Monthly Archives: Oct 2015

Outsourcing is on life support, with many providers failing to invest in As-a-Service

October 26, 2015 | Phil Fersht
Legacy Cat

Why aren't you prepared to share more risks with your clients, Mr Provider?

If I have to hear another advisor, lawyer or provider sales executive whining about their lack of business, I am just going to tell them straight - "You're a dinosaur, you are selling a capability from a bygone era. The reason clients don't call you anymore is because you are not offering them what they really need - or at least educating them on what they need to haul their legacy back ends out of the dark ages."

The narrative simply has to change. Today's enterprise world is littered with literally hundreds of legacy outsourcing relationships where the service providers are unwilling (and many just plain incapable) of making any genuine productivity improvements.

What's more, the leadership in their clients is quickly wisening up to what's going on and simply does not trust them to invest in their delivery capability, or share risks with them to find new thresholds of value.  Close to half (47%) the enterprise leadership we spoke to in our recent As-a-Service study view their service provider's unwillingness to cannibalize their existing revenue model as a highly significant obstacle to make the As-a-Service shift, and a similar number (44%) view their provider's lack of support to share any risk as a key issue:

Providers unwilling to change the model

Click to Enlarge

The outsourcing industry is stuck in a legacy holding pattern and is in real danger of decline

The problem we have, today, is that the leadership within many enterprise "buyer" clients is under huge pressure to take their operations to the next level, but most of their middle and lower management clearly only care about keeping the current status quo. In a nutshell, our industry is suffering from hundreds of stagnating outsourcing relationships, where the service provider has zero incentive to do anything much beyond keeping the margins consistent, while the middle management on the buy side has a similarly lethargic ambition not to do anything much... bar keeping the lights on.

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



Accenture, Deloitte, Capgemini and Bluewolf lead the industry's first Salesforce Services Blueprint

October 23, 2015 | Phil Fersht

Salesforce dot com.  Remember that upstart little CRM online platform that created affordable, intelligent customer management capabilities that defied the evil on-premise model?

Well, it's now a multi-billion dollar service market that commands ERP-level rates, demands expertise that are in very scarce supply... and has driven a whole ecosystem of services upstarts and established providers all seeking to master the art of delivering salesforce-as-a-service.  So without further ado, let's hear from Blueprint report authors Khalda de Souza and Charles Sutherland on this escalating As-a-Service market:

Click to enlarge.

Khalda.. why have we undertaken an HfS Blueprint on the Salesforce Services market at this juncture?

Well, we saw the Salesforce services market as being analogous to a “petri dish” where many of the innovations of the “As-a-Service Economy” are visible. As a result, we wanted to use our Blueprint methodology to assess how service providers were responding to all of these innovations up close and in a structured manner. Every enterprise and service provider is making the commitment to Write Off Legacy in some way by moving to Salesforce to begin with and with that they are looking

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Posted in: Business Process Outsourcing (BPO)Buyers' Sourcing Best PracticesCloud Computing



And finally... The Agenda for the Harvard Working Summit for Service Buyers

October 21, 2015 | Phil Fersht

Who else can put on an event and oversubscribe it before even releasing the bloody agenda?  Didn't people realize the central theme this year is invoice processing transformation in Kazakhstan?

Well, the long wait is over and we're proud to  present a slightly eccentric and highly knowledgeable line up of industry luminaries for our upcoming HfS Working Summit for Service Buyers, in Harvard Square, Cambridge, MA, December 1 - 2:

Here's a mere sprinkling of the luminaries joining us for the December summit:

A mere sprinkling of the luminaries joining us for the December summit.

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Posted in: Business Process Outsourcing (BPO) HomepageHR Strategy



Provider, provider on the wall, who's delivering Trust for Digital?

October 18, 2015 | Phil Fersht

Anyone who knows me well has seen how hard we've been pressing the importance of security and trust in a global services delivery environment, since we founded HfS.

In short, we're moving into a world where reactive fixes to security breaches is a sure-fire recipe for disaster.  Savvy enterprises simply have to deploy proactive, holistic management practices of their data flows across systems, people and processes.  What's more, with all these new investments going into digital technology, SaaS platforms, global outsourcing initiatives and automation bots, the risks out there with our data flying all around the place - and the trust in people needed to manage these risks - is second to none.

So who better than an analyst legend of the networking and computing boom era, the founder of analyst firm Current Analysis himself, and now a year-long member of the HfS team, Fred McClimans, to have a serious deep dive into what we are calling... Trust-as-a-Service:

Click to Enlarge

Click to Enlarge

So Fred, why a Blueprint on security, or perhaps the better question, why trust as a Blueprint topic?

The transformation from an analog to a digital economy has been profound, giving rise to a whole new wave of business and economic models that place the consumer first and corporate assets online. This is a huge shift from the legacy models where brands controlled the message, consumers ate what was available, and managing risk meant not much more than a solid business plan, a line of credit, and Master locks on the front and back doors. That game ended a long time ago.

With most, if not all, corporate data now available online, and a massive consumer-driven omnichannel engagement model, we’ve literally given competitors and “evil-doers” a map of where

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



Meet General Gary

October 16, 2015 | Phil Fersht
Gary Novak, KPMG China

Gary Nowak (pictured right) is Partner for KPMG's Shared Services and Outsourcing Practice in China

How many consultants do you know who just give up their life of first class travel, champagne lunches, and arrival by helicopter to luxury golf courses to slum it in the back streets of Shanghai?

Yes folks, KPMG's Gary Nowak had it all . . . but his love of Yoga, meditation, and people-watching just got the better of him and off he went. So, without further ado, let's learn more about KPMG's Gary Nowak and what he's learned having lived in China the last few years . . .

Phil Fersht, CEO, HfS Research: So good evening, Gary Nowak. Thank you for spending some time today with HfS. I know we’ve met in the past, but I’d like for you to give a little introduction to our audience. Tell us a bit about yourself, your history in the industry, and how you’ve ended up leading a practice for KPMG in China.

Gary Nowak, Partner, KPMG China:

Sure. Thanks, Phil. I appreciate the invitation. I've been in China since January 2013. In the summer of 2012, I took a trip to China in connection with a client I had taken globally—to Eastern Europe, India, and eventually China. I was very impressed with China, specifically Dalian China, a city with a high concentration of outsourcing, located in Northern China. After that visit, I requested, through KPMG, to be sent to China, specifically Shanghai, because

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Posted in: Business Process Outsourcing (BPO)Sourcing Locations



Join us in NYC next week to give BPO a much-needed face lift

October 14, 2015 | Phil Fersht

Let's get together in New York next week to reminisce about that wonderful  phenomenon that was BPO, which - of course - is now a thing of the past, with everyone digitizing and automating their business operations, while adding layers of artificial intelligence to help make groundbreaking business decisions. Who needs BPO anymore, right?

In fact, us humans are probably not even needed at this conference, so why don't we just meet at the bar instead and leave the discourse to our future employees:

BPOi NYC Conference

Come to NYC next week and get your future BPO employees motivated...

But wait!  It's not over for us humans yet - honest!

The problem with all this much-hyped digital tech and automation is that it's completely useless without the right talent to operate it. Don't tell the software firms, but better technology underpinnings actually empower humans to do their jobs better - and spend more time on higher value activities.

"BPO" is now going through its biggest-ever facelift, with the advent of intelligent automation, analytics and digital, and I am personally excited to get some quality time in the Apple next week, at the 2015 BPO Innovations Conference, where we can cut through the hype and get to the real conversation, starting with my opening keynote address:  Welcome to the As-a-Service Economy.
Come along and I will be hanging around all day to spend time with you all, with some of the HfS team, including Bram Weerts and Tom Reuner.  We would love to spend time locking heads on where our industry is heading.


  • Don’t miss Keynote sessions from HfS Research, Xerox’s Chief Innovation & Chief Process Officers, and HBO executives
  • Join leading buyer execs from Astra Zeneca, Bloomberg, HBO, McKesson, Pricewaterhouse Coopers, SunTrust Bank, Thomson Reuters
  • Hear from industry expert thought leaders at Avasant, Capgemini, Tata Consultancy Services, Xerox, Loeb & Loeb & Neo Group

Register today to build your rolodex during 5 designated networking sessions, including complimentary breakfast, lunch, and evening cocktail reception, where you will have the opportunity to win a test drive with a Tesla.

Registration is complimentary to buyers and practitioners. Influencers and Suppliers can use code HFS15 when registering to receive a 15% discount.

Conference Details
October 22, 2015
8:00 am – 6:30 pm
Bohemian National Hall
321 East 73rd Street, NY, NY 10021

The full conference agenda can be found at

Register today and hope to see you there!

Posted in: Business Process Outsourcing (BPO)



Cannibalize or face extinction (if you want to survive in the As-a-Service Economy)

October 11, 2015 | Phil Fersht

hannibal the cannibal“Ten years ago, my CEO asked me to drive efficiencies through offshore outsourcing, now he’s asking me to make them through automation”, declared the CFO of a major corporation at the recent NASSCOM event in India.

This pretty much sums up where we are as a global services industry. We're embarking on the next phase of productivity, and that means we have to incorporate it into our contracts and prepare to invest in the future model, not merely perpetuate the old one.

Service Providers invested in the old FTE model and it worked, now they need to make new investments in As-a-Service delivery

It's not completely dissimilar to the old "lift and shift" FTE-centric deals of 5+ years ago, where providers would invest in the short term costs of client transitions, and spread the investments out over a 5-7 year contract to make the deal offer immediate attractive cost-saving gains for clients.  Yes, they were making their first steps to becoming insurance firms for their clients, which is even more the case today, where the risks are higher and the savings more challenging to generate.  However, if today's service providers fail to develop scalable As-a-Service delivery platforms they can replicate across clients for the future, they will likely get replaced by other service providers in the future, which have made the investments necessary to provide more automated delivery, better data - and consequently more intelligent operating talent.

OK - the legacy FTE deals were less risky, so long as you could deliver up the lower cost people and shift the work to them without any major blow-ups.  The modern deals require providers to find additional margin by automating processes effectively, converting freed-up effort into lower operating costs and also redeploying available talent on higher value collaborative activities.  In other words, the old model was all about hard savings from direct labor swapping, the As-a-Service model is about a combination of smarter labor provision and genuine process transformation through better technology (i.e. soft savings).

It's higher risk to avoid making the necessary investments - extinction could beckon for many

As the following graphic clearly illustrates, from our recent As-a-Service study covering 178 major buyers of services, if the major decision makers (SVPs and above) fail to see real As-a-Service progress made by their existing service providers, six-out-of-ten believe replacing their services providers would have a significant impact smoothing their progress towards their desired As-a-Service end-state.

While their more junior subordinates clearly do not view replacing their service providers as having such a drastic impact (25%), the frustration at the senior levels from providers' failed promises and lack of progress to invest beyond the legacy model is abundantly clear:

Legacy SPs getting Dumped

This isn't about like-for-like body-swapping, this is about removing menial transactional work and redeploying people resources into areas of higher value-add to clients.  This is what real "transformation" (sorry, I said it) is about - spreading workloads across talent pools effectively, by leveraging smarter automation, SaaS-based process standards and training talent to work more collaboratively and intelligently.

The Bottom-line:  Most service providers are not structured for success.... and the problem lies at the top

There are a lot of client RFIs on the market that are increasingly complex, but aren't as attractive to providers as the juicy scale deals of the past, requiring a determined effort from the provider to cobble together the right resources and expertise to take them on effectively. Sadly, many of today's service providers are simply not structured in the right way to take on more integrated / As-a-Service-type deals.  At HfS, we are seeing some of the legacy service providers turn up their noses at these deals because they simply cannot break down the barriers internally to bid effectively for them.  They are geared up for the dwindling legacy deals, not the new ones that are emerging from the next layer of buyers ready to move into outsourced As-a-Service business models.

In most cases, service providers are too vertically set up, for example, most still have an infrastructure service line, an application service line and a BPO service line - and most have product service lines too (not to mention some legacy vertical industry groups that do not even talk to each other). Each service line still tends to use its own unique contracting, pricing and risk tolerances.  In short, client expectations are increasingly becoming much more mature around integrated services, taking the form of As-a-Service models, comprising elements of infrastructure, storage, comms, apps functionality and BPO, optimized around that integration as opposed to discrete components.

The legacy service providers (and those service providers who may not realize they are - actually - legacy) simply don't know how to price, solution, assess the risk and pull it all together - they can't, because they simply aren't set up that way.  These problems stem from the leaderships in these providers, where they simply have failed to structure their organizations in a way that can truly deliver As-a-Service.  They are slaves to their little fiefdoms of siloed P&Ls, which have dictated strategy over the years.

Without a game-plan to take on integrated deals at lower margins to grow the future platform, many service providers can kiss goodbye to growth.  The only route is to invest in smaller deals to build a service delivery platform for future client utility - today's providers need to develop a 2-3 year plan where they will take on strategic deals at low margin/cost in order to build out the As-a-Service model of the future. Those ignoring this strategy better have a few billion in the bank to make acquisitions down the road, as that will be their only route out of this legacy black-hole into which they currently find themselves sinking.

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



The 2015 HfS Global IT Services Top Ten. Here it is.

October 07, 2015 | Phil Fersht

Yes, we threatened to update our annual look at who's climbing and falling in the IT services world, after the storm we created last year when Jamie Snowdon put out the 2014 Top 10.  So here it is:

Click to Enlarge

Click to Enlarge

While the Indian-heritage providers continue to surge, here cometh Amazon

Last year, we observed the entrance of the first of the large India-heritage service providers into the Top 10 IT Services providers, with TCS entering the fray. Throughout the past decade, the five major India-heritage offshore-centric IT services providers have dominated growth in the marketplace, and had created a new market segment - a tier of fast growing services providers.

Over the last 5 years, we have seen another unique growth phenomenon emerge, representing another tier of the IT services market, a tier of even faster growth the cloud pure play providers. In this year’s 2015 list, we have included the Top 10 providers, the major 5 India-heritage offshore-centric providers and Amazon Web Services (AWS), as the largest as-a-service IT services provider (see above).

AWS has dominated the infrastructure cloud market with revenues as much as ten times larger than its nearest pure play public cloud providers, at over $4.6 billion. In response to this threat, the traditional providers are also staking a major claim to be in the As-a-Service business with IBM, for example, stating it now has achieved cloud revenues of $7 billion in 2014, with $3 billion of which is As-a-Service, with the rest presumably comprising more traditional consulting and integration services.

Accenture poised to overtake HP, Fujitsu wobbles

HfS' Jamie Snowdon, Author of the HfS Global IT Services Top 10

HfS' Jamie Snowdon, Author of the HfS Global IT Services Top 10

IBM remains the lead provider thanks to its broad portfolio of technology products and services, plus its genuine global reach. IBM is one of the few providers with significant revenues in professional services, outsourcing/managed infrastructure services, application services and traditional support services. Although HP remains in the number 2 spot, consistently poor growth performances in its Enterprise Services group, over the past 3 years, creates the possibility of being overtaken by Accenture in the near-to-medium term. Fujitsu has slipped down the list, in part due to exchange rate, with ~60% of its services revenues coming from Japan and over-exposure to the recent weakness of the Yen.

Of the traditional onshore-centric service providers, Accenture has created a tier in its own right for the last 2-3 years, with a couple of exceptions, posting consistently strong growth quarter by quarter. A large part of this success has been its dual role as a strategic thought leader for its clients, in addition to its focus on delivering global services across an expanding array of global delivery centers, most notably in India and the Philippines. Accenture’s focus on balancing consulting with managed services has helped support the firm’s differentiation and revenue growth in the industry. In addition, its early wins in the digital space that brought about new investments in technology could lead to significant new business value and wealth being created for the firm.

SAP and Oracle both have large professional services teams, accounting for ~$3.7 billion in revenue, for both providers. However, HfS includes their product support revenues in its IT services definition that pushes both providers' IT services revenues to the level above.

Capgemini and TCS move on up

The last 12 months have been good for Capgemini, has managing to remain robust with solid organic growth across its regions, particularly in North America, Asia, and the UK. Its continued focus on portfolio management, taking the best ideas from its large teams of local consultants and building

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Posted in: Cloud ComputingDigital Homepage



Harman, Tech Mahindra, IBM, Accenture and Atos leading the Internet of Things phenomenon

October 03, 2015 | Phil Fersht

The silicon valley giants are not satisfied with embedding themselves into your phones and laptops - now they are looking to connect up our cars, bank accounts, air conditioning systems, washing machines, even our hair dryers (OK, maybe not hairdryers just yet)... They want to manage data tied to your whole life, not just your computing activities.  Live with it, it's happening.

Suddenly, IT services are morphing into "Things services".  So we decided to get ahead of this and conduct exhaustive research into how the leading service providers are shaping up their capabilities and investing in this emerging space. HfS' Charles Sutherland is a walking, talking, breathing example of the Internet of Things. He's plugged in 24x7 into a global network of devices and companies operating said devices. Yep, he never stops, and his research into autonomics has naturally pulled him into this market.

Charles and his team have been conducting exhaustive research interviews over the past few months with many enterprises to learn more about their experiences with IoT, in addition to the performances of their service providers to provide the bread and butter service delivery and assess their innovative capabilities, vision and investments.

As a result, we are proud to unveil the industry's first assessment of the IoT services market: HfS Blueprint Report: IoT Services 2015, which is available for our premium research subscribers on


Click to Enlarge

So Charles, why have we undertaken an HfS Blueprint on the IoT services market today?

Because we wanted to sort through the daily avalanche of IoT related press releases, presentations and conferences to understand how 18 different service providers were really designing and delivering IoT services for enterprises clients. HfS is focused on the emergence of the As-a-Service Economy and the impact that digital services are having on IT and business processes and the IoT is part of how those are coming together for clients today. It is still very early in this market but we

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Posted in: Analytics and Big DataBusiness Process Outsourcing (BPO)Digital Transformation



Thriving in a market that refuses to change? Then join us next month for the Analyst Relations Forum

October 02, 2015 | Phil Fersht


So what are you doing on Guy Fawkes' night?  Well, rather than blowing up Parliament, why don't we start with the legacy analyst business?

With the swirl of social media, free information and business model disruption in the technology world, everyone assumed the traditional analyst world would follow suit. We thought there would be a plethora of new generation analyst boutiques cropping up to challenge the old model. Some tried, and most have failed. A few linger on in their death throes, but the revolution we thought would happen - let's face it - never really did. Except in one corner—right here at HfS.

I'll be presenting on Research-as-a-Service and how HfS is changing the face of the analyst industry

As we look around the industry, we see the same old legacy analyst houses producing their useless charts and dull, turgid research just as they did a decade ago. Few subscribers actually read the stuff, but technology vendors still fund these firms because they have few other outlets to justify their existence.

Here at HfS, we’ve been fortunately enough not to be beset by legacy contracts and the dirty vendor dollar to give to industry a very different analyst model - one where we are unafraid to make our research widely accessible to the world with our freemium model and call out the real trends that are happening to our industry (as opposed to regurgitating the same old marketing fluff that turns off the smart buyers).  In short, we've thrived because of our huge global community, our continuous demand data from our readers and a team of  great people and analysts who love the freedom of Research-as-a-Service.

This is where the real fireworks will be on the 5th November...

I’m pleased that I’ll be in London on November 5th to share our story as I keynote the Analyst Relations Forum. My keynote, Thriving in a Market that Refuses to Change: Research-as-a-Service, will look at how HfS has fought to transform a conservative industry that has been slow to change.

I’ll also be having a fireside chat with Wipro's dynamic new CMO, Naveen Rajdev, and we'll also hear from Accenture's popular Managing Director for Global Analyst Relations, Allen Valahu, about what it’s been like to work with a multitude of analysts over the last two decades and what they would like to see in the future (see full agenda for the menu of analytical delights).

We are providing 10 free tickets for those who hurry to register! Sorry---all gone!

We have made special arrangements for ten free tickets to the event (with promotional code JoinPhilFersht) - first come, first served!  Sorry---all gone! But we also have arranged for a $124 discount (with promotional code ARForumKeynoteHfS) for those who did not manage to register in time.

Please register here with the promo code.

Hope to see you there,


Posted in: HfS Research Company Homepage