I received a ton of email and blog comments this week from various people airing their views on Senator Schumer’s visa-fee hike. They tended to be in the form of one of the following:
“Right on – this guy is all about protectionism and has little idea how to create jobs”
“The policy is so toothless, it’s barely worth talking about”
“It’s only targeting firms who excessively use H1B staff, so what’s wrong with that?”
“We have to protect American jobs”
“I never knew you were a Republican”
All fair comments – except the last one. Firstly, my politics have always been left-of-center – I am merely a global realist and believe in intelligent, informed debate on these tough issues. Secondly, it never ceases to amaze me how polarized people in the US are when it comes to politics. You’re either Democrat or Republican – there’s now common ground on anything. And thirdly, I’m not American anyway, so it’s a moot point.
The other major point that needs to be made, is that this policy does nothing to create American jobs – it’s merely political grandstanding from the protectionist lobby. As we pointed out, the visa-hike will only encourage further offshoring, and the inflated fee is not enough to have any meaningful impact on altering current dynamics. Moreover, it’s pretty hard to couch these political actions as anything but protecti0nist politics when the Senator in the driving seat brands one of the leading Indian IT services firms a “chop shop” (detracted, or whatever – he said it).
What options, then, could the US government consider, if it wants to “stop” Indian IT services firms bringing temporary IT staff over to the US, and create an environment for fostering onshore technology employment and innovation?
1) Give Indian services firms tax-incentives that would sufficiently motivate them to hire and train US IT employees. Many of these firms provide a great training ground for new IT talent – now let’s ensure they are motivated to train and develop talent in the US and not just offshore staff. Many leading Indian firms have proved extremely good at training, developing and motivating young IT talent, so why not get us a piece of the action?
2) Give US enterprises tax-incentives for creating new onshore IT jobs. This won’t be any harder to administer that call center tariff etc.
3) Establish an oversight committee that will devise an immigration strategy to encourage top talent into the country and ensure it stays here. Ensure immigration policies are focused on developing the talent pool in the country and not open to abuse;
4) Establish more dynamic partnerships between academic institutions and businesses. We don’t see enough involvement from the academic sectors in the global sourcing industry today – a few firms, such as Systems In Motion, are pushing the agenda, but these firms need a lot more investment to get anything like the scale and execution capability to be effective in the global market place.
We live in global economy and we need to focus on being competitive for a larger piece of the pie, not trying to protect limply the dwindling one we have left. The Chinese economy is the new powerhouse – we need to ensure we have the innovators, thinkers and operators to compete effectively. Countries with developing talent, such as India, can help us be competitive, as long as we create smart entrepreneurial environments to work with them.
Chuck (center) and his selfless buddies strategizing how to stimulate the US economy
Senator Charles E. Schumer, not content with ludicrous attempts to tax the US consumer for taking an offshore call, has continued his personal tirade against the use of offshore services, by pushing through legislation to add a further $2,000 tax for an H-1B visa application, and $2,250 more for an L-1 visa application. This CIO Magazine article by journalist Stephanie Overby does an excellent job discussing the situation.
You have to wonder about the motives of a US senator, who describes Infosys as a “chop shop” and pushes through legislation that is deigned to antagonize service providers, as opposed to what he should be doing: helping to make US service providers become more competitive, and US IT / BPO workers more attractive to be hired than those offshore.
In terms of creating more US IT jobs, this is a further backward step in trying to re-energize the US IT industry for the following reasons:
1) Indian IT services providers will attempt to conduct more IT work offshore / outside of the US, whereas in the past they would have conducted the work locally with either a US employee, or an Indian visa holder in the US. Impact: more work moves offshore as opposed to onshore work being created
2) Indian IT service providers have been investing heavily in hiring onshore staff, and have been creating local employment. However, the new visa taxes will only help to accelerate the movement of more complex IT work offshore. The Indian providers have a proven successful strategy of taking on complex IT projects and “learning on the job” with their offshore personnel. This new fee will only encourage them to take bolder steps to take more work offshore. Impact: more work moves offshore as opposed to onshore work being created
3) When Obama was elected and voiced potential moves to slowdown offshoring, several Indian IT providers made investments in locations such as Canada (especially Ontatio) and Latin America. They will now look to leverage these investments more aggressively. This is great news for the developing nearshore IT services markets. Impact: more work moves offshore and nearshore, as opposed to onshore work being created
4) With the global IT services industry poised for consolidation, this may encourage several of the leading Indian IT giants to acquire onshore US firms, now they have more financial incentive to do so – which would likely have further negative ramifications for the US IT job market. When Indian firms acquire US IT services firms, they will seek to rationalize the existing onshore staff to support their offshore operations, while keeping salary costs at a minimum. Impact: more work moves offshore as opposed to onshore work being created
5) The US IT and hi-tech industries grew up on bringing talent into the country that added new skills and ability – and was often more affordable. By further discouraging bring the talent to the states, Schumer and co are driving the next wave of IT development out of the country. Impact: innovation moves offshore, and more vacant office-lots in Silicon Valley.
President Obama has set out to be a transformative president, who can elevate US competitiveness in a global economy and create jobs by intelligent fiscal stimulus. He needs to drive policies that will stimulate employment, and stimulate innovation. The economic wonder that became America, was centered on an immigrant society, and attracting talent to these shores. My fear is that policies like Schumer’s are moving the US further away from the very principals with made its economy what it once was. The imperative word here is “was”…
we'll be happy to deliver that to your door for an additional $20…
Today’s outsourcing industry is balanced on a knife-edge as costs continue to level-out across service providers for operational work. Business leaders are demanding more innovation and productivity from their outsourcing endeavors, but their delivery teams tend to be more concerned with the work culture of their provider.
So how can leading service providers deliver all the goodies CFOs and CIOs want, in addition to being really flexible and easy to work with? Quite an ask, but those who can deliver both will win out. So how did we arrive at this impasse?
During the early years of this Millennium, the onslaught of the Indian-headquartered outsourcing providers was centered on low-cost service provision, and a willingness to do whatever clients wanted to win the business. This strategy has proved especially effective for the less-complex IT application development and maintenance work, and several operational business processes, such as invoice or claims processing.
In today’s market, the Western providers have been forced to bring their costs in line to be competitive for the “lower-end” work, by expanding and optimizing their offshore/nearshore operations. Once their prices are within 10-15% of the offshore-centric providers, the provider selection decision veers away from price, and towards one of with whom do we actually want to work?
Two different services cultures have defined today’s outsourcing business
We’ve witnessed an incredible dichotomy of styles in the outsourcing business over the last decade – one of top-down dictation from our traditional incumbents, in stark contract to the bottom-up tenacity from our growth machines from the sub-continent. To put it quite simply, the Western incumbent providers show up at the CIO’s or CFO’s office and tell her/him how they can change their world to do things their way, while the Indian-headquartered providers have typically operated a rung or two down, offering to do whatever their clients need to get the job done – and make them look good in the process.
One set of providers has grown considerably over the recession years, and continues to outperform the industry, while the other is maintaining a status quo, with far more modest growth. And, as we’ve mentioned, it’s not all about price anymore – several hundred thousand Indian and Philippines citizens are proudly showing up to work in an Accenture, Capgemini , Deloitte or IBM polo-shirt. Both the traditional providers and the newer Indian breed can offer low-cost services to take on new business. So if it’s not really about cost anymore, and the Indian-headquartered providers continue to gain marketshare in this environment… the secret sauce must really be about work culture. Let’s examine further…
C-levels don’t get so involved in service provider selection. Most IT or discreet business project decisions are overseen by the direct report to a C-level (or even lower than that). If you’re a VP / director level executive, why would you want some flash MBA-infused team of hotshots telling you what to do, while constantly trying reach over your head to your boss to let him (subtly) know you could run your department a lot smarter, and more cost-efficiently? In this post-recession environment, people are incredibly nervous about their job security, and the last thing the VPs and directors want is a provider that is going to threaten their cosy world.
Conversely, a team of humble, dedicated and determined service provider staff, who see you as king of their world, and are prepared to do anything for your business – and promise you outcomes you probably realize are unrealistic (but who cares, right?), are far more appealing providers for your custom.
Peer pressure up the chain trumps a round of golf. In the old days, when CIOs were wined-and-dined at offsites in Monte Carlo, they made the provider selections. They could afford the occasional $100m project-wastage and no one really cared (hey – it’s just IT, right – it’s just a black hole of lost cash, right?)
Today, most CIOs are tied to their desks staring at a spreadsheet trying to keep within budget, while trying to prove they can deliver value to their board – they are in a pressure-cooker environment, with ever-decreasing tenures. They are completely reliant on their teams to bring them results. When their two, three, or four direct reports come to you with a suggestion to “use this provider”, it’s very hard to challenge a consensus from your own team – you’re the boss and you need you team to like you, or you’re in serious schtuck. You don’t have time to mess up, and you may be out of a job soon anyway, so short-term success works better for you anyway. If you recommend your consulting partner buddy (who just three-putted to let your win on the 18th) propose work for your managers down the ranks, the chances are they’ll find every excuse not to use them. If your team isn’t happy and you’re making multi-million dollar investments, you can’t afford mistakes, or a lot of dissention from the ranks beneath you. Might be easier just to keep everyone happy as long as you’re staying on budget.
So what can the CIO do? Risk upsetting your team, or keep the costs low and find a way to keep the machine ticking over and meet the operational goals?
The next wave or productivity requires a new approach from the industry. Quite simply, most of the managers, a rung down from the CIO, have squeezed as much as they can out of the easy work. The app support, the testing, the simple coding is running about as cheap as you can – you even bring in sourcing advisors to keep the contracts running as low as you can manage. There’s no more room for maneuver. That nice Indian head-quartered provider – who still loves you as much as the first day they showed up at your office – can’t find anymore wiggle room to keep making you look good. Besides, today they’re a multi-billion dollar eneterprise with a lot more overhead, and have sales heads forcing them to start raising prices.
At the same time, some of the old Western providers you abandoned a couple of years ago, can now match the prices you’ve just been quoted from the “low-cost” provider. They want you back and are begging for that second chance, promising delights that you forgot that failed to deliver in the old days…. WHAT DO YOU DO?
Bottom-line: the Indian providers are trying to be more like the Western providers, and the smart Western providers have studied the Indians who’ve been eating their lunch, and are working out a game plan to win back lost business. The cultures are moving closer together.
Does that mean we may actually see one of the Indian biggies merge with a Western one? I’ll put a stake in the ground and say we will. In the next year it has to happen – a blending of the two cultures to form a mega-provider which can do it all.
Leadership: a very fine line between love and nausea…
I got a few of emails today from people who claim you can’t only blame Hurd for HP’s current malaise, moreover it’s the whole HP leadership that should be held accountable.
I say it’s all about the leader and the team he or she molds that drives the vision and instills passion down through their organization.
Today’s winning services firms are being shaped by their leaders:
Accenture’s Bill has charisma, is pragmatic, and has had the guts to bring in new blood and thinking to constantly break new ground; Cognizant’s Frank’s incredible energy, youthful thinking and intellect defines his firm; Genpact’s Pramod relentlessly drives his firm on with a consistent vision; Infosys’ Kris has a determination to shape the industry; while Wipro’s Suresh has stuck to his guns to deliver his own brand of global sourcing to clients. These are just some examples of today’s services leaders who define agendas for their firms and are prepared to adapt to change. And one other thing – if a large deal was on the line, they would be personally involved.
Several other providers have forgotten their personalities, are lumbering along trying to meet certain metrics, but seem to be following trends, as opposed to leading and defining them.
Now, none of these providers are perfect – they all have their warts (hell, we all have warts), but what they do have are leaders with a vision and an understanding of how to position their firms in unique times like these, where there is no “set” way of doing things. Today, there is no rule book. Instead there is passion and energy, creativity and innovation. Moreover, services companies need to forge an identity to survive.
Hurd’s challenge was that HP was too big and too focused on hardware. He needed 5% annual growth, which was about $6-7B a year. He would much rather sell a hardware device to a business or a retailer with a service contract attached, than sell a more strategic and “sticky” business process contract.
HP doesn’t have time to make a poor, or even an average, decision. The firm needs a vision, it needs to detail specifically how it intends to service its customers, and how it intends to help them find new thresholds of performance. It needs a leader who can step in to re-energize the firm, set out its agenda, nurture the cash-cows, while investing in the growth opportunities. The industry is watching which direction HP takes – and this one’s crucial.
When Mark Hurd took up the reins as HP’s boss back in 2005, the company badly needed him to stabilize the business, drive up the stock price, while instilling discipline and cost-control into many of its global operations.
Whatever the reason for his demise (and quite frankly, he’s not Tiger Woods, so who cares?), he’s done what HP needed him to do – and this is a good time to put someone else at the helm who can start closing the gap with IBM and others. In fact, he should have gone sooner, because there’s a lot of ground to be made up right across the board.
One of those is a flagging BPO business that had outperformed anyone’s expectations before the EDS merger threw it into a confused shambles. The addition of EDS should have been the cherry on the icing-on-the-cake to drive the emergence of a major BPO powerhouse to challenge the likes of Accenture and IBM.
In pre-EDS days, HP was giving everyone a run for their money winning several mega F&A engagements, such as Nestle, P&G, Clorox and Molson-Coors, and were doing a great job bundling IT and ERP-enablement services around their BPO. The firm was also discretely picking off payroll-centric HRO engagements and building an impressive competency for running multi-country SAP-based payroll services. HP also boasts one of the world’s largest supply chains it could have leveraged to drive its source-to-pay offerings.
But Hurd rarely mentioned BPO in his speeches or strategy discussions – the business relied firmly on the determined leadership of some great individuals (you know who you are) who drove that business in spite of lacking much senior leadership support. Consequently, since the EDS merger, more of the BPO leadership exited the business, the ExcellerateHRO business was sold to rivals Xerox(ACS) and the firm is rarely seen in major pursuits. Instead, most of its BPO focus is polarized on the healthcare sector, which is smart, but not when the rest of the BPO areas are neglected.
Bottom-line, Hurd is one of those IT operations guys who didn’t quite understand the value and stickiness BPO engagements can bring to a IT-BPO services provider – he’s a dollar- and-cents guy, not a business transformation one. Accenture and IBM have multi-billion dollar BPO businesses. Infosys, TCS and Wipro are tenaciously growing BPO business that are threatening to surpass HP’s. Capgemini has also moved in front of HP in the pecking order in most deal pursuits – particularly in Europe. And even in the verticals, such as healthcare, up-and-comers like Cognizant are edging in front.
HP is a great company and has a solid base of BPO from which to build. But it’s “lost years” in BPO need addressing quickly by whomever next takes the hot-seat. And this time, there isn’t much time, in a polarizing industry with twice as many competitors. An acquisition or two will likely be needed to turnaround its stuggling BPO service lines… and we’ll be hinting on where this should come from very soon.
Like an ’86 Margaux, some things just mature with age, and one of those is the good ol’ newsletter.
Read the Finish Line, edited by HfS analyst Bruce McCracken
So we asked another fine vintage, HfS senior analyst, Bruce McCracken, (whose claim-to-fame is once receiving a fat check from the State of Texas), to pull one together for us.
This month we’ve featured industry dignitaries such as Vinnie Mirchandani, Naomi Bloom, Ben Trowbridge and Mark Trepanier airing their views about Mahindra Satyam’s re-emergence and AON’s takeover of Hewitt.
And don’t miss a superb interview with EquaTerra’s Stan Lepeak, discussing the latest Industry Pulse and its new findings on Cloud Computing adoption.
Bruce McCracken (pictured center) is senior analyst at HfS Research, and editor of the Finish Line.You can read his bio here.
You can submit news and views that you deem appropriate for inclusion in future Finish Lines by emailing Bruce at bruce dot mccracken at horsesforsources dot com.
The Windy City will be injected with some additional hot air on 28th September for the ultimate finance and accounting shoot-em-up.
Yes, HfS has teamed with its networking partner, SSON, to present a superior discussion across the ‘hood of F&A and sourcing, with Northern Trust’s Jay Desai, one of the buy-side’s most respected voices on sourcing governance, Capgemini’s own sourcing sheriff David Poole, the pontiff of procurement Jason Busch… and bossed by HfS. We’ll be debating the burning topics in finance technology, shared services and outsourcing, waste management, and presenting some new research findings from our recent F&A studies.
As usual, we’ve haggled a blazing 15% discounts for hungry horses readers – just quote promo code “HfS_FT2010” when you register.
During Part I, we talked about social media and marketing, a little bit about outsourcing, and touched upon the late-night cannoli scene in Baltimore.
Rebels without much pause…
In Part III, we will discuss the merits of ricotta versus custard cream filling, but for now, let’s dive into where the outsourcing business is heading…
Phil Fersht: I’ve observed, at several recent forums, that most software folks still don’t really understand the services market. They seem to think services people do the grunt work and it’s still all about the app. Do you agree that software people still don’t have their head around ITO, BPO and how it all fits together?
Ray Wang: I think software people see that the value-add in the solution is what customers are looking for. And that last mile, which is still in services, is even harder to deliver as customers’ requirements continue get tougher. Flipping that around, do you think the service providers see that their solutions are increasingly differentiated by software or their own IP?
Phil Fersht: Let’s look at a growting BPO area like F&A (finance and accounting), where clients want service providers to handle their AP, procure to pay, payroll and other related processes. The providers can partner with a company like NetSuite or Workday and deliver to their clients the hosted application and the processing around it. But if you have 10 service providers offering NetSuite F&A, what’s differentiating them? Their ability to process invoices? No. For the service providers to gain competitive advantage, they need to develop their own IP and their own applications to add value for their clients. And when we’re talking about the coming together of SaaS/Cloud and BPO, it really becomes more of a business transformation issue than a technology transformation one.
Ray Wang: Yes. With the Cloud, all the pieces of what I call commoditized infrastructure go away. Think about it. Do I really care what hardware, databases or applications are out there? No. All I really care about is that you’re giving me a service level guarantee. But then I want more. Can the service provider give me value add on top of that? Can someone give me those services with strategic economies of scale and innovation? The providers that help with commoditized processes and incrementally add more value are going to make a big difference.
Phil Fersht: One of the most fascinating aspects of the way the industry is developing, is the rapid rise of the Indian pure play providers. They’ve really been a game-changer in how these solutions get adopted. Their attitude is increasingly, “Let’s try and sell a solution first, be flexible and as easy-as-possible to work with, and then figure out how to deliver it.” In many cases that has actually worked for them. We’ve seen that have a huge impact in the ITO business, where you’ve seen the rise of companies like Cognizant, TCS and Infosys as they’ve adopted this bold attitude of marching into clients and increasing their footprint by being very easy to work with, and very eager to take on business. Quite frankly, if I were an IT VP these days and I had one of the Indian providers coming to me, begging for my business and offering to do whatever it took to win that piece of the pie… it’s becoming vogue for IT professionals to start dealing with these folks. That’s been a major change from everything we’ve previously seen, and it’s reaching a fever pitch with the Indian providers, and poses a lotof critical questioms regarding where things are heading next in the outsourcing business. They’ve really proven themselves in the IT services space, and are now trying to do something similar in the BPO space.
Ray Wang: What we’re seeing among the Indian providers – no matter what their entry point was, whether testing or break fix or maintenance – is that there’s a certain level of confidence that wasn’t there 10 years ago. They’ve been doing a fairly decent job across the board, and each one of them has a stronghold with achieving “quote unquote” trusted advisor status. As they’ve been trying to achieve that status, they’ve started looking at IP for differentiation.
A related question for you Phil: are the service providers becoming less reliant on the large software vendors, or do they still see them as an important part of their income stream, especially dealing with SaaS?
Phil Fersht: I do think the way service providers engage with technology, is proving to be one of the major differentiators, and the service providers who are developing their own IP and actually acquiring SaaS solutions are gaining quite a significant advantage within industries. So let’s take an example of Navitaire, an airlines reservations solution Accenture acquired, and now leverages to deliver full scope F&A services, hosted and fully BPOed, to all the major low cost airlines. It’s very hard to compete with them on that business because only one other competitor we know has developed a similar reservations system. It’s the same in the insurance industry, where providers like Infosys and Genpact have acquired specific insurance platforms and are delivering them as their own hosted applications to their clients. On the flip side, you have five or more different service providers offering an off-the-shelf application like SmartStream, which does trade settlements in banking. And all are trying to differentiate themselves on how distinctive they are. But, “We do it better than they do because understand GAAP better,” just isn’t a selling point. It’s much harder to differentiate on operational capability than it is on having something no one else has. That’s why technology IP is becoming so important for the service providers. And I think we’re going to see more exclusive partnerships pop up. The software vendors are going to want to have exclusive arrangements with services companies so they can provide them with the support and the capabilities to deliver and manage it properly. And having exclusive partnerships with cutting edge software is going to be a major differentiator for the providers, especially as industry specific solutions become more important in this market.
Taking it beyond exclusive agreements into acquisitions…do you think at some point we could see some one of the big ERPs purchasing one of the leading service providers?
Ray Wang: It depends. It seems most companies are headed in the direction of having both technology and services businesses. If you look at the transition for software vendors and getting tighter services partnerships, they can easily build their professional services units. Instead of doing an acquisition, it may be cheaper just to recruit everyone into their unit. I mean kind of like the old IBM model – you can’t beat them, they’re just going to be the largest provider in India. What do you think?
Phil Fersht: Well, you could argue that Oracle buying Sun was the first start at looking at this space a bit more – even though I think Larry’s motives for buying that company were very different from making a services play. It’s already invested in BPO by buying an Indian company called i-flex Solutions, (which they renamed Oracle Financial Services Software Limited.) It wouldn’t surprise me if things got so competitive at some point that one of the software companies decided it needed to have a greater services channel. Because, for example, when you look at SAP’s revenues, isn’t its consulting business one of its fastest growing units right now, and it has to sort of disguise some of that revenue?
Ray Wang:Well, some vendors are actually claiming license revenue for custom maintenance work, so that makes things very interesting. For example, Amdocs has been 80 percent services revenue for a long time. But is it a software company or a services company? I argue it’s a DSI shop focused on telco that happens to own software.
Phil Fersht:I agree, and looking at it very simplistically – if a company is increasingly moving to hosted SaaS-based applications and the amount of IT reconfiguration is consistently decreasing, we’re not really talking about these massively drawn out, painful systems reengineering projects. Instead, the company is going to have to change all its processes and completely transform its business to run on this type of solution. Since we’re really moving from technology transformation to business transformation, I believe that means the winners in this space are going to be the ones that can take their clients through transformative business change, not technology change.
Ray Wang: Interesting, huh?
Phil Fersht: These are certainly interesting times, Ray…
Ray Wang (pictured top right) is Enterprise Strategist, Disruptive Technologies Expert and a Managing Partner at analyst advisory firm, Altimer Group. You can rach Ray at R at Altimetergroup dot com. You can also follow his tweets at @rwang0. His personal blog, “A Software Insider’s Point of View” is one of the most visitied in the software business.
There is only one Ray Wang. Thank the Lord, because if there were two, the Twitter servers would likely fall-over and the industry wouldn’t need anymore analysts.
In all seriousness, Ray Wang is a true dynamo in the technology and social media world, having made his name as a superior analyst at Forrester Research, with spells at PeopleSoft, Oracle and E&Y, before co-founding research-based advisory firm Altimeter Group. He also has an industry-standard blog “A Software Insider’s Point of View“.
I only ever seem to meet Ray at the oddest times of the day – most recently he took me on a midnight guided tour of his University town, Baltimore (Ray went to Johns Hopkins), and we also staged a late-night pool tournament at a vineyard somewhere in Georgia. Anyhow, while I was sinking the winning black, we threatened to share some views together on the industry, and thought we’d air some recent discussions we had about the world of social media and the convergence of software delivery and outsourcing… here’s Part I:
Phil Fersht: Ray – you’ve been pretty immersed in the world of social media for quite a while now. As it seems to be having a major impact on the potential customer experience, how do you think enterprises and service providers need to approach embracing social media and tools and technologies?
Ray Wang: Companies need to quickly start embracing social tools, because their customers are increasingly using them. But some organizations don’t even realize their customers have moved. For example, we met with a client about a month ago that had just discovered it could shift 20 percent of its marketing budget online and reach 40 percent of its audience. So the one thing we’ve really been focusing on is customer insights. Who is your customer? Where are your customers going? Facebook? Twitter? Where are your competitors going? To do this, companies need to start with the analytics and the insights, build a social media case and then work their way from there.
I also think there is a significant component when you think about BPO for the cloud. The reality is, we’re actually moving very quickly back to the old service bureau models from 1960. If you think about what you need to do on social media analytics, what you can do to tie social back to contact centers – all of this is going to come back to having efficient services and operations that are better connected to how people are using those services. So when people argue that social is just a channel, I would counter that social is a different manner of how people are going to be working. And that’s going to have an affect on all service providers.
Phil Fersht: Yes, absolutely, because the services business is an entirely people-driven business. The quicker you can get information, the quicker you can find solutions, the quicker you can bring minds together, the more powerful it can be. For example, we’ve had a really interesting case discussion with the London School of Economics, which has been working on a grid computing project that essentially ties together six of the most eminent physics institutes in Europe into a private grid. They really feel they’re at the point where they’re almost walking into a room where 20 scientists are together exchanging views and information. It’s a great example of a microcosm of what a private cloud, or ultimately the cloud, can do for a collective community.
Ray Wang: And if you look at it from a dollars and cents perspective, a customer can probably shift today up to 25 percent of its marketing budget to digital and it really isn’t going to make a difference to their non-digital efforts. It’s the significant transformation occurring, or that must occur, at the chief marketing officer (CMO) level that will drive more results in digital. And here again, it’s about the analytics. The role of analytics in decision-making is only going to expand. So CMOs have to be able to take that quantitative data and make qualitative decisions from it. And to do that in a social media world, they have to be tech savvy and course-correct within days, instead of weeks. They still have to be creative, but their role is going to continue to transform because they have to deal with the tests out there, and see if they’re still engaging with their customers and improving the customer experience. The driver is really about engagement and influence.
Phil Fersht: In terms of how clients can acquire these skills – not everybody can go out and find marketing people who really understand analytics and Google searching and things like that. Do you think there is going to be a move to providers who can deliver almost full service marketing coming in to play here? Or do you think it will be more disparate with little niche agencies coming up in certain areas?
Ray Wang: Companies are super specializing, even in industries. It’s really the micro verticals, the micro industries, where the profit margins and differentiators are for both software companies and service providers. Especially with Cloud – there’s a whole bunch of stuff that just goes away, and if you don’t specialize, you’re pretty much going to be out of the picture. So things like storage technologies, middleware, databases, hardware platforms…all the different kinds of commoditized infrastructure essentially go away. So as a software company or service provider, what’s your next step? You’re going to have to get into the applications, keep verticalizing solutions, and keep delivering on the value add whether building tools for creation or delivering an applications in the field.
Phil Fersht: So, in a roundabout way, that brings us to what software assets service providers should buy to reduce their dependencies on the big ERP vendors. Unless you want to buy the support operations of an existing company to get into a particular industry, you need to acquire some genuine IP in an area that will bring customers to you. I keep a very close eye on M&As in this space, and see about one a week right now, where one of the large BPOs picks up a $10 million piece of software and maybe 20 or so clients along with that. They’re trying to do is trying to build a common set of processes and leverage it across as many clients as possible. And we’re seeing this happen pretty aggressively in industries like financial services, and starting to see it in the healthcare space – and even verticals like travel.
Ray Wang: Yes, all the verticals are starting to pick up pieces. What I don’t get, is why the providers don’t buy the integration software too? Because at the end of the day that’s the more important piece and they’re going to have to pull all this stuff together. So the Informaticas and all the hybrid SaaS offerings out there…the service providers need those. They need the client-side ESBs or all the geeky middleware. They can keep OEMing it, but once they’re big enough it doesn’t make sense for them.
Phil Fersht: You make a very good point, because when we look at the ITO space, integration of the service is a trend we’re picking up. A lot of the new growth is happening with enteprises expanding their infrastructure services engagements. The up-and-coming service providers who want to have IBM’s and HP’s lunch – especially the Indian providers, we’re seeing push heavily into the infrastructure space with their bold style of looking at a project, doing a quick assessment and thinking, “Let’s just do this”. They are realizing they should develop some competency there, and are going to look increasingly at picking up some of these infrastructure tools and capbilities. I think we’ll start to see more of this happening aggressively as the market proliferates, and a lot of it comes down to when these companies are going to become more reasonably priced.
In Part II we’ll get serious talking about the future of the outsourcing business…
Ray Wang (pictured) is Enterprise Strategist and Disruptive Technologies Expert and a Managing Partner at analyst advisory firm, Altimer Group. You can rach Ray at R at Altimetergroup dot com. You cal also follow his tweets at @rwang0
Wendy Shlensky, Analyst Relations at Infosys Technologies
Imagine a job where good work is rarely praised and people can only complain that you somehow messed up?
Imagine a job where you had to spend all your time ensuring industry analysts (whom are all, of course, very nice humble people) had their facts straight and you hoped liked your firm enough to say good things?
Imagine a job where you had to constantly be nice to your executives, to make sure they showed up on time to all these analyst meetings, and didn’t say anything stupid?
Welcome to the world of vendor analyst relations (or simply known as “AR” in the biz). If I do some really bad things in my life (which, of course, I haven’t yet, but may do so in the future), I will be brought back to this planet as an “AR pro”. This is a no-win profession – you have to be nice to absolutely everyone and pray you won’t get fired because your firm somehow didn’t make it far enough onto the right hand-side of some analyst’s chart.
So we asked one truly unsung hero from this much-beleaguered profession to share with us how they actually succeed (avoid messing up). Bring forth Wendy Shlensky, one of Infosys’ lead AR folks, who somehow found a few stolen moments away from her 120-hour a week job to share her secrets with us. Normally, at this stage, I introduce some hobby or past-time to add some color to our guest, but I’ve never assumed the poor girl has time to do anything beyond staring aghast at her email inbox…
Wendy’s World
I am an AR (Industry Analyst Relations) professional. I succeed and fail based on my ability to maintain and leverage relationships between many different parties –
Myself & the analysts
The analysts & our executives & marketers
Our executives, the marketers and me
One way I illustrate the importance of relationships to non-AR practitioners is to look at your email inbox. Which emails do you open first? The ones from that whiney person in the ether, who’s always bugging you to do things that you don’t want to do or the ones from your boss, or the ones from that person who is always overly complimentary to you about the job you do? Or somewhere in between? If your inbox is anything like mine, you rarely open the mail from people you don’t know – mostly because you’re too busy looking at the emails from people you do know. So, whose emails get opened first? I end up opening the mails from people whose names I recognize or people I have relationships with. One quite funny anecdote is I tend to open mails from Phil Fersht faster than mails from Philip Fersht. While these 2 names denote the same person, with the exact same email address, they enter my mailbox as two separate names and I’m more familiar with Phil Fersht than Philip. Full disclosure: I do try to open all emails, this is just a colorful example of the power of relationships.
The other key to understanding the power of relationships is that they are two-way affairs. Ideally all parties in the relationships are getting something valuable from each other. One of the reasons I value some of my analyst relationships more than others is because of the care & figurative feeding they put into our relationship. They are working to help me become a better AR Manager because the better I get at my job, the more enjoyable our working relationship should ideally become. What do analysts want? Bottom line they want a direct connect into the organization, someone who is going to find out the information they need and get it to them when they need it. I need to be a good connection-point for them, otherwise they’ll find other ways to get the information they want.
Ideally there is a win-win-win going on within analyst relationships – The analyst gets something they are looking for – information, the chance to assist a vendor with their strategy, the chance to help solve a business need for an end user client. The vendor gets something they need – validation for their offerings or exposure of their offerings to their prospects. The AR Manager has happy executives and analysts on both sides of the relationship, hence signaling they are doing a swell job.
When I mentioned to a colleague that I was writing this guest blog, they told me a story that someone had told them, that instantly resonated with me and why I consider myself so successful in my role. A young girl had to care for her grandmother and always wanted her care to be perfect. Her brothers, played cards, watched movies and enjoyed their grandmother’s company all while she took care of her. One day while the grandmother was clearly enjoying the grandson’s time, and the granddaughter was slaving away on her caretaking tasks, the granddaughter became particularly disturbed. Her grandmother noticed and asked her “Do you ‘enjoy’ me, Juliana, or do you care for me only out of a sense of duty?”
That question, made me stop and think “how do I relate to people? Out of enjoyment or because it’s my duty?” For me, life and my job is much more enjoyable when I am relating to people out of pure desire to assist, rather than because it’s my duty.
Bottom line – remember relationships need to be earned. You can’t buy a relationship; you can buy access, but not a relationship.
How you choose to behave in every interaction affects your capacity for building relationships.
Sources: Alan Stern, Stage Right Organizational Development; Juliana Lesher, Chief Chaplain, Fargo, North Dakota VA Medical Center
Wendy Shlensky (pictured) is Analyst Relations Director at Infosys Technologies. You can add to her email inbox at Wendy_Shlensky at Infosys dot com
