While most folks are obsessing with the performance of the IT mainstays over the past 18 months, spare a thought for two IT services businesses that not only entered Covid on a long growth cycle, they also readjusted quickly and carried on their growth stories even during the worst of 2020. Just check out the quarterly revenue growth paths of LTI and Mphasis respectively:
Click graphs to Enlarge
Why have LTI and Mphasis carried on their growth unphased?
Big enough to get to the table, small enough to keep client intimacy. It’s the oldest quote on the book for the mid-tier service providers, but couldn’t be more true in today’s market. Enterprise clients want to feel they have the personal attention of the CEO and the leadership team when it comes to signing over their technology control. Rewind 10-15 years, most enterprise CxOs had a direct line to Chandra (TCS), Shibu (Infosys), Jeya (Patni), Pramod (Genpact) or Frank (Cognizant). Client leaders wanted to feel the personal touch from their services partner leaders, and they were usually personally involved in the scope and negotiations. Today those same executives are most likely stuck with a client partner, who is literally horsetrading the rate card with them. Enter the likes of Sanjay and Nitin, who spend most their time talking to their clients, reassuring them, convincing them, but most importantly are available to them.
Flatter structures and visibility to leadership motivate staff. Staff want more from their companies these days than a good stock plan and competitive salary – they want to know what their leadership stands for, and want to learn from them. With less bureaucracy and promotion cycles based on merit, not purely tenure, it motivates staff to see how to get ahead, and and having more access to their leadership. Nothing demotivates staff more than seeing weak managers stay in their positions year in, year out, while the rockstars leave, or are sacrificed. I have even seen hierarchies in some services providers so rigid, you are instructed not to interact with people in the level beneath you. Yes really…
Sustained profitability helps high performers to be financially rewarded and retained. In a market where attrition is running at an all-time high, the smart players are identifying their talent engaging with clients and helping them execute and making salary increases to keep them. Providers like LTI and MPhasis have kept their profit margins in the high-teens consistently over the Pandemic and are in good stead to reinvest in retaining key talent and attracting new blood from start-ups and larger service providers suffering from low morale.
Savvy tuck-in investments and market moves. Mphasis continued to bolster its depth in largest industry, banking and financial services, with its Front2Back transformation methodology and NextOPs framework really bearing fruit during the Pandemic, while also venturing effectively into other industries, such as logistics. The firm also added delivery depth in the UK, notably acquired Seattle-based digital design house Blink and significantly de-emphasized its reliance on DXC as a client. LTI merged most of its cloud transformation under its Infinity umbrella mimicking Accenture’s Cloud First and Infosys’ Cobalt offerings, but at a lower price with a focus on outcome or risk-based pricing models. This bought their customer an extra ~20% of possible savings while the downturn driven by the Pandemic was underway. LTI also ramped up its CSP/Hyperscaler partnerships (mainly with AWS) at the right time and added some customers to their book through acquisition.
CEOs who can inspire and motivate their people. Simply-put, making themselves highly accessible to customers and staff has been huge in driving their respective businesses. Moreover, showing longevity and loyalty to their brands has been a key factor with Nitin recently signing on for a further 5 years at the helm with majority investor Blackstone.
Bottom-line: Big is no longer brand-beautiful
The days where you never got fired for hiring IBM, or ensuring high performance being delivered with Accenture, are not as vogue as they used to be as service delivery levels off across providers and speed/execution take center stage. Moreover, the top tier of service providers simply cannot afford to focus their A teams on smaller-scale deals that will not fit their high-pressured revenue models. The amount of new business becoming available to the likes of the LTI, Mphasis, Virtusa, Hexaware, Zensar et al is larger than ever and most of the Global 2000 opt for one to two primary global service providers and a couple of these nimble, energized mid-tier firms to keep everyone honest.
New insights by HFS Research from FORTUNE 1000 leaders provide the context of how we have to reimagine the automation narrative. It is not about the myopic view of one bot for every employee or bold claims of progressing toward the autonomous enterprise. It’s about delivering immediate outcomes by designing workflows that take the RPA value out of the back office, where most RPA has been buried, and aligns its capabilities with helping the immediate commercial needs for the enterprise. The need to create immediate solutions with the digital hyperscaler platforms is now far greater than ERP suites, as that is where the hyperconnected business environment operates, as opposed to the traditional back office.
RPA impacts when it helps enterprises function effectively in new virtual customer and supplier environments
Over half of organizations are realizing that it requires rapid investments in process innovation to be effective in virtual environments. Before and during the pandemic, organizations that deployed RPA as a band-aid on badly designed or even broken processes were found badly wanting. Firstly, scaling fragile processes with RPA fixes is a huge challenge – they are brittle, and usually results in perpetuating a legacy environment. Secondly, RPA can have much more impact when it is deployed to bridge existing commercial systems with digital platforms that are essential for survival.
The RPA fraternity has reacted to this by accelerating tie ups with the Hyperscalers. The most recent example is Blue Prism (see news) who significantly expanded capabilities across the AWS ecosystem. However, what is urgently needed are proof points of how we are managing the new complexity of cloud native deployments. If applications or processes are running on containers, the interdependencies and consequently the reasons for failure increase exponentially.
As our current in-progress study of the automation focus of the FORTUNE 1000 is already revealing, the majority of automation investments enterprises are making are with the digital platform giants (75%). Only half of them still keep faith in ERP, while even less are focused on workflow suites and the RPA platforms themselves. Hence, hooking up with AWS is a masterstroke as it dominates so much of the commercial supply chain in the virtual economy:
The onus shifts from fluffy “strategy” to immediate need fulfillment
Addressing immediate critical needs at the business and supply chain end is happening… when you get into the whole commerce space the needs are immediate. Like how does a consumer products firm take data from legacy supply chain systems into an AWS environment… not the sort of thing you can solve overnight. You literally can’t operate seamlessly in the virtual economy if you don’t have the tools to link the old with the new, and RPA must be part of the toolbox to make immediate impact with the suppliers and customers which are the lifeblood for survival in a world where supply chains are falling apart at the seams, customer needs are immediate and stitching together processes from the front to the back office is the only way to function in today’s hyperconnected markets. As this new data shows us, more than half of today’s F1000 organizations are under intense pressure to implement new capabilities to take them into the future, as opposed to clinging on to the past:
Bottom-line: Automation is not a strategy it’s the native discipline to keep the wheels on as you rush to the future
Organizations are gearing up to drive fundamental operational change. To stay relevant in the virtual world, application and processes must be designed in and run on the cloud. This requires not only a broader ecosystem of cloud native capabilities but a new mindset and culture of running operations. It is literally about operationalizing the OneOffice by driving change that finally delivers on overcoming the organizational silos and experience-led outcomes. Yet, we can only get there by converging IT and business operations and by leveraging IT and business automation
So what’s our new cloud guru Joel Martin, saying about the frantic rush to the cloud these past few months? Let’s just hear it from the horse’s mouth…
Phil Fersht, CEO and Chief Analyst, HFS Research: Hey, Joel. So how should we be thinking about cloud today? What do you think has changed in the last couple of years, and how should we think about the market as it starts to evolve?
Joel Martin,Research Leader, Cloud Strategies, HFS Research: The cloud is the architecture people are building their businesses on. As we move to these virtualized economies, virtualized businesses, and virtualized experiences, inside and outside the organization, the cloud is the only way companies can scale up and scale down their ability to reach those customers and deliver services. They can’t do that within their private data centers. And that’s the biggest differentiation of using hybrid or public cloud, is that scale versus continuing to invest in in-house IT talent, resources, and tools.
The thing that has changed Phil, is the speed of the network. With fiber, 5G, and gigabit speeds working in the cloud feels like you are working on a device on a local network. The pure speed at which we can create, collaborate, and innovate with others, with systems, and with a growing number of AI solutions is truly mind-blowing. And it’s become so simple to use. People don’t have to be technology literate to create solutions others can benefit from ease-of-use at scale is really what we are benefiting from these days.
Phil: Okay. So tell me about the flow of workloads in the cloud. We hear about private cloud, we hear about public cloud, and then we hear about hybrid cloud. What do you think is going to be the ultimate outcome with these workflows, and how are people going to engage with the cloud in the future?
Joel: There are two things I’ll focus on. First, looking at HFS’s recent Pulse survey data, and which workloads are moving to those different cloud models paints a very interesting picture. As you look at that data, and it looks like a black hole. There’s no clear direction of how firms are preferring to deploy, develop, or adopt workloads. Instead, companies are moving their workloads to the Cloud because they have to move; remaining complacent is not an option. Honestly, we see less of a clear strategy and more of a tactical plan to get things into the cloud because their executives, employees, and customers demand it. What I see is rapid tactical execution without a long-term, conscious strategy for sustaining the current momentum. This is true across private, public, and hybrid cloud initiatives in many cases.
Second, as we move to native cloud workloads, what we’re going to see is a much more real-time access to the data across those workloads, for people to make decisions – and by people, I mean people at the executive level, and all the way down in the field level, those closest to the customer. The challenge is these, often like the applications they are moving, are the existing workloads. Too often, the drivers for these are cost-related rather than outcome or value-driven. Shortly companies are going to realize many of these workloads don’t reflect how people work now and how people engage with the markets and customers they deal with.
Regardless of cloud type, we need to change the discussion from applications and workloads to data and architecture. Once we understand the data we need to run our business, where it comes from, where it resides, and how people want to use it, then real innovation can happen. I feel we’ll realize the value of domain-centric, hybrid clouds with a whole lot of AI, and tools like Low Code will let teams and individuals create the next generation of workloads. As such, the two things CIOs and CEOs need to be focused on are data and governance. The “what and how” of composing, consuming, and curating digital experiences driven by data securely to their teams and customers.
Phil: Right. So how do you see the competition between Google, AWS, Microsoft Azure, as we look at that battle for who’s managing the datacenters in the cloud, Joel? What is driving adoption, and who do you think is winning the medium-term battle here?
Joel: Who’s won the medium-term battle out of the gates? You know, Microsoft’s done a great job at catching up to AWS, but I continue to talk to the services providers and the enterprises, and AWS is still the one they think of first. While it might not be the one they choose, AWS is still extremely strong with their ecosystem, the different solutions they’re offering for everything, from customer experience, with Amazon Connect all the way through to their big data tools and their Fargate solutions. So, you know, Amazon is still the big guy in the room, and how they’ve invested in talent across the ecosystem, at the customer level, and at the integration level, that’s what’s keeping them there right now. Meanwhile, Google is going to be a dark horse, and I think, at the end of the day, the vast majority of customers will have an Azure cloud, and then one other, and this is where Google and AWS, to me, will continue to battle for customer mindshare.
Phil: Interesting. You mentioned earlier, Joel, that we’ve now got to get our shit in the cloud, but our data’s still crap. Can you build on that a bit? I mean, how much of that is genuinely true, versus are companies now adopting a realization that they need to transform their data before they make the shift? How is that evolving?
Joel: Right now, data is moving with the applications, rather than people figuring out their data and then realizing what applications are critical to get to their data. Again, people have moved their applications quickly to the cloud because that’s been their mandate, driven by executives, and the market factors. But if you look at where we’re going with cloud-native architectures and solutions, how data is going to need to be managed, organized, and delivered is very different from the way applications or the pure database vendors built their solutions. Whether you take microservices, which requires a direct call to data to manage it, so parsing your data and securing that data is delivered completely different than a large open database, you’re also seeing a lot of native cloud database solutions, whether it’s Mongo or PostgreSQL, those things are also becoming very popular with companies, typically in smaller workloads, or smaller solutions, but they’re going to grow, and that’s going to be the data repository. And, honestly, that scares the hell out of most of the application vendors, because the application vendors are really differentiated on how they manage data and then how they integrate that data with other databases, which is really a bane for CIOs.
I’ll give you an example, I was talking to the Chief Technical Officer at a global food company, he was talking about how the marketing team will come to him and want to buy a new SaaS application because they can’t get the data they need out of SAP. Not a big surprise there. And he looks to a low-code provider that can help him extract the information out of SAP more effectively and deliver it, without using a packaged app at all; they’re able to quickly customize and build things that have strong survivability with their core systems. That’s less an application play, and more a mining the data and then presenting the data.
To me, the second half of this decade is going to be all about fixing your data. And that’ll also be driven by the amount of IoT data that’s coming into the marketplace. And this is, again, where companies are really struggling right now. I mean, you take all the IoT, say, in a manufacturing facility, where you have sensors collecting data on a device’s noise, visualization, thermodynamics, and all this data can help them prioritize how they service, replace, and maintain very expensive physical assets. That’s all important data, but it lives outside the traditional data domain. So all that needs to come together because it’ll be critical for their hyperconnected supply chains, their partners that do the servicing, and also how they manage inventory and replace the machines.
Phil: So the final question I have, Joel, is how is the role of the technical architect, the senior-level IT manager, going to change, as a result of this, and the way they interact with the rest of the business? When this becomes more and more about data, is this really less about technology, at some point, and more about just getting clean about the data we need? How do we access it? How do we get it? How do we make it ubiquitously available? How do you think this is going to change the roles of business and IT executives?
Joel: Companies will struggle to keep up with change, Phil. They are going to need to work with partners who can bring automation tools, data modernization practices, and domain-centric planning and governance. A lot of our conversation has been about moving to the cloud. Those companies that feel they can go straight to the cloud vendors (Microsoft, AWS, Google, etc.) may struggle with building and sustaining these core elements of the Cloud.
We expect to see technical people with a lot more domain expertise, so you’re not going to have business owning the domain expertise and technology owning the platform and technology acumen; we’re going to see a much more digitally fluent company that people understand, fundamentally, what their customers are paying them to do.
And, you know, at the end of the day, that’s what I look for. It’s like, what are you doing… what are you investing in that brings value to that customer engagement? Because they don’t pay you for your ERP solution. You know? They don’t pay you to have Salesforce or CRM; they pay you to answer questions and deliver services. And, you know, those are the applications that we’ll see the IT organization and the business work closer on, on developing, and all the things that take care of traditional back-office are going to be the ones they’re going to be either partnering or looking to simplify as much as possible.
Phil: So what can we expect to see, just briefly, from you, coming up in the next few months, in terms of the research that you’re driving?
Joel: The three biggest things you’re going to see from us coming out in the next few months, Phil… we have a big study on app modernization, outlining what are the opportunities to refactor, renew, replace, recode traditional on-premise software solutions and data solutions into the cloud. That’s coming out in October. We’re also going to be talking a lot more about low-code, and really drilling into how low-code and Agile methodologies are coming together to do something that we haven’t been able to do before, which is to see co-innovation between the business and the end-users, where they collaborate. They can build and sustain the momentum of being able to react to changes in the market faster than before. Another thing that you’re going to see us talking about is that mix of domain and data expertise; this will come to market as a Data Modernization research study. We’ll delve into the kind of data needed in banking and financials versus manufacturing versus healthcare and life sciences. I’m going to be working with our team that focuses on those domain areas and really drawing that out. I think that’s going to allow us to start that data conversation that will become more and more important to our customers over the coming years.
Phil: Excellent. Thanks, Joel. It’s been great seeing your research over the last few months; look forward to what’s coming up in the future. Awesome Joel!
We’re operating in a short-term period between the “world that was and the one we’re emerging into”… there’s some feel-good that we survived a pandemic, but the hard change, the very survival of companies’ business models and peoples’ careers starts now.
And we can’t get there without the help of partners to plug the skills and resource gaps that will help out businesses make this pivotal shift to survive in this Virtual Economy…
Services are increasingly about accessing skills that are not ubiquitous in a traditional offshore model
In the Virtual Economy, no one cares much about “offshore” as a strategy – it has become part of the fabric of managing a global operating model, where operations leaders just tap into whatever global resource they need to achieve their desired outcomes. This doesn’t mean that traditional “offshore” global delivery locations, such as India and the Philippines, are going bust overnight. But it does mean the playing field is leveling out as the need for emerging skills trumps the desire simply to reduce labor costs.
Our recent HFS Pulse Data of more than 800 major global enterprises is showing the focus on offshoring has sipped behind onshore, nearshore – and even most profoundly – agnostic-shore as enterprises look to realign their operating models:
The Virtual Economy has shifted the operational emphasis to outsourcing partnerships
In fact, we’ve never seen a boom like this in demand for tech and business process services since the dot-com days. What’s more, we believe the services market for the Virtual Economy is only just ramping up – we only have to examine the growth of the leading service providers to see this shift:
It’s all about future scalability without the linear resource investments
The difference between new style of automation-rich intelligent operations and offshore-centric traditional operations is growing. It’s a bit like comparing the growth of Walmart to that of Amazon where, for many decades, the success and growth of Walmart has largely been tied to selling more retail products by continually adding new stores, and continually increasing its supply chain to support them. The firm could produce a linear business forecast that tied revenues to employees and capital infrastructure investments. Expansion and profitability were always dependent upon investing in more people to service the needs of the increased clientele – both the end customers and suppliers. With Amazon, so much of the customer front end is intelligently automated, adding customers often requires very few additional labor or capital investments – most front line customer support is completely automated, most the point-of-sale promotions are entirely driven by cognitive tools and smart algorithms that tie together customer needs and preferences with all the products on offer.
The offshore model is being dis-intermediated by intelligent automation in a similar way Amazon completely disrupted the traditional retail supply chain
It’s the same dynamic that is impacting the use of affordable offshore people services to be augmented – or even replaced – by the almost-free fruits of intelligent automation. While Walmart was always an attractive outlet to push products to market, suddenly that business model is no longer viable when you can push your products to customers without the need for new investments in capital infrastructure or staff.
The emerging brand of more packaged operational services, outcome-based services, and As-a-Service offerings – will be much more location neutral. It just doesn’t matter as much to the client where the service is delivered – they will only care if they have a reason to, like compliance, latency, etc… It’s not dissimilar to what’s happening in manufacturing – over the last 20-30 years, it made a load of business sense to displace, for example, 5000 onshore factory workers with the vastly cheaper services on offer in locations such as Taiwan and China, but as manufacturing automation advanced, the same products could be made by 100 workers managing machines. It gradually became more cost-effective to bring the work closer to where end customers were situated to speed up inventory replenishment and reduce transportation costs. Why is it any different with finance, or procurement or HR – wouldn’t you rather have support services that were more culturally aligned with your staff and had a better understanding of your business needs?
You could argue that this dramatic shift is caused by automation or a desire for organizations to have more control over parts of their operations. We’ve seen examples of large organizations growing on-shore application development teams, partly because they need additional resources given the increasing numbers of complex customer-facing applications they are designing. But also because the applications needed to address onshore customer needs more directly – with greater personalization and cultural affinity.
Offshore provides truly effective applications teams in terms of speed of development and technical quality of the final applications, but is less able to deliver the wow factor needed for the digital economy – especially in areas that require cutting-edge design and alignment with emerging digital business models. Also, DevOps environments and agile have made on-shore development more cost-effective and help deliver the same disciplined development ethos offshore has delivered. This does not mean that application development and maintenance disappear from offshore – far from it. It just means that services being delivered will be from more globally diverse teams and are more outcome-oriented, with offshore services leading the compliance / technical quality aspects of the delivery – at least for applications.
However, we think this is only part of the story, particularly as you move into other process areas, where there isn’t a hugely creative element and the service can be better delivered through automation as processes are standardized (such as back-office F&A, HR and Procurement). In addition, areas, where cognitive tools and virtual agents are emerging, are also slowing the need to add bodies offshore, where self-learning systems are really starting to work effectively. This is where the real change lies.
The Bottom Line – No more “location, location, location”, it’s now “skills, skills, skills”…
In the Virtual Economy. no-one care’s as much about offshore anymore. Offshore is going to be an ever decreasing part of the consideration for operational managers and their C-Suite. Location will still play its part as a cost lever in some circumstances – but it’s becoming a side issue, in most cases. Service is becoming outcome-led and driven by automation – people will add flair and handle exceptions – the HFS Pulse survey shows that they aren’t thinking about it as an issue. It is either an ingrained part of a legacy operation, which is shrinking over time, and a component of a more streamlined automated, As-a-Service delivery model. However, what is clear, is the need for skills to drive business outcomes, and if those can be found offshore, that is a bonus, but not the deciding factor. When it comes to IT and business process services, it’s no longer about “location, location, location”, it’s now all about “skills, skills, skills”.
The days of everyone talking about the “new” culture of working from home are so over
This isn’t new, it’s the way we do business today across all industries and job functions where physical office visits are non-essential. If it gets done over Zoom it stays on Zoom. Most people travel for vacations and personal needs, not business anymore. 18 months in, and we’re not going back – we’re efficient, we’re intense, we get things done in a much faster, cheaper, and family-friendly manner.
A recent study of service provider staff in India showed that 90% do not want to go back to an in-office culture, with staff getting 10-20 hours a week back from their nightmare commutes; in the UK staff are furious about being forced to commute to work and in the US conferences are being canceled en masse and most offices are virtually empty, despite staff having the option to go to work. Of course, when the pandemic eventually fades there will be more conferences and physical meet-ups, but the days of many people traveling and commuting regularly for their jobs are over.
As our Pulse Data of 800 major organizations shows, 40% of workers are going to be home-based for the foreseeable future:
People just don’t want to put their career before their lifestyle anymore… and we have to adapt
We are in serious danger of our careers becoming subdued and de-emphasized in the current climate. While I am one of the first people to laud the increased focus on family commitments and having a pragmatic approach to the highs and lows of our professional lives, I am seeing clouds of demotivation gathering and sapping much of the passion and excitement out of our industry. You only need to see the pathetic levels of enthusiasm for digital conferences, webinars, thought leadership right across the industry to realize that many people are just not as engaged with their jobs as they used to be.
I love the fact that so many employers are giving their staff “mental health breaks” (such as Nike recently following similar initiatives from the likes of LinkedIn, Bumble, Mozilla, and Hootsuite). We’ve even been giving a few Fridays off for staff at HFS to allow them to take long weekend breaks. However, we won’t be very effective businesses if we grant our staff 6+ weeks of PTO each year!
In short, mental health at work is a massive issue, and something employees need to tackle head-on. Employers can offer as much support as they can, with time off, counseling, good management, and good resources, however, there comes a point where staff have to figure out how to keep themselves motivated. Let’s be honest, we’re living in a world where your work experience runs the risk of becoming yet another digital channel to fit alongside Facebook, Netflix, Instagram, and whatever else consumes your digital time these days.
The Bottom-line: 10 ways we can re-motivate our careers
Prioritize non-Zoom time to focus yourself. At HFS we have “no meetings Wednesdays” where we insist staff use the time to get their written / cerebral work done without the constant distraction of video meetings. It’s impossible to execute well on your work when you don’t have chunks of time to focus your thoughts. We used to use plane time/hotel time a lot for this type of work… not we need to carve it out. If your employer won’t sanction a no-meeting day, then create one for yourself and block off you calendar. If there is push-back, you should seriously question the mentality of your leaders and whether this is a company adapting to the virtual economy.
Embrace change and explore new roles with your leadership. Many people are discovering/developing new skills in the virtual economy – things they thought they were bad at, they are improving dramatically at. The fear of change is dissipating from so many, and the ideas of trying new things are so important today. Careers can go stale and this environment may have accelerated your sell-by date for doing a certain activity, and it’s time to freshen it up. So talk to your bosses and your mentors… have a look at jobs going in other firms. It’s time to embrace change and put yourself in a position to do new things that could energize you and refocus your skills.
Meet fellow workers and clients local to you. Nothing is more energizing than merely seeing faces familiar to you from 18 months ago… just do it. And don’t sit in an offering staring at PowerPoint, go to lunch or dinner. Start enjoying meeting folks local to you where there is little stress, and the time investment is minimal.
Orient your work effectively around your family commitments. It’s been a hard time for so many Moms (and Dads) taking care of our families, and some have been amazing at finding the time to become more focused, efficient, and flexible to get work done. The nice-to-five is over folks and we need to find times like late evenings / early mornings where we can deliver. The key is to make sure your employer gets this and judges you on outcomes… not simply that you were online during “office hours” every day.
Spread meetings out over longer periods. The lockdown intensity of packing your calendar with 10 back-to-back Zoom meetings all day have to end. You will burn-out and become a jabbering idiot. It’s OK to book meetings 3-4 weeks out, and you must create mental breaks for yourself during the day. We aren’t robots and if we don’t manage our time better we will start to become them.
Keep learning new things. There probably hasn’t been a more critical time to stay ahead of market developments, new business models, new technologies etc. You must find time to read and network.., the only two ways you will keep learning.
Keep networking and stop making virtual excuses. The excuses of “I can’t develop relationships over video calls” are done. If you can’t, then you’re toast. Find time to keep in touch with key people and also to get to know new folks who can help you.
Get a decent webcam. If your laptop camera sucks then buy a webcam. You can get one for $25 on Amazon for chrissakes. And get rid of the up-nostril view… please.
Keep exercising and keep healthy. Sit on a yoga-ball all day… buy a Peloton. The days of lockdown are over and you don’t have excuses for the expanded girth, the excessive booze consumption, or whatever bad things you do to keep yourself amused. Poor physical health eventually means poor mental health and your employer giving you mental health breaks won’t cut it forever.
Reevaluate your own goals and stop living off past glories. I know so many people clinging onto their past work glories, which may never return in this very different work culture. Trying to cling on to an inflated salary is not a strategy – it’s potentially asking for trouble down the road if you’re failing to innovate your capabilities and value to your organization. The cost of living has changed for many of us – we don’t need two cars in the family, we save a lot on commuting and eating out… on all sorts of things. So why not evaluate what you want to do with your career, the type of organization you want to work for, and whether you can afford to rationalize short-term earnings to chase future opportunities for yourself?
We’re thrilled to let you all know that HFS is blessed with the presence of Ralph Aboujaoude Diaz (see bio) as Practice Leader for Cybersecurity strategies with a keen eye on Horizon 3 technologies.
Ralph has expensive experience as a risk management consultant for PwC and EY before leading Core Tech for Life Sciences giant GSK. Many of you will know Ralph from his extensive LinkedIn humor and his flirtation/obsession/hatred of RPA. He is based in London and spends time when he can with family in Lebanon… and now he’s an analyst! So let’s find out a bit more about what makes Ralph tick…
Welcome to HFS, Ralph! So what gets you up in the morning?
Hi Phil! Personal life: my 2 kids (a 6-year-old boy that is driving me crazy these days and a 3-year-old girl that only loves her daddy). I love my wife by the way!
Professionally: Believing in the work I do but more importantly enjoying what I’m doing. You need to work with “Meraki” (a Greek word to describe doing something with passion and creativity).
You’ve been a Big-4 consultant and an enterprise tech leader… why become an analyst now? And why with HFS?
I have been lucky and grateful to work with brilliant minds and I never stopped learning along the way. Without all these great leaders and mentors, I will not be where I am today! However, the only thing that I always missed is the inability to speak my mind. I am a proud non-conformist and not a big fan of political correctness. But always pragmatic and respectful.Transitioning to the analyst world is for me the natural evolution of my professional career. I will finally be able to utilize all the hard/soft skills that I have acquired during the past 15+ years but saying things my way. I want to provide direct, unfiltered, and actionable insights. But in a funny way too as I firmly believe that conveying a serious and honest message in a humorous way is much more impactful.
Why and I joining HFS Research? Because HFS is just like me, and I love that. Working with the iconic Phil and a diverse team of talented, bold, and friendly people is what gets me up in the morning.
And why do you think you’ll bring something a little different to the analyst industry? What will you be writing about? What is it you care about?
The little different thing that I will bring to the analyst industry is quite simple: no previous analyst experience! I have spent more than 10+ years running large-scale tech-enabled security transformation projects. My last 5+ years on the buyer side have been focused on embedding and sustaining processes post-transformation, which in all honesty, is the most difficult part of the journey. So, the little different thing that I will hopefully bring is that mixed experience from the seller/buyer side, allowing me to understand what really matters for enterprises and position the right products/ services. My research agenda will be focused on Cybersecurity and Horizon 3 technologies (with an initial focus on 5G and Quantum Computing).
I am not pretentious enough to say that I will be covering the entire cybersecurity spectrum. My research agenda will concentrate on 6 topics that matter, on real problems that cybersecurity professionals and enterprises, in general, are currently facing. I will be talking about the role and challenges of the CISO, how to reduce the cybersecurity skill gap, how to secure the cloud environment, how to govern identity and access management, how to augment the capabilities of cybersecurity professionals with intelligent automation, and last but not least how to respond to security incidents in this Hyperconnected world.
I will not disclose more for now…
I love Tech and I will be also writing about Horizon 3 Technologies. Exploring and understanding how potentially disruptive technologies could transform existing business models in the next 5/10/15 years. I am very excited about that!
You got a huge following in social media when you dabbled in RPA before you made a hasty exit from the space… can you share what you were doing, what you learned, and where you see that market going in this environment?
Back in 2018, RPA was one of the hot topics that the Office of CEO at my previous employer was keen to explore. I was initially tasked to build the business case and drive the vendor selection process. I then led the design and deployment of a global RPA program across all Business Units (including the implementation of a global Automation Centre of Excellence and enablement of regional scalable Automation Deliver Hubs).
I have learned one very important thing: RPA is just a great tool in the wider automation toolbox that serves very well a specific business case (UI integration). However, RPA is, by nature, a brittle technology. In order to truly scale and operationalize RPA, enterprises need to invest a significant amount of time and resources. Without any doubt, RPA can help organizations rejuvenate their substantial legacy landscape by injecting much-needed automation. But rejuvenating does not mean modernizing. Rejuvenating does not mean transforming. Putting RPA at the center of the digital transformation is like trying to win a gunfight using a knife.
The RPA market is here to stay. As we can see now, ISVs have started to enter the RPA space by acquiring niche RPA vendors. The objective is straightforward: extend their integration capabilities and ultimately offer a holistic framework to customers. The big 3 RPA players are actively transforming their existing offering to include more integration, analytics and AI capabilities. But will this be sustainable and affordable in the long run?
So, finally, what do you think we’ll be talking about in a year? Can many of today’s enterprises survive if they don’t change their legacy habits?
We will be talking much more about “Enterprise Process Orchestration”. There is an urgent to unify and manage the increasing number of individual tasks, managed by humans and non-human identities, into an end-to-end process that can be easily visualized, monitored and recalibrated. The concept has been floating around in the last few years, but I feel that organizations are now ready to embark on ambitious projects and not just targeted pilots. And I use the word “enterprise” because the platforms that will support such macro-orchestration will be robust, secured and scalable.
Welcome to HFS Ralph – I can see you are already pushing our some insights =)
We’ve never seen a boom in demand for tech and business process services since the dot-com days (hopefully some of you can still remember those when we texted on flip-phones with 12 keys and thought it was cool to put an “e” in front of everything we did). However, we believe the services market for the virtual economy is only just ramping up, and this is merely the hors d-oeuvre before the real feasting starts…
What is driving this new phase of growth in IT services?
Accenture has performed quite the pivot since the pandemic rocked up, de-emphasizing themselves as an advertising firm and reinforcing their prowess in cloud and IT services. Capgemini has raced on since its acquisition of Altran and making some long-overdue leadership changes internally, which has reflected in a strong uptick in performance that actually saw the French firm sneak above TCS last quarter. Cognizant has quietly picked up its performance after taking a write-down of its Samlink Finnish nightmare in Q4 last year and has bedded in several new leaders right across the organization. After a challenging pandemic that included a ransomware attack, the firm is finding some stability to support this renewed growth curve.
While IBMsold-off of its commodity services business lines, it is still struggling to post any significant growth, but at least this is a major improvement from its difficult years where the firm posted declines for several years. The business is stable, its focus on retaining and growing complex engagements is bearing fruit, but there seems to be an eternal conflict from its leadership on whether IBM’s long-term future lies in services or software. With the future of services tied intrinsically to the intersections across SaaS solutions and the services to enable them, IBM needs to forge a clearer path for itself and the role it wants to play.
TCS‘ performance going into the pandemic was lackluster, after being the market’s most consistent, aggressive and dominant Indian-heritage performer – and by some margin – for several years. The firm seems to be ingesting these last few years of heavy growth, but struggling to pivot as quickly as some of its competitors in this market, where responding to demanding clients and aggressively investing in new engagements are the watchwords. There was a time when TCS could win any large IT services deal in the world if it wanted to… those days seem to be from a different era in this environment. However, the TCS rebound is strong since last year and the “Walmart of IT services” definitely seems to be finding it feet again in this virtual economy.
When comparing the growth over the pandemic itself, comparing Q2 2020 performance with Q2 2021, the two standout performers, in terms of revenue growth, are Wipro and Infosys. The first year of Thierry Delaporte at Wipro couldn’t have gone more smoothly, where much of the old guard were jettisoned in quick-time to make way for a host of new leaders from within the firm and externally. In addition, a restructuring of the firm around geographical locations seems to be paying dividends, despite some challenges, and the major acquisition of financial services consultant Capco has really improved the perception of the firm and encouraged several enterprise clients to increase their investments.
Infosys simply sailed into the pandemic after a series of impressive quarters and has continued unabated. It has a reputation for delivery reliability and has demonstrated real stability in leadership and focus. Moreover, investments in locations such as Germany and Ireland have helped pivot Infosys as the leading Indian-heritage provider from a perception standpoint. Pre-pandemic investments in its onshore US locations have also paid dividends as the firm continues its impressive growth across both IT services and BPM (BPO) lines. Infosys is arguably the leading Indian-heritage provider at present, giving the likes of Accenture and Deloitte and real run for their money on major deals.
HCL has continued to command a strong presence as an infrastructure and engineering-focused IT heavyweight, but hasn’t been quite as impressive with its performance over the past year, compared to its rise to prominence over the five years prior. Tech Mahindra has struggled greatly to command a market position and communicate to the industry where the firm’s direction is pointed, but its performance is at least stable and 2021 has been a better year for the firm from a financial standpoint. Atos promised a lot leading into the pandemic but seems to be drifting somewhat, as it continues to lose ground to the Indian heritage providers and hasn’t done much with its expensive acquisition of Syntel. Moreover, its weak US presence continues to plague the firm, not helped by a failed takeover attempt of the industry’s performer struggling the most: DCX. As for DXC? The firm continues to struggle to find any sort of foothold to stem the bleeding… maybe Atos needs to take a second bite at the apple when the stock prices level off…
The Bottom-line: The Pandemic has changed the IT service provider landscape quite significantly… and it’ll change even more as the Virtual Economy takes hold
Just observing the world of services providers over the past 18 months, we’ve witnessed a dramatic sea change in which firms are driving the market, and which ones are losing steam. Am pretty certain we’ll see yet more movements occur in the coming months and some firms come back more aggressively, while others get stuck ingesting their recent wins. I also expect to see consolidation as the impressive wave of mid-tiers continue to snap at the heels of the majors – and the dearth of talent will force inevitable mergers between service providers. The services market for the virtual economy is only just ramping up, this is merely the hors d-oeuvre before the real feasting starts!
If there was one corner of the services market which got severely disrupted overnight by lockdowns and unpredictable customer demand, it was customer engagement. For example, when Philippine’s President Duterte locked down the world’s call center capital Manila with 24 hours’ notice, there was an almighty scramble from the CX service providers to shift their agents to other locations, such as nearby Cebu, or to work at home agents in the United States or other locations. As the pandemic dragged on it became clearer than ever that this industry was in dire need of a long-overdue transformation from legacy people-heavy models to smarter use of automation and AI tools.
One thing I always struggled to understand was why several of the leading IT service providers turned their backs on the customer engagement market, such as when IBM sold off its CX division to Concentrix in 2013 and Capgemini exited the market. When the full value of automation and AI is realized in the revenue-generating processes driving customer engagement and predicting spending patterns, then the need to couple customer experience services and digital transformation is critical. This is why Infosys acquired Eishtec in 2019 (1400 seats in Ireland) and Tech Mahindra’s Business Process services has risen to number 5 in the rankings this year with 30%+ growth – these firms are able to manage the intersection between traditional BPO delivery and digital capability. This is also why the number one ranked call center provider, Teleperformance, is known to be exploring an IT services acquisition to supplement its global CX business. Simply acquiring more call center is no longer reaping exponential dividends as non-linear growth is only possible when embracing AI, automaton and digital workers.
So let’s check out the 2021 rankings (download report here), which clearly show which providers kept the wheels of customer services moving throughout the Pandemic and get the insights from the report’s lead analyst, Melissa O’Brien…
Melissa – what on earth happened to the CX services industry over the last year and a half? Was it pandemonium? What worked and what didn’t?
There has been a considerable boom in CX services in the past 18 months. This market was already in the midst of a significant revolution, and the pandemic forced a lot of changes and accelerated decision-making that had stagnated. As with every other industry, the most significant change was the end of resistance to work from home. The contact center providers we covered in this report largely succeeded in the shift to work from home and made it work really well, much to many of their clients’ surprise. What made the difference is that WFH was an already established and fast-growing business model in CX services, representing almost a quarter of FTEs in January 2020. A year and a half into almost entirely remote work, many enterprises say they’ll never go back to brick-and-mortar — in fact, most we spoke to said they don’t care whether agents go back to the office and will leave that decision up to the BPOs.
But there are dynamics at play in the contact center that will even out the WFH balance over the next year. The CX services providers have long known that employee experience (EX) is king, and employee engagement does not work the same in a remote environment, especially for particular demographics and geographies. Service providers reported lower attrition and absenteeism levels in the early stages of remote work. These have gradually increased as people lose patience and crave the engagement of working in the center (many of which were explicitly designed to attract and delight employees.) So while we don’t expect office staffing to go back to pre-pandemic levels (on average, providers said that 2022 will be a 50/50 split), the agent engagement aspect, which ultimately drives customer service excellence, will end up dragging a lot of operations back to the center.
The other big change was an acceleration of the adoption of digital tools – with all the disruptions in staffing and unpredictable volume fluctuations, digital associates (i.e., intelligent chatbots and IVRs) also had their burning platform in the past year and a half. But we also saw this interesting paradox: while volume volatility significantly increased the adoption of digital assistants, there was also a tremendous demand for traditional voice (human-based) interaction. The CX services industry now has an increasingly difficult challenge of balancing the right blend of digital and human interactions in a volatile pandemic environment. Enterprises now rely on their service provider partners more than ever to help them find the right balance and differentiate through a dual focus on employee and customer experience.
So who came out on top – and were there any specific examples of heroism/failure along the way?
On the execution side we see the “usual suspects,” the big boys like Teleperformance and Concentrix flexing their brawn with the global scale and breadth of services that many of the other providers can’t hold a candle. They are tops as far as robust global operations models, sheer breadth of delivery locations, and process consistency. So while shuffling work around and getting capacity sorted out was by no means an easy task, these guys are the ultimate pros.
Then you have the innovation leaders. As in the past, we were struck with Sutherland’s co-innovation and design capabilities but this time they were utilized to help clients get through this difficult time. We were impressed with how much proprietary technology Conduent is using in its service delivery, including a COVID-19 outbreak management tool. We also have new criteria for OneOffice alignment where Tech Mahindra and Sitel came out on top, demonstrating the pillars of OneOffice, including collaboration and internal transformation.
“Voice of the customer” was a tight category because virtually all the customers we spoke to were really pleased with their providers, particularly their ability to shift to remote work with minimal disruption. The pandemic separated the haves from the have nots in this market. Those that were just making their foray into work from home grappled with the shift. But firms that had made significant investments significant prior, particularly in the cloud, security, and remote employee engagement, were able to mobilize the work from home environment faster. SYKES stood on the tremendous foundation that is 2016 Alpine Access (a pure-play work from home platform) afforded it as an advantage of being WFH experts.
Of course, there were hiccups along the way which the providers largely were quick to course correct. Poor call quality as a result of inconsistent connectivity in certain geographies was the most frequent issue we heard from customers and was often resolved by pivoting calls to chats and sometimes by sending out 5G devices to augment agents’ internet. Analytics and engagement tools played a huge role in ensuring process adherence but, more importantly employee health and well-being. There were some examples of heroism for sure, particularly as these firms empowered employees to deliver on CX in spaces directly impacted by the pandemic – think of all the interactions fraught with real customer distress and anxiety in industries like healthcare and financial services during a global public health and humanitarian crisis.
We’re now seeing a lot of consolidation in the space, and while we expect the usual “just buy more call center” attitude from some, I am hearing that we may see some actual consolidation across the IT services / CX services space. Does this make sense to you? I thought the IT services firms were eager to offload their call ctr business in the past?
Yes, many IT services firms were eager to offload or de-emphasize these capabilities in the past due to their reputation as low-margin services anchored by labor arbitrage and mired in low-value interactions. But now, there’s a paradigm shift reversing this trend. As enterprises increasingly adopt a OneOffice mindset, barriers are breaking down between IT and business with ‘experience’ as a common goal. The leading and most serious CX services firms have known for a long while that having a holistic and technology-enabled capability including design, software development, etc. is required to have a value proposition beyond commoditized contact center services, even if it meant cannibalization of traditional business process revenues. Providers’ investment and focus have been very real and largely organic, but adoption from clients is still tepid – and it’s very hard for these firms to differentiate when literally each of them has a flavor of “digital contact center” offering. Close to 3/4 of the 50+ enterprises we spoke to as references for this study said they are not using their CX service provider for any technology or innovative solutions, opting for pure operations delivery. One CX executive put it well: “It’s not that the CX partners don’t have the capabilities, it’s that the enterprises are not open to using them. The number one problem is perception… I can’t convince my CTO to look at (a CX services provider) the same way she looks at a technology services provider or vendor.”
So, as much as we’ve seen some IT services firms bulking up their CX capability for a more holistic value proposition, I think we’ll see it happening on the other side too with the serious CX services firms buying their way into the IT side of the house — for example, Telus International’s acquisition of IT services firm Xavient. These kinds of moves will help to bridge both the perception and capability gap.
In your view, Melissa, what should CX leaders do to be effective in this hybrid work / business environment?
Firstly, have a relentless and continuously evolving focus on EX. The top providers know very well how important EX is to delivering quality CX services. The required expertise will inevitably change hybrid remote and WFH emerges, and as automation and self-service continue to take a bigger piece of the customer interaction pie. Well-designed CX and well-trained customer service agents are always going to be a part of the equation. Plus, the labor market is changing. There are pockets of staffing shortages, employee expectations have shifted, and gig work is going to be an even bigger part of the workforce of the future; all this demands an ongoing re-evaluation of how to recruit, onboard, train, retain and motivate people.
My second piece of advice is related to the first because people today care a lot about the values and philosophy of the companies they choose to work for. “Profit with a purpose” is becoming a mantra in our business environment, and it’s more than paying lip service to ‘feel good’ causes; so be very clear about what you stand for as a firm and take bold action to ensure you live these values. CX Services providers traditionally have awesome CSR programs that involve employees from the bottom-up; allowing employees to choose what programs to donate time and money to has been a staple of the top providers’ strategy to attract and retain talent. But this is becoming a bigger part of retaining and winning new business also. CX buyers have always cared about how their partners approached ESG efforts but are now devising ways to measure and assess potential providers in the RFP process. Diversity and inclusion are at the very top of the list, and sustainability is catching up. We saw some awesome examples of how CX services companies and clients are partnering to jointly address ESG initiatives. Bottom line, CX executives will not buy from firms that don’t share their core values beyond revenues and profit, and act upon them.
It’s been a good two years since a young German man sought me out to excitedly tell me about a process mining tool that was set to change how process wonks approached their operations. After a couple of beers he then ‘fessed up to driving around Germany in a crappy old car – as a twenty-something passionate process software entrepreneur – to deliver software demos driving a whole new area. This area is process mining – a novel analytical discipline for discovering, monitoring, and improving processes by extracting knowledge from event logs readily available in today’s information systems. While his firm smartly developed much of its earlier business courting customers of SAP, it is now evolving far beyond the traditional ERP platform to inspire process execution initiatives enterprise-wide as businesses move rapidly into virtual environments.
With a post-money valuation of $11b following a Series D round earlier this year, an impressive partnership with IBM, and a number 1 ranking in our September 2020 HFS Top 10 Process Intelligence Products, I was thrilled to end a forced 18-month separation with Celonis Co-Founder and Co-CEO Alex Rinke to get a real update of how his firm has driven incredible forward momentum – and investment – during this period of crazy…
Meet Alex, soon to become the youngest process software billionaire (who avoided buying an RPA product) to focus on adding value to CxOs much higher up the enterprise food chain…
Phil: Tell me how you got started in this game. Is this what you always planned to do?
Alex Rinke,Co-Founder, and Co-CEO, Celonis [Laughs]. Absolutely not, Phil. There was a lot of planetary alignment – a fancy way to say we were very lucky. I was a math student 11 years ago – and I read a paper about process mining and got really excited about the idea of extracting data from information systems and figuring out how an organization operates, and where they’re inefficient. At the time there was no practical adoption of it. I talked to my two friends, who later became my co-founders, Bastian (Nominacher) and Martin (Klenk), and we decided it had so much potential, we had to learn more about it.
We had an opportunity, through the university, to work with a business on a research project, and we applied process mining to one of their processes in the customer service and IT service domain. We were able to help them to cut their resolution times by 80% just through better process execution. Then we got so excited about it that we decided to start a company.
From boot-strapped to $1billion Series D Round
Phil: So how did you build out the firm, Alex? How has it evolved for you?
Alex: Early on, we bootstrapped the company. We raised the first round of funding in 2016 when we wanted to expand to the US market. We grew in three waves as the product has evolved. The first was an x-ray system so that any business can do an x-ray of their business processes with process mining. Then, as that got momentum, the second big evolution was to build a process data platform, to not just x-ray, but also to monitor the processes and connect to all the different data sources in a company. And then the third evolution is our execution management system, which takes this process intelligence, and turns it into more intelligent execution of your core processes – data-driven execution of your core processes.
We raised a Series C round, exclusively from private individuals. That helped us in establishing our brand further and building an executive team of seasoned enterprise leaders. We acquired Integromat, to boost our automation capability. The Series C funding round was really maturing the brand, the product, the company, to move beyond process mining. We crossed 1,000 people in headcount.
We launched our Execution Management System, in October of last year. That, plus the investments made from the Series C funding round, led to explosive growth momentum, so we decided to double down again, and raised this very large $1 billion Series D round to grow the company even faster.
We are working towards building more than a product and a company, but an entirely new software category and an ecosystem around it.
Phil: Where are you looking to invest to get you to IPO, Alex?
Alex: We have heavily invested in our go-to-market and are continuing to do so. That includes strengthening our ability to serve customers directly, but also investing in the partnerships we’re building – with IBM, and the global BPOs and SIs.
The third big area of investment (not in order of priority) is R&D. We have opened an international R&D hub in Madrid, and in the US we are expanding our resources from a product perspective. From an engineering perspective, we continuously evaluate whether to build or buy. We also continue to invest in the infrastructure of the business – HR, finance, all those things.
Meeting customers with an old Opel car to running a global enterprise company – the problems remain the same
Phil: What’s it like to start off driving to customers in an old Opel car, growing a very small business, and now being a hyper-growth enterprise software market shaper? How does that change how you work?
Alex: It’s obviously a little bit different, in terms of what you deal with every day. But it’s also not that different. Ten years ago, I woke up every morning thinking, “What do we need to do from a product perspective? What do we need to do to grow? Who do we need to hire?” The problems are very similar now – just at a very different scale.
We’ve got a really strong leadership team now, Phil, so I’m much less focused on the current quarter or the next quarter. I try to focus on doing the things that will help us in 18 months to three years from now. My focus is on building a company that stands the test of time.
Phil: You are just 32 years old. When you make a huge amount of money when you go to IPO, do you plan to stay in the technology space for the rest of your career?
Alex: An IPO is not really an exit event. It is a milestone on the journey. We had multiple opportunities to sell the company to big corporations. We just never thought that was the right thing for us. When the three of us wake up in the morning, we think about Celonis, and when we go to bed, we think about Celonis, and, personally, wouldn’t know what else to do. There is no plan B, at this point in time.
On a (fun-filled) mission to fix peoples processes
Phil: [Laughs]. It’s not all about the money, then?
Alex: Absolutely not. It’s just so much fun to be part of and to build Celonis. I always say our purpose is to unlock the world’s processes. So many processes are frustrating for people and are highly inefficient. And processes are an incredibly horizontal thing, everywhere, in every organization, touching so many consumers’ and employees’ lives. It’s both motivating and fun to be able to have a really big impact on something so pervasive.
Phil: So your life’s mission is to fix people’s processes. I love it. [Laughs].
Alex:[Laughs]. It’s pretty good, don’t you think? [Laughs].
Phil: Yes! You’ve identified something that is in dire need of fixing, and you’re out there doing it with incredible momentum. It’s great to see an independent organization building out both a successful platform and a thriving ecosystem. Am sure all of us here are excitedly watching you guys to see what’s next in this fast-moving market…
One of my heroes driving disruptive and practical thinking in global business models, the impact of the Internet and globalization and foreign affairs is three-time Pulitzer winner and NY Times columnist Thomas Friedman.
Tom came to prominence in our industry in 2005 penning the seminal book “The World Is Flat: A Brief History of the Twenty-first Century“. Was that really 16 years ago? If you’re a spring chicken and never read the book, I suggest find the time as this laid the foundations for the world we’re hurling into today. So you can imagine my interest levels bubbling when my friend Ravi Kumar “S” got some YouTube time with him last week:
Work has become separated from the workplace and jobs.
AI shifts the emphasis of human endeavor from problem-solving to problem-finding.
Companies have become giant education systems delivering just-in-time learning at the edge of the envelope; the linear integration of government-education-work is disrupted.
Universities should follow the Amazon Prime recurring subscription model to scale lifelong learning to the world
For any organization to win in the future will require them to be part of complex adaptive coalitions
Companies themselves have become giant education systems
When the industrial revolution hit we created something called the welfare state, basically a series of walls ceilings, and floors to help people make the best of the industrial revolution and cushion the worst. The politics has since debated how high, strong, etc the walls and ceilings and floors should be. This worked while the assumption was the pace of change would be linear.
In the last 40 years – since the microchip – what happened was four forces came together and blew up this grid of walls, ceilings and floors
The microchip
Software
Sensors
Bandwidth
And now the beginnings of AI.
This blowing up has created a world where the job of leaders and educators is to navigate now, a very different ecosystem: Characterized by:
Fast – the pace of change now
Fused – beyond connected and interdependent
Deep – Tech has gotten deep – Fakes, Mind, Research
Open – a radically open system in which everyone can play
So the challenge now is how you enable adaptation in this context.
How? We have to look at analogies from nature – when ecosystems thrive it is those with complex adaptive networks – where all the elements of the ecosystem network together (this is the hyperconnected org we discuss at HFS). Complex adaptive systems network together to provide resilience and propulsion. The organizations that will thrive are those that build complex adaptive coalitions to maximize (collective) resilience and propulsion.
Tom: What’s new is where companies are pushing the boundaries and realizing they need to train their own people faster and faster, how will companies, like Infosys and many others, become central players in the ecosystem of education?
Ravi: Nature, human behavior, and technology define how you can predict the learning needed for the future. The whole linear integration between work, education, and government – which was rooted in the industrial revolution – is changing
The world we are getting into is very digital, with rapid sentience, high-speed with rapidly changing business models. Now work, education and government must connect in an ecosystem. Education has never been impacted in the last 40-50 years. The cost of education has gone up 150% vs inflation in that time – and that is because it hasn’t really been disrupted.
Skills are getting depleted at rapid speed, people are having multiple careers, with work getting very modular and disintegrated from the workplace, the pandemic has taught us how to make hybrid models work…I can believe that work and education will get intertwined:
Example: Google’s six certifications. Anyone can do these, anyone without a degree, at the end of that we had a consortium of employers, including Infosys and Google ready to hire. We’re going to move to an era of skills process degrees – work and education intertwined.
Example: What we are doing. We are hiring without degrees, landing them on digital backbone jobs, and then have a runway of credits so someone can do a degree while they work with us, a learn-earn and work model of the kind that was popular in engineering apprenticeships.
Two-thirds of the workforce in the US doesn’t have a degree so I’m hoping this will lead to more diversity and inclusivity. We have community-led companies which hand-hold people as they land on those backbone jobs and then Infosys helps them to become life-long learners, navigating the credentials and micro-credentials they need.
The US should try out Education-as-a-Service, moving to buying a recurring subscription service – the perfect model for lifelong learners. A Harvard Prime (etc). This will address both student debt and the inclusivity challenge. The US now has a unique opportunity to get digital reskilling to the world, to make the world a better place. It can start to show its generosity to the world (a la post WW2). The US should take its education to the rest of the world.
Tom: The in-house universities of IBM, or Infosys or (etc) are delivering just-in-time learning because they are touching the edges. What does Infosys’ just-in-time platform look like?
Ravi: We have always focused on lifelong learning. We are building a corporate learning university in Indianapolis – and we are not only using that for our employees, but also for all large incumbent companies. They need to reskill their workforce more than we need. AI will mean half the workforce in the world will need to reskill. In creating just-in-time learning we hope to create learners who can adapt to this. We may have to take a hotel clerk and make them a cyber expert. We look for learnability, the aptitude to learn, then we create immersive templates and hand-hold to learn on the job. You start as an apprentice and learn forwards.
Tom: We have to build student agency, supporting independent learning.
Ravi: Over the last 50 years the workplace has created space for problem solvers. Now we must create space for problem finders. Problem finders will be the new human endeavor – problem-solving will progressively be moved to machines. We think workplaces will be flooded with more anthropologists, people with liberal arts, sociology etc backgrounds. Problem finders look for what the human desire is. The future is all about creating solutions at the intersection at the edge – maths and meds, arts and science, computers and anthropology – these are where you will find more problems.
Diversity will be better if we get this right, the model will be distributed around the world and into the homes of people who may only be able to join part-time, thanks to the new modular nature of work, enabled and orchestrated on a digital platform. It won’t just be humans + machines, it’s going to be gig workers, plus FTE plus part-time + machine. Gig work will extend to all industries and FTE will be only a small % of the working population.
Tom: How do people get healthcare and retirement when work is separated from jobs
Ravi: The key is the government’s role in protecting the workers, which will drive how well this is adopted.
What do you think governments should do, Tom? They seem built for your first and last 20 years, how do they deal with the middle years when all your change happens?
Tom: It took a consortium to write a law for safe self-driving (in Israel), governments must be participants and convenors of these ecosystems. They will have to test and be very experimental – and not dogmatically left or right.
Infosys is moving so much faster than the government (we see this with all tech), so the only way you can get on top of it is through collaboration
Do click on the YouTube link to hear this terrific discussion in full! Thanks, Ravi and Tom for airing this:
