Welcome back to our interview with KPMG’s Captain Cliff who has proclaimed the Death of Outsourcing in a recent white paper. So without further ado…
Captain Cliff Justice, who happens to be Partner and U.S. Leader, Shared Services and Outsourcing Advisory at KPMG
Phil Fersht (HfS): You’ve spent a good part of your career in the outsourcing business yourself. What inspired you to coin the headline and write a paper entitled the “Death of Outsourcing”?
Cliff Justice (KPMG): Outsourcing has changed dramatically in the last five years. When we saw the megadeal declining, we started asking why. The answer: Companies had become more sophisticated in how they deployed their third-party service provider relationships. When companies were outsourcing everything, they just moved out large parts of their organization, handing them over to third parties to operate. Some of those were successful and achieved the goal, which was pure cost reduction. Labor arbitrage became truly feasible and economical when markets like India became a prime outsourcing destination with the acceptance of offshoring around 2001.
Phil: What changed?
Cliff: Over time, companies realized that the value they can gain from using a service provider extends beyond just labor cost reduction. By offshoring you get a lot more than labor arbitrage. You get good talent and providers with advanced processes that would have been difficult to source domestically under a traditional structure.
Phil: How has the rising cost in emerging markets affected this equation?
Cliff: Today, there is still labor arbitrage. But year-over-year wage inflation of 10-15 percent has started to have a material impact on the business case. There will be a day when we reach an equilibrium. I don’t know if that will be five or 15 years from now. Companies have to start looking at how they get the long-term value out of their service delivery organization. Is labor arbitrage going to be the sustainable answer?
Phil: What are your clients doing?
Cliff: Many of our clients see it as unsustainable. They are now looking at their services more holistically. They look at their suppliers in a different way, too, not just as a means to lift and shift resources but as a means to add value to their businesses. We work with hundreds of leading organizations and we also work closely with service providers.
Phil: So what part of outsourcing is dead?
Cliff: The traditional perception that outsourcing is purely about offshore labor arbitrage, or simply a race to the bottom. The death of outsourcing as I define it is the death of the simple, traditional, lift and shift offshore outsourcing. That is still going on and there is still a part of the outsourcing community where that is their value proposition. But we’re seeing a major shift in how the entire service delivery model is deployed which is much broader and delivers more value
Phil: How are companies using outsourcing providers instead?
Cliff: Companies are using third parties in a more sophisticated way to drive value. Outsourcing is now shifting to a race to improve value through the use ofthird parties. Now labor arbitrage is just a part of that. Enterprises are still interested in reducing cost. But now they are looking for cost reduction through other mechanisms such as technology enablement through the cloud (which they do through a third party). They are also using their own captives and shared services capabilities, then augmenting those capabilities with third parties to improve processes.
Phil: In this brave new outsourcing world, what do the relationships look like?
Cliff: They are beginning to look more and more like true partnerships where both parties share objectives. The service providers win because they are developing depth and breadth in an industry. They are strengthening their long-term relationships and moving up the value chain into business outcome objectives with their clients. They are entering areas of the business that can move stock prices and improve the value of that organization. In the same instance, they are improving their own value.
You can see this by looking at where service providers are moving in their clients’ organizations. Look where their focus is. You can see the satisfaction of the clients themselves. We’re fortunate to see a wide range of these relationships. The way to get true, long-term sustainable value is getting the partnership to align with the business objectives. Labor arbitrage by definition is temporary, so the unsustainable relationships are those that are in the traditional category of “your mess for less.”
Stay tuned for Part III where Cliff shares his views on whether we should drop the “O” Word, among other things…
Cliff Justice (pictured above) is Partner and U.S. Leader, Shared Services and Outsourcing Advisory at KPMG LLP.
Wow – HfS’ Peter Ackerson completes the hat-trick. So without further ado, here is the final installment…
The famous Mary Sue Rogers practically invented HR Outsourcing with IBM, before outsourcing herself to Australia with Talent2
Contrary to Mr. Fersht’s implications that any analyst would desert his/her post before an event is concluded, this analyst was there at 8:00 AM for Mark Hurd’s (Oracle) presentation and remained there until 12:30 for one last discussion. Hopefully my (modest) fee will be doubled for this dedication.
Payroll Gurus speak
For those of you who don’t know me, I am one of those rare individuals who likes payroll as a delivered service. Other than that aberration, I’m a fairly balanced person. So to have the opportunity to talk to senior leaders from ADP and Talent2 was a great event. Well, maybe not great, but at least interesting. This will be a brief recap as I intend to cover payroll as an outsourced service in greater detail at a later time.
ADP
Don Weinstein, SVP- Product Management met with us to give an overview of their model and plans. ADP has broadened their offerings over the last few years through acquisitions as well as organic growth. What they want to be known for is as a provider of Global HCM, with three major offerings: Payroll/Time; HR; and Talent. GlobalView, their SaaS offering based on SAP, will continue to be the growth engine. Of the 80+ countries served by ADP, ~40 are using localized GlobalView. ADP has always been SaaS oriented, even before the term existed. There is more to the story, but that will follow later. One tidbit of interest was the PEO business is growing at a substantial rate. The growth is tied to organizations wanting three deliverables: Healthcare cost arbitrage, risk management, and HR administration/compliance.
Talent2
I must admit I had not heard of Talent2 until recently. However with Mary Sue Rogers, late of Big Blue, as Global Managing Director, it was only a matter of time until Talent2 had more visibility in the US – (you can read a great interview here between she and Bill Kutik last year). Talent2, based in Australia, is a major player in the Asia-Pacific area with a significant number of their clients being US and Western Europe multi-nationals. Their primary offerings include payroll, learning administration, recruiting, and advisory. With service centers across the region, they appear to have significant knowledge of legal requirements and compliance. They serve the entire region with the exception of North Korea. We will be interested in following their progress.
Last comments…on the conference
General feedback was fairly positive…Bill and David did well on this event. We have not seen the final attendee count yet, but assume it will be significant. Next year’s conference will be in Las Vegas. Some of the exhibitors privately expressed concern as Las Vegas has far more distractions that Chicago. Let’s face it, when you’re at McCormick Place in Chicago, you are there for the day unless you want to invest in taxis.
If any of you who attended or exhibited would like to comment, please feel free to contact me.
Peter Ackerson is Research Fellow for HR Outsourcing and Shared Services at HfS.
And, for the first time ever, an analyst has managed to write a “second day” blog at an industry event. So, without further ado, here’s HfS’ Peter Ackerson with Day Two…
Events of the day – ignoring the 12 miles I walked around the Cook Convention Center
Contrary to Phil’s comments about spirituous liquids being imbibed at the behest of certain vendors; this did not happen…of course none were offered, so my morals remain untested. I did frequent The Twin Anchors restaurant with the best ribs in Chicago and where there is Positively No Dancing. There was also Day Two of the conference.
Naomi’s Master Panel
Naomi, of course, is Naomi Lee Bloom, technology guru extraordinary, who assembled a rather formidable panel of senior technology leaders from: Oracle, ADP, SAP, Salesforce.com, Workday, and Ultimate Software. The topic was Bringing HR into the Cloud. The session was interesting in that while most are direct competitors of one or more of the others, they obviously respect each other and indeed had similar (high-level) views about the topic. One interesting comment was that self-service was no longer open for discussion. The advent of SAS/Cloud driven platforms has imbedded self-service into core functionality. That is a general statement, not absolute, of course. It was also fascinating to hear companies that traditionally provided on-site products, now openly discussing cloud based models for core and/or appropriate modules. It did remain for Mike Capone (ADP), in his final comments, to remind everyone to “focus on what matters. It is all about the business”.
This luncheon session took place on Monday. While the full results are on HRE’s website as well as in the October issue of HRE, we’d like to add some comments. Of the ten award winners, eight were talent/recruiting products, one was analytics, and one was pure technology. Of the ten, nine were from relatively small companies; the other was from Monster. It will be interesting to see if this innovation gets delivered by the originators or if they get swallowed up by the big players.
NorthgateArinso unveils euHReka11
While platform releases come and go, this one is interesting. The press announcement was yesterday and we met with Keith Strodtman, Michael Clusters, and Will Manual of the NGA North American team. NGA’s focus remains on technology and services. While best known as an SAP shop, they do support other platforms and are one of the major payroll partners for Workday. Their ideal client is global, includes payroll, and has at least 10K employees. There are exceptions, of course.
The release includes two interesting phrases…Business Process-as-a-Service (BPaaS) and BPO platform. While there could be conjecture on whether two more acronyms/descriptions are needed, they do label how NGA intends to go to market. Their offering is not “either-or”; instead it is a technology platform designed to deliver outsourced services. As NGA intends, and using their terminology, clients can “mix and match” technology and services and change the proportions as business circumstances change. The cloud-based platform will allow clients 12 months to turn on any new functionality, thus leaving time for change management or process changes.
We also met with Eric Delafortrie, VP of Enterprise Strategy and Design. Eric demo’d the product. It now includes payroll support for 111 countries. It has a new UI, customizable by the end-user. One more interesting feature was the total integration of specific services (learning content as an example) into the core platform allowing for searches across all elements and linkage to all features…thus required training can be pulled from another source and brought into the talent features.
To someone who is not a technologist, it looks user-friendly and fairly complete. It will be interesting to see if this helps differentiate them in the marketplace.
Odds and Ends
There is an extreme mix of vendors at this conference, including some services I didn’t know existed. Two examples: Hughes provides a “break room of the future” and internhousing.com does provide “temporary housing for interns”. There are also a number of vendors whom I have no clue what they do, based on their signage and terminology. A little “cuteness” goes a long way.
And now over to Chicago, where HfS roving analyst Peter Ackerson is trying to fathom what on earth is going on in the world of HR technology. This could be the first post of several, however, it will probably depend on how many drinks get forced down his gullet tonight, so make the most of this one…
Who are these people and what are they doing here?
The first day of this event begins with obligatory thank-you to the sponsors, exhibitors, press, and probably some long-lost relatives. Next was the really obligatory keynote speech pitching “Cloud Surfing”…book available later. In any event, I spent most of the day surfing the Expo Hall with the 250+ exhibitors. Actually there were two groups of exhibitors…those with really good stuff and then those who added the latest buzzwords to their old offerings. Fortunately, the first group was larger than the second group. Many acquisitions were together for the first time including IBM/Kenexa, SAP/SuccessFactors, and Equifax/TALX .
I talked to a number of the exhibitors asking about whether they were seeing decent prospects and most said they were. That bodes well for the industry as a whole…clients appear to be moving to a buy mode. A number of exhibitors were from across the water, which again was indicative of many of these services truly becoming global in nature.
IBM/Kenexa rehashed and re-analyzed (for one last time)
We met with some of IBM’s senior leaders including Kellar Neville, John McGlone, Dan White, and Brian Day. HfS had already been briefed by IBM on the Kenexa acquisition and this was a chance to dig deeper. The Kenexa acquisition, when finalized at year-end, will include both software and services and was funded by those same groups within IBM. The products will fall within the Multi-Process HR Group and more specifically within the Tech Infused Smarter Workforce sub-group. Smarter Workforce will tie to IBM’s current marketing tagline of “Smarter Planet”.
An interesting point here is that IBM had been offering Recruitment Process Outsourcing (RPO) and allied services as a stand-alone product over the last few years. What is interesting is that not many people were aware it was available. In my personal case, I had been involved with RPO projects over that time period and IBM’s name never appeared on the radar screen. We knew Recruitment was offered as part of multi-process offerings, but not stand-alone. That will now change with a vengeance.
The deal appears to make sense. IBM acquires 8000+ clients in 80+ countries and more importantly acquires software, people, and 11 service centers, including three in the US. Kenexa and IBM offerings combined have the potential to deliver a full talent suite, including Learning, Assessments, Surveys, Performance and other related services. The trick, of course, is to smoothly integrate two cultures, platforms, and selling methodologies…and not lose any clients.
If there is any caution to be considered, it would be about timing. While there is sufficient time to integrate the two entities, things can happen. Contingency plans may be important for projects going live during the integration process, although as they say in Texas…this ain’t IBM’s first rodeo.
Overall Impressions
Peter Ackerson, HfS Research Fellow (click for bio)
There were a number of smaller exhibitors at this conference, some of whom probably have most of their marketing budget for the year invested in this show. However, it was good to see them taking the risk as they may be the break-through companies of the future. New blood is needed in this field; the industry needs to get away from re-branding offerings and find some revolutionary services and products. Having said that…is HR senior leadership willing to take a leap of faith with “non-brand-name” and revolutionary providers? I’m really not sure they are.
Over the next two days we have some interesting meetings lined up and will report back to you as appropriate.
Peter Ackerson (pictured right) is Research Fellow for HR Outsourcing and Shared Services at HfS. You can contact him here.
Danny Justice and his dad Cliff, who happens to be Partner and U.S. Leader, Shared Services and Outsourcing Advisory at KPMG
This man is calmness personified. He’s steadied more ships, weathered more storms, diffused more bombs than, well, practically anyone in the sourcing business. He’s literally grown up with the industry and today is the most sought-after consultative mind for enterprise leaders trying to figure out what on earth to do with their global morass of technology and business operations. However, what’s most compelling about this chap, is that he started life flying places, running an emergency-response 911 service, before (somehow) finding his way into the sourcing industry. In other words, he was already used to dealing with hazardous situations and dealing with hysterical people… on a constant basis. This was, clearly, highly appropriate training for what he was about to do next…
So without further ado, please allow us to introduce Cliff Justice, KPMG’s very own kingpin of the extended enterprise, who’s calmly building out one of the most impressive collections of experienced sourcing operators and thinkers in the global shared services and outsourcing industry.
Phil Fersht (HfS): Cliff, you were in outsourcing advisory before we were even calling it “outsourcing”. How on earth did you get started in this business?
Cliff Justice (KPMG): In the early 1990s I started a private ambulance company. The idea was to contract with the smaller cities and municipalities in the area to provide them with better technology and services around non-emergency ambulance transportation and emergency dispatch. A year and a half later, my partner and I sold that company to a larger company; so I joined that company, Rural/Metro, as an operations manager.
I performed numerous roles over a seven year period. I was director of marketing. I ended up in Seattle running a multi-state operation providing emergency 911 and non-emergency services to municipalities, healthcare organizations and hospitals. We were an outsourcer, it just wasn’t called outsourcing back then. It was called managed services.
Phil: How did that experience morph into outsourcing consulting?
Cliff: Shortly after that I was part of a consulting firm start-up called neoIT. We helped other companies look at outsourcing, particularly offshoring. We helped large enterprises develop relationships with service providers, put contracts together and assemble the service level structures. We helped them manage those relationships effectively. We formed a partnership with TPI; we went to market together as an end-to-end service around IT outsourcing, business process outsourcing and offshoring.
After I left neoIT, I joined EquaTerra as the head of globalization. We focused on global service delivery strategies. We became well known and had a voice in the market. We showed companies how to globalize their service advantage, manage their services and even improve them through multiple delivery options.
Phil: What were your initial goals when you joined KPMG?
Cliff: I had the opportunity to come to KPMG in 2008 and start a practice focused on outsourcing. I wanted to leverage the broader capabilities that a Big Four firm had around transformation that the smaller boutiques (the ones I had been a part of) did not have. We created a concept called “Extended Global Enterprise,” which is based on a delivery model concept that our largest clients have influenced. Some of the largest companies in the world have been very successful in applying large, complex and integrated service delivery models, which bring together a mix of shared services, third-party service providers and traditional outsourcing contracts.
We built a consulting practice around how companies improve and transform their businesses through the use of multiple service delivery models. We showed them how to align the different delivery models and technologies to their business objectives.
Phil: How has KPMG’s practice grown since you arrived?
Cliff: When I joined KPMG, it had a small sourcing practice focused on helping companies identify services to outsource and then outsourcing them. We put a slightly different team together and focused on a concept that we called “ the extended global enterprise.”
KPMG member firms brought in several consulting professionals to help build out the offering in 2008. Then EquaTerra was acquired (see post) and we’ve continued to see considerable growth, which was recognized by the IAOP’s recent ranking of KPMG as the leading outsourcing advisor.
Phil: Why did you integrate other areas of KPMG into your shared services and outsourcing practice?
Cliff: To allow us to offer the widest breadth of services. We obviously have expertise in the outsourcing life cycle; we know the process and methodologies of going through the outsourcing process or shared service capability.
But we also have deep functional expertise that we’ve brought into the practice from KPMG groups like our financial management group. We were able to bring in expertise in various sub-functions and in my view, most importantly, deep industry- specific expertise in industries such as financial services, healthcare, manufacturing, etc. In addition to the functional capabilities, we have IT, accounting, HR, real estate and legal expertise. For example, we have deep knowledge around issues such as accounting compliance and HR issues associated with the transaction and its implementation.
Phil: There’s been some widely publicized criticism that it’s hard for audit firms to do sourcing advisory. Do you find it restrictive in growing your client base in the type of work you want to do?
Cliff: We have robust controls and guidelines around the services that we provide to an audit client. However, there are very few services in sourcing that we can’t provide. We are not operational outsourcers. We are advisors, so we provide advice and offer guidance. We don’t put ourselves in a position that would generate a conflict of interest with our audit clients.
We haven’t found any restrictions that have materially affected our growth.
Phil: You’ve spent a good part of your career in the outsourcing business yourself. What inspired you to write a paper entitled the “Death of Outsourcing”?
So why did Cliff write about the “Death of Outsourcing”? Well, stay tuned for Part II and he’ll tell you exactly why…
Cliff Justice (pictured above) is Partner and U.S. Leader, Shared Services and Outsourcing Advisory at KPMG LLP.
Mark Smith is CEO, Ventana Research, and doesn't hold back…
Ventana Research CEO, Mark Smith, convincingly blogs that some major vendors actually have contracts with some analyst firms that give them rights to review, edit and approve research written about them.
Mark should know, having made third place in the analyst of the year in 2011 and boasting an impressive analyst resumé that spans SAP, META Group (Gartner) and Oracle, before starting his own successful analyst venture, Ventana Research, 10 years’ ago. In his industry exposé, he claims:
The dirty secret is that some of the largest technology vendors have forced industry analyst firms to contractually agree to the right to review, edit and approve any written research that references their name or products before it is published.
So this means that some vendors actually have the right to alter, or even veto, analyst insight on them, if they don’t like it. I have no reason to believe why a veteran analyst of Mark’s standing and experience would make this claim if he did not have irrefutable evidence that it was true.
The fine line between influence and coercion
Having worked for some of the traditional research firms myself in my earlier career, I can recall the pressure to shower the top paying clients with praise and frequent coverage… “Phil – you need to write more about xxxx as the renewal is coming up soon” was the frequent request from sales. I rarely complied, unless there was actually something worth writing about.
However, it is the unwritten rule that several leading vendors have, for years, paid handsomely for analyst firm access, where the analysts are lavished with ego-stroking, first class airfares and marketing hype to write lots of nice things about them. If anyone wants to challenge this fact, be my guest. Ask any vendor marketeers, analyst relations professionals etc, over a discreet bottle of wine, and some will proudly regale stories of how skilled they are at “influencing” certain analysts. Many stake their reputations and careers on getting their firms praised in puffy reports and placed in favorable corners of scatterplot charts.
However, what is completely unacceptable (if true), is Mark’s claim that some vendors have actually purchased the right to change what an analyst has written about them:
Many of we newer analyst firms refuse to play into this game of contractual review of research as it crosses the line beyond which we stop being independent and objective research and advisory services firms.
While we haven’t been approached directly at HfS to enter into such a contractual arrangement, I have been convinced that this is going on at a widespread level. Moreover, I am also hearing about industry analysts being given payments in vendor stock and other sweeteners.
Industry analysts are completely unregulated, so beware what you read
It’s come up in several discussions that today’s industry analysts should be regulated, such as equity analysts are, whose analysis can directly impact stock prices.
I am not sure how enforceable this is (or whether it would do any good), but there is little doubt that the traditional analyst business is at an all time low when it comes to credibility. Moreover, in today’s social world, there is a proliferation of boutiques and individual “influencers” who are able to get their research and insight to market quickly and easily. How can you gauge whether their work is credible or not?
Three simple steps you can follow to assess the reliability of research, if you are impacted by the analyst’s research
1) Request to talk to the analyst about her/his research. Most analysts worth their salt are happy to talk with someone who actually bothered to read their spiel. Get them on the line and ask them to elaborate further on why they said what they said… hearing it from the horses mouth will help cement their credibility. If you paid for the report, it’s your right to at least get a phone call with the author. If the firm / individual from where you bought it will not talk to you about the findings directly, demand a refund and find another analyst somewhere else to talk to you.
2) Ask the analyst how many buyers they talk to on a regular basis, how experienced they are in the subject matter, their methodology behind the findings. Do not accept pages of canned bullsh*t to explain how their firm does research either – demand your simple questions to be matched with simple answers.
3) Ask the analyst to disclose whether they/their firm take money from the vendor they covered. A pregnant pause will speak volumes. There’s nothing wrong if they do, but they should disclose it without hesitation. Ask them about their business model and what is their revenue split between buyers and vendors. All analyst firms in tech and services take money from both – and many actually make 100% of revenue purely from vendors.
All-in-all, the research world is the wild west – you believe what you want to believe – you decide if the research is credible. You may live and die by their insight, so you need to be smart and form your own judgement whether said analyst really knows what she/he is writing about.
Rarely has a debate aroused so many emotions, yet failed to reach any conclusions, which was precisely what transpired when 900 of us duked it out over whether to drop the term “Outsourcing”. However we view this debate, outsourcing is centered predominantly on one constant: talent.
Talent costs money and brings capability. Outsourcing is about helping enterprises get better capability without increasing costs. It’s about tinkering with enterprises’ talent bases to deliver improved services without increasing costs. So how – pray tell – can enterprises improve their talent without going through the considerable expense of hiring new people and training their existing staff? The answer is simple: find someone else to help you do it – and good luck with it!
Of course, better workflow and process, better quality and innovation are vital ingredients to achieve greater productivity and increased revenues, but you have to start with the most critical ingredient: your talent.
If the industry known as outsourcing can prove consistently over time it can improve clients’ access to talent and new capabilities without increasing costs, then we won’t call it “outsourcing” any more, we’ll just call it “IT”, or “Finance”, or “Insurance” (and so on) services. However, when the central component of the industry is to swap out local staff with foreign staff, the first question the general public (92% of whom – in the US – are actually employees) will ask is “Can these people do IT, finance or insurance better than we can”.
Fortunately, HfS has been able to reach out to close to 700 key stakeholders in the industry, 215 of whom are from predominantly large-sized US corporations, where we were able to ask them how they rated the attributes of their local talent to the overseas talent being provided by their service provider:
Where outsourcing is performing well
In terms of work ethic, process competency and overall value for money, service providers’ non-US staff are matching the local staff. If these staff are 30-50% cheaper, that’s a pretty good return on your investment if that’s all you really care about.
Where outsourcing needs to close the gaps
In terms of business understanding, initiative, innovation and culture, the non-US staff being provisioned are miles behind local staff. For example, only 43% of buyers feel their non-US staff understands their business, when compared to 88% of local staff. Yes, this gap will surely close as the industry matures, but I find this talent-chasm unacceptable in today’s global marketplace.
The Final Word: Service providers need to improve their talent mix and use more local talent, however, buyers need to demand it
Outsourcing has earned a largely crappy reputation because it’s become so focused on providing rules-based models that can enable offshore staff to get the job done. Many clients, for whatever reason, have been convinced they can do this with 90% of their delivery staff sitting offshore, or some simply didn’t care and wanted to make the numbers work.
However, our research clearly tells us that most clients care passionately about innovation and process improvement, so why are we persisting with these imbalanced delivery models, where the outcomes are performing miles from what we want to be? Why aren’t today’s buyers training their own staff to manage their global resources more effectively, so that more of them do understand their businesses? Why are service providers so insistent on sending offshore managers onto their clients’ sites to manage their own staff, when they should be training their clients to be more self-sufficient?
I believe this industry has become skewed – too much work has been shifted to offshore locations, when their needs to be greater investment in improving local talent. Providers need to be more global with their focus and provide more balanced location options for their clients, even though clients will have to pay more for it. A more balanced onshore/offshore mix will lead to better development of offshore personnel and help bridge the current talent-chasm that is plaguing today’s outsourcing industry.
There’s no doubt that developing, educating and – quite simply – having the right talent, has become the number one issue in the world of outsourcing and shared services. In fact, HfS Research has found that companies now place twice as much importance on having the right talent, compared to when they began their outsourcing and shared services initiatives.
We are inviting you to participate in a brief survey to explore today’s talent management challenges facing both your executives and staff – and you could win an iPhone 5 into the bargain (gasp), in addition to a complimentary copy of the study findings.
Rest assured that your contact details will be treated with the strictest of confidence and only used for the purposes of sending you the optional executive report and entering the iPhone 5 prize draw.
This will take no more than 10 minutes to complete and will give you some food-for-thought on your organization’s own talent needs, while you cogitate your answers. Click here to complete our survey
As always, we truly appreciate your supporting our research – which we always share with the industry to further our collective learnings.
HfS Research VP Jonathan Yarmis (pictured right) putting in the hard graft at the Dreamforce show
We can’t understate the importance of social media on the enterprise. Hey – we bet our whole business model on it! And that’s why we hired one of the best thinkers in the social sphere to help us understand how social will impact business processes and how enterprises will operate in this new social world we live in.
So we coaxed Jonathan Yarmis from his Dreamforce-induced hangover, where he was living it up with 90,000 other technology geeks, to tell HfS why social actually matters….
Phil Fersht (HfS): Jonathan – why the hype over social? should enterprises care? what is hype versus reality? is this just the tech industry jumping in the next soundbite, or is there something real here?
Jonathan Yarmis (HfS): The hype over social is very simple and I can capture it in one statistic: 950 million people are on Facebook. Social is transforming the way we communicate with each other, and the way we discover and share things.
Enterprises should care at so many levels. First, we’re in an era when consumer technologies move quickly into the enterprise market so consumer social trends presage changes that are coming in to the environment. Second, you should care if you want to reach and communicate effectively with your employees, partners and consumers. Your customers are already sharing insights and information via social channels. All organizations will have change brought on them by these stakeholders. Savvy enterprises will capitalize on these changes to build better connections with their communities. We just came back from Salesforce’s Dreamforce user conference, where the whole theme of the 90,000 person event was building the social enterprise. Microsoft paid over $1 billion to buy Yammer. Enterprise vendors are making real and substantial investments to build out their social portfolios. Oh yes, there’s something real and building here, and the vendors continue to double down on that investment and belief.
Phil: Is “social” just being over-hyped like cloud was, or is there some real substance here?
Jonathan: Of course social is being over-hyped. That’s the nature of the technology business. But let’s understand the nature of that overhype. It has been recent history that we overhype in the short-term but actually under-hype in the medium term. Think back to the days of Pets.com and Webvan. Perhaps we were a little ahead of ourselves in the short-term. But fast forward 10 years. If I had told you a decade ago, that if the Internet shut down, we’d just go home because we can’t get our work done; if I told you a decade ago that governments would be toppled in large part because of social media; you would have laughed. Yet here we are a decade later and those are our realities. Yes, there’s substantial substance here but even more significantly, we’re still in the very early stages of realizing the business value to be derived and the significant opportunities that exist, not to mention the changes that social will bring about to the way we work.
Phil: What’s next for social beyond Twitter and Facebook? Are we already at maturity stage for social, or is there still a long way to go?
Jonathan: We’ve just scratched the surface of the changes that are going to be wrought by social. Phase one has largely been a consumer phenomenon and our functionality has been limited, largely constrained to the creation of what we’ve taken to calling activity streams (your Twitter or Facebook news feeds). In the second phase, we’re going to start mining those activity streams for more business insights, from sales indications to customer support requirements and more. And amplified as these streams are by the deployment of mobile technologies and the proliferation of sensors and other forms of intelligent devices, social platforms will become more intelligent, more real-time and more active.
There’s a recurring pattern with new technologies. First, we enhance existing processes through the incorporation of the new technology, in this case social. Only later on do we ask “what can we do that we haven’t been able to do before?” We’re about to embark on that exciting second stage with social, which is where we realize the greatest value of a new platform, albeit with the greatest change and threat.
Phil: How is this going to impact the global services industry?
Jonathan: Social may well prove to be one of the most exciting technological changes in history in terms of how it impacts the global services industry. For service providers, there are large opportunities in the short-term. Customers are dealing with an unfamiliar challenge and so many opportunities that they’re often paralyzed. Call it the tyranny of opportunity. Into that breach, service providers can help customers make meaningful advances in terms of helping clients to build a “social business.” But that’s not the big opportunity. More profoundly, rearchitecting businesses around social processes creates opportunities for service providers to facilitate significant process improvement. Service providers can incorporate themselves deeply into a client’s business process, sharing knowledge, driving insights through analytics and otherwise becoming integral parts of their clients’ business processes. Some service providers will be challenged by the emergence of social businesses, fearing loss of account control. Far-sighted service providers will realize social platforms actually enable deeper connections with their clients, enabling the providers to better add value to all areas of their clients’ processes.
This is one of those lead, follow or get out of the way moments for service providers, except it’s more like lead or wither away into irrelevance. Your clients are changing their business processes; you’ll either facilitate those changes or fall victim to them.
Phil: Jonathan – thanks for the feedback from Dreamforce! Now for your next futuristic gig at the HfS 50 in Boston 🙂
Jonathan Yarmis is Research Vice President, Social Business Services Research and Disruptive Technologies at HfS Research, You can view his bio here and email him here.
