Welcome to the age of Digital cruelty, where two-thirds of operational jobs are under threat

Has anyone noticed a much harsher mentality towards “labor” these days?  I can recall presenting at an HR Outsourcing conference in 2004 where there was a large gathering of anti-globalization protestors outside the hotel bearing placards and shouting obscenities are us through the window.

“Outsourcing” was a truly dirty word, and shame on any callous corporate executives for instigating the use of low cost foreign labor to substitute their own. Even poor old Mitt Romney was associated with evil “outsourcing” practices during his corporate days at Bain Capital, which hurt his (unsuccessful) attempt to become elected US president.

But all of a sudden, noone really seems to care about protecting jobs anymore – if people are just performing “transactional” tasks, for chrissakes automate them quickly, or buy a SaaS platform to get rid of the unnecessary waste. Where are the demonstrators outside of SAP headquarters in Waldorf, or Oracle HQ in Redwood Shores as these firms desperately try to convince the world they are cloudifying their products so their clients can start to do away with some of those unnecessary jobs on-premise software provides.

And what about that evil Workday, which only provides cloud-based software and enables its clients to do away with HR admin people making a living cobbling together archaic hire-to-retire processes? And where are the tears shed for all those lovely marketing admins who used to earn a crust managing customer databases… their jobs literally obliterated by Salesforce.com?  Not to mention those jovial IT maintenance people no longer needed to support crappy old email systems now their companies have started using Google apps or Office365…

Why did companies get such terrible rep for using lower cost overseas labor, but get a completely free PR pass when it comes to eliminating positions altogether through better technology?  At least they were providing jobs somewhere…

Job protectionism really has left the building 

In all seriousness, organizations are already democratizing their decisions to do IT outsourcing and BPO and, instead, looking at ways simply to erase labor altogether (see earlier). If you only outsource your labor to a provider, you’re likely going to be stuck with it for some considerable time – just at a lower price point. You’ve simply passed on your labor costs to someone else to manage for you – more efficiently and cheaply. And once it’s been outsourced, it’s not as easy to eliminate those passed-on labor costs – you have to convince your provider to replace the labor with better automation and make less money from you, which it is not going to do unless create genuine incentives in place to do it.

Hence, the pressure is really now on for corporate leaders to eradicate that need for labor in the first place to ensure those costs are expunged for good… never to return.  Suddenly, reducing transactional labor has become the accepted norm for enterprises – not some wicked, insensitive capitalist strategy being driven by greedy corporate leaders. Essentially, if you’re only managing routine operational work with limited interpretation of meaningful data, or failing to provide creative ideas that drive value or income for your company, you may already be on that short-list to be eliminated.

Why the new wave of Digital capabilities is challenging the workforce like never before

Organizations have been trying to reduce their labor costs for decades, but something feels very different about the new Digital reality in which we operate.  Many people thought the onset of web technologies would be the big game changer with how we utilized labor, but it actually increased our reliance of humans – many business processes became web-enabled, which necessitated training on new applications and helped us work more effectively – but they didn’t fundamentally change how we operated – the web really just enabled us to run things the same way as perviously, just with more global capabilities and much more efficient communication. It was this previous wave of Digital which really enabled the great outsourcing boom of the last 15 years, as communication costs plummeted and web applications made it possible to work with people anywhere/anytime.  The initial web evolution helped globalize the workforce, but didn’t have as much impact on how we could automate processes, mine vast pools of data, leverage mobile applications to interact with our employees, partners and customers.

We have entered an era today where there is real capability to change how we run our businesses – from the back office processing to the front office customer interaction:  we have tools and apps to target and interpret meaningful data, we have developing software solutions to automate and even robotize processes like we never could in the past and we have all submerged ourselves in a mobile culture where all forms of business are conducted on all types of devices and interfaces.  Perhaps even more importantly, cloud-based platforms are being developed which allow us to share these capabilities, re-invent the way we run services and process transactions that require such a lesser amount of human intervention and oversight.

Hence, the onus shifts to the capabilities of our talent to add value to their organizations that are insightful to help base decisions; that are creative, which help try new ways of doing things, or targeting new markets; that are innovative, where their organizations can find entirely new ways of competing, or developing unique products or services.  Whether their work in finance, HR, marketing, procurement, IT, supply chain… their job is to leverage Digital technologies and platforms effectively so they can refocus their time adding value, because the need to people to sit around and fill in spreadsheets all day is being gradually eliminated. People need to do a lot more thinking, and less executing.

Two-thirds of today’s operations talent is falling short when it comes to supporting Digital Transformation

Which brings us to our new State of Outsourcing study, conducted with the support of KPMG and covering the experiences of 312 enterprises, where two-thirds of operations jobs are now under threat. Simply put, barely a third of enterprises today are happy with their internal talent’s ability to drive positive outcomes from their analytical and creative capabilities with their current outsourcing engagements:

Click to Enlarge

Steps enterprise leaderships should undertake to prepare for Digital Transformation

What’s clear, is that company leaders are bemoaning the lack of capabilities of their operations staff to adopt Digital technologies and provide the acumen to make them effective for the business. If two-thirds of them are not providing the capabilities to help automate processes, analyze meaningful and targeted data, or come up with creative ideas and solutions for the organization, then their leadership needs to take on the following measures:

1) Evaluate the Digital Transformation capability of existing internal staff

The burning issue today is whether people have the capability to change the way their work, as doing things the same old way and expecting different results is the known recipe for failure. Staff need to be evaluated whether they not only have the intelligence to develop their analytical and creative skills, but more the willingness and motivation to do things differently. Simply put, most people in the white collar workplace are smart enough, but whether they have the mental fortitude to change the way they work is another matter.  Future research will tell, but we already see millennials and younger generation staff showing a more Digitally-aligned mindset to how they work, and can embrace their technology environment to be effective. The mid-career people can go either way – some embrace change (or do it through fear), while others just seem incapable of deviating their work habits – and choose to jump jobs than step up to the challenge of actually being better at how they apply their skills to the workplace.

2) Introduce formal training to change the way capable staff approach managing operations

Once organizational leaderships have evaluated the right candidates which want to re-align their skills, then lies the challenge of beginning the training. Consultants can be useful at bringing in organized programs, structured methodologies and smart learning tools, but ultimately organizational leadership needs to drive the change.  The change is more than merely “doing things differently”, it is about thinking differently, it is about changing the work culture.  It is about having staff understand how they are going to be measured in the future, what is expected of them, and how they need to spend their time.  It is about these staff understanding how to embrace the technology toolsets around them to do their job smarter and collaborate with other like-minded staff to come up with better ideas for the business and better ways to achieve results.

3)  Evaluate and engage with existing and future potential partners to create a Digital culture across your organization

Most companies really struggle with change, and only relying on steps 1 and 2 might not be that effective alone. However, the nature of third party relationships can forge a very powerful catalyst to do things differently. The successful providers of the future will be those which can work with their clients to advance their skills beyond transactional.  For example, if you buy finance and accounting services, a provider which only does the transactional grunt work isn’t going to be very relevant in the future when you can get much of the work done using automated technology.

Providers need to be the ones helping develop the Digital mindset with your staff, so they can work with them to be more analytical and creative. They need to provide teams of data scientists and creative thinkers who can work in hybrid teams with your own staff to create a whole new training ground and environment to take advantage of the new wave of Digital. If your current provider cannot offer those capabilities, then evaluates those who can. And these partners aren’t necessarily the usual suspects of today, many of whom have already become legacy (and are only just realizing it).  The partners of tomorrow are going to look very different, may have different brands, working styles, leverage different platforms and tech. Many aren’t traditional service providers, but operate with different models where delivery staff might be in the less traditional locations, or may simply be consulting firms which prefer to work with clients on longer-term service models. They may simply be SaaS vendors with great support capabilities.  The landscape is going to look very different in three years’ time…

The Bottom-line:  The business world is becoming a harsher place to be, and many workers will struggle if they can’t adapt

The talent crunch is already coming.  The old safety nets of years gone by have bigger and bigger holes in them – you only need to look at the job ads and the types of skills smart companies are now looking for to understand quickly how irrelevant you could become if you don’t embrace the Digitally transforming world we are now living it.  It really is time to get with the program, people, or start preparing for an early retirement…

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17 Comments

  1. Jon Price
    Posted August 1, 2014 at 3:25 pm | Permalink

    Phil,

    Excellent insights. This is a real “call to arms” for those companies ignoring the digitization trend,

    Jon

  2. Gaurav
    Posted August 2, 2014 at 7:31 am | Permalink

    Loved reading this – so true. The day of the transactional employee is under threat like never before. I do worry that many people will do nothing about re-orienting their skills until it is too late.

  3. Anon
    Posted August 2, 2014 at 10:30 am | Permalink

    Phil,

    I do worry this is overly negative about the future. While you have some good recommendations for businesses, I am not convinced anything will change as dramatically as you predict. We’ve been talking about a talent crunch for some time now.

  4. Phil Fersht
    Posted August 2, 2014 at 10:38 am | Permalink

    @Anon: This is not intended to be negative, this is reality – and intends to proactive some measures staff and management can take to stay ahead of this curve. Digital Transformation is underway today, not tomorrow, and we’re doing our workforce a disservice if we choose to bury our heads in the sand and pretend this isn’t happening. I would be interested to hear what mid-career unemployed workers are going to say in 3-5 years’ time when they bemoan the fact they do not have relevant skills for the workforce anymore. While I agree the over-arching topic of worker irrelevancy is nothing new, the speed to change being driven by the onset of analytical needs, mobility, social interaction – all enabled by cloud platforms and better automation is now really accelerating the mindshift in many business with regards to the skills they need moving forwards. While many “transactional” workers may be safe for sometime – maybe even several more years, it’s already obvious when you look at the requirements most firms have of new staff they are hiring, that having Digital skills is a real differentiator in a job – and becoming increasingly the case.

    For those workers keen to further their careers and evolve with the changing times, Digital Transformation is creating tremendous new opportunities for some. Enterprise leaders and advisors who are failing to grasp these disruptive dynamics and advise their firms/clients how to prepare are already “legacy” in my opinion. The business world is on a new trajectory and people can’t afford to ignore it…

    PF

  5. Posted August 3, 2014 at 6:12 pm | Permalink

    Very useful insights, Phil. It is killing all sorts of regular jobs – in consulting, in ops, its affecting CIOs’ role. I wrote a similar article on linkedin:

    https://www.linkedin.com/today/post/article/20140329232614-10816248-are-digital-technologies-destroying-middle-class-jobs

    Key is to continue to evolve in your role. Adopt Digital Technologies and use it to enhance your’s and your company’s brand equity!

  6. James
    Posted August 3, 2014 at 7:34 pm | Permalink

    Phil,

    Best article I have read on this topic – and the data supports what is about to happen. The talent deficiencies are going to become the next theme for the technology industry as software technologies in the cloud finally take over routine labor tasks.

    Nice work – keep it coming!

    James

  7. Suyog
    Posted August 4, 2014 at 2:12 am | Permalink

    Phil,

    This blog should get into the induction kits, and screen savers of several IT providers, immediately.

    Even today, going digital remains a theoretical discussion or just lip talk. Implementing it remains a mirage. In this era, I still have to raise a Service Request to access social platforms. Mind you, I am not asking to access FB, but even blogs, LinkedIn – I need to provide a ‘justification’ to access. By the time, some of us wake up – we’ll only see burnt grass remaining and it will be too late to run and do the catching up game.

    The talent is ready (and fickle), but are some of the behemoths ready too – else options exist to take up and go somewhere else.

    Enjoyed your blog thoroughly, Phil. Thanks.

  8. Bikram Chatterji
    Posted August 4, 2014 at 9:00 am | Permalink

    Hi Phil – Nice article.

    Very true in the changing business environment being witnessed across the globe today. I have a few thoughts to share as well. What differentiates the forward looking organisations from the rest, is not just embracing altogether new technology, but making better use of the existing one by adding new modules and enhancements (whether off-the- shelf or customised) by partnering with the third party technology providers in a more meaningful way. Also just upgrading the IT skills of the existing internal teams is not going to deliver the desired results unless they are trained to think more creatively, add value and provide out of the box solutions to the process/ function using the new/ existing IT tools.

    Also while engaging the third party service providers and external consultants, the vision and objectives of the project/ programme have be laid out in crystal clear terms by the senior leadership of the organization in the beginning to the service provider along with establishing a stake from the provider’s side in the success of the project to enhance the probability of success of the project. At the end of the day it is the quality of the people using the tools and resources that makes the difference, if everything else remains constant,

    Bikram Chatterji

  9. Phil Fersht
    Posted August 4, 2014 at 9:33 am | Permalink

    @Tarry – I have always said talent development is all about progression, not succession!

    PF

  10. Phil Fersht
    Posted August 4, 2014 at 9:36 am | Permalink

    @Bikram: completely agree about the people quality. Once you’ve got decent tech and tools, it’s in the hands of those using them!

    PF

  11. Phil Fersht
    Posted August 4, 2014 at 9:38 am | Permalink

    @Suyog – good to hear from you old chap! I am close to coining a new phrase after your comment: “Behemothism”

    PF

  12. Phil Fersht
    Posted August 4, 2014 at 9:40 am | Permalink

    @James – it’s all going back to the talent issue. It’s also a global challenge – where can enterprises source these skills, if they cannot develop them themselves? Which countries are developing students with the right adaptive mindsets for the Digital workplace?

    PF

  13. John Haworth
    Posted August 4, 2014 at 11:30 am | Permalink

    Phil,

    As the posts attest, the HfS spider senses have really hit a nerve with your digitalize-or-die insight. In considering how this just-barely-below the surface trend will manifest more completely as time goes by, it may be that we are approaching a tipping point. This point may be driven not so much by individual career failures as by a kind pre-digital corporation mass extinction event.
    This pre-digital labor extinction is not necessarily that individual workers will fail to acquire digital skills fast enough so much as that their employers will fall into a Kodak-esque failure to adapt to a digital universe in time. Dull behomothism is more a threat to mass labor dislocation than the failure of individual workers to learn Hadoop or Workday configurations fast enough.
    In other words, the future of the Amazon warehouse worker, as neo-Dickensian as this job is portrayed, is more secure than other jobs, because that worker’s employer has definitely crossed the digital chasm. The mass extinction will occur as teetering, unresponsive, and pre-digital giants start to create fewer, and shed more, future-proof jobs. No doubt keeping skills current is important, but choosing the right employer may be a bigger determinant of the career trajectory of most individuals. Instagram is hiring!

  14. Phil Fersht
    Posted August 5, 2014 at 7:17 am | Permalink

    @John – good points about choosing the right company, in addition to focusing on your own skills. Legacy businesses often promote legacy behaviors and thus ensues a perfect cycle of behemothism – crappily-run legacy firms breed crappily-trainned legacy staff

    In truth, many more exciting jobs are – and will – develop. Yes, for ambitious executives, these are exciting times of opportunity. But – as our research points out, only a third of them today have these skills to develop and progress. Even at our most optimistic, half of the remaining two-thirds can adapt / survive. This leaves a third of the white collar workforce essentially redundant. And this is without factoring in the abundance of talent and cheaper labor available in other countries – you would be surprised at the quality of analytics work we are seeing performed in India and eastern Europe, as examples.

    While the smarter of us will prosper, the gap between the haves and the have-nots will reach alarming proportions….

    PF

  15. Chris
    Posted August 8, 2014 at 5:24 am | Permalink

    Thanks a lot Phil for the article. There is quite a lot to say on this topic and I am strong believer the coming 10 years (not 20) will bring a new era of jobs and skillset needed whether it is triggered by SaaS, Cloud, RPA and so on. And that’s where the rubber hit the road: 10 years. 10 years is too short for traditional Educational system to adapt. So who gonna take the lead?

    Moreover the change will hit the workforce differently whether in Western economies or BPO countries such as India, China, Philippines, Eastern Europe.

    Now, Windows, back in the late 80’s also transformed our business world by spreading “PA tasks” across millions of other people writing their own emails, letters, creating their own tables. We could also mention robots in manufacturing sites to spot the obvious or simply outsourcing as you said, centralizing, optimizing, downsizing…

    My point is that the world as I know it has always been a harsher place to be, forcing workers to adapt, learn new skills, change job.
    But I can see where the harsh part is: adapting faster!

    KR

    Chris

  16. Posted August 12, 2014 at 9:36 am | Permalink

    There are several key considerations around the future of work that we should not lose sight of.

    Firstly, this is progress folks! Economists across the western economies are all talking about the shortage of labor ahead of us. The ageing population, the growth in the global service industries, the increasing demands for leisure. They warn how the lack of talent is so great that economic growth may be constrained.

    Automation is a solution to this problem that whilst it replaces traditional low level labor makes room for greater customer focus, innovation and service. Yes they are different roles and different talent types but our new digital world is all about enabling customer service without requiring the traditional skills that go along with it. I agree it’s a matter timing and how quickly individuals and companies can adapt.

    Not many of us would look back at the industrial revolution as a negative or unnatural progression. I think this new digital revolution is exactly the same. We will adapt and workers will migrate to different types of roles and hopefully more leisure. Companies will be able to free resources that they can reinvest in better customer experience, new products and growth – creating yet greater opportunity. The capital tied up in human labor for routine tasks will (in retrospect) look like a poor use of shareholder money.

  17. Peter Ward
    Posted August 13, 2014 at 5:51 am | Permalink

    Good insights from Phil-the labor shortage is not an absolute shirtage but specifically relates to folks with the “right stuff” -that is Lions not sheep. It’s also often risky challenging the status quo, whether within the retained organisation or the outsource provider. The Key Q is can you train and encourage enough folks to do this. Providing insights to the technical opportunities re digital is ne thing -selling it is much harder!

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