Monthly Archives: Mar 2020

Coronavirus cruelly exposes the fragility of the offshore outsourcing industry: Will clients trust all their eggs in one basket again when this is over?

March 22, 2020 | Phil FershtOllie O’Donoghue

The outsourcing industry is fast-becoming be the first vital piece of the global economy to come under the microscope as nations, businesses, and societies try to build a blueprint for what the post-coronavirus economy may look like.

India and Russia, in particular, are now being widely seen to have the slowest response to the coronavirus pandemic across all the major economies, and the situation is forecasted to worsen rapidly in the coming days and weeks - perhaps at the most alarming scale of all the current major global economies.

In addition, the current curfew (just announced) in India is going to have serious and immediate consequences for the smooth delivery of IT and business process work conducted for both overseas and local clients. Many IT support staff are poorly equipped to support work-at-home staff, not owning laptops, often living in unsuitable accommodation for work, and often with poor internet / wireless connectivity.

In short, like our governments and healthcare systems, the offshore outsourcing industry just wasn't prepared for this.  All the warnings were ignored and now some very sick chickens are coming home to roost...

We're running out of global locations to source service delivery, while work-at-home measures are proving woefully inadequate for offshore IT service provision

In short, the global industry is quickly screeching to a halt as a consequence of this pandemic. Most of the leading service providers have been instilling "safe distancing" in their centers, increasing onsite medical facilities and sanitary measures. However, with the death rate spiraling massively in Italy (almost 800 per day and rising) and US and UK expected to accelerate significantly because of their slow response to locking down public gatherings, workplaces and travel, the increased curfew measures just announced in India render these efforts from services firms pretty much moot.

In short, all global businesses are being significantly disrupted because of major restrictions mandating employees to work at home, and not having sufficient resources in India is going to exacerbate the situation for supporting critical IT delivery. Global enterprises may be forced to source local service providers to plug critical gaps, such as security monitoring, disaster recovery etc. which is going to put a strain on their budgets and my least to some major contract disputes (although many of the IT service contractors should be protected by Force Majeure provisions). In addition, service providers with strong delivery resources in locations such as Russia, which is resisting a lockdown, may take on additional business at this time, though most nations with strong IT delivery, such as Poland and Ukraine, are already in lockdown situations. The Philippines is also seemingly open for business, which is keeping the lights on for delivering a lot of voice-based services, but we expect them to shut down their centers soon with Duterte discussing emergency measures with the Philippines Congress on 23rd March.

Finally, the robustness of outsourcing will be tested to its maximum.  And - most likely - well beyond its maximum 

Discussing the issue with multiple executives in leading offshore IT Services firms paints a telling picture of how broad and painstakingly detailed business continuity plans are now. And, by inference, how woefully inadequately designed they were for a situation of this magnitude. Executives are telling us they have never seen such widespread implementations of business continuity in their multi-decade long careers. For their clients, while more measures from key offshore locations are understandable and, frankly should be applauded given their laissez-faire approach thus far, could still not come at a worse time. Outsourced service desks are already overwhelmed as they move to support huge volumes of end-users trying to access systems remotely and, in some instances, using technology stacks with which they have no training or familiarity. While it's not clear how the curfew will impact these engagements, one possible outcome is enterprises - out of desperation - start to develop and stand-up their own in-house capabilities to handle the glut in core IT work.

In terms of outsourced customer support, leading call center firms are showcasing their ability to shift a lot of work to their WAHA (Work at Home Agents) if the need arises, and most are still able to utilize their large Philippines centers because of Duterte's confusing attempts at a lockdown. However, we will only witness the true reliability of whether WAHA can actually deliver at a massive scale, when these workplaces are finally locked down... which is surely coming very soon.  In addition, after more than a decade of hype surrounding crowdsourcing, we will finally witness whether that can really do more than plug a few gaps for occasional developer needs.

The Bottom Line: Will enterprises still have an appetite to keep outsourcing when this is all over, or are those days fading fast?

Should this become widespread - we may emerge from this situation with a very different outsourcing landscape and a reluctance from enterprises to put all their eggs in one basket again - in-line with broader comments about de-globalizing supply chains. In short, the outsourcing industry may be the first vital piece of the global economy to come under the microscope as nations, businesses, and societies try to build a blueprint for what the post-coronavirus economy may look like.

Keeping enterprise clients' critical support services functioning is becoming the biggest challenge ever facing India's IT industry as it tackles this exacerbating health crisis. Provisioning laptops to essential IT staff, ensuring internet infrastructure is functioning under the strain while enforcing staff takes the necessary self-distancing and hygiene precautions are the critical functions of service provider management at this time. They have to operate on an immediate short-term footing to keep the lights on for enterprise clients, and with a medium-term focus on surviving the next few weeks with the right emergency provisions in place to keep staff healthy and a financial fallback to keep the wheels on the track as we go through these very painful motions. Whether governments will be bailing out outsourcing firms and laid off contract staff is very fuzzy right now, and the concern is whether there is an outsourcing industry to save after all this is over - even if there are some emergency financial relief measures in the interim.

Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT ServicesPolicy and Regulations

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In times like these you need to pivot your business model... now!

March 20, 2020 | Phil FershtTom Quigley

Posted in: Absolutely Meaningless Comedy

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Quarantine... there is no choice

March 20, 2020 | Phil Fersht

Posted in: None

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Covid-19: Learn to live and work with it... Fast

March 15, 2020 | Phil Fersht

Firstly, we are not going to shut ourselves at home and lose our minds for the next few weeks.  This is the first time we are experiencing a truly global pandemic and we’re all learning what the hell to do.  However, rather than staring into a paralyzed abyss of a suspended reality of virtual conference calls, binge-watching the entire five seasons of the Wire (again) and watching your son’s best friend’s mom forbid them sharing Pokémon cards, take a deep breath.  This thing is not going to ruin our lives.  We just can’t let it.

Getting from abnormal to normal... quickly

The next 3-4 weeks we’ll figure out what’s going on.  Firstly, we just don’t have all the data points yet.  We don’t know how many people will get infected, and the speed that this will move – but it’s getting clearer everyday.  In 3-4 weeks, we’ll all have much better data on the longevity of this thing, and how to manage ourselves accordingly for our families and our jobs.

We must quickly find our steady-living-state where 'abnormal is normal'. Once we have a clearer picture, and we’re all taking sensible measures of self-distancing and avoiding risky gatherings, we can start planning our life again.  We’ll know many people with whom we can meet, the houses we can visit, have small gatherings with colleagues we all know are observing sensible routines, even clients we can visit with in non-crowded sanitized offices, meeting rooms for hire which are Covid-19 compliant – or even each other’s houses, if the relationship is that good.  We won’t be hopping on planes for a few weeks, but we can make the most of our social and professional networks around us.

Its time to get to work rapidly framing our new future, or we could quickly get left behind. Economies are changing, and most clients’ needs are radically changing with it.  Business models that may have worked just a couple of weeks ago may already be dead in the water.  Emerging technologies such as effective automation suites and the need to redesign processes will be more needed by companies more than ever.  The hyperscale cloud will be the platform where global business is done.  Turmoil forces change, and the current maelstrom will create rapid opportunities for some, and significant challenges for many caught in the headwinds.  Keeping right on top of this is critical, and having research, advice and validation to support quick decisions has never been so critical.

This may not be going away anytime soon, so we just have to learn how to live with this.  When reading what the experts in viruses are researching, it’s pretty clear that things thing will probably dissipate in warmer weather, but is highly likely to return again in the winter.  In fact, it may just become a really nasty strain of flu that comes back in phases – and many of us will become immune because we had a strain of it, while there will also be preventative drugs and (touch-wood) a “Covid-19 shot” we can take that will negate our catching this.

We’ll emerge into a more virtual, hygiene-conscious world, and I really hope we’ll all be wiser for the experience as the whole value equation of society changes for the better

I’d be very surprised if this comes and goes in several weeks and we never hear from it again.  It will take weeks to dissipate, there’ll be recurrences in various geographies, and there’ll be constant speculation about new strains emerging.  Yes, this is a huge pain in the backside.  But it’s here and will likely lurk around our lives and society for much longer than we expect.  However, it has raised awareness of core hygiene issues so many people always ignored, and it has made the issue of fake news and lack of real, credible data the most critical issue today. It is also forcing many countries to address their woefully underfunded health systems and may even create a new value system where critical issues like climate change become more important political issues than merely the growth of the stock market.

The Bottom-line: it’s time to face up to this new normality… and we hope a new societal value equation

We’ll be back on planes eventually and grandstanding the next awesome technology innovations at conferences.  But I hope we’ll all emerge a little more humble, human and socially conscious than we once were. 

However, what we can’t do is wallow in paranoia, fear and allow ourselves to get sucked into a vortex of negativity.  The stock market will most likely get hammered, we’ll tackle a difficult recession and many people will likely lose their jobs.  However, our global economy will recover and we’ll find prosperity again.  Let’s just hope it’s a world where we care more for our people, our health, our education, and our planet.

Posted in: Policy and Regulations

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Tackling Coronavirus.. The good ol' UK playbook works everytime

March 12, 2020 | Phil FershtOllie O’Donoghue

Posted in: Absolutely Meaningless ComedyPolicy and Regulations

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Coronavirus: Why You Must Act Now

March 11, 2020 | Phil Fersht

Highly-respected writer Tomas Pueyo conducts a bone-chilling analysis on the speed of Coronavirus spread if we don't act now.  Just observing the cases in China show how rapidly the virus stopped spreading as soon as it was locked down.  These were his conclusions:

Let's examine some of the data highlights from his research - all based on real-time data being reported in the virus spread.  Firstly, see how quickly the number of cases in Hubei Province declines once the government implemented its lockdown:

Click to Enlarge

Pueyo goes on to perform some data modeling to show how sensitive every single day can be when implementing social distancing:

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The Bottom-Line:  Social distancing policies reduce the exponential spread to the most vulnerable

In short, we need to buy time to make sure the elderly and young people do not catch this.  The data from Taiwan already shows how effective social distancing and travel restrictions can be if implemented immediately as the country currently has the lowest incidence rate per capita.  The broad data set from Hubei clearly tells us that, although the government acted late, its impact on decreasing the spread was massive.

While most businesses in our industry must be commended for enforcing swift travel restrictions and events cancellations, the same cannot be said for many governments which seem to be adopting more of a "wait and see" policy. Will we regret not acting swiftly enough?  Only time will tell...

Posted in: Policy and Regulations

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Meet Rajesh... in the flesh

March 09, 2020 | Phil FershtSarah Little

 

When the legendary Chandra moved on from his TCS leadership role three years ago, his successor had a very big pair of shoes to fill to lead, not only India's most valuable company, but also to sustain its position as a truly global IT services heavyweight that could rival the likes of Accenture and IBM on any deal.  Step up Rajesh Gopinathan, a quiet unassuming man who had focused on designing the internal workings of the firm for 16 years away from the spotlight.

So when presented with the rare opportunity to get time with Rajesh at the recent NASSCOM event in Mumbai, we couldn't resist grabbing the chance to get him to share some of his views with the HFS audience... no scripting, just straight from the heart. Within his words you’ll find his formula for success, key areas of focus, commitment to people, ability to engender both transformation and regeneration, all while maintaining a commitment to make technology work for its customers.... enjoy.

Phil Fersht, CEO HFS Research: Good afternoon, Rajesh. It would be great just to hear a little bit about you and your role at TCS, and how you’ve evolved in the company. Maybe you could just give us a little bit about your background, where you started out and whether you ever expected to be doing this job that you’re doing today?

Rajesh Gopinathan, CEO TCS: That’s an easy one, the last part of it. No. [Laughs]. I am an engineer by education; I did an MBA and then joined the Tata Group, and, pretty much, that’s been where I have been throughout. But I moved around within the group, worked in a few of the operating companies, and then the last 20 years have been with TCS. And, in fact, as is the culture in TCS, I have moved across multiple areas, so I’ve been in operations, I’ve been in sales, then I was in finance, and finally ended up in this current role. When I joined the company, we were less than $400 - 500 million, so it’s been a phenomenal journey.

The good news is all of us have worked together right from the beginning, so none of us quite knew what the future held, but it’s always been run by aspiration, you know? We saw the possibility, and we knew that this is something that can be attacked systematically, going after it one after the other. That’s the biggest part of TCS. Right? That we have all grown together, and different people are in different roles throughout. …It’s a unique company, to that extent; I don’t think, of this size and scale, there are too many around.

Phil: We talk a lot with clients about what got them here and the journey they came on for the last ten years to today. So, as you look at where you’ve come from, and where the company’s going, do you think the same formula is going to work for the next five years, that worked in the last five? Or do you think things are changing radically?

Rajesh: There are formulas that have worked for the last ten years which will continue to work in the future, and there are formulas that have worked which will not. The formula that has worked, and which will continue to work, is this unrelenting focus on the customer, and unwavering belief in our own talent. As long as you stay very close to the customer, don’t get too coy, or too ahead of trying to think that you know what’s better for the customer. Stay very close to the customer, stay relevant and be in cadence with them, one step, two steps ahead. I keep characterizing our business in this way, that, if you think of a product company, a product company, by definition, needs to be ten steps ahead of the customer. They need to reimagine what the future is. They need to think about the possibilities, and they need to take a bet on where the future will be. I would say a more management consulting-oriented company needs to be five steps ahead. It needs to have answers and frameworks for when a customer starts to think about things. A technology services company needs to be a couple of steps ahead of the customer. It should be ready to be able to provide the customer with a trusted place where they can experiment with the things that they want to experiment with.

These are three different business models, and you need to be clear in your head which business model you are operating with. So we have been very, very focused. It’s like surfing the wave. The waves will keep changing, but you need to define yourself as surfing the current wave. And, as the wave changes, you’ve got to keep on readjusting yourself. But the value proposition is unwavering in its focus; it’s to make technology work for our customers. 

Phil: Rajesh, do you think there’s a distinct shift happening, from technology change to culture change, to business change?

Rajesh: That’s an interesting way of putting that question, Phil. From a technology perspective, there was a period of massive heterogeneity, and now it’s coalescing, which has been the nature of technology. It keeps getting compressed; therefore, we need to equip ourselves to be able to deal with it again and again. So the way we think about it is, every time we hire a kid out of college we believe that the person will have a 30-year-plus career with us. So, with the speed that we are going, you are going to see three, four, five, eight cycles.

We have to be able to make sure that we can get our talent through each of those cycles. How do we build both the culture for that, as well as the infrastructure and the systems? That is the focus, so we massively invest in training. This last time around, we have taken a very fundamental relook at our training infrastructure. We have always been leaders on training, but we have built up a training infrastructure which was optimized for the last generation - large training campuses, classroom training, a course curriculum, three-month training, three-week training, those kinds of areas. About five years back, we started relooking at it. We said, “How do we break this up and align it to the current learning culture which is more tool based?” So massive changes. We broke down the course content, which was more aligned for this kind of push training, to be more pull-based. We changed our learning management system. We were on an off-the-shelf product; we threw it out and rebuilt our own training management system, completely reimagined it, gamified it and integrated that with our social platform internally, called Knome, that’s similarly gamified.

We changed the infrastructure. It’s a cloud-first, mobile-first approach, it’s available, on the fly, anywhere.  So across, you know, seven, eight different dimensions of learning, we completely changed it, and scaled it massively. We’re talking around 300,000 people being trained in 12, 18 months. So massive changes. So, it’s not just culture; you’ve got to back it with infrastructure and with the systems to be able to do it. 

People are inherently open to change.  There’s a saying that we use: There’s a flood. And as floodwater started going up, all the people got on top of a building. And there was a very god-fearing person. So, as the floodwater rose, a boat came along. A lot of people there jumped down and got into the boat, but this guy said, “No, no, God is going to save me,” and waited. The floodwater increased. Then a raft came along, quite a few people were on the raft. They said, “Come on, jump; we’ll take you along.” Most people left. The man said, “No, God is going to save me.” The floodwater kept on rising. A log came around, with four or five people hanging on to it. They said, “Jump. We’ll go together to safety.” “No. God will save me.” Finally, the floodwaters got to him; he drowned. He goes to heaven and says, “I was such a god-fearing person, and how come, god, you didn’t save me?” God said, “I sent you three saviors that you didn’t use.”

The individual has an onus to change. And the organization has a commitment to make sure that it won’t sink. But that jump has to be done by the individual. So that’s the culture that we’re building internally, that change is inevitable, but it is something that we as the business will facilitate, and there is a lot of emphasis on retraining.

 Many organizations, Phil, when they think about talent, it is something that is going to come from outside, they create a sense of fear internally. We have a very supportive culture, and it gives us the ability to regenerate internally, which puts us in a unique position because we can then retain knowledge, and acquire the new knowledge. Knowledge is not something to be used and thrown away. It is to be invested in. Our retention rates are the highest in the industry - that’s our biggest competitive advantage. We are almost 10 percentage points ahead of the competition on retention, and that’s where our advantage comes from. We are very focused on that. 

Phil: If you had one wish – from God – to change the services industry for the better (beyond salvation from floodwaters), what would that wish be?

Rajesh: Slow it down a little bit, [Laughs] and give a bit of breathing space. 

I think that’s about it. But, to some extent, it’s self-correcting. Unlike consumer tech, enterprise tech needs to work in the context of what exists. And new technology comes, by definition, not from the people who understand how to make it work. So, before technology gets permeated inside an enterprise, there is a real physical lag, and that is the period of time that you have to scale it up. And the fact is that, if it is not scaled up, enterprises cannot use it. You can’t just infinitely change technology at an enterprise level the way it happens in the consumer [space]. At least that’s the belief that I have. 

We need to find what that sweet spot is. But we will, we can - we can afford to change faster than what we are changing today. We are not in a situation like processors or memory where you are constantly on a collapsing timeline. I do believe that we have some physical boundaries that we can rely on. 

Phil: Well, thank you very much, Rajesh. It was wonderful to hear from you for the first time here. Am sure our readers will be very excited!

Posted in: IT Outsourcing / IT ServicesDigital OneOfficeOutsourcing Heros

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Covid-19: Opinions are like assholes, everyone has one...but listen to the qualified one (weekend rant)

March 08, 2020 | Ollie O’DonoghuePhil Fersht

First of all, we are not epidemiologists, healthcare professionals or medical experts. Sadly, in our industry right now, this important distinction is moving into a grey area as everyone chimes in with their opinion.

Opinions are like assholes, everyone has one... especially when you can back them up with fake data

This post is a disillusioned response to the materials, opinions, and general wonderings now prolific on social media from people who, like us, don’t know anything outside of what their favorite newspaper columnist or news channel is telling them. If you want genuine medical advice about Coronavirus/Covid-19, please consult your local medical experts and healthcare practitioners – you won’t find much use in the musings of the technology analyst community, regardless of how passionately they pepper their opinions over social media.

As an employer where the health and safety of our employees, clients, families, and friends are paramount, we have been just as glued to the rapidly changing and seemingly unpredictable

Read More »

Posted in: Policy and Regulations

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Welcome to the New Abnormal, where this post-corona business environment will never be quite the same

March 03, 2020 | Phil Fersht

Well, what a difference a few weeks make!  Our business environment had never become so social, so connected, so personal, so networked... Life had become a logistical quandary of constant air travel, hotels, conferences, meetings, workshops.  Just doing one's day job and spending time with one's family was becoming a huge challenge for so many. Then suddenly it's all changed overnight. Wow.

Welcome to the New Abnormal everyone...

As of March 3, 2020, over 90,000 cases of COVID-19 have been confirmed worldwide across 73 countries, with over 3,200 deaths. With over 100 cases now confirmed in the United States, including cases of undocumented origin, the virus is now spreading faster outside of China for the first time.

With the WHO, the CDC and various key government health bodies making it clear that this novel virus is “highly likely” to spread worldwide, we are now entering unchartered territory. While the current death rate seems to be hovering around 2%, indicating that while highly contagious it is not highly deadly, it is unclear how this virus will behave once it has a widespread stronghold in the community.

We have never before seen a respiratory pathogen that is capable of community transmission, but which can also be contained with the right measures. The unprecedented measures China put in place, albeit later than optimal, has helped curb the spread and taught us all the advantages and the perils of locking down entire cities or regions. Last week was a clear example of how emotions were guiding the stock market, as panic about manufacturing slowdown, fears of global recession and the unknown path COVID 19 will take, really set in. World leaders are trying to straddle the line between the strict safety measures that would halt spread, and not bringing entire economies to a halt.

Without clear guidelines, companies are trying to find their own balance between keeping their employees safe and not bringing their businesses to a standstill. Here at HFS, we are thinking of the same issues and are trying to find our own balance. In doing so, we wanted to share our thoughts on how we can all move forward in ways that protect both our businesses and our staff and without panic.

Make this a Quarter of “Hunkering Down”. Unlike after Sept 11, 2001 or even the 2009 H1N1 pandemic, we are technologically poised to create a new virtual business environment. We have the technology to empower our employees to work locally or even remotely, as well as the ability to do very tech savvy virtual meetings. Strategy sessions, client visits, internal meetings – these are all things that can be temporarily moved to a virtual setting if and when needed, limiting travel to essential travel only. Without clear travel guidelines, this technology will allow businesses to let their employees choose which travel they are and are not comfortable undertaking.

It was estimated today that during the peak of COVID-19, an estimated 1/5th of all UK workers could be off sick at the same time. Allowing flexible virtual working environments by empowering employees with the technology they need to do it will undoubtedly help reduce the numbers off sick and help keep companies stable.

Discuss openly with clients and business partners what they are comfortable with. While some companies have strict new travel policies that have just kicked in, issuing a wave of what will be the new abnormal, for others it may be business as usual unless directed by governments to do otherwise. Discuss openly with clients and business partners their comfort level to travel and attend meetings/conferences and share your own polices. Make it very clear that in this new environment, most if not all work can be done virtually.

Discuss openly with your employees what they are comfortable with.  Some of your staff will be gung-ho to risk the virus while others will be nervous to travel on business, especially internationally.  Firstly fully understand your liability here - you may have to cover hotel expenses if staff are help for screening/quarantine periods (and some screening costs alone are in the thousands).  Once you are comfortable with your exposure as an employer then you can work sensibly with your staff to make sure everyone is comfortable.  In the coming weeks, everyone will be accepting of staff who just do not want to travel and those firms who are simply not willing to risk their staff hopping on planes. This is part of the new normal folks!

Invest in getting far more hands-on with the technology needed for this new environment. Companies must ensure that all employees have adequate access they need for teleconferencing and video conferencing capabilities. Make sure you have the tools in place match the need will be critical, as suddenly everyone's going to have a lot more time on their hands behind their desks, so we need to use video far more than we were, get much more comfortable using sharing apps such as Microsoft Teams, Slack, Google Hangouts, Apple Facetime, Skype etc.  In short, the culture of doing business is changing dramatically from the physical to the digital, and we have to get used to it fast.  We've yearned for digital for so long, now we have to use it!

Keep up to date on information. From reliable sources like WHO, CDC, or government health agencies only. Not passing on misinformation will be critical to ensure that this virus does not become worse for our minds than our bodies.

Unfortunately, it is not all up to us as companies or individuals. As more world leaders try to straddle the balance between keeping economies going and keeping their country’s safe, concerns have crept in. In addition, it is unclear the path this virus will take and therefore uncertain if the emergency response will be enough at the peak of the pandemic. It is HFS’ opinion that all countries need to prepare.

Learn from the example set by China. While much data points to an initial Chinese cover-up in early December, it cannot be argued that China’s move to lockdown Hubei Province hasn’t helped stem the tide. Despite the great risk to their own economy and the global economy as a whole, China acted in a manner that has bought other countries time to prepare for likely spread. Global leaders must now be ready to do the same kinds of school and government office closures if needed.

Prepare for worst-case scenarios and nothing less. Over-preparedness has never harmed anyone. Ever. It’s been annoying and it’s been frustrating but it never hurt anyone. Governments must adopt this philosophy and put plans in place to prepare for possible office closures, school closures and travel freezes as well as the need for medicine, ventilators, doctors, hospitable beds, etc.

Make widespread testing available and accurate. After returning to Miami in January from a work trip in China, Osmel Martinez Azcue was developing flu-like symptoms, just as coronavirus was taking over the country he had visited. Recognizing the seriousness, he felt like the responsible thing to do was check himself into one of Miami's largest hospitals. The hospital staff followed the proper protocols, took the necessary precautions, and put Azcue in a closed-off room. Fortunately, blood analysis found that he simply had the flu.

Mr. Azcue was rewarded for his diligence with thousands of dollars worth of medical bills. If governments are going to fight this via as much containment as possible, this cannot happen. People cannot avoid testing because they are afraid of the cost of finding out. What would happen when the coronavirus outbreak spreads in the United States if Americans avoid seeking medical care because they're concerned about bills they can't afford? It would be catastrophic in terms of containing the virus, devastating to the economy and even more crucial, critically dangerous for those who may become ill. Testing should be made available for all so we can all work together to contain and mitigate the risks facing the global community right now.

The Bottom-Line:  Life just changed but at least we can finally become Digital with how we do business

When we polled 355 enterprise leaders across the global 2000, the shift to digital from physical / face-to-face ranked number one as their primary business pressure.  Well now they're going to be forced to make these pressures come true:

So - right now - it feels as if the whole fabric of our industry is being ripped apart all around us - and in some ways it is.  However, this forces us to brave up to the world around us in a way we never envisaged... 

Less travel = more family time and staff time.  For me, personally, this is revolutionary.  I was hopping from country to country like it was just normal ...and this has made me take stock.  Fortunately, I have spent so much face time with my clients, industry friends, and colleagues that I am sure we can survive for a while on videos and phone calls.  I can also spend more time with my family who saw me as little as much of my team!

This will pass, but it may instill some better work and life habits... more time behind a desk means I can call all those people I have neglected, write more research pieces, think deeper about the future and where everything is going.

Peace out friends, we'll get through this one =)

Posted in: Policy and Regulations

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Big is no longer as beautiful as Mid-Tier IT service providers surge with double-digit growth

March 01, 2020 | Phil FershtJamie SnowdonMartin Gabriel

Just a few short years ago, the world of the mid-tier service providers ($500m-$3bn revenues) was a pretty depressing place - many clients were wary of using lesser brands with smaller scale and high attrition and preferred to stay loyal to the Tier 1 brands and beat them up on price.  Growth was pretty stagnant and most of them just wanted a lucrative exit, such as IGATE selling to Capgemini, Syntel to Atos, Luxoft to DXC etc. Fast-forward to the last 2-3 years and suddenly the smaller service providers are in vogue, being seen by many clients as more agile, more capable of client intimacy, more flexible and eager to take on complex projects and avoid the exhausting turgid RFP bake-offs which squeeze the value out of engagements before they have even started:

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EPAM ensures not all roads lead to India. While we have been overly-focused watching the success of the Indian-heritage IT service providers, the biggest standout performer is the predominantly Eastern-European provider EPAM Systems, which has quietly built out its app development capabilities over the years with its powerful access to tech talent in places such as Minsk, Moscow, St Petersburg, Katowice, Budapest etc.  The firm's focus on complex app development, software engineering, IT security and a recent investment in Blockchain is positioning the company well for strong growth in the foreseeable future.  It's also taken advantage of DXC's acquisition of Luxoft's to become Eastern Europe's standout IT service provider.

Hexaware, Mindtree, Mphasis, LTI, and NIIT lead the Indian-heritage Mid-tier growth spurt.  With an IT services market barely growing at 5% annually, for the five Indian-heritage Mid-Tier firms to grow at rates between 13% and 17% is quite remarkable. Clearly, the bias over brands is reducing dramatically as clients seek greater intimacy, focus, and dedication to their needs.  We can dive into all these firms to call out where each iswinning, but the main factor in common is the fact that client needs are changing - they increasingly demand shorter projects as opposed to these clunky frustrating multi-year relationships that take many months to set up.  I cannot tell you how many executives from these firms have said to me that more and more of their clients simply want work done - and fast - and do not want to jump through all the hoops of the legacy outsourcing world. With the need for systems modernization, digital app development, data management, and automation at an all-time high, clients are more willing than ever to trust those IT services partners where they can still get the CEO on the phone, who understand them, and are willing to move mountains to succeed for them.

Let's take a deeper look at what is going on at enterprise intentions when their current primary outsourcing contract expires:

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Only 23% of clients are prepared to settle with their current partnership.  The traditional model is only working for a minority of outsourcing clients today.  If you're a service provider leader and you haven't identified who these clients are (and who are not), then you are in serious trouble.  Smart Mid-Tiers avoid these clients - no point wasting valuable resources on lethargic clients who really only care about keeping the lights on.

Another quarter (26%) wants to move the needle but may opt for a hybrid model. Meanwhile, 27% are getting itchy to kick their service provider up the rear end and get them embedding some real automation and outcome-focus into their delivery if they are to renew with them.  This means they want to see real commitment to reduce the dependence on the staff army and see real investments in process automation to digitize their delivery.  These are relationships where Mid-Tiers are frequently being brought in to snaffle pieces of the pie to create competitive tension.

A third is more decisive and likely to make the switch.  31% have clearly got to know their current outsourcing provider only too well over the years and have zero hope they can get any real co-investment out of them.  As we have discovered over the last couple of years, some providers have made real investments in competencies like automation and AI, while others have merely added a little sugar-frosting and persist with selling the same old model with some cost shaved off the package, and some added incentives for performance (i.e "outcomes").  Moreover, ambitious outsourcers and Mid-Tiers are heavily targeting their competitors' disaffected clients and are willing to offer eye-catching deals to win their custom.  This can include attractive pricing tied to aggressive delivery staff reduction over a 3-5 year amortization plan that is offset by efficiency savings due to automation and digitization.  In other instances, clients are breaking up the provider mix and opting for multi-source relationships with shorter engagements to drive more value and innovation.

In some cases, it may also prove more attractive for the legacy provider to shed the business than fight to keep a client that will quickly become unprofitable (and the industry is littered with those engagements). In several services markets, we are seeing emerging offerings from providers where they are offering fully digital offerings (with vastly cheaper support), such as TaskUs in the customer call center market, or nDivision in managed IT operations, which can undercut traditional outsourcers so aggressively, there is no feasible way the traditional providers can compete.  In addition, we are seeing several India-centric service providers offer $-per-chat support models for some transactional services that are essentially chatbots offering basic-level support services at costs as cheap as 15 cents a chat... we are finally seeing "digital disruption" attack the traditional outsourcing market that has somehow staved it off for years thanks to lethargic clients and lock-in contracts.  

20% have given up and will just look at something very different.  Maybe the cost of changing the model is just so abhorrent it's time for clients to pull the work back and fix it themselves.  Some are so fed up with the lack of innovation in changing anything they've realized they have smarter people on staff who are better deployed to take the work back, staff up to execute it while they explore all their digital and automation options.  Maybe they will invest in an integrated automation platform, and use the funds saved by backsourcing the work to invest in a digital backbone that enables them to perform work in a touchless, smarter manner?  Again, there are ample opportunities here for smart Mid-Tiers to pick up new client work and prove themselves to shrink legacy IT systems, develop new digital backbones and help their clients achieve real business outcomes.

The Bottom-Line:  In this current climate, the time is riper than ever for these Mid-Tier service providers to grab more market share

The IT services industry really needs this healthy competition as it gives clients more choice and forces the Tier 1 juggernauts to change their delivery model and entire approach to engagements.  And during a time when there is worrying economic uncertainty, global panic about some nasty flu virus, clients will need more support than ever to work with smart partners which can support them remotely, jump in to help critical situations are a moment's notice, and show the ability to really listen to their needs.  

Posted in: IT Outsourcing / IT ServicesService Provider Analysis

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