The traumatic Q4 results season has finally ended and our Chief Data Officer, Jamie Snowdon, is able to report on the final Q4 standings…

We’ve visualised the latest set of results for Q4 in the diagram, the top chart shows our usual margin v growth view (excluding AWS). With a chart showing the quarterly growth for Q4, an estimation of the annual (calendar) growth and the Q4 operating margin.

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For each of the providers the results look like this:

However, it is important to view Q4 in context, the following chart shows the average and weighted average revenue growth of these tracked providers, which represent 75 of the largest IT and business service companies.

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After a strong Q3, Q4 dropped back – making it the worst quarter for average growth since 2010. There are a number of factors that caused this drop – partly the on-going uncertainty in the market heightened by Brexit and Trump, but also the last few quarters were boosted by revenue from smaller acquisitions which no longer impact the growth.

The Bottom Line – The traditional outsourcing model has had its day, now we need to focus on the emerging client needs in this transitional market

For the market as a whole Q4 was a disaster – with the worst average growth rates seen since we started this tracking in 2011. This really shows how much the market is shifting toward new more technology driven solutions and how much of the traditional cost is being cannibalized by these new digital platforms and automation.

The onus is on us as analysts to start looking more deeply into the underlying trends in the market as the top-line data is increasingly swamped with hangovers from last decade. There is growth out there – but it is barely offsetting the declines in existing business. We have looked under the hood of the infrastructure management services market in one of our latest reports – IT Infrastructure Management Services in the Post Digital World – which is available on hfsresearch.com.

Posted in : IT Outsourcing / IT Services, trends-analysis

The time for smart partnerships to drive real innovation and new thinking in Artificial Intelligence (AI) and cognitive computing is now. This means we need to see the industry’s deep-pocketed innovators become increasingly open – and eager – to working together to help the services industry make the shift to true digital, intelligent, cognitive capabilities.

Recent HfS research shows adoption of Artificial Intelligence (AI) and cognitive computing to enhance operational analytics and Machine Learning is strongly accelerating, with 72% of senior operations executives citing cognitive as becoming a critical component of the future operations strategy:

Digital and Cognitive are Driving Enterprise Operations

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Source: “Intelligent Operations” Study, HfS Research 2016; Sample: Buyers = 371

While the market perception around these topics remains refreshingly blurred, AI is a critical building block as organizations increasingly look to progress from legacy labor-driven service delivery to progress toward notions the As-a-Service Economy and the Digital OneOffice (see link). While AI is capturing the imagination of many PE investors and VCs and is being used to hype up media reporting and conference circuits, the market dynamics are far from clear.

Against this background, the fundamental question being posed is “Who will be in the driving seat scaling out the deployments? Will it be the service providers, the leading industry platforms or will startups scale out?”

Salesforce Einstein and IBM Watson Partnership: A genuine step forward in AI, or another nice Press Release?

Salesforce and IBM have announced a global partnership to integrate their respective AI platforms to provide enhanced information and services to joint clients. Clients currently have access to Salesforce Einstein, which is built into the Salesforce Intelligent Customer Success platform. Einstein provides a broader set of capabilities around operational Analytics and Machine Learning. Salesforce’s ‘Spring 17 product announcement made Einstein available across Salesforce cloud products for customers.  The integration of Einstein with Watson, planned for the second half of 2017, would bring significantly deeper and broader analytics insight to customers. In addition, IBM Application Integration suite for Salesforce, which enables clients to integrate on premises and cloud data for Salesforce, will become available at the end of March 2017. IBM, for its part, will deploy Salesforce Service Cloud enterprise-wide.

So, what does this mean for the respective parties?

• Client and business growth: Both providers have broad opportunities to cross-sell into their respective customer bases through the partnership. The providers have an estimated joint client base of more than 5,000 enterprises.
• Salesforce strengthens growth area: As market awareness, if not real demand, for AI increases, Salesforce will be able to offer clients a broader orchestration of AI enabled services. The fact that it has already made Einstein available across Salesforce cloud products demonstrates the software provider’s commitment to and investment in this space.
• Potential to create leading AI offering: The partnership has the potential to drive broad AI capabilities into industry platforms. Thus, extending the reach and commoditizing of Watson capabilities. From a domain standpoint, while Einstein has focused on customer relationship management, Watson is going deeper into vertical scenarios, in particular financial services, healthcare and retail. Additionally, weather data from Weather.com will create new opportunities for both AI capabilities to test new use cases altogether. Salesforce brings its broad customer base and rich customer data to the table. IBM has had a head-start with building Watson APIs and products, which Einstein could benefit from. Clients will most likely select multiple cognitive engines in the next few years, as they embark on their journey towards increasingly intelligent operations that require less direct human interaction. These systems will need to interact with each other, built upon interoperable standards for data curation and access. A partnership like this could help that process, and possibly help clients with overall cognitive engine adoption in the long run.
• IBM wins in technology and services: As well as finding an additional, lucrative channel for its Watson technology, IBM also has an advantageous position to take the associated IT services work. IBM strengthened its Salesforce services capabilities by acquiring specialist Bluewolf in 2016 (see: IBM Culls The Pack Of Salesforce Partners By Buying Bluewolf). Salesforce has always had a close relationship with Bluewolf, and it’s no surprise that it has decided to strengthen this particular partnership now. Bluewolf, an IBM company, will establish a practice to deploy the combined functionalities for clients, called Bluewolf Dedicated Consulting Services and Expertise for Cognitive Solutions. IBM will therefore strengthen its position in this market, with potential increases in technology and services revenue.  Other partners in the ecosystem with the relevant capabilities have opportunities to build out similar services, but Bluewolf has a first mover advantage.

How can this partnership truly plug Salesforce’s gaps in Analytics?

While the stage could be set for AI in the long term, Salesforce needs to address the more basic analytics piece of the equation. While access to advanced AI insights delivered by a combined Watson and Einstein platform is useful, most Salesforce services clients are simply grappling with implementing basic analytics solutions.  Some Salesforce services clients who require analytics capabilities have selected alternative solutions to Salesforce because of the disappointment with the slow development of the Salesforce Wave Analytics product and the service providers’ slow ramping up of Wave capabilities. 

Our research from the HfS Blueprint Report: Salesforce Services 2017 highlights that most Salesforce services clients are just starting to consider analytics services, so Salesforce needs to speed up its development of the analytics module as well as market the developments made, so as to prevent any future clients looking elsewhere.  Analytics services, particularly consulting services are a massive growth opportunity for Salesforce services providers. Leading service partner, like Accenture, Deloitte, Cognizant and IBM, have invested in analytics solutions and services, anticipating the upcoming demand, but the specific solution selected by clients will not necessarily be Wave Analytics.

The bottom-line: This new partnership could genuinely accelerate the commoditization of AI capabilities

This partnership is a smart move by both Salesforce and IBM to use their strengths collaboratively – potentially winning IBM and Bluewolf more business, bringing Einstein up to speed on Watson’s expanding range of cognitive capabilities and industry depth and most importantly, unite the industry heavyweights that are most heavily marketing AI capabilities.  At HfS, we increasingly view smart partnerships with real teeth as the way forward for the software and services industry makers.

The ecosystem around Watson capabilities is slowly starting to emerge. IBM is working on a more structured approach to driving the broad capabilities toward partners that often are its competitors beyond the more narrow Watson context. As with all partnerships, most will come down to the investments into the collaboration and how transparent the account management will be. For IBM the partnership could accelerate the pervasiveness but also the commoditization of its Watson capabilities. The upside could lie in establishing Watson as de facto standard for broader industry platform and thus see Watson crystalizing its position in emerging ecosystems. Conversely, Salesforce could get access to much deeper analytics capabilities that would increase the stickiness of its products.

For the broader market, this could provide the blueprint for driving Watson capabilities into other industry platforms such as ServiceNow, Workday, and others. Fundamentally though this requires significant education of clients that the combined marketing power of IBM and Salesforce could provide. And these initiatives could prove tactically helpful to contain the impact of emerging competitors to Watson. If executed effectively, the Digital Underbelly of the OneOffice could mature significantly faster.

Posted in : Cognitive Computing, intelligent-automation, saas-2, smac-and-big-data

We’re witnessing the most far-reaching evolution in Procurement’s existence with ambitious procurement professionals desperate to elevate the profession to a much more strategic level aligned with the needs of the business or face irrelevance in the wake of emerging digital procurement solutions and rapid automation of transactional procurement processes. This means procurement leaders need to reposition procurement as a strategic ally that supports the business stakeholders it is designed to serve.

The evolution of Procurement As-a-Service solutions is making day-to-day procurement needs become increasingly easy at access in an affordable on-demand model. Our Procurement As-a-Service Blueprint shows the steps service providers have made in morphing their service offerings to combine people, technology, and processes into these on-demand, flexible services, with pay-as-you-go, As-a-Service pricing, and subscription based models.

Procurement As-a-Service delivery models are already having a significant impact on the market thus far; with the expectations of procurement services buyers rapidly changing. The average size and length of outsourcing engagements have plummeted from large ($50-100 million) and long (8-10 years) to small ($3-6 million) and short (1-3 years). This greatly impacts ambitious service providers’ revenue models once they have realized the ability to scale modular, agile services delivered via a utility model and increase their overall profitability. This is in addition to delivering high-value upstream procurement activities in strategic sourcing and category management to build out their end-to-end procurement capabilities.

Customer Demands and Technology Drivers will relentlessly continue to Disrupt Procurement

Let’s explores how the landscape will evolve and who we expect to rule the Procurement As-a-Service space.

The big survival challenge for procurement is threefold;

1. Redefining Talent: The old-school procurement professional has become legacy and needs to be completely reoriented or retired. Focusing on (transactional) procurement with the sole purpose of saving as many costs as possible is a dead end – it’s counter-productive in the new business world, especially when it’s increasingly easy to leverage digital procurement solutions to source purchases at the lowest prices and conduct most transactions digitally without the need for human interaction. The name of the survival game for procurement is relationship management; becoming the spider in the web that consists of internal business stakeholders, suppliers, service providers, partners. Next to relationship skills like empathy and business acumen, the new skills that need developing are critical thinking, creativity, and complex problem-solving. And being able to use technology to improve processes and ultimately experiences.
2. Embracing Technology is Critical: Standardized procurement platforms combined with cognitive automation is the only way forward. Procurement tech platforms like Ariba, SMART by GEP, Coupa, Tradeshift have demanded a lot of attention the past few years and have emerged at the core of procurement. Processes are clustered, integrated and delivered by platforms. Processes that are not suitable to be on these platforms are the focus of robotic process automation. The next wave of technology affecting procurement and sourcing is cognitive and artificial intelligence.
3. Delivering the customer experience must be embedded into all procurement activities. The pièce de resistance is creating better experiences for customers, being end-customers, buyers within the internal organization, suppliers, partners and your customers’ customers. It’s about creating buying experiences that meet the needs of more mature internal buyers, underpinned by seamless, straight through transactional processes. Effective procurement is all about enabling much more collaboration and innovation to take place with suppliers, providers, partners and customers and amongst them.

Posted in : Procurement and Supply Chain

This past Monday at the Boston FinTech Showcase over 300 people gathered to talk shop around emerging Financial Technology (fintech) and see demos from several hot startups in the space. There’s a lot of activity in fintech right now, demonstrated by the excitement around the event, which was at capacity with a waitlist.

There were startups for asset management, payments, analytics, and risk management, among others. And each startup had a point of view about how to transform fintech. There were also several incubators, investors, and corporate innovation groups. But what wasn’t? Blockchain. (Author Note: Check out my colleague Reetika Joshi’s blog for a broader perspective on the technologies and solutions that were highlighted at the Boston FinTech Showcase.)

Last Fall, we looked at what’s happening with blockchain services in BFSI and found that the market was mostly still in the proof-of-concept (POC) stage. At the showcase, we talked to several innovation teams at big financial services corporations about their progress on blockchain and found that they’ve gotten past the research stage and are in development in some specific areas like payments/settlements (something that was also big in our research) and derivatives. They all pointed out that they picked areas where they saw ROI. In other areas, they decided that blockchain was not better than current or alternative solutions.

Investors echoed this perspective. Network costs, interoperability and switching costs, and first-mover costs of picking a platform that might not wind up as the industry standard were among some of the reasons they felt that adoption hadn’t progressed faster and why the business cases were stronger in specific areas like cross-border payments.

Bottom Line: Blockchain and fintech tend to get used together a lot as if blockchain was the major trend in fintech, but in fact, the two markets aren’t as intertwined as we’d expected. Instead, fintech is developing quickly in areas unrelated to blockchain, like analytics and automation. Meanwhile, blockchain is finding a foothold in some specific areas but isn’t the driving force in fintech.

We also think that this shows some further evidence that other applications like provenance (proving the origin and chain of custody of materials through a supply chain,) anti-counterfeiting efforts and compliance reporting will overtake financial applications as the “killer apps” for blockchain, as HfS has written before. In fact, a recent study from Deloitte recently found this as well: it recently published results that showed 58% of consumer goods and manufacturing companies had already deployed or would deploy blockchain this year, compared to only 36% of financial services firms.provenance

We’re going to keep digging further, as my colleague Reetika Joshi and I research blockchain’s evolution in BFSI and I kick off reports in supply chain-related blockchain applications. Stay tuned.

Posted in : Blockchain

Last week, HfS had the opportunity to meet with the NTT DATA leadership team at the service provider’s first major analyst summit in Dallas Texas, since its acquisition of Dell Services last year.  So can the firm live up to its new billing as one of the major tier 1 global service providers?

Making sense of a complex fast growing entity

Analyzing NTT DATA is by no means an easy undertaking, given its complex organizational structure and lower visibility due to its reluctance to invest in marketing.

The CEO of NTT DATA Inc., John McCain, tackled those perceptions head on and vowed to change direction. Much of the purpose of this event was to present the “new” NTT DATA. Building on the acquisition of Dell Services, he pointed to branding campaigns that include TV and broadsheets. This is reflecting that the company has evolved, not least through acquisitions, into one of the largest global service providers. And with these significant investments come higher expectations. So, how should we look at NTT DATA and how does the company stack up in the competitive landscape?

The strategy framework that McCain outlined appeared sound and offers a platform for further expansion. In particular, (re-)packaging the portfolio and industrializing delivery. In the context of the portfolio pillar, McCain was pointing to the aim of deriving greater value from NTT DATA investments and of leveraging the “NTT Group power”. Yet, throughout the two days, we actually did hear very little about the Japanese capabilities and activities that the broader NTT Group brings to the table. When executives actually touched on those capabilities, the differentiation to the broader market appeared at least in contours. NTT DoCoMo, DiData, discussions on how Quantum Computing and Cognitive Computing could solve mankind’s more pressing issues, were providing a glimpse of highly differentiated capabilities. Invariably, the discussion of cognitive evoked strong memories of IBM. However, in contrast, NTT DATA is crucially not constrained by the many legacy deals with which IBM is still struggling. If anything, NTT DATA had hitherto focused on specific project-centric business but is now keen to trade up to larger and broader sourcing deals across multiple domains.

The challenge of bringing together the existing Japanese business units with the newly-acquired international businesses

The marginalization of NTT DATA’s Japanese business points to another crucial issue. The integration of the various business units, including the many acquisitions, is a work in progress. One can point positively to the long-term focus of the Japanese business culture that has seen acquisitions being very carefully integrated over a longer period of time. Yet, I couldn’t help feeling that the cultures of Keane and Dell Services appear to be the dominant reference points in many discussions. Thus, there appears to be a healthy tension between the Japanese core business and the “Global Business” i.e. the multiple acquisitions outside Japan. However, if HfS’ contention that organizations are moving toward to the Digital OneOffice™ (download our POV for a full definition of the Digital OneOffice), where connecting back, middle and front-office is corroborated, then NTT DATA has to eat its own dog food and move toward being a more connected global organization – you can’t deliver true Digital OneOffice capability if you haven’t become a true Digital organization yourself at your core.

NTT Data has real potential to align to the Digital OneOffice

From what we are learning, the seeds for that are already being sown. Around its Digital Services, NTT DATA is suggesting the first focus is through its customer’s eyes. And, similar to our suggestion of a Digital Underbelly, NTT DATA is pointing to the fundamental shift that automation is creating. However, the boldest initiative is to wrap the needs of the customer directly around its delivery priorities through its CUE², continuous customer experience engineering program.

Let’s start with NTT DATA stance on automation. The prominence in which executives were talking about automation was tangible. Yet, the specifics of the various initiatives might have been lost to many in the audience. Below the radar screen, NTT DATA is running the largest deployments of IPsoft’s IPcenter globally. Tellingly, the Global Management One platform is helping clients with onboarding to NTT DATA’s cloud platform. A task that has been challenged by the many acquisitions that we have called out. Furthermore, the company is helping to adapt IPsoft’s Amelia to the Japanese language and executives were suggesting strong traction. Around more mundane matters, the strategy around RPA was a trifle blurred. While NTT DATA’s BPO business is focused on its proprietary AFTE solution, as executives suggested the solution to be more efficient than any third-party tools, the consulting arm, largely representing the Carlisle & Gallagher acquisition, was pointing to third party tools as the preferred way of engagement. Beyond the nuances of the automation strategy, what really stood out for us at the event, was NTT DATA’s ambitious plan to integrate customers directly into their delivery strategy with the CUE², continuous customer experience engineering program. This program is not only adapting Agile and DevOps to the requirements of Managed Services but putting the user center stage. In all but name, here it is where the connection to the HfS Digital OneOffice concept is the strongest. Suffice it to say, NTT DATA is still very early in rolling this out across its engagements, but the strategic intent could evolve into one of its strongest differentiators.

Bottom-line: NTT DATA has to eat its own digital dog food to progress toward the OneOffice

As bold as the CUE² initiative is, in order to catch up with the leading global service providers and to demonstrate its Digital OneOffice credentials, NTT DATA has to advance significantly the integration of its various business units. Only by finding and leveraging commonality across its global delivery units, NTT DATA’s many innovative forays will lead to repeatability and thus margin improvement. In order to reach new clients, NTT DATA should make a virtue of the achievements of the broader NTT Group. While culturally not always accessible, NTT DATA’s strong innovation credentials, often emanating from the Japanese market, provide a platform for a clear differentiation in a market that has been notoriously difficult to achieve a meaningful differentiation. Deep networking and mobile capabilities that can be leveraged in IoT scenarios are jumping to mind. To succeed with the ambitions for the “new” NTT DATA, a broader mix of accents might go a long way, not least Japanese. Then we will start to look at NTT DATA as a truly global heavyweight.

Posted in : Digital Transformation, OneOffice

Finally! We’ve just saved you hours upon hours of mind-numbingly dull hangouts trying to figure out all your fancy new digital job titles and reporting lines… now time to get combatting all that disruption to make your firm a true transformative digital pioneer in this emerging quantum era, where you can be a digital Michael Phelps diving into your own datalake:

Posted in : Absolutely Meaningless Comedy, Digital Transformation, OneOffice

There is a staggering gap between C-level executives and middle managers when it comes to dealing with the change digital-enabled business models and new services paradigms force upon us. The journey to the As-a-Service Economy is met with enthusiasm by the C-Suite (see Exhibit 1). But their middle management has a different take: shying away from big transformational initiatives and focusing on more tactical interventions. Are you all living in the same world?

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We should not blame middle management for the inertia we witness in many industries, including the business and IT services industry.

Anxiety and resistance are logical reactions to change. People don’t like change, as it threatens the status quo, what they know and worked hard for. This is the playground of the sunk cost fallacy. “We worked so hard to get to where we are: we can’t throw that away. We need to keep going to maintain what we have”. C-Suite respondents in our large surveys show they’re not willing to throw good money at keeping the status quo. That is the big point: change is inevitable. The way a company deals with change will increasingly be a deciding factor for survival and competitive advantage. 

The Ball is in the C-Suite’s Court 

Having a vision is one thing, enabling implementation and executing the vision is significantly different. Middle management’s lukewarm reaction to change is understandable and frankly not surprising. There is a lot of uncertainty about new technologies such as autonomics, robotic process automation, artificial intelligence, and cognitive computing. There are wild predictions about robots destroying people’s jobs. People are wondering how they will be impacted; what do the changes mean, what will my job look like in this As-a-Service economy, do I have the skills to be successful?

Uncertainty is the enemy of the ability to embrace change. 

The answer? Educate, show results and impact. Also, are people incentivized in the right way to lead sweeping change? Or are they incentivized to drive incremental improvement? Aligning incentives to the ultimate goal is paramount.

“Beam me up, Scotty”

Wouldn’t we all want to just be there, at the destination? Counting the times, you would love to say, “Beam me up, Scotty” … But alas, if you need to go somewhere, you must endure the journey.

It is a journey to change, and all road warriors know making a journey is not always fun, it is pretty exhausting, and you often have to deal with unpleasant adversity. 

Investing in disruptive technologies is one thing. Successfully implementing them and going through the change process as a business is another. C-Suite respondents are likely to bring in external help in the form of transformational leadership or change agents to redesign the operations.  However, to be successful, they need to inspire, motivate, and properly measure and provide associated incentives and rewards for the team.

Often when a sports team is dysfunctional, the leadership tries to shake things up by firing the coach and bringing in new blood. On the one hand, a new perspective can change the dynamics of the team for the better. On the contrary, there is an entirely pragmatic reason to fire coaches; it is much easier and cheaper to fire one coach than to fire all players. This logic holds true for enterprises as well. An external stimulus is good, but getting rid of the middle management is impossible and threatens the going concern (aka the revenue generating machine).  See here the dilemma for the large incumbent with legacy operations trying to fight off the nimble new entrants, who simply don’t have to drag all the baggage with them. 

A Plan is as Good as its Implementation

Leadership is critical; don’t let there be any doubt about the destination, the Northern Star. But, involve the rest of the company to map out the journey. Let them be a part of the solution. Our research shows the gap between C-Suite and middle management is significantly smaller when asked about using creative problem solving (Design Thinking) to reach the As-a-Service end-state. 54% of C-Suite and 43% of middle management think Design Thinking will have a significant impact on the journey. 

Unleash the Knowledge and Creativity of the Company

Years of operational excellence, Lean and Six Sigma have beaten all creativity out of operations and middle management. You get what you pay for. So if you pay for hundreds of green KPI’s, you get hundreds of micro-managed green KPI’s.

C-level leadership has to set creativity free, unleash the innovative power of the workforce. Granted, corporate Japan is not the prime example of free-spirited creativity, but they have a thorough understanding of the power of expert knowledge. Toyota’s concept of the Creative Idea Suggestion System brought them a lot of good (and paradoxically they copied it from the American firms they tried to beat). For service providers, a big challenge will be to integrate the innovation labs and all the beauty created there into the legacy beast. Innovation labs can quickly become ivory towers. And no-one likes the people shouting from ivory towers.

Revamp Imagination by Creating a Culture Capable of Dealing with Constant Change

Our take on change? Use the old concepts of Total Participation and Employee Engagement and focus it on creative, lateral problem solving and Design Thinking (instead of operational excellence and Lean Six Sigma) in an era of increasing volatility, uncertainty and technology driven change.  Bring in academics, analysts, practitioners, other ‘thinkers’, but most of all the company’s own brain trust.

We are not arguing everyone will be a good fit in the new era, or that the goal is to keep everybody on board and happy. But an inclusive strategy to alter the culture is ultimately the most promising trajectory for change.

Our subscribers can download our upcoming Blueprint Report on Design Thinking in a few days here in our ever-growing research library.

Posted in : Design Thinking

A Different Take on HIMSS 2017 and Health IT

Technology was first and foremost on the minds of the over 42,000 people who gathered in Orlando for HIMSS2017 last week – or was it? And should it be? There is a groundswell rising at HIMSS for not just talking but acting when it comes to putting the individual—the person—at the center of healthcare. In a word: empathy. How does what you do with IT, or as an IT professional impact the way a person experiences healthcare throughout their lives? There is a lot of attention on security, cognitive computing, analytics, and so forth – the enablers of how healthcare can better serve its constituents. But at the end of the day, it’s about the people for whom you are designing these systems because if they can’t or won’t use them, it won’t impact health, medical, and financial outcomes. So an undercurrent of themes is swelling around social, behavioral, and environmental aspects of healthcare.

Effective healthcare IT systems need alignment and collaboration inside the hospital system—but need to also include what is outside of it

After the conference, on the way back from the airport, I sat next to an IT project manager. She told me how she had coordinated across five hospitals in a system to prioritize a list of IT projects that would enable these hospitals to create an interoperable network to exchange data more effectively and enable communications. After the agreement, one hospital came back and said, no, we have a different priority this year. This is the real challenge in healthcare—not whether the technology will work because it can and it will—it’s about whether the people will work together to define and achieve common goals.

Community collaboration as shown by the Value Care Alliance (VCA) in Connecticut

Earlier in the week, I attended a session about a group of hospitals in an ACO called the Value Care Alliance. They share a goal to increase quality and to build capabilities to assume and manage risk in a move to value-based care, with efforts to improve the health of the local community, reduce ER instances, and to reduce the number of attributed ACO members who go outside their community and their provider network for healthcare services.

To be successful, the alliance knew they needed to have a shared view of the community members – in technical terms, a population health platform with a data repository that would bring in data from disparate systems. However, each member of the alliance had a different platform; and they didn’t know each other’s platforms. They had started the alliance with a governing body that over time had saved money through shared services and group purchasing, thereby funding the investment in infrastructure needed for the population health initiative.

How has VCA approached it?

The VCA aggregated claims and electronic health record data, the hospital and physician practice medical records. The group then cross-referenced medical data with geographic data, looking at maps in the neighborhood: what is the health of the community when looking at, for example, a group of people with high HbA1Cs… is there local access to clinical care; what are the community activities offered; where are the grocery stores; can they see physical elements and conditions of buildings. They started reaching out to other community organizations such as the YMCA and a local parish nurse program to conduct health education, screenings, and other outreach activity. They also applied to CMS for a community health grant that will help them fund activities for further identifying high-risk individuals and connecting them to resources.

Back to the IT: the local hospitals all had legacy population health IT and didn’t know each others’ systems, and getting them to abandon what was already in place was complex. They brought in a facilitator to assist with defining shared goals and IT decisions; and every organization had one vote, regardless of size, to show commitment to the collective. The group also defined the value of the data to each and to the collective, to come to an agreement on multi-stakeholder data sharing. The underlying theme throughout, is how to get to a community health program – where the hospitals are enabling greater health in the community, where people locally come to their hospitals for treatment as needed, and have local support for being healthier, staying healthier, and receiving the right care at the right time and right (local) place.

To strategically use Health IT to drive health, medical, and financial outcomes, you need to balance internal and external efforts in coordinating care with shared community goals.

While walking the halls at HIMSS, I saw an endless variety of technology offerings—and among them, people—physicians, EMTs, nurses, patients, caregivers—all of whom want a healthier society. We need to not only connect the systems for interoperability, we need to connect the individuals. IT professionals need to be just as excited as doctors, nurses, and caregivers about truly changing people’s lives through healthcare, in order to really have an impact. We need to get our security experts, IT project managers, coders, consultants, and data scientists all thinking about the impact they can have on helping the people in their community live healthier, and therefore less expensive, lives.  Because when we care, we make a difference.

Posted in : Digital Transformation, Healthcare

“I’m putting more money behind women-run businesses because of return of capital and performance; this is what matters,” said self-made millionaire Kevin O’Leary, in the closing keynote at HIMSS2017 last week. When it comes to growing a business, Kevin has a proven track record you can easily find online if you don’t already know it from the U.S. hit show, Shark Tank. He has invested millions in startups over eight seasons of the show that hosts entrepreneurs pitching businesses and requesting support. 

When taking a look at the returns in his portfolio, Kevin O’Leary noticed the ones with the greatest returns are owned or run by women.  And what he called out about their management style is universally applicable in business.

It may also be a reason why we’ve seen in our research at HfS that the #1 thing that executives would change about the outsourcing services industry – per 25% of respondents – “more women in executive roles.” What we can learn from women-run businesses that are realizing higher results:

1. Allocation of Time: “If you want something done, give it to a busy mother.” This is about focusing on what you know needs to get done first to impact the outcomes that matter; and about delegation, not trying to “do it all.” As an example, Kevin pointed to Honeyfund, which is approaching ~$500 million. He describes CEO and co-founder Sara Margulis’ approach with her team as: you have goals to achieve on a monthly or quarterly basis, period. It’s not about “how” or watching to see it done. It is closely linked, however to #2…
2. Achievable Targets: In the companies run by women, the teams achieve revenue targets over 90% of the time, in Kevin’s experience with his portfolio. He claims this is because women tend to set realistic goals and motivate productivity. When individuals and teams achieve goals, there is a feeling of satisfaction, turnover is lower, and productivity is higher.  In some circles, it’s called employee engagement. The opposite approach is to set goals that are too high to be achieved … leading more often to higher staff turnover, lower morale, and lower return on capital.

Along with the management style, Kevin also pointed out that successful business (and project) pitches have three characteristics: (1) Articulation: Ability to articulate an opportunity in 90 seconds or less; (2) Uniqueness: Why you are the right person or the right team to execute; (3) Numbers: Know the numbers on the size of the market/opportunity, margin, etc. Altogether, these three, with the passion of a leader for her cause, can take a pitch from a spark to a sizzle to an explosion.

While Kevin’s observation comes from a review of his portfolio of start-ups that survive the explosion to move into operations, these two “T” characteristics can be universally applied to management in current business as well.

Bottom line: Today’s businesses need this type of outcomes-focused performance management with meaningful and achievable targets in this day and age when so many businesses that have been in existence for years are having to undergo transformation to become more customer-focused, interactive, and flexible.

Posted in : Digital Transformation

The IoT hype in insurance continues unabated, with new research by NTT DATA suggesting that 3 out of 4 insurance carriers believe IoT will strongly influence their future products and services. Titled “IoT: Disruption & Opportunity In The Insurance Industry,” this U.S. based study surveyed end consumers and decision makers in carrier organizations on the subject of IoT devices in the home (thermostats, smoke alarms, garage door openers, door locks and bells). A few research findings for the two groups stood out to us.

Consumers are divided on their readiness to change

Two cohorts emerged from the consumer research, which also reflects in their views about smart home technologies. 64% of consumers surveyed, or the “Seekers” are younger, less loyal to their carrier, price-sensitive and want more personalized products and service. Unsurprisingly, the Seekers want their carriers to be more innovative and are more willing to share varying degrees of smart home data in exchange. The remaining 36% are the “Keepers,” older policyholders that feel protected by their current policies and are unlikely to make sudden switches. Overall, 50% of the consumers expected to buy smart home devices in the future despite privacy and security concerns, but the majority find current products to be expensive and complex: I still haven’t rigged up my “smart bulbs,” gifted over Christmas by a tech-savvy relative!  

Insurance carriers get the importance of IoT

87% believe IoT will improve customer relationships, 83% see it as an opportunity to attract new customers, and 74% see IoT as having a significant influence on products and service. Already, 77% are ramping up IoT initiatives, with customer service and technology use cases at the outset. The major challenges for carriers are the inability to get smart home data (68%), building analytics into underwriting processes (62%) and the expenses of the carrier or customer buying and installing smart home devices (55%).

In my conversation with Normand Lepine, NTT DATA Consulting’s Sr. Director of Insurance Data and Analytics, he pointed out, “Carriers recognize the opportunity to expand their value proposition with clients through IoT. In the next year, pilots, strategy and lab work around smart home technologies will help carriers create new products and services.” We believe each carrier that is experimenting with smart devices will go through a calibration process with customers, all centered around one factor – data and how to use it to create meaningful products and services. NTT’s survey data hints at this as well, with the lack of data being a carrier challenge, and consumer responses suggesting that they are willing to share only certain types of data, depending on their demographics and lifestyles.

Implementing connected insurance solutions requires carriers to rethink major business functions towards becoming digital organizations.

Let’s consider the customer lifecycle as an example. Carriers will need strong, mobile-first, sales and marketing channels to attract and transact with the “Seekers.” They can leverage smart home device technology to offer two key benefits to customers – a more personalized service experience, and cost savings in the form of usage-based risk and premium determination (an “As-a-Service” offering). This customer acquisition effort will need to have straight-through processing, with smart underwriting powered by real-time profitability analysis. When it comes to customer service experiences, smart devices again play a few roles, such as providing insights (e.g. smoke alarm data) that can be made accessible to customers with recommendations on usage. If a carrier is interested in smart home technology to drive new customer experiences, customer interaction touchpoints can be reimagined with the help of interactive personal assistants (e.g. Amazon Echo). These at-home assistants can intelligently converse with policyholders for simple service requests throughout the customer lifecycle (as Nationwide, Grange Insurance and Safeco have started to do).

In addition to home insurance, we also see examples of carriers exploring IoT- enabled auto insurance, and large-ticket opportunities in areas like commercial insurance. What will be interesting to watch is the role that technology and business service providers play in this evolving market. From IoT infrastructure services to the design, development and running of the related data and analytics infrastructure and services, IT services such as IoT app development, platform migrations, and micro-services, consulting/advisory on new product development and rapid prototyping/testing of IoT offerings, partnering with device manufacturers (particularly niche, insurance-related startups), we see several new opportunities for service providers.

While IT and business services providers are investing in IoT offerings as a horizontal capability, carriers will need to find the ones that are doubling down on insurance, with the appetite to invest in the industry specifically. The survey data makes this much clear – both consumers and carriers are getting ready for IoT-led change. The question is—will the service providers be able to embed themselves as “As-a-Service” partners to the emerging “connected insurance” economy?

Posted in : The Internet of Things