There was a time when “learning on the job” meant you were an apprentice or a “newbie,” someone with little practical experience. However, today, “learning on the job,” is a critical activity to do all the time, as digital technologies and business models change the way we work, not a little, but quite significantly and often at a breathtaking pace. There is no defined curriculum for the pace of change in today’s businesses—it’s a capability we must all be very adept at—dealing with a constant flow of new ideas, new technologies and ambiguity that takes us outside our comfort zones.
The expectation today to drive faster time to market with new ideas, faster response to queries, and faster results from the work we do is also impacting the services and outsourcing industry. This industry grew up based on a culture of “getting the job done faster, cheaper, more efficiently”… and as those expectations are met… it’s still true. And because many companies can meet the cost reduction baseline, differentiation now depends on quality, innovation, and not meeting but beating expectations. And that means constantly evolving.
Do you need to shake up your outsourcing engagement to redefine the value and create a new way of working together? A way to bring “both sides” back to the table? To build on a trusted relationship, one that is collaborative? Nothing creates a team like solving a problem together. There needs to be some degree of trust in place—either through experience or through reputation and recommendation. Design Thinking is also gaining interest and traction as a way to identify and solve a problem as a team in a services relationship. The bottom line is that the way forward for outsourcing—service buyers and service providers—is based on willingness to learn… experiment… and start over.
On the Job: Learning by Doing is the way forward
To make it work, service providers—and many service buyers too—need to step out of the risk averse and “no fail” “yes” culture. By nature, Design Thinking requires more of a “learning by doing” approach. And it may take awhile to yield measurable results. In one example, a service provider launched a Design Thinking exercise to address a very general interest—to reduce the cost of their collections process. Reducing collections would help the client but also may hurt the service provider as that was their job. But this problem of the cost of collections is not unique to that one client or to one industry, so anything learned could likely be reused.
While the project was focused and undertaken with a specific client, the learnings, regardless of whether they led to more work for the client, would still increase the understanding of the service provider team of the consumers in that industry and the experience they were having at the time. In this way, it became a learning exercise as well. It also focused the service provider on the clients’ consumer base, increasing the understanding of the context of their work.
The interaction between the service provider and the service buyer’s customers brought to light some opportunities and challenges that would not have been noticed without a service provider employee “shadowing” someone living the process that had been in place for years. This effort was not about changing the process per se, but about changing the focal point from the process itself to “who” was in the process—to the experience and the desired outcome. That’s a pretty new way of working in the outsourcing industry.
From the observations and interviews, and studying data collected over time from its call center, the service provider came to the table with the client with an informed, but different, perspective, and with some ideas on what to do next. Some of these ideas were ones that interested the client and led to further plans and projects. Some were not, and others were simply put on hold. The point is, the service provider took the first step to say, let’s try this—with the client’s permission and participation—and invested in those first steps.
The Bottom-line: It’s about courage, budget and stories
This exercise tapped into the three partnership “Power Ups”—the courage of the service buyer to let the service provider get close enough to their customer base to interact with them personally; a budget for the shadowing and testing ideas; and stories—those of the consumers that drove the next steps toward change and business impact—and that of the project overall. Are you ready to tap into your inner “gamer,” and partner to Power Up to drive real, impactful innovation?
Superhero movies have been particularly popular over the past several years, but long before then they’ve been a staple of our culture. We love the hero coming to save the day, helping fellow citizens and making the world better. In the movies (and in real life) there are superheroes who save countless people from human trafficking, sweat shops, and other dangerous conditions. I want to be a superhero and do these things too. And guess what? I’m going to do it. How? By helping companies buy IT products and services ethically and by helping suppliers create new opportunities for themselves and their people.
Will you be a superhero with me? Here’s what we can work on together to make our world a better place:
Buyers, make it your mission to use sourcing for the good of your company and all workers/locations touched by a deal.
Source ethically. Searching for the lowest cost labor (and then negotiating even lower rates) often can lead to firms ignoring warning signs of poor ethical labor practices. Don’t be one of the companies that will choose the lowest price over a supplier that treats it workers fairly and gives them good working conditions.
Don’t rush through compliance and treat it as a “check the box” activity. Use compliance and regulatory requirements to shine a light on where your value chain can be improved. Try to exceed regulations on supplier ethics and work practices.
Monitor, test, and remediate on supplier compliance obligations. It’s expensive, annoying, and time consuming to audit whether suppliers were telling you the truth on their security, compliance, and other obligations. Do it anyway. It’s important for your legal and regulatory obligations. It’s also important for you as you try to make the world better. Hold your suppliers accountable – make them fix what’s wrong or pick different suppliers.
Suppliers, use new technology to create opportunities. Don’t just settle for doing the same thing with fewer people or for less money.
Use automation to find new ways to employ your talent and spend more on retraining before choosing staff reductions. HfS’ latest research shows automation taking away about 1.4 million jobs. Will you just take those jobs (and people!) out of your company, or will you find new things for them to do, new places to invest, new frontiers to explore? Don’t get lazy and settle for doing the same thing faster and cheaper. Find new things to do and create more opportunities for your people and your clients’ people.
Show clients your worker conditions and how you’re making the world better for your people and the communities where they live. Clients need to know you’re following legal and ethical practices. Go beyond that to proactively showcase the programs you have in place to enhance the lives of your workers. Turn corporate social responsibility into a differentiator.
Follow compliance guidelines in practice, not just on paper. Just like buyers need to make sure they’re not just “checking boxes,” suppliers need to make sure they follow the spirit of these regulations and use them to drive business and worker improvements.
Influencers (analysts, deal advisors, self-proclaimed evangelists,) Find and expose areas where the market is hurting workers and communities, and talking about ways to fix those areas.
Educate the market on opportunities coming from new technologies and service models. Many of us in this space are automatically attracted to new things and shiny objects, so this one might not seem difficult. But as you look at these new areas, get beyond the sunshine and roses to discuss downsides and how to avoid them or to balance those negatives by positives in other areas. Explain to buyers why ethical sourcing is important for their specific engagement and for the market.
Help buyers find suppliers who can collaborate on the superhero-mindset of the market instead of road-blocking it. Clients that want to find suppliers who are legitimately invested in avoiding issues like poor worker conditions need help from advisors who feel the same way. Make worker conditions, people issues, and other similar areas a more explicit part of selection criteria and educate buyers on how to validate supplier responses to those criteria.
Guide suppliers to find ways to deliver services that treat employees fairly, serve market needs, and create growth opportunities for both suppliers and clients. Just as suppliers should find ways to expand the market as new technologies emerge, influencers should work with them to discuss how suppliers can operationalize their ideals.
With no physical danger to ourselves, we can help stop poor working conditions, human trafficking, and a host of other challenges affecting the world right now. We only need to do our existing jobs well. I want to do that. I want to be a superhero. What about you?
At HfS, we’re growing fast in a very competitive and volatile market… and with growth comes change – but change is always good if you ask me! The most fun in jobs is when you have changed – you learn new things, get new ideas and you meet new people to help accommodate the change. Nine months ago, we needed to add more firepower to our sales function. To be precise, we needed top sales quality that could thrive with the HfS mentality and culture. We found that person in Samyr Jriri (see bio), and today I wanted to give you a little more background about him.
Bram Weerts, Chief Commercial Officer, HfS: Samyr, can you share a little about your background and why you have chosen sales as your career path?
Samyr Jriri, Vice President, Global Business Development, HfS: Next to having owned a small restaurant and antique furniture business, I started out working in the Telco sector here in Belgium. That was just at the time when the monopoly held by the – at that point – state-owned Telco provider, was broken up, and I joined it’s first big competitor. After spending about five years working for the two largest Telco providers in Belgium, I joined Microsoft where I focused on the upcoming Dynamics platform and later on became a generalist, managing a portfolio of top and mid-market clients. In those days I wasn’t too familiar with the research industry yet until I moved to London and joined Gartner. There I spent seven years, mainly working with startup and midsized tech providers, as well as helping set up the account management team for their Supply Chain business in Europe post the AMR acquisition during my last year there. After that, I went to Kea Company, a consulting business in the analyst relations industry, before joining the HfS team. Sales were always in my blood I guess, I always had an interest in this multi-faceted discipline, from the perspective of an individual contributor as well as from sales leadership point of view. It’s one of those arty sciences that touches upon many principals that are applicable in daily life. I also always enjoyed the meritocratic character of a pure sales role, where I think this philosophy had a motivating effect on me.
Bram: Why did you choose to join HfS?
Samyr: Being active in the research industry for quite some years, I was already familiar with HfS before joining. I guess HfS had a high likeability factor as a new upcoming brand, but my sympathy for HfS went further than that. The As-a-Service Economy really isn’t covered by any other analyst firm in the way that HfS does it, and it profoundly resonates with where the market is going. On top of that, I liked watching this ‘new kid on the block’ who came to challenge the conventional business models of the bigger analyst firms – and successfully so! Everyone talks about change, innovation, sharing and all that good stuff, but in practice, we often see the low-risk safety approach. So for a young research firm to put out 70% of their punchy and high-quality publications for free, shows a great understanding of how information and insights should be treated these days, as well as courage to do so in today’s economy. That was all before I got to meet the team here, where I discovered the pleasure of being part of the HfS family.
Bram: What are the focus areas on driving your revenue?
Samyr: The research and advisory business are all about the relevant exchange of information and insights that fuel business decision making. What we sell is not transactional, nor is it tangible, so relationship and trust are essential. In our efforts to grow the business, we focus on matching our capabilities against our clients’ priorities, as well as ensure that the ecosystem we build up is compatible with the trends we see happening in the market. Sales are the growth engine, which fuels the investments in talent and content, which in turn fuels business growth and market influence. This principal needs careful discernment.
Bram: What trends and developments are capturing your attention today?
Samyr: I think that we are living in great times, there is great insecurity of course, but great opportunity equally balances that. It’s a cliché sentence, but it seems that the fabric of our current organizational structures is being pressured so much that we will start to see real change in how people organize themselves from the bottom up. It can be observed in the business world as well as socially and politically. The automation trend is a great example; there are many doomsday predictions of disappearing jobs and the redundancy of human labor. This only used to be true for mechanical processes, today it is almost equally applicable to cognitive processes. It’s the organizations’ actual choices that will determine whether we will experience the automation continuum as positive or negative. One thing is for sure, at some point, the entire organizational premise on which automation solutions are built will need to be revisited. This will initiate the real change.
Bram: And what would you like to see different in the research / services industries?
Samyr: We already see the beginning of an important trend that I would like to see move a little bit faster: companies should refrain from taking a directive role towards their service providers by just telling them what they want from them and move towards treating them as equal partners, which allows for more dialogue leading to better solutions. Only when this dynamic is truly in place from both sides will we see real innovation. But it takes some time to learn to let go. It remains hard to let complete control slip through your fingers in exchange for projected innovation and improvement.
Bram: And, what do you do with your spare time?
Samyr: I love cooking; I am a bit of an audiophile, and I enjoy traveling as well as hiking.
Bram: If you could change one thing in Sales what would that be?
Samyr: I think a lot of sales efforts across markets have created a dynamic that is seen as normal when it comes to negotiations. If you can get a 50% discount on a deal, you might be happy with that cut. However, I see that as a total loss of credibility. Every company is trying to create customer loyalty, meaning no matter how transactional your business is, you need to build trust. A correct pricing strategy should therefore not allow for ridiculous discounts, which in the long term only creates unnecessary confusion with the buyer, as well as often cannibalizes long time opportunity for the seller anyway.
Bram: Thank you for your time Samyr, it’s a real delight to have you onboard and work with you in these exciting times!
Last week (see post) we revealed the true impact of the emergence of Intelligent Automation on the global industry of 15 million IT services and BPO workers, revealing a net decrease of 9% and ~1.4 million jobs.
The HfS future workforce impactmodel predicts the likely impact of the most recent wave of automation on the IT Services and BPO industry. We estimate that the current total IT Service and BPO industry employs c15 million in 2015, with ~3.5 million in India, ~1 million in Philippines, ~5 million in North America and ~4 million in Europe.
The workers within the worldwide industry have been divided into 3 categories: low skilled, medium skilled and high skilled. Low skilled workers conduct simple entry level, process driven tasks that require little abstract thinking or autonomy. Medium-to-High level workers undertake more complicated tasks that require experience, complex problem solving, ability to learn on-the-job and to work autonomously. The model then applies underlying growth rates for each category linked to market growth. Each scenario has a different set of parameters that will impact each level of worker setting out likely degree of automation for each group and the probability that the job will be automated and in what time frame this is likely to happen. You can read a fuller description of our methodology for our future workforce impactmodelhere.
The low-skilled United States and Indian services workforces are most impacted
So what does this look like when we drill down to the country levels of the main global delivery locations: UK, US, India and Philippines? Let’s start with the low-skilled positions, greatest at risk from robotic process automation (RPA):
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As the graphic illustrates, India is set to lose 640,000 and the US 770,000 low-skilled positions by 2021 – these are decreases of 28% and 33% respectively. This is largely because there are a large number of non-customer facing roles at the low-skill level in these countries, when you take into account the amount of back office processing and IT support work that are likely to be automated and consolidated across a smaller number of workers. On the flip side, the Philippines is expected to be the least impacted, due to its heavy reliance on voice-based customer support and high-touch healthcare operations work undertaken – and the location’s reputation for low-cost, high-quality services. The UK has a very large customer service call center industry, in addition to IT and back office clerical processing work, which protects the impact somewhat, but we still expect the impact to be high at the low-skill end (200,000 jobs at 27% decrease), especially with uncertainly over Brexit expected to drive enterprises to source to alternative locations.
Philippines, UK and India set to benefit the most from medium/high skills job creation by 2021
The whole counter-argument to job losses caused by automation is the new work created in the future to focus on higher value work. In addition, most of the low-end skills jobs are not being created in any case, hence many workers will be challenged to migrate and evolve their skills to take on roles with higher degrees of complex problem solving, autonomy, creativity and emotional intelligence. Based on the make up of the workforces, education levels anticipated service delivery work, we expect the Philippines to make the move higher up the mid/high value skills value chain (48% growth, albeit from a low base), the UK creating 131,000 new services jobs at 16% growth, India 160,000 at 14% growth and the US lagging with 7% expected growth at 173,000 new jobs:
(Click to Enlarge)
So what impact is all this having on the overall likely scenario to these countries’ service delivery workforces?
Overall, India’s services industry set to endure the largest negative impact with a 14% decline in its workforce
With 640,000 low-skilled jobs at risk, only being offset by 160,000 mid-high skilled jobs being created, HfS’ model predicts a 14% decline for India:
(Click to Enlarge)
The US service industry is also expected to suffer a notable decline with 12% total workforce reduction, with the UK at a more modest decline of 4%. The Philippines is actually expected to increase overall by 8%.
The Bottom-line: The advantage will go to those nations investing in the next waves of opportunities, not those stubbornly resisting innovation and obsessively trying to protect legacy business models that won’t be around in another decade
The good news is that the impact of automation isn’t about to have the Armageddon impact many outlandish futurists have predicted. However, I am not going to sugar-coat the impact advances in both automation an digital technologies are having on workforces, which struggle to change with the times. Enterprises today, which need to expand their operations, are not always going to look at extra headcounts to do it – if they need more insurance clams processed, they will want to ensure they have a platform in place to scale for the extra work (whether inhouse of with their service partner). If they have greater IT infrastructure management needs, they will look to better cloud-based orchestration tools to manage them. Simply put, the services industry grew up through more enterprises out-tasking work that was largely conducted by people. Now, the onus is shifting to using only people for tasks that require human skills that cannot be replicated in a piece of software – and this trend is snowballing as more tools for RPA and autonomics management are being widely adopted by enterprises and service providers alike.
The service providers cannot mess around here – their very competitiveness is at stake and they have to adopt Intelligent Automation aggressively if they want to remain viable and competitive with ambitious clients. This is creating a serious, significant issue for governments of countries with a heavy reliance on its workers providing outsourcing services for Western enterprises. India has enjoyed hyper-growth in its services industry for over two decades now, and this is the first time a decline is now setting in, in terms of worker numbers. Its leading service providers will maintain high margins for several years to come, but their growth through linear employee scale addition is on the slide. Half a million workers to be re-employed elsewhere is a large number, not the mention where the armies of “freshers” leaving the colleges are going to go. And let’s not forget the low-skilled employees not willing/capable of learning new skills and new ways of working. Meanwhile, the focus on affordable, multi-lingual customer work has been a masterstroke for the Philippines government, while the UK similarly benefits from a robust call center economy – industries core to their strengths in numbers.
In short, India needs to focus on new avenues for services job creation where it has strength in numbers and strength in potential. Engineering services in a bright spot, and so is analytics, with their being such a proficiency for data and technology from its services talent. Moreover, India has a very strong competency for process and, believe it or not, automation capability. So why not become a leader in helping clients access better data from better automated processes? Yes, the next five years will be the painful ones for India as we go through this transition from people to technology-plus-people services, but the five after that could well be a different story as enterprise crave more human-centric skills at scale that can’t be fed into a software object recording or SaaS platform. These are challenging times ahead, but where there is change these is always opportunity – and the advantage will go to those nations investing in the next waves of opportunities, not those stubbornly resisting innovation and obsessively trying to protect legacy business models that won’t be around in another decade…
Any organization can quickly come up with a list of the top 50 partners with which they would love to work… identifying these opportunities really isn’t hard.
The real trick is to identify what you can offer and align these incentives with a company that fills one of your needs. Look for companies that might be able to bring in valuable customers and give you added credibility. The key is finding a partner with a similar vision who wants to find mutual value, “beyond the press release.” Chances are you are going to be working closely with these companies for extended periods of time, so it’s in everyone’s best interest to make sure the spirit, vision, and culture are all aligned.
Why are the strategic objectives so often forgotten in the hurry to get a deal done?
The stakes are always high: capital is always scarce, management always under pressure, and high-quality talent is in short supply. Challenging economic conditions so often compel those involved to ‘close the deal’ as quickly as they can. Whatever people say, the experience of partnerships is nearly always mixed; how often do partnerships take longer to negotiate and become harder to implement, than expected? We all know how people operate when they rush these things – they may look great on paper, but rarely deliver in practice.
Let’s face it; it’s time for a rethink and a fresh perspective on the structuring of strategic partnerships.
So here are ten questions to make your strategic partnership successful:
1. How does the partnership fit into the bigger strategic picture? The partnership may be significant in itself but should be seen in the context of other partnerships and other strategic activities. Are there under-exploited synergies or conflicting objectives?
2. Is everyone onboard? Cultural fit is often as important as financial fit and is often overlooked. Be sensitive to cultural differences – whether between organizations, industries or countries. The “softer issues” are often the most difficult to tackle, but the most lucrative when you get them right.
3. Are you afraid to iron out your differences? Identify the potential clashes between individuals, and any conflicting goals and ideas between you and your partner. Don’t just stay in the comfort zone; you need to deal with conflict upfront and find your common goals and outcomes.
4. How well do you really know your future partner? Anticipate and evaluate your partner’s value proposition – get inside their head. It will help avoid surprises and enable a solution that works for both parties.
5. How well have you defined and monitored KPIs for the partnership? It’s important that both parties agree on both “what” to measure but also “how” to measure it. Otherwise, you’ll struggle to call your partnership a success, or identify how to improve it.
6. How much ongoing evaluation and analysis are you doing? Continuous analysis and assessment or your partnership make you both more confident, agile and sensitive to differences in culture and approach, in addition to avoiding misunderstandings.
7. How positive and constructive are you in your negotiations? Framing the proposition in a positive, constructive manner makes a huge difference – ‘take-it-or-leave-it’ deals may appeal, but risk alienation and relationship breakdowns.
8. Are you prepared for disagreements? Establish review and dispute steps in the negotiation and implementation process early on – it avoids the potential for litigation and opens up new possibilities for challenge and improvement.
9. How many unanswered questions remain? Always raise questions or issues that have come from the analysis and preparation you have conducted – the path untrodden may have been paved with gold, or at least been an easier journey for all parties.
10. How much sponsorship with all stakeholders do you currently have? Communicating benefits along the way helps to keep up momentum and increase support with the parent companies – it also keeps spirits up when times get tough (which they will, at some point!).
Bottom-line: Creating a strategic partnership is wisdom and art combined. Like all areas of business, perception is still essential. It’s important to choose brands with an excellent reputation, but you also want to work with companies that will make good partners. When assessing a potential partner, look at which brands or individuals they’ve worked with in the past. Reach out to those brands or individuals and ask them how the partnership worked out. And don’t hesitate to reach out to those outside of your industry for a fresh perspective. It is ideal to cooperate with an organization that stays true to your key messages, goals, and demographics. Most of all, enjoy the ride. This “mini-MBA” will enrich your career forever!
We are all sick and tired of this conversation by now, so I’ll make this short and sweet (hmmm…. Maybe not so sweet). So now that the dust has settled what can we expect the impact of Brexit to have on the U.K. jobs market?
I’m going to steer intentionally away from the hyperbole here, as we’ve all heard way too much of that, and just focus on the raw facts. As someone with an Economics and stats background I like facts… (less sniggers in the back row please).
Let’s examine the bare facts behind this impending skills crisis:
UK job vacancies have increased 42% since 2013. Well, in the HRO world, we often speak about the mythical skills shortage. But what is the real situation in the U.K.? The revival of the economy, since the dark days of 2008, has created an obvious uplift in job vacancies. The UKCES Employer Skills Survey 2015 states that in 2015 there were 900,000 job vacancies in the U.K. (up from 600,000 in 2013), this 2015 figure represents 3.3% of total employment in the U.K. and indicates a considerable 42% increase compared to the number of vacancies reported in 2013. In addition, the percentage of organizations with vacancies has increased from 15% in 2013 to 19% in 2015.
Low growth in EU migrant workers moving to the UK. In the most recent ONS survey (U.K Labour Market: June 2016) we can see that at present we have 2.15 million EU nationals working in the U.K., this has grown from less than 500,000 in 2000 (year on year CAGR of 10%).
So from these figures it is plain to see that, yes there is a skills shortage and even with EU nationals “flooding” our borders and accounting for around 7.8% of the U. K’s workforce, there is still an increasing number of vacancies struggling to be filled.
So yes, right now the data would indicate that the U.K. is in desperate need for more talent and if that talent comes over from the EU, great.
In the short-to-medium term, the outlook for the UK skills market is bleak
Firstly, potential candidates from the EU looking to enter the U.K. will be discouraged by the uncertainty of free passage and working rights in the U.K, coupled with the lower real earnings in their home currency, due to reductions in the GBP/Euro exchange rate. Given the stated skills deficiency and the significant role EU migrants play, in the U.K. job markets, this is a less than ideal scenario.
In the long term, interest rates cuts, due to currency devaluation, should more than mitigate the potential fallout from Brexit and stimulate the U.K. economy. Now I know I’m getting dangerously close to the “what if” and deviating from the “hard facts”, but the empirical evidence of interest rate reduction effect on the U.K economy has been born out post the 2008 recession. This stimulus should further exacerbate the skills shortage already in place.
The Bottom-line: The immediate impacts of Brexit on the UK talent gap are all negative, however, with change often comes new opportunity
So where does this leave the U.K? Well, as can be seen from the evidence, the EU was contributing a significant amount of talent to the U.K. market, but even with this inflow it has still been insufficient to fill demand. Stifling EU talent inflow is only going to exacerbate the issue thereby leading to drastic measures whereby the government might be forced to falsely boost the U.K. job market through fiscal incentive. This represents a situation that no one, least of all, U.K. tax payers would appreciate.
Right now it would seem that to fill this skills gap the U.K. has to look further afield than the EU. Given the freedom Brexit would give the U.K. there could now be the opportunity for freer movement agreements with other English speaking nations including the U.S, Australia, Singapore, South Africa and India. Positively, within all these nations there is a substantial mix of both low, medium and high end talent available, the challenge lies in selling this to the U.K. public who have largely voted to leave the EU due to immigration concerns.
The rapid onset of Digital business models is having a number of implications for developing a service provider – client contract, including:
Lack of defined outcomes: Engagements are starting to have a more open ended nature: the end result is not clearly defined nor are the steps needed to get there. Experimentation and agility are key characteristics of many new engagements.;
Challenges of embracing new tech: Accelerating change driven by more and more emerging technologies that affect the operating environment of enterprises and service providers;
Setting future milestones: Plotting a detailed course of action (and relevant KPIs!) over multiple years has become virtually impossible: one simply cannot know what one needs in 2 years’ time, let alone look 5 years’ ahead
I see service providers and buyers struggle to deal with this new reality.
Existing commercial models and contracting practices are no longer viable to capture the outcome of the engagement, let alone the spirit of collaboration, co-innovation and partnership.
The old way of contracting is not sustainable and leads to sub-optimal results in a Digital, As-a-Service world. What should the sales process, the contract, governance, contract duration and responsibilities then look like?
The big issue here is trust. In a situation that calls for innovation and new ways of working, there is a double trust dilemma. It’s the classic “agency problem” times two: neither party has an information advantage in the relationship and aligning interests is very difficult in situations with a lot of moving parts and uncertainty about goals and how to get there. Trust requires mutual understanding of people’s and companies’ interests and culture. A huge part of trust is predictable behavior, knowing what to expect from the other. Understanding each other and customers’ customer is critical in creating mutually beneficial relationships.
In typical (legacy) engagements today, many parties have failed to contract in a way that cements trust.
Thick documents, dozens if not hundreds, of KPI’s to measure performance, and other metrics, which all create a (false) sense of certainty. This hasn’t been terribly effective, as business environments change and KPIs often don’t as they are part of the contract, and it is even less satisfying from a perspective of really solving business problems. Business cases are often based on a best estimate or just plain guesswork as the glass ball gets more foggy as tech driven change accelerates. Enter even more uncertainty, velocity and tech driven change and it becomes almost undoable to define the goals and terms of contracts.
So what is the way forward for contracting in an age of uncertainty and novelty?
HfS is going on an ambitious journey to answer the key questions:
What ways are there to tackle the double trust dilemma?
How to deal with the open-ended engagements?
With more risk involved, is there a tendency to share risks? If so, how does that work out, what works, what doesn’t
What ways of contracting are actually enabling innovation rather than hindering innovation, new ways of working, collaboration and co-investing?
One solution we are exploring is that of an “Uncertainty premium” for the service provider taking on more risk in new commercial constructs. This uncertainty premium could be in the form of an “Innovation bonus” which entails achieving innovation and/or cost savings (with the savings earmarked for innovation). This approach could then drive budget for additional innovative work, benefitting both parties. One increasingly popular measure is the introduction of Robotic Process Automation into an engagement – one oil and gas firm stipulated that if the service provider can hit a 20% saving, that 20% will be added to a budget earmarked for innovation projects. Another I’ve heard is along the same lines but with the savings being earmarked for more industry talent / SME’s to be paid for by the client, and so introducing more quality and higher value work into the engagement.
We have launched our research initiative recently with selected buyers and providers. We will report back to the industry in twofold: a report and a session at the HfS Buyers Convention in New York September 14-16 2016.
Imagine if you have a clone which can do less interesting work for you, such as attending events, dialing conference calls, sitting in meetings, visiting doctors, meeting social obligations, etc. and can be present at different places while you are doing real work (for me, that’s reading a book or writing research in my study), how much productive you can be. Well, we don’t know whether we will have such human clones in our lifetime, but in engineering industry, digital clones are definitely beginning to appear.
Call it the digital clone, digital twin or digital thread, it is now possible to represent industrial products digitally – opening the door for amazing possibilities. It starts even before products are manufactured where all the data from design, analysis and manufacturing can be digitized and connected by a digital thread. This can lead to the construction of the digital clone or the digital twin of each manufactured product.
As Game of Thrones is driving the entertainment industry, the Game of Digital Clones will drive engineering services industry.
Take an example of industrial machinery operating in a manufacturing plant. Now a number of sensors can be placed on each machinery and its output can be simulated back to the digital clone. These sensors can track all machinery parameters such as vibration, temperature, humidity, etc. The exact behavior of the product can be simulated on the digital clone in the real time. Each industrial product is made of thousands of systems, subsystems, parts, and subparts. Imagine the ability to simulate behavior, not only at the product level, but at the system, subsystem part and even subpart level. What kind of insights and possibilities it can generate? And all this without stopping the products from working or tearing them down. All product information can be available, anywhere and anytime.
This will tell us when the product will need maintenance, when it can break, how it can react in changed circumstances, how it will be serviced, etc. All this intelligence can go back in designing better parts, better systems and subsystems and ultimately better products. Also, each OEMs have hundreds of tier 1 and tier 2 service providers and sharing this digital information with them can develop better products.
Initially, these digital clones use cases are largely for the optimization of existing products. However, this will be even more helpful in the innovation and design of new products. The digitalization of the whole process of design, testing and operation of new products, using digital clones, will significantly reduce the time from design to manufacture of new products. It can lead to challenge of some of assumptions we make while designing the products. Some of the engineering theories and best practices, which have stood the test of time for the lack of better data and experiments, can be significantly augmented with a digital clone model – this is about enhancing capabilities, not constraining them. And combine the digital twin with robotics, 3D printing, composites these are interesting possibilities awaiting us to say the least.
And digital clones don’t need to be confined to industrial machinery – cars, locomotives, planes, medical devices, turbines, pipelines, etc – any manufactured item can be digital cloned and improved. In fact, digital clones will move beyond products and vehicles to houses, buildings, factories – in the construction industry, they being applied in the form of BIM (Building Information Modelling). Governments are mandating construction of BIM, which will have details of all construction, plumbing, electricity etc at the granular level. Digital clones can be applied to whole towns or cities. We can go as far as privacy debate permits, but the possibilities are endless.
Manufacturing companies cannot play this Game of Clones themselves as their expertise is in manufacturing physical products, not developing software tools – they will need support in developing digital clones and exploring all possibilities it can bring with it, otherwise, they will be at a significant competitive disadvantage. Digital clones represent a golden opportunity for all consulting firms, IT service providers, engineering service providers and even BPO service providers. Like Game of Thrones, in Game of Clones, manufacturing companies will need all the help they can!
I think this is the most disruptive trend which is hitting manufacturing industry and this the backbone of Industry 4.0, the fourth industrial revolution. The combination of cheap sensors, storage, computing, analytics, and connectivity is enabling digital clones and Industry 4.0 now.
Considering its importance, our next two engineering services Blueprints will focus on uncovering this trend. This digital thread is driving adoption of PLM services and we will cover it in our recently launched HfS PLM Services Blueprint Study. In our next HfS Manufacturing As-a-Service study we will explore the digital clone and Industry 4.0 development in much greater details. If you are interested in participating these studies, please drop a line to [email protected]
On the closing note, engineering services providers which will not be ready to play Game of Clones will have to prepare for a long winter!
Earlier this year, HfS Research and Accenture surveyed over 200 cybersecurity professionals around the globe to better understand how enterprises are securing their digital assets and dealing with increasingly sophisticated, and all too frequent, cyber attacks.
I recently had the opportunity to sit down with Bill Phelps, Managing Director, Accenture Security, to discuss our report. Bill was one of my co-collaborators in this research effort, and I was curious to get his take on both the survey and its implications for the cybersecurity sector moving forward.
Fred McClimans, Research Vice President, Digital Trust and Cybersecurity, HfS: So Bill, we spent several months surveying security professionals on a global scale—different verticals, different geographies, different size organizations—to really uncover what the state of cybersecurity and digital trust are today. What were your expectations when we first started and what surprised you coming out of the report?
Bill Phelps, Managing Director, Accenture Security: Fred, I was really excited about doing this report together because we were taking a new perspective looking at security through the lens of digital trust, not purely as a technical or an operational issue, and I think a lot of the findings reflect that. I think honestly one of the most amazing things was that our respondents said over a third of their management doesn’t see the value in the money they spend on security, and they are disengaged. So in spite of security being a front-page headline item almost every day of the week, we still have leadership in organizations that don’t make it a priority.
Fred: That was a bit of a surprise to me as well. I would have expected closer alignment between security operations and the executive management in these organizations.
Bill: The best CISOs I know spent the majority of their time with their business counterparts, and that typically creates a good alignment. But there are still a lot of what I think of as old school CISOs—very technical, very capable individuals who often came up through a technical track. They haven’t learned to engage with their business counterparts, and so the business counterparts don’t necessarily appreciate the value of the security organization and how it can team with them.
Fred: One of the elements that might be fueling closer alignment between CISOs and their business counterparts is the shift away from cybersecurity as a way to protect assets and more towards a way to develop assets that can be leveraged to create a greater feeling of digital trust for the enterprise and its consumers.
Bill: I think that’s absolutely right. I think that people have viewed security as a very tactical discipline. We know we have to authenticate users and prevent data breaches. When we are talking right now to CISOs, especially for global organizations, privacy and trust are coming up more in the agenda and it’s becoming more and more about the brand and about how organizations convey to their customers how seriously they take privacy and trust around the digital identity.
Fred: One of the things that came out of the report that was a bit surprising to me was the number of organizations that acknowledged they have had insider data theft over the prior 12 months, and in fact they expect that to increase for the next 12 to 18 months.
Bill: The reality is that the easiest person to steal information inadvertently or intentionally is an insider. They have the credentials. Perhaps more importantly they understand the value of the information. They have access to it. And I do believe that we are going to continue to see more of that until organizations not only have the right controls in place but have the right value system in place and can convey to their leaders and to their employees the importance and sensitivity of the information to the customers.
Fred: One of the things that was encouraging in the report was that while firewalls and encryption technologies are still core to cybersecurity, moving forward a lot of the CISOs said they see a lot more reliance on things like automation, analytics, and cognitive shifting into AI moving forward.
Bill: I think there are two things going on. One is better analytics around user behavior, around where information is flowing so that we can quickly spot anomalies and patterns. The second thing is what I call a rebirth or resurgence of the importance of identity management. And organizations are realizing that so many of the breaches are the result of a misuse of an identity.
In some cases it’s by a malicious insider and in other cases it’s by an insider who has been tricked. Sometimes it’s a stolen identity¾an identity that’s been acquired maliciously and is being used All of those can be addressed through better analytics but fundamentally they also need to be addressed through better management of those identities and we are seeing a huge uptick in interest in that.
Fred: From an identity management perspective there is also the possibility of blending behavior analytics with digital and physical security analytics. This combination has the potential to expose something that’s out of the norm from typical behavior, such as the right person, in the wrong location with the wrong credentials or at the wrong time of the day.
Bill: An interesting finding in the report was the immaturity of organization governance reporting lines¾who the CISO is working with. One of the places this manifests itself is the link between physical security and information security, or logical security. Many organizations have completely different cultures, reporting lines, accountability, budgets. If we bring them together we can answer these questions around why is somebody accessing the financial system in New York at 1:00 AM? Shouldn’t it raise a question? We can’t understand this simply through the information security systems, but as soon as we overlay the physical items it’s an obvious question.
Fred: Now you mentioned reporting structures. One of the surprises to me was that across the board there was a dissatisfaction with who cybersecurity professionals were reporting to.
Bill: First, I think it’s an indication of the immaturity of this area. We don’t know what the right answers are in many ways in information security. We are working through it and we know that some things don’t work. But in terms of reporting lines, I can say that roughly half of CISOs report to a CIO. Sometimes that’s a very good and positive relationship and sometimes it’s not. One of the reasons it’s not always a positive relationship is that the CISO and CIO have conflicting motivations. The CISO’s job is to protect the organization first and foremost while a CIO’s job is to deliver business functionality and business outcomes. If the CIO is under a great deal of budgetary pressure and time pressure and the CISO is saying you need to slow down and spend more money on the security of the code that is being delivered and the security of the architecture, you have a conflict. Sometimes that’s been rationalized, at other times it hasn’t, and I could give you similar examples with CISOs reporting to CEOs, CISOs reporting to COOs, CISOs reporting to CROs.
I also think that the autonomy of the CISO is critical as is their access to the senior level executives across the organization; but we don’t have a one size fits all in the organizational alignment yet.
Fred: In the report, we identified five gaps that are having a significant impact on the ability of CISOs to execute on their role within an organization. I’d like to walk through those gaps. The first gap is the talent gap – the requirement on the part of CISOs to fully staff the organization with the right number of bodies but also the right skill set, against the available talent pool in the market.
Bill: Of the five gaps, I would put talent as the second in importance. It’s clear from the findings of this research and from all of my discussions in the industry that we need talented security professionals, almost nothing else matters. Without them, we can’t configure the tools properly or communicate effectively to the business. And these are people that in many cases it takes time to develop. It’s not putting them through a brief certification program. It’s education plus on the job training and apprenticeship with professionals. We are not satisfying the demand for talent quickly enough and it’s one of the top things that comes up in every single discussion around security with my business clients.
Fred: One of the ways that some organizations are starting to address the talent gap is through automation; looking to lighten that level one burden for the individual and let them bump up to a level two in capability is a good step but it may also have a negative impact because the entry level position into the cybersecurity talent pool is now level two, not level one.
Bill: I think that’s true. Robotic Process Automation is a huge buzzword in IT right now and really valuable for automating tasks that are easier to teach people to do. But the toughest jobs to fill in security are those of seasoned individuals who know how to spot telltale behaviors, who know how to respond to the problem or the issue they haven’t seen before. So you need those people to train human labor, you need those people to train the robotics and the analytic system. So while there is a benefit to process automation, I’m not sure how much it’s going to help create the very talented senior level security professionals and as you pointed out it may even be a hindrance.
Fred: The second gap that we identified was around technology. One of the challenges we saw was just keeping pace with the technology that’s available out there.
Bill: The threat actors have very good talent and are not necessarily using expensive commercial software. Instead they use technology that is available via open source or on the dark net and they know it extremely well. The technology that’s being used to defend the organization many times comes off the shelf, is highly sophisticated and capable, but we don’t have the people who understand how to use it well. It is evolving very rapidly as the newest brightest shiniest object is funded by the venture capitalists or comes out as a feature from a large vendor.
I think what the research says, and what I have found is that you need to really make it simple. The problem in technology is that what we have we are not using well, not that we don’t have the latest technology.
Fred: Cybersecurity is an asymmetric battle today.
Bill: It is totally an asymmetric battle and there is no end in sight. I’d love to sit here and tell you that two to three years from now the defenders are going to catch up, but there are so many vulnerabilities in the environment. The attackers have a real advantage in their collaboration, in their understanding of the technology.
Fred: The third gap that we uncovered was what we are calling the parity gap – the differences between different capabilities that exist within an extended enterprise. To give an example of that we asked respondents to rank how secure they thought various business elements were. The sales organization: not that secure. IT: very secure. Customer support? Kind of in between.
Bill: This is one of the top challenges I see. We sit down with a CISO or a Chief Risk Officer and they explain how much they have invested in security in IT or in security education. And then I ask them if they know all the organizations in their supply chain, or if they recently acquired a company – have they assessed the security if the acquired organization. It completely comes down to this weakest link problem, and with computers and automation it’s not hard to find that weak link.
We think about so called security by obscurity, but when the adversaries are running scanners against the environment, they can quickly go through every single IP address. The idea that you can protect only a part of the organization really well is completely inadequate. So many of the major breaches we have seen have been the result of exactly that, compromising some obscure part of the ecosystem and using it as an entry point into the broader enterprise. It’s a huge problem.
Fred: When we asked CISOs what were the top inhibitors to complete enterprise cybersecurity and digital trust, one of the top inhibitors was lack of budget for either technology, or more importantly, for staffing and training.
Bill: My bias in this is that the security professionals are not doing an adequate job of educating the business. I have heard business executives, board members, and others all say a variation of “We are willing to spend the money. We have the money. But we need to understand where the money is being spent and the value that is being created”. I am not saying this is easy, but the security organizations are struggling to answer those questions. There is a cynicism that the money is not actually improving the problem.
Fred: That leads nicely into the fifth and final gap – the management gap. When we asked CISOs how they viewed the management’s position on cybersecurity, we saw a third of the respondents indicate they believed management views cybersecurity as an unnecessary cost.
Bill: We are still seeing cybersecurity in too many organizations as a discrete function, not as a value system and a part of the brand that is broadly embedded in the organization. I’ll use an example from the energy industry, which has embedded employee safety as a fundamental value. If you go to most of the oil exploration production companies, the first thing they will talk about or do is a safety minute. You have to sign something that says you understand their safety policy. We are so far from that in cybersecurity. In so many organizations, if you say “What are you doing Mr. Vice President of Sales for security?” You get a blank stare and they say, “Well, that’s the job of the CISO”.
We have a long way to go. In the most successful organizations, the CISO has become a peer of the business executives both in substance and in style. They spend a great deal of their time with the business. There is top down support for making security part of the culture, part of the brand and that’s where we are going.
You never want security to be an inhibitor. Security maturity and state-of-the-art starts with the alignment of the security function to the business. It starts with how security is perceived as enabling the business, enabling trust amongst the customers, the suppliers and the others within the organization. It’s asking “do we have enough of the sufficiently talented security people in our organization and are they respected by the business?” Then of course it comes down to specific capabilities in technology and things like that, but those are almost an outcome, not a starting point when I think about what the state-of-the-art looks like.
Fred: From Accenture’s perspective, how has this report affirmed your position on digital trust or shaped the way you view digital trust in cybersecurity moving forward?
Bill: I think it was tremendously validating for some of the direction that we were already taking, and I think in some ways may accelerate that. We are moving away from thinking about security as a technical issue to talking about it as a brand attribute, as something that is communicated to customers, and that’s a business value. So what does that mean in our business? It means we are selling to business executives. It means we are engaging with the broad business leadership in security. It means we are talking about digital trust not just about security. It means we are asking, “what do you want your customers to think about you in terms of whether or not they trust you, whether or not they are confident in your protection of their private sensitive information, whether it’s medical records or financial information or whatever?”
Fred: I think if your cybersecurity approach doesn’t reinforce the brand promise and your ability to deliver on that, you’re probably wasting your time.
Bill: You certainly are thinking it’s not valuable and that it’s a cost, not an investment. As soon as you start thinking about it as a brand attribute it becomes an investment.
Fred: Bill, I can’t thank you enough, and I look forward to following up again a few months down the road. We’ll see how this is playing out.
Bill: That’s great Fred. Thank you very much! I think this is some very exciting research.
I have been researching the notion of Intelligent Automation and, in particular, the rapid uptake of Robotic Process Automation (RPA) for more than 4 years. It was this work that eventually brought me to HfS. Over the years, I have made many good friends and acquantances in the automation community – and many of those good folks have graciously suggested I have become a spokesperson for this community. Yet, it is time to take a stance and declare: RPA is dead!
This is not meant to try to grandstand my esteemed colleague Phil, who’s eloquently stated that RPA 1.0 is a done discussion. Phil suggested: “We know what it is, we know what it can do, we know how it can augment operations and help digitize broken processes.” I rarely disagree with Phil, but I would argue that that broader market, outside of specialized services, technology and process areas, has no clue as to what RPA really is. We have no common reference points, we have no definitions, we have no clarity as to how successful deployments really are. What we have, is a set of reference technologies and respective case studies that demonstrate potentially significant efficiency gains, if implemented effectively. What we have is a set of innovative technology providers who use the term “RPA” to get a seat at the table to transform service delivery. However, to quote Lee Coulter, who chairs our Sourcing Executive Council, “In the context of automation we have a Tower of Bable; we have many languages, but we don’t really understand each other”.
RPA has dominated the conversation with industry novices and this needs to advance to the broader automation outlook
Yet, it is about much more than just semantic nuances. RPA currently is largely about the automation of tasks that can be implemted from the bottom up, then land and expand within enterprises. RPA is about rules-based processes. RPA is being delivered for specific accounts, often at sub-process levels, but does not sit at the heart of a delivery backbone. Nevertheless, RPA, for the wrong reasons, or just the lack of reference points, is the focal point for all the innovation that we at HfS tend to subsume under the notion of Intelligent Automation. However, if we move beyond the confines of the BPO and operations world, we see automation deployments at much larger scale – and beyond clearly defined processes. The current market development and opportunity in IT-centric automation scenarios in a lot more advanced, has more breadth and scale than business process centric scenarios, yet, in the discourse on Intelligent Automation these tend to get marginalized. It is in those IT-centric scenarios where the impact of Cognitive Computing and Artificial Intelligence is most pronounced. Yet, as an industry, we appear to be stuck in the “RPA” mindset, largely due to the heavy influx of marketing investments from the emerging RPA software suppliers which is influencing sourcing advisors and analysts new to the automation discussion.
Examples for a broader, more holistic approach to Intelligent Automation is Accenture’s artificial intelligence engine that provides an architecture abstraction layer for interacting with various autonomics services such as natural language processing and machine learning. Thus, underlying components can be swapped out according to client preferences or as new solutions become available, leveraging a broad autonomics ecosystem. Suffice it to say, not many providers have merged IT and operations like Accenture has done. But we also see a convergence of IT and business process centric scenarios starting to happen on a tool level. IPsoft and Arago trying to get traction in operations while the prominent RPA tool providers invest in analytical and cognitive capabilities. Thus, we are seeing virtual agents to gain traction of virtual agents in in operations and RPA tools in IT helpdesk use cases. These activities have to be reflected in the discussions on Intelligent Automation – not in isolated use cased but as part of a holistic strategy to scale out automation initives.
Therefore, as an industry, we really have to change the perspective. The focus should be on top down, the point of view of process owners and on taking a much more holistic point of view. That is what we had in mind when we launched the HfS Intelligent Automation Continuum back in 2015. All the approaches on the Continuum are both interdependent as well as over-lapping. Put in simple terms, life is complex. There is no such thing as a silver bullet or a turn-key solution. Intelligent Automation is about transformation. We have to wean ourselves off the drug that is task automation. Off course, it is prudent to automate low-hanging fruit. Though how do we optimize the processes after the effect of that drug starts to subside. Thus, we shouldn’t lose sight of the direction of travel. We at HfS call it the journey toward the As-a-Service Economy. Crucially, Intelligent Automation is just one building block among others along this journey.
Away from the headlines and away from the confines of business processes, we see some indications for market maturity as providers like Atos, TechMahindra and Hexaware start to standardize delivery on ServiceNow, linking it up with service orchestration engines that allow the plethora of Intelligent Automation tools to be plugged in. Put in simple terms, we see a much more holistic approach to Intelligent Automation. The crucial question is how do we cross fertilize all these approaches across the boundaries of trational and established business units? Flipping this to the client side, how are service provider supporting their clients with Intelligent Automation on their journey into the As-a-Service Economy? This is not about RPA alone anymore, but the broad notion of Intelligent Automation in all its complexity. To assess how far the industry has matured on this journey, HfS has just launched the RFI for the Intelligent Automation Blueprint to take stock where the industry really is at.
The Bottom-line: All the stakeholders in technology and operations need a much more effective education on the impact and potential of Intelligent Automation. Confining the discussion to “RPA only” is doing everyone a disservice
What I hope to hear in our discussions on that Blueprint is around broader notions of service orchestration, about integrating broad data sets, about moving beyond clearly structured processes. My gut tells me much of the future of Intelligent Automation will be about deep and unsupervised learning, about vertically-infused insights, about technologies for which we don’t even yet have monikers. To advance all those discussions, we urgently need a much more effective and actionable education of all the stakeholders. So once again I declare:”RPA is dead – long live Intelligent Automation.” But I want you to challenge me in that, be it to convince me that RPA is the best thing since sliced bread, deconstruct my arguments, unmask my assumptions. But most importantly I love hear about new approaches and new ideas.
