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Sherpas in Blue Shirts

The Impact Of Leaders’ Transformation Knowledge Gap | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Too many transformation initiatives aiming at breakthrough performance hit critical roadblocks that can quickly spiral into costly delays or even a failed initiative. Why is that? The primary problem that afflicts initiatives is the knowledge gap in leaders’ understanding of the nature of the transformation journey and what it requires. The usual focus of discussion among leaders at the outset of a major transformation is “Can we do it?” This is the wrong question. Instead, the focus should be on “What will it take to do it?” Here are three tips (among many others) on what it takes.

  1. Ensure Executive Ongoing Commitment To Complex Change

There is no “silver bullet” for a journey in which your company will reconceive the value it delivers to customers and end users as well as how it delivers that value. Often, leaders believe that changing only one or two components of the business will drive the desired impact. Their mistaken mindset underestimates the scale, complexity and cross-functional nature of the necessary change. The level of change encompasses many elements of the business model.

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Mindtree Takes Two-Pronged Attack for Digital Leadership | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

What would you do if your company has been the darling of its industry with leading industry growth but now struggles to adapt to new market requirements in the digital world and faces a shrinking book of business? How would you change existing and potential clients’ perception of your company’s expertise?

In observing how India’s service providers adapt to the new realities and transition to become digital transformation partners, Mindtree is one of the firms going all-in on the digital sweepstakes. A mid-size service provider that made its mark by doing strong work in building applications, Mindtree is well positioned to make the transition into the digital marketplace. It has existing advantages, such as its collaborative culture, that aid in this effort.

But changing market perceptions and client perceptions – from a firm that provides good but cheap offshore services to a firm that is a digital transformation partner in position to help clients build innovative digital technologies – is a steep hill to climb. So, the firm is investing in a two-pronged attack to change its branding.

Two-Pronged Attack

The first line of attack was to buy a series of digital firms, which helps more strongly position Mindtree toward being a digital company. In the second line of attack, Mindtree built two digital pumpkins – digital innovation hubs. This is like developments we see at Accenture, Infosys, TCS and other providers transitioning to digital. I like the branding of the innovation hub as a digital pumpkin. It brings a cool marketing vibe to a model that other providers have already rolled out into the marketplace.

I recently attended the launch of Mindtree’s second digital pumpkin, a US digital innovation hub in New Jersey. Like its first digital pumpkin, located in Bangalore, the hub is a collaborative, interactive space demonstrating Mindtree’s digital expertise and is designed to help clients accelerate their digital journey. It displays interesting examples of digital projects that Mindtree ran in its Bangalore pumpkin.

Like other service providers, Mindtree’s Bangalore digital innovation hub takes advantage of the significant footfall of enterprise clients as they visit their delivery partners in India. A visit to the hub for a few hours illustrates the kinds of digital capabilities that Mindtree can perform on a client’s behalf.

Its digital pumpkin in New Jersey gives clients a space to co-create and manage new digital capabilities, turn innovation sessions into pilots and then to more meaningful initiatives with deeper adoption across a client’s space.

Mindtree is combining acquisitions and innovation hubs to make a case to its existing and prospective clients that they should consider Mindtree as a partner that will help take full advantage of new digital technologies.

So, What’s Missing?

Despite both digital innovation hubs and the acquisition, Mindtree still faces an uphill battle. It needs to do two things:

  • Overcome the shrinking in its core marketplace. All service providers transitioning to the digital world face substantial shrinking of their revenue based on the labor arbitrage model. As clients engage in portfolio rationalization happening in the mature labor arbitrage space, they seek to reduce the number of service providers in their portfolio, taking work away from smaller providers and giving it to larger providers in exchange for better pricing and lower costs. As a sub-billion-dollar firm, Mindtree loses out in the portfolio rationalization.
  • Create differentiation by changing its business model. The firm doesn’t yet appear to have come to grips with the need for a differentiated delivery model aligned with the new digital reality.

It remains to be seen how effective Mindtree will be in changing market perceptions and in selling enough digital work to offset the losses in the labor arbitrage space and establish a healthy growth rate. Its two-pronged approach is a good step in that direction. But with the entire market following a similar path, Mindtree will need to work very hard to create a differentiated position from other service providers.

Pharma Service Providers’ Role in Tempering Pricing Wars | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Shortly after the U.S. Food & Drug Administration (FDA) approved Novartis’ CAR T-cell drug, Kymriah – which is used for pediatric B-cell Acute Lymphoblastic Leukemia – last month, Novartis announced its price…a whopping $475,000 per patient. This is certainly not the first market instance of highly expensive drugs (see below.)

But it might just be the tipping point for stakeholders – including regulatory bodies, payers, physicians, advocacy groups, and patients – to start having constructive discussions with drug manufacturers on how to make drugs that treat extremely rare diseases more accessible to the very small share of the population that needs them.

eg13
It is certainly time for pharma companies to overhaul their operations in order to mitigate price anger and get such drugs into the hands of those whose lives depend on them.

One way they can do so is by employing pay-for-performance, or outcome-based, contracts, wherein the manufacturer charges for the drug once it proves effective, say one or two months into treatment. Note that this pricing model hasn’t yet really taken off, especially in the United States, where the fragmented multi-payer environment acts as an added roadblock. Indication-based pricing, wherein there are different prices for different conditions, is another model that biopharma companies can use, but the U.S. market does not have mechanisms in place for it, at least as of now.

Other ways of ensuring patients are able to benefit from such critical drugs are through mixes of personalized offline and online marketing campaigns directed specifically to the relevant patient and physician pool, and improved and comprehensive patient support programs to help in solving “last mile connectivity” issues.

But at the end of the day, stakeholder backlash might – and should – force pharma companies to drive down their own costs to make these expensive, personalized medicines more affordable. And this is where outsourcing service providers can help.

The third-party service providers that are already servicing the pharma industry need to prepare or bolster solutions and capabilities around areas including patient and market access, data analytics, omnichannel marketing, IoT, automation, portals, applications, customer support, pricing analytics, infrastructure modernization, and cloud orchestration. Service providers that are struggling to enter the life sciences space should view this as a window of opportunity to get a foot in the door of these companies. Doing so will mean additional business for both these types of vendors; it could also mean reduced pricing pressure for the patients who need such vital treatments.
The future of personalized medicine depends a lot on success of such drugs, and biopharma companies can no longer afford to sit back and operate like they always have. For a detailed discussion and analysis around these solutions, and to learn about other trends in the life sciences market, look out for our soon-to-be-published State of the Market Report.

Service Integration and Management in the Digital Era | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

As enterprises increasingly realize that their ability to compete hinges on their digital strategy, they’re engaging with a wide, ever-growing range of niche small- to mid-sized digital technology providers. In some cases, we’ve seen organizations’ portfolios include more than 50 providers servicing a mix of traditional and next generation IT services.

The high complexity of such a massive number of providers is driving a surge in the need for Service Integration and Management (SIAM) specialists to help ensure seamless service and contract management and integration through a single body that interfaces with the multiple stakeholders including business and IT. While digital programs are being led by enterprise business units, the IT unit is focusing on rationalization of the legacy landscape and providing support for digital transformation projects.

In the golden days of outsourcing, when things were much simpler and outsourcing-related benefits were limited to cost, enterprises clearly preferred to completely retain the SIAM function internally. The enterprise IT teams collaborated with suppliers and ”leased” resources in a T&M fashion, while completely owning the operational and strategic aspects of the services.

More recently, some organizations have employed hybrid SIAM, wherein enterprises willingly relinquish the design, operations, and contractual aspects of the service to a third-party with proven SIAM expertise, while retaining the more strategic aspects such as portfolio strategy, business relationship management, and procurement.

But in the digital era, hybrid SIAM is starting to take a different shape and flavor.

In a traditional IT delivery model, enterprise IT is the interface between the provider and the business. But we’re now seeing enterprise business units become increasingly involved in end-to-end digital transformation engagements, and interacting and collaborating directly with providers.

Following is an illustration of two different hybrid SIAM models, outlining key functions that are outsourced or retained:

eg12

 

So, what will outsourcing the SIAM function cost you?

It fully depends on multiple factors. The first is team size, which must appropriately match to the input volumes. Next is scope and responsibilities. For example, does the engagement include cross-functional activities?

Of course, the location from which the SIAM program is delivered – i.e., onshore, nearshore, or offshore – also impacts the cost. While offshoring will provide the lowest price, the complexity of new age digital engagements requires a SIAM practice that is located closer to business.

Has your company outsourced SIAM, or is it considering doing so? Are there any best practices or pitfalls that you would like to share? I encourage you to do so by contacting me directly at: [email protected].

 

 

Designing an Engagement Model for the Contact Center of the Future | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

As the customer experience (CX) is becoming increasingly critical in the contact center space, buyers and service providers must take a significant relook at their engagement model.

Indeed, changing market realities are calling out for greater:

  • agility – to more effectively respond to changing buyer and process requirements
  • innovation – to meet seamless and consistent CX expectations
  • collaboration – to jointly work towards differentiated business and operational outcomes.

Over the past 12 months, Everest Group has had multiple conversations with contact center outsourcing (CCO) buyers and providers about what a more consultative, customer experience-oriented CCO engagement model might look like.  Here’s our view:

CX Contact Center Outsourcing

What are some of the specific differences between the current and the envisioned engagement model? Let’s take a look.

Sales process

Traditional model –Service providers have limited involvement in scoping requirements and shaping the desired outcomes. Thus, they are typically restricted in their RFP responses to mainly familiar core operational requirements and cost management issues.

New model – The new sales process aims to involve service providers earlier in the cycle through a collaborative solutioning phase, which can then shape an RFP that targets both operational gains and business objectives. This approach can lead to more targeted and impactful proposals that drive more value for the client beyond cost savings and core service level agreements (SLAs).

Innovation scope

Traditional model – Delivering a seamless customer experience across multiple channels requires co-innovation between buyers and service providers. The present engagement model falls short of delivering this, as innovation conversations are limited to defined checkpoints rather than happening throughout the process.

New model – The new model will involve a formal innovation cycle that enables buyers to make forward-looking investments, and helps leverage the collective expertise of both parties for continuous innovation. This is an iterative operational process loop that takes into consideration current operations, development of various customer journey maps, identification of process gaps, and implementation of needed changes across people, process, and technology.

Partnerships

Traditional model – Although an increasing number of buyers expect their providers to proactively suggest out-of-the-box solutions that can directly impact their business, providers are often neither given the opportunity to, nor incentivized to, prescribe innovative solutions, due to the existing guideline-based RFP process.

New Model – The new model positions providers to develop a more holistic understanding of buyers’ overall CX challenges and opportunities, enabling them to better identify improvement opportunities.  This, in turn, can lead to improved relationships and a rise in mutual trust, which ultimately leads to more productive, stable, and long-term partnerships.

Of course, the service providers with in-house consulting practices are better positioned than others to weather the disruption in the CCO industry. For example, Sutherland, Teleperformance, and Teletech have already displayed their intent to focus more on CX and move towards a more collaborative engagement with enterprise buyers.

To learn more about the evolving engagement model in the CCO industry, please read our recently released CCO Annual Report 2017: “Disruption is Here: The End of Contact Centers as We Know Them.” And, if you’ve initiated this journey towards the new engagement, or feel we are missing an important element in our view of this model, please email us directly at [email protected] and/or [email protected]

 

Remedy for frustrations in legacy IT infrastructure contracting model | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

A significant driver motivating companies to migrate workloads out of their legacy environment into the cloud is the increasing frustration of operating under onerous, complicated services contracts. Of course, these workloads migrate to the cloud and a software-defined environment primarily for greater efficiency and agility. But many workloads are too expensive and risky to migrate and thus are better suited for maintaining in a legacy environment. So, I’m calling for a better, more rational legacy infrastructure contracting vehicle. Here’s what it would look like and how companies would benefit.

What’s wrong with the typical contract?

Large, cumbersome, difficult master services agreements (MSAs) with functional areas or towers govern the legacy IT outsourcing market. No matter the function outsourced, these legacy contracts have in common several characteristics that make them too complex and make administering these contracts incredibly complicated and frustrating.

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The impact of automation collapsing enterprise IT | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

The IT stack is collapsing, thanks to the latest innovation in IT and moving into a software-defined service-oriented architecture. What can happen as a result of the collapse is important for every company to understand, as the more the stack collapses, the better results IT can deliver.

Before we look at the potential impacts, let me explain what I mean by collapsing the stack. A multi-layer stack of technology comprises IT – things like the server layer, operating system, middleware, enterprise application, security layer, etc. That stack informs and drives a reciprocal stack, which is the functional organization of enterprise IT. In this functional stack are infrastructure, database, middleware software, database and middleware teams, application maintenance and development, security, etc.

 

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Digital Transformation: the Future of SDLC is not DevOps, it is “no SDLC” | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

One of the keys to successful digital initiatives is quick release of better application functionalities. Enter DevOps, the philosophy of automating the entire infrastructure set-up, quality assurance, environment provisioning, and similar processes to quicken the pace of application delivery. Everest Group research suggests that 25 percent of enterprises believe that DevOps will become the leading model for their software development lifecycle (SDLC) in the next three to five years. While this number appears small, I am quite upbeat seeing it.

But, let’s step back for a moment. What if SDLC was no longer a lifecycle with different demarcated teams but instead a point in time that kept repeating itself? This “no SDLC” concept would make discrete processes within the traditional SDLC disappear or collapse (not compress) into one. Enterprise shops wouldn’t have to fret over these processes anymore.

I believe a no SDLC future will come faster than we expect. Here are four key indicators:

  1. Serverless: Amazon’s introduction of Lambda a few years ago and now Microsoft’s introduction of Event Grids to enhance Azure functions, has brought serverless into the spotlight. Everest Group research suggests that 10-15 percent of new application projects leverage serverless architecture to a certain extent. The philosophy behind serverless – getting the required infrastructure as and when needed rather than provisioned initially – is very strong. So, if we don’t need long-drawn infrastructure set-up, why would we need DevOps? The developers can focus on coding rather than managing the infrastructure their applications will run on. True that this is a strong theoretical argument that needs to be tested. However, the value it brings to enterprises cannot be ignored.
  2. Artificial Intelligence: Why can’t applications create themselves and drive everything on their own? Most software projects begin by understanding business requirements. What if AI systems could understand past user behavior and automatically predict the requirements, making the traditional phase redundant? These AI systems could also manage the underlying infrastructure in an event-driven manner, instead of architecting the applications for specific infrastructure.
  3. Automation: Automation across the SDLC is becoming pervasive, moving into previously unexplored areas. Enterprises are experimenting with automation to convert business requirements to technical specifications, Agile teams are automating user stories, and IT operations teams are automating the provisioning, configuration, and management of infrastructure. Adding cloud, the old hat, into the mix creates a fundamentally different SDLC. Given the application infrastructure (middleware), infrastructure management, and updates, moving to the cloud fundamentally reduces an application team’s need for downstream activities.
  4. Lowcode: Companies such as Appian, K2, and Outsystems have made a strong case for low-code development. This has less to do with making SDLC a point-in-time activity, but it is still very relevant. If developers (or business users with less coding experience) can leverage these platforms and rapidly deliver applications, the functionalities will be created and deployed at run time. The key reason we have downstream management is that once features are built, they are protected and managed by the IT operations team. Low-code allows developers to deliver functionalities rapidly, even possibly on-the-fly, and reduces the need for large-scale management.

All the above will eventually tie to the nirvana of the as-a-service economy. It’s the software development equivalent of buying a car and maintaining it for years, versus getting a new, worry-free car every day (sounds like Uber, right?).

The current no SDLC wave is about compressing the processes to blur the lines between the different phases. Once the above future is achieved, no SDLC will expand to make the processes unnecessary, rather than shifting responsibilities outside the enterprise. Organizations that really want to succeed in the digital world must strive towards this goal and commit to a no SDLC world.

Gazing into the Global Services Crystal Ball: Sometimes you get it Right, and Sometimes, Not so Much | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

When I visited India for the first time in the early 2000s, the country was largely unknown in terms of business. The airports were small and dingy. The upscale hotels were really nice but also scarce. That meant they could charge insanely expensive rates…I remember paying US$700 per night at the Leela Palace!

My U.S. colleagues and I were on a mission to visit largely unknown service providers like Infosys, TCS, and Wipro, all of which had around 10K employees. At the end of the trip, we concluded that this was going to be real, and big…very big.

So we, and the other industry analysts in the space, pulled out our crystal ball to see what specifics we could predict. How clear, or cloudy, were our sixth senses back then?

What we got right

We did well in this category. India, along with many, many other low-cost locations, is absolutely capable of doing the global services job with scale. It’s also capable of doing many sophisticated processes (full disclosure: we might have underestimated this one a bit.) And those “unknown” companies I mentioned above? They’ve become truly global players, by some measures even surpassing the original powerhouses like Accenture, ACS, CSC, EDS, IBM, and HP (many of which have already consolidated).

What we got wrong

While inflation slowed in the U.S., it did even more dramatically in recent years in India. This, in turn, slowed the arbitrage difference, creating relatively smaller impacts on our models. And currency moves – such as a change from around 45 to 64 rupees – created a large positive impact, offsetting inflation by roughly 50 percent.

What we got really wrong

Labor supply was the biggie. All of us in the analyst community completely underestimated the impact of the available supply, which created an ongoing downward pressure on entry-level salaries. Using the best available data, the number of college students in India has risen from 13.6 million in 2008 to more than double that (28.5 million) in 2016.

While we didn’t predict it in the earliest years of the global services industry, by the end of the 2000s we were forecasting the end of labor arbitrage. India salaries were rising at double digit rates, and it seemed that it was only a matter of time before we reached parity (for offshoring purposes, 70 percent of U.S.-based salaries was considered parity.) As you see, we were miles off on that one.

What we got really wrong | Supply of labor

Increased labor in India as well as other locations have ensured limited salary increase, especially for junior roles

Future of Global Services

Looking forward (through our much more mature crystal ball) on the cost question

  • Temporary shortages of key skills, particularly digital, will create upwards pressures on salaries. But as the education and corporate systems retool their training curriculums, I expect the resulting surge in available talent will allow a cap and perhaps drive down salaries. Still and all, India is still a viable place to get low cost labor, albeit not quite as good as it was 15 years ago. (Review our Executive Briefing, India Global Services Industry: A Look Back at the Last Decade and Our Future Outlook, to drill down into the supporting analytics for this analysis.)
  • Many functions and processes have reached an offshoring saturation point. This doesn’t mean a complete stoppage of work moving offshore, just that many of the big, concentrated moves have already happened.
  • New automated solutions like RPA are going to create significant process labor efficiencies, in turn increasing headcount pressures.
  • The tipping point in this equation will go back to the supply side, where the ongoing wave of college students will keep pressure on wage advances far into the future, especially for the entry level positions.

Gazing forward to at least a 2040 – 2050 timeframe, other low-cost locations such as eastern Europe may get tapped out, since they don’t have as large a stream of graduates as does India. So, I say: advantage to India in keeping the wages compelling with its tidal wave of ongoing supply. But the looming question will be, what to do with all of those freshly minted grads?

My next blog will tackle the interesting another aspect of my looking back and looking forward retrospectives: “Are the India Heritage Services the new Global Leaders? The answer isn’t obvious. Stay tuned…

Heralding the Robot Revolution in Human Resources! | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Until a year or so ago, the common refrain among those operating in the HR function was that HR services were already so heavy with platform automation that there wasn’t much that Robotic Process Automation (RPA) or Artificial Intelligence, its more advanced cousin, could do.

However, my extensive research shows that HR has enthusiastically jumped on the bandwagon. Even though many automation projects still inhabit the realm of slideware, many HR leaders and their service provider brethren are recognizing the impacts that automation can have on both their costs and revenue.

Enterprises: cost impact

Even though Human Resource services are heavy with platform automation (these platforms can be the traditional ones such as SAP and PeopleSoft or the new-age ones such as Workday and SuccessFactors), humans continue to do transactional tasks, such as entering data into platforms, transferring data between platforms, or preparing templated documents such as offer letters. RPA can perform these types of tasks faster and more accurately, and leave a reliable audit trail, wherever needed. It also frees people to do higher-order work. The result is significantly better efficiency and reduced costs.

Enterprises: revenue impact

Automation can also boost revenue indirectly by enhancing the employee experience, which in turn increases productivity. Think chatbots. While the current chatbot implementations are mostly RPAs, infusion of AI features such as Natural Language Processing (NLP), machine learning, and conversational user interfaces can be game changing. For instance, AI-enabled chatbots could remove employees’ toil from applying for leaves, filing expense reports or timesheets, selecting benefit plans, or getting answers to common HR queries. Managers could use chatbots to help shortlisted candidates, provide personalized onboarding assistance, and collect performance evaluation feedback. Chatbots’ 24/7 availability, ease of use, and rapid and accurate responses contribute directly to better productivity and experience.

HR service providers: cost impact

Service providers too are gaining significant cost and efficiency benefits through RPA, which mainly translates to deploying less Full-Time Employees (FTEs) to deliver the same outputs. Providers are presently grabbing most of these cost benefits to expand their margins, rather than pass them on to their clients in the form of reduced prices. That approach works like a charm for providers because the dominant output-based pricing model (per employee served, per pay slip processed, etc.) of HR services delinks FTE count from pricing, thus hiding gains through FTE reduction from clients. That is unlike the case of say, an F&A services construct, where the pricing is usually input-based (per FTE) and enterprise customers pressure providers to reduce FTE count through RPA and thus, cut prices.

HR service providers: revenue impact

However, enterprises are steadily wising up to RPA benefits that can drive lower price. Moreover, with increasing competition, providers are increasingly using RPA to set ever lower prices. Thus, providers will soon be forced to make a choice – do nothing and let others take away their business, or aggressively deploy RPA and cannibalize themselves but retain clients. The latter is obviously the lesser evil, even though revenues will be adversely impacted. That is when providers that look beyond RPA and invest in AI-based automation will trump the market. AI-based automation can provide benefits, such as enhanced employee productivity, for which enterprises will be willing to pay a premium. Powerful AI-based automation can also help providers deliver services they were earlier incapable of delivering, such as cognitive analytics. That can expand revenues and counter the cannibalization effect of RPA.

Clearly, automation is steadily becoming an imperative for both enterprises and HR services providers.

However, as with any advanced technology, enthusiasm without a generous helping of caution can be a dangerous potion. Setting realistic expectations about the benefits of automation, investing in technological and cultural change management, and bringing on-board key stakeholders are a few keys to success for enterprises and service providers in the long journey that is an automation implementation.

Keep your eyes peeled for my drill-down blog on these, and other, keys to success! In the meantime, feel free to share your opinions and stories of automation in HR – why or why not go for it, what works and what doesn’t, etc., directly with me at [email protected].