Experts in the global services terrain

I recently concluded an engagement on impact sourcing. Did you say, what? That was my first reaction as well when I initially heard about impact sourcing. I knew about other global services constructs – rural sourcing, crowd sourcing – but not impact sourcing. Turns out, I wasn’t alone. During the course of my research I realized there is a lack of awareness about impact sourcing in the market. For uninitiated folks like me, I hope this blog – the first in a series on the topic – helps create awareness about impact sourcing and its role within global services delivery.

What is impact sourcing?

So, what is impact sourcing?

Impact sourcing (IS) is a business process service delivery model that provides quality and cost at parity with traditional BPO services, but with optimized enhancements such as:

  • A qualified, trained, untapped talent pool with skill sets aligned to match client needs,
  • Lower attrition rates and higher corresponding levels of employee engagement, and
  • Opportunities to fulfill corporate social responsibility and diversity objectives while operating within a traditional BPO framework

Put simply, it is a BPO service delivery model that employs high potential but previously disadvantaged individuals for service delivery that provides positive impact on both business and society.

About Impact Sourcing

Here are some facts to set the context:

Impact sourcing is sizable (235,000-245,000 FTEs). There are many instances where it is practiced across countries in Africa (South Africa, Kenya, Nigeria, Egypt, Ghana, Morocco), India, and Philippines. In fact, our research shows that across these countries, impact sourcing constitutes ~12% of the overall BPO market. Not only that, it is growing at a faster clip than the overall BPO market.

What constitutes impact sourcing?

Our experience shows that there is no one answer to what constitutes impact sourcing. Depending on who you are talking to and the social context, impact sourcing constituents vary by how one defines a disadvantaged individual. Broadly, the constituents can be classified in three different categories:

  • Economically disadvantaged: Near/below poverty line, located in low income areas, lack of access to jobs or prior work experience
  • Socially disadvantaged: Minorities, historically underemployed or marginalized group (e.g., black and Asian communities in South Africa, certain castes/tribes in India), gender groups
  • Physically disadvantaged: Differently-abled, diagnosed with health conditions (e.g., HIV/AIDS) limiting equal opportunities in the workforce

Why does it matter?

Impact sourcing has the potential to engage high potential individuals in meaningful employment opportunities and make a real difference in their lives. These individuals in the absence of impact sourcing would not have access to jobs or their situation/background would put them at a disadvantage as compared to mainstream workers. Impact sourcing provides these individuals a platform that helps boost their confidence and provide opportunities to bring themselves at par with the mainstream workers through direct and indirect impact.

  • Direct impact: Our research shows that impact sourcing typically leads to an improvement in workers’ lifestyle (40-200% increase in individual income), professional development, increase in confidence levels, reduction in tendency to migrate, and reduced stress levels
  • Indirect impact: The increase in individual income typically benefits 3-4 family members due to increased spending power for family and household and facilitates a stable environment. This is especially empowering for women. In addition, it strengthens communities by creating a 3.5-4.0x multiplier effect on the local economy and improves future employability of disadvantaged individuals

So one impact worker can potentially lead to a much wider impact that uplifts many more in the community.

More than a feel good factor

There are many large, global companies across buyer and service provider organizations that currently use impact sourcing for BPO service delivery. These companies experience measurable business benefits of impact sourcing while also positively impacting the worker, their families and communities. In order to scale the practice of impact sourcing, more companies need to adopt the practice.

Our research suggests there is a compelling business case to impact sourcing in addition to the social benefits. This business case is based on strong foundational elements with credible supporting evidence.

To give you an idea of the business benefits of impact sourcing, check out the performance improvements Teleperformance has experienced using impact sourcing, the access to new talent that Aegis has because of their involvement in impact sourcing, and the plans Microsoft has for impact sourcing,

In my next blog in this series, I will share impact sourcing’s value proposition and its business case. Watch this space for more.

Everest Group, supported by The Rockefeller Foundation, conducted an in-depth assessment on impact sourcing (IS) as a business process service delivery construct. The study presents a detailed, fact-based business case for IS that substantiates the benefits of the IS model for Business Process Outsourcing (BPO). Additionally, it sizes the current IS market for BPO work, profiles the landscape, details the business case, and shares experiences of companies through case studies and testimonials. The report focuses on Egypt, Ghana, Kenya, Morocco, Nigeria, South Africa, India, and the Philippines.

The Rockefeller Foundation aims to catalyze the IS sector in Africa through its Digital Jobs Africa Initiative. The Foundation’s role is to ensure positive social and economic impact on 1 million people by supporting high potential but disadvantaged youth to work in the dynamic outsourcing sector in Africa, benefiting them, their families and communities. The Foundation recognizes that the most sustainable and scalable path to achieving this impact is because of the tangible business value impact sourcing provides. Impact sourcing enables companies to purposefully participate in building an inclusive global economy, gaining business efficiencies while changing people’s lives.

Visit our impact sourcing page for more information.

Be sure to join our webinar, The Business Case for Impact Sourcing on Tuesday, October 7, 2014. Register now.

Photo credit: The Rockefeller Foundation

Today, Cognizant announced the acquisition of TriZetto® (a leading provider of healthcare IT software and solutions) for US$2.7 billion. The deal ties in favourably with Cognizant’s dominant position in the healthcare IT marketplace, with the combined entity having US$3 billion in healthcare revenue. TriZetto has around 3,800 employees across the U.S. and India, who will join Cognizant’s existing healthcare business, which currently serves more than 200 clients.

The acquisition is a landmark deal within the Indian IT service provider community, given the size, scale, intent, and implications to the status quo, but what makes it unique is its focus on industry solutions vs. other services-centric acquisitions.

Indian IT service providers’ notable acquisitions

Indian IT service providers notable acquisitions

What it means for Cognizant’s services focus

TriZetto primarily develops and licenses IT platforms and service for healthcare providers and payers, competing with the likes of Allscripts, DST Systems, and McKesson. Cognizant aims to leverage its dominant position in the market–a healthcare IT portfolio in excess of US$2 billion–to provide an integrated portfolio across services and platforms. Investing in products and solutions has been a key area of focus for Indian IT service providers as they look to embed their solutions within enterprises buyers, use technology adjacencies, and leverage the technology-platform model instead of flexing just the labor arbitrage card. This acquisition could be one of the steps allowing Cognizant to cross-pollinate and build an integrated (applications/infrastructure/business process services) services play in an industry in which it has primarily relied on its application services strengths. 

What it means for Cognizant’s growth story

Cognizant will get access to multiple software platforms and aims to realize nearly US$1.5 billion of potential revenue synergies over the next five years. TriZetto currently operates at 18.5% margins on a revenue base of US$711 million. The numbers are right in the zone for Cognizant, as it wants to continue to drive its growth-plus-margin story in the high revenue base in which it currently operates. The products, platforms, and solutions play has very unique challenges, opportunities, and operating dynamics. Whether Cognizant can navigate this fundamental transition and still maintain its growth story, will be an interesting study.

How it relates to the way Healthcare IT industry is evolving

The ongoing transformation in the U.S. healthcare system is shaping service provider’s strategies as they look to capture the incremental opportunity that is up for grabs. The focus on driving down healthcare costs, wide-sweeping reforms (driven by Obamacare and ICD-10), and blurring lines between payers and providers, are principally reshaping the healthcare delivery model. Cognizant will aim to drive increased stickiness with healthcare buyers to drive retention in an increasingly complex vendor landscape. It is aimed at garnering a large share of the growth pie, when it comes to the payer and the provider ITO market. This acquisition is an unmatched clear indication that service providers must evolve from a services-only play to a platform-based solutions play, to stay relevant in a market that has an immense potential to grow.

Global healthcare ITO market

What this means for the competition

The deal will also have myriad implications for the overall healthcare IT services competitive landscape. Most competitors of Cognizant already have a steady revenue stream (large or small) implementing TriZetto solutions, most importantly Facets™, which is used by most payers in the U.S. How this impacts its engagements and partnerships will be tricky. Whether Cognizant will want to (and if so, how) assume a dichotomous role of a partner and competitor will be another interesting area to watch. Additionally, whether Cognizant plans to ultimately absorb TriZetto (thereby dissolving the brand) or leverage its unique positioning is also unclear.

Cognizant is ideally placed in healthcare with few like-sized competitors, allowing it to consolidate. Two things that are definitely salient here–one, Cognizant is going all out to bet big on healthcare; and two, this acquisition has the potential of taking it to a different league altogether! There are already murmurs in the healthcare IT industry equating Cognizant to a new “IBM,” when it comes to its negotiating power at the table. This is another step in ensuring it stays ahead of peers as the competitive intensity in the market increases. The deal definitely has characteristics of a long-term strategic bet than a tactical manoeuvre.

For the past two years, we’ve observed rapid adoption and market growth of outsourcing of global services in the Nordics. This is well-documented and a real bright spot for a number of global services companies. The question is: how long will this growth continue?

At Everest Group, we believe the Nordics will behave much like the Australian marketplace. The Nordics are a larger market than Australia but have similar characteristics.

Australia is a market of 20 million people and has a well-educated, sophisticated population. Aussie businesses were quick to adopt a new global services paradigm, quick on the traditional outsourcing infrastructure model and quick on labor arbitrage. However, the Australian services segments grow quickly for three to four years and then mature equally quickly.

We believe the Nordics are following a similar path. This market is limited in size and scale. Just like Australia, its business is concentrated in some large companies that have a tendency to share or to think similarly. Therefore, we believe the growth in the Nordics likely will slow down and the market will move into a mature stage within 18 months to two years.

We make this prediction based on our observation of the Australian market performance which shares many characteristics with the Nordics in terms of size, business concentration, sophistication and collegiality.

In October 2012, the Harvard Business Review named “Data Scientist” the “sexiest job of 21st century.” While this profession has since gained meaningful acceptance and understanding in the broader big data analytics world, the dearth of real data scientists (some believe there are only 3,000 in the world), has opened the door to what I call “data doctors.” And many enterprises desperate to make sense of their burgeoning data to drive business value might get duped by IT consultants or aspiring candidates masquerading as data scientists.

What’s the distinction between the two? Data doctors – business intelligence analysts, ETL developers, data assemblers, data quality testers, data analyst, etc – are skilled in working with data. But data scientists typically deal with complex algorithms and statistics to unearth the hidden treasure in big data. They give yet unexplored meaning to the data. Their work has a higher degree of risk and probability to fail, but it also delivers the highest rewards. They are the ones responsible for big-ticket transformational ideas.

Yet, with the increasing consumerization of analytics and the realization that the data scientist pool is minute, many enterprises believe they do not need data scientists as:

  1. There may not be all that much value in the data
  2. Data scientists are very expensive
  3. When given the right tools, data doctors can replace data scientists.

While it’s true that data scientists are expensive, the other two above points are erroneous. There is a lot of value in data that data doctors are unable to mine. And assuming that a college graduate or an IT engineer adept in BI technologies can become or substitute for a data scientist by leveraging new age big data solutions is a mistake.

These “consumer focused” solutions hide the complexities of generating meaningful insights, data discovery, and visualizations by adopting a WYSIWYG (What-You-See-Is-What-You-Get) approach where users can assemble workflows and analytics logic/model using drag and drop in a highly intuitive user interface. These technologies are destroying the data custodian ivory towers of corporate IT, and making business analysts perform substantial analytics projects on their own. But make no mistake… they do not reshape analysts, the data doctors, as data scientists.

While it is true that new age technologies help data and business analysts skill up to perform more advanced analytics, assuming this eliminates the need for data scientists is akin to saying we don’t need human pilots due to the auto pilot function. Indeed, the great demand for real data scientists is the reason many universities have launched dedicated data scientist programs (e.g., advanced analytics programs at Columbia’s Institute for Data Sciences and Engineering).

The real value of these new analytics tools is in enabling data doctors to perform many tasks previously handled by data scientists, thereby freeing the prized scientists to work on resolutions to highly complex problems that can significantly benefit the business. They also help enterprises who believe data scientists are overkill to enable data doctors to perform reasonably complex tasks.

However, enterprises really interested in data-driven insights will be best served by empowering both scientists and doctors. The doctors need to keep updating their knowledge about the latest analytics solutions that can help them add more strategic value. And data scientists need to dive deep, unravel unexplored territories, and develop data-driven insights that can transcend the boundary of human intelligence.

Photo credit: Stephen Coles

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For five years we at Everest Group have tracked the cloud space in global services. Until this year, there was a lot of talk about cloud, but much true cloud adoption was driven in business units with large enterprises. CIOs basically sat out the game and watched the cloud’s performance. But since the beginning of 2014 we’ve seen a real shift in large enterprise CIO organizations, which signals a significant change for the services industry.

Until recently CIOs in large enterprises were reluctant to put cloud initiatives in place because they felt it was premature. They struggled with compliance and security questions. And they worked to make sure their organization understands and embrace cloud and as-a-service technologies. Their posture is moving from cautiously watching to actively planning and driving, and some have large initiatives underway. Their plans with regard to cloud have moved from the radical fringe to mainstream strategic intent to embrace and drive.

Large enterprise tech budgets are still controlled by the CIO organization because they are best able to drive technology initiatives to scale and to execute initiatives across functions.

This is a very important development and will cause significant changes in the technology and services industry. This undoubtedly will start to drive a significant shift in spend from the traditional structures into the cloud and as-a-service models. As that occurs, we believe it will pick up momentum and pull the rest of the industry through.

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