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Monthly Archives: Feb 2017

NTT DATA's Insurance IoT Survey Confirms The Steady Rise Of “Connected Insurance”

February 28, 2017 | Reetika Joshi

The IoT hype in insurance continues unabated, with new research by NTT DATA suggesting that 3 out of 4 insurance carriers believe IoT will strongly influence their future products and services. Titled “IoT: Disruption & Opportunity In The Insurance Industry,” this U.S. based study surveyed end consumers and decision makers in carrier organizations on the subject of IoT devices in the home (thermostats, smoke alarms, garage door openers, door locks and bells). A few research findings for the two groups stood out to us.


Consumers are divided on their readiness to change

Two cohorts emerged from the consumer research, which also reflects in their views about smart home technologies. 64% of consumers surveyed, or the “Seekers” are younger, less loyal to their carrier, price-sensitive and want more personalized products and service. Unsurprisingly, the Seekers want their carriers to be more innovative and are more willing to share varying degrees of smart home data in exchange. The remaining 36% are the “Keepers,” older policyholders that feel protected by their current policies and are unlikely to make sudden switches. Overall, 50% of the consumers expected to buy smart home devices in the future despite privacy and security concerns, but the majority find current products to be expensive and complex: I still haven’t rigged up my “smart bulbs,” gifted over Christmas by a tech-savvy relative!  


Insurance carriers get the importance of IoT

87% believe IoT will improve customer relationships, 83% see it as an opportunity to attract new customers, and 74% see IoT as having a significant influence on products and service. Already, 77% are ramping up IoT initiatives, with customer service and technology use cases at the outset. The major challenges for carriers are the inability to get smart home data (68%), building analytics into underwriting processes (62%) and the expenses of the carrier or customer buying and installing smart home devices (55%).

In my conversation with Normand Lepine, NTT DATA Consulting’s Sr. Director of Insurance Data and Analytics, he pointed out, “Carriers recognize the opportunity to expand their value proposition with clients through IoT. In the next year, pilots, strategy and lab work around smart home technologies will help carriers create new products and services.” We believe each carrier that is experimenting with smart devices will go through a calibration process with customers, all centered around one factor – data and how to use it to create meaningful products and services. NTT’s survey data hints at this as well, with the lack of data being a carrier challenge, and consumer responses suggesting that they are willing to share only certain types of data, depending on their demographics and lifestyles.

Implementing connected insurance solutions requires carriers to rethink major business functions towards becoming digital organizations.

Let’s consider the customer lifecycle as an example. Carriers will need strong, mobile-first, sales and marketing channels to attract and transact with the “Seekers.” They can leverage smart home device technology to offer two key benefits to customers – a more personalized service experience, and cost savings in the form of usage-based risk and premium determination (an “As-a-Service” offering). This customer acquisition effort will need to have straight-through processing, with smart underwriting powered by real-time profitability analysis. When it comes to customer service experiences, smart devices again play a few roles, such as providing insights (e.g. smoke alarm data) that can be made accessible to customers with recommendations on usage. If a carrier is interested in smart home technology to drive new customer experiences, customer interaction touchpoints can be reimagined with the help of interactive personal assistants (e.g. Amazon Echo). These at-home assistants can intelligently converse with policyholders for simple service requests throughout the customer lifecycle (as Nationwide, Grange Insurance and Safeco have started to do).

In addition to home insurance, we also see examples of carriers exploring IoT- enabled auto insurance, and large-ticket opportunities in areas like commercial insurance. What will be interesting to watch is the role that technology and business service providers play in this evolving market. From IoT infrastructure services to the design, development and running of the related data and analytics infrastructure and services, IT services such as IoT app development, platform migrations, and micro-services, consulting/advisory on new product development and rapid prototyping/testing of IoT offerings, partnering with device manufacturers (particularly niche, insurance-related startups), we see several new opportunities for service providers.

While IT and business services providers are investing in IoT offerings as a horizontal capability, carriers will need to find the ones that are doubling down on insurance, with the appetite to invest in the industry specifically. The survey data makes this much clear – both consumers and carriers are getting ready for IoT-led change. The question is—will the service providers be able to embed themselves as “As-a-Service” partners to the emerging “connected insurance” economy?

Posted in: The Internet of Things

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

February 26, 2017 | Phil Fersht

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

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

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

Pillar 3) The Digital Underbelly (Weighting 20%)

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

Pillar 5) Intelligent Digital Processes (Weighing 20%)

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

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

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

Why The Digital OneOffice is the Future of Outsourcing

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

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

Click to Enlarge

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

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

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

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

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

Posted in: Digital TransformationDigital OneOffice

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Persistent Systems: Fast Growth Salesforce Practice with Healthcare Focus

February 24, 2017 | Khalda De Souza

Salesforce remains one of the most important and established enterprise SaaS products in the market, with a vast ecosystem of service partners from the smallest consulting firms to large global integrators. This makes the choice of service partners increasingly complicated and ever more vital as the competitive landscape for these services grows. This is especially important for enterprise organizations that are looking to SaaS projects as more than just IT initiatives, but as catalysts of wider business innovation and to drive business value throughout their lines of business.

HfS concentrated its recently published HfS Blueprint Report: Salesforce Services 2017, on the large enterprise service providers, the winners being those that are able to add the most value to a large scale adoption of Salesforce. This report outlines trends in service delivery and profiles twelve of the leading service providers in this increasingly dynamic market segment. It identified key selection criteria which included the ability to understand enterprise clients’ business imperatives and provide timely and flexible services. In addition, buyers need to look at providers who invest in Salesforce tools, on achieving specific Salesforce certifications, have relevant experience and the requisite geographical scale. These were the main considerations to ascertain service providers’ capabilities and commitment in the Salesforce services market.

In the Blueprint report, we positioned Persistent Systems in the High Potential category. Compared with the other service providers in the Blueprint, Persistent Systems has a relatively small Salesforce services practice, focused on US enterprise clients. However, its Salesforce services business is in high growth, and the service provider is investing in all the right areas to achieve success. Although Persistent Systems serves clients in several industry sectors, it is primarily focused on Healthcare. This is reflected in its investment in tools, including a healthcare accelerator tool, and the Physician and Patient Relationship Management, which has Fullforce Industry Solution certification. Moreover, healthcare clients commend Persistent Systems for its understanding of their business specifics – one commented that their chief architect’s understanding of their business was “outstanding”. In addition, Persistent Systems achieved high customer satisfaction scores from its client references, who were mostly impressed by the strength of its resources, and their ability to provide both business and technical advice. This is also backed by a flexible and cost-effective offshore delivery model. Moreover, Persistent Systems helps drive innovation within the Salesforce development community, where it helps software vendors, App Innovation Partners, to develop SaaS products using the Salesforce App Cloud.  

HfS believes that Persistent Systems (www.persistent.com) is a great fit for enterprises needing strong resources, with offshore delivery capability, particularly in the US healthcare market.

Persistent Systems was rated highly in the Blueprint for the following criteria:

  • Quality of account management
  • Strong resources
  • Incorporate client feedback
  • Vision for Salesforce effectiveness
(HfS Soundbite snapshot of service provider capability on Horsesforsources.com is part of the HfS Blueprint™ Digital License agreement)

Posted in: SaaS

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Location, location, location

February 24, 2017 | Jamie Snowdon

HfS is about to publish our quarterly analysis of the service provider and shared service center location announcements by Hema Santosh. As a taster, we would like to post the highlights and the infographic from this work.

Highlights for the quarter:

  • We see expansion of jobs in both the US and India – of the estimated 9,000 jobs that these new locations will house, 4,350 will be in the US and 4,300 will be in India.
  • Industry specific BPO drives expansion with 3 new BPO sites in the US in Q4 2016.
  • Downsizing – we saw some down sizing of in-house centers with eBay, Standard Chartered and Verizon all shrinking some centers.

Bottom Line:

Check out the full document here in the growing market analysis section of the HfS Research site.

 

Click to enlarge

Posted in: Location AnalysisService Provider Analysis

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IoT is only transformational to a point: we need to evolve to the Banking of Things to mine its true potential

February 23, 2017 | Pareekh Jain

There are already more mobile connections (over eight billion in 2016, according to GSMA) than people on this earth and some forecasters are already predicting we’ll have 20 billion devices or things connected in a couple more years.  Yes indeed, people, the internet of things (IoT) has truly come to life in recent months, and this is only going to escalate on a massive scale.  

However, is simply having this obscene level of connectivity really going to have a transformational impact on us?  Won’t we reach a point of connectivity saturation where the net benefits almost become negatives in our lives, or will IoT be extended to true commerce and the banking of things?

Up until very recently, these discussions have been more science fiction than reality, however, a news item this week raises our hope that IoT will evolve in this direction and we can start talking about a world beyond mere prolific device connectivity.

IBM is partnering with Visa to offering Visa’s tokenization services to its IoT clients. Every IoT device or thing can be made a point of sales (PoS) terminal and be able to enable transactions itself, such as a car ordering spare parts and a refrigerator ordering groceries. (Read here.)

Aside from the operational complexities, analysts have liberty to think about future scenarios. We can visualize this evolution of things in two dimensions. In the horizontal dimension it is human, and different categories of things (industrial things and consumer things). In the vertical dimension, it is digital activities. It starts with connectivity and then extends to payment, commerce, and banking.

The mobile revolution has been providing connectivity to humans from late 90s. Now the era of connectivity of things has started. On the digital activity dimension, humans are using digital payments, digital commerce, and digital banking.

Getting connectivity to things is the start. It will become interesting when connectivity of things is extended to the payment of things and ultimately to the commerce and banking of things.

Internet of Things (IoT): Things have a unique identity by SIM, RFID or similar identification technologies and can be connected to each other by different communication technologies. Things produce data with sensors attached to them, which can be used for generating information and insights.

Payment of Things (PoT): Things have the capability of paying themselves. Things can do commercial transactions and pay automatically, without human intervention.

Banking of Things (BoT): Things have a legal and a commercial identity of their own and can bank on their own. They have their own existence and bank accounts. They can take a loan, generate revenue, make deposits and can do all commercial activities which humans do with banks.

The use case of banking of things could be a machine or a car, which is not owned by anyone, and it can have its own identity. Banks can give a loan to a machine and the machine can use it to pay its initial cost to the manufacturer. The user can use this machine and pay usage charges for the machine in its bank account. A single machine can be used by multiple users. The machine can pay interest back to the bank, pay for its own maintenance, pay for insurance, upgrades and can decide what to do with its profit.

Similarly, an autonomous car can benefit from the banking of things. A car can have its own identity. It can operate like a taxi and available on demand like Uber. But unlike an Uber cab of today, it will not have any owner or driver. Users can use them and pay charges to car’s bank account. The car can pay interest to the bank, pay for insurance, taxes, gas (or electric charge), maintenance, upgrades and can decide what to do with its profit. Combine this with artificial intelligence, the car can decide how to optimize its activities for maximizing profits. Combine this with robo advisors, the car can invest its profit for maximum returns. Combine this with blockchain, the car can enable smart contracts between passengers and cars.

Why is this important?

As noted in our earlier IoT research, IoT is real but not yet transformational. For transformational impact, IoT needs to be combined with other technologies and commercial activities. The IoT combined with  PoT and BoT can have transformational impact as discussed in earlier use cases. Earlier waves of mobile connectivity and its evolution have produced Uber, AirBnB, WhatsApp which decimated the business models of many industries. Even internet businesses of Google, Amazon, Facebook leveraged this evolution to consolidate and expanded their positions by dis-intermediating so many traditional business models. Now IoT and its evolution to PoT and BoT will have potential to disrupt many more business models and industries.

Bottom Line: IoT provides the initial building blocks and it will evolve to Payment of Things and Banking of Things to disrupt many more business models.

The service provider ecosystem can play an active role enabling enterprises in their journey towards IoT and beyond. Enterprises now need to embrace the Digital OneOffice more than ever to thrive in this era. There is a lot of advice enterprises can still use to prepare themselves for the future. So this leaves us with the next trillion dollar question: Can enterprises really bank on service providers to take them to the world of Banking of Things?

Posted in: Digital TransformationThe Internet of ThingsBFSI

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3 Reasons Why You Should Care About Our New Blueprint Market Guide: “Predictive Capabilities in HCM Systems”

February 22, 2017 | Steve Goldberg

When HfS Research community members check back here later this week they will have access to my first major research effort for HfS since joining late last year: “Predictive Capabilities in HCM Systems”. This Blueprint Market Guide includes trends, themes and related implications for both buyers and solution vendors, an evaluation of these capabilities within 9 HRMS or HR System of Record vendors, what to watch as this emerging area continues to evolve, and – of course – our recommendations for driving business value and ROI from these capabilities.

 

The aforementioned 3 reasons are:

  1. Surprising trailblazers … such as some of the HRMS players blazing the trail for other vendors to follow (aka our High Performers group) are probably not who you’d expect; e.g., none of the top 3 rated vendors on these specific capabilities are in the top 3 from a market share perspective.
  2. Insights … as well as market intelligence that will likely make you say to yourself “Hmmm, I haven’t thought of that.” As just one example, there are very logical reasons why a number of the 9 HRMS vendors covered selected ‘predicting flight or retention risk’ for their initial foray into this product investment area, but also some not-so-obvious reasons. Among the latter ilk, the “consequences of being wrong” are probably not as severe as with a number of other examples of predictive HCM use cases (actual and hypothetical) highlighted in the Report.
  3. Recommendations … including why investments from both vendors and customers in this exciting product innovation area should arguably be ratcheted up, and ways that both parties can do that and start reaping corresponding benefits while proactively managing risks and costs.

Bottom Line: This first-of-its-kind industry research from HfS will shine a bright light on one of the most promising advances to hit HR Tech since on-premise, client-server deployments went the way of the dinosaur

Yes, the costs to hop onboard are not insignificant, but you can perhaps start with an economy ticket (modest investment) and then go further into this realm when business impacts are obvious. In time, HfS believes they will be, and early adopters often hold onto competitive advantage once they have it.

Posted in: Digital TransformationHR Strategy

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It's here, it's real... it's the 2017 RPA Blueprint deal!

February 22, 2017 | Phil FershtTom Reuner

At a time where alternative facts and fake news open doors to a parallel universe, where global labor markets are being disrupted by various flavors of travel bans to the United States, the specter of a wall being built at the US-Mexico border that costs more than the entire Space-X program, a reform of H1B visas that could likely dismantle the traditional outsourcing model, and a curious thing called Brexit that could change the global trade landscape forever, one might be forgiven for feeling slightly disoriented.  Yes, people, we've arrived at a time where the very foundations for service delivery models across the industry are being put at risk, where there is no written rule book for how to get ahead of this. So what better time than to add a sprinkle RPA into this global potpourri of disruption? Maybe a food dose of process automation will give us all something to cling onto during these heady days?

Against this slightly perturbing background, what is the state of the RPA market, the emergence of the virtual workforce - and how will it affect the broader markets? Is RPA the silver bullet to overcome many of these issues and obstacles? Back in December, we already chartered the service provider capabilities around RPA. As a result, we not only got a strong endorsement for our findings, but stakeholders were asking us to provide a similar assessment for the RPA tool providers themselves. To get more clarity on these pressing issues, we have sent our automation overlord Dr Tom Reuner back into the RPA community to separate the wheat from the chaff... the bots from the clots.

Based on his findings, Tom and I went into conclave, compared notes and war stories, as well as cranking the numbers for the evaluation. And finally, we have white smoke. Thus, we are pleased to share the new 2017 RPA Blueprint grid and the key findings with you.

Click to enlarge

 

Phil Fersht, CEO and Chief Analyst: Despite all the noise, many stakeholders still struggle to comprehend what RPA is all about. Tom, can you help these lost souls to get up to speed before we dive into the details?

Tom Reuner, SVP Intelligent Automation: I wish that would be so easy, Phil. Despite all the noise RPA is still an undefined market. To make matters worse, the IT juggernauts, the service providers, and management consultancies are only very gingerly educating the market. Two

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Posted in: Cognitive ComputingRobotic Process AutomationIntelligent Automation

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Overcoming Blockchain’s Obstacles to Adoption

February 21, 2017 | Christine Ferrusi Ross

Industry adoption is the biggest obstacle to blockchain becoming important in banking, according to 78% of participants in a study. Wait, what? It’s an odd data point to me, because adoption happens (or doesn’t) because of obstacles like cost and complexity. Slow or late adoption is a symptom of a challenge, not the challenge itself. So let’s take a quick look at what might slow or stall adoption, and what to do about it.

Blockchain is an element of “the platform revolution” that’s based on user economies of scale

Recently I had the chance to speak with Marshall Van Alstyne, co-author of The Platform Revolution and a professor at Boston University. He discussed the network and platform model of many new digital businesses like Airbnb. Airbnb is successful because it can exist and profit from user economies of scale instead of company-based economies of scale, according to Professor Van Alstyne. Essentially, this type of platform business allows users to create and share value themselves instead of relying on a company to create the value. The role of the business is to provide the infrastructure and support. While Airbnb doesn’t use blockchain as its base technology, the concept applies because firms can use blockchain as the basis of new platform-based business models.

Blockchain, with its design point of peer-based approvals for transactions and distributed ledger data storage, is a great example of a platform technology. It’s the enabler of a business that needs users to help define how it will scale.

What to consider in using blockchain as a platform for business

If blockchain can help companies build a platform business, what might slow or stall adoption? Professor Van Alstyne mentions a few:

  • Network ownership – who manages the network and gets to decide the rules? Is that owner in a position to run the network effectively?
  • Cost/transaction friction – how much does it cost to join or participate? And do you have to pay before you get value out? Can you design the network so participants pay only after they’ve gotten value to reduce the transaction friction?
  • Monetary policy (for financial transactions) – who or what agency is going to ensure the network isn’t too volatile? Who will ensure that there are guardrails to give users comfort that the system will have some inherent stability?
  • Standards – can players on different blockchain implementations work together rather having to agree on the same implementation? Who creates and manages those standards to ensure adoption isn’t hindered by interoperability problems? A good example of how standards can help is to solve issues like block sizes and reducing network consensus time, both of which significantly hinder the speed with which transactions can be completed.

The end user is at the center of the platform-based business

Customer-focused businesses need to exist in an environment where user economies of scale have become the norm. That means the business needs to understand the user and the users’ needs—doing so, will help identify and drive scale. And understanding the users and what they value, and how that then fits into a business model (addressing compliance, for example) can help drive the answers to the questions above. Rather than trying to scale internal operations like manufacturing, firms that adopt this customer-centric “Digital OneOffice” need to focus on user value and associated data. As Professor Van Alstyne points out, platform businesses can scale indefinitely because they don’t require internal company investment (beyond some compute power.) Instead, platform businesses that use technology like blockchain can scale as quickly as user adoption grows because there are no marginal costs of that growth.

Going back to that study I saw – blockchain may not get adopted, but if it doesn’t, it’s because companies didn’t take advantage of user economies of scale and learn lessons from older network-based businesses like eMarketplaces.

Bottom line: Focus on solving the obstacles to adoption, not adoption itself – especially transaction friction and interoperability standards – if you want your blockchain implementation to succeed and move you forward in your digital transformation.

Posted in: Blockchain

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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

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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.  

Click to Enlarge

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

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

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Supplier Relationship Management in 2017: It’s all about talent, standardizing processes, and RPA

February 14, 2017 | Derk ErbéBarbra McGann

A smart business operation uses the right combination of talent and technology to drive desired business outcomes. Third party suppliers are crucial for that combination, and our new research shows an increasing focus on the relationships with suppliers 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.

The big emerging trends in SRM:

Based on our new research, including discussions at the HfS Summit, our annual Shared Services and Outsourcing survey with KPMG, and 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:

  • Ambitious procurement / sourcing leaders are positioning themselves as advisors to plug capability gaps – partnering with the business units 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.
  • Organizations 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.”
  • There is a similar move to centralize supplier/partner governance and contract management, often 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.

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

Click to enlarge

  • Supplier management talent 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. In our state of industry study, 57% of enterprises are in the process of evaluating/implementing RPA for procurement processes.
  • Across the board, we have found a move to consolidate 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.”
  • It doesn’t matter what your operating model is if you don’t have the right talent. The right talent 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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