HfS Network

Monthly Archives: Dec 2015

10 issues defining the services industry in 2016

December 31, 2015 | Phil Fersht

We've pooled all the big discussion topics from our recent service buyers summit in Harvard and let our analysts loose to demand 10 big things the industry needs to address if we are going to drag ourselves away from legacy land and avoid becoming massage therapists... and venture into the promised land of the As-a-Service Economy:

Click to Enlarge

Click to Enlarge

1. Outsourcing is now part of a broader management capability; it is not a standalone profession. Outsourcing is a competency that is learned on the job and through real experience as opposed to a qualification or certification. It is an ongoing, amorphous capability that has no end-state or stamp of perfection, it is the ability to partner to improve constantly processes, outcomes and performance. Outsourcing is a means to improvement, access to resources and better capability, usually not the means to a specific end.

2. Intelligent Automation has emerged as a core competency for operations staff. Like outsourcing,Robotic Process Automation (RPA) is a means to improve processes and applications, but rarely the ideal end-state - it typically is retrofitted to make legacy applications and processes function more automatically and efficiently. Legacy operations delivery and BPO can only achieve a certain level of efficiency, without a well-planned Intelligent Automation roadmap. RPA is one of the leading technologies to provide efficiency improvement in rules based tasks and processes, but Intelligent Automation (see link)  is also now including the adoption of real time self-learning techniques, predictive analytics and cognitive computing.

3. Ambitious providers will cannibalize their revenues when their buyers give them more to work with. Moving forward, buyers will need to make some new investments in Intelligent Automation (especially RPA) technology and expertise, while the service providers will ultimately have to concede they may need to reduce the FTE provision on their side, as automation takes effect. A service provider must prove it can redeploy "freed-up FTEs" on their clients’ higher value

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Posted in: 2015 HfS Buyers SummitAnalytics and Big DataBusiness Process Outsourcing (BPO)

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HfS is back in Cambridge University for another no-cheese bake off of services leaders

December 20, 2015 | Phil Fersht

The Event: The European HfS Service Leaders Summit

The Date: 21-22nd March 2016 (click for details)

The Venue: Gonville & Caius College Cambridge

The Theme:  Avoiding the Race to Irrelevance

To Apply for a Seat / lead a session (buyers only):  Email us here

This promises to be another UK style "throw the kitchen sink at everything crappy about our service industry"

We're back at Gonville & Caius College, Cambridge this Spring (Click to learn more)

We're back at Gonville & Caius College, Cambridge this Spring (Click to learn more)

Join these core discussions where we'll finally address these issues:

The Race to Irrelevance: Are we on a race to the bottom, or are we genuinely in the midst of change: Are service providers really selling what service buyers actually need?
Europeans v Americans: Who’s outsourcing smarter and where can we improve to get to the As-a-Service Enterprise?
Demystifying all that Robo Hype: What is the realistic place for a Robotic Process Automation strategy inside the enterprise - and what should Service providers be doing to support it?
Digital Transformation: It's really all about the business, stupid!
Beyond the Transition: How can service buyers and providers really share their risks to achieve longer-term gains?
Ending the Master/Slave Model: Can service buyers and providers leverage "Design Thinking" to fashion a collaborative relationship with a common purpose, common values and jointly desired outcomes?
Getting beyond the Paperwork: What does it really take, in today's environment, to execute and manage a meaningful, effective and lasting contract?
Getting past that "outsourcing career track" discussion: Is the outsourcing "profession" now part of a broader management capability?
The Message we have to Send Back to the Industry: How can we fix this industry to deliver the As-a-Service Enterprise?

Service buyers email us here to apply for your seat...

None of that famous Cambridge cheese, honest!

None of that famous Cambridge cheese, honest!

Posted in: Buyers' Sourcing Best PracticesCaptives and Shared Services StrategiesDesign Thinking

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HCL, Cognizant, HARMAN, TCS and EPAM make the Software Engineering Winner's Circle

December 18, 2015 | Phil Fersht

While the benefits of the cloud and the pervasiveness of new digital technology impact our professional and personal lives - more than at any point in history - the need for the tech skills to make this all work has never been under so much intense pressure.

Not every firm can drop $200K a year on whizkid programmers who can actually handle this stuff, so the focus moves to those firms which can do this effectively and affordably. The industry's only dedicated engineering services analyst, Pareekh Jain, has been micro-focused on the emerging engineering service industry over the past couple of years and today unveils the industry's first unvarnished view of software product engineering capability of the leading service providers.

This is our second engineering services Blueprint. In the first one, we focused on the provision of engineering services for physical products. In this Blueprint, we look at Software Product Engineering (SPE) services in detail. So let's turn to Pareekh to learn more about his Blueprint experience in this emerging space:

HfS Blueprint, ISV Engineering Services

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Pareekh, how do you see this market evolving and what are the key drivers for software product engineering services?

This market is very dynamic today. A few years ago there were only a few specialized and small service providers who strategically focused on this market. Large service providers generally treated this market and clients more opportunistically. Their product engineering service capability was relatively small and often sat inside a larger ADM practice. Overall the attractiveness of ISV market was not high enough for large service providers to make investments to serve this market in detail. Now the market attractiveness has increased because of two reasons. First, as ISVs (Independent Software Vendor) are moving to As-a-Service, they need help. Second, as more and more products are software driven in IoT world, enterprises need help too. Traditional software product engineering outsourcers were ISVs. Later internet companies who faced similar challenges of scalability, reliability as ISVs also became a major customer segment. What we are now witnessing is an emerging trend with the rise of IoT that all products and industries are becoming smart and will need software solutions for scalability, reliability and connectivity. The traditional ISV market had limited potential and was driven by the R&D spend of ISVs but this much greater market for software products beyond ISVs has huge potential. Consequently, service providers both large and specialized are increasing their attention on and capabilities to serve this market. We have observed new specialized service providers have also emerged in this space in the last few years.

And how did the Blueprint analysis turn out?

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

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

This Blueprint analysis was interesting. First we researched how service providers are making investments in helping ISVs transition to As-a-Service economy and used these criteria also in evaluating service provider capabilities.

The scope of this Blueprint was software product engineering services for ISVs and internet companies. We excluded software product engineering work for enterprises because it is still an emerging area and there is a lack of a common understanding among service providers of what enterprise work will qualify as ADM versus SPE.

We evaluated 13 service providers for this study. These service providers include providers which are China centric, Eastern Europe centric, Latin America centric, and 100% domestic US sourcing centric in addition to India centric service providers. This is much geographically dispersed than most other outsourcing markets we research.

There are five service providers in our Winner's Circle - Cognizant, HARMAN, HCL, EPAM, and TCS (in

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Posted in: Buyers' Sourcing Best PracticesCloud ComputingDigital Transformation

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More bite than bark? Warner Bros transformation head, Jason Barkham, talks about his HfS Summit experience

December 17, 2015 | Phil Fersht

Posted in: 2015 HfS Buyers SummitBusiness Process Outsourcing (BPO)Outsourcing Heros

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The legend that is Bruce Richardson ...at the HfS Harvard summit

December 16, 2015 | Phil Fersht

Anyone who's been in and around the tech industry for the last couple of decades, will have come across the legend that is Bruce Richardson. The first of the true blogging analysts with his famous "First Thing Monday" newsletter, having had the misfortune of bringing me back to the analyst industry with AMR (Gartner) and being my (last) boss, has today survived that experience to lead strategy for Salesforce.

We were priveleged to dust off Bruce's old analyst hat and bring him along to our recent Buyers Working Summit at Harvard Square where he immediatetly declared, "If anyone here doesn't have a Cloud-first strategy, I am walking out of hrre right now"... He did also start to worry he was starting to sound like the Donald Trump of cloud computing... So  over to you Brucey!

Posted in: 2015 HfS Buyers SummitCloud ComputingIT Outsourcing / IT Services

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80% of outsourcing relationships fail to deliver collaborative value... so what can we do?

December 13, 2015 | Phil Fersht

Our theme for 2016 is all about us "getting back to basics" as a services industry, and nothing exemplifies this more than what the buyers and providers privately said about each other at the recent HfS Working Summit in Harvard Square.  Once we get past all the talk of disruption and change, the real issue holding back progress is the simple fact that too many of today's services relationships are just not set up to be collaborative ventures.

What's more, in spite of all the chest-pumping from providers on their revolutionary capabilities to turn their clients' business models on their heads, over half their clients still perceive them as brokers of cost-efficiency... not capability:

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Click to Enlarge

I am sure many of you are muttering to yourself, "This is very consistent with previous studies HfS has run" - and you are correct. Little is changing. However, it's worse than just the buyers' having negative perceptions of service providers... 80% of buyers simply aren't engaging with their providers in a collaborative way:

Click to Enlarge

Click to Enlarge

Until we can break this legacy master/slave culture, this industry will continue to stagnate

Here are three measure that could break the cycle:

1) Buyers need to entrust more higher-value work to their providers, with their leadership incentivizing their middle-managers to "let go".  Many buyers consistently admit they need to entrust their provider with higher value work to improve the quality of their engagement. But this isn't really about trust, it's more about the buyer letting go and having the confidence to give their service provider more responsibility, which would make them more effective at their own jobs.  Sadly, most middle-managers have absolutely no motivation to entrust more to their service provider -and, frankly, why should they? What motivation would you have to make yourself less dispensable to your firm?  So it's up to their leadership to force the issue, either by demanding more work is outsourced, or by incentivizing their managers by giving them more motivating work to do... with real financial and career benefits to do so.

2) Automation is the "new offshoring", so leverage RPA to create renewed opportunities to collaborate.  The next wave of value is blending global sourcing with the mimicking of manual processes in RPA software that are predominantly high throughout, high intensity tasks.  All enterprises have varying potentials for real automation value to be created by robotizing rote manual tasks. And most of the respectable service providers have invested in capabilities to develop an RPA strategy for their clients. Buyers must learn from mistakes of the past to look beyond short term cost savings and create a broader intelligent automation strategy, which also creates significant opportunities to establish more collaborative, value-added relationships with their service partners. Moreover, it is in the interests of buyside managers to put automation capabilities on their resumés as CEOs increasingly demand a cohesive plan to create a more automated operating platform to support non-linear future growth for their firms.

3) Weave Design Thinking into engagements to shift the impetus towards mutually beneficial outcomes. The less hyped, but nevertheless creeping uptake of Design Thinking is helping several relationships inject lateral thinking and renewed motivation to work together, not only in the customer-facing front office, but also in the back office operational functions. Design Thinking in services is based, primarily, on both service buyer and provider coming together to create business outcomes that are mutually beneficial - and motivational - for both parties. However, this must be established as ongoing collaboration across all key relationship stakeholders, and not simply two days of senior management putting sticky notes on each others' foreheads. There must be senior pressure and buy in to adopt Design Thinking as a means to move away from Six Sigma-obsessed old world models, and really change the way the service buyer and provider teams work together. We're seeing encouraging signs from several providers aggressively promoting Design Thinking techniques, such as Infosys, IBM and Cognizant, into their engagements, but this is still restricted to far too few a number of buyers at this stage.  But Design Thinking, and new creations of Design Thinking-eque collaborative methods are increasingly important ways to bring together new concepts and ideas, better teamwork, and ways to design outcomes jointly that can incporporate investments from both sides.

Posted in: 2015 HfS Buyers SummitBusiness Process Outsourcing (BPO)Buyers' Sourcing Best Practices

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Why we mustn't make the same mistakes with RPA that we made with BPO

December 10, 2015 | Phil Fersht

Forget the Trump, 2015 has been one helluva year for pontification on big disruptive, and occasionally ridiculous topics.

Anything robotics, artificial intelligence, the end of work, the end of sanity... the end of pretty much anything has been bandied around. Hence, it was refreshing to bring together a host of service buyers and providers in Harvard last week, to dial back into planet earth and really get to the point of where we need to take things.

Glaring into a future, where there is no written rule book, no set curriculum to follow, can be a little daunting.  So it can't hurt to take a look at some of the mistakes of our past to create a more long-term, focused strategy to set us in better stead as we embark on this new wave of change and disruption to our cosy little world:  the Continuum that begins with establishing a rudimentary, trigger-based Robotic Process Automation underbelly, that forms the building blocks for incremental investments in more predictive autonomics and - ultimately - cognitive self-learning capabilities, before reaching a haven of true artificial intelligence (which doesn't actually exist yet, but we can all dream, right?):

Click to Enlarge

Click to Enlarge

I've been reading some interesting arguments that discuss separating RPA out from the more intelligent developments further along the Continuum.  And they're half right, but I also argue they're half short-sighted too.  The best comparable is BPO, where we are going to see most RPA deployments, as many service buyers seek to eke out more productivity from their messy processes, which they didn't quite get right the first time around.

And why - pray tell - did so many BPO buyers not do enough that first time around?  Why is our industry literally littered with hundreds pf underperforming BPO contracts that are caught in a purgatory of status quo, where the provider has no desire to change anything and simply keep pumping home their predictable profit margins from a pre-set provision of offshore FTEs, while their buyers have long-lost the attention of their CFOs to get renewed investments to make their processes run better.

Why is it that so many BPO buyers only enjoyed some "transformation" during their brief 18-24 month transition towards a BPO steady-state, before their service provider packed up the Visio charts and redeployed their process wonks to work on that next deal coming down the pipe?

The Bottom-line:  Only focusing on RPA is a fast-track to short-term disappointment.  A broader Continuum focus is where the smart buyers are headed

The answer is simple - most BPO buyers only focused on getting that initial 30-40% of cost out the door.  They were not thinking beyond that.  They did not budget or create a real plan for achieving ongoing process improvements and innovations, once they reached that steady state of lower cost. And it's the same with RPA and cognitive - focusing only on the short-term cost is only going to get you so far.

Do you think your CFO is really going to release significant funds to embark on a cognitive strategy once you have reached a happy state of RPA, where you have a few bots cranking through processes more effectively and more headcount freed up to do other things?  Did that same CFO open up the coffers to invest in significant process transformation once BPO steady state was reached?  Of course he/she didn't...

So learn from that experience to make a broader business case for an intelligent automation journey right from the onset. RPA is only the first step on a journey of self-learning, self-healing, dynamic process creation and really smart decision making support for your business.  Don't ring-fence it... embed it in a broader program of Intelligent Automation.

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

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Save the dates for our 2016 HfS Buyers Summits

December 06, 2015 | Phil Fersht

After the brilliant "back to reality" conversations at our Harvard Summit last week, where we crammed 53 senior enterprise buyers into a fantastic room with the HfS team and some very "game" sponsors, we are thrilled to unveil our 2016 Summit Agenda, starting with a return to Cambridge University in March, a debut Summit in San Francisco in the Spring, and a major industry gathering in September.  We'll be rolling out themes, speakers, crazy new ideas and lots of associated buzz in the coming days and weeks...  click here to learn more and apply for your places.

Next stop in the HfS quest for operational perfection... Gonville and Caius College, Cambridge

Next stop in the HfS quest for operational perfection... Gonville and Caius College, Cambridge

Click here to learn more and apply for your places.

Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesCognitive Computing

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The 2016 HfS Autonomics Premier League Table

December 03, 2015 | Phil Fersht

And finally... the eagerly-awaited industry bellwether 2016 HfS Autonomics Premier League table is unveiled...

autonomics-PL-trophy-blog

Tom, firstly, what is autonomics and why is it different from RPA?

Thanks Phil, before we dive into the details, let’s level set where we believe the industry is at. We have seen the market and the discussion on Intelligent Automation change significantly, both in terms of maturity as well as in terms of scale especially in 2015. The large service providers are accelerating investments in and build out broad capabilities around the comprehensive notion of Intelligent Automation. Yet the mainstream narrative on Intelligent Automation remains largely

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Posted in: Business Process Outsourcing (BPO)Cognitive ComputingDigital Transformation

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Automation: Flavor of the month or disease of the decade?

December 02, 2015 | Phil Fersht

The reality of Robotic Process Automation is hitting us at the HfS Summit for services buyers at Harvard Square this week.  We anonymously polled 53 senior outsourcing relationship leads with the question "what measures would improve the outcomes and quality of their outsourcing relationship":

Click to Enlarge

Click to Enlarge

Last year's buyer's summit saw 48% polling they needed to let go and entrust their service provider in higher value processes... now that number is dropping to 28%, with the preferred partnering focus shifting to working jointly on an automation strategy.  Nearly half of today's buyers (45%) now see that as the main area to get renewed value.

What does this tell us?

As mature outsourcing deals get stuck in holding patterns, automation is providing the new flavor to find that next increment of value. The industry hype and marketing is clearly reaching the buyer - and many want their service providers to work with them to help figure out an automation strategy.

So the real conversation now shifts to how buyers and providers can find common commercial models to make automation work for both parties.  However which way we look at this, buyers will need to make some new investments in Robotic Process Automation technology and expertise, while the service providers will ultimately have to concede they may need to reduce the FTE provision on their side, as automation takes effect.

Now, the real challenge here is for the service provider to redeploy the freed-up FTEs on their clients' higher value processes.  So these two motivations should go hand-in-hand:  decreasing labor effort on automatable tasks and increasing it on the higher value work the clients would like to outsource in the future.  So if buyers and their providers can get this right, automation will be a long term play for both parties, where higher value work gets done and delivery staff are kept busy because of the closer collaborative relationship and greater volume of work being parsed out.

Posted in: 2015 HfS Buyers SummitBusiness Process Outsourcing (BPO)Buyers' Sourcing Best Practices

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