The digital failure of today’s operations talent: two-thirds of enterprises are falling short

As we peruse the results of our soon-to-be-released State of Outsourcing 2014 study, one of the core elements that jumps out at us is the widespread dissatisfaction of enterprises in their own internal operations talent to change the processes, automate them, analyze them… or come up with creative thinking on how to improve things in general.  The talent dearth is so bad that barely a third of buyers from the 312 enterprises we surveyed has seen any positive impact on their own talent with their current outsourcing relationships using their own internal talent:

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Organizations clearly cannot reach their state of  Digital nirvana without professional help.  “Digital” capabilities, in this context, relate to the acumen of operational services talent to understand the interplay between their applications and processes to achieve better automation and more productive workflows that can ultimately lead to better analytics to base future business decisions.  In addition, these capabilities also relate to the creative flair of staff to align their services with the core business and come up with new ways of doing things to drive value, new ideas for business improvement and, in short, to behave more like a “front office” employee than transactional operator.

Bad IT can be even more culpable than bad BPO.  Let’s not throw all the blame for this talent failure at the doorstep of the business operations staff. In so many cases, enterprises would have much more effective process capability if corporate IT wasn’t so constipated with maintenance and infrastructure. In so many client cases, IT still can’t figure out how to code without error, and they’ve done it for decades… at least processes change, but IT continues to be stuck in the dark ages for so many organizations.

The Bottom-line:  A Digital talent crunch is coming and this could get ugly for some

At HfS, we predict a major talent crunch coming to the vast majority of ambitious organizations who are struggling to find or retrain their back office staff to be more front office staff and “Digitally savvy” with their approach to services.  Two thirds of outsourcing clients are happy with how their internal teams manage costs, keep the basics ticking over (“lights on”) and respond to compliance needs.  But, as these “light on” capabilities become increasingly commoditized through more sophisticated global delivery and standardized technology platforms, the need for these armies of back office operators is steadily decreasing.

What is clear is that technology has become a major component for future value of the enterprise (read our earlier study on this topic) and one avenue for operations staff to increase their future value is to train in areas like analytics and process automation where they can add whole new echelons of value to their organizations.  Sadly, many of the two-thirds we identify above are not going to make it, and others are simply not going to be needed – the relentless pursuit of increased value and decreased labor costs will see to that.  Less is more is the brutal rule for the future of the enterprise operations function.

For forward looking service providers and consultants, these clients are becoming rich hunting grounds for valuable partnerships in the future as the need for the Digital skills and new talent exacerbates.  Most clients will find their need to develop or acquire better talent a fruitless exercise and will look to their external partners to plug these operational gaps that will drive future value.

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12 Comments

  1. Seamus Walsh
    Posted June 11, 2014 at 11:30 am | Permalink

    Phil,

    Fantastic blog! Data is very revealing – definitely a crunch coming and it’s going to his some companies hard,

    Seamus

  2. Carola Copland
    Posted June 11, 2014 at 2:09 pm | Permalink

    Phil,

    This will not change as long as the climate is not open for ideas – “this is how we do it”, “sit down and do what you are told” needs to change rapidly within the organisations themselves. It has few to do with “talent”, more with the appreciation of brain usage and critical thinking.

    Carola Copland

  3. Jim
    Posted June 11, 2014 at 2:15 pm | Permalink

    “If corporate IT wasn’t so constipated with maintenance and infrastructure”

    Hear hear!

  4. Paul Rhodes
    Posted June 11, 2014 at 5:00 pm | Permalink

    Phil,

    Good insight from you, as always. I think this shows that too many companies struggle to improve themselves and operate in a perpetual holding pattern. Even if suppliers bring new talent to the table, it may not have much effect if the client is not willing to change and improve. It would be interesting to ask clients how much they see the *need* to improve in those areas. Many may simply not see the disruption coming and are content to operate in this state if inadequacy until they are forced to make changes,

    Paul Rhodes

  5. Posted June 11, 2014 at 5:52 pm | Permalink

    It is sad that the lowest area is to innovate which our study last year on the workforce worldwide showed is exactly what the workforce wants to be doing to be more engaged in their roles and productive in their companies.

    But Carol and Paul are right: companies have to want to come up with new ideas and ways of working — to actually change — and change management capabilities were rated by workers as one of the biggest challenges in their organizations.

    Operational readiness and organizational effectiveness has to replace the hire to retire process-centric approach of too many HR organizations, and ironically it is going to require investments in people and workforce enablement-support infrastructure — not simply more new technology — to resolve.

  6. Posted June 12, 2014 at 3:04 am | Permalink

    Totally agree – thats what we are here for – http://www.advocacyandinteraction.com

  7. Posted June 13, 2014 at 8:10 am | Permalink

    Very interesting Phil. At Genfour, we are constantly experiencing a lack of capability in organisations to truly understand their processes, think through how to systemise them and then get the right engagement from IT to work through an automation programme. It is only by developing these capabilities that the full digital agenda can be embraced…. and only then can the true innovation cycle begin, the one that will keep them in business in the future.

    James Hall

  8. Posted June 14, 2014 at 10:12 am | Permalink

    Good piece, Phil.

    Dearth of talent is so challenging that critical digitization programs are stuck. Aeging skills are not needed anymore, new/emerging skills are largely misunderstood. One example is big data: this is a new terrain with new technology and even new ways of reimagining business process. So you can imagine how hard it gets when you are looking at the current people/process/tech state. How is one to transform this to a always on, digitally savvy, semantically adaptive organizational state.

    Feel free to check out my articles at http://tarrysingh.com

    Tarry

  9. John Thomann
    Posted June 14, 2014 at 2:56 pm | Permalink

    Good piece and I echo some of the earlier comments. For many companies there are “cultural shields” that prevent or devalue transformational initiatives, while for others it is the internal crud of bureaucracy that inhibits. On my last project it took nearly six months to install a simple server for some automated processes. When I expressed my frustration I was told by the CIO that I shouldn’t feel singled out as they do it to themselves all the time.

    John “TJ” Thomann

  10. Posted June 16, 2014 at 4:46 am | Permalink

    Great article!

    In my experience in shared services and outsourcing I constantly see “Service Delivery Management” struggling to balance the need for the top elements in your chart (costs, efficiency, compliance, standardisation) with those you have marked out in the red-box (innovation, creativity, “better…”). They are pretty good at costs etc, but this seems to constrain the ability to address innovation and the need to ‘to behave more like a “front office” employee than transactional operator.’ Without more balance we will continue to see deal constructs around costs and transactions, and service delivery teams managed to deliver just that at the expend of “better”.

  11. Posted July 21, 2014 at 2:40 am | Permalink

    Phil
    Thank you for the integrated insight, in our experience decisions on business efficiency are often driven by Technology and to an extent the notion that the IT departments are running the business by using and pushing new technology can only be changed once the business takes ownership of their area of discipline, e.g. Finance, HR, Procurement, Marketing,.. Business needs to ensure they have effective Change Enablement ( leaders Enable change hence Enablement and not Management) practices in place to ensure their operational staff have the new competencies (such as “Digital Savvy”) required to embark on the journey. The tendency of just moving the deck chairs on the Titanic when it comes to staff during the transition to a new Operating model needs focussed attention from Leaders. Leaders need to give themselves a break and appoint and /or develop the best people. People make things work, not strategies, technology or processes they are guides to IMPLEMENTATION.
    Dennis

  12. Phil Fersht
    Posted July 21, 2014 at 1:12 pm | Permalink

    @Dennis – “transformation”, in my book, also applies to job roles and skills. As you rightly point out, simply shuffling the deck chairs isn’t transforming, it’s delaying…

    PF

11 Trackbacks

  1. [...] the Horses for Sources blog noted that while researching its upcoming State of Outsourcing 2014 study, one of the reoccurring motifs [...]

  2. [...] has struggled to prove value beyond transactional process delivery, often because of the talent deficiencies on the buy side, and mismatched expectations on the provider side, as buyer expectations evolve during the course [...]

  3. [...] has struggled to prove value beyond transactional process delivery, often because of the talent deficiencies on the buy side, and mismatched expectations on the provider side, as buyer expectations evolve during the course [...]

  4. [...] has struggled to prove value beyond transactional process delivery, often because of the talent deficiencies on the buy side, and mismatched expectations on the provider side, as buyer expectations evolve during the course [...]

  5. [...] And those providers which simply do not have the Digital capabilities their clients demand to address these gaps are going to get relegated to legacy staffing resource provider, or ditched [...]

  6. [...] can lament the shortage of Digital talent within corporations, but maybe that’s because the next wave of “Digital” skill and creativity is [...]

  7. [...] can lament the shortage of Digital talent within corporations, but maybe that’s because the next wave of “Digital” skill and creativity is coming from [...]

  8. [...] When you talk to buyers today, most will tell you that having to deal with the technology and operations/BPO divisions of providers is akin to dealing with two separate companies. There is often very little synergy – and very different working cultures – between those people which deliver business processes and those who design, develop and maintain technology solutions. It’s been a major impediment to the progression of the BPO industry, and one of the key reasons why 49% of enterprises today (see above) still find themselves trapped in a “lift and shift” purgatory. Having IT infrastructure and operational talent together should help to break down these barriers and create a culture of enabling technology-driven services, moving processes into an “As-a-Service” model and creating the skills and acumen that providers need to make the delivery of “As-a-Service” effective.  Simply put, BPaaS (Business-Process-as-a-Service) delivery is not as dependent on transactional processing scale, as most these processes are now full automated in the cloud; instead the successful providers will develop their BPaaS businesses around providing teams of analytical, creative and digitally-centric talent – areas where most enterprises already recognize they have real talent shortages. [...]

  9. [...] our talent to operate with digital mindsets, by adopting analytical, creative approaches to help their enterprises progress from creaking, legacy business [...]

  10. [...] the desire to innovate, research from HFS concludes that clients recognize they need support in making changes, as shown [...]

  11. [...] the desire to innovate, research from HFS concludes that clients recognize they need support in making changes, as shown [...]

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