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In the last 10 days, analysts tracking digital services across the world woke up to highly savvy India-heritage service providers lapping up marquee digital deals in the world of sports. These new partnerships include HCL and Manchester United (soccer), Wipro and Chelsea (also soccer), and Infosys and the ATP World Tour (this one in tennis.)
These deals are prized because of the impact they create.
As an industry analyst, I am used to analyzing deals for their profitability and total contract value, i.e., the impact they create on the books in upcoming quarters. Looking at the above deals through this lens, I immediately saw that these are not traditional services deals. In fact, something tells me they will not figure similarly on the accounts as other services deals do. Indeed, Infosys candidly called out that it will be a “Global Technology Services Partner and Platinum Sponsor” of the ATP World Tour. Hence, it does not take a Sherlock Holmes to deduce that these three deals are essentially sponsorship arrangements (with an inbuilt services component) that the service providers have entered into under the garb of a services construct. A very easy way to decipher this is to compare the positioning of HCL’s and Wipro’s logos on the Manchester United and Chelsea websites, respectively. It makes it very clear which provider “spent” more on their “sponsorship.”
Take a look at the Manchester United website and you’ll see HCL’s logo is at the top of the page, right on top of ManU’s.
But when you check Chelsea’s website, you have to scroll all the way down to discover Wipro’s logo sitting in a corner sulking with Singha Beer for company.
Am I contemptuous of this sponsorship-deals-under-the-garb-of-services construct? Not at all! In fact, I am pleasantly surprised by the gumption shown by HCL, Infosys, and Wipro in taking this leap of faith to build a strong brand connect and pedigree. It shows they are willing to challenge the traditional constructs and meet the digital market head on. In a highly consumer-oriented world, new business will not come by just being efficient nerds. India-heritage companies are up against the likes of VC-funded start-ups, reforming technology majors (Google, IBM, Microsoft) and niche enterprise software firms (NetSuite, Workday, etc.,) all of which have stronger credentials in digital constructs. Given the buzz these deals have created, there is enough market validation for the tactical approach taken by these service providers. What is even better is that these are not typical paid sponsorship deals – these service providers will actually be providing services that will be touch and feel for millions of fans of these sporting giants. If they successfully manage it, this will create an exponentially stronger brand recall compared to what they have achieved in decades – being efficient service providers to enterprises, working in black boxes.
Hence, do not be surprised if TCS, which sponsors the New York Marathon (and many other races), turns around tomorrow and says that it is sponsoring managing all IoT (health sensors, speed sensors), platforms, and analytics of the race.
Keep watching this space for more on these developments!
Photo credit: Flickr
I recently spent a very productive day with Wipro as they showed examples of their commitment to service delivery automation – a commitment I observed as more than in any other service provider. HOLMES, their recently unveiled artificial intelligence platform is just the beginning of this serious commitment. Here are three very important aspects of this commitment.
Some time ago Wipro recognized that the service industry is changing very profoundly, and a significant secular driver of the change is new automation technologies that allow customers to automate a dramatically higher number of services than has been automated in the past. They took concrete steps to address this change.
They recognized not only the customer impact of implement automation in their workflow but also the impact to the service provider. Over time, the value will be captured by the automation owner, not by the service provider. Therefore, Wipro decided to invest in owning its automation IP – and that involves not just funding the initial build but also ongoing investments.
That’s not to say that when Wipro deploys automation in their accounts they will employ exclusively their own IP, but they recognize the need for a significant portion being their own IP.
Wipro allocated a large, dedicated team into building its automation platform, which they named HOLMES. But unlike some other providers, they extensively used open source software to get a head start and then layered in their own development on top of the open source component. This allowed them to move quickly in bringing compelling functionality to the marketplace.
The third aspect of Wipro’s automation strategy is their commitment from CEO TK Kurien on down through the leadership ranks to bring this to the marketplace. TK and senior leadership are committed to take this service delivery capability into their existing client base as well as use the automation platform as a challenger to gain new share in the market.
I believe bringing automation into their existing client base will be the most challenging endeavor, and they acknowledge that it will be disruptive and may be cannibalistic to their revenue flows.
We await to see how they handle such disruption. The details revealed to me were somewhat vague as to how they will realign their incentives to allow their account teams to do this. But certainly the executive commitment is such that it’s possible they will take the necessary steps to make incentive changes.
They are preparing for the inevitable disruption that will accompany the drive to become a leader in automated service delivery.
Wipro is reportedly looking at headcount and cost-reduction exercise in the realm of $300+ million. Why are they doing this? Is it a good idea? Of a few possible interpretations for wringing out costs, here’s my opinion – starting with my belief that this undertaking was inevitable. The more important question is how will they do it?
Wipro’s action comes on the back of similar news about TCS and IBM and is predicated by the pricing pressures hitting leading service providers. As I blogged recently, pricing pressure has become acute with existing clients looking for significant cost reductions.
In addition, the market is changing and clients are more insistent about requiring onshore resources; this raises operational costs for the Indian firms, which need to invest in a richer set of capabilities on shore. These resources located close to the customer are substantially more expensive for Wipro and other providers than their India-based resources.
It’s a case of when push comes to shove; if Wipro and other providers are to maintain reasonable margins or be competitive, something has to give. That “something” is the necessity to take out costs to allow them to meet the pricing pressures and allow them to hire the onshore resources that clients increasingly insist upon.
I think Wipro and others will move further into the industrialized factory model, which relies on an ever-widening pyramid that pushes work down to lower-cost resources and eliminates middle-management roles.
However, I think the strategy of moving deeper into the pyramid model raises the risk of further commoditizing the space and increasing churn. And clients are more and more intolerant of churn. The likely result is that it will open the door for firms like EPAM and others that differentiate around persistent teams of experienced engineers.
Wipro just hired Abid Ali Neemuchwala as COO and group president. Clearly the provider is setting up a succession plan for him to take over Wipro from current CEO, TK Kurien, who has been driving the firm’s transformation. This is an intriguing move as Wipro appears to be succeeding in the turnaround. So it makes sense that the industry is questioning the move. If the turnaround is, indeed, happening at Wipro, why bring in an outsider?
Abid comes to Wipro from TCS with a pedigree of having run the TCS BPO business. This is a big step up for him, from running a $2 billion business to a $9 billion business. The good news is Wipro is giving him at least a year to learn the ropes.
It’s interesting to reflect on why Wipro did this. I don’t believe the firm is stepping away from the transformation that TK Kurien has been driving. Nor do I think Wipro looks to capture some of the TCS magic and execution capability. I believe the firm is reinforcing its need to continue changing and is bringing in an outside perspective to drive change. This move follows in the footsteps of Infosys, which similarly brought in outside leadership.
Wipro gave TK formidable power, and five years, to drive significant change and transformation. Like any transformational plan, it has been painful and has taken time. But as I blogged before, the transformation is starting to show promise with Wipro wins picking up in the marketplace just as TK’s five years comes to a close.
So why bring in an outsider? I believe the answer is that the journey has just begun. The services industry is at an inflection point. It is clear that with changing technologies, client expectations and business models, leadership in the existing space does not guarantee leadership in the future. I think Wipro understands this and is looks to challenge its organization with fresh perspectives.
Running faster with the old model will not allow for leadership in the future. Fresh perspectives and augmenting existing talent is necessary to give Wipro the best chance at being a leader as the market evolves.
The challenges Abid will need to take on will shape and continue to drive Wipro to change how it delivers services, takes advantage of new technologies such as the digital and analytics space, and how it deals with changing client expectations demanding value beyond labor arbitrage. And Abid will bring new perspectives on how to successfully guide Wipro through the transition into the new business models of SaaS, BPaaS, platforms and consumption-based IT and business processes.
I think it’s a good move.
Photo credit: Wipro