on smaller scale contracts that are arising with mid-market firms, in addition to being nimble enough to compete for business at the high end. What's more, many savvy buyers are feeling more secure investing in emerging providers that are not weighed down by the legacy contracts of older times and greedy investors eager to jump ship once they sense the gravy train has stalled.

One such character is the affable Manish Tandon, who made his name at Infosys, where he led some major divisions, before recently popping up at customer experience and IT provider CSS Corp.  So let's hear what life is like moving from the very large to the medium-sized provider... 

Phil Fersht, Chief Anaylst and CEO, HfS Research: Good morning Manish. It’s great to have you on HfS today. You've had a very illustrious career in the services industry, spending a long time at Infosys where you climbed the ladder, and you recently took the CEO job at CSS Corp. Did you expect such an illustrious career in services - and what's exciting about this move for you?

Manish Tandon, CEO, CSS Corp: Thank you, Phil for having me, and great talking to you, as always. I would say I have always liked the services business tremendously. As a graduate from one of the top management institutes, I had the pick of jobs in most of the top financial institutions and so on, but I always liked technology and particularly technology services. Primarily, because this is one area you get to work on something new, something different, something challenging every one or two years, every assignment is different, so I have always

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Posted in: Outsourcing Heros

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DXC’s challenges represent a microcosm of a services industry in perilous transition

April 09, 2017 | Phil FershtJamie SnowdonTom Reuner

April 3rd saw the long-anticipated creation of a new IT and BPO powerhouse service provider – DXC.technology. However, DXC’s challenges represent a microcosm of a services industry in perilous transition.

This is a crucial event in the services industry, not only because it isn’t often a “new” $25 Billion services firm is created, but because of what it signifies about the uncertain state of the current market and the huge challenges facing service providers in the near future.

Read our complimentary analysis of the merger on the HfS Research website by clicking here.

Posted in: IT Outsourcing / IT Services

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Worried you're failing at your job? Here are six simple questions to ask yourself...

April 06, 2017 | Phil Fersht

Posted in: Global Workforce and Talent

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Accenture adds European Automation Brains and Brawn with Genfour Acquisition

April 03, 2017 | Phil FershtTom Reuner

As an addendum, many of you have reached out to us since publishing this blog, regarding whether this was the right time for an emerging star in automation, like Genfour, to sell. There is a lot of runway in Intelligent Automation and there is no doubt in my mind that Genfour's architect, James Hall, could have held out for longer and continued along his growth path as one of the few attractive pureplays in the space worth acquiring.

As our recent analysis of them revealed, the current bunch are not very well established, hence some want a quick cash-out and exit, while others are hunkering down to play the longer game.  It is our view that Intelligent Automation and AI will evolve like the digital market, with service providers crying out for "press release buys" that give them credibility.  Hence, this is as good a time as any to establish your own pureplay Intelligent Automation shop and throw yourself into the mix.  But good luck finding the talent... there's a real shortage of it out there!  

So why did Accenture acquire Genfour and does this make market sense?

In times of disconcerting political and macro-economic events, where #fakenews and a traditional outsourcing model officially running out of value, getting predictions right is becoming increasingly difficult for an analyst.  Hence, the more pleasing it is when you can gloat about predicting an acquisition.

Case in point, Accenture’s acquisition of UK-based Genfour, a pure-play automation services provider that will become the cornerstone of a newly formed Center of Excellence (CoE) for Intelligent Automation, located in Wales. Back in December 2016 we did gaze deeply into the automation crystal ball and suggested that similar to the acquisition of Alsbridge by ISG, the

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Posted in: Cognitive ComputingRobotic Process AutomationIntelligent Automation

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Yamazaki, Macallan and Redbreast lead the inaugural HfS Premium Whisky Blueprint

April 01, 2017 | Phil FershtBram Weerts

We've talked long and hard about the extent of digital disruption of traditional business models, so we decided to extend our research coverage into growth markets where the impact of digital is always positive.  When you look at the premium whisky, for example, our research shows its impact promotes new ideas, helps foster greater team collaboration and can even provoke new Design Thinking principles. Let's have a look at how the leaders in this space are positioned, based on our Blueprint Research Methodology:

At HfS we are expert analysts at peering into markets and evaluating the performances of the major players, so we thought "why not extend our coverage into adjacent markets where some of our analysts have years of practical, hands on experience?".  Personally, I have had more innovative client discussions comparing the various merits of single malt whiskies than which automation tools vendors have better control features.  

So let's talk to a few of our contributing analysts to understand how this market played out:

Bram Weerts, COO, HfS Research:

"I've tried each and every one of these buggers and you can't beat the old Yama 18.  I do love the Mac, but Yama hits the spot everytime"

Tom Reuner, SVP Intelligent Automation Research:

"I believe I've sampled all of these whiskies, especially when I am out at analyst conferences. I haven't a clue which is the best, but wanted my name on the report, so I endorse whatever Bram and Phil came up with."

Derk Erbé, VP Research:

"I believe the whisky market is ripe for digital transformation.  Emerging brands like the Walmart Fireball are poised to rip the bottom out of the market"

Jamie Snowdon, Chief Data Officer:

"There's no way I could get through our quarterly forecasts without sampling a few of these first.  And the way the industry's going, the old Walmart Fireball will only increase in popularity"

Phil Fersht, CEO:

"We may worry about robots stealing our jobs, but those bastards will never be able to drink our Scotch."

Bottom-Line:  This is only the beginning, HfS is going to extend into new markets everywhere as digital disruption takes hold

We believe we are qualified to become experts on any market where money changes hands and greats ideas emerge. Stay tuned for our forthcoming blueprints:

"Tequila Transformation - it can really change things"

"The least disgusting low-carb beers of 2017" and

"Organic wines that you really want to avoid As-a-Service" 

And of course... this was an:

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Posted in: Absolutely Meaningless ComedyDigital TransformationHfS Blueprint Results

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The spreading outsourcing disease: barely a third of buyers see real value in their current provider relationships

March 30, 2017 | Phil Fersht

Oh dear - here are the private views of about 60 outsourcing clients we polled today at the HfS Summit in New York.  Close to half the room are either feeling let down by their provider over-promising, or merely feel they are only really getting cheap labor from their relationship. Moreover, barely a third of them actually believe their provider can come up with the goods, provided they pay for them via the legacy FTE pricing model. Now, these buyers are highly experienced and sophisticated, so this data is particularly hard for the outsourcing industry to digest.

So a few simple takeaways from this:

Service providers have to stop the over-promising and start over-delivering.  Over-promising may result in some short-term wins, but the implications of long-term damage caused by missing client expectations are much more hazardous. Sadly, investor pressures to sustain unrealistic growth is forcing several service providers to over-sell without the talent resources to deliver anything beyond low grade offshore delivery.

Many providers are proving their competency, but failing as proactive co-innovators.  As we recently revealed, a third of senior management does see real potential in their service providers to become genuine co-innovation partners, but there is a stark difference between fantasy and reality.  Providers need to prove they are willing to share risks, really roll up their sleeves with their clients - and clients need to work harder to create an environment of trust that they'll stick with their providers, provided they are willing to co-invest with them. Design Thinking anyone?  Maybe it's time to get in a room together and figure this whole thing out.  

Bottom-line: We're going to see a lot of chopping and changing of service providers in this volatile environment.  

Several buyers cited they felt their providers were too comfortable with them and were not worried they would get ejected from long-term outsourcing relationships.  However, with advisors, competitive providers and RPA vendors all touting the magic 40% of cost savings through automation, the leadership layers are exerting unprecedented pressures on outsourcing governance leads to demand change. In many cases, buyers are simply bringing in advisors and RPA tools vendors themselves and running their own pilots, but eventually, they are likely to put their existing deals out for rebid to find providers willing to guarantee the RPA savings.  And that is where the market is going - lots of cut-throat rebids, higher degrees of risk-taking to win business and more clients being over-promised.  We're in a vicious cycle where desperation is trumping good, pragmatic partnerships where both buyers and providers can figure out how to work together in trusted, risk/reward sharing environments.  

Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT Services

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Welcome to Judgement Day, where the real future of Outsourcing and the Digital OneOffice will be decided in NY this week!

March 26, 2017 | Phil Fersht

Dear Friends,

Our day of judgment is upon us! Can we really “unlearn” the last two decades and change how we buy, sell, behave and operate? Do we really have what it takes - deep down inside - to get ahead of this maelstrom of change and come out the other side with wealth, happiness and another two decades of double-digit growth?

Of course we can! But only if you book your last-minute spot to the services event of the year, in Midtown Manhattan next week… Join me, my colleagues and the industry’s finest as we engage in the richest dialog yet on how to tackle the most crucial transition our industry has ever faced, and how to come out the other side re-energized and happy to go to work again.

Service Buyers get complimentary access - only a few seats left, so apply now!

To name a few companies which will be represented...

And a few of the power brokers debating the big outsourcing reset in New York...

Find the full line-up here. See you in New York this Thursday, I hope!

Cheers,

Posted in: Digital OneOfficeOutsourcing Events

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The traditional outsourcing model is officially out of value, but the future is bright for co-innovation partnerships

March 19, 2017 | Phil Fersht

Remember all those juicy reasons why companies jumped into outsourcing? Like driving out cost, standardizing processes, perhaps even finding a few nuggets of innovation along the way with better access to talent and technology? Well our new 2017 State of Operations and Outsourcing Study of 454 major enterprise buyers gives a pretty gloomy picture of the current value impact of today’s outsourcing engagements:

 

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What made us happy in the past no longer passes muster

If there was ever one home-banker benefit from outsourcing, it was always the ability to take 30%+ off the bottom line cost of running a process or set of processes.

The VPs and below are those who are managing the engagements – and not even a third of them view their engagements as being very effective at driving out significant cost or making their operations more flexible and scalable. Their bosses are slightly less cynical, but still the vast majority is underwhelmed.

"But how can they be unhappy, we saved them so much money?" I hear frustrated providers cry… 

Well, the answer is quite simply that those costs have been removed from the balance sheet – they no longer exist. Managing operations in a global environment is now the new normal – money that was saved was a onetime experience in the past. It’s like trading in your Hummer for a Prius… you don’t think to yourself, everytime you fill up with gas, “Wow, I’m saving $50 per tank”, but you might even think, “Hmmm… maybe I’ll get a fully electric car next and save even more on my running costs”.

We can go on to bemoan the disappointing lack of effectiveness from analytics, automation and cognitive from over four-fifths of outsourcing engagements, but we know clients are unlikely to have invested actual funds in these areas as part of most of these engagements today – they are getting what they have paid for in the past.

All is not lost as many operations leaders want their service providers to change with them

However, the next wave of engagements have to be set up in a very different way to bring back delights to these jaded customers, which is where the brighter news appears:

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What's encouraging here is that buyers, by and large, do not view their service providers as mere efficient cost take-out vehicles, which was how well over half viewed them a couple of years ago. While 43% of SVPs and above see service providers as competent partners who can deliver the goods, another 35% actually view them as real innovation partners who can work with them to achieve co-defined business outcomes.  This is a breakthrough for the services industry.

The Bottom-line: The door is wide open for ambitious providers willing to invest in developing their talent, but closing firmly shut for those perpetuating what worked in the past

There has never been a time in the history of services where we've arrived at such a pivotal turning point - what used to work for clients is now commodity, and those service providers wanting to avoid this drain-circling spiral into transactional insignificance must make serious investments in their internal capabilities to partner with their clients.  This means more people who can work in close proximity to their clients with real capabilities rolling out automation roadmaps, designing digital business models, working with clients to develop predictive data models and smart cognitive strategies.  Sadly, there isn't much of an available pool of eager college graduates ready to leap into these roles at low wage rates, so providers need to reinvent themselves radically as true learning establishments and universities for their emerging talent... ambitious people will want to invest their careers with firms who are prepared to invest in their talent.  The future isn't about buying packaged consulting, it's about partnering with services firms whose stakeholders want to co-invest in themselves and their clients with a long-term vision and definitive plan.  The model has changed forever... and we can only watch, learn and work with it as it unravels piece by piece.  

Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT Services2017 State of Industry Study

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Genpact becomes the first provider to acquire an AI platform

March 14, 2017 | Phil FershtReetika JoshiTom Reuner

While most of the services and operations industry obsesses with Robotic Process Automation to streamline its rudimentary back office processes, one provider that’s never shied away from making bold moves to disrupt illustrious competitors is Genpact, with an imaginative move to integrate true artificial intelligence with its business process service offerings by acquiring the impressive Boston-based Rage Frameworks.

It's almost history repeating itself from a decade ago, when the (then privately held) Genpact turned the BPO model on its head with its disruptive virtual captive proposition that significantly challenged the pricing models and ability to integrate offshore capabilities into the old BPO model. Now, the firm is breaking the mold, yet again, by making real inroads into infusing AI into business processes and introducing these concepts to its huge global community of finance leaders.  

Let’s get to the rub: RPA is all about digitizing the back office, but Artificial Intelligence is where we see the true marriage of business processes with clever technology and self-developing algorithms. We’ve danced for years trying to prophesize when BPO will truly integrate with IT, but we’ve now had reality unveiled: RPA platforms streamline the back office, while AI brings the middle and front together to create that true Digital OneOffice experience. The Digital OneOffice is not about collecting and archiving historical data simply to discover what went wrong, it's about being able to predict when things will go wrong and devising smart strategies to get ahead of them. The Digital OneOffice is about embedding smart cognitive applications into process chains and workflows, it’s about learning from mistakes and new experiences along the way. This is the emerging “organization neural system”, where the needs of the customer can be intelligently supported by real-time, self-learning intelligent operations:

 

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Why is this acquisition significant?

In a nascent market where stakeholders stumble through smoke and mirrors to make any sense of the many claims around Intelligent Automation, M&A is a clear indicator that the market is starting to mature. When in December 2016 ISG bought Alsbridge and CA acquired Automic, HfS suggested that Intelligent Automation was at an inflection point and that the focus on automation tools will shift toward the likes of Google, Amazon, and Facebook around deep learning and the integration of unstructured data. While we have not yet seen the Internet giants play their hand, Genpact’s acquisition of Rage Frameworks is underlining exactly these market dynamics. And this is the first time that a service provider is driving automation capabilities through M&A.

Rage Frameworks drives pre-built automation engines deep into unstructured territory

Whereas the broader market remains misguidedly focused on the intricacies of RPA, Rage’s focus is not on automating specific process steps, often on sub-process level, but on developing a broad ranging platform (RAGE Enterprise) for custom solutions with a deep vertical footprint. While RPA is largely focused on structured information, Rage will take Genpact deeper into integrating semi and unstructured data. Their development effort over the last two years to build enterprise applications for financial industry processes (wealth management, commercial loan processing and financial statement spreading) is shifting the focus from automation tools and capabilities to providing an end-to-end process leveraging a model driven business transformation platform.

In our view, the value proposition of Rage Frameworks is centred on leveraging Machine Learning and Natural Language Processing to build out highly vertical engines in Financial Services, Capital Markets, and Supply-Chain. The functionality of these engines ranges from managing business rules to real-time integrating content to data access and NLP all built around a process assembly engine. These engine building blocks can then be assembled for custom solutions that automate business processes or can be used as one of three pre-assembled financial services industry applications: LiveWealth, LiveCredit, and LiveSpread. In addition, broader capabilities including front desk automation, real-time intelligence, and pricing are transforming how commercial lending, policy underwriting, financial statement analysis, investment research, and multi-system reconciliation can be performed.

RAGE’s industry applications are a big part of the allure for Genpact, which has spent the last few years going deeper into its commercial banking and capital markets operations accounts with data and analytics solutions trying to solve the same client operational challenges as Rage. In our recent HfS Capital Markets Operations Blueprint, Genpact placed in the Winner’s Circle, with an HfS callout about its need to bring more technology enablement to capital markets. The service provider has examples of using emerging technologies such as machine learning, automation, dynamic data extraction, etc., in LOBs as retail banking. What Rage brings to the table for Genpact is a more strategic approach for impacting client operations through technology-led change.

Genpact continues to lead the automation discussion from the front

From Genpact’s perspective, the acquisition is reinforcing the perception of being a pioneer in Intelligent Automation. Having led the market with the first publicly announced partnerships with AutomationAnywhere, Exilant, and Automic around its Rapid Automation program, Rage Frameworks fits in well with Genpact’s holistic approach to automation. Within that context, Rage’ assets will further advance the integration of unstructured data: Genpact has invested heavily in analytics and big data with a dedicated research lab in Bangalore, India. They have developed a Data Engagement Platform using big data technologies, in order to be able to harness structured and unstructured data from multiple sources. Thus, its Lean Digital strategy is aligned with HfS OneOffice concept. But the company has to demonstrate that it is starting to link up back, middle and front-office.

The broader market will follow with accelerated M&A activity

Regulations and risk management requirements are forcing banks to rethink the way in which they capture, store, manage, and distribute the growing volumes of transactional and trade data. Structured data from multiple departments and asset classes are maintained in silos, and unstructured data present new challenges as well as opportunities for automation and analytics.

Despite the continuing noise around RPA, we believe the market will shift toward operational analytics and the broader notion of AI. Not only are the leading RPA tool providers expanding in that direction, but we expect the investment focus to progress toward Deep Learning, Neural Networks, and broad NLP capabilities. While it might sound trite, data really is becoming the new currency. But this currency needs to be integrated into delivery backbones on an industrial scale. Thus, service providers need to reinforce their efforts on service orchestration. We haven’t seen many proof points for a successful expansion into data-centric scenarios, but those deployments will be a clear demarcation between the leaders and the also-runs.

Central to this will be the articulation and delivery of business outcomes for specific industry functions through the use of operational analytics, RPA, BPO and AI. Can Genpact put together a financial spreading function by leveraging its operational expertise in BPO and RPA, the RAGE LiveSpread application and analytics interventions to deliver more efficient and effective credit risk management?

Bottom-line: Genpact is progressing toward True Digital OneOffice capabilities

Genpact’s announcement can be crystalized to its ambition of blending RPA in the back-office with AI in the middle-office, which is why the firm, still regarded by many as a "pureplay BPO" managed to break the top 10 in the recent Digital OneOffice Premier League, despite not dragging a multi-billion dollar IT services business around.

Thus, BPO is ever more changing to becoming technology-led. We expect that this strategy will be increasingly underpinned by neural networks and notions of self-remediation to enhance the Digital Underbelly and the Intelligent Digital Processes of the OneOffice concept. While Rage Frameworks is one of the superior suppliers across the Intelligent Automation Continuum, the more providers that are progressing toward the notion of AI, the more inflated the valuations for M&A will become. Against this background, valuations for RPA providers could look like peanuts very quickly. But then again, M&A is rarely rational in today's foggy market.

Posted in: Business Process Outsourcing (BPO)Cognitive ComputingFinance & Accounting BPO

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Deconstructing Q4 2016 – Growth in the Traditional Services Model close to Flatlining

March 10, 2017 | Phil FershtJamie Snowdon

The traumatic Q4 results season has finally ended and our Chief Data Officer, Jamie Snowdon, is able to report on the final Q4 standings...

We’ve visualised the latest set of results for Q4 in the diagram, the top chart shows our usual margin v growth view (excluding AWS). With a chart showing the quarterly growth for Q4, an estimation of the annual (calendar) growth and the Q4 operating margin.

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For each of the providers the results look like this:

 

Growth Q4 (%)

Growth 2016 Calendar Year (%)

Margin Q4 (%)

Comments

Accenture

6.3%

7.1%

15.6%

Good quarter for Accenture with plenty of success stories around digital, cloud and security. Constant currency growth around a percentage point above the actual growth for the quarter. Annual services growth is 7.1%.

Atos

6.8%

9.7%

9.6%

Coming down from the highs of its recent acquisition-fuelled growth of the last couple years - Atos remains solid with organic growth at 1.8% for the year and 1.9% for the quarter. Benefiting from strong execution and its investments in analytics, security and automation.

Read More »

Posted in: IT Outsourcing / IT ServicesTrends Analysis

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Watson and Einstein Sitting In A Tree: IBM-Salesforce join forces to give you more ways to buy AI

March 10, 2017 | Phil FershtReetika JoshiTom ReunerKhalda De Souza

The time for smart partnerships to drive real innovation and new thinking in Artificial Intelligence (AI) and cognitive computing is now. This means we need to see the industry’s deep-pocketed innovators become increasingly open – and eager - to working together to help the services industry make the shift to true digital, intelligent, cognitive capabilities.

Recent HfS research shows adoption of Artificial Intelligence (AI) and cognitive computing to enhance operational analytics and Machine Learning is strongly accelerating, with 72% of senior operations executives citing cognitive as becoming a critical component of the future operations strategy:

Digital and Cognitive are Driving Enterprise Operations

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Source: “Intelligent Operations" Study, HfS Research 2016; Sample: Buyers = 371

While the market perception around these topics remains refreshingly blurred, AI is a critical building block as organizations increasingly look to progress from legacy labor-driven service delivery to progress toward notions the As-a-Service Economy and the Digital OneOffice (see link). While AI is capturing the imagination of many PE investors and VCs and is being used to hype up media reporting and conference circuits, the market dynamics are far from clear.

Against this background, the fundamental question being posed is “Who will be in the driving

Read More »

Posted in: Analytics and Big DataCognitive ComputingIntelligent Automation

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Crush that cobol... at last a standard org chart for your disruptive digital hierarchy

March 07, 2017 | Phil Fersht

Finally! We've just saved you hours upon hours of mind-numbingly dull hangouts trying to figure out all your fancy new digital job titles and reporting lines... now time to get combatting all that disruption to make your firm a true transformative digital pioneer in this emerging quantum era, where you can be a digital Michael Phelps diving into your own datalake:

Posted in: Absolutely Meaningless ComedyDigital TransformationDigital OneOffice

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IBM, Accenture, Cognizant, Deloitte and Infosys lead the first Digital OneOffice™ Premier League

February 26, 2017 | Phil Fersht

As the market for enabling and supporting the digital organization reaches fever pitch, HfS’ analyst team has run a detailed assessment of service provider capability to deliver the Digital OneOffice experience across the five pillars that align the front, middle and back offices. We believe it essential to evaluate how service providers’ emerging capabilities are stacking up, not just in each distinct category, but how they align to the holistic Digital OneOffice Framework across these five key pillars:

Pillar 1) The Digital Customer Engagement (Weighing 25%)

Pillar 2) Design Thinking: Designing Digital Outcomes (Weighting 15%)

Pillar 3) The Digital Underbelly (Weighting 20%)

Pillar 4) Intelligent Digital Support Functions (Weighting 20%)

Pillar 5) Intelligent Digital Processes (Weighing 20%)

This is HfS’ very first Digital OneOffice Premier League ranking exercise. We have taken the 5 key components of the Digital OneOffice described above, and scored each service provider on each category and subcategories as applicable (see the Digital OneOffice Organization illustration below). Using materials from recent research projects, namely Blueprint reports and many client reference discussions, we leveraged our broad analyst team’s collective knowledge of the industry to perform this analysis, involving analysts Phil Fersht, Melissa O'Brien, Barbra McGann, Jamie Snowdon, Tom Reuner, Derk Erbé, Reetika Joshi, Pareekh Jain, Khalda de Souza and Steve Goldberg.  

HfS subscribers can download their copy of the 2017 Digital OneOffice 2017 Premier League here.

The result below is the ranking of the top 25 service providers and how comprehensively each is aligned to the Digital OneOffice framework overall and enabling its clients to become more intelligent organizations that ultimately improve customer experience. 

Why The Digital OneOffice is the Future of Outsourcing

The Digital OneOffice Framework is all about the design and implementation of the organizational digital experience and the creation of an intelligent, single office to execute and support it. In a few months, we won’t be talking nearly as much about intelligent automation and digital technology as the critical “value levers” for operations, as they become an embedded part of the fabric of the future operations platform for new generation organizations. Instead, we will be talking about an integrated support operation having the digital prowess to enable its organization to meet customer demand - as and when that demand happens. Everything about the digital organization is about engaging people by responding to their needs instantaneously, giving people their choice of medium to interact with it, be it voice, chat box, text, Facebook messenger, email, virtual agent, etc.

In this context, "Digital" describes the interactive channels that drive customer engagement, such as cognitive agents, interactive tools, mobile, social, text and chat. "OneOffice" describes the enabling technologies, such as unified analytics and cognitive automation, that enable real-time predictive capabilities and an engaging digital experience that unifies all the stakeholders across the organization: the customers, partners and employees. In short, the Digital OneOffice is where the organization's people, intelligence, processes and the infrastructure come together as one integrated unit, with one set of unified business outcomes tied to exceeding expectations.

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The Bottom-line: The Winning Service Providers are those who can become Digital OneOffice Organizations themselves

The bottom line is that digital is all about realigning the organization to the customer; even those processes and roles which aren’t even remotely customer facing still play a critical role in supporting the digital customer experience. The service providers we have evaluated all play different roles in enabling that for clients. Those which scored well in the rankings are doing the best at bringing together the cross-organizational Digital OneOffice concepts for clients, but in the age of frequent and abrupt disruption, things can change. In 2017, we’ll continue to see service providers making moves to invest in and build out more comprehensive Digital OneOffice capabilities as well as those which will double down in the pillars of The Digital OneOffice where they excel. These are still early days, and we anticipate the next iteration of the Digital OneOffice Premier League will produce winners which have proven they can integrate the pieces most effectively, driving transformation across the pillars leveraging their strategy, consulting, Design Thinking and operational enablement prowess.

To conclude, people simply want to operate digitally these days, whether they are an employee, customer or partner. They want to use interactive technology, mobile apps, social media, text, online chat, etc. to get things done. We are used to using sophisticated digital technologies in our personal lives, and now expect to use them in our professional lives. Whether we are buying products, groceries, renting accommodation, ordering Starbucks, takeout, applying for mortgages, insurances policies etc., digital technology is the new language of business. The issues facing many traditional businesses today is the fact that while the consumer is increasingly digitally sophisticated, many organizations are still beholden to legacy technologies and processes that are fast sinking into obsolescence. In addition, many have employees in the “back office” who are so steeped in the legacy way of doing things, they are facing a double-edged issue: how do they drag their operations kicking and screaming out of the dark ages to support their digital customers? The answer, believe it or not, is quite simple: break down the barriers between departments, involve the digital customer experiences into all the business processes and practices, by creating a Digital OneOffice where an organization’s customers, partners and employees are all entwined together to deliver the end customers the ultimate experience, and the operations function a genuine connection with the true running of the business from back to front.

Net-net - every touch point of the modern business needs to be digital - and to achieve that you need to be a digital business right at your core, where the most rudimentary of processes are automated to enable the building blocks of the digital experience. The winning service providers will be those which are true digital organizations that can partner with their clients to feed off their DNA and culture.

HfS subscribers can download their copy of the 2017 Digital OneOffice 2017 Premier League here

Posted in: Digital TransformationDigital OneOffice

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