Experts in the global services terrain
I recently had a chance to sit down with Infosys’ CEO and his team, and they shared with me their new/renew strategy. From what I understand, it resonates with where the market is heading. This is remarkable as it addresses the vexing problems and risks service providers now face in trying to change their business to address new models, new technologies and new customer expectations. It is always easy to drink the Kool-Aid, and I am definitely experiencing a sugar high. However, the Infosys strategy is one to watch as it appears to connect all the dots in a quickly evolving marketplace.
There are a number of things I find attractive about this new/renew strategy. First is the simplicity of its messaging. It’s easy to understand where they’re coming from and that they are focusing on their customers, not on Infosys like their past strategies. That in itself is powerful for customers’ understanding of what Infosys stands for and where they are heading. And it’s also powerful for the Infosys team to be able to understand what to focus on and what not to focus on. That resonates.
The new aspect
Second, I find the direction compelling. Clearly there is much in the market that is new. New technologies and new business models are driving the market and, when combined, are extremely powerful.
Digital changes how companies interact with their customers, and there’s nothing more powerful than that. Cloud changes the speed and agility and price at which companies can move. The consumption-based and as-a-service models allow companies to align services closely with business outcomes and only pay for services as they consume them. Taken together, these new technologies and business models are very relevant to where customers are headed with their business, and these new areas are capturing the growth in the services segment.
Infosys aligning itself with this direction makes perfect sense as they move to redesign their growth and maintain their leadership position in the services industry.
The renew aspect
This aspect of Infy’s strategy is equally powerful. There is a second set of technologies that allows providers to change the way they deliver services. I’ve blogged often about four of these technologies: automation, analytics, robotics and artificial intelligence. Providers such as Infosys are looking to harness these technologies transform their environment, lowering costs and making their existing services far more responsive than they’ve been before.
Customers are more demanding
So Infosys is tapping into the big themes in the marketplace. They’re leveraging new technologies and new models to connect the dots to new opportunities for growth. And they’re renewing their existing business by harnessing new technologies and capabilities to optimize their service delivery.
Underpinning the strategy is a sea shift in customer expectations. Enterprises are increasingly more demanding of their existing services and at the same time impatient to take advantage of new technologies and business models.
I like Infy’s new/renew strategy because I believe it is directly in concert with where we at Everest Group see the market moving – taking advantage of new technologies and rethinking how to optimize existing services. And it embraces the “old wine in old wineskins” concept I recently blogged about.
I think this strategy will position Infosys well. A word of caution: as an often-quoted lines goes, “Execution eats strategy for breakfast.” So we look forward to seeing how they execute in this marketplace.
Photo credit: Flickr
Despite changing market needs, key locations in Scotland, Ireland, and N. Ireland continue delivering value in the contact center space to the greater UK market. First off, these locations remain relevant in terms of the 3 C’s – cultural affinity, cost savings, and coordinates. But if you broaden the view, you’ll also see that the nature of the value derived from these locations continues to evolve, ensuring relevance into the future. Let’s take a closer look.
C#1 – Cultural Affinity: As with the rest of the market, about 83% of the traffic through UK nearshore contact centers involves voice-based interaction. Unlike the rest of the market, about 31% of such interaction involves supporting public sector needs. This combination underscores the draw for UK citizens to receive customer support from other UK citizens with a shared cultural compatibility. This dynamic, while most pronounced with public sector consumers, also resonates within banking, telecom, retail, travel, utilities, etc.
C#2 – Cost: UK nearshore costs remain compelling compared to operating costs elsewhere in the UK. Today ranging from 15-30% below that of locations in the southern UK regions, these nearshore locations are expected to continue offering favorable cost differentials for at least another 4-5 years. Further, this cost savings occurs in an environment with relatively low business and operational risk.
C#3 – Coordinates: Under coordinates, the most important element is the availability of talent. In cities such as Dublin, Glasgow, and Edinburgh, available entry-level and experienced talent in the areas of customer service, sales service, and order/payment services remains strong. In emerging delivery locations such as Derry and Limerick, similar skills exist, though fewer in number. However, these emerging locations typically have lower attrition rates, so talent volatility remains low. In the more mature locations, two sources keep the CC talent pool active, namely the influx of university populations and the growing base of experienced customer care professionals.
Beyond the core 3 C’s, the nearshore UK locations highlighted here continue to evolve their value propositions along with client requirements. One area involves voice interaction. Everest Group sees a future where the nearshore UK locations become increasingly specialized in complex customer voice support, with lower complexity interactions either moving to non-voice channels or to lower-cost offshore locations. This is especially true in the case of retail and telecom industry clients. We have also seen these delivery locations expand their scope of delivering value-added services. Activities such as customer retention and customer analytics are increasingly being serviced out of these locations. As evidence, over the past several years, spending on nearshore UK voice interaction has grown by 5-10%, notably above the global average of 4-6%.
The second key enhancement area involves expanded language capabilities. Across the region, we see many centers delivering services in the languages of Central and Eastern Europe, and to a limited extend, Asia. Whether Polish, Dutch, Norwegian, Lithuanian, and Hungarian, or Urdu, Hindi, Punjabi, and Mandarin, UK nearshore contact centers have expanded their reach beyond English-only populations to offer customers a more targeted and effective consumer experience.
Despite their relative maturity in the scheme of the contact center market, UK nearshore locations continue delivering value to clients and customers. The trick to staying relevant will be keeping the value proposition balanced between cost savings and differentiated capabilities and higher skill sets.
For more information, download a complimentary preview of our report, “Cultural Affinity, Cost Savings, Coordinates – 3 C’s of Targeting UK Contact Center Market.”
Three stoplights. Well, eventually four by the time I moved away in 1985. Also, a line of people each night around the new McDonalds for several days after it opened in the late 1970s. This was the situation in my hometown of Maryville, Missouri with a population of just less than 10,000 people at the time.
Small, rural town, right? Yes, it was in many ways. But it was also home to a university, Northwest Missouri State University, which was the first college in the U.S. to put PCs into every dorm room and a student population of about 5,000. The area was packed with PhDs and farmers quietly living the pleasant life in the middle of the country.
As the buzz about rural and domestic outsourcing has increased over the past five years, I have often wondered “Is this type of location a good candidate for a service delivery center?” To the best of my knowledge, it does not have a service delivery center of any notable scale.
To help answer questions like these, Everest Group is the research partner for RevAmerica, to be held in New Orleans on May 5-7, 2015. This is the only event focused on domestic sourcing in the U.S. and Canada.
The research report that we release at the event will analyze the trends in domestic outsourcing, looking at variations by location type across different functions (IT, business process, contact center), type of service provider, and other factors.
Although we are currently deep in the middle of collecting responses to RFIs and conducting interviews, we have been able to glean a few initial insights from the database of approximately 350 cities, which range from small, rural communities to tier 1 cities. Some of these insights include:
- The number of centers for domestic outsourcing is clearly on a growth trajectory and with a whopping 66% centers expecting headcount growth in next 3 years
- Some of this is in response to preferring domestic locations over offshore locations, but much is about creating a portfolio of locations to support increasingly diverse sets of work
- The typical size of a center is in the range of 100-500 employees; some centers are in the 1,000 employee range and are almost exclusively a long-term hub of an organization in a tier 2 location (vs. tier 3 or 4 or rural)
- For IT services, the key driver is largely around the presence of local educational institutions that offer computer science and technical training, and are willing to collaborate on helping shape that talent for the needs of technical employers. Having said that, IT is a function where more than half of the centers are using a mix of locally hired resources and landed resources (resources traveling from other parts of the world on work permit)
- Finally, two-thirds of the centers are single function delivery focused (i.e., IT or BP or CC) and couple with the fact that they are small, indicates that they have been primarily set-up to serve a specific need – serve a local client, tap into (small) specific talent pool at the same time gain cost arbitrage
We invite you to join us in New Orleans as we roll out the findings of this important study. We look forward to hearing your experiences.
With the rise of smart machines and robotic technologies replacing labor arbitrage, multi-sourcing becoming a norm, and “as-a-service” models increasing in adoption, the IT services (ITS) market is undergoing radical change. And it could wreak havoc on – or mean opportunities for – ITS providers nearing deal renewal time.
It’s abundantly clear to us that multiple hunters over the last few months have been eyeing big portions of the US$76.3 dollars in IT services contracts soon to be up for renewal. And if they’re not careful, it could mark the end of millions or billions worth of business for several companies. The verticals primarily at stake are BFSI, Healthcare, and Energy and Utilities, which have a combined share of more than 55 percent of the total pie.
But before we talk about how these providers can fend off their attackers, let’s take a quick look at the state of the market, per our recently released Report on Upcoming Contract Renewals (ITS) – 2015:
- BFSI continues to remain the dominant vertical in the total value of deals expiring in ITS; 94 percent of the deals in this sector are with large service providers (with revenue of greater than US$5 billion)
- Western Europe is the dominant market for expiring high value IT deals, accounting for 55 percent of the total number of expiring billion dollar deals
- Infrastructure services are included in the scope of more than 77 percent of the total value of ITS deals, and 55 percent of these deals are due to expire over the next year. Data center and network services are the primary components in more than 70 percent of the total expiring ITS contracts
- Pure application services (AS) comprise 25 percent of the total value of the entire ITS pie. Large service providers of BFSI and Travel and Transport support services will drive 60 percent of the total AS renewal spend over the next two years, concentrated primarily in North America and Western Europe. In fact, the highest valued IT deal expiring in the next two years is a pure AS deal with a French Travel and Transport provider
With so much renewal money up for grabs, who will win the hunting game? A David versus Goliath story is currently playing out in the deal renewal industry. Incumbent service providers want to expand their footprints across clients and fend off the attacking competitors. Attackers are desperate to penetrate newer opportunities by eating away share from the incumbents.
The reality is, the incumbents have a lot more to lose than the attackers. Given high anti-incumbency sentiment in the deal renewal market (~40 percent of deals are not renewed with incumbents), these providers need to take a serious look at their traditional deal renewal strategy, taking into consideration:
- Enterprises are no longer willing to sign up large IT services deals spanning multiple years due to factors such as vendor lock-in and lack of transparency; as a result, best-of-breed solutions may emerge as the better option
- These massive service contracts have tapered off over the last decade, since customers are now more willing to disaggregate the requirements into different IT towers or services
- Enterprises realize that these large deals may not be able to flex to changing business requirements.
At the same time, attackers can’t reduce their efforts and investment in winning new clients. Despite all the challenges with incumbents, enterprises typically default to them fearing cost of change management and disruption. The onus lies on the attackers to demonstrate value beyond niche positioning or price aggression. Attackers need to invest early in building credibility with the enterprises. They need to communicate value in tangible terms beyond cost savings. And they need to make themselves visible to gain mindshare of their target clients. It’s a cultural overhaul where attackers must promote both their vision and their delivery capabilities in the market.
It is difficult to predict what lies ahead in this hunting game. But there will certainly be winners and losers. If you’re an IT service provider, will you be one of the winners?
A famous teaching of Jesus explains that it’s a mistake to pour new wine into old wineskins because it will burst the skins and both the wine and the wineskins will be ruined. New wine belongs in new wineskins. I think we’re seeing this principle playing out in technology – where the consequences are profound.
New wine expands and grows fast; so it requires a supple, pliant container to allow for that expansion. Old wine is stable and mature; it does better in a stable, consistent environment.
For the most part, now that the cloud experiment is over, we see that new technologies and functionalities have many of the properties of new wine. They are effervescent, change continually, move quickly and often rely on heavy iteration. They constantly expand and change. They are best suited for new architectures such as cloud infrastructure and SaaS services. New technologies also have new requirements; thus, they require new structures, new and more flexible governance vehicles to allow them to capture their full value.
Legacy applications, the systems of records in which enterprises have invested hundreds of millions of dollars, are mature and were designed for their traditional environments, which tightly govern change. They are in data centers that have the requisite management support and requisite talent pools.
The services industry is starting to recognize the profound truth of the new and old wineskins: At this point in time, legacy applications are best left in their old, original containers where they can continue to operate in a mature fashion. Old applications or systems of record need to remain in their existing frameworks or architectures. They should be changed only slowly. Furthermore, new functionalities and technologies need to go into new wineskins, or architectures, that allow for and encourage agility and other attributes that support evolving change.
Photo credit: Flickr