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Monthly Archives: Aug 2016

Why is Gartner spewing such irresponsible and unsubstantiated data about "robobosses"?

August 29, 2016 | Phil Fersht

Clients are being subjected to such a load of nonsense about the impending impact of robotics and cognitive computing on enterprise jobs, many are literally terrified. Conversing with the "head of automation" for a F500 organization today, is akin to meeting a Secret Service agent in a clandestine alleyway. These people do actually exist, but most have to conduct their work under a veil of secrecy, due to the level of discomfort and panic our robo-commentators are making in the presses.  

Remember the panic about jobs getting shipped offshore?  Well, that is child's play compared to the emerging tumult of fear being generated by jobs being completely eliminated by robotics. Net-net, people are frozen stiff with fear, and it's the responsibility of respected analysts, consultants, academics and journalists alike to educate and world using real, substantiated facts. Sadly, the likes of Gartner, McKinsey, Oxford University and our beloved Stephen Hawking, all seem hell-bent on capitalizing on the panic to grab the headlines (read my post earlier this year) as opposed to dispelling much of the ridiculous scaremongering about the impact of automation on job losses.  

At HfS, we published a very thorough analysis on the impact of automation on global services jobs, showing there is likely to be modest downsizing of ~9% over the next five years as low-end tasks are increasingly automated across major service delivery locations.  And this 9% will be immersed in natural attrition and redeployment of workers to other industries, as global services streamlines and matures as an industry. Yes, there will be impact, and it will be somewhat painful to absorb for some enterprises, but it's not the impending workforce apocalypse these people are predicting. 

So why, pray tell, is Gartner, a respected voice in IT research, continually pounding us with continual scaremongering that we're all doomed to the will of the robot, and we may as well start preparing for a life of unemployment, or sandwich making? Oh wait, robots can even make sandwiches, right?

Peter Sondergaard, Gartner's Head of Research, predicted one in three jobs will be converted to software, robots and smart machines by 2025.  OK, that's so far out in the future, I think Peter's on pretty safe ground here - he's probably going to have cashed in his Gartner stocks long before then, in any case, and be on a golf cart somewhere, when one very earnest soul decides to dig into the Gartner archives of previous decades to read very old research, with very dodgy predictions, that absolutely noone care about anymore.  So we'll let Peter off the hook here - he wanted to make a splash at his Symposium and he achieved exactly that.

But then we get treated to this almighty whopper from Fran Karamouzis, a vice president and distinguished analyst at Gartner...

By 2018, more than three million workers globally will be supervised by "robo-bosses".  Wow - isn't this barely more than a year away? Excellent, so Fran's going to be around to declare automation glory when global employment goes through a robo-geddon so seismic, it'll be like all three terminators visited from the future at once  to change the world? My god - what is going on here? The suggestion that an employee will be supervised by a machine simply cannot be corroborated by any meaningful research...

So why do we, at HfS, view claims like this as factually incorrect and irresponsible? 

There is only one very shaky example of "robo advisors" in the industry. The most cynical implementations of automation that HfS has come across, thus far, where direct replacement of human labor by robots is the declared outcome, are examples such as Royal Bank of Scotland, where virtual agents, deployed as “robo advisors” are solely deployed to replace FTEs.  We've also witnessed a service provider radically downsizing some delivery staff claiming success of its robotics strategy (only to find out later these staff were simply redeployed elsewhere).  Let's be honest here, the onus so far seems to be about firing people and using "robotics" as the smokescreen. While Intelligent Automation decision-making will undoubtedly increase (view our Continuum here), we see no examples of employees being supervised by bots. At HfS, we are covering every deployment in the industry, and are just not seeing it.

We still haven't had a real debate on the ethics of automation and cognitive computing in the B2B environment. Suggestions that employees will be supervised by bots can be traced to the broader discourse on Artificial Intelligence, where more consumer-facing technologies are discussed with undercurrents of movies, such as the Matrix. These discussions tend to focus on technology capabilities of providers like Google and Facebook. However, we haven’t seen a similar debate in the B2B space. If anything, the B2B urgently needs a debate on the ethics of automation, in light of these nascent cognitive capabilities. But to surmise that robobosses will be so prevalent in barely over a year before we've even had these debates is quite absurd.

The speed of internal organizational change is painfully slow. The tendency from clients with automation is to pilot first, rather than to go full scale, and every ambitious forecast is always waylaid by the reality of interacting with legacy systems.  Most of today's Robotic Process Automation(RPA) tools are simply being retrofitted into smoothing over manual processes within legacy technology environments with obsolete processes. They are adding efficiency to broken operations, which may, in the future, lead to a lesser need for headcount in low value work areas.  Talking about today's enterprises being so close to investing in Robo bosses is just very wide of the mark.  What's more, much of this RPA technology has been around for more than a decade - this stuff isn't exactly revolutionary, it's just becoming more popular as enterprises figure out further efficiencies beyond initiatives such as offshore outsourcing and shared services

Cognitive tools are only just emerging. While IBM has done a stellar job aligning its Watson capabilities with the healthcare industry (read our report here) and software experts such as IPSoft's Amelia and Celaton have some compelling client stories to tell, the focus on self-learning and intuitive cognitive solutions are mainly confined to customer service technology and virtual assistant chatboxes.  Talk to the call center BPO providers and they're really only just figuring this out.... forget robobosses, we're still just trying to figure out some basic software to make chatboxes work better these days. Moreover, with Watson, our research shows it's best application today in the medical field is helping flesh out the bad science and saving scientists serious amounts of time doing their research.  Meanwhile Celaton, in the UK, has created a really cool tool to help Virgin trains handle emailed customer queries.  But the long and short, here, is that Intelligent Automation solutions today are great at augmenting processes and unstructured data pools, not replacing real people who make real decisions doing real jobs.  

The definition of robo bosses, and the potential value, of robobosses is missing. There is, however, something to be said for the value of increased automation combined with analytics to better understand the impact — measured by targeted business outcomes — in a more realtime way during a contract with a “gig economy” worker (or any worker).  Such knowledge can help us intervene and train/coach a project “going south” sooner, or catch fraud fastest, or identify a worker to “gets it faster”. Along these lines, we see value in "robo advice", but the point also needs to be made that these "robobosses" (give me a break) do not work alone, such as with Watson and health / medical diagnosis and treatment, they work in tandem with doctors / clinicians, changing and refining the dr/clinician job (freeing up that person to be more targeted and more of a coach than a statistician) with the intent of better medical results.  These robo tools (or whatever we call them) do not replace the doctor / clinician. 

Monitoring software has existed for decades... so when does it become a "Roboboss"? Currently, there are probably a million or more workers just in the UK (for example) managed by extreme monitoring of some kind. The Amazon style warehouse pickers, fast food cooks, many call center agents, delivery drivers, assembly line factory workers are subject to time monitoring and computers giving them tasks. We're just not sure when this turns into a roboboss?  

Bottom Line: The real "roboboss" is the human worker who can use Intelligent Automation tools effectively

It today's swirl of gibbering noise around the social media presses, it's the responsibility of leading analysts, advisors and academics to be the voices of sanity and reason, when it comes to topics as critical as the future of work elimination through Intelligent Automation technology.  The vendors love the hype as it gets them attention with clients, but analysts who like to take money from these vendors have a responsibility to articulate the realities of these technologies to their clients. They are great at augmenting work flows, and even aiding medical discoveries, but this is the real value - it's not about sacking people.  It's about making operations function better so people can do their jobs better.  The real "roboboss" is the human enterprise operator who can use smart Intelligent Automation tools to enhance the quality of their work.

Net-net, industry analysts, advisors, robotics vendors, academics and service providers need to engage with clients around how all these disruptive approaches will affect talent management as well as organizational structures. Even without these apocalyptic scenarios, some job functions are likely to either disappear or be significantly diminished (as our 9% forecast reveals). Equally, we need to talk about governance of these new environments, touching upon ethical, but also practical, issues. This is not only a necessity for the broader adoption, but also offers high value opportunities. 

I'll probably get a few nasty messages as a result of this piece, but I sincerely hope this has the outcome of steering our industry conversation in a more realistic direction, backed up by real data and experts who prefer realistic conversation that mere headline-grabbing and panic creation.  

A special shout out to Cartoonist and Innovation evangelist Matt Heffron for penning this little gem:

Click to Enlarge

Posted in: Cognitive ComputingConfusing Outsourcing InformationRobotic Process Automation



Why An Outcome-Based Approach Can Shatter the Watermelon Effect of Outsourcing Contracts

August 29, 2016 | Barbra McGann

In her recent blog on outcome-based contracts, Christine Ferrusi Ross challenges the industry with Outcome-based Contracts Are A Nightmare --Do Them Anyway, and offers guidance and experience to rally the troops. What is also intriguing about this outcome-based approach is the potential to shatter the so-called “watermelon effect” that often takes shape in an outsourcing engagement that is based solely on key performance indicators (KPIs) and service level agreements (SLAs)… and use those traditional metrics as seeds for new value-based engagement. 

What Is the Watermelon We Want to Shatter?

The outsourcing industry grew up on contracts that clearly articulate KPIs and SLAs, providing an agreed upon set of targets for the service providers to get the work done at a level that is satisfactory to the client. As transitions take place and Lean, Six Sigma and continuous improvement methods iron out processes and make them more efficient, these metrics regularly appear “green” on the scorecard. But, even when all the indicators are green, service buyers can be left feeling red—the so-called watermelon effect of green outside and red inside. There is often a sense that while all the targeted metrics for turnaround time, uptime, and transactions processed are being met, clients and service providers “feel” value is still missing.

This effect often leads to questions about the value of the contract and challenges for achieving innovation, price reductions, and competitive re-bids. The key issue is that perceived value changes as relationships evolve; therefore, the benefits received and the associated metrics to measure and manage real performance need to change with it. We once joked that “if outsourcing was an employee it would be fired,” meaning if you took a job and were judged on the same performance metrics every year, you wouldn’t last very long!

There is a Step Along the Path to Outcomes-Based Contracts

As Christine’s blog points out, outcome-based contracts can be incredibly difficult to create, but you can still address the watermelon effect right away while sorting out the outcomes desired. In one such example, we heard of service buyers and providers addressing this point by including a metric and payment based on Net Promoter Score in the contract. That way, all parties in the engagement have to figure out, and proactively address, that feeling of missing value. An example is a simple performance evaluation, on a regular basis, that asks for a rating of partner satisfaction on a scale of one to three. If the feedback comes back as a one, a percentage of the payment is held back, if a two, no movement of money, and, if a three, then a percentage bonus.

The intent is to drive the right attitude, behaviors and cadence of interaction and measure, not just the service levels and performance indicators, but that “feeling.”

Yes, it’s subjective, but isn’t any relationship subject to “feelings”? This “feeling” can be an indicator that the engagement is at a stalemate—that the engagement is no longer driving step change, helping the business to improve or address what matters to their customers today.

Using KPIs and SLAs As Seeds to Grow Outcomes-Based Contracts

How does a business outcome differ from a KPI or SLA? In practice, a business outcome often encompasses multiple KPIs and SLAs. For example, a business outcome in retail could be “increased sales closed by visitors that start a shopping cart,” versus an SLA which could be “ensure website has availability of 99.999%.” In healthcare, “decreasing the cost of care for a targeted population” could be a business outcome, while a KPI may be “percentage of targeted population enrolled in a relevant wellness plan.” They are not mutually exclusive, and when used together, can help advance an outsourcing engagement towards a structured, but more interactive and flexible arrangement for today’s dynamic business environment.

Looking at business outcomes puts the focus of the outsourcing engagement directly on the client and the client’s customers and stakeholders—the ones who are judging and measuring the client’s performance. The business outcomes for an outsourcing engagement in operations are broader than simple transactions, like website uptime or number of bills, invoices or claims processed. Using a healthcare industry example, what matters to a healthcare payer today could include retaining members in their plans, and that means KPIs that could include member satisfaction scores, and SLAs like payer web site uptime, claims processing throughput, and accurate provider data.

The Bottom Line: The point is not to move away from KPIs or SLAs in a contract, but to use them as building blocks for achieving real outcomes that make a difference to the client’s business goals… and in a way that can flex and change in order for the partnership between the service buyer and the service provider to stay relevant over time.

Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesDesign Thinking



Beware men in gray suits: Clients want more senior women, more real client stories and less automation hype

August 27, 2016 | Phil Fersht

We set out a few weeks' ago, with support from NASSCOM, to test the views of service buyers, advisors and providers on what the BPO industry needs to do to make the leap from delivering mere efficiency to one that can provide genuine strategic value to clients (if this is indeed possible).  

As we filter through the first results, what immediately leaped out at me was the following:


Clients want more women leaders and real case studies... more than anything else

"Why are these providers and advisors dominated by boring men in gray suits?"  bemoaned several clients at one of our HfS Summits recently (where more than half the buyers executives present were actually female).  This is a serious issue, folks. Our industry has - somehow - become dominated by too many dinosaur service provider executives with their lavish air-miles accounts and two iPhones* (why do some people insist on having more than one iPhone?  Are they really that popular?), who have, at the same time, somehow lost all records of actual client success stories that justify their new vernacular around "digital transformation" and "automation".

In fact, during one service provider briefing last week (which will remain nameless), we asked an executive to explain how he defined "Digital Transformation" (after many utterances of said phrase) and the poor chap was positively floored that he was asked to define what he was talking about. These people seem to be obsessed with recanting the vogue buzz phrases, without the need anymore to know what they really are. Can we just call it "technology" again and go back to sharing real examples of how technology can enable and transform client performance? Can we just explain what all this hype is surrounding automation and emphasize that most of today's RPA technology has actually been around for more than a decade in many shapes and forms?

Here, it's abundantly clear that we need to see more women - and, dare I say it, more youthful executives, who can simply connect better with the clients.  Everything has become so dominated by the men in gray suits, who talk in increasingly more impressive riddles that are becoming increasingly distant from reality.  Moreover, we need to dispel much of the hype surrounding automation and jobs impact:  Gartner's unsubstantiated claim that "more than three million workers globally will be supervised by robobosses in just 18 months' time", is simply irresponsible and unprofessional. It's time to make it real and drop the hype and scaremongering...

The Bottom Line: It's time for progressive change from within to break ourselves out of this legacy holding pattern 

The industry has spoken, and it's not pretty - clients are fed up with the same old selling, the same old unsubstantiated hype and the same old cronies dishing it out. Change only comes when we look at progressive change, not successive change. This means we must stop making the same old mistakes by replacing jaded middle managers with more faceless middle managers with a hype-upgrade; this means we must stop plastering out turgid marketing that was really a rip-off of the other ten competitors, with a different logo slapped on it.

We need real people selling and delivering our solutions, who can listen to what clients need and can really empathize with them, who are diverse across the genders, the age groups and the ethic backgrounds. We need to start talking real English again, and less of the manifested garbage we can't resist spewing out to mask our insecurities. As our whole 2017 research theme at HfS is centered on... it's simply time to start making everything real again and redefine our industry as something that is geared up for our clients' real needs, not needs we are trying to convince them they have! 

*In full disclosure, the author of this article has been seen once sporting a gray suit and did possess two iPhones for a brief period of time.  He has since changed his ways...

Posted in: Business Process Outsourcing (BPO)HfS Surveys: All our Survey PostsHfSResearch.com Homepage



The testing community has to find a distinctive voice for the As-a-Service journey

August 26, 2016 | Tom Reuner

One thing about testing services that continues to strike me is that the development is largely out of sync with the broader IT market. That is not to suggest that the testing community lacks sophistication or innovation, but we cannot just use the usual mindset, concepts and monikers without adaptions when we discuss testing services. Much of that has to do with the reluctance of buyers to invest in testing. For many organizations, testing services remain a secondary concern when setting strategic IT goals or embarking on transformation projects. Yet, as organizations journey toward to the As-a-Service Economy is accelerating, and in particular Intelligent Automation is fundamentally changing the way we deliver services, the discussions on testing have to move center stage. HfS had the opportunity to sit down with executives of Capgemini and TCS to discuss their strategies for test automation and how the notion of Intelligent Automation will shape the future of testing services.

Desperately seeking an organizational model for testing

Testing services have never fully mirrored the broader IT market in the way it was seeking to optimize its organizational models. Be it aiming to centralize large parts around the notion of shared services or be it by embracing large-scale outsourcing. The build out of Test Centers of Excellence (TCoE) has always been a litmus test for the progress with centralization efforts in testing. However, as executives at Capgemini put it:”TCoEs have flat lined”. The reasons for that a likely to be twofold. First, the lack of maturity on the buy-side. Second, the traction of Agile and DevOps methodologies. The latter has two direct consequences: On the one hand the requirement for more co-location, yet as Capgemini put it with more intelligent solutions than just aligning delivery teams. On the other hand, both executive teams agreed on the rise of Distributed Agile. While Agile is intrinsically aligned with the journey toward the As-a-Service Economy, the testing community has to articulate and demonstrate what the concept exactly means. Not least in the context of vastly varying buyer maturity, or in the exasperated words of a Capgemini executive:”99% of the market is still Waterfall.” As a result, both Capgemini and TCS see Distributed Agile as the next key development phase for testing services.

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Posted in: Cognitive ComputingDigital TransformationRobotic Process Automation



You can bet your mortgage-as-a-service on Accenture, Wipro, Cognizant and TCS

August 24, 2016 | Phil Fersht

Perhaps the best example of the evolving As-a-Service delivery model that immerses all the value levers of global delivery; namely offshore talent, cognitive automation tools, analytics and the digital customer experience, can be found in the burgeoning mortgage processing industry.  With banks going all out to sell highly competitive mortgages at record low interest rates, the onus to manage the whole process both efficiently and intelligently, while battling all the regulatory demons, has never been so great.

Two years after our inaugural Blueprint in Mortgage BPO Services, we took a fresh look at this industry… here’s announcing the findings of the HfS 2016 Mortgage As-a-Service Blueprint, led by HfS banking analyst, Reetika Joshi.

The concept of delivering mortgage As-a-Service, using plug and play digital business services is still in its infancy. We’re not quite at “push button, get mortgage” as an industry – and the verdict is out on whether this is the right message to send for a lending environment that is still rebuilding itself, seven years after the 2008 housing crash. How do you do this without raising eyebrows? You’ll have to ask Quicken Loans, as they learn from the backlash of their Super Bowl campaign with that very slogan.

Reetika, how do you view the 2016 Service Provider Landscape?

Our HfS Blueprint methodology assesses service providers based on two critical axes: Execution and Innovation. We gather data to support our analysis from client reference interviews, market interviews, RFI submissions and exhaustive service provider briefings.

In this Blueprint, we identified four As-a-Service Winners: Accenture, Cognizant, TCS and Wipro. These service providers have the strongest vision for As-a-Service delivery in the mortgage industry, and are driving collaborative engagements with clients to bring this vision to life. They are making significant investments in future capabilities in automation, technology and borrower experience to continue to increase the value over time. 

The High Performers in this year’s Blueprint are a highly competitive set of service providers:  Genpact, Infosys, ISGN/Firstsource, Sutherland Global Services and WNS. They have high execution capabilities and are growing their client bases as a result of investments in future capabilities and innovation. These service providers have the pieces in place for As-a-Service delivery, and need to focus on consistently bringing these capabilities to clients and scaling up with broad, multi-client solutions. We expect them to challenge the Winner’s Circle leaders in the next couple of years, with each building on unique strengths and assets in this vertical. 

We see Unisys and Xerox as the Execution Powerhouses. These service providers are strong in operational excellence with ubiquitous technology platforms in their respective markets, and need to focus on value chain expansion and innovation in their services stack:

Click to enlarge

Why does mortgage needs to have a different approach and response to “digital disruption”?

Despite this sensitivity, other industry forces still march on; regulation, homebuyers and a new breed of disruptive fintech firms are steadily shifting the entire mortgage industry towards generally being more digitally enabled. Lenders have this big ask today: how to carefully balance their investments in new technologies, with changing consumer needs, volatile rate

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Posted in: Financial Services Sourcing StrategiesHfS Blueprint ResultsHfSResearch.com Homepage



Who Are the As-a-Service Winners in Energy Operations? HfS’ inaugural Energy Operations Blueprint reveals frontrunners Accenture, EPAM, Infosys, Wipro and TCS

August 24, 2016 | Derk Erbé

Why An HfS Research Blueprint for the Oil & Gas Industry?

Tumultuous times in the Oil & Gas industry. Understatement of the day I hear you say… Time for a rigorous look at the role service providers play to help Oil & Gas clients battle adversity. 

The Oil & Gas industry is on the cusp of a significant transformation. Economic, societal, market, political and regulatory pressures are coming together bringing immense challenges for companies to solve through more effective and lower cost operations.

HfS sees a significant role for next generation services providing flexibility to scale up and down, agility to deal with a volatile environment and fully leverage digital technologies and digital enabled business and operating models now and in the future. 

What does this Blueprint cover?

This is not a beauty contest about size, revenue and global scale. There is a place for smaller providers that excel in a niche and help clients on their As-a-Service journey. 

One of the key attributes we looked for in this Blueprint process was if the service provider has a real Oil & Gas practice, not a collection of contracts with a sign “Oil & Gas Practice” slapped onto it. In this light we are interested in the way service delivery is organized, the availability of industry domain expertise, investments in industry talent, acquisitions of companies with industry specific capabilities and partner ecosystems. Another point of emphasis in our research is the move to As-a-Service, how service providers are enabling new ways of working, how automation and analytics are used to tackle industry specific challenges and the level of innovation brought to clients.  

Key Market Dynamics

 Two dynamics jumped out at us during the Energy Operations Blueprint process:

Oil & Gas Companies Looking for New Levers: As the focus of the industry is on cost reduction, production optimization and operational efficiency, automation and outsourcing are two principal levers available to the industry. The name of the game for Oil & Gas is: Fix the basics and leverage new technologies. Oil & Gas executives are forced to have a good look at their strategy. Key questions include:

  • What is the core of our enterprise?
  • What do we need to do internally, what differentiates us from the competition?
  • What parts of our processes can we automate?
  • Can we outsource what we can’t automate?

 Buyers Perception of Service Provider Becoming More Strategic: A pivotal changing dynamic in the market is how buyers look at their service providers. With the renewed focus on outsourcing as a lever to deal with the pressures in the volatile business environment, Oil & Gas clients tell us they look beyond labor arbitrage and see service providers as an extension of their organization. They want deeper relationships with their providers and forge stronger ties between internal and external staff. They look at their service provider(s) to help the organization become more flexible and scalable, ramping up and down in the cyclical business of Oil & Gas.

Who is Standing Out? The Service Provider Landscape and Blueprint Grid Performance

All of the 13 service providers that participated in this Blueprint share the conviction that innovation is crucial to helping their Oil & Gas clients through this volatile environment. Most of them have a unique set of offerings and capabilities. There are a couple of clusters of expertise. For example, KPIT and HCL, focus on a specific area of the value chain; TCS, Infosys, Wipro, Accenture, IBM and Cognizant, focus on strong domain expertise and consulting-led delivery; and EPAM, Atos, Luxoft, Harman and Tech Mahindra, lead with engineering or Digital Transformation with credible experience from other industries.

As-a-Service Winners are service providers that are in collaborative engagements with clients, and making recognizable investments in future capabilities in talent and technology. These providers are also leading in incorporating analytics and BPaaS to deliver insight driven services: Accenture, EPAM, Infosys, TCS and Wipro. I’ll highlight two Winners here: 

Accenture has tremendous breadth and depth in its capabilities and experience serving the oil and gas industry. Its commitment to innovation in technology and service delivery and bringing digital platforms to the industry make it one of the leading service providers in the move to the As-a-Service Economy. 

Wipro’s Oil & Gas practice holds a lot of domain expertise, which Wipro combines with innovation in digital, cognitive computing and automation (Holmes) and commercial models. What stands out is Wipro's ability to bring valuable, new As-a-Service propositions to the market, enabling the introduction of clients' new reimagined digital business models, a crucial capability for success in Energy Operations.

 High Performers show solid performance in either technical execution or services innovation but may not show an innovative services vision or lack execution momentum against what is potentially possible: Atos, Cognizant, HCL, KPIT and Tech Mahindra. Atos impressed us with their vision on Holistic Security and Industry 4.0 experience, two key areas for the future of Oil & Gas. 

Harman, IBM and Luxoft are ranked as High Potentials, emerging players bringing highly innovative approaches and overall vision to the market, but lacking in the complete build-out.
IBM is struggling to transition from being firmly entrenched in ‘traditional' services, and has been on the wrong end of consolidations in the industry. However, what caught our attention is IBM's capability that puts it on the forefront of advanced analytics services, with heavy investment in cognitive capabilities. We have seen a number of interesting applications of Watson with Oil & Gas clients, for instance using predictive data science to leverage more than 30 years of collective knowledge and experience in a cloud based knowledge platform. With the Big Crew change firmly underway, this an important area for Oil & Gas companies. 

What is Next? Sustaining the Momentum of Change

The downturn in the Oil & Gas industry and sustained low oil price has created a momentum for change in the industry. But will it continue if the oil price goes up again—what happens when it hits $60 per barrel? Many industry executives shared a concern that without the economic necessity of cost cutting, the industry will return to a complacency that will slow the pace of innovation and change.

This Blueprint shows that, in addition to cost reductions, the industry needs to be focused on business outcomes relating to talent, operational efficiency, organizational flexibility and scalability and time to market. The way forward is through more collaborative engagements that incorporate the achievement of these business outcomes. The Energy Operations Blueprint provides a comprehensive overview of the industry and identifies ingredients for long-term business value along the As-a-Service Journey.

I’ll wrap this up by emphasizing again the importance of true partnerships. To survive the oil price slump and come out stronger Oil & Gas companies need partners that proactively bring innovation and are willing to co-invest in technology, collaboration and talent.

HfS Premium Subscribers can click here to download their copy of the new 2016 Energy Operations Blueprint Report.

Posted in: Business Process Outsourcing (BPO)EnergyHfS Blueprint Results



Social media has turned us into a society of gibbering digital morons

August 19, 2016 | Phil Fersht

As someone who has profited very nicely from social media (I helped build an analyst company with blogging and social at the heart of our culture), I am probably not the most appropriate person to speak out against the negative side of social media’s impact.  But, as Gerald Ronson once famously espoused to the editor of the Guardian newspaper, “Opinions are like arseholes, everyone has one”, I just can’t help myself, so I’ll give you mine…

2008 was a financial disaster fueled by greedy bankers; 2016 a political disaster fueled by social media wankers.  Opinions on politics.  My god – back in the day, people pretty much kept quiet on their views until they had some facts to back them up.  Today, they just have a bloody opinion and want to get it out there, regardless of whether they can justify it or not. When they get into an argument, they just try and shout louder, rather than listening to reason.  David Cameron has been guilty of one of the biggest political snafus of modern times, where he went to the public with a complex decision to be made.   Instead, all he succeeded in doing was allowing every opinionated idiot with a twitter account to air his or her views on society at large, until the vote become one about him and the establishment and not whether Britain should remain in the EU. (And you wonder why Hitler loved referenda…)

All social media has achieved is providing a platform for people to spout off unsubstantiated rubbish, as opposed to a collaborative opportunity for them to learn more about what’s truly going on in the world.  Then we advance to the lovely US media and the most insufferable election in history, where reality got somehow lost in a maelstrom of hype, tweets and many unsubstantiated facts that really dumb people actually believe.  All I can say is that I cannot wait for the election to be over so we can actually get back to some normalcy of running a country again.

The tech and services industry has complete lost itself in the socially-driven hype. So let’s reflect on what happened to our industry over the last couple of years.  For a while, social media was fun – we could debate the trials and tribulations of real services and real technology and how to improve ourselves.  Suddenly, the facts have got lost somewhere are we’ve arrived at this dark place where it’s more about who’s making the loudest noise than who’s talking the most sense.  Every supplier of tech and services talks up “Digital” but never defines it – with few to no clients to reference their capabilities.  They talk “automation” with little clue how to do it, with (again) no clients as reference points. Myself and my team have sat through hours and hours of deathly dull briefings where we’ve actually had analysts bemoaning the fact that the providers failed to brief them on the subject at hand.  It’s really that bad. 

The Bottom-line:  It’s time to find our way (somehow) back to reality

Let’s be brutally honest - we’ve all lost the plot.  Why are tech and service providers so obsessed with sounding the best as opposed to proving they’re the best?  Why do so many analysts and consultants just parrot each other, as opposed to having real opinions and real substantiated viewpoints?  Why have so many enterprise buyers buried their heads under the bedcovers, scared to come out until someone dared to explain to them what this new bullxxxt was all about?

It’s time to make things real again… we owe it to ourselves and our clients to talk about how buyers/end-users adopt these emerging solutions - what are they doing, which processes are being impacted, what outcomes are being achieved. We need to focus on real industry dynamics to learn why is digital so relevant to retail; omni-channel to travel; block chain to banking; cognitive to healthcare etc. We need truly to understand and articulate how today's workforce grasps these emerging concepts and drives them in practice - how can experienced professionals reorient their capabilities, and the younger generation be embraced into the workforce? What are the career progression plans in these areas?  While technologies advance, how are staff advancing (or failing to advance) with them?

Unless we really dig deep to stop using our social foghorns to spout the loudest and start focusing on being the more real, we are truly doomed to a future of increased stupidity, naiveté and confusion.  It’s time we all broke form these habits and refocused on what is really happening in the world.

Posted in: HfSResearch.com HomepageHR Strategy



Where is AWS in relation to the other IT services players? And a sneak peek at Q2 provider chart…

August 19, 2016 | Jamie Snowdon

Sometimes it’s all in the fine print. We often put a small comment at the bottom of our charts that gives additional details about the data and a note of anything which specifically impacts the chart. A note we often add to the quarterly bubble charts we do is that we haven’t included one provider or another because if we added them it would skew the chart. One question I get asked fairly frequently is where AWS would feature on the chart.

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Posted in: IT Outsourcing / IT Services



Gazing into the Automation Crystal Ball

August 18, 2016 | Tom Reuner

As the leading authority on Intelligent Automation, HfS gets inundated with requests to size and forecast the market.

Our standard answer continues to be another question: “How can you size a market that is not defined?†Suffice it to say, we have seen some of our peers put numbers out. Yet, how do we actually size the market? Do we aggregate licensing revenues by the tool providers? Do we draw a big mind-boggling number on AI into the sand? Or can we assess the addressable market beyond the bleeding obvious that every IT or business process is conceivably an opportunity for providers?

Until we have clearly segmented and defined markets, the value of market data is probably on the limited side. But don’t get me wrong, my learned colleague Jamie Snowdon can model any of those markets. He not only publicly declared his love for market sizing and forecasting but his Twitter handle is statement of modesty: he is one of the best in the business. And where it makes sense, we draw very visible lines in the sand, as in the case on the impact of automation on talent and jobs.

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Posted in: Cognitive ComputingDigital TransformationRobotic Process Automation



Meet the HfS team in Bangalore next month for NASSCOM BPM Strategy Summit!

August 18, 2016 | Phil Fersht

We're excited to fly over some of the HfS star analysts to meet with the delegates at this year's NASSCOM BPM Strategy Summit, where HfS is the exclusive content partner with the theme "The Next Big Goal - From Effective to Strategic, can BPM get this one Right?".  And the more discerning of you will notice that the theme is centered on HfS' own Eight Ideals of the As-a-Service Economy.

So what are you waiting for?  Book your flight and place now!

Venue:  Hotel Leela Bangalore

Date: 22-23 September 2016

And if you'd like to meet with some of the HfS team, drop us a quick note and we'll see what we can do.

Posted in: Business Process Outsourcing (BPO)Outsourcing EventsThe As-a-Service Economy



Recalling a Bill Gates Joke Amidst Vehicle Recalls

August 18, 2016 | Pareekh Jain

When I was in college, I heard an incident involving Bill Gates and his comments about innovation in the automotive industry in the late 90s. Later, I found that Bill Gates comments were extrapolated and converted into a then very popular joke among automotive engineers. The irony is that joke is coming true now for car makers, but it is a good opportunity for engineering service providers.

It goes like this--

Bill Gates: If the automotive industry had kept up with technology like the computer industry has, we would all be driving 27 dollar cars.

Automotive Industry: Yes, but would you want your car to crash twice a day?

(Sources here & here)

And guess what? Two decades later, cars have become more like software and vehicle recalls have skyrocketed.

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Posted in: Procurement, Engineering & Supply Chain Outsourcing



Retailers Need a Digital Architect to Save their Legacies

August 18, 2016 | Melissa O'Brien

Most of the coverage of the Walmart/Jet.com deal has focused on whether this helps the firm compete more effectively with Amazon. Speaking as an Amazon addict, ahem, loyalist, my initial thought was there is no way this deal even comes close to having the intended impact. But as I dwelled on it further, I realized the more interesting facet of this news is how ecommerce competition is driving a fundamental change in the retail business model to support today’s digitally savvy customer; namely to architect a digital strategy that carves out a new value proposition for traditional retailers.

Walmart brings “digital brain” Marc Lore into the fold as its architect

This acquisition is as much about platform, relationships and customers as it is about the experience and savvy of Marc Lore, who also launched Diapers.com, which was acquired by Amazon in 2010. This is a tangible sign of Walmart looking to “get digital” in the core of the company—hiring someone who has turned boring legacy markets upside down by making the unsexy task of shopping for products like diapers and laundry detergent easy and appealing to yuppies and millennial shoppers. 

The biggest part of this strategy is about better serving and understanding the customer. Retail, arguably more than any industry, has a real competitive need to move away from general segmentation to individual personalization. Jet.com leverages technology in a way that enables lower cost and greater personalization with its dynamic pricing engine. The retailer has also grown substantially in terms of membership and product availability and has been hyped as a potential Amazon disruptor since its inception.

Retail self-disruption is critical – where does the store fit in?

Emerging digital business models are disrupting retail in a way that legacy companies like Walmart simply cannot respond to fast enough and remain viable. Headlines of store closings are ubiquitous, while others scramble to leverage stores more effectively and invest in digital (such as Kohl’s use of ApplePay). For legacy brick and mortar retailers, the key is finding the right balance of in-store and online shopping capabilities, and ensuring a seamless experience between the two. In terms of physical real estate, writing off legacy isn’t necessarily the best approach- it’s about morphing and shaping that legacy into something that meets customer demand and supports the digital customer. Retailers like Macy’s, which has just announced significant store closings, may be missing out on an opportunity to use their real estate legacy to their advantage by making those stores points of shipping, pick up, or experience. And let’s not forget that today online sales are still a very small percentage of retail sales overall.  One advantage of the Jet.com acquisition (over say Diapers.com being absorbed by an online native) is that it can leverage Walmart’s massive brick and mortar presence as a point of shipment for products.   

The Bottom-line: You don't have to completely write-off legacy - it’s about morphing legacy businesses to meet customer demand. Digital architects can save traditional retail if they adopt this approach     

Retailers need to have leadership that addresses the overarching digital picture—a digital architect. They also need to master personalization in the same way that ecommerce natives have. This is no easy feat. In the case of Walmart/Jet.com, it is just one more example of on how difficult it is to redefine and recreate an existing legacy company into a digitized company, and addressing the need to understand the digital customer more effectively.  Walmart has recognized that it cannot rest on its laurels—a company that was once seen as innovative because of its supply chain practices, but lost its edge over time, is making a bold move to revitalize the innovation.  The challenge lies in integrating these two very different creatures. The acquisition is bold, and the market is taking notice—now begins the tough job of making it work for the digital shopper. 

Posted in: Business Process Outsourcing (BPO)Contact Center and Omni-ChannelDigital Transformation



I'm going through an analog transformation...

August 17, 2016 | Phil Fersht

For the first time since Al Gore and Donald Trump founded the Internet, I am braving a few days in the analog world on a camp-site up in Canada somewhere.  In fact, I don't think this place has even undergone analog disruption yet... 


Posted in: Absolutely Meaningless Comedy



Interview: Meet Sunjeet Ahluwalia, the sales elephant from India!

August 15, 2016 | Bram Weerts

At HfS, we’re growing fast in a very competitive and volatile market… and with growth comes change - but change is always good if you ask me! The most fun in jobs is when you have changes - you learn new things, get new ideas and you meet new people to help accommodate the change.

HfS is always on the lookout for serious talent that can help our clients become even more successful. So happy days when I heard that some serious quality was on the lookout for some new chapter in his life. Sunjeet Ahluwalia has joined per August, and today I wanted to give you a little more background about him.

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Posted in: About Us



No more (offshore) heroes anymore? The big shift left continues.

August 11, 2016 | Jamie Snowdon

Q2 2016 has been an exciting quarter of results so far, with a few surprises particularly amongst the large offshore providers. We commented on the pressure on Infosys caused by its results last month.

We see a real change in fortune amongst the big players, certainly over the last two quarters. With the players with strongest growth rates over the last three years, TCS and Cognizant dropping year on year growth to single digit.

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Posted in: IT Outsourcing / IT Services



Why We Should Love Procurement

August 11, 2016 | Derk Erbé

Last month, my colleague Bram Weerts declared the procurement function at risk of extinction.

But all is not lost! I see some very powerful paths Procurement can take to become a more appreciated and valuable business function in enterprises.

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Posted in: Business Process Outsourcing (BPO)Procurement, Engineering & Supply Chain Outsourcing



Welcome to the era of outsourcing stability. Now let’s automate stuff

August 10, 2016 | Phil Fersht

Question: Why are we becoming so obsessed with Automation and As-a-Service relationships?

Answer: Because outsourcing has worked so effectively, we can now look to new levers to pull to find that next threshold of value 

Question: Will the next person who says “Outsourcing is just so Passé" get a punch in the face?

Answer: Yes

Barely three years’ ago, we were still lamenting that nagging lack of innovation in outsourcing relationships and the inability of service providers to deliver those transformational delights to their clients after they had come through with their promised cost savings. But let’s face it, the FTE-based labor arbitrage model has really worked – and a lot better than we thought it would, during those heady days of offshore screw-ups. I can barely remember the last time I sat on the receiving end of a group of clients throwing their service providers under the bus because they couldn’t get the procure-to-pay transition right, or got caught sneaking through change-orders to fix their dodgy coding.

Service relationships are more stable than ever, but focus is shifting to As-a-Service delivery and Intelligent Automation

You only need to look at the intentions of 371 major enterprise buyers towards their outsourcing contract renewals from our new Intelligent Operations Study to get the picture that this isn’t an industry in delivery turmoil, about to self-combust because deal flow isn’t growing at quite the clip it was a couple of years’ ago. In fact, only one-in-four IT services clients today are even considering ditching their current partner, and a even lesser proportion with their BPO provider.  However, many do want to make the switch to As-a-Service contracts:

Click to Enlarge

The focus on automation is the logical next phase of value once stability of global service delivery has been reached. 

The availability of smart automation tools and platforms from the likes of Automation Anywhere, BluePrism, IPSoft, Nice, UIPath, WorkFusion and Redwood have really been conversation catalysts to get the automation conversation to the table. In fact, most of the buyers we’ve been interviewing in our current Intelligent Automation blueprint are still in the

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Posted in: 2016 Intelligent Ops StudyRobotic Process AutomationThe As-a-Service Economy



Did Randstad just pay $429m too much for Monster?

August 09, 2016 | Phil Fersht

Usually when there is an acquisition in the tech/services space, you can always appreciate why the deal was done; no matter how cynical you try to be, there is always some gold in there to dig out. 

However, in the case of Dutch staffing giant Ranstad buying the shriveled remains of a legacy resumé-based online recruitment firm that made its name during the dot-com days, my reaction is simply one of “Why? Just why?”  The business was cratering (albeit slowly, but steadily) in a world where most people just don’t use Monster anymore to do their recruiting and job hunting—it’s a business from a bygone era. But there’s always someone out there ready and willing with the ego to resurrect a dinosaur (or a Monster in this case).  So I asked the question to our HR-as-a-Service analyst, Mike Cook, to give us the answer...

Mike, Is there a Monet in the Monster or has LinkedIn already Rinsed the Shop?

Phil, Once Randstad blows off the dust from Monster, will it like what it finds? In the thrift shop of the recruitment market there are treasures to be found but in a market that has been turned on its head by the LinkedIn juggernaut, there isn’t much left. 

In its strategic priorities for 2015-2016 Randstad aimed to capture positive growth opportunities as well as be in the top 3 scale positions in each market it participates in. Over the last 12 months this strategy has been bearing fruit—following the acquisitions of twago, Careo Group, Obiettivo Lavoro and RiseSmart.

However, these acquisitions have just been dwarfed with Randstad announcing the acquisition of one of the true veterans of the online recruitment market—Monster, for $429 million in cash. This represents a sale price of $3.40 per share, a premium of 63.7% over Monday's closing stock price. But it's worlds away from Monster's $8 billion market cap achieved in early 2000. With much of the market questioning the 47% premium Microsoft paid for (a still extremely relevant) LinkedIn (see post), one should wonder about the wisdom of paying such a price for a site that is declining in popularity.

Monster was one of the original online recruitment leaders but has struggled to stay ahead of the pack and has lost significant market share in recent years. Direct competition is fierce in this industry and recent acquisitions, such as Indeed.com taking over Simply Hired, have highlighted this.

So what does this acquisition mean for Randstad?

  • Bolsters Randstad’s staffing and RPO capabilities: The increased footprint this acquisition gives Randstad should prove beneficial and provide improved service delivery to the provider's staffing and RPO clients. However, the value of Monster's candidate database is questionable. Unlike LinkedIn, which users update regularly, job seekers usually abandon job search site profiles when they're not actively searching for a role.
  • Raise Randstad’s profile, particularly in the US: Currently Randstad’s US operation accounts for around 20% of its revenue. Considering its aim to be in the top 3 of each of its markets, the acquisition of Monster with its US-heavy revenue model (70% revenues from North American operations in 2015) may make sense.

Outside of these takeaways, it is difficult to see the value for Randstad in this deal. Monster looks to be the pensioner still wearing high tops, shades and a tank top, with its platform now largely outdated and its market share no longer what it once was. The likes of LinkedIn have disrupted this market to such a degree that legacy online recruitment sites are struggling to survive. This bid for survival is being played out in the massive consolidation currently taking place in this market. The one card that online recruitment sites still have to play is in the contingent workforce market, but with Microsoft is looking to steamroll its way into this area, through LinkedIn—and the forecast looks less than sunny.

Posted in: Business Process Outsourcing (BPO)HR OutsourcingHR Strategy



HfS unveils the first ServiceNow Services Blueprint report, with CSC, Cognizant and Accenture leading the pack

August 08, 2016 | Phil FershtTom Reuner

HfS readers are used to us relentlessly preaching the inexorable journey toward the As-a-Service Economy. And you still aren't get familiar with the Eight Ideals, then you must have locked in solitary confinement for the last year...

But there are many missing pieces in that big jigsaw. Service management, while unspectacular, is a critical component of the digital underbelly of the OneOffice as HfS has termed it. As ServiceNow is aiming to expand the notion of service management to evolving into the “third estate between CRM and ERP,” providing a new cloud-based level of efficiency between front and back office, we have asked our Intelligent Automation expert in residence, Tom Reuner, to take stock as to where the ServiceNow ecosystem has advanced to.

Click to enlarge

Tom, there appears to be a buzz around ServiceNow in the industry? Is the hype justified and where does it fit in strategically for buyers?

Amidst the marketing noise in our industry, ServiceNow still stands out. And that, Phil, is quite an achievement as service management is really not among the sexiest of topics. You can see that in thousands of developers and partners having made their pilgrimage to Knowledge 16, ServiceNow’s customer event in Las Vegas this year. Crucially though, ServiceNow has

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Posted in: HfS Blueprint ResultsSaaS, PaaS, IaaS and BPaaS



Why Cognitive Product Support is in full swing

August 08, 2016 | Pareekh Jain

It’s hard to overstate the importance of product support to software and high-tech companies. Good product support helps in customer satisfaction and influences purchase and repurchase decisions.  

But what is good product support? Ideally, it’s where no support is required. Although companies should strive to develop products that require minimum product support, they should also look at improving the customer experience and reducing time spent on product support. Overall product support systems should be cognitive, intelligent and self-improving.

This is all the more important because most customers in the As-a-Service Economy are used to a customer-centric user experience and instant gratification. They expect the same for software and high-tech firms in both the consumer and enterprise segments. Companies need to minimize the need for product support, provide an improved customer support experience, and improve the effectiveness and timelines for product support. 

Most companies outsource product support. But, whether in-house or outsourced, improving product support typically means adding headcount or seats, which will increase costs. Adding seats may improve responsiveness but may not improve customer support effectiveness.

There has to be a better way to do it. Enter the As-a-Service Economy, in which product support can be re-imagined and existing product support process can be disrupted. 

Goodbye legacy product support and welcome cognitive product support

The product support process can be made cognitive or intelligent by leveraging analytics, automation, and engineering approach.  The business outcome and productivity gains committed in the contract will drive the adoption of cognitive product support levers and deliver value to the enterprises. Our estimation based on case studies we discussed shows that software and high-tech companies can save about 40% of total product support cost by moving to cognitive product support as shown in the Exhibit. This 40% saving is over and above any labor arbitrage which service providers promise when they leverage offshore resources.

Exhibit: Value Proposition of Reimagined Cognitive Product Support Process

Apart from reduction in product support cost, cognitive product support increases customer satisfaction by

  • Reduce MTTR by increasing resolution accuracy
  • Reduction in invalid escalations to backline/frontline
  • Increase Self Service to maximum extent possible
  • Improve forecasting accuracy

Both users and enterprise will benefit from cognitive software product support but existing outsourcing relationships need to be revisited

In our research, we’ve found that biggest obstacle for software and high-tech firms in achieving cognitive or intelligent operations is their existing outsourcing relationships. Some of our buy-side customers believe that their primary service providers though are providing the good quality support they are still using legacy ways and nothing has changed in the product support process in the last ten years.

Enterprises should leverage cognitive product support if not for savings then for customer satisfaction. Phil recently had a very bad experience in customer support from a large high-tech enterprise. He had to speak to 16 reps to resolve the issue. No prize for guessing that this large high-tech enterprise will not be Phil’s first choice at the time of repurchase.

Net-Net, software product support is ripe for disruption. Progressive software and high-tech product companies will not hesitate to leverage cognitive software product support and futureproof their value-driven product operations.

HfS subscribers can click here to download the full POV, which details our research and recommendation on cognitive software product support

Posted in: Procurement, Engineering & Supply Chain Outsourcing