Monthly Archives: Apr 2021

Why outsourcing has become hot again... and it's all about automating to get to the cloud

April 26, 2021 | Phil Fersht

The impact of the pandemic has completely changed the mindset and change imperative of the majority of organizations.  Our recent study of 400 operations and IT leaders across the Global 2000 shows how crucial automation has become as the catalyst to modernize business operations.  And this means the old-thinking around RPA is rapidly leaving the building, as enterprises are faced with a dual challenge: ring-fencing legacy data centers and processes, while making fresh investments to re-jig critical processes to function effectively in the cloud:

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Simply put, if you try to take your existing messy processes and simply move them "as-is" into a cloud environment, it's going to be one very costly exercise that could be so cumbersome, you may go out of business before you even get them there.  We used to talk a lot, in pre-Covid days, about moving your "mess for less" offshore, and even if you did very limited transformation, you would reduce costs simply because you were tasking lower-cost people to run them for you.  Essentially, anything you couldn't shoe-horn into your standard ERP model would be a prime candidate to outsource as it was not likely to be core business activity, but you still needed them processed, and you might as well run your mess for cheaper via a service partner, than do it yourself.

Two thirds of major enterprises have no choice but to head for the Cloud in the new economy

Fast-forward to 2021, and most large enterprises have managed to move their messy stuff to an outsourcer or their offshore captive.  That was what legacy outsourcing was all about and over 90% of the Global 2000 did it.  Now they are faced with a whole set of nagging new challenges, as they simply have to function in the cloud, if they want to be effective in this work-from-anywhere environment, which we know is going to be the norm for at least two-thirds of enterprises, even after we finally get Covid under control:

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So what does this new wave of outsourcing look like, and why is it poised to increase at close to 10% this year - and likely even more next year?

The desire to centralize large clusters of people is dissipating with enterprise leaders focused on outcomes.  After 14 months of operating with armies of shared service staff operating remotely, most have learned how to manage by focusing on the outcomes of getting processes delivered, as opposed to obsessing with governance structures based on effort and control.  Many enterprise leaders have told us how they are focused on driving greater internal coordination with increased daily video meetings, where accountability and ownership are determinedly applied, and 51% (see above) do not see the need to add additional headcount to make this happen.

The need to scale-up and scale-down at speed has never been more pronounced.  The number one watch-word today is about moving at speed.  Enterprise leaders accepting the current status quo simply want to make fast decisions to make their operations and supply chains as nimble as possible.  This means freeing themselves from multiple sign-off points to enact policies and strategies is becoming an imperative; lugging around bloated back office functions that strangle the ability to get things done is becoming a tainted memory.  Having deeper partnerships with lesser numbers of partners not only cuts out operational costs, but also creates far more flexibility to operate at speed in unpredictable market conditions. This explains why a quarter of enterprises have already increased their outsourcing scope across business and IT processes in this environment, and a further third are planning to accelerate in the near term.  Pipelines for new deals are strong - especially in Europe, and early indications from our soon-to-be-finalized Pulse study for H1 2021 indicate expenditure increase in the high single-digits:

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The need to add “digitally-fluent capability” is forcing the issue on the interplay between business context and technology capability.  With all today's technology solutions CIOs are evaluating being cloud-based, their roles are shifting away from the provision of custom-app development, support and maintenance etc., and towards understanding the business context of their non-IT executive counterparts.  This is more about housing data, ensuring security, scalability, speed and business continuity.  They need to make their departmental leaders' data ubiquitously available, accessible, and mineable - working with them to embed a mindset that inspires business and IT staff to work together to create an organization that can flip its business model to exploit these seismic market changes.  

There is a lot more trust to work with partners.  The rapid uptick in deeper, broader outsourcing relationships is being driven by enterprise buyers becoming more decisive and experienced, and their service partners becoming much more adept and confidant to strike rapid, cost-friendly deals, knowing they have the expertise and resources to make these deals profitable in the short term and (potentially) lucrative in the medium-longer term, as they get closer to their customers' customers.

It’s much easier to have a third-party drive automation than forcing it on resistant/inexperienced staff.  Today's service providers are becoming highly adept at automating transactional work - simply because they have had no choice but to get proficient at it if they are to deliver value for their clients profitably.  On the flip-side, enterprises have proven particularly useless at scaling automation projects and doing anything more than piecemeal projects within silos. We can delve into all the reasons why this has been a failure for over 80% of them, such as politics, employee resistance and inability to redesign processes (and let's not forget a year-plus of pandemic), but the benefits of having an external party tasked with driving your automation efficiencies are now crystal clear.

Bottom-line:  With the cyclical nature of global recessions, the historical reaction is to outsource without much transformation. However, the response this time is different... 

Today's service providers are much more confidant at delivering the outcomes because they know how to infuse technology to support these new commercial models.  Moreover, you can't get the data you need if your critical data is not in the cloud and you don't have the people, partners, processes, technology - and desire to change - to make this possible.  Service providers now have the experience, desire and risk-appetite to roll their sleeves up and help many enterprises make it through the most unpredictable economic era we have ever lived through.

Posted in: Business Process Outsourcing (BPO)Cloud ComputingIT Outsourcing / IT Services

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Getting chatbot fatigue? Then upgrade to digital associates...

April 17, 2021 | Melissa O'BrienPhil Fersht

Let's cut to the chase folks... chatbots have struggled to gain much of a foothold in the corporate tech innovation stack.  However, our analyst Melissa O'Brien has spent the last few years studying how these engagement technologies are evolving deeper into the enterprise where they can truly augment staff and reduce a significant amount of their time, while driving a whole new digital way of engaging for both employees and customers... from the back office right through to the front. So let's take a look at which services firms are getting good at creating these digital associate workers for enterprises...

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Melissa, we've been observing the evolution of "conversation AI" for a good decade-plus now, so what's new?  has the pandemic driven more uptake?

The demand for conversational AI has exploded over the last year.  The automation tools we call digital associates were one of the digital superheroes of the pandemic, as conversational tools picked up the slack in handling volumes of interactions when human associates were not available due to a lack of work-from-home preparedness. Reduction in staff coupled with spike in volumes of interactions in many industries such as ecommerce created a burning platform. For many companies, this rapid and massive disruption resulted in accelerating digital

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Posted in: Digital TransformationDigital OneOfficeCustomer Experience Management

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Time for the Foster posture as Mark puts his own stamp on IBM services

April 16, 2021 | Phil FershtSarah Little

 

When it comes to big stonking change and the new meshing of business and IT disciplines, let's talk to the ultimate wave-spotter: Mark Foster.  I met Mark a few decades ago when I was wearing button-downs and he was one of the key Group Chief Executives at Accenture. I've been very curious to catch up and see for myself what enticed Mark out of (what he dubs) "blissful semi-retirement" to lead the 250,000-strong services business at IBM. So let's dive in...

Phil Fersht, CEO and Chief Analyst, HFS Research: It’s great to get some time with you, Mark. You’ve been a well-known figure in strategy consulting for many, many years. I met you during your Accenture days, but not so much recently. I’d love to know a bit more about you, where you came from, and were you always intending on going into the services industry? Was this your goal when you were at university? 

Mark Foster, Senior Vice President, IBM Services: Well, probably not. My background is rather strange, insofar as I have a degree in Ancient Greek, Latin, and Ancient History. So, I spent the best part of all my school and university career studying languages that are now largely dead, and only readable in ancient texts. (Laughs)

Very early on, though, I had a sense that there was something happening around technology; it was going to be a really important thing to get involved with. My first job was joining Accenture back in 1983, what was then Arthur Andersen management consulting, where the first thing that happened was to be sent off to St. Charles to learn to code in COBOL. That was really the start of an involvement with technology that’s carried me through for a very long period of time.

 

“I had a grounding in technology, a grounding in what it can do to transform industries and business, and then also a career that evolved away from core technology…”

 

When I came here to IBM, I remembered that I learned to code in RPG III on the AS/400 back in a dim, distant day as well. I had a grounding in technology, a grounding in what it can do to transform industries and business, and then also a career that evolved away from core

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Posted in: Cloud ComputingDigital TransformationGlobal Business Services

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Are you Cloud Native? Of course you're not... so join us on 21st April

April 11, 2021 | Phil FershtTom Reuner

Still grappling with moving your operations into the Cloud?  Click here to grab your spot at the HFS Cloud Native digital roundtable on 21st April 10.00am-1.00pm ET

Posted in: Cloud ComputingDigital OneOfficeIT Infrastructure

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One word defines today’s business environment: Speed

April 09, 2021 | Phil Fersht

Posted in: Digital OneOffice

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It needn't be hell... with Nigel

April 03, 2021 | Phil Fersht

Nigel Edwards is Chief Client Officer, HFS.  Click for LinkedIn and Bio

While we can speculate all day long about what businesses can do when they are given the huge amounts of someone else's money to burn, how about those that are employee-owned and make their own investments using the hard-earned money they actually earned themselves? 

When you look at the growth and success of HFS over the past 11 years to tackle competitors hundreds of times our size, there is one constant throughout the whole experience - the collective array of people who've made it all possible.  While you can buy successful brands, IP, methodologies, APIs, and algorithms, the most important asset you can accumulate is your people.

One such individual, whom I have known since the days just prior to founding HFS, is Nigel Edwards - an enthusiastic and affable character who's weathered the best of the Indian-heritage service providers namely Cognizant. Wipro and EXL, after earning his business and IT services stripes at Accenture in his earlier career.  It was time for "Nige" to take nearly three decades of blood, sweat, BPO and captives and lend it to HFS' long-suffering clients, crying out for a sense of reality and to exploit the current market turbulence.  Now there isn't too much to say about Nigel beyond the fact he's a lifelong Foxes fan (Leicester City), has played cricket with David Gower and gets beaten up in a boxing ring by his son almost daily... so let's hear a bit more from HFS' Chief Client Officer, Nigel Edwards:

Phil Fersht (CEO, HFS):  Before we get to all the work stuff, Nigel, can you share a little bit about yourself… your background, what gets you up in the morning?

The honest answer is that it’s a combination of my 6-year-old (the youngest of my 3 boys), the dog, or the sound of the refuse collection folk reminding me that I did not put out the recycling…

Seriously though, it’s the opportunity to do something creative.  My dad was in the construction industry for many years and he doubled up as a highly accomplished artist, sculptor, and writer. Even at 78 he is still pushing out new ideas each day in his quiet, unassuming but engaging

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Posted in: Business Process Outsourcing (BPO)Global Business ServicesIT Outsourcing / IT Services

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HfS Research receives $223 million in Series C Funding to become the world's favorite tech analyst firm

April 01, 2021 | Phil Fersht

This injection of money is intended to expand HFS' cutting-edge research coverage across all core geographic locations, plugging the gaps the firm missed in recent years.  "Thank God we got the extra cash", exclaimed the firm's President for Research and Business Operations, Saurabh Gupta.  "With the recent pandemic, not being able to cover dynamics in emerging countries like Turkmenistan and Laos was holding us back.  Now we can really hit Gartner where it hurts most...".

HFS is most famous for inventing the industry known as RPA in 2012, before famously killing it off in 2019, only to see its memory kept alive by Gartner and Forrester, which persisted in believing the revenue numbers of firms that were eking out the last of their PR cash.  "I am so excited to fully restart the RPA myth now we have enough cash to throw at it," stated the HFS Founder and CEO Phil Fersht in a recent press conference that was barely audible over Webex. "Without RPA, we had to pretend technologies like Cloud were making a comeback, and even our sustainability analyst has been trying to muscle in on the action."  Later on, Fersht managed to resume the discussion over Zoom, where he added, "All we had to do was promise Hoden we'd bring RPA back to life and we'd get a sizeable check to invest pretty much anywhere we wanted.  I've convinced my head of research the next wave can be found in Turkmenistan and am funding a trip to escort him out there to view it first-hand.  Apparently, they scraped the government's mainframe green screen and managed to get a script to reproduce the content in a Windows app.  Now they're just waiting for Microsoft to give them a free bot to share it over their cloud network".

Details of the investment plans will be available soon when the firm applies for its long-awaited IPO, where it's rumored to claim it is worth at least $10 billion.  There is no reason why HFS will ever be worth anything close to that amount, but at least it gets PE firms excited enough to throw them more money and put out more meaningless press releases.

To learn more about HfS Research, please email [email protected].

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MEDIA CONTACT:

Trevor McTrevor

HFS Research

[email protected]

And of course... this was an:

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Posted in: Digital TransformationDigital OneOffice

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