Ukraine IT Sector: Resilient, Agile, and Hopefully Here to Stay | Blog

April 14, 2022

The Ukraine IT sector has grown as a result of, and not despite, its humble, post-Soviet origins, and characteristics of agility and resilience appear to be serving it well. Read on as we share the viewpoint of our expert who traveled to Ukraine after the dissolution of the Soviet Union in this blog.

In March 1992, four months after the dissolution of the Soviet Union, I traveled to Ukraine to attend a hastily convened conference on the liberalization of post-Soviet telecommunications in the Commonwealth of Independent States. Delegates flew into Simferopol on a Swiss Air charter, and we took a rickety bus ride across the Crimean Peninsula to Yalta, the site of the eponymous wartime conference.

The conference was chaotic but enlightening: Soviet telecommunications had been so Moscow-centric that at independence, Ukraine did not have a singular, state-owned telecom carrier and virtually no direct international circuits. Disparate local networks loosely managed by the Ministry of Transportation and Communications were spread across Ukraine’s 22 administrative districts. These networks became Ukrtelecom in 1994, but outdated and inefficient fixed-line service was overtaken by rapid mobile take-up from the mid-1990s.

The results? A generation of Ukrainians grew up with mobility as their default. And the legacy of decentralized infrastructure led to a fragmented internet marketplace with ten or more internet service providers. Mobility and decentralization spawned an entrepreneurial and healthy, if not spectacularly large, IT services sector that now has some 290,000 professionals – 79% of them “individual entrepreneurs,” that was worth over $6.83 billion in export revenue in 2021, according to industry association IT Ukraine.

The Ukraine IT sector, innately agile and resilient, was in many ways prepared even more thoroughly for the dislocation caused by the Russian invasion, having endured 20 months of pandemic-enforced remote working. Anecdotal evidence, popping up in podcasts, on LinkedIn, and in mainstream media, suggests that the Ukraine IT sector is very much still working. Companies like Intellias and Sigma Software in Lviv, GeeksForLess in Mykolaiv, Reface in Kyiv, and many more, have contributed, according to IT Ukraine, quoted in an April 6 article on DOU.ua, to “almost 85% of [IT] companies operat[ing] in a normal business rhythm.”

How long the Ukraine IT sector can maintain that normal business rhythm, of course, remains uncertain. While some look to post-war opportunities in an independent Ukraine, created by the outflow of business from Russia and possibly Belarus, the current reality is that the reduced appetite by foreign businesses for risk and the execution of business continuity plans have meant that work has started to move outside Ukraine.

That said, I expect a significant share of work that is currently being delivered, and that can continue to be delivered remotely, will remain longer-term with Ukrainian companies or contractors, irrespective of whether specialists are operating in western Ukraine or outside of the country.

Indeed, Lviv IT Cluster, a body representing business, academia, and local government, claims that upwards of 40,000 IT specialists have relocated to Lviv in western Ukraine since the invasion, swelling the available talent headcount in the city to between 70,000 and 100,000. For now, internet and power in Lviv still function, and as long as they do, the Ukraine IT sector will find a way to continue its normal business rhythm.

To discuss the Ukraine IT sector further, please reach out to [email protected] or contact us.

Learn more about the current impacts in the Ukraine region in our LinkedIn Live session, How to Manage the Ukraine-Russia Impact on Service Delivery.

How to Manage the Ukraine-Russia Impact on Service Delivery | LinkedIn Live

March 10, 2022

LinkedIn Live

How to Manage the Ukraine-Russia Impact on Service Delivery

March 10, 2022 |

8:30 AM CST | 9:30 AM EST | 2:30 GMT | 8 PM IST

The service delivery ecosystem has been disrupted in nearly every region of Ukraine and its bordering countries such as Poland, Romania, and the Baltic States in the Central and Eastern Europe (CEE) region. As businesses move into recovery mode, what do they need to know and what can be done now as the conflict persists?

Everest Group and the Shared Services & Outsourcing Network (SSON) hosted a LinkedIn Live event to discuss the effects of the Russia-Ukraine war on service delivery and actions global business services / shared services organizations, enterprises, and global services firms should take as they immediately recover and plan for the coming months.

Watch the replay of the LinkedIn Live session to learn:

Impacts of the conflict on service delivery in Ukraine and the broader CEE region
Key actions and measures for enterprises that already have or are considering investments in Ukraine
Recovery plans to address the various scenarios of the conflict

Our Panel

Julian Herbert

Vice President

Everest Group

Barbara Hodge

Global Editor-in-Chief

Shared Services & Outsourcing Network (SSON)

Janusz Dziurzynski

Global Information & Digital Technology Manager

BAT

Deborah Kops

Principal and Co-founder

Sourcing Change

Eric Simonson

Managing Partner

Everest Group

Will Empty Call Centers Stay Empty? One Historical Example Says Not | Blog

December 2, 2020

The established delivery model of the customer experience management (CXM) industry has adapted quickly to the pandemic, with Work From Home (WFH) the norm for a workforce accustomed – until nine months ago – to working in offices, and the increasing use of digital technology to replace or supplement some human interactions. What does a historical example suggest will happen to CXM after COVID-19?

I’m never sure whether historical perspectives can teach us how to do things better, or whether they are merely of interest for interest’s sake, but there is an echo of the challenges facing the CXM industry in the evolution of the telephone exchange after the Spanish Flu pandemic of 1918-21. Telephone exchanges were reliant on dozens, even hundreds, of operators sitting in close proximity at switchboards, taking calls from customers and manually connecting them with other customers. They were the call centers, literally, of their day.

The telephone had been marketed to homes (in the US, at least) for a host of reasons. A famous 1910 ad for the Bell Telephone Company of Missouri entitled “When in Quarantine” promoted the telephone as a way of allowing life to continue as near normally as possible in an epidemic, at a time when smallpox, diphtheria, influenza, TB – take your pick – were common. By 1918, in the middle of the Spanish Flu pandemic, US phone operating companies were begging customers not to call unless absolutely necessary. The operating companies faced the dual challenge of increased demand driven by the industry’s successful marketing and inadequate delivery, caused by sickness and the enforced home quarantine (up to a third in some US cities) of their skilled workforce.

Today’s CXM companies have responded to the coronavirus pandemic in two ways that mark them out from the telephone companies of 100 years ago: First, they found ways within two or three months, to allow 70% of employees (according to Everest Group estimates), to work from their homes; second, they were able to offload some of the extra demand to technology (chatbots and interactive virtual agents), or to call centers in locations less affected by restrictions (see Navigating Uncertainties and Building Operational Resiliency: Customer Experience Management (CXM) State of the Market Report 2021 for details).

But as the promise of mass vaccination heralds the end of the COVID-19 pandemic, there may be parallels between the CXM industry of today and the telephone exchanges emerging from the Spanish Flu in the early 1920s. Office estates stood then, and stand now, underutilized; and proven technologies capable of replacing humans were and are available. You could be forgiven for thinking that the post-pandemic telephone company of 1920 would have pushed to minimize dependence on humans and to shift to an operating model resilient against future disruption. The technology to replace highly trained women making the connections manually had by then been in existence for 30 years. Seats that had been emptied between 1918 and 1921 would surely not be filled again.

But fill they did. When the epidemic petered out, telephone companies filled the spare seats in their exchanges to capacity. The number of both exchanges and operators sitting in exchanges doubled and quadrupled respectively – in the UK at least – between 1921 and 1951. Why?

My guess is two reasons. First, the technology of the day offered the benefit of being resilient, of not being human, but became widely available at a time when labor was priced at a level that made gains from capital intensive investment in technology merely marginal or non-existent; it was just as cheap to pay humans as it was to buy machines. Second, the desire to return to normal was stronger than the desire to safeguard against the influenza’s return. People just went back to work and as demand for telephone services expanded, so did the number of exchanges and exchange operators.

The situation facing CXM companies and their employees today is not so different: recession and mass unemployment logically benefit sectors that need to employ large numbers of people at the lowest achievable cost. The CXM industry will refill its seats in many offshore locations because, history tells us, most people will just go back to work.

CXM companies could actually end up recruiting more agents overall, and more cheaply, because some of those seats are in, or close to, employees’ homes – in effect, earnings for some agents will be discounted by the cost of commuting. The opportunity this presents for onshore expansion for enterprises looking to outsource for the first time is considerable. Those CXM companies able to recruit, train, and retain agents willing to work this way will benefit from a tech and brand-savvy, culturally proximate workforce at significantly lower operating costs.

In the end, the demise of the human operator in telephone exchanges in the industrialized world was brought about by the availability of electronic technology in the late 1950s. The new technology promised vastly more capacity and speed, and lower operating costs in a period of post-war economic boom, when unemployment rates were at historic lows and labor costs were rising. Let’s hope this time around, the confluence of technology and economic growth doesn’t take 30 years.

Have thoughts on what call centers will look like post-pandemic? Reach out to me julian.herbert@everestgrp.com to share them.

Atos Announces Group Management Committee – All Change or More of the Same? | Blog

March 26, 2020

On February 19, 2020, the day its annual results were announced, Atos revealed a new Group Management Committee (GMC), replacing the Group Executive Committee. The announcement was notable for the absence of one or two high profile former Syntel executives from the list of the 20 people making up the committee. Is Atos reverting to type or preparing for global ambition?

At the time of the announcement of the new GMC, eight of the 20 executives appointed to the GMC, were also being appointed to new roles. These changes reflect Atos’ focus on five regions (three of them European) and six industry verticals, as part of its broader strategy to become a customer- rather than services-centric business. All 20 executives are internal appointments with an average tenure at Atos of about 12 years; 12 are French nationals, and all but one are European.

We might be forgiven for thinking this looks like a retrenchment, with new CEO Elie Girard turning to a cohort of executives with connected educational backgrounds (at least half are products of one of France’s Grandes Écoles) and career experiences to deliver a strategy that focuses on core verticals in Europe, with a bit of North America. This impression is exacerbated by the departure of leaders like Ashok Balasubramanian, Global CTO, Business and Platform Solutions, who came into the business from Syntel, and the side-lining of Sean Narayanan SEVP, Head of Business and Platform.

But the strategy is over 18 months old, arguably evolving prior to the Syntel acquisition in mid-2018 though only formally articulated by former CEO Thierry Breton in his Investor Day presentation in January 2019 as the “Road to Agile Competitiveness & Excellence” or RACE. It combines a vertical market strategy with the global digital ambitions that underpinned the Syntel acquisition and the spin-off of Worldline.

The acquisition of Syntel saw Balasubramanian, Narayanan, and Rakesh Khanna assume high-profile positions at the company, but this was a break with the norm. Atos has always been a business run from France, focused on European markets, with a largely French or European senior management team. While the Syntel acquisition has defined Atos’ strategy, it is not defining how the strategy is delivered.

There are two interesting recent hires, however: Robert Vassoyan arrived from Cisco in March 2018 and Jean-Philippe Poirault joined Atos only six months ago from AWS’ telco division, after a 20-year career with telecoms equipment vendors Alcatel-Lucent and Ericsson. Both bring experience grounded in selling hardware to enterprises and telcos respectively. The same is arguably now true of all the heads of industry, who have backgrounds with HP, Bull, and Siemens.

So, Atos is delivering a digital and cloud strategy, directed by a sales-focused management team, to address its flat revenue and margin growth. In the immediate term, the question has to be whether a management team that does not exactly scream diversity and, with the exception of two recent hires, has a minimum tenure at Atos of five years, can embrace the fresh thinking required to deliver the global nature of RACE ambition.

Coronavirus Service Delivery Update | Blog

March 6, 2020

This is the third in a series of blogs that explores a range of topics related to these issues and will naturally evolve as events unfold and facts reveal themselves. The blogs are in no way intended to provide scientific or health expertise, but rather focus on the implications and options for service delivery organizations.

These insights are based on our ongoing interactions with organizations operating in impacted areas, our expertise in global service delivery, and our previous experience with clients facing challenges from the SARS, MERS, and Zika viruses, as well as other unique risk situations.

Over the past two to three weeks, media focus has shifted away from China, where the growth rate of new infections has slowed markedly. Hubei province remains the epicenter of the disease, but 8 of the 10 provinces that make up that core group of provinces where the disease has been most prevalent, have seen no new cases for several days. Hubei and the coastal province of Zheijang alone among the 10 are reporting new positive cases. There have been no public reports of service delivery interruption from any of the 44 Global In-house Centers (GICs) inside the core group of 10 provinces. Indeed, the last week has seen a steady return to work outside Hubei province.

The new global focus is on a group of high-risk countries including South Korea (Daegu and Cheongdo), Iran and Italy (specifically the whole of the north of the country and not just the provinces of Lombardy and the Veneto), and on a secondary group comprising Japan, Singapore, Laos, Thailand, Vietnam and Myanmar.

Data from Everest Group Market Intelligence (EGMI) shows that there are 470 Global Inhouse Centers (GICs) – or shared services centers – and 196 service provider delivery centers located in China and across these additional nine countries. Based on travel advisory and media reporting of regions that are more or less severely impacted, China still has the greatest exposure to delivery risk, with 73 delivery centers in high impact areas, and a further 272 in areas that are likely seeing little or no impact. Italy has 14 service provider delivery centers in the high-risk Northern provinces. South Korea has one or two GICs in Daegu, the city most affected by coronavirus infections. See details by country and sector in the two tables below.

In view of restrictions imposed by governments, or companies implementing business continuity protocols, or simply out of fear of contracting the virus through proximity to large numbers of people, it is highly likely that most, if not all, of the delivery centers in high impact areas are closed and will remain so until further notice.

Many multinational corporations with offices in China and Hong Kong have imposed either complete travel bans (Amazon, Apple, Citigroup, Credit Suisse, Ford, Goldman Sachs, Google, HSBC, JP Morgan, LG, Salesforce) or have banned non-essential travel (GM, Johnson & Johnson, P&G, PwC, Siemens) to and from mainland China, Italy, Japan, and South Korea. In some cases, cross-border travel has been suspended indefinitely.

The same imposition of a work from home policy for all staff of multinationals in China and Hong Kong, which is beginning to ease, is now the norm for many businesses in Milan, the capital of Lombardy. The cancellation of meetings or conferences involving even modest numbers of international participants is now a daily occurrence.

The outward spread of the disease has also started to impact major service delivery locations, especially India, which comprises 40 percent of the world’s global services delivery capacity. As of March 6, 2020, 30 Covid-19 cases have been confirmed in the country. Initially, only passengers from high-risk countries were being checked at airports, but the government has implemented universal screening for all passengers flying into the country. Multiple companies such as Cognizant, PayTM, Wipro, and KPMG have temporarily closed select offices in Delhi NCR and Hyderabad and stepped up their employee safety efforts. In addition to encouraging the remote working model, these efforts include disinfecting and sanitizing office spaces, putting hand sanitizers at entry and exit points, discouraging staff from conducting physical meetings, restricting the entry of outsiders in office premises and distributing N95 masks amongst employees.

We continue to monitor these locations.

Visit our COVID-19 resource center to access all our COVD-19 related insights.

Impact of Coronavirus on Service Delivery Is Limited But Ongoing | Blog

February 13, 2020

This is the second in a series of blogs that explores a range of topics related to these issues and will naturally evolve as events unfold and facts reveal themselves. The blogs are in no way intended to provide scientific or health expertise, but rather focus on the implications and options for service delivery organizations.

To date, over 99 percent of the officially confirmed total of 45,000 (61,000 if the Chinese authorities’ newly expanded definition is used) Covid-19, or Coronavirus, cases are inside China. The impact of the virus is pronounced in a core group of ten Chinese provinces: Hubei, where the virus originated, the six neighboring provinces of Shaanxi, Heinan, Anhui, Jiangxi, Hunan, and Chongqing, plus the adjacent coastal provinces of Guangdong, Fujian, and Zheijiang. As of February 9, these areas account for 90 percent of the total reported confirmed cases and 92 percent of China’s new cases.

While supply chain organizations in these provinces are facing severe impacts due to closures, we believe the level of exposure to risk of disruption for service delivery organizations is limited because the service delivery centers are largely servicing internal customers, which are themselves operating at reduced capacity or are closed completely until further notice.

Data from Everest Group Market Intelligence (EGMI) shows that there are 51 Global Inhouse Centers (GICs) – or shared services centers – and 20 service provider delivery centers located in these 10 provinces. Of the seven GICs in Hubei at the epicenter of the outbreak, two, owned by FedEx and UPS respectively, are thought to deliver internal shared services to domestic and near-Asian employees. The rest are technology research or innovation centers.

In view of restrictions imposed by the Chinese government, provincial governments, or companies implementing business continuity protocols, it is highly likely that most, if not all, of these delivery centers are closed and will remain so until further notice.

Examples of the restrictions imposed by the authorities or by companies themselves that have been in place for at least two weeks and look set to remain include:

The Chinese government extended the New Year holiday, which began on January 24, to February 2. Authorities in in 24 provinces and cities further extended closures by a week to February 9, and many businesses look set to remain closed the week of February 10; authorities in Beijing have urged businesses to adopt flexible working policies, including working from home
Places of business in Hubei will remain closed until February 15 at the earliest
With extensive internal travel restrictions in place, many workers who had returned to their home provinces for the New Year holiday are now unable to return to work
All multinationals with offices in China and Hong Kong have imposed either complete travel bans (Amazon, Ford, Google, HSBC, and LG) or non-essential travel (GM, Johnson & Johnson, P&G, PwC, and Siemens) to and from mainland China
Many multinationals have imposed a work from home policy for all staff in China and Hong Kong until further notice; in some cases, this policy has been backed by widescale closure of offices and facilities
Some businesses have cancelled meetings or conferences involving large numbers of international participants, including, for example, Citibank’s annual investor conference in Singapore, ZTE’s press briefing at MWC in Barcelona, and Ericsson’s attendance at MWC in Barcelona.

As an example of specific defensive measures businesses are taking, all businesses and public facilities in Singapore, in accordance with government guidelines issued on February 10, are now:

Scanning people entering and leaving buildings for raised temperature
Increasing the frequency and intensity of cleaning
Making hand sanitizer widely available
Requiring all visitors to make a health and travel declaration
Issuing face masks to staff who interact with members of the public

It is possible that some enterprises will use the disruption caused by the outbreak as justification for cost cutting and capacity reduction, but we don’t yet see clear evidence of that.

Visit our COVID-19 resource center to access all our COVD-19 related insights.

Ongoing Coverage of the Service Delivery Impacts of Coronavirus | Blog

February 3, 2020

Ongoing Coverage of the Service Delivery Impacts of Coronavirus

Coronavirus, or 2019-ncOv, creates many uncertainties for organizations engaged in the delivery of business process, IT, and engineering services. While the initial focus is the delivery of services from China, geographies such as India and the Philippines (and perhaps others) may also become areas of increased concern. Global service delivery organizations are typically large and involve extensive international mobility, increasing their risk exposure; at the same time, they are also leaders in virtual interactions via phone, email, and video.

This is the first in a series of blogs that explores a range of topics related to these issues and will naturally evolve as events unfold and facts reveal themselves. The blogs are in no way intended to provide scientific or health expertise, but rather focus on the implications and options for service delivery organizations.

Everest Group recently published a Risk Radar update on China related to coronavirus. With this update, we increased our risk rating for service delivery in China from “low-medium” to “medium.” Members of our Locations Insider, Catalyst, and Market Vista memberships can access the report.

We recommend that business process, IT, and engineering services firms migrate their critical operations to alternate delivery locations and promote the use of teleconferencing and work-from-home policies to ensure business continuity with minimal impact to operations. Additionally, companies should implement precautionary measures in compliance with the government guidelines.

In the coming days, we will publish additional blogs covering a range of topics related to this issue. At this point, mortality rates appear low, so the main concern may continue to be basic availability of business operations in China and implications on travel, families, and in-flight initiatives.

Visit our COVID-19 resource center to access all our COVD-19 related insights.

Upskilling and Reskilling: Is It Just Good L&D or Something Different? | Sherpas in Blue Shirts

December 4, 2018

Is upskilling and reskilling little more than a thinly disguised attempt by HR departments to rebrand Learning and Development (L&D)? The answer, as one practitioner pointed out at a conference in Poland, is “no.”

I recently presented to the Association of Business Services Leaders (ABSL) Chapter in Krakow, Poland about the talent acquisition challenges that digitization poses to Shared Services Centers (SSCs.) The argument runs roughly like this:

Robotic Process Automation (RPA) is replacing human agents in transactional roles, freeing up capacity in the workforce. This can mean lay-offs at worst, or unqualified internal candidates reapplying for roles at best
There is greater demand for people with new skills both technological (design thinking, robotics, autonomics, analytics) and soft (pattern-recognition, complex problem solving, leadership, intuition) than can be met by simply recruiting externally
As automation takes care of transactional processes, organizations can enhance the value of their brands and the service they provide by having more people in roles which emphasize first contact resolution, emotional intelligence, listening, etc.
This new value chain focuses on outcomes: people are measured against quality of outcome rather than throughput (for instance, a shift from average handling time to CSat), which in turn requires new management thinking around staff incentives, culture, and business model.

The data in the presentation was based on the Everest Group survey of 81 SSC leaders in Poland, the Philippines, and India, published earlier this year (see “Building a Workforce of the Future – Upskilling/Reskilling in Global In-house Centers.”)

So obvious was the message that emerged from the survey that one or two skeptics in the audience questioned why retraining that part of the workforce most affected by the trend of automation was even worthy of discussion. Is it not just good L&D practice? And surely survey respondents would not admit to anything other than good practice when asked the question?

Not quite true: there were survey respondents, albeit no more than 10 percent of them, who said that they were not planning to undertake upskilling and reskilling as a means of addressing talent shortages. A small majority, 58 percent, said upskilling/reskilling was the highest priority in addressing this same problem, while 10 percent, possibly the same nagging 10 percent, said it was a low priority.

The discussion continued after the presentation. Without experience as a practitioner, I wrestled with an explanation as to why this 10 percent stubbornly refused to fit the theory. Thankfully, the HR head of a Krakow-based SSC rode to my rescue and gave the answer.

This is the group, she said, which understands that reskilling and upskilling is indeed good L&D practice but remains wedded to external hiring of permanent and temporary staff. It is the group that fails to see that existing employees must be recognized as the key pool to meet scarce talent requirements in SSCs.

Her explanation, thankfully, echoed our contention that successful application of reskilling/upskilling to talent acquisition needs:

Senior leadership backing to ensure adequate resource and profile within the organization
Implementation of a skill-specific talent acquisition strategy to identify both critical areas of shortage and those most suitable for reskilling/upskilling
Quick roll-out of pilots in critical areas of shortage to build confidence and to learn
Breaking down of functional barriers and giving employees wider exposure to functional roles
A combination of effective duration and appropriate method (job rotation, on-the-job training, mentoring, peer-to-peer learning, and specialist external providers)
Clear communication of career paths, internal opportunity, incentive, and compensation
Patience and persistence!

She explained further. In her experience, the real difference between reskilling/upskilling as good L&D practice and reskilling/upskilling as a talent acquisition solution is simple. The talent acquisition solution approach is not considered aspirational, “something that HR does,” or nice to have. Rather, it is a strategic imperative.

How nice to have somebody who really knows what they are talking about answer a difficult question on my behalf!

Marketing Services: You Can’t Outsource Creativity…Can You? | Sherpas in Blue Shirts

May 2, 2018

At the Procurecon Indirect conference in Copenhagen a couple of weeks ago, three senior procurement people from different corporations approached me with their woes about the lack of control and the high levels of procurement indiscipline their marketing departments exhibit. They wanted to know how and if Everest Group could solve the problem of rogue spend with external agencies for marketing services. It’s an interesting and very valid question.

Marketing services is one area in which many enterprises’ Chief Procurement Officers (CPOs) have had neither the evidence nor the mandate to challenge established thinking. Furthermore, unlike IT and non-core business process outsourcing alternatives that have been around for 20 years, outsourcing options for marketing didn’t exist until recently. Now that they do, CPOs are sensing the opportunity, in partnership with Chief Marketing Officers, to transform the way marketing services are delivered.

Benchmarking Can Help, but…

Benchmarking can certainly provide rate-card analysis, SLA review, a breakdown of the cost-stack, and any number of other elements from the contract, to give a view of pricing and equitable contracting. But there are problems:

Marketing services engagements are often part of the long-tail of spend, ad hoc in nature, sometimes not subject to a formal contract, and often worth not much individually. Benchmarking these could cost a CPO several-fold more than would likely be saved
If a contract did exist, benchmarking would drive the discussion between a procurement team wanting to understand whether marketing services suppliers are delivering value and a marketing department wanting to defend the status quo. Typically, however, benchmarking informs the commercial negotiation between client and supplier
The nature of marketing services engagements are sometimes niche and specialist, based on knowledge of a vertical or channel acquired over time. Providing meaningful points of comparison is likely to be difficult
Buyers will doubtless maintain that it is impossible to benchmark creativity.

But, as one of my Procurecon conversations suggested, the issues for CPOs aren’t high levels of spend or a desire to be in control of every spending decision. Rather, they’re concerned about fragmented spend and lack of overall visibility.

5 Steps CPOs Can Take

They can begin by promoting the procurement function as an exemplar of best practice by pointing to examples in other spend categories of how procurement has driven cost savings, improved quality, or stimulated innovation. Doing so establishes CPOs’ leadership credentials.

Next, they can introduce some level of technology that will deliver at least visibility into spend. Several speakers at the conference cited the need for the procurement process to generate data to increase efficiency. Many CPOs without a mandate for category management seem reluctant to push for integrated procure-to-pay or source-to-contract systems. But less invasive approaches, such as customized applications in Salesforce, could still generate useful information about spend categories, transaction volumes, and whether suppliers are being contracted by separate groups within an enterprise.

Third, they can consider portfolio rationalisation, against these rationales:

unravelling large numbers of small, often informal arrangements is hard, but the disconnected procurement of “specialized” or creative skills by separate parts of the business can produce a rate-card premium of up to 25 percent
buyers may have contracted long-term rates for specialized skills; in this age of rapid obsolescence, the skills may have become commonplace, but the long-term contracts continue to charge contracted premiums
a specific resource requirement may indeed be specialised for a provider with low capability in a particular area, but may fall into another provider’s delivery sweet spot; in our experience, transitioning such skills to a best-fit provider can save between 1 percent and 3 percent of contracting costs.

Next, they can investigate alternatives. Arguably, marketing services and creative agency spend are still immature enough to offer the opportunity to arbitrage. And providers with capability are rapidly emerging. Accenture has acquired over 20 agencies since 2010. Onsite digital design agencies such as NuFu, Oliver, and Spark44 have a growing impact. Every major service provider – Atos, Cognizant, Sutherland Global, Wipro, etc. – is investing in or acquiring digital agencies, and these investments will allow enterprises to consider accessing marketing services alongside a suite of outsourced IT or business process services.

Finally, they can benchmark the status quo with an alternative. Can a sourced solution give the enterprise not only a cost advantage but also faster delivery, access to global talent, measurable outcomes, and real transparency?

So, CPOs, there’s little reason to ask yourself “how do I do it?” Instead, the real question is, “why wait?”

You can find out how Everest Group helps enterprises optimise global procurement operations here. We also help enterprises rationalise complex portfolios of external suppliers.

Bitcoin is to Blockchain What A5 was to GSM – A Parallel from Digital History | Sherpas in Blue Shirts

March 9, 2018

The mobile communications industry provides a historical example of how it solved a real problem with cryptography, overcame complexity, and transformed a market once viewed as a niche into something the world takes for granted. Blockchain has a way to go.

Blockchain is no longer just Bitcoin. Medical records, claims handling, fraud checking, supply chain management, national identity records and personnel background checks: all need to access data from multiple sources between multiple entities, in a secure, efficient way.

But all technology adoptions face challenges. An article by Iansiti and Lakhani in the February 2017 edition of Harvard Business Review presented that complexity and novelty are the two principal challenges. Complexity is defined as “the number and diversity of parties that need to work together to produce value with the technology.” Successful adoption requires a huge effort of co-ordination. The more parties involved in the technology ecosystem, the longer it takes.

Novelty translates as “is this a solution looking for a problem?” In other words, does the technology solve a real problem, or one that’s manufactured to accommodate the technology? The ecosystem needs to understand the problem and recognize the solution.

With that stage-setting, let’s take a look at an historical precedent that shows how a complicated technology that required multi-party cooperation and adherence to a common standard overcame complexity and addressed novelty to make the long journey from concept to successful adoption.

GSM: Global System for Mobile Communications, nee Groupe Speciale Mobile

In February 1987, the European Conference of Postal and Telecommunications Administrations (CEPT)published the first draft of a specification for mobile telephony, GSM, which had been conceived in 1982. At that time, mobile radio was a well-established, if niche, expensive, and technologically imperfect phenomenon. CEPT recognized that business people needed to use a phone connected to a public telephone network while on the move, and sought to improve its use in several ways.

Because phone call privacy was critically important to business users, CEPT specified a stream-cipher technique called the A5 algorithm (“A5”) at the February 1987 meeting. When the first GSM networks were launched commercially four years later, users simply understood that with a GSM phone, it was impossible for anybody with a $50 Tandy scanner to listen in on their phone calls. Cryptography had found a receptive marketplace, and the prevailing term “digital” sold the idea that conversations on the move were private and secure.

Because successive organizations that promoted GSM lined up a pool of telecom operators willing to buy, technology manufacturers organized themselves into consortia to share the risk, and invested heavily in turning GSM into physical equipment in just four years. National regulators then set the conditions for the licensing of competitive carrier models. With these moves, GSM had overcome complexity in its ecosystem “to produce value with the technology.”

Five years after its commercial launch in Finland in November 1991, GSM with A5 had been adopted by 200 carriers in 100 countries. Just under half of the world’s mobile phone subscribers were connected to a GSM network by 1996. By the end of 2008, when Bitcoin was creeping onto the world stage, an evolved set of standards based on GSM had become a de facto global standard for mobile.

Users of most of the world’s five billion active mobile phones don’t know or care why A5 was specified, that it can now be processed in real time by security services, or that it has been routinely hacked by cryptographers since the late 1990s. But in recognizing that a solution was required for an easily understood problem – air-interface privacy – CEPT had kick-started a market, assisted by cryptography, with scale and application way beyond the problem which the technology originally solved.

But, even with a highly orchestrated ecosystem, it had taken 26 years.

Back to Blockchain

Blockchain technology has arrived, and proofs of concept and enterprise-specific applications abound. IBM and Maersk will establish a joint venture to develop a trade platform for the global shipping industry. Australia’s stock exchange, ASX, is deploying blockchain to replace its existing registry, settlement, and clearing system. Nation states following Estonia’s lead are considering using blockchain to build their entire e-government infrastructures.

Blockchain as a broad technology will certainly end up as a solution to thousands of parochial problems. But the back to the future lesson from GSM and A5 is that for Blockchain to emerge as a transformative solution on a global scale, it needs a single big ecosystem (banks?) to identify a single problem (interbank settlement?) and to adopt a single standardized approach (Ethereum? Ripple? Iroha? Corda? Quorum? Sawtooth? Et al?). That ecosystem must have convinced regulators at worst that the approach will be compliant, and at best that the approach is mandatory. It must then agree timelines for implementation and adoption, and stick to them.

Will it take 26 years? I guess we’ll all have to shine up our crystal balls.

To learn about our practical five-point framework for understanding business processes that are best suited to blockchain adoption, please see our November 2017 viewpoint, “Unblocking Blockchain Adoption“.

Announcing our inaugural conference: Everest Group Engage, The Pragmatic Edge: Designing Your Future. Learn more.

Author: JulianHerbert

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