As we predicted last year, TCS has now become the first of the Indian majors to break the Global IT Services Top 10 for revenues, replacing CGI.
Click to Enlarge
Talk to any incumbent Western service provider today, and the one making them all tremble from the sub-continent is TCS. So what’s the secret sauce?
TCS’ aggressive targeting of renewals and new business, particularly in continental Europe is an important factor in driving its assault on the leaders. Moreover, TCS is frequently seen as being the most flexible service provider on pricing and terms, and has a developing reputation for winning any deal anywhere in the world at any price, if it really wants: it depends on what its leadership thinks is important, what its perception of the market is, and what it needs to tell its stock-holders.
The firm is increasingly being perceived by many today as an alternative provider to the Western Tier 1s, that can come in and fix messy contracts and implementations; it has shown an appetite and willingness pick up a lot of the low margin, low value work that seemingly every Western Tier 1 wants out of and make the deals profitable and leverageable across clients. Not only that, TCS is having much more success de-linking the direct correlation of revenues from FTEs: the firm has a laser-sharp focus on managed services, fixed price projects and has successfully monetized its product group. The sheer size of its referenceable client base and the executive connections of its leadership, is a huge strength. In addition, its tunnel-vision on developing its platform-based solutions is really helping the firm move gradually away from the FTE-pricing model, with real progress already being recognized in banking and insurance verticals.
Cognizant highly likely also to make the Top Ten in the next 2-3 years – most likely at the expense of CSC
It is interesting to note another important characteristic that is starting to differentiate the providers in this list, is the margin of the providers – and we believe the need to maintain margin is slowing growth for many of the Western incumbents. As can be seen in the chart above, the average operating margin for the Top 10 (excluding SAP and Oracle) is 11.5%, with IBM, Accenture and TCS the only top 10 providers with margins in excess of 10%. IBM and Accenture growth may have slowed in the past 24 months, but they have maintained margins. What is worrying for some of the other providers is growth and margins have been compressed by recent market conditions, namely price-squeezing and service commodotization, making it more difficult for them to invest in restructuring / offshore infrastructure / technology imperatives needed required to halt the decline.
As a result, the next likely entrant with strong Indian roots will be Cognizant, where the likely formula for entry being CSC to lose a further $1 billion in revenues and Cognizant to gain another $3 billion – a very likely occurrence based on the recent trends, when you consider Cognizant’s recent growth surge and ability to maintain margins at the 19% level.
The Bottom-line: The naysayers will claim the Indian majors will run out of steam, but who’s really going to challenge them as the delivery model matures?
Jamie Snowdon is Applications Services guru, HfS (click for bio)
As we discussed last month, the Indian majors doubled their market share in global services in barely four years – and while access and management of lower cost offshore talent is a key factor, even when that advantage peters out, the sheer passion and culture of the Indian firms sets them apart from many of the flagging Western incumbents. Moreover, as IT services continue to commodotize, it’s becoming almost impossible for many of the incumbents to come back.
At HfS, we see longer-term disruptive factors, such as advances in automation and robotics and cloud platforms, which could actively negate the need for outsourced labor, as the bigger threats to the Indian majors, but these are still a few years away from making significant inroads into the mighty IT Indian services model.
You can read more about the HfS IT Services Top 10 in our new report “TCS Breaks into the HfS IT Services Top 10”, authored by Jamie Snowdon and Phil Fersht, by clicking here.
No joke, but where else can you hear a discussion about reproducing the cerebral cortex in a piece of software? Where else can you truly understand how paychecks will be processed and IT systems will be remotely operated by robotic human clones in the near future?
Had something better to do than be one of the 800+ registrants for yesterday’s Ultimate Robotic Automation Debate? Or, were you so enthralled with the debate that it’s left you hungry to devour more information on how and when to deploy your very own, round-the-clock robot?
Well, fret no further as HfS Research’s powerful, little, semi-automated, back-end assistant makes it a practice to disseminate our webinar slides and replay for your robotic revelry.
Oh – and a special thank you to our excellent panelists: Lee Coulter (Ascension Health), Pradip Khameni (Blue Shield of California), Chetan Dube (IPSoft), Alastair Bathgate (Blue Prism), Ian Barkin (Sutherland) and Charles Sutherland (HfS).
A momentous event quietly occurred on Friday which could well have significant ramifications for the business practice that calls itself “outsourcing”.
Accenture dropped the term from its strategy line, “Consulting, Technology, Outsourcing”, which it had been using for more than a decade, changing it to “Strategy, Digital, Technology, Operations”. In addition – and perhaps more significantly – it renamed its BPO growth platform “Accenture Operations”. The BPO term is still used when you drill right down to the specific business service lines, but Accenture wants to emphasize to its clients that it provides end-to-end services that go beyond just BPO.
As many of us universally lamented last weekend, the outsourcing (so-called) industry has long been struggling to create a clear, meaningful identity and establish recognized career paths for almost two decades, and much of this is because so many of the service providers, advisors and enterprise customers have failed to create a positive brand perception – and communicate effectively – the value of partnering with service providers to improve and extend operational capability and productivity.
Accenture was one of the last bastions of the outsourcing term, and its de-emphasis of it may be the final nail in the coffin for the dwindling band of outsourcing diehards still clinging to the fantasy that an “outsourcing industry” actually exists. In fact, the term IT Outsourcing is already practically dead, with only a couple of advisors and IBM (oddly) still using it, so let’s see which of the providers actually still use BPO as their official terminology:
Well – there you have it – most have actively distanced themselves from the term, with only Capgemini, Dell, Infosys, Wipro and Sutherland still wed to it. Oh – and for some inexplicable reason, the major HR services firms like ADP still use it, even though the HR profession looks more negatively at outsourcing than any other.
The Bottom-line: It doesn’t ultimately matter what the providers call it, more how the enterprise clients view it
In my view, “outsourcing” really describes the initial act when an enterprise moves the responsibility for processes and operations over to an external party. Once that act is complete, those processes being executed form part of an externalized service or operation for the customer. “Operation” signifies more than merely a service, but the orchestration of an end-to-end suite of processes, so I give Accenture credit for the being the first provider brave enough to use the “operation” term. Now we can sit back and observe many of the above providers also slip that word onto their websites and marketing copy.
However, whatever these providers name their offerings, the real litmus test is going to be whether the buyers of services will start approaching service partnering as a genuine opportunity to improve their capabilities. Ultimately, they are the ones who would need to drop the O word and view services as what they are: services.
Accenture’s move is the most significant yet in terms of rebranding the outsourcing business – my best guess is that O will be pretty much gone from our business vernacular within a year.
If we’re going to cross the chasm and seize the opportunity before us to grow the industry, we need to make outsourcing a career people are attracted to
– Mike Salvino, Accenture, March 2014
Mike Salvino is Group Chief Executive, Operations at Accenture
And finally it’s time for the long-awaited second tranche or our interview with outsourcing hall-of-famer, and the man who’s steered Accenture’s BPO juggernaut these past few years, Mike Salvino. During Part 1, we talked about the challenges and opportunities facing enterprises striving to move up the “BPO Generations” continuum and Mike’s philosophy about how BPO can provide a genuine career opportunities for such a broad diversity of people. We finish our discussion talking about how companies can drive change and what Mike would do if he is ordained as the Lord of BPO for one week…
Phil Fersht (CEO, HfS): Mike, you’ve talked a lot about what needs to change within companies, to move towards more value and away from these transactional engagements. But what do you think really can drive change within enterprises? What do you think has got to happen within themselves to alter the mindset and their approach to developing their governance teams and their staff?
Mike Salvino: I think we will get people to change based on delivering business outcomes. Remember, business outcomes mean that you’re helping clients increase revenue or further decrease their cost –beyond the normal cost savings of outsourcing.
And when we do that, people step up and take notice. They want to understand how you did it. The first step in delivering business outcomes is doing global operations and achieving silent run. That eliminates any discussion amongst ourselves about “Are the transactions getting done?” Then because of that silent running, we we’re able to apply analytics and study what’s going on. Sometimes descriptive looking at past history to try to predict the future, sometimes running algorithms that will help us predict the future, but you can only get to the analytics stage if the operations are silent.
Once you can get to the analytics and produce some data you can hand it over to people that have industry knowledge to get to those insights and generate business outcomes. The last step is getting it into the right hands of people to make a difference. When we’ve done this for our clients, we’ve delivered on fourth and fifth generation BPO. The next step is to turn around and say, “That’s how we want to get paid in the future.”
We want to get away from the FTE based deals, we want to get away from the deals where they can’t scale up and scale down. Clients should pay for what we deliver—and that’s where this industry can go. Now, when you show clients that we can do that it always comes back to people. Once clients see you start producing business outcomes, they never want the people to leave because they value what they can do. That reinforces the need to develop and grow talent in the industry.
It’s been my experience that if we train our folks, if we produce an environment with our clients where people can learn, if we’re clear about their career paths and care about them personally, and if we are authentic leaders, we’ll achieve the business outcomes. But it’s like anything else, once you have been successful at something, it just catapults and snowballs from there. There’s nothing like winning to create positive momentum.
Phil: So that brings me to my final question: You’re ordained by a higher spiritual power as the Lord of BPO for one week, this is even greater than being in the Hall of Fame for the IAOP, right 🙂 You can do two things to change this industry in your one week reign. What would those be?
Mike: Actually, let me have three! The first thing I would do is erase everybody’s memory banks because there’s still too many people that want to remember the failures of the industry versus the successes. In any business it always takes longer than you thought it would to get to where you wanted to be, but we need to celebrate how far we’ve come. So I would first erase the failures of the past because I don’t think that’s the reality of where we are today and that would give me the platform to do the next two things.
The next thing is delivering and getting paid around business outcomes. Deals would be crafted based on business outcomes and people would absolutely understand exactly what that meant. We would contract to it and the impact we were making on the business would be clear.
Then third is an industry that, for instance, my three kids would want to go into. If I had my wish the industry would achieve the business outcomes that would create the growth in the industry for many years to come and that it would be such a good industry with great career paths that our kids would want to run to it to spend the next 20 years. That would be pretty neat if we could get there and maybe we can if we get enough people telling the story.
Phil: I would agree, Mike. I think we need more good people who can share their vision and whip up enthusiasm and excitement – and I think you are being one of those guys who has helped to do that and have been a real credit to this industry. So I thank you for your time today and sharing some of your views and thoughts with our readers.
Industry analyst authority HfS Research has today announced a strategic partnership with leading Robotic Automation software company, Blue Prism to develop the first automated analyst prototype.
HfS has been conducting some major research studies into the emerging trend of Robotic Process Automation (RPA), which is threatening to revolutionize the IT and business process outsourcing world by mimicking and automating repetitive back office tasks such as order management, accounts payable and employee performance management. As HfS was developing its research findings, the firm’s research leadership started to realize its own research processes could potentially benefit from RPA and approached Blue Prism to prototype a beta-robot to produce the first ever automated analyst report.
“Developing new research on an automation platform could be the new game-changer in the world of research and analysis”, commented HfS Research CEO Phil Fersht.
“We’ve been searching for a while now to break the linear growth cycle of the research industry – that is hiring human analysts everytime we need to cover new research areas for our clients. Being able to leverage the capabilities of a world class automation platform like Blue Prism will enable us to become thought-leaders in whole new corners of the market without adding stifling incremental costs to our research delivery.”
As part of HfS and Blue Prism’s first pilot Robo-Analyst project, the development teams have been able to produce the first Robo-Quadrant in the area of “Digital Transformation”.
Commenting on the project, Fersht added, “We have been blown away by the results – we programmed the robot to trawl vendor websites and create complex algorithms based on their usage of technical terminology. Essentially, the more they used terms such as ‘Big Data’, ‘Transformation’, ‘Digital Solutions’, ‘Social Media’ and ‘Cloud’, the further the robot moved their position over to the right of the quadrant. Then we created an API to our accounting system, and based on how much the vendor was spending in proportion to its competitors, the robot proceeded either to raise the vendor performance towards the upper-right corner, or lower it in the direction of the lower-left. Then we checked the results with the same quadrant being run by one of our human analysts and the results were a 97% match”.
After the initial success of Robo-Quadrants, HfS is quickly turning its attention to the use of Robo-Analysts directly with its clients. In order to minimize any risks to its key client relationships, HfS has been soft-launching its first client-facing robo-analyst in Australia, which has resulted in the creation of Robo-Analyst Clive, who has already been working with a series of local clients.
Commenting on Clive’s recent performance, Blue Prism’s CEO Alastair Floodgate personally sat in on a recent telephone briefing between Clive and a local provider of technology services. “I was amazed at how well the briefing went – we’d pre-programmed Clive with phrases such as ‘you are simply wonderful – clients will be thrilled by your outcomes, mate’ and ‘its so refreshing to hear an original value proposition that genuinely differentiates you from your competitors’. However, it did get a bit weird when the provider asked Clive out for a drink – we’ll need to work on that aspect.”
Based on the success of Robo-Analyst Clive, HfS and Blue Prism are planning to roll out a series of Robo-Analysts across the globe, including Robo-Analyst Grace for China, Robo-Analyst Hank for North America and Robo-Analyst Gary for the UK. They are also experimenting in the sourcing advisor market, and have a Texas-accented Robo-Advisor call Rate-card Rick in the works.
If you would like to learn more about the revolutionary HfS and Blueprism venture, you can email your questions to [email protected]
And of course… this was an:
Please, please don’t tell me you fell for this again! Even though the solution might kinda work…
And while we’re reminiscing about falling for April Fools’ gags, here is 2013’s classic:
The author is not is a particularly good mood and may say things that are not entirely objective, not completely rational and potentially insulting to some readers. His opinions are based entirely on tons of research and his own experiences – and prejudices. Do not read this if you have a thin skin or hate reality checks… otherwise read away, nod vociferously and weigh in 🙂
One fact I would challenge anyone on is the abject failure of the outsourcing industry to brand and market itself to corporate society at large.
Lousy events, third-rate publications, meaningless jargon that only “outsourcing people” actually understand, poor branding and too many old white dudes who remain lost somewhere in the 80’s and 90’s, are culminating in a directionless mess that used to be an emerging industry, but is now becoming a confusing collection of activities, business strategies and provider offerings.
Where’s the fresh thinking, the new ideas, the spark of youth and enthusiasm for what we do? I don’t think I can remember sitting on a call with anyone under the age of 40 for quite some time now.
This business needs a complete overhaul with how we approach outsourcing careers, how we communicate what we do and – most importantly – how we define ourselves. I hate to say this, but we really haven’t created an “outsourcing” industry, more a functional capability that only a select few people understand and care about.
One of the biggest problems facing the services and outsourcing industry today, is the constant failure to market the use of third party services providers as value-added services for enterprises. Good Lord – is it really that hard to promote the fact that our enterprises today should drive down their operating costs and improve how they do their IT, finance, procurement, HR, supply chain management, etc?
While business leaders are falling over themselves to blow more corporate moolah on the sexiest new SaaS solutions or the latest ERP upgrade, when it comes to soliciting real help to drive down costs, improve technology and service quality, suddenly every excuse under the sun is used to delay decisions and investments. Buying new tech is about automating processes – and ultimately eliminating unnecessary tasks and jobs, while engaging with services is more often about improving the way that processes are delivered… so clearly the tech industry does a far better job marketing itself that the services industry does. Why is this?
Very poor and boring communication to corporate society about the benefits of services and outsourcing. We’ve done the “O” debate to death and there isn’t much that can be done to mask the term, however, that is no excuse for the poor job most people in the services and outsourcing industry do to communicate what we do. Complicated, badly-written and (frankly) boring white papers that only very sophisticated outsourcing people can understand do not help. Why do so many providers and consultants persist in churning out unreadable stuff that probably costs a small fortune to produce and virtually noone, bar their competitors and the people who write them, actually read. Scratch that, I bet even their competitors do not bother to read the stuff anymore… probably only the authors. And let’s not forget the turgid webcasts that keep getting churned out, where barely a handful of people turn up and pretend to listen to the painful conversation. Whatever happened to people talking and writing in plain English and having a personality to make this stuff interesting? We’re talking about how businesses can re-invent themselves and get much smarter at how they operate – does that need to be boring?
Failure to create “outsourcing careers”. Most companies, once they outsource, fail to rotate their best talent into the outsourcing governance function, and view it as some weird anomaly that only procurement people should do. Not enough people stand up and talk about the potential career opportunities it can create despite the fact that many of us have developed very interesting, challenging and rewarding careers in this business. One of the problems is buyers and providers are only looking to hire people with an “outsourcing” track record on their CVs. How many jaded provider sales execs do you know of their third, fourth, fifth or even sixth provider? And why do buyers only look for people with major outsourcing experience? Why not hire real ambitious practitioners and train them how to understand outsourcing and develop real career tracks, rather than groping for the same ol’ dwindling pool of old timers who know the lingo?
After the deal the real “operators” get neglected. This one really starts to irk… in so many instances both buyers and providers roll out their big guns to negotiate a deal, but, once the ink is dry, they dump it all off onto middle managers to figure out what was actually sold and how to deliver the stuff. At HfS, we are increasingly finding the executives managing the deals, especially on the buyside, are often junior managers desperately trying to figure out how to get through the day, let along do anything remotely “innovative”. Not having enough senior day-to-day visibility and support is highly detrimental to an enterprise seeking to achieve more than “lights-on” effectiveness with their engagement.
Western media always views outsourcing as negative. Every time I get a call from a reporter from a non-Indian publication, they are always trying to dish dirt on outsourcing. And this ranges from the small rags to the most respected broadsheets. There is a stigma that just needs to be broken through better education and communication to the media masses.
Events only promote the paying sponsors. Most events in the outsourcing and services industry struggle to serve up good speakers – they tend to be paying advisor or provider sponsors who just want to get up and preach the same four trends, receive awards and take us through their worn out PowerPoint paraphernalia. And now they can even do them on their iPads…
Niche outsourcing media is poor quality.Ugh – it’s just bad. Most of these publications and websites just copy each other’s rubbish. Some even hire ghost writers to put together “interesting blogs”. Does anyone actually read this stuff? And why do some firms persist in sponsoring it?
Too many advisors are tired old dudes who stopped learning about new stuff more than a decade ago. For example, we estimate that close to 20% of the current application services deal flow today is actually being driven as digital projects from the CMO and there are virtually no advisors today which have any clue how to approach them, according to the providers bidding on them. In so many cases today, providers just prefer it when the advisor is not even there, so they can have decent direct conversations about what the clients need. Advisors have their boxes into which they want to shoehorn everyone, when what they really should be doing is helping tailor the solution the client needs with what providers have the capability of delivering. As someone once said, outsourcing is a game of “horses for courses”.
Big analyst firms have shied away from it.Where did they go? Do they even cover this space anymore? Do they care? Did all the good outsourcing analysts really go work for Cognizant’s marketing department?
Buyers still feel everything is just so “NDA”. When 97% of the Global 2000 “outsources” some element of its IT and 90% some element of its business processes, isn’t the cat out of the bag these days that most big firms “outsource”. Then why do the majority of buyers refuse to allow their executives to talk openly in public channels about their experiences and best practices? Are there really trade secrets that will leak out about how GM uses Prasad to process some invoices? Surely when buyers can talk about their global services experiences more openly, more operations executives will learn what this is all about, and we can get on with the business of creating a more open, developing industry?
Most providers are still not investing in the right sales talent.This one just continues to baffle. If you want to sell F&A BPO, then hire someone who can hold a meaningful conversation with senior finance people, and if you want to sell Cloud services, hire someone who understands the real issues needed to get there and can articulate them to their clients. Is it really so hard, or is there some other reason why the same old blokes keep showing up at different providers every year, who really would be better suited to a BMW showroom?
Can we have more women please?At our recent HfS summits, about 60% of the buyer execs were female, but about 90% of the provider and advisor execs are male. Isn’t it smart business practice to level the playing field a bit here, folks?
Charles Sutherland is EVP, Research at HfS (Click for bio)
On this week’s HfS Podcast, we’re talking robotics. Hot on the heels of his seminal report, Framing A Constitution for Robotistan, and his presentation at Blueprint 3.0, HfS EVP Charles Sutherland sat down with Mark Reed-Edwards to dig into the key issues around robotics and automation.
What are the five reasons automation may replace BPO as we know it today? What trends will we see over the next year to five years? Who’s leading the way? This podcast will give you the answers to those questions and more.
Reetika Joshi is HfS Research Director, BPO and Analytics Strategies (click for bio)
On this edition of the HfS Podcast, Mark Reed-Edwards talks with Reetika Joshi, Research Director, BPO & Analytics Strategies at HfS.
Reetika recently published the HfS Blueprint Report: Insurance BPO, which evaluated the innovation and execution capabilities of service providers in life and annuities, property and casualty, and other segments.
In the podcast, we examine the following questions: What data is behind the report? What are the key highlights from the report? Which providers made it into the Winner’s Circle? Which ones were close? What does it take to make it into the Winner’s Circle? Listen below for answers to those and other questions.
If I had a rupee for everytime someone had told me that Indian based providers are…
a) Running out of steam;
b) Just offering staff augmentation at lower prices;
c) Suffering from such bad wage inflation that the house of cards is about to come down;
d) Providing services of such low quality that everyone is following Randy Mott’s lead and backsourcing everything;
…I would have at least a month’s worth of app testing at my disposal right now.
However, the sustained growth surge of the leading Indian majors is proving much more resilient than the naysayers are claiming and I would argue has created a dynamic where many of the traditional providers may never find a return to prominent growth. Let’s discuss…
Global business is never going back to the way it was
Many of these people are simply waiting for the world to return the ways of pre dot.com crash days, where clients paid the exorbitant fees of consultants for “transformation projects” and dumped hundreds of millions into dysfunctional ERP projects that often achieved little beyond creating meaningless work to support faltering processes, many of which are now rendered obsolete.
I hate to be the hearer of bad news, but the world really has moved on since then, and the emergence of the Indian majors has been a bi-product of the emerging opportunities for enterprises to shed their bloat and create an environment to do things differently. Cloud computing platforms, improving analytics opportunities and the advantages of lower-cost global delivery are the three main game-changers in today’s business environment – and this isn’t going to change anytime soon.
What we’ve witnessed is the Indian majors literally doubling their share of the global market in barely four years, while the “traditional” onshore-centric IT and business service providers have largely floundered. With the notable exception of Accenture, the onshore-centric major providers have only managed to post growth rates in the low single digits, with both HP and CSC revenues actually lower in 2013 than in 2009. Over the same period, the major Indian-based offshore-centric providers all grew annually in double figures with Cognizant expanding at almost 30% year-on-year over the last four years:
Click on Charts to Enlarge
Nine reasons why the offshore-centric providers have enjoyed their unprecedented growth
It’s time to acknowledge one of the phenomenons of the electronically-connected era of global business – brand India and its emergence as a key component of the IT and operations back office for the Global 2000 – and it’s done it while using Indian delivery as the hub. It would be convenient just to pass this off as the effect of labor arbitrage and resultant price pressures, but over this period of time, all of the onshore-centric suppliers have steadfastly developed significant offshore presence and access to an abundance offshore resources at genuinely massive scale. At HfS, we have identified the following nice elements that have been the main reasons for the success of the Indian majors:
1) Brand. India’s brand in IT services has matured in last 5 years – whereas businesses, in the past, were seen to be using Indian offshore-centric providers for primarily low-cost services, now they are genuinely going to offshore-centric /India-based providers for IT value and knowledge, as costs have leveled out across all providers for bread-and-butter business and IT services. The offshore-centric providers increasingly benefit from India’s growing brand equity, as well as their own.
2) Customer satisfaction. Many clients like the more humble approach of the offshore-centric providers, where delivery managers are more flexible, and “going the extra mile” for clients is never an issue. Moreover, many of the offshore-centric providers’ account managers are not constantly trying to “go up the totem pole” within their clients to sell more services and undermine their client relationships. Client like to feel in control of their provider and the Indian approach often gives then that.
3) Client understanding. The “penetrate and radiate” strategy of the leading Indian offshore-centric providers has worked wonders. Once they have developed an understanding of their clients’ institutional processes, their clients do not want to kick them out – even if they haven’t performed as well as hoped. Getting to know the “warts and all” of clients creates an incredibly sticky and sustainable relationship. While many of the onshore-centric providers shy away from small projects as they like to concentrate in the big, high margin engagements, many of the Indian providers love to take on the small stuff, preferring to take the longer view that once they get embedded within a client, their opportunities will quickly emerge. Any advisors reading this will empathize with the enthusiasm of the Indian firms to chase after all types of business, not matter how small or unappealing it may often be.
4) Incentivized and entrepreneurial employees. Offshore-centric providers have driven success within employees by offering incentive based pay and share options. This has helped to tie employee success and corporate success together. Anyone who’s attended their sales offsites and customer events will quickly see how entrepreneurial some of their staff are – always keen to engage and build relationships.
5) Hunger. The offshore-centric providers are clearly hungrier for the business – always eager for more business and always eager to please their clients. Clients like hunger and determination, as long as it is supported by execution, which the offshore-centric firms work hard of achieving. In addition, when providers show passion and determination to please their clients, they earn a lot more forgiveness from their clients when they do mess up, as opposed to creating constant escalations and issues that can derail a relationship.
6) Aggressive pricing. Both TCS and Cognizant are great examples of keeping the prices competitive, even when the Western providers, such as Accenture and IBM, have also brought their prices down to similar levels. Moreover, the Indian majors tend to carry much less overhead than their traditional competitors, where many have much thinner layers of management and administrative and marketing functions, which enable them to be much more aggressive when they need to drop the price points to win business.
7) Sticking to client commitments. The offshore-centric providers value strong customer relationships and, as mentioned above, often go the extra mile in a deal, this is just as true when things do not go as planned. When things don’t go to plan the offshore-centric providers are less inclined to “change order” their clients to death, which is frequently the criticism of their Western counterparts.
8) Innovation. In many cases client increasingly cite some of the Indian offshore-centric providers as innovative – constantly coming to them with new ideas, offerings and capabilities. They frequently see their client base as fertile ground to develop BPaaS platforms around client situations to be used with other clients, and are often willing to do this at much lower cost when compared to their illustrious competitors. Many take the longer view of building future business through new endeavors than simply trying to maximize revenue from current situations. While onshore-centric providers are also capable of providing great innovative offerings to their clients, some of the offshore-centric providers have surprised their clients with their ideas and capabilities. Sometimes beating client expectations with innovation is more important than selling innovation at $500/hour.
9) Executive relationships. Indian offshore-centric providers have done a great job of having their senior executives available for their clients, when requested – many of them have the mobile phone number of the CEO, even though the provider is well into the billions in revenues. Most senior clients have met the likes of Frank at Cognizant, Chandra at TCS and Tiger at Genpact, while very few clients of the big traditional providers are able to say the same about the Megs, Ginnis, Pierres etc.
The Bottom-line: The future winners will be those which can adapt today’s winning services formula to the evolving technology and business domain needs
Most of the onshore-centric providers need to take a good look at the success of the offshore-centric providers and see what characteristics from these Nine Steps they are lacking. While many arguments can be made the the Indian juggernaut has to slow down (and it eventually will), these firms and their armies of passionate employees are not going away anytime soon. Quite simply, the traditional providers need to offer something different for clients that they actually need – and to be able to offer a level of service at similar costs that the Indian majors are providing. Yes, there are some real factors that could diminish the competitiveness of the Indian majors, namely rising domestic wages, rupee appreciation, robotic process automation, Cloud based offerings and the availability of skilled BPO staff, however they have proven very adept at protecting their existing business, while continuing to grow their market share.
However, everyone needs skilled and affordable labor to underpin delivery, and while advanced in technology and automation will reduce the amount of staff clients may need in the future, there will be the emergence of new skill demands, such as data scientists, process and domain specialists and technology experts in emerging areas such as mobility and Cloud. From what we’ve witnessed over the past decade, the Indian majors have been ahead of the game when it comes to developing a pipeline of young talent, while keeping the management overhead down… their next challenge is to adapt this to the changing demands of the clients and not rest on their laurels. If anything, it may be harder for some of the traditional providers to fight their way back into the services game than the Indian majors to continue their surge…
If you get a fleeting moment to wrench yourself away from your twitter feed, formatting that PowerPoint deck that’s on its 18th cycle, or that excruciating conference call you are seriously not listening to, then you could do a lot worse that take a gander at our new report glamorously entitled, “BPO on the Brink of a New Generation: Technology Transformation“.
In order to attempt to capture your attention, even for said fleeting moment, we analyzed the performance of 189 BPO buyers and the role technology is, could, and will potentially play to help them achieve their desired business goals.
Why BPO clients which have tech-enabled their processes are achieving better performance and outcomes
One of the key takeaways from the research was analyzing the varying performance BPO providers based on the maturity of their client’s approach to BPO across the following three categories:
“Lift and Shift” (49% of the market): Those BPO clients which have merely shifted their existing people and processes, with very limited transformation or standardization, over to the service provider;
“Process Transformation, limited Technology” (23% of the market): Those BPO clients which have performed a genuine transformation of their processes, but have yet to introduce any new technologies to enhance process flows, analytics or delivery;
“Technology Enabled Transformation” (28% of the market): Those BPO clients which have invested in a wide-scale technology transformation of their BPO processes.
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Buyers with technology-enabled BPO outperform for standard operational delivery
Firstly, those buyers with technology-enabled transformational BPO are reaping much better results from their standard services (80% view their engagements as quite to highly effective). This is indicative of the impact technology enablement can bring to standardizing processes and workflows that underpin process delivery and enable greater visibility and control for clients.
According to one finance executive at a major media enterprise responsible for overseeing a finance and accounting BPO initiative, “Our provider implemented some workflow tools that enabled our accounts payable process to be fully automated. As a result, we’ve been able to reduce the amount of sub-tasks from 36 to 23, our payments cycle has sped up considerably, and we have much faster access to cash flow data and overall visibility over our processes.” As the chart above illustrates, automation capability is one of the areas that is vastly improved with technology enablement of process workflows (80% see real effectiveness). Technology clearly offers one of the fastest tracks to demonstrable improvement, in terms of ROI, with BPO engagements.
Buyers with better technology-enablement of BPO are able to make the shift away from an FTE-based model
52% of buyers with technology-enabled BPO are seeing real progress towards shifting away from the “lift and shift” BPO model where the only value metric is based on cost per employee. This is twice the proportion of those clients which haven’t undergone technology-enablement of their BPO processes.
According to the finance executive at the media firm, “since we renewed the contract, we now are paying for our accounts payable service purely by cost per invoice processed, we have greater visibility and predictability into our costs now”. Other BPO clients, still operating in less mature models without technology-enablement universally struggle to move away from the FTE model as they simply do not have the data and visibility of their transactions. While some clients have embarked on some gainshare initiatives, for example offering incentives to their providers for speeding up their collections processes, or making greater savings from spend management, they have found it nigh-on impossible to develop the predictability of transaction volume without a strong technology underpinning.
Cloud-enabling process is a major driver for adding common standards and workflows; however legacy ERP implementations are holding back many enterprises
Another key factor in shifting away from an FTE model is to move processes into the cloud, which enables them to be universally accessible across an organization with one set of standards and workflows. Unsurprisingly, over half (52%) of the buyers who have undergone a technology transformation can boast effectiveness of process delivery in the cloud, which is a real driver behind shifting away from an FTE model. However, one key factor holding back many buyers is their heavy reliance on on-premise ERP which proves very cumbersome when it comes to cloud enabling many back office processes which are still mired in legacy software-based frameworks.
“Our finance processes are so tied to our back-end data warehouses and our custom-built ERP that we’re years away from moving them to a cloud model”, stated one BPO client. However, HfS is seeing more progress moving HR process into the cloud, especially with many companies investing in Workday’s emerging HR platform. One client pointed out that “Workday has enabled us to unify our hire-to-retire processes across our North American operations is just a few months. Our provider has been able to help us implement the software and make rapid progress away from many of the manual processes we were relying on previously. Moving to a cloud model has enabled us to unify processes rapidly across manufacturing plants”.
Technology-enabled BPO has enabled buyers to achieve greater analytical insight and innovative capabilities
Most strikingly, technology-enabled BPO buyers are achieving real effectiveness in higher value areas, namely new ideas/initiatives (50%), analytical insight (45%) and even gainsharing with their providers (42%). While clearly there is room for improvement in these areas, it is notable how those buyers, which have invested in technology to enable their BPO, are able to focus on higher value outcomes. One major global hi-tech company has been working with its provider to develop a finance dashboard tool that helps provide real-time access to revenue cycle data. What is innovative about the initiative is that the provider is developing the tool at limited cost, with the agreement with the buyer that they can resell the tool to other clients when fully developed. HfS sees this as a genuine example of BPO gainsharing and innovation that adds significant value to both buyer and provider, and gives the buyer access to the best skills and expertise from their provider without paying exorbitant fees.
Additionally, many of those buyers which have ventured into technology-enabled BPO, are clearly excelling at developing new ideas and initiatives. Much of this is because the more streamlined and standardized the operations become, the more buyers can focus on the higher value areas that can add real value to their business and align their operations with the corporate goals. One finance controller for a leading consumer products firm expands on this dynamic, “We embarked on a major initiative with our provider to roll out a unified financial system after we had undergone the initial BPO transition. Now we’re fully operational, our finance staff is able to focus on planning and analysis activities and providing much more relevant data to our leadership team than previously. In the earlier phases of our BPO they were consumed with just getting through the day with our basic operations – now things are running better than ever and our finance team is performing at a level we have never seen before.”
The Bottom-line: Both buyers and service providers need to up their game if they want to capture more value through BPO
Buyers and service providers need to re-think all of the existing “analog” steps processes which may currently be eased by technology but which aren’t fundamentally digital in nature. The move to digital process platforms is inevitable as buyers and providers continue to search for ongoing savings, but it won’t happen in the near term. The investment budgets of most BPO service providers remain too low to fuel digital innovation, while at the same time the majority of buyers and service providers still think in terms of FTEs more than process outcomes when contracting. Buyers also need to revamp their governance skills to cover these new capabilities, while many service providers need to invest in the higher caliber talent, analytics capabilities and technology platforms required to create this value. In short, the BPO industry’s ability to change is still slower than what buyers claim they want and expect, and what service providers claim they can actually deliver.
Click here to read all related posts from the 2014 “Technology in BPO Study”
Click here to download the full research report “BPO on the Brink of a New Generation: Technology Transformation”, authored by Phil Fersht and Charles Sutherland and conducted with the support of Accenture
No joke, but where else can you hear a discussion about reproducing the cerebral cortex in a piece of software? Where else can you truly understand how paychecks will be processed and IT systems will be remotely operated by robotic human clones in the near future?
A momentous event quietly occurred on Friday which could well have significant ramifications for the business practice that calls itself “outsourcing”.
If you get a fleeting moment to wrench yourself away from your twitter feed, formatting that PowerPoint deck that’s on its 18th cycle, or that excruciating conference call you are seriously not listening to, then you could do a lot worse that take a gander at our new report glamorously entitled, “
