Monthly Archives: May 2018

The G2000 is still cost-obsessed, but getting there now depends on process robotics, predictive data, OneOffice alignment and a whole lotta pain

May 27, 2018 | Phil Fersht

However which way we look at it, driving out costs from business operations still dominates the directives of C-Suites across the Global 2000 - just revisit our 2014 study to see how little has changed. Fast forward to today, and the only real differences, since then, are the methods to slake this thirst for cost elimination, as traditional operating models are no longer delivering much more than incremental value.

Our new State of Operations and Outsourcing Study, conducted with KPMG, covers the dynamics of 381 operations leaders from the Global 2000 and reveals these rapidly changing C-Suite directives to drive out their number one nemesis: cost.

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Traditional cost savings models are running out of steam, as robotics, predictive analytics, OneOffice and cognitive become the new operating value levers

Little tweaks here and there to delivery locations and headcount allocations are becoming less and less effective, as it becomes clear only the fundamental rewiring of underpinning data repositories - and the digitization of manual processes - are going to progress operations to a place where real efficiencies can be enjoyed. In addition to fixing data and manual processes that clearly hit that old cost button, C-Suites are also recognizing the dire need have their customer needs being addressed by their employees as and when they occur (OneOffice), and also to invest more in cognitive tech and machine learning to drive more value from their current pool of talent:

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Cost reduction mandates still fall well short, but expect to see them improve as data-driven initiatives bear fruit

The perennial issue here is clearly one where C-Suites rarely feel exhilarated by the cost reduction impact of their operations leaders.  Of all their mission-critical directives this year (see above), none disappoints them as much as their ability to impact cost reduction (only 28% are very satisfied), while there are much larger numbers of C-Suite leaders already a lot happier with their robotic process investments (40% 'very satisfied' and a further 30% 'satisfied').  However, as we continue to see this strong impact in these areas aligned to robotics, OneOffice, and predictive analytics, surely it's merely a test of time until we see these initiatives having greater visibility, in terms of ironing out unnecessary costs and inefficiencies in the system.

The Bottom-line: It's taken several decades, but our enterprises finally have no choice but to make fundamental changes to the very make up of their processes, data, and people if they are going to survive 

Ever since my first blog 11 years ago (right here), we've pretty much repeated the same conversation that's been continually refined over the years.  The only game changers have been the gradual need for less people to run operations as cloud-based software platforms take-hold, offshore talent is optimized, and the more recent introduction of robotic process automation solutions to remove manual workarounds and create broader digital processes, that can be aligned with common business outcomes and metrics. 

However, these changes are more fundamental than merely slimming down the number of cooks in the kitchen and making the food taste better:  it's forcing a complete rethink from ambitious firms to redesign operating frameworks where revamped business processes are enabling true digital business models, where emerging AI capabilities can be weaved in... where innovation is native to the culture of the firm and its people. Yes, it's redesigning the entire kitchen, not merely hiring some better chefs with better recipes. 

The toughest challenge is fixing many years of poorly-constructed data repositories, where the corporate IT ancestors that built them have likely long-since departed, and other IT stormtroopers from the midst of time have plastered on countless workarounds and spaghetti coding to keep the back end (somehow) functioning.  These are the deep, murky areas where it's frighteningly difficult for many firms to take the risk of investment and change to find their way out of the dark data ages.  Somehow ripping out the very fabric of what got you here is what you may have to do to survive in the future... and that can be one very painful, risky and costly experience.  Sure, you can keep papering over those yawning cracks, but the wallpaper just isn't working like it used to... 

Posted in: Analytics and Big DataDigital OneOfficeRobotic Process Automation

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The why, the what and the how of the HfS Digital OneOffice

May 21, 2018 | Phil FershtSaurabh Gupta

We've talked a lot about the HfS Digital OneOffice operating framework - it's the HfS vision for the business operations endstate for digital organizations:

The Digital OneOffice is where teams function autonomously across front, middle and back office functions to promote broader processes with real-time data flows that support rapid decision making. It’s where front, middle and back offices will cease to exist, as they will be, simply, OneOffice.

Why Digital OneOffice?

Digital organizations must have an operating framework that maps out how they have to operate in the future. Traditional operating models, while creating some incremental productivity value if managed effectively, struggle to drive the unification of digital business models with emerging technologies across a business's operations:

A true digital business cannot succeed without unifying front, middle, and back offices
Traditional approaches (organizational restructuring) have failed to have a purpose beyond incremental efficiency / productivity 
The Digital OneOffice is the organizational end-state to survive and succeed

What is the Digital OneOffice?

The Digital OneOffice focuses on real-time customer and employee engagement. OneOffice is:

Collaborative (Collective outcomes)
Unified (Without silos and hierarchies)
Dynamic (Agile and scalable)
Intelligent (Predictive, not reactive)
Responsive (Real-time)
Simple (Touchless and autonomous)

How to achieve Digital OneOffice?

The Digital OneOffice is the framework for achieving a true digital organization:

CX is not just fancy UI. Make CX the core of all your business operations from front to back.
Cost reduction is not a strategy. Drive organizational alignment and metrics that measure value creation, not only cost reduction. 
Weed out the people unprepared to change. Invest in an inclusive talent strategy, based people who want to learn and share.
Your tech infrastructure is everything. Automate, digitize, cloudify, and secure your organizational underbelly.
Build co-innovation relationships and shed legacy relationships. The partners who got you’re here may not be the ones to take you where you want to go.
Stop kicking the intelligent technology can down the road. It’s all here and now you need to make decisions on where you go with it
Stop thinking about the Future of Work. It’s already here...act now!

The Bottom-line: Traditional operating models have been focused on incremental improvements, not creating genuine frameworks for digital organizations

While traditional models such as outsourcing, shared services and global business services promote incremental efficiencies based on centralization of support functions and use of offshore to lower operating costs, none of these models have provided an ideal endstate for ambitious digital organizations.  Without having a true picture of how you want to operate in the future, you will be perennially be searching for short-term fixes to drive out further costs, and never be able to map out a strategic journey that will bring together your two most critical assets: your customers and employees.

Posted in: Digital TransformationDigital OneOffice

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Is RPA officially the new outsourcing?

May 17, 2018 | Phil Fersht

Just as many enterprises were running out of places to find more and more hidden costs they could quickly remedy through (yet) more outsourcing, along came their perfect new toy to unearth costs they had never thought possible to eliminate: RPA.  

Yes, folks, this stuff is just the thing to keep you occupied for the next few years to keep your greedy CFOs at bay - and even includes the word "robot" to conjure up images of human work displacement, creating hours upon hours of repetitive (robotic) debate at conferences from people who literally sprung from seemingly nowhere to become lifelong experts in this new dark art. 

And, oddly, most of these new RPA maestros seem to be exactly the same people who were hawking the delights of outsourcing just a couple of years ago.  Maybe the connection between outsourcing and RPA is a lot closer than we think?  So let's have a gander at the new findings from the 2018 State of Operations and Outsourcing study, conducted with KPMG across 381 Global 2000 organizations, where we questioned operations leaders about their intentions to keep investing in RPA and outsourcing. 

This data shows the tranche of operations leaders making significant investments in RPA and outsourcing, sliced by industry sector:

Financial services firms, where outsourcing is most mature, are showing voracious appetites to go down the RPA path

While banks and insurers are showing the smallest appetite (10%) to keep pursuing aggressive outsourcing strategies, they are right at the front of the queue (50%) when it comes to RPA.  Insurers were one of the first industries to explore BPO and offshoring twenty years ago, so it's little surprise that RPA is so appealing to these firms, where they can find completely new ways to mimic highly repetitive, intensive processes, plagued by manual workarounds, using smart

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Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT ServicesRobotic Process Automation

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Sticking to his Nitin

May 06, 2018 | Phil Fersht

Let's be honest, the services business needs dynamic leaders, if we're ever going to step up to being these innovators and true partners we keep claiming we are.

One such character I have enjoyed getting to know over recent years is Nitin Rakesh, who spent a good part of his earlier career at Syntel, eventually taking the CEO mantle for three years, until moving over to Mphasis just over a year ago, to revitalize the $1bn financial services focused IT services firm, which spent many years are part of HP, before being divested. 

Nitin is also very active in the thought leadership sphere as chairman of the IT services council for NASSCOM, and serves on the advisory broad for [email protected] (among other activities). But one of the things you'll get to know about Nitin is his brain typically works faster than most mortals, especially when it comes to his favorite topic about aligning technology to the needs of the customer, and working those desired outcomes right through to the back office, which is a philosophy very close what we believe in at HfS, with our Digital OneOffice conceptual framework

So let's hear a bit more from Nitin about how to get ahead in today's IT services industry, and what we need to do to be effective in the wake of intense competition and the leveling off of traditional IT services...

Phil Fersht, CEO and Chief Analyst, HFS Research: Good morning, Nitin. It's great to have you on here. To start with, I'd love to hear a bit more about you personally - you’re a technical guy, you're an engineer at heart. So how did you wind up running a billion-dollar IT services firm? Tell us where this all started and why you've been so successful at it.

Nitin Rakesh, CEO Mphasis: Thank you for that, Phil. I think I am an engineer at heart, I love building stuff. Early on I started experimenting with newer areas - as I came out of college, back in the days in the early '90s looking at how do you apply technology to things like image processing, character recognition. Those were very early days of artificial intelligence because you are teaching the software how to actually recognize handwriting.

So I think early on I got really excited about the impacts technology can have on our daily lives, and how we can change the world surely but certainly. I think from then I’ve never really looked back even though I've done a few stints in financial services. How do you apply technology and innovation? Back in the day, in the mid '90's, there was a field which is now also pretty prevalent called ‘Technical Analysis of the Markets’. And that was nothing but pattern recognition to see how do you analyze human behavior looking at the patterns in stock markets or their price behaviours.

So I think the theme started to get clearer to me over the years, but I've been lucky that I was at the right place at the right time as well. More importantly, I am really passionate about applying technology to everyday problems and ended up running a technology services company.

Phil: We got to know each other when you were at Syntel, but you've since taken over Mphasis, and now it's free of the HP empire (or former empire). So how is that business refocusing itself... and where are you taking it?

Nitin: I think this company has got some unique capabilities despite having gone through both shareholders in the last 12 years. I think we have retained and maintained our focus on applied technology. The company was founded by two ex-Citi bankers, so the focus was always applying tech to financial services and banking.

One of them was a business leader and the other one was a technical leader, a CTO. I think they built a techno-functional mindset into the business more than just a functional approach to applying problem-solving. I think it was always about embedded technology. And I think under EDS and HP, some them flourished, but some of them were impacted due to the overall global empire of HP, and the fact that we were a small piece of their overall business.

But as I came onboard about a year ago, we do have a fairly progressive shareholder who encouraged us to find our footing based on our areas of strength. What we've really been doing over the last 12 to 18 months is, essentially, differentiating ourselves by being an applied-tech firm that focuses on looking at how to apply new technologies to everything that banks, insurance companies and financial services firms do.

This is really about looking at, in the current age, how we make every enterprise customer-centric for their end customers and consumers, and how do you apply technologies to help them get closer to their customer in order to improve customer experience, reduce downtimes, offer targeted products and services with hyper-personalization?  And all of this at a lower cost, with a fast time to market. So that's kind of the mantra that we've set for ourselves.

Phil: A billion dollars in revenue: Surely, Nitin, that should be the ideal size to be big enough to be dangerous, but small enough to be sort of nimble and disruptive. What does this mean though, in reality? Can you share an example or two of how you can disrupt with your clients, while also delivering the bread-and-butter work that keeps the machine going?

Nitin: Absolutely Phil. That's a great positioning statement! We actually use a variation of that quite often. But I think our positioning almost always is that of a 'champion challenger". And from that, one, we obviously have the agility and the customer-centric focus on our side. We aim to give clients a personalized white glove service experience and we continue to invest significantly in our capabilities to stay ahead of the curve. In fact, there are multiple examples where we've been fairly nimble - but also aggressive - about going back to our clients and proposing to them things that challenge how they run their current operations, whether technology or business.

I'll give you a small example: Why should we not apply something like predictive analytics to an offering as standard as infrastructure application management? Why should we not turn AMS or an IMF into a big data analytics problem, and why should we wait for something to fail or break, so that we can go and fix it, which is (let's face it) the traditional IT outsourcing model?

So, I think, from that perspective, it means that we end up shrinking the overall footprint of the ITO team, but that's okay with us because I think that's the right thing to do for the customer. So, I think from our perspective, we've been fairly aggressive in moving clients along this journey of applying technology to traditional services as well.

And given that our scale is normally a fraction of some of the very large players, we are able to go back in and propose something very creative, even if it means that it actually shrinks the core and has an adverse impact on us as well. I just think that's the right thing to do. So that's how we are able to challenge the status quo, and in the process, carve out a position for ourselves.

Phil: One of the big discussion topics we talked about at our recent New York FORA summit centered on emerging technologies like automation, machine learning not being an end - they are just a means to get from one place to another. So, what are these places? What - in your view - is the real end-game for clients these days?

Nitin: Great question, Phil. I think I'm a big believer in the fact that every next technology isn't anything more than a tool, and what you do with it depends on how you are able to align it with one or two objectives. I talked about the fact that one of the biggest reasons why we are seeing fairly high degrees of disruption, especially in consumer-facing industries, is because, over the years, enterprises became so complex in the way they ran their back office systems and operations, that almost every business that's been around for 25-30 years is essentially run back-to-front what that means that the back office determines when you can launch the next product, the back office determines what's the next recycle for you to be able to make changes to your system, so you can have the new functionality.

The back office determines how much flexibility do you have, and so on and so forth. Whereas if you look at the new age, truly digital companies, they actually put the end customer in the middle of everything, and work backward from that. So how do you really pivot the focus of large enterprises from being functionally operationally back-office driven, to being customer-driven. And that's how you should think of applying all new technologies, whether it happens to be analytics, which should give you the ability to understand every customer, or whether

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Posted in: IT Outsourcing / IT Services

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