“Rewritten by machine and new technology, and now I understand the problems you can see”
Source: “Video Killed the Radio Star” by the Buggles, 1979
Yes, even back in ’79, when a portly Christian Bale wore a hairpiece and the first nudist beach was established in the United Kingdom, the world was already beginning to zone in on the power of automation. Well maybe it wasn’t, but we were trying to find a clever way to connect the Buggles, American Hustle with Automation and BPO… so let’s have HfS’ own automation star, Charles Sutherland, shine some light on this one…
The Stagnation of Gamification
It wasn’t that long ago that in certain circles of the outsourcing market, there was a great deal of excitement about how gamification was a trend which would have a real and meaningful impact on how work was done in delivery centers around the world. Books were written, conferences like GSummit were organized and in general there was an emerging belief that if you made even the most routine work more “fun” organized around mini-games, competitions, points and leaderboards rates of employee engagement and retention would rise and with that overall productivity in the outsourcing market. A full disclosure now, I believed in this at the time and in many respects still due although as I’ll explain, I no longer see this as a wide-sweeping trend and instead as a niche approach for certain roles and workforces now in the future. So while the books still reside on my Kindle, I’m now moving to the belief that at least in the world of BPO and GBS, it won’t be the gamification of roles rather it will be the process automation of roles that will define this world over the next several years.
While it’s true, that gamification may not have made it into the standard discourse in the BPO and GBS marketplace, our recent study of technology trends in BPO suggests that by comparison to process automation and the members of the SMAC stack (Social, Mobility, Analytics and Cloud), Gamification is at best the present, likely the past and certainly not the future technology trend. What has emerged in its place is process automation.
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Why and Why Not Gamification in BPO
Gamification was attractive in BPO as a possible solution to some structural challenges in the industry. How do you keep employees engaged and retained when their daily work isn’t always interesting and rarely varies? How do you appeal to new millennial and Gen-Y employees who live in a gamified environment earning “rewards” such as FourSquare badges or posting their Candy Crush Saga conquests on their smartphones when they leave work each day but work on citrixed green screen mainframe claims systems during their days? How do you foster competition between employees to be more productive when you aren’t able to shower them with direct financial rewards? To these problems gamification seemed like the answer. If somehow you could just make the work more “fun” than surely these problems would recede and the benefits would begin to accrue both to service providers and their clients.
Charles Sutherland is EVP Research, HfS (click for bio)
Only it’s been hard to gamify enterprise applications or at least the ones that most employees in the BPO marketplace need to use each and every day. Building rewards and badges and point systems and attractive graphical interfaces has taken a back seat to just getting multiple legacy applications to speak to each other and just delivering the process in an effective and efficient manner at a lower cost. It turns out the theory of gamification is great but the business case is much harder to secure for a BPO contract. When it comes to front office staff inside an enterprise there are plenty of examples of successful products like Cognizant’s Motivate to get greater productivity and engagement but that’s a much harder sell inside a BPO especially now that instead of motivating employees in mundane roles to increase productivity you can simply automate out the least exciting, most mundane of work.
You still have attrition in a gamified environment and your BPO employees still get bored with flashy games and competitions as they will always want something new in the same way that people jump to the newest smartphone app or social media tool. An automated process, by contrast, is best when it doesn’t change and the servers processing the work aren’t asking for new screens ever. The business case is also clearer. Develop the process automation flows and then pull in the transactions and then release your employees to engage in other tasks.
The Bottom-line: Why gamify a standard process when you can replace the human element altogether?
To be fair we are still in the early days of the current iteration of process automation applications from the likes of IPSoft, Blue Prism and UIpath to name a few and the BPO reference clients are still pending but the underlying trend seems clear.
So, why invest heavily in gamifying a standard process for your BPO employees when you can replace the human element altogether? It’s for this reason that our surveyed BPO buyers clearly see that there is an increasing importance for process automation going forward, so much so that it has likely now “killed the gamification star” for the future.
You only need to face the simple fact that 50% of corporate office space (in the US alone) is now left unused to understand that the connected worker is becoming less and less tethered to her/his desk – they are mobile. While Marissa Meyer is making valiant efforts to reverse this trend, the unfortunate news for her is that more and more workers want to be mobile, so if you want to the best talent, you’d better be able to cater for their mobile needs.
Quite simply, the speed by which Mobility is dominating our personal and business lives is staggering, and the capability of providers to mobilify their services to keep enterprises functioning is becoming increasingly significant by the day as a services differentiator. So let’s take a peek at the results of the first Blueprint Report into Enterprise Mobility Services, where HfS analyst Ned May scoured over 10,000 datapoints across 270 Enterprise Mobility services contracts:
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Ned, firstly, can you talk about some of the business-specific uses of Enterprise Mobility that you’re seeing?
For some industries, Mobility is already table stakes, for example:
* Shipping: One of the earliest to adopt mobile solutions. Proprietary devices manage both the package status and the delivery fleet to provide real time information all the way back to the consumer. * Market Research: In the field surveys now get entered immediately in a laptop – reducing costs and allowing for on the fly targeting of needed demographics.
For some it’s quickly getting there, for example:
* Healthcare Insurance: Membership apps for healthcare apps running on tablets allow sales reps to customize, quote, and close a new membership in the field and in a much more engaging way then possible via even a laptop. * Travel: Flight attendants are being equipped with phablets tied into passenger data and entertainment systems that are also able to receive food and beverage requests all in an effort to better manage travelers and provide a personalized experience for everyone on the plane.
And some likely future uses:
* Car Insurance: Auto insurers will tailor car policies not based on actuarial tables and demographics but instead on real data gathered about each individuals driving habits gleaned from sensors in their smartphones. * Retail: High-end retail shopping will become an augmented experience as laptops get handed out (or in store apps downloaded) that provides context around every item in the store, makes recommendations for complimentary purchases, directs buyers to the location of an item, allows for purchase of items sold out in one’s size, and even allows one to purchase items as they gather them rather than wait at the end to check out.
So what’s been driving the Enterprise Mobility market?
The rapid proliferation of smartphones is fueling a broad range of mobile activity across most enterprises today. Firstly, there a need for the first wave of customer-facing mobile initiatives to be better integrated with existing content and commerce platforms, and secondly, many businesses are pursuing more radical change by embracing Mobility internally across the enterprise. The Blackberry was a phenomenal communication tool, but its limited interface offered little opportunity for further integration with the business.
When CEOs began to demand enterprise level access for their iPads and iPhones, they unleashed a torrent of activity that very few IT departments had the wherewithal to stop. Today. that activity now has the potential to change fundamentally the way many of a businesses’ underlying processes are performed. In conducting this research, we found most enterprises fall within one of three stages of enterprise mobile adoption:
The first stage and the one where most companies reside today is characterized by the addition of a mobile interface to a discrete app. Typically, these interfaces are created within silos that enable some core function such as customer engagement or field support and they are often initiated outside of IT department in areas like marketing and sales.
The second stage of adoption we saw – and one getting a good amount of attention today – is those companies where the priority is to integrate many of their mobile initiatives that are underway. This stage occurs when an enterprise realizes the disparate activities will yield greater gains if they are rationalized within a cohesive approach. For example, by tying together a sales system with a customer care portal they can enable more seamless client lifecycle.
The third stage is what we label transformation and is characterized by those that are bringing about radical change to an underlying business process by leveraging new ways to harvest and interact with information via these devices. Few businesses are operating at this level today but those that are will mostly likely be tomorrow’s leaders.
Ned, what are the key challenges facing IT departments looking to Embrace Mobility today?
One of the biggest challenges most enterprise IT departments face today is how to rationalize all the disparate mobile activities currently underway across their enterprise. As functional departments outside of IT – areas like sales, marketing, and even HR – began to drive the selection and adoption of new enterprise applications they often layered in a mobile interface either at the outset or in a later refresh stage. This led to a hodgepodge of activity without a cohesive strategy. The end result is an enterprise riddled with multiple mobile entry points and interfaces that employees and customers alike are challenged to navigate. In short, the concept we know as the consumerization of the enterprise resulted in what could best be termed the Appification of the enterprise and today many companies are realizing that this model is not driving the hoped for efficiencies but rather it is at best driving confusion and at worst customer dissatisfaction.
So how should business executives approach an Enterprise Mobility initiative?
Ned May is SVP, IT Services Research, HfS (Click for bio)
What I recommend for anyone tasked with driving a Mobility initiative in their organization, is to take a step back from whatever point solution they are looking to enable or refine, and to conduct a more thorough assessment of their organization’s overall Mobility readiness. Before another dollar is spent on development, a cohesive Mobility strategy is required – even if the short term recommendation from that strategy is to continue letting individual departments add the mobile interfaces they need. Nearly every service provider I spoke with for this report has this type of offering in place to conduct these assessments. Many, if not most, will even provide this for free, yet very few enterprises took advantage of this in 2014.
And how did the Winners shake out?
The Winner’s Circle Features a Mix of provider groups and strategies. The four leaders in our analysis represent a diverse mix of strengths and strategies:
Accenture brings deep vertical industry expertise grounded in business needs and by combining this with a significant investments within user experience and UI design it has the ability to produce truly transformative mobile initiatives at global scale.
IBM made its mantra of MobilityFirst one of its four key corporate initiatives for 2014 and with its broad portfolio of proprietary platforms – many of which are some of the leading tools within Mobility – the company is in a great position to deliver on that promise.
Infosys hasa robust portfolio of proprietary IP and solutions that allows it to more quickly address many Enterprise Mobility needs at relatively low cost.
Tech Mahindra’s roots lie in the telecom industry a space it continues to serve deeply today and in doing so it brings a deep understanding around the future evolution of devices and networks that helps it meets the future needs of an enterprise.
Close behind the ranking of these four providers were another seven that made it into our High Performers group. These seven were loosely clumped into two subgroups – one group excelling in execution and the other in innovation. The innovators were iGate, Tieto, Cognizant and Capgemini and those stronger in execution were HP, EPAM, and Virtusa though it should be noted that each brought strengths in the other areas as well.
Net-net, Ned, what are the key takeaways?
The Market Remains Immature: Though we identify five service providers in our Winner’s Circle and another six High Performers, there is considerable room for every service provider to move up and to the right. We expect the market to look very different in a year’s time.
Service Provider Capabilities Span Three Areas – Application Development, Integration, & Transformation: Enterprise buyers are advised to carefully assess their unique needs and make sure they engage with an appropriate service provider within one of these three. Boutique App developers will serve some buyer needs the best while leaving others without the solution they need. The same goes for a skilled integrator that might be lacking strength in up front UX / UI design.
The Market as a Whole Skews toward Innovation: On average, every service provider ranked higher on the scale of innovation then they did on execution highlighting the challenge of delivering excellence in a rapidly emerging market. This provides an opening for any service provider excelling in this regard.
Mobility Is Not Just a Device: Leading service providers are recognizing Mobility is about untethered data and not merely communicating to a screen on a phone. Offerings in telematics and efforts to make use of this data will be a big theme in 2014.
Mobility is Becoming Commoditized: Despite the relative immaturity of the market as a whole, parts of it are already rapidly becoming commoditized. e.g. Device Management an area that has seen a wave of roll up acquisition activity is now seeing SaaS like offerings that aim to simplify – even automate – the task.
Thanks, Ned, for an excellent synopsis of the new Blueprint
HfS subscribers can click here to download their copy of the 2014 Enterprise Mobility Services Blueprint Report
Having spent more than a decade in traditional analyst houses before starting a boutique research firm over four years ago, I’ve genuinely seen both sides of the coin when it comes to “pay-to-play” shenanigans with analysts.
We’ve heard all the accusations of vendors “buying” their positioning in quadrants, waves and marketscapes for years, and I’ll leave it to your own judgement what actually transpires there. In anycase, I think most knowledgeable people just use those things as guides when they make decisions.. and do not always take them as gospel. Am sure we get the some sniping when we run our Blueprints, even though analyst opinion only accounts for 10% of the scoring.
However, one practice I seem to be exposed to every bloody day is the blatant opinionating from a host of “independent” analysts/bloggers/pundits/consultants /influencers/journalists who all make a living from the dirty vendor marketing dollar.
Essentially, these “independents” make money using three tactics:
Tactic 1) Pay for Praise:
The oldest model for the dollar-eager “independent”. Simply go to vendor conferences, tweet sweet-nothings to noone in-particular (just so their marketing team notices) and write up some favorable pitch for their products/services. Then license it to them for ten grand and Bob’s yer uncle. Do one of those a month and you can eke out a meager living for not using a helluva lot of brainpower. Alternatively, just call up a vendor and offer up your praise services, and have them pay you twenty grand to write a white paper where they can have liberal “editing rights”.
How to identify: It’s pretty easy to pinpoint these”independents”, and there seems to be an inexhaustive supply of marketeers who persist with feeding the beast for their nice little independent endorsements to add to their handout bags at conferences. Why they haven’t figured out that noone trusts (or reads) “analyst” puff-pieces being offered up from vendors is another curious enigma.
Tactic 2) Pay to Shut-Up:
A more recent phenomenon where the “independent” analyst repeatedly publicly slams a vendor. At some point, said vendor may succumb and write them a check for “subscription services”, but the real deal is that the analyst needs to shut the xxxx up if they want to keep those checks coming. This tends to work for the more credible, influential “independents” who don’t need to resort to blatant white-papering and reprint-whoring to make their money.
How to identify: This can take a while to figure out – essentially watch out for analysts who never offer comment on a key vendor in their space (especially one whom it’s not very cool to praise, but has deep pockets). Or just observe which vendors an “independent” analyst likes to criticize and work out why they’re not commenting on others.
Tactic 3) Pay to Attack:
Most pay-to-play independents, who’ve lost all sight of what it means to be credible, will write nasties about their non-clients and sweet-nothings about the paying ones (unless they are influential enough to make more cash via the Shut-Up model). The vendors who get the nasty treatment have either given up trying to bribe the analyst, or have too much pride to be drawn into the pay-to-play game. Or simply, the money from the vendors getting praised far outweighs the money on offer from the other ones. This type of “independent” is in a constant state of flux praising their money masters and bitching about their competitors. What’s often most baffling is some these “analysts” are so lost in their little business model they actually believe the crap they are writing – they truly have become coin-operated.
How to identify: Pretty easy to figure these ones. Just read their stuff and join the dots.
The Bottom-line: Who can you trust?
There is only one opinion, at the end of the day, you can rely 100% on – your own. You’ll hear all sorts of puff and bluster, observe all sorts of fancy grids and scatterplot charts, and you’ll be able to pick up a lot of useful datapoints, especially with the plethora of free information available today. But the only opinion that ultimately matters is what you see with your own eyes – and hear from other customers who’ve experienced the products and services.
And trust research you know is straight from the customer and not written by whomever is bankrolling it. Talk to the analysts writing the stuff too, as it’s harder for them to play the act when they are actually having to give you their real opinion.
Sadly, this is only going to get worse before it gets any better. Suddenly, in today’s media-insane environment, everyone is an expert and can put out their own version of the world in many different forms and soundbites, across many different information channels. It must be getting really, really hard for some people to keep track of what is real versus propaganda (or just plain crap). I can only hope that better filtering tools are developed in the future that allow us to manage our information environments better, de-social some of the insanity that deluges us, and focus on the experts we trust and opinions that matter.
Our new “Technology in BPO” study will soon reveal (stay tuned) that this industry is on the brink of a significant, radical overhaul to its very core value proposition. Quite simply, when we look at the current performance of BPO engagements today, the results are more than depressing, but the encouraging news is that half of today’s clients are not expecting to settle for this status quo:
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Where BPO is performing well (green). The positive news for the BPO industry is that providers are proving effective at delivering the principal two table-stakes of BPO: (1) delivering the standard basic operations, and (2) meeting the pre-agreed contractual cost reduction targets for clients on more that six out of every ten engagements.
Where BPO performance is average (amber). Encouragingly, half of BPO buyers are pleased with the efforts their providers’ leaders are making collaborating well with their own leadership, a recent trend we have observed where senior provider executives are getting more hands-on with their clients, as opposed to disappearing from sight the moment the contract ink is dry. This is positive news for buyers which need to discuss how evolve their BPO value beyond very basic service provision and gain senior buy-in. In addition, it is reassuring that more than half of buyers are pleased with the specific industry process knowledge their providers are bringing to the table – an area that has proved much more disappointing in past studies.
Where BPO is struggling (red). The areas in the red box give serious cause for concern regarding the potential of the vast majority of today’s BPO engagements. When you consider that many of the leading BPO providers today are significant IT services firms, it is staggering that over half of buyers are dissatisfied with the technology solutions and automation being incorporated into their engagements. Not only that, among the areas where providers can easily impress with a little investment is in providing talent that can be more proactive with their clients, and also deliver more than simply operational support. The picture becomes even more depressing with the fact that barely four out of ten BPO buyers can attest to some positive performance with new ideas and initiatives and some analytical insight from their providers.
Simply put, the majority of providers need to step up significantly, if they can fulfill their clients’ ambitions of moving to a broader transformational environment where they are benefitting from process and technology transformations. On the flip side, HfS research last year (see link) examined the talent issues in sourcing, revealing that many buyers simply do not have the right talent mixes on their outsourcing governance teams to work effectively with their providers to take advantage of their analytics capabilities, jointly plan and develop new initiatives, or work collaboratively on problem-solving or outcome-based gainshare initiatives.
And now the good news: Half the industry expects to break out of the old world of “lift and shift”… and fast!
Some buyers and their providers will embrace what needs to be done to evolve this business beyond being a mere wage-reducing staff augmentation service, while others will persist in slogging away with a model that is now proven, beyond any doubt, that the only real benefits are from the supply and purchase of cheaper labor.
BPO creates a new normal for businesses… and the winners will be those which can break from the status quo. Sadly, once enterprises offload labor costs, they don’t ever want them back, so a new normal will quickly occur where the most enterprises’ leaderships will start to demand further efficiencies – and smart governance leaders today know they will be out of job before long if they are simply going to persist in overseeing a stagnating offshore-based operation. What’s more, expectations are moving a lot faster in today’s environment, where function leaders don’t have the luxury of ten year programs anymore – leadership expects to see tangible results in much shorter timeframes.
Smart enterprise leaders know they have to change how they add value to their firms. You only have to look at the growing number of unemployed CIOs to understand what happens when functions become overly operational and limited value and innovation is being achieved. It’s the same for CFOs, CPOs, supply chain heads and other function leaders – they are all under pressure to drive out costs, while delivering ongoing improvements to data quality and having greater alignment with front-office activities. This is why 49% of today’s BPO buyers expect to have moved to a “wide-scale transformation of business processes enabled by new technology tools/platforms” in just two years:
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The Bottom-line: BPO will only fail those enterprises which settle for “mediocre”
Providers can only deliver what their clients demand of them – and pay for. Simply put, 49% of enterprise buyers have only ventured as far as doing basic labor arbitrage, and are clearly failing to find much (if any) value beyond those wage savings. Most providers are not delivering that value, but, in most circumstances, this is because their customers have not got their act together to set out a value-based agenda and work with their provider to have them help achieve it. Providers will not seek to deliver value until their clients demand it, are prepared to invest in it – and will kick them out if if they then fail to deliver it.
BPO is the start of a new phase of change for more enterprises… it’s persisting with the change agenda which dictates the pace of new value creation. These 49% of “lift and shift” engagements have been set up for short-term cost gains, not long term improvements and innovations. However, all is not lost, because moving into a “lift and shift” BPO environment isn’t necessarily leaving the buyer and provider in a bad situation. They have achieved goal number one with most outsourcing: they got the bloated costs off the books and are in a better place to effect change.
In essence, BPO isn’t failing, it’s simply milked as much as it can from the very first phase of efficiency gains… the removal of bloated costs from years of onshore staff hiring. As one major BPO enterprise adopter, now in a very mature state, declared, “We were mired in expensive shared services and politics. The situation had reached the point where we were unable to drive any changes, efficiencies or innovations. Every decision to change a process, procedure or policy would require a committee meeting of people who had no desire or incentive to do anything differently. BPO saved us – it drove the shock through the system we needed to change our ways, and created a new starting point for creating a much more effective, scalable operations infrastructure.”
So, folks, this isn’t the end, or the beginning of the end… moreover, its the start of a new beginning.. for at least half of today’s BPO buyers.
HfS will shortly release its new report, entitled “BPO on the Brink”, that analyzes, in full, the results of this groundbreaking study that covered 189 experienced buyers of BPO services and their practices with regards to achieving business outcomes, deriving value beyond cost and adopting enabling technologies to improve processes and performance.
When God invented broad-scale multi-process outsourcing for the back office in the 1990’s, a big chunk of the Global 2000 leapt up screaming “Please take our HR! Please fix it – Oh and save us 20% off the bottom-line while you’re at it”.
Lo and behold, by 2006, more than 300 major enterprises had already outsourced a proper bundle of core HR process to providers brave enough to take it all on – and try to make a profit in the process. Typically, these deals were payroll, benefits admin and a plethora of HR administrivia… all lumped together within an HR call center, with an employee portal veneer as a band-aid attempting to mask whatever assortment of manual non-standard processes, custom made spaghetti-code and dysfunctional on-premise technologies that came with the package.
In short, how can you outsource a people, process and technology nightmare and expect someone to replicate it and run it for less? Not only that, when the function being outsourced screams for the hills to resist this corporate colonoscopy with a stubbornness not seen since Custer’s Last Stand, it’s gonna go south… and fast.
Hence, it was hardly a surprise when Hewitt (pre-Aon) got skewered by its purchase of Exult, while Convergys almost died of HR-poisoning before offloading its HRO beast business to NGA. And we bet you’ve all long forgotten the aborted attempts of benefits specialists Fidelity and Mercer, which got the hell out of Dodge at the first sight of a “ring-fenced contract”. Meanwhile, the likes of perennial outsourcers HP (EDS), Accenture, IBM and Xerox (ACS) quickly got queasy with that they saw, opting to hang around on the off-chance something tasty came along, without sinking vast wads of cash into a function that was simply horrible to outsource.
So, what’s happened to multi-process HRO in today’s slightly-smarter BPO world? Who survived the early HRO ordeal to develop solutions that are profitable and functioning? And how have the Indian providers fared, with their own flavor of operational discipline?
So without further ado, let’s ask HfS’ lead analyst for HR and talent research and report author, Christa Degnan Manning, what in the world is happening in the HRO universe after conducting the most comprehensive study of multi-process HR providers and buyers to-date…
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Christa – before we even get into the details of this Blueprint Report, the first thing that jumps out is the fact that the provider performance is a tad “mediocre”. What’s going on here?
It’s simple really – the employee experience still sucks! Given the significant dynamics of the changing global workforce and workplace, HfS has seen an opportunity to revisit this space and to redefine it from the consumer of services point of view – the employee. Too often in the quest for administrative cost savings and automation in the enterprise, the worker has been left out of the equation and HfS research shows this has had a significant impact on employee engagement, productivity, and retention.
So what is this report all about? Why is this the first Blueprint we are doing in HR?
The genesis of this study – taking this research job at HfS really – was that the typical state of employee support services today in large and small companies alike is abysmal. I have experienced it first hand, my friends have, even people at some of the large vendors we cover admit they feel similar frustrations as a worker – too many different self-service apps, help-desk service tickets, call center numbers, IVR (interactive voice response) rat holes – it is not a joke that the biggest advancement in HR for most firms is single sign on.
I make the analogy in the report that if the typical corporate HR service portfolio today was a retailer, it would be a dead-end discount strip mall with confusing, competing storefronts short on staff where people dread going. Just as companies that outsourced key customer support functions purely for cost reasons have learned from the error of their ways, I think the best businesses are going to realize that the employee experience is just as important as the customer experience. Maybe even more so, because the employee ultimately affects the customer experience.
So what we wanted to do was redefine “multi-process HRO” – a meaningless term really – in terms of workforce support services and what the worker wants. From the workforce research we have done, we know that people today want to be doing meaningful work, collaborating with colleagues, and rewarded for their best effforts – so we have reframed the consumption of services from a linear “hire to retire” model – (seriously, who knows anyone who has been hired and retired from the same firm these days? Except IBM?) To a more non-linear, day to day work day experience of the employee: What am I doing? Why am I doing it? Which gets to the whole area around rewards, remuneration, and recognition – what is my basic motivation for working here?
We think this sets the foundation for HR service delivery, starting with the most fundamental stuff, payroll, benefits, which absolutely require a consistent set of core data and have to be gotten right or all the talk of talent management, career development, and employee engagement is pointless. But we also included other monetary and non-monetary rewards such as tuition assistance, social media recognition, and even incentive travel as pure compensation budgets are strapped or capped and companies need to look at new ways to motivate workers.
So what did we find?
In 2014 multi-process HRO (excluding recruitment and learning outsourcing) will hit $36 billion, growing at a 5% clip and expected to grow closer to 6% for the next 4 years. I’d say this market is virtually untapped, though, when you consider the upside from truly transforming into workforce enablement services, which also takes into account collaboration, mobility, and performance management areas.
But, for now, to some extent we are using binoculars to look in a rear view mirror. While HfS research has shown that enterprises want to see more innovation and execution excellence from outsourcing providers across the board, this multi-tower HRO market today is largely a reflection of cost-cutting deals cut five to ten years ago.
That being said, given the competitive workforce and workplace dynamics today, companies that want to differentiate themselves can no longer accept simply not screwing up paying workers – they need to embrace new ways of engaging and empowering them to get back to the real business of serving the customer. The HRO service providers that have recognized this are the actors that dominate the stage and are in the prime position to take on more higher value BPO work around workforce analytics, planning, sourcing, and development over time as well.
Who is in the Winner’s Circle and High Performers categories and Why?
HRO specialists dominated, but the upstart competition is fierce and hungry. Amongst the top performers, the companies that have been doing payroll and benefits as their core businesses were recognized (ADP, Aon Hewitt, Ceridian) as well as those that have particular discipline in HR outsourcing (NGA HR, Neeyamo, Xerox).
Winner’s Circle:
NGA HR — proactive, flexible, global, partnership culture
Aon Hewitt — total benefits approach, consulting capabilities for communications and change
However, several traditional and niche Indian-headquartered services firms, such as Wipro, Neeyamo and WNS, are aggressively investing and targeting workforce services as their next growth platform and counting on their traditional strengths of cost-efficiency, process excellence, and continuous improvement to win business and expand footprint with major enterprises worldwide. Buyers are taking notice and will definitely put these players in the mix to put pressure on their incumbents as many early HRO deals come up for renewal.
Of note, some of the High Performers have virtually no market share, but you know what? Neither did Google or Zappos or Netflix or any disruptive player in any market. In fact, whole books like the Innovator’s Dilemma have been written that in order to be bold and actually disrupt a market you have to come from the outside and start fresh with a whole new take. They are coming from related disciplines like ITO which in many cases is a workforce support service in and of itself. So I’d say we are at an inflection point in the industry. What used to be known as multi-process HRO, is now workforce services, and a different set of rules for success are being written.
What about some of the earlier leaders like HP, Xerox and IBM? Are they still in the game, or just seeing out their contracts?
Early pioneers/players HP, Xerox, and IBM all suffered in general from the fact their customers are reaping the seeds sown of first generation outsourcing based on labor arbitrage and cost reduction. While they can speak to a refreshed employee experience vision and offering set, by and large it remains to be seen if they can make the transition.
What about the role of technology here? What did you find from that perspective?
Good question. Many say the early mega multi-tower HRO deals went wrong because the systems were not in place to make the engagements scale effectively and I think the industry has learned its lesson. While there are still plenty of deals where the enterprise retains responsibility for the core HRIS (human resources information system), a number of vendors are now including technology, notably SaaS applications such as Dayforce, Ramco, and Workday as key enablers of the deals. However, these personnel data systems only go so far, and the leading HRO players have invested in their own technology wrappers and enablers such as portals and multi-channel communications platforms to provide a more streamlined and seamless user experience.
Software as a service is a real game changer though. The popularity of SaaS has helped HRO mature as companies learn to accept technology as an enabler of value in outsourcing as well as standardization. SaaS is also key to the market as companies consider giving additional work to incumbent information technology (IT) service providers they have good relationships with — they already know their industries and businesses. Providers doing SaaS implementations, collaboration, mobility, and analytics support are in prime position to extend these into workforce productivity services more broadly, particularly if they have global and on/nearshore footprints for contact center support.
So what are the key take aways?
Christa Degnan Manning is SVP, Workforce and Talent Strategies at HfS (Click for bio)
There can’t be better business processes suited for outsourcing than payroll and benefits administration, but everyone has to take a more strategic view of it, enterprises understanding what motivates their workforces and the providers leading the way on the “how” which is serving the employee, not HR or procurement ends of themselves. A lot of HR and even HRO folks seem to be beaten down that HRO can never really come together to delight workers, but the people that believe in the employee experience and are energized to deliver good service – because at the end of the day HR is a service – are the ones that will be differentiated in their roles and their firms in the marketplace.
In the meantime, we offer the following advice:
End-to-end doesn’t exist. When one assesses the global breadth and depth of capabilities across the employee’s experience of pay, benefits, and other rewards from HRO vendors today, there is a wide range of support offerings. In speaking with vendors, it seems models often opportunistically developed to meet individual client’s needs so they don’t match the same footprint or needs of another consistently worldwide just yet. So companies should consider the areas where they have the biggest pain points or opportunities for improvement and evaluate vendors current and future product strategy against their own workforce objectives and reward maturity.
Look under the covers. More than one vendor indicated it is the subcontracted provider of another vendor in certain areas, despite that vendor selling a global solution. In HfS’s mind, this is acceptable if not inevitable, as long as the prime HRO providers are ultimately accountable for total global outcomes.
People help people. Despite or perhaps because of the advances in technology and the systems integration role that HRO providers are playing, buyers expressed particular appreciation for the staff of the HRO partner – both account management and operational teams – for making the difference in vendor performance. Buyers acknowledged that everything can not be seamless and integrated but the HRO providers that are responsive and accountable when exceptions arise or things go wrong are the ones that earned the highest marks.
The best is still not great. While the Blueprint methodology identifies the best players in the “Winners’ Circle” and those following as “High Performers,” even these players did not score high marks consistently across the board nor across all reference customers. Also of note, while the buyers of HRO services often praised their provider, there was frequent acknowledgement that the employee consumers of the services would not likely score the vendor as highly. This reflects the shift going on in the BPO marketplace to get beyond adequate in general and we predict the bar will be raised on service providers to meet consumer-grade retail shopping expectations of service across HRO.
Thanks, Christa, for an excellent synopsis of the new Blueprint.
HfS subscribers can click here to download their copy of the 2014 Multi-tower HR Outsourcing Blueprint Report
We’re very shortly going to reveal the incredible findings (and they really are) of our new Technology in BPO study, and one of the key areas that jumps out at us is the rising importance of automation as a core value-driver for BPO clients.
As organizations seek to “cross the chasm” from a legacy labor arbitrage / staff augmentation model of business service delivery to a technology-enabled service experience that isn’t completely dependent on adding extra bodies to scale a service, the most immediate measure is to map out simple process workflows that humans are doing, and develop them in a software program using a process automation tool (and yes, I am trying to avoid using the term “robot” for now…).
Suddenly BPO clients discover, for example, that as sales of a particular product increase, they can scale their order management capability by replicating many of the human tasks processing those orders, as opposed to simply throwing more bodies at the problem. Many service providers will not be happy as this may well hurt their model of earning money through the supply of additional labor, but smart clients are already wisening up to the fact they need to get out of the FTE game. So, we asked HfS’ Charles Sutherland to share his views on what is really happening with process automation and why is shouldn’t be confused with technology automation theories of yesteryear…
We’ve seen it all before: IT suites, BPM Suites, customer service management tools etc. so how is this any different?
I came across a blog on automation by Somok Roy at ISG entitled “Lets Be Clear: Automation Is Not New Technology“. I couldn’t be more in agreement with the title, and its premise that the term “automation” is imprecise and a source of confusion. In fact, the blog is a case study in how automation can be misunderstood when approached as a lesson in IT history and not as a means to solve a set of current business problems.
So in the spirit of collegiality, I thought it would be useful to share some perspectives on why process automation is more than a surge of breathless marketing and less than the arrival of an entirely new outsourcing paradigm, but still a solution to many business problems. That’s why it is resonating with every enterprise client and every service provider we talk to today – and why two current market surveys we have in the field capture interest in automation as a solution to current business problems that is second only to analytics:
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My take is that all these other forms of automation have certainly played a role in how IT and business processes are delivered inside clients and in service providers, but in many cases those tools are too hard to implement, over-engineered, too costly and – more often than not – fail to live up to their promise. If they were so great, we wouldn’t have had the creation of the “lights-on-outsourcing” industry that we have today or at least certainly not at the scale it has reached. Instead, we’ve had an FTE-dependent model for service delivery that, for a great many enterprises (and service providers) is losing its viability, as ongoing productivity gains prove harder to squeeze out of the status quo and COLA driven increases reduce the business benefits for all.
Process automation is new in that it doesn’t try to be as transformative as BPM Suites or as dependent on deep tech skills as past IT infrastructure automation tools. Instead, these new breed of tools, such as Blue Prism, IPSoft and UiPath, are meant to be used by business analysts working on small-to-medium sized projects so that they can replicate the process done today by a human, by setting up a software-based equivalent instead. When that occurs, it becomes possible to reduce costs further, pilot additional new productivity improvements and make these changes quickly, whether in the enterprise location and or in a service providers delivery center. To me, actually achieving process automation quickly, with lower net costs and without the overhead of a broad transformative effort seems like something new. That their interfaces are user friendly and you can readily apply them, even in the sort of Citrix-based processing environments many BPOs use today, also suggests that they are something new. I’m not a developer by any means and so when I can use them to replicate simple processes with only a minimal level of training, then that also suggests that there might be something new in this as well.
The Bottom-line: Automation projects can provide those first baby-steps away from the FTE-model
They are a step in the journey, especially for enterprises that aren’t in a position to swap out their enterprise applications, but are looking for something more than they can achieve by merely hurling incremental labor at a process.
Charles Sutherland (pictured left) is Executive Vice President, Research at HfS
Now here is where the breathlessness has occurred so far…. these tools don’t eliminate the value of all the other automation capabilities out there.
So, if you step back and don’t try to confuse this emerging capability in process automation with other forms of the term covering BPM, analytics and infrastructure monitoring, then maybe, just maybe it will be a little clearer why this is an important trend in business services delivery in 2014+.
The insurance BPO market will hit $5 billion this year, growing at a 5% clip and has proven to be one of the select verticals truly embracing technology enabled BPO capability to support operations. The insurance market has become incredibly competitive in recent years, with the differentiation across insurers moving to customer service and brand perception, once price points are relatively similar across the reputable firms.
In short, these insurance firms need to invest every cent they can in their advertising intensity and customer facing capability to keep ahead in this market. And with advertising costs becoming so immense for the firms operating on wafer thin margins for many insurance products, they have no choice but to find cost efficiencies from elsewhere in the organization to pay for it all, if they are really going to save you 15% or more in a 15 minute phone call…
For the large insurers, many could go out of business if it wasn’t for the savings and efficiencies generated by maturing BPO delivery models. So let’s take a look at the industry’s first meaningful analysis of the innovation and execution capabilities of all the leading service providers:
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HfS has evaluated the innovation and execution capabilities of service providers catering to life and annuities (L&A) and property and casualty (P&C) insurers, brokers, reinsurers and others (excluding healthcare). We asked Research Director leading the blueprint initiative, Reetika Joshi, to elaborate further on the results of the exhaustive study.
Reetika, what are the key challenges facing insurers today?
The key challenges global insurers in our study face are regulatory compliance, member retention, reducing total cost to service, integration efforts for aggressive acquisitions, multi-line agency management, profitable growth in new markets (esp. for L&A), pricing pressure (esp. for P&C) and most importantly, risk management. Our conversations with these insurers and their service providers, along with exhaustive secondary research reveal the changing mindset of buyers in this industry. Insurance clients’ outsourcing motivations are slowly starting to change, going from task outsourcing and optimization to impacting total cost to serve, cost of compliance, organization level efficiency and insight generation – in line with core organizational challenges.
How are service providers adding value beyond basic low cost staff augmentation?
Clients are increasingly looking to their service providers to help them with these business outcomes (part of what HfS calls “progressive outsourcing”) which goes beyond traditional, transactional “lights-on outsourcing”. Insurers are continuing to expand the scope of their processes with service providers to include more high-value, complex and core functions such as actuarial and underwriting support, agency network optimization and analytics across areas such as new product, risk and claims. However, service provider capabilities in these service areas are not consistent. Clients are more willing to entrust execution of complex processes to market leading service providers. Further, the delay in decision making around closed block administration outsourcing is starting to give way to a host of new contracts in the last two years. North American insurers are the source for the vast majority of these deals since 2011.
Our research sizes the global insurance BPO market at $4.72 billion in 2013, growing at a CAGR of 4.6% to reach $6.19 billion in 2018. For the scope of this study, we have excluded the traditional third party administrator (TPA)/loss adjustment segments as we believe the competitive dynamics of the outsourcing provider group is unique.
So how did they winners shake out?
The Winner’s Circle Features a Mix of Provider Groups and Strategies. The leaders in our analysis represent a diverse mix of strategies and strengths:
The leaders in our analysis represent a diverse mix of strategies and strengths:
Accenture with dominance in Europe and strengths in catering to both P&C and L&A segments
IBM which exclusively plays in the North American and Asian L&A market
EXL and Genpact which have a mix of P&C and L&A coverage, tending towards North American clients
TCS which has a stronghold in the UK L&A market through its subsidiary Diligenta
These service providers have robust global delivery capabilities, demonstrated expertise across the core insurance BPO services value chain, have exceptional account management and client engagement efforts. Accenture, EXL, Genpact, IBM and TCS have all made significant investments in insurance technology to offer integrated technology and business process solutions to clients. Further, they are committed to future investments in the insurance vertical and delivering value beyond cost by consistently engaging with their customers on vertical-specific innovations. Their forward-thinking vision for the future scope of insurance BPO has helped clients realize benefits from the use of emerging technologies, continuous improvements efforts and regulatory compliance vigilance. We recognize Accenture, Genpact and IBM for leading overall Execution, while Accenture, EXL and Genpact lead Innovation in global insurance BPO.
High Performers Represent Strong Competition. High Performing service providers including Capita, Cognizant, CSC, Infosys, Wipro, WNS and Xchanging have strong execution skills and existing market share. Our study suggests that of this group, Capita, Cognizant, Infosys and WNS will prove to be strong competitors to the Winner’s Circle in the medium term. This is due to their significant commitments to the insurance vertical and investments in innovation capabilities that require time to mature.
And finally, Reetika, what are the key takeaways?
» Most buyers are unimpressed with technology enablers in use today – time to invest in real “value add”. Our primary research with a diverse group of insurers across geographies reveals that most buyers are ambivalent about the performance of technology enablers embedded in their BPO operations today (including reporting dashboards and other tool kits). Bar a couple outperformers, service providers need to address client expectations and improve the standard technology enablers provided to their insurance BPO clients.
» Buyers most swayed by talent management – at the operations level as well as account management. Insurers are highly vocal about how critical the talent brought in by service providers is to client satisfaction. Account managers are one such layer where buyers appreciate prior insurance industry experience apart from account management skills. Further, the industry knowledge and local domain expertise of BPO teams is highly valued by clients, and cited as one of the most important reasons for client satisfaction.
» Service providers of all categories have upped their game on industry knowledge – differentiation will now come from niches. We found numerous examples of efforts by service providers to impact outcomes through industry-specific solutions. Clients have consistently attested to their service providers’ level of knowledge on domain-specific processes including complex service areas, regulatory compliance and reporting knowledge and nuances of different market segments and niches. What this implies is that insurance industry knowledge is now becoming the norm, and will no longer be a source of differentiation in and of itself. Service providers will need to dig deeper into their niches within different market segments and geographic markets to push the envelope on further differentiation.
Reetika Joshi is HfS Research Director, Industry BPO and Analytics Strategies (click for bio)
» Platform play is emerging as one of the strongest engagement models and differentiating strategy. Service providers have seen the most prominent uptake in business platform adoption from the insurance industry. 54% of the deals analyzed for this study featured modern business platforms proprietary to providers. Insurers are accessing new sources of cost reduction, process consolidation and standardization and technology modernization through platform based BPO engagements. Service providers are in turn owning larger parts of clients’ processes, and creating larger and longer lasting relationships (e.g. while average contract length is 7 years, platform based BPO engagements average at 8.2 years)
» Buyers are yet to see a proactive and consistent approach to innovation from their service providers. Our research finds that buyers and service providers have not yet tapped collaboration opportunities for disruptive innovation. Most innovation effected so far has had incremental operational and financial benefits for insurers.
» Regulatory support and compliance is top of mind for both buyers and service providers. Both clients and service providers are very aware of the possibilities of working together to improve regulatory compliance and support. Even if it doesn’t translate into actual business right now for all insurers, this is definitely an area where we see an increased scope for work in the near future.
Thanks, Reetika, for an excellent synopsis of the new blueprint.
HfS subscribers can click here to download their copy of the 2014 Insurance BPO Blueprint Report
And after all these years of horsing with sourcing, it’s finally OUR YEAR! Yes – this is the year of the horse, where HfS is going to achieve all of its wildest ambitions 🙂
Just when you thought it was safe to turn on your PC… then HfS’ webcast roller-coaster returns for another hour of undiluted words and data…
Renewed economic growth, the onset of the digital enterprise, a rebounding outsourcing market and the rise of process robots. That’s what we’re having to contend with in 2014, so we’ve dredged up a plethora of experts to help us understand how this will impact business and IT services dynamics, operations frameworks and investment behavior across the world – and what this all means to the impact on talent and the extended enterprise.
Have you ever tried to dissect the assortment of (sometimes absurd) characters in your professional life with whom you have to invest so much of your time? Well now you don’t have to, because here they all are in their naked glory…
The haters. There are people out there who will always despise and resent you, no matter how hard you try. Just ignore them… if you can. They’re jealous.
The skin-crawlers. There are people you will just despise, no matter how hard you try to like them. Keep trying… never give up, one day you might find something you like about them… unlikely, but you never know. However, once your skin crawls, it usually stays crawling.
The irritants. There are people who will just irritate you. There is no remedy, just suck it up. Try to think about how you deal with the in-laws…
The zombies. There are people who somehow always seem to be employed, despite being completely and utterly unemployable. Just remember, they will keep finding some idiot to give them a job. It’s just reality… deal with it. God invented zombie companies to hire zombie staff…
The upwardly immobiles. There are some people who always seem to get overlooked for promotion, despite the fact they are the only person in that company who does any work and has half a brain. Just keep dealing with them and ccing their management to give them recognition.
The rejections. There are some people whom you really admire and respect, but just don’t seem to feel the same about you. They probably think you’re an idiot, so just move on – they just don’t see your greatness through their mental fog. Remember high-school and the cool kids who just didn’t want to hang out with you…
The hate-hates. There are some people whom you despise, who also (probably) despise you. Might as well pretend to be friends and have painful conversations where you pretend to like each other… keep your enemies closer, and all that.
The drama queens. There are some people who are just a nightmare to deal with – always blowing up with every little activity always becoming a major issue. Just keep practicing that egg-shell walking… this one ain’t going to change anytime soon.
The walking dead. There are some people whom you have no idea what it is they actually do all day. They just exist. They will always exist. Be nice and never probe too deeply on the specifics…
The whiners. There are some people who just go on and on about how busy and over-worked they are all the time – even though you’re not exactly sure doing what. But they somehow manage to spend an awfully large amount of time complaining about their inhumane workload . Just sympathize with how hard they have it and let them know you’re always here to help them… but you have to run, as you “don’t want to take up any more of their precious time…”
The job-hoppers. How about those peeps who are always looking for their next gig as their current job just sucks big-time (like their previous six). Like, what do they expect to be different each time they jump ship? Haven’t they realized that they’re going to be somebody’s b***h wherever they go? Sadly, their new companies are becoming increasingly obscure and the hopping time-spans are decreasing. Just avoid being a reference… you’ll become someone’s enemy pretty quickly!
The “refuse to find a new line of work” people. The are more blogs on HR than any other business topic, because people in the HR industry don’t have anything else to do (or the work is so boring, they just avoid doing it). Why spend all your time writing how fxxxxxd-up your function is than actually doing something about it? No remedy for this, unfortunately. We’ll no doubt get deluged with thousands more blogs about how messed up HR is in 2014… or, heaven forbid, some of these people will actually find jobs in other functions where they can actually do some work.
The social media zombies. A more recent creation of colleague, but one with a high-irritant factor – those people who seem to be endlessly on Facebook, LinkedIn, Twitter, Quora, SlideShare and lord-knows-what-else every minute of every day. What the xxxx do these these people do all day, or are they still living on the memory of the work they used to do pre-2007? Just don’t “like” or re-tweet any of their mindless updates, if you want to avoid them electronically stalking you for the next 20 years…
True corporate love. And finally. there still exists a small number of people in your work environment whom you admire, who feels the same about you. Go see them, have dinner, take in a movie, it’s a rare, but pleasurable experience!
Having spent more than a decade in traditional analyst houses before starting a boutique research firm over four years ago, I’ve genuinely seen both sides of the coin when it comes to “pay-to-play” shenanigans with analysts.
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