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.
With the increasing momentum of Robotic Process Automation and comprehensive business platforms solutions in BPO, it seems like a good time to step back and take a look at what really occurs “under the covers” of most BPO delivery. Let’s hear what HfS’ Charles Sutherland has to say about deconstructing those “human” elements of processing work – and how they will evolve with all the technology-enablement underway…
HfS' Charles Sutherland (pictured right) and Tom Ivory deconstruct BPO in a Dallas parking lot
When you get right down to it, BPO isn’t all that complex and, regardless of whether it is a horizontal or industry vertical based process solution, there are only a few basic components that are used to construct a solution. Understanding this will be critical to making BPO work in the new “As-a-Service Economy”.
Architecting a BPO solution is not all that different from being a writer of a comedy movie, whether that writer happens to be based in Hollywood, London, Paris or Mumbai. If you watch closely, most comedies are based on the interweaving of a few recurring plots involving the key cast members. These might include:
Mistaken identity (in all forms)
Boyfriend/girlfriend that got away returns to town
A couple works together for the first time
Eccentric in-laws come for a visit
Friends feel that someone is hiding something and decide to investigate
A family vacation
Dad gives horrible advice to son/daughter about dating/relationships
A protagonist suffers accidental memory loss
Competition for a prize
Unexpected arrival of a windfall of $
A surprise party/birthday/pregnancy
Accidental ingestion of a mind-altering substance
The only difference, therefore, between most generic comedies, whether they involve Kate Hudson, Peter Sellers, Jacques Tati or Priyanka Chopra, is which mix of these plots is involved.
And it’s the same with BPO – when you deconstruct the actions in a BPO process, what you will generally find is that they comprise some combination of these human elements:
Opening an envelope
Answering the phone to interact with customers/suppliers/partners
Keying or scanning in data
Repurposing content
Starting or closing a case
Comparing data fields on screen and or on paper
Identifying an exception to a process and flagging it for remedy
Making a decision based on a business rule
Requesting/Authorizing/Making a payment
Updating status field in a system
Hopefully by now you recognize the repetition of the elements, both in comedy movies and, more importantly, in your business processes. But why does this matter, why should I even think about deconstructing a process into its human elements at this point in time?
It’s useful to do, because the way that you will need (or want) to combine those elements together in your BPO process, is going to change in the next few years, if not already for you today.
We believe that with robotic process automation, the digitization of previously “analog”, or paper-centric processes, enabled by the advent of As-a-Service intuitive solutions, will result in many of these 10 human elements being less critical to the “plot”, if not being eradicated outright.
Therefore, if you aren’t already thinking about what you really have in your business process and what your people are really doing, you aren’t going to be as prepared for this new disruptive world as you will need to be.
In short, we believe that process automation is going to impact dramatically these human process activities over the next 5 years:
Keying or scanning in data
Repurposing content
Starting or closing a case
Comparing data fields on screen and or on paper
Identifying an exception to a process and flagging it for remedy
Making a decision based on a business rule
Updating status field in a system
The Bottom-line: The roots of the As-a-Service Economy have already been planted – and BPO is taking on a very different solution form
The broad-based adoption of As-a-Service business platforms will radically impact how these 10 human process elements are transacted tomorrow, compared to how they they are transacted today.
This is our future for BPO, which will likely not even be called BPO for much longer as more and more processes are digitized and technology-enabled to form components of automated solutions where the outcomes of these processes are taken for granted. For example, does anyone with half a digital brain cell even think about photocopying receipts for their expense submissions anyone when a quick scan onto your mobile in the taxi will be only “manual” component necessary? And why will be we need to employ call center reps to prepare auto-insurance quotes once all the data points can be pulled together and a computer generated quote can be automated for the customer in seconds?
This is the future that HfS is researching to understand how it will turn out and by when. That’s, at least, what keeps us up at night rather than watching re-runs of “Being There.” We’ve already been here and we want to see where we all end up before long.
We really didn’t want to over-toot our horn with regards to our performance with the recent excellent 2014 Analyst Value Survey, which canvassed the views of 1093 enterprises, analysts and vendor consumers of research. However, we were extremely excited (and proud) to see how effectively our research has penetrated European organizations:
Click to Enlarge
We’ve been trying very hard to increase our readership and client uptake in Europe and this really validates our open model for getting our research into the nooks and crannies of global enterprises. It also goes to show how much noise you can make with a “Born in the Cloud” business model these days, when a small boutique like HfS can outperform a host of firms many times our size, because of our ease of access and quality of work. It’s also a great validation for the services industry when we have firms like ISG, Everest and NelsonHall also outperforming many of the mainstay traditional analyst firms. This is also very apparent when we look at the rankings global for “Value for Money”:
Well, that’s the last of our horn-tooting for now, but a special shoutout to the team at Kea, especially Duncan Chapple, Bram Weerts and Derk Erbe, for doing such a tremendous job pulling off this innovative and unprecedented research. Oh – and people can purchase a full copy of the data for a few shekels here.
The globalization wave is peaking, and many maturing enterprise service buyers are struggling to find incremental value from the traditional model, such as accessing more meaningful data, deploying end-to-end process delivery, and driving down operating costs to a minimum, with globally accessible technology platforms based on common standards enabled by the cloud.
Looking at this next evolution of value, it is coming from technology-driven “As-a-Service” advances that directly enhance employee, partner and consumer effectiveness.
This emergence of As-a-Service represents the most disruptive series of impacts to the traditional IT and business services industry that we have seen.
The way service buyers receive services and the way service providers sell and deliver them, is going to be very, very different in a few short years, and already is already impacting some process areas where the technology is already available.
For those legacy service providers still thinking this is a passing fad, it may already be too late…
Click to Enlarge
The Ten Key Tenets Providing the Foundation of the As-a-Service Economy
As the As-a-Service Economy continues to emerge and evolve, it is the belief of HfS that the model will follow the following tenets:
1. Services and technology are available on an as-needed (plug-and-play) and/or subscription based model. Traditional commercial models from pricing to contract durations will be replaced by “As-a-Service” solutions meeting an increasing buyer expectation that flexibility is at the core of the service provider proposition.
2. Further automation changes the focus of services staff from cost take-out to value-add. By automating formerly manual tasks and replacing legacy applications, business services staff will have more time to drive business outcomes, as opposed to keying in data, cross-checking data tables or the other tasks that were integral to service delivery before.
3. End-to-end process delivery becomes standard. Business services teams will be able to design/drive/enhance end-to-end global business processes across multiple technologies including: mobile/SaaS/Internet of Things all supported by a mature global delivery model.
4. Analytics capabilities can be more readily tapped. Both clients and service providers will no longer have to recruit and then train highly specialized data scientists to perform largely descriptive analytics tasks. Instead both will be able to use more intuitive As-a-Service applications together with less specialized business service staff to produce analytics to support both operational and market decisions that overcome the data gaps and system complexities of the present environment.
5. Services become fungible. Formerly niche services will be easier to “plug-and-play” into a multi-sourced or GBS model – and can be slithers of process (i.e. FP&A) sourced from specialists that give service buyers more options when building comprehensive solutions that go beyond turning to a one-stop shop service provider, whose niche capabilities may be missing or inferior.
6. Specialization trumps scale. Service providers will deliver more specialized services that are: enabled by technology and priced by outcomes, require less arduous implementations on the front end, and provide more consultative ongoing, “light touch” support that can be delivered inexpensively and virtually. These will ultimately be smaller in scale than legacy people-based services, but higher-margin and operable on the one-many utility model.
7. Operations talent become “Brokers of Capability”. Services governance staff will need to become “brokers” of service delivery, where they manage multiple supplier relationships (tech implementers, BPOs, process specialists, consultants) to deliver maximum value to their organizations.
8. Incumbency is not a right. In the “As-a-service” economy, service buyers will, over time, migrate to the solutions and service providers which offer the best combination of capabilities and flexibility, so that service buyers are no longer as locked-in to a service provider as they may have been in the past. While this was less of an issue when service buyers were predominantly sourcing staff augmentation, as their solutions evolved to include more technology, legacy solutions often locked in service buyers to a specific solution, well beyond the point where it was creating any incremental further value. Service providers will also be expected to be much more transparent as to how migrations to and from their “as-a-service” environments can be undertaken by enterprise clients.
9. The past will stay in the past as legacy technology investments are written off. Even today, many service buyers are dissuaded from buying new technology-enabled solutions, as their organization has made significant past investments in legacy technology solutions and feel they have a certain degree of “technology debt” that needs to be repaid. Forward-thinking enterprises are now realizing that many past investments in technology platforms and services have now become redundant with the availability of Business Process-as-a-Service (BPaaS) offerings that negate the need for major future technology investments. Advanced BPaaS solutions will make the technology investment a redundant issue, as cloud-based process delivery does not entail a need to invest significant in technology, but more the interfaces to create the appropriate integration points between the “leased” process and the necessary in-house systems. As enterprises move more and more of their solutions into the cloud, their future integration headaches will be caused by “islands of cloud” cropping up in various process areas, and their having to figure out the right intersection points and APIs to make it all work effectively.
10. The “Born in the Cloud” businesses will have an advantage over the legacy enterprises. HfS believes the make up of the Fortune 500 in five year’s time, will be very different from today’s. One of the key reasons for this is the rapid evolution of new business where all their services are in the cloud and their entire infrastructure delivered to them on a seamless “As-a-Service” model. These firms will (and many already are) enjoy significant cost and speed-to-market advantages, where they are not beset by poor technology, over-bloated with back office personnel.
The Bottom Line: How service buyers receive services and service providers sell and delivery them, is going to be very, very different…
Engagements are getting smaller in scale as ambitious service buyers seek to de-couple the payment for labor from the delivery and ultimate outcomes. However, while the demand for scale in terms of labor is diminishing, the need for skills and expertise to provide nimble, specialized delivery that is SaaS-driven, is at an all time high.
We’ve thrived on new innovations and disruptions for the last five decades… from mainframes to Client/Servers to ERP to web-based architectures to cloud computing. The only difference, today, is the pace of change and innovation is considerably more aggressive – digital technologies such as mobility, analytics and social are generating new business value when legacy business processes are dragged into a digital business environment, while new developments in robotic automation platforms are making it much easier to create fluid workflows for operations to become more efficient. On top of that, add the possibilities of artificial intelligence, cognitive applications and advanced data science, and you have a maelstrom of immense change and new complexity challenging the status quo of corporate systems and processes. Looking at this next evolution of value, it is coming from technology-driven “As-a-Service” advances that directly enhance employee, partner and consumer effectiveness.
With this onset of true As-a-Service solutions, the onus is shifting away from massive technology implementation costs to business-reengineering programs to enable the SaaS delivery. Yes, there will always be some upfront investment in technology integration to knit together workflows and different systems, but that is already shrinking for many SaaS platforms. At HfS, we believe the opportunity for smart service providers with As-a-Service enablement weaved into their offerings is massive.
This means providers wishing to profit from the As-a-Service evolution need to make significant investments in their technology and talent (see our recent POVon the winning investment strategies service providers need to make). At HfS, we believe the landscape for As-a-Service providers in the business and IT services industry will be very, very different from the leaders today. In fact, there will likely be new brands which have not even been established or founded yet. And many of these As-a-Service providers will be more nimble than today’s incumbents, but very profitable – and will chip away at the existing business logic which dictates that many of today’s huge global monolithic service providers still have the best model for long term health and success in this marketplace.
In short, there will likely be a whole new ecosystem of niche specialists right across the services spectrum, offering technology-enabled services in horizontal areas such as finance and HR, through to industry domain specialties such healthcare, life sciences, manufacturing and financial services. There will also be many regionally focused As-a-Service providers services who understand the uniqueness of local business conditions. For those legacy service providers still thinking this will pass with time and who therefore aren’t already onboard the As-a-Service train, it may already be too late.
I don’t know about you, but I’ve been getting really tired of people lamenting that jobs are being robotized, our operations talent is too transactional and we’re all, basically, screwed.
I’ve also been guilty, in the past, of preaching the doom and gloom scenario for the workforce, as our enterprises find new ways and means to improve efficiencies and effectiveness, however, as business models evolve, so do our labor needs – and this often translates into an even greater need for talent. I also have an increasing amount of faith in the capability of most workers to evolve and adapt, and our new research supports this theory.
In short, industry has been striving to minimize the reliance on manual labor to support processes for centuries, since the invention of the water wheel, the steam engine, the spinning jenny, the motor vehicle and – of course – the computer. All this means, is that skills which become redundant need to evolve to ones that are in need – and in today’s digital era, the need for creative minds, for talent which can use analytics tools and other apps, for knowledge workers which can use their judgement, for customer service reps which can delight customers, HR reps which can delight their managers, accountants which can improve cash flow and support tough decisions, healthcare administrators which can work the changing systems and regulations etc. has never been higher.
Complexity and change drives the need for expertise – and the need for talent has never been as intense as it is today. Society, education and businesses simply need to ensure today’s workers have the environment to adapt to the new methods. In fact, the electronic revolution is only driving the thirst for new skills to an even higher intensity. People adapt – they always have and they always will. Just go on LinkedIn to see all the fancy new job titles and career resumes being aligned with the evolving needs or today’s employers. Human nature is to adapt and survive, and today’s “digital” environment is creating challenges for some, but great opportunities for the majority, to further their careers and perform more intellectually challenging and rewarding jobs.
When we recently asked 115 major enterprises about the capability of their operations governance staff with the impact of digital transformation, we were pleasantly surprised by the confidence most enterprises have with their operations workers’ abilities to reorient themselves to be effective in a digital business environment:
Click to Enlarge
In nearly all digital scenarios, the vast majority of enterprises feel they have talent with some capability to be effective – and, in many cases, very capable. Only 11% bemoan their lack of analytical talent and 90% are convincing their leadership that a digital roadmap is adding real value to their operations. Where there is a worrying death of capability is in the area of creating-thinking and the ability to drive effective change management programs, but, even in these areas, there is a clear capability to improve. It’s a largely positive picture with regards to how today’s enterprises can cope with the shifts and get ahead of them in time.
The Bottom-line: the digital era is not only changing the way we work, it’s improving it
Accountants who used to spend their days pumping reports out of SAP can now spend more time exploring data correlations and global markets to prepare reports for their Board. With today’s massive advances in technology and automation, HR reps who used to spend all day filing benefits and payroll information can now spend more time hunting social networks for new talent… procurement staff can develop valuable relationships with suppliers than simply beat them up over a cost spreadsheet all day… healthcare administrators can spend more time prepping doctors with critical patient information, than wrestling with archaic scheduling and insurance systems…. IT staff can focus on creating an environment of usable digital tools and apps for their organization, than maintaining help desk tickets and writing lines of horrible code. The world of work’s just so much more interesting and rewarding today that it was even five years’ ago.
So let’s stop bemoaning the fact we may one day get replaced by a piece of software or an actual robot… or will simply become an unemployable lump of wasted humanity. The future needs us to adapt and flourish with challenging roles we never dreamed of just a few short years ago.
And finally, the results of the Analyst Value Survey, which canvassed the views of 1093 enterprises, analysts and vendor consumers of research, have been released. This is – by some margin – the largest study ever conducted to gauge the influence and value of the industry technology analyst firms, and even the most optimistic followers of HfS couldn’t have expected this result:
Click to Enlarge
And not only did we enjoy a huge uplift in influence of the last 12 months, this also also builds on our influence increase over buyers and providers the previous year (see last year’s results):
Click to Enlarge
I really don’t want to bore you with a sales pitch as to how we have been achieving this recognition (hopefully you have your own ideas, and if you were one of the nice people who voted for us, I thank you personally – and owe you a drink).
All I will say is “thank you” to the HfS team for working their socks off and making this all possible. And also a thank you to YOU for reading our stuff, saying great things about us and believing in our approach and determination to change the face of the analyst industry forever.
I would also like to thank the hard-working people at Kea Company, which today has adopted the mantle of “analyst of the analysts” for pulling off such a terrific and comprehensive study.
If you would like to purchase a full copy of the results, you can access them here. If you are a provider marketer who needs some conclusive data and a decent steer where to invest your analyst relationship time, you could to a lot worse than spend some time with these guys.
Last week, HfS attended and presented at NASSCOM’s buzzing BPM Strategy Summit 2014 in Bangalore.
We asked our EVP of Research, Charles Sutherland, to share the team’s thoughts on the event and what were the key themes that came out during the various sessions and how those relate to NASSCOM’s ambition to grow Business Process Management (BPM) exports from $20 Billion in 2014 to $50 Billion by 2020. The simple fact that Charles actually shaved for this conference tells you in was quite the big deal…
Charles Sutherland closes out this year's Nasscom BPM Summit in Bangalore
Phil, let me begin by first acknowledging strong attendance (~500 people) for this year’s Summit and the high level of engagement from across the NASSCOM membership during the day and a half of sessions. The theme of the Summit was what NASSCOM member’s could be doing to drive hyper-growth to bring the exports of BPM services from India to $50 Billion by 2020 a CAGR of ~16.5% which really is hyper-growth by anyone’s calculations especially for an industry with 25+ years of history in India.
To borrow a metaphor provided before to HfS by Anantha Radhakrishnan, SVP and Global Head of Enterprise Services at Infosys BPO, we liken the final goal that NASSCOM wants to create with this $50 Billion to the equivalent of an especially tasty meal of an Indian Biryani (a mixed rice dish comprised of many different ingredients that also has many different regional variants across India) made up of various existing ingredients that the BPM industry has at its disposal today, plus a few that are just now emerging. Based on the panel discussions and all of the hallway conversations during the Summit, we identified the following as being the key ingredients that most NASSCOM members believe will comprise the final dish.
The existing base ingredients in this Bangalore Biryani:
» Analytics. Perhaps the most recurring topic through the Summit was whether analytics could be the driver for BPM growth through 2020 that Y2K was for the Indian IT industry in the late 90’s. We sat in on discussions around pricing models and operating models in analytics along with whether clients would be most interested in offerings based on descriptive or predictive analytics solutions. Some panelists stated that analytics could be the second biggest area in Indian BPM export mix by 2020 bypassing F&A, which implies that analytics could be $11 billion-plus sector from the current levels of only $825 million.
» Omni-Channel Contact Center. The Customer Interaction Services (CIS) is the largest component in the Indian BPM export mix and the consensus during the Summit was that it will remain so by 2020. There were discussions around the evolution of CIS to multi-channel or omni-channel contact centers, and how consumers, who now interact with companies through numerous channels, expect superior services and a seamless experience across all the channels. These companies then in turn expect the same from their BPM service providers which will be the challenge for NASSCOM members as they seek to have this sector drive a significant portion of the overall growth ambition.
» Finance & Accounting (F&A). The second largest component of the Indian BPM export mix today and from discussions at the summit it was clear that the service providers think that F&A will continue to be a high growth offering through the rest of this decade fueled by untapped customer demand and the depth of capabilities available from service providers across the NASSCOM membership.
» Healthcare. There was also great interest in healthcare primarily driven by the fast approaching second operational year of the Affordable Care Act. The announcement of Cognizant’s acquisition of Trizetto just before the Summit further validated the healthcare opportunity and signaled how service providers are willing to make big bets in this vertical.
The emerging base ingredients in this Bangalore Biryani:
» Partnerships. Partnerships are a cornerstone of the growth strategy for BPM service providers who don’t have capabilities in all the possible delivery technologies and process domains. In the past we saw that BPM service providers were occasionally naïve in their approach to technology and service partnerships but that is changing quite dramatically. In our side-bar discussions and in the panels, we saw many, many examples of new and extensive partnership strategies emerging to drive growth especially from traditionally “pure play: BPM players which don’t have an extensive library of proprietary platform plays today.
» Platform Plays or Business Process as a Service (BPaaS). While not a large source of export revenue today, the discussions around the Summit were that business platforms need to be a central component of BPM solutions across vertical and horizontal offerings going forward. During individual service provider discussions, the specific business platforms they have or will be bringing to market were always near the top of the agenda with our HfS team.
» Robotics Process Automation (RPA). I presented a closing keynote session at the Summit that introduced the concept of a Maturity Model for RPA which in turn generated significant discussions as to whether this was an enabler or an impediment to the $50 Billion growth target. HfS believes that RPA will for many service providers act as an enabler of growth breaking the current near linear linkage between FTE growth and overall revenue growth in the BPM industry. That said, for those NASSCOM BPM members whose core service offerings are based upon data entry or other process steps which are easily replaced by RPA the future will not be anywhere as rosy and in fact RPA will likely be a very significant threat to even the current business.
The flavorful ingredient on the top of this Bangalore Biryani is:
Yes, we just had to add a Biryani pic
» Acquisitions. Perhaps fueled by the size of Cognizant’s Trizetto acquisition, the Summit was buzzing with discussions as to whether ramping up acquisitions in the BPM industry especially of software and business platforms could to really solidify the hyper-growth or to keep with our Biryani metaphor – to add the final flavor which makes the dish totally enticing. Sadly, we didn’t hear any juicy new rumors to share with you here but it’s clear that the industry is willing to step up from broadly having a strategy of small “tuck-in” acquisitions to targets which are much bolder and potentially harder to digest.
So overall, we clearly saw during the Summit what this $50 Billion Bangalore Biryani is likely to be comprised of, and we will be eagerly watching all the chefs congregate in the NASSCOM kitchen to deliver this tasty treat by 2020. We will check in again next year and see how all of this is coming together and what else the industry might yet add to create the final dish.
Authors: Phil Fersht and Ray Wang: Industry Analysts who still give a sh*t
(This is a collaboration and represents our individual points of view and not necessarily our employers. Oh wait, that’s us…. moving on…)
Is the analyst business stuck in its own trough of disillusionment?
We called it three years’ ago and we can now officially proclaim that the industry once known as “research” is close to meeting its maker.
Okay, the reality is it’s rare these days for analysts to comb for obscure facts, ask the hard questions, reach out to customers, dig deep with the system integrators, and circumvent corporate communication teams by going direct to employees for the inside scoop.
In fact, the alarming observation of analysts, especially in the large firms, is that most of them are spending all their time on evaluation matrices (e.g. MQs, Waves, Marketscapes, etc.). There seems to be precious little (or any) research coming out of these places anymore. Where are the big ideas? Where’s the insight? Where’s the thought leadership? What do these people stand for anymore?
When we sat down to talk to our client base, our analysts, and our clients, we determined that there were eight common reasons, namely:
1. Legacy business models are built on scare-to-play. The only way the legacy firms are making money is through selling reprints of vendor positionings. Sales folks tell vendors that if they don’t pay for briefing hours and advisory time, analysts will ignore them.
2. Tele analyst approach reinforces an ivory tower image. Today’s legacy analysts have no other means of getting data. Sadly, most rarely ever talk to buyers of services or users of technology. The situation is so bad, that many vendors are forced to provide 15 to 50 customer references because the analyst has no means to reach out to real customers.
3. Stone soup research model reflects the laziness of analyst firm methodologies. They are essentially having the vendors do their “research” for them. Another way to look at this, legacy analyst firms are strong-arming vendors into providing references as their primary method of reaching out to customers. Some analysts today are demanding three hour briefings with vendors to educate them – they are essentially making vendors pay to give them the knowledge they need to appear smart.
4. Egotistical narcissism drives power trips in evaluations. Legacy analysts love the attention of vendors pandering to their demands. In one case, a legacy analyst asked for 35 client references for a scatterplot chart. Vendors humored him just to play along.
5. Information often confused as insight. Many legacy analysts have precious little fresh insight of their own. Often legacy analysts operate on limited data and base “facts” from old surveys run at the corporate level. The result – dated insight not grounded with the reality of the buyer’s point of view. In fact, many have become so enslaved to the vendor evaluation model and have forgotten that they really are an analyst who’s supposed to provide insight to the world – not simply regurgitate vendor-fed marketing hype.
6. Limited practical experience hampered by siloed’ coverage areas. The legacy analysts firms create specialists blinded by the big picture and intensely focused on the hyper specific. Clients often express frustration in having to schedule conversations with multiple analysts who often can not match experience with context.
7. Lowered expectations reinforce lowered standards. Let’s face it, the legacy analyst firms have lost touch with their clients when it comes to research. Clients aren’t expecting insight anymore, and most the analysts just aren’t producing it.
8. Failure of research firms to bring in visionary leaders. Most of the traditional analyst firms prefer to have 20 year veterans as their lead visionaries to the market, many of whom have never worked in the real world and refrain from hiring dynamic analysts who can outshine them. Many refrain from talking to clients, speaking at conferences as they have lost touch with their customers – and are not incentivized to inspire – simply keep their money machine cranking along. They have become slaves to their internal politics and P&Ls, as opposed to shaping new ideas and insights to delight their markets.
The Digital Chasm Among Analyst Firms Is Growing
Buyers must seriously ask if legacy analyst firms are still analyst firms or are they merely advertising agencies for vendors smart enough to play their game? With the dearth of enterprise journalists and media, has the analyst become the new media for the enterprise market?
Gartner’s model is smart. It continues to create more categories to include more vendors with the goal of monopolizing a vendor’s resources and time. Many vendors now have multiple FTE’s dedicated to just Gartner’s evaluations. This model crowds out other independent voices and puts pressure on the other legacy analyst firms. Those dedicated to the analyst relations function have little time to see a different point of view.
We believe that should this continue, there may not be a research industry left in 2 years’ time. We believe that this model of racking and stacking vendors will no longer be sustainable.
The Bottom line: The only way to resurrect research is to bring back talent – and motivate it
Rebels without causes? Two fresh-faced analysts from back in the day…
We can talk about new business models for hours, but the one missing ingredient in today’s fading research business is the lack of passionate people who want to know everything about their area, who are talking to the people who buy and sell technology and services… who care about what they represent and articulating what they think and do.
Where are those people? Are they hiding, did they retire, or did they just give up? Or did they just figure out how to check the boxes as analysts and give up caring about their careers?
Without passionate talent, we’re doomed and research can – and will soon – be put to bed as a distant memory that once was. Maybe a couple of smart individuals will save this industry, but it needs some serious saving…
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.
