The new HFS Digital Engineering Services (DES) Horizons report provides a snapshot of leading digital engineering service providers’ capabilities in a rapidly changing market as more companies adopt digital technologies in product development and engineering processes.
Ultimately, the goal is to bring together siloed digital initiatives and look at a holistic picture of the business
Advanced technologies like artificial intelligence (AI), machine learning (ML), the internet of things (IoT), 5G, robotics, cloud, automation, data and analytics, blockchain, and alternate reality and virtual reality (AR/VR) are revolutionizing product design and development. As these new technologies emerge, there is a need for skilled talent, particularly in areas such as AI, ML, and data analytics.
Additionally, the rise of new business models such as product servitization (traditional episodic encounters being replaced by continuous personalized interactions) and platformization (making platforms data ready to drive commerce and interactions between buyers, sellers, and suppliers) has further fueled the need for providers to offer expertise in business design, marketing, customer and supplier engagement to stay relevant. This trend is driven by enterprises’ needs to optimize data use, digitally enable processes, accelerate growth, achieve customer intimacy, and become true ecosystem participants.
Disruptors, Enterprise Innovators, and Market Leaders
The HFS Horizons: Digital Engineering Service Providers, 2023 report examines service providers’ roles in digital engineering. The HFS Horizons model aims to align enterprise objectives with service provider value. We assessed 25 service providers across their value propositions (the why), execution and innovation capabilities (the what), go-to-market strategy (the how), and market impact criteria (the so what) to best understand and plot the value they offer to their digital engineering clients.
Here are the results.
Note: All service providers within a Horizon are listed alphabetically
The new Horizons landscape demonstrates the providers’ positions within the three Horizons:
Horizon 1 (Disruptors) refers to those providers who have been able to drive functional transformation with ecosystem partners and co-innovate solutions.
Horizon 2 (Enterprise Innovators) includes those creating end-to-end organizational alignment to drive unmatched stakeholder experiences.
Horizon 3 (Market Leaders) includes all providers with OneEcosystem™ synergy via collaboration to create completely new sources of value.
The Rise of Smaller Players in the Booming Digital Engineering Services Industry
The digital engineering services industry is a dynamic and rapidly evolving field, with many players offering a diverse range of technology and services. These players tend to be smaller, focusing on specialized niches within the industry. Despite their smaller scale, these service providers are experiencing impressive growth, with an average growth rate of 25%. Much of this growth can be attributed to North America’s booming market for digital engineering services. As this industry expands and develops, it will be interesting to see how these smaller players adapt and differentiate themselves from their competitors to remain competitive and relevant.
Strategic Partnerships and M&A
The digital engineering services industry is competitive, and service providers consolidate through mergers and acquisitions to expand their capabilities, enter new markets, and gain a larger market share. They also partner with startups and other players in the ecosystem to develop new capabilities and technologies to better serve their customers. This reflects the evolving nature of the industry and the need for service providers to continuously seek new partnerships and growth opportunities to remain competitive and meet the evolving needs of their customers.
Innovation Is the Key to Success in Digital Engineering Services
In the digital engineering services industry, service providers need to invest in innovation and R&D to remain competitive as new technologies emerge. Technologies like the metaverse and blockchain are garnering interest for enabling new business models and revenue streams. Service providers must adapt to changing client demands and explore co-innovation and value-creation partnerships to develop comprehensive and integrated solutions. Joint ventures, strategic alliances, and co-innovation programs allow service providers to leverage their expertise for growth and value creation.
The HFS Horizons: Digital Engineering Service Providers, 2023 report highlights the value-based positioning for 25 service providers: Accenture, ACL Digital, Akkodis, Ascendion, Bosch, Capgemini, Cognizant, Cyient, EPAM, Globant, HCL, Hitachi Vantara, IBM, Infosys, LTIMindtree, LTTS, Persistent, Publicis Sapient, Softtek, TATA Elxsi, TCS, TechM, UST, Virtusa, and Wipro. It also includes a detailed profile of each service provider.
HFS has successfully road-tested the capability with several research customers, who universally declared their whole research experience had been transformed. “It was like the research had come alive, and I was actually living it,” stated one customer. “I asked about the Metaverse and finally understood that it won’t be anything until Web3 is incorporated”.
To help customers navigate the HFS Web, HFS has developed an Avatar called Hillary, based on the firm’s popular Horse logo:
“With GPT, if you win, you win. If you lose, you still win”, stated HFS CTO Jake LaMotta. “When we tested Hillary with our customer focus group, we discovered our customers wanted to ‘Holler for Hillary’, so we have opted for a non-binary horse to guide everyone. We think this is going to be very popular.”
Another HFS customer, Tony Montana, was not quite so convinced. “Why do I need a damn horse to tell me about UiPath’s long-awaited admission that RPA is dead. Everyday above ground is a good day.”
HFS CEO Phil Fersht, commenting on the launch, added, “We disrupted with free research and loads of brash views on the market. Now we’re disrupting with a hollering horse. It’s what I dreamed of as a young entrepreneur. GPT-6 is the future, and it’s part of us now.”
2022 was the year where many peoples’ lifestyles trumped their commitment to their jobs; however, that attitude today might just get you the sack.
Just when it seemed that a hybrid work model, which is primarily home-based, had settled in as the status quo, the global economy enjoyed its post-pandemic bounce, and people were coasting along in their cozy hybrid habitats; 2023 hit us with a thumping jolt.
Massive tech layoffs, back-to-office mandates, a highly-uncertain economic and political climate, and an epidemic of banks almost collapsing dominate the headlines, and suddenly the workplace power dynamic has shifted squarely from the jaded employee-fuelled Great Resignation to something resembling a great workplace freakout.
In the current challenging economy, many employers are pointing fingers at remote workers as a reason for underperformance
There are many high-profile organizations now mandating in-office policy that is more “office-first” than “remote-first”. For example, Disney has mandated four days a week in-office and General Motors and Starbucks three days a week at their main headquarters and regional centers. Social media firm TikTok has mandated two days per week and threatened employees with termination if they do not comply. Many more enterprises are following suit, with three-day-a-week in-office mandates becoming commonplace. Moreover, the proportion of remote jobs being advertised on LinkedIn has decreased from a high of 20% a year ago to just 13% today.
Net-net, work-from-home entitlement is out the window, and uncertainty is high across the board. Our recent study (with the support of Unisys) of 2,000 employers and employees across the U.S., U.K, Germany, and Australia laid bare all discrepancies between staff and managers’ perspectives of hybrid work and also pointed to some ways to bridge the gaps and avoid the pitfalls that this freakout is threatening.
Hybrid work is breaking down, but finding that right balance is like walking a tightrope
While the power pendulum has swung back from employee to employer, enterprises struggle with keeping their employees happy while demanding the motivation, presence, and productivity that business performance requires. Our study showed employees are much more confident in hybrid work, with over half indicating they work in a ‘very effective’ hybrid environment, compared to only 1/3 of employers.
Employees reported enjoying the work/life balance that hybrid affords, but managers struggle to know whether the staff is engaged and productive. Employers are also struggling to justify real estate investments, high-security risks for remote work, and a lack of collaborative culture. Enterprises want to retain top talent, but not at the expense of financial results. Case in point, to kick off Meta’s “year of efficiency,” leadership used poor employee evaluations to try and weed out the low performers before announcing its 10,000 staff layoff last week.
Poor IT experiences and security setbacks are threatening staff efficiency and morale
While the pendulum may be swinging back toward in-office protocols, the reality is that hybrid, in some shape or form, is here to stay for the foreseeable future. Our study found some very specific pain points that employers must address to improve hybrid functionality. One mammoth issue we found is that 49% of employees lose between one and five hours of productivity per week dealing with IT issues. Not even half of employers are not measuring productivity loss due to IT support issues, meaning many are woefully unaware that their staff are losing this much time in the week. And cybersecurity, while the top enterprise concern for 2023, poses another major issue impacting worker productivity. 1/3 of employees report their ability to work effectively being negatively impacted by security policies regularly. The survey showed that positive IT experiences are a main factor in employees’ choice to leave or remain with a company; employers must provide a smooth experience or risk losing staff.
These issues are not insurmountable. Making investments in systems and technology that can proactively identify and quantify IT issues before they impact users can go a long way to improve workplace efficiency (about half of the employers surveyed currently have these in place). And 92% of employees report that they are willing to share more data (such as app/device/network usage and performance) if they can receive more proactive IT support in exchange. This statistic points to a win-win scenario if employers have the foresight to invest in systems that will measure and predict these issues.
Investing in EX: empowerment, recognition, and flexibility trump the old motivators
We covered some of the tactical issues impacting experience, but culture and engagement have a huge impact on how employees perform and are motivated at work. Any decent leader knows that EX is important, but do they know what their employees need and how to deliver on that? What motivates employees vs. what their managers think motivates them is quite a chasm across several key areas, particularly with employers not recognizing the importance of empowering employees to make an impact:
Employees are much more focused on their ability to have an impact and be recognized than the corporate brand
Employee motivations have changed, and employers need to pivot to enable better EX. The whole in-office culture was much more about belonging to the big corporate brand where you got a window cube when you got promoted. Now it’s less about the big company prestige and more about autonomy to make decisions, the recognition of doing your job well, and the flexibility to manage work/life balance. The big company rhetoric about mission and value is actually at the bottom of the motivational factors. Clearly, enterprise leadership is struggling to resonate with staff, many of whom must be losing their pride and identity with mothership as they lose touch with in-person interaction with their colleagues and managers.
So how are companies investing in ways to better understand staff and deliver on their needs? Enter the EX program: including specific methods and metrics to measure EX, a centralized function that measures and informs EX policy, ways to solicit and incorporate feedback and manage against business outcomes, to name a few initiatives. Companies with very mature EX programs find their employees more engaged at a rate of 74%, compared to those with somewhat mature EX programs (59%) and immature EX programs (24%) (Exhibit 2). What’s more, employers and employees agree that EX programs also have a strong impact on business outcomes, including productivity, customer experience, and even financial performance.
The Bottom Line: Invest in creating the right conditions to shift from employee engagement to employee empowerment. You must understand employee frustrations and motivations to make hybrid work effective in this next era of the digital workplace.
The Great Resignation is in the rearview mirror, but we could have a messy freakout ahead if leaders don’t prepare accordingly. Many employees are increasingly citing an “edgy” culture is unsettling their enterprise, where most staff have no idea if layoffs are imminent and which staff will be targeted. We are not far from a Great Freakout engulfing enterprises as banks struggle to cope with increased interest rates, tech firms are radically addressing their cost structures, staff wages are not aligned with the current inflation rates due to a tough economy, and firms grapple the unprecedented situation of a shortage of low-income workers.
Last year there was a mistaken belief that by getting people the ability to work from home, we have achieved hybrid work, but our study shows we have not really figured out hybrid work. The good news is that there are enough synergies between employer perceptions and what employees want to create much better experiences; it is a matter of informed planning and execution to capitalize on the positives. The data is clear that investing in EX leads to better employee engagement. Tying this engagement to business outcomes is the next frontier and a critical one to brace for the uncertain days ahead in 2023.
In addition, companies have to address the cultures they want to create – and fast. They need to instill more urgency into their workforce and ensure their workers, whether remote or in the office, are accountable and still take their jobs seriously – and an effective EX strategy will go a long way to creating and maintaining that culture and settling employees’ nerves, providing your leadership takes it seriously and you have an empowered executive to drive it.
The days of hiding in our caves are over… it’s time to get out and face the world and fix our businesses. What worked in 2019 may no longer work in 2023, but if we don’t pull our teams together, we may find that out too late… and then it will be time to freakout!
As we famously declared in 2019, standalone RPA is dead, and the only way to derive real value from process automation and data is to adopt an integrated approach that breaks down silos and produces the data executives need to make rapid decisions. Our autonomous enterprise principles clearly outline the steps needed to define the data needed, the transformation to collect and access it, and the governance capabilities to arrive at the decision points along the way.
Enterprises can either use a multitude of specific software tools to support their needs or opt for a single platform approach that encompasses the functionality they need. We categorize software platforms that support this integrated approach as “Process Intelligence”:
To this end, HFS published its latest HFS Horizons report delving into the world of Process Intelligence Products. Rather than being a ranked Top 10 list, the assessment methodology provides a Horizon view comprising a full market landscape of vendors bringing different sets of technologies and focus to help enterprises understand how their work gets done.
Much like our previous assessments, we grouped process and task-mining vendors in this analysis for several reasons:
HFS focuses on the use cases and business values being derived from this set of technologies rather than the specifics of data capture and analysis techniques. In fact, our research proves that enterprise clients are applying a combination of process and task-mining tools toward similar and distinct use cases.
There’s a significant amount of convergence in this space. The market is full of acquisitions, investments, partnerships, and inhouse development to offer integrated solutions to combine both process and task data to deliver combined value – and it’s a trend we expect to see grow in the coming years.
The process intelligence market continues to grow exponentially and transform equally as fast.
Organizations are battling decades of technical and process debt, and as we immerse ourselves further into the digital economy, it will be enterprises with efficient operations that will succeed. To that end, we expect to see the impressive growth of process intelligence to continue – and the data in this HFS Horizons report confirms it, as we report that the majority of enterprises are predicting a ‘significant increase’ in spend on the technology over the next 12-18 months.
On the vendor side, we’ve witnessed the process intelligence market transform radically in recent years. A handful of vendors have been acquired by large enterprise technology platforms, automation, and workflow vendors. Meanwhile, new entrants are coming to the market armed with fresh approaches to gathering information and analyzing how people work. For enterprises, this makes it even more difficult than ever to select their preferred process intelligence partner – but they are also spoiled for choice.
HFS evaluated 20 technology vendors
We assessed 20 technology vendors across four key dimensions: Why, What, How, and So What, allowing us to categorize vendors into three horizons: delivering cost and efficiency transformation (Horizon 1), driving enterprise business transformation at scale (Horizon 2), and creating new sources of value and creating an ecosystem impact (Horizon 3).
Note: All service providers within a “Horizon” are listed alphabetically
We identified one clear Horizon 3 market leader – Celonis
Celonis emerged as the only clear Horizon 3 market leader thanks to its ability to deliver ecosystem-based, data-driven transformation today. Horizon 2 hosts 10 fast-growing vendors whose clients are seeking enterprise-wide, data-driven initiatives – and it includes a combination of pureplay and acquired process intelligence vendors.
Horizon 2 plays host to 10 innovative vendors who are driving real business outcomes and improved stakeholder experiences. These vendors are putting an increasing amount of pressure on the likes of Celonis and are beginning to assemble a compelling end-to-end proposition, which we expect to see come to fruition in the next 1-2 years.
In Horizon 1, we identified 9 disruptive vendors helping enterprises make focused investments in the space. In particular, Horizon 1 disruptors excel when helping organizations with limited process intelligence experience and those focused on project-based functional transformation.
This report included detailed profiles of each service provider, outlining their placement, provider facts, as well as detailed strengths and opportunities.
HFS subscribers can download the report here (available free for a limited time).
We thought the Y2K IT spending trigger was one-time bonanza… until we experienced the pandemic trigger, which saw IT investing bulge beyond our wildest dreams. Not only were we blowing cash on any collab app that seemed viable, any overpriced webcam on Amazon that would (surely) make you look amazing, but enterprise heads were also convinced they had to go on an insane rush into the cloud, even though their legacy systems and siloed 1960s processes were nowhere near ready.
Sadly, all good things come to an end as the majority of enterprises tighten their belts
Firstly, appreciate 2021 and 2022… we won’t see the likes of growth like it in IT services again. Or not until another trigger gets pulled, and we don’t know what that will look like – or when it will be. However, 2023 is going to be choppy, uncertain, and complex as we grapple with rampant global inflation and a recession everywhere except the US, which only decides to be in recession when Fox or CNN decides it’s time to be in one, based on whatever numbers can be spun to suit their agenda. Or when the government decides not to keep bailing out inept unregulated banks.
As soon as CFOs hear the “R” word, their hair-trigger response is to freeze all spending and gradually unfreeze items that are “critical” once they realize they were overreacting. Everything gets caught up in their web of austerity (except maybe some nice dinners with the auditors), and the humungous sums being lavished on all these expensive cloud migrations are under intense scrutiny as projects are either scaled back, accelerated to fruition, down-sized or even scrapped altogether.
Brand new data from over 500 IT leaders across the global 2000 tells an ugly story of how quickly the cloud bingeing is grinding to a halt, with only a third of enterprises currently staying the course with their current IT sourcing investments:
As startling as these factors are, market indices such as the S&P500 and the FTSE100 continue to trade at record highs. None of the leading service providers or bellwether ISVs like SAP, Salesforce, and ServiceNow have talked about a fundamental change in the market conditions.
Against this backdrop, the data from the survey tells us that discretionary spend is disappearing fast. This is neither the time for fancy innovation projects nor lavish client entertainment. However, spend for managing the core operations of organizations is holding up. We haven’t come across indicators that would suggest a softening in sourcing activities beyond service providers privately complaining deal cycles are lengthening and harder to close. So let’s examine these conflicting views…
We have seen a rapid shift in focus from top-line to bottom-line
One way to read into these data points is that we are seeing a reversal of buying trends triggered by the pandemic, where lengthy project lifecycles with opaque objectives have been billed to enterprises like there is no tomorrow. What has rapidly changed is tech and operations leaders expect a commitment from their service providers to deliver tangible outcomes in clearly defined timeframes. We are seeing an increase in many projects shifting to quarterly budgeting – and being placed under considerable scrutiny to reach their desired conclusions on time and on budget.
The macro headwinds that we did describe will force service providers to deliver outcomes that drive efficiency and automation. They also have to demonstrate an understanding of their clients’ data requirements and processes to ensure workloads can be migrated to the cloud effectively; otherwise, these projects will be expensive, long and painful.
At the same time, those headwinds could spell trouble for innovative startups that require PoCs to show the proof-points of their capabilities. Enterprise leaders want certainty at predictable costs and to minimize their exposure to project failure.
How should both CIOs and cloud providers address this dramatic change in enterprise focus and spending in 2023 and beyond? Can they find new fizz by approaching the cloud differently?
SaaS providers must show more flexibility in their contractual agreements and go beyond standardized seat-based pricing to support broader transformation initiatives.
Service providers must align technology with business objectives to (finally) capture business value for their clients
CIOs must change their mindset from cost to business value. Thus, FinOps must be expanded to governance and, ultimately, business assurance.
CIOs and Ops leaders much work together to map out their underlying data infrastructure to ensure it is cloud-ready
The cloud discussion has to shift to business value.
In just a few days, Silicon Valley Bank (SVB) fell from grace so swiftly that it still holds onto ‘buy’ ratings from most analyst firms. A month ago, stock pundit Jim Cramer urged investors to buy the stock—a clear warning sign to anyone familiar with inverse-Cramer investments. Tomorrow, an estimated 1000 tech start-ups will be unable to make payroll, and a further 2000 will be clinging on to liquidity for dear life. The future of America’s innovation – and the world’s innovation – is hanging by a thread.
So what actually happened with SVB?
Simply put, SVB piled loads of customers’ cash into long-term illiquid assets that, at the time, were safe but tanked as interest rates increased. That meant they couldn’t lay their hands on enough cash quickly enough to meet withdrawal demands. Word got out; more withdrawal requests came in. Eventually, the whole thing collapsed—a classic run on a bank.
Most of us have seen a run on a bank before. But for those new to the rapid demise of a financial institution, here’s a deeper analogy. Let’s say you’re kicking off a tech startup. SVB’s wooed you with their compelling investment offer for £1m in funding and all the goodies that come with it. Part of that deal involves putting your cash in SVB. They are your bank of choice. SVB, for its part, bought a lot of bonds, dishing out 1.5%. It’s not a bad deal on the face of it, given historically low-interest rates. But then, interest rates started rising. 3, 4, 5%. So those bonds paying out 1.5% suddenly look less attractive than newer bonds getting 4.5%.
Understandably, people aren’t keen on buying them anymore or want a much lower price. These factors combined (SVB pulling below-market yields on its bond portfolio, and the corresponding reduction in the value of bonds) pushed SVB to cash out on billions of bonds at a loss. Then, apparently to reassure the market, they chose to raise new funds from VC firm General Atlantic, alongside a public-facing bond. Rather than reassuring the market, panic set in. Their customers started pulling cash out.
So now, depending on where you are in the queue, getting your cash out of the bank becomes pretty hard. If you’re close to the back of the queue, it becomes impossible.
Some of it’s insured, and some SVB promises to pay back. But, for now, billions of dollars sit in an uncomfortable limbo. Leaving the CFOs of SVB clients to work all weekend as they develop a fiscal survival plan.
Multiply that $1m example a few thousand times, and you have the true scale of the challenge. And that’s assuming it’s just SVB. Global stocks took a kicking at the end of last week, with bank stocks leading the charge. The market is betting that the contagion will spread beyond SVB’s four walls. Most likely due to wary depositors racing to redeem their cash.
Another dent in the tech industry: The ecosystem effect will ripple far beyond tech startups
Now that may be a bit of a simplistic explanation—and economists and equity analysts will no doubt offer countless superior answers—but it gives a flavor of the crisis at hand. Now let’s zoom in on the impact of the SVB crisis on our industry.
Let’s start with the obvious: SVB clients. Firms with cash tied up in SVB face a tough few weeks or months as regulators figure out how to compensate clients and distribute SVBs remaining assets. Already, there are countless stories of tech firms of varying sizes warning that they’ll struggle to make payroll next week.
Few big names have announced any issues, but given its prevalence in the sector, it’s almost certain we’ll see some major enterprise software and services firms touched by the crisis. And, dependent on the direct exposure, we’ll see a ripple effect across the industry.
That’s because SVB’s clients in the enterprise space don’t sit in isolation. Take cloud observability company, Datadog, which is a known client (at least regarding SVB’s published case studies). Amongst their partner ecosystem, Datadog boasts IT Services giants Accenture, Fujitsu, and IBM. If Datadog encounters business continuity challenges—and there’s nothing to suggest they are—, then the ripple effect can swiftly spread across marquee outsourcers and into client engagements.
Of course, larger cornerstone companies (think the big SaaS giants now deeply embedded in most major businesses) will cause significantly larger problems for the industry, particularly as many are already grappling with rightsizing initiatives to drive down unsustainable costs. We could see some significant operational challenges if even a portion of their cash is locked away.
A bigger dent to innovation: A new funding winter
The immediate impact aside, we can expect a more damaging aftershock – a hit to innovation. SVB, as a financial institution, is a crucial source of funding for many high-potential tech firms—many in the consumer space but also a large cohort targeting real-world business challenges. Many will likely struggle to fight through the next few months without access to capital.
These firms may be small and nameless today but could be tomorrow’s enterprise tech giants. We may never know.
The impact is global. For example, TechCrunch reckons 60 YC-backed Indian Startups are struggling to redeem cash stuck in the failed bank. Encapsulating the issue, a founder told the India Express, “It is 4 am now and we have been on hold at the toll-free number given by the FDIC for over half an hour. We have around $2 million in our SVB account and need that to create payroll.” Meanwhile, in the UK, the Chancellor is working on a rapid intervention to provide cash to companies impacted by the crisis and give them some fiscal breathing space.
Smaller companies, or those earlier in their journey, will be the hardest hit. For instance, they’ll find it harder to lean on clients for early payments to help cashflow. And are far less likely to have followed risk best practices by spreading funds across multiple banks. They are also, on average, the source of the greatest industry innovation (today’s SaaS giants, for example, all started somewhere, very few are homegrown in already giant companies).
Bottom Line: The collapse of SVB isn’t just a banking crisis; it’s an innovation crisis
While many look to the collapse of SVB as an inevitable outcome of Silicon Valley excess, perhaps there’s some truth to the characterization. But below the surface, what we have here is the start of a potentially painful period for a tech sector already struggling to make sense of a world alien to their upbringing oriented around cheap cash. But worse, this could be the final nail in the coffin of innovation-focused funding for some time.
While the last decade of easy money deserves a degree of criticism, the inability of traditional investments to offer any meaningful return saw capital flow into startups and innovators. Now, why risk it? When the risks seem much higher, and the comparative returns much lower? And while there are already efforts underway to save SVB, it’s possible the damage to the tech sector is already done.
Retail banking remains the most visible segment of the global banking market with the greatest alignment (and exposure!) to consumer behavior and sentiment. This perpetual tension between what consumers want and what banks provide has driven nearly a decade of sexy front-end somewhat superficial digital investment to help banks defend against fickle customer loyalty. In our post-pandemic world, the top imperative for retail banks has shifted from digital engagement to front-to-back modernization. To succeed, digital innovation must permeate throughout banking operations and modernized core systems to enable new forms of value for end customers. Retail banks will get there with the help of their ecosystem partners.
The Best Service Providers for Retail Banks, 2023—Disruptors, Enterprise Innovators, and Market Leaders
Horizon 1 is digital: Ability to drive functional optimization outcomes through cost reduction, speed, and efficiency
Horizon 2 is experience: Horizon 1 + enablement of the OneOffice™ model of end-to-end organizational alignment across the front, middle, and back offices to drive unmatched stakeholder experience
Horizon 3 is growth: Horizon 2 + ability to drive OneEcosystem™ synergy via collaboration across multiple organizations with common objectives around driving completely new sources of value
The purpose of the HFS Horizons model is to align enterprise objectives with service provider value. We assessed 21 service providers across their value propositions (the why), execution and innovation capabilities (the what), go-to-market strategy (the how), and market impact criteria (the so what) to best understand and plot the value they offer to their retail banking clients. Here are the results:
Note: All service providers within a “Horizon” are listed alphabetically
The Horizon 3 leaders are, in alphabetical order, Accenture, Deloitte, EY, Infosys, TCS, and Wipro. These service providers have demonstrated their ability to support retail banks across the journey from functional digital transformation to enterprise-wide modernization to creating new value through ecosystems.
These leaders’ shared characteristics include deep industry expertise across the retail banking value chain, a full-service approach across consulting, IT, and operations, a strong focus on innovation, internally and externally with partners, co-innovation with clients and partners, and proven impact and outcomes with its retail banking clients around the world.
Retail banks should select their partners based on the value they seek.
The HFS Horizons model aligns closely with enterprise maturity. We asked the retail banking leaders we interviewed as references for this study to comment on the primary value delivered by their service provider partners today and in two years. Overwhelming, respondents indicated that the value realized today is Horizon 1—functional digital transformation focused on digital and optimization outcomes (72%). Two years from now, the story changes with an enhanced focus on using service providers to help achieve enterprise transformation (24%) and a heavy focus on driving growth and new value creation through ecosystem transformation (28%). Retail banks should select their partners based on the value they seek. The most effective service providers of the future need to enable the growth and transformation of retail banks across the ecosystem continuum.
Which of the following statements best represents the primary value delivered by your service provider today? And in the next two years?
N=41 retail bank respondents Source: HFS Research, 2023
The Best Service Providers for Retail Banks, 2023—Disruptors, Enterprise Innovators, and Market Leaders report highlights the value-based positioning for each participant across the three distinct horizons. It also includes detailed profiles of each service provider, outlining their provider facts, strengths, and development opportunities.
HFS subscribers can download the report here (available free for a limited time).
The latest Sourcing and Procurement Horizons report is a snapshot of leading procurement service providers’ sourcing and procurement services capabilities. The aim of ambitious CPOs is to realize the value of procurement beyond costs and savings if they want to avoid back-office irrelevance in today’s unforgiving era. And partnering with deep procurement experts to create and manage their critical sourcing data, develop their sourcing ecosystems, and constantly fuel them with new ideas and methods can really drive impact for them.
Disruptors, Enterprise Innovators, and Market Leaders
We assessed 10 service providers on their capabilities across a defined series of value propositions, execution and innovation, go-to-market strategy, the voice of the customer, and alignment with the HFS OneOffice criteria. The new Horizon landscape (below) demonstrates the providers’ positions within the three horizons. Horizon 1 (“Disruptors”) refers to those providers who have been able to drive functional procurement transformation, Horizon 2 (“Enterprise Innovators”) includes those who have reached the level of business transformation, and Horizon 3 (“Market Leaders”) includes all those providers who have closed the gap and moved towards ecosystem transformation.
The HFS Horizons report is aimed at evaluating the capabilities of service providersto deliver to the needs of enterprise buyers
With global competition intensifying and new technologies emerging, we are seeing a shift towards more automated and data-driven procurement processes and investments in category management to keep pace with changing markets. At the same time, enterprises must also navigate a complex regulatory landscape and manage a wide range of risks, including supply chain disruptions and changing customer demands. Service providers hoping to play a role in their procurement clients’ businesses thus require a deep understanding of their industries and a commitment to ongoing innovation.
Also, with the recent global assault impacting businesses greatly, in many organizations the procurement function has led organizations out of the crises. The face of procurement is no more a cost-saving function, but a strategic business enabler sitting at the intersection of the organization and its external connections. The service providers supporting this function are helping procurement reshape their role by reimaging their talent, technology, and process capabilities to build this function as a value enabler for the business.
Reshaping procurement role to realize its value beyond costs and savings
Driving down costs and reducing spending continue to be top priorities for procurement. Procurement’s role is changing given its responsibilities in managing third parties. It now includes new accountabilities like risk, diversity, sustainability, and social performance of third parties. Procurement assembles the resources to create the services and products the enterprise brings to market, and it arguably has the closest lens on differentiated value propositions that external stakeholders and partners can offer. Enterprises need and expect to fully capture the benefits a portfolio of external partners may have. To help procurement realize its evolving role, service providers are reimagining their skills and capabilities, designing, and delivering solutions around technology, and consulting to truly build this function to become a value enabler for the business.
Helping CPOs build ESG into the organization’s sourcing DNA
Effectively implementing the envisaged sustainability goals is an overarching organizational challenge, and it often means change for the product portfolio and the organization, including its culture. Service providers recognize the scope involved and are helping organizations with not just a sporadic launch of individual initiatives but rather a transformation of companies’ operations spanning the entire supply chain network. To ensure success and support the organization’s ESG (environmental, social, and governance) priorities, service providers are building core ESG teams, recruiting ESG leaders, and developing technologies and tools to monitor ESG markers.
The HFS Horizons: Sourcing and Procurement service providers, 2022report examines the capabilities of 10 FP&A service providers.
These service providers (in alphabetical order: Accelerate, Accenture, Capgemini, Genpact, GEP, IBM, Infosys, TCS, Wipro, and WNS) are offering differentiated approaches to meeting the transformation needs of clients. This research effort will assess how well service providers are helping their clients to envision and deliver sourcing and procurement transformation outcomes.
We assessed and rated the transformation capabilities of these service providers across a defined series of value propositions, innovation capabilities, go-to-market strategies, and market impact. This report also includes detailed profiles of each service provider, outlining their placement, provider facts, as well as detailed strengths and opportunities.
HFS subscribers can download the report here (available free for a limited time).
In our recent post discussing “The Six Principles of the Autonomous Enterprise,” we touched on all the key behaviors and technologies that must come together as smart leadership continuously seeks to refine the data it needs, in real-time, to be successful. We need to delve much deeper into the roles, traits, and responsibilities enterprise leaders must develop if autonomous enterprises are going to be effective in their emerging ecosystems:
A robust governance system embedded across all decision touchpoints guides the effectiveness of your autonomous enterprise
A strong governance capability has the talent, tech infrastructure, automation, and AI to deliver the data that will drive success with minimal manual interventions that impede progress and speed. The ultimate goal of an autonomous enterprise allows us humans to remove ourselves from some parts of the system so that we can make continuous improvements to the ecosystem as a whole.
Ultimately this is about machines making decisions where we previously had humans and removing humans from loops that don’t need humans anymore. Leadership must understand the data they need to be successful and assemble and govern the right system to deliver success. Hence great governance is about maximizing the ability of talent to understand and access data, make rapid decisions based on that data and have a seamless infrastructure that houses that centralized data, and embed an effective risk management framework. Bringing together those processes and interactions with trusted and scalable automation frees humans from slowing down decisions and operating effectively in fast-changing ecosystems.
What are the leadership roles needed to understand the data they need? How can we build the right internal teams and external partnerships to support an autonomous enterprise? And how can we design smart governance to manage key decisions faster with some degree of confidence? It really boils down to breaking down internal silos and designing leadership roles to drive better decisions and support talent.
These are the roles – and leadership traits – that will optimize the value from autonomous enterprise models
The Chief Executive Officer: The CEO should be the leader who drives the infinite mindset across the organization. He/she must continuously define the purpose of the organization and relentlessly drive a fearless collaborative culture that values stakeholder value beyond shareholder value. As a leader, it’s so easy to obsess with operational functions of the business during times of disruption or distress – in this case, a global pandemic – that it can create knee-jerk, often short-term decisions that could inherently damage your long-term vision, your business’ culture and your raison d’être. With no defined time horizon, no clearly-defined rules, and with players that may enter and exit at any time, the primary objective of an infinite game is quite simply to keep playing. The goal for businesses is to have the will and resources to stay in the game through thick and thin. And none more so that the current unpredictable and challenging business environment.
Having lived and worked through four recessions, I personally understand the rapid change in leadership mindset that can occur when a firm goes from peacetime and growth to one of survival and all-out war. According to author Simon Sinek, people look to leadership to serve and protect, to “set up their organizations to succeed beyond their lifetimes.” But in the modern landscape, most organizations place an unbalanced focus on near-term results that may ultimately prove to be self-defeating, like casting aside your umbrella in a storm because you haven’t been getting wet. In short, business is no finite endeavor. This pandemic lays plain for all to see the game we are really playing.
The CEO is the ultimate collaborator, forcing the change that is needed and balancing the desires of the various stakeholders (the board, key clients, key partners, the employees). His/her/their team to make this happen, must be responsible for the full gamut of their customers, employees, and partners, working with a transformational wizard to bring together the process and technology with the real innovation ingredient: the people. Taking people out of routine work that should be automated or digitized and refocusing them on responsibilities that require real innovation and cultural affinity is so valuable.
Chief Transformation Officer:Any transformation leader worth their salt must be able to drill an autonomous mindset into their teams and work out a plan to implement the right technologies to form the baseline to break down silos and centralize critical data.
This leader must link front to back office and ensure processes run smoothly across functions to deliver the data/outcomes the organization needs. This should ideally be someone who understands the challenges of enterprise operations and how to align them with the market-facing/client-impact areas of the firm. Forget the old GBS head / shared services head role, as this just has repeatedly failed to get out of the transactional back-office world and the “finance factory”. This person must oversee both technology and operations, understand the value of automation and AI, be able to design and implement change programs and work closely with the employee experience leader to eliminate the back office mindset from antiquated business functions into one that is aligned with the direction of the business.
Chief Customer Experience Officer: This is the leader who lives and breathes the world of the customers and obsesses with how to engage them as effectively as possible – right across the entire customer life-cycle – both with talented humans and autonomously where humans are not necessary. Ideally is someone who understands how to design customer interfaces, how to service customer needs leveraging both digital tools and physical support, and ensuring the entire employee base is unified around (and incentivized on) driving customer impact. In addition, the CCXO must ensure the marketing mindset is to communicate with the customer, educate the customer, and develop specific programs that have a real impact on driving customer engagement and business growth.
Chief Employee Experience Officer: Forget transactional HR, the employee experience leader is the person responsible for making the company a great, energizing place to work, where staff of all backgrounds, ages, experience levels cultures are energized by the values and desired outcomes of the firm. The CEXO must drive trust across managers and staff to embrace autonomous technologies and craft roles that maximize human interactions. Noone wants to be stuck in zombie roles in this environment where ambitious leaders demand value from their talent, delighting customers, colleagues and key partners. Never has there been a time when people skills are more important, supported by trusted and robust technologies and data infrastructures.
This individual must be the person who can manage the expectations of the board, the CEO, and the shareholders to create a company culture and values that everyone believes in. Moreover, the CEXO must be intimately involved in the creation and execution of training programs across the firm to attract talent who want to work for a company that will develop them, as well as establishing a culture and values they can identify with. This should ideally be a strong leader with broad experience in the business and staff development, who knows what it takes to be successful, and who understands how to motivate people beyond pure compensation. The best leaders today are also great people managers – and the CEXO role must be at the core of the business leadership, not some ancillary executive painting lip service and not having any real impact.
Chief Partner Experience Officer: As the OneEcosystem environment evolves, the need to collaborate with entities with common objectives across the entire customer value chain has never been so prominent. Partners are no longer just your suppliers. Suppliers are essential partners in delivering your goods/services. Still, the OneEcosystem looks at partners more holistically – partners in the ecosystem involved in providing the customer experience across the entire customer lifecycle.
An autonomous enterprise needs to function autonomously both internally and externally. Essentially, the OneOffice and OneEcosystem are effective when processes and interactions require fewer manual interventions and data can be accessed in centralized repositories. It requires leadership to have the ability to continuously refine the data it needs in real-time to be successful right across both internal and external ecosystems and the CPXO is the leader to drive this mindset into practice.
In the age of transparency, these roles must be codified to ensure accountability
It is not enough to provide a high-level description of the key roles that will govern an autonomous ecosystem – enterprises must codify the responsibilities of each one of them to ensure transparency when measuring their effectiveness.
As highlighted below, adherence to each principle of the Autonomous Enterprise comes with different responsibility levels across the leadership roles.
We believe the CEO should ultimately be accountable for understanding data needed for success. Thinking about data as an “ecosystem builder” requires a mindset and cultural change – if the CEO does not show the way, nobody will. The CEO’s mandate is to lead the way and be directly accountable for the overall performance of transitioning into a data-driven enterprise.
The Bottom-line: The old way of running businesses is fast eroding as we rethink what constitutes success and ambition. Bring on autonomous principles to drive the next wave of innovation
We launched the “HFS Enterprise Innovation Framework” in 2022 that enables organizations to survive (Horizon 1: Digital), thrive (Horizon 2: OneOffice), and ultimately lead (Horizon 3: OneEcosystem). One of the six distinct organization characteristics for enterprises to successfully create the OneEcosystem will be “autonomous processes” which allow firms to operate with less inefficiency in order to make faster decisions.
Did you ever think your enterprise could move to a 100% work-from-home environment with less than three weeks’ notice? This era of constant change has forced businesses to flex – vastly accelerating the OneEcosystem environment, dramatically cutting redundancies and improving processes at scale. Essentially OneOffice and OneEcosystem are effective when processes and interactions require fewer manual interventions and data can be accessed in centralized repositories. Hence leaders need to understand the data they need, have the right teams/partnerships to support them, and have smart governance in place to manage their decision points. The Autonomous Enterprise principles, if followed by smart, ambitious leaders, will enable the OneEcosystem mindset to prosper and provide the discipline and clean data needed to be effective.
There is a massive amount of change happening, and out of change comes real transformation. After years and years of complacency due to the relentless growth (and papering over the cracks of 2008), all of today’s organizations now finally have a burning platform to change how they operate globally. In fact, the autonomous platform is positively on fire!
