Phil Fersht
 
CEO and Chief Analyst 
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#NASSCOM_ILF 2018: An industry stuck in #fakenews limbo, desperately needing to change the channel
February 22, 2018 | Phil Fersht

Stability and modest growth should be the best thing that has happened to this industry:  companies can plan for the future with greater predictability and make smarter investment decisions.  Instead, we’re suffering from a culture of endless hype, copycat marketing and an addiction to hypergrowth. 

NASSCOM’s annual India Leadership Forum is always a good bellwether for testing the temperature of the global services industry – and the 2018 rendition this week in Hyderabad served up some real pearls of wisdom (yes, Hyderabad is the world’s leading refiner of pearls).

Getting to the point, the services industry has never found itself in a worse state of bewilderment and confusion.  After last year’s sense of looming disaster with President Trump’s proposed Visa reforms, at least the industry has something collective to hang onto – a common fear of being politicked out of business.  However, with that panic pretty much diluted, what has been left is a conflicting range of moods, ranging from confusion to depression to uncomfortable modest growth, alarmingly untrue #fakenews, and a never-ending plethora of meaningless buzz words, which have become so deepset in the fabric of our industry, most of us are resigned to using them, as it’s the only language left to communicate basic sentences to each other.

So let’s try and shed some light on the confusion, based on some of the terrific conversations we had this week:

The Indian IT industry is struggling to cope with “modest growth”.  With NASSCOM bravely predicting something in the 7-9% range, most credible analysts are predicting 4-5% for the short, medium and long-term.  The reality is, the whole DNA of Indian IT has been borne out of hyper-growth, offering genuine riches to ambitious executives who could project-manage their way to a very nice condo in Bangalore or Gurgaon.  The gravy train has now firmly ground to a halt, and most of the lovely folks remaining are still coming to terms with their salary increases slowing down, or disappearing altogether.  And many are just pleased to cling to their jobs. The level-headed executives have accepted they are now looking at a more modest outlook for their firms and their own futures, and are making some adjustments, while others are still clambering around trying to find the next hype bandwagon to hitch to their next career move (and payrise).  Did I hear the words AI, Blockchain, or RPA anyone?

“Digital” provides a sugar frosting for restating revenues as something that is not traditional IT.  While we managed to have about 30 structured meeting with service providers and tech firms, the term “digital” has become so meaningless, it now ceases to be used in any coherent sentence. It seems to be purely a term now for convincing investors and Wall St analysts that, somehow, traditional services revenues have now become something mysterious and new that will set services firms on a new pathway to returning to hypergrowth… and very soon. Digital is all about designing new revenue channels for customers using emerging interactive technologies.  It’s all about collapsing internal silos within business operations to service customers’ emerging digital needs.  If you’re telling me that 50-75% of IT services revenues are now “digital”, then please tell me where all the billions of dollars of app testing, app management and IT infra revenues mysteriously disappeared? 

Services has fallen hook, line and sinker for its own #fakenews.  Suddenly, every services provider has developed the industry’s leading competency for delivering automation, artificial intelligence and blockchain… overnight.  While, barely a year ago, exactly the same firms were the industry’s leading maestros at serving up “digital transformation”.  Amazing how they could source thousands of experts, and convince so many clients to make this all possible in barely a few months.  Until recently, most providers declared they were adopting a “wait and see” attitude to approaching some of these areas, but now are in there fully-fledged and firing on all their lovely blockchain cylinders.  Puhlease ladies and gents!  At least, in days gone by, most providers would be relatively honest about their core areas of focus and expertise.  Now it seems perfectly acceptable for many just to stare you in the eyes and just lie… what on earth has driven us to this place?

DXC continues to baffle everyone.  Can someone please explain what DXC is supposed to be doing?  I love the Accenture-esque TV ads, but I am still clueless as to what this firm is actually doing to be the next big thing in the industry.  While I was very happy with the DXC branded gifts for writing notes and charging my phones, I would rather just get a little postcard explaining what on earth this new-fangled services business is supposed to be doing that is so special…

Sourcing advisors have just fallen off a cliff.  Yeah – they just weren’t present.  Barely a couple of years ago they still trawled these halls with their promises of big deals (or would try and sell you some “research” to make a few bucks).  Now they have all but disappeared from the equation.  Maybe their absence is the most notable sign that the good ol’ days are firmly gone forever, and it’s high-time to wake up to something approaching a normal, stable industry?

The Bottom-line: There are some seriously cool things going in in the world of technology services; we just need to unearth them and change the narrative

There is a lot of goodness this industry is capable of achieving if we can just get out of our own way.

For starters, we're seeing the fastest revenue growth from several middle-tier providers who are big enough to go after some large complex deals, small enough to work on new concepts with clients and lack the legacy business to focus on going after greenfield disruptive opportunities that the big guys cannot consider.  We are seeing some of the major providers unearth new gold by taking ambitious clients to new places of business value, with a high-risk / high value mindset, using technology that is here today and working with them as a trusted long-term partner.  We’re seeing real advances in automation, machine learning and digital enablement that are here today – they are now a reality, not some future innovation that is still some years away.  We are also seeing a feverish desire from many clients to experiment with blockchain, despite the fact it’s still a long way from providing many meaningful business applications today. 

The present is now the future and this should be the most exciting time ever to be innovative, courageous and entrepreneurial.  So let’s stop trying to pretend to be something we’re not and focus on the real potential that is staring us in the face.  Everyone’s tired of the #fakenews… it’s time to change the channel!

There's no FTE hell with Chris Caldwell
February 19, 2018 | Phil Fersht


The good old customer BPO business has taken quite a battering in recent years, where the same old usual suspects have embarked on selling predominantly the same old voice services, with most choosing to compete with ever-cheaper global locations to prop up their fragile profit margins. While many of the services majors have chosen to steer clear (or quietly exit the market), the importance of creating an amazing customer experience has never been so critical to customer-facing businesses.  Something has gone sorely wrong here...

In an era where every firm aims to be "digital" (and has a Chief Digital Officer to boot), the focus on engaging customers with both digital and voice communications has taken center stage... yet, these legacy call center practices continue to hound the services industry as most of the call center firms continue to fight it out to the lowest common denominator: who can delivery average customer service as cheaply as possible?  But you can't just blame the service providers alone for this behaviour:  many of the FORTUNE 500 propagate this behaviour by playing everyone off to squeeze every last drop of cost (and subsequently value) out of their delivery capability... preferring to talk a big digital customer experience game than truly investing in one.  

One leader in the space who has taken it upon himself to declare war on these legacy practices is Concentrix President Chris Caldwell, who has masterminded the impressive growth of the firm over the last 12 years, which has included some major acquisitions, notably, the IBM contact center business, BPO firm Minacs and the Australian digital outfit, Tigerspike.  The company today boasts annual revenues greater than $2bn with over 100,000 employees globally.  Having observed this rapid rise, I thought it high time to invite Chris on here to share a bit more about his story and his views on why this industry needn't be an FTE hell any longer...

Phil Fersht, CEO and Chief Analyst, HfS Research: Good morning Chris. It's great to finally get you here on HfS. I would love to hear about your journey on how you wound up running the Concentrix business.

Chris Caldwell, President, Concentrix Corporation: Of course, Phil, It's bit of an interesting story. I’m not sure if anyone starts out saying that they are going into a career to beat your business, or a call center business. But I worked for a parent company, SYNNEX where I was looking after M&A and the diversification of their business model from the core distribution business. One of the businesses that we bought, very small at the time, was a BPO business, about 30 people which was barely doing over $1m a year and had begun to lose money after some time. And my boss who was the CEO of the other company, said to me, 'you bought it, you fix it.' That was the start of the BPO business and that's when I took over Concentrix at the time. I then had to learn the call center business very quickly; figure out how to grow it and do something with it, which happened in approximately 2005.

Phil: Chris, you then went through this much, much larger acquisition of the IBM call center business in 2013. Can you talk a bit about how Concentrix got to that point, the relationship with SYNNEX, and how things have really progressed since you made that major acquisition?

Chris: Sure, It’s interesting. When we originally invested in Concentrix it was to provide additional services to SYNNEX vendors. SYNNEX is an IT distributor and I can still remember

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The digital worker survival guide: it's much more about attitude than skills
February 12, 2018 | Phil Fersht

Yes, people, as we inch towards the dreaded singularity, we will continue to be bored silly with arrogant diatribes describing how “humans can stay relevant”.

Do we really need to hear this daily splurge of pontifications from business leaders in Davos about reskilling the workforce, without any real practical advice on what that reskilling is?  I would argue this is more about culture and attitude, than training students to learn new programming languages and data analyst skills. The latter will come naturally as the needs of the workplace change, my view is that it’s the former which poses the real challenge: how can we enlighten people to change their working attitudes to make them much more valuable and irreplaceable to their employers?  Anyone can fix a line of code within hours, or slam in some new software, it’s what you actually do with the tech that really counts. 

It's what you do when your boss isn't looking, that makes you less predictable and more valuable 

It’s not just about performing predictable tasks, it’s also about helping your firm devise new ways of doing things – that is the magic that makes staff valued.  The truth is the singularity is a gimmick to jazz up advances with intelligent computing capability; the reality is the present and the future of the workplace are converging before our very eyes, and the survival of the digital worker depends on our ability to be looking constantly at where our firms are going, and being part of that journey.

The future of every type of ambitious commercial business, whether it’s a factory making products, a bank loaning money, an IT support shop helping users, a grocery store selling goods, a law firm prepping available information for its client cases, an analyst firm producing insight… is to perform its business operations with the optimum balance of talent, so it can maximise its immediate profits, with an eye on the future to stay ahead of the competition. As soon as someone’s output is predictable, taking inputs from various sources to produce outputs, you can start to figure out how to program software and machines to perform said tasks – and computers will always be cheaper than humans, once they are functional and can do the job.  So our goal has to be about furthering our abilities, not only to get the basics of our jobs done, but to immerse ourselves into helping our colleagues and bosses figure out the what next.  Because if we only focus on the now, we are eventually going to render ourselves predictable and replaceable.

Xerox and Zume: Two ends of the comfort/innovation spectrum

However, not all businesses are ambitious – some just want to milk what they have, squeeze as much as they can out of their current product and then exit.  Just look at Xerox – the firm developed a tremendous product for many years (and was the most patented and innovative workplace technology alongside the emergence of the IBM computer back in Don Draper time), which literally dominated a market in such a way that their brand became a verb.  However, Xerox just couldn’t find a way to become something else as copying documents became a commodity practise, and recently took its final payday before becoming part of Fujifilm

Maybe some firms and some boards just aren’t destined to do anything else, and those who made millions and retired off their stock can sip their martinis and congratulate themselves on their success (and luck).  However, for every millionaire, there will be a thousand mid-career folks rendered practically unemployable with a legacy skillset servicing a legacy product. So often we see people clinging onto the past with their careers, when it's abundantly clear their train has left the station. Good money today doesn’t always mean a healthy long-term decision, and there are so many people facing that predicament. What of the bank teller facing branch closures and their role being BPO-ed?  Or the insurance inspector being replaced by flying drones with webcams?  Or the call center agent being phased out for an intelligent chatbot?  Or the investment analyst being replaced by smart algorithms?  We can just go on and on and on… and there are so many more examples, such as the case of Zume pizza.

Zume, a typical Californian disruptive business, makes its pizzas with robots, and can deliver up to 200 at a time thanks to remotely controlled ovens inside their delivery trucks, their patented “Cooking en Route” system. It’s secret sauce is literally automation (not tomato purée) which speeds pizzas to market more cheaply, efficiently and at scale (and delivered freshly cooked ant hot).  Instead, it can invest its profits in hiring creative people to think of clever occasions with which to personalize and sell pizzas (i.e. during The Superbowl and Game of Thrones).  In short, tasks that are automatable such as rolling out the dough, adding on the sauce and toppings and placing the pizzas into and out of ovens are much more cost effective to use machine labor.  And when predictable intelligence is needed, such as forecasting weather conditions and popular events can benefit from a machine learning algorithm, the supply chain mechanism can be astutely optimized to get products to hungry customers quickly and profitably as possible.  Hence, the human skills are being pushed further and further up the creative value chain, such as designing a Philly cheese steak pizza for Eagles fans, or a lobster roll pizza for new England fans (OK I just made those up, but you get the picture). 

If you are an employer looking for creative talent, would you rather hire a successful Xerox executive who's kept that beast trundling along for the last couple of decades, or someone who's been immersed in the exciting growth of Zume over the past 18 months?  Hmmm...

The secret sauce to an ambitious business lies in energizing its culture and mindset to focus on the now and the next

As we have discussed, predictable is not the secret sauce – the secret sauce is what you do when no one is looking, the less obvious tasks that make you irreplaceable.  The key is to immerse yourself into the personable side of the business to become part of how the company drives value.  This means making your value less simple to put on a spreadsheet  - successful companies are those that create a culture that is unique to them, where its people are engaging in an enthusiastic way to find new sources of value for their firm, while enjoying being part of that journey.  People who love what they do and energize those around them are rarely fired.

In the case of Zume, once you have your intelligent pizza supply chain perfected, the human differentiator lies in marketing the product to drive the customer experience, which means having teams of smart people who love the product and work enthusiastically to come up with ideas to win in their marketplace.  It’s the same analogy with many insurance firms, where the whole process of managing an insurance process and developing smart algorithms to predict risk are increasingly digitizing (with the help of outsourced support), and the human edge lies with insurance firms out-marketing and out-thinking each other to offer the customer something that is more appealing to them?  Do we really care whether Geiko or Progressive insures our cars?  Probably not, but we will buy with whoever targeted us most effectively and made it easiest to get the transaction done.  Or it may be as simple as which TV commercial appealed to us to the most – the frog with the British cockney access or the friendly Flo who just seems to trustworthy and nice.  The simple reality here is as routine tasks become automated and the data becomes increasingly predictable with the use of advanced analytics and machine learning, the human skill lies in establishing the culture of a firm and the creativity in connecting and engaging as impactfully as possible with a customer base which just wants to be served as quickly and touchlessly as possible.  Do we really care about talking to a pizza order-taker or an insurance customer rep on the phone, when we can just order something on an iphone app?  I bet we’d hardly care if a drone rang our doorbell with a piping hot pizza at out front door, as long as it tasted great and was delivered quickly.  And you wouldn't have to tip either =)

The Bottom-line: Future workplace success is as much about  attitude as it is skillset, where we need to focus on this convergance of the present and the future

If I have to hear yet another “we need to fix the skills gap” diatribe from some plastic HR analyst I am going to become a Belgian trappist monk and brew very strong beer all day.  But I think you already knew that... so hear are some takeaways:

Get out of your silo. Get to know your colleagues and get them excited about what you do.  Even if your work areas don't converge that much, how hard is it to give up some time to get to know who you're working with, and exploring how you can help each other.  While we are all becoming digitally lazy with our social interactions (and many other activities) we need to focus harder on our people relationships to energize those around us.  So get back to having lunch with colleagues... call them up to air ideas.  Don't be unafraid to get people to explain what the hell it is they actually do (because they are likely clueless whay you do also...). 

Get to know some useful tech.  Whatever you do, where are cool apps to enhance your job, whether its collaborative apps and social software, graphics and content packages, data visualization and analytics tools, CRM tools, RPA/RDA/BPM and easy-to-use process configuration software... you don't need a computer science degree anymore to use this stuff. If you mastered that beast called PowerPoint, you can certainly use some of the sexier tools in the market and... and evaluating them is almost always free.  If you're not using some form of new tech in your job, then something is going amiss... or you're just too busy selling your next photocoper to care.

Get to know your firm's business better.  Your bosses should be driving themselves nuts trying to get one over the competition and come up with new ideas for disrupting your market.  Insert yourself in that conversation... everyone has a few good ideas in them somewhere.  By showing you care about the business adds to your value and inclusion... and you'll learn more about the business model and help people think through some clever options.  If you just don't care about the business your work in and really can't be bothered to support your firm with its future, your current career track may be getting very limited...

Include others in what you do, even if it's boring.  Everyone loves being included in what others are doing... inclusion far out-trumps boredom.  If someone enthusiastically shows you how he RPA-ed some workflows together, you'd just be happy he showed you how he did it, even though he may be dis-invited to your next pool party.  

Being smart about data is no longer geeky, its career-critical. If you can’t automate and digitize your rudimentary processes, you will quickly run out of value to any organization. Plus, every siloed dataset restricts the analytics insight that makes you a strategic contributor to your business. You really can’t create value or transform a business operation without converged, real-time data.  You don't need to have a mathematics masters to understand your customers and the markets in which your operate - you just need to explain to your colleagues what you need and make sure it gets done.  

Tune up your cross-cultural intelligence.  We need to do a lot more than merely understand cultural differences - we need to adapt and modify our behaviors as the situation dictates as our workplaces and business environment continues to globalize. That means we need to get smarter about different senses of humor (and different sensitivities), widely differings levels of political correctness, different styles of engagement (most Americans tend to like to talk a lot more than most Europeans, for example and their meetings often last longer).  Also be sensitive to time zones - the days of expecting people to take 4.00am calls are pretty much over.  And be prepared to talk more about geopolitics - many people just want to talk about the big issues more openly these days (even Americans where political discourse has been taboo in days gone by).  My only advice here is to try to listen, even if you are in violent disagreement with someone... 

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.

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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):

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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

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No longer that great: The USA’s stagnation is spurring genuine global innovation, with data and AI at the core
January 31, 2018 | Phil Fersht

Having spent the last 15 years of my life in the US before recently returning to my British homeland to focus on the global expansion of HfS, I think I have earned the right to offer a view on how global innovation will evolve in the coming years. So let's have a real State of the Union look into global battle for economic and digital supremacy.

For decades now, Silicon Valley has driven technology innovation, US corporates dominated business innovation, and US healthcare was the paragon of high-quality patient care. Everyone looked to the US for innovation, leadership and entrepreneurship.  Hell, there was nowhere else in the world I could have founded and made HfS a success eight years’ ago… people in the UK used to sneer at new brands, ideas and anything that cut against the legacy business establishment. But Americans liked shiny new things, they embraced entrepreneurship and new ideas, and welcomed foreign talent.  The US was the world’s innovator, the world’s entrepreneur… it was the place where ambitious people aspired to flourish.  All good things happened in America – it’s where dreams were hatched and made real.

Fast-forward to present day and all this is changing before our eyes

Tech innovation is no longer confined to a politically exhausted, entitled and overpriced Silicon Valley.  Israel is becoming a leading hub for security, blockchain and AI start-ups and talent.  India’s startup scene is especially vibrant as ambitious IT talent grows frustrated with the monolithic outsourcers and seeks to join emerging tech firms and get involved with AI development environments such as Python, R, Caffe, Google TensorFlow, the Azure ML Workbench, Amazon's Sagemaker etc. In China, real cooperation between the government and its tech giants is significantly positioning the country’s advancements as an AI leader.  Meanwhile, Estonia is already putting its entire population database on a blockchain platform as part of its plans to build a digital nation, and even Dubai is declaring it will be a Blockchain city run by smart contracts by 2020.

The abhorrent cost of talent in Silicon Valley, coupled with the extremely negative politics

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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

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Has the IT services biz reached its tipping point as the Digital OneOffice emerges?
January 19, 2018 | Phil Fersht

Surely not, folks... but did the flagging IT services business finally find rock bottom... and we're now working our way back to something resembling (gasp) growth

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According to our latest market size and forecast, Q3 2017 showed real signs of genuine improvement in the services business. It is consistent with the gradual upward trend we've been monitoring over the past 8 quarters (with the exception of Q4 2016), when the market dipped due to concerns around Brexit and Trump. We've been observing an increasingly significant number of Digital OneOffice type deals, and it seems we may have finally reached an inflection point where these “OneOffice style” engagements are driving more growth than the legacy is sucking out of the market.  

How we define OneOffice IT Services

The OneOffice framework is all about collapsing the barriers between front and back office to create OneOffice with unified outcomes, centered around customer impact.  OneOffice IT supports this framework. As such, OneOffice IT Services is split into two main components – operational services and professional services:

 

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i) Managed / Operational OneOffice IT Services

The difference between traditional operational services and OneOffice operational services is the business model of the services itself and the manner in which the service is delivered. Operational OneOffice services can include both application management and IT Infrastructure focused services. OneOffice services use an evolved service delivery model that shifts the business model towards outcome realization and consumption, so would include hybrid and

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RPA often starts out like a teenage romance: a lot of enthusiastic fumbling around that ends quickly, frequently leading to disappointment
January 12, 2018 | Phil Fersht

Yes, folks, that was one of the key takeaways one of the delegates pointed out at the FORA Summit in London last month, where a very mature conversation took place about the real future of operations in this lovely robotic age (download your full copy here). 

This packed-out event was attended by 120 senior executives, the majority being senior buyside enterprise clients, joined by the CEOs of the leading automation solutions vendors, practice leaders across the leading service providers and global advisors. and the HfS analyst team.  This was a chance to get beyond that deluge of wooden marketing and sales hype that is murdering our sanity… and get to the real nub of the of the issues plaguing a confused – and fumbling – industry.

Ten Big Takeaways from the Discussions

1. RPA needs to move beyond the teenage romance stage. One delegate pointed out that RPA often started out like a teenage romance – a lot of fumbling around with enthusiasm that ends quickly, often leading to disappointment. Past events have focused on the importance of change management to the process, however, our recent study of 400 automation buyers shows that a lack of clarity around the business case is the major barrier to RPA adoption (change management rears its head after all the fun and games of implementing the software):

2. RPA hype is over and it's nearing time to retire the term in favor of Digital Operations and the emerging Digital Workforce. Hype needs to move from replacement to enablement. The benefit of automation and AI are not reducing the workforce, but enabling machine to human and human to machine interaction. Helping enterprises and governments make better decisions with data. Building a more virtuous cycle with automation, decision making and data.

3. The Pace of Change Cannot Be Slowed – If You Aren’t Disrupting You Aren’t Surviving. Companies that view disruption as an opportunity and are not complacent are the most successful. Paranoia about the world ahead is your friend – driving staff to innovate and disrupt. Technology in this circumstance is a tool not a solution. Our customer panel said that there are ‘burning platforms’ already being created and businesses are going to have to come to a decision at some point soon to adopt. The supplier panel were agreeing that automation is surviving for big businesses and large enterprises have less than five years to sort this out.

4. The biggest challenge for Automation is the shift to scale. It's not a technology problem, but an organizational change issue and how to achieve a broad set of outcomes at scale. Currently many implementations are sub-scale - tens or hundreds of bots instead of thousands they could potentially be.

5. Ultimately the world needs to shift its economic measure from effort to outcomes – where value is linked to achievement rather than the effort to achieve. The value of relationships need to be more interactive than ever, to make the shift towards outcome-based engagements, and away from effort-based.

6. The C-Suite is paranoid about the future and eager to make changes, while middle management is complacent and resistant to change. Culture is a major impediment to changing this dynamic. This requires a number of changes –change in the way companies operate, change in the skills that companies value, change in the incentives and the training that enterprises offer staff.

7. To adapt we need to constantly learn. This means better understanding of new technologies, better understanding of underlying processes and what can be improved. But ultimately it is about the best way to drive outcomes within the business.

8. We still need more use cases – especially as we look to Cognitive/ML/AI. As the hype shifts to higher forms of automation the need for use cases for all automation expands. There needs to be clearer understanding of where the value lies and where the process should begin. RPA is being passed over even when it offers 80% value for 20% cost and should be recognized as a valuable tool in an enterprise's arsenal.

9. The purpose of digital is to bring humans and technology together. One of the panellists made the comment that digital was not about specific technology or about a transformation. “Digital” is about the bringing together of humans and technology. It is the interface, closing the gap between the two.

10. Change management remains a vital component of automation strategies. The difficulty in delivering at scale is exacerbated by poor change management and planning. It’s clear from our event in Chicago and in London that enterprise customers and service providers need to spend more time on planning to get automation to work effectively. One senior buyer representative said “change is not like flipping a light switch… more like a dimmer where it comes to full light over time and every new leaders is a new start.” So there needs to be a clear outcome and commitment - one of the main topics of conversation during the event was around the need for better change management to ensure that nothing is left behind in the race to transform. With important advice that "change management is about educating people slowly toward what the world will look like tomorrow”.

The Bottom line: Here are the anti-fumbling themes taking the conversation to New York this coming March...

To conclude the London summit and take the narrative onto our biggest and baddest FORA summit yet, the following four themes will steer the next phase of this industry mandate:

The Technology – a means, not an end. Data is the currency of transformation

Like with many new technologies, analysts, consultants and industry practitioners become obsessed with definitions and the demarcation between automation variants: in this case RDA, RPA, AI, Machine Learning, Cognitive, and all their permutations and combinations. Whilst this might be important for market sizing and positioning – many of the conversations in London reinforced the point that technology is a means, not an end – deemphasizing this definitional obsession. All these pieces of tech are tools, not solutions themselves. Without a coherent, end-to-end business transformation strategy, “dabbling” with automation technologies frequently does more harm than good, at best yielding only meagre results.  Given the amount of potential disruption to legacy work practices businesses are facing, a deeper transformation strategy is required which will take automation at scale – “you need to go big,” as one participant put it, to get real benefit from automation.  But first, organizations must map out the path to understand where they’re going.  This brings with it another crucial part of the transformation recipe – data. Understanding the centrality of data to the digital enterprise – how to acquire, structure, interpret and act on it – is essential

The Value – shifting the metrics from effort to outcomes

Much of the discussion during the event focused on the outsourcing services industry, in part because that’s where the prevailing labor-arbitrage business model is under existential threat, and in part because that’s where automation technology is already being deployed at scale.  During his keynote Phil Fersht observed that “Transactional outsourcing’s death throws began in 2012” – dating its demise to the rapid emergence of RPA.  However, there is a new, business model within reach.  Providers have meaningful experience with automation technologies and valuable know-how, while buyers desperately need expert help with design and implementation.  What’s needed is a new value proposition – one that separates effort and time from cost and revenue, and shares risks and gains.  “Clients will have to contribute value to their suppliers,” as one participant put it, and providers will have to become more innovative and willing to expose their balance sheets – in short, being less transactional and more consultative.

The Talent – taking the robot out of the human and putting insights back into the process

As has been discussed at the FORA and HfS Summits in the past - and as noted by Professors Leslie Willcocks in London, automation is not about replacing humans, automation “takes the robot out of the human.” Taking the mundane and process-centric tasks to free up employees to engage in more meaningful activities.  Artificial Intelligence, on the other hand, augments and extends the human mind, empowering humans to make more consequential decisions.  Together, they fundamentally change human behavior and workplace management paradigms.  In the digital future, all employees will need skills in data analysis and interpretation, and middle managers in particular will need to be able to connect the work they supervise with the outcomes the business requires.  Both must be granted what one participant called “permission to change” the way they have traditionally operated, and business must invest to equip them with new skills to succeed.

The Change Imperative – the way operations support the business itself needs to be redesigned

There is a growing awareness that we are at a step-change – a discontinuity – in business history.  The challenge presented by digital and automation technologies can only be met successfully with a commitment to transformational change; incremental, tactical approaches will only yield limited results and risk failure.  As never before, senior executives in every industry face existential decisions about the future of their enterprises, and will need to “make themselves uncomfortable,” as one participant put it – to re-imagine their businesses based on the centrality of data and digital relationships (see Technology above).  They will need to shed the constraints of the “as is” and articulate the journey to the “to be.”  Success will be measured not on beating last quarter’s results but on the ability to see and grasp the scale of change required and create a viable and compelling digital vision for what one participant called the “journey to improvement.” 

HfS Subscribers can click here to download their complimentary copy of the London FOR A Mandate “Arise the Digital Middle Manager!”

How the Blockchain Six-Pack is changing how we think about business transactions, storing data and new revenue models
January 06, 2018 | Phil Fersht

Our Chief Strategy officer, Saurabh Gupta has been pioneering new research and vision across distributed ledgers, blockchain and smart contracts.  In his latest POV, entitled "The Blockchain Reality Check. Where are we, and what can we expect in 2018?" Saurabh dives into what we describe as "Blockchain Six-Pack", which describes six built-in features of blockchains that manifest into a disruptive potential over the long run for enterprises, when leveraged intelligently in relevant business use-cases. Net-net, the Blockchain Six-Pack is changing the way we think about business transactions, data storage, and even industry value chains and associated revenue models:

  1. Distributed shared data over Peer-to-Peer (P2P) network reduces single points of failiure. The most fundamental difference between DLT and the way we store data today, is that Distributed Ledgers do not have a central administrator. A distributed ledger is replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, or institutions. This allows information to be available across the network in a fully transparent and autonomous way, reducing single points of failure and enabling far better collaboration.
  2. Consensus-driven trust cuts out the middle-man. In blockchains, there is no need to trust the middle-man as you don’t have one. Trust is driven by consensus algorithms such as proof-of-work (PoW) or Proof-of-Stake (PoS) or some variation of these. As a result, we don’t need to worry about unreliable, inaccurate, dishonest or overpriced intermediaries.
  3. Immutable transactions ensure trust. Each block in a blockchain contains a timestamp and a link to a previous block. By definition, blockchains are inherently resistant to modification of the data. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks and a collusion of the network majority creating a single source of truth.
  4. Hashing-based data ensures integrity and security. All records are individually encrypted. Blockchains use cryptographic hash codes to verify data that drives up integrity and creates strong resilience to cyber-security concerns
  5. Automated smart contracts promote touchless interactions across process chains. Several blockchains also offer ‘Smart Contract’ functionality. These are computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract, or that obviate the need for a contractual clause. This allows contracts to auto-execute based on pre-set conditions or triggers and allows for much higher levels of straight-through It can even allow the millions of IoT devices to work autonomously
  6. Permissioned and permission-less flavors give enterprise users flexibility. Much like public and private clouds, blockchains can be private (permissioned), public (permission-less), or somewhere in between (hybrid). These flavors give enterprises the flexibility to choose their solution based on their needs and preferences. Permissioned blockchains enhance privacy and take less computational power (so have higher throughput) but lack the Utopian trust that permissionless blockchains, such as Bitcoin, can bring.

Blockchain’s inherent features give it the potential to drive new touchless business models and disrupt existing ones by removing the need for intermediaries in the long-run.  This results in significant increases in the speed, security and reliability of executive processes, transactions and interactions on both micro and macro scales.  The potential is enormous, provided blockchains are adopted, sensibly regulated and executed effectively. However, HfS expects a five to seven-year horizon for blockchain to delivery fully, given the nascency of the technology and associated challenges.  In addition, media hype and fake news, in addition to negative activity from threatened legacy stakeholders and other economic impacts, could impede adoption.

What can we expect from blockchain in 2018?

In the near term, we do expect blockchain initiatives to drive significant business impact and create a frenzy of excitement as ambitious businesses jump on the potential of new technology developments like never before. Use-cases around traceability through provenance and asset tracking, digitization of contracts leading to faster settlements, management of private data and digital identity will drive significant efficiency and effectiveness gains in existing business models. Blockchain can also become a source of competitive differentiation in the medium term by re-imagining IT infrastructure that is shared and decentralized, re-defining transaction management that is transparent and immutable and driving additional trust in multi-party collaboration. 

We might not see the true disruptive potential of blockchains over the next 12-18 months, but we will see it become much more than a conversation topic with several use-cases that are generating tremendous business value for its constituents. And let’s not discount the levels of hype that tend to drive our industry in new directions, especially when the tech works.  While digital, AI and automation have been the flavors of 2017, blockchain is gearing up to lead the hype in 2018, as enterprise leaders search for new levels of value that have genuine, proven business applications.  

So don’t sit back and assume that the world is not changing, because very soon this funnel is going to flip. Go ahead and investigate blockchain!  

HfS subscribers can click here to download our new POV: "The Blockchain Reality Check. Where are we, and what can we expect in 2018?"

Ready to Learn to Change in New York this March?
January 04, 2018 | Phil Fersht

Dear Friends - it's time to push the biggest events button in 2018!

Oh yes... we're excited to trigger the first nuclear tranche of speakers for the Future of Operations in the Robotic Age (FORA) Summit in New York, March 7-8.  The summit will span the entire two days with the theme "Learning to Change" rocketing the conversation.

The tech is here and is being proven, but are we really, truly ready to disrupt our underlying corporate DNA to exploit it to its full potential? Can we really change how we operate, think, collaborate and focus to embrace the new wave of data-driven transformation that is engulfing us? In true ballistic HfS style, we are bringing together some of the finest minds from enterprise buyers, academia, technology and BPM services to share how change can be realized - and how to venture outside of our comfort zone to get there. As always, this is a non-salesy sharing of best practices and research between the key industry stakeholders.  No cardboard cutouts, plastic booths or dodgy salesmen... honest!  

Do apply here to save your seat ...space is limited and filling up fast.  Let's push some great big buttons, people...

Apply here to save your seat