Month: December 2015

All Service Providers are Equal, but Some are More Equal than Others | Sherpas in Blue Shirts

With apologies to George Orwell and his novel “Animal Farm,” I think Napoleon the Pig’s famous quote (“All animals are created equal, but some animals are more equal than others”) has important applicability and insight for the services industry.

The industry is changing very quickly. Customers are open and eager for transformation and to apply disruptive technologies. Service providers are eager to bring them to the customers. Seems like a match made in heaven.  

But here’s the problem: all providers’ presentations look identical. They all include phrases like “extreme automation,” “cloud” and “elastic service.” In fact, if you delete the logo and the background color of the presentations, they are indecipherable from one another. For the customer, it looks like all providers are equal. And the customers are equally cynical about them.

From the customer’s perspective, the problem is how to pierce the veil and determine which providers really can do the work. There are a variety of ways to determine this, but one of the prominent ways is to look at the price. If the provider pitches robotics, repeatable process automation (RPA), or cloud services, it should translate to lower pricing. But this is not the case. Usually we find that the offer price and terms don’t align with the presentation slides.

For example, if the customer is moving to a consumption-based frame or elastic vehicle, it expects a low price and no long-term entanglement. But we consistently see is providers coming in with a five-year contract, a modest reduction in price and COLA (cost of living adjustment). All of these terms fly in the face of the promise of cloud, elastic services and extreme automation. AWS, for example, dropped its price by 60 percent last year.

As an industry observer, providers often ask me how they can change their messaging to be more compelling. My answer is, “You can’t. Any clever graphic or catchy saying will be quickly adopted by your competitors.” Instead of changing the way the presentation looks, providers need to make sure their pricing mechanism and contractual structure aligns with the promise of the offering.

Customers can tell service providers apart by looking for the provider whose entire model is consistent with the promise. Otherwise, the promise is just rhetoric and all providers are equal.

IAOP’s The Outsourcing World Summit® 2016 — February 15-17 | Event

Everest Group is sponsoring The Outsourcing World Summit 2016, IAOP’s annual global gathering. The event is taking place at Disney’s Yacht & Beach Club Resort & Conference Center in Lake Buena Vista, Florida, February 15-17, 2016.

Eric Simonson, Managing Partner, Research, Everest Group, will be the Track Chair for the multi-session, multi-day  Disruptive Technologies: RPA, Digital and the Internet of Things track.

 

Additionally, we’ll also be distributing complimentary copies of the new book Socially Responsible Outsourcing — for which Eric Simonson penned the foreword —  at our booth #31.

Please visit Everest Group’s analysts, consultants, executives at booth #31. We look forward to seeing you there. Learn more.

Socially_Responsible_Outsourcing_forewordbyES_2016

NOA Automation SIG — February 11, 2016 | Event

Over the past 12 months we’ve seen an unprecedented rise in the use of automation across business processes services globally, from both service providers and their clients.

Recent research conducted by Everest Group has demonstrated that levels of understanding vary hugely across the automation space; when the outsourcing industry is asked what it knows about automation, responses range from advanced levels of understanding to “absolutely no idea.”

On 11th February 2016, members of the NOA will be presented with a valuable opportunity to learn more from those who have already implemented automation solutions, and a chance to gain some factual insight about the financial and operational outcomes.

If automation is not currently part of your sourcing strategy, it soon will be!

Join the NOA and Everest Group in the very first Service Delivery Automation SIG to be informed and share experiences about this very real, very current catalyst to change that is facing the business services market.

Speakers will include: Sarah Burnett, Vice President, Everest Group. Learn more.

NASSCOM India Leadership Forum 2016 — February 10 – 12 | Event

Everest Group CEO Peter Bendor-Samuel will lead the Analyst Corner session Beware the Digital Trough! at this year’s NASSCOM India Leadership Forum 2016 on February 11, 2016.

Session Description:

Adopting Digital themes within the fabric of enterprise business models is a fundamentally different proposition from technology transformation or outsourcing. The challenges associated with making enterprise Digital initiatives successful are very different. Everest Group research shows that while enterprises tend to be very optimistic about their digital initiatives early on this journey, enthusiasm tends to stall as the going gets progressively tough. Listen to Peter Bendor-Samuel talk about this “trough” in adoption, explain why it happens, and what enterprises and service providers must do differently to avoid derailing Digital transformation journeys.

Be sure to attend Peter’s session and arrange to meet with other Everest Group analysts and executives.

Learn more.

 

 

 

Winning in the Competitive Contact Center Outsouring Market | Sherpas in Blue Shirts

The contact center outsourcing (CCO) industry has been growing at an average rate of 5-6 percent over the last few years. Yet some service providers in the mature, competitive CCO market, where most of the traditional offerings have been commoditized, have managed to expand their businesses organically at a higher pace than the CCO industry average, some to the tune of 10-15 percent. How have some small to mid-sized players with targeted CCO offerings such as HGS or Wipro, and the largest player in the market, Teleperformance, been able to so significantly exceed the average? They’ve been making right set of differentiating investments.

To set the stage, two key changes in the CCO market explain the reasons these value differentiators make a difference to the growth of the service providers:

  • Changing consumer mindset – The new tech-savvy consumers seek instant and painless gratification in their interactions, via the channel of their choice. Most providers are ill equipped to manage the expectations of these new-age consumers and are looking for solutions
  • Changing value proposition – There is growing realization within the buyer community that CCO is not just a cost containment measure, but also a means to drive strategic initiatives impacting business outcomes.

These changes present an opportunity for service providers to have a significant impact on their clients’ performance. They also mean a departure from the growth strategy used by providers so far – expanding operations to leverage economies of scale.

The new value differentiators

Through its extensive research, Everest Group has identified five key differentiators that will enable providers to outshine their competitors.

1CCO Diffs - 5 High Growth

Each of these is focused on providing a best-in-class customer experience to the new-age consumer, which in turn ensures positive impact on the client’s business outcomes. For example, high-growth service providers that have made significant investments in higher-margin value-added services – such as performance management and reporting, and customer retention management – have generated 10 percent more revenue than their competitors.

 

2CCO Rv by process for blog

To find out who these high-growth providers are, and how the value differentiators have helped them outpace the market, grab a copy of our recently published report titled “Identifying the Differentiators of High Growth CCO Providers.”

 

Liberty Source: Using a Military Spouse Talent Model to Energize Onshore Delivery / Part II | Sherpas in Blue Shirts

What if a service provider could build itself from scratch based on the learnings from the past two decades? Liberty Source, launched in 2013 as an impact sourcing provider, is trying to do just that in the highly competitive finance & accounting (F&A) outsourcing market. It has agreed to share its story with us as its business continues to scale.

Our first discussion with Steve Hosley, CEO of Liberty Source, provided an overview of their journey thus far. Our next discussion began our detailed look at Liberty Source’s talent model, which continues below with insights on its challenges and benefits.

Eric: Once an employee is onboard, what is the design for her or his development and career path?

Steve: Many organizations follow a typical succession planning and talent management process to aid in guiding their employees down their career paths in which they are aligned with the goals of the company. Where we differ is the frequency of this review and the involvement of our clients.

Because our mission speaks to providing job progression opportunities, our first client agreed to the formation of an employee development committee that meets on a quarterly or semi-annual basis to aid us in evaluating our talent management program for employees assigned to its account. This dialogue provides us with great insight into current and future required skills. While the jobs may be entry to mid-level careers at Liberty Source, the longer-term partnership we take with our clients allows us to create and grow “farm teams” to form talent pipelines that are extensions of our clients’ talent planning models.

Career paths are individually determined and then taken into account when we perform our regular talent review discussions. While employees may be in a role associated with a Finance and Accounting career path, some employees have indicated they would like to pursue other areas of responsibility. To support their development, we use creative networking and affinity groups in a different way to provide extra-curricular opportunities for them to pursue and grow their interests.

Eric: This is a fairly different type of people model. How have you adjusted the management model to reflect this?

Steve: First off, we commonly refer to our managers as coaches because we believe this is the kind of culture we are building. We have to focus on non-traditional techniques. Most of the BPO world is set up to manage in-person and face-to-face. The mission we are on changes the very nature of this relationship because the majority of our people are destined to relocate or telework. We have to manage virtually, create touch points that factor in different time zones and modes of communication, and manage client expectations differently.

We also allow for more independent and direct communication with the client. Ordinarily this is highly filtered by the BPO organization. We remove as much of the go between as possible to allow for the transparent process we promise to our clients. Once the employee is up to speed and producing, they own this relationship in most cases.

The typical command and control model that drives a directive, task-oriented communication style is replaced with a coaching and mentoring model. This view of leadership vs. management permeates how we engage employees to own their work more directly and learn how to transform it to a more efficient and scalable plan for the long term.

Eric: With all these modifications to normal people practices, it would seem that Liberty Source’s culture must be distinctive. Can you comment on what defines the culture?

Steve: Liberty Source is a place to come home to. Stable careers, flexibility in workplace and schedules, and with a common goal of being a place where employees come to transform their careers and customers come to transform their work. To achieve this, we have to translate what our employees may be used to and begin to train, teach, and coach on commercial culture norms and expectations. Some of our employees may be working in a sophisticated office setting for the first time, so we cannot expect everyone to come to the job without clearly defining rules of engagement and a structure to follow. We came up with a few simple principals to help guide a way of thinking and acting based on language they might already be used to. These six principles are:

  • Own it: We take personal responsibility to get our tasks done, meeting or exceeding both our clients’ and colleagues’ expectations.
  • Learn and lean: We look at every task or process as a learning experience, and don’t hesitate to lean on others for help.
  • Know our clients: We know what drives our clients’ success, and make decisions that support their business.
  • Know your numbers: We always know our performance metrics, and what we’ve committed to our clients.
  • No surprises: If something gets in the way of our performance, we immediately flag the situation to our management and our clients
  • No boundaries: Performance has no limits. We always look for opportunities outside our scope of responsibility to make a difference.

We also rely on a family approach to bring everyone to the table to resolve challenges. There is a level of honesty and support that comes from a family-centered view. You don’t get this in a commercial setting, and we tap in to it to gain trust and thus create strength.

Eric: What are the biggest opportunities and challenges you see for the talent model to continue scaling and evolving?

Steve: We still believe there is work to be done in better leveraging localized municipal community colleges as well as tapping into SaaS providers for training as well. Our size impacts the number of resources we can tap. To move past this, we are fortifying partnerships to expand our capability to expand learning and development goals.

The power of the Liberty Source family is in their sense of mission. It is easy to convey to this community that the success that you and the organization achieve now with our clients will create a wake of opportunity for future deserving spouses and veterans – and on behalf of those future spouses and veterans, we thank you for your commitment to Liberty Source. This message typically would not resonate in a BPO operation, but at Liberty Source it is “all hands on deck.” We strongly believe that the human capital model we have designed will directly translate to commercial differentiation in the market through low attrition and a committed workforce.

Eric: What are the benefits of the Liberty Source talent model in comparison to traditional BPO models?

Steve: Access to untapped, capable talent that fits – with our deep ties, affiliations and tools we have access to talent that is not readily apparent to the typical BPO. This is paying off in a couple ways:

  • Dedication: We have single digit attrition which is directly attributed to our dedicated military community and the culture we have formed. Typical BPOs have higher levels of turnover and much less social impact than we do. This retention creates the opportunity to transform work for our clients. We have a workforce that is highly engaged in the work of Liberty Source and wants to see us succeed like we’ve not seen in our previous commercial experiences. We’d like our current and future clients to see what can happen when full engagement is in action.
  • Agility: Our proximity to our clients and our EQ lends itself to less cycles and revisions. We get hand-offs right the first time.
  • Continuous improvement: This has long been an elusive goal of BPO providers. At Liberty Source we are committed to growing our employees and a big part of achieving that is through transforming our clients work so the type of Liberty Source work begins to elevate. This in turn elevates the abilities of our team.
  • Connection to Corporate Social Responsibility (CSR): Companies should no longer think of their CSR activities independently from the operation of their company. At Liberty Source, we deliver services at a commercial standard and our clients also get the benefit of evangelizing about our amazing social story as well.

Eric: What could others learn from Liberty Source’s experiences?

Steve: Major misconceptions are tied to spotty résumés and unrecognizable military terms and experiences. This is the primary reason the military spouse has challenges in achieving their full potential. If you focus clearly on what defines success in the role and manage to that in your selection, in your goal setting, and in your rewards you can really achieve a lot and help someone really deserving achieve their potential. Lastly, given that many of our staff originate from a command and control hierarchy, empowerment needs to be consistently reinforced to generate their optimal performance.

Eric: Thanks for sharing these insights with us. It is stimulating to think about how much a people model and culture can be designed to align to a particular targeted talent pool. I look forward to hearing more about Liberty Source’s continued journey in a couple more months.

Does DevOps Threaten the Labor Arbitrage Service Model? | Sherpas in Blue Shirts

DevOps offers a tantalizing opportunity for the service provider industry. On one level, it’s perfect. It allows service providers to get closer to the business, deploy automation and provide an integrated services stack with greater wallet share. There are even clear indications that it can be applied to a legacy environment as well as private and public cloud environments. Plus it increases productivity, so it delivers services at half the cost and twice the speed. So what could possibly go wrong?

One thing that could go wrong is a service provider that is heavily invested in an offshore-centric talent factory model. The problem is DevOps is different from traditional labor arbitrage services world.

In the arbitrage services world, providers attack cost in two ways. The first way is to move the work offshore to leverage low-cost labor pools. With this comes the tyranny of distance with implications of coordinating by only talking by phone and text and difficulty of coordinating across time zones and the differences in terms of business context.

The second lever is the invention of the talent factory and pyramid model. It relies on the provider constantly bringing in freshers – young people fresh out of college – and training them. This keeps costs low by having junior staff do the work under more experienced supervisors.

How does DevOps challenge this model?

The purpose of DevOps is to get much faster delivery as well as much closer connection to the business. And organizations are finding that DevOps more than makes up for the cost savings of labor arbitrage. It achieves this outcome by two tactics.

  • First, DevOps combines four teams (the development team, testing team, maintenance team, and infrastructure team) into a smaller central group that develops, maintains and manages the environment all from the same place. These tightly integrated DevOps teams require fewer people, and they’re often more than twice as productive as the old-model factory teams. In addition, the teams are located as close to the business as possible, both from a proximity and a time zone perspective. Clients now want to have more participation in their service delivery and want the teams to build a strong connection to the business. So, organizations using DevOps desire having a greater proportion of the team onshore than offshore.
  • Second, DevOps uses persistent teams rather than the leveraged, churning teams in the old factory model. You can’t achieve the productivity gains if you keep changing out the team members. The old pyramid factory model implicitly drives personnel change, which is completely antithetical to the DevOps model. Typically, if the work is delivered out of a talent factory, the client doesn’t get a persistent team. There is a different team for each project, and there is substantial turnover, both in the firm at large, with turnover rates ranging from 15 to 30 percent, and turnover across the pyramid with different people assigned to a wide variety of client projects. So the client always has a junior team and different people for each project.

The tightly integrated, persistent teams located close to the business threaten the labor arbitrage model. Given the clear benefits of adopting DevOps, I see it as a significant challenge to the traditional status quo as practiced in most arbitrage-assisted IT organizations today. DevOps challenges the old 80-20 rule (80 percent of talent offshore, 20 percent onshore). I don’t mean to imply that I believe that all offshore work will move back onshore. I simply don’t believe there is enough talent in the originating destinations for this to happen.

The adoption of DevOps is certainly creating a headwind for a set of issues that I think will, over time, fundamentally question the way we conduct services businesses today. DevOps delivers on its promise for services at half the cost and twice the speed. But the consequence of DevOps is that it takes service delivery to a new business model with different kinds of pricing, a different kind of talent mix and different choices around location.

Disaster Recovery in Chennai, Cumbria, Boston, or Your City: Are You Prepared? | Sherpas in Blue Shirts

An airplane might be one of your first thoughts of a way to escape when your city is flooding…

chennai_flooding_plane2

. . . but you wouldn’t have gotten far in one during the worst flooding Chennai, India has experienced in 100 years.

People in Boston, Massachusetts found that cars didn’t do them a whole lot of good either when faced with 108.6 inches of snow during the 2014-2015 season.

Boston_snow_cars

But rafts can do the trick, as sufferers from the U.K’s Storm Desmond learned recently.

UK_Storm_Desmond_raft

All levity aside, natural disasters and other catastrophic events can wreak havoc on people’s lives…and on business operations.

While most offshore service providers have complete and world-class disaster recovery and business continuity plans in place for their clients, many are primarily focused on re-establishing facility-level activities and, ultimately, the systems and data used offshore. However, during catastrophes, the effectiveness of these plans can be greatly hindered due to lack of access to key people or resources.

Thus, in light of the recent Chennai and U.K. floods, we thought it an appropriate time to review the critical components of disaster recovery (DR) and business continuity (BC) plans.

Everest Group breaks disaster recovery and business continuity planning into four primary categories.

Immediate relief

At the immediate onset of a disastrous event – be it fire, tornado, earthquake, flood, gas leak, etc. – fear, anxiety, and adrenaline are all extraordinarily high. To make certain all goes as smoothly as possible in the earliest hours of the event, this portion of your plan must your cover communications (with authorities, business partners, employees, and family members), how top and high priority tasks will be managed, and, most important, evacuation al all personnel to a safe location.

Backup plan to keep the lights on with diminished capacity

Focuses here must be on alternative sites, and detailed procedures for establishing voice and data communications and other operations. Will you use a location hot site, a mobile facility, or a combination? What processes and services will be delivered from each site? What procedures are in place for establishing voice and data communications? These are just a few of the key considerations for helping ensure the most critical operations continue.

Facility and operations restoration and reconstruction

To enable the impacted facility to become habitable once again, your plan must cover procedures for departments, team responsibilities, emergency accounting, functional areas, notifications, risk assessments, etc. It must also address equipment considerations including main computer system(s), microcomputers, desktop systems, data and voice communications, and other critical equipment such as heating, cooling, and security systems.

DR/BC plan maintenance and testing

As conditions change over time, your plan must include maintenance procedures for keeping the plan current, a regular refresh to update the inventory of systems hardware and other equipment, and a calendared update of network operations, communications lines, service recovery requirements, etc. As the best laid plans can go awry, periodic testing of the plan is also a critical requirement. Everest Group recommends maintenance and testing be conducted annually.

While disasters can strike anytime, anywhere, proper preparedness can go a long way in minimizing the impact. We wish all those affected by the current Chennai and U.K. flood situations a quick and healthy recovery, and mourn with those who lost loved ones during these epic events.

Keep your eyes on this space for more details on what DR and BC plans should include!

Global Healthcare IT Outsourcing Market Is Projected to Double by 2020 | Press Release

Facing the challenges of tapering margins, regulatory reforms and evolving customer-centricity, the global healthcare industry is turning to technology to trim expenses and enable innovation. Consequently, the healthcare IT outsourcing (ITO) market is expected to double by 2020, growing at an estimated 12 percent compound annual growth rate from US$34.5 billion in 2014 to US$68.3 billion over the next six years.

Payer-provider convergence as well as significant merger, acquisition and restructuring activity also will fuel healthcare ITO growth.

“In comparing IT activity between healthcare providers, payers and the life sciences subvertical, healthcare providers are expected to witness the highest growth, by percentage, as they make up for their historical lag in adoption and gear up for various mandates,” said Abhishek Singh, practice director at Everest Group. “These mandates include payer-provider convergence, patient-centric care, evolving reimbursement models, and value-chain digitization.”

These and other findings were recently published by Everest Group in IT Outsourcing (ITO) in the Healthcare Payer Industry – Annual Report 2015: Go-to-Market Strategy for Healthcare IT. This research analyzes the current trends and future outlook of large, multi-year ITO relationships in the payer market. It also provides specific insights into enabling a go-to-market strategy for healthcare IT.

Other key findings

  • The deal activity in 2014—which witnessed a healthy 9 percent year-on-year growth—was led by strong spurts in the life sciences and provider subverticals and was partially offset by a decline in the payer subvertical.
  • Smaller deals (in terms of both value and duration) dominated the transaction scenario in 2014, with the constantly evolving regulatory environment and associated technology mandates keeping stakeholders from committing to large technological engagements. Service providers, in turn, are taking steps towards offering more integrated portfolios of services so as to lure buyers into large-ticket deals.
  • Market factors that promote ITO and offshoring activity include consumerization, reforms mandates, analytics and cost optimization; conversely, data security concerns and lack of proprietary platforms inhibit ITO in healthcare.
  • North America continues to be the dominant geography for healthcare ITO activity.
  • Regulatory mandates—particularly ICD-10, HIX and Medicare—have driven over three-fifths of payer ITO transactions.
  • Payers’ short-term technology imperatives are focused on data security, analytics, legacy modernization and digital initiatives.

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