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Monthly Archives: Feb 2017

Sticking to his education NIIT-ing... meet Arvind Thakur

February 20, 2017 | Phil Fersht

There's never been a better time than this for the specialized midtier services partner which isn't dragging around billions of dollars of legacy contracts and isn't reliant on massive people-scale deals to sustain its growth and profit margins.  Clients are increasingly looking for shorter, sharper engagements - with immediate impact - that drive executives and their staff back to the classroom... the type of engagements which may simply not be attractive enough for a Tier 1 service provider which isn't built for smaller, focused engagements that require higher level talent to lead real change management programs.  In addition, most clients today do not want to drop millions of dollars on consultants to change things for them... they would rather have someone come in who can teach them to change themselves. Moreover, with the relentless appetite for RPA, clients want service providers unencumbered by cannibalizing their own revenue models, and many are turning to the specialists who can parachute in and get the job done quickly and effectively.

In this vein, meet NIIT, India's original IT training company, once famously dubbed the "MacDonald's of the software business" by Far Eastern Economic Review in 2001, as it built a unique franchise business in IT education globally.  Today, the business has ventured into sectors such as banking, finance and insurance, executive management education, professional life skills, BPO, and IT education for schools - and now it is going full throttle into supporting RPA and digital needs for enterprises.  Never has there been a more critical time to help clients with learning new ways of thinking, understanding the true impact of emerging automation models and separating the hype from reality when it comes to digital business models.  

So, without further ado, let's talk to Arvind Thakur (see bio) who is the CEO and Joint Managing Director of NIIT Technologies Ltd, for a discussion on the impact of Digitalization on IT growth and how the Indian IT sector is adapting to the shift from traditional IT services.

Phil Fersht, Chief Analyst and CEO, HfS Research: Good evening Arvind. It's good to have you on HfS for the first time. Maybe you could start by giving us some background on yourself and tell us a bit about how you wound up at NIIT Technologies, leading the charge?

Arvind Thakur, Chief Executive Officer, and Joint Managing Director: Phil, I have been with NIIT since 1985 when I joined the founders who pioneered IT education in India. Essentially the company had embraced a model inspired by a teaching hospital. As you know, a good hospital typically would have a research institute attached to it. Experienced medical practitioners teach at the research institute and the students who are trained get valuable experience as apprentices in the hospital. This creates a synergy between the learning and execution.

Over the years NIIT evolved naturally into offering software and system integration solutions driven by this model. It pioneered the software factory concept because the people that were being training were not necessarily experienced to face customers. To gain global customers we needed to follow good, strong processes, to deliver quality software and this was achieved by embracing quality models.

We embraced the models of those times, in the ‘90s. We began with the ISO 9000 framework and then the Capability Maturity Model (CMM). In 1999 we were the 12th company in the world to be assessed at CMM level 5, the highest level of maturity for software development. Backed by this capability we rode the internet wave and grew our software business rapidly through the nineties.

By the turn of the century, the dot-com meltdown resulted in eCommerce and Internet investments to become discretionary spends by clients. This, in turn led to a change in our software business profile which began to focus on legacy and our education business too started focusing on aspects of education other than IT. The strong synergy that existed earlier as teaching hospital became less relevant, so the company demerged its software and learning divisions into two independent companies, both listed on the India Stock Exchange; NIIT Limited, continued to focus on education and is now, in fact, a global leader in learning, and NIIT Technologies Limited was spun off to focus on services, and I came to lead the charge of the company as its CEO.

Phil: So, Arvind, what do you think today makes NIIT Technologies unique in the market? Why do your clients really hire you?

Arvind: When we de-merged in 2004, we were yet another IT services organization competing in an environment which was dominated by large-scale players. We put together a simple strategy which was to be very focused on a few industry segments and compete on the strength of our specialization. What differentiates us is essentially this strategy. People hire us for our understanding of the select industry segments that we serve: Banking, Financial Services, Insurance and Travel. We understand the platforms which are relevant to these industries. The understanding of the industry and the understanding of the technology relevant to the industry is what truly differentiates us, and that's why people hire us. This sharp focus has resulted in the creation of our own intellectual property, which are now leading platforms in some of these industry segments.

Our training heritage enables us to rapidly build strong capabilities as new technologies emerge and our customers evolve. We've been able to put together a very unique culture which focuses on delivering a great experience. Our vision is to be the first choice in the select segments and accounts that we focus on. Everything that we do is guided by this vision and that is what makes us unique.

Meet the IT educator himself... Arvind Thakur, CEO of NIIT Technologies 

Phil: You talk a lot about being a “digital organization” at NIIT Technologies. How would you define digital as it impacts IT growth in the medium to short-term? Do you think India can become a digital juggernaut and evolve from much of the traditional IT markets that have served you so well? How do you see the whole impact happening and do you think NIIT Technologies can be successful?

Arvind: I think our industry is at a crossroad, Phil, and actively addressing this new Digital paradigm. The industry is rapidly shifting gears to embrace this new paradigm. As with a vehicle which slows down while shifting gears, the industry too is experiencing a slow down as it shifting gears to embrace new business models required to take advantage of the Digital opportunity. The good news is that India’s IT services industry has plenty of cash and is using the cash to rapidly build new capabilities both organically or inorganically and indeed has the ability to become a digital juggernaut.  

NIIT Technologies itself is seeing rapid growth in its Digital business. We are approaching this opportunity by focusing on three things:

1. Smart IT - adopting automation in a big way so we deliver value to our clients. Anything that can be automated will be automated. In this context, we've put together an automation framework, a platform which we call ‘Excelerate’. The platform embraces the tools required to do traditional activities associated with the development and test automation, and also other elements like smart maintenance, infrastructure automation, all the way to advanced robotic process automation.

2. Superior Experience – The focus here is on the culture, and change required to the mindset of the entire workforce to address the new Digital paradigm. The industry so far has grown on the value proposition around cost arbitrage where customers would normally tell us what they wanted and we would build it faster, cheaper and better than anybody else. In the digital world however, clients are looking at how you, as a technology partner, can deliver business value. We need to change the mindset of the entire workforce from doing what you’re told to do, to identifying opportunities of value add. I believe we have taken the lead in the industry to invest in making this culture change.

3. Scale Digital - As mentioned earlier, we are using the cash generated from the business to build capabilities around Digital offerings both organically as well as inorganically and doing it fairly successfully. Digital revenues in the company which was negligible a few years ago, is now about 18% of the revenue mix.

Phil: One final question for you Arvind. You've got Prime Minister Modi's attention for one whole hour, his full attention. What if anything do you urge him to do differently with regards to growing India's IT sector over the next three years?

Arvind: One hour’s a lot of time with the Prime Minister! There would be many interesting things to talk to him about. He would appreciate that the IT-BPM industry, in India, contributes in a very significant manner to the GDP of the country - 9.3%. What's more important, is that the industry plays a significant role in the balance of payments for the country, with over 45% of the foreign money earned through services exports on the current account coming into the country through engagements by the IT-BPM sector. That’s very significant and I'm sure he does appreciate that.

The first part of my conversation with him would be around negotiating trade agreements specifically around, "How do we leverage our purchasing abilities as a fast growing large economy, to negotiate policies associated with free movement of people with trade partners?” Restricting movement of people particularly if it discriminatory is akin to imposing non-tariff barriers. I would urge him to get an understanding going between heads of government, that mobility of people is not the same thing as immigration. That would be one interesting conversation to have with him, which would obviously be very useful for the growth of the IT sector.

My second conversation would be around ease of doing business. You might have heard that the country is adopting a single tax regime for the goods and services which is now being made law. The focus has been to eliminate multiple levels of taxes to drive efficiency which is certainly good for the manufacturing sector, but we have to ensure is that it does not impact the ease of doing business for services sector. The services sector currently operates with a central single tax regime. The new GST (Goods & Services Tax) law creates the possibility of multiple registrations in different states for the services industry creating a lot more additional administrative work and difficulties in conduct of business. This would seriously impact the global competitiveness of the industry and so with the Prime Minister a good conversation would be “In terms of the single tax regime for goods and services – when the laws are promulgated, how do we ensure they do not impact the ease of doing business for the IT Sector”. 

These would be the two important things to discuss with him.

Phil: I think that would be very relevant, Arvind! This has been a most interesting discussion – I look forward to sharing this with our readership... the NIIT model is certainly becoming increasingly relevant in today's uncertain market.

Posted in: Digital TransformationIT Outsourcing / IT Services

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NASSCOM 2017: Indian IT services paralyzed by Trump, but being a deer in the headlights is not an option

February 17, 2017 | Phil Fersht

When, in history, has there existed a market that keeps relentlessly growing at 5-10% each year, with profit margins consistently at a 15-20% level; and for well over a decade? Yet you attend the annual flagship Indian IT conference only to experience an atmosphere of acute paranoia and paralysis.  Is change really that frightening?

Even most clients are openly declaring they haven't had their budgets reduced - many simply aren't ready to make investments while there is such uncertainty surrounding the market because of an unpredictable US President.  Even NASSCOM itself adds to the uncertainty by deferring its usual business outlook... 

However, acting like a deer in the headlights is not an option.  The smart strategy is to expect the worst and make measures now to get in front of it.... don't let the juggernaut, that is a protectionist US administration, squash you flat in your tracks.  

Breaking out of this paralysis cycle

However negatively this could turn out for some of the Indian IT services industry – here are six simple ways to break out of this paralysis and reinvest some of these bloated warchests, before greedy investors who got rich off your spoils demand to cash in their chips...

1) Invest internationally beyond the US.  Those Indian IT majors in the strongest position are those that are least reliant on their US clientele for future growth.  In fact, HfS estimates $7 Trillion in B2B digital expenditure by 2020 - with only $2bn being in the US (traditionally 50% of worldwide IT spend came from the US, but digital spending - both B2B and B2C - is changing that picture dramatically). For example, the British PM is already deep in discussions with Modi about closening UK/Indo ties even further in the wake of Brexit. The UK has the potential to become a major digital hub, fuelled by Indian talent.  While Brexit appears like a terrible idea on paper, change forces action and these actions will be all about increasing the flow of trade and talent with emerging nations and creating new wealth. We also see a real appetite for digital business model investments and automation by Australian businesses - and many of the Asian nations are only too happy to move from zero to hero to take advantage of the humongous digital B2B expenditure in Asia/Pacific and the rest of the world.  

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In addition, many of the European regions, such as Nordics and Germany, are now rapidly exploring more global resources to support their digital growth. If America - as it appears - is on the path of becoming a protectionist anti-globalization country for the next four years, perhaps its time to broaden your horizons?  

2) Invest in a smarter onsite/offshore model that gets you closer to your customer's customer.  Yesterday's IT services model was all about helping legacy traditional enterprises keep their lights on by maintaining clunky old ERP implementations keep operating, adding extra sauce to spaghetti code and keeping an eye on server outages from afar.  Tomorrow's winners have moved all this stuff into the cloud and automated much of their infrastructure management.  The future growth is working much closer to your customers to help them design and implement digital business models by building mobile applications, testing customer sentiment, forging partnerships and developing APIs with new digital business partners and communities.  Technology skills such as DevOps, Agile, Hadoop, Blue Prism and AutomationAnywhere are the watchword, and a global race is on to access these skills.  Moreover, the developers need to be closer to the business designers and customer strategies of the clients to make this effective.  So Indian IT majors need to focus on developing these skilled resources where all their clients are situated, in addition to India itself.  This will require re-investing some of that lovely cash sitting around - and, heaven forbid - take a small margin sacrifice for a few quarters.

3) Partner with digital agencies to get it done.  Be realistic for once and accept the fact that most customers are not going to come to you to design highly creative digital business solutions.  You have an IT services brand, not a creative digital brand.  Most clients will go to the advertising firms, the Design Thinking consultancies and the digital specialists for that work.  However, all those firms are pretty clueless when it comes to actually communicating their business designs to technology firms and having them just get it done. This is where you can really do well - by working with these agencies and consultancies as their IT partner - bring them into your clients and they will being you into theirs!  Believe me, most the digital firms worth acquiring have already been hoovered up by the Accentures and Deloittes... most the stuff left on the market is overpriced, too small, and most their nose-ringed designers will jump ship the moment you buy them. 

4) Become great intelligent automation intermediaries to manage broad automation and analytics environments for enterprises. Clients are crying out for providers to partner with them on their automation journeys – in fact, 45% of buyside operations leaders, when polled privately, view rolling out automation in tandem with their service provider as adding the most quality to their service relationship (see below). Several of the leading Indian heritage IT services firms are making impressive strides with their enterprise analytics and automation solutions – such as Infosys with MANA, TCS with ignio and Wipro’s Holmes – the key now is their ability to twin their solutions with the cream of the third party intelligent automation apps, such as AutomationAnywhere, Blue Prism, Pega, UiPath, Workfusion, Redwood, Antworks etc to become their clients’ intermediary for automation and analytics value. While some proprietary tools and bots can add great value, especially when aligned to specific industry processes, clients want to have the choice of adding their own independents tools to enjoy the biggest impact on their process value. The Indian IT leaders need to become great partners and facilitators in these emerging environments – they have the development talent in spades and the passion to bulldoze their way to the front of this market.

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5) Keep investing in start-ups. One of the best cultural shifts in the Indian IT industry in recent times has been the emergence of the start-up scene in Delhi, Mumbai, Bangalore and other areas. Ambitious Indian IT talent is no longer desperate to walk that slippery steep treadmill of the IT juggernauts – many of whom are already too big, clunky and corporate for their own good. Moreover, tech investors are fed up having to invest $20-100m in US start-ups to develop one product or technology, when you can get the same value from the likes of India, China or Eastern Europe for a fraction of the cost. Having heard about the 400+ emerging startup firms who are already members of Saurabh Srivastata’s network (the original founder of NASSCOM), it gives me real hope for India’s future that the next generation of IT talent is already being healthily incubated.

6) Just make a plan and stick to it.  The one big element of NASSCOM which I found most infuriating was the lack of a plan from most of the service providers.  Most are simply playing a game of denial and react.  This is a recipe for failure.  Accept the fact there will likely be some uncertainty for six months before some new draconian measures are forced on businesses seeking to do business with the US.  Net-net, it'll be more expensive to deliver services to US clients and also harder to send your own talent over there to train US staff and manage projects. So set aside funds to hire more people in the US and budget for a margin squeeze on future US contracts.  And forecast a 10-25% hit on deal flow due to longer decision cycles and US clients veering away from using highly visible offshore services suppliers.  

Bottom-line: Take the tough blows now to roar to the front of the global IT industry when sanity returns

While the global IT world waits with baited breath, paralyzed by the ramblings of an unstable and determined US President, our beloved IT services firms can either remain numbed by fear, or actually use this opportunity to make some key strategic investments and initiatives. Those mountains of cash need to be used sensibly before those greedy investors demand their piece back, so act now, swiftly and decisively to organize an IT business that isn’t so reliant on lifting and shifting labor to and from the US, and puts you in the driving seat to lead in the $7 trillion dollar digital world, where automation is native and access to skills absolutely critical. India has a great shot at emerging as the world’s great IT pioneer, and so much more than a low cost labor provider for greedy legacy US corporates. Trump won’t be around forever, and he might actually be doing India a massive favor without ever realizing it…

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

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The Rise of Supplier Relationship Management

February 14, 2017 | Derk ErbéBarbra McGann

A smarter business operation is one that uses the right combination of talent and technology to impact business outcomes. Third party suppliers are an inevitable part of that right combination, and most effective when managed according to their potential impact on business results. There is, therefore, an increasing focus on the relationships with suppliers and investment across industries to standardize contract management and governance, centralize management of strategic suppliers, recruit and engage talent that has relationship building and critical thinking skills, and better leverage self-service platforms and automation in procurement and supplier management.

Based on our research, including discussions at the HfS Summit, our annual Shared Services and Outsourcing survey with KPMG, and 10 interviews with executives from financial services, healthcare, logistics, high tech and other industries, we’ve put together this picture of the “state of supplier and partner management” in the IT and business process services industry:

  • As organizations grow the business, they are increasingly standardizing and centralizing business operations functions, often incorporating outsourcing in hybrid / global business services models. IT has been the first mover here, with business functions following – F&A, Procurement, and HR as well as industry specific support. We expect centralization and shared services to continue, with selective and targeted use of outsourcing (on and offshore) and RPA in a model many are calling “no-shore.”
  • In the same way, there is a move to centralize supplier/partner management – if not the complete set of activities, then at least the governance and contract management separate from the relationship management. Relationship management is more difficult to centralize and typically happens when the suppliers are providing IT or BPO through a shared services unit. Once centralized, governance and contract management is increasingly automated; and relationship management gets more focus.
  • More mature or forward thinking Procurement / Sourcing leaders are working to position themselves as advisors – partnering with the business to define strategy; coordinating across business units, IT, and legal; defining standards for governance (reinforced through templates and automation); using training to ensure the more distributed relationship management is active and following a framework.

Exhibit 1: Top 3 Desired – and Hardest to Find – Capabilties for Business Operations

Source: HfS Research in Conjunction with KPMG, State of Business Operations 2017 N=454 Enterprise Buyers

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  • Talent for supplier management (and procurement/ sourcing in general) is increasingly oriented toward relationship building, decision-making, and analytical skills. Subject matter knowledge of the function is a basic capability that’s needed; negotiation and contract management “can be taught.” Executives are also increasingly interested in candidates with technical skills (or interest) in determining the right mix of talent and technology for managing optimal business results.
  • Procurement is setting the pace for evaluating and implementing robotic process automation and cloud-enabled platforms for more self-service. Some interviewees mentioned that processes, especially those associated with managing commodity or transaction-based activities and suppliers, are candidates for RPA.
  • Across the board, we found a move to consolidate, reduce, and prioritize/tier suppliers for better negotiation capability, more effective and compliant oversight, and a more collaborative and engaged approach to partnering versus managing “off the side of the desk.”
  • Talent will either enable or hinder your ability to have supplier relationships that support business objectives. It doesn’t matter what your operating model is if you don’t have the right talent. If you have the right talent, they will make the relationship with the supplier effective for the business.

The bottom line: There are three critical components to effective supplier management that stand out in our research

  1. Alignment and tiering of suppliers with business objectives
  2. Standardized and coordinated supplier relationship management and contract management and governance
  3. The “right” talent to broker and manage relationships and results

In general, companies are on a journey to have a more strategic approach to supplier management and believe it will take a matter of years to get there because of the cultural shifts required. We explore these themes further in our recently published POV, “The Rise of Supplier Relationship Management,” available for download (free with site registration).

Posted in: Procurement, Engineering & Supply Chain OutsourcingRobotic Process AutomationThe As-a-Service Economy

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The offshore shift left part 3 - Q4 wasn’t that good…

February 13, 2017 | Jamie Snowdon

Back in August 2016, we wrote about the shift left with offshore providers – we were recently updated in January. Below is the new chart that updates to include Q4 revenues – we always include a full year of data it is the trailing twelve months - now it represents the full calendar year view for all of the years.

 

Click here to enlarge the image

Hopefully, the new charts show the shift even more clearly. With the top chart zooming out to show the whole of the y-axis – giving the full margin picture and demonstrates quite how close together the firms really are and highlights the convergence even more. As you can see Q4 hasn’t halted the shift and we see these companies cluster around the high single digit growth mark.

The Bottom Line – we’ll have the full roundup at the end of the month

This is just a taster of the results, once all of the quarterly results have been published we will collate them and produce our full quarterly roundup. We can then see the offshore shift left in the context of the other providers.

Posted in: IT Outsourcing / IT Services

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See you at NASSCOM!

February 13, 2017 | Phil Fersht

Am looking forward to seeing many of you in the warmer climes of Mumbai this week... so having some "Beef Wellington" to protect myself against what threatens to be a mudslide of confusion this week! I hope many of you can attend our opening session "“The Digital OneOffice - Getting Ahead of Today's Disruption”... cheers PF

Posted in: IT Outsourcing / IT ServicesOutsourcing Events

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Ask the Experts: Security Gurus Offer Their Advice for Non-technical Buyers

February 09, 2017 | Christine Ferrusi Ross

A big challenge for sourcing specialists is needing to rely on security domain experts internally to judge provider quality. The internal team, already working on their day jobs, often doesn’t have as much time to devote to the selection and negotiation process as sourcing leaders want. It’s important for sourcing teams to get smarter about security themselves to lessen their dependence on domain experts for preliminary RFP screening and downselecting.

In our upcoming security services Blueprint, we asked the client references (themselves security experts) what advice they’d give non-technical teams on buying security services. Some of them are general sourcing best practices, and some are very specific to security. But they’re all important to ensuring the success of your security services engagement. Here are some of their key recommendations: 

  1. Make a map of your security landscape. You need to cover your bases regarding what kinds of security technology you’re using – end point, antivirus, etc. -- so you can ask the provider about its expertise in each one. Ask in-depth questions about what kind of expertise it has with those tools, and look for specific clients and places where it can demonstrate the details of its experience. Have the provider pull it all together into a diagram and one vision so you can see it and make sure it matches your expectations.
  2. Communicate. A lot. How you interact with the provider will have as much bearing on the engagement’s success as the technical security. Make sure you’re not so focused on technical questions that you ignore challenges in communication. Remember the provider’s on its best behavior during the RFP process and it’s unlikely that communication problems get better after signing the contract. As one client reference said, “if the communication is good, you'll get it right 90% of the time.”
  3. Ask references about mundane details. Beyond the technology expertise, talk to references about what their daily experiences are like. Ask about little things like how quickly the provider answers emails and responds to questions that aren’t part of a service issue. Talk to people who have direct experience with the processes and skills you’re buying to make sure what the provider wrote in the RFP response is actually borne out in client engagements. For example, one client we spoke with mentioned a situation where its incumbent provider proposed expanding scope based on its process for innovation – yet the process described in the proposal looked nothing like the process the client experienced every day with the provider. So even tactical steps within a proposed process need to be explored.
  4. Weight flexibility and potential highly when grading. One client reference expressed sympathy for his sourcing counterparts: “It's hard to know what questions to ask and know how to evaluate the answers,” he said. But he then explained that evaluating a provider’s flexibility is critical to engagement success. He points out that flexibility matters because even if you ask the right question, your questions will change over the course of the work. So flexibility and potential capability are better than specific current capability that may not be relevant in another year.
  5. Pick a supplier that can meet you in the middle. It’s been a truism of outsourcing to hire for areas where you’re weak. But this often leads to provider teams that can’t effectively work with client teams because they have no common skill sets. One client pointed out that she relies on her provider’s ability to speak “business language” when discussing security. Can the provider talk about security from a business perspective or are they expecting you to translate their technical discussions for your stakeholders? What you really want is a provider that can go deep in the technology but still have a business discussion, while you’ll match those skills with your internal security experts and stakeholders.

Bottom line: Don’t be intimidated by the lack of deep technical security knowledge. It’s important to bring in domain experts as much as possible, but sourcing teams can dramatically improve their own efforts by making sure they focus on the business side of security.

Posted in: Security and Risk

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Is there any sanctuary left from the robot these days?

February 08, 2017 | Phil Fersht

Posted in: Absolutely Meaningless ComedyRobotic Process AutomationIntelligent Automation

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EXL On A Journey to More Effective Engagement with Insurance Clients

February 07, 2017 | Reetika Joshi

 

On a recent visit back home to India, I had the opportunity to spend some time with EXL’s EXLerator team that is working on how to improve insurance operations and deliver more business value for its clients with a “version 2.0” of EXLerator. From what I saw, this team’s efforts couldn’t be more timely and are in line with what we have outlined in our research as its areas of improvement.

Like the HfS Buyers Guide on EXL suggests, the service provider pursues an industry-led approach to providing business processes, with strong vertical practices in insurance, healthcare, travel and logistics, banking and utilities. The 2015 Insurance As-a-Service Blueprint highlighted EXL’s domain expertise and scale and execution on BPaaS strategies. However, both the Buyers Guide and the Blueprint also pointed out that EXL needed to bring more technology enablement. It has struggled to find footing with technology-enabled BPO that will fundamentally change the way day-to-day operations are run, moving away from the legacy BPO model. In addition, we have heard from clients the message, “great story but give us examples of how it all comes together.” So EXL also needs to convince its clients to come on this journey.

The work-in-progress V2 of the ‘Business EXLerator Framework’ is EXL’s approach to delivering a change in customer and business outcomes for its clients. What stands out to HfS from the visit, is alignment on the HfS Eight ideals of As-a-Service delivery, which we see as the building blocks for more collaborative and business oriented engagements, including: 

  • Design thinking principles: The EXLerator team highlighted “effortless experience” for insurance customers as one of its key goals. The point, therefore, of EXLerator v2.0 is to give the EXL team a framework for helping clients create “effortless experience” for their stakeholders and clients. Instead of focusing on only traditional process views to make improvements, EXL is starting with comprehensive customer journey maps, taking an insurance customer/agent lens on, for example, lead-to-sale, and then working through the appropriate processes and where and when to use what technology to create that targeted experience.
  • Collaborative engagements working towards outcomes: EXL stressed its commitment to improving business outcomes, which are impacted by achieving process outcomes. In this way, EXL is making a distinction between efficiency (and KPIs) and business impact. Confusion between the two is what usually results in the “watermelon effect,” an industry challenge where the service provider delivers on its KPIs, but the services buyer is unhappy with the results of the engagement. Defining and delivering business outcomes comes with its own challenges, but we like the linkages that EXL is making with process outcomes as building blocks to overall business goals. For example, its client, a US personal lines insurer, outlined “cost per quote” as an outcome, which was reduced by 20% by EXL, through a 10% improvement in process accuracy using the EXLerator framework.
  • Actionable and accessible data and analytics in core processes: EXL is investing in machine learning and operational analytics as one of the key technologies that will improve core insurance operations with EXLerator v2. The journey maps we saw had clear points of decision making where analytics interventions could make a difference, such as the insights that agents and underwriters need in commercial underwriting. Its EXLerator analytics team sits on the operations floor and receives direct mentorship and guidance from EXL’s analytics practice.

The vision is gradually coming together for EXL as it evaluates how to change its traditional business and drive progressive services engagements that will survive the next 5-10 years of this industry. EXL has invested in developing or acquiring a lot of ‘pieces’ and is known for delivering on analytics, etc. but the EXLerator 2.0 framework looks like it is designed to bring it together to enable a journey with the clients.

Even with this progress, the hard work for EXL – like many of its competitors – starts now. The future is all about driving more intelligent operations that will help enterprises become digital customer-facing organizations. Technology enablement is a big piece of that puzzle and EXL has challenges to overcome in executing on its 2.0 vision. The EXLerator team is still fairly small and will be unable to hit EXL’s entire client base consistently, making those valuable “2.0” experiments slower to roll out. Additionally, its robotic process automation approach is currently hinged squarely on its partnership with Automation Anywhere, with which not all clients are willing to get on board. In its journey to create “effortless experiences” for end customers, EXL must keep working on how to make it easy for clients to join along for the ride.

Posted in: Business Process Outsourcing (BPO)Design Thinking

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Unveiling the first ever Digital OneOffice Premier League (Webinar Replay)

February 06, 2017 | Phil Fersht

WATCH THE REPLAY

Read More »

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

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Four Golden Rules to save the Indian IT Industry from Trump

February 04, 2017 | Phil Fersht

You must read my LinkedIn post and join in the discussion. Click here to access... go on, you know you want to =) 

Posted in: Policy and Regulations

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Digital Customer Service BPO: A Chat with HGS

February 03, 2017 | Melissa O'Brien

I recently caught up with Wendy Shlensky of HGS to talk about customer service trends on her blog. Here’s what we talked about:

Today’s companies are challenged to meet everyday customer service pressures while also building for the future. They must provide optimized customer service across various digital channels while also using new tools to better understand customer demographics and preferences, to deliver more personalized service.  The ability to simultaneously achieve these goals is really a differentiator in a world where many products and services are commoditized.

Wendy: Can you share the trends you’ve seen in customer service?

Melissa: Today’s customer service trends are being driven by customer expectations for really simple and straightforward communication. In many cases, this means self-service tools, although customers also sometimes need to pick up the phone and speak with a person.  Depending on objectives and available channels, customers will use various ways to communicate with companies to ask a question or give feedback. 

Balancing self-service and digital—including human assistance, when needed—is a significant customer service focus area. Customer service solutions that pre-empt and solve customer inquiries—before requiring agent assistance—are driving self-service as a solution to decrease customer effort.  Improving self-service is frequently put forward as a cost savings mechanism, but often has the most immediate impact on service quality and consistency. Most importantly, weaving all of the potential touchpoints to support an omnichannel customer experience is a design challenge for most organizations to undertake. 

Wendy: How essential are digital CX tools in today’s marketplace?

Melissa: These digital tools are critical. At HfS, we have been working on the concept of a digitally enabled contact center. We have produced a competitive assessment of service providers in this space.  Essentially, this means that a contact center is equipped to service today’s digital customer, who, as we all know, has increasing expectations in terms of communication channels.  At the most basic level, the start of the digitally enabled contact center means embracing “digital” channels: social media; web self-service, including mobile apps and visual IVR; video kiosks; and chat.  Also important is seeking to use automation to create efficiencies and the really smart contact center operators are trying to figure out how to involve increasingly intelligent automation into the mix.

However, it’s more than just implementing these channels, it’s the design of how each channel fits into the overall customer journey, and the understanding of how talent fits into the equation. This talent should not only be able to handle communication on varied channels that demand different styles (yet be consistent), but can also take contextual information from multiple sources and use that in a way that benefits the customer. From an analytics perspective, it’s all about using the data to better understand customers, enable personalization, and be more predictive.

Wendy: How is this changing BPO services engagements?

Melissa: Digital channels and the underlying technology will fundamentally change the way that service providers and buyers of BPO services engage. We have learned from our recent Intelligent Operations study that almost half of senior leadership buyers are using a “customer first” strategy to drive their sourcing models. This means embracing the change and solution ideals of “As-a-Service,” including design thinking. We see opportunity for service providers to use design thinking to help their clients develop better processes, especially around “customer journey maps.” Rethinking customer journey design is absolutely essential to the digital customer experience. 

For example, HfS recently spoke with a retailer that was struggling with efficient scheduling processes for an in-store service. The service provider took the approach of interviewing the staff members fulfilling the services to understand the areas where they saw inefficiencies and problems. The results included a scheduling process redesign that blended the digital self-service channels and those that were human assisted. Often, design thinking projects will involve an employee-centric approach—recognizing that employees are customers, too, who often hold the key to improving customer experience. 

The service provider-buyer relationship is also affected by buyers’ expectations of greater flexibility and value. Some service providers are looking to their BPOs to be really nimble, and scale, as needed. Additionally, they want their service providers to be thought leaders and help them figure out this puzzle of digital customer interactions. 

Wendy: What do you see as the future of digital BPO?

Melissa: In a customer-first digital economy, BPOs will strive to find the right balance of technology and talent, and deliver that as effortlessly as possible to clients. Contact center service providers’ strategies must be multi-fold—they must provide something more valuable in conjunction with traditional operations that addresses automation and self-service, built in with exceptional support (with a great talent strategy) to address the changing contact center model to derive more value out of clients’ investments.

What’s one of the biggest wild cards, with the biggest impact? It’s artificial Intelligence, or the development of “intelligent” virtual assistants. While right now most contact center automation is augmenting agent talent, we are seeing virtual agent pilots and POCs that can replace some contact center talent. Regardless of how quickly this evolves, eventually artificial intelligence will have a material impact on contact centers. Service providers, together with their clients, will need to figure out how to blend the best of human and artificial intelligence, and most importantly have a greater sense of urgency to understand how this will impact the customer experience. 

Posted in: Business Process Outsourcing (BPO)Digital OneOfficeCustomer Experience Management

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From Designing to Doing: Enabling Design Thinking into Solutions and Results

February 03, 2017 | Barbra McGann

We’ve seen a number of consulting and outsourcing firms making investments in design thinking over the last couple years.  The most visible approach recently has been the roll of acquisitions of design-thinking boutiques. A few representative ones that are being covered in our current research for the Design Thinking in the As-a-Service Economy Blueprint include:

  • Capgemini – Fahrehenit 212 (2016)
  • Cognizant – Idea Couture (2016)
  • Tech Mahindra –BIO Agency (2016)
  • Wipro – Designit (2015)
  • Accenture – Chaotic Moon (2015), Fjord (2013)

And while other outsourcing companies are not making acquisitions, they are partnering with design thinking firms  (e.g., Sutherland with UXAlliance, Genpact with Elixir Design) and academic institutions that offer design-thinking curriculum (e.g., Infosys with Stanford d.school).  Do their clients feel like it really makes a difference?  From what I’m hearing in my interviews with operations executives, product managers, and finance transformation leaders to name a few… Yes, it does.

Here’s how:

From designing to doing: Design thinking offers an approach for a diverse group of people to work together to identify and articulate a common problem, brainstorm ideas for addressing it, quickly prototype/wireframe/storyboard and test it, and continue to iterate on the idea as it takes shape into a proposed solution. While designers often operate within a “non-constrained world,” Consultants bring a healthy dose of reality check into the process, shared one interviewee. For example, a market-based and analytical approach adds context to the process of testing the ideas and prototypes for how well they could work in the business and how relevant they are to the market. Another executive described it as an “innovation agency” partnering with a “solution provider.”

Industrialization of methods and tools: Consulting and outsourcing firms have a rich history of standardizing what they have seen work in multiple instances. Many of them have been known to go to the extreme of “this way or the highway.” Most design thinking firms take a more creative, empathetic, and flexible approach, but are typically not as strong in analyzing, identifying, and setting standards. There are design-thinking agencies that are known for strictly adhering to standardized approaches and toolsets – IDEO comes to mind – but it is not the norm in the industry.  Likewise, there are pockets of creativity in consulting and outsourcing, but, again, not typical. These two groups are starting to find complements in one another. Clients are appreciating this emerging combination of creative, engaging, and simple (thanks designers) and standardized, contextualized (thanks consultants) approaches. 

Research depth: Design thinking can be a richer experience through thoughtful diversity – bringing together people at different levels (hierarchy) in a company, from different business units and functions, and from different professional backgrounds (e.g., ethnographers, CPAs, and programmers).  Design thinking firms are rich in creative professionals; and consulting and outsourcing firms can tap into industry subject matter experts, technology gurus, and change management leaders, as well, because of the breadth and depth of their organizations. They can help address needs from market sizing to industry expertise to rapid prototype development with new, emerging technologies because of internal experts or their own ecosystems. 

Recalibration underway 

A key theme we hear over and over in the outsourcing industry is the drive toward “recalibration.” Outsourcing firms that have been in business for years were built on the premise of providing lower cost, higher efficient processes using best practices: Lean six sigma, and ERP or now, increasingly, cloud-based/SaaS platforms. But to keep doing something basically the same way and expecting different results is insanity (a refrain often accredited to Einstein) – design thinking offers an approach to finding those new results. 

Bottom line: A design thinking led approach moves the focus of the operations executive and service provider partner off the process itself, off the internal, “what’s wrong inside of what we do” to “what do we actually want to achieve” (the business outcome), and what do we want people to feel and do naturally that will lead to further engagement and new—and different—results. 

After seeing the impact of the human-centered, flexible, creative, fast approach within “innovation centers,” “labs,” or “digital” business units, consulting and outsourcing firms are realizing that design thinking can help a company and its clients reimagine something that desperately needs a new way of working. Outsourcing and service delivery is an industry suffering from hitting thresholds on cost reduction, failing to meet expectations of innovation, and wondering how to use digital technology and overcome barriers in communication set up within and between clients and service providers.  At the same time, though, there are key aspects of rigor, process orientation, and service inherent in the services industry that fit well into enabling design thinking to move into solutions and results such as increased customer and employee loyalty and new revenue streams.

About 18 months ago, we thought – wow, what an interesting idea, using design thinking in the services industry. And we launched the first Design Thinking in the As-a-Service Economy Blueprint to explore whether it not it was feasible – if there were any examples of how design thinking was changing the way consulting and outsourcing firms work, internally with or for their clients. There were a few. As we go through the current refresh, we are finding that design thinking is actually changing the way many clients and service providers work, that there is a real complement between designers, consultants, engineers, and service delivery; and we will continue to share examples over the next few months.

Posted in: Design Thinking

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BPO Market Primer – Watch This Space For the Update in April

February 03, 2017 | Jamie Snowdon

As we mentioned in our recent blog on the IT Services Market we are looking to make our content more visually appealing. So we have below the companion primer cover the BPO market for 2015 to 2021. We will be doing a full update of the forecast at the end of Q1. When we have a chance to analyze all the vendor results for 2016.

Click Here to Enlarge

This chart gives our top level view of the BPO market in numbers – this provides a top level look at the market as a whole. We will be looking at producing a number of cuts of this data over the next few months, especially as we roll out our BPO Top 50 report and our updates to our market forecast.

The Bottom Line - Watch this Space

We are publishing a point of view on market conditions over the next few days, which presents these charts again with some additional commentary. Please find the piece at www.hfsresearch.com.

Posted in: IT Outsourcing / IT Services

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Retail Embraces the Digital OneOffice and Optimizing the In-Store Experience (NRF report)

February 03, 2017 | Melissa O'Brien

HfS has been spending the past several months talking about the Digital OneOffice – a business model focused on placing the customer at the center of every internal operation, even those not normally considered customer-facing. Whether you consider your firm a “traditional” business or a digital native, you need better customer centricity.

Recently I saw evidence of how this new focus on customer centricity is affecting the retail industry. Retail is rife with brick and mortar giants struggling to pivot their operations to support omnichannel shopping, and online upstarts vying to make their voices heard amid the e-commerce din. After hearing yesterday’s news that Target’s Goldfish project -- its mysterious Silicon valley digital startup --  now swims with the fishes, I started thinking about the tales I heard at the recent NRF conference. From both retail giants and small retail innovators, moving to OneOffice is about enabling the ability to support heightened customer expectations and often strengthening business fundamentals in order to do so. 

Stepping into the Customer’s Shoes

Target’s stated reasoning behind abandoning the potential e-commerce spinoff was to renew a focus on the brick and mortar business, strengthening the personalization of the in-store shopping experience with greater personalization and payment options on its shopping app.  In doing so, Target is putting a stake in the ground about where it wants -- and doesn’t want -- to compete. In the case of this retail giant, leaders see greater value in digitizing and optimizing the experience of its in-store customers than in creating something new that doesn’t necessarily jive with what customers want from Target.  It seems counter-intuitive that focusing on brick-and-mortar stores helps in Target’s Digital OneOffice transformation, but this move shows that the retailer is honing in on its customers’ experiences where the customers want it.

This strategy had plenty of examples at NRF. I saw providers demonstrating solutions which have the potential for retailers to take their traditional businesses to the next level. These solutions ranged from getting real-time information from the store to engaging the shopper around product education to promoting promotions or specials while they’re making the product decision were top of the list for this kind of optimization. Specifically, here are some exhibitor examples: 

  • Wipro Intelligent Displays: Wipro had a retail in-store demo which featured the use of sensors to allow the shopper to get more information about the product on a display screen in the store.  For example, the shopper could pick up two items and compare them side by side as they would online or in a mobile app.  This could also be reconfigured with near field communication (NFC) to connect to the app for greater personalization. I think this would be even more effective. 
  • Infosys Home-to-Store Journeys: Infosys took a real customer-journey-centric approach with its immersive demo of a full home-to-store shopping experience.  The journey demonstration begins in the customer’s living room, with the customer shopping on a mobile app and noting preferences and upcoming events (birthdays, vacations).  The journey then moves to the store, and demo participants were greeted by name by the store employee who knew what items the customer shopped for at home.  The comprehensive booth also featured a demo of the possibilities for augmented reality in store.  Infosys is using a combination of technology and services to customize these journeys for its retail clients and showing what’s possible for the future of retail. 
  • Sutherland’s Predictive Chat: A demo at the Sutherland booth highlighted a chat solution which originated with a design thinking approach to bridging store and online experience.  The platform enabled more proactive engagement with customers by drawing customer data from various external and internal retailer sources, feeding insights into the chat which could pre-empt customer questions and concerns.  
  • Honeywell Employee Tools: There were also interesting products at NRF. I popped by the Honeywell booth where I saw demos of plenty of tools aimed at making the customer experience better through improving the employee experience.  This ranged from a software infused headset enabling pick and pack staff to more efficiently sort items in the warehouse (and move away from manual tracking!) to light, durable wearable scanners that employees can wear on the wrist or finger to enable more swift customer check out; all pointing toward creating better efficiencies in the entire process behind a shopping experience. 

The bottom line: being customer-focused means improving the customer’s experience in store as well as online. Remember that in store sales still represent the bulk of revenues in the retail sector. Optimizing legacy systems to make them complement new business initiatives in a way that supports customer experience is how retailers will successfully move to DigitalOne Office.

PS: If you’d like to know even more about Digital OneOffice, come to our New York City Summit on March 30!

Posted in: Digital OneOfficeCustomer Experience Management

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