Have you ever had a meal that tickled your intellectual curiosity, delighted your sensory perceptions and of course, sated your appetite? Challenged your concepts of what a restaurant should be and what it should deliver? That’s what Chef Grant Achatz and his team at Alinea, Chicago are trying to create— over and over again. Much as I would like to have had the actual experience, it was while watching an episode of Chef’s Table that I saw eerily familiar themes– concepts we talk and write about in the services outsourcing industry everyday.
Chef Grant and Alinea team at work
Here are three takeaways from Alinea that I put together that are meaningful “food for thought” for service providers, buyers and influencers alike:
The maker is as important as the consumer: Whether its for IT, business process services, call center operations, or analytics services, we are increasingly telling service providers that they have to think about the customer experience, and alter their service delivery metrics and workflows around delivering for the “customer first” organization. Sometimes its easy to forget that behind all the delivery are new generations of global workforces, that want to do meaningful work that “makes a difference”, instead of getting stuck in robotic, rote processes. Alinea sees the fulfilment of its team’s creative pursuits and experiences to be as important as those that it delivers to its customers. Chef Achatz describes, “Doing the same thing over and over again bores me. [My Colleague] will say, “Well, none of the guests that are coming in tonight have ever been to this restaurant before. So for them it’s all new.” And I go, Yeah, but…what about us?” We need better ways to link employee experiences to the work they deliver, and the ideas they continually generate.
Innovation and risk go hand in hand: With the As-a-Service Economy, and the evolution to the Intelligent OneOffice (or Dumboffice, as the case may be), we’re talking today about the eventual demise of the labor model, new opportunities for intelligent digital data, support and processes – and a transition period for an entire industry in the long run. Which ones will be able to make the shift, attract and motivate the right talent that “gets it”, make the smart platform and data buys, and articulate the most compelling visions for running the digital businesses of the future for their clients? Chef Grant takes reinvention so seriously, Alinea throws away perfectly good menus and starts from scratch on a regular basis. His colleague mentions on the show “We wanna lionize him [Grant] and romanticize him for creativity and innovation. But you can’t do it without being risky…What can you keep doing that’s new, that people will still like? And will you destroy yourself or destroy your reputation, or destroy the restaurant as a business…in the pursuit of doing something new?”
Three Michelin stars in, the idea of reinventing food and the restaurant experience is obviously still paying off for Chef Grant. Enterprise clients, by the same token, often state in our research that their hands are tied on innovation efforts with their service providers, for various reasons that have a lot to do with risk. Yet, we see a subsection of their peers succeed with collaborative engagements in place, creating joint innovation funds and chipping away at their legacy practices with their service partners. Innovation and risk – you cannot accept/expect one without planning for the other.
Reimagination is not a one man job: Alinea hit hard times despite all this success – in 2007 the press dubbed Grant as “the chef who couldn’t taste”, following his diagnosis of stage IV mouth cancer. A miraculous treatment saved his life, but took away his taste sensitivity. Grant powered through this phase with a renewed fervor to prove himself. He came up with even more provocative food concepts, and designed a system to communicate with his team on exactly how they were to be prepared (e.g. on a 1-5 acidic scale of pickles to bread…), and opened up other ideas for his sous chefs to experiment with more (how can we make food float?). This was revolutionary for an industry that thrives on “secret sauces” and ideas that chefs closely guard all the way to their graves.
We need to recognize that a lot of service providers today are in Chef Grant’s shoes – doing retail customer service without selling anything, running claims analytics without being insurance companies. This doesn’t exclude them from being innovative, or understanding the nuances of a particular industry. We need this caliber of human collaboration between buyers and service providers in the As-a-Service Economy, that can jointly contribute to executing on new ideas, without master-slave constraints.
These are seemingly broad, “soft” and intangible concepts, but they will dictate the level of success that service providers will have in either becoming OneOffice Enablers or left perfecting their backoffice outsourcing recipes. As for Alinea, they have just undergone renovations to rip apart and put together their well-run restaurant. In the episode, Chef Grant even wonders why plate manufacturers get to decide the canvas on which food is presented. He asks rhetorically, “Can we eliminate what we’ve been doing for the last ten years…and start over? And, uh… the answer is, “Yeah.” Sound familiar?
Fed up with 100 page profiles that focus on quantity as opposed to the key areas that really matter to you? If only there was something unbiased, concise, relevant and to-the-point that really helps us navigate sourcing providers’ key offerings and capabilities?
One question that crops up, time and again when we speak with outsourcing buyers, is the need for easy to use resources to help identify and select the right provider for the right task. HfS is launching a new type of report that delivers buyers a view of an individual service provider’s capabilities across both horizontal and industry vertical offerings. This is in addition to our flagship blueprint reports, which provide sourcing buyers with a view of the relative performance of providers in a particular offering space.
These Buyers Guides will be (as the name suggests) focused on the research needs of service buyers vetting potential IT/BPO service partners, providing in depth, referenceable insight. The Guides will include service provider people, process and technology capabilities, key financials, client examples, excerpts from published HfS Blueprints, strength, challenges, analyst insight as well as maturity modeling on the Eight-Ideals of the As-a-Service Economy. All factors that influence buyer’s decision-making today but more importantly, future-proof tomorrow.
So keep an eye, for the first of the buyer’s guides, starting with Genpact. They should appear on www.hfsresearch.com over the next two weeks. If you have any feedback or suggestions for buyers guides you’d like to see, please reach out as these are always welcome.
Long before it was turned into Hollywood film, Douglas Adams’ The Hitchhikers Guide to the Galaxy was one of my favorite books. It reminds me of the unburdened days of my youth when the book’s one liners and quotes were secret code among my friends. Among them was “42” as the answer to the ultimate question of life, the universe, and everything, calculated by an enormous supercomputer named Deep Thought over a period of 7.5 million years. To explain the meaning and the vision of Intelligent Automation, I wish I could throw a “42” at you.
Problem is, there are no simple answers.
To learn more about the complexity around the notion of Intelligent Automation, HfS has launched the inaugural Intelligent Automation Blueprint. Over the next several weeks I will share some of the learning from that project with you, starting with Capgemini today.
The HfS Intelligent Automation Blueprint assesses the delivery of comprehensive automation strategies
When HfS launched the Blueprint, there was broad encouragement and endorsement by the leading service providers, resulting in the project being oversubscribed. The stakeholders agreed that the main exam question should be how service providers orchestrate diverse sets of automation within the context of service delivery. How are they proactively transforming the processes for clients? Thus, the emphasis is not on task automation or isolated point solutions, but on automation from a business function or process point of view. The work through the Blueprint process is a litmus test for the state of industry.
The Intelligent Automation broader market is maturing
Capgemini is a compelling example how the industry is maturing. So far, Capgemini had built out some strong RPA capabilities and was starting to expand the Intelligent Automation skills to application management around its Autonomics PaaS platform. Fast forward to July 2016 and Capgemini just announced the Automation Drive suite of services that is aiming to leverage the disparate automation skills as well as four CoEs across the traditional business units. As a result, the company is addressing the issues we have earlier. The next logical step probably would be to organize those capabilities as one CoE on Group level. In practical terms Capgemini has expanded the RPA methodology to the broader notion of Intelligent Automation. Similar to many discussions on the journey toward the As-a-Service Economy, the key was a change in mindset as many delivery practitioners had to be introduced to the intricacies of Intelligent Automation. A further goal for the Automation Drive initiative is to progress to the next level of automating the automation, increasingly underpinned by a DevOps flavor. The ultimate vision is one to evolve toward a Digital Delivery Center where the capabilities of the automation CoE are overlaid with governance and control at the business unit level.
The Bottom Line: We urgently need a debate on the transformation of knowledge work
Two other aspects caught our imagination in the discussions with Capgemini. First, the company has started to deploy IBM Watson to achieve better management of the resource bench, more accurate staffing, and anticipation of gaps, rotations as well as the optimization of the “fresher” intake.
Second, Capgemini has launched an Intelligent Automation Academy to train and upskill staff so that they can move into consultancy and advisory, product selection, and proof of concept development among other things. If successful, the Academy is likely to be extended to broader Analytics and Cognitive skills. These two initiatives are important because they are part of the transformation of knowledge work that has been all too often neglected.
Data scientists and cognitive skills don’t grow on trees. Therefore, formalizing the upskilling process is a very sensible idea. The proof will be in the pudding of successful transformational projects. The answer might not be “42” but a much more holistic approach to Intelligent Automation.
Ever wondered who the leading 50 BPO providers are across the globe, when we add up all relevant revenues? Well, you need look no further:
Source: HfS Research 2016 estimated from services provider financials. Revenues are fitted to nearest calendar year. We attempt to make the BPO services numbers as close to HfS definitions as possible. The market primarily used for this list is the horizontal BPO processes of F&A, HR, Customer Care/CRM, and Procurement. Some industry-specific back office processes are included but we have excluded specialist categories, for example, banking securities.
We have segmented the providers into 5 broad categories: HRO specialists, Customer Care specialists, Multi-process BPO, Multi-process IT & BPO and document management providers. The specialist areas: document management, customer care and HRO should be fairly clear—the vast majority of the services these company provides in BPO is related to this category. The IT multi providers and BPO multi providers—divides the companies that provide multiple types of BPO services into those with an IT heritage and those without. These categories are subjective; we based these splits partly on the type of services they provide and individual company background. For example, Accenture provides multiple types of BPO service and has a sizable IT services business so we have described as a IT multi.
HfS subscribers can download the full report, authored by Jamie Snowdon, Barbra McGann and Phil Fersht by clicking here
Paris headquartered Workday specialist service provider, everBe, recently announced the opening of a new ‘Global Excellence Service Centre’ in Bordeaux, France. everBe selected Bordeaux from a list of 10 locations, because, to quote the CEO, Jean Manaud:
“Finding a location where our staff could raise families and enjoy a quality life was a major criteria for us.”
I have read hundreds of press releases over the years of service providers opening delivery centers or Centers of Excellence around the world, to support local clients and/or be the hub for a particular solution capability. Typically, service providers highlight the ability to offer local support, with resources who understand local culture and language, and generally make local enterprises feel understood and loved. everBe will of course tick this off as well, but it recognizes that the most important element is to attract good people and retain them. everBe aims to support Workday Human Capital Management and Financial Management deployments and management services from this center, to which it wants to attract 30 consultants in the first round of hiring.
everBe has actually considered what people need to be happy in a job. It’s way beyond just having a stable job, the opportunity to advance skills, and getting a good salary. It’s also about actually liking where you live, and being happy there with your family.
Wow. The service provider pendulum is definitely continuing to swing towards focusing on its people.
I started playing Pokemon in college. More or less at the same time, I watched my first sci-fi movie Minority Report, which blew my mind and I started imagining the role of many futuristic technologies including augmented reality (AR). I could have never imagined, 14 years later, the combination of these two (Pokemon and Augmented Reality), Pokemon Go would become such a craze, adding $7 billion to a company’s valuation in just a couple of days. It also leads me to think again about the use of AR in engineering services.
Augmented reality has a 360-degree relationship with engineering services.
On the one hand, AR augmented the existing product design, analysis, manufacture and services capabilities and on the other hand augmented reality applications are built using software product engineering.
Augmented reality enhances engineering services by adding visualization capabilities and takes the concept of the digital clone to the next level. The capability to visualize real objects can be a very powerful tool across the engineering services value chain of design, analysis, manufacturing, and services and can reduce time and cost significantly, while at the same time improving quality. Some of the AR use cases across engineering services value chain are shown below.
Exhibit 1: Augmented Reality Use Cases Across Engineering Services Value Chain
Augmented reality is made possible because of software product engineering services. The ISVs rely on software product engineering support across design, architecture, development, testing, maintenance, integration, mobility, product management and localization for supporting AR applications. Apart from engineering, AR has strong use cases in tourism, government, entertainment, healthcare, construction, military, logistics, retail, internet, etc. which ISVs will like to capitalize.
AR also has strong use cases in engineering education. I remember how much pain it was, always looking for lab and equipment manuals in the middle of experiments and difficulty in imagining engineering objects from different angles in engineering drawing classes. Augmented reality can help future engineers in all these areas, and much more.
Okay Sherlock, what has Pokemon changed for augmented reality in engineering services? The two-word answer is “User Adoption.”
The augmented reality solutions mentioned above already exists both in labs as concepts and implemented in some of the advanced factories. Almost all CAD ISVs support AR applications. I have tested some of these solutions myself in the labs (the perks of being an engineering services analyst!), and the overall feeling was that it is still not intuitive, or user friendly. The limited success of Google Glass and other similar gadgets have reinforced the belief that user adoption will take time. It was similar to journey of mobile smart phones before iPhone era. And suddenly, the Steve Jobs iPhone moment changed everything and lead to the birth of mobile based unicorns such as Uber, WhatsApp, Instagram, etc.
The user adoption of augmented reality is a good opportunity for all three stakeholders – enterprises, ISVs, and engineering service providers to revisit their augmented reality strategies. Enterprises will have the confidence of higher user adoption among their employees, and can invest in augmented reality technologies further. ISVs can revisit their product roadmaps and prioritize augmented reality related features and applications. Engineering service providers can take the lead and develop/ enhance their augmented reality expertise and should even look at inorganic options too, with many potential AR startups emerging in the industry such as nGRAIN.
To conclude, this Pokemon phenomenon may be a fad or it maybe we are looking at that Steve Jobs iPhone moment which changed user adoption forever. Whatever the case maybe, we will be keeping track of AR developments in engineering services and include augmented reality as one of core areas in our upcoming Industry 4.0 Blueprint.
HfS produces a roundup of the quarterly financial results (see our recent one for Q2) – which means we have to wade through lots of financial data and listen to quarterly calls. We also read various bits of commentary around the performance. One thing that always surprises me is how much commentators make of one single set of results and even one small part of those results. I ought to say that I look at the results as indicators for the market as a whole and the individual supplier performance. I tend to focus on annual changes rather than quarterly changes. So I am always a little shocked when the bigger picture is lost. There’s nothing worse when investment analysts and market pundits take such a short term quarterly view of the world, so let’s take a step back and look at it long term.
When I looked at Infosys Q2 2016 results (I use calendar quarters not fiscal – I am referring to Q1 2017 fiscal) I thought they looked OK. Growth was OK, down from the predicted growth, but round and about on par with the overall market performance – and certainly better in market terms than the last two years, except last quarter. Operating margin looked OK / consistent with previous performance. While I understand there are other metrics to measure success – I think this shows a pretty good showing, nothing concerned me.
Then I see the commentary which seemed to suggest the CEO was doing a bad job and lots of quite negative thoughts, disappointing results, etc… – mostly concerning the forecast adjustment. I certainly get the value in accurate forecasting, and consistency in forecasting well is a sign of smart leadership. However, in a market that is going through the major upheavals seen in IT and BPO services at the moment, the ~10% growth year-on-year enjoyed by Infosys is at the top end of the scale in performance terms. To put this in context, Accenture’s last quarter was not as good, and neither was the stalwart TCS. We have yet to see other contemporary’s Cognizant and HCL Q2 results which may show an equivalent dip.
Because of the criticism leveled at Vishal Sikka – I looked at Infosys’ long-term performance and mapped against each CEOs tenure. Looking at the chart, the financial performance during his reign seems to be pretty good. With increasing revenue growth and stable operating margins. This quarter has shown a modest drop in growth of a couple of percentage points (from 13.3% or 15% in constant currency in Q1 to 10.9% or 12.1% in Q2), but it just seems too early to say this is a trend.
The bottom line: you cannot judge a provider’s performance effectively with one set of results.
Moreover, without seeing some of the other results, it is difficult to gauge – as success can really only be measured in market terms and is relative. However worrying any dip in growth is, we will not know if it is a problem until next quarter, after all the results are out.
Buyer: “This service provider delivered no innovation, thought leadership, or long-term best practice management advice for my business process.”
Me: “Did you ask them for any of this?”
Buyer: “Erm….no.”
Alright then. It’s funny how many times I’ve had a similar conversation with IT services clients over the years. Luckily at HfS we take into consideration that there’s usually two sides to every story – otherwise some service providers would consistently be scored badly in any innovation or thought leadership category in our research reports. So, why is this happening? It seems to come down to one of three reasons:
The beauty of hindsight: Buyers often don’t know what they need until the end of the engagement, particularly in a deployment project. At that point, they can very easily highlight all the processes, approaches, methodologies and advice that would have been fantastic to have had access to prior to implementing the solution. Service providers do however have a responsibility to explain all of their capabilities and all the points the buyer needs to be aware of before starting the implementation. It would then be up to the client to decide whether they want to contract the service provider for these skills, use in-house skills, cross that bridge at the appropriate time, or frankly ignore it.
Not required: Sometimes buyers engage in a detailed consulting project with a consulting provider, and then use a separate implementation provider. This is particularly true in the SuccessFactors services market. Clients assume that every possible eventuality has been considered in the consulting phase. The implementer is often selected based on its technical capabilities and its cost effectiveness. Complaining that this provider did not provide any thought leadership or viewpoint outside of specific module implementation is simply unfair. Often the service provider has successfully completed the exact work it was contracted for, which in my book counts as a successful project. Again, it’s probably wise for service providers to point out to clients exactly which skills and engagement levels to expect for the price the client is willing to pay.
It’s all Horses for Sources: Sorry for the pun, but frankly, every enterprise defines innovation or thought leadership in a different way. I once had a mid-sized buyer enterprise with zero sourcing experience tell me that their first engagement with an IT service provider was ‘out of this world! They put the stuff in, they were very nice, and it all worked!’ Whoopee. I doubt a large enterprise who has been outsourcing for decades would get as excited about this achievement.
So, buyers and service providers alike need to have the innovation, thought leadership, or whatever they care to call it, conversation upfront. That way the service provider knows exactly what they are required to deliver and the buyer knows exactly what they will get and what they’re paying for. Remember: if you want some value add, I’d tell someone.
So it’s finally happening. Enterprises are using SaaS applications to run important processes, such as CRM, HR and even Finance. Moreover, some even have an enterprise cloud strategy that requires departments to consider cloud options alongside on premise solutions, as part of process transformation projects.
Until recently, enterprises dabbled in SaaS applications to support specific, isolated needs. Did you hear about the Marketing Manager who purchased Salesforce.com on his credit card without any recourse to the IT department? We did unfortunately. Salesforce.com is one of the most established SaaS applications in the market, but initial deployments were seldom aligned to an enterprise-wide CRM strategy. Second waves of Salesforce.com implementations have been more strategic. Workday and SuccessFactors implementations have also taken off in the past few years as enterprises realize the importance of having a modern HR department running programmes to hire, motivate and retain the best talent. Workday’s Financial Management product is also increasing in popularity, with some enterprises deploying this before the HCM module.
But SaaS adoption brings with it many differences from the on premise world. Enterprises need to consider the organizational change management implications for one. Engagement models with service providers are also changing. The service providers, for their part, need to understand the different types of services required to effectively support SaaS applications. Some have invested early to be prepared. But for others, this all seems to have crept up on them rather quickly. The same might be said for research and advice for service providers and buyers alike in the SaaS services market.
Luckily, HfS has been tracking this market for some time and produced a wealth of information in just this past year to help both parties. This includes three Blueprint reports:
Clients with the necessary subscriptions are lucky enough to have access to all the detailed service provider profiles in these. But we have also published several Points of View and Soundbite notes that are FREE to anyone who cares to visit the site! These include:
I’ve been busier than I thought! And there’s more to come. The updated Workday Services Blueprint and the Salesforce Services Blueprint will be published before the end of 2016, with all the accompanying buyer and service provider oriented supporting notes – all free of course.
So stick with HfS. We’ll keep you posted as this hot market evolves over the next few years.
This is a question you expect to get as a forecaster, and it is not always the easiest to answer. It is always troubling to be asked to speculate on a market size where the outcome is so uncertain. However, this is not speculation upon speculation. This is not like forecasting the impact of Grexit (Greek exit from the EU) – even though this has not happened.
Brexit has happened, and we should have a position, even though the ramifications are far from clear, and it is still in its infancy. The current uncertainty is broadly focused on exactly what the terms of the EU departure are and the on-going relationship the UK will have with the EU. As forecasters, we have a choice to make as to which scenario we choose as the likely option or the middle ground. Our thought process is likely to develop over the next year, and this is going to change the forecast.
So, our workload is likely to increase as we will have to consider the Brexit model and adjust over the next few quarters (at least). Even the most confident of forecaster should reflect on what they have done and make adjustments as things unravel. The old maxim that the analysis is only as good as the best available data rings true here.
In short, how do we see the impact of recent events? We think it is safe to assume that the level of uncertainty currently is going to have an impact on the IT and business services markets, regardless of any eventual outcomes. We have already heard services firms mention Brexit in negative terms during financial calls. Although, Infosys CEO Vishal Sikka said it might lead to uncertainty in the near term, he said it would also lead to opportunities in the medium-to-long term. TCS’ position was similar, with its Chief saying his executives will be talking to their clients and watching what happens.
Typically, recessionary periods / periods of economic uncertainty impact the IT and business services market in two waves. Firstly, a slowdown in discretionary spend and some decision making is suspended/slowed. We are loathed to forecast a big delta at this stage as services buyers have weathered many economic issues in the last six years and this may just be seen as one more thing. If this were an isolated uncertainty, it might have had a larger impact, but in a stream of issues, the impact may not be as severe. It does not, as some observers believe, mean an automatic uptake in external services to augment the increased scarcity of internal resources or as a cost cutting measure. Any uptick is countered with the uncertainty. The secondary effect mean organizations are likely to make investments to make themselves agiler and less susceptible to economic issues in the future – this is where we see an increase in outsourcing, more adaptive operating models and, inevitably cost cutting.
Bottom-line: The short term impact is likely to be wracked in uncertainty. However, medium-long term opportunities could well arise. To conclude, our current position is that there will be a short-term impact on market growth in the UK, which will ripple across Europe, but this slowdown will be caused by some increased market uncertainty and – for the most part – the services market will continue to chug along unabated. We will see some opportunity as the buy side adjusts, but, given the process is going to take some time, it is too early to predict the timing or scale.
