Although we expect to see more and more core IT moving to the cloud in the coming months and years, largely this is preceded by successful use of public cloud for new application development and deployment. This continued uptake in the use of public cloud eases the pressure on large organizations, with the availability of on-demand flexible computational power that scales rapidly to cater for changing business and customer needs.
For example, the rapid deployment of more customer applications as part of a digital strategy, or trying to collect more data from IoT devices, or making better use of SaaS applications are typical drivers of the thirst for on-demand scalable computing power. The issues for enterprise enterprise functions and their IT departments with cloud remain: managing cloud alongside existing infrastructures, making sure the solution complies with security and other enterprise risk concerns, ensuring they have the skills and resources to manage it effectively, performs to the right standards, is genuinely scalable, and, of course, is cost effective.
One solution to this problem, for many enterprises, is moving to a more holistic software defined datacentre model – or a hybrid cloud platform – which gathers together cloud instances and, in some cases, legacy IT into a manageable framework. This is what Accenture, and many of the other infrastructure outsourcing service providers, are doing as a way to continue to be relevant and add value in the cloud world.
In this vein, Accenture has formed another cloud-centric alliance as part of the firm’s Cloud First strategy, by teaming with Google. While this encompasses pure cloud computing from Google, it also includes other Google-specific technologies, namely Android, Google apps, analytics, augmented reality, big data, IoT and machine learning. Accenture has integrated the Google Cloud Platform into its own multi-cloud platform, the originally named Accenture Cloud Platform (ACP) – ACP existing partners include AWS, Microsoft Azure, and NTT. ACP helps manage enterprise IT and cloud resources across multiple public and private cloud instances – helping to manage and automate infrastructure requirements.
The likely success or failure of such a move depends on your position on cloud platforms and their long-term future in infrastructure management. As you can see in the diagram, HfS took a position on this last year posting our view of the three most likely scenarios for enterprise cloud adoption over the next five years.
HfS stands by this schema and is increasingly of the opinion that the eventual outcome will be two or even three – with the timeframes for two perhaps stretching beyond 2025 – largely because this is the nature of prediction. Everything takes longer than people think or you desire, when it comes to replacing legacy IT. However, the big deciding factor will be the success or failure of orchestration platform layers and cloud ecosystems. However, even if scenario 2 is the ultimate winner, it still provider us with a healthy runway for cloud platforms – and these platforms are likely to be retained for enterprise environments if only to make sure the client receives the best price and cloud operators continue to innovate and provide good value.
So it seems that, at least for the time being, these platforms will be part of the on-going story for infrastructure management, particularly in complex and risk-averse enterprise environments, for several years to come. Before AWS cries fowl and says our customers tell us that they’re going 100% cloud without a platform. Or that a hybrid platform creates a lowest common denominator of cloud services. I need to explain that this is a generalisation aimed largely at the enterprise space and there will be many organizations that will choose to use AWS, Azure or Google as the window into Cloud. But there are still significant numbers that don’t want to be locked into a single provider, the investment in legacy is too much to abandon and that have complicated requirements that one solution won’t work.
OK so now the question is who will win the battle of the cloud platforms? In the old legacy IT outsourcing world there were many “winners” with providers winning deals based on complex sets of criteria and there was scope for differentiation outside of pure technology skills or efficacy – largely because the engagements were all heavily customized and deciding which provider would deliver the best service was based very much on whether an enterprise was important enough to the provider to warrant its best resources and get the “A Team”. A provider’s ability to deliver value over and above the technology in IT infrastructure management engagements will persist somewhat but will be diluted by benefits that flow from the platform itself. The big changes we’ll see with selecting a hybrid cloud platform will be: The big change with selecting a cloud infrastructure platform will be:
A large part of the success of the platform will be the richness of the ecosystem – both regarding quality of partner and number of services/partners in the ecosystem.
The actual functionality of the platform will also be crucial to its success. So functions like plug and play analytics, brokerage, and automation.
Finally, the way the platform deals with commercial aspects of cloud management will also be key to its success. Platforms that allow flexible methods of payment and structuring of engagement will be key. We can envisage the most flexible platforms being able to offer a full range of pricing options at a fixed monthly price managed service approach to fully pay per use cloud model.
The Bottom Line: Accenture has a firm handle on the most diverse and complex cloud capabilities to support its long-term roadmap
A key aspect of the deal between Accenture and Google is it helps to make sure the Accenture’s cloud ecosystem is a rich and diverse as possible. One of the most important, if not the most important criteria for any hybrid platform will be its ecosystem. This is likely to mean there will be competition for the “best” ecosystem, and perhaps the most important gauge, for the time being, will be who has the richest set of partners. So it makes sense that Accenture adds Google to its list of partners, not just to give another compute option, but also to leverage Google’s investments in other technology like AI, analytics, and automation. This a great opportunity for Google to tap more directly into the enterprise space with Accenture’s credentials – similar to the benefits AWS is hoping to enjoy from its arrangement with Accenture.
More widely we expect to see more partnerships looking to build out cloud ecosystems. We expect this to happen at the infrastructure layer and also the DevOps layer. So more partnerships between PaaS platform operators and service partners – as although PaaS environments success is around broad capabilities/functionality, access to ready pools of skilled developers who use the platform is essential.
When you see major advances in disruptive robotics, such as the soon-to-be-unveiled Hadrian X, which claims to build a house in two days, moving four times faster than human construction workers, you realize that making invoice process workflows more automated is small-time, when it comes to achieving real robotic efficiencies:
The robot, named Hadrian after the Roman emperor who built defence walls in England, is being primed to work day and night, lay 1,000 bricks per hour, and could potentially build 150 homes in a single year. That’s a lot of construction workers who may just not be needed anymore… and where you get genuine hard cost savings because you’re removing actual labor, not merely automating some annoying manual steps in a process chain.
When I set out to do a spinoff Blueprint on the future of contact center services, I thought of this concept that only seemed logical to explain as “digitally-enabled contact center.” Initially, I think this inspired more confusion and uncertainty than it did to define the future of contact center services. I confused the service providers, who were convinced they had already provided their best digital story, and the buyer references, who had way more examples of traditional call center work than true digital enablement. I’m admitting this, hoping that we can learn from the lesson that sometimes it takes a lot of battling through confusion/hype/ attempted brainwashing to figure out what’s really going on in the markets we cover.
The most important question this exercise inspired is: how can the contact center break free from legacy butts in seats engagements that force customers into bad conversations they don’t want to be having– and create a customer experience that serves the digital customer, and inspires greater satisfaction and loyalty?
What is a digitally enabled contact center?
At the most basic level, embracing “digital” channels: social media, web self-service including mobile apps and visual IVR, video kiosks and chat is the start of digitally-enabled contact center. Also important is seeking to use automation to create efficiencies; and the really smart contact center operators are trying to figure out how to involve increasingly intelligent automation into the mix.
It’s more than just implementing these channels, though, it’s the design of how each channel fits into the overall customer journey, and the understanding of how talent fits into the equation– talent that not only can handle communication on varied channels that demand different styles (yet consistency!) but can also take contextual information from multiple sources and use that in a way that benefits the customer. From an analytics perspective, it’s all about using the data to better understand customers, enable personalization and be more predictive.
A digitally enabled contact center is way more than the technology—humans are actually at the heart of a digitally enabled contact center.
Ultimately, a digitally enabled contact center is one that supports Intelligent OneOffice. It’s not just about supporting the digital channels themselves, it’s the design and strategy about how digital impacts the way enterprises handle customer service in a “customer first” organization. Ask anyone who has worked in a call center and they will tell you it’s hard and it can be tedious. I can attest to this as someone who’s toured dozens, and worked in them myself. But, there are moments when it can be very rewarding; moments of human connection and real customer satisfaction, and even loyalty—those moments are what we need to focus on in order to understand what’s at the heart of this rapidly changing industry—and requires a digital strategy to support.
Digital enablement is happening in spurts
A contact center strategy that addresses all the above capabilities is largely aspirational. Digitally enabled contact center is happening in pockets – little bits here and there. Some of the highlights include:
Channel Mix: Digital channels have been supported for many years, and service providers continue to implement services well around “newer” channels which are now mainstream, such as chat and social media support. A “self-assist first” strategy is one that’s emerging among the savviest contact center service providers; the idea of guiding customers with self-service first and then incorporating the agent role to intervene when needed. Voice is still the dominant channel, while others have increased as a percentage of overall interactions; the issue is not so much about voice declining as it is about understanding the shift in channel mix, and the underlying dynamics and preferences driving the shift.
Channel deflection/ issue prevention: Intuitive knowledge bases which pre-empt and solve customer inquiries before requiring agent assistance is driving self-service as a solution to decrease customer effort. Improving self-service is frequently put forward as a cost savings mechanism, but often has the most immediate impact on service quality and consistency. Automation on the front end of customer service in many cases is not developed enough to address these drivers.
Digital Customer Experience: Demand for adoption of true end-to-end customer care offerings is still low compared to actual adoption, but we’ve seen pilots with large clients looking to really connect the underlying back and middle offices to support customer experience. The next year or so will be telling with how and whether these pilots come to fruition. The competitive landscape is about to change. Some large multinationals and tech-focused service providers have more horsepower to be real “OneOffice Enablers”—connecting the front, middle and back office to support the digital customer experience holistically. Many traditional contact center service providers will end up focused on scale, geographic footprint and labor arbitrage (“DumbOffice” category)—for which there is still a large market but getting more and more difficult to compete and stay profitable in.
How to thrive and not just survive—Contact center services need to cross the chasm by:
Changing the perception (and reality!) of contact center and contact center service provider relationships. I recently spoke with a buyer who said that after implementing a web self-service strategy, his company automated about 50% of their phone calls over the course of only several months. This caused a re-evaluation of the company’s contact center service provider and whether it was really worth outsourcing the decreasing amount of phone calls. This begs the question, what can this provider do to keep the relationship alive? Are there other channels they can help implement to deflect calls? What analytics can the provider bring to create more value and bring insight to their client?
Sharpening a strong partner ecosystem. Digital trends increase the importance of a strong, smart partner ecosystem. Most contact center services providers aren’t really “tech shops” so don’t do core development, and need to focus on partnerships with established firms and startups. Considering the technology needed to service customers using channels like video, mobile, and chat, as well as connecting to other systems such CRM, having access to platforms that are agile and connect easily with other systems is critical. Strategic technology partnerships are especially important for the pure play service providers that are not technology providers.
Shifting the metrics. Engagements focused on average handle time will fall flat or cease to exist in 5 years. For example, SLA s for response times involving an email might be 48 hours, whereas response time SLAs for social media are often four hours or less (Amtrak may want to look into implementing some kind of standard there).
Future-proofing the contact center services business
There’s lots of talk about cannibalization of legacy engagements. Contact center service providers’ mitigation strategy must be multi fold—they must provide something in conjunction with traditional operations that addresses automation and self-service, built in with exception support (with a great talent strategy) to address the changing contact center model to derive more value out of clients’ investments.
One of the wild cards with the potential biggest impact is artificial intelligence – as we discuss in the Blueprint, many of the traditional contact center service providers are not looking at artificial intelligence in any meaningful way. Whether they invest in a partnership strategy or at the least develop a team to study its potential impact, action needs to be taken– but most providers are content to bury their heads in the sand. Eventually artificial intelligence will have a material impact on contact centers, and it won’t be pretty for the providers who are dependent on butts in seats. Understanding how to blend the best of human and artificial intelligence, and a greater sense of urgency to understand how this will impact the industry is sorely needed right now.
And I’ve waited this long to get to the dreaded “omnichannel” phrase, but let’s face it: in the future, anything can be a “channel”—it could be a car, or a watch, or a refrigerator. What this demands more than anything is an agility that is very rarely found- and often antithetical- to traditional contact center services.
The Bottom Line: The entire future of contact center (and OneOffice) hinges on creating different kinds of relationships
This seems to beg for a design thinking first strategy. One executive quote from a recent analyst event that stood out was: “We’re teaching clients how to work differently, and they’re teaching us. We’re learning together.” These are the kind of relationships that will ultimately generate a customer experience that keeps contact centers a critical part of the CX strategy. I’ll be really excited to take another look at this digitally enabled contact center in a year or two. With so much of the discussion being around pilots and big picture thinking, I’ll be eager to see how some of this stuff comes to fruition.
For an evaluation of the digitally enabled contact center market themes and service provider analysis, click here.
The manufacturing industry has reused components for a long time. A high level of reuse not only reduces waste but also lowers the cost of production and reduces time-to-market. Now this concept is being adopted by engineering service providers for part of the software product development process. Software code reuse helps clients save resources, which provides cost advantages and also enables engineering service providers to reduce redundancy and time. In many cases, engineering service providers claim to be using software code reuse components for client engagements, but often software product engineering buyers don’t have visibility into software code reuse by service providers and are not sure whether they are getting the benefit of it.
In our Software Product Engineering Blueprint, we asked software product engineering customers to rate service providers on different major capabilities. The capabilities were broadly divided into six categories and the response is depicted as below.
As the Exhibit shows, the code reuse capability of engineering service providers is rated as the lowest capability. Software product engineering buyers don’t know whether service providers are performing any software code reuse and also have no visibility in case the software code reuse is implemented.
Currently, software code reuse is seen as an industry best practice for IT service providers but often there are no metrics/KPIs identified to measure it. Therefore, there is a need to measure software code reuse capability and performance because what is measured is what gets done.
We have developed a PoV focused on the metrics-based approach that software product engineering buyers can use to drive software code reuse in their engineering engagements with service providers. Software product engineering service providers should also use software code reuse metrics proactively to demonstrate their capabilities even if customers are not asking for it.
Some service providers are hesitant to highlight their software code reuse as if customers know about software code reuse then they might ask for discounts in pricing. This in our opinion is a short-term thinking. The customers will anyway know about the software code reuse from analysts, advisors and competitors and then service providers will risk losing their credibility and contract. It is better to disrupt the engagements with software code reuse yourself than leave the room for competitors to disrupt it. Also, with code reuse KPIs, engineering service providers might have a better business case of outsourcing in comparison to the customer’s internal software product development in their in-house R&D centers.
HfS subscribers can click here to download the full POV for developing a plan for metrics based software code reuse in software product engineering .
HfS analysts recently attended Wipro Digital’s first analyst and advisor day event in the U.S., and our collective first impressions could summed up into, “Ok, they get digital, and what it means for enterprises, but are they articulating exactly how they’re going to market on it – and will clients understand?”
The mantra that this group articulated is to think it – design it – build it – run it. Wipro has traditionally been associated with the last two of those battle cries, and is making investments and efforts to climb up the ladder on the first two. With its acquisition of design firm Designit, it has a new set of capabilities, organizational practices and culture that it has started to draw from. As importantly, it is hoping to leverage the agency’s design positioning and brand identity for Wipro Digital – and perhaps Wipro as a whole.
Moving outside of IT, and into the business, is perhaps Wipro’s greatest challenge
A significant challenge for Wipro Digital is its current footprint and connections within enterprises. The service provider mentioned at the event that its starting point for new deals was most often the IT organization, where it is best known and experienced. “Design tech” work is increasingly originating outside the CIO’s office, and while marquee/strategic clients might take Wipro Digital to the table with stakeholders for new initiatives, the service provider has to take new approaches for the larger market where IT and operations are starting to take more joint ownership of digital projects. We see promise and challenge as Wipro, like a lot of its competitors, gears itself up to service old customers in new ways , as well as reinvent itself for new breeds of customers.
Examples of how Wipro Digital is bringing this to life, shared at the event, include:
“Digital pods”: 13 design studios that are office spaces for creative work for Wipro
Digital and Designit’s teams. Wipro stresses that the more clients visit these spaces and
see this way of working, the more its brand perception will be changed.
A $100m fund to invest in digital startups that it can bring into large projects.
Scaling up resources that work exclusively in methodologies that prioritize agility, rapid
prototyping and flexibility in IT design and implementation, including agile practices and DevOps.
Wipro brings “digital” to life with clients in banking
Of the examples of projects Wipro shared the last two years with these new capabilities and methodologies, three examples in banking represent different use cases and Wipro capabilities:
A transformation with a major British retail and commercial bank: The engagement spans across consulting, design and technology. Wipro is taking a different approach with this client – partnering on governance, jointly engineering prototypes, and bringing access to its ecosystem of partners/startups and academy for the client’s IT organization. In the next few years, this is going to be the engagement to watch, to see how Wipro Digital pulls off coordination and collaboration across its internal groups, Designit and the client’s IT organization to execute on the bank’s strategic digital initiative.
From the ground up with Designit: A project with Israel’s second largest bank, Leumi, to create a new digital, mobile-only, bank as a startup within the enterprise. Christened Pepper, the teams used agile design thinking methodologies that included intensive collaboration between team members from product, design and technology, and constant user-based feedback and prototyping.
The journey with a multinational BFS firm as they rollout an implementation of the Wipro Holmes E-KYC solution: The bank wants to streamline how its KYC is being run to free up valuable analyst time, focusing not on cost savings but innovation with the help of automation and machine learning technologies. He described his vision for this project as, “wanting to redefine the way we work to make KYC competitive in the banking industry.” The bank is working with Wipro to define outcomes, ROIs and commercial models as the implementation advances.
Service providers need to determine their early “sweet spots” and really hone digital and business capability –and story—with their clients
These examples demonstrate how opportunistic and diverse the digital market is, making it challenging for service providers to pinpoint their approach/experience. Wipro Digital laid out its goal at the event, with Avinash commenting, “We want to move from a cost and efficiency play as a system integrator, to revenue generation and outcomes as digital executors.” That reads like HfS’ thinking on the bifurcation coming down the line, with service providers wanting to be OneOffice Enablers. Wipro has started to share how clients are starting to leverage it – with both new and existing capabilities being brought to bear. What was missing from the messaging was specificity in the execution – how many clients is it working with today, what are the sales team’s approaches, and what is the progress it has made on scaling its talent, and presence in different geographies, especially client markets.
HfS cautions that much like the heady days of IT services, where the biggest players went with ‘being everything to everyone’, Digital practices like this one run the same risks of diluting their message, and as a result, their specializations. Even with the banking examples shared above, the solutions being developed are highly tailored to the clients’ needs – as they should be – but don’t paint a picture of what Wipro Digital envisions as its approach for the banking industry’s needs and opportunities. It will take some big success stories – told by its clients – that will help Wipro Digital in further formulating its range of new capabilities and the brand association behind it.
With the realization firmly sinking that the new normal in Oil & Gas is “lower for longer,” it is hard to find service providers investing heavily to build out their Oil & Gas Practice. That is, until Cognizant announced plans to acquire Frontica’s IT outsourcing and BPO business for $128 million, a service provider born in the Oil & Gas industry.
Frontica hails from one of the largest hydrocarbon rich areas in Europe—Norway—and specializes in ITO and BPO services for Oil & Gas. Frontica has been on a transformative journey the last couple of years, reorienting itself from the internally focused shared services unit of oilfield service company Aker Solutions until 2014. At that time it started operating as a separate ITO and BPO service provider in Oil & Gas. It has a healthy portfolio of contracts such as the 5 year deal signed in February 2016 with former parent Aker Solutions, which is valued at between $ 116 million and $ 145 million annually.
Frontica’s ITO services are focused on SAP consulting, application maintenance and development, IT infrastructure, implementation services, IT support for mergers and demergers (good business in Oil & Gas). BPO services focus on HR and payroll, F&A, operational procurement, category management and sourcing.
Cognizant, a High Performer in our 2016 HfS Energy Operations Blueprint, already has a strong Oil & Gas practice. We commended Cognizant for its vision for Energy Operations and its depth of industry specific capabilities. We felt Cognizant lacked industry specific acquisitions that would build out its capability and credibility in Oil & Gas, especially compared to some of its competitors, such as Infosys (acquired Noah Consulting in 2016) and Accenture (acquired Schlumberger Business Services in 2015).
Some smaller Cognizant clients in Europe mentioned they would appreciate more engagement, especially when navigating challenges around outdated legacy applications. This acquisition brings in local knowledge and delivery power, which can provide clients with increased interaction and closer engagement.
Although HfS sees this $128 million deal as a significant investment in the Oil & Gas practice, it’s not a game changer for domain specific processes, as Frontica’s expertise lies more in the process-enabling sphere. Nevertheless, the merits of this acquisition include:
Support for SAP customers who continue to struggle with a move into the world dominated by cloud and digital.
Delivery capability in BPO, a market currently dominated by Accenture and IBM. This acquisition gives service buyers a credible alternative, especially in Northern Europe.
A client base and network in a market very much in flux. Turmoil in the Oil & Gas market not only impacted service buyers, but also service providers’ ability to invest in their Oil & Gas domain expertise, capabilities and innovation.
Frontica, which has global aspirations, is better off as part of Cognizant’s Oil & Gas practice and wider ecosystem than it is trying to build its presence alone.
Bottom Line
With this acquisition, Cognizant bolsters the profile of its Oil & Gas practice, and shows a seriousness supporting clients in this vertical, with the addition of industry specific talent and capabilities. In the process, Cognizant also shores up its geographic presence in one of Europe’s largest Oil and Gas markets. The challenge is to integrate Frontica into the O&G practice quickly and leverage Frontica’s knowledge of the market and position in Europe, particularly in the Nordics.
The modern digital world is awesome in so many ways. But sometimes I get sent a piece of data, and I just wonder why? Not to be an advert, but I recently started to use a grammar / spelling plug-in called Grammarly (it just corrected the spelling of itself as I’d forgotten to capitalise). I find it helpful as it does things like contextual spelling – so it’s a bit better at spotting some of the common mistakes I make – for example, I am always typing deliverying instead of delivering which Word seems not to find.
Anyway, I get an email from them every week giving me a run-down on how I used it that week – I have displayed one of my latest stats in the picture.
When I first received this, I thought that this was great – look at me I’m 99% more active than everyone else. Then the following week my number of words went down 30%, and it worried me – thinking I’d been just as busy. As the weeks rolled on, I have made the same number of mistakes and my stats fluctuate – but they just don’t help me. It went from “That’s interesting”, “Wow” to “So what?” in about two weeks. It may just be that I am not learning from my mistakes….
Coincidentally, I wrote about the importance of learning from mistakes in one of my last blogs (Why the slogan “Fail Fast” is bullsh*t if you want to succeed with OneOfficeTM) and I think this is where much of the data explosion is failing. We’re provided with all this useless data, but without much guidance on what to do about it, how to act on it – how to improve for the future. I think that is the issue with all the data – we just don’t know what to bloody do with it!
Bottom line: To avoid #bloodyuselessdata you need a data chicken, not just a data egg
HfS Research is calling time on bloody useless data. Pure data collection and naïve analysis are table stakes in the digital world. The only way to create business value is to provide a feedback loop. The data needs to be used to inform the person in a positive way and iterate the process. Just hoarding data with no purpose is pointless (and potentially expensive) and next level of statistical reports which generate little action are almost as bad. For data to have any power it needs to inform the process and it needs to be actionable. From now on HfS will be looking for examples of useless data and calling it out. If you have any examples, please contact me via twitter @thewizeone #bloodyuselessdata or [email protected].
What a September that was the industry formerly known as “outsourcing”!
An “industry” still searching endlessly for an identity, a purpose and a value proposition, founded on more than dredging up cost savings through lower wages, tortuous conferences for bored sourcing advisors and pompous analysts who ask idiotic “questions” which end up confusing themselves… but finally we finding some salvation for our industry! Finally outsourcing doesn’t have to fester on the scrap heap of legacy commoditized business models, akin to what happened to the telecom industry…
The State of Denial is over in the States. In White Plains for the HfS Cognition Buyers’ Summit, the mood was the most upbeat I have experienced in a long time – clients were peeping above the bed covers and saying “I want real examples, I want to touch and feel this automation stuff… tell me what I need to know and how this is done”. There as a stark admission that “our kids will be alright, they live and breathe what is needed in organizations today, its us mid-career folks who need to be worried – we’re the ones who need to reinvest ourselves if we are to stay relevant”.
Many of the Indian providers want to extend their stay in Denial a while longer. Then we took the HfS team over to Bangalore, India for NASSCOM’s 19th BPM (BPO) Strategy Summit, where most of the local service provider dignitaries were firmly hiding under their bed covers asking the same old question: “How can we sell higher value deals to the same clunky big enterprises without doing anything differently since we started doing this stuff 19 years ago?”. Clearly most of these guys won’t change course while they’re still enjoying a (diminishing) 5% revenue growth and still making (diminishing) healthy profit margins…
The Problem dogging the outsourcing industry: Too many buyers simply aren’t looking to their providers with the expectation they can receive more than the basics
Perhaps most telling is this data point from our brand new industry study of 343 industry stakeholders, conducted with NASSCOM for the summit, where it’s clear over half of today’s buyers do not view their providers as purveyors of the new high value capabilities that will help them break out of their legacy tail-spin. This is in stark contrast to the views of the service providers themselves and sourcing advisors, where the vast majority clearly view the role of the service provider as pivotal to help clients advance their capabilities in areas such as Design Thinking methodology, automation, cognitive computing, analytics and process redesign:
The Solution to making outsourcing great again: Supporting and enabling disruptive business models
The big issue today, in my view, is that the outsourcing industry is too focused on the wrong things, such as staving off the “threat” of automation and protecting traditional headcount-based delivery. So let’s break down the issues to come up with some ideas for preparing for the future:
Automation is not the threat to outsourcing, it’s Digital Disruption. The real threat comes in the form of disruptive competitors using digital platforms and cognitive computing, that can wipe out your enterprise overnight. Imagine a new bank appearing, with a great mobile app, immediate customer service via chat / phone etc. Or a rival insurance firm that delivered everything you needed at half the premiums, but twice the usability? You’d switch in a heartbeat wouldn’t you? And these capabilities are here today, they’re not coming tomorrow. Today’s clients are under incredible pressure to be more nimble, more intelligent, more scalable and more digital than ever. And this is right across industries, where the threat and opportunity posed by digital disruption is rife. Remember, it’s recessions that destroy jobs, not robots:
Outsourcing is the perfect solution to help scale and operate disruptive business models
BPO and IT services provide the modern business with the ability, not only to survive and thrive in today’s disruptive market, but it’s here for today – not just tomorrow. BPO is not some legacy service that’s going the way of the robot, it’s a very real solution that is more imperative than ever for the survival of our most advanced digitally-savvy businesses.
I recall one of our analysts recently coming back from a visit to AirBnb’s new BPO contact center and she was actually shocked – “Phil, it’s just your classic BPO center providing traditional customer support services.” Digital businesses actually need BPO to function – why do they want to going out and hire armies of support staff and processing people when they need to attack their markets at warp speed?
Digital disruption is driving an unprecedented level of urgency and paranoia among enterprise leaders – and outsourcing can really help
In many industries today, digital business models can completely take established legacy enterprises out overnight. If you are an insurance firm with 10,000+ people processing claims onshore using green screen computers, or a bank which still has hundreds of branches employing tellers from the 1970s, or a retail outlet with no mobile app strategy, you are at dire risk of competition coming at you with a completely mobile app-driven, user friendly, intuitive and cognitive business model, supported by intelligent, affordable BPO and IT operations. So you need partners who can help you pivot fast, and combat these potential fatal threats to your business model… and where better to look than BPO and IT services firms which can provide the scale, talent and analytics you need to operate with the flexibility you need, without the burdensome capital investments?
Outsourcing can make itself great if it can pivot between helping today’s traditional enterprises and tomorrow’s emerging digital businesses
When we look out into the future of the world leading companies, the Global 2000 in five years time will look very different to what it does today. As we’ve discussed many times before, enterprises are looking to focus on their core and stop adding size and scale to grow. With businesses which interact with their customers, partners, suppliers and employers using apps and collaborative tools, the focus is quickly shifting to growing profitability through smart scalability of customer base, as opposed to linear revenue growth. This means a $100m digital business in the future could command $10-20m in outsourcing spend a year to drive its business forward. But the crux of the problem today us today’s outsourcing providers are still obsessing around pursuing $5bn+companies because they only see their success in going through the initial labor arbitrage, as opposed to pursuing clients which to not have the legacy back office burden and just need agile services they can plug into quickly and effectively.
The emerging outsourcing customer needs a very different approach to account management, sales and service delivery
Outsourcing providers need to completely revamp their account management models to cater for the evolving digital business – but this something well within their capabilities… just go hire forward-thinking sales leaders and build teams of people who can work with the emerging companies of the future, not just the ones of the past. In addition, providers need to ensure they have the ability to cobble together smaller delivery teams which can quickly grasp the needs of these evolving clients. Hence, they need large investments in training and Design Thinking to help with outcome and goal setting with clients. The old “master/slave” delivery model will be a thing of the past with the emerging digital business, which will demand much faster ramp-up times and staff who can quickly respond to their unique business needs.
The Bottom Line: It’s time to embrace our Scary Bright Future – we have the tools to make it happen!
So it’s time to be smart, time to be prepared to help our clients combat, and ultimately win this war with digital disruption. BPO and IT services provide a critical foundation, so let’s prepare to reinforce to the world what we stand for and the sustained value we deliver every day to thousands of clients around the world.
Phil reminded me recently of my piece on the Automation Crystal Ball and then challenged challenged me to take a longer (and bolder) view as to where Intelligent Automation (IA) will be in 5 years’ time.
Here’s the interesting piece: to do that, we have to know where we are now. IA isn’t well defined today and stakeholders struggle to find any common ground. So in the midst of that confusion it might be difficult to see a clear path forward. But I’ve already accepted Phil’s challenge so I’ll start first by offering my views on where we are today so to have better clarity on where I think IA will go.
Blurred Perceptions Rule Right Now: Today’s Game Is To Create Shared Understanding and Definition
First, it’s NOT about tools, technology, and hollow promises to solve the most pressing issues of mankind (although who doesn’t want to save mankind?). Instead, at HfS we believe the relevant context for discussing IA is service delivery. Most approaches to IA involve decoupling routine work from labor arbitrage. At it’s core, it means IA is about automating mind-numbing, repetitive pieces of everyone’s jobs – giving companies two benefits:
Lower costs by reducing the number of people needed for “grunt work.” This savings goes way beyond what could be achieved simply by swapping out higher paid workers with lower paid ones (even if the lower-paid workers were equally or more talented.)
Increasing opportunities for workers to do creative work, develop new avenues for revenue creation and skill growth, and improving the job satisfaction of workers who no longer have to suffer through boring, routing tasks.
Our research shows that the IA is still a nascent market amidst the confusion we discussed earlier. But as the market begins to firm up around this service delivery perspective on IA, we see exponential growth coming. The seeds of that growth have been planted by suppliers and buyers. The supply side has built out strong capabilities by setting up IA centers of excellence and by continuously integrating the plethora of IA tools. The picture of the demand is much more difficult to assess as IA clients tend to shy away from discussing their projects in public. They often don’t want to give away perceived competitive advantages or are concerned about the socio-economic implication of the topic. However, in private buyers tell us they’re piloting, testing, building and otherwise beginning to engage in IA.
Suppliers And Buyers Must Co-Create A Consolidated Understanding
Against this background of an extremely blurred perception of IA, what are the issues that need to be addressed in order to see an acceleration in the market development? The following points provide a high level call to action:
Buyers need to:
Work with service providers and other third parties to educate the market on use cases and implications of IA.
Address the issue of governance. How do these highly automated environments need to be managed?
Create scenarios to understand the implications on talent and affected workers so they don’t cause unintended consequences in their automation efforts.
Service providers need to:
Better understand the impact of IA on their revenue models so they can make better decisions about what to offer the market and how to change their businesses to be successful in the automated environment.
Discover the right testing methodologies to guarantee the quality of service delivery in an environment of self-learning and self-remediating engines.
Look at their own talent, not just the talent of clients. Are robots taking over the workplace and how is the way services firms work going to change?
Suffice it to say, much of the future development is dependent on how stakeholders are going to address the issues that we have raised. Therefore, in this context we will focus on two top level issues that encapsulate the future of IA. First, what is the direction of travel for the build out of IA? And second, how is IA impacting knowledge work?
IA’s Growth Will Come From Vertical Evolution
HfS believes in 2020 we won’t talk about RPA anymore as it will be just a reality in the back-office. But we will continue to talk about the broader notion of IA. Yet, in the context of how of industrialized, highly automated service delivery will interact with Deep Learning, Neural Networks and Artificial Intelligence to generate highly verticalized insights. That is where both value will be created as well as differentiation be provided. We see early examples in Watson Health or UK startup RAVN which offers enterprise search and machine learning in legal environments. At the back of my head I keep thinking about the comparison to high frequency trading. In a market where standardized platform don’t offer differentiation anymore, value will be disseminated through new business model on top of those platforms (as well as the continuing informal practices).
Bottom Line: IA Will, Yes, Bring About A Virtual Workforce. Eventually.
In 2020 we will be in the midst of a disruptive transformation of knowledge work. Already now we see the emergence of virtual agents that are underpinned by broad scale automation capabilities. Those agents range from the big beasts Watson and Amelia to OpenSource avatar and Amazon’s Alexa voice integration. Those approaches will make a broad range of activities superfluous. Take RBS in the UK who has announced to introduce robo advisors with the sole purpose of taking out FTEs. Thus, we will see a mix of mainstream human augmentation through the use of IA but equally cold hearted job elimination. The impact will be most prevalent on the supply side. As we are working in the sourcing industry we have to stop dressing up the issue and start an open and honest debate on the discussion of knowledge work. Just like offshoring, automation will severely disrupt the industry – and clients need help in addressing those issue. Therefore, these projects should be paid for work and not pre-sales engagements.
IA will be a blended but mainstream reality in the various service delivery strategies. The focus will have changed to connecting front and back-office through the rise of virtual agents that will integrate the requirements and capabilities for what HfS has termed the Intelligent One Office. Those virtual agents will be tangible part of the transformation of knowledge work. However, unless the industry is addressing the implications head on, we wouldn’t be surprised to see widespread demonstrations against some industry practices on IA as the fervent discussion on the ethics of Artificial Intelligence that is already raging through the developer community and more customer facing businesses such as Google and Facebook will disrupt the B2B space. Thus, Virtual Workforce could be both a euphemism as well as a broad placeholder for a blend of human and automated work.
A pervasive theme in the HRO market today is the need to improve employee satisfaction. This requirement to nurture and retain employees stems mainly from a concern that there is a scarcity of talent in the marketplace. Personally, I have often written on themes relating to talent shortage, and while this situation is backed to some degree by statistics, is it in fact overstated?
Is the shortage of talent self-induced by organizations?
My recent research has focused on the RPO market and never have I seen such a disconnect in the maturity level of both provider’s capabilities and also client policies.
No wonder your talent pool is limited if your hiring policies are outdated and your RPO provider is still using the yellow pages.
So let’s begin with the organization. It’s scarcely a surprise you can’t find talent if you are still stuck in the age old practice of sourcing either top performing or ivy league candidates. This issue is compounded further by hiring departments alienating candidates who are not successful in their first application. The simple fact is; we have growing global economies requiring an ever-increasing workforce. Supply can simply not meet demand if we continue to use the old model of hiring what we perceive as “the best.” Your sales team look to continually expand its target market, so why isn’t your recruitment department doing the same?
At this stage, you might be asking, “Don’t we hire RPOs to advise and assist with this?”
Well, firstly outsourcers can only be as good as the processes they are permitted to follow. And secondly, the disparity in RPO service provider’s capability is massive. On the one hand, there are providers offering traditional RPO support that balk at the idea of using analytics and simple automation, beyond interview scheduling, to enhance the selection process. Then there is the modern leader in the RPO market, using machine learning and intelligent analytics to enhance the candidate selection process thereby expanding the available talent pool. Here the “ideal candidate” is constantly updated through the ongoing analysis of interview and employee performance data. These systems can then identify the best, and most likely to succeed in an interview, candidates from available talent pools.
How do we address this talent shortage then?
Address your legacy recruitment policies: Firstly, start with the organization itself. Companies need to realize that what was previously viewed as “the best” is no longer entirely accurate. Targeting a wider pool of targets is key for success in today’s recruitment department. Ernst & Young has been a forerunner here, with its UK hiring department dropping its minimum academic requirement for graduates after it found no correlation between academic performance and on the job performance. Also, psychologists now need to be a key member of the recruiting department. Assessing candidates via skillset as opposed to behavioral characteristics seem counter-intuitive. Skills can largely be taught, behavior and culture are more generally ingrained in one’s nature. A great case study to highlight this point was a contact center which changed its hiring approach and realized an 80% improvement in first month KPI adherence from candidates hired through a purely behavioral based methodology, against counterparts hired via a traditional skills based assessment.
Foster your unsuccessful talent pool: Secondly, organizations can no longer simply forget about unsuccessful candidates. By unsuccessful we mean they might not be a fit for the one job, but keeping them engaged for future opportunities can shorten the recruitment cycle for a potential future match. Sales and marketing have been doing this for years, continually engaging and challenging its target audience, so why not recruitment? Accenture has developed a talent community which continually provides updates for suitable available positions and further candidate development, thereby keeping its talent pool engaged and aligned for future job openings.
Your RPO needs to embrace automation and analytics.
RPO service providers have a crucial role to play here. If organizations are open to expanding hiring policies, service providers need to be able to deal with a larger and more diverse talent pool. One of the reasons RPO’s have not embraced automation is simply because automation in the recruitment market needs to be cognitive to offer true value. Automation at its most basic level relies entirely on rules-based, preconfigured processes. As we have discussed here, hiring practices need to be increasingly fluid, making cognitive automation a better fit. As such recruiting platforms that utilize automated processes need to learn from prior hires and adapt “ideal fit” accordingly. Very few providers yet have this ability. What is crucial to realize here is that cognitive does not remove the role of the recruiter, it merely means recruiters can spend more time in the assessment process with a better candidate.
The Bottom Line
Our key takeaway here is that after companies initially address internal hiring policies, they then need to partner with providers that offer both the technology AND the people needed, to identify and engage a diverse talent pool.
