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Category Archives: Confusing Outsourcing Information

Confusion-as-a-Service: The massive disconnect between vision and reality

March 04, 2016 | Phil Fersht

"Our clients come back from conferences demanding they need an Automation and a Digital strategy, with no idea what they are", said a senior partner in a Big 4 consultancy yesterday.

I have never known a time in the world of business when there is no much hype, confusion and unsettlement. Sadly, we are now living in a world where snippets of soundbites are so intensely shared across the variety media we use (I nearly said "omnichannel") that our industry is completely dominated by hype, as opposed to reality.

Data from our recent As-a-Service study just shows how alarming this disconnect is... the C-Suite is just living on a different planet from the teams below them trying to keep their businesses functioning:

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"Cannibalization" is merely the C-Suite waking up to the realization they can spend less with their service providers

Let's stop beating around the bush on this one - services providers (in most cases) make nice profit margins on their outsourcing deals. What's happening is that supply is now outsripping demand - there are too many competitors vying for a pool of enterprise clients who want to decrease their external spend.  The "demand" is coming from the next layer down of clients (the proverbial "mid market") which just don't have the size and resources to warrant the attention of the top tier providers.  What's more, the top tier of service providers is simply not structured to go after the mid-market - they can't afford to - and are stuck circling the same legacy enterprises like vultures trying to find new ways to squeeze money out of them.

Terms like "Digital transformation" are being used as the new levers to encourage gullible C-Suite

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



Nasscom Wrap: Grasping for digital identity, but needing a dosa reality

September 27, 2015 | Phil Fersht

The BMP Masala Dosa Reality: Great product, Weak Message

My recent experience of dosas, one of Southern India’s favorite food snacks, typifies the potential and shortcomings of India’s BPM (Business Process Management/Outsourcing) industry. The product is fantastic once you experience it, but, as a Westerner, you probably haven’t got a bloody clue what you are actually buying.

“It’s a bit spicy, sir” was the response, when I asked what the Mysore Masala dosa actually was. At that stage, I just took the plunge, but a little more description of why this food product is very tasty and will meet my desired hunger-fulfillment outcome, would have really helped close that deal.

This scenario isn’t a million miles from the typical experiences of dealing with an Indian-heritage business process service provider....

Coming back from the excellently well-attended and content rich 2015 NASSCOM BPM strategy summit in Bangalore this past week, I find myself feeling conflicted between excitement and frustration for the future of Indian-centric business process management / operations services.

My excitement

Execution is better than ever. India-based process delivery is getting really good. The tiresome client whining about poor execution and failed promises is become fainter than ever, with the vast majority now proudly talking about how smoothly their offshore operations are running. At HfS, we

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



Weekend Rant: Let's cut this bullsh*t and have meaningful conversations again (please)

September 12, 2015 | Phil Fersht

Skeptical? You should be...

Admit it, people, you're all being subjected to presentations from many service providers and advisors that have become so confusing you're actually too embarrassed to say: "I really haven't got a clue what you are trying to pitch me here".

In many cases, you suspect the suit presenting it to you probably doesn't have much of a clue either, so you just zone out and permit him to portray painfully his pre-scripted, professionally puffed-up, potpourri of PowerPoint.

I don't believe I've ever witnessed a time our services "industry" has descended into such a mind-numbing pattern of meaningless marketing hype and unintelligible bullsh*t.  It was bad enough when everyone was painting pretty pictures of "transformation" to sugar-frost labor arbitrage deals, but at least we could understand the bullsh*t and detect its scent a mile away.

Today, we've fallen even deeper into a trough of verbose desperation, as most service providers and advisors replicate each others' sales decks to reel off an increasingly inane plethora of confused rubbish, that is transcending further and further away from reality. In most cases, this is much worse than mere sales hype, it is hype and confusion squished together in such a confused steaming mess, it leaves most of us speechless to even question it. How can you ask sensible questions, when you just don't really understand what you're being presented?

When we questioned the understanding of today's technology enablers with 178 experienced service buyers, the results are quite alarming - and telling:

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Despite being the most hyped technology to hit the services market in the last three years, only 50% of service buyers actually understand what Robotic Process Automation is? And only a third grasp what cognitive computing platforms are? How many more millions need to be spent on these newfangled cognitive/autonomic platforms until the people who are their prospective customers

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Posted in: 2015 As-a-Service StudyBusiness Process Outsourcing (BPO)Confusing Outsourcing Information



How the gig economy has turned bad analysts into vendor advocates

August 03, 2015 | Phil Fersht

What's happening to the world?

Yes, I have been trying hard – and failing miserably – to avoid using the term “Uberization”, but it’s everywhere! Even in the analyst business, where the sharing platform is the Internet and any old whackjob can get in on the act. All you need is a computer and an ability to write remedial English.

The technology and services industry today is awash with individuals whose only professional activity is flitting from vendor conference to vendor conference, with the sole purpose of writing completely non-objective puff pieces praising their vendor hosts in exchange for money (or in the hope said vendors will pony up some dough in gratitude). Vendors are only too willing to pay these

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Posted in: Analytics and Big DataConfusing Outsourcing InformationHfSResearch.com Homepage



#Crazymergerideas - Why IBM should acquire TCS

April 26, 2015 | Phil Fersht

As-a-Service Graphic

When IBM announces a 12th consecutive quarterly decline, when practically every other service provider is trying to mask layoffs and austerity plans as strategic moves to delink revenue from headcount, you have to hold your hands up and admit the services industry is going through a secular transition that is going to get considerably more painful, before it eventually reemerges in the As-a-Service Economy.

Service providers need to address the transition years we are currently in, to reach the As-a-Service promised land

With consolidation of the current environment clearly very much on the minds of senior leaders in the service providers (e.g. Capgemini and iGATE widely mooted to be close to tying the knot), it's pretty clear that we're distracting ourselves from entering the As-a-Service world anywhere as quickly as we should be. There are simply too many operations and IT careers tied to legacy ERP and business processes, and too many providers making too much money feeding off this legacy, for the change to happen at anything bar a snail's pace.  There simply is no burning platform for change - no Millennium Bug, no Dot.com bust, no Great Recession in the offing (perish the thought...).

It is my belief that we're at the start of a ten-year cycle of interim change as operational human labor is gradually replaced by automated platforms that are in turn augmented by analytical and creative talent and cognitive computing.  The smart service providers are those which are going to address this ten-year phase of transition head-on and not get distracted by maximizing their position in the old model.

So let's pick on the biggest service provider of all in the middle of this industry transition, IBM, to assess its options:

The cool stuff is all great, but the dollars are relatively small

While IBM is making many right moves investing for the long-term, it's this long drawn out medium-term period that's the real problem. Watson, Apple and Twitter alliances, its new $3bn IoT unit, Softlayer etc.  all create As-a-Service mojo, but it's going to take years to get to the revenue levels that can replace the traditional services dollars that are in gradual decline.

IBM needs to work with clients at the pace they are comfortable with, if it wants to maintain its wallet-share with them.  The problem with the current business is that prices are getting squeezed and second tier providers are getting desperate and practically buying deals with the hope of making them profitable down the road and keeping their investors happy.

The solution:  Buy TCS and create a dominant giant to crush its competitors

It's simple - make a move on the largest, most aggressive and dynamic of the Indian-heritage providers:  TCS.   Together, they would crush the market across all aspects of delivery, all verticals,

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Posted in: #CrazymergerideasAnalytics and Big DataBusiness Process Outsourcing (BPO)



Service providers blame their clients, advisors and analysts for their As-a-Service failure

March 30, 2015 | Phil Fersht

We couldn't resist sharing a quick snippet from our new "Eight Ideas of the As-a-Service Economy" study that reveals some rather alarming news:  service providers are blaming everyone bar themselves for obstructing their progress towards As-a-Service.

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At fault number 1 - the Clients. Top of the lists are their clients themselves, with 78% of service provider executives (from a pool of 238) citing their unwillingness to venture into risk/gainshare models with them. Considering most enterprise clients we talk to complain that their provider refuses to budge from their predictable, profitable FTE delivery model, baffles me here.

At fault number 2 - the Advisors. Next up are sourcing advisors - those lovely folk who bring them to the table and horsetrade to get deals done.  Apparently, they are not selling the evolving model to enterprise clients and are just not very capable.  We are starting to see more As-a-Service traits in some mid-tier deals, where there is less wiggle-room to make huge profits on wage arbitrage, and these frequently are too small to warrant several hundred grand being spent on an advisor.  The advisor model is still built for the old world of big scale deals, not the new world where analytical and creative skills, technology enablement and automation are the watchwords.

At fault number 3 - the Analysts. And third on the list appears to be a pot shot at analysts, where providers claim a "Lack of quality research to educate the industry on the benefits of As-a-Service models".  We apologise and promise to write more coherently... and this time make sure you read it, Mr and Mrs provider executive, because we know how much time you spend trawling your way through analyst reports these days....

Least at fault - the Providers themselves. And very last on the list (no sh*t) is the fact that they are struggling with their own inhouse talent to shift the model to As-a-Service.  Well that's great news, as I thought it might be a bit of a struggle for providers to retrain their developers and project managers to think analytically, help clients with design thinking, laying out an automation roadmap etc.  Now we can all rest easy with the knowledge that the providers will save the day, while the rest of us clients, advisors and analysts can all go away and die somewhere on the scrap heap of legacy labor models, SLAs and dull irrelevant research.

Bottom-line:  We're all pretty much at fault for perpetuating the old models.  This is a collective learning effort across all stakeholders to adopt the ideals of As-a-Service

As we reach the end of the runway with the legacy model (which still has a way to go for many enterprises) there needs to be a much better effort collectively to discuss the actual measures enterprises need to adopt to take better advantage of the technology enablers and hone our skills accordingly.  Many advisors are clearly still making a good living advising on the old model, otherwise many would cease to exist, while analysts clearly do a poor educating the market on real world examples of how to make the shift (and persist on an old world model themselves to engage with clients).  Meanwhile, if service providers are as good as they think they are, they need to find better ways to convince their clients to trust them more, to work with the on joint projects of discovery etc.  Lee rhetoric, more dialog among the key stakeholders and better real-world education is the only real formula for success here.

Posted in: 2015 As-a-Service StudyBusiness Process Outsourcing (BPO)Confusing Outsourcing Information



Have most analysts completely given up doing "research"?

September 23, 2014 | Phil Fersht

Authors: Phil Fersht and Ray Wang:  Industry Analysts who still give a sh*t

(This is a collaboration and represents our individual points of view and not necessarily our employers. Oh wait, that’s us…. moving on…)

Is the analyst business stuck in its own trough of disillusionment?

We called it three years’ ago and we can now officially proclaim that the industry once known as "research" is close to meeting its maker.

Okay, the reality is it’s rare these days for analysts to comb for obscure facts, ask the hard questions, reach out to customers, dig deep with the system integrators, and circumvent corporate communication teams by going direct to employees for the inside scoop.

In fact, the alarming observation of analysts, especially in the large firms, is that most of them are spending all their time on evaluation matrices (e.g. MQs, Waves, Marketscapes, etc.).  There seems to be precious little (or any) research coming out of these places anymore.  Where are the big ideas? Where’s the insight? Where’s the thought leadership? What do these people stand for anymore?

When we sat down to talk to our client base, our analysts, and our clients, we determined that there were eight common reasons, namely:

1. Legacy business models are built on scare-to-play.  The only way the legacy firms are making money is through selling reprints of vendor positionings. Sales folks tell vendors that if they don’t pay for briefing hours and advisory time, analysts will ignore them.

2. Tele analyst approach reinforces an ivory tower image.  Today’s legacy analysts have no other means of getting data.  Sadly, most rarely ever talk to buyers of services  or users of technology.  The situation is so bad, that many vendors are forced to provide 15 to 50 customer references because the analyst has no means to reach out to real customers.

3. Stone soup research model reflects the laziness of analyst firm methodologies.  They are essentially having the vendors do their “research” for them.  Another way to look at this, legacy analyst firms are strong-arming vendors into providing references as their primary method of reaching out to customers.  Some analysts today are demanding three hour briefings with vendors to educate them - they are essentially making vendors pay to give them the knowledge they need to appear smart.

4. Egotistical narcissism drives power trips in evaluations.  Legacy analysts love the attention of vendors pandering to their demands.  In one case, a legacy analyst asked for 35 client references for

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Posted in: Analytics and Big DataConfusing Outsourcing InformationHfSResearch.com Homepage



Great to see Gartner adopting our HfS Blueprints!

August 06, 2014 | Phil Fersht

We woke up this morning to a wonderful endorsement from the mighty Gartner for all the hard work the HfS team has been putting into developing our HfS Blueprints over the last couple of years, when we proudly launched our revolutionary HfS Blueprint crowdsourced methodology for evaluating business and IT service providers.  Yes indeed folks - Gartner has announced it is doing its own "Blueprints research"!

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Since we released the first Blueprint Report almost 18 months' ago, the HfS Blueprint has become one of the industry's best known and most popular methodologies for assessing provider capability and competitive market landscapes, with fourteen Blueprint reports now published (you can view all the HfS Blueprint highlights here).  Enterprise buyers have used the Blueprint Reports exhaustively as an assessment guide for their provider portfolio management, and many advisors rely on it to sanitize their own provider selection processes with their clients.

So does this mean Gartner will take onboard the key tenets of the HfS methodology, in addition to leveraging the broad community data we gather from 1000's of industry constituents, when it develops its own "Blueprints"?  Let's recap how we develop and execute on the HfS Blueprint methodology - and you can make up your own mind whether you think Gartner will deviate away from its Magic Quadrant process for assessing tech suppliers:

The Tenets and Objectives of the HfS Blueprint:

  • To assess services providers without being reliant on the arbitrary viewpoint of a single analyst;
  • Provide a credible methodology (see here) to gauge the performance of service providers against “real” innovation and execution capabilities;
  • Deliver a performance assessment of providers that apportions importance weightings of each innovation and execution category based on data from our annual State of Outsourcing Survey, conducted with the support of KPMG, covering 1200 enterprise buyers, influencers, advisors and provider executives each year;
  • Evaluate performance assessments of providers where exhaustive inputs from buyers and influencers shape the scoring (not solely a handful of rose-tinted client references that the providers served up themselves);
  • Enable a customizable assessment tool where enterprise buyers re-calibrate the weightings to assess their provider-fit based on their own unique needs.

Good luck Gartner - we can't wait to see these new Blueprints of yours' hit the market!

Posted in: Business Process Outsourcing (BPO)Confusing Outsourcing InformationIT Outsourcing / IT Services



Time to stop the buzzword balderdash and become meaningful again

May 24, 2014 | Phil Fersht

Am I smoking something illegal, or has our industry really started to lose the plot with the amount of buzz terms that – quite frankly – only mean something to the sellers and advisors trying to make their wares sound that little bit savvier than their competitors. And even then, I am not too sure whether many of them even fully understand what they are buzzing about either, more simply regurgitating what their competitors are saying.

I’m not trying to be a fuddy-duddy here, and I do empathize with the exuberance of so many sell-side individuals who are simply starry-eyed at all the disruptive technology and evolving business models that are on the horizon, but c’mon folks, can we find a sensible balance between vision and reality?  Why has it become so uncool to talk about where we are, as opposed to where we think things might evolve in 5 years' time?

I mean, wasn’t it barely six months ago when we were still having (relatively) meaningful debates about things such as:

  • “What is innovation, and how can I get some of that?”
  • “How can I find a provider to do something more for me than provide cheap labor”
  • “I really would like some visibility over my order-to-cash process chain”
  • “Our provider still can’t figure out how to automate our accounts payable processes”
  • “Do we really get value from outsourcing all this stuff – are there other options to consider?”

Instead, suddenly it’s become terribly untrendy to have meaningful conversations about what we’re actually trying to achieve… like improving processes, trying to do a better job than merely maintain status quo operational performance, and accessing meaningful data to help us get more value from our day to day operations.

Yes, folks, if we aren’t creating Digital Services on SMAC platforms, we’re going to fail with Big Data and the Robots will come to replace us… so let’s see what 312 major buyers - in the brand new State of Outsourcing Study we conducted with KPMG - really understand about today’s latest slew of sexy savvy-sounding soliloquies:

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All joking aside, there is a serious message here: too many buyers are getting lost in the verbiage and the lack of relevance to their businesses and simply don't understand exactly what is being sold to them. Let’s be honest here, SMAC doesn’t mean anything to 70% of buyers beyond being a concoction of new technologies lumped together… finance executives have been talking about “Big Data” for four decades and nothing is really new except the fact there is better technology to help them analyze it… I can go on.  Oh – and nearly a third of buyers don’t know what “transformation” means to their business? Seriously?

The Bottom-line:  Our industry is simply terrible at communicating to clients and needs a major reality check

There is an abject communication problem in our industry, when such vast numbers of operations executives are baffled by the BS their providers and advisors are lobbing at them via boring white papers, instantly-forgotten PPT decks and thousands of automated inane tweets.

It’s time for the industry side to start tying all this buzz to the reality of operations – where we can educate how enterprises can learn more about where the world is heading, how they can start to evaluate the pace of change that will impact them and develop change programs and new operations strategies that make sense to their businesses.

We have got to stop jumping on the bandwagon of spewing poorly communicated rubbish that has little meaningful relevance to businesses today, and instead explain in plain English how processes and interactions can be digitized, how robotics could one day enable our business systems to become more cognitive and less reliant on manual steps, how new analytics tools and expertise can help our staff become more relevant and valuable, as opposed to turning widgets and updating spreadsheets. Most of the stuff I read today is focused 95% on flashy terminology and only 5% on the actual substance on what businesses can do with all this stuff.

It’s time to get meaningful people and stop this feeding frenzy of confusing jargon…

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



Accenture de-emphasizes the term "outsourcing" - is this the final death knell for the O word?

April 06, 2014 | Phil Fersht

A momentous event quietly occurred on Friday which could well have significant ramifications for the business practice that calls itself "outsourcing".

Accenture dropped the term from its strategy line, "Consulting, Technology, Outsourcing", which it had been using for more than a decade, changing it to "Strategy, Digital, Technology, Operations". In addition - and perhaps more significantly - it renamed its BPO growth platform "Accenture Operations".  The BPO term is still used when you drill right down to the specific business service lines, but Accenture wants to emphasize to its clients that it provides end-to-end services that go beyond just BPO.

As many of us universally lamented last weekend, the outsourcing (so-called) industry has long been struggling to create a clear, meaningful identity and establish recognized career paths for almost two decades, and much of this is because so many of the service providers, advisors and enterprise customers have failed to create a positive brand perception - and communicate effectively - the value of partnering with service providers to improve and extend operational capability and productivity.

Accenture was one of the last bastions of the outsourcing term, and its de-emphasis of it may be the final nail in the coffin for the dwindling band of outsourcing diehards still clinging to the fantasy that an "outsourcing industry" actually exists. In fact, the term IT Outsourcing is already practically dead, with only a couple of advisors and IBM (oddly) still using it, so let's see which of the providers actually still use BPO as their official terminology:

Well - there you have it - most have actively distanced themselves from the term, with only Capgemini, Dell, Infosys, Wipro and Sutherland still wed to it. Oh - and for some inexplicable reason, the major HR services firms like ADP still use it, even though the HR profession looks more negatively at outsourcing than any other.

The Bottom-line:  It doesn't ultimately matter what the providers call it, more how the enterprise clients view it

In my view, "outsourcing" really describes the initial act when an enterprise moves the responsibility for processes and operations over to an external party. Once that act is complete, those processes being executed form part of an externalized service or operation for the customer.  "Operation" signifies more than merely a service, but the orchestration of an end-to-end suite of processes, so I give Accenture credit for the being the first provider brave enough to use the "operation" term.  Now we can sit back and observe many of the above providers also slip that word onto their websites and marketing copy.

However, whatever these providers name their offerings, the real litmus test is going to be whether the buyers of services will start approaching service partnering as a genuine opportunity to improve their capabilities. Ultimately, they are the ones who would need to drop the O word and view services as what they are:  services.

Accenture's move is the most significant yet in terms of rebranding the outsourcing business - my best guess is that O will be pretty much gone from our business vernacular within a year.

Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesConfusing Outsourcing Information