New research from HfS clearly shows all is not as it seems in the global services landscape. HfS’ Jamie Snowdon investigates…
It would be easy to forgive anyone for assuming that the Indian services majors Wipro, Infosys, TCS, Cognizant and HCL (aka the “WITCH” providers) are dominating the global battle for services supremacy, given the hype that surrounds India’s dynamic IT outsourcing economy. However, In spite of their impressive growth over the past ten years, none of the WITCH providers have yet to make the HfS Top 10 of global IT services firms, despite dominating the application development and management business:
The first of the WITCH providers likely to break the Top 10 is TCS, provided it can maintain its current growth trajectory, break through its landmark $10bn revenue barrier, and there aren’t major acquisitions or merger amongst the Top 20 providers.
The IT services competitive landscape is still dominated by the traditional large global IT firms (HP, IBM, Accenture), the global enterprise software companies and local IT services firms with strong domestic/regional market positions (Fujitsu, NTT, Capgemini, CSC, CGI).
HfS Research’s new Global IT Services Market Size and Forecast 2013 provides an analysis of the recent financial performance of the leading IT Services companies and the key drivers and inhibitors that are driving growth in these markets, particularly how they are coping with the endlessly on-going economic crisis in Europe and the key technology and business dynamics driving growth in 2013 and beyond.
Ten ways the WITCH providers can break the IT Services Top Ten
1. Develop a greater client base outside of the US – particularly continental Europe where the benefits of offshore development are beginning to be recognized
2. Move up the value chain – too many of them are being “ring-fenced” into the IT back office and struggling to get a bigger chunk of the integration business
3. Expand into the upper-middle market ($1-$5bn revs), where the heritage western firms are much less dominant and demand is highest
4. Acquire more consultative capability to move clients into the cloud
5. Invest in word class BPO and business transformation capabilities to become genuine “technology enablers” and not solely IT body shops
6. Focus on verticals where they can really differentiate with institutional expertise and stop trying to be “all things to all people”
7. Become more global in nature, establishing more middle and upper management in locations outside of India
8. Diversify more aggressively IT infrastructure-based services and become less reliant on lower-level ADM work
Jamie Snowdon is EVP Research Operations, HfS (click for bio)
9. Diversify beyond legacy ERP services into supporting SaaS enviroments such as Salesforce.com, Workday, Netsuite etc.
10. Acquire a “traditional” onshore IT services business that can add many of the areas mentioned in points 1-9
Rather than panicking about the next quarterly earnings, Michael Dell is focusing on building something for the next couple of decades
I don’t want to shock everyone, but occasionally I do have positive things to say about some providers. And it’s nice to be pleasantly surprised by one which is clearly on the right path, because when Dell acquired Perot Systems in 2009, many of us were skeptical as to whether a product-centric firm, such as Dell, could make a genuine push into high-end services.
It is my personal belief that the likes of HP and CSC will be sweating from the oncoming threat from the Austin-based firm’s $8.5 billion services arm in the not-too-distant future, not to mention some of the flagging Indian firms struggling to rediscover their mojoes.
Why Dell is a dark-horse future services powerhouse
Strong leadership and deep resources. Michael Dell is a great guy, liked and respected by everyone who knows him and works for him. He is also a smart businessman and smart communicator and his no-bullshit style has permeated its way throughout the company. Moreover, he is very, very rich – with his Dell investment rumored to be only a third of his entire personal fortune.
Taking Dell private will shelter the firm from the intense public scrutiny being placed on services firms today, consumed with unrealistic margin pressures and gobbledygook strategies that mean little, but sound impressive. It is clear that Michael recognizes which elements of his business are nearing the sunset or maturity phase of their evolution, and where the future growth is coming from. He recognizes that the services industry is hitting crunch-time with too many competitors and too many copycat strategies. Being able to take a detour from the impending turbulence will enable the firm to weather the storm, make some strategic tuck-in acquisitions and re-emerge in the future onto public markets as a real Tier 1 force.
Talent in abundance. Michael has assembled an unbelievable array of talent through his acquisitions and direct hiring from competitors. In services, snagging Suresh Vaswani to lead Dell’s services shortly after he was displaced as Wipro’s CEO is proving a masterstroke. Suresh has built a very dynamic team, including Ashutosh Vaidya, Wipro’s former head of BPO, Tanvir Khan, who helped establish Minac’s US operations, and Sid Nair, one of Wipro’s US sharpshooters to drive the healthcare services offerings. In addition, what impressed me most was the talent in the middle-management layer, for example, former star Redmonk analyst, Michael Coté helping devise cloud strategy, and Cameron Jenkins, former COO of legacy modernization firm Clerity, helping drive Dell’s thriving application modernization business. While many of Dell’s competitors only push their thin veneer of senior leaders in front of the industry stakeholders to mask a mediocre middle-layer of sales people, Dell is proud of the people it has assembled throughout the organization.
Positive culture. Let’s make no bones about it, several of today’s services firms are suffering from low morale and executive burnout. Some have really lost their way and much of their top talent – and it’s sometimes hard to pinpoint people you still know in those firms. However which way we look at it, services is still a people-business, where passion and energy are still the core ingredients to inspire clients and drive new thinking and ideas. You don’t get that feeling from the Dell crew, even after several mojitoes… these folks are genuinely happy to be where they are.
Limited bullshit. When your leader is a straightforward guy who clearly articulates what he wants to achieve, the rest of the firm normally follows suit. This really is the case with Dell, where everyone talks a straight game regarding their strategy and game plan. The firm’s offerings are, quite simply, uncomplicated: IT products and services across all key areas, namely security, private cloud enablement, enterprise mobility, service management, application development and infrastructure management. I was particularly impressed with its cloud strategy, based on its own datacenter and hardware heritage, and also its modernization business, where it was addressing many of today’s businesses still plagued by legacy mainframe environments.
There is also a stealth BPO strategy where the firm is pushing into verticals where is has deep domain expertise (both onshore and offshore), such as healthcare, life insurance, transportation, retail and hospitality, as opposed to getting crushed in horizontal areas such as F&A and procurement, where it hasn’t established much presence. An estimated $350m a year of non-federal BPO business is enough to get Dell to the big boy’s table in its selected vertical areas, and open up the potential for acquiring additional BPO capability as it grows.
Very strong edge in the upper-middle market for IT services. There is a host of clients in the $1bn-$5bn range which are struggling to get the red-carpet treatment from the Tier 1 providers, still feasting off the fruits of the high-end enterprises. There is a great opportunity for Dell to exploit its massive installed base of hardware clients with no-nonsense IT services offerings from simple Windows migration projects through to complete apps and infrastructure modernization engagements. It also has a pretty decent brand to work from (with a concerted marketing push). It will need to contend with competitive friction from the reseller channel, but Dell knows it must develop its broad services business offerings if it wants to survive and prosper. In addition, many of these “upper middle market” clients are going to be the F500 of the future, and building a solid base of clients in this sector is laying the groundwork to attack more high-end business down the road.
The Bottom-line: Dell’s enterprise services journey is in the early stages, but it has a much brighter future than many of its counterparts
Dell has a lot of work to do, but Michael has spend the last three years putting together the framework and game plan to take the company forward. Being able to shield the firm from the Wall St. headwinds that are consuming the leading service providers, is a huge benefit for the firm seeking to take its time adapting to a rapidly changing environment and re-positioning itself in new growth areas where it needs to develop its brand and reputation. Rather than simply panicking about the next quarterly earnings, Dell can focus on building something for the next couple of decades. The firm does need to acquire additional scale and depth across most its service lines – and may need to sunset or divest of some of its own legacy businesses, which simply make less sense to own in today’s environment. However, for many of today’s ambitious services executives, this is one firm that has a great culture, strong leadership and a no-nonsense vision that is in tune with the realities of what is needed to survive. I hope to link back to this post in a couple of years with an “I told you so” smirk on my face 🙂
Barely more than a year since SAP made its bold move into the cloud with the very expensive acquisition of Successfactors, does the hotshot visionary and symbol of the attempted “new look SAP” leave the firm… Lars Dalgaard.
Lars Dalgaard… sporting a fine red tie to an SAP event
Anyone who has met Lars over the last decade has been drawn to his incredible passion and vision for the future of enterprise software with the shifting sands away from legacy on-premise software and expensive lock-in licenses.
Lars joining SAP was the acid test as to whether old-world ERP vendors could find a rapid path into the shiny new world of cloud and multitenant delivery models for enabling global business operations. He was a true visionary who had almost single-handedly taken on the legacy enterprise software firms, building up Successfactors from nothing to something, that would entice SAP to part with $3.4 billion to take it out.
The stark reality is there’s just so much vested in today’s legacy enterprise model
Lars leaving so quickly symbolizes SAP’s struggle, in my mind, to change its culture and approach to disruptive business models. The economics of the cloud cannot print anywhere near as much money for our German friends as the current legacy ecosystem of clunky enterprises, whose IT managers simply do not want to invite change or disruption. If your clients don’t want to change, why should you?
Net-net, SAP has created a nice cosy industry around itself that has created, literally, millions of careers. What are all these developers and project managers going to do if companies suddenly had single instances of SAP available in the cloud? What are many of the service providers going to do if they can’t earn tens of billions trying to stitch all this stuff together? And what would SAP do if it can’t command such incredible revenues from its consulting, services and multiple-license revenues?
The startling truth is that there is a $255 billion industry (Source, HfS Research) that feeds off this ERP chaos and dysfunction centered around both SAP and Oracle, and and estimated $156 billion of this is purely the annual cost of keeping enterprises’ SAP worlds ticking over in 2013; the external services, the licenses, the hosting, the internal staff to maintain and develop the software etc.
Why do you think these little upstarts, such as Successfactors, Workday, Netsuite and SFDC command up to 40 times their annual sales income in valuation? Because they threaten the status quo of a much, much larger industry that is scared stiff of being blown out of the water by disruptive technology:
Click to Enlarge
While the decrepit old enterprises stick to their legacy IT infrastructures, the evolving mid-market firms are breaking the mold
I recently spoke to a senior executive at a legacy software vendor stuck in multi-instance and fake-cloud land, who confided “we’re purely in the protection business now. All the new logos are going into Workday. Fortunately our existing clients still spend enough to keep us solvent.”
This pretty much confirmed my viewpoint that it’s the small to middle-market organizations (under $5bn in revenues) seeking technology and sourcing solutions that can drive nimbleness and cost-effectiveness, as they simply do not have the people and technology resources within their IT, finance, HR, marketing and supply chain operations to manage their evolving needs. Moreover, many of these organizations are moving from prehistoric infrastructures to cloud-based ones… bypassing much of the painful inch-by-inch transformation where so many of today’s high-end enterprises are stuck.
As the existing high-end business opportunities slowly shrivel up, the new logo opportunities are springing up in the mid-tier, will the likes of SAP and Oracle be equipped to take them on, when compared with the evolving array of developing cloud solutions from the upstarts? Remember, many of these new mid-tier logos will make up a significant chunk of the F500 in the future… so clearly the failure to evolve to true cloud models is eventually going to come back and bite the incumbents. Surely they can’t keep spending billions and billions on new acquisitions to control them when they start to hurt their business?
The Bottom-line: The evolution to the cloud for firms likes SAP is simply way, way to slow for a guy like Lars
SAP’s enterprise customers, and many of the services giants which feed off the beast, are still many, many years from being forced to evolve, but one thing is clear… eventually they will be forced to comply. The big question is whether it’s still another 5, 10 or 15 years away…
Simply put, SAP was never a place for the likes of Lars… and won’t be for many years to come. There is no burning platform for SAP to really jump into the cloud just yet, and guys like Lars do not work in the slow-change business. When that burning platform does come, it will need people to change the mindset a lot more aggressively than they are prepared to in today’s market. Maybe then, they’ll wish they had a Lars to call on.
Let’s just hope, for SAP’s sake, he doesn’t pop up at one of these other cloudy upstarts anytime soon…
I always like it when the nice guys get the top jobs. Too frequently providers put in a suit with good P&L skills, an upwardly mobile corporate persona, amazing PPT builds, is always “selling” and never letting any cracks appear in the glossy façade.
Gautam Thakkar is Chief Executive Officer and Managing Director, Infosys BPO (Click for bio)
What’s wrong with a down-to-earth guy who’ll sit down and share a beer with you to give you the no-frills run down on his challenges and opportunities? What’s wrong with an executive who has shed blood dealing with a decade-plus of transitions and tackling real client pain-points? So I was pleasantly surprised when my good pal Gautam Thakkar got the nod to take on the reins at InfosysBPO last month.
Gautam has actually sat himself through one of our HfS sourcing executive council meetings to hear close-up how clients are dealing with the world post-transaction. What’s more, Gautam doesn’t live in a world of PowerPoint – he lives in the world of the tough realities of the business we are in – long decision cycles, complex change issues, challenging economics…
So we managed to “drag” Gautam away from the squash court and his collection of Malbecs (which is probably fairly pitiful at the rate he drinks it) to learn a bit more about how he intends to take on the next chapter of the InfosysBPO story…
Phil Fersht, CEO HfS: Good morning Gautam! Could you share some background on yourself, where you came from and how you got into what you’re doing today?
Gautam Thakkar, CEO InfosysBPO: Hi Phil… I’ve been working with Infosys for about 13 years. At that time the company was trying to grow an upsteam business – hiring consultants to work with clients and starting other transformation initiatives. I was in the middle of some projects and someone came up to me and asked, “Would you like to be a part of something Infosys is starting up, spend a couple of months framing a strategy for our BPO business?” I said sure, I’d do 2 months, but then 2 became 4 and 4 became 6 months. I went in kicking and screaming, saying this isn’t something I want to be doing for a lifetime! But as you now know, it’s become something I’ve done since 2001, before Infosys officially got into the business. I was one of the first employees at Infosys BPO and have been through almost 10 years of the company’s BPO journey, played different roles along the way and ended up in this position. I’ve lived and worked in the US, India and Europe. It’s been an interesting evolution to see a company that was conceptualized from the grassroots and growing to where we are today, at 25,000 people globally, 23 centres and more than 60 nationalities.
Phil: You’d been heading the F&A practice for a long time, and that’s now broadened into a CEO role. What will you be doing differently now?
Gautam: As I mentioned, since I was one of the early employees, we were pretty much doing everything in the beginning. Then I was responsible for the entire Europe business, which morphed into the F&A role. Subsequently to that, in the last 2 years I’ve been handling all horizontals outside of F&A as well. This is what we refer to as the entire enterprise business BPO, accounting for 65% of revenues today. So yes, F&A was the largest part of the business that I was looking at directly, but other businesses were also rolling into me. The transition has been smooth, as I was running 65-70% of the business already and was connected with most clients. The agenda that my predecessors saw for the company was growth, differentiation and people. This is the foundation on which we have grown the business and will continue in the future. From a client standpoint, we follow the 3 Rs – being Relevant to our clients & employees, Respected as and as the best place to work for employees and one of the most profitable businesses and having strong Reach with clients and drive sustainable businesses globally. I’m taking it upon myself to be connected to most CXOs, clients and otherwise. So directionally, the transition has been smooth because I was a part of leadership team earlier and will be taking forward these principles to engage with clients.
Phil: Looking back ten years ago to when you first formed InfosysBPO, what’s different today?
Gautam: I think there are some things that are different, while others remain the same. Cost is a focus area and has stayed true as a favorable driver for clients to engage in BPO. When companies look to us, cost is still one of the drivers. However, what has changed dramatically is the way that we engage with clients. They are now looking at it from a revenue standpoint – how do we offer agility, flexibility and scale? So the conversation has moved from a cost focus to a growth focus in BPO. For example, we’ve moved with clients to different geographies. We recently opened a delivery center in Costa Rica where we are giving a client nearshore scale and flexibility. Last quarter we talked about creating 200 jobs in Atlanta. So ten years ago, the value proposition was largely cost. Now it has shifted to cost and growth as well – growth-led BPO. This is reflected in our revenues as well, where 40% of it comes from global centers outside of India. The headcount still remains largest in India, but we have 6,000-6,5000 employees working outside India in these global centers.
Phil: One of the things that impressed me about InfosysBPO is that you’ve gone after different markets, beyond F&A, from the outset (read our earlier discussion). For example, you’re the largest and most successful Indian provider in procurement BPO, and you’ve got tentacles in customer management and insurance as well. Can you talk a little bit about the broader portfolio and where you’re going to double-down in the next 3 years?
Gautam: Phil, the way we’re organized today, we’re centered around industry vertical solutions and the horizontals where we’ve made a lot of investments. There are certain areas where we’ll be spending a lot of our time and expanding on these investments. Sourcing and procurement is continuing to hold our attention because it is where we are having value based conversations with clients. We also acquired an insurance platforms specialist, Mccamish Systems in 2009 – insurance is another business we are spending a lot of time on, from a vertical solutions standpoint. Overall, sourcing and procurement, insurance and healthcare are the key areas we are being fairly aggressive on. F&A continues to be a staple, even though it is the most competitive service area. I believe its there for the taking, and is the easiest conversation to have with a client since the area is relatively mature.
Phil: Infosys has been frequently making acquisitions to grow the BPO business, more than most other BPO providers out there. What is the thinking around that? Can we expect more acquisitions in the near term?
Gautam: We have made acquisitions historically in BPO – the Philips center, McCamish, Portland and Marsh BPO. All these we acquired not for scale, but for a logical fit in our portfolio. We identify those areas (white spaces) which we believe will give us the capability and skillset to get a headstart or help fill the gaps from our overall capability set. However, each business has to stand on its own – we don’t want to go acquire just to get revenues. Businesses have to be profitable and have clear growth paths of their own. We also want to make sure we are able to go after them in a structured fashion. One aspect people tend to ignore is how the acquired firm integrates in the company and whether it’s a good fit overall. All our BPO acquisitions have been integrated extremely well, giving me great confidence to go ahead and look for similar assets in the market, as and when it happens. We’re always looking for the right assets which fulfill the criteria I outlined, and we’ll continue to do so.
Phil: So what are you going to do differently that’s going to make a huge impact to Infosys and the market?
Gautam: One of the aspects I’ve always been comfortable with at Infosys is client relationships. That’s my strength and I will ensure I engage with the right clients, whether existing or prospects we’re targeting. As I mentioned earlier, the bedrock of what we had evolved was growth, differentiation and people. If I extend that to the 3Rs, I am going to continuously focus on and hopefully take Infosys to the next level. The nature of the market is also changing, there are more integrated deals happening now. Fortunately when we talk to clients and customers, we are one business, whether its IT, infrastructure, systems integration, consulting or BPO. That gives me strength and comfort that we’ll be able to take this to market appropriately. I believe clients will start seeing that value proposition that I think will differentiate us from the rest.
Phil: There’s been a lot of talk, particularly from Infosys, about seeking “non-linear growth”…you’re saying 33% of revenues are going to be targeted at being non-linear in the mid-term. How realistic is that for BPO, is that achievable and are you already seeing signs of that evolving for the company?
Gautam: The BPO and technology businesses are very closely linked at the hip. The platform strategy that Infosys 3.0 talks about is very closely linked to BPO as well. For example, two of our platforms out there, TalentEdge and ProcureEdge allow us to go on the platform and manage the entire stack of applications, infrastructure and all the business processes. That completely ties in to what Infosys is trying to do from a non-linear perspective. The other thing to remember from a BPO standpoint is that we’re close to $600 million in revenues and 25,000 people. Three years down the line, if we want to double revenues, we can’t also double headcount. There has to be a break in linearity so that we can grow our business sensibly, along with technology interventions. Infosys 3.0 fits in with what we’re trying to do because for this industry or business, you don’t want to double both [revenues and headcount]. After a while, it becomes unmanageable. There are some core processes which will be intensive on resources, but I think technology will play a big role. This is why I mentioned the cost and growth focused BPO initiatives. The shift will increasingly happen, but it will be on the back of technology, not just on the back of headcount as you increase revenues.
Phil: Finally, if I wrote you a cheque for $2m today, what would be the first thing you would do?
Gautam: <laughs> What would be the first…? I think I would take my family on a long holiday. This is more for them than for me. They bear my travels and being away for long periods of time… I think they definitely deserve a break more than I do! I’ll take them to the most exotic place that they can think of and be at their beck and call to do whatever they want to and hopefully spend that money usefully.
Phil: Answered like a CEO should 🙂
Gautam: I’ll pass that on to my wife. I think she will be very impressed, I don’t know about the rest of ‘em!
Phil: Gautam – you’ve been a great sport! Am sure there will be many folks here wishing you all the best in the new role.
Gautam Thakkar (pictured above) is Chief Executive Officer and Managing Director, Infosys BPO (Click here to read his full bio)
Amigos – it gives me great pleasure to announce some imminent new analyst arrivals at HfS, in addition to announcing the promotion of a couple of guys who’ve been instrumental in the development of this business, which has literately sprung from nowhere in three years to the monstrosity it has become today…
Christa Degnan Manning joins HfS Research as Vice President to lead the firm’s Human Capital Management Strategies research practice addressing both technology and services dynamics. Christa joins from American Express where she was a leader with the firm’s managed business travel services. Prior to AMEX, she led the Human Capital Management Practice at AMR Research (Gartner), and the Procurement and Category Management Practice at Aberdeen Group. She was one of the few analysts at AMR who never took any crap from me… she is feisty, smart and fearless.
Ned May joins HfS Research as Senior Vice President to spearhead the firm’s research coverage of Technology Enabled Business Services, where he will research the impact of mobility, big data and cloud technologies on business and IT services. Ned previously led worldwide IT services research for analyst IDC and most recently worked in the new media industry covering the impact of new technologies on publishing and information. His official name is “Edward” and is known as the “Frat Boy” by his former UK IDC colleagues. He is also a great writer, thinker and all round guy.
Tom Ivory is promoted to Chief Operating Officer of HfS Research, where he will oversee the company’s commercial operations, events and marketing functions, in addition to contributing to the overall research strategy. Tom has overseen 300% growth in HfS revenue performance in his two-and-a-half year tenure. He previously worked in senior commercial roles at OpenText (Metastorm) software and the Corporate Executive Board. Tom has thrown himself hook, line and sinker into HfS and been a real part of our growth story. Just don’t be fooled by the angelic features…
Jamie Snowdon is promoted to Executive Vice President, Research Operations, where he will manage the core HfS research analyst team, oversee the HfS Blueprint supplier evaluation methodology, price benchmarking service, market sizing and forecasting, and research processes. Jamie has successfully overseen the firm’s establishment of its Market Index forecasting during his 18-month tenure, in addition to developing the firm’s PriceIndicator benchmarking service that focuses on IT services and BPO pricing. He previously worked in research leadership roles at NelsonHall, IDC and Input. Jamie is knows in business as the “Ginger Ninja”… the quiet research assassin who can produce research from practically anything. He has also promised he will finally get a mugshot done which involves a collar and tie… however I’ll believe it when I see it.
Being able to attract and develop this level of talent is critical to supporting our growth plans. The research industry has been both disrupted and transformed by the whirlwind availability of information and data in recent years, and maintaining a distinct voice above the noise has never been so critical. Research must be more about talent with a unique vision than dull reports and mass-produced trends, if the analyst industry is to thrive and prosper in today’s environment.
Finally, we wouldn’t be anywhere near close to where we are today without the support from YOU. So thanks 🙂
"It's not all about social media, it's about everything we do being very integrated". Jason Corsello is VP, Strategy at Cornerstone OnDemand
About a decade ago, when I was chugging along in the old-school analyst business, I hired a kid from the West Coast to learn the ropes.
I think he was just looking for any old job to get him to the East Coast, but, hell, he seemed smart and was willing to work for a lousy wage. After a glamorous relocation (I recall we put him up at the Holiday Inn at Logan Airport for 2 weeks), I threw him some god-awful analyst report on HR technology platforms and said, “can you write something better than this crap”. He’s never looked back.
Jason Corsello didn’t just turn out to be a great analyst and one of the original HR bloggers, but he’s now honing his knowledge to be a real strategist in modern marketing plying his trade for leading strategy and marketing for Cornerstone OnDemand, one of the hottest Cloud-based HR tech firms on the Nasdaq today, specializing in talent management.
I asked Adam Luciano, HfS analyst covering customer experience management, to connect with Jason just to discover how he approaches marketing strategy in today’s environment, and learn a little about Jason’s too…
Adam Luciano (HfS Research): You’ve had a very colorful career to date – can you share the highlights? How did you end up doing marketing at Cornerstone?
Jason Corsello (Cornerstone OnDemand): Phil and I worked together as analysts at Yankee Group (back in the day) and I spent a lot of time researching technology and – more specifically – the HR technology market. I left Yankee and joined a top consulting firm [now part of Appirio] servicing the Fortune 1000 companies, like Starbucks, Nike and Dell with helping create their whole HR and talent management strategy. Essentially we looked at the best ways to recruit, manage and train employees by leveraging technology.
Then, two years ago, I decided to join Cornerstone OnDemand. At the time, Cornerstone had just gone public, and was one of the top three vendors in talent management. In the last year, two of the top competitors have been acquired by Oracle and SAP, now making us the leader on the best-of-breed side in talent management. I joined Cornerstone in the role of VP of strategy and corporate development – meaning figuring out the three-year plan for the business and the buy-build-partner perspective. In year one, we did an acquisition, launched a number of new products and initiatives and formed some very unique partnerships. In the last year I’ve now taken on responsibility for marketing for the sole reason to better articulate our strategy and then communicating that to the marketplace of customers and key influencers. I have been leading our global marketing efforts for about six months now and am really trying to change and embrace all of the new models of marketing today.
Adam: Why the human capital management industry? What’s the appeal?
Jason: I probably never would’ve thought I would be in some sort of HR-related field, but I think most people would probably agree that it’s [HR] not very efficiently run at most companies. From the way HR recruits, to the way they manage performance, to the way they train people is still very inefficient. A number of companies typically spend anywhere from 60-70% of their overall capital expenditure on salaries, so to me there is a lot of inefficiency today that technology can have a huge impact on. Technology is drastically changing the HR industry, much the way it did in the past with the CRM industry.
Ten years ago, Cornerstone was focused on delivering online learning and training via virtual and online classrooms. Today, Cornerstone helps organizations do everything from recruiting and sourcing the best talent, to training and developing employees and partners, to managing the performance of individuals and teams.
What we are now seeing is that the market is shifting once again. There’s so much embedded data in companies that they are not leveraging to get smarter – why are high performers, high performers, how do you know you’re finding your best candidates, and what types of training programs are affecting sales? I think the evolution happening right now is moving from process based to more intelligence based HR decision making.
Adam: So what does the future of the HR function look like, in your view?
Jason: There are a couple of areas… I think collaboration is definitely having an impact on HR right now and so are social technologies. The ability to stay current, and break down the barriers to figure out where the knowledge is, who has the skills and who has the expertise, is changing the way organizational structures are made. It’s really flattening out organizations, and I think this evolution is still in its early adopter phase. At this point, online collaboration and social-media based collaboration are changing the game.
When you look at all of the data that companies have about their employees, they haven’t even touched 1/10th of it. Linkedin knows more about its members than their own companies do. Companies know their employees on an individual level. For example, Jane got a 3.8 on her performance review but companies do not necessarily know at the aggregate level, what makes Jane a good performer, or what makes certain people high performers.
I think Big Data will have an impact too, as there is now so much data to sift through.
Adam: This brings to mind a project that I worked on last year, developing a just in time curriculum model for education institutions. Do you see things becoming more “just-in-time?”
Jason: Yes. Embedded contextual information is becoming more important. We just launched Cornerstone for Salesforce, delivering sales training and enablement from within the Salesforce platform to enable faster time to sales efficiency. For example, if a user changes a status or record type, it triggers a learning event [also known as an object] and the user has an option of educating himself or herself from an online tutorial about a competitor or the latest and greatest new product.
Adam: Now that you’re in a marketing role, is the job as glamorous as it looks from the outside?
Jason: I have dabbled in some marketing roles in the past, but now I am overseeing all aspects of marketing. Marketing is very different than it was even eighteen months ago. By leveraging technology, it’s fascinating how marketing has changed. We are leveraging a lot of new technology and we are now fully embracing marketing automation. We’ve been using marketing automation tools in the past, but there’s just so much more you can be doing with them today.
Most people use marketing automation tools to just do email campaigns or email communications. Now I see over the last two years things like nurturing and scoring have become very important to not only consumer organizations, but enterprise B2B organizations as well. So, essentially you can track how educated a certain prospect is before you even put a salesperson in contact with them to make a sale. Now, I spend a lot of time making sure that the client is smart or educated about what we do, know our brand, that they want to associate themselves with us, and that we are doing all the heavy lifting by the time it is in the salesperson’s hand. Sales should not be focused on educating or getting potential customers brand aware, they are focused on differentiating and really delivering the highest value proposition at the highest price point they can attain. So I think marketing has definitely shifted, in three key areas:
1) Demand generation/automation. There is so much capability in this area now, from social media to tracking tools, to following prospects and understanding their behaviors, to making sure you are front and center to where prospects are going on the internet. It is really an interesting area to be concentrating on right now.
2) Brand awareness and brand building are becoming more important every day. A lot of cloud companies that are five to ten years old are deploying more of their marketing expenditures on brand awareness than anywhere else. If you look at companies like Box or Workday for example, I heard Box is spending upwards of 70-80% of their marketing budget on brand awareness. By getting the brand out and matching their leadership position in technology and innovation, the funneling effect of that becomes very easy. Focusing on brand building is so important, because a brand has so many touch points to an organization.
3) Social media is definitely impacting a lot of things about the way people market today, both inbound and outbound. Meaning that you can leverage social media to increase targeting, so if you know that a potential prospect comes to a product page and “Likes” it on Facebook, you can reinforce that message through sponsored ads or different types of branding advertisements that you can do on social media sites. A lot of that is really focused on just getting that brand awareness, but in effect you also control your messaging and positioning.
Adam: What are your core challenges on a daily basis? What are the opportunities?
Jason: For us in particular, it’s really around the state of our marketplace. Our market today is about a $5 billion market opportunity and the leaders have still single digit market share, which tells us that there’s still plenty of green-field market opportunities … so there is a lot of room to grow. Our focus is getting our brand and message out into the marketplace.
There are still a lot of people that use Microsoft based tools to do talent management, so for us it’s about getting them convinced on why they should be interested in using a tool like Cornerstone. This gets accomplished through traditional ways as well as electronic media. Our goal is to maintain a constant flow of information in the marketplace. We still do press releases, but we increasingly use social media. Social media is a huge channel and is huge emphasis for us. Social media to us is not necessarily about winning clients overnight, but building brand awareness and you can do that very cost effectively. For example, we’ve got 26,000 likes on Facebook, and it does not cost us anything to be able to promote things that we want there. We also create sponsored ads/posts as a relatively cost-efficient way to get our brand and message out there. Those are some things that we are doing on a daily basis to build out our market and make sure that people know the value associated with our brand.
The heavy lifting today is around how to differentiate. I mean, you see this across all technology markets – it’s hard to differentiate today. All technology vendors have really focused on is talking about things like cloud, social, mobile, and analytics. You would not think that it is so hard for us to differentiate that message, but what you need to do is elevate that message so we look different from everyone saying the same thing. So how we elevate it is by focusing on what the impact of those things are, for example: why should we care about cloud, why does mobility matter, why does analytics matter? A lot of our work is focused on elevating that message.
Companies like Salesforce are great examples. We figure out how knowledgeable a company is about our products/services, and track the company via a scoring system. For example, our sales people approach our prospects very differently based on their level of education rendered in our scoring tools. We do this through marketing tools like Marketo.
Adam: How would you say the marketing role is changing in today’s environment? What’s different? Is it really all about Twitter and LinkedIn these days?
Jason: It’s not all about social media, it’s about everything we do being very integrated. You can’t just use social media to say that we use social media. Having a social media presence is not enough; it has to be integrated into everything else that you do. I think that the difference for me from 18 months ago is that marketing departments worked fairly siloed, and this is actually very similar to a lot of other functions. Look at HR, HR is fairly siloed – you’ve got recruiting, you’ve got learning, you’ve got training, and you’ve got benefits. What we are starting to see in HR today is heads of talent starting to oversee all of that, and I would say the whole role of the CMO is starting to shift in that direction as well. It’s not just around sales operations and its not just around lead generation, it’s about a more integrated marketing approach. From making sure that you’re getting the right return on investment to making sure your cost per lead is shrinking.
You need to constantly integrate everything that you do. An example for us is that we do events all the time. To build an effective event, there should be a lot of upfront work – that you know who’s in the event, you can communicate with them in advance, you can prearrange meetings, and you can educate them before the event. After they attend the event, you can also find out if they received a demo, did a salesperson engage with them or not, did they see the product, etc. It’s a very simplistic example, but integrated marketing is where things are shifting. It is about leveraging tools, and we leverage our core tools (Salesforce and Marketo) that build the foundation for us to be able to do a lot of our integrated marketing efforts.
Adam: After having been an analyst, what do you see as the future for HfS, from the marketing side of the fence?
Jason: I think the differentiation for HfS is just being able to be more opinionated and being able to have a point of view. A lot of smaller boutiques that we see are so vendor coin-operated that they won’t take a position because they are afraid to offend a vendor and have their contract pulled as a result. For us, I’d love to see HfS as much more opinionated, even if its critical of our own company. I know marketers freak out about that stuff, but I would rather it be out in the public than behind the scenes so you can manage it.
Adam: Finally, if HfS gave you $10 million to spend on anything you like, how would you spend it?
Jason: Cornerstone was built in a very bootstrapped way, so we did not spend a lot of money in the early days. Our focus was more grassroots and enabling our salesforce to compete effectively. In today’s world, you will likely always be competing for viewship with companies that have more money and resources. For us, it’s less about the dollars and more about having more precision in what we do.
I also think about getting people to know us by building brand awareness in a non-traditional way. One example is putting up billboards. There’s an interesting model around billboards building brands in local markets. We did a billboard campaign and found it to be very effective to our home market of Los Angeles, so I think there’s a lot you can do today to gain brand awareness that doesn’t always have to be online and still carries a punch.
Jason Corsello is Vice President of Corporate Development and Strategy for Cornerstone OnDemand. In this role, Corsello is responsible for identifying key market opportunities, driving corporate initiatives and guiding M&A, as well as supporting product strategy and service innovation. You can read his full bio here and contact him directly here.
The IAOP has announced its 2013 “best outsourcing advisors”, and kudos to my former employer, Deloitte, for coming top. Credit has to go out to Peter Lowes and his Outsourcing Advisory Services group for their achievement. In addition, KPMG’s Shared Services and Advisory Group, led by Cliff Justice, finished in second place – a strong showing and justification of their 2011 acquisition of EquaTerra.
Click to Enlarge
The biggest surprises, however, are the absences of ISG (formerly TPI), the largest transaction advisor of outsourcing contracts, and PwC, one of the leading management consulting firms actively operating in the sourcing industry. I asked both firms how they had managed to miss the “Top 20” and they simply responded that they had declined to participate.
In addition, I am still trying to figure out how a firm can call itself “Elix-IRR” (and who, exactly, is Elix-IRR?). Am also curious how Avasant can finish third – they seem like nice guys, but are they really ahead of the likes of Alsbridge and E&Y?
And why does the rest of the list seem to be made up largely of law firms? Do these guys actually advise on outsourcing, or just do the legal stuff?
The premise of utilizing software robots running on virtual machines has become more of a reality than you might think. As seen in the print edition of The Economist and also discussed during last week’s HfS webinar, the attraction of employing robots is on the rise and HfS Research is paying attention…
