It’s high time we brought the HfS show back to our hometown of Cambridge MA this December, where we’ll give everyone a big reality slap around the face with a wet kipper:
Yes, people, it’s time to dial back the rhetoric, stop talking about fantastical things that will probably never happen, and get to the heart of the matter: how can we actually define and realize business outcomes from outsourcing?
This will be a service buyer event, where we have 45 exclusive enterprise buyer seats reserved for the chosen few, and we will wheel in some unsuspecting service provider leaders for our famous face/off debate, where we are going to challenge them on why they aren’t self-cannibalizing, why they all insist on using the same lingo we can barely comprehend, and how they plan to be different from each other when the fog lifts.
We’ll be holding the HfS Working Summit in Harvard Square just down the road from our headquarters. So mark your calendars now:
Defining and Realizing Business Outcomes
HfS Working Summit for Service Buyers
December 1-2 2015, Harvard Square, Cambridge, MA
More details–including the agenda, accommodations, how to apply for registration and sponsors–to follow very soon.
Bookmark our event site to stay up to date! Drop us a note to apply for a seat (Service Buyers Only)
We hope you can make it to Harvard Square this December. It will be a great way to end the year and get ready for 2016. And, of course, we’ll have a little fun, great food and booze while we’re at it.
This will be an invitation only event, but we do encourage you to drop us a note if you are interested in applying for a seat. It’ll be great to have you there to celebrate the year we’ve had and get stuck into some unvarnished debate!
The beauty of procurement is that is was never really geared up for cheap and cheerful labor-arbitrage based BPO. In short, most procurement functions have been cut to the bone in most organizations, and many still rely on fax machines, photocopiers and copious filing cabinets of yellowing contracts to get the job done.
Shipping this stuff off to far flung offshore destinations for a few FTE savings has rarely proved to work very well. However, creating a capability where clients can plug in to a whole new experience of procurement capabilities, category expertise, spend management analytics and gain-share opportunities As-a-Service is now happening for many ambitious buyers and service providers.
The procurement outsourcing market has evolved significantly since 2013 since HfS launched its first Blueprint, covering 14 service providers, to this new report that covers 18, co-authored by analysts Charles Sutherland and Hema Santosh. This new report is looking very closely at the evolution of procurement services from its legacy outsourcing roots in lift and shift mega-deals, coupled with strategic sourcing consulting, to the increasingly available As-a-Service solution models offered today.
The latest HfS Procurement-as-a-Service Blueprint captures the transition of service providers into the As-a-Service Economy:
Click to Enlarge
What has changed since 2013 in procurement outsourcing services?
If we look at where we are today, or starters, we’re living in a post Procurian world, as its acquisition by Accenture in late 2013 shifted the competitive landscape. Both were in our 2013 Winner’s Circle and when combined they created a market leader by share and by innovation. When we first commented on the acquisition we expected several more would quickly follow especially for Genpact and Capgemini who needed to replace the partnerships they had been developing with Procurian. It turns out that rather than buy at least for now, those service providers who had gaps in capabilities or technologies turned to partnerships instead.
Indeed, partnerships between service providers born out of the transactional procurement market (e.g. TCS, Genpact, WNS) and those out of the technology (e.g. GEP) or strategic sourcing (e.g. Proxima, AT Kearney) are more prevalent in 2015 than they were back in 2013 as service providers construct end-to-end offerings to better compete with Accenture and IBM in particular.
But acquisitions didn’t end with Procurian. Xchanging has followed suite with two more that have revitalized their presence in North America and brought them a new proprietary technology base. While Infosys has accelerated the value of the 2011 acquisition of The Portland Group by utilizing their procurement consulting skills
Internal investments have also mattered over the last several years with service providers increasing their development budgets significantly while also spending on adapting solutions models. In fact over the last two years we have seen previous solution models of end-to-end procurement lift and shift and sourcing consultancy become impacted by the arrival of more modular technology supported service delivery models. While still not the broad norm, this “As-a-Service” approach is setting roots in many service providers and we expect this to increasingly be the norm in the years to come.
So in many ways the last several years have been less revolutionary than they have been evolutionary with a slow and steady acceleration for all end-to-end service providers in the breadth of their offerings and only modest movement in their Blueprint positioning as a result. It should be noted though that the specialist service providers have markedly picked p their game in the last few years and now have a much more prominent place in our evaluation than before.
What matters today in procurement outsourcing
We are seeing slowing growth. Procurement outsourcing while still much smaller than F&A or HR is becoming a substantial multi-billion market and with that we have seen a slowdown in overall market growth from 10%+ a few years ago to something more in the 6% range and so the competition for new clients and renewing deals is greater than ever.
The nature of transactional procurement is changing. Transactional Procurement for the last decade has often looked like a “lift and shift” model supplemented by post transition process excellence projects by service providers. In the last 18 months, we have seen a rapid evaluation of the potential first for robotic process automation and of late cognitive computing as well to this process in order to move away from the labor arbitrage heavy model of the past and to improve overall delivery speed and quality
Sourcing and category management still in demand. Client value creation and service provider differentiation often depend on the breadth and depth of the available sourcing staff in the service provider. The battle to hire and retain sourcing expertise is significant especially as clients in both North America and Europe are looking for the on-site availability of consultants from their outsourcing service providers. Many of the strategic actions undertaken over the last several years by the service providers including acquisitions and partnerships have been made in order to address gaps in organic indirect sourcing category coverage.
Procurement technology and technology management has never been more important. Service provider technology has always played a role in procurement delivery but in the present market with the increased availability of SaaS solutions it has increased again in importance. We have increased the attention and weighting given to technology in this iteration of the Blueprint and spent even more time reviewing service provider capabilities and strategies for technology as well as what it feels like to be an enterprise client today that is increasingly reliant on technology they no longer control to deliver procurement results.
Moving to As-a-Service. We are certainly not there yet, but procurement outsourcing service providers have made extensive efforts over the last several years to further transform their offerings from “lift and shift” transactional procurement together with consulting led sourcing to more modular, integrated, technology based as-a-Service solutions.
Which service providers are taking advantage of this market?
Our 2015 Blueprint Winner’s Circle members who led in our evaluation of the criteria on Service Provider Execution and Innovation are: Accenture, Capgemini, (promotion) GEP, IBM, Infosys and Xchanging (promotion).
Our 2015 High Performers include: Denali (new entrant), DSSI (new entrant), Genpact, Optimum Procurement (new entrant) and Proxima.
So what does HfS expect will happen next as this market unravels?
HfS’ Charles Sutherland, report co-author, having a bit too much of a good time in Kraków last week
Crystal ball gazing in procurement has proven to be challenging over the last few years but let’s throw caution to the wind and make at least three bold predictions about where we will be by the next Procurement As-a-Service Blueprint.
There will be a much greater commercial adoption of As-a-Service in procurement as current trends towards modular processes and hosted software make further inroads.
There will be much more extensive adoption of robotic process automation and cognitive technologies in procurement than we have seen so far. For most service providers these are still at the PoC or limited deployment stage in procurement but we don’t see that being the case for much longer.
Some of the recent partnerships especially for sourcing and category management not lasting the test of time and leading to increased efforts to grow organic capabilities
Attracting and retaining leaders in strategic sourcing and category management will continue to be a struggle for many service providers as that is part of the solution we don’t see diminishing in value or importance anytime soon.
So that’s our take on Procurement As-a-Service in 2015. Please do share your thoughts with us as this important segment of the business process market continues thrive, and…
For you HfS subscribers, please click here to download your full copy of the report
We’re participating in two sessions at the NOA Symposium held at etc. venues, St Paul’s on Wednesday 24th June. We’re also sponsoring the pens (which will surely create an avalanche of new delegates)
Click the logo to get more details on the 2015 NOA Symposium
I’ll be part of a panel with a motley assortment of legacy analysts from Gartner, Everest and NelsonHall as part of “The Outsourcing Debate”, moderated by the Professor of Process himself, Leslie Willcocks. This meeting will surely produce some fireworks as we vehemently debate the most overhyped and underhyped ITO and BPO trends in the UK.
Then, I’ll be chairing a workshop session on “Transitioning to the As-a-Service-Economy.” This is a subject sure to be close to the hearts of many of our readers and we’ve lined up a couple of HfS community friends to co-host with me, John Ashworth, VP Finance Transformation and Systems at Pearson, and Steve Turpie, Deputy Chairman of West Suffolk NHS Trust.
NOA Symposium… all the outsourcing royalty will be there
We’ll weigh the importance of the ideals of the As-a-Service industry vision, discuss how to get the right mix of technology and talent, and evaluate how the painful shift to As-a-Service is/will impact traditional buyer/supplier relationships.
The Symposium will be followed by the NOA Summer Party (we guarantee it will not rain), where booze and entertainment (whatever that is) will be provided for the rest of the evening. I’ll hopefully see you there!
You can book your tickets for the NOA Symposium online via the NOA website.
If you have any questions, you can email NOA Events Manager Stephanie Hamilton at [email protected] or call her on 0207 292 8692.
We’re excited to be heading to Krakow next week to participate in the two-day 6th ABSL Conference from June 16-17.
The great agenda features 80 speakers who will engage the 800 delegates in attendance in discussions about strengthening talent management and supporting regional business leaders for their next global roles in (and beyond) the industry, achieving sustainable and accelerated growth of the sector for the next decades, stimulating innovation and improvement culture, and taking advantage of the technology and client expectations revolution.
With any luck, I’ll get a selfie with Tony. Show up yourself and see what happens.
I’ll be standing on the same stage as Tony Blair (he actually shows up right after our panel discussion where I will attempt a selfie… stay tuned) when I deliver the Keynote Presentation, titled “The Four Foundations of the As-a-Service Economy: The Industry Has Spoken” at Auditorium Hall from 12:40 – 13:00 on Day 1. My talk will look at how the emergence of As-a-Service represents the most disruptive series of impacts to the traditional global services industry that we have ever seen. I’ll share some of our new research, covering more than 2,000 enterprise service buyers in the HfS global community, which paints the picture of what our industry needs to do to get ahead of this impending disruption.
HfS Executive Vice President Charles Sutherland will facilitate a Day 2 Panel, titled “Looking for more fuel! – how to build on current success?” The discussion will focus on the experience of world class GBS organizations, as well as the next SSC trends and opportunities.
Charles will be joined by a group of industry luminaries, including Tom Bangemann, Senior Vice President Business Transformation, Hackett Group; Adnan Behmen, Associate Director GBS, Procter & Gamble; Wojciech Karpinski, Services Head, Global Operations Manager, Infosys BPO Ltd.; Agnieszka Kubera, Managing Director, Accenture Poland; and Magdalena Wlodek, Director Finance Service Center Europe, PMI.
This will be a terrific two days. I hope to see you there!
We’ve been doing this research things for a while now. The blog started in 2007 and HfS Research has been around since 2010. It’s really a blink of an eye when you think about it–especially compared with the established firms that we knock heads with every day:
But what keeps us going, apart from the great (and sometimes insane) clients we work with, is the knowledge that we’re doing the right thing – or at least we convince ourselves we are. But, occasionally, there is independent confirmation that tells it like it is, for example this new analysis from the International Institute of Analyst Relations, which surveyed analyst relations professionals from 60 organizations.
Again, here we are in the mix with the Gartners, Forresters and IDCs of the world in The IIAR’s now infamous “Tragic Quadrant,” which IIAR just released on the impact and relevance of IT analyst firms. As you can see, we’re square in the bullseye on the Impact and Relevance quadrant, along with Interaction (which is depicted by the size of the bubble). What’s really encouraging for HfS is our reach beyond outsourcing and services into mainstream coverage of technology – we really seem to have left some of the niche analyst firms in the outsourcing space behind.
We’re not much for living in bubbles, but it’s not bad for your favorite insurgent firm. And we assure you, we won’t let it go to our heads. Honest we won’t =)
The world we’re venturing into is demanding a very different approach to how we progress our capabilities and careers, and I’ve never seen so many enterprises so fixated on finding innovation-capable talent, when looking to hire senior executives. The hiring process for new talent has never been so complex and challenging for ambitious enterprises, desperate to avoid yet another disappointment of ending up with someone who talks a big game, but fails to deliver the goods.
And while it’s harder than ever to re-invent yourself to satisfy ever-demanding employers or clients, it’s also a great opportunity for many of us who have the determination, willingness to improve and application to take our careers into the As-a-Service world. However, today’s work environment is also posing a huge threat to those of us unwilling to change with the times, or are simply seeking to ride out our final working years in the hope we can escape unharmed with our retirement nest eggs.
However which way we look at this, building our personal brands is the critical ingredient for furthering our career potential in this unraveling As-a-Service world. So let’s evaluate how to make some basic shifts from yesterday’s reactive worker to one which ambitious employers are going to want to lure…
Seven Simple Steers to avoid Screwing up your Personal Brand
1. Get rid of the 9.00-5.00 work mentality.It’s amazing how many people still operate like this. You can’t possibly function if you still have this attitude to work and never take calls / return mails in the evenings or weekends etc. Ambitious business leaders no longer want people who just don’t want to put in the extra effort and time to be effective in their roles. If you really don’t want to work hard, then find a career that doesn’t warrant that – sadly, it won’t likely be very intellectually stimulating… but that’s the tradeoff these days.
2. Be a people person… or at least pretend to be. Networking and having people want to engage with you has never been as critical as it is today. Email and social media is fun to communicate in soundbites, but nothing beats meeting up socially, talking on the phone etc. I know many people out there who just don’t like people very much – it’s just in their DNA. This is something you have to fix – if you’re not great to engage with, it’s going to hold you back. You don’t really need to like people to have a functional relationship with them.
3. Stop being an asshole… you know you can try. Let’s face it, we all have to deal with them. Just don’t be one yourself. I know several people who just persist in badmouthing me and my firm because they compete with us – or just are assholes. Can’t we all get along? Share a few jokes or have a drink at a conference? Can’t we even pretend to like each other, or at least be civil? In today’s world, it just isn’t the way anymore – we work hard enough not to need to deal with negativity and bad vibes.
4. Use social media to promote others, and not just yourself. Nothing irritates me more than those people who only tweet or use LI to promote their own work. These people who self-promote to the point of narcissism, and never bother to promote others….ugh. It’s like going on a date when you were younger and having to listen to someone just talk about themselves all evening. If you only ever promote yourself, people will quickly notice and start to avoid you. Fix this habit and force yourself to me more than being all about YOU.
5. Become genuinely collaborative and don’t just pretend to be. Yes, we all know the types, but the more you collaborate, the more people will enjoy working with you and the more you will learn from others. Take the attitude that if you give, you will mostly get back. However, nothing beats having a genuine reputation for being collaborative – it’s such a big plus in the emerging work environment. Noone likes the non-team players and it’s easy to uncover who they are in today’s environment.
6. Figure out how to self-improve by looking at yourself and being honest once in a while. It still amazes me everyday how many people are simply incapable of being able to take a good look at themselves, identify their weaknesses and work out how to improve on them. Deep down we all know what we’re good at and where we are falling short, we just need to work harder at the latter independently as we’re not always going to have someone telling us where we need improvement. Being able to self-improve is an amazing quality in today’s world if you can open your mind to doing this. If computers are self-learning these days, we need to be too…
7. Be creative and unafraid to refocus your abilities on achieving business outcomes. This is so important today – you can’t just box up your skills to say “I’m great at Salesforce.com”, or “I have 20 years experience doing FP&A, ABAP programming, deal negotiation, HR policy etc”. You need to focus more on business outcome capabilities where you can clearly demonstrate how you identify problems and solve them in creative ways that add real value and future growth potential for enterprises. For example, you need to prove you can “Re-orient a firm’s whole go to market focus to open up new growth opportunities that might now have been obvious previously”; or “Re-define and simplify what data a firm needs to be effective in an industry”; or “Evaluate an automation strategy investment by identifying which processes would provide a genuine business advantage being automated, versus those which would cause more headaches than they are worth”.
Bottom-line: We mustn’t settle for easy, we need to keep pushing ourselves in today’s work environment
I will be the first to hold my hands up and admit I am not perfect – am sure I have many enemies and resentful individuals out there I managed to somehow rub the wrong way – and I am sure I could have been more successful than I currently am today if I had not made many mistakes with my career choices and business decisions. But I do passionately believe we need to constantly challenge ourselves to stay ahead of our careers in today’s environment. Simply settling for the fact we have already reached the ceiling of our capabilities and career potential, could likely take us on a downward spiral faster than we realize as we increasingly compete with a broader spectrum of people for our jobs and our clients.
One of the most scintillating sagas of the year has been the unravelling of the great Alsbridge European mystery, with their previous UK entity being reincarnated under the name Aecus (the son of Zeus) and Alsbridge US preferring to grow its own European business, as opposed to persisting with a franchise strategy.
Clearly, CEO Chip Wagner and his cohorts had grander ideas than merely hiring a few local boffins – and their recent acquisition of Source accelerates the firm up the value chain of sourcing advisors. Source has developed a growing reputation for itself under the leadership of its founders Barry Matthews and Eleanor Winn, adds 20 staff schooled in ITO/BPO, vendor management, governance and SIAM skills, as well as demonstrated robotic process automation/autonomics insight, expertise and hands-on experience. Geographically, they have a track record in the Nordic market, a hotspot in the industry, and will bring credibility, should Alsbridge choose to focus on that area in the future.
So we recently caught up with the affable Barry Matthews to learn a bit more about what Source brings to the Alsbridge mothership…
Barry Matthews is a Managing Director for Alsbridge in the UK (Click for Bio)
Phil Fersht (CEO, HfS): Good afternoon, Barry – thank you for joining us on HfS, it’s a pleasure to have you with us. Your company, Source, recently got acquired by Alsbridge. But before we go into that, maybe you can just give us a very quick high-level bio and how you ended up in the advisory world.
Barry Matthews: Okay, no problem. It’s a pleasure to be with you. My background is in the service provider supplier side of things—predominantly in the IT world.
I was at GE Capital selling and delivering big infrastructure deals for a number of years. And then at Sapient, back in the day when we it called “globally distributed delivery.” It seems to have become offshoring. So I have a lot of expertise in delivering offshore deals. I then was an independent consultant in the outsourcing space before I joined Alsbridge plc (now known as Aecus) in the UK back in, I think, 2005. I setup their IT sourcing practice and had a very enjoyable time with those guys before I left at the end of 2009 to set up Source. We had five very enjoyable years before Alsbridge approached us six months ago to rejoin the Alsbridge family. I’m now one of the managing directors for Alsbridge in the UK. So, yeah, it’s been an interesting journey. I now have the same email address I had six years ago.
Phil: So all your old spam is coming back to haunt you…
Barry: Exactly!
It’s the same Alsbridge brand, but it’s a very different organization from my earlier tenure. It’s very fast paced and rapidly expanding. There was a real meeting of minds when we had the discussion about whether or not it made sense for us to merge. It is very exciting. It’s more like a startup in the UK. And we now have got a number of service lines we didn’t have before and are able to offer the CIOs and CFOs we work with completely different services. So we are excited about the next 12 months or so.
Phil: So – in a nutshell – what was it that attracted you most to the Alsbridge business? I’m sure there were probably a few other bigger advisory shops that would have loved to absorb you. What was it about Alsbridge which made you choose them?
Barry: I am sure it sounds trite but culturally I think we were really well matched. When I first met Chip Wagner it was a real meeting of minds. And they painted a vision of what they wanted to achieve in Europe—which was what we wanted to achieve—and where they were trying to give outsourcing a much more positive brand and shift the focus to positive outcomes. They felt that we were doing a good job with the one service line we had, which was outsource advisory. They were able to bring another five service lines and really expand our offering. And so with them we saw that we’d be able to make much more of an impact for the industry. So we agreed with that and went ahead with it.
And so there was that fundamental meeting of minds. And the other area that we were talking a lot about these days is automation—whether it’s RPA, IPA or artificial intelligence. Alsbridge really falls into our vision for that and what we have been doing. And we have some exciting plans. Then there’s the investment opportunity of really building that practice in the UK and in Europe. So we are excited about that as well.
Phil: Alsbridge has been making quite a lot of noise about the RPA space. But, getting past the hype, what are you generally seeing from the client side? Are you seeing some real traction here or are we still early days and it’s a few people just dabbling?
Barry: It’s interesting really. I have been thinking about robots and RPA for the last three years or so. And it’s only recently that it’s been talked about a lot really, if I am honest. We were the first advisors to set up an RPA practice, which we did 12 months ago. And until about 6 months ago it really was still a lot of talk and not a lot of action. But in the last six months we are now really starting to see some traction in the industry.
Interestingly, on Tuesday we had a service provider summit in London at the Oval. We had all of the major service providers there. There were about 130 people in the room and I asked for a show of hands around a panel on RPA as to which service providers were really taking it seriously now and putting in place—you know, big programs around RPA as a strategic differentiator for them or something they were taking seriously. And 80 percent of them put their hands up. You know that wouldn’t have been the case 12 months ago. We have been running a RFI in the RPA market for the last three years and are seeing big changes in terms of service providers taking it seriously now.
So we have seen a big difference in the last six months. We now have 10 proper RPA engagements where we are not just talking about it but are doing actual billable work with customers to advise them on business cases, processes that they should start with, software vendors they should work with and change management around it. And that wasn’t the case six months ago. It is now. We have got some really interesting customer engagements on the go and a big pipeline of opportunity too.
I think we have reached the turning point. I think people have stopped talking about it and have started doing stuff now.
Phil: And where are you seeing most interest and traction on the process side? Is it in F&A or is it just a broad spectrum?
Barry: It’s a really broad spectrum of stuff. Brands are hesitant to allow us to go into details, for obvious reasons. But we have a range of customers and it depends on the industry. We are working with a utility provider and have looked at 15 different processes that are very, very specific to the service they provide to their customers. We also are working with a big car manufacturer.
And we are looking at all of their non-operational processes to identify automation opportunities. We work with an insurance broker—and that’s very specific to underwriting processes. We are working with a water company and that process is related to customer billing. So it really varies. It’s not just in F&A or in HR. It’s more industry-specific processes.
Phil: Barry, maybe you can clarify something for our readership. We have seen some confusion around what people generally term as “automation.” You know, what is legacy automation and what is RPA? Can you explain to our readership what the real differences are?
Is it a bird, a plane? Nope. It’s just Sourcing Superman, Barry Matthews! Oh dear…
Barry: Yeah, sure. I think there is a lot of confusion. I’ll talk to customers and they’ll tell me, “We’ve been automating. We have been implementing Oracle or SAP, and we are going to implement business process management systems.”
And isn’t that automation? Absolutely, of course it is. It is automation.
What we are talking about is replacing manually intensive processes—processes that don’t lend themselves to the large-scale BPM programs, things which are sort of swivel-chair processes that have been carried out by business process outsourcing or offshore for a long time.
And the way I describe it to customers is sort of like the software we talk about is macros on steroids. It’s simple stuff. It really is simple stuff. And you don’t have to automate an entire process. You can automate parts of a process incredibly quickly using the new software tools which typically they don’t know about. And so it’s really the long tail of the specific processes, which typically you would use a person to do, that can be automated pretty rapidly. So it’s mapping what people have been doing manually for quite a long period of time and monitoring them. It’s rule-based. Setting up a process to automate what they were doing previously rather than having to rely on a big IT program.
Phil: One final question I have to ask is this, Barry: If you were crowned king of RPA for one week, what would be the one task you’d try to achieve for the industry?
Barry: A good question. I would try and free people up from doing boring stuff I think to be honest. There is so much in our industry whether it’s in IT or in business process where there are people doing incredibly low level quite frankly boring tasks again and again and again. And if you can free them up to do more interesting and more value adding stuff by replacing that boring stuff with technology then I that would say that would be a good thing to do in my brief role as king. So I would rid the world of boring mundane tasks.
Phil: That is brilliant. Thank you very much, Barry!
Barry Matthews will be speeding to your sourcing rescue if you email him right here…
In Part 1 of our Four Foundations, we discussed the challenges and opportunities facing enterprises which are not taking better advantage of outsourcing relationships to help plug their talent and capability shortcomings.
However, while it’s one thing to talk about the delights that await ambitious enterprises when they make definitive plans go down this path, it’s another to assess whether they truly recognize the burning platform to take themselves through this period of pain and complexity to get there.
Foundation III. A Burning Platform for Change: As operational efficiency becomes a commodity, operations professionals need to strive for that next threshold of value, or find themselves rendered irrelevant
Our brand new study that delves into the Ideals of As-a-Service (stay tuned for the full release very soon) reveals some startling home truths as to what’s likely coming next. My biggest fear in our the industry is for those people just sitting around literally waiting for change, as opposed to squaring up to the commoditization and automation of legacy processes to provide their firms with new ideas, new ways of doing things and adding value, beyond simply keeping the operational lights on.
One alarming trend coming out of this new study, which covers the dynamics and viewpoints of more than 700 industry stakeholders, is the delta between the desire to change the model from business leaders (SVPs and above) and their middle-managers and below:
Click to Enlarge
The middle layers and down need to step up – or step out – of the picture
Why is it that over half of senior managers view As-a-Service dynamics as critical, while only 29% of their teams under then feel the same? Answer – most people are comfortable with their daily grind – they stare at metrics on spreadsheets, ensure exceptions are handled and the corporate engine keeps running. They turn up at meetings and say all the right things, avoid challenging the status quo (while acknowledging there can always be improvement), but deep down have settled for adequacy and a steady treadmill drumbeat of efficiency without too many fireworks or drama.
Why would they want to learn how to collect and interpret data more intelligently? Why would they want to find problems, as opposed to solving them when they crop up? Why would they want to mimic manual processes into scripts to have them run robotically, when they can patch over these inefficiencies with cheap offshore labor? Why would they want to explore the potential of artificial intelligence and self-learning computing capability when they can just do these things themselves (or at least pretend to do them). Answer – they have no burning platform to change the way their do their jobs.
But there is one significant burning platform that will burn them, if they are not willing to adapt to the As-a-Service world: they will be irrlevent in tomorrow’s corporation. Yes, they may be lucky and survive in legacy organizations that can get away without changing, or they may be in their late 50’s and only care about lasting a few more years until retirement, but – for most – if they cannot adapt to As-a-Service, their bosses will shift them on and either replace them with a service provider staffer, or just simply phase out their legacy job, as it was not really needed anymore.
The As-a-Service Economy is forcing a shift from Efficiency to Capability
It’s true, in many cases, that service providers are not providing much more than basic operational offshore-centric delivery, however, that’s usually because that is all these clients intended to receive, when they ventured into using external services to drive out cost – and the reason why they selected service providers to provide operational efficiency, as opposed to plugging critical capability gaps.
We all know the initial benefits behind outsourcing quickly become forgotten as the C-Suite turns to its operational leaders to demand continual productivity gains and value, however, the motivations from leadership are not changing, more the means by which to satisfy the C-Suite’s insatiable thirst for running the enterprise as cost-effectively as possible. And this is the very essence of the As-a-Service Economy; finding new ways and means to run businesses as efficiently, intelligently and flexibly as possible.
However, while a company’s leadership is always biting at the heels of its operational leadership to keep driving out the cost, the resistance coming from the middle layers and down is clearly becoming a pressure point as enterprises realize they have to go through a more radical, painful period of transition as the As-a-Service Economy slowly becomes a reality.
As research we conducted earlier this year clearly demonstrates, well over half of enterprises, today, only view providers as brokers of Efficiency as opposed to Capability:
Click to Enlarge
The good news for service providers, is a very small proportion today views them negatively as low cost body shops (this would have been a lot higher just a few short years ago), however, most are stuck in this middle ground, where their clients only want and – expect – a service designed to scale their operations and help them be more cost efficient. However, a third of the more senior managers (VPs and above) do view service providers as genuine capability partners – and that’s actually pretty good, provided the right providers can figure out how to work more with these senior people to explore value-driven relationships.
So… two things need to happen to move the needle away from stagnation:
1) Service providers seeking to deliver genuine value beyond cost need to have a more intense dialog with that growing proportion of senior service buyers who view them that way;
2) Service buyers need to recognize this genuine burning platform to shift gears from Efficiency to Capability.
The Bottom-line: We owe it to our delivery staff to give them the hard truths – the platform is already smoldering, even if they can’t yet smell the smoke
The changes coming to our world are significant – and not dissimilar to when coal mines were displaced by nuclear power plants, when car plants which used to employ 5000 people now only need 300 etc. Operations are becoming standardized, cloudified and robotized – and if we can’t reorient our staff to accept this reality and expand their capability horizons, many will be waiting tables, driving ubers or cutting hair before we know it. We don’t need a burning platform to drive this change as it’s already on fire – many of us simply haven’t yet realized it…
Stay tuned for our final part where we discuss the impact of technology on knowledge-workers…
I recently attended a graduation ceremony and was amazed at the number of students engrossed in their phones, occasionally looking up to applaud a graduate.
What’s happening here? Have we created a whole generation of socially-retarded morons preferring to network on Instagram and Snapchat than engage in physical dialog anymore?
Welcome to the entitled job market for the twenty-somethings where BPO doesn’t quite fit in…
What’s even more disturbing is the lackadaisical attitude displayed by so many of them when you ask them about their career plans and ambitions. Most seem pretty happy to sit around at home staring into their phones for a couple more years until their perfect job just happens to turn up on their doorstep. If you haven’t gone down a specific career track such as medicine, law, finance or engineering, the future is an apparent wilderness of vagueness, deluded desires and uncertainty. Doesn’t anyone have a plan to start somewhere and work their way up to a better place in the future? Isn’t that what us mid-career folks did when we were starting out?
So let’s focus on our industry – the one of servicing enterprise IT and business operations effectively. Whether we buy, sell or advise on business operations, if we don’t have succession plans to blood the next generation of talent, we’ll just become an industry of old farts with over-bloated salaries and a culture of preserving the past, not advancement into the future.
New data from our Talent and Trust in BPO study, where we spoke to 540 business stakeholders on the topic – and you can read the full report here – is pretty damning in this regard, with the vast majority of newbies in BPO seriously struggling to see a career path around BPO practices, despite being impressed with the potential of BPO as a real change agent within their businesses:
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In my view, failure to develop a Millennial Strategy will be the ultimate death-knell to a long fruitful future for business and IT services, and we may as well accept the reality that we will become mimicked into a piece of RPA software and erased into the ethernet of digital retirement within the next decade. Our problem isn’t one of setting out challenging work and even creating exciting roles for people, it’s about getting them focused and interested in building a career as a Capability Broker.
Six ideas we can embrace to try and create the next generation of Capability Brokers
There is no quick fix when it comes to creating work ethics and motivating people who are only ever willing to do just enough not to get fired (or even less, but don’t really care), but we can craft a better defined career path and set expectations of what it means to work in the business services industry. Here are some ideas:
1) Establish the Chief Services Officer role. We need transformational leaders to define and drive Capability Broker roles. There are several excellent governance leaders today developing these careers who are helping define the next generation of services professionals. We had some of the at our recent Dallas event. We need to give these people an identifiable role in the organization that inspires others to join their teams. CPO, CHRO roles are too broad and, let’s face it, not exactly inspiring to the younger generation. As Fast Company famously revealed ten years ago now, the bottom 2% of MBAs end up in HR, and I dread to think the number that wind up on procurement. We need a services leader who sits over the operations of a business to ensure the right partnerships are being brokered and the right careers are being developed internally to take maximum advantage from them.
2) Promote the career path of the Capability Broker. Today’s service practitioner is increasingly becoming less about having specific skills wrapped up in a nice bow, such as “ABAP programmer”, or “Vendor Contract Manager”; it’s now about being a Broker of Capability – people who can multitask across multiple disciplines and find business problems, in addition to solving them, who can work with multiple delivery vehicles or partners, such as service providers, SaaS platforms, crowdsourcing firms, shared services COEs etc. And these brokers must operate as real integration points of capability, not simply procurement administrators that negotiate rates and manage contracts. This sounds much like an exciting career path that incorporates genuine resourcefulness, ingenuity, consultative acumen and ability to think out-of-the box in order to achieve real outcomes for an enterprise. So let’s start promoting these roles as such… they’re exciting and require smart people to grow into the roles, where there is no defined curriculum and need an ability to handle ambiguity and go with the flow.
3) Orient towards Design Thinking over Six Sigma. Six Sigma, Lean and process excellence saved the BPO industry over the last decade from the unprofitable excesses of the early days of off-shoring – and gave service providers a frosting of process excellence by which to brand their offshore-dominant strategies. However, we at HfS believe that these are no longer the most suitable approaches by which to improve business processes. Six Sigma is about eliminating waste and solving imperfections in processes. Instead, we believe that, as a market, we need to lead our process improvement efforts with a starting point based in Design Thinking, which is about finding problems, not just solving them. We need to see the desired outcomes from clients and, in turn, their customers, as the lens by which to look at processes rather than the process itself. All too often, we have “optimized” processes for cost, based on a very inward looking view of the business process, which either keeps the view of the external connections of the process static, or just ignores those considerations outright. In the As-a-Service economy, it is flexibility in process design and delivery which will win out, and starting with a Design Thinking approach (after training and converting many of the existing process excellence teams) will be the best model for future success.
4) Ensure outsourcing contracts have real actionable measures to develop Capability Brokers across the buyer/provider relationship. Moving beyond the “lights on” tedium of an operations contract has to become paramount in all new contract negotiations. When you listen to experienced governance executives today, many are proudly talking about how they are emphasizing the joint workshop sessions, the bonuses for achieving innovations and improvements, the incentives for achieving productivity enhancements beyond merely moving work offshore. It’s not easy to contract for innovation, but many firms are now trying – and finding some success.
5) Ban personal smartphones from being used during the office hours. It’s just got to be done. It’s the disease terrorizing today’s business environment – too many people just cannot focus on their jobs anymore because they are completely distracted by the sheer volume of social media impacting their lives. Seriously, I know hundreds of people (and not just Millennials) who cannot concentrate on one single work task for more than five minutes at a time (and you do too…. you just know it). Force them to focus – you’ll be doing them a huge favor… the best performing shared service centers do it, so why not follow their example?
6) Focus on locations where young people still appreciate a service career and have some company loyalty. When you visit smaller cities, there is often still the culture of people going to an office and staying with one company for several years to develop a career with it. They appreciate a job with some security tied to it and have less grandiose career ambitions. In most big Western cities, today, the cost of living is far too high to justify a modestly paid job. Someone was trying to convince me the other day that a family of four in Massachussetts needed a household income of $300K a year just to live reasonably well. Sounds a bit excessive, but they are probably not too far off. Clearly services jobs starting at $25k a year are not going to be very appealing to people wanting to raise a family on the expensive Eastern seaboard of the US (and let’s not even get started on California).
The Bottom-line: There is no quick fix, but we need to get ahead of this now
I dread to think what could happen if we hit another economic downturn (if HSBC’s recent viewpoint is correct) with today’s working attitudes of the younger generation. There will be millions of unemployed youths angry that the living they felt entitled to never transpired. We can’t simply send them to work with a kick up the behind, but we can try to create a career path with a mission, a purpose and strong leadership that inspires the next generation. That’s probably the best we can do for now, so let’s start doing it!
Moving at Warp Speed into the As-a-Service Economy?
Thanks to all of you who spent a fabulous day with us in Dallas for our first HfS Working Summit, dedicated purely to a joint unravelling of how we can find a way to the As-a-Service Economy.
What struck me was how quickly our industry has genuinely become focused on achieving business outcomes over the past few months – and this is being weaved into many of today’s new contracts and governance performance metrics. The conversation has moved along quite markedly and I view this is a major leap forward for many industry stakeholders to change the way we manage service delivery that isn’t purely based on valueless metrics and squeezing out those last remnants of bloated labor cost.
However, it’s also clear that ambitious enterprise leadership teams are growing increasingly frustrated with their teams’ struggles to progress their capabilities, which will be the ultimate burning platform for many enterprises to make the shift and write off their legacy back office. Here cometh the As-a-Service Economy, where stagnation and legacy will no longer be tolerated…
So what are we learning, at HfS, about the current readiness of enterprises to outsource and leverage As-a-Service delivery?
In short, we’re on a train hurtling towards something resembling “As-a-Service” and we need to make sure we stay on it:
At HfS, we are baking this unraveling of As-a-Service delivery into four distinct foundations:
Foundation I. The Optimum Operating Model: Outsourcing not exploited nearly enough by ambitious enterprises
Today, most buyers are still using outsourcing as an augmentation vehicle for most of their processes – filling occasional delivery gaps, but more as a vehicle to drive scale and cost efficiency:
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Our new research shows only a third of buyers today view outsourcing providers as a real strategic partner, while half see them as efficiency vehicles for themselves. However, it’s becoming abundantly clear that the desire to shift towards As-a-Service delivery is much stronger at the senior levels, and we believe many enterprises will turn to their service providers more aggressively over time as they simply lack the skills and capabilities inhouse to get them past the traditional service delivery model.
What’s clear in the chart above, which illustrates a view from our recent industry studies with KPMG on how enterprises run their business operations models, is that outsourcing is still predominantly an augmentation vehicle to support business processes, as opposed to the end-to-end delivery of business functions themselves. For instance, less than 40% if enterprise IT s outsourced, 20% of finance and accounting – and only (amazingly) a third of payroll.
When we look at real value-add areas, such as analytics, where As-a-Service focused providers can really help clients, we can see that over half of analytics work is still conducted in decentralized models, with only 12% currently being serviced externally.
Foundation II. Empowering Talent: The Focus shifts from Skills to Capabilities, from solving business problems to finding them
The biggest issue impacting buyers, service providers and advisors in the industry today is the challenge of broadening, not only skillsets of delivery staff and leadership, but changing their mindsets and capabilities.
Our State of Outsourcing study clearly reveals two-thirds of operations jobs are now under threat if staff fail to reorient their capabilities. Simply put, barely a third of enterprises, today, are actually happy with their internal talent’s ability to drive positive outcomes from their analytical and creative capabilities, with their current outsourcing engagements:
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This is nothing new; organizations have been trying to reduce their labor costs for centuries, but something feels very different about the emerging digital reality in which we operate. Many of us believed the onset of web technologies would be the big game changer with how we utilized labor, but it actually increased our reliance of humans – many business processes became web-enabled, which necessitated training on new applications and helped us work more effectively – but they didn’t fundamentally change how we operated. The web really just enabled us to run things the same way as previously, except with more global capabilities and much more effective communication and collaboration.
It was this earlier wave of digital evolution which really enabled the great outsourcing boom of the last 15 years, as communication costs plummeted and web applications made it possible to work with people anywhere/anytime. The initial web evolution helped globalize the workforce, but didn’t have as much impact on how we could automate processes, mine vast lakes of data and embrace mobile applications to drive interactions across our employees, partners and customers.
We have entered an era, today, where there is real capability – and need – to change how we run our businesses – from back office transactional processing through to the front office customer interaction: we have tools and apps to target and interpret meaningful data, we have developing software solutions to automate and even robotize processes to mimic human tasks like we never could in the past, and we have all submerged ourselves in a mobile culture where all forms of business are conducted on all types of devices and interfaces.
Perhaps, even more importantly, cloud-based platforms are being developed which allow us to share these capabilities, re-invent the way we run services and process transactions that require such a lesser amount of human intervention and oversight.
Hence, the onus shifts to the capabilities of our talent to add value to their organizations that are insightful to help base decisions; that are creative, which help try new ways of doing things, or targeting new markets; that are innovative, where their organizations can find entirely new ways of competing, or developing unique products or services. Whether they work in finance, HR, marketing, procurement, IT, supply chain, their job is to leverage digital technologies and platforms effectively so they can refocus their time adding value, because the need for people to sit around and fill in spreadsheets all day is being gradually eliminated. People need to do a lot more thinking, and less executing.
It’s less about having specific skills wrapped up in a nice box that can be marketing, such as “ABAP programmer”, or “Vendor Contract Manager”. It’s now about being brokers of capability – people who can multitask across multiple disciplines and find business problems, in addition to solving them.
The Bottom-line: The As-a-Service business world is moving the talent goalposts, and many workers will struggle if they can’t adapt
I truly believe the oncoming wave of As-a-Service is going to be driven by the inability of enterprises to reorient their existing talent to move beyond the traditional transactional outsourcing model.
This talent crunch is already coming. The old safety nets of years gone by have bigger and bigger holes in them – you only need to look at the job ads and the types of skills smart companies are now looking for to understand quickly how irrelevant you could become if you don’t embrace the digitally transforming world we are now living it. It really is time to get with the program, people, or start preparing for an early retirement.
Stay tuned for Foundations III and IV coming As-a-Service style to a screen near you very soon…
