HfS Network

Monthly Archives: Apr 2014

Six market disruptions coming to challenge the Indian services majors

April 28, 2014 | Phil Fersht

Gravy trains invariably come to a halt at some stage in their journey, and labor-driven IT and business services, fueled by lower wage regions and robust delivery models are poised to change beyond all recognition in the next few years. However, this doesn't mean today's winners have to become tomorrow's also-rans, if they are smart enough to make discreet investments in the disruptive business models of the future, and gradually introduce these into their traditional models.

The Indian majors have defied their critics to sustain their labor-driven model beyond all expectations - and are in a great position to blend their models to cater for the coming disruptions 

You've probably been reading from us that we see several of the Indian majors continuing to carve out a commanding position in the global services market, with their market share doubling in the last four years, in addition to their leading revenue and profit generator, TCS, making the HfS IT Services Top 10 for the first time.

And while there are the usual detractors claiming "India will run out of runway and prices are getting too competitive to sustain this growth", they are still able to maintain their growth numbers consistently in the double-digits.  The disruption and havoc the Indian majors have reaped on the incumbent service providers has lasted much longer than many were predicting, and that tail continues to happily wag for them and enterprises continue to gobble up their wares.  And with 60% of IT services, and 80% of back office business operations still sitting inhouse, this gravy train has a few more stops left to make on its journey.

When change to the traditional outsourcing model comes (and it is coming), there is no reason why some of the Indian majors cannot challenge whatever new wave of disruptive providers come at them. You only need to look back five years to see how quickly the landscape can shift. There is no "new breed" of service provider on the horizon today, which is an obvious candidate to offer services that are lower-priced than the Indian firms, however, I do see a multitude of significantly disruptive forces already at play that are going to change this market beyond recognition in the medium to long term:

Disruptive forces already on their way to change the services landscape indelibly

In short, there are some very real threats to today's entire services model underpinned by one factor: client needs are becoming less labor-intensive and more focused on higher-value business needs. Let's look at six examples of how the new breed of services will emerge.

1) Cloud vendors: Firms like Rackspace, Google and Amazon are already subbing to the major providers to deliver data center solutions for enterprise clients. There is nothing stopping them from moving up the value chain to the client end, displacing the Indian majors altogether as more IT operations become automated and less reliant on human intervention.  These firms already have the SME market saturated and can easily move up into the enterprise space once their standardized solutions become "acceptable" at the enterprise level, and less customization is needed. In addition, IBM is making huge bets on selling more cloud-driven platforms to clients, that can replace traditional outsourcing models, which could bear significant fruit for the firm in the future.

2) Robotics-driven vendors: This is more of a threat to current BPO delivery models, where advances in robotic automation software are enabling clients to reduce their "already offshored" services by a further 20-30% by replicating manually operated processes in robotic software

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Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesHfSResearch.com Homepage

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BPO: Pronounced dead, but still very much alive

April 25, 2014 | Phil Fersht

If I had a Bitcoin every time someone claimed that BPO is "dead" / "hitting the bottom" / "merely staff augmentation that's going away soon", I could commission a whole team of robots to write this blog until the new year. And Accenture's recent decision to drop outsourcing from its tag-line and submerge "BPO" under the broader term "Operations" felt somewhat like a death-knell for the troubled terminology.

However, I would argue that BPO is just at the beginning of a much more dynamic phase of its existence and is at least three years' away from the term being put to bed.  BPO will evolve into "progressive operations" in time, but as our research illustrates (read on), the BPO market is still immature and has some room to grow before it becomes mainstream.

BPO is a powerful term - it genuinely implies the transferral of the management of processes

As negative as the connotations of BPO have been in recent years, it has a powerful meaning for businesses today. "Outsourcing" has always signified the transferral of the management of work to a third party, while the broader term "services" just means "work".  "They performed services for us" can mean anything, from little projects through to a much larger array of operational delivery.  "I outsourced my xxxx to them" means you actually transferred work to the third-party to manage for you on a consistent, ongoing basis.

I would also argue that "outsourcing" is appropriate during the early stages of transferring work to a third party.  Once that relationship is fully operational and the management of said work already outsourced, then both the client and provider will naturally start calling it something else.

Outsourcing is the correct term to use when the externalization of operations is nascent

Synonymous to this theory is IT.  Remember how everyone used the term "ITO" in the late '90s through mid-2000's to describe their sourcing of IT to the EDSes, IBMs and so forth?  But today, "ITO" is pretty old-hat - people just call it "IT services", even though so much of it has already been outsourced. Outsourcing was a more appropriate term during those years clients and providers were grappling with all the challenges to make outsourced IT operational and effective.

However, once outsourcing had become the norm with how most enterprise clients received a portion of  their IT services, it was no longer outsourcing - it merely became the way they ran their IT. It's the same with manufacturing, which has been outsourced longer than anything else, for example, many years ago, Apple outsourced its manufacturing to a Flextronics, but now it's merely how Apple makes its gadgets.

Four-fifths on business operations are still in inhouse  

I believe the same will eventually happen to BPO as more companies do it, but as our recent study of 343 major enterprises with KPMG discovered, around four-fifths of business operations are still sitting inhouse, either in decentralized business units or in shared services, still burning up the payrolls of the majority of global enterprises:

Click to Enlarge

On average, close to 40% of IT (apps and infra) is outsourced today.  "Outsourcing" of IT is pretty mature - it still clearly has a lot more wiggle room to grow, as close to half of IT is still run from shared services operations, but the level of outsourcing of IT is double that of finance, HR,

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Posted in: Analytics and Big DataBusiness Process Outsourcing (BPO)Buyers' Sourcing Best Practices

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Genpact feasts on Pharmalink to take on Accenture in the life sciences regulatory space

April 23, 2014 | Phil Fersht

When you’re feeling a tad queasy as a service provider and the prognosis is for lower-than-expected growth in the year ahead (4-6% in this case), one of the prescribed treatments is usually a healthy dose of M&A activity to boost market potential and make the competition sweat instead.

This inorganic medicine can be especially effective when the treatment aligns to a client vertical where you have a strong competitive position. So when Genpact announced the acquisition of Pharmalink Consulting earlier today, a global provider of regulatory services to the life sciences industry, it seemed like the patient was on the right treatment regimen.  Charles Sutherland takes a deeper look into the merits of this new acquisition...

Genpact has been a leading performer in the life sciences vertical for several years now, being especially dominant providing finance and accounting BPO for a host of the leading pharma giants such as Astrazeneca, Pfizer, Sanofi and GSK.  In addition to Genpact's horizontal strengths in pharma and life sciences, the firm has been competing head-on with the likes of Accenture and Cognizant in industry-specific process areas such as Clinical Data Management (CDM),

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Posted in: Business Process Outsourcing (BPO)Healthcare and OutsourcingHfSResearch.com Homepage

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HfS unveils the first Robotic Premier League Table

April 20, 2014 | Phil Fersht

After all the hype... after the endless stream of blogs and articles every woman, man and dog have found irresistible to conjure up (or just cribbed from whatever we've already published and passed off as their own, but who cares...), we're enraptured to publish the first Robotic Premier League Table of service providers delivering robotic-esque automation to their clients.

And congratulations to Sutherland, TCS, HP, Capita and NorthgateArinso for making the early pace in this race for robotic royalty.

So, without further ado, let's hear from HfS' own commandant of cognitive computing, Charles Sutherland...

Kicking off the first Robotic Premier League (RPL)

At HfS Research, we really enjoy our sport and so with the English Premier League season in its final throes and the Indian Premier League just starting, we thought it would be an excellent time to launch the Robotic Premier League of BPO Service Providers.

While it is too early in the evolution of robotic process automation (RPA) to apply our comprehensive Blueprint Methodology to this market as sufficient reference clients don’t yet exist to feed into our execution criteria, we still wanted to provide our assessment of where the innovation in this market is coming from. Having been the first analysts to start exploring RPA back in 2012, we have had the benefit of dozens of service provider and technology supplier briefings and have taken that insight and applied it to 5 major scoring criteria  (using a 1-5 scale) to create an initial pre-season league table of BPO service providers in RPA.

These five equally-valued scoring criteria are as follows:

  • Credibility of RPA strategy
  • Support of business leadership for RPA
  • Breadth of internal tools and external partnerships for RPA
  • Effectiveness of marketing effort behind RPA strategy
  • Apparent actual client activity underway

Like the English Premier League, we have 20 teams (BPO service providers) in the premier division that we felt had showed some level of interest in RPA so far in 2014. Using our own judgment and experience against these criteria, and some pre-season comments and observations from the providers' training sessions, here is our initial RPL league table:

We also want to recognize emerging start-up specialist RPA solution provider UK based Genfour which is our current candidate for the mostly likely service provider to be promoted into the RPL over the coming year.

As we said before, it’s still the “pre-season” for RPA in BPO and as we see the first client pilots turn into reference clients in the months ahead this initial league table will likely be turned upside down and around by service provider efforts. In the meantime, reflect on where your service provider(s) are in our rankings and watch to see how aggressive they are in moving up this table as the “real season” of client delivery for RPA begins.

HfS Subscribers can click here to download the 2014 HfS Robotic Premier League report

Posted in: Business Process Outsourcing (BPO)Global Business ServicesHfSResearch.com Homepage

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Cogny cogitates on a new industrial revolution

April 17, 2014 | Phil Fersht

Patrick Cogny is Genpact's Global Business Leader for Manufacturing (Click for Bio)

I think it was back in 2006 sometime that I was working with a major global enterprise which was deliberating a wild swathe of BPO deals, and there was this upstart little Indian company, which had just shed its weird name ("Gecis"), and was vying to win the F&A business, in spite of fierce competition from the likes of the traditional establishment that included Accenture, ACS, IBM et al. The conversation quickly turned to "which one of these providers can actually do supply chain accounting for multiple European destinations".

"Not to worry everyone, we have ze perfect set up in Romania for you" piped in a dashing young Frenchman. And there closeth the deal, at the time one of Genpact's largest, and I first met Patrick Cogny.  Since then, Patrick has quietly developed a very strong reputation as a deep thinking and very personable executive, helping first grow Genpact's European capabilities before taking on the role of leading one of G's largest industry practices, manufacturing and services,almost three years' ago.

Anyhow, we managed to lure Patrick away from his newly-formed habit of wandering aimlessly around the streets of his adopted New York City to get some lowdown on the crazy early days of Genpact, and how the firm is approaching the manufacturing sector with what he calls the "New Industrial Revolution"...

Phil Fersht (CEO, HfS): Hi Patrick, thanks for spending time with HfS today. You've been one of the real characters behind Genpact's rapid growth, both in Europe, and now in the States. However, before we get into your current role and plans, can you give some insight into your background - how you started your career and why you found your way into the Genpact organization.

Patrick Cogny (Genpact): I started my career with GE a long time ago - disclosing details would betray my age - I spend 12 years in the Healthcare business of GE, most of them in a high-tech division designing and manufacturing X-ray sources. I held roles there in supply chain, sourcing,

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Posted in: Analytics and Big DataBusiness Process Outsourcing (BPO)Buyers' Sourcing Best Practices

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TCS breaks into the HfS Global IT Services Top 10, with Cognizant poised to follow

April 13, 2014 | Phil Fersht

As we predicted last year, TCS has now become the first of the Indian majors to break the Global IT Services Top 10 for revenues, replacing CGI.

Click to Enlarge

Talk to any incumbent  Western service provider today, and the one making them all tremble from the sub-continent is TCS.  So what's the secret sauce?

TCS' aggressive targeting of renewals and new business, particularly in continental Europe is an important factor in driving its assault on the leaders. Moreover, TCS is frequently seen as being the most flexible service provider on pricing and terms, and has a developing reputation for winning any deal anywhere in the world at any price, if it really wants: it depends on what its leadership thinks is important, what its perception of the market is, and what it needs to tell its stock-holders.

The firm is increasingly being perceived by many today as an alternative provider to the Western Tier 1s, that can come in and fix messy contracts and implementations; it has shown an appetite and willingness pick up a lot of the low margin, low value work that seemingly every Western Tier 1 wants out of and make the deals profitable and leverageable across clients. Not only that, TCS is having much more success de-linking the direct correlation of revenues from FTEs: the firm has a

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Posted in: Cloud ComputingHfSResearch.com HomepageHR Strategy

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Learn all about neocortical cloning of the dynamic core... you know you want to

April 08, 2014 | Phil Fersht

No joke, but where else can you hear a discussion about reproducing the cerebral cortex in a piece of software?  Where else can you truly understand how paychecks will be processed and IT systems will be remotely operated by robotic human clones in the near future?

Had something better to do than be one of the 800+ registrants for yesterday's Ultimate Robotic Automation Debate? Or, were you so enthralled with the debate that it's left you hungry to devour more information on how and when to deploy your very own, round-the-clock robot?

Well, fret no further as HfS Research's powerful, little, semi-automated, back-end assistant makes it a practice to disseminate our webinar slides and replay for your robotic revelry.

Oh - and a special thank you to our excellent panelists:  Lee Coulter (Ascension Health), Pradip Khameni (Blue Shield of California), Chetan Dube (IPSoft), Alastair Bathgate (Blue Prism), Ian Barkin (Sutherland) and Charles Sutherland (HfS).

Click here to access our slides

Click here for the replay

Posted in: Business Process Outsourcing (BPO)HfSResearch.com HomepageIT Outsourcing / IT Services

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Accenture de-emphasizes the term "outsourcing" - is this the final death knell for the O word?

April 06, 2014 | Phil Fersht

A momentous event quietly occurred on Friday which could well have significant ramifications for the business practice that calls itself "outsourcing".

Accenture dropped the term from its strategy line, "Consulting, Technology, Outsourcing", which it had been using for more than a decade, changing it to "Strategy, Digital, Technology, Operations". In addition - and perhaps more significantly - it renamed its BPO growth platform "Accenture Operations".  The BPO term is still used when you drill right down to the specific business service lines, but Accenture wants to emphasize to its clients that it provides end-to-end services that go beyond just BPO.

As many of us universally lamented last weekend, the outsourcing (so-called) industry has long been struggling to create a clear, meaningful identity and establish recognized career paths for almost two decades, and much of this is because so many of the service providers, advisors and enterprise customers have failed to create a positive brand perception - and communicate effectively - the value of partnering with service providers to improve and extend operational capability and productivity.

Accenture was one of the last bastions of the outsourcing term, and its de-emphasis of it may be the final nail in the coffin for the dwindling band of outsourcing diehards still clinging to the fantasy that an "outsourcing industry" actually exists. In fact, the term IT Outsourcing is already practically dead, with only a couple of advisors and IBM (oddly) still using it, so let's see which of the providers actually still use BPO as their official terminology:

Well - there you have it - most have actively distanced themselves from the term, with only Capgemini, Dell, Infosys, Wipro and Sutherland still wed to it. Oh - and for some inexplicable reason, the major HR services firms like ADP still use it, even though the HR profession looks more negatively at outsourcing than any other.

The Bottom-line:  It doesn't ultimately matter what the providers call it, more how the enterprise clients view it

In my view, "outsourcing" really describes the initial act when an enterprise moves the responsibility for processes and operations over to an external party. Once that act is complete, those processes being executed form part of an externalized service or operation for the customer.  "Operation" signifies more than merely a service, but the orchestration of an end-to-end suite of processes, so I give Accenture credit for the being the first provider brave enough to use the "operation" term.  Now we can sit back and observe many of the above providers also slip that word onto their websites and marketing copy.

However, whatever these providers name their offerings, the real litmus test is going to be whether the buyers of services will start approaching service partnering as a genuine opportunity to improve their capabilities. Ultimately, they are the ones who would need to drop the O word and view services as what they are:  services.

Accenture's move is the most significant yet in terms of rebranding the outsourcing business - my best guess is that O will be pretty much gone from our business vernacular within a year.

Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesConfusing Outsourcing Information

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Moving Mountains with Mike, Part 2

April 04, 2014 | Phil Fersht

If we’re going to cross the chasm and seize the opportunity before us to grow the industry, we need to make outsourcing a career people are attracted to

- Mike Salvino, Accenture, March 2014

Mike Salvino is Group Chief Executive, Operations at Accenture

And finally it's time for the long-awaited second tranche or our interview with outsourcing hall-of-famer, and the man who's steered Accenture's BPO juggernaut these past few years, Mike Salvino. During Part 1, we talked about the challenges and opportunities facing enterprises striving to move up the "BPO Generations" continuum and Mike's philosophy about how BPO can provide a genuine career opportunities for such a broad diversity of people.  We finish our discussion talking about how companies can drive change and what Mike would do if he  is ordained as the Lord of BPO for one week...

Phil Fersht (CEO, HfS): Mike, you've talked a lot about what needs to change within companies, to move towards more value and away from these transactional engagements. But what do you think really can drive change within enterprises? What do you think has got to happen within themselves to alter the mindset and their approach to developing their governance teams and their staff?

Mike Salvino: I think we will get people to change based on delivering business outcomes. Remember, business outcomes mean that you're helping clients increase revenue or further decrease their cost --beyond the normal cost savings of outsourcing.

And when we do that, people step up and take notice. They want to understand how you did it. The first step in delivering business outcomes is doing global operations and achieving silent run. That eliminates any discussion amongst ourselves about “Are the transactions getting done?” Then because of that silent running

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Posted in: Business Process Outsourcing (BPO)HfSResearch.com HomepageHR Strategy

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HfS and Blue Prism partner to develop automated analyst solutions

March 31, 2014 | Phil Fersht

Meet Clive: Robo-Analyst Prototype

Industry analyst authority HfS Research has today announced a strategic partnership with leading Robotic Automation software company, Blue Prism to develop the first automated analyst prototype.

HfS has been conducting some major research studies into the emerging trend of Robotic Process Automation (RPA), which is threatening to revolutionize the IT and business process outsourcing world by mimicking and automating repetitive back office tasks such as order management, accounts payable and employee performance management. As HfS was developing its research findings, the firm's research leadership started to realize its own research processes could potentially benefit from RPA and approached Blue Prism to prototype a beta-robot to produce the first ever automated analyst report.

"Developing new research on an automation platform could be the new game-changer in the world of research and analysis", commented HfS Research CEO Phil Fersht.

"We've been searching for a while now to break the linear growth cycle of the research industry - that is hiring human analysts everytime we need to cover new research areas for our clients. Being

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Posted in: Absolutely Meaningless ComedyConfusing Outsourcing InformationHfSResearch.com Homepage

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