Suddenly, everyone is a bloody analyst. I must get at least five posts a day from a completely random selection of individuals attempting to educate me on how robotic automation, digital technology, IoT, big data and outcome-based pricing are going to be the biggest game changers to disrupt the business world since the invention of the desk.
Suddenly, there’s going to be minimal need for human labor anymore, so we’ll just sit at home all day running our lives from our mobiles devices sequencing our own genomes using some cool analytics app that we only need to pay for once we’ve added 10 years’ to our life expectancy. Somebody please shoot me now… let’s dial this dialog back to reality for a few minutes.
During our Blueprint Sessions in a very, very chilly Chicago this week, we started with the vintage discussion, “How can we re-set these stale services relationships to drive more value beyond labor arbitrage and standard operational delivery”. Yes, the old chestnut conversation has to take place, just incase there has been a dramatic, unexpected shift in these relationships in the last six months. But, alas, as per usual, most service buyers in the room were still pacing the treadmill of operational ordinariness with little clue how to move the needle.
So we asked them one very simple question:
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Oh my god. After all the whining about things like, “All they do is sell to us”, and “All that cool stuff they promised us during the sales process and never delivered”… the real reason behind this stagnation is the simple fact that most buyers are just struggling to let go!
So there we have it, folks. Rather than spend another minute reading the latest riveting diatribe about how “big data is about mining meaningful insights”, let’s focus on the real issue at hand here: TRUST. Why do 43% of buyers today admit they need to give up more high value work to their service providers to drive value into their relationships? Quite simply, this is an admission from buyers that they are scared of change – they worry that giving up control to a third party will minimize their own value, and their provider simply does not make them feel comfortable enough to take more of a risk.
The Bottom-line: The biggest disruptive trend on the horizon is TRUST
The solution, then, is simple: service providers need to earn that trust – and prove they can enhance the value of their clients’ governance teams by taking on higher value work from them. This means many need to change behaviour… the overselling needs to stop and the demonstration of real value needs to start. Service providers need to take a long, hard look at the personalties of their account managers to make sure they are providing consultative value to their clients. Service buyers do not “let go” until they know they have a safe pair of hands to trust with their beloved processes… so let’s refocus on the one real business value item that matters: TRUST.
For the last decade, and longer, we’ve been debating and bemoaning how we can encourage services relationship to drive better collaboration, better automation, better talent development, throw off better data… and shift us away from a labor-based model that will not survive the test of time. Next week, in Chicago, we will stare at that wall we’ve hit, and collectively figure out how to jump over it. So without further ado, pop in your headphones, turn up the volume and enjoy!
Is it possible to make it through a single day with the word “robotic” being uttered somewhere?
Indeed it is not, ever since HfS Research first began covering the emergence of the new technologies in Robotic Process Automation (RPA) back in 2012. Since then, we have seen RPA take off and become one of the dominant topics in the BPO and IT services market (read more here). RPA is now on the strategic agenda of every service provider, third party advisor and increasingly on the minds of enterprise buyers as well.
But, until now, there wasn’t a way to contrast how different service providers in particular were both thinking about and acting on the opportunity created by the emergence of these new RPA tools. Instead, every activity by a service provider seemed unique and it was hard to get a picture in anyone place as to how mature this capability was and how central it might be to the future operating model of the BPO service providers.
So, after dozens of interviews with service providers over the last several months, we have created the HfS RPA Maturity Model based around 10 Elements and 3 Levels that define what it means to have a mature strategy and delivery capability for RPA in today’s marketplace. The HfS RPA Maturity Model is a useful way for enterprise buyers, third party advisors and service providers to guide conversations within the BPO and IT services ecosystem about RPA and to assess where an individual service provider sits with regards to the maturity of its RPA strategy and program.
The 10 Elements of the HfS RPA Maturity Model include:
Primary Goal of RPA.What does the service provider want to achieve through their RPA program, is it skills augmentation or labor cost reduction for example?
RPA Program Owner. Who owns the RPA program within the service provider’s organization?
Vision of Deployed RPA. How sophisticated a vision does a service provider have for how the “robots” in RPA can be deployed and the utilization model that comes with that?
RPA Tech Vision. Is the service provider looking to deploy RPA in a relatively simplistic technology vision going forward with remote access to a client’s applications or are they building RPA into the heart of a more ambitious business platform program?
RPA Expertise Owned By. Where is RPA knowledge being captured and maintained within the service provider’s organization?
RPA Program Funding. Is there substantive funding behind the RPA strategy or is this being done of the back of individual client contract P&Ls?
Vision for Processes Addressed by RPA. Does a service provider see a way to use RPA to transform existing business processes or is it a vehicle to look things in place as they are now for a few more years?
Approach to Client-Service Provider RPA Partnership.Has the service provider learned through experience about the interdependence of RPA and a client’s business applications and if so have they built a strategy to manage that interdependence?
Vision of RPA Data for Analytics.Has the still under-appreciated benefit from RPA of the increased availability of data on the performance of the software robot agents been identified and how has that been used in the broader analytics approach of the service provider?
Current Long Term Vision for RPA. How does the service provider think about RPA technology itself and where it is likely to go over the next several years?
What we realized is that there were currently three different answers that came out from our interviews with regard to each of these Elements, which we then clustered into 3 Levels:
Overall, most of the service providers are consistently operating at either Level 1 – Initialization or Level 2 – Industrialization. Perhaps that shouldn’t be surprising given how relatively young RPA is in the overall scheme of BPO.
However we have seen that a few service providers are actively shaping their strategy around Level 3 – Institutionalization. Which is a broad strategic commitment by a BPO service provider to the transformational potential of RPA on their business and operations. A service provider characterized by this Level is making a sizeable, executive led investment in RPA with a view to creating a fundamental change in the commercial and delivery operations of the business.
Charles Sutherland, author of the HfS RPA Maturity Model (Click for bio)
We believe RPA will be integral to BPO delivery over the next few years as we shift away from an excessive dependence on labor arbitrage and towards the emerging “as-a-service economy” where technology will be at the core of value creation. It isn’t necessary for a service provider to be at Level 3 to create value today for an enterprise client but we do need some service providers there to set the broadest possible vision for how RPA can change the delivery of business processes.
It so happens that there may also come to be a Level 4 to this RPA Maturity Model, a Level that might come to be called “Innateness”. In this additional Level 4, it may be that the lines between RPA as deployed by BPO service providers on behalf of their enterprise clients and the RPA capabilities that may be adopted inside the client’s internal operations will come together and a new hybrid model of coordination and delivery will emerge.
We will be looking for signs that Level 4 maturity is appearing as we continue our daily discussions with service providers, software developers, advisors and enterprise buyers on the value and evolving maturity of Robotic Process Automation.
Please find the full HfS RPA Maturity Model for download on the Automation Anywhere website.
Yes, we’ve bemoaned the stubbornness of some service providers, which are protecting the profitability and predictability of their labor arbitrage businesses, and laid out the key tenets of the emerging As-a-Service Economy. So what steps can we now take to figure out who’s on the As-a-Service train, and who’s just pretending to be?
Click here to access the new POV "Does Your Service Provider Have A Winning Investment Strategy for the As-A-Service Economy?" by analysts Charles Sutherland, Barbra Sheridan McGann and Phil Fersht
In the As-a-Service Economy, the service provider will not be a stand-alone entity; the cost of doing business this way is simply too high. The partnership ecosystem of how technology vendors and service providers forge workable alliances over the long term, with effective investment practices and product management, will be a key factor in having a portfolio of As-a-Service options that are flexible, scalable, and in tune with these evolving times.
But how can buyers really see past the pretty PowerPoint and claims of future value?
Simple: Here are nine key questions that can quickly clarity what’s really going on behind the scenes, when it comes to service providers making the financial commitments needed to be effective in the emerging As-a-Service Economy. Find answers to these and you’ll have a much more realistic picture of where a service provider’s future direction is heading:
1) Is this As-a-Service platform, or new capability, funded year-to-year, or with a multi-year commitment, including CAPEX?
2) How is the first (or first few) client(s) of your As-a-Service platform being charged – and do they bear an excessive level of initial investment?
3) Are you defining and measuring the success of this new As-a-Service capability against clear quantitative metrics, or is this more of a “fast and loose” gut-feel?
4) Are you really making big bets for investment, or just parceling out small bits here are there for Proof of Concepts?
5) Are you getting input from younger talent in your organization, and not just with the submission of ideas, but also with the evaluation of the decisions?
6) Has the level and focus of investment kept pace with the number of emerging areas that need further investment and attention?
7) Is there an investment ‘bank’ of some kind for quick response to industry changes and challenges?
8′) How effectively do you partner with technology vendors to weave their services, namely wrapping the product management, support and innovation over time?
9) Do you have a focused talent development plan to provide analytical, consultative and value-add skills to customers beyond transactional support functions? And how will this talent plan be funded without passing on major incremental fees into the clients?
The Bottom Line: Service providers must find their balance between growing their legacy revenues and investing in next-generation of As-a-Service solutions
In the subscription-based, plug and play, collaborative As-a-Service Economy, service providers are touting their toolsets, their industry and functional expertise, and their alliances – and all of this requires investment over the long-term to maintain progress and drive ongoing innovation. To achieve a true one-to-many approach, it also means increased internal collaboration and transparency, with some give-and-take on priorities near – which is a major challenge for a service provider seeking to protect and grow its legacy cash-cow business, while growing its next-generation capabilities.
In addition, there needs to be flexibility with funds to address the unexpected and provide fast and furious value to address the issues of the day. Xerox for example, responded quickly to the need for tracking and reporting on people exposed to and having contracted the Ebola virus, by releasing an update of their disease surveillance and outbreak management software, Maven®. With greater investment comes greater value. Transparency into the investment decision 3Ps of processes, priorities, and partners can help services providers and buyers take full advantage of the As-a-Service Economy.
As I was finalizing client interviews for our forthcoming Blueprint on “Progressive F&A Services”, my overwhelming conclusion is how unprogressive many of today’s BPO relationships still are.
To epitomize our findings, to quote one major enterprise client, “We worked really hard to move onto a transactional pricing model with our service provider – and they worked with us to achieve that outcome. However, once the service provider started taking a drop in revenues from us, they insisted on moving back to the FTE-based setup.”
Now re-read that quote one more time – what does that tell you? Yes, people, some of today’s service providers depend on the legacy effort-based labor model to keep their revenue numbers up. Having their clients shift to more fluid volume-based models is costing them money, and they don’t like it. What’s more disturbing here, is the fact that the profitability generated by the service provider is through the margins on selling the labor, not the margins on selling the services. Changing the legacy model does not sit well with some service providers, as pricing by FTE guarantees them a predictable rate of return, whereas innovating with the way services are priced and the risks/gains are shared isn’t doing them any favors.
At least that service provider had tried to move its client away from a labor-arbitrage-driven model – many other BPO clients are simply locked down in a perpetual status quo, where delivery is transactional, and they are struggling to get them to change how they operate.
What’s most worrying for the BPO industry is the simple fact that half of today’s BPO relationships are still operating in legacy labor-arbitrage models, and only 28% have introduced technology-enablement into their business service delivery, according to our survey earlier this year on the state of BPO and technology-enablement:
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Service Providers that ignore their clients’ pleas for change and incremental value will fade away. Nearly all the clients I have spoken to this year have expressed a desire and determination to evolve their current BPO model beyond the transactional and have the opportunity to share risks and rewards with their service provider. As the data above clearly illustrates, half of today’s BPO clients actually expect to be in a transformative engagement where their processes are enabled by new technology tools and platforms in barely a couple of years. This means if they do not reach this state, they will look at alternative means to achieve it.
Many buyers will terminate their relationships once they realize there is limited future value to be gained. Here’s the bottom line: if service providers do not do what their customers want, they are toast. Wizening buyers seek advice constantly from advisors, analysts, other service providers, and peers in other firms, and they see what is going on. They know the only long-term avenue towards continual improvement and value is by reaching out into the market to explore new provider partnerships if their existing relationship has hit a ceiling for future value returns.
A new breed of service provider has to emerge, which can disrupt the legacy labor-based model. It has to happen – and already is in some quarters (albeit very slowly). In short, there are two levers the surviving service providers will have to pull to deliver more value to clients:
(1) Higher-value consultative talent;
(2) Technology-enabled BPO (BPaaS) solutions that can scale and be more profitable to both seller and buyer.
These two levers above need to offset each other. The winning service providers need to figure out more fungible models where they can scale their top talent more effectively across their key clients to help them use analytics, technology, and automation more effectively to enable end-to-end process delivery and apply meaningful intelligence for their business leaders.
The Bottom-line: Service Providers need to look at existing BPO clients for their future growth, not merely the lure of the new logo
Up until today, the service providers have grown through the land-grab of virgin clients – that’s where the big money is – by sewing up new deals with all the trappings of revenue and profits driven by the offsetting of labor, transition and “transformation”. Sadly for them, those days are fast-fading as most of the big deals to be done, have now been done – the next wave of business for them is from deriving revenues from existing BPO clients. This is going to separate the wheat from the chaff, as it requires a different skillset to grow your client footprints than grab them in the first place. It’s like getting past that seven-year itch when a married couple questions whether their relationship is worth maintaining – and 41% of first marriages do actually end in divorce… can a new relationship bring new delights to the table, new ways of looking at things?
The next wave of value for the post-labor arbitrage enterprise is to reduce the reliance on manual labor and create value from SaaS-platform analytics tools and other digital solutions. However, in order to create this value, service providers need to help their clients apply this technology effectively and reorient how their operational staff delivers services to be more aligned with the needs of the C-Suite. The smart service providers need to accept the fact that the big plump deals are going away, and they will have to adapt to more consultative engagements, such as “operational excellence as-a-service” if they want skin in the next wave: The As-a-Service Economy… to be continued!
You may have seen, earlier today, we announced a couple of very exciting analyst additions to the HfS teams in the US and UK this week. So let’s start with one very talented individual who plies her knowledge trade just outside of the city of Chicago… Barbra McGann Sheridan.
Barbra Sheridan McGann joins HfS as Senior Vice President, Research
Welcome Barbra! Can you share a little about your background and why you have chosen research and strategy as your career path?
As the saying goes, my parents wondered what I would do with my Bachelor’s Degree in English if I didn’t want to teach… it would have been so much more practical to stick with Engineering. And yet, what I’ve learned over the [many] years is that the skills I developed in earning that degree, and since, have helped move me into this direction… listening, researching, analyzing, distilling down issues, ideas, and problems, and finding ways to communicate messages to different audiences with different interests.
Why did you choose to join HfS… and why now?
There is a lot of energy and forward thinking at HfS, grounded in practical realism and surrounded by a depth of knowledge and experience. At the heart of HfS is the ability to communicate a point, challenge the status quo, generate a conversation, and collaborate with a client to dive into a challenge and drive a desired result. I’m looking forward to both participating in the BPO to business process ‘as a service’ evolution and creating a type of micro-community around healthcare and life sciences.
What are the subject areas and topics that you will focus on in your analyst role?
As I hinted at in response to your last question, I’ll be contributing to the research, analysis, and advisory services on BPO generally, and also building a Healthcare and Life Sciences program. Healthcare and Life Sciences industries need to change at such a rapid rate with regulation, consumerism, new business and payment models, technology and security advancements, and more, that sourcing innovation, networking, and learning from other industries will be critical to help drive the kind of impact needed on health, clinical, and administrative outcomes.
What trends and developments are capturing your attention today?
The future of BPO is not just a speck on the horizon anymore. It’s taking shape. Focus, subject matter depth, scale, all the variants of technology, analytics are coming together to deliver new kinds of business outcomes in particular when there is unprecedented collaboration and innovation in sourcing models.
Service providers are claiming stakes in focus areas… we’ve seen the deliberate moves by Accenture in Procurement through the Procurian acquisition; and more recently by Cognizant to address consumerism and platform opportunities in Healthcare with their acquisitions of Cadient and TriZetto; and investments by Genpact on operating models in Insurance. “As a Service” is becoming more than just a phrase or a vision, as shown in the latest HfS survey – about 30% of enterprises noted use of BPaaS or cloud based services as an alternative to legacy outsourcing. And then there’s analytics… how will service providers and clients truly collaborate to create quality integrated data stores for modeling and analysis? EXL now brings Blue Slate to the table. None of it will have the desired impact though without talent and collaboration.
So, Barbra, what are you working on first for our clients?
It may surprise you to hear that I’m working on a Blueprint for Healthcare. But only if you haven’t read any of what comes before this. In addition to custom research and strategy projects, I’ll be drafting up our first Care Management Blueprint, followed by a refresh of the Health Admin for Payer Blueprint. There’s a convergence of these areas to explore, and further impact to outcomes and sourcing opportunities with the fast rise of consumerism in healthcare and an intriguing intersection between healthcare and retail data and analytics. We are also looking to create a roundtable forum on sourcing and healthcare in the 1H of 2015.
And, what do you do with your spare time (if you have any…)?
Being a Midwesterner now but raised in California, I prefer being outdoors to in, even when I’m reading, but especially for gardening, soccer, volleyball, hiking. My spare time activities flow with the change of seasons, and typically with my husband and two daughters, and our Schipperke. The one constant is my Sunday very early morning ‘walking of the stairs’ in a nearby forest preserve, where the toboggan slide is closed but the 100+ stone stairs to get to the top of it remain open for those of us who find vertical climbing an exhilarating exercise.
Welcome to HfS, Barbra. Delighted to have you choose us as your analytical home and can’t wait to see those first pieces of insight to hit the press =)
Barbra Sheridan McGann (pictured above) is Senior Vice President, Research, at HfS – you can view her full bio here, email her here and tweet her here.
In today’s worlds of services and software, all roads these days are leading directly into the Cloud. Last month alone, SAP announced it was spending a jaw-dropping $8.3 billion on an aging SaaS platform and Larry Ellison used the majority of his opening keynote at Oracle’s annual end-user conference to lay out his own vision for the Cloud. The very next day, Microsoft’s CEO, Satya Nadella, focused on the opportunity in a public appearance as well.
“So tell us something new” We hear you cry
Indeed… why, suddenly, is all the attention on a technology trend that has been emerging for years (and remember that 2010 study)? Because we have now reached the tipping point where Cloud-centric delivery is the only true direction providers can take, if they want to be around in another couple of years. On premise activity might not be going away on all fronts in the immediate future, but it’s clearly in a period of slow decline –especially when you witness the 100% annual jump Microsoft just enjoyed for Cloud revenue in India during fiscal 2014. For its part, SAP saw a 3% decline in on-premise license sales during its recent third quarter, while claiming Cloud-based revenue grew more than 40%.
All this could spell significant trouble for service providers
While nearly all of them view Cloud as a long-term challenge to their core business, few, if any, are prepared for a period of accelerating change. Just look at the recent results of IBM. Despite growing their cloud business by 80%, they reported disappointing revenue and earnings and their share price took a massive hit.
There are some exceptions – at least on paper. For example, Infosys has tapped a new CEO with a product background in an effort to remake its culture, and Cognizant has recently doubled down on Cloud-centric healthcare software platform Trizetto to transform its whole approach to delivering services to the biggest growth industry in North America. But the changes that need to occur go well beyond actions at the top. The increased adoption of Cloud computing, be it as standalone infrastructure or as an end-user business service, is going to impact profoundly how the majority of services are produced, packaged, and sold. Simply wrapping up some existing activity and slapping platform on the label, while a move in the right direction, is not going to solve the challenge alone.
Service providers need to understand how the delivery of their core activity – bridging an enterprise’s consumption of IT with a business outcome – is going to change. To that end, HfS’ Ned May, in conjunction with Avendus Capital, just published a series of recommendations that were gleaned from examining survey data, market forecasts, M&A deals and interviews with a dozens senior leaders across the space.
What follows are two key observations excerpted from that report:
First, there are three types of services providers at greatest risk from the Impact of Cloud regardless of whether the underlying offering is IaaS, SaaS, or even BPaaS. These are:
The Pleasers. Service providers that demonstrate a willingness to do whatever it takes, by customizing their offerings to the unique needs of their clients to please their customers, will find this operating approach now gets in their way. Conversely, those that are highly driven by common processes and standards, and maintain a product mindset will fare better.
The Body Shops. Providers that have become skilled at efficiently providing cheaper labor, whether or not that is augmented by technology, need to understand that the advantages they bring today become disadvantages in the era of Cloud if they cannot develop repeatable IP that can be replicated and scaled across multiple customers.
The Generic Mid-Tier. Cloud-centric services dictates and rewards scale or specialization. Those mid-tier service providers attempting to be “all things to all people” may already be too late to get into the game. Cloud creates a winner-takes-all opportunity as depth trumps breadth.
Second, a new set of providers are emerging that may ultimately reshape the landscape of how services are provisioned and sold.
HfS analyst Ned May is author of new report "The Cloud's Impact on IT Services Providers"
There is a set of Cloud-centric service providers emerging – with names like Appirio, Bluewolf, Fruition, OneSource Virtual and CloudSherpas – that are solely focused on offering deployment, integration, and even maintenance services around leading SaaS platforms such as Salesforce, Netsuite, ServiceNow and Workday. At first pass, these providers look similar to the global Sis, but take a deeper look and you’ll see they are organized around a different set of metrics and ways of doing business. In short, this new breed of Cloud-centric service provider is built to take on smaller deals (typically less than $5m TCV) with can be run profitably across multiple clients. This impacts everything from how they go to market, how they recruit and compensate sales staff to how they can build and scale consultative services across their clients and remain profitable. There’s a great deal to be learned from these current boutiques and it’s likely a few of them will emerge to become the next top tier firms in the space. In addition, there will be emerging leaders in the Cloud-centric services arena by 2020, which may not even be formed yet.
The more time I spend with some of the top services account leads for providers, the more impressed I become with how some of them manage incredibly complex client relationships, which only seem to be getting even more complex in today’s climes.
Carole Murphy is Capgemini's Head of BPO Business Transformation Services
The good account managers literally have to know everything about their clients, from their quirky custom built systems, their internal politics, their process flows, their changing directives from leadership, and so on. And when you get into BPO, it’s not like consulting where you can parachute into clients, devise impressive roadmaps for them to follow and make a hasty exit before the real work begins. Nope – in BPO you need to craft the game-plan and handhold your client through the quagmire for many years to come. As someone one told me, “you’ve got to eat what you kill”…
One person who lives and breathes these complex client transformations is Capgemini’s Carole Murphy, who today heads up the firm’s BPO transformation services. When we managed to drag her away from her reserved seat at the Tottenham Hotspur stadium (a team which can certainly benefit from her transformation skills), we managed to pose some questions on where this BPO business is heading and what she’s experiencing with her clients…
Phil Fersht, HfS: Carole, it’s great to have you on our interview docket today. You’ve been in the BPO industry for quite some years now and are very hands-on with several clients I know. Would you give us a little more color on your background and how you’ve found yourself so involved int he BPO industry?
Carole Murphy, Capgemini: Like many of us in Capgemini BPO, I started off as an accountant. I worked for British Steel and for Kraft Foods, and in about 1996 I joined what was then Ernst & Young Consulting because I was really interested in finance and accounting and transformation. Finance transformation has been the core of my career since then. Five or six years ago I started exploring how we could use Capgemini BPO’s assets to best help our clients to transform, delving deeply into how transformation really works and how we could bring more impactful transformation to our clients. As time went on, I got increasingly interested in how BPO delivers the promise of transformation. I think there’s something quite exciting about the BPO industry in that you’re able to help clients not only make transformation happen, but also sustain that transformation because it’s part of what we do every day.
Phil: We’ve had countless discussions over the years about how clients can achieve operational results with BPO and meeting their core performance metrics. Suddenly, many buyers we speak with expect transformation, and if a provider can’t bring that to the table, it’s not going to last very long. Do you feel that client expectations are a lot higher than they were three or four years ago?
Carole: I’m finding it surprising that some clients’ expectations of what a BPO can deliver is still limited to the simple lift and shift, or just transactional activities, or the impression that ‘surely the only thing a BPO provider can help you with is cost takeout’. On the other side of the seesaw, there are clients who see huge amounts of value from BPO transformation and expect more than cost savings. They’re able to obtain great value by working with their provider to look at not only how to solve their immediate problem, but also how the provider can address their top line agenda of growth, help them achieve profitability, help them with their control agenda, help improve their reputation in the market, or address their working capital agenda through improved collections. I think one of the things that is really changing is providers’ ability to deliver transformation. They’re investing not just in a global delivery network or IP or global process models, but also in technology and in good people who can drive the next wave of transformation.
Phil: Carole, we’ve been hearing the term virtual company being bandied around a bit, I think it’s coming out of Capgemini. Would you explain it to us, and how this applies to businesses today?
Carole: The virtual company is a Capgemini term, Phil. It actually came from a ‘co-creation’ program on BPO-driven innovation that we have between Capgemini University students and our clients. One of our clients was looking to accelerate how they would bring new crop protection and new seed projects to market. But sometimes within the confines of a large organization, it’s hard to take an idea from the page to the field. So the idea that we came up with was to use emerging cloud technologies to create micro environments that would sit outside the core operating environment of the company, whereby more attention would be given to those emerging projects or emerging markets without necessarily putting in the same cost burden. We could maintain control, but also get better insights from what was happening in terms of market response to a product, or in terms of the make-up and profitability. So the idea we came up with was that you could actually create within the larger enterprise a virtual company, and that virtual company would be where you might have new innovations. The virtual company has become a solution that Capgemini offers, and we typically look for clients that are involved in some form of either a new market entry or a small market where you aren’t necessarily going to invest in a complete back-office, but need more flexibility. So the virtual company will basically run the back-office for you from a people, technology and process standpoint, and also supplies the analytics that will help you understand how that new product or new market differentiates itself.
Phil: Is this something you are bringing to existing clients, and getting them to evolve into that model, or are you pushing this now a lot more at new logos?
Carole: A bit of both Phil. To a certain extent it probably starts to address some challenges existing clients may have with small markets, where they don’t necessarily want to invest in a standardization agenda but would like to improve the control, efficiency and effectiveness of accounting for small markets. We also potentially see it with new clients where there’s a divestiture or an M&A happening. Those are situations that traditionally require quite a lot of oversight and insight to start understanding how these two companies come together. And that’s where I think these platforms can be faster to build, and add a little more flexibility within them. Hence, they’re ideal for disruptive situations where innovation is required.
Phil: And you’ve struck up a partnership with NetSuite as well, which is particularly tied to this whole virtual company concept, right?
Carole: Absolutely. When we came up with the concept of the virtual company, we evaluated different solutions and found that we could incorporate solutions around NetSuite. The idea of the virtual company was also making sure that at any moment we are leveraging the different technologies out there that might be able to take a more agile approach as we’re building the solution…so a pilot solution where we would use the Capgemini Global Process Model and other elements of our Global Enterprise Model to make sure we have the right consideration of people, technologies and processes to support the virtual company, but would accelerate the design and build phases. NetSuite is the core platform we use. And we would potentially explore WebCollect, for instance, if there’s a strong focus on collections and collections strategies, or IBX if there’s a strong component of indirect procurement that has to happen to support that client.
Phil: So, when an F&A system is in the cloud, how is that impacting the BPO? Is it really bringing dramatic improvement, in terms of the client’s ability to get better data faster, to be more flexible and agile? What are you seeing from a BPO standpoint when the cloud is introduced into a relationship?
Carole: Cloud technologies usually have a better user interface that can make adoption easier, as compared to the more traditional integrated ERPs that have long configuration and training times. The accessibility of data can be quite powerful from a control sense. If you look at something like a cloud-based Trintech tool, whereby clients can actually see and understand what’s happening across their balance sheet at any time, I think that also helps usability and transparency control, and allows quicker movement. So faster implementation, easier adoption and better communication of results and control.
Phil: How does it impact the provider? Does it mean that you’re focusing on providing more services in areas like analytics and FP&A, and higher level support for clients than just doing a lot of transactional work? Do you find that it’s almost changing the game to more of a high-level value proposition in general?
Carole: I think that’s happening, particularly in and around analytics as a lot of the emerging technologies make integration with traditional systems easier. The real value of analytics for providers is in identifying the actions we can take to link back to the original outcome that the client is looking for. Collections is a good example of that. You can look at the data to identify a customer who’s paying late, and then quickly take action to contact that customer to understand why he or she isn’t paying on time, and actually take some of the barriers to paying out of the way. I think providers tend to be very pragmatic in using data to drive outcomes for their clients to take actions.
Phil: So do you think this virtual model is going to be the big game changer in BPO? You’ve got providers who love the big messy, clunky transactions around dysfunctional ERP, because you can keep hurling more labor at it, and milking those deals…
Carole: I think that the virtual company is an adjunct that fits alongside an ERP. While everyone has their issues with ERPs, they do integrate the data. Many years ago, I worked in an organization that almost had a different building for each ledger, so you would walk from the purchase ledger building to the stock ledger building to find out what had happened. The value from the ERP is the data integration, and the value of emerging technologies is that they can make it easier and more cost effective to access and use that data.
Phil: One final question. You’re appointed the “Queen of BPO” for one week. What would you change in the industry?
Carole: I think the overall BPO industry should have the mindset that we are professional providers of transformation services. Clients and advisors need this mindset so they can recognize they should be looking for a partner that is an expert, and they should respect that partner as an expert. And providers have to be ready, willing and able to be that expert to drive transformation for their clients.
And what about you Phil? If you were King of BPO for a week, what would you change?
Phil: Thanks for turning the tables and putting me on the spot! I’d like to see less focus on the deal, and more on the relationship. I think providers are too frequently strong armed into saying what they need to win a deal, as opposed to being able to structure something that works for both sides with specific milestones and balanced delivery expectations. Another thing I think is really important is around the profession of services and sourcing governance. I think we’re still in a situation where most corporate staff have little knowledge or understanding of what services and outsourcing governance is, what we do and why we matter. And I think it would be really helpful if companies started putting a Chief Services Officer in play (or a Chief Transformation Officer), who can really start to manage this and build more of a professional career focus around our industry. I feel we’re still a bit of an anomaly, as opposed to something that should now be a mainstream career path for people. So I’d like to see us as an industry develop better career paths with clear outcomes and objectives that staff can get excited about.
Carole: I agree. We are an emerging professional services industry, and we do need to focus on what helps people develop and what attracts and keeps people in our industry, because it’s an exciting place to be.
Phil: Yes. And on the buy-side, people seem to either get out – this is a nightmare! – or start to really effect a change that needs to be made and develop really interesting transformative roles for themselves. I think we need to see more of the latter and less of the former. And I think that’s happening, but it has been painful and has taken a long time for the clients as they’ve gotten used to this.
Thank you Carole for your time today – it’s been great hearing about your focus and and views on the BPO business.
Suddenly, everyone is a bloody analyst. I must get at least five posts a day from a completely random selection of individuals attempting to educate me on how robotic automation, digital technology, IoT, big data and outcome-based pricing are going to be the biggest game changers to disrupt the business world since the invention of the desk.
