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Businessman Scratching His Head

Don’t SMAC Your Customer! | Sherpas in Blue Shirts

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The service provider community is very fond of clever terms, and SMAC — standing for Social, Mobile, Analytics, Cloud — is a good example of that. However, if you’re a service provider looking to sell to new or existing clients, talking about SMAC may not be the most productive way to hold the conversation.

The most productive way to uncover a significant opportunity is to talk to your customers in their language about the business issues they have. Sure, they’re looking for technology answers to their issues, but very few of them use the term SMAC of their own volition.

So if you’re talking to a retailer about their out-of-stock condition, for instance, talk about the practical ways that your solution will help them identify where they’re out of stock and how you can help them prevent that from happening.

Software tools can be very powerful. But as I’ve blogged several times in recent months, decision rights and buying influence are flowing toward the business users rather than CIOs. Providers must change terminology and communication to successfully capture their attention and serve them well.

Use simple business terms to communicate what you can do for a customer. If you use clever technology terms, you’ll probably just marginalize your impact and consign yourself to the realm of being a geek.

My advice: Keep the acronym out of your sales toolkit. Don’t SMAC your customer!


The Services Industry Is Not Getting Its Return from Investing in Innovation | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts | 2 Comments

At the request of a BPO provider, we did a fairly exhaustive study of all vendor/provider-funded innovations and their impact on the business growth. The data were startling. Our study clearly revealed that the hundreds of millions of dollars that providers invested in innovation yielded very disappointing returns. Although they often succeeded in taking their innovations to market, they realized only scanty returns and not the kind of return that creates a differentiated accelerated growth. Why is that? Were their hopes too ambitious?

The biggest culprit in the poverty of their return on investments is that those investments didn’t have the necessities for success built into their DNA. What was missing? In many cases innovation initiatives don’t resonate with existing and prospective clients because they simply don’t meet the clients’ needs. In other cases the offerings require a different kind of sales discussion as the provider tries to sell something the client isn’t looking to buy. In both cases this creates a difficult sell and largely proves unsuccessful.

Strategy for innovation that leads to business growth

As I explained in a previous blog post about innovation agendas, these disappointing outcomes from provider-funded innovation initiatives often start with trying to design a solution for multiple clients rather than innovating on a single client’s defined needs. Providers fall into the seduction of believing it makes sense that just because one client wants a particular innovation other clients also will want it that way.

Further, building things in a vacuum away from a client is not helpful and tends to result in outcomes that are off target.

The path to innovation that accelerates growth lies with the provider working closely with clients to define their needs and then bringing the provider’s capabilities to meet those needs. It’s a powerful strategy that results in much deeper client satisfaction.

It also allows a provider to deal with the issue of changing influence structures that we’ve noted in previous blog posts, where the business stakeholder is now more influential in defining a client’s business needs and driving investment and work that goes to third parties.

Providers that interact with business stakeholders to address their needs find the effort pans out and they can move to more impactful innovations that the client will be ready to fund.

And that’s a recipe for explosive growth.

Photo credit: Matter Photography

Modern Space

Automation, the Once and Future King | Sherpas in Blue Shirts

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I once read that our society’s major accomplishments over the last 50 years were that we had harnessed lightning and used it to get sand to think. This massive leap forward was about using information and computers to automate processes, and it really took center stage in the service marketplace. But 15 years ago labor arbitrage emerged and arguably supplanted automation as the dominant source of value creation in the services field. With the maturing of the arbitrage market, we are seeing automation reemerge at the center of service offerings, and I feel we are in the early stages of a tectonic shift where automation once again dominates the landscape.

We see this disruptive shift to automation happening in many areas. For instance, what moves the market now in end-user customer service isn’t outstanding service from India or the Philippines. It’s the emergence of “service now,” an automation SaaS play, which creates increased levels of automation for customer service.

And there is the expectation of just-in-time cloud or consumption-based CRM. I blogged before about IBM reacting to this trend by selling its transactional BPO and CRM practice when the space commoditized. Dell and CSC are other market leaders reacting to the move toward automated services.

The analytics movement is part of the shift to automation. Another hot growth area is digital commerce. Both of these areas have become largely a tools play rather than a labor arbitrage play.

The as-a-service platforms are also a manifestation of the shift to automated services. Hot new offerings are coming out as BPaaS platform-based services and disrupting the BPO space. In a previous blog I mentioned how payments companies are outperforming BPO companies because of the automated platforms that allow the payments providers to be highly profitable.

These are all harbingers of things to come as automation re-disrupts the global services world.


HCL Catches Lightning in a Bottle | Sherpas in Blue Shirts

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Double the fun! HCL’s stock valuation doubled in a just a little over 12 months. They’ve been on a tear, improving every month, with revenue per employee skyrocketing and the corresponding profitability rising. Sure, HCL has shifted some positions in its leadership team. But what really caused the investing community to value HCL at twice the price as before is HCL’s successful shift to transaction-based pricing.

The strategy behind the leadership shifts was to ensure future growth. Former CEO Vineet Nayer became Vice Chairman a year ago, and Anant Gupta moved from President/COO to President/CEO. Gupta has been with HCL for 19 years and built its infrastructure business — which is now the dominant marketplace for HCL.

HCL’s growth strategy is taking hold, and it successfully transitioned its infrastructure offerings from an FTE-based pricing model to per/service transactional pricing.

Previously I blogged about payment companies outperforming their BPO brethren: it was because they implemented platforms for transaction pricing. As I explained then, there are few examples of transitioning successfully to transaction pricing models outside the payments space. It’s almost as rare as catching lightning in a bottle.

Spectacular and Rare

But HCL is one of those rare instances and succeeded in the infrastructure space.

Where success happens in rolling out and implementing transaction pricing, a service provider can reap tremendous benefits because it captures productivity gains from automating. When a provider can scale this strategy, as HCL is doing, the financial and competitive benefits are spectacular.


Are We About to See a New Wave of Shared Services Activity? | Sherpas in Blue Shirts

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We were recently a sponsor at the 18th annual Shared Services & Outsourcing Week conference in Orlando (part of SSON, the leading event for shared services). The significant portion of attendees that are just embarking on shared services for the first time and opening up new shared services capabilities was striking to us. It raises this question: Why are we seeing a new wave of shared services situations?

There are two perspectives for shared services and outsourcing: (1) two sides of the same coin or (2) differing vehicles to achieve the same goals. Either way, most of us now think of shared services as a mature space with companies refining their shared services.

So it’s certainly interesting to see new shared services starts on the upswing, especially since BPO in 2013 certainly performed less robustly than we had hoped for in terms of growth.

Are organizations moving to favor shared services? Or are we going to see a re-acceleration of outsourcing as companies move to build hybrid models (both outsourcing and shared services) going forward?

We’ll be watching this trend. But there can be no doubt that based on this conference we are seeing a pick-up in new shared services starts.

Photo credit: SSON

Different Directions

Is Xerox Changing Direction or Is It More of the Same? | Sherpas in Blue Shirts

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I’m watching with great interest the current change in leadership at Xerox. They just announced that Lynn Blodgett will retire at the end of 2014 and Robert Zapfel will join the firm on April 1 as president of Xerox Services and EVP of the corporation, reporting to the chairman and CEO. Bob has had a distinguished career for 35 years at IBM and helped transform Big Blue’s services business to profitability. Will Xerox now use the IBM playbook?

Here’s a short version of the IBM playbook:

  • Be relentless in adjusting the cost base and disciplined in exiting businesses that can’t meet the return total.
  • Be patient and consistent in acquiring new properties that enable positioning in attractive, high-growth market segments.
  • Be very effective at utilizing the company’s broad capabilities including products and R&D to craft a differentiated position in services.

In many respects Xerox and IBM enjoy a similar position. They both have strong balance sheets with which to finance acquisitions, they both have golden brands that engender trust, and they both have R&D that is the envy of the industry. Arguably Xerox has already been walking down the IBM path to some extent. It will be interesting to see how Bob shapes the future of this proud and venerable industry leader. What do you think?

Photo credit: Derek Bruff

Business Man

Will Cloud Kill The CIO? Survey Says No | Gaining Altitude in the Cloud

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Sometimes it’s hard to distinguish the facts from hype in enterprise cloud adoption. This is why Everest Group and Cloud Connect continue to conduct our annual joint survey to understand why and how enterprises are migrating to the cloud, and what they are migrating to the cloud. Check out my blog on InformationWeek for more findings on the Enterprise Cloud Adoption Survey. Here’s an excerpt:

If supermarket tabloids covered enterprise cloud adoption, their headlines would scream “The CIO is Dead,” “Security Concerns are Old News,” and “Cloud Makes Consumption Easy—No External Help Required.” And as we perused these headlines in the checkout line, we would wonder how much truth lay behind the hype.

To distill fact from fiction, the Everest Group launched the Enterprise Cloud Adoption Survey in 2012, in conjunction with Cloud Connect and UBM TechWeb. We have just completed the third annual survey of enterprises and vendors and will share the results in Las Vegas on Monday, March 31, at Cloud Connect Summit, co-located with Interop.

Read more on InformationWeek

You can also download the full survey summary report here.

Healthcare Doctor Writing on Tablet

Why Healthcare IT Security Must Be at the Forefront of the CIO Agenda | Sherpas in Blue Shirts

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Considering the nature of regulations and the sensitivity of personal information, one would assume that IT security is a top priority in the healthcare space. However, an estimated 29 million+ patient health records have been compromised, (classified as HIPAA data breaches,) since 2009. The number of health records breached in 2013 jumped a whopping 138% over 2012. Serious security flaws have even been detected in Obamacare’s much-touted flagship health insurance exchange website,, including severe lapses spanning JSON injection, unsanitized URL redirection, user profile disclosures, cookie theft, and unprotected APIs.

An Afterthought

Healthcare IT security challenges

The pace at which IT is changing the healthcare landscape makes it a prime target for malicious activity. Industry headwinds such as big data, payer-provider convergence, BYOD, HIX, EHR/EMR, and the Internet of Things (IoT) are adding to the healthcare information security conundrum. Patient records have become increasingly common in the fraud marketplace. When combined with other data sources such as insurance and medical data, the problem assumes more alarming proportions.

And it’s not a case of absence of punitive measures. Under the new HIPAA Omnibus Rule (effective from September 2013), firms face fines of up to US$1.5 million in the event of a violation (“willful neglect that was not timely corrected”). Europe has enacted several data security measures. Even before the latest regulatory rulings, insurer WellPoint was fined US$1.7 million after its online application database exposed information concerning more than 600,000 patients.

Feeding the problem

Although CIOs often list security as a priority imperative, it just doesn’t translate into actual spending. This discrepancy can be attributed to a confluence of reasons. The problem originates in a lax culture regarding IT security. The majority of information security breaches are highly avoidable, and most lapses can be traced back to sloppy system administrator password practices, careless sharing of sensitive information, failure to change default login credentials, among others. Healthcare information security is still not a top execution priority for most personnel, and most security programs are hampered by lack of relevant expertise and attention. Regulatory inconsistencies compounds the issue, i.e., multiple agencies are involved (FTC, FDA, FCC, to name a few), and their often divergent mandates contribute to the travails of healthcare IT security stakeholders.

Healthcare IT security roadmap

Stakeholders – both buyers’ internal IT teams and third-party service partners –face an increasingly complex technology conundrum. Any mitigation strategy should incorporate leading practices utilized in similar initiatives:

  • Conduct a thorough risk-assessment to proactively identify and secure vulnerabilities
  • Establish clear level-driven permission policies (on a need-to-access basis) applicable to data, applications, and devices (keeping in mind expanding BYOD policies)
  • Institute appropriate staffing practices to make sure personnel with relevant skills are given charge of security tasks
  • Ensure adequate personnel training and sensitization toward information security
  • Implement best-in-class encryption standards
  • Collaborate with business associates (held to the same standards as HIPAA-covered entities) to establish processes and enforce standards
  • Evaluate the security strategy along a security versus accessibility paradigm
  • Drive synergy between the business and IT vision to avoid incoherent implementation resulting from disparate imperatives

Ultimately, any healthcare IT security policy has to encapsulate the individual needs and challenges of various stakeholders – patients, providers, payers, and third parties – to ensure equitable access and health information exchange for coordinated care. The unenviable task of securing healthcare information in the onslaught of exploding devices and touch points calls for a carefully thought-out and implemented approach. But first, healthcare IT security must make a monumental shift from being an afterthought to being a primary strategic imperative in any plan design.


Pondering TCS’s Modest Morsel | Sherpas in Blue Shirts

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TCS posted industry-leading financial results in its FQ4 2013 report. But what caught my attention was its quarterly guidance to investors where management stated they believe TCS can add “a few billion dollars” from digital as a growth driver. Really? Just a few billion? We believe TCS is substantially underplaying its digital hand.

Management talked constructively about taking the digital business area seriously. But they are guiding to only modest aspirations, almost a mere morsel of the market share potential in the seismic disruption cloud and digital are creating.

Although we recognize TCS’s need for measured conservatism and modesty in investor guidance, we at Everest Group feel no such need. We believe TCS is strongly positioned to exceed the modest goal of a few billion. Here’s why: From our industry analysis, we predict that 30-50 percent of workloads will migrate from traditional infrastructure models to cloud-based models.

As this occurs, we expect that TCS will garner substantially more than a few billion dollars of revenue.


CSS Corp Cloud Services Making an Impact | Gaining Altitude in the Cloud

By | Gaining Altitude in the Cloud | No Comments

For several years we’ve predicted that the cloud would disrupt data centers. But it’s not as simple as lift and shift; it requires an understanding of how to deploy in the cloud and also requires some reengineering. Now some innovators are succeeding in deployment solutions and achieving momentum. One that caught our eye: the explosive growth of CSS Corp Cloud Services.

CSS is off and running. Need evidence? Among other clients, they’re currently working with:

  • 12 Fortune 100 companies
  • 12% of the top 50 U.S. companies
  • 16% of the world’s 25 largest banks
  • 5 of the world’s largest Fortune 350 manufacturing companies

The issue around using any public cloud — especially the lowest-cost cloud, AWS — is that it requires re-architecting applications in such a way to get enterprise performance. This has been a significant constraint in the migration of workloads to public clouds.

But we’re now seeing real use cases emerging where companies systematically take production workloads, reengineer them and deploy them into the public cloud in a way that gives them production-quality outcomes — that is, high performance and high resilience.

CSS Corp Cloud Services was an early AWS adopter. The firm invested in toolsets around AWS cloud services and developed a capability for consistently re-architecting and deploying into the AWS public cloud. The company’s public-cloud use cases already span a wide area of processes including Big Data analytics, digital marketing, e-commerce, backup and storage, disaster recovery, application and Web hosting, development and test environments and media/entertainment.

Data centers are not yet an endangered species. But as firms such as CSS master cloud deployment in large corporate enterprises, we believe the rate of disruption will quickly pick up.