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Sherpas in Blue Shirts

Are Offshore-heritage Service Providers “H-1B Visa Abusers” or “Sitting Ducks”? | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Recently, an official from the Trump administration accused Indian IT providers of abusing the H-1B visa process by “flooding” the lottery system with applications, giving them an unfair lottery draw advantage. The statement again spotlighted the issue of importing foreign IT services workers to the U.S., thereby limiting job opportunities for domestic candidates. It also underscored the huge extent of outsourcing being done by U.S. corporations, especially to offshore-heritage providers. What it didn’t discuss was other types of companies’ usage of the H-1B program to import skilled talent into the country.

Everest Group conducted a quick analysis on the Labor Condition Applications (LCAs) employers filed to obtain H-1B visas in the last few years. We classified the employers into several categories:

  • Offshore-heritage service providers, such as Cognizant, Infosys, and TCS
  • Multinational service providers, such as Accenture, Capgemini, and IBM
  • Professional services firms, such as Deloitte, EY, and PwC
  • Product companies, such as Apple, Cisco, and Oracle
  • All other companies

Our findings?

  • While the total number of certified positions increased at a CAGR of 11 percent between FY 2011 and FY 2016, offshore-heritage providers’ share has dropped significantly, from 74 percent in FY 2011 to 40 percent in FY 2016
  • The biggest share grabbers are professional services firms, which are increasingly competing with traditional IT services players across deals. Their share in H1-B visas has increased from 7 percent in FY 2011 to 37 percent in FY 2016. On an absolute basis, that’s an almost ten-fold increase
  • The top 25 employers contribute ~50 percent to the total positions certified, which implies that offshore-heritage providers have only a 20 percent share of the total positions certified for H-1B visas by the Department of Labor between FY 2011 and FY 2016.

(For the uninitiated, a certified LCA (ETA Form 9035), is a prerequisite to H-1B approval. The LCA must be certified by the Department of Labor (DOL) before the H-1B petition (Form I-129) is submitted to USCIS. The LCA contains basic wage and location information about the proposed H1B employment. Please note that a certified LCA does not guarantee H-1B visa approval, however, certified position trends are good indicators of H-1B visa usage. Also, note that the data below includes positions certified for new H-1B visa applications as well as renewal and transfer of H-1B visa.)

H-1B visa and offshore service providers

One of the Trump administration’s suggested reforms is to increase the minimum wage for H-1B visas from US$60,000 to US$130,000. But as this minimum wage recommendation is applicable to companies that are “H-1B dependent” – and most offshore-heritage providers fall into this category – the required increase in minimum wage, whatever it ultimately is, will likely affect offshore-heritage providers more than any other type of organization.

At the same time professional services firms have quietly increased their leverage of the visa-led model, offshore-heritage providers have been the unfortunate recipients of far greater scrutiny and negative limelight. In order to successfully compete, offshore-heritage providers have no choice other than to prepare now for the impact of visa policy changes. As the old saying goes, “better safe than sorry.”

Reimagining Global Services: How to get MORE out of Technology | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Much has been written and said about the Bimodal IT model Gartner introduced in 2014 – with forceful arguments for and against. Not at all intending to bash that model, it’s safe to say that the digital explosion over the last three years demands that enterprises’ technology strategies be much more nuanced and dynamic.

The MORE model for global services

Let me explain with the help of the following chart. I call it the Maintain-Optimize-Reimagine-Explore – the MORE – model.

Global Services and Technology in the MORE model

I’ve tried to plot (intuitively) a bunch of technology and service themes on their current and future innovation potential.

  • Maintain: On the bottom right are themes like mainframes and traditional hosting services that are unlikely to go through dramatic changes in the near term. These are exceptionally stable and commoditized, and will not attract exciting investments. Enterprises still need them, and CIOs should Maintain status quo because it’s too risky and/or expensive to modernize them.
  • Optimize: Seven years back, that cool AWS deployment was the craziest, riskiest, hippest tech thing we could do. But, I guess we’ve all aged (just a little bit) since then. The needle of cloud investment for most enterprises has moved from AWS migration (USD$200 per application, anyone?) to effective orchestration and management – a clear case of the enterprise seeking to Optimize its investments in the bottom right corner of my diagram.
  • Explore: On the top right, we have the new wild, wild, west of the tech world. Blockchain can completely transform how the world fundamentally conducts commerce, IoT is working up steam, and artificial intelligence can shape a different version of human existence, much less business models. Enterprises need to Explore these to stay relevant in the future.
  • Reimagine: What we cannot afford to miss out on is the exciting opportunity to Reimagine “traditional” global services into leaner and more effective models using a combination of enabling themes like automation, DevOps, and analytics. These are immediate opportunities that many enterprises consider essential to running effective operations in a traditional AND a digital world. For example:
    • In a world where “the app is the business,” QA is being reimagined as an ecosystem-driven, as-a-service play built on extensive automation and process platforms. The reimagined QA assures a digital business process and a digital experience – not just an app.
    • We are getting into the third generation of workplace services (first hardware-centric, then operations-centric, and now software and experience-centric.) The reimagined workplace service model delivers a highly contextual, user-aware experience, without sacrificing the long-range efficiency benefits.
    • Application management services (AMS) are being reimagined through extensive outcome modeling, automation instrumentation, and continuous monitoring.

Three principles for reimagining global services

It’s interesting to note that many of these reimagination exercises are based on three common foundational principles:

  1. Automation first: Automation and intelligence lie at the heart of our ability to reimagine technology services, because automation helps us deliver breakthrough outcomes without blowing the cost model out of the water.
  2. Speed first: The need to run ALL of IT at speed is driving reimagination and the corresponding investments. If you’re at the reimagination table, throw away your tools to build the perfect (and the biggest) mousetrap. A big part of the drive for reimagination is to move from scale-driven arbitrage first models to speed-driven digital first models.
  3. Alignment always: This is important and good news. For decades, we’ve all complained about the absence of Business IT alignment. Reimagination hits out at this issue by focusing on technology architecture that is open and scalable, and by delivering as-a-service consumption models that are closely linked to things that the business really cares about.

Over the next several months, Everest Group is going to publish viewpoints on each of these topics and more. But we’d love to hear any comments and questions you have right now. Please share with us and our readers!

Software Eats World, AI Eats Software … Ethics Eats AI? | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Marc Andreessen’s famous quote about software eating the world popped up often in the last couple of years. However, the fashionable and fickle technology industry is now relying on artificial intelligence to drive similar interest. Most people following AI would agree that there is a tremendous value society can derive from the technology. AI will impact most of our lives in more ways than we can think of today. In fact, it often is hard to argue against the value AI can potentially create for society. Indeed, with the increasing noise and real development around AI, there are murmurs that AI may replace software as the default engagement model.

Artificial intelligence may replace software

Think about it. When we use our phone or Amazon Alexa to do a voice search, we simply speak, hardly using the app or software in the traditional sense. A chatbot can become a single interface for multiple software programs that allow us to pay our electric, phone, and credit card bills.

Therefore, artificial intelligence replacing software as the next technology shift is quite possible. However, can we rely on AI? Or, more precisely, can we always rely upon it? A particularly concerning issue is that of bias. Indeed, there have been multiple debates around the bias an AI system can introduce.

But can AI be unbiased?

It’s true that humans have biases. As a result, we’ve established checks and balances, such as superiors and laws, to discover and mitigate them. But how would an AI system determine if the answer it is providing is neutral and bereft of bias? It can’t, and because of their extreme complexity, it’s almost impossible to explain why and how an AI system arrived at a particular decision or conclusion. For example, a couple of years ago Google’s algorithms classified people of a certain demography in a derogatory manner.

It is certainly possible that the people who design AI systems may introduce their own biases into them. Worse, however, is that AI systems may over a period of time start developing their own biases. And even worse, they cannot even be questioned or “retaught” the correct way to arrive at a conclusion.

AI and ethics

There have already been instances in which AI systems gave results for which they weren’t even designed. Now think about this in a business environment. For example, many enterprises will leverage an AI system to screen the resumes of potential candidates. How can the businesses be sure their system isn’t rejecting good candidates due to some machine bias?

A case of this type could be considered an acceptable, genuine mistake, and it could be argued that the system isn’t doing it deliberately. However, what happens if these mistakes eventually turn into unethicality? We can pardon mistakes but we shouldn’t do the same with unethical decisions. Taking it one step further, given that these systems ideally learn on their own, will their unethicality become manifold as the time progress?

How far-fetched it is that the AI systems become so habitually unethical that users become frustrated? What are the chances that humanity stops further developing AI systems when it realizes that it’s not possible to create AI systems without biases? While every technology brings a level of evil with the good, AI’s negative aspects could multiply very fast, and mostly without explanation. If these apprehensions scare developers away, society and business could lose AI’s tremendous potential positive improvements. That would be even more unfortunate.

As the adoption of AI systems increases, we will likely witness more cases of wrong or unethical behavior. This will fundamentally question and push regulators and developers to put boundaries around these systems. But therein is a paradox: developing systems that learn on their own, while putting boundaries around that learning – quite a contradiction. However, we must overcome these challenges to exploit the true potential of AI.

What do you think?

The Primary Challenge To Blockchain Technology | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Any emerging technology goes through a hype stage. It takes a while to get the kinks out and for pilots and proofs of concepts to prove use cases and shift the curve to broad adoption. The power and disruption of blockchain is evident in the news almost daily, and people are beginning to understand how blockchain distributed ledger technology works. I’ve previously blogged about soaring investments in pilots and proofs of concepts (POCs) on its security and examples of use cases. Even so, there are several issues currently slowing adoption.

Blockchain adoption is currently crossing the chasm, and I believe the next two years will be critical for resolving issues now slowing broader adoption.

Read more at Forbes blog

Which Way are the Winds of Change Blowing in the Global Services Industry? | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

2016 will unquestionably be recorded in the history books as one of the most turbulent years in modern times. Geopolitical, socio-economic, and technological volatility hit global service providers and enterprises alike particularly hard, leaving them in a state of uncertainty never seen before in the services industry.

Everest Group’s recently-published Market Vista™ – 2016 Year in Review report took a deep-dive look at these and other key trends and drivers impacting GICs, offshore/nearshore locations, service providers, and outsourcing transactions.

Here’s a snapshot view into some of the most interesting developments of 2016:

Digital takes center stage in outsourcing deals

While the volume of BPO deals had surpassed that of traditional IT services (e.g., application development and infrastructure services) in the previous decade, the pendulum has swung back to IT – now in a digital form. Several factors are driving this change, including increasing maturity of traditional services, the need for a personalized customer strategy, the need for increasing operational efficiency, and the protectionism wave. Indeed, the number of inked digital deals increased by 175 percent between 2014 and 2016.

Outsourcing deal sizes are decreasing – but not for everyone!

Higher maturity and increasing customer expectations continue to drive comparatively smaller or unbundled deals, particularly in the U.K. and North America, where a significant portion of deals are incremental or outcome-based. However, many enterprises, are signing larger deals as they invest in infrastructure and supporting platforms in order to build digital capabilities in the near future.

New technology, but different implementation strategy

Although large buyers have the capabilities to insource digital services delivery, dearth of talent and investment size and complexity forced smaller buyers to outsource delivery of their digital services.

Concentration in leading geographies

With digital services talent availability increasing in some global services destinations, the share of activity is being redistributed. Share of top-10 locations increased from 60 percent in 2015 to 70 percent in 2016. Locations recording a >50 percent increase in activity in 2016 were Ireland, Malaysia, Poland, Romania, and Singapore.

Surging wave of protectionism

A growing set of countries, including the U.S., U.K., Australia, and Singapore are adopting an “our country first” stance. This has manifested into a series of inward looking protectionist steps and safeguarding regulations, such as Brexit, the recent change in visa regulations in Singapore and Australia, and proposed immigration changes in the U.S. While these had limited impact in 2016, as most of them came into effect in early 2017, it will be interesting to see how players’ location activity evolves going forward.

Following are the five key trends we believe will define the global services industry in 2017:

Global Services Outsourcing Deals in Market Vista

To learn more about Everest Group’s take on 2016’s key trends, developments, and associated drivers – and how these will impact what happens in the global services industry in 2017 – please refer to Everest Group’s report titled Market Vista™: 2016 Year in Review: Global Services Industry Facing “Winds of Change.”

Bitten by the Blockchain Bug | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

The business world is abuzz with the potential benefits of blockchain distributed ledger technology and the wave of disruption it will bring in not just payment transactions but also sharing information of value to participants in a distributed ledger. The media are already referring to it as an “internet of value.” Even though Blockchain is still nascent, a research report predicts the blockchain market will be worth $5.4 billion by 2023. In this blog post, I’ll highlight how some organizations around the world have decided to capture value from blockchain.

Although blockchain first captured attention of banks and other financial institutions, the use cases have expanded far beyond the BFSI industry. In all corners of the world, organizations have been conducting blockchain pilots and proofs of concepts, evaluating its validity, security and how it stacks up against delivering on their business objectives. Need evidence? Look at the following examples.

Blockchain use cases

Secure Communications. Since they invented the internet, you probably remember DARPA (Defense Advanced Research Projects Agency) the research unit of the U.S. Department of Defense. Now DARPA is funding startups to develop blockchain to ensure secure communications in the area of weapons systems development and in storage. In the intelligence arena, blockchain could help determine data integrity and whether hostile players have viewed or modified information.

Discover Issues in Mission-Critical Process. Lockheed Martin recently announced it is incorporating blockchain into its operations to improve efficiency and cybersecurity in its systems engineering processes, supply chain risk management and software development efforts. In addition to its operations in developing military weapons, the firm is involved in several NASA space projects requiring smaller, nimble operations.

Improve Transparency in Internal Workflows. Software giant Oracle was granted a patent to use blockchain to improve real-time transparency and keep data on employees’ tasks in a workflow. Another benefit? Protecting proprietary or sensitive information in workflows.

Raise Funds. Crowdfunding is an obvious use case for blockchain. But the World Bank is taking this application further. It plans to use blockchain in issuing bonds to help Kenya’s government. The concept was already tested by Australia’s Commonwealth Bank regarding a provincial treasury service.

Sharing Medical Information. In April 2017, a Japanese insurance company, Tokio Marine & Nichido Fire, won the second annual Efma-Accenture Innovation in Insurance awards. The company created a blockchain-based platform for sharing patient’s medical information among relevant parties. It’s being touted as a “new best practice.”

Healthcare Incentive Programs. I blogged before about blockchain being ideal for incentive programs. That use application is now evident in healthcare. Healthcoin is a blockchain-enabled platform focusing on insurers and employers incentivizing people to make lifestyle changes to prevent diabetes. Patients earn tokens they can cash in for rewards.

Reconciliation Among Reinsurance Companies. The reinsurance business involves complex relationships among insurance companies, a tedious, multi-ledger process of calculating multiple exchange rates and currencies, transaction costs – those aspects that I refer to as “friction” in a business process. Currently, a group of 15 of the world’s largest insurance companies are working on a blockchain-based prototype designed to simplify the process. The group hopes to reduce the transaction time from seven weeks to almost instantly. One of the companies had already completed its internal blockchain pilot for handling bonds for catastrophic events.

Assets Sales Transactions and Government Records. Malta plans to use blockchain in its Lands Registry and national health registries. Sweden, Honduras and Brazil are among the countries exploring how to use blockchain to track progress in real estate or other asset sales transactions.

Contributions Transactions. The United Nations has a cross-agency blockchain working group, which is analyzing the use of a blockchain distributed ledger system in international assistance. The UN is considering blockchain for the digital currencies, supply chain management, self-auditing of payment, identity management and data storage aspects of the potential system.

The United Nations is also studying how to rethink cash-based transfers. Within that study, the UN’s World Food Program is conducting a proof of concept (and an upcoming pilot) using blockchain to improve security and eliminate administrative fees in distributing humanitarian aid.

Service Providers’ Incubators. All major service providers have conducted in-house proofs of concept and pilots for various use cases. Some have taken this strategy a step further and are creating environments (or incubators) where their enterprise clients can experiment with blockchain technology for their own applications.

Blockchain as a Service (BaaS). IBM is one of the service firms providing client support of blockchain production pilots in a low-risk, fail-fast platform in its Bluemix cloud. Recently Big Blue boosted this Blockchain-as-a-Service platform to provide even more value by enabling multi-company blockchain networks across Bluemix regions and subscriptions.

What you need to know

So, what’s the big takeaway that emerges from this glimpse into current trends in blockchain adoption? The use cases are quickly expanding to more industries and governments, and I’m seeing a lot of activity across the board from different kinds of players. Yes, it’s still in an early growth stage. But if you were to ask me what’s really happening with blockchain technology now, I’d say organizations are finding more and more ways to capture business value from it. Creating new value is a prime focus for most companies, so I look for blockchain to be highly disruptive and the adoption pace to quickly grow.

How to Successfully Fund Your Enterprise Innovation Initiative | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

One of the biggest obstacles to successful innovation efforts is a challenge familiar to any entrepreneur: funding. Good ideas take time and money to get off the ground. But when those ideas are relatively “out there” or unproven, the investment can be hard to justify.

This is especially true in a corporate environment. Standard corporate funding models for technology projects simply don’t align with the way innovation works. Traditionally, organizations base their internal investments on a business case that shows projected improvement from a baseline. The business case requires and includes upfront knowledge of the full funding needed to complete the project, and assumes that every project will in fact be successfully completed.

Read more at Cecilia’s blog

How Donald Trump May Save the India-heritage Outsourcing Firms | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Over the past month or so, many of the India-heritage outsourcing firms have reacted to the current political climate to announce significant hiring goals for onshore (U.S.) hiring while scaling back applications for H-1B visas. There are numerous reports across the country of these announcements creating a frenzy of governors courting the companies to locate delivery centers in their states, with sweet incentives included.

Impact of the digital model

Notwithstanding the irony of taxpayers underwriting job growth for the same companies that are simultaneously being raked across the coals for stealing American jobs and moving them to India and other offshore locations, the shifts coming on the back of political jawboning may be setting the stage for a way to a longer-term turnaround of prosperity. Recent analysis of the organic growth of the top 20 outsourcing services providers by Everest Group and DeepDive shows a dramatic deceleration of these collective firms’ growth. Projections over the next couple of years indicate a continuation of this trend. Deeper in the numbers, however, is the startling fact that the 80 percent block of these firms’ revenue that is labor arbitrage-based is actually shrinking slightly! The remaining 20 percent – that which is generally considered “digital” (cloud, mobile, social, analytics, AI/robotics, etc.) is growing at an annual rate of over 20 percent.

Many of these “digital” activities require service delivery resources that are intimate with the consumers of the service. This is driving a push for a greater onsite (onshore) delivery mix to unlock the value inherent in these digital initiatives.

Now you see the punch line – Trump-driven reactions to increase the onshore presence aligns with what is required for success in the digital marketplace.

The digital transformation challenge

However, it is not a forgone conclusion that all the firms that shift their mix slightly will succeed in this fast-growing digital space. Digital success often requires a different business model that demands changes far beyond the location of service delivery staff. We see all elements of the business model shifting – locations, talent approach, innovation cycle, sales motions, organization models, funding processes, etc. – a transformation that is challenging for companies large and small (enterprises seeking to adopt digital solutions also have major transformational change requirements).

That said, actions in response to the U.S. administration’s stricter posture toward immigration, commitments to “hire American” and “buy American,” and rhetoric about trade reform (i.e., border taxes could position, if not encourage, service providers to increase their digital mix. The market revenue numbers suggest that customers want it, so those offshore-centric players who can navigate the business model changes required to do it at scale could end up thanking President Trump for the push into the digital pool.

Outsourcing firms thrown into digital model

Why Anticipated Value From Digital Implementation Often Disappoints | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Every senior executive recognizes that digital disruptions are both a huge potential blessing and an enormous threat. Companies can be Uberized out of existence, as is happening with taxi cabs. Or like Amazon, companies can create whole new offerings and competitive advantage. GE uses the power of the Internet of Things to create a new $5 billion business and transform its competitive position. But if it didn’t, new competitors could take its place. It’s no wonder companies often fall into the trap of believing technology can create value.

Businesses recognize the power of digital technology. However, the technology business presents a great lie to the market: Buy this technology and you will be able to do wonderful things. At one level, that’s true. Companies that have bought technology have accomplished wonderful things. But it isn’t true that the technology drives the benefit. The business model drives the benefit.

Read more in my blog at Forbes.

What Pain will You Experience if the AHCA Bill Becomes Law? | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts
  • Health insurance lost for 24 million U.S. consumers
  • Billions of dollars of care investment marginalized
  • Providers’ margins eroded by payers
  • And a five-year setback to the healthcare system

These are potential side effects if the U.S. House of Representatives- approved American Health Care Act (AHCA) bill becomes a law. Let’s look at the impact the law would have on the key constituencies.

Healthcare providers

With the most needy (the sick and the elderly) portion of the population left uninsured, the healthcare providers will once again be expected to foot a large part of their healthcare bills due to lack of coverage, non-payments, use of ER services, etc.

Healthcare consumers

With premium increases, credits/subsidies being based on age instead of income level, and states’ ability to change or waive pre-existing health condition coverage, a large percentage of older, lower income, and infirmed consumers would likely opt out of having coverage altogether. Young and healthy people would have less incentive to get insurance coverage.

Healthcare payers

The overall theme of the bill would result in a significant decline in volume of work managed by payers. That said, there would be numerous key operational implications for both private and government payers including:

  • Product development: Payers would end up having state specific plans, leading to increased administrative work around plan design and development activities. This would likely have a cascading effect on downstream processes (policy servicing, network and care management, and claims management) which are expected to become more complex and specialized.
  • Claims: Claims volume would likely dwindle, particularly among the old and ill, as a large percentage would have opted out of coverage.
  • Policy servicing: Payers would likely experience a significant uptick in queries from patients and providers, as uncertainty around topics such as eligibility, verification, and premium collection amplifies. However, demand for certain processes, such as HIX support, would likely be sluggish.
  • Care and network management: Care management programs would likely take a backseat, given their significant cost to enrollees and providers. Additionally, companies that had invested heavily in such programs could see decline in their ROI. Lower patient volumes might drive payers to tighten their provider network, leading to less work around network management activities.
  • Government (Medicaid): Reduced federal spend on Medicaid would likely push states towards a modular approach, and maybe even a shift towards a managed care construct.

With a decline in volume of work, it might not be surprising to see some of the larger payers insource certain processes.

The Healthcare IT and BPO service providers

A lesser volume of work across various value-chain segments would translate into lower revenue for third-party vendors. In fact, even though a law hasn’t yet been enacted, the healthcare business in some of the key players, such as Accenture and Cognizant, is already growing at a slower rate than their overall company growth rate. This impact could extend to the overall outsourcing industry. On the other hand, if states decided to exercise the power granted to them differently, service providers could also expect to see increase in the complexity of work around certain functions such as policy servicing and claims management.

Additionally, the ratified law might just be the impetus that mid-to-large buyers without GICs need to opt for bundled IT and BPO deals, which were traditionally a feature of mid-sized buyers.

Of course, the above-mentioned implications are for the bill in its current form. However, moderate Republican senators might well make massive changes to it, especially after the public outrage over certain parts of the bill.

It is going to be tough time of uncertainty for all stakeholders until a law – in whatever shape and form – is passed. In the meantime, payers and healthcare providers need to work closely with their respective service providers to ensure they stay afloat and come out on the right side of fence when the dust settles.
For a detailed analysis comparing the AHCA and ACA, please see our report titled: Acing Uncertainties in the Payer Market: The Trump Cards.