Month: July 2016

Companies Consistently Run into Problems in Automation Efforts | Sherpas in Blue Shirts

It’s very clear that robotics process automation (RPA) and cognitive computing have tremendous capacity to digitize our workforce and reduce the number of back-office FTEs. Leading companies are looking at doing this in a big way, looking to automate thousands of jobs that have been performed by FTEs. But they consistently run into a problem.

The tools to automate a process exist. Admittedly, no tools come ready for use out of the box; they have to be adjusted and implemented. But the technology clearly exists to drive an advanced level of digitization or automation.

The problem is when organizations try to automate jobs, they achieve only very modest results. They stand up a team of 10 to 40 robotic engineers, for example, but run out of steam very quickly. If the plan is to automate 2,000 jobs, the first five — the low-hanging fruit — go very quickly. And then the process bogs down.

Read more at CIO online.

What You Need to Do to Get a Business Performance Breakthrough | Sherpas in Blue Shirts

At Everest Group, we’ve been studying the reason behind the disappointing phenomenon of powerful new disruptive technologies achieving only modest, incremental benefits instead of their promised performance breakthroughs. In my recent blogs, we’ve looked at whether the fault could be due to hype or immaturity of the technologies, whether it might be a lack of talent or whether there is an inherent conflict of interest in companies’ incumbent ecosystem. Not one of those things is sufficient to explain why we’re not getting the breakthrough in performance that is ripe for the taking if we can get there. We think all of these factors may contribute to the phenomenon; but these factors don’t seem to be powerful enough to prevent the breakthroughs.

We think a missing ingredient is the organization. When companies implement these new technologies, they must also change the fundamental organization.

At the moment, these technologies tend to be implemented to save costs, whereas the change in performance is far more than cost savings. It has to do with customer experience and cycle time. Although cost is often reduced, that is a byproduct of the greater performance that is generated.

As the buyer of the new technologies, the remedy is to be willing to step back and understand that you have to create a new strategic intent. That intent must focus on performance. It also requires a willingness to address the organizational dynamics. Whenever you digitize a workforce or you embed analytics into it, this affects how you organize work. So often we see people attempting to bring in tools but just adding them to the existing organization. That doesn’t work.

Fundamentally, to get a performance breakthrough, you have to rework your organization. Doing that means significant change across all the pieces. Along with creating a new strategic intent, you have to change your organization, your ecosystem, your technologies and your talent. All of those components have to come together and focus on the promised improvement you’re seeking. Only then will you get the step change performance. If you do them individually or only partially, you’ll only get is more of the same. You’ll get a better status quo, not a changed status quo.

Impact of Brexit on the UK Outsourcing Industry | Sherpas in Blue Shirts

There’s no doubt that Brexit created a slowdown in European outsourcing during the last two quarters, especially in the UK. How long will the slowdown last? Let’s look at what’s really going on.

The reason Brexit contributed to slowdown is because it created indecision and senior management attention was captivated by the unthinkable prospect of the UK exiting the EU. That indecision caused the slowdown.

Having just returned from the UK and talking to UK leaders, I believe that the indecision has passed and decisions are reversing back to their normal rhythm. I expect there to be a little ongoing hangover; but going forward, I expect an increasingly low impact on outsourcing growth due to the UK exiting the EU. Yes, it’s still uncertain as to how the UK will exit, but that’s different from the indecision based on whether or not it would actually happen. I’m seeing signs that the indecision and senior management attention necessary to do outsourcing deals has now reverted back to running the business.

On their earnings calls, a number of outsourcing executives called out that they expect Brexit will create an imperative to do more outsourcing and to accelerate deals. I see no indication that is likely to happen. Here’s why:

  • The UK has a mature outsourcing market, which is already well along in its shift to cloud, automation and cognitive computing.
  • The imperative for UK businesses to save more money due to Brexit is likely to be resolved in an acceleration of the automation strategies, not an acceleration of further outsourcing in the labor arbitrage model. Work that has been available to move offshore has already moved, so I don’t see an uptick in demand for further offshoring. If Brexit has an effect, I believe it will accelerate the move to automation, which provides even greater savings than labor arbitrage.

Summing up, Brexit has had a modest impact on growth of UK outsourcing; but I think that impact is lessening dramatically by the day and will have little or no impact within a month. Where it does have an impact, and counter to well-publicized prophecies, I believe Brexit will not lead to further growth in the labor arbitrage space, but it’s likely to impact the transition to automated solutions.

Everest Group Identifies Pharmaceutical Firms Leading the Way in Digital Effectiveness | Press Release

Adoption of digital is creating a new pecking order of technology savvy life sciences firms led by Astra Zeneca, Johnson & Johnson, Novartis, Pfizer, Roche and Sanofi.

Fewer than 15 percent of all life sciences transactions signed in 2015 had an element of digital services in their scope; nevertheless, digital technologies are the pivotal driver for life sciences companies as they restructure to become leaner and pursue agility in operations to drive new product development, according to Everest Group, a consulting and research firm focused on strategic IT, business services and sourcing.

To illustrate this point, Everest Group profiled 15 global pharmaceutical companies regarding their digital functionality and business impact. In “Life Sciences IT Industry: An Assessment of the Market Opportunity and APEX MatrixAssessment,” Everest Group identifies Astra Zeneca, Johnson & Johnson, Novartis, Pfizer, Roche, and Sanofi as industry leaders.

This new research from Everest Group indicates that the key market trends driving digital adoption include the rising number of “born digital” healthcare consumers, the need for operational efficiencies and cost optimization, and the movement towards data-driven, personalized, evidence-based medicine.

The life sciences industry’s data-rich environment (including scientific, clinical and operational data) coupled with its many market challenges make analytics a key lever to provide real-time, actionable insights and improve operational efficiency. Analytics presents value in three key areas for life sciences organizations: cost reduction, top-line growth, and risk and compliance management.

Driven by the focus on analytics and infrastructure services, recent life sciences ITO deals focus on datacenter, end-user computing, and databases/middleware services, as well as application, development and maintenance (ADM) and enterprise resource planning (ERP).

“Most of the 2015 IT outsourcing contracts in the life sciences that did include digital services, did so as an add on to existing contracts, with a focus on remodeling existing ADM agreements,” said Jimit Arora, partner at Everest Group. “Digitally native contracts in life sciences are still a rarity, but we will see an increase in these contracts in the future. In fact, the adoption of digital is creating a new pecking order of technology savvy firms, with those that successfully use digital technology to both drive internal operations and customer-focused channels—i.e., digital for efficiency and digital for growth—leading the way.”

Other key findings:

  • Market imperatives to drive 12 percent CAGR growth till 2020. The life sciences industry is in a “recovery phase” as it grapples with a multitude of challenges that are stifling R&D efficiency, changing the portfolio mix and increasing M&A/restructuring. To address the challenges, market participants are adopting technology as a means to enable quicker product development, better consumer connections and significantly improved time-to-value.
  • Growth is a key driver of digital investment. While efficiency and enablement of digital are aspects gaining primacy, the life sciences industry is focused on driving growth via digital channels, consumer engagement, and healthcare ecosystem collaboration.
  • Analytics and cloud are aspects that will drive most digital investments in the short term. When it comes to enabling a cohesive digital strategy, organizations are going to extensively leverage hybrid cloud models and focus on analytics (both prescriptive and predictive) to get to outcomes quicker

*** Download Complimentary, Publication-Quality Graphics Here ***
High-resolution graphics illustrating key takeaways from this research can be included in news coverage, with attribution to Everest Group. Graphics include:

  • The changing value proposition in life sciences global services
  • On- and nearshore delivery on the rise in life sciences IT
  • IT opportunity in the life sciences industry
  • Digitization in life sciences IT contracts

Digital Graveyard: Verizon Acquires Yahoo for US$4.83 billion – Why Amazon, Apple, Facebook, and Google Need to Beware | Sherpas in Blue Shirts

After a long, drawn-out, and scrutinized sale process, Verizon is acquiring Yahoo’s core operating business for ~US$4.83 billion in cash, marking a tumultuous fall for the once-iconic Internet giant, which once had a market capitalization exceeding US$125 billion. Verizon’s purchase includes “core” Yahoo, which spans search, email, advertising products, and the media business, including Yahoo Finance. It does not include Yahoo’s ~ 3,000 patents with an estimated value of over US$1 billion, which reportedly are being hived off through a parallel auction process. Beating out competing bids from a range of probables such as Advent International Inc., AT&T, Bain Capital, TPG, and Vista Equity Partners, the deal adds an important dimension to Verizon’s burgeoning digital media and advertising business, building on its 2015, US$4.4 billion acquisition of AOL.

Not surprisingly, numerous digital revolution themes are reflected in this deal.

  • The pace of disruption is unprecedented: We are increasingly witnessing companies achieving meteoric status, then being forgotten. While the demise of Blockbuster, Kodak, and RadioShack can be attributed to the innovators’ dilemma, fundamentally new technologies and consumption require companies to master the art of reinvention. Akin to running on a treadmill with a continually increasing pace or incline, being the poster child of one technology wave, even the Internet, is no guarantee of future relevance if you don’t reinvent and respond nimbly to market changes. Looking back at the history of the modern enterprise, there are only a handful of firms – think GE and IBM – that have reinvented themselves and continue to be relevant today. Verizon is prepping its arsenal as it looks to battle against the likes of Amazon, Facebook, Google, and Netflix for the fickle attention of an increasingly mobile consumer. It has made meaningful moves, but integrating AOL and Yahoo into its broader digital content and advertising narrative will be crucial for these bets to pay off.
  • Time-to-value is experiencing exponential contraction: The lifetime of technology companies (and enterprises in general) has shortened drastically. This has fundamental implications for business strategy, as modern leaders don’t have the luxury of time in the wake of quarterly Street expectations, fickle investors, intense competition, and extreme scrutiny. Companies need to stop overthinking about the long term, and instead focus on meeting shorter hurdles. There’s no longer room or relevance for a five-year horizon, as there’s no saying what the next wave of technology onslaught is going to be.
  • The law of gravity catches up: Yahoo, despite being ubiquitous during its heyday, is still a relatively young company born in 1995. Its downfall was hastened by the likes of Facebook and Google eating up the advertising pie. As the volume, variety, and velocity of competition keeps increasing, we may need to redefine the definition of long-term. For example, the common thread among Airbnb, Dropbox, Fitbit, Instagram, Pinterest, Slack, Snapchat, Spotify, Tumblr, Twitter, and Uber is that all are billion dollar companies (Unicorns) that didn’t exist 10 years ago. Yet, other than Salesforce – which started in 1999 and now has a market cap of over US$50 billion – most technology companies have failed to meaningfully scale, and have died a slow death or been acquired by a bigger fish.
  • Tactical re-engineering can only get you so far : Yahoo failed to adequately respond to challenges in its core business, and once caught off-guard, it responded with successive leadership changes (Marissa Mayer is its fifth CEO since 2009), employee layoffs (Mayer culled nearly 15 percent of the total workforce), and overvalued acquisitions made out of desperation (it bought ~58 firms since 2009, including Tumblr for US1.1 billion in 2013). None of these moves dramatically changed its fortunes, as they only tangentially addressed its core travails. Companies lacking a “real” asset will always be at risk. Yahoo, like Microsoft to a certain extent, missed the bus on social, mobile, and cloud. While Microsoft has belatedly begun to make amends under Satya Nadella, Yahoo remained stuck in a bygone era, underscoring the importance of looking out for future trends and placing bets early.

Going forward, we expect other marquee tech companies to also face the heat, whether it’s Apple trying to tackle plateauing iPhone sales, and perhaps pivoting to a rising enterprise business, Facebook/Google endeavoring to increasingly monetize their saturating mobile advertising moats, or Twitter attempting to answer its user acquisition dilemma. The future is uncertain, and there are no longer clear winners in the digital era.

Is Your Incumbent Service Ecosystem the Source for Lacking Performance Breakthroughs? | Sherpas In Blue Shirts

In three of my recent blogs, I’ve discussed the possible reasons as to why companies are only getting modest, incremental benefits from vetted, powerful new technologies such as cloud, analytics, cognitive computing and robotic process automation (RPA). These technologies should be making big differences – performance breakthroughs. As I’ve mentioned, we at Everest Group are studying this phenomenon – an important issue these days as these technologies continue to disrupt business. We’ve looked at whether the maturity of the technologies is the reason for their not delivering performance breakthroughs and whether it might be due to lack of talent. In this blog I’ll discuss the role of incumbent ecosystems as a possible culprit.

Take the situation of RPA in finance and accounting (F&A) processes as an example. It’s reasonable that, with our current state of technology and current adoption, 40 percent of the FTEs in the F&A function can and should be turned into a digital workforce. So the question is, would the current service provider resist the RPA technology because it would lose revenue (or in the case of internal services, the company would lose people and prestige)?

Let’s examine that in the most difficult situation, which is the third-party providers. If they charge on an FTE basis, as much F&A is done, why would they be reluctant to bring in the technology?

We find that today almost all new F&A bids for work have an RPA (robotic automation) component. And if you go to an Accenture or a Genpact delivery center, it’s very clear that they have an aggressive program to implement automation. So, yes, they could resist it in existing contracts (and the same could be said for internal services).

But this alone doesn’t seem to be a sufficient answer to the question of why companies are not getting performance breakthroughs. Why aren’t they getting the step change in delivery that they could be getting?

Is it a conflict of interest? No. That seems a hard argument to make because service providers are actively implementing the RPA technology.

In my next blog, the final one in this series, I’ll reveal the answer to what’s causing the phenomenon of powerful new technologies not delivering on their promise of performance breakthroughs.

Digital Transformation: How to integrate UX and Agile Teams | Sherpas in Blue Shirts

The digital services market is seeing a lot of traction, with technology companies acquiring digital and creative agencies to expand their digital portfolio. A modern digital services provider is continuously adding services into its digital portfolio, such as social, mobile, analytics, and cloud. Digital agencies help these technology providers build expertise in customer insight, user interface (UI) design, and campaign design. Hence, digital acquisitions help service providers expand quickly, and compete to grab a larger pie of the digital services market.

This is leading to a new disruptive model where customers get creative and seek business strategy from one firm instead of multiple agencies and consulting firms. However, the integration between consulting, design, and system development/deployment is harder to achieve on real customer engagements.

The new digital landscape is making a significant impact on traditional delivery models. Most organizations have adopted agile and DevOps models to help development and operation teams deliver with higher speed and efficiency. The focus on digital and design thinking is pushing organizations to think through new models to integrate user experience (UX) with agile delivery teams.

Traditionally, there has been little overlap between UX and development teams, and both teams have operated in silos. In order to provide digital capabilities, service providers are setting up design studios to ideate and prototype digital solutions for clients. This requires UI designers, solution architects, and developers to quickly prototype a solution to test feasibility before piloting the solution.

UX professionals might find it difficult to understand and collaborate with agile teams. UX designers typically focus on laying out the entire design in one go. In contrast, development teams focus on creating a “Minimal Viable Product” using agile methodology.

Historically, enterprises have adopted an internal agency approach wherein the UI designers are allocated to projects based on their area of specialization. But, this model may not be best suited in the new digital world, wherein UI designers and development teams need to work in tandem to quickly deliver sprints. In cross-functional teams, UI designers will have to be closely aligned to the agile teams for digital transformation projects.

There are several ways enterprises can address some of these challenges:

  • Educate UI designers on agile design principles
  • Require the UI team to collaborate closely with agile teams to iteratively develop new wireframes and designs
  • Ensure the agile team incorporates design principles in their development methodology to deliver an exceptional customer experience
  • Design management by objectives (MBOs) for both UI designers and agile team members on the overall success of the project, rather than on individual design or software delivery, to deliver maximum value

Enterprises that are able to think ahead and focus on solving these team integration challenges will be able to reap the most benefit from an integrated digital environment. As I see it, enterprises have barely started with DevOps! So the cultural shift to DevOps might need to be even more dramatic, as it now needs to integrate design as well!

How can we engage?

Please let us know how we can help you on your journey.

Contact Us

"*" indicates required fields

Please review our Privacy Notice and check the box below to consent to the use of Personal Data that you provide.