Naomi Bloom discusses the new breed of SaaS-savvy HRO providers
My little rant last week (click here) about HRO and SaaS seemed to ruffle a few feathers. It’s clear, without the benefit of significant labor arbitrage, the advent of serious SaaS solutions is going to (and already is in some quarters) bulldoze the entire way enterprises access business services. None more so than HRO, which has been so reliant on onshore processing centers to deliver low-value administrative work for clients – especially those suffering dysfunctional / non-existent technology. I wanted to share a contribution to the discussion from matriarch of HR technology, Naomi Bloom, who expands on these points and provides a couple of excellent example of where the HR Cloud revolution is already well under way….
Phil, this is a great topic with lots of threads worthy of comment, but I’ll focus on just two.
First, not only does the new breed of SaaS provide a better foundation for delivering a wide range of HR capabilities directly to the real customers, from manager and members of the workforce to applicants and vendors of contingent workers, but the best of the new SaaS offerings automate HRM so much more fully that the amount of manual work, the amount of HRO needed, is reduced substantially. Except in the heavily regulated areas, like benefits and payroll, great SaaS should eat a lot of HRO providers for lunch. Call centers? We shouldn’t need them at anywhere near the level that exists today for many large organizations. HRO-provided self-service? Gone! But that doesn’t mean that there isn’t work to do with SaaS; it’s just very different work, which takes me to my second point.
Second, with near continuous attention to turning on entirely new functionality as frequent releases deliver it or business conditions warrant its use in an already present release or even when changes in business require reconfiguration/changes to existing functionality, customers need clever business analysts with deep business and product knowledge to ensure that such work gets done well and quickly. But these are still scarce KSAOCs in our world, especially as regards understanding the growing number of models-based, metadata-driven products which old think analysts struggle to understand. What’s needed to support customers here is a very new style of HRO, which is much more business analyst services than call center/manual processing services.
One example, OneSource Virtual, is such a new style HRO provider focused entirely on Workday’s customer base for whom they provide not only a wide range of initial and ongoing implementation services but also a variety of ongoing back office payroll and benefits administration outsourcing services. Another strong example is Ultimate Software, which just bought one of its partners, which provided similar services focused entirely on Ultipro’s customer base, to offer some of these same services in-house. These are just examples as you and I know that there are many such offerings in various stages from planning to real.
It will be fascinating to see if the larger SIs and/or HRO providers will be able to craft just the right mix of quality and cost-effectiveness to be successful in delivering much smaller, less labor-intensive and more tool-based implementation and post-implementation HR services.
How much longer will we be staring into the HR abyss?
My attention was momentarily side-tracked by an interesting blog penned by HR blogger-cum-consultant Andy Spence bearing the dramatic title “Will HR in the Cloud kill HR Outsourcing“. Oh yay – I like titles like that…
Andy raises some interesting points and cites some good examples and other analyst data sources, namely:
HR Buyers are cautious, ‘letting the dust settle’ on SaaS providers as they review their current HR Operating Models and future needs.
The rise and rise of Workday has actually breathed life into the HRO market – NGA HR, IBM and AON Hewitt are implementing or have HRO contracts using Workday software.
HRO Buyers want both SaaS and services together, however are not willing to lose portal, chat, contact centre solutions that have been developed over last 10 years. Expect HRO providers to develop solutions in this space.
There is a 15-20% HRO penetration level for orgs with >10,000 employees and there has been more new buyers in last 8 months than previous 2 or 3 years
Why the successful advent of HR Cloud solutions breathes new life into the multi-process HRO corpse
Having cut my teeth on HRO in the early-mid 2000s, I became increasingly frustrated with the market because you couldn’t make the numbers work moving dysfunctional processes to a third party provider which – more often than not – didn’t have much of an integrated technology platform to help standardize process and workflow. My good friend and HfS board member, Naomi Bloom, was at pains to point out that multi-process HRO was fundamentally flawed as you can’t improve HR processes if the technology underbelly was a steaming pile of rubbish.
So I watched the market tank into insignificance while the likes of Fidelity, Mercer, Convergys, IBM, Accenture and several others made subtle (and some not-so-subtle) exits from the space. I also watched the admirable efforts of SAP and Oracle trying to encourage everyone to do HRO on their on-premise software packages, but struggle to do much more than paint pretty pictures around payroll deals that weren’t really much more than… er… payroll.
Sadly, everyone who was counting of multi-process HRO being successful quietly slipped away, either to focus on discreet HR services markets like staffing, benefits admin or payroll, or slinking off into adjacent growth BPO markets like F&A, procurement or LPO.
Let’s face facts here, people. When God was dishing out the technology dollars, poor old HR was always loitering at the back of the queue. We’ve grown up amidst hoards of enterprises suffering from multiple instances of ERP, far too many payrolls, benefits providers, staffing firms, complete black holes of data on their workforces being mismanaged by understaffed and under-skilled HR departments. So many firms have been desperate to make HR less cumbersome – they’ve tried to outsource it, they’ve tried looking at terrible software products that are overpriced, hard to integrate and built on rules-based engines that add little-to-no-value. They’ve made HR the whipping boy for everything dysfunctional and low value about an enterprise.
Then slowly, but surely, HR has gone Cloud crazy.
It’s completely changing the way companies can/are/should be approaching HR. The industry is suddenly awash with enterprises rolling out the likes of Workday – and seeking providers which can not only implement the product, but also help with the HR transformation, support and processing that comes along with the purchase. In short, rolling out a true Cloud-based HR solution completely changes the HR dysfunction game. It brings together the app and the process in a way we have never experienced and enables organizations to kill off the obsolete processes that add zero-to-negative value – and helps them re-set and rethink how they manage their workforces.
Suddenly, you don’t need armies of HR admin weenies to pester staff to fill out forms and jump through their hoops – as so much of this is now automated and standardized. And when there are providers (we hope) prepared to step up to the plate to host your Cloud-based HR nirvana, you can completely rethink how to refocus how you manage your staff. Suddenly, line of business managers can access better data to understand how to staff their functions better and manage the performance of their staff in a more relevant value-add manner. The value of HR – of acquiring, developing, motivating and managing staff, is now able to permeate the business managers outside of the dreaded HR department because their systems of record are suddenly functional and more relevant.
The Bottom-line: Cloud is helping clean out the detritus of everything that was wrong with HR
Dysfunctional process and dysfunctional technology created a dysfunctional function that attracted low-value individuals to paper over the cracks. The emergence of more affordable Cloud based solutions is finally – after decades of disarray – making it possible for firms to stop staring into the HR abyss and start getting functional again. And the HROs who want to do more end-to-end HR services finally have a backbone upon which to service clients. Yes, the dust needs to settle on the SaaS products and the capabilities of the new breed of HROs, but the HR Cloud revolution seems to be taking root and threatening to completely revamp how today’s enterprises can – and should – manage their workforces.
Well, that was quite the week! Thanks to all of you who made the effort be part of a great December networking escapade in the Big Apple. I can’t remember such a large group of outsourcing powerbrokers under a single roof…
Recessions are good times for business leaders who love to focus on containing costs. Saving money is the name of the game, and executives who achieve this for their organizations become heroes.
Struggling to manage your extended enterprise? Then click here to course correct
However, times of recovery are markedly different. The onus shifts from cost to value; from defense to attack; from conservative to bold; from tactical to strategic; from efficiency to innovation. And, with the current recovery, perhaps most significantly, the very nature of a company’s cost base is shifting from inside to outside of the organization.
For decades, enterprise executives focused on reducing costs as the key to unlocking an organization’s profitability. This often began with an emphasis on reducing expenditures around SG&A. Activities that fell under this area received derogatory descriptions such as “back-office” and “non-core.” In time, the application of these terms spread across the entire business and any function tagged as such was prime for outsourcing. As a result, many parts of the enterprise were increasingly outsourced.
At the same time, forward-looking businesses began to adopt new organizational structures that were developed to foster lean operations. Rather than build out functional areas across the value chain, companies picked a few key areas to focus on and used partners to deliver the rest. Car manufacturers stopped building components and focused on design and assembly. Hotel chains stopped owning and operating buildings and focused on building and maintaining a brand. Businesses in nearly every industry adopted models that moved significant functional elements to a third party.
Consequently, many of today’s companies look like shells of their former behemoth selves. Marketers now rely on outside agencies and analytics providers to improve their own customer insight and advertising spend, operations teams rely on outsourcing and technology to eliminate labor costs, and IT teams rely on cloud-enabled SaaS platforms instead of an army of programmers occupying the lower floors. For any area of an enterprise’s P&L, a range of suppliers are ready and willing to perform the same tasks faster, cheaper, and better. Yesterday’s pay slips have become today’s supplier invoices.
Want to learn more? Then download our new report “Why so many cost-obsessed CEOs will fail if they ignore their supplier management capabilities”, where we hone in on the following:
The shell game: today’s successful enterprises are leaner versions of their former selves
The goal: leverage external relationships for broader business value
How to shift from tactical sourcing and procurement to a capable strategic team
The bottom line: the business models of the future require better leverage of your supply base’s assets and operational flexibility
Feel free to drop me a line with any questions on the topic,
As we gather the largest-ever superstar assemblage of sourcing leaders in New York this week, let’s have a look back at how we got here as an industry… and how HfS has evolved from this ramshackle little outfit into such a glitzy professional high-end corporation (ahem)… oh – and crank up the volume 🙂
Leila Janah is Founder and CEO of non-profit social sourcing organization, Samasource (click for bio)
One person we are very excited to be addressing the Blueprint 3.0 Sessions next week is Leila Janah, the dynamic Founder and CEO of non-profit social sourcing firm Samasource.
Leila’s work is focused on providing training and computer-based work to women, youth, and refugees living in poverty, while providing Internet-enabled outsourcing services to paying clients. Samasource recruits workers from low-income, underserved communities across the world. We managed to catch up with Leila to learn more about her, and what we can expect to hear from her address next week…
Phil Fersht (HfS): Leila, we are very excited at HfS that you will be coming to our event and delivering our evening keynote address. Before we get into that, can you give us a little bit of information on your background?
Leila Janah (Samasource): Sure, Phil. I started Samasource 5 years ago. Before that I studied international economic development at Harvard as an undergrad and did a lot of work in the NGO world after going to Africa when I was 17 to do volunteer work. I worked with Ashoka and the World Bank and just became frustrated with the traditional approaches to poverty alleviation, which saw poor people as helpless. What I saw while I was there was how much educated human talent was emerging and could be tapped to contribute to the global economy and would contribute to wages that would help to alleviate poverty. Over time, I thought through that model further and became a management consultant at Katzenbach Partners, which was later acquired by Booz & Company. My first consulting assignment was to help take a large Indian Outsourcing firm public. Through that I got a lot of exposure to the industry and I learned the dynamics of outsourcing. Perhaps the most powerful thing that I learned was that thanks to the internet, a back-office job can be done pretty much anywhere. This frees us of the traditional constraints of capitalism, which is that money can move freely across borders but people cannot. That has profound implications for the ½ of the world’s population that lives off of less than $4 a day. This population is increasingly educated and capable of doing knowledge work. So it was this background that led me to found Samasource. I had a number of experiences following my undergraduate career, both through the World Bank and Ashoka , but also through some other NGO’s that really led me down this path.
Phil: You are working across a number of economically challenged nations including Haiti, parts of Africa, and even parts of rural America. Can you tell us more about your global reach and where you are engaging with your clients today?
Leila: Sure, and I think as I talk about this, the thing to consider is that the bulk of people living in extreme poverty now live in middle income countries. One of the myths about poverty is that poor nations have most of the world’s impoverished population, yet what we are finding increasingly is because of income inequality, those poor people reside in places like India, China, and Brazil; places that are not seen as the most destitute areas. So that is where Samasource does most of its work. We work in India, Kenya, Uganda, Haiti, have a small presence in Ghana and we launched a new program in the US called SamaUSA, which trains low-income Americans to do online work.
Phil: Leila, can you give us some examples of some of the types of projects that you’ve taken on across the world for your clients and how they are developing as you evolve the company?
Leila: We work with Google, Wal-Mart, and Getty Images. The reach of these three projects is really astounding. For Getty Images we are doing a large-scale image tagging project. At the Blueprint Sessions, I will start with a video that outlines this program. We have workers at locations disparate as Northern India, where we have an all-women’s center in a conservative Muslim community where women are not ordinarily allowed to work. Additionally we have a center in rural northern Uganda, which is an area that had previously been in the middle of a massive civil war that had tens of thousands of children abducted as child soldiers and some of those former child soldiers are now working on that same project for Getty. The project involves tagging celebrity images in a way that machines cannot yet do. We have human workers identifying images with celebrities and then tagging the celebrities. The same images then get pulled into national and international media that requires celebrity images. It is a very exciting project for workers because their output is immediately seen by people all over the world.
Another example is what we do for Wal-Mart.com, which is a growing need among e-commerce companies. That work involves helping to improve the quality of the e-commerce product catalogue. In this case we have English speaking workers who come together and write descriptions of products on Wal-Mart’s website. What’s remarkable about this project is that people who don’t have a lot of exposure to Western products, but are interested in them because of their interest in Western media, are very passionate about learning about these products. So you will find a worker in Kampala who is able to write a very accurate and thoughtful description of the product that has never before been seen in Uganda. Nonetheless, the quality of the descriptions remains high because there is such a strong motivation to do this work well.
Phil: When you look at the broad commercial outsourcing industry today, which is so centric around India, the Philippines, Central and Eastern Europe, what is your take on where all of that is headed? Do you feel that there is a race to the lowest common denominator or do you feel that it is an industry that is headed in the right direction?
Leila: I do see some things that are concerning. I see the consistent production rate in the price that companies are willing to pay for these services, which has a lot of implications for workers in these countries. At the same time, I think that the constant price pressure forces us to look beyond the current locations for outsourcing and that can be a good thing for workers in poor locations. What might be less than a livable wage in one country could be a huge boon for a worker in another. So, that can be good. The critical concern that I have is that the wages that workers are paid are appropriate and living wages given their context. That is not currently a huge priority for the industry, but it really should be.
Phil: You are going to meet a lot of these folks who are big customers of outsourcing and suppliers of outsourcing at the Blueprint 3.0 event in December. What do you plan to talk about at the event?
Leila: First, I think I will talk about the evolution of corporate social responsibility. It used to be something that companies would do to check a box and to show that they had been responsible and then could move on. I think what we are seeing now is this hunger among employees at big companies to feel like their company is not just checking boxes but is having a positive impact on the world. The new generation of people entering these companies are young people who are hungry for change and are less interested in just taking home a big paycheck. They want to see that the organizations that they are a part of are genuinely improving the world. I think that Impact Sourcing is one trend that goes far beyond CSR and cuts across so many aspects of the business, especially in the supply chain. It is a very real way for a company to make a social impact that goes far beyond just having an employee volunteer day or giving some money to a charity. This is helping people in a way that is completely integrated with the company’s bottom line and supply chain and that is the real way to create change and to evolve capitalism from within. I will talk about the implications of that strategy and what that means for the field of poverty alleviation. In this field, which is dominated by non-profits, we are finally starting to come around to the idea that corporations have far more capital than non-profits do to solve some of these big problems. Essentially, what we do, is we take money from Google and Wal-Mart and we get it into the hands of poor people in rural Uganda. Traditionally that would only be done by a development agency and now I think it is really cool that it is being done by a big corporation. So we need more corporations doing that and I think the other piece of it is ensuring that once those relationships are established, that they continue to work for the benefit of people. Unfortunately, in the wake of the Bangladesh factory fire, I think there is growing concern that Western firms can have a negative impact in poor countries. As an industry, I think we have to nip that in the bud and ensure that we are setting things up in a way that doesn’t lead to those outcomes. I think it is very possible and not so difficult to do.
Phil: Leila, thank you for your time today and looking forward to seeing you in NYC next week!
Laila Janah (pictured above) is Founder and CEO of Samasource. You can also learn more about Leila Janah at her personal website and follow her on twitter here.
Click to find out about private clouds embedded inside public ones…
Now we’ve really heard it all… HP and Salesforce’s new “Superpod” offering provides a Private Cloud within the Public Cloud, making the term “Cloud”, well, pretty much irrelevant…
HP and Salesforce.com have teamed up to provide Salesforce CRM on dedicated “Superpod” HP boxes in an effort to satisfy enterprise clients fearful of having their data situated in the Public Cloud. The partnership is designed to help Salesforce.com gain more traction with large global enterprises and highly regulated industries, while providing HP some Cloud street-cred after years of negative publicity and pride a much-needed fillip to its hardware and CRM services businesses.
Following the announcement, many industry stakeholders quickly questioned whether the arrangement met “required criteria to be referred to as a Cloud offering” based in the fact that dedicated hardware boxes do not service “multiple tenants”. HfS believes those arguments from multitenant purists have some validation from a theoretical perspective; however, in today’s environment of commoditizing hardware prices and paranoid enterprise IT leaders, those arguments have now become irrelevant. If having a dedicated HP box can provide some increased processing power and peace of mind to enterprises while still delivering all the benefits of scalability, security and global ubiquitous access that internet-based delivery can offer, does it really matter whether that offering is classed as “Cloud or multi-tenant anymore”? HfS believes the core focus has now shifted to the “what” in achieving business outcomes rather than the “how” in terms of technical mechanics.
Clearly, leveraging a public cloud environment is still too much of a bitter pill to swallow for “Zombie” IT departments still clinging to the idea that they need to control all the data that flows in and out of the enterprise and not have their enterprise data housed on the same Internet services as other firms. Creating a “private cloud within a public cloud” will provide a more acceptable solution for many enterprises still grappling with the concept of public Cloud, especially for their most sensitive data that resides within their CRM system. In short, the whole concept of public and private cloud is becoming pretty moot, as long as the enterprise is leveraging cloud delivery to achieve the outcomes it needs in a secure, reliable, effective delivery environment. So who cares whether the new offering, which, for a higher price, provides a dedicated hardware environment within Salesforce’s larger public cloud, violates some sacred principle?
For years, Salesforce was the poster child for anyone touting the benefits of adopting a SaaS based solution and by broader implication an underlying cloud based infrastructure. It was a strategy and market position the company and its founding CEO aggressively pursued. The company’s very logo demonstrates how important it is to its core.
However, as opportunities mature, so to must the innovators driving the change. What this announcement signifies is not the end of the Cloud but quite the opposite – the maturation of the Cloud. In short, this is likely the moment we can attribute it to the delivery model becoming truly mainstream. Do we even need to use the term “Cloud” anymore? Is it still relevant? Does anyone purchase new services, outside of a few stagnant examples of legacy on-premise ERP, that are not in the “Cloud”?
Why This Matters
IT departments can focus on driving Cloud integration and business alignment, as opposed to low-value security and maintenance tasks. Cloud advocates should greet this announcement with glee as it could boost adoption among those reluctant to embrace a truly multitenant public environment. More importantly, it also allows the entire IT industry to focus on the business outcomes to be achieved when adopting these newer offerings, rather than whether or not such adoption creates undue risk. IT executives can focus on the integration work that needs to be done to adopt new Cloud services into the enterprise and work with their LOB counterparts to ensure the applications are supporting the business needs.
Future IT solutions are increasingly being driven by the business lines. Furthermore, questions around how to deploy the underlying technology and implement security should always be secondary to how best to address the business need. The driving force behind the adoption of any particular cloud based offering is not the underlying technology, but rather the business change the new model can bring. The driving appeal is a better-run organization, the ability to better match costs to performance, the freeing up of scarce resources to focus on more strategic efforts, or perhaps some combination of all three. This new offering helps remind us of all that. In the instance of Salesforce, for example, sales and marketing executives are increasingly making the decisions regarding purchasing new solutions to drive business value. The same is happening across all major lines of business, such as finance, HR and procurement. IT has become the enabler of the solution, not the solution itself.
The need for enterprise mobility is rapidly changing the onus of IT solutions to achieving business outcomes. Finally, by marking the point of cloud maturity, the announcement allows us to truly focus on the next evolutionary phase of our computing environments – mobility. This is not to say cloud environments are fading to the background nor even diminishing in importance. Quite the opposite, they will continue to be prominent as the enabler that allows us to connect to our core processes from anywhere at any time on a mobile device. But as we increasingly leverage the cloud to embrace mobility it brings with it an additional layer of enterprise change.
As consumers we expect our mobile environment to be crisp, clean and focused. When the need arises to perform a task, we look for a specific app to get it done. Increasingly, that consumer led singularity of focus now flavors our desired approach to engagement within the enterprise. Yet the burden this puts on existing legacy applications – whether old behemoth onsite systems or yes, even the newer lightweight SaaS offerings – is huge. New interfaces must be designed, road tested, and implemented for all of these applications or better yet robust APIs developed to allow connectivity across all of them and into new task specific UIs.
What to Watch
Ned May, article co-author, is SVP for IT Services Research, HfS (Click for bio)
The critical question in all of this is whether we will see a new class of enterprise apps emerge to overshadow the current SaaS darlings or if these existing leaders will adapt to the new demands. In an interview with the media and analyst community at the same event, Benioff shed light on the company’s efforts around building out its APIs highlighting it as one of the most important efforts underway. Sometimes maintaining relevance means letting go of what once defined you. Salesforce appears to get that and is well on its way to helping us all embrace the Applification that is spreading across all aspects of our lives.
The good news in all this for the traditional IT services firms is that the new delivery models which at first appeared to offer a lightweight solution for the enterprise and thus little need for additional programming, ultimately require a great deal of integration work to tie them back deeper into the enterprise. As we move to a SaaS driven mobile environment, systems integration is now giving way to services integration and the opportunity is robust. In short, the clouds just might be clearing on the next wave of IT services growth.
“Now, suddenly, CIOs have to be very creative, they have to adjust to these new challenges, they have to deal with ambiguity”
–Bruce Rogow, November 2013
And we can bring our superlative discussion with Bruce “hand-brake released” Rogow to a conclusion with one very frightening warning to all technology leaders…. don’t fumble the future!
Phil Fersht (HfS): Bruce, what do you think visitors from 10 years into the future will think of us if they came back for a gander?
Bruce J. Rogow (IT Odyssey & Advisory): The 80’s taught me that most organizations will adapt. It may be very painful though. For my view of what It will need to become, here are some relatively radical ideas. First, I think that IT will have a merchandising function. And by that I mean it’s going to try to figure out what technologies are out there, and what ways IT should bring them into the enterprise to add value. It will be very much like a merchandising manager at Home Depot decides what goes on the shelves. IT’s second role will be brand management, being able to consumerize services and present them to end users in a way where they are literally building brand equity. Third, IT won’t be able to successfully manage brands unless it has service management, so the whole idea of how they do service management, and what those services will be, Next, although most firms have a PMO, I think we’ll see a growth in asset management to the extent that they will also have an AMO function. Informatics is another weak area in which companies aren’t getting enough value.
Bruce being kept in line by his missus, Winnie
But I have a terrible concern that with everything going on right now, we can fumble the future. So we must have some type of underlying architecture and operating platform to bring all of these pieces together in some coherent fashion. If you’re asking what an IT organization is going to be…it’s not going to be about developing or running a business center or network, it’s going to be in these more value added roles.
Another thing that bothers me is the attitude of many CIOs. There hasn’t been a need for someone to talk to for many CIOs of the past two decades. However, going forward, most CIOs need a confidant they can talk to, test ideas and push back. Yet, when I ask many CIOs who performs that role, they tell me they don’t need anyone like that, go to a conference, get feedback from their existing vendors or talk to other CIOs. This isn’t an attempt on my part to solicit clients. I’m fully engaged.
Phil: So… what is your final piece of advice for today’s aspiring IT professionals looking out at their long-term careers?
Bruce : The first thing is, despite everything I’ve said here, they have to start and end with security, control of the asset base, privacy in the data, and assurance of the service. Everything else I’ve said is added on top of that. Effectively, they’re going to have to sort out the way in which they convert from their current base. Recognize that base has pretty much been abandoned by the vendors and the outsourcers, and figure out how, over the next five, ten, or 15 years, do they move to this new platform?
Next, I think they have to create a template and an architecture as an onramp and a way in which they rethink the governance structures for how these things are going to come into the enterprise. For example, mid-range companies I visit are really into mobility. I actually have one small firm, a $200 million company, with 150 mobile apps on the shop floor and in engineering. Everyone from the manufacturing engineers to machine operators to the forklift drivers have apps that make them much more productive. Their on-time shipments are up and there’s a reduction in waste which has more than paid for the investments out of yearly budgets. And then I go visit a big company and they’ve been spending a year trying to evaluate whether to go Mobile Iron or Ironwatch for their MDM. Now, I believe they’re going to spend another year developing mobile policies before they even start to deploy. Talking to all these big companies, I’m reminded of 1982 arguments we had about whether Profs from IBM or All-in-One from Digital was going to be the future. And I remember one of my clients being absolutely convinced it was neither, and he chose Wang. So when I listen to these folks taking a year to evaluate something…you may make a mistake, but you have to do something and start the learning process.
Phil: Bruce, when you’re not thinking about technology or writing? Are you trying to enjoy any form of retirement at all?
Bruce: I’m not made for retirement. I tried it once and drove my wonderful wife nearly nuts. I do a little bit of boating and golfing. I’m blessed with a spectacular family and an EA, Ruth who optimizes my life. But I really enjoy talking to these people. In addition to the 120+ IT Odyssey visits, I probably do 60 dinners and lunches a year with these folks, and there’s just so much to learn from other people’s perspectives. So I think my hobby is just trying to understand how other people think. We are back in most exciting times and I am thrilled to still be involved in this great endeavor of IT. And yes, I do like sports…I’m a Red Sox fan, a Patriots fan, and I like the Bruins. It’s a good year in Boston this year 🙂
Phil: Thanks so much for spending time with us Bruce. I know our readers will love digesting your insights.
Bruce Rogow (pictured above) runs his own advisory practice, IT Odyssey & Advisory. Each year, he visits with over 120 executives, academics and consultants involved in the management of IT. He is also a Gartner Executive Programs research affiliate, with four decades of experience that have included roles with IBM and Gartner group, where he served as head of worldwide research. You can view his bio here.
“You really need progression planning where you determine the skill set you’ll need going forward, because it’s a different circus with different clowns”
Phil Fersht (HfS): Bruce, how has the role of the CIO changed to cope with the shift in approach to enterprise technology? Are many CIOs succeeding in refocusing themselves into more business-aligned roles within their companies?
Bruce J. Rogow (IT Odyssey & Advisory): Ah! We are NOW going to be “business aligned”. Phil, with all due respect, what the heck do you think DP managers and CIOs have been trying to do since the 60’s?
I come from the school that has seen these guys trying to do alignment since 1968! Once again, the game has changed. And the important thing to recognize here is the maturity of the platform and its relationship to IT strategy, expectation, deployment and management. I’ve likely talked with over 1,000 DP managers and CIOS in my career and I never met one who said he was all about the technology and was working to ignore or misalign with the business.
In 1982 we had a very immature platform, and so the key role of the DP manager becoming a CIO in those days shifted to figure it all out, sort it all out, and try to figure out what comes first and what’s going to work. There was no vision of where we were headed, the boundaries and the journey. Then we went through a period of rapid deployment…let’s put in an ERP, let’s see if we can solidify some of this, consolidate it, negotiate contracts, figure out the CRM, an awful lot of the back end activity. But all that was alignment too.
Then as we headed toward the maturity stage, it became how do we get cost out of this thing, how do we further consolidate, can we eliminate licenses, can we do a little vendor bending, can I fool around with my rate card with my outsourcer…and that was the way in which we got alignment in the last five-10 years.
Now, those CIOs are suddenly finding themselves with a totally different set of challenges. They are still out to maintain what they have, but trying to get agility into it. Over 60 percent of the CIOs that I interviewed now have responsibility for revenue generation or business development, and they’re involved in M&As and restructuring. Many have been given staff or line responsibility well beyond IT. It’s not so much about optimizing and baby sitting the supply chain anymore as it is about how to generate revenue and help re-invent the business.
On top of that, the second issue is that there’s this new technology base, and a new application set…I call this a different circus with different clowns. And you’ve got CIOs who have done a good job of getting us this far at the tail end of a maturity curve. Their challenge is whether these buttoned down, slack eliminating, control oriented IT leaderships and providers can morph into a very different type of role. Can they deal with the need for slack and vision creating rather than fulfilling capabilities associated with a very immature set of technologies and a tremendous amount of ambiguity related to the business and the technology?
Finally, what consistently comes out in the interviews I conduct with these people is that they feel the majority of the vendors they have are anywhere from misaligned to clueless at this point in terms of what the market really needs to thrive. They give the vendors credit for trying real hard, but question if they know the game they are in or what to do differently tomorrow morning.
Phil: In terms of companies finding the right skill set for a CIO, would you say the traditional CIO from 10 years ago can adapt? Or do you think many of them just don’t have the right backgrounds, and companies need to look at different types of individuals for these roles? What are you seeing work for companies, and what are you seeing as a struggle for them?
Bruce: We didn’t have the perfect set of players in 1982 and we don’t have many perfect players now. There are a lot of moving parts in what you said, Phil. One of them is that expectations are different. We’re coming out of 10-15 years where the CIO was measured on cost, efficiency, and tightening things down. And the whole purpose was to get the ambiguity out of the system. “Let’s nail this thing down, get it down to an SLA, get it to whoever we have as a provider, and make them do it.” And CIOs and their directors were sort of nursemaids to that. Their staffs mastered the way to get things done was by dialing 1-800-outsourcer. As their few older, experienced players retire, many firms are left with a paucity of the practical, detailed skills and experience needed to prudently move ahead. But move ahead they must.
Now, suddenly, CIOs have to be very creative, they have to adjust to these new challenges, they have to deal with ambiguity. They have to stop asking to see “best practices” and be told war stories about what another company did. They have to get engaged, think for themselves and invent what is the prudent way forward in their situation. Hearing another war story is not as important as taking the IT staff aside from the day-to-day tasks and doing the hard work of envisioning, testing and delivering the future.
And while they’re trying like crazy, many are finding: 1) it’s a totally different game; 2) it’s totally different players; 3) they have a skeleton staff left over from vendor bending during the last generation; 4) now they’re expected to be technology insight people, be creative, look at revenue generation, deal with ambiguity, understand exactly how the business works and can work, be flexible, be agile; and 5) they might as well be talking a foreign language to many of their support staffs. They have a partial compliment of officers skilled and experienced at fighting the last war.
There’s another issue in that the CIOs that are in many of these companies are viewed as a cartoon. They’re the guy who keeps users from doing things. They have an architecture bureaucracy thing centered on the desktop and locking the organization to ugly technologies that are pathetic compared to what the employee has at home. They look like dinosaurs to the young, bright, digital natives that are once again being hired. And now, users want to have a revolution, demand BYOD, buy their own SaaS or whatever it may be, and drag brother dinosaur along. So today’s CIOs are in hostile territory. Whether they can make it remains to be seen on a one on one basis.
Bruce Rogow runs his own advisory practice, IT Odyssey & Advisory. Each year, he visits with over 120 executives, academics and consultants involved in the management of IT. He is also a Gartner Executive Programs research affiliate, with four decades of experience that have included roles with IBM and Gartner group, where he served as head of worldwide research. You can view his bio here.
Bruce Rogow willing Big Papi to knock one out of the park
Can you imagine a guy who’s immersed in, literally, hundreds of CIO relationships. And not only immersed in them today, but for more than four decades – long before they were called “CIOs”.
This guy knows exactly why CIOs are succeeding and why many are failing in their jobs. He is the archetypal CIO therapist, one of the original “Gartner Greats” having headed their worldwide research in the 80’s and 90’s, in addition to years and years advising, coding and analyzing IT.
Today, Bruce Rogow has been banned from retiring by his missus, Ruth, as he’ll just drive her insane, so instead he wiles away his hours advising, perhaps, the most challenged of enterprise executives today. Plus he still writes for Gartner’s executive program as a Research Affiliate, so not exactly sure how we managed to get him on here. But here he is – my favorite lunch companion and living IT mind, who has his own very distinct flavor of the future of the IT function, the role of the CIO and how companies frequently xxxx up their outsourcing strategies. So, without further ado, let’s begin the first of three blogs where Bruce opens up to us – and where better to start than…
The Outsourcer’s Comeuppance
Phil Fersht (HfS): Bruce, you’ve been a luminary in technology, as an analyst and an advisor, for a very long time. Would you please give us an overview of your career background, and how you wound up where you are today?
Bruce J. Rogow (IT Odyssey & Advisory): I started off with IBM a long time ago. One of the areas I was involved in there for five years was advanced technical training, where we were trying to invent what became known as systems management and was later packaged as ITIL. After that, I spent 10 years with a consulting firm called Nolan Norton, which was a spin-off of some work that had been done by Dr. Richard Nolan at Harvard Business School. I left there in 1987 and joined Gartner Group. My mandate was to change Gartner from being all about Wall Street and vendors to producing research that users would buy. So we developed and institutionalized things like the Magic Quadrant, the Hype Cycle, the IT Industry Scenario and the idea of TCO. After I left Gartner I remained a Fellow, and still do some work as an affiliate of its executive program.
For the last 10 years, I’ve been doing this thing called IT Odyssey. Each year I visit over 120 executives, academics and consultants involved in the management of IT. These visits, which are free and open discussions, are the background, practice development and refresh process for my private practice and support of my client work.
Phil Fersht (HfS): So when you look back over the last 15 years, what’s changed with technology in enterprises in terms of the way they approach managing their IT infrastructure and strategy? What have the shifts been?
Bruce J. Rogow (IT Odyssey & Advisory): In my opinion, the last major shift occurred around 1982. We’ve had adjustments since then, but the shift we saw in 1982 was on both the business and IT aspects. The nature of business changed dramatically as well as the business’ expectations for IT. In the IT arena we saw PCs, minis, distributed networks and databases cascade into the organization, changing forever the IT landscape, architecture, applications, major and minor vendors, management processes and governance. We even saw the name for IT change as what was called DP morphed into IS. As IT became more pervasive, we saw the emergence of the CIO as the new IT leader. Initially, it was the wild, wild west and that has played out over the past 20-25 year period as the IT landscape and current platform matured.
As the master IT platform matured we developed new applications, skills and management processes. IT was becoming a stable, mature, robust family of relatively commodity offerings and providers. Businesses learned how to deploy what they needed for the lowest cost.
When things became fairly mature, which they were from about 1995 on, it made sense to outsource, offshore, solidify your relationships, and attempt to manage to contractually set SLAs. By 2000 both the customers and the providers knew what they were doing and it was a game of who could get the upper hand or establish a workable relationship.
I think we’re now in a totally different world because both businesses and IT are simultaneously changing so radically. Over half of the firms I visit tell me that they honestly believe that if they don’t change their business models, they won’t survive the next decade. IT is moving from the platform it’s been on to a host of alternative delivery vehicles (ADVs) including everything from private cloud to public cloud to SaaS to BPaaS to IaaS to social media to mobility and app stores rather than massive enterprise-wide, all-encompassing commodity systems. During my IT Odyssey discussions I’ve been asking for the terms they use to describe these ADVs and I now have a list of 60 different names for various types of ADVs. I believe we are now in the third, fourth or fifth year of another one of these major transitions and we are re-entering the wild, wild west.
Another way to look at the situation is that for 25+years IT has been filling in a relatively crisp vision. We have been implementing packages, overcoming Y2K, consolidating resources, cutting IT cost and putting up web sites. No one has a crisp vision of where we are headed. We may feel the drivers but there are no packages to implement for capitalizing on mobility, morphing to a service-based delivery model, making money on social or BI, providing for the converged vs. diverged architecture or enabling the new business model which is also just coming together. This is a major epiphany that seems to be eluding much of the IT industry. Many feel they can play Whack-a-Mole as the issues pop up or tweak their way forward.
Phil: Bruce, we were talking a few weeks ago about companies that may have outsourced too much for too long, where many have lost too much control or pretty much given up on their IT strategy. I’ve actually been seeing more of this since we last spoke, and we’ve actually got situations with clients where they’ve got IT managers who literally don’t know what they’ve got in their apps portfolio any more. What’s your view? Do you think companies have given up too much, and can they get it back at all in the future? Where is this headed?
Bruce: I call this the outsourcer’s comeuppance. Many of these outsourcers wanted more and more control which made the client more manageable. They didn’t want to be challenged by their clients. As somebody said to me last week, they aren’t outsourcers, they are a legal staff of IT people. And I’d say that 80 percent of the people I’ve interviewed in the last three months told me they don’t have enough enterprise architects, IT strategists, security expertise, business analysts, mobile/social/UI experts and program managers. Their project management capability is low. They don’t have people who know how to work across the silos. In fact, when I asked if they have the right technology, multiple CIOs stated they don’t have the technical staff to appraise that so they’d have to ask their outsourcing partner.
And then you also have this sort arrogance on the part of the outsourcers that’s coming back to bite them. I keep hearing stories in which the outsourcer has told the CEO, or in one case the board, “our people know more about your business than your people do”. Gee, that has to make the CEO or Board feel so good. So I think CIOs are facing a dilemma of finding the staff they need.
There’s one other really important point here. We now have governance models that are distrusted and killing many organizations’ ability to change. What I’m about to say is heresy, but succession planning is killing IT because it ensures like for like. What I’m suggesting is that we need new people, new skills. I’ve stated in a couple of recent writings that if you’re just doing succession planning, you’re probably digging a hole. You really need progression planning where you determine the skill set you’ll need going forward, because it’s a different circus with different clowns. If you don’t know how the skills you will need are different from the ones you have…that should tell you something.
Stay tuned for Part II, “A Different Circus with a Different set of Clowns”
Bruce Rogow (pictured above) runs his own advisory practice, IT Odyssey & Advisory. Each year, he visits with over 120 executives, academics and consultants involved in the management of IT. He is also a Gartner Executive Programs research affiliate, with four decades of experience that have included roles with IBM and Gartner group, where he served as head of worldwide research. You can view his bio here.
We’ve had the 
