Phil Fersht
 
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Accenture, Cognizant and Virtusa peg the top spots in the HFS Pega Service Providers Top 10
November 28, 2021 | Phil FershtTom ReunerKhalda De SouzaKrupa Ks

The convergence of SaaS and services has re-focused the ROI of software towards achieving defined business outcomes. With so many sophisticated SaaS platforms on the market - many of which offer far greater functionality than most enterprise customers need - the onus is shifting rapidly towards the business value these solutions bring to customers and how they support alignment with a OneOffice mindset. This is a major pivot away from customers simply purchasing what they are led to believe are the best features and functions and expecting miracles. Our new SaaS XXV research initiative is geared towards defining these business outcomes and measuring the leading - and upcoming - SaaS platforms against their customers achieving these outcomes.

So where better to start than looking at the leading services being built around low-code leader Pega....

“The power to simplify: What you need to crush complexity” – This was Alan Trefler’s ( Pega Founder and CEO ) key-note at the PegaWorld iNspire 2021. What stood out for me in Alan’s ~13-minute key-note was how to crush complexity. Simply put, it is about getting the business architecture right! This means an architecture that is organized around the heart of the business, customer and outcomes across the customer journey.

Putting the customer at the center is critical to the success of a transformation to drive meaningful and measurable outcomes. This was also a key insight from our latest HFS Pega Service Providers Top 10 2021:

To learn more about how the Pega market is evolving, what service provides are leading the way and how clients are leveraging Pega, I sat down with analysts Krupa K S and Khalda De Souza to learn about their experiences and insights from working on this report.

Phil Fersht, CEO and Chief Analyst, HFS Research: So, Khalda – My first question to you is around understanding the Pega services market. Please can you share the highlights and significant developments?

Khalda De Souza, Research Fellow, HFS Research: Pega offers integrated back-office and front-office solutions along with automation offerings and a low-code application development

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Job-hopping is only a temporary fix. Remote workers have to emerge from their comfortable cocoons as the Pandemic fades
November 24, 2021 | Phil FershtElena Christopher

We have to stop focusing on the "right now" and prepare for what's happening in the next six months (and beyond).  The Pandemic has created this immediate mentality from people that the situation we're in now is the only thing we should care about, and it'll be the same unto perpetuity. We need to break out of this mindset and accept we're in a temporary bubble... and the real world will quickly emerge in the coming months.  Let's prepare for that world, not the current one, folks.

With all the current panic about job-hopping and attrition, we need to consider we're in a temporary situation, where people have become burned out, and sometimes groping for the shiny and new is just so much easier than fixing the old.  Let's consider why...

It's become abundantly clear that many businesses simply cannot function in a remote model.  It can work for a short period, but ultimately creativity comes from a collective group of people being together physically.  Operations can keep cranking remotely, but for people to learn from each other, develop their relationships and lock heads to come up with ideas. They need to be together physically.

Swapping one cocoon for another is immediate gratification. I believe the current "Great Resignation" is a direct result of people stuck at home staring at a PC screen, desperate for some attention, fed up after 20 months of incarceration in their comfy cocoons.  Sure, they can always claim a pay rise and a new challenge excited them, but I believe the reason for most is the ease of hopping jobs in a talent-starved economy, where a Zoom call or two is all you need to make the switch.  It's just so easy in this bubble... merely swap one cocoon for what seems like an even nicer one.

It’s an attrition bubble. Attrition in knowledge jobs – those requiring IT or business process domain knowledge - has been spiky, but it's temporary and over-blown. Attrition levels in IT and business process services (for example) are now remarkably similar to pre-pandemic levels. The current exodus is more a result of 20 months of a temporary economic boom, pandemic, and employee fatigue than any permanent trend. As the Pandemic recedes in the spring of 2022 we will see people-centric industries quickly stabilize.

In-person work will come roaring back. Regardless of your new normal model – remote-first, hybrid, or in-person – every enterprise must respect and support the value of physicality. People still need physical interaction, education, and collaboration to learn and develop. Whatever your model, it must include a physical element and it must be thoughtfully constructed to ensure desired results. The physicality must be purposeful.  For example, most call centers across the globe are already back up to capacity, all the Indian-heritage IT service providers will have their facilities back to capacity at the beginning of next year, and many financial services institutions are always back to in-office work - as this is the only way they know how to function.  Talent at scale is still a brilliant thing to drive a business forward.

There are notable variations by industry and region. Industries that depend on people collaborating en-masse are already bouncing back to physical environments, or have imminent plans do to so. Work cultures that were very people-driven will bounce back almost 100% and are already on that track (China, India, others). Geos experiencing very / unrealistic high wage inflation will go through a correction when the economy stabilizes / levels off as the Pandemic recedes (i.e. US, India)

Bottom-Line: The pursuit of being perpetually remote is unrealistic

While there is a current huge focus on creating work environments to sustain remote working, it’s unrealistic to think in-person work is eradicated. The new normal may be more hybrid in terms of physical location, but enterprises and employees have to focus on motivating, educating, and helping create employees that are great to work with Jumping jobs is not a long-term solution to burnout and boredom. Neither is the red herring of “remote work” as some new productivity miracle.

Data and Decisions services 2021 - Accenture, IBM, TCS, Infosys and EXL lead the way in HFS Top 10 Rankings
November 16, 2021 | Phil FershtReetika FlemingNischala Murthy KaushikDavid Cushman

 

Everyone we talk to these days has become a data governance obsessive, regardless of their role.  Whether it's ensuring data flows are effective across front to back office to align customer engagement with employee effectiveness, or accessing external data up and down our supply chains to stay ahead of our competitors and cement strategic partnerships.

In short, we need to make our data ubiquitously available, accessible, and mineable - embedding a mindset into our leadership to inspire our people to work together to create an organization that can flip our business models to exploit these seismic market changes. But we can't get the data we need if our critical data is not in the cloud and we don't have the people, partners, processes, technology - and desire to change - to make this possible.

At HFS, we describe data and decisions services as an array of services designed to help customers create a culture of data that drives new opportunities through interactions, insights, and predictive capabilities, giving clients the ability to access data at a speed that drives critical decisions for their business.

This month, we unveiled the 2021 rankings on Data and Decisions (download report here) which clearly show which providers have been able to maximize the value of their data investments during the pandemic:

 

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To learn more, I sat down with Reetika Fleming, Research Leader and David Cushman, Practice Leader at HFS to talk about their reflections and perspectives in working on one of our most exciting and topically relevant research publications,  2021 HFS Top 10 Rankings on Data and Decisions.

Phil Fersht, CEO and Chief Analyst, HFS Research: So Reetika, What did you learn from doing this interesting and topically relevant Top 10?

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Four mindset shifts to operate as OneOffice
November 14, 2021 | Phil Fersht

OneOffice is a mindset where we break down all the silos and barriers that connect customers, employees, and partners. OneOffice is where we have processes that deliver front-to-back dataflows where we can unify our desired outcomes, how we measure success, employee effectiveness, and engage our external partners most effectively. It is how our organizations can function most effectively in today's virtual environment across borders, business ecosystems and complex supply chains. 

To get there is as much a mindset transformation as it is a technological one:

How to approach the mindset changes to operate as OneOffice 

Over the past year-and-a-half, we've gradually let go of the many shackles of the past and realized we're in a new reality, a wholly new environment, where we're all trying to focus on achieving real business outcomes, on values that are important to us, and a new work reality that is intense, high-touch and very real.  The change in the enterprise mindset towards technology has gone through a genuinely pragmatic revolution over the pandemic.

Mindset Shift I. We must align our data needs to deliver on business strategy.  This is where we clarify our vision and purpose. We need to make our data ubiquitously available, accessible, and mineable - embedding a mindset into our leadership to inspire our people to work together to create an organization that can flip our business models to exploit these seismic market changes. But we can't get the data we need if our critical data is not in the cloud and we don't have the people, partners, processes, technology - and desire to change - to make this possible.

Mindset Shift II. There is simply no option but to plan to design our processes in the cloud using scaleable web-architected applications.  If there’s one thing the pandemic taught us, it’s been the necessity to re-think processes to get the data; what should be added, eliminated, and simplified across our workflows to source this critical data. In this virtual economy, our global talent has to come together to create our borderless, completely digital organization. This is the true environment for real “digital transformation” in action. 

Mindset Shift III.  We must ingrain a critical discipline to automate our processes and data so we can function and survive in a virtual environment.  Automation is not our “strategy”, it is the necessary discipline to ensure our processes provide the data - at speed - to achieve our business outcomes. We have to approach all future automation in the cloud if we want our processes to run effectively end-to-end, which means we need effective, scalable technology to make this all possible.

Mindset Shift IV. Once we are automating successfully in the cloud, we can apply AI to data flows to anticipate at speed in self-improving feedback loops.  This is where we apply digital assistants, conversational AI and NLP, computer vision, machine learning, and other techniques to refine the efficacy of our data.  AI is how we engage with our data to refine ourselves as digital organizations where we only want a single office to operate with agility to do things faster, cheaper, and more streamlined than we ever thought possible.  AI helps us predict and anticipate how to beat our competitors and delight our customers, reaching both outside and inside of our organizations to pull the data we need to make critical decisions at speed.

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Bottom-line: You can't get the data you need if you don't have the people, partners, processes, technology - and desire to change - to make this possible

Over the past year-and-a-half, we've gradually let go of the many shackles of the past and realized we're in a new reality, a wholly new environment, where we're all trying to focus on achieving real business outcomes, on values that are important to us, and a new work reality that is intense, high-touch and very real.  The change in the enterprise mindset towards technology has gone through a genuinely pragmatic revolution over the pandemic. You can lead a horse to water, but can you get it to drink? OneOffice is about understanding and discovering the data you must have to win in your market - right now in real-time - and in the future - as the market environment keeps evolving. 

10 Reasons why we launched HFS Research-based Sourcing Advisory Services
November 13, 2021 | Phil FershtSaurabh Gupta

Almost every business has evolved its business model over the pandemic era as their customers' needs are changing to remain effective and competitive in this virtual environment.  And it's been no different for analyst firms like HFS, where enterprises demand immediate help and advice to be delivered remotely and rapidly in an intimate, personal environment.  Analysts must cut through the 3000-foot view and present practical, hype-free advice to customers is they want to be credible.

When it comes to figuring out rapid changes to business operating models, smart enterprises have been demanding immediate insights, data and advice to make fast decisions on partner selection, which services to insource or outsource, how to stay ahead of their data governance needs, how to re-think their processes to get the data they need in a virtual model, and consider how to approach automation and AI to help their operations function effectively and autonomously.

To address this, we've successfully launched our Research-based Sourcing Advisory Services (see link) under the guidance of our President of Research and Advisory, Saurabh Gupta, where we're helping a number of enterprises with our unique approach to helping enterprise customers in this virtual environment.  So what makes us unique and why does our approach to enterprise sourcing support dovetail so effectively with our global analyst business?  Here are 10 reasons why...

10 Reasons why we launched HFS Research-based Sourcing Advisory

  1. The role of analysts and advisors is converging and HFS provides the perfect balance.Our recent research covering the Global 2000 reveals that only 5%* of enterprises are leveraging the Big 4 or Sourcing advisors to handle the entire sourcing process from screening through to implementation and governance. (*Based on HFS Research of 150 C-level executives across G2000 enterprises, 2021).  HFS manages the most highly engaged community of enterprise leaders and applies great research and advisory to help them.  Sourcing advisory needs a fresh, trusted face, and that is HFS!
  2. Mature outsourcing enterprise customers do not need babysitters. Second-generation enterprise clients know how to run the sourcing process. They don’t need a team of full-time onsite consultants to rack up the billings. They mainly need data, expertise, and insights in specific areas where they have gaps.
  3. Welcome to the Virtual Economy, where HFS wins. Covid-19 has proven that sourcing advisory can be done remotely and virtually.  HFS has grown 30% during the pandemic and added multiple new research practices in new areas such as banking, healthcare, cloud/SaaS, and cybersecurity. We have many proof points here at HFS that 'virtual' works!  
  4. Advisors must deliver outcomes, not simply charge for time. Our sourcing advisory is based on fixed fees for definite milestones and results, not T&M, where the consultants are not incented to speed up the process. 
  5. Real research gets to outcomes much fasterYou don’t need an RFI for everything if you already know the market, have exhaustive data on decision dynamics and the supplier landscape. Our existing repository of Top 10 research reports, case studies, Industry Pulse of 800 Global 2000 enterprises, and IP allows enterprise clients to speed up the sourcing advisory process significantly.
  6. The sourcing advisory market is crying out for some innovation. The incumbents are still running sourcing advisory the same way as 15 years ago… as a procurement process designed to beat down the service providers on price. This cultural mismatch is the #1 issue why outsourcing engagements fail, yet no advisor conducts a psychometric fitment between the client and supplier.
  7. Where is the real transformationIs sourcing advisory designed to create outcomes for clients that are slightly better, slightly cheaper, and slightly faster? Is that transformation? HFS Research-based sourcing advisory is driven by the OneOffice mindset of an integrated approach across the front, middle, and back-office to drive employee and customer experience.
  8. The over-templatized process kills creativity. Yes, sourcing advisory needs a methodology, but it can’t be so rigid that it stymies creativity and out-of-the-box ideas. But few sourcing advisory engagements allow creativity and out-of-the-box thinking.
  9. Supplier shopping must go beyond cost-gouging. It’s a common (mal)practice to launch RFPs just to find a lower price point without any real intention to change the incumbent. Again research-based and IP-backed advisory services can prevent such wastage of time and effort across all stakeholders. We don’t encourage competitive bidding just for the sake of it!
  10. We must learn from each other. There is no template for success in today’s world. The best chance of success is to learn from each other and share experiences. Our research deliverables, roundtables, videocasts and events provide an open forum for our enterprise clients to share frustrations and best practices, and we all learn from each other.

Bottom line. The traditional sourcing advisory space is ripe for disruption and HFS is challenging the status quo.

HFS provides the perfect balance between the best research in the industry and experienced practical advice. Our comprehensive repository of Top 10 research reports enables clients to develop supplier shortlists. Each Top 10 report ranks leading service providers across a series of pre-defined criteria across execution, innovation, and voice of the customer. “HFS OneOffice Pulse,” a bi-annual study of 800 global enterprises, is designed to focus on anticipated demand changes for technology and business services. Our diverse suite of data-driven offerings (price benchmarking, contracts database, emerge tech. case study compendiums) give you the tools to predict, respond to, and benefit from changes in the service industry.

Working with us, enterprise leaders will be better-informed, more enabled, and in a much-improved position to anticipate economic, technological, and market challenges.

See how our sourcing advisors can help you. Drop us a line at [email protected]

COP26: We’ll make it - but too late for so many
November 08, 2021 | Josh MatthewsPhil Fersht

HFS Sustainability Practice Leader Josh Matthews on stage at COP26 with executives from BMW and Accenture (Click to Enlarge)

 Anyone familiar with our analyst team knows how passionately analyst Josh Matthews has beaten the sustainability drum since he joined us three years ago (when no one cared about sustainability).  So we sent him along to the COP26 world climate change global political summit, not only to wake up Joe Biden,  but also to share some unfiltered and uncomfortable truths among all the corporate fluff... so over to Josh for his takeaways...

I left Glasgow and COP26 to the surreal experience of Fridays for Futures demonstrators, pioneers of the school climate strikes we’ve become familiar with, claiming the streets. All generations were represented. It drove home the magnitude of the most pivotal UN climate summit. Having been immersed in business and policymaking circles for a week, I found myself explaining reserved but real optimism (combined with cautious relief and pleasant surprise) to two local activists from Keeping Our Cool, a team aiming to support constructive conversations around COP.

The G20 which preceded COP26 (and honestly the last 6 months or so of sustainability-based research) gave me little optimism on the policymaking front. And for those of you who know my political background, you’ll know I don’t immediately jump to support the current UK government. But (for now) it’s optimism.

We have reason for optimism on two fronts

1. Tangibility emerges. First, the world’s largest and most influential businesses are becoming more serious (and more believably so) about moving from goal setting and ambitious rhetoric to planning their transitions and creating tangible roadmaps;

2. Big businesses will (likely) have to disclose their efforts. Secondly, the UK’s announcement that in 2023, most big businesses must disclose transition plans (it remains to be seen how rigorous or enforced this will be) will hopefully mean all organizations align themselves to sustainability goals - decarbonization to net-zero and beyond, alongside all 17 UN Sustainable Development Goals - and that this standard becomes a worldwide norm.

However, tempering that optimism are two severe problems

1. The most progressive organizations are those who’ve grasped basic concepts. The first problem is that we’re attributing gold standards of sustainability to organizations (and governments) that have grasped simple road-mapping concepts: set a goal, understand your starting point, and plan your journey. We need to quickly reach a point where detailed transition roadmaps are the norm, rather than the top 20% (a generous number). To push us in this direction, organizations like the CDP, a respected environmental disclosure and ratings charity, are moving the bar upwards in their assessments of an organization’s sustainability - and focusing on transition plans, not only commitments, even if those commitments are validated by the Science-Based Targets Initiative (SBTi), a leading voice on net-zero target setting.

Perhaps the biggest advantage we have across sustainability is that we have goals. We have the endpoints of the roadmaps we need to move along. And while we need to reach these goals as soon as we can—and these roadmaps must include rapid action in the next 5-10 years, not just targets set for 2050—this is a massive difference compared to the last decade or more chasing a horribly vague concept of digital transformation. We need to measure and understand our starting points to make these roadmaps. And we need to work together throughout organizations, and ecosystems to both figure out our starting points, and to make these roadmaps happen. I’ll be publishing a more detailed take on what COP26 means for business leaders soon, following the conclusions to the summit.

2. Humanity can be amazing in a crisis—but sadly never fast enough to save everyone. The second problem isn’t one we can fix — we can only limit. I wrote this piece filled with optimism at Glasgow Central station that there’s enough innovation and determination out there between businesses, policymakers, and people to decarbonize and meet net-zero by 2050. If we do so and fall on the right side of the 50:50 chance that gives us to limit global warming to 1.5-degrees, we can avert the very worst scenarios of climate change. But this optimism then came with a bitter aftertaste. Even if we meet these targets, and make massive strides on all 17 UN Goals, so many across the world are currently experiencing what the opposite of sustainability looks like. As time goes by means we become too late to save another person, another ecosystem, or avert another of the damning effects of climate change. What that doesn’t mean, is that that the efforts we all need to make rapidly, each in our own individual and organizational ways, aren’t worth it. We ran out of time to compromise and delay decades ago. I hope and I am optimistic that this really can be the “decade to deliver,” as so many put it—I can’t afford not to be.

Bottom-line: We ran out of time to compromise and delay decades ago 

I hope and I am optimistic that this really can be the “decade to deliver,” as so many put it.  We can’t afford not to be.

Wipro catches a growth mindset with Stephanie Trautman
November 06, 2021 | Phil Fersht

One of the most notable turnarounds in recent IT services history has been the remarkable increase in revenue and profit performance of Wipro since Thierry Delaporte took the helm 18 months ago just as the Pandemic was in full throttle.  Over the past few quarters, the firm has posted close to double-digital revenue growth and will surpass the $10 billion revenue level.  Thierry moved swiftly to make restructure the firm around geographic regions while simplifying its management structure, and he also brought in some new faces from the outside to add fresh ideas, energy and focus to implement his plans.

One of Thierry's recent recruits has been Cincinnati's own Stephanie Trautman, who joined the firm last February from Accenture, to take on the new role of Chief Growth Officer for the firm.  So we coaxed her off the golf course to tell  us a bit about herself, what she's doing for Wipro and why the firm has been making such a strong bounceback in the market...

Phil Fersht, CEO and Chief Analyst, HFS Research: Well, it’s great to get some time again with you, Stephanie, up close and personal. So I guess my first question is going to be, you know, have you always been in the tech business? Can you share a little bit about maybe how your career evolved since you left college? Was this what you always wanted to do?

Stephanie Trautman, Chief Growth Officer, Wipro: Sure, Phil. I’ve spent my entire career in either financial services, technology, or both. I really did not anticipate this career, when I graduated from college. I went back to school to get my MBA, and then started a career at Ernst & Young, and that’s where I kind of got introduced to technology, and really had a passion for it, so have stayed in this industry since then. So I did move around a lot, in my career, but when I did, you know, it was often to either learn something new, or grow my responsibilities, or use my experience for the organization I was joining. So I’m really lucky to have worked with some fantastic organizations, and learned a lot, learned this business, and happy now to be able to help others do the same.

Phil: You’ve got this fancy job title, you’re the Chief Growth Officer, so you head up, what, sales, and marketing, and partnerships, large deals, etc. Can you tell me a bit about what a day in your life is looking like, Stephanie, in this new role of yours?

Stephanie: You know, I’m really fortunate to really love what I do, and I was particularly excited about this role. On a typical day, I’m either meeting with my chief growth office leadership team, talking about how we increase our large deal pipeline, and win large deals, or I’m meeting with Laura and Gurvinder to talk about what we need to do to increase brand awareness, either in the marketplace, or with our advisors and our partners. I spend a lot of time with our ecosystem partners, understanding their strategies, and Wipro, and how we could come together in more impactful ways. And then, you know, in the first, probably, four or five months, I spent a lot of time hiring, which was also a lot of fun, and met some fantastic talent. On the

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Cognizant is over the Hump... thanks to the Humph
November 02, 2021 | Phil Fersht

One of the most over-criticized service providers of the past couple of years has been Cognizant. The company which rocketed from $1bn-$15bn in 15 years took full advantage of the pre and post-Great Recession offshore boom, the directionless years of Wipro and Infosys, and a lovable arrogance... which even scared the hell out of Accenture.  And all this was achieved with very few changes to its leadership team and an entrepreneurial spirit which was the envy of the IT services industry.

However, with the pressure of the activist investor Elliott Management's buy-back in 2018 shortly after its president and operational architect Gordon Coburn fell on his sword for greasing the palms of Tamil Nadu government officials to obtain building permits, the Cognizant halo quickly faded, and CEO Francisco DeSouza departed with revenue growth slumping to 5% and operating margins heading down to the low-teens.

Brian Humphries' patient approach to change has proven the smarter approach considering the complex structure of the firm 

Enter Brian Humphries in early 2019 (see blog) to take on his first IT services leadership position having spent most his career in telecoms with Vodafone and hardware with Dell and HP prior.  While many people thought Brian would cut deep, he took his time evaluating the firm's long-time leadership - it took the best part of two years for most the old-guard SVPs (known internally as "one-zeros") to take themselves out or require a gentle nudge.  Compare this to Thierry Delaporte who joined Wipro in 2020 and quietly cut 155 VP (and above) level executives after a few short months.  While many onlookers criticized Humphries for moving too slowly, he was trying to develop a renewed spirit, professionalism and culture without a traumatic break from its very impressive past.  Wipro had stagnated for years because of a very stodgy and bureaucratic structure which needed a quick, rapid fix, while Cognizant is more than twice the size and needed a more gradual pivot, especially as several former one-zeros had built huge fiefdoms that were not broken, but in dire need of discipline, direction and realignment with the broader business planning across its global business units which were too skewed to the US market.

Just when things were moving in the right direction, enter a pandemic, a ransomware attack, and the write-down of a disastrous legacy client

When you examine the challenges of incoming CEOs into very large businesses, there are not many which rival the series of events that Humphries has had to endure.  After righting the ship in 2019, along came the deep panic of the global pandemic with the seismic adjustments needed just to keep the wheels on keeping their clients' delivery functioning.  And to rub salt into an already gaping wound, the firm was hit with the Maze ransomware attack, just as its employees were being rapidly transitioned into their work-from-home environments.  And, despite these unprecedented disruptions to its business, Cognizant plowed through the worst of these impacts only to be forced to write off around $150m in Q4 2020 from a disastrous acquisition of Finnish developer Samlink, struck shortly before Humphries took the helm, which was geared at building a shared core banking infrastructure for three Finnish financial institutions. 

Yet, despite these three significant setbacks, Cognizant has risen again, posting three successive high-growth quarters with a strong outlook for Q4 which should see the firm comfortably blow past the $18.5 bn level.  This will see the firm likely finish 2021 as the fourth-largest IT services firm in the world, only being surpassed by Accenture, TCS, and (marginally) Capgemini.  IBM's spin-out of its infrastructure services business (Kyndryl) and DXC's decline will likely make this eventuality happen: 

(Click to enlarge)

The reason for real optimism is that growth in revenue comes with positive movement in operating margins and EBITDA.  With the current issues impacting staff wages and attrition (especially in India), it's critical for providers to maintain strong margin performance to provide that ability to reinvest in staff recruitment, training and salaries:

(Click to enlarge)

Reasons for this robust post-pandemic bounceback

Ongoing acquisitions adding specific expertise across geographic and solution areas.  In 2019 and 2020 Cognizant took specific strides to increase its cloud migration and modernization capabilities with a series of targeted acquisitions across core domains such as AWS, Pega, ServiceNow, Workday, Microsoft Azure and Salesforce.  Examples include Collaborative Solutions, 10th Magnitude, Bright Wolf, and Inawisdom There have also been specific acquisitions in engineering services areas, notably in the product and automotive realms, such as TQS Integration and ESG mobility

Flexible pricing models for apps modernization.  Our multiple discussions reveal that Cognizant’s customers are happy with the pricing models that Cognizant is offering for applications modernization, and are generally happy with the talent.  The growth of digital deals is resulting in Cognizant being able to price “land and expand” pricing models that include gain share, outcome, and risk-based pricing components.

Clients see Cognizant as an "engineering-first" firm.  Focusing on its software engineering DNA and not trying to sound like a low-cost alternative to Accenture, is perhaps a less obvious aspect of Cognizant's pivot over the past couple of years. Several Cognizant clients we recently interviewed mentioned they prefer its focus on staff training and depth/scale of resources and care much less about how much it influences the C-Suite with grandiose ideas.  The new attitude, after the past 18 months of pandemic-induced volatility, has definitely seen enterprises prefer service providers with a roll-up-sleeves approach to drive rapid transitions.

Strong growth outside of US mainstay.  While Cognizant's US business grew 10% over the past year, there has been a significant 17% increase in Europe and 22% across the rest of world. Some key wins in the UK (HMRC and a major UK publisher) and Sanofi (France) contributed to the notable increase in European presence.  The recruitment of Rob Walker to lead UK and Ireland has been a notable addition, who was recently invited to brief the British Prime Minister, and Rajesh Nambiar is proving to be a stabilizing figure in India, amidst all the turbulence and staff attrition currently plaguing the whole Indian tech scene.

Continues to strengthen their capabilities across both the Life Sciences and Healthcare value chains. In Life Sciences, Cognizant's Industry 4.0 push to enhance its manufacturing capabilities is impressive and has a lot of potential. The acquisition of Zenith allows it to combine its IT expertise with Zenith's OT expertise to be able to deliver a full-stack tech integration for all LS manufacturing integration. In addition to this acquisition, it has also partnered with Phillips to be able to use data to connect medical devices, health systems and health plans on AWS using Philips HealthSuite (PaaS). This type of ecosystem connectivity will give Cognizant significant leverage to support clinical trials better, reduce fraud waste and abuse and generally optimze the use of data. 

Challenges Cognizant needs to address

Attrition and wage inflation.  The "Great Resignation" is hurting all service providers with significant reliance on Indian talent and Cognizant is among the worst of the Tier 1's affected with current rates estimated in the high 30 percentile.  While enterprise customers have expressed concern over the current high rates across all service providers, we have yet to see any major delivery issues as a result and impact is being felt more with rising costs due to rising wage rates.  Cognizant has a healthy operating margin and added 17,200 staff over the last quarter, bettered only by TCS (19,690) and Accenture (55,541).  With this aggressive focus on hiring and attention from the C-Suite on combatting attrition, Cognizant should not find itself at any significant disadvantage vis-à-vis its competitors, especially in software engineering areas where its scale and depth are so important in the current environment.

Banking and Financial Services needs an injection of energy.  The sector only grew 5% year-on-year compared to 10% in healthcare and 20% in comms, media and tech.  Cognizant has recently revamped its BFS capabilities with new leadership, new offerings, and a new approach that better emphasizes transformation rather than IT partnership. We applaud the direction but Cognizant has been outpaced in many categories by its competitors. We’d like to see continued progress with consulting-led capabilities helping Cognizant make good on being more than a tech partner. We’d also like to see continued progress with Cognizant's European footprint and nearshore delivery, which is a strategic priority for BFS clients.

Create a compelling narrative for its digital business operations.  Cognizant's $2bn of revenues in the business operations arena (growing at a health high-teens clip) are two-thirds of the entire revenues of pure-play Genpact and double the likes of EXL, WNS and InfosysBPM.  However, few people outside of Cognizant recognize this capability and are surprised to learn the deep plethora of industry process, content expertise, digital business acumen and process automation experience that exists within the firm.  While Cognizant has always done a very good job of marketing its bread and butter tech capabilities, it has perennially struggled for many years to create and articulate a compelling narrative for its operations and process capabilities... which are a well-kept secret.  Key client executives need to know that Cognizant's business operations are a strong alternative to Accenture interactive operations, TCS' banking and insurance process services, or Genpact's CORA AI platform, and so on. In today's virtual environment, the ability to deliver business services in the cloud has never been so critical and having that capability to bridge process and technology services is critical.  Cognizant is well placed to capitalize here, provided it creates an identity for its business operations capabilities and aligns its practice leaders to bring the pieces together for clients across cloud, apps and process.

The Bottom-line:  The negativity is leaving the building and the new Cognizant is quietly emerging

The strong rally over the past year proves there is a lot of life and energy fizzing as the new Cognizant emerges from a slow transition and a very unlucky series of events that threatened the very essence of the organization last year.  Now we need to see the leadership team drive the company forward as we stumble (somewhat) out of the pandemic into a 2022 that could be as volatile and unpredictable as the past 18 months.  One thing is for certain - Cognizant has proved to be a highly resilient animal that has quietly found new energy and footing in this most testing of times.

Accenture, TCS, Infosys, IBM and Capgemini leading the way with Native Automation services
October 25, 2021 | Phil FershtElena ChristopherDavid Cushman

We're excited to unveil our eagerly-awaited Top Ten report covering Native Automation Services (click here for your copy).  In short, Native Automation services leverage a range of emerging technologies to create intelligent and automated workflows in the cloud enabling new "native" standards for consistent cross-functional enterprise operations.  Let's remind ourselves that automation is not your strategy.  It is the necessary native discipline to ensure your processes provide the data - at speed - to achieve your business outcomes. Hence you have to approach all future automation in the cloud if you want your processes to run effectively end-to-end.

The report examines the capabilities of 12 service providers. We assessed and rated their native automation service capabilities across a defined series of execution, innovation, OneOffice alignment, and voice of the customer criteria. So let's see how the leading service providers fared:

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Key criteria for rating Native Automation service providers

Native Automation Excellence.  Native automation is one of three enabling capabilities supporting the journey to OneOffice. It covers services that leverage a range of emerging technologies to create intelligent and automated workflows in the cloud, enabling new "native" standards for consistent cross-functional enterprise operations. The top five leaders in our study, Accenture, TCS, Infosys, IBM, and Capgemini, showcased exemplary capabilities across the assessment criteria, demonstrating the inclusion of automation as a standard “native” element of transformed enterprise operations. 

Execution.  Native automation is scaling, but most engagements are still at the front end of the value chain in the planning and implementation stages. Native automation is an essential element of enterprise operations transformation. But remember, the value is from working smarter and solving problems, not from successfully implementing a single-thread technology. The increase in outsourcing and managed services deals points to automation truly becoming a native element of enterprise operations. TCS shone in this category, closely followed bt Infosys and Accenture.

Innovation.  Native automation engagements are becoming more tech-diversified, but robotic process automation (RPA) is still the dominant technology. RPA and process intelligence have become the power couple of automation engagements, packing a powerful combo punch of understanding and automating processes then measuring the impact of the automated processes. Study participants tell us RPA and hyperscalers dominate their partner landscape, with Automation Anywhere (AAI) and UiPath as co-leaders; almost 70% of respondents named them as a top automation partner, followed closely by MS Azure and AWS, reminding us that ecosystems are changing and on-prem was so pre-pandemic.  Accenture dominated the innovation categories, followed by impressive showings by Cognizant and HCL.

OneOffice Alignment.  Service providers say they are delivering OneOffice digital transformation in an average of just 65% of their native automation engagements. This suggests the need to work harder to forge the link between native automation and its essential role in delivering OneOffice transformation. It’s time to walk the walk: Take the OneOffice message beyond the thought leadership and into the deal.  TCS was able to win this category, clearly helped by its merging together of data, process delivery in recent years to deliver a front-to-back experience for many of its automation clients.

Voice of the Customer.  Native automation customers speak, and they want proactive recommendations! One hundred percent (100%) of the customers we interviewed indicated they regard their native automation service provider as a strategic partner. Enterprises largely recognize and appreciate services providers’ proven expertise, skills, innovation, and scale that help make their businesses better. But they want their service provider partners to challenge them and provide more proactive ideas for improvement. Business process and data management services provider EXL was the surprise winner of this category, proving that a deep understanding of clients' institutional processes is so critical when is comes to redesigning workflows.  It is no coincidence its business process management rival WNS also surpassed expectations here, while Genpact was also a high performer.

Bottom line: Automation is the native disciple that sets up the platform to drive AI capabilities to refine your data

Once you have successfully automated processes in the cloud, it is easy to administer AI solutions to deliver at speed in self-improving feedback loops.  This is where you apply digital assistants, computer vision, machine learning, and other techniques to refine the efficacy of your data.  AI is how we engage with our data to refine ourselves as digital organizations where we only want a single office to operate with agility to do things faster, cheaper, and more streamlined than we ever thought possible.  AI helps us predict and anticipate how to beat our competitors and delight our customers, reaching both outside and inside of our organizations to pull the data we need to make critical decisions at speed.

As enterprises grapple with the enablement of their post-pandemic, work-from-anywhere future, native automation is going mainstream. It is rapidly becoming an essential element of enterprise operations transformation—enabling the modernization of work through thoughtful process reinvention and eradication of soul-crushing manual work. Service providers play a critical role in driving transformative solutions and mindset change about how and where work gets done.

HFS subscribers can click here to access their copy of HFS OneOffice Services Top Ten: Native Automation Services 2021

IBM rebrands its GBS division to emphasize what it actually does: Consulting
October 18, 2021 | Phil FershtSaurabh GuptaElena ChristopherSarah LittleJoel Martin

Almost two decades after its landmark acquisition of PwC Consulting, IBM Global Business Services (GBS) is now IBM Consulting. Just another industry rebrand, you say? Botox for GBS? Not so fast. .

Here are five reasons why this rebrand matters...

1) Clarity is king and consulting dominates what IBM’s services organization does. There have been a lot of misconceptions around IBM’s GBS (Global Business Services) and what the organization does, so part of the positioning with IBM Consulting is to clarify this across the board while pitting itself more aggressively against competitors with deep consulting chops like Accenture, EY, PwC, and Deloitte. With roughly 70% of its $16 billion revenues in the group coming from technology and business transformation projects, this rebranding is aligning the identity of IBM services with the lion’s share of its business activity. Moreover, the term “GBS” is most often associated with centralized internal shared services governance organizations, which is vastly different from the IT and business services where IBM specializes.

2) Simplified organization structure. Behind the rebranding, IBM Consulting also restructured its organization structure to shift from an input/capability-led structure to a more client-centric model. There are now four transformation services blocks that IBM consulting is organized around – customer transformation, employee transformation, finance & supply chain transformation, and industry transformation with cross-cutting cloud services and emerging technology capabilities. All the emerging technology capabilities (automation, AI, analytics, blockchain) are now housed under the same group to try and maximize the value creation opportunity for clients. One of the biggest gripes of IBM clients has been painful navigation across capabilities. This simplification should help.

3) Talent acquisition. There are two roads to travel here for the talent discussion: organic and inorganic talent growth.

a) Organic acquisition. “IBM Consulting” certainly brings more cache than a consulting title within GBS when compared to Accenture and the Big 4. This is an opportunity to strengthen the employer brand at all levels so long as IBM supports it internally with clear consulting career pathways and progression towards a master class of client-facing managing client partner roles. The shift from GBS to IBM Consulting and the strength of its growth should be a boon for IBMs ability to pull talent from top firms during the Great Resignation and straight out of the university gates.

b) Substantive skills and talent growth through M&A. IBM acquired eight firms in since 2019: 7Summits, Expertus, Instana, NordCloud, TruQua, WDG Automation, Accanto #, and Red Hat. Consider this a catalyst for skills-building that accompanies world-class training and assets. IBM ranked #4 in the HFS Employee Experience Services Top 10 report, with notable takeaways on their skills ecosystem. IBM places skills at the center of its people strategy and has a fully scaled internal experience to back it up: half of the revenue IBM earned from 2015 – 2020 is from new areas of the business (e.g., cloud computing, AI, data science, cybersecurity).

4) IBM Consulting leadership has a consulting pedigree and a leader who pioneered the modern-day Accenture consulting model. So many of the leaders within the group came across as part of the 2002 PwC acquisition and have long-since built consulting and managed services practices under the IBM banner.  In recent years, the revenue model has shifted more and more towards consulting and away from commodity managed services offerings where it is increasingly challenging to compete on cost-driven engagements against the likes of the heritage Indian providers and Accenture (with 250,000 of its staff based in India).  Moreover, Mark Foster, the SVP leading the IBM Consulting division, is widely credited as the leader behind the significant growth of Accenture consulting until he left the firm in 2011. He was the pioneer behind the Accenture “diamond client” model, where a laser focus on 150-200 major enterprises has formed the bedrock behind the force that is Accenture today.

5) Divorced from Hardware, finally. With the spinoff of Kyndryl days away, IBM Consulting has clear mandate to focus on business and technology process re-engineering. The Consulting group is free to partner more broadly with hyperscalers, accelerate innovation labs with its Garage services, and be more software first around AI, automation, and emerging technologies like blockchain, IoT, and 5G.  Garage services will become innovation labs for industry-centric consulting services to align technology consulting and software platforms (Cloud Pacs) with industry-centric business transformation for large enterprise customers. Expect a big consulting push around “the cognitive enterprise powered by IBM Consulting” as they meld together Watson, multi-vendor hybrid cloud, Red Hat OpenShift and Enterprise Linux, and Cloud Paks to modernize technology and push with industry-specific software and services offerings.

The Bottom Line:  IBM Consulting now has the structure to take on Accenture and Deloitte, but optics have to be complemented by real talent investment, C-level commitment, technology agnosticism, and client results.

IBM’s shift to emphasizing consulting couldn’t be better timed with a huge talent dearth for outsourcing delivery talent, especially in India.  Our research shows that 54% of the FORTUNE 1000 are racing to stay relevant in the virtual economy, and they need immediate transformational and IT support to make fast decisions.  This lends much more to partnerships with providers with deep onshore talent and a deep consulting pedigree.  If IBM can continue to beef up its consulting presence with organic talent – and perhaps an acquisition or two – there is no reason why IBM Consulting cannot challenge Accenture and Deloitte at the help of the IT transformation market. 

IBM consulting should also make it very clear to its existing and prospective clients that it is not getting out of the “outsourcing” market with this rebranding to “consulting.” The Kyndryl divestiture earlier this year and the contact center divestiture to Concentrix in 2014 provides ample ammunition to its competitors to raise concerns about IBM’s commitment to the BPO and ITO markets which it needs to proactively address,  

Another area where we – at HFS – believe IBM Consulting needs to clarify its position, is with regards to its technology partnerships.  While the firm has been successfully teaming with software firms such as Celonis, Blue Prism and UiPath, it has also had to work with IBM Software which has acquired produces such as myInvenio and WDG, which compete in the market with these firms.  If IBM Consulting can clarify its technology agnosticism in a similar way to the ethos Foster applied at Accenture, there is every chance of success as we venture into unchartered waters.