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Category Archives: Business Process Outsourcing (BPO)

The broader issues behind Brexit send a frightening message to the services industry

June 26, 2016 | Phil Fersht

The vote for Brexit wasn't really about debating the finer points of EU membership - it was a big thumbs down for the establishment from over half the UK voters who feel disenfranchised.  This is a reflection of the ever-widening gap between the wealthy and the working classes, the educated and the uneducated, the socially-connected ambitious younger generation and the disconnected older generations, who've lost interest in the direction of the modern world that no longer represents their interests.

Moreover, this rebellion against the establishment can be clearly mirrored in many of our enterprises, where similar issues of disenfranchisement are rapidly permeating.

Rote jobs are being eliminated with limited reorientation and progression planning

We talk a lot about the new work and career opportunities being created by digital disruption and digital business models, but these require greater problem solving skills, critical thinking and creative capability, if the World Economic Forum's new jobs report is to be believed:

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And while we can complacently talk about all the exciting work creation the As-a-Service Economy is bringing, we've already precisely pinpointed that 30% of routine, low-value positions are being phased out through automation over the next five years, far outweighing the expected new jobs being created in the medium-high skills areas:

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This means we need to ensure our businesses and colleges alike are actively involved in reorienting this 30% to avoid their exit from working society. This is serious stuff which needs to be urgently addressed by our politicians, if they genuinely want to get back in touch with their increasing base of disenfranchised voters.

The younger generation, clearly more in tune with opportunities of free labor movement and their career growth, overwhelmingly voted to remain in the EU.  In fact, the majority of British voters under the age of 45 want to stay "in"; it's the 45+ year-old people which see no value of EU membership for themselves, which opted to stick it to the faceless politicians:

Age analysis for Brexit votes3

And when we delve even deeper, it's also highly obvious that the better educated the person, the more they were inclined to vote "remain":

Voter analysis, Brexit

The Bottom-line: As automation and further outsourcing take a firmer grip on enterprises, we face an almighty challenge - and cost - to reorient staff in low-skilled jobs

We've long-countered the whole argument about job elimination and offshoring, with the response that businesses need to be competitive and this is all part of the natural evolution of society and business. However, when 30% of services jobs are likely to be phased out over the next five years, we need to ensure these people can orient themselves into new jobs. Politicians need to forge closer ties with business leaders to ensure this happens, otherwise we'll have more Brexits and more fascist lunatics creating frightening futures for us.

When you have 52% of your voting public sticking it to the establishment, there is a serious situation emerging that could change the game forever:  if we can't have leadership that can get back in touch with the people doing these rote jobs, we will end up with governments that force even more draconian measures on businesses to protect jobs. And this will likely mean less competitive businesses and less jobs to go around in any case.  This is a journey to the bottom if we give in to archaic government measures and an avoidance of investment in work creation through re-education and training.

Taking away EU employees from British firms, and the ability for low-wage EU workers from places like Poland, Ukraine etc to wait on tables and clean hotel rooms, the economy is much worse off.  Just as a benchmark, British science is hugely dependent on EU grants and talent to keep it going.  It's the same with university programs and technology start ups benefitting from EU synergies and subsidies alike.

Many governments need to accept the fact that this 30% of future job elimination is caused by woeful education systems over the last few decades that long lost touch with the reality of business and modern day commerce. Serious investments need to be made by governments to fund the reorientation of workers to be relevant for the future workplace.  Our businesses need to be funded to retrain staff and retain them, not simply look to reduce headcount wherever possible.

Brexit symbolizes the failure of government to listen to so many of their people who are just angry.  They feel neglected at the ever-widening gap between the rich and the poor.  There's a reason Bernie Sanders and Donald Trump (for various reasons) gained so much popularity. Love or hate their policies, many people see them as politicians who can "hear" them.  David Cameron may have fought - and lost - the cause to keep Britain in the EU, but the majority of his people felt cut off from the future and made their voices clear.

The painful process now begins for legacy establishment politicians across the globe to wake up to the reality that an increasing majority of their voting bases are fed up with their lack of affinity to the common workers, and the fact that our business leaders have limited (or any) incentives to protect them or reorient them.  Otherwise, they will get voted out and we'll have some alarming social unrest that could well put us all out of business.  This is serious stuff, and we can't afford to keep brushing these issues under the carpet in a democratic society.

Posted in: Business Process Outsourcing (BPO)Digital TransformationHfSResearch.com Homepage

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Digital labor will trim 1.4 million global services jobs by 2021

June 24, 2016 | Phil Fersht

It’s time we dispelled the scaremongering and hype and gave you the true picture of how advances in automation tools and methodologies, such as RPA and autonomics, will impact the global IT services and BPO industry over the next five years.

The current debate on these issues is as polarizing as it is confusing. On the consumer-facing side of technology, we have a fervent and far-reaching debate about the ethics of artificial intelligence and automation, led by executives from the likes of Google and Facebook. On the enterprise side, we frequently see quotes from studies from firms such as McKinsey and Gartner predicting seismic job losses through the impact of disruptive technologies that could have a devastating impact on the global economy and society in the next few years.

Yet, many of the leading stakeholders much closer to the true deployment of emerging enterprise Intelligent Automation tools and platforms—namely the service providers, the ISVs and the sourcing advisors—remain on the sidelines when it comes to discussing the true impact of automation as it’s adopted by many enterprises today.

We’ve been talking, for the best part of two decades, about how to “transform” business and IT processes after the cost benefits of labor arbitrage have been maximized. Well, the simple fact is that much of these arbitrage costs are close to optimization for mature services providers that have well-honed global delivery machines. As enterprise clients demand further cost advantages, and as competitors become increasingly aggressive with their service pricing, the focus shifts toward clients attaining outcomes that are not always directly linked to lower headcount rates.

“Intelligent Automation-as-a-Service” is a genuine lever for enterprises to pull for further productivity gains beyond low-cost offshore labor

Consequently, many enterprises that have chosen to externalize their service delivery can enjoy even more cost effective services, as ambitious service providers further rationalize their delivery organizations by taking advantage of automation to standardize and scale service delivery to their clients.  In short, while many enterprises can invest directly in Intelligent Automation into their own processes, they can also simply outsource those processes to service providers, which can embed further productivity gains tied to automation, in addition to labor arbitrage.  “Intelligent Automation-as-a-Service” is quickly emerging as a significant productivity option for enterprises as part of their service delivery.

Sadly, greater productivity and effectiveness through “digital labor” comes at a societal cost—jobs that were once required are no longer needed. However, we would point out that the jobs that are being phased out are no longer being recreated in any case, and much of this shrinkage will likely come from natural attrition as some people leave the service industry for more relevant jobs in other industries.

The Impact of Automation on Services Jobs

The following graphic shows three Automation Impact Scenarios for the IT and BPO services industry, ranging from a modest/conservative prediction which is a continuation of current RPA use to a scenario we consider more likely where adoption of RPA and more Intelligent Automation increases to an aggressive scenario, where automation adoption hits a broader range of the skills. If we examine the most likely outcome, Scenario 2, we see strong growth for highly and medium skilled personnel—with highly skilled positions in our industry increasing by 56%, and medium-skilled by 8%. However, low skilled, routine jobs drop 30% as many of these roles get phased out over the next 5 years, resulting in a net loss of 9% of jobs, totaling 1.4 million:

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The following graphics shows Scenario 2, the Likely Scenario, in more detail, outlining the number

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

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Can HPE + CSC dominate the digital underbelly, or has that ship sailed?

June 19, 2016 | Phil Fersht
Digital Underbelly

Just stare at that digital underbelly... there's a lot of work needed down there!

When the news broke last month about the second largest IT services merger of all time (after the 2008 HP-EDS whopper), the reaction among the services cognoscenti was - and has continued to be - one of confusion.  Big services mergers have just not done very well over the years. HP/EDS was a culture clash of immense proportions - and occurred right before the great recession, while other mergers, like Dell's acquisition of Perot, has resulted in the old Perot business being flipped over to NTT Data at a significant loss, and the Xerox/ACS merger has been shaken up and spun off and needs a major reinvention under new CEO Ashok Vemuri to get the company back on track.  Meanwhile, Capgemini and IGATE are still figuring out the best pieces of each other to mesh together, while not taking their eye off the ball, during the services industries' most cut-throat transition phase.

We heard HPE CEO, Meg Whitman, excitedly address the firm’s key clients and industry analysts at HP’s recent Discover event in Las Vegas, with an obsessive focus on “digital transformation” and the impending impact of “digital disruption”.  However, the real opportunity for HPE isn’t really in the design of digital business models for clients, it’s the enablement of them – it’s the provision of the agile “digital underbelly” to make digital change really happen for enterprises.

It's easy to be cynical about legacy IT services, but there's an awful lot of it to scrap over as enterprises are forced to fix their plumbing

Digesting the merger of these two struggling services giants has resulted in more rumination than most, considering the timing, sheer scale, transitional uncertain market and motivation. This is not a time when most traditional service providers are looking to add more global delivery scale to already large foundations – most are trying to slim down their delivery armies and sales forces,

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

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Accenture, TCS, Wipro, Tech Mahindra and Infosys lead the 2016 Telecom Operations As-a-Service Blueprint

June 13, 2016 | Phil Fersht

HfS Telecom guru, Pareekh Jain, is back with his second blueprint looking at service provider capability delivering telecoms business services, following his debut analysis at the end of 2014:

Click to enlarge.

Click to enlarge.

Pareekh, how would you describe the current state of Telecom Operations As-a-Service?

We describe this market as a under-penetrated market. Our research suggests the current global telecom operations market (i.e., business processes under network, fulfillment, assurance, and billing) is perhaps one-third of $10 billion potential.

The telecom market is perhaps only vertical market with the dubious distinction of both enabler and victim of the digital transformation. Telcos have enabled cost-effective communication with likes of WhatsApp, Skype and in turn, they have eaten telco's lunch. Telcos worldwide are struggling to find their right place in the digital world. As-a-Service solutions can enable service providers to help telcos to prepare for the digital era.  The As-a-Service is the model today and for the future in telecom operations services.

Tier 1 telcos have generally been early adopters of telecom operations services. Now, there is an opportunity to provide services to Tier 2 and Tier 3 telcos, too leveraging As-a-Service solutions. As-a-Service solutions are driving growth in this market.

The eight service providers we evaluated for this Blueprint approach this market in essentially two ways. Service providers with strong IT offerings focus more on non-voice solutions whereas pure-play BPO service providers focus more on voice-based solutions. Service providers with strong IT offerings have taken the lead in platforms replacing legacy stack, plug and play business solutions, intelligent automation, holistic security, design thinking, and collaborative solutions while analytics and social is on the agenda of all telecom operations service providers.

How has that changed since our inaugural Telecom Operations Blueprint in 2014?

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

Even back in 2014, we could see many ideals of As-a-Service present in service providers’ offerings. In the last two years, As-a-Service momentum has accelerated.

Compare to our analysis couple of years back, we see the rise in collaborative engagements driving business outcomes. Analytics is now embedded in most of the engagements. Service providers are launching new services incorporating design thinking. We see more examples and use cases of automation. Also, telecom operations service providers are becoming effective brokers of capability by partnering with IT, platforms, local construction companies and telecom domain experts.

We see industrialization of few new service offerings such as network rollout management, revenue assurance in last two years. Also, service providers are constantly innovating with

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Posted in: Business Process Outsourcing (BPO)HfS Blueprint ResultsIT Outsourcing / IT Services

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Futurist Gerd Leonhard to keynote at HfS Cognition this September

June 09, 2016 | Phil Fersht
Futuring Gerd Leonhard will keynote at HfS' Cognition Summit this September

Futuring Gerd Leonhard will keynote at HfS' Cognition Summit this September

Now we have finally managed to get past that frightfully riveting conversation about doing some rudimentary process automation with our invoice processing and customer collections (aka RPA 1.0), we can finally get to the heart of what new technology capability  - much of which is already here - is really doing to our world.

With human brain power and computing power on collision course to become one, the enmeshing of human behaviour and thought processes with self-learning and self-remediating cognitive systems is set to confuse, frighten and - ultimately -  inspire us to change our whole approach to managing our technology investments, making data meaningful, collaborating with work colleagues and creating new business models.

This is our goal, this September, in White Plains, New York, where we are, once again, bringing together the diverse stakeholders of the operations and services industry to get past the fear, and find the inspiration to drag us out of this transition phase, in which we currently find ourselves.

To this end, at HfS we are thrilled to have persuaded Gerd Leonhard, CEO of The Futures Agency, to keynote our HfS Summit, "Cognition: Welcome to the Future of Services", September 14 – 16, 2016 in White Plains, New York. So we sat down with Gerd to get his critique of the future of technology, the emerging quagmire surrounding Digital Ethics and the true potential of Artificial Intelligence..o and how this will all potentially impact our jobs, our societies, our lives, and our humanity...

Phil Fersht, CEO and Chief Analyst, HfS: Good evening, Gerd. Great to have you on the HfS platform today! We're very excited to have you join us at Cognition, our coming flagship event in New York this September. But maybe before we start, could you give me just a little bit about your background and how you've ended up as such a visionary in the Artificial Intelligence (AI) Space these days?

Gerd Leonhard: CEO of The Futures Agency: It's a long story. I'm a futurist. But I started as a musician and producer, and then in the late '90s I went on the Internet and I did a bunch of music startups. It was an interesting time, but I was too early and ahead of my days. I think I realized in

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Posted in: Analytics and Big DataBusiness Process Outsourcing (BPO)Cognitive Computing

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Meet the Dinamo driving TCS' business process services impressive growth

June 03, 2016 | Phil Fersht
Dinanath (Dina) Kholkar is Vice President and Global Head of BPS at Tata Consultancy Services

Dinanath (Dina) Kholkar is Global Head of Business Process Services at Tata Consultancy Services

As we endlessly debate the future of the global IT service delivery in the wake of advances in automation, digital disruption and the ability to maintain double digit growth rates, one area that has steadfastly kept to respectable growth and improved delivery confidence is our beloved business process outsourcing services.

In fact, we are about to reveal to all of you that the growth in Indian-heritage BPO has been consistently out-performing IT services over the last year.  Why?  Because BPO is several years behind IT in terms of widespread adoption, but is now coming to the forefront as processes can be better-enabled by cloud platforms and maturing global delivery models.

In this vein, I thought it timely to interview Dina Kholkar, TCS' global head of BPS, who has helped steer his division to $1.9 billion at a 6% growth clip... making BPS now represent 12% of the total TCS business...

Phil Fersht, CEO and Chief Analyst, HfS: Good evening, Dina. It's great to have you on HfS for the first time. You've been one of the best kept secrets behind the exciting growth in the Business Process Services (BPO) team at TCS. Maybe you can share a little bit about yourself, your own background and how you ended up leading the highest-growth division in TCS today.

Dinanath (Dina) Kholkar, Vice President and Global Head of BPS at Tata Consultancy Services:  Sure, Phil. I've been at TCS for a very long time. This is my 27th year in TCS! I started in 1990 as part of the IT business. I managed a few IT projects, went on to manage accounts across different geographies, different types of roles. The longest stint I had was in the capital markets area. I also spent a few years in TCS’ R&D unit, predominantly focusing on data warehousing and data mining. Those were the years when data had started becoming a focus in many organizations. I did have a stint in operations when I was managing customers, but I never really managed the business of running operations until I got the opportunity to manage e-Serve, which TCS had acquired from Citibank. After a few years, when it was integrated into TCS, I took on the role of the overall head of the TCS BPS business. So we’ve had quite an exciting and an interesting journey, a journey filled with lot of learning and a lot of customers we’ve been able to positively impact over the years. And I feel quite proud about the type of opportunities that I have gotten and the way I have delivered on the objectives that TCS has laid out for itself.

Phil: So what can you share with us then about the secret sauce at TCS? What is it that makes you guys really tick?

Dina: One thing which I have always seen probably over multiple generations—and all three CEO leaders of TCS—really strikes me is the customer centricity. We go the distance, which means we do whatever we need to do for the customer. We do the right things and ensure that we are taking care of the customer’s business, bringing all we have as an organization to solve problems that the customer has. I think that customer centricity is paramount in the organization. I think we also

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Posted in: Analytics and Big DataBusiness Process Outsourcing (BPO)Design Thinking

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Robotic Process Automation has now penetrated a third of enterprises. Time to advance the conversation...

May 30, 2016 | Phil Fersht

RPA 1.0 is a done discussion. We know what it is, we know what it can do, we know how it can augment operations and help digitize broken processes.  To this end, our brand new study on Intelligent Operations, which canvassed the dynamics of 371 global enterprises, already shows a third of them are very active with RPA within their IT and finance and accounting processes:

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RPA is here and being adopted at a fast clip

All the incessant RPA hype has done its job - it has literally dominated IT services and BPO conversations at every conference, provider strategy deck, advisor "new practice" press release and many buyer converations.  Indeed, we can even forgive those cheesy sales presentations from guys who suddenly claimed to have 20 years' experience as automation pioneers and talked about bot farms as if they were actually hand-raised on one...

The overwhelming conclusion is that a large chunk of enterprises are actively implementing it, and

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Posted in: 2015 As-a-Service StudyAnalytics and Big DataBusiness Process Outsourcing (BPO)

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The new HP Enterprise is now the #3 high value IT services provider

May 25, 2016 | Phil Fersht

Love this merger or loathe it, the marriage of HPE and CSC has just spawned the third-largest high value IT services provider in the world - and happened just in the nick of time for our 2016 HfS IT Services Top 25:

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Click to Enlarge

So, let's ask HfS' lead analyst for market sizing and forecasting, Jamie Snowdon (bio), how we fleshed out "High Value IT Services" from the general morasse of IT services:

We estimated all this data from services provider financials. Revenues are fitted to nearest calendar year. We attempt to make the IT services numbers as close to HfS definition as possible—as part of this exercise we exclude revenues from subcontracting, we don’t include BPO or business services revenues in this definition and some product services revenues were classified out of scope, if the equipment serviced is not IT – for example, telephony related equipment. These numbers do not include software-as-a-service, unless included within a broader managed services agreement.

Jamie, how did you come up with the $26 Billion number for the new HPE?

The merger of HPE Enterprise Services and CSC, brings together the high value services of HPE and the commercial revenues of the old CSC business. The $26 Billion revenue figure takes $8 Billion as CSC without the hived-off public sector business, and $18 Billion from HPE Enterprise Services division, much of which was the acquired EDS business unit.

And what's your initial take on the merger, before we get deep into the weeds of the broader implications?

This deal brings together two of the original outsourcing behemoths EDS and old rivals CSC. The reasons for the merger given by management focus on the scale of the new company. Certainly scale was an important requirement for IT outsourcing providers in the past, as it gave flexibility and economies to these asset and labor intensive businesses. However, in asset light world of modern IT managed services and the increased use of automation – scale is not a vital component. It does give them access to the very largest of global deals, but HPE, and depending on location, CSC, would have been able to handle anything that crossed its desk. What we have is two large services businesses that have spent the last 3 years hemorrhaging revenues, because they weren’t offering what many enterprise clients wanted or there was another provider able to do the same task cheaper and more nimbly. This issue is not going to be resolved by this merger. The two firms have to reinvent themselves as a modern services firm when contracts are more open-ended, value is counted in revenue growth, not just cost savings and scale is replaced by other features such as agility and innovation as the key differentiators.

Well, good timing indeed, Jamie, with the new Top 25. Interested readers can download their complimentary POV on the HfS website here.

Posted in: Business Process Outsourcing (BPO)HfSResearch.com HomepageIT Outsourcing / IT Services

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Accenture, Xerox, NGA HR, Aon Hewitt and ADP make the HR Operations-as-a-Service Winner's Circle

May 19, 2016 | Phil Fersht

The market for talent has seen massive fluctuations over the last eight years. The 2008-9 global recession caused massive employment contractions across all major regions, however, the tide has really turned to turn after one of the longest sustained periods of economic growth in the last 200 years, with the need for fresh talent is on the rise.

Coupled with the rise of the intelligent digital business, these dynamics have forever changed the way organizations have to approach their HR function as seek new expertise and mindsets. As such, optimization and smart thinking across the entire HR stack is a critical requirement to attract, onboard and nurture talent within organizations.

As more and more millennials enter the workplace (now making up a third or staff), employee interaction has to change. The always-on, always-connected workforce is here. Organizations need to adapt HR functions accordingly and embrace mobile and cloud technology that can be accessed anyway and anytime.

Cloud HCM platforms have developed user interfaces that speak to this new workforce, but with ~50% of buyer organizations still using on premise legacy HCM systems, there is still a long way to go for many organizations. By partnering with proven service providers, organizations can now make the migration to the cloud quickly and efficiently. Also by leveraging the managed service expertise of these providers, organizations are more enabled to focus on key moments of truth with employees thereby reducing employee churn and having a more aligned, motivated and focused workforce. 

Knowing the importance of these solutions for the very future of HR, we put our best and brightest on this. And the result is HfS Human Resource Services Research Director Mike Cook's first Blueprint for HfS: HfS Blueprint: HR Operations As-a-Service 2016. So we invited him in to tell us all about it.

HR Ops_Axis

How did this Blueprint take shape, Mike?

In this HR Operations HfS Blueprint, we take a look at the evolution of MPHRO to “As-A-Service”--a services market that is increasingly agile, collaborative and employee-centric. HfS considers this transition in outsourcing a move to the As-a-Service Economy, placing increasing value on diverse

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Posted in: Business Process Outsourcing (BPO)Digital TransformationHfS Blueprint Results

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The back office is dead... long live OneOffice

May 13, 2016 | Phil Fersht

Intelligent OneOfficeIf someone called you "back office", I'd imagine you'd be a little bit offended.  It's probably not much worse than being called "useless", or "about to be automated out of existence"...

But I have good news for you back-office rebels - your time spent festering in the backend of yonder is finally coming to an end. Why?  Because the onset of digital and emerging automation solutions, coupled with the dire need to access meaningful data in real-time, is forcing the back and middle to support the customer experience needs of the front.

Our soon-to-be released study on achieving Intelligent Operations, which canvassed 371 major buyside enterprises, reveals two key dynamics that are unifying the front, middle and back offices:

  1. A "customer first mindset" is the leading business driver driving operations strategies.  Over half of upper management (51%) view their customers' experiences as impacting sourcing model change and strategy, which is placing the relevance and value of the back office in the spotlight.
  2. Three quarters of enterprises (75%) claim digital is having a radical impact. We can debate the meaning and relevance of digital forever, but the bottom line is that enterprise leaders need to (be seen) to have a digital strategy - and a support function which can facilitate these digital interactions and data needs. The old barriers where staff in the back office don't need to think and merely oversee operational process delivery, and those in the middle, which only venture a part of the way to aligning processes to customer needs, are fading away.

Consequently, we're evolving to an era where there is only "OneOffice" that matters anymore,

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Posted in: 2016 Intelligent Ops StudyAnalytics and Big DataBusiness Process Outsourcing (BPO)

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