HfS Network

Monthly Archives: Jan 2017

The year of the HfS Infographic begins... in earnest

January 23, 2017 | Jamie Snowdon

In our bid to make our research more visually appealing we would like to post the first version of our IT Services market primer. This shows the first round of the 2017 HfS market size and forecast for IT Services for 2015 to 2021. We will be doing a full update of the forecast at the end of Q1. When we have a chance to analyze all the vendor results for 2016.

This chart gives our top level view of the IT Services market in numbers - the market we focus on here is our high-value market - by this we mean the outsourcing/managed services and professional services markets - we exclude standalone support and training from these numbers.

 Click to enlarge

 

The Bottom Line - Watch this Space

We will be producing more graphics such as this, the next will be a top line view of the BPO market. We'll also be writing up our thoughts on both markets in a PoV by the end of the month. 

 

Posted in: IT Outsourcing / IT Services

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Offshore has become Walmart…as Outsourcing becomes more like Amazon

January 21, 2017 | Phil FershtJamie Snowdon

In the post-digital world, no one cares much about “offshore” as a strategy - it has become part of the fabric of managing a global operating model, where operations leaders just tap into whatever global resource they need to achieve their desired outcomes. This doesn’t mean that traditional “offshore” global delivery locations, such as India and the Philippines, are going bust overnight. But it does mean the playing field is leveling out as the need for emerging skills trumps the desire simply to reduce labor costs.

Our new State of Industry Study, conducted with KPMG (see above) of more that 450 major global enterprises – shows an increasing majority of customers of traditional shared services and outsourcing feel they have wrung most of the juice offshore has to offer from their existing operations, and aren’t looking to increase offshore investments.  When we compare enterprise aspirations for offshore use between the 2014 and 2017 State of the Industry studies, we see a significant drop, right across the board, with plans to offshore services. Organizations are now either looking to make their existing offshore operations more effective, or even reduce them where they can (especially in F&A and HR), using new technologies and smarter process management.

It’s all about future scalability without the linear resource investments

The difference between new style of automation-rich intelligent operations and offshore-centric traditional operations is growing. It’s a bit like comparing the growth of Walmart to that of Amazon – (although it has started to change with its belated online strategy and acquisition of Jet.com), for many decades, the success and growth of Walmart has largely been tied to selling more retail products by continually adding new stores, and continually increasing its supply chain to support them. The firm could produce a linear business forecast that tied revenues to employees and capital infrastructure investments. Expansion and profitability was always dependent upon investing in more people to service need of the increased clientele – both the end customers and suppliers. With Amazon, so much of the customer front end is intelligently automated, adding customers often requires very few additional labor or capital investments - most front line customer support is completely automated, most the point-of-sale promotions are entirely driven by cognitive tools and smart algorithms that tie together customer needs and preferences with all the products on offer.

The offshore model is being dis-intermediated by intelligent automation in a similar way Amazon completely disrupted the traditional retail supply chain

It’s the same dynamic that is impacting the use of affordable offshore people services to be augmented, or even replaced by the almost-free fruits of intelligent automation. While Walmart was always an attractive outlet to push products to market, suddenly that business model is no longer viable when you can push your products to customers without the need for new investments in capital infrastructure or staff.

The emerging brand of more packaged operational services, outcome based services, and As-a-Service offerings – will be much more location neutral. It just doesn’t matter as much to the client where the service is delivered – they will only care if they have a reason to, like compliance, latency, etc… It’s not dissimilar to what’s happening in manufacturing – over the last 20-30 years, it made a load of business sense to displace, for example, 5000 onshore factory workers with the vastly cheaper services on offer in locations such as Taiwan and China, but as manufacturing automation advanced, the same products could be made by 100 workers managing machines. It gradually became more cost effective to bring the work closer to where end customers were situated to speed up inventory replenishment and reduce transportation costs. Why is it any different with finance, or procurement or HR – wouldn’t you rather have support services that were more culturally aligned with your staff and had a better understanding of your business needs?

You could argue that this dramatic shift is caused by automation or a desire for organizations to have more control over parts of their operations. We’ve seen examples of large organizations growing on-shore application development teams, partly because they need additional resources given the increasing numbers of complex customer-facing applications they are designing. But also because the applications needed to address onshore customer needs more directly - with greater personalisation and cultural affinity.

Offshore provides truly effective applications teams in terms of speed of development and technical quality of the final applications, but is less able to deliver the wow factor needed for the digital economy – especially in areas that require cutting-edge design and alignment with emerging digital business models. Also DevOps environments and agile have made on-shore development more cost effective and help deliver the same disciplined development ethos offshore has delivered. This does not mean that application development and maintenance disappears from offshore – far from it. It just means that services being delivered will be from more globally diverse teams and are more outcome-oriented, with offshore services leading the compliance / technical quality aspects of the delivery – at least for applications.

However, we think this is only part of the story, particularly as you move into other process areas, where there isn’t a hugely creative element and the service can be better delivered through automation as processes are standardized (such as back office F&A, HR and Procurement).  In addition, areas where cognitive tools and virtual agents are emerging are also slowing the need to add bodies offshore, where self learning systems are really starting to work effectively. This is where the real change lies. 

The Bottom Line – No more "location, location, location", it's now "skills, skills, skills"...

In the post-digital world, no-one care’s as much about offshore anymore. Offshore is going to be an ever decreasing part of the consideration for operational managers and their C-Suite. Location will still play its part as a cost lever in some circumstances – but it’s becoming a side issue, in most cases. Service is becoming outcome-led and driven by automation – people will add flair and handle exceptions – the HfS/KPMG survey shows that they aren't thinking about it as an issue. It is either an ingrained part of a legacy operation, which is shrinking over time and a component of a more streamlined automated, As-a-Service delivery model. However, what is clear, is the need for skills to drive business outcomes, and if those can be found offshore, that is a bonus, but not the deciding factor.  

The Indian IT/BPO services majors should also be more concerned by President Trump's stance on outsourcing than any other factor over the last 20 years. Not only is offshoring of IT and BPO slowing because of lessening demand, but increased political pressures and policies being driven by the Trump leadership are completely changing the game. When it comes to IT services and BPO, it's no longer about "location, location, location", it's now all about "skills, skills, skills".

Posted in: Business Process Outsourcing (BPO)HfS Surveys: All our Survey PostsIT Outsourcing / IT Services

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Talking Blockchain Business Models and Network Ownership With HCL

January 20, 2017 | Christine Ferrusi Ross

Since we published our first report on blockchain, we continue to talk to players in the industry about how this fast-moving market is changing and growing. Compared to last year, there’s more discussion about security and privacy (evolving from the “blockchain is unhackable” talking point that was popular last summer,) there’s more talk about non-financial examples like using blockchain to help with supply chain compliance issues, and a hunger to get beyond POCs into valuable operational execution.

Recently we spoke to Santosh Kumar, Rob Ellis, and Mani Nagasundaram from HCL about blockchain trends. HCL shares many characteristics with the players we included in the report, such as:

  • Basing its blockchain expertise within its financial services practice
  • Building expertise in some key industry hot buttons like international money transfer, asset tracking, and trade operations
  • Creating POCs with global banks like one HCL did on cross-border money transfers across subsidiaries
  • Exploring partnerships with several key blockchain technology vendors like Ethereum and ERIS Industries

Regarding trends, HCL sees a lot happening in security and privacy, as well as regulatory agencies stepping up to help businesses form some governance policies around blockchain. We’ve seen in the past few months that while maybe the blocks in the chain aren’t hackable per se, there have been identity thefts, fraudulence, and further concerns about public blockchain networks.

The HCL team notes that transactions are well executed in blockchain, but identity validation and asset validation are less mature. And valuation of assets still needs to happen in the real world, so they caution over-optimism in moving quickly to broad blockchain adoption.

Also, adoption may be slowed down until we can answer the key question, “who owns the network?” HCL’s current thinking is that there’s likely to be one or two per industry and that moving or crossing networks will be difficult (HfS agrees that network interoperability is a big problem. See my prior blog on network interoperability issues here.)

They also believe that maturity in blockchain comes in three phases and that blockchain mirrors the Internet itself in this maturity curve:

  • Operating business processes better with blockchain
  • Changing operations using blockchain
  • Using blockchain to create new business models, processes, and activities

When you get to the discussion of new business models, HCL has a few scenarios that they share (see Exhibit 1 for an example.) We like HCL’s ability to not just explain the technology in-and-outs, but blockchain’s impact on business. In the blueprint guide on blockchain, we scored providers highly on innovation when they have strong business stories and the ability to demonstrate blockchain’s potential to prospective clients.

Exhibit 1: HCL’s Blockchain Ecosystem Example

Click to enlarge. Source: HCL, copyright HCL

Bottom Line: 2017 will be an important validation year for blockchain

As HfS continues to research HCL and its competitors, we’re looking for the following in 2017:

  • Movement beyond POCs into live implementations
  • An example of inter-company blockchain work (remember, most POCs right now are intra-company, which is why the network question didn’t come up much this year)
  • Some hardening lines in the partnership area as the winners and losers on the technology side become clearer and providers get pickier about which vendors they bring into client engagements

Posted in: Procurement, Engineering & Supply Chain OutsourcingThe As-a-Service EconomyBlockchain

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Capital Markets Operations Blueprint Explores the Perfect Storm for Services

January 20, 2017 | Reetika Joshi

We started off the new year at HfS with the launch of the Capital Markets Operations Blueprint last week. This is our first coverage of the key dynamics in capital markets and furthers our BFS research on the back of the HfS Mortgage As-a-Service Blueprint mid-last year.

Policies, politics, and structural market challenges are plaguing capital markets firms, raising the stakes in partnerships with service providers

Going into 2017, we find banks and capital markets firms are cautious as they continue to endure a volatile environment with no signs of letting up. Policy ambiguity across the US and European markets, political uncertainty, and structural market changes continue to plague the capital markets industry. Meanwhile, low interest rates and as a consequence, bank margins across sectors have created new waves of cost pressures. Capital markets firms continue to struggle to generate more revenues to counter their rising cost of capital.

To add to this perfect storm, the revenue-generating aspect of this industry is under fire as well. Capital markets firms have had to abandon categories of products due to new regulations. They are more challenged to attract and retain clients that expect different, digitally enabled levels of service with faster turnaround times across the ecosystem, particularly in wealth management. As more big-ticket fines and penalties hit the headlines, public confidence and trust are continuing to erode, and at the same time, the competitor landscape is expanding for the biggest players with the continued success of community banks, regional banks, and fintech disruptors.

Overall, banks and capital markets firms are severely challenged in predicting strategies for long-term sustainability in a changing market and need to have several strategies in play to meet short-term cost pressures. Traditional cost management from cutting back trading desks and providing front-line compensation have not yielded results at the magnitude required to significantly balance profitability.

As a result, we believe that capital markets firms will undergo large-scale operational transformations in 2017 and beyond.

 Since the early to mid-2000s, global technology and business services providers have taken over large parts of the back and middle office processes for banks and capital markets clients. They are now in a unique position to help rethink and run more Intelligent Operations as capital markets clients figure out their strategies to tackle these market challenges. Some of the key buyer-service provider dynamics include:

Back Office Processes Continue to Dominate the Services Landscape: The capital markets operations market started a little over a decade ago with back-office BPO processes offshored to IT service providers. Today, these processes are the majority of work engagements, prominent in 63% of contracts in our analysis. Major service areas include clearing and settlement, corporate actions, reconciliations, fund accounting, collateral management, data management and reporting, investor operations, and product control.

  • Market Forces and Regulation Stimulating New Demand: With global regulatory bodies placing continual pressure on banks and capital markets firms, there are new areas of opportunity for service providers to step in to help clients meet regulatory compliance requirements in different ways. Regulatory data management and reporting and analytics modeling and model monitoring are some of the biggest areas of growth for service providers.
  • Industry Staring at Technology-Driven Change: We see multiple initiatives fighting for prioritization within client stakeholders and service providers’ strategies, all related to technology-enabled service delivery in capital markets’ operational processes. Platform-based services, provided as a utility, are sparking new interest from clients especially as these models promise consolidation and economies of scale across internal LOBs and asset classes. Similarly, clients are also driving automation initiatives within each business, led by robotic process automation and some level of machine learning and predictive analytics to improve operational performance for retained and outsourced functions.

 

What’s next?

Standardization: We see a sort of “gold rush” for standardization in the foreseeable future of the capital markets operations. Service providers, including new entrants and industry veterans, are in a race to find ways to bring more standardization to overcome the significant challenges in data management. The managing director at a midsize PE firm we interviewed remarked, “Although we all have to do reconciliations, everyone’s built up in a certain way. The challenge for a service provider or market utility is not the actual processing but standardization in the upstream data that has to be fed in from various systems and the downstream outputs to different stakeholders like regulators and clients where the reporting requirements may be different.” Even within the walls of one enterprise client, data metrics, logs, and audit terms and the systems that consume them across businesses are varied. The biggest areas of investment for clients in the next few years will be in consolidating and standardizing processes such as reference data management and reconciliations.

Robotic Process Automation: Along with potential cost savings, one of the biggest business benefits of using intelligent automation technologies is the higher level of accuracy and standardization due to the lack of manual errors. It is no wonder that the new breed of automation tools has caught the attention of capital markets clients. We see a strong appetite for automation with RPA at the forefront. In the next year, we anticipate many more implementations, particularly for processes that have not been offshored yet where big bang savings are more possible. In the medium term, the cognitive capabilities and machine learning projects under way today in areas like due diligence and inquiry management will have matured and created more confidence for conservative buyers. This is a big opportunity for new market entrants to come in with an automation-first strategy for displacing incumbents. The key will be in proving domain knowledge by coming to service buyers with industry-specific use cases and examples; don’t expect them to have done the homework in this emerging area.

Industry Expertise: On the subject of domain experience, we see emerging opportunity for providing ongoing guidance to capital markets clients for the changes in and the impact of regulatory reforms on their operations and compliance needs. They have traditionally sought consultative advice from risk advisories and consulting firms, and our primary research reveals that for many clients, most service providers are not perceived by key client stakeholders as experienced enough to take on those advisory roles. We anticipate more acquisitions and strategic partnerships by service providers to bridge this gap as multiple clients in our research state that they would find value in getting advisory input from experienced operations partners.

Overall, banks and capital markets firm in our Blueprint research highlighted – and evaluated—the need for a collaborative service provider that is willing to take risks on critical new initiatives that they plan to roll out in the next 12-18 months.  

Bottom Line: Whether it’s automation-led, pure-play BPO services, platform investments to drive BPaaS and/or market utilities, or bringing experienced consultants to address regulatory concerns, this high-stakes market demands service providers that are willing to take risks and invest for the long term.

For more details –including visuals of the market activity and analyses of the service providers—click here to access and download the HfS Capital Markets Operations Blueprint. The service providers included in this report include Capgemini, Cognizant, EXL, Genpact, HCL, Hexaware, Infosys, NIIT Technologies, Syntel, TCS, Tech Mahindra, WNS and Wipro.

Posted in: Finance & Accounting BPOBFSITrends Analysis

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Meaningless data makes way for PCV: Pointless Crap Visualization…

January 19, 2017 | Jamie Snowdon

A couple of months ago we wrote about meaningless data – the seemingly endless spew of pointless information that just starts to grate. Recently, we’ve started to see another related category of pointless crap – which is probably going to become more prevalent as organizations seek to increase the ease with which information is conveyed to a public that cannot be bothered to read anything anymore.

The category that is pointless crap visualization (PCV). Where an attempt is made to visualize something, often a relatively complex concept and it fails utterly to get the point across. But looks nice and gets attention because they drop some names of big vendors in there.

We recently noticed a thoroughly confusing diagram from one of our analyst colleagues, NelsonHall, that caused us scratch our heads in utter bewilderment:

PCV From NelsonHall

The diagram is supposed to tell you something about the acquisition strategy of the companies in the triangle. We wrote down a couple of questions about what the chart meant, having not read the associated blog post.

It looks like Cognizant is more likely to make acquisitions than IBM?  Really? Which seems highly unlikely given the huge difference between the two companies in the past – and the fact that Cognizant has a much smaller war chest for M&As, especially after its massive $2.7bn investment in Trizetto. We suppose you could limit to purely IT services – but a tuck-in acquisition is just as likely to be IP based as it is additional niche skills. Although even then we’d expect IBM to spend a great deal more – its Software group having notorious deep pockets for acquisition. Cognizant have made some significant acquisitions like Trizetto, but like all the offshore firms have been pretty gun shy when it comes to inorganic expansion compared to the big traditional technology firms.

Cognizant/TCS are more likely to acquire than NTT or Fujitsu? Mmmm... Fujitsu has been fairly quiet on the acquisition front for a few years, but you cannot count them out of the acquisition game – they made a few acquisitions in 2016 and made some very large purchases in the past. Given their cloud capabilities in Asia, it seems likely it would want to build on consulting capabilities particularly in Europe and the US. And NTT – certainly we may see a lull in activity as Dell Services gets absorbed, but NTT has been one of the most acquisitive of the services firms over the years, so this again seems slightly at odds. This seems much more likely than TCS, the least acquisitive of the already reluctant offshore providers.

The inclusion of CSC using the CSC logo... er seems a bit unnecessary. In fairness it may just be the choice of CSC as the logo – but CSC is part of HPE and no longer exists - so we do wonder how useful it is to know they won't acquire...

Also, what is the difference between a "tuck-in acquisition" and active acquisitions? To say that IBM is not an active acquirer seems odd – again it may be a narrow view of just the IT services business, but we’re not sure that view really helps anyone considering IBM as a partner given that any software acquisitions bring IP which add to the richness of the services offerings.

Again the distinction between active and tuck-in is not clear for Accenture – which is certainly the most acquisitive and has a very active strategy with an acquisition made seemingly every week, but some of these will be tuck-in, maybe half of them? You can judge for yourself and look at the list of Accenture acquisitions we tracked in the table below. We did some work on which providers are making digital acquisitions – not with the same list of providers, but it illustrates the scale of Accenture’s acquisition activity, compared with some of the providers on the NH diagram. So we’re not sure the visualization really captures the huge difference in acquisition trails between Accenture and the other pure services companies on the list.

HfS - Just The Deals

It is a challenge to come up with good visualizations - that support data and summarize points being made. We have some way to go converting our list of contracts above into a statement about the different players - but I think if we do something around our acquisitions data we'll probably convert into an index and visualize as a quadrant (oh no) or a simple bar chart. So in a way you have to applaud NH for trying something new.

To be fair the associated blog made a lot more sense – but the chart fails to reflect what is said or adds much to the understanding – it just throws names at you without any clear reasoning. What the diagram needs to do is illustrate a point or, ideally, provide a short cut to understanding. This doesn’t seem to do either. Frankly, it just obscured any of the valid points being made.

The Bottom Line – in this era of fake news and poor information, analysts have more responsibility than ever to reflect reality

This year HfS is making a clear commitment to visualizing our information better and trying to make our perspective in as clear and concise a way as possible. Like the above chart we may not always get it right – but hopefully, that is where our community comes into play and you will let us know what we get right and what we get wrong.

Posted in: Confusing Outsourcing InformationIT Outsourcing / IT Services

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The offshore shift left part 2 - Q4 better be good…

January 19, 2017 | Jamie Snowdon

Back in August 2016 we wrote about the shift left with offshore providers – we were recently reminded of this piece and asked to update the chart. Which we have done in the chart below. It’s interesting to see if things have progressed, and as a prelude to the new results season approaching rapidly…

These results add fuel to Phil’s thought in his Bandaid economy blog. With more traditional services markets slowing, largely because they support older business models. At the same time we see a rapid increase in wealth being generated by enterprises that are tapping directly into digital business models – with the digital pure plays like Amazon, Airbnb, NetFlix, etc. and the rapid adopters like Tesco’s, CapitalOne, Staples, The Gap, John Lewis…  Service providers need to find a way to tap into the money that is flowing into the technology and talent to fuel these increasingly ubiquitous digital business models.

We have been looking to quantify the total opportunity for the digital expenditure or the "flow of revenues over digital channels between business and consumers”. We have started by quantifying the digital retails sales, but will expand to include business to business digital sales, travel and financial services expenditure. But below is a taste of this exciting work – with digital retail center stage and some estimates of the other components for North America to the right.

 

The Bottom Line – let’s just say it again…

As we have said before long term success in the services market is dependent on inertia or the lack of it. Providers that are reacting quickly to the changing market conditions are still finding growth, and this growth is shifting from purely low-cost or offshore providers. This is starting to show up in the financial results more and more as services firms customers ambitions drop, revenue growth fades. The “cut until it bleeds” continuous cost-saving model for operations is creaking badly, especially in light of new technology solutions and an increasingly competitive environment for many traditional businesses.

We will be taking note of the full calendar year results that are coming up this month and next. But we expect the current shift left to continue as providers adjust to the market realities.

Posted in: IT Outsourcing / IT Services

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ADP Crosses the Transactional HR/Payroll (Branding) Chasm in Acquiring The Marcus Buckingham Company

January 18, 2017 | Steve Goldberg

Maximizing team performance and improving employee engagement are both winners in their own right as HCM themes to focus on. Solutions that focus on either are correlated with better business results. ADP and its clients can now play in this arena with the strategic acquisition of The Marcus Buckingham Company.

By many accounts, including mine, ADP's past acquisitions of companies like Workscape, Virtual Edge and The Right Thing, while accretive to revenue (not necessarily a game-changer on a base of over $10 billion) and enabling a more diversified solution and customer portfolio, didn’t fully detach the company from its long-time transactional HR / Payroll branding. Yes, Workscape did bring cool technology around total rewards and portals, but ADP also talked a lot about their new benefits admin outsourcing capability after that acquisition.

The bold move of adding The Marcus Buckingham Company could pay off nicely for ADP, and in “multiplier effect” ways that, by definition, are much more consequential than incremental revenue or adding some new strategic customers.

Just as SuccessFactors was a clear catalyst in SAP’s embracing of the cloud, TMBC could do the same for ADP; not in terms of the cloud as ADP operates there already. The story here is adding a disruptive HCM solution, one that weaves together technology and services elements to help customers solve issues many HR tech products will never tackle.

Among other things, TMBC’s flagship technology StandOut distils the complexity of a team leader’s job into two fundamental questions: “what are my team members’ priorities, and how can I help them?”. As this will entail a new way of approaching the job for many team leaders, the transition is helped along by targeted and expert coaching, TMBC’s other strength that ADP plans to tap into.

TMBC’s technology and complementary coaching bring self-awareness to the performance management and career development process

Self-awareness/self-discovery is often the missing link in feedback and performance management models and systems. You could say that one exception is when an employee is told their self-ratings are very different than how others see/rate them; however that is “being told” rather than learning it through a guided process. Coaching is also advocated by more and more companies, but most aren't consistently adept at it enterprise-wide.  ADP customers can now benefit from Marcus Buckingham’s proven approach, one centered around individuals fully leveraging their strengths (motivating and energizing) vs. addressing their performance gaps (often de-motivating). The model also clearly fits organizations wanting to pursue a “learning organization” strategy and corporate culture.

While a talent management solution offering the type of capabilities TMBC brings can be ahead of many smaller company's adoption or strategic interests for some time, this acquisition should allow ADP to finally break free of its transactional HR/ Payroll branding constraints.

The Bottom Line:

The Marcus Buckingham Company found its mother ship to reach the next stage in its journey to greater revenue and broader market influence/impact; and ADP likely jumped on an acquisition that will put it on the broader HCM brand trajectory it’s been longing for. The pairing should bring even more value to ADP and TMBC customers, and broaden ADP’s strategic HCM footprint in those customers, over 600,000 strong worldwide.

Posted in: Digital TransformationHR Strategy

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Digital Marketing Operations Services: Disrupting the Agency Model

January 18, 2017 | Melissa O'Brien

As we discussed in Part 1 of the digital marketing operations Blueprint blog, marketers are upping their spend and re-thinking the way they spend on services as a result of digital consumer needs. The market landscape for these services includes BPO/ITO providers, marketing technology companies, traditional agencies as well as a vast array of digital and niche agencies. This is a fast-evolving space that requires multiple players to come together and create an ecosystem for business changing solutions. Many buyer organizations (e.g., PepsiCo) have been very vocal about their dissatisfaction with the traditional agency model and are taking marketing work back in-house, or instead of consolidating providers they’re distributing work to several specialty providers. The opportunity for BPO providers to disrupt in this space is increasing; while it is critical for BPO service providers to partner with agencies, which still have and will continue to have a prominent place in the ecosystem, there is much more opportunity for BPOs to provide strategic level work than in the past. In addition, technology has disrupted the way companies go to market. “Martech” has grown exponentially in the last few years, and managing an increasingly complex stack is the norm while companies struggle with the pace of change to manage these varied systems.

So traditional ad agencies have not kept pace with market changes and thus have opened up opportunities for consultancies and BPO organizations to enter the market in some unexpected ways. The part where BPO service providers play in this ecosystem is often in a paradigm referred to as a “de-coupling” strategy: separating the creative from the production. In this model, agencies set the big picture tone for the campaign but can’t meet the needs for reduced cost and speed that BPO service providers can for services such as localization, translation, regulatory/compliance and re-imaging.  The service provider takes the agency campaign assets and reworks them for specific markets, devices, etc.

Sample Content Production Engagement Model

However, many of these services involve elements of creative design and require a blend of talent and automation to execute well.  And services buyers are increasingly looking to providers to have more strategic capabilities, especially where the convergence of marketing, sales and customer service happens in customer experience design.  Almost every services buyer we spoke to expressed an interest in more strategic, higher value services from their providers.

As in almost every market, buyers are increasingly looking to BPO service providers to get more innovative and hungry for their business. Most buyer references said their providers “do what I ask them to do well,” but these same references admitted there is much potential in the future for handling more strategic services: and many service providers have the capability. Even larger enterprise buyers see potential in moving away from the arrogant and set-in-its-ways agency model and embracing services with a fresher-thinking provider. As one client reference commented: “When you go with a big agency, you’re going to get their B team.”

So how are service providers coming to the table?

Players with smaller practices, such as EXL and Tech Mahindra, have some interesting vertically focused offerings and have the advantage of being able to give clients lots of attention and thought leadership. Customer experience management-focused companies (i.e., HGS, Concentrix, Aegis, Revana Digital) have the advantage of knowing their end customer’s requirements best through the connection of their contact center businesses. While these providers aren’t known as a marketing brand for new logos, with the convergence of service and marketing can often sell bespoke or smaller campaigns with an interesting value proposition to customer experience focused stakeholders. The same goes for ITO focused providers (i.e., HCL, NTT DATA Services), where these providers have solid operations engagements elsewhere in the organization, can leverage the strength of those relationships in the growing digital marketing space.

Companies like Genpact, Infosys and TCS have approached digital marketing operations with a strong stance around automation and analytics.  And clients seeking alternatives to the traditional agency model have enabled providers like Cognizant, Wipro and Accenture to excel at an overall vision for digital marketing operations– these providers are acquiring and integrating digital expertise– unlike the traditional agencies who buy up digital agencies and run them as separate entities without as much thought to leveraging the assets of each piece across the organization.

The Bottom-Line: In the rapidly changing marketing services landscape driven by the digital consumer, there is tremendous opportunity for service providers bringing their A team … and it’s anyone’s game


The HfS 2016 Digital Marketing Operations Blueprint covers market trends and direction as well as the analysis of 14 service providers: Accenture, Aegis, Cognizant, Concentrix, EXL, Genpact, HCL, HGS, Infosys, NTT DATA Services, Revana Digital, TCS, Tech Mahindra, Wipro. For more detail—including analyses and individual profiles of the service providers—click here to access and download the Blueprint.

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

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Putting healthcare services at the fingertips of your patients and members

January 17, 2017 | Barbra McGann

“It is a truth universally acknowledged” that the healthcare experience needs to change – for consumers and clinicians. Part of this change is to make access to data, services, and transactions easier – more “at the fingertips,” if you will—and more relevant to their healthcare experience. In a word, mobility. Mobile is about the platform; mobility is about the journey, the movement of the person, and the experience while in motion. There are a number of mobile platforms on the market today, but who is using them to bring mobility to healthcare?

“…mobility is about understanding where I am, where I am going and what I want to accomplish, and helping to make that journey exponentially better,” said David Sable, CEO of communications firm Y&R in a Huffington Post blog.

Well said. There are a number of mobile platforms on the market today to help make this happen, from well-established technology providers like IBM, PegaSystems, and SAP as well as up-and-comers like Kinvey, Kony, and MobileSmith. And I recently had an opportunity to get to know one offering suite a little better – Skava, which was acquired by Infosys in 2015.

How can mobile platform technology providers bring mobility to healthcare?

Skava is well established as a mobile development platform in retail, powering mobile apps, kiosks, and mobile devices for Gap, Staples, ToyRUs, and others. Now Infosys is bringing this consumer engagement and e-commerce enablement platform to healthcare. It is developing a set of independent, modular, discrete functional units packaged as “Build Your Own Digital Platform” for healthcare providers and payers. (see Exhibit 1) Imagine consumers, patients, caregivers, pharmacists, and clinicians – among others in the healthcare community – being able to enroll, complete transactions like paying bills, scheduling, care management plans and alerts, etc. Then imagine having it integrated into the core healthcare management systems already in place.

Exhibit 1: The “Build Your Own Digital Platform” Play for Mobility in Healthcare

Infosys isn’t the only one with this capability, so if you are looking at walking down this path, take a look around for what best fits your needs. What I found with Infosys is that even though this solution set is not well established in healthcare, it does have a strong client base and proof points from retail, an industry that is heavily dependent on engaging consumers in transaction oriented interactions. The platform supported $1.5 billion in e-commerce revenues in 2015. Infosys also has depth in IT services across industries, including healthcare, so it has the capability to work with clients to integrated and customize apps and services as needed. The Skava platform does plug into current IT infrastructure. And, the service provider is also better integrating its business services and IT capability so that if you want on-going support that includes data management and analysis, you can tap into extended services and have a single provider.

One “miss” in the story line so far, though, is my earlier point about mobility and creating an experience versus offering a mobile platform. Infosys as a company is investing heavily in design thinking capability – an innovative approach to identifying and solving problems. Yet, when we engage in briefings and look at the materials associated with this solution set, there is no mention of starting first with – what problem are you trying to solve? What opportunity are you looking to address? How are you defining and testing out the proposed solution prototypes with the stakeholders – consumers and business? And that’s a critical first step to ensure that the use of the IT-based solution is truly to address the consumer experience and how that impacts the business outcomes.

Bottom line: If you want people to do something, make it as easy as possible for them to do it. Healthcare providers and payers need to make healthcare services easier for consumers to access, use, and pay for, and mobility plays an inevitable role.

Infosys can tap into its design thinking approach and IT services, and leverage the Skava platform in a flexible way to help clients get there. There are already a number of healthcare management apps and mobile capabilities on the market, so it isn’t new. It is something that if you want to truly be a healthcare consumer oriented organization, you’ll have to incorporate into your business, and partnering with a service provider with IT, business process, and analytics skills is a viable option.

Posted in: Digital TransformationHealthcare and OutsourcingMobility

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Ramyam and Arvato – Raving Fans or Raving Mad?

January 16, 2017 | Reetika JoshiMelissa O'Brien

Arvato just announced its acquisition of Bangalore-based Ramyam Innovation Lab, whose stated mantra is to make customers “raving fans” by enabling contact center staff to have valuable customer information at their fingertips. Ramyam’s key asset is its omnichannel platform, Enliven CEM. The platform integrates various communication channels such as email, chat, voice and social media, and uses interaction information to generate individual customer profiles. This is layered with analytics and dashboards; the analytics model aspires to manage customer journeys with “context-based decisioning” in real time, helping agents more proactively solve customer problems.

Our research shows that in this race toward providing digital customer experience, most of the leading customer experience management companies are taking a stab at providing omnichannel customer services. Major CEM providers are starting to/have figured out their strategies for developing 360 customer views that would provide insights to improve contact center effectiveness. To provide progressive omnichannel service support, a CEM service provider needs a strong framework for the underlying data and technology, and that’s what this acquisition is about. Most are taking a third-party approach to enabling the technology, but Arvato’s move provides it an opportunity to have better integration and perhaps move towards providing CEM As-a-Service in the future.

Arvato’s approach is admirable, especially where it affords the company an inroad to one of its key growth markets in India. Ramyam’s highlighted consumer-facing verticals of telecom, retail, banking and travel are key industries for omnichannel customer communication. This also is some much-needed publicity for Arvato, which has fallen behind its customer experience management competitors in thought leadership and demonstrated investment in innovation.

However, all of these buzzwords around omnichannel are used so often and heavily (i.e. “next generation analytics-driven actionability, enabling service providers to deliver superior experience and engagement to their customers”) that they are becoming diluted, making it harder for service providers to carve out a real differentiator with these platforms. Arvato’s assertion that this capability creates “a distinct competitive advantage” is disillusioned. To create differentiation, it will need to use this acquisition to craft and articulate an As-a-Service on-demand, flexible strategy for providing customer experience management—one that provides a single contract with well-defined business outcomes by leveraging technology platforms, data and insights and omnichannel customer support functions.  

The bottom line: Kudos to Arvato for making an investment in a young, emerging tech startup with some solid customer experience thinking. But the messaging needs some maturing to really highlight the differentiation that Ramyam can bring to the table.

Whether the combination can help turn Arvato’s end customers into raving fans, we’ll wait and see.

Posted in: Contact Center and Omni-ChannelAnalytics, Big Data and BICustomer Experience Management

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Trump Intel Story: A Stark Example Of A Predictive Security Management Dilemma

January 13, 2017 | Christine Ferrusi Ross

This week the Internet blew up based on news that Intel officials briefed President Obama and Donald Trump on the possibility that Russia had information on Donald Trump that was damaging to him personally and might even have implications for the entire US government. (And while one never expects a hashtag like #goldenshowers to trend on twitter, the feed was hilarious.) 

Politics aside, this story is a textbook case of problems with being proactive with threats. Notice: I wrote “threats” not “events” or “incidents” because the incident hasn’t happened yet, there’s just a high potential for it to be true and for it to happen.

You get lots of finger pointing in hindsight. The common question is “what did you know, and when did you know it?” Because, after something bad happens, anyone who knew of the potential for the event comes under fire for not saying something sooner, not being more forceful if in fact they HAD said something, and for not doing something to stop it from happening.  The fact is something happened and someone has to somehow get blamed.

And in the Trump intel story, you see the opposite of that, with everyone retreating to respective political corners, defending or dismissing the intel reports based on emotion and personal perspective. And since now that everyone’s already picking sides, it will be that much harder to make the right decision on how to treat the threat risk. So, how do you ask the right questions and take action in time to avoid the impending threat?

Here are the questions predictive security and risk management brings:

  • When do you flag a threat to executives? It’s important to have a policy in advance so there isn’t confusion later. It could be something like “a risk has been increasing steadily for the past 3 months” to “a risk increased very quickly in a short period” or similar idea. When you raise the flag may have a drastic impact on which actions you take to address the treat, since risks are often time sensitive.
  • How much do you tell them? Even if you’ve decided to tell executives, you must decide how much information to give. Too much detail and you may panic them unnecessarily, too little and they may not appreciate the implications of the threat. This question is usually harder to answer than the first one.
  • What do executives need to DO because of the rising risk? Another tricky area, what do you propose be done about the threat? Wait it out and seek more confirmation? Deal with it proactively, even if there’s potential for the threat to not happen? Take interim steps? This is the most important question to be answered when talking about predictive security management.

Focus Predictive Security On Remediation Not Reporting

We don’t know what advice the intel team gave to the government leaders, but we do know there are a few general ways you can deal with a threat or risk:

  • Accept the risk and go on with what you were doing. Sometimes there’s not much that can be done – or worth doing. For example, there could be a heightened risk of a terrorist attack, but you don’t want to be seen to be weak and encourage them further and choose to ignore it, safe in the knowledge airport security is already prepared for such a threat.
  • Try to remove or reduce the risk. In a political context, it might involve finding the people who are informants and stopping their ability to keep helping the other government. In a corporate setting, it might involve cutting a contract with a supplier you think has illegal dealings, for example.
  • Make a strategic bet to increase the risk. In a political context like yesterday’s story, increasing a risk strategically could involve cutting diplomatic ties, mobilizing troops or invoking sanctions, among others (these increase risk because they may cause the original threat actor to escalate further or move more quickly with the original threat.) In a corporate context, an example would be to work with a startup vendor even though you know it’s a highly risky supplier because that vendor has some amazing new technology that you want to use.

Unfortunately, if you didn’t have a remediation plan in place BEFORE the risk became likely, you’re facing much more confusion about what to do and even whether to do anything at all. This puts your company at risk and in fact, negates the value of having predictive security capabilities.

Bottom Line: Security professionals need predictive security management and prescriptive treatment plans to protect their firms from looming threats.

Security teams need clear treatment plans that address potential risks and how to mitigate them. As a simple example, if there is a threat of insiders giving information to third parties, then the remediation plan would involve something like “when someone downloads more than one file they don’t normally access, that person’s manager must ask why the person needed those files within 4 hours of the download.” Without this proactive treatment planning, companies likely do nothing and then get harmed even by risks they could have addressed.

 

Posted in: Security and Risk

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2017: The year people are forced to learn new skills... or join the Lost Generation

January 13, 2017 | Phil Fersht

Let’s cut to the chase – there have never been times as uncertain as these in the world of business. There is no written rule-book to follow when it comes to career survival. The “Future of Work” is about making ourselves employable in a workforce where the priority of business leaders is to invest in automation and digital technology, more than training and developing their own workforces.

As our soon-to-be-released State of Operations and Outsourcing 2017 study, conducted in conjunction with KPMG across 454 major enterprise buyers globally, shows a dramatic shift in priorities from senior managers (SVPs and above), where 43% are earmarking significant investment in robotic automation of processes, compared with only 28% placing a similar emphasis on training and change management. In fact, the same number of senior managers are as focused on cognitive computing as their own people… yes, folks, this is the singularity of enterprise operations, where cognitive computing now equals employees’ brains when it comes to investment!

My deep-seated fear for today’s workforce is that we’re in danger of becoming this "Lost Generation" of workers if we persist in relying on what we already know, versus avoiding learning new skills that business leaders now need. We have to become students again, put our egos aside, and broaden our capabilities to avoid the quicksand of legacy executives no longer worth employing. We need to become hybrid corporate animals.

So let’s give some examples of these "new skills" we need to develop for ourselves:

Sales people: it’s no longer just about selling and relationship development, it’s about understanding evolving business models, understanding the impact of technology and the importance of smart marketing. You need to be a trusted consultant, not simply good with a 9-iron. Clients needs are increasingly complexifying and you need to be the arbiter of helping them simplify their requirements. Understanding business models is what will make you successful in the digital world.

Software people: it’s no longer about data management, security and making apps function, it’s also about understanding the desired business outcomes associated with these investments and helping your enterprise stakeholders articulate them better, so you can work with them to

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Posted in: Cognitive ComputingDigital TransformationHfS Surveys: All our Survey Posts

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Making Industry 4.0 Real For Manufacturers

January 12, 2017 | Pareekh Jain

Industry 4.0 has become a buzzword in the manufacturing industry today. There is a reason for it. There has not been a full-scale change in the way we manufacture goods since the days of Henry Ford. The PLC (programmable logic controller), MES (manufacturing execution system), first generation robots have all made incremental improvements to efficiency but not to the same extent. Now with Industry 4.0 the change is beginning to happen.

But what is Industry 4.0? The danger of the buzzwords is that many service providers are trying to label their legacy services and solutions as Industry 4.0 and confusing clients. We at HfS Research believe that Industry 4.0—or the fourth industrial revolution—is the confluence of many technologies coming together in manufacturing for the creation of smart factories with significantly high efficiency, productivity, quality and flexibility than the current state. It will enable mass customization in manufacturing. While it will take few decades to enable promises of mass customization at scale, the journey has started. 

While most engineering, consulting, technology, and business process services in manufacturing industry offered today (even legacy services!) can help enterprises in their Industry 4.0 journey in some way, we have identified 13 enabling technologies that we believe are critical for any enterprise to accelerate its Industry 4.0 journey.

To make Industry 4.0 real for our enterprise clients, we are launching our Industry 4.0 study, which will focus exclusively on R&D, plan, implement and operate services around the 13 enabling technologies shown in the chart. Most of these technologies are in the early stages of adoption, as we will discuss in the forthcoming Blueprint Guide.

Bottom Line: HfS Research Blueprint Guide: Industry 4.0 Service 2017 will cut the chase and make Industry 4.0 real for our enterprise clients.

This study will help enterprise clients understand the real case applications of different Industry 4.0 offerings along with capabilities and offerings of the service providers in the market today. We will work to understand the different ways that this functionality is delivered and how it may evolve. We will evaluate about 15 service providers on their innovation and execution capabilities in this emerging and exciting space. If you have any interesting Industry 4.0 services story to share, please contact [email protected]

Posted in: Engineering

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The Digital Marketing Operations Blueprint is Out - Part 1: Key Market Dynamics

January 12, 2017 | Melissa O'Brien

Just before the holiday break we released our first HfS Blueprint focused solely on the Digital Marketing Operations market. In the past, we have covered customer experience management along with marketing in the same report, and this year decided to break out the front office processes and look at them in a narrower scope, including our Contact Center and Digitally Enabled Contact Center blueprints, and this most recent endeavor in digital marketing services. It quickly became obvious that while service providers have varied strengths and value propositions across each of these areas, the blurring lines between front office functions is creating confusion- and opportunity- in this quickly changing market.

Digital is all about realigning to the customer

Changing customer demands are driving companies to up their investment in digital marketing. The way customers prefer to communicate and consume information is forcing marketers to rethink their strategies, as well as collaborate with other business units for a greater holistic customer view. Whether it’s advertising on social platforms, understanding customer segments on the web or mobile apps, or putting out relevant content for greater personalization and sales conversion, the need for speed and efficiency is top-of-mind for marketers. Because these expectations and preferences are constantly changing, marketers are tasked with becoming nimbler and more efficient organizations in order to be increasingly competitive. Some of the buyer-service provider dynamics include:

  • Maturing digital marketing operations are driving investment: The maturity of digital marketing services buyers falls across a broad spectrum. We spoke with some buyers at the very beginning of their journeys, converting paper-based materials to digital formats. Others already have a solid digital marketing strategy in place, and are looking to further optimize and create efficiencies in their operations. As buyers mature, the burgeoning volume of digital assets becomes a greater challenge to manage—which often falls upon their service providers.
  • “Better, faster, cheaper” is table stakes: Not surprisingly, cost reduction still ranks as a top driver for digital marketing operations services. Buyers have ever-increasing expectations for speed and efficiency with reduced budgets. The need to reduce turnaround time and time-to-market for campaigns is common. Many clients view their service providers as an extension of their teams that they can often use in off hours when timelines are tight. On top of these increasing pressures, most buyers are also looking to their service providers to deliver market insight, thought leadership and innovation.
  • Customer experience is impacting governance models: While the front office traditionally operated in siloes, digital is driving a convergence of traditionally disparate departments. Often under the purview of an “engagement or experience officer,” leaders are learning to reach across functional siloes, between IT and lines of business, to deliver on a more holistic experience for their end customer. This, in turn, increases the complexity that service providers deal with when setting expectations and delivering on services to their client stakeholders.

What’s next?

It became very apparent while doing this research exercise that it’s getting harder and harder to draw a line between “marketing” and other front office functions like customer service and sales as we move to a more holistic customer experience viewpoint. As the edges of front office services continue to blur, the services that providers offer overlap and the competitive landscape will get more complex, with more niche/specialty service providers entering the mix. Many providers not included in this report were on the periphery of digital marketing operations because of their approach to customer experience; the coming year will see greater development of their value propositions and emergence into this competitive landscape in the coming year. 

Also, a shift in the way that buyers and providers work together: the need for higher value services from buyers is often easily expressed but not as easily adopted by various stakeholders within client organizations. The combination of embracing the ideals of design thinking and brokers of capability within client organizations will help to enable a better reception of new ideas and strategic thinking with digital marketing operations service providers. Buyers need to be willing to work with service providers on this type of end-to-end CX initiatives. This often involves using service providers as change agents to bring together multiple internal stakeholders across the front office in their siloed organizations. 

The bottom line: service providers have a big opportunity to continue moving into the realm of strategic and cause disruption in this market.

This is not only an opportunity for new entrants, but also really an opportunity for service providers which have a greater breadth of services to grow their existing relationships, evolving beyond isolated engagement to more comprehensive marketing operations services. Right now services in this market are often consumed in a more piecemeal fashion, but buyers are interested in adopting services from providers where they have trusted relationships. The majority of buyers interviewed for this report were interested in expanding the scope of the relationships with their current service providers and experiment on new platforms (i.e. social media platforms as they arise). Service providers which are focused on thought leadership will win these expansions. For some, digital marketing operations will mature into another commoditized, race-to-the bottom BPO service for cost takeout. But the smart service providers with a well-planned talent strategy and plans for intelligent automation have a real opportunity to disrupt the agency model and gain a greater chunk of marketing spend.

Posted in: Digital TransformationHfS Blueprint Results

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No more denial for WNS as it makes its concerted procurement play

January 12, 2017 | Phil FershtDerk Erbé

This is era of the emerging BPO provider, as IT services stagnate and clients demand greater personalization and attention from business services firms that have the scale, resources, hunger and technology enablement skills to take on increasing complexity and make sense out of the dataswamps plaguing so many of today's businesses.  

One such stalwart of BPO, quietly going about its business over the years with steady growth and increasing reputation for solid delivery, is WNS (yes, the one that was spawned out of the British Airways captive back in the day).  WNS has performed well over the years, growing business streams in knowledge process domains, finance and accounting, insurance, travel, mid-size banks, contact center and some other areas.  It has oft-threatened to make a grander procurement BPO play, but mostly opted to partner with the likes of Denali when the need arised.

In my view, having solid procurement delivery capabilities goes hand in hand with F&A, so it's refreshing to see WNS snap up one of the best pureplay strategic sourcing providers left in the market, which should make the merged entity a Winner's Circle contender later this year when we rerun the Procurement-as-a-Service blueprint:

Click to view

So let's hear from our Procurement and Supply Chain analyst, Derk Erbé, who's recently emerged from a major analysis of the procurement services market:

WNS + Denali - The Details

To start the New Year with a bang, WNS announced the $40 million acquisition of Denali Sourcing Services. We have covered both WNS and Denali in our December 2016 Procurement As-a-Service Blueprint. WNS is ranked as an Execution Powerhouse, while Denali is a High Performer in the Procurement As-a-Service market.

The acquisition of Denali Sourcing Services is a good move from WNS, and effectively bolsters

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Posted in: Business Process Outsourcing (BPO)HfS Blueprint ResultsProcurement, Engineering & Supply Chain Outsourcing

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Poach, diversify or upskill? What is the secret for sourcing security talent?

January 11, 2017 | Mike Cook

With the continued rise in cyber security threats, highlighted by the recent Tesco banking breach in the UK and the ongoing Russian hacking debacle in the US, organizations across industries are scrambling to get their cyber security measures in order. The General Data Protection Regulation (GDPR) and the Network Information and Security (NIS) directives in the EU have only increased the urgency for organizations in this region to bolster their cyber defenses.

This urgent need to address cyber security, coupled with challenging hurdles to overcome in building internal security practices, is driving more firms to partner and outsource this critical business function.

One of the key internal hurdles we have identified in this market is that clients are challenged to source the required talent to keep abreast of their security requirements. This is a well-documented problem within the cyber security community and is one of the top three drivers that is shaping and driving the outsourced cyber security market at present.

So, the solution seems simple enough, if you can’t find the talent, hand over the responsibility on to someone who already has it.

But this begs the question: if there is a lack of security talent in the market how are service providers finding it?

Well, not easily is the answer. The more successful service providers have branched out and are tackling this problem from several angles. These can be largely categorized under external sourcing and internal sourcing:

External Sourcing

  • Hire young: For most of the leading providers in the market, partnering with universities to hire graduates straight out of the gate has been a go-to method. EY, for example, has partnered with 12 of the leading universities that provide courses on cyber security and analytics in the US. EY has not stopped there however and is now building partnerships with six smaller regional universities to further plumb the graduate talent pool. Often within these university/service provider partnerships, the service provider is fundamental in helping to shape course work and the curriculum, this is a positive dynamic as it gives students the skills needed to hit the ground running in the workplace.
  • Increase diversity: For example, reach out at the grass roots level to mentor female students taking analytics, mathematics, and related courses into the cyber security field. Capgemini has made a huge push in this regard with 20% of its UK and 25% of its Indian security operations now female. Next is looking outside of the professional sphere and into the military, many operations specialists in the army possess the necessary skillset to thrive in the cyber security field. Finally, is an apprenticeship scheme whereby hiring is conducted on behavioral and cognitive characteristics rather than qualification.
  • Poach: Or in corporate terms “hire laterally”. With the cyber security talent market lacking the volume it currently requires, attracting talent from competitors, or in some cases startups, is typically going to be on the cards.

Internal Sourcing

  • Upskill: This is basically what it says on the box, taking junior staff and putting them through internal and external training qualifications such as the Certified Ethical Hacker (CEH) or GIAC Certified Penetration Tester (GPEN) certificates.
  • Creatively use the people you have: The service providers covered in the (upcoming) 2017 Trust as a Service Blueprint all have overall staff counts in the thousands (some in the hundreds of thousands). With such a wide and deep IT talent pool, it makes sense to laterally pull in staff from other divisions in the organization. The most common positions targeted for internal transfer to security teams include application developers, risk and compliance, people assessment and digital transaction professionals. These staff will then be trained in security courses complimentary to their previous experience and skillset.

Sourcing security talent, even for service providers, is a challenge. The one ace these service providers have up their sleeves is the large and diversified IT workforces they have to hand. Some service providers are sourcing up to 60% of their security personnel from inside. With this in mind, organizations need to carefully consider the cost and time involved in building an in-house security team over partnering with and integrating capability from ones that have already fought the battle.

Posted in: HR OutsourcingSecurity and RiskTalent in Sourcing

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Change Management in HR Tech Deployments – Lessons from the Trenches

January 11, 2017 | Steve Goldberg

 

My preoccupation with change management can be traced back to when I realized that success on HR Technology initiatives was perhaps more a function of the organization being “ready, willing and able” to change (in the form of leveraging new technology) than anything else, including the virtues of any particular system. Now before some folks in the vendor community or others fascinated by shiny objects yell “blasphemy”, let’s remember that:

  • Any HCM system (aka HRMS) that‘s been successfully deployed in hundreds of similar organizations likely provides at least 80% of the major process-enablement capabilities a typical customer needs, plus many innovative people management features as well.
  • It’s unlikely that any HCM system will 100% match a buying organization’s business requirements, let alone their future vision around managing talent for competitive advantage.
  • Much of the gap between 80% and 100% can often be addressed through a combination of configuration tools, influencing the vendor to address in an upcoming release or product update (more frequent updates with cloud delivery) or inconsequential process workarounds.

Successful HRMS implementations are more linked to factors outside the chosen technology, and the #1 factor is (internal) customer-centric change management.

It took me some time to have the above epiphany partially because senior management and project sponsors at my first few employers generally assessed project success based on the system being delivered on-time, on-budget and stable. End-user adoption and business case realization were rarely on the project charter in those years. You could say this was fairly helpful to my HR Tech career at the time, but not so helpful to those particular organizations as a whole. 

As a result of inadequate attention to change management in the first few rollouts, very few folks outside the HR Department used the system at these companies, and worse, most line managers maintained their own spreadsheet with HR data and related update processes. They simply trusted their own, personally crafted low-tech data repositories more. These dynamics can cost companies millions annually. (Post a comment below if you’d like to see the math!) What was missing? All future end-users needed to be “ready, willing, and able” – a framework used by many change management experts.

"Ready” suggests the impacts of the change are understood, and sources of resistance and associated mitigation steps identified. “Willing” relates to the case for change being widely syndicated, tailored to stakeholders as needed, and reinforced through communications programs and executive support.  Finally, “able” suggests that relevant skills, competencies, performance measures and even corporate culture aspects are being put in place to execute and sustain the change.

Ready-Willing-Able: A Success Story

In one of my later HR Tech involvements, we went beyond understanding process automation requirements and spent considerable time with line managers discussing people management (not process management) issues that kept them up at night, how real-time access to high-value data would help them, etc. This time, we put “empathy for the customer experience” first. We also worked to overcome (beginning with acknowledging!) some long-standing disappointments with HR on the part of many consumers of HR solutions, services and programs. This was Design Thinking before the term was widely used, although empathy had been around for eons.

The team also figured out creative ways to give end-users (mostly line managers in this instance) a sense of control and ownership over the system and its data. One example involved hitting a “challenge button” about any data that line managers suspected of being incorrect. That opened a dialogue box for comments and auto-generated an email to an appropriate HR administrator requesting research and resolution. Quick turnaround was ensured through an associated SLA (service level agreement) process. 

The “black hole” of trying to resolve data issues with HR disappeared! 

That prestigious bank’s Chairman came into my office for the first time ever to congratulate our team on the crowning achievement for the HR Department, not just that year, but any year in his memory.  He heard that people outside HR were using the system, and regularly.

Combating Employee Disengagement from all the Change

Multiple generations at work with different personal drivers, automation changing the nature of work, achieving more with less, and the frequency with which businesses tweak their operating models or totally re-invent themselves are dynamics that won’t be changing anytime soon. These dynamics can lead to employee disengagement even without adding new “HR / People Systems” to have to learn and use. And disengagement can bring down even the best run companies. Investing in employees in ways that resonate certainly helps with the employee disengagement challenge; but empathetic change management is absolutely essential when the change is represented by something very tangible, like a new system.   

Bottom Line:  When end-users genuinely feel their work lives and perspectives are taken into full account, due to proactive change management, the prospects of broad HCM system adoption and even a stellar ROI are significantly higher.

Posted in: HR StrategyIT Outsourcing / IT ServicesSourcing Change Management

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Which Service Providers will help our healthcare organizations survive, even thrive, post-ACA?

January 10, 2017 | Phil FershtBarbra McGann

Have we ever lived in such unpredictable political times?  An unpredictable president-elect, with unpredictable policies in areas where it's hard to predict what will work... or what won't, whatever we predict. But one prediction is certain... HfS has a healthcare analyst who'll keep pounding away at the issues and challenges, where this industry needs to plug capability gaps to be effective... so over to Barbra McGann to give her assessment of the current services market landscape of providers jostling to be in pole position to pivot to support healthcare clients, however things start to unravel...

Much as I’d like to, I can’t foresee the actual future of the U.S. Affordable Care Act (ACA) or healthcare policies under President-elect Donald Trump… anymore than anyone could predict the true outcome of the recent U.S. presidential election. What I do foresee, however, is the increased need for partnerships to focus on what the ACA is designed to accomplish (regardless of its existence) – affordable, accessible, quality health care.

Getting to the heart of the problem –the cost.

There are many people who are upset at having to pay for “other people’s” healthcare costs – which they believe is because of the ACA. And there are many people who are receiving care who didn’t before and wouldn’t otherwise, because of pre-existing conditions or age, for example. And these are often people who when they did get sick, would go straight to an emergency room – an expensive treatment which by the way somehow had its cost passed in some way at some time to, likely, people who today do “not want to pay for other people’s healthcare.” Any way you look at it, costs get spread around.

So let’s look at this issue – cost – from a different angle... how about the angle of reducing or eliminating some of these costs?  Reducing the cost of ER visits or readmissions because we can identify and intervene in someone’s pattern of such use or events before they happen because of triggers? Or, increasing the possibilities of people being healthy because of proactive education around nutrition, exercise, and lifestyle?

Partnerships are critical to truly changing the nature and outcome of health care

Just as it “takes a village to raise a child,” it takes a community of partners to create a high quality, lower cost environment for healthy consumers. Those partners include people on the front lines of care everyday—the obvious, like doctors, nurses, pharmacists, social workers – and also professionals who work behind the scenes but have an impact on care and cost – such as billing coordinators, claims processors, and coders. If everyone is thinking about their work, and how changes to the way they work, can impact the healthcare consumer, we have a

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Posted in: Business Process Outsourcing (BPO)Healthcare and Outsourcing

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What ever happened to the Death of Offshoring through RPA?

January 06, 2017 | Tom Reuner

I remember vividly reading an article back in 2012 that a new set of software termed “robotic automation” could be a serious threat to offshoring if not outsourcing at large. Suffice it to say I sat up straight in my chair and wanted to find out more. And I am very glad that I not only read that article but started to research those topics. This research not only got me immersed in the small yet highly innovative Intelligent Automation community, but it led to HfS suggesting that we should join forces to push the envelope on how these tools might disrupt our industry. At the time, Phil titled the blog in his inimitable fashion: “Greetings from Robotistan, outsourcing’s cheapest destination.” And the key strategic questions the HfS team was asking included: If you were a buyer, how fast would you jump at the option to hire FTEs at rates that undercut the Indian body shops by 50% -- without sending jobs offshore? (“Hire” isn’t the right word, of course: it’s “create”.)  If you were a BPO services provider, how would you like to build a software robot to automate a business process for one client, and then resell copies of that robot to a dozen other clients in the same vertical?”

So, fast-forward 4 years, is the offshoring industry any closer to the abyss? Those questions raised by HfS can be condensed to the suggestion that RPA will lead to a surge in insourcing which in turn will cannibalize large parts of the offshoring industry. This was underpinned by the assumption that scaling those robots is a piece of cake.  Suffice it to say those suggestions need to be understood in the context of time, but equally that it were tool providers like Blue Prism and UiPath pushing that narrative in order to get the concept of RPA on the radar screens of the industry’s stakeholders. So where is the industry really at and what are the likely scenarios moving forward? Two recent industry events might help to shed more light at this. First, early in December Capita announced restructuring program. Crucially, the expected job losses are meant to be buffered by both moving services offshore as well as investing into a proprietary RPA solution. Capita is an important reference point as it has been used by the likes of Blue Prism and UiPath as a case study for the suggested trend of increased insourcing through RPA. What this tells us is that we have to stop ask binary questions, namely is one concept supplanting another. This is also demonstrated by the second event. HfS did spend a couple of intriguing days in Vietnam visiting Swiss Post Solutions (SPS) delivery centers in Ho Chi Minh City and Can Tho. SPS is a compelling example for scaling out RPA as part of its Global Sourcing strategy. The company is blending proprietary IP, RPA (UiPath) and Artificial Intelligence (Celaton) to accelerate toward higher value services. Thus, SPS is aiming to expand from its core in document management outsourcing toward BPO services. This journey is incremental, building on its historical strengths around document management and invoice processing but progressing to broader capabilities in F&A BPO and Insurance Claims processing. Unlike many other RPA deployments which tend to focus on client specific activities, often on a sub-process level, SPS is focusing on industrializing the core of its delivery capabilities through RPA and AI.

Before you raise your eyebrows, the point here is not to suggest that the market will necessarily follow SPS, but that we need a much more nuanced understanding of the implications of RPA and Intelligent Automation at large. HfS has been vocal, to put it mildly, on the impact of automation. First and foremost, this impact plays out differently in different scenarios. We see the most pronounced impact on service providers internally. It is here where RPA is being deployed aggressively and as financial earnings calls show, thousands of jobs are being “freed up”. Service providers are much coyer in deploying RPA in Managed Services contracts as top line revenues will be impacted. More recently we see a surge in transformational projects building out captive automation capabilities for clients. However, the boundaries between the last two scenarios are blurted. As part of the sourcing mix both might exist within one organization. But equally, we are seeing failed in-house projects that end up as BPO contracts and vice-versa.

However, to get a better sense for potential disruption, we have to continuously enhance our understanding of what automation really means. The more I think about automation, the more discussions I have with stakeholders, I keep increasingly coming back to one issue that helps me crystallizing my thoughts on the impact: How much of automation conceptually is actually a managed service and how much conceivably could be run as unsupervised learning. Take the example of SPS, business agents are being supported by elements of RPA and AI but their activities continue to require significant manual intervention. You can apply the same logic to the various tool providers and you get a sense when you visit their offices. Do you see hordes of developers doing manual tweaks and coding or do you see largely just R&D capabilities? Unsurprisingly the latter technologies offer higher value moving forward, even though at times it might require more effort to get the deployments up and running. Now combine the emerging notion of Virtual Agents underpinned by those forward-looking technologies and we really are staring at highly disruptive scenarios. On the danger of sounding like a broken record, we urgently need an honest and transparent debate on the various implications of Intelligent Automation.

Bottom-line: Intelligent Automation projects will only be successful with constructive change management

The White House released a report on the implications of automation and AI on the economy, the UK Government undertook an inquiry into robotics and artificial intelligence, yet our industry appears largely to remain in denial about those issues. Almost all service providers we try to engage with around this topic continue to suggest there will be no disruption. People “freed up” from projects will re-trained, re-badged – and you will have guessed it – all be happy. But I keep scratching my as we work in the sourcing industry. I am the last one proposing restructuring and job losses, but we finally have to get to a more honest and transparent debate on all of this. The implications will not only be felt in global sourcing locations but much closer to home in equal measure.

Posted in: Business Process Outsourcing (BPO)Robotic Process AutomationIntelligent Automation

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Will WorkFusion’s “Free RPA” destroy the RPA market as we know it?

January 05, 2017 | Tom Reuner

 

When somebody offers me something that is allegedly free, I tend to get skeptical, if not outright cynical, about possible motives or hidden catches. This is especially the case in the emerging intelligent automation market, where the focus needs to be centered on making automation work effectively and driving value from digitizing legacy processes, not saving some money on software licenses.

I had the same reaction when I first heard about WorkFusion’s plan to offer core RPA capabilities for free. In a nascent market that is clouded by the reluctance of many stakeholders to share their views and more importantly playback experiences, leading to extremely blurred perceptions, the move to commoditize core RPA, before it even has become mainstream could open a Pandora’s Box. In mythology, Pandora’s Box contained all the evils of the world. So what is really in WorkFusion’s box? Is it rather an altruistic box helping clients to climb to the stairway not to heaven but to digital operations as the company did put it?  Before I let my cynical inner-self rip, I listened to WorkFusion’s webinar to find out more details. So, let’s first look at what WorkFusion is actually planning to launch. Dubbed RPA Express and planned to be launched in Q1 2017, the new product is said to offer the core RPA capabilities including:

  • Bot Recorder
  • Developer Studio
  • UI Automation Drivers
  • Bot Libraries
  • Scheduling
  • Control Tower
  • User/Role Management

While RPA is not defined across the industry, those suggested capabilities capture the value propositions of the leading RPA tool providers such as Blue Prism, UiPath, and AutomationAnywhere. Thus, WorkFusion’s strategic move to offer these for free could have profound implications for a market that has not yet reached maturity.

The two fundamental questions we have with WorkFusion’s aggressive move:

  1. Will it lead to commoditization before we have even reached market maturity and
  2. How this move could impact the leading RPA tool providers – and how will the respond (if at all)

WorkFusion’s move will accelerate the move toward transformation

WorkFusion suggests the motivation for offering RPA Express for free is to accelerate customer’s journey toward cognitive automation including crowdsourcing, chatbots and a broad integration of machine learning. As WorkFusion is not a shy organization, it reminded the audience in a recent webinar that it had launched several industry firsts including:

  • Train Machine Learning with Crowdsourcing
  • Virtualize data science
  • Combine RPA with broader cognitive capabilities
  • Build-in Tableau analytics
  • Automate conversations through chatbots and other means

Fundamentally, free RPA tool sets will lower the barrier to entry. Organizations can trial capabilities without having to worry about licensing costs. WorkFusion was at pains to stress that RPA Express is not a community version, requires costly upgrades to delivery enterprise-wide results or containing padlocks on higher value features. Provided these claims will get corroborated, the move could accelerate the move toward understanding RPA as part of transformation projects rather than a short-term focus on cost elimination, often on task rather than process level. Suffice it to say, at the same time it WorkFusion will strike at the heart of the RPA tool providers. On the service provider side, many will be chuffed by the elimination of licensing costs, but at the same time, many have established practices for Blue Prism, AutomationAnywhere or UiPath and will not easily jeopardize these relationships at least in the short term. However, the missing piece in the jigsaw is the talent that can integrate RPA capabilities – regardless whether they are free or not – into broader service delivery strategies. Therefore, partners will charge for training around RPA Express as well as helping to advance the journey toward higher value, cognitive automation capabilities. Nothing in life is really free.

Move could impact valuations of RPA tool providers

RPA Express is all about free tools for structured data. Yet, as we have stated repeatedly the industry needs to embrace the broad Continuum of Intelligent Automation (IA), with a strong focus on integrating unstructured data and building out cognitive automation capabilities. It is here where WorkFusion’s Smart Process Automation (SPA) is providing the value add and will thus provide the revenue streams. WorkFusion’s starting point in IA was Crowdsourcing and Machine Learning. Initially, it had used the RPA moniker to get a seat at the table for the decision-making on automation projects before building out broader RPA capabilities. The core RPA discussions continue to center on Blue Prism, AutomationAnywhere, and UiPath. It is these providers that could lose most from this move. Their licensing models will come invariably under scrutiny. The key question here is, how quickly can those providers accelerate their roadmaps in building out operational analytics and cognitive capabilities to buffer against potential losses in licensing revenues? Suffice it to say, I expect Harvey Ball graphics depicting the differences between RPA Express and the leading tool sets any time after the expected launch. And I can hear already voices claiming that WorkFusion has only limited capabilities in RPA to start with and can therefore easily suggest free offerings. However, in a market where very few understand the technical details of RPA tools and their impact on broader process flows, perceptions are likely to remain as blurred as they are now.

But there is possibly another subplot here. I believe that the leading RPA tool providers will be absorbed over the next 18 months by M&A. Thus, free RPA tools could weigh on valuations while management of RPA tool providers will be forced to focus on accelerating their roadmaps as the key value proposition is being forcibly commoditized. RPA Express could easily be seen as a spammer thrown into those M&A scenarios. Having said that, Blue Prism’s share price has not yet suffered, but then again, the broader market does not yet have seemed to digest the news of WorkFusion’s move.

Bottom-line: Disruption, but at what price?

We are seeing the move as a strong positive for WorkFusion as it will accelerate its customer acquisition but equally the progress toward higher value services. For the broader industry, however, the jury is still out. While WorkFusion might succeed in squeezing competitors boosted by a strong balance sheet, the market might lose important educators on the broader notion of IA. Obituaries on the demise of RPA might be premature, but the stakes have been raised significantly. It could hasten M&A in either direction.  However, it could be a case of forced commoditization that carries significant risks for the broader market. A “self-medication” with free RPA tools might throw the hard-fought progress in understanding RPA as part of transformation projects off track. Put in a nutshell, it could be a highly disruptive move. It will take more clarity from WorkFusion’s partners to understand how they are planning to balance their ecosystems and what the detailed strategies are. Therefore, be braced for disruptive counter moves.

Posted in: Robotic Process AutomationIntelligent Automation

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