As we digest the incredible dialog from the HfS Cambridge University blueprint summit this week, the overwhelming mood from enterprises is one of frustration to get beyond this tactical status quo of legacy operations, in which so many find themselves wedged.
And most services providers aren’t going to come to the table with the technology and talent until their customers clearly dictate and demand what they need to cross this chasm. And those providers which simply do not have the Digital capabilities their clients demand to address these gaps, run the risk of being relegated to the class of legacy staff augmentation provider that performs only the low-value grunt work, or ditched from many client provider rosters altogether. And this is already happening with some ambitious determined clients.
When we surveyed 312 enterprise buyers on their two-year expectations from their current outsourcing relationships, it becomes abundantly clear that those desired business outcomes from yesterday’s outsourcing era have quickly become today’s table-stakes:
Clients are rapidly losing patience with services providers that aren’t working proactively with them to provide more value than the basic terms of the original contract. I feel like we’ve had this conversation before, but this time many clients are doing a lot more than having a quiet moan that they aren’t really getting value beyond very basic service provision. This time, many are actively looking to fire their provider if they cannot get past operational teething issues and actively begin the process of transforming the way they do things. In so many instances, clients are beginning to doubt their current provider actually has the skills or acumen that they were promised during the early courting days prior to contract signing. In today’s climate, close to a quarter of clients will actively seek to eject their current provider if they have not effectively helped them standardize, automate and transform their processes within the next two years. This is no longer about achieving significant cost reduction targets and getting basic tactical operations functional – it is about moving clients into a future state that is much more effective than the current one.
The focus on Digital outcomes has dramatically emerged, with many clients increasingly no longer viewing tactical success as their end-game. Whereas, in years gone by, the focus was slowly shifting from cost reduction to better global scale (see our 2010 study), the onus on clients to move the conversation to one of better analytical capability, more savvy and creative support talent, access to better tools and tech, has leapt onto the table: these are the new stakes. While most providers will not get fired today for Digital failure in the short-term, it is already very clear that an increasing majority of enterprise clients expect their providers to bring these skills to the table. 60% already see operational analytics as very important as an outsourcing outcome, and a similar majority are already expecting their providers to pony up savvy talent and better tech within two years.
The Bottom-line: Innovation is now defined and most clients know what they need. Providers have to step up if they want permission to play in the next phase of this industry
Remember all those fantastical debates about “What is innovation and how can I get some?” Well, the answers are now unraveling and it’s becoming clear how both buyers and providers can be successful in the future – and how they can also maintain the status quo and risk being relegated to the detritus of legacy operations. Clients no longer yearn for transformation of processes, reduced costs and flexibility of global scale – because that’s what most have already bought and paid-for. Hence, those not getting these outcomes today are not yearning, they are feeling duped and let down – and know they are failing and going down on their provider’s sinking ship.
The table-stakes of 2014 are now a must-have for clients which have their eyes firmly planted on what they need to achieve in the medium and long term. They want providers who know how to engage with them to help them get to the next level. However, too many of today’s providers have lost interest in their clients once they have reached an operational steady-state – and are constantly laser-focused on winning that next deal, as opposed to fixing their existing ones.
Until our industry takes the painful steps to fix the current legacy it has created, many will likely fail in creating a new era of Digital services. This means both clients and providers need to invest in the skills and tools they need – and recognize that failure to do so will likely result in their ultimate failure to drag themselves out of operational low-value purgatory. In addition, intermediaries and advisors need to stop forcing these deals to get done in three-week RFPs so they can walk away with their fees paid with little care for what that client and its provider really achieve down the road. We all need to focus on planning and investing in the long-term future and not solely on the quick wins staring us in the face near term.