Jamie Snowdon
 
Chief Data Officer 
Learn more about Jamie Snowdon
Brexit will rip out the underbelly from the British economy - and we'll likely never recover
November 07, 2018 | Phil FershtJamie SnowdonOllie O’Donoghue

Click to Enlarge

However which way you analyze all the economic indicators, and whatever your opinion may be regarding Britain's relationship with the European Union (EU), removing the movement of EU labour into the UK will create a perilous shortage of labour, particularly for low-to-mid skilled professions.  If anything, removing worker base at the lower end of the skills spectrum is worse than at the high-end, for the simple reason it's much harder to entice people into jobs that may be low-paid, unattractive and - in many cases - require hard graft for low wages.  How are our hotels and restaurants going to find 120,000 staff willing to work for the minimum wage; our food factories to renew a third of their workforces to prepare our food; our cleaning firms going to backfill 132,000 people willing to mop and scrub for a living? The answer is sadly obvious - many of our industries will be under real threat of implosion because they simply cannot access the people they need to keep them functioning.

And without a thriving working class, the economy will suffer due to less money being spent, our businesses will suffer because of rising hotel costs, our entire society will suffer because of rising food costs, our commercial and domestic real estate markets will struggle to complete projects.  While professions like education and hi-tech can source talent from elsewhere (and are less reliant on EU people imports) it's those industries that form the underbelly of the economy which will really suffer.  Forget "trickle down economics" Brexit will cause a "trickle up" effect that will be hazardous for the British economy and its mid-long term sustainability.  In the short-term, many EU workers in the UK should be able to stay on, but the reliable conveyor belt of workers prepared to roll their sleeves up and support our entire economic underbelly will be permanently halted, and the availability of workers will get progressively worse - and much more expensive with this shrinking supply of people.

So, without further ado, let's dive into the fuller implications of this seemingly masochistic self-flagellation known as "Brexit"... 

Nice try Theresa, but even your dancing can’t make us forget about the increasingly no-win Brexit scenario 

For our fellow Britons, these past few weeks have been a refreshing break from the normal Brexit debates as we became distracted instead by our premier literally dancing for trade agreements. Trade agreements that, even for the most dismally poor mathematicians, don’t stack up when compared to the one we’ll soon be leaving.

 

Brexit has been a topic of heated debate for years now - and I'm sure we all have that friend or relative you daren't mention Brexit in front of or risk a lecture based on unfounded inferences and sketchy sources. In many ways, it's these long-winded and often inebriated debates that are the problem - we're close to the day we sever ties with Europe and reclaim some sort of democratic freedom that only a nation with several unelected heads of state can find any ironic sense in. And yet we're no closer to understanding what Brexit means - even if we had a clear picture of how awful it will be at least that's something we can prepare for. Instead of this mind-numbingly irritating narrative from British politicians of 'Don't worry, it'll all work out in the end.' Well, unfortunately, we're not an eight-year-old child looking for reassurance from our

Read More »

IBM / RedHat: A grand play at out-sharing Microsoft’s open source economy
October 29, 2018 | Phil FershtJamie SnowdonOllie O’Donoghue

It’s really not about the cloud – not at this massive $34bn price tag.  IBM's ingestion of RedHat, the third largest IT purchase in history, is all about Open Source.

Commentators are already pitching this deal as long-awaited reinforcements to the trench-warfare of the cloud wars. But in reality, we need to look much deeper to understand what persuaded IBM to part with such an exorbitant sum of money for Open Source giant RedHat.

Did we read that right? $34bn? – And what will happen to renegade RedHat?

Even for budding venture capitalists, the princely sum of $34bn is more than enough to make your eyes water – especially when it’s hurled at a firm with annual revenues of just $2.9bn and headcount that will be just a drop in the Big Blue Ocean. So there must be more to IBM’s thinking than a quick financial return – it’s either a play to kick the other hyperscale players out of play, or a push to get the upper hand in the increasingly valuable Open Source sharing economy.

If we dig into the financials, it’s clear that RedHat is a profitable firm with a strong track-record in the space – describing itself as the leader of Open Source capability. In many ways RedHat

Read More »

IBM, Accenture, Cognizant, Atos and HCL leading the Top 10 infrastructure and
September 20, 2018 | Phil FershtJamie SnowdonOllie O’Donoghue

it's easy to overlook our digital underbelly during these times of AI hype and "let's make a few billion based purely on investor hype" fantasies.  But who's providing the tools and grunt to make all this possible?  HFS analyst Ollie O'Donoghue has pooled our study data from the Global 2000, conducted countless enterprise interviews and driven the providers potty to deliver the perfect poignant viewpoint of this industry:

Click for a detailed view of the leading 18 providers

Ollie, what are the major trends in the infrastructure market?

Over the last few years, the infrastructure market has taken a bit of a battering with the kings of hyperscale eroding market share, and enterprises looking for more exciting things to spend their money on than traditional “lift and shift” engagements. However, that’s all changing, and the market is evolving. The big providers are partnering up with the hyperscale cloud players and making them a valuable tool in their toolbox. Moreover, “digital” has fueled enterprises’ appetite for technology. Which means getting their infrastructure and digital foundations in order. After all, these overhyped technologies like AI and blockchain have to run off something!

The challenge for us as analysts covering the space is rethinking how we assess and evaluate providers. In essence, partnerships have become a much more critical part of this market – if a firm isn’t befriending the big cloud leviathans, then they’re likely to struggle to build offerings that resonate with evolving enterprise appetite. The challenge is that as all providers follow this path, there’s a degree of equilibrium, so the assessment needs to evolve further and evaluate how these providers are leveraging partnerships, and building value-add offerings. We also need to scrutinize how providers are developing automation capabilities to design and build more resilient, scalable and cost-effective infrastructure solutions for clients. So while this is a mature market, it’s one that’s changing all the time – and one that certainly keeps us, analysts, busy.

So who’s winning this infrastructure and cloud war?

IBM’s still the undisputed champion of the infrastructure and cloud market – Big Blue brings with it unrivalled enterprise trust, and is the only IT Services major that truly has the cloud capability and resources to fight alongside the hyperscale leviathans AWS, Google, and Microsoft. It also has true scale and ability to manage the largest most complex engagements in this space. That being said, Accenture has an uncompromised reputation for delivering quality and bringing best in class capabilities to engagements. From an enterprise perspective, the fact that this comes at a premium count against the firm to some extent. And while Accenture executives assure us they’re building commercial models to make pricing more attractive, the reputation for being expensive is relatively well set in, and any changes might be like trying to get toothpaste back into the tube. Although let’s be honest, there are worse problems to have than being known for delivering quality at a price.

And the main movers and shakers in the Top 5?

A couple of firms are worth mentioning – Atos performed well because of a concerted effort from the firm to broaden and deepen partnerships with major cloud players. It’s now shaken hands with all of the big hyperscale players and is doing some exciting work around analytics with Google. Atos has also pulled some fresh thinking out of the bag and built a compelling vision for hybrid cloud. HCL has excelled at large scale transformation, is also doing interesting work in the space and comes with strong client references – the consensus is, HCL will keep working to get the job done, bringing in automation capabilities to get the most out of assets. And then we have Cognizant, another firm that is striving to deliver innovation through all its infrastructure services is producing offerings that focus on specific client’s needs. Ensuring business value is delivered, whilst pushing hard down the hybrid cloud path – in recognition that the future of cloud will be leveraging multiple providers to deliver the best results.

So what about the Top 10 overall, any surprises there, Ollie?

The big heavy lifters hold a competitive position, TCS brings a lot to the party and has an enviable track-record of delivery in some industries and loyal clients that leverage the firms considerable global delivery network. Similarly, Infosys is positioned competitively, reflecting the investment the firm is making in building out nearshore delivery centers and redeveloping talent into higher value areas of work. However, the firm does struggle to get its message out there which is holding it back a tad. And then we have DXC – the leviathan firm can bring considerable brains and brawn to engagements, but its path is still unclear to some clients and all eyes are on its financial reports looking for stability at a time when providers sinking can drag clients down with it. Unisys relies on its strong legacy in the Infrastructure space – and innate trust from some industries, particularly financial services. Supplemented by respectable security credentials and offerings. Finally, Wipro is driving a competitive approach to writing off legacy through a cloud-only approach, a strategy which could see the firm drive further up the top 10 list in the future.

So what does the future look like for the market?

We’ve been charting the major trends impacting the infrastructure space for some time now and it’s a quickly moving market. Partnerships are no longer a nice-to-have, they are mandatory if providers are going to have a chance of survival. Finally, the big providers are warming to the potential value they can leverage from the cloud giants, rather than shaking hands through gritted teeth as their revenues eroded. This is an important step as the market matures. But the biggest shift is the rosier tint the market now has after years of revenue freefall. Shifts to cloud and as-a-service hammered traditional revenues – which often made up a sizeable chunk of vendor revenues. But with some compute-heavy applications and technologies on the cards, spending on infrastructure is very much back in vogue. The smart enterprises are investing in their digital underbelly now, in preparation for their future digital needs.  

Bottom line: Our partners who got us here may not be the ones to take us where we're going - the future’s all about smart partnering as the need for savvy IT talent reaches critical levels

If we take a look at revenue projections for the market, it’s not the good news providers are looking for. With As-a-Service and cloud continuing to batter traditional revenues, the market is unlikely to grow from a revenue perspective. But it’s not going to shrink either - we see this market is bouncing back in other ways as enterprises urgently seek help digitizing their operations and scaling their digital businesses: technology is at the heard of C-Suite strategy these days, and partnerships which provide scarce talent to keep these increasingly data-driven environments agile, scalable and secure are critical for enterprises.

Reputationally, IT infrastructure has always had a hard time – security breaches, server crashes, and integration challenges. But all of that’s changing now as automation drives service quality up, and costs down. And partnerships are supporting providers in offering clients best-in-class cloud capabilities at a time when the contents of their digital shopping list needs to be running on the best. 

There is a massive opportunity to lead in the world of IT services, provided you can plug these skills gaps. The challenge is breaking out of the traditional sourcing model to access niche talent across the globe in areas such as crypto-technology, Python development, Lisp, Prolog, Go and C++. While most traditional firms still rely heavily on bread and butter IT services delivered at scale from regions such as India, the emergence of talent in Central and Eastern Europe, China and parts of South America also need to be brought into play. The IT services world will be a very different place in a couple of years as boutique firms offering niche skills come into the fore. Not to mention the emergence of crowdsourcing for IT talent. Having really savvy IT leaders who can cobble together crack teams on-tap to solve their IT headaches is already becoming a huge differentiator for many firms. The will also be a role for the super services integrator, who can pull together teams for clients to work with them on complex projects.

To this end, we recently presented the Digital OneOffice Concept to 100 C-Suite executives to understand what is holding back both business and IT leaders from reaching the promised land of perfect real-time symmetry of their business operations staying ahead of their customers’ needs.  While the business leaders grapple with changing their mindsets, the IT leaders were quick to call out their skills deficiencies to enable their businesses to achieve a digital OneOffice.  

Click to Enlarge

Hence, those providers which can pull together the resources and talent can still profit from this disruptive market - the digital engine can only purr when it's aligned with all the core components of the business, right from the front to back office.  Today's market is all about taking bigger bets on bigger risks... and only the smartest and boldest will make it.

Premium HFS subscribers can click here to download: The HFS TOP TEN Report:  Infrastructure and enterprise cloud services 2018

Is Syntel worth $3.4bn? And does this bring Atos to the adult’s table?
July 23, 2018 | Phil FershtJamie SnowdonOllie O’Donoghue

Syntel brings to Atos a larger platform into the North American market, stronger IT automation capabilities to augment its data management and analytics heritage and, above all, access to quality long-term engagements. And not to mention a mighty Indian offshore IT depth that fills a lot of delivery holes for the firm.  And don't forget, this firm tends to know what it's doing when it comes to acquisitions and making them work:

However, even with all this combined, $3.4bn seems like a hefty price to pay, albeit a price that will likely set both industry valuations, and other acquirable mid-tier service provider hearts’ racing. Not only that, competitors with banking pedigree, such as Capgemini, Cognizant, DXC and IBM will not welcome a stronger Atos being welcomed to the dance at a time when competition is already reaching a cut-throat breaking point.

We haven’t seen any meaty M&A in IT Services for over two years... So why now?

We’ve been predicting an increase in merger and acquisition activity across the business process and IT outsourcing space for some time, but these IT services monster marriages are like London buses – you wait ages for yours to arrive, and suddenly several appear right behind it.  

To this end, the only real action of late has come in the call center realm with the feasting of Teleperformance on Intelenet and Concentrix on Convergys.  Not since the dinosaur mating noises of HPE and CSC in 2016, or Capgemini’s nuptials with IGATE in 2015, have we had anything much to chew on in IT services bar lots of digital agencies being round up for slaughter.

Let’s be realistic, there really aren’t too many “heritage” mid-sized offshore-centric IT services providers left in existence which can get you an immediate seat at the adults’ services table, which explains Syntel’s fantastically lucrative exit, and the disappointment of several other suitors which had been eying picking the firm up on the cheap for several years.  Moreover, providers like Atos are feeling the pressure like never before to force their way forward in terms of growth and breadth of offerings and believe the pressure point has been reached and it’s time to act.

A drought in traditional client wins for some firms is literally pushing them to acquire as a way to drive market share.   The IT services industry is no stranger to firms buying out rivals to gain short-term respite from the market in the face of poor market performance – buying time to regroup/transformation, an injection of new clients and scale.

Atos’ recent announcement of its intentions to acquire Syntel has already set tongues wagging in the industry, but before we get caught up in the inescapable hype, let's dig into the facts!

At $3.4bn this could be the start of the M&A silly season where “Everyone’s up for Sale”

It’s hard not to get lost in the number of zeroes in this deal and, frankly, the price tag has left us all scratching our heads a little. At a recent press conference, an investment analyst asked whether Syntel was happy with the deal…why wouldn’t they be? And it’s this sort of seller's market that’s getting a lot of the mid-tier firm’s excited about a potential takeover from a major firm in the space.  “Everyone’s up for sale” proclaimed the CEO of the of the leading service providers recently in a private conversation.  

With some of the world’s biggest IT services firms looking to shore up revenues, capabilities, and access to clients, a lot of firm’s are adjusting pricing expectations, setting the bar far higher than they would have a few years.

And the market is undeniably tough right now, and many firms are struggling to find their way. Recently, brighter horizons have been on the cards for some firms as the HFS Digital tipping point theory started to yield results, with enterprises investing in technology to drive their transformation ambitions. But the same theory argued that many firms would struggle to pivot their business models and offerings to meet the changing demands of the market. In this winner takes all market, it stands to reason that firms will shore up their capabilities through acquisition, at the same time that smaller firms that struggle to gain market traction become more attracted to the idea of a buyout.

Is chasing a “$250m a year synergy target” realistic, or just merger charm?

But, according to Atos, the hefty price tag is supported by some strong arithmetic. The firm stands to gain access to a lot in the deal, including strong long-term banking and financial services engagements and a decent launchpad into North America – a geography the firm has struggled to position itself in from its European stronghold – in spite of its 2014 acquisition from Xerox. But let’s start with what the firm has championed as the main selling point to investors, a $250m boost to annual revenues by 2021 from the synergy of the two firms.

On the face of it, this seems a challenging target to hit. Revenues in Europe have been hit just as hard as everywhere else in the IT Services space, more so in Atos’ strongest line – infrastructure and enterprise cloud. And Syntel’s revenue growth has disappointed financial analysts for years – even if its operating margin is aspirational to many. If the firm can export Syntel’s processes and embed them across Atos, it may stand to drive greater operating margins. Moreover, if it can leverage Atos’ Syntbots RPA technology in new and existing engagements, it could drive out some serious costs. But an increase of $250m a year is perhaps a little more ambitious than the numbers can accommodate. Even with Atos assuring investors that if its current bookings stay put, it should be more than capable of reaching its objectives.

The real motivation behind the price tag is likely to be tapping into Syntel’s existing client base and cross-selling between the two firms. In the current market, where new deals are few and far between, the adage of ‘if you can’t beat them, join them’ has never been truer. For the princely sum of a few billion dollars, Atos has gained access to some major financial institutions and enterprises that Syntel has managed to keep on its books for years (over 30 years in some cases). And many of these are big spenders, Syntel is always pleased to mentions that it has grown a handful of its clients to build out up to half of its overall revenues.

However, the challenge for Atos is to keep these clients happy. We’ve chewed over the pitfalls of some of the major M&A activities in recent research. And in many cases, these clients may be even tougher to please. Syntel’s ‘customer for life’ no questions asked approach has built a fervent loyalty among its client base – while its too early to say now, the sentiment from this client base may prove to be less than enamored with the recent announcement than either Syntel or Atos are willing to admit. 

It is also worth pointing out that the oft-stated criticism of Syntel has been its overexposure to a small handful of large clients, should one get acquired or kick them out.  However, with a massive new owner in Atos, surely there is now some air cover from this long-discussed risk.

A nice deal for Syntel's shareholders, but what’s in it for the clients?

As usual, the bit that’s often missed from the narrative when a big deal like this rears its head is ‘what’s in it for clients of both firms?’ At an early stage like this, we can only be speculative, but there are a few things that enterprise clients of both firms should be cautious and excited about. First of all, for Atos clients, there is the opportunity to get your hands on some real RPA capabilities. Atos has struggled over the past few years to find its place in the market, but Syntel has positioned itself nicely with Syntbots – an intelligent automation platform that while lacking some of the bells and whistles of the others has proven itself time and time again to be a solid cost-reducer. Existing financial services clients can also look forward to more verticalized expertise, and a stronger proof-point around delivery as Syntel brings in its considerable experience to engagements. Finally, Atos’ multinational clients can consider leveraging some of Syntel’s North American and Indian delivery capabilities to expand engagements or move work closer to home or further offshore dependent on the circumstances.

For Syntel clients, it’s a different kettle of fish. Foremost on their mind must be the protection of the partnership culture they have become accustomed to. That’s not to say Atos is miles from the culture of Syntel, but long-term partnerships have been the building block of the mid-tier firm since its inception and may be a tough hurdle to overcome after the firm’s combine. But they can expect some of the benefits that the firm will bring, such as strong credentials in the enterprise cloud space, and the scalable heft that a larger provider can offer over mid-tier players.

Bottom Line: Market conditions and appetite for acquisition mean we’re sure to see more activity like this in the future

Ultimately, there’s a lot of areas where the two firms can create synergy, and cross-sell offerings into each others client bases. But there’s also a huge amount of risk that this engagement is akin to the appetite of the day, which is to stop trying to outbid rivals for engagements and simply buy up rivals. In some of these engagements, clients may come out on top, with access to more experienced and capable delivery partners – but equally, they could lose out on the cultural alignment, and agility that they looked for in a smaller partner.

However, Atos management has a historically strong track record for acquiring and integrating business in both the long and medium term. The firms have a long history of large acquisitions across borders and huge integration challenges, starting with Origin in 2000. Plus we see relatively successful integrations of Siemens Business Services back in 2010, Bull and Xerox IT Services in 2014. Indeed you can trace it’s acquiring prowess back to decent purchases of SchlumbergerSema in 2004 and UK and Dutch KPMG Consulting business in 2002. 

The issue as ever for successful acquisition is making the most of synergy – so that the whole organization is greater than the sum of its parts. This is always a hard trick to bring off measured financially, by the value it can deliver clients and increasingly important, culturally. If the financial boost is only $250m on a $3.4B investment let’s hope gains in the last two are worth it.

What does this say about future mid-tier IT services acquisitions?

The fact remains that in spite of the turbulent market we’re now in, Syntel has attracted a big price tag. This can only mean many of the larger firms are on the acquisition trail. Which means this is unlikely to be the only major M&A activity we’ll be seeing in the coming months. Possible mid-tier targets we can expect to come under the spotlight of some of the big players (if they’re not already) include:

Hexaware – possible price tag $1.50 / $1.25bn: Hexaware is gaining ground quickly and building a narrative that seems to resonate well with clients – however the firm remains small enough for some of the bigger players to see it as a valuable route to inorganic growth.   Has good hybrid BPO and IT capabilities, a strong specialization in HR Tech and promising potential in RPA services. 

Mindtree - possible price tag $1.75 / $2.25bn:  Mindtree has had a scratchy few quarters at the start of 2017, but since then have posted rapidly improving revenue growth – over 20% in Q2 2018. The firm’s strong digital offerings make the firm a good prospect for bigger firms looking to shore up capabilities as well as build out market share.  Has managed to make a strong shift from BI and analytics to adding digital prowess and has a capable suite of offerings and loyal clients to boot.

Mphasis - possible price tag $2.25 / $2.75bn: Has made a strong market impact since freeing itself from a decade-long HP hell... plus CEO Nitin Rakesh is credited a lot for his fine work at Syntel, getting the place in better shape financially.  Strong financial services presences could make this firm the next IGATE/Syntel-esque pick up.  

Virtusa Corporation - possible price tag $2.00 / $2.50bn: Virtusa’s strong consulting background – gained from the acquisition of Polaris – puts this firm as a valid target for large providers looking to build up talent and onshore delivery capabilities in North America.  Very strong offshore business built from the ground up by the irrepressible Kris Canakeratne, with deep presence in insurance IT.

Automation to impact 750,000 low skilled Indian jobs, but create 300,000 mid-high skilled jobs by 2022
February 03, 2018 | Phil FershtJamie Snowdon

A lot has changed in the last year... especially when it comes to automation: it has now become the broadly-accepted efficiency tool for cost leverage with operations.

Every customer has RPA project managers and automation leads hungry for data, advice, and ideas. Every service provider has RPA embedded into their service delivery models, and every credible advisor has a practice that is working with multiple clients to make this happen. The Armageddon days of talking about robots taking our jobs are over - these are now the reality days where we can see exactly what's going on with automation and AI, and accurately estimate how it's going to impact the services industry in the next few years.

There will be impact, but it's manageable provided we focus on new skills and value.  

In short, the global IT and BPO services industry employs 16 million workers today.  By 2022, our industry will employ 14.8 million - a likely decrease of 7.5%* in total workers (see our research methodology below).  This isn't devastating news - we'll lose this many people through natural attrition, but what this data signifies is this industry is now delivering more for less because of advantages in automation and artificial intelligence.  The new data also shows how job roles are evolving from low skilled workers conducting simple entry level, process driven tasks that require little abstract thinking or autonomy, to medium and high skilled workers undertaking more complicated tasks that require experience, expertise, abstract thinking, ability to manage machine-learning tools and autonomy.

Click to Enlarge

The low skill routine jobs are getting increasingly impacted, and our new demand data shows an acceleration in RPA tools (a 60% increase over the next year) where service providers are the largest adopters into their own service delivery organizations.  We expect to see a more rapid impact on routine job roles which is most notable in 2022 as companies take time to build the impact of RPA into service contracts and figure out how to turn work elimination into hard savings than merely soft efficiency savings.  With barely a 50% satisfaction level, this will take 4-5 years to see the real cost benefits in terms of job elimination.  Most of the short-medium term benefits are being seen in increased efficiencies and more digital process workflows.  All major service delivery locations are expected to be impacted at the low-end, but the higher the wage costs, the higher the expected role elimination (750,000 roles in India and a similar number in the US):

Click here to Enlarge

Medium skilled roles are picking up across the board, especially in roles that are customer/employee facing with the need for more customized support, the ability to handle

Read More »

No time to get TWITCHy... but which providers are ready to bounce back?
January 27, 2018 | Phil FershtJamie SnowdonOllie O’Donoghue

Knowing full and well that predictions can bite you on the arse isn’t going to stop us making them! Particularly when the financial reports pour in from some of the biggest movers and shakers in the services industry confirm what we are thinking.

What do we know now?

Unlike the Trump-esque games of ‘I told you so’, we’re not going to pass off something everyone knows already as a prediction (and then immediately congratulate ourselves on doing such a good job at getting a prediction bang on the money).

First up, we need to talk about what we already know; most of the big providers have already posted their results and they make for interesting - and upbeat - reading.

Let’s start by taking the TWITCH providers (Tech Mahindra, Wipro, Infosys, TCS, Cognizant, and HCL). By now, all of these providers, barring Cognizant and Tech Mahindra, have submitted their financial reports for Q4 2017. This gives us a decent picture of the state of the market in general—a topic tackled in greater detail in our latest 2018 market primer—but, suffice it to say, we are starting to look at the IT services market more optimistically - for the first time in years. Our expectations that all of the major providers would report reasonable growth figures have largely been met, a sure sign of the market finally reaching the tipping point. In short, we’re leaving behind much of the turmoil-ridden restructuring of the market from traditional and legacy services to the as-a-service and digital models enterprises now consume with increasingly insatiable appetites.

TWITCH is the winner?

Even so, there are winners and losers, and the pick up in market growth is not shared equally. Wipro, for example, is bucking the trend somewhat by reporting weaker growth than its contemporaries. Similarly, TCS is pushing a more consistent growth line, but the increase of a few percentage points doesn’t quite match the considerable spike other providers are seeing.

HCL’s continued growth has come as somewhat of a surprise to us. While the firm has a strong track-record as an IT services major, there were expectations that the emergence of increased digital uptake would leave the firm struggling to mirror its rivals. Central to this thinking is the fact that the firm has acquired digital capabilities less voraciously than some of its peers, and many of the larger acquisitions, such as Volvo IT, are now mature enough that we would not expect to see them contribute enormously to revenue growth. However, HCL’s continued growth

Read More »

HfS Data Products are here!
September 07, 2017 | Phil FershtJamie Snowdon

We just love data at HfS - we built this company by surveying our terrific community over the last 10 years to keep on top of all the curious things enterprises do to stay competitive and profitable.  And this year, we are literally surveying 3,000 billion dollar plus enterprises on their intentions and dynamics across the 5 critical change agents of our industry: automation, AI, analytics, blockchain, emerging digital business models, and global sourcing strategies.  

While everything we do is based on data, we've not really packaged it all up in a way for our clients to digest it and use it most effectively for themselves.  Until today.

We’ve set out our research agenda to bring reality to the research analyst world, dynamic engagement with our clients and our vision for the industry: our Analyst 2.0 model. Over the next 6 months, we will be adding more data products and enriching the existing ones, based on the wealth of information we have collected over the years:


1: Contracts Database

Launching in September 2017. As part of its ongoing research HfS has always collected and collated contract data across the different service lines it tracked. HfS Contracts Database gives subscribers access to this data, which provides up-to-date analysis of IT Services and Business Process Outsourcing contracts. This interactive tool allows users to search for specific contracts, view contract progression annually and by quarter, and view heat maps of specific deal categories by region.

2: HfS PriceIndicator™

HfS PriceIndicator™ has been part of HfS Research data tools for over 4 years now. The next 6 months we will start to include RPA and automation pricing.

HfS PriceIndicator™ is a real-time, research based price benchmarking service that provides clients an insight into current ITO and BPO pricing. Currently, PriceIndicator™ provides a biannual set of hourly FTE rate cards for ADM, F&A BPO, Insurance BPO and Healthcare Payor BPO.

3: Buyers’ Guides

HfS buyers' guides provide an independent view of individual service providers across different service capabilities. Giving a summary of the organization's strengths and weaknesses in addition to details in specific service categories.

The long-term plan will be to integrate these guides into the HfS Data website updating them whenever new financial data is available and when we publish new blueprints/vendor analysis – so they always deliver the most up-to-date content on each provider.

4: Quarterly Market Indices

HfS provides market size and forecast for the IT and business services market updated on a quarterly basis. This view of the industry provides a top-level view of service provider performance and uses this to predict market growth and performance within the main IT and business services markets.

5: Supplier Revenue Data

For the past 5 years, HfS has been tracking the IT and Business service supplier landscape collecting key financial data from the industry – creating models which are used to create our Top 25 IT services and our Top 50 BPO provider list. HfS is expanding these models to create revenue maps across key service lines, industry, and geography.

6: Direct Buyer Viewpoints

HfS regularly interviews buyers throughout the Global 2000 organizations, conducting 3,500 interviews over the course of the year. The Buyer Viewpoints opens up this data for additional analysis by industry, and across regions. So our subscribers can create their own views of the information for presentations and infographics, in addition to HfS own drive to make our data more accessible.

The bottom-line

The Analyst 2.0 model means making data more accessible, easier to digest and self-service – the analyst should not be a barrier to insight. HfS wants to enable our community with the right data to drive their own insights and their decision making – revolutionizing the way market data is used and consumed. At the same time letting our analysts do what they do best - drive thought leadership within the operations and IT services community.

 

Learn More

Unveiling the HfS 1-2-3-4 Research Agenda
August 26, 2017 | Phil FershtJamie SnowdonBram WeertsSaurabh Gupta

 

Last week, we launched the Analyst 2.0 Model along with the HfS ThinkTank to revolutionize our industry. And today we unveil the new HfS 1-2-3-4 Research Agenda. The updated agenda serves the real needs of our clients. The tired legacy analyst model continues to only look at the past and lacks out-of-the-box, stimulating, and forward-looking thinking. We aim to turn this legacy Analyst 1.0 Model on its head, by delivering impactful knowledge and insights that will help our clients survive and succeed in the VUCA (Volatile, Uncertain, Complex, and Ambiguous) world that we all live in.

1: Research coverage across each element of the OneOffice

HfS launched the OneOffice Framework in January 2017. Our industry is evolving to an era where there is only "OneOffice" that matters anymore, one that is focused on creating an impactful customer experience and intelligent operations to enable and support it. At HfS, we like to practice what we preach. We have aligned our research practices with the OneOffice with designated research leaders.

  • The Digital Front Office research explores customer engagement, design thinking, contact center, marketing and sales, as well as social, mobile, and interactive solutions.
  • The Digital Underbelly research focuses on desktop automation, robotic automation, and security.
  • Our coverage for Intelligent Digital Support Functions spans across IT services, Finance, Procurement, Supply Chain, Payroll, and Engineering services.
  • The Intelligent Digital Processes research explores advancements in artificial intelligence, smart analytics, blockchain, and IoT.

Click to Enlarge

2: Voice of the Customer embedded in the Analyst 2.0 Model

In-sync with the Analyst 2.0 Model, we designed the new research agenda to help us become the leading Voice of the Customer. Our team of global analysts speaks to over 3000 stakeholders across the Global 2000, our industry summits provide us with an unmatched platform to interact with senior stakeholders, and our analysts publish real client stories. We’ve always mandated customer reference calls for every Blueprint report that we publish and with the new research agenda, we are taking this customer focus a notch higher. Some key initiatives:

  • Our recently published and upcoming IT-services research, based on a Global 2000 client-only survey that helps us get beyond the supplier marketing and sales spiel.
  • Similar survey(s) for mature horizontal business process areas as well as industry-specific offerings.
  • Our major Blueprint reports will now be accompanied by a summary of client conversations in the space to present aggregated patterns of how clients view market execution and innovation.
  • A unique buyer experience guide for the top RPA products, based solely on interviews with RPA clients. 

3: Forward-looking research across three-time horizons

A key reason for clients to engage with us is the provocative nature of our research.  We’re future looking, and unafraid to call a spade a spade. The new research agenda aims to arm our clients with the knowledge and insights across three-time horizons they need to navigate the future of operations:

  • Horizon 1 - Act-now: Mainstream topics in the market, such as Robotic Process Automation (RPA). Horizon 1 research is aimed to deliver practical insights into current market trends, supplier capabilities, as well as current client experience that will help institutionalize the concepts.
  • Horizon 2 - Watch-out: Emerging themes and topics that are likely to become mainstream in the next 1-2 years, such as Artificial Intelligence (AI). The objective is to help clients test value propositions and understand potential benefits and challenges in their industry.
  • Horizon 3 - Investigate: Areas that show tremendous potential but are still too nascent to predict adoption, such as blockchain. The purpose of covering such topics is to ensure a healthy dialog with key industry stakeholders to define these spaces, articulate challenges and support awareness.

4: Four-dimensional view of business operations

The future of business operations is not one-dimensional. To provide our clients with a completely holistic view of the market, we have a team of four-dimensional analysts who understand the market across four lenses in their area of specialty:

  • Dimension 1 - Change agents: Major change agents driving the industry including automation, artificial intelligence, blockchain, digital business models and smart analytics.
  • Dimension 2 - Business functions: Detailed coverage across Business Process Services (both back office and front office), IT Services, and engineering services.
  • Dimension 3 - Industry orientation: Business operations impact across 10+ industries including Banking & Insurance, Healthcare, Energy, Utilities, Manufacturing, Telecom, Retail, Travel & Hospitality, and Public Sector.
  • Dimension 4 - ThinkTank: Bringing together our collective knowledge and insights across change agents, business functions, and industries to think out-of-the-box and collaboratively solve real business issues.

 

Bottom-line: We are raising the bar, and we are revolutionizing the industry with our new HfS 1-2-3-4 Research Agenda.

Check out the details of the Analyst 2.0 Model, ThinkTank, and our 1-2-3-4 Research Agenda.

HfS hammers the final nail in the legacy analyst coffin with the HfS ThinkTank
August 11, 2017 | Phil FershtJamie SnowdonBram WeertsSaurabh Gupta

It’s time to close the chapter on the legacy analyst industry that has lost its energy, its identity, its independence and sense of purpose.  HfS was founded seven years ago to shake this up, and what’s astounded us is the stubborn refusal of the rest of the industry to change, preferring to milk the remnants of a stale model.  So we’ve worked very hard behind the scenes to develop a knowledge platform that impacts, with an engagement style that shakes our clients from their slumbers.  Welcome to our ThinkTank…

Why is the legacy analyst industry stuck in a depressing holding pattern?

The analyst industry never made it out of 1.0.  Despite all the guff about analysts using twitter and blogs, the sporadic number of boutiques and one-man/woman bands that slipped in (and out) of the analyst market over the last decade. Despite the “freemium model”, where there was a pretence of free research “disrupting” the market, but most of it being regurgitated supplier press releases. We are still trapped in the old analyst model:

Let’s face it, this current model has steadily deteriorated over the last decade, with most analysts firms selling their praise to willing vendor marketeers only too happy to fund the propaganda, adding increasingly damp fuel in vein attempts to heat up their sodden sales decks and watery marketing brochures.  Even firms like NelsonHall, Everest, Zinnov and others have got in on the act of putting out endless scatterplot quadrants of supplier positions in all sorts of markets – as if customers really take this stuff seriously anymore? Is this the only way these firms can forge a living these days? How can you “influence” a market when your only impact is a few thousand quasi-human twitter followers, you don’t run customer summits, you don’t provide your clients with research labs, you don’t provide relevant data products and the only people you ever talk to are suppliers?

I would even go as far as declaring some of these “analyst” firms should be more correctly reclassified as supplier marketing support firms.  How can you be an “analyst” when all you do is take money from marketing people to reinforce their products?

The current model is increasingly desperate, we now see tech suppliers buying up advance licences of Quadrants, Waves and Marketscapes at the beginning of their budget cycles, before they are even written, so they can pick and choose which scatterplots to buy licenses when they like the outcome.  Yes, people, this really happens

How did it get this bad?  Simple – most analyst firms are just not very good. They are jaded, they are too stingy to invest in real talent with real experience, and just reel out the same old dinosaurs whose only value to industry is to market the wares of their paying customers.

Fortunately, we have started to see light at the end of this rather dingy tunnel. Which is about time, as  there’s nothing more depressing than bemoaning a stagnant industry encircling the drain before its eventual plummet into the plug hole of irrelevance. 

Don’t lose hope. Analyst 2.0 is finally here!

The industry is reaching its first major Come-to-Jesus moment, where growth is flat, there is mass confusion surrounding the real impact of “disruptive digital business models”, with the potential creative destruction of automation, the lack of clarity of the business benefits of cognitive and AI, and the blurry potential of blockchain in its nascent pre-industrial form.  It’s well past time for enterprise customers, suppliers and other key stakeholders to come together and really collaborate and think about what their true options are moving forward.

But, all is not lost, folks, because HfS is kick-starting a new era in the analyst biz with the HfS Impact model.  Let’s be honest, the analyst 1-800 hotline market, where you have to wait 3 weeks to talk to some clueless kid, and those strategy days when you got subjected to an endless deluge of dull slides explaining the basics of your industry that you were reading about in 2003, are fizzling out.  No one cares anymore.  No one bloody cares.

We’ve made it our mission  to drag this business kicking and screaming out of these dark ages of obsolescence. So, welcome to  Analyst 2.0, a model based entirely on Knowledge and Influence, centred around our revolutionary ThinkTank:

The ThinkTank approach is all about getting the industry collaborating again, where we use Design Thinking techniques to drive joint problem-solving.  Our mantra is that the analyst role is shifting from passive observer to facilitator. To make this happen, we have dedicated an entire floor of our new offices in Cambridge England, in addition to facilities in Chicago and Boston, to hosting day long ThinkTank sessions with our clients. ThinkTanks are where we invite customers, suppliers and even advisors to spend entire days with us Design Thinking their desired goals, and solving the problems that are preventing their achieving these outcomes.  This is where we challenge you, you challenge us, and we work together, supported by our research, to drive genuine achievement, defining where you need to go and clearing the path to get there. And yes, we lock all our phones away in a safe, while we drive this whole ThinkTank process. Learn more about the ThinkTank.

The Bottom-line:  The HfS Mission is to Revolutionize the Industry and lay the Analyst 1.0 model to rest.  For good

HfS’ mission is to provide visionary insight into the major innovations impacting business operations: automation, artificial intelligence, blockchain, digital business models and smart analytics. We focus on the future of operations across key industries. We influence the strategies of enterprise customers to develop operational backbones to stay competitive and partner with capable services providers, technology suppliers, and third party advisors.

HfS is the changing face of the analyst industry combining knowledge with impact:

  • ThinkTank model to collaborate with enterprise customers and other industry stakeholders.
  • 3000 enterprise customer interviews annually across the Global 2000.
  • A highly experienced analyst team.
  • Unrivalled industry summits. 
  • Comprehensive data products on the future of operations and IT services across industries.
  • A growing readership of over one million annually.

The "As-a-Service Economy" and "OneOffice™“ are revolutionizing the industry!

Break With Tradition Drives Infrastructure Services Toward Better Outcomes
August 02, 2017 | Jamie SnowdonOllie O’Donoghue

The HfS’ Blueprint reports are our temperature check of an industry. A guide to some of the trends that are already in play, and those starting to bubble under the surface. We have just launched the first in our series of IT Services reports focused on Infrastructure Services, and it’s some the trends around this research we’d want to shine a light on today. Of course, if you’re interested in all of the market information and dynamics covered in the research, you can get your hands on a copy here.

The industry breaks with tradition

When we talk about infrastructure services, the mind immediately jumps to build and manage or “lift and shift” engagements. Indeed, for a long time, it was this type of work that was the most in demand and lucrative of providers operating in the space. However, this is no longer the case as businesses seek to secure more holistic IT Services to support their digital ambitions. As we researched the mechanics of the infrastructure and enterprise cloud industry, it became apparent that providers are breaking with the traditional services and models they used to thrive on, and are seeking to focus on higher-value transformational activities instead. For some providers, this is more of a pivot, as they grapple with providing traditional services as well as new ones. While for others it is a more decided and strategic shift, in which “lift and shift” engagements are avoided entirely in favour of juicier transformative projects.

Our expectation is that this will transform the way some vendors pitch their infrastructure services completely. Polarising some to either end of the spectrum – those focused on high-value transformation, and those solidifying their position in at the traditional end. Somewhere in the middle, we’ll see some of the larger firms, capable of spreading themselves across the spectrum to handle a broad range of engagements.

Service Brokerage enables firms to become a one-stop-shop

Another dynamic, undoubtedly linked to the commotion caused by an industry pivoting and refocusing engagement models, is the decidedly increased role service brokerage plays. Many firms are moving toward semi-impartial and fully-agnostic service brokerage models to enable clients to secure best-in-class services through them. Many firms are moving toward semi-impartial and fully-agnostic service brokerage models to enable clients to secure best-in-class services through them, allowing them to offer a one-stop-shop for sourcing services across the IT spectrum.

However, some firms will find this easier than others, particularly those who have invested considerable sums in building proprietary technologies. For these firms, balancing the incentive to protect investments and assets against the industry shift to brokerage will be tough. But potentially necessary if client expectations set the pace at the agnostic provision of best-in-class services.

As this trend develops, we can expect to see larger and more tightly woven partner ecosystems in the space. Alongside increased activity from vendors trying to prove their credentials to partners in a bid to take relationships to the next level, while articulating their brokerage credibility to clients.

Consultancy-led engagements focus on business outcomes

The two preceding trends have the potential to completely alter the dynamics of the infrastructure and enterprise cloud industry and, indeed, IT Services as a whole. In part client expectations and demand are leading these challenges as business scream out for services and solutions that meet their digital and operational ambitions. Of course, businesses vary considerably, and the suitability of one IT Service offering varies accordingly. Leading to another shift away from tradition, as providers seek to deploy higher value solutions that tackle the core of a businesses problems.

We can see this trend play out in various ways - such as evolving pricing models that focus on business outcomes - but there’s another way that paints an encouraging picture. A picture of an industry refocusing its engagement model away from core, unadaptable services and towards the design and implementation of those which tackle a particular challenge. At the forefront of this shift is the increased focus on consultancy-led engagements that seek to understand a business and its challenges and objectives.

Approaches like this will be necessary if firms are to thrive in the changing marketplace. For example, it’s only through understanding a client's needs that a provider will be able to select and recommend the right services through its brokerage model or if the firm is to assess whether the engagement fits in with their model and approach.

As this trend develops, we can expect to see firms shoring up their consultancy brains and brawn to support engagements across IT Services from initiation to completion.

Bottom Line: Trends impacting the infrastructure and enterprise cloud industry signal a potentially turbulent future albeit one packed with opportunity for dynamic and agile providers.