Remember when sourcing advisors has become the “new analysts” and dominated so many outsourcing discussions? Remember when it was the norm for clients to bring in the sourcing specialists whenever they needed a deal done, not only to get a good price, but also to make sure they selected the right partner and had a strategic view of the future? Remember when most advisors were not only contract experts, they were also strategists, researchers, sounding boards and respected brands you could hang your hat on… Just look at our 2011 study when advisors lorded the influence over everyone bar direct peer feedback:
Fast forward to today, with all the sourcing advisors doubling-down in RPA to compensate for the drying up outsourcing deals and confidently hoping their outsourcing clients will immediately turn to them to help them grapple with the new outsourcing-cum-automation model. Surely their ability to craft deals for clients will put them in pole position to take their clients down the RPA path…
Let’s visit our brand new (still-in-the-field) study on the 2017 State of Automation, and it’s telling us a very different story when we spoke with 56 enterprises actually deploying RPA:
Less than half the RPA buyers view either consultants of sourcing advisors as influential in their automation sourcing. Even conferences are impacting automation buyers more.
So what’s gone so wrong with advisors in automation?
Credibility. Suddenly many advisors who were previously hawking their deep understanding of HCL versus TCS’s FTE rate cards are now suddenly adding their names to white papers on automation and trying to insert themselves into serious client conversations about said topic. It’s just not credible.
Smarter clients. The swirl of information over social channels is so intense these days that most clients’ knowledge isn’t that far behind the experts. In many cases, you’ll learn more about RPA talking with a client in beta mode than an advisor or analyst trying to impress you at a conference. That is why internal channels, such as procurement and plain old desk research is such an influence factor these days.
Archaic focus on headcount reduction. Just because you could create simple cases for headcount reduction with “take the people” outsourcing, doesn’t mean you can deploy the same draconian strategy to automation. Even the most clueless governance executive knows you can just fire people before you programmed some manual activities into a piece of software. Sure, there are serious productivity gain to be gleaned over time through the digitization of manual processes, but to tie this to immediate headcount takeout just doesn’t work.
Competition from service providers. For the first time, sourcing advisors and service providers are going head to head, and automation is the promoter of the fight. When clients want to understand RPA and a partner so help them roll it out, they need people who are in the game for the long haul, not a broker to dip in and out and get a deal done. Many of the sourcing advisors are just not transformation people – they are great at helping clients plan their outsourcing weddings, but marriage guidance councilors they truly are not. Service providers depend on long-term, complex and often messy relationships to keep them employed and busy… and RPA really fits the bill. While it poses significant threats to their margins over the long term, they cannot afford to be not playing in the automation game. What’s more, most the BPO service providers are rapidly running RPA in their own delivery organizations, which is giving them the experience and lower cost base to be effective.
The traditional consulting model doesn’t work with RPA. The advisors are struggling to scale up talent bases that can understand the technology and deal with the considerable change management tensions within their clients. RPA is murky and complex, and not something you can train bus loads of 28-year-old MBAs to master overnight. Meanwhile, we are seeing some advisors simply do some brokering of RPA software deals for small fees, only to make a hasty exit from the client as they do not have the expertise to roll-out effective implementation and change management programs.
RPA specialist consultants few and far between. Pure-play RPA advisors are explaining this is not quite so easy and requires a lot more of a centralized, concise strategy. There are simply not enough of these firms in the market, especially with Genfour having been snapped up recently by Accenture. With only a small handful of boutique specialists to go around, these firms can pick and choose their clients and command high rates. Quality RPA advisory boutiques, such as Symphony Ventures, are literally turning business away as they cannot scale fast enough to cope with the demand.
Advisors are not producing research. There’s a reason why procurement folks, analysts and simple desk work actually sit above advisors in the new data – clients want product specific benchmarks and real experienced advice that they are simply not getting from the advisors. All the advisors are putting out is the same of tired “drama” about robots replacing workers, and how to think “strategically” about RPA. While I like some of the stuff I see coming out of the likes of McKinsey, KPMG and EY, it’s just not giving me the real deal about which RPA vendor I need to be working with, how these tools truly stack up against each other and how I can actually build a bloodybot. That is why many clients are getting more reality from attending a conference than the lovely lunch they just got bought from their nice friendly consulting partner.
Turgid, hackneyed marketing doesn’t work anymore. Cheesy pictures of robots and the same endless stream of 300-foot view puff that sounds just like the last piece you read on LinkedIn by some weird dude who you can’t actually recall allowing into your network, isn’t helping matters. These advisors are relying on their brand and past reputation for credibility in a world where clients want to see some meat on the bones.
The Bottom-line: Advisors need a vastly different approach to automation to avoid complete irrelevance in this market
This industry has literally entered into a destructive war over automation, and the need for credible, independent and experienced advice has never been so in demand from customers. The skills to make automation a feasible profitable reality are few and far between, while greedy corporate leaders demand cost savings that simply are not achievable if their organizations fail to make the necessary investments and partnerships. Did companies become world class at HR overnight because they bought an expensive Workday subscription? Or stellar at sales and marketing because they slammed in a Salesforce suite? So why should they become amazing at cost-driven automation simply because they went and bought some licenses from an RPA vendor promising bot farms and virtual labor forces?
RPA and Intelligent Automation have sparked a major war in the worlds of outsourcing and operations, where many battles are being fought – and the winners will be those who are in this for the long haul, who can absorb some short-term pain in order to benefit from the larger spoils further down the road. While automation is killing outsourcing today – costing many people their jobs, their reputations and destroying the profitability of legacy engagements, those who can hunker down, focus on self-contained projects where they can fix one broken process at a time, can get stakeholders onside by demonstrating meaningful, impactful outcomes without major resource investments, will be the winners.
Advisors who can win out are those who can take their clients through this journey – one process chain at a time, evaluating all the right solutions and developing milestones that are realistic. Sadly the easy gigs where you could roll out of bed for a couple of million in billings are now extinct. The key is to play the long game, invest in the new skills you need to be truly credible in this market, and produce credible research that gets down and dirty in the weeds, not that 300 ft helicopter view that everyone’s heard over and over again…
Tired of the RPA hyperbole? Well, you’d better get used to it continuing, as key industries have already made significant short-medium term commitments:
Our 2017 State of Operations and Outsourcing study with KPMG, covering 454 major enterprises, shows the hi-tech and financial services industries leading the way with, respectively, 53% and 44% already making significant investments in RPA over the next couple of years. Only retail falls below 30%, which may be a result of highly distributed organizations finding it if challenging to find high-throughput, high-intensity process where there is real tangible ROI for the investment.
The Bottom-line: The more digital your firm need to be, the greater the onus on digitizing and automating your manual processes
Quite simply, you can’t be an effective digital organization if you don’t have your manual processes digitized and automated. That’s what RPA does. All software and hi-tech firms have to transact their services over digital channels, and most tend to be further along the change curve when it comes to automation. Net-net, hi-tech’s DNA is all about automation, so having a digitized back-end just fits with how they view the world. For banks, these companies are plagued by manual processes and many have taken the plunge in recent years with large RPA teams to help them meet compliance deadlines and standards – almost every major bank has an RPA story unfolding. Insurance is catching up too, especially those with archaic claims processing workflows. Moreover, many insurers were among the first to exploit offshoring over the last 10-15 years, and moving along an RPA path is a natural progression for many of them. Energy and utility firms are all about cost control these days, while healthcare orgs are among the most backward when it comes to legacy technology and process. As patient care moves into the digital era, the need to digitize those manual records has never been more dire.
However which way we look at it, RPA is on a major growth trajectory… our forecast may be too conservative, but we believe many organizations will be surprised at how much time it will take to get their act together to adopt RPA in the right way. However, the newbies should be able to learn from the pain of the early adopters to move along the RPA adoption cycle faster.
The pendulum is swinging back. Over the past year, we’ve seen the increasing focus from India-based service providers to invest in building on-shore presence and capability in the U.S. While spurred on by H-1B visa limitations and in-flight policies regarding minimum wage and the politics of “protectionism,” the long and short of it is that the U.S. citizens should benefit from local investments. U.S. governments and economic development entities are offering incentives for partnering with these service providers as they seek out “hubs” central to current and potential clients. Two recent examples are Indianapolis, Indiana with Infosys and Jacksonville, Florida with Genpact, where the cities offer tax incentives and colleges and universities can provide a talent pool.
It used to be “too expensive” for service providers to set up on-shore service delivery centers, but with the increasingly integrated and intelligent use of robotic process automation and cognitive computing and the motivation of politics and protectionism, this argument is fading. What is also relevant is when the partnership changes focus from outsourcing a task or point solution such as “collections” to business outcomes such as providing a better patient experience and increasing upfront payment (thereby reducing the need for collections), the service provider needs to be more integrated into the end-to-end process and business operation. That means having a local presence and interaction to provide relevance and create meaning and insight. (See “Recasting the patient billing experience” as an example).
Our research (see Exhibit) shows the there is a significant drop across the board in the move to “offshore” business and IT work – finance and accounting and HR, in particular. Case in point, we recently heard from a client about how Sutherland helped set up and recruit into a local service center for F&A services in a matter of a few months for a company that was separating from its parent.
Exhibit: Changing use of offshoring – shared services and outsourcing
Source: HfS Research in Conjunction with KPMG, “State of Operations and Outsourcing 2017” Sample: n=454 Enterprise Buyers
How service providers are expanding local, U.S.-based presence
Investments by service providers in having short- and long-term U.S-based capability for clients include local service delivery centers and increasing co-location delivery teams as well as work-from-home options; education support through curriculum development in local colleges and universities as well as programs for K-12 to “entice” and enable interest in STEM (e.g., code.org and Girls Who Code) to create the workforce of the future; and transitioning workforces from clients to their own organizations.
Examples include:
Genpact: In July, Genpact will add to its network of 12 U.S.-based service support and delivery centers by opening one in Jacksonville, Florida. This one will focus first on mortgage service support with processing, underwriting, and closing services for residential mortgage loans for a leading financial services institution
Infosys: A new entry into this discussion, Infosys has far outstripped other service providers in pursuing H-1B visas to date and is now refocusing on building local presence and brand recognition. Infosys intends to develop four locations in the U.S., centered in “client clusters” and focused on particular capability areas such as artificial intelligence, user experience, and enterprise cloud. Its approach is to partner with local colleges and universities and offer incentives such as investing in student tuition and curriculum development. Infosys is also preparing for more long-term needs by looking at ways to entice a broader interest in STEM. The first partnership in this effort is in Indianapolis, Indiana, the heart of the U.S.
Cognizant: Its recent acquisition of Health Care Services Corporation’s TMG Group adds Medicaid and Medicare support in offices in Texas and Pennsylvania. This move provides its clients access to more local resources – people with knowledge and depth in government health as well as infrastructure.
Bottom line: Indian-based service providers have been building near-shore and onshore presence for a few years now, but it takes on new meaning and significance now as the context changes – politics, the impact of technology, objectives for partnering, and changing priorities around the skill sets that are needed. As a service buyer or government, university or economic development organization, be creative and also take a long-term view as to how these service providers can funnel the investments they are increasingly willing to take to have value locally to grow their businesses.
HfS has just published its first HFS Blueprint Report: Microsoft Dynamics Services 2017. The report looks at the capabilities and vision of nine global Microsoft Dynamics service providers. As this report forms part of HfS’ SaaS services research, a small weighting was applied to the service provider’s specific experience in deploying the cloud products.
What are the Microsoft Dynamics cloud products?
That’s not an easy question to answer! We have traditionally looked at the services market for stand-alone SaaS products (Workday, Salesforce and SuccessFactors). The Microsoft Dynamics ERP and CRM products are different and can be deployed on-premise, on a private cloud, on a public cloud, or with a hybrid model. Many buyers love this because it gives them maximum flexibility and control which is future proof.
The majority of Microsoft Dynamics deployments have been on-premise, especially for the ERP products, which have also been more popular with mid-market buyers. The CRM cloud product, CRM Online, has been more popular in recent years with mid-sized and large enterprises alike. The new Dynamics 365 platform, launched in Q4 2016, delivers a combination of Microsoft Dynamics ERP, CRM, productivity, and other applications on the cloud. We expect this platform to be a key growth driver for the adoption of cloud in this market over the next few years.
So, which service providers stood out in this Blueprint?
We included leading, global Microsoft Dynamics service providers. They all have good experiences and have made impressive investments to grow this aspect of their service practice. All of the service providers were positioned either in the Winner’s Circle or High Performers category. Notable performances from the different providers include:
DXC Technology, which impressed with its overall experience in deploying Microsoft Dynamics.
Those with the best cloud experience in engagements were Accenture/Avanade, Capgemini, HCL (PowerObjects), IBM and KPMG.
Accenture/Avanade and KPMG also impressed with their investments in consultative tools and technologies.
DXC Technology, IBM, Infosys, Wipro and TCS particularly stood out for their industry sector tools investments.
So, where do we expect this market to be headed in the next few years?
As the Dynamics 365 platform gains momentum, we expect increased service opportunities across our Value Chain of consulting, implementation, management and optimization services. One of the biggest challenges service providers have is keeping up-to-date with Microsoft’s product developments and training consultants to meet increasing buyer demand. As with all SaaS service markets, key differentiators lie in the ability to hire, motivate and retain good talent to maintain client project continuity. Buyers are becoming increasingly selective of the specific team members on projects. Look out for notes detailing recommendations for service providers and buyers on the HfS research site soon.
Talent is still the most precious asset firms have and it needs to be nurtured as the real proponent of growth and success, not merely the fancy technologies that can automate workflows. Our technology and business services industry desperately needs a mindset shift – and one that requires a longer term view, than the next quarterly Wall St announcement. Whilst we are not the only guilty party here, our technology and business services industry is still rooted firmly in people capability, much more than technology and commodity products, hence the desperate need to correct course and avoid circling the drain…
I was interviewing with the Delhi branch of NPR the other day on the layoff paranoia engulfing the Indian IT industry, and it dawned on me just how inhuman our business has become. These are normal people who still view the world as one where employers have responsibilities to their employees, where people still care about the welfare of others, when you got up in the morning and went to a job that had a purpose and a future.
The poor interviewers simply couldn’t comprehend why major employers enjoying ~20% profit margins and continual 5-10% growth were so focused on making massive staff reductions. “Don’t these firms have a responsibility to their employees, Phil?” was the question. “Of course they don’t, it’s all about their shareholders” was my immediate hair-trigger response. Ugh – I suddenly felt ashamed of the business of which I was part.
We’re in the business of increasing profits for investors, not creating new business value from people
Is our sole purpose now simply to eliminate people? We spend a couple of decades displacing “expensive” workers because we could find less expensive able ones to do the job. Now we’re getting rid of them altogether just to keep the Buffetts and Elliotts happy? And why are we literally obsessing with labels to describe what we do: Digital, Machine Learning, Intelligent Operations, Robotic Process Automation… or my favorite “Digital Labor”.
Let’s be honest, what all these things really signify is “how to get work down without the need for people”. And how can you call something “Digital Labor” when the labor is no more… unless we start redefining RPA recording loops based on optical recognition software as “labor”. Maybe we need to revisit what labor actually is, according to Merriam-Webster:
Definition of Labor (Merriam-Webster):
“1) The human activity that provides the goods or services in an economy;
2) The services performed by workers for wages as distinguished from those rendered by entrepreneurs for profits.”
Correct me if I am completely losing my mind here, but we’re no longer in the business of promoting human activity to stimulate economies… we’re in the business of increasing profits for investors. Is there any way to dig ourselves out of this hole, or are we on an inexorable nosedive to the lowest common denominator of creating and promoting business operations that no longer require people?
As technology and operations professionals, we must rediscover our purpose or we’re just promoting the end of labor
I wish I had a silver bullet solution to help us take this dramatic U-turn, but sadly, all I can offer are some ideas on how we can re-humanize what we do:
Find meaningful work for our people to do – not just fire them. In the past, when most businesses had some excess staff capacity, there were always useful things for them to do – such as consulting and outsourcing firms deploying their benched consultants to work gratis with existing clients on special projects that could eventually lead to future business – or just make those clients happy. Why just fire them for the sake of it? Why not set aside some modest investments to use these people to grow the business and increase client satisfaction? Why do we have to operate on a “you pay for what you get” basis with clients today? With all the guff we hear about co-creation and co-innovation between clients and service partners, surely this is the time to invest in our staffing ranks to change the nature of partnerships and create more trusted and innovative work cultures? Why does everything always have to have easily-accounted dollar attached to it? Will extracting a few extra dollars, rupees and pounds from the bottom-line, just to reduce excess human capacity, really have a hugely beneficial impact in the medium term? Maybe we could have had a few of these recently redundant folks examine the potential security issues of an airline IT system going down, thus saving billions of dollars in lost productivity and brand impact? Did British Airways really make out, when it cut as many corners as it could, just to lay off some onshore IT staff?
Stop this inane drivel about digital, automation and machine learning and start focusing on proper business solutions. There, I said it. Sorry to be blunt, but why is almost every service provider and consultant subjecting us to the same sales pitch about how amazing they are at automating, digitizing the machine-learning the crap out of everything. I have found myself imprisoned at conferences with legacy outsourcing advisors, analysts and service providers – many of whom can barely spell “algorithm” – suddenly pretending they have been lifelong evangelists of these areas… And all these enterprise practitioners who subtly sneaked “RPA” into their job titles. Have we really become an industry of bullsh*tters and callous labor eliminators promoting this new wave of technology-driven human greed?
Enough! Any modern service provider with delivery credibility can fashion a framework to help orchestrate and implement all sorts of slick data-driven technology. Most advisors can probably help you kick the tires with an intelligent automation strategy and a selection of products to tinker with… and most enterprise side practitioners should (by now) be smart enough to work out if they can even start to adopt this stuff in their current environments.
Let’s just assume we can automate rudimentary manual processes and create meaningful machine learnings from data and text that is in some state of being legible to a series of algorithms. The technology is here today and we have the capability to take advantage of it. Let’s refocus the conversation on solving business problems and finding new opportunities and challenges together. Let’s talk about how we can help healthcare providers improve their patient satisfaction levels, or how banks can do a better job helping small businesses qualify for loans… or how retailers can better leverage Amazon and Alibaba to market and sell their products… Or how RPA providers can work with their partners clients to find value for their clients beyond sheer labor elimination. There are so many business needs to address, let’s raise the conversation to making business more successful, as opposed to simply whacking their staff.
Lobby governments to offer tax breaks to tech firms which increase their employee bases. This just has to happen. Companies need to be encouraged to add talent to their ranks, not slash it because they think they can. I sincerely hope Prime Minister Modi is in talks with India’s flagship IT services firms to fashion new tax incentives to have them invest in their staff – not simply resign themselves to satiating the whims of greedy investors. And President Trump – how about offering those promised tax breaks to US firms which invest in their people?
Raise our social responsibility brand as discerning employers. Let’s celebrate firms which grow through great people investments. Sure, we have to be smart about balancing the P&L, but those which can do it with real talent investments should be the beacons for us all to follow. Let’s highlight our talent successes and how great we are at investing in people to be great at what we do. No one is going to remember us for being amazing at automation, but they may remember us for creating a culture of collaboration and great service. People still buy from people and are (still) predominantly serviced by people, so let’s not lose sight of that.
The Bottom-line: The enterprise IT and business operations industry is venturing down a very dangerous path and we need to get off it – and fast.
We have to focus on helping clients find business value, not obsess with this labor elimination disease which has taken a stranglehold over our conversations. You can just sense we’re sinking into a new abyss of paranoia and negativity and we need to work hard and fast to pivot the discussion up a level, where the focus is on people and technology driven success, not simply a morass of algorithms designed to turn our firms into highly cost efficient transaction machines. Let’s get back to business and let the technology do its thing to enable it, instead of dominating it.
When an industry is enduring a secular shift that is literally redefining how we do work, it’s pretty important to get some real, unfettered dialog going among all the key stakeholders this impacts. We need to break free from the glitzy paid-for sales presentations, robot keyrings, stress balls, nasty logo-ed leather notepads and greedy events firms vying for a quick buck from vendors eager to part with cash to promote themselves to all their competitors.
That’s why we’re assembling 100 of the industry’s finest leaders in a single room for a whole afternoon to thrash out the mandate for the future of operations in the robotic age for our inaugural FORA council session in Chicago, 19th September. And we promise no sponsors, stress balls or bad white papers to take away…
Here’s just a sample of the industry robo dignitaries who’ve already committed:
Alastair Bathgate, CEO, Blue Prism
Chetan Dube, CEO, IPsoft
Chip Wagner, President, Emerging Business Services, ISG
Cliff Justice, Partner, US Leader, Cognitive Automation and Digital Labor, KPMG
David Poole, CEO, Symphony Ventures
Daniel Dines, CEO and Founder at UiPath
Jesus Mantas, Managing Partner and General Manager, IBM Business Consulting, IBM US
Lee Coulter, Chair for the IEEE Working Group on Standards in Intelligent Process Automation
Dr. Mary C. Lacity, Curators’ Distinguished Professor of Information Systems, UMSL, and Visiting Scholar MIT
Max Yankelevich, CEO, WorkFusion
Mihir Shukla, CEO, Automation Anywhere
Peter Lowes, Partner, and Head of Robotics & Cognitive Automation, Deloitte US
Shantanu Ghosh, SVP, CFO Services and Consulting, Genpact
Thomas Torlone, U.S. Leader of Enterprise Business Services, PwC
Tijl Vuyk, CEO and Founder, Redwood Software
Weston Jones, Global RPA Leader, EY
We also have leaders of cognitive and automation initiatives from the following buyside firms already signed up to get stuck into the debate:
So let’s cut to the chase – it’s time to have the real, hard conversation about where we really are as an industry. Why aren’t those 40% cost savings happening, each time someone slams in some software and hopes it somehow eliminates manual labor because they can access a bot library? In fact, why are a third of RPA pilots just left hanging with no result? Yes, people, it’s time to wake up and smell those robotic roses and have those really tough conversations about what is real, versus why so much of this stuff just isn’t working – and why we’re not putting together properly governed RPA rollout plans like we do with ERP software and SaaS platforms. Why are we making such a mess with this, when we could have so much to benefit from?
So join us in Chicago this September 19th for FORA the inaugural council meeting that finally debates the true Future of Operations in the Robotic Age
FORA is the very first industry council established to bring together buyside operations leaders, service providers leaders, expert advisers and technology developers to steer industry’s transition to the Digital OneOffice™.
FORA’s mission is to bring together the leadership from senior buyside operations leaders, service provider leadership, expert advisers, and technology developers to set the agenda for the transition to the Digital OneOffice™, and to develop an industry mandate for navigating and managing the creative destruction that looms. Supporting the FORA initiative is the IEEE’s Intelligent Process Automation Standards initiative that will encourage further research and investment, leading to powerful and attractive new service offerings. But the commercial frameworks needed to encourage and sustain wider deployment of these technologies are lagging because they fundamentally threaten established models.
In order to communicate the learnings from the FORA meetings, the group will produce a quarterly “FORA Mandate” that communicates core recommendations to the industry from the group meetings that will be held at quarterly HfS Summits.
So how can you get considered for Council Membership?
HfS will consider applications to the FORA Council based on seniority and relevance. Are you interested in participating? Just email us at [email protected].
This is a really important development as we consider the future of services and operations amidst all this creative disruption. I hope to greet many of you personally in Chicago this September.
Earlier this week, Cognizant announced its intention to expand its footprint to support U.S. Government health operations through the agreement to acquire the TMG Health subsidiary of Health Care Services Corporation (HCSC). On the flip side of that announcement, HCSC has carved out its Government health support function to be run by a partner – Cognizant. HCSC can benefit from Cognizant’s dedicated, prioritized, and leveraged (cross-client) resources to manage the operations services. However, to impact the health, care, and financial outcomes of its healthcare consumer base, HCSC will need to partner with Cognizant in a way that creates the OneOffice™ – a seamless flow of data, insights, and infrastructure for the front, middle, and back office.
TMG Health’s relationship with HCSC started back in 2005 when HCSC selected it to provide BPO services in support of its entry into the Medicare Advantage market. At the time, TMG Health provided some measure of enrollment, eligibility, claims, and billing support to a total client count of 30 plans covering 2.8 million lives. In 2008, HCSC acquired TMG Health for $100m, tucking in the BPO provider as a subsidiary. TMG Health has since added support for Medicare and Medicaid claims processing and member services and has local resources in Pennsylvania and Texas – for 32 health plans (+2 since 2009) and more than 4.3 million lives. TMG Health has not really grown its portfolio of clients although the footprint of services has expanded over time. And public health programs continue to grow – in numbers and complexity as the industry moves to greater coverage and value-based care. The changes in the healthcare market driven by consumerism and compliance are driving healthcare plans to “rethink” their business and operations strategy.
By exiting the “back office business,” HCSC can focus its investment and resources on becoming a more consumer-oriented company.
While retaining a partnership with Cognizant for its support/back office services, we expect HCSC to focus on becoming more consumer-oriented; to channel its resources to becoming insightful, tech-enabled, and overall “savvy” to impact health outcomes for its constituents. In the meantime, it can rely on Cognizant to provide a steady and increasingly optimized rules-based foundation. We expect Cognizant to tap into the Medicare/Medicaid COE it told us about in our last Healthcare Operations Blueprint research. The consolidation of its subject matter expertise, IP, and tools in the COE is to help manage the tricky business of complying with government policies and the continued growth of Medicare, Medicaid, Medicaid Advantage, and Dual-Eligible consumers – providing support for eligibility, enrollment, billing, claims, and applying its solutions around quality and reporting (e.g., STARServe). Cognizant has the right experience plus industrialization and scale and has the Trizetto and RPA capabilities to drive increased efficiencies and free up resources to support new growth in the Government Health operations business.
The Bottom-line: HCSC and Cognizant will need to partner to keep – or establish – integration between front and back office to impact health, care, and medical outcomes.
One place this arrangement could break down is if the back office support that Cognizant provides is not integrated with the front- and middle-office of HCSC (and its other clients). In order to impact health, care, financial, and quality outcomes, healthcare payers need to be healthcare-consumer oriented – understand the health, financial, economic, and social determinants of their constituency. A lot of that data is part of those back office systems and processes, so HCSC and Cognizant will need to be partners in defining workflows of the future that will support an insightful, consumer-oriented business that complies with government standards and also enables HCSC to better manage the health, care, medical, and financial outcomes of its public health base.
A question I get asked a lot is what do I think about the future of outsourcing? In this case in a few hundred words. I thought I’d share, but forgive me if it becomes evangelical:
The future of outsourcing is linked very strongly to the future of technology and its use in the enterprise – often it’s very hard to distinguish between the trends of these two things. Essentially outsourcing is the commercial arrangement between technology (and business services) organizations and their customers – it’s how you put a price on an operational service between the two.
The big shift will be the level at which you quantify an amount of service. The most popular way to quantify outsourcing arrangements has been by the number of people, per FTE models. But over time these transformed into a hybrid of FTE, transaction/consumption based and the slightly misleading outcome based pricing – which was often just an emphasis shift toward an achievement or variant of the first two, essentially the same but with a stricter KPI focused on a specific goal.
Cloud and as-a-service types of the contract have made consumption/transaction based pricing the norm for IT and IT services – we expect this to pretty much remain. The twist in its tail will be the unit being consumed will not be an IT measure. The unit of consumption will start to be linked more directly to a business metric, not an outcome. So, for example, all of the costs associated with hiring a bicycle from a city-wide hire scheme could be paid for in bike hire units – the provider only gets paid when a bike is hired – irrespective of the technology being consumed. This is a simple example – but as we see better use of automation and AI within IT and within transaction management, which reduces idle costs and we will reach a point where this type of deal has little risk. The cost of keeping the IT running could be negligible – this won’t be risk/reward in the traditional sense as the IT firm carries very little risk if the client doesn’t achieve the desired volume. The build and run deal, where the client doesn’t pay for the implementation will require the same type of calculation as current build and run deals – but the measure used for payback will be different.
Additionally, as these models develop we expect the level of risk within the contract to be better understood. This means the risk equation can be better calculated into the mix as analytics dictate the acceptable level of risk and the appropriate price points.
We have quantified this shift to more consumption-based services in the chart below – if you look at the proportion of IT services contracts that will be as-a-service by 2021, it is jumping from its current 19% level to almost 40% by 2021. We define AaS is a turnkey managed service solution based on a standardized platform delivered via the Internet – uniform standards across clients with relatively low levels of customization (<25%) – not lift and shift, but adopt, change and adapt. The price of the service is directly proportional to a transaction or measure of consumption. We also include consulting and professional services that advise upon and wrap around this type of service.
Another shift, particularly in IT outsourcing will be the merging of applications and infrastructure – which we have already seen to a certain degree. Cloud and DevOps have helped to break the silos between applications and infrastructure intrinsically linking these two pieces – making separate outsourcing deals for these two parts of an organization increasingly unlikely as the applications and infrastructure continue to merge. This will be particularly true in industries where applications are developed for customers, and the infrastructure requirements are linked to the success of the application. The adoption of the app dictates the scale of the infrastructure – which increasingly means monolithic, inflexible infrastructure deals fade away. Replaced by more application focused deals including the infrastructure paid for based on consumption linked to business use.
Bottom line – outsourcing will continue to exist, but the variable won’t be as directly linked to the cost of people. It will use technology to form new blocks of consumption.
Outsourcing is one of the commercial wrappers for consuming technology and business services. As these services become more software and platform based, the commercial models will become more As-a-Service. So consumption based models will be and already are becoming the norm. However, the most critical shift in will be the commercial parameters changing to fit the technology being outsourced. Automation and AI technologies will be used to allow outsourced IT (and business services) to split into new blocks of consumption, more linked to business requirements. With AI even helping to match risk levels to specific price points. True As-a-Service outcome pricing is born.
The windy city will get extremely blustery this September 19-21, when HfS stages the inaugural FORA Council session, immediately followed by our annual HfS Summit “The Digital OneOffice: Redefining How We Get Work Done”
Friends,
Someone just described going to an HfS event as the whole industry being bludgeoned with a blunt instrument… how dare they? Yes, friends, it’s nearing the time for the next, immense iteration of that HfS summit, where we’re cementing together the biggest, boldest and baddest crowd yet to mix some serious debate with a good sprinkling of humor and networking.
Indeed, the way we get work done really is being completely redefined before our very eyes. However, while it’s one thing to redefine how we do things, it’s another actually to execute in the reality of the workplace. This is where we turn the traditional outsourcing model on its head as clients demand a piece of the automation action. This is where we talk about end-to-end processes that include both RPA products and cognitive tools. This is where we talk about the Digital OneOffice, where the barriers between front, middle and back offices are forever eroded to meet common business outcomes.
Please join me and the HfS analyst team in Chicago, September 19-21, for two amazing days of debate and collaboration, where we put our egos aside and make some key recommendations to the world.
Apply now for the full program consisting of compelling keynotes and discussions, case studies, workshops, and networking. Find the full agenda here and apply for your seat now while we have some spaces left.
Cheers,
To name a few companies which will be represented…
I have refrained from political commentary since Trump took office because so much has been unclear. Not that his stated views during his campaign that climate change is a Chinese hoax and climate rules are designed to hurt American businesses or his appointment of staunch climate change-deniers to the EPA and Department of Energy, promised anything good. But now the long awaited, reality TV decision about the Paris Climate Agreement showed the real Donald Trump meant what was really going to do what he promised: The United States will “withdraw from the Paris Climate Accord,” “seizing all implementations right away.”
Trump frames the climate change fight, not as one of our world’s biggest challenges but an economic zero-sum game of the US against the rest of the world. In his speech, Trump tried to tie leaving ‘Paris’ to the protection of the American people. This is a narrative weaned from reality.
Here are some sobering facts to put Trump’s decision in context
Withdrawing from Paris doesn’t impact much in the medium term, regarding real climate policy and action. Withdrawing from the agreement will take a full four-year period. Ironically the US can only officially withdraw the day after the 2020 presidential election.
Paris is a voluntary agreement, of which many critics claim lacks teeth. Every nation sets its own goals. Obama pledged to reduce carbon emissions by 26 percent during the 2005 – 2025 timeframe. The US could have simply adjusted its ambitions and goals if it felt Obama’s goals are unattainable. Trump has already gutted the Clean Power Plan, an essential part of Obama’s efforts to reduce emissions by fossil fuel burning electricity plants and increase the use of renewable energy and energy conservation.
Many “legacy” energy jobs are already gone. Coal jobs won’t come back, nor will the jobs in Oil & Gas that were lost in the downturn over the last three years. Coal has lost its ground and competitive edge to natural gas, solar and wind. Mostly for competitive pricing reasons, not policy reasons. Coal companies acknowledge this, saying they don’t see a future for coal and jobs will continue to diminish. The production of oil and gas has rebounded from the slump of 2014-2016, but jobs have not. This is due to new efficiencies in the field, primarily driven by automation.
The new jobs re in clean energy and Paris promotes their creation. The jobs Trump is so eager to create are not in the fossil fuel industries but in clean energy. The solar industry is the biggest engine of job creation in America. In 2016, one in fifty new jobs was in the solar industry. Grid modernization driven by renewable energy has created 100,000 new jobs in 2016, according to the Department of Energy. The Paris Agreement created a lot of momentum for the adoption of clean energy. For the first time in history, the world united to curb emissions and set a framework to act against climate change. The Paris Agreement provides a big push for the energy transition that is underway across the globe, a transition that some experts expect to create a ten-trillion-dollar economy for renewable energy and is already creating large numbers of blue-collar manufacturing, installation and service jobs in the US.
Any deal on climate change is terminal while Trump is in power. There won’t be a new deal of a re-negotiation of the current agreement, as Trump alluded to in his Rose Garden spectacle.
Will it change US progress in the inevitable move to renewable energy?
The simple answer is no. Besides the damaging effects of Trump’s actions at the federal level, for businesses, states, and cities, the only common sense course of action is to continue down the path of renewable energy. Directly after Trump’s decision, California, Washington, New York, Connecticut, Massachusetts, Rhode Island, Hawaii, Oregon, Vermont, Minnesota, Delaware, Virginia and Puerto Rico – representing roughly 35% of the US economy – formed the United States Climate Alliance, vowing to uphold the Paris Climate agreement within their borders. Eleven other states, including Maryland, Ohio, North Carolina and Illinois, have also supported the Climate Agreement.
The historic Paris Climate Agreement has already been ratified by most parties to the treaty and was signed by all countries except Nicaragua, who find the agreement not far-reaching and aggressive enough, and Syria, for obvious reasons. The Paris agreement is an agreement with intentions, not with automatic actions. The interpretation and subsequent actions heavily rely on industry and civil society. And they are now further encouraged to take action. While the Trump administration is doing everything to shut down forward-looking energy policy and climate change policy on a federal level, such as overhauling Obama’s Clean Power Plan, on a state and city level, the majority is acting; investing in renewable energy resources, adhering to the Paris Agreement guidelines. Since Trump’s announcement, governors, mayors and business leaders have spoken out and showed their intentions to stick with ‘Paris.’ California’s governor flew to China to sign an agreement with the Chinese to collaborate on climate and clean tech, emphasizing the resolve from states to act and move forward.
A symbolic policy shift with diplomatic and reputational impact first and foremost
The announcement to withdraw from ‘Paris’ is a symbolic move more than anything. And it is symbolic for all the wrong reasons
The backlash is starting to show; there is a negative impact on the reputation of the US – the rest of the world effectively sees Trump’s move as the withdrawal of the US from the world stage. The diplomatic backlash will be felt beyond the climate realm.
Impact on American businesses – US businesses fear they will be at a disadvantage seizing the opportunities in the renewable energy market, while they, until Trump’s decision, where well-positioned to lead in the global clean energy market.
It highlights the missed opportunity to jump on the renewable energy train. Trump is missing a great opportunity to make a concerted effort on infrastructure and the job creation in the renewable energy market. Last year, one in fifty new jobs in the US was created by the solar industry. Think about that. And only 50.000 people work in coal. Pick your battles, Mr. Trump. Instead of trying to save a small number of coal mining jobs with the red herring of ‘clean coal’ and withdrawing from Paris, focus on re-training coal miners for the manufacturing, installation and service jobs in the wind and solar industry.
The bottom-line: Trump will be gone when Mar-a-Lago is swallowed by the sea
As Oscar Wilde famously said: “With age comes wisdom, but sometimes age comes alone.” Trump’s announcement was short-sighted and removed from reality and science, catering to a small fraction of people with extremist and ancient views on climate and energy
The good news is that the clean energy transition is well underway and won’t be stopped by the Trump administration, not in the US and certainly not abroad. But, as many critics of the climate agreement emphasize, it might be too little too late. The Paris deal was a strong message from all nations, coming together in the endorsement of curbing global warming and the impacts of climate change, but the climate fight needs more ambitious goals and most importantly actions. The world can’t wait any longer and play an economically motivated game of chicken, with the well-being of our planet at stake.
