Last week, the HfS Leadership team went all in on the 2016 NASSCOM Industry Leadership Forum (ILF) in Mumbai with 4 presentations and panels, dozens of meetings with industry leaders from providers and clients, multiple media interviews and local delivery center visits thrown in for good measure. So myself and Charles Sutherland jotted down our thoughts as we fought off the lurking jet-lag demons on our way back to the States yesterday...
Most refreshing this time around, has been the toning down of the rhetoric and hype, as most of the providers tackle the winds of change threatening a worrying decline of growth in the global services industry.
From this year's proceedings, we have taken to heart the near ubiquitous discussion of “Digital enablement and Disruption” to construct a sentiment analysis of where the stakeholders in ILF currently find themselves in their transition from a world of legacy operations to delivering what HfS has termed the “As-a-Service Economy”.
From enthused to unsettled, service providers sober up as reality sets in
In a word, we felt the sentiment of the ILF sessions in 2016 is best described as the global IT services industry being “unsettled”. Last year, we saw the pervasive adoption of “Digital” as the driver of future growth for every service provider at ILF, with a different definition in every instance as to what it meant. The ILF sentiment in 2015 was “enthusiastic” in a word. Over the the course of the past year, we believe most of the service providers are awakening to the degree of change necessary to move to a new model that delivers Digital value based on technical capable offerings, untethered to huge incremental headcount investments.
While seeing some early client successes, most smart service providers are also questioning whether each is as differentiated in their capability and messaging as they believed a year ago. It is becoming abundantly clear, as the industry wakes up to the reality of what is really needed to evolve to the As-a-Service economy, that the differentiation points between service providers has become blurred - and being able to demonstrate true distinctiveness and differentiation from each other has become a very difficult task.
If in 2015, every service provider at ILF wanted to brief HfS on the excellence of their Digital offerings, in 2016 the conversations were inquiries, seeking to test the efficacy of a service provider’s messaging against that of competitors and against buyer requirements and expectations.
Six Factors causing this “State of Unsettlement”
So what has caused this change to a State of Unsettlement, amongst the service provider community in just 12 months? In short, we believe it has been a mix of six factor factors, namely:
- A rise in global economic uncertainty, exacerbated by the instability of the Brazilian, Russian and Chinese economies, record oil price lows, a volatile and unpredictable stock market globally and the creeping threat of deflation;
- The rise of new “born in the cloud” competitors, such as: Aason, Bluewolf, Equiniti and OneSource Virtual which can offer significantly more cost effective solutions and different delivery models;
- The increasingly viral adoption of Intelligent Automation in service delivery;
- A recognition that Digital is not just a supplemental technology spend to the legacy business, but a fundamental change in how the underlying business model operates (for clients and for service providers);
- The increased relevance and disruptive competitiveness of nimble mid-sized service providers (IT and business process) that can scale up and down aggressively to win deals, based on client needs and their own intentions to invest in the future model, such as EXL, Genpact, Hexaware and Virtusa;
- Increasing engagement with mid-market clients, which frequently have requirements as complex as the high-end, but cannot spend anything like the same amounts. Many of these clients will form the FORTUNE 500 of the future and most traditional service providers are simply not equipped to take these clients on profitably with their current delivery models.
Analytics and Big Data, Business Process Outsourcing (BPO), Cognitive Computing