Monthly Archives

August 2016

Open APIs – Building A Digital Ecosystem For The Financial Services Industry | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Customer expectations and buying behaviors for banking products and services have dramatically shifted. Banks are realizing that they need to move beyond providing deposit, payments, and loan services, and reinvent themselves to help customers buy homes and cars, send money to family and friends, manage monthly finances, make more informed investment decisions, and buy products from online or retail stores with complete ease. Digital technologies are helping banks do all of this and even more. Banks now have the potential to create an ecosystem of value-add services that constitutes the “bank of the future.”

The travel, retail, and media industries have already begun to build a digital ecosystem around their core offerings, powered by a vast community of third party application/content providers that offer customers convenience and a superior customer experience across the channels of their choice. Indeed, companies such as Amazon, Apple, and Facebook have become highly successful in part by the presence of Open APIs through which third party developers can access technologies and services developed by these firms, along with customer-authorized data.

In their quest to become the bank of the future – a one-stop destination for all financial transactions and services, with a seamless user experience accessible via any Internet-connected device – financial institutions are starting to jump on the Open API bandwagon. Doing so will not only allow them to offer a better customer experience, and give customers more choices and control, but also to create new business models for growth. For example:

  • Open APIs can help create a coherent digital ecosystem for financial services firms by putting the customer at the center of all development
  • Open APIs will allow FinTech startups to develop applications for one bank and port it to others with minimal effort and costs, thus driving innovation and scale
  • Financial services firms will be able to augment their internal data with external data from other third-party applications on its platform to deliver enhanced customer value
  • Technologies such as Internet of Things (IoT) demand Open APIs to explore various use cases and to reach scale to become a viable investment

Of course, standardization, security of customer data, compliance, and integration with legacy systems are certain roadblocks on the way to wider adoption of Open APIs, and the industry will need to evolve and adopt standards for high interoperability.

Yet, we are witnessing early signs of an API revolution in the banking industry. Several leading banks, FinTech firms, and open source projects have started experimenting with and embracing the new platform-based economy. Regulatory developments in the form of PSD-2 have further given steam to the development and use of Open APIs in payments.

Consider these examples: U.K.-based digital challenger bank Monzo (formerly Mondo) has launched its own API for Alpha users. Visa has launched the Visa developer platform, which allows developers to tap into its full suite of products and services, and gain open access to its underlying payment capabilities. Bank of America, BBVA Compass, Capital One, and Citigroup have allowed external developers access to their applications through APIs as part of hackathon events or partnerships with technology firms.

Moreover, the Open Bank Project and the Open Banking Working Group (OBWG) are developing standards for an open source API for banks to promote adoption. And Solaris Bank in Germany is looking to provide banking as-a-service to FinTech companies through its APIs, enabling mobile and web-based startups to plug directly into its core banking platform through its API infrastructure.

Needless to say, these investments drive innovation, and allow financial services firms to deliver more, better customer experiences.

Robotic Process Automation Yields Cost Savings as High as 47 Percent | Press Release

By | Press Releases

Healthcare Payers Turn to Robotic Process Automation to Control Costs

Robotic Process Automation (RPA) can yield incremental cost reduction in healthcare payer business process outsourcing (BPO) ranging from a low of 15 percent for offshore operations to a high of 47 percent for onshore operations, according to new research from Everest Group.

The cost reduction achieved through RPA depends on the existing state of healthcare payer BPO operations and can be 10 to 19 percent for balanced shoring operations. These are savings beyond labor arbitrage.

This boost in cost efficiency is one of the primary reasons healthcare payer BPO buyers are increasingly seeking automation solutions. Processes particularly ripe for the cost-saving potential of RPA include policy servicing and management, network management and claims management.

Driven by this demand, service providers are building capabilities in RPA, and adoption of RPA is rising, as an increasing proportion of new contracts signed have RPA in their scope. Specifically, the percentage of new, signed contracts that include RPA in their scope has increased from 7 percent in 2012-2013 to 14 percent in 2014-2015.

“The global healthcare payer BPO market is growing at a healthy pace of 15 percent and reached US$5.5 billion in 2015,” said Anupam Jain, practice director at Everest Group. “However, payers’ margins are getting squeezed, and they are looking for newer ways to boost profitability. Robotic Process Automation is making a notable impact on the industry in this regard, because it is a new lever to further reduce the cost of operations. We expect RPA to play an significant role in the future.”

Two new Market Insights™ published by Everest Group graphically depict these findings:
• Impact of RPA on healthcare payer BPO cost
• Inclusion of RPA in new contract scope is rising

These high-resolution graphics are available for complimentary download and may be included in news coverage, with attribution to Everest Group.

A more detailed discussion about the healthcare payer BPO market is available in “Healthcare Payer BPO—Annual Report: From Cost Reduction to Value-driven Outsourcing—Moving on Up.” This report provides a detailed analysis of the market size and growth, key drivers and challenges, solution characteristics, and the service provider landscape.

Additional complimentary Market Insight graphics stemming from this report are available for download here and include:
• Global healthcare spend
• Analytics on the rise in healthcare BPO in an effort to combat fraud
• Healthcare payer BPO market growth: past and future

TCS Makes Digital Bet against Accenture and Cognizant | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

TCS is the largest Indian heritage player in the services industry and is a true market leader. But like the rest of the services industry, TCS faces the maturity of the labor arbitrage market. We see it reflected in TCS’ growth over the last year and in its prospects of growth going forward.

Like its competitors – Accenture and Cognizant – TCS aspires to also become a leader in the new market segments of automation, analytics, cloud and cognitive (AACC) or some type of digital technology and the new business models around AACC. However, the TCS strategy to do this is different from Accenture and Cognizant.

TCS is developing the capabilities and technologies for AACC in house and trying to use its tremendous client base to launch these new capabilities. This strategy stands in contrast to Accenture.

Understanding that its ERP practice was very mature and in decline, Accenture decided to take a leadership role in digital. Historically, Accenture has used a “grow your own capabilities” strategy. But it changed course this time, recognizing digital is a different business model and it was moving so fast that Accenture didn’t have time to build its own capabilities. So Accenture has been on an aggressive digital company acquisition strategy to acquire talent – buying, on average, two digital companies a month for the last two years.

Interestingly, these acquisitions have not contributed meaningful revenue to Accenture, but they have contributed significantly to the Accenture growth. They have done this by allowing Accenture to capture the rare skills in this new market and move to the preeminent leader position in the digital marketplace. The race is still early, but Accenture has opened up a tremendous lead.

Moreover, Cognizant joined Accenture in the acquisitive model, recognizing that building its capacity alone would not assure the market leadership role that it desires.

Here’s the question for TCS: Will it have to change its perspective on acquisitions, adopting the examples of Accenture and Cognizant of acquiring capabilities and talents in the digital arena instead of taking the TCS approach of build-your-own capabilities?

The TCS strategy

I believe TCS is playing the long game rather than looking at near-term capabilities gains. TCS has everything it needs to adopt the Accenture and Cognizant strategy – everything except the willingness to do so. It has the balance sheet and sophisticated management. But it also is a thoughtful organization with a strong culture focused on people.

As retired CEO Subramaniam Ramadorai wrote in his 2011 book, “The TCS Story … and Beyond,” “This is a people business and we are mindful that integrating acquisitions in this type of business is very difficult and that many large deals in this sector have failed.” He added that TCS supplements organic growth with acquisitions “where they make sense” but doesn’t “strike too many deals.” He summed up the TCS position with the statement that most companies “can grow organically much faster and achieve better returns by reinvesting in organic growth than in acquisitions.”

The company’s view of organic growth turned out to be right in the case of labor arbitrage. But is it different this time? The winning formula in arbitrage was about capacity and de-risking service delivery. In the digital world, where speed is important, the risk is not having the right technology fast enough.

The TCS approach of building from within may take a bit longer to bear significant fruit, but it may also enable smoother, more integrated operations and a healthy culture with solid benefits down the road.

Will the TCS strategy be powerful enough to capture the leadership position down the road? This will be a long race. Often the early leaders in a race are the eventual winners. But TCS could be a late bloomer. Do you think TCS will maintain its course, or will it move to a more aggressive, acquisitive strategy?

Everest Group Ranked as a Top Consulting Firm to Work for by Vault.com 2017 Rankings | Press Release

By | Press Releases

Vault.com – a market research firm providing career intelligence and company rankings across multiple industries – has ranked Everest Group among its annual signature list of the top 50 consulting firms to work for. In its survey, currently employed consultants at reputable firms were asked to rate their firms on metrics that include satisfaction, culture, ability to challenge, compensation and overall business outlook.

The survey included both large and boutique firms. Everest Group, a boutique consulting firm, is ranked #44 on the list of top-rated performers.

Review the complete list and profiles of top-ranked companies.

About the Rankings
The Vault Consulting 50 for 2017 is based on a weighted formula that includes the following: prestige, satisfaction, compensation, firm culture, work-life balance, overall business outlook, promotion policies, and ability to challenge. The survey is only open to consultants who are currently employed at reputable firms in the industry. When rating quality of life issues, consultants are only permitted to rate their own firm. For prestige and practice area rankings, consultants are only allowed to rate competitors, and not their own firms.

About Vault.com
Vault.com provides in-depth intelligence on what it’s really like to work in an industry, company or profession—and how to position yourself to land that job. Vault’s influential company rankings, ratings and reviews are sourced and verified through ongoing directed surveys of active employees and enrolled students. Vault also welcomes current and previous employees and students who were unable to participate in the surveys, to submit reviews on their experiences, salaries, interviews and more.

Global In-house Centers Account for 25 Percent of Offshore/Nearshore Digital Services Market | Press Release

By | Press Releases

Research reveals why GICs are well poised to support the enterprise with digital services

The criticality of digital services to the future of the enterprise is one of the reasons Global In-house Centers (GICs) are well positioned to provide those services. According to new research from Everest Group, enterprises tend to view GICs as more strongly integrated with the core business than other offshoring or nearshoring options. This explains in part why GICs represent 25 percent of the offshore/nearshore digital services market, and why that percentage is likely to grow.

Currently, analytics, cloud and mobility services are the predominant digital capabilities being provided by GICs. The banking, financial services and insurance (BFSI) sector leads in driving digital service adoption, followed by the technology and retail industries.

One of the biggest challenges faced by GICs in delivering digital services is acquiring digital talent. Everest Group suggests that GICs expand their acquisition of talent beyond traditional sources, improve talent retention endeavors, and enhance efforts to reskill and upskill talent to encourage progression along defined career paths.

Everest Group described these results and recommendations in detail in a one-hour, live webinar on August 10. The webinar, “GICs Drive Digital Transformation, Plus Market Vista™Q2 2015 Update,” also featured Everest Group experts sharing highlights of the global services market in Q2 2016.

***Download the complimentary presentation and attend the webinar on demand.***  (Note: download requires free registration on Everest Group’s research site or log-in using an existing account.)

“GICs are uniquely positioned to support their parent enterprises in their strategic digital journeys,” said H. Karthik, partner at Everest Group. “GICs typically have an established foundation with and an endorsement from their parent; they possess a significant pool of talent; they are tightly integrated with the core business; and they are highly focused and motivated to build internal innovation capabilities.

“One of the key challenges for GICs, however, is maintaining the talent pool,” Karthik continued. “We see best-in-class GICs going beyond traditional recruitment channels and leveraging alternate ecosystem routes to hire digital talent.”

Other Takeaways

  • Q2 2016 saw a stagnation of overall ITO demand, with the market being characterized by a shift from traditional services to digital technologies, DevOps, and as-a-service models.
  • Business process outsourcing (BPO) demand increased significantly in Q2, led by analytics and industry-specific business processes.
  • GIC activity was strong, with an increasing share of mid-sized buyers in new setups.
  • Location activity continues to grow in Asia Pacific and Nearshore Europe, with new center setups reaching an all-time high.
  • Brexit is likely to significantly impact the global services market in the UK and EU.

NASSCOM GIC Thought Leadership Series — August – November, 2016 | Events

By | Events

Everest Group is the Knowledge Partner of the NASSCOM GIC Roundtable Thought Leadership Series in 2016.

The first event in this series was held on August 23 in Gurgaon, India with others scheduled to follow in Hyderabad, Bangalore, and Pune. The two-hour sessions will showcase Everest Group’s research on the “Digital GICs” theme, followed by a panel discussion, and knowledge sharing by eminent Leaders from the Industry.

Event Details

Global In-house Centers (GIC’s) have evolved as powerful value creators, pushing boundaries and finding ways to drive innovation and create value beyond arbitrage for their parent enterprises. In particular, GICs are showing strategic leadership in supporting their parents’ digital transformation journeys, helping drive adoption of technologies such as social & interactive, mobility, analytics, cloud, Robotics Process Automation (RPA) and other enabling technologies.
This has several talent related implications for the GICs, especially in the areas of acquisition, upskilling and reskilling, retention, and performance measurement and career pathing. While GICs are striving to align their talent models with the emerging business needs, there are still gaps that require GICs to rethink their current talent models. The session further builds on Everest Group’s recently conducted survey with GIC’s in India, in partnership with Nasscom, to understand the talent model initiatives GICs are undertaking to bridge this gap and gear themselves for supporting the “future” enterprises.
When and Where
  • Tuesday, August 23, 2016: Gurgaon, India
  • Tuesday, September 20, 2016: Hyderabad, India
  • Thursday, October 20: Pune, India
  • Tuesday, November 15: Bangalore, India
These are exclusive, invitation-only events. For more details or to participate, email [email protected]

“This Time it’s Different” are Dangerous Words | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

“This time is different” are often thought of as the most dangerous words on Wall Street. I’ve been in the outsourcing services industry since 1983 in the early days of outsourcing pioneer EDS. I watched the rise of the asset-intensive infrastructure space. Then I watched the rise of labor arbitrage and the enormous changes that brought to the industry. And now I’m watching the rise of automation, analytics, cognitive, and cloud bring a similar scale of disruption. I know from experience how “this time it’s different” is seductive to believe in the outsourcing industry.

In 1986 when I left EDS, its net return was 22.5 percent – very similar to the top labor arbitrage firms today. It was the height of the first wave of outsourcing. That continued to go on and the industry moved to large transactions and lower margins. That business peaked in the mid- 1990s. From 2000 on, labor arbitrage took over, and the industry went back to smaller transactions with high margins – very similar to the high margins that EDS achieved back in the 1960s and 1970s. Now we’re seeing the rise of the next S curve –automation, analytics, cognitive computing and cloud – and this space is rapidly growing and gaining share. Labor arbitrage is still growing, but it’s slowing, and profit margins are declining.

I’ve recently had private conversations with some industry executives who have been prophesying the death of labor arbitrage. Some leading executives believe the market is in for a massive shift over the next 18 months to five years in which the labor arbitrage space will be completely disintermediated. I think this is unlikely.

So is it different this time?

Like the asset-intensive space, I think the labor arbitrage space will be disintermediated. But just like in the asset-intensive space, which started in 1995-1996, here we are 20 years later, and we still have asset-intensive outsourcing. Yes, EDS was bought by HP and now is combined with CSC, and IBM is still in the game. There’s still a significant infrastructure market.

I expect 20 years from now that there will still be a meaningful market for labor arbitrage, but it won’t garner the same profits as today. And I expect the shift from labor arbitrage will be a slower move than 18 months to five years in terms of having a dramatic and drastic effect on existing workloads.

Having said that, I do expect the value will move to new areas – just as it did in the past as the market evolved. And we’re currently seeing this happen with automation and other digital technologies. Market capitalization and growth should be in the new models, just like it happened for EDS, HP, CSC and IBM.

Good news and bad news

I predict difficult years ahead for the arbitrage business but radical change to the current players. The only industry leader that successfully migrated to the labor arbitrage space from the asset-intensive space was IBM. Likewise, this time I don’t expect many existing arbitrage players to successfully migrate. We saw massive consolidation in the infrastructure space, and I expect to see consolidation in the labor arbitrage space too.

Yes, I understand this time it’s different in that minority shareholder laws in India will create more resistance to consolidation. But I think the change is an irresistible force meeting a little object. I believe that the industry will consolidate, growth will continue to slow and profit margins will come down, just like it happened in the asset-intensive infrastructure space.
At the same time, automation, analytics, cognitive and cloud technologies will shift the industry to new business models, different commercial relationships, different pricing structures, and different kinds of risk sharing – just like it happened when labor arbitrage entered the asset-intensive infrastructure space. The good news is that these new models will bring new providers into the services space. The bad news is I think these differences create a high barrier for incumbent providers when it comes to changing their offerings. So, once again, this time it won’t be different.

Key Action Items Contact Center Providers Should Take to Optimize Their Operating Model in a Digital World | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Today’s consumers are mobile, self-reliant, and demand faster and more convenient access to information. Thus, it’s not surprising that there was 50 percent growth in the number of contact center outsourcing (CCO) contracts signed in 2014-15 that include chat and social media support.

Tantamount to winning and retaining modern customers in today’s digital world is delivering great customer service. Just think about the astounding success of new age companies such as Airbnb, Amazon, Facebook, and Uber, each of which has differentiated their products and services with an unwavering, unparalleled focus on providing a best-in-class customer experience.

Traditional enterprises are feeling the heat to catch up and transform themselves. As a result, buyers who once outsourced their contact centers solely for cost reduction have started to rethink their customer engagement strategy. Buyers also expect service providers to be a strategic partner in transforming their contact center operations, such as expansion into non-voice digital channels and new delivery models.

So, how can service providers optimize their current operating model to provide a superior customer experience? Insights on emerging, new age KPIs from buyer feedback surveys and interviews conducted by Everest Group during 2014-15 help frame the answer.

 

Contact-Centers-in-a-Digital-World-1024x595

Unlike when traditional KPIs were used, buyer perception of service providers’ overall performance today is heavily impacted by four KPIs: relationship management, better insights/analytics, proactiveness, and innovation. As the relevance of these has either increased from the previous year or remained high over the last two years, it’s clear that buyers are increasingly evaluating service providers on new age KPIs. Against this backdrop, we recommend CCO service providers incorporate four action items into their operating model in order to remain competitive.

1. Strengthen relationships through greater governance and coordination across teams

Successful relationship management is the fundamental reason that larger deals have been signed during renewals over the past two years. Fostering strong relationships demands greater governance across buyer and service provider cross-functional teams. CCO providers that are deeply embedded in their client’s business and operational processes are often well positioned to proactively identify undetected challenges and propose relevant solutions. This goes a long way in building mutual trust and transparency between the two parties.

2. Unlock customer insights through advanced data analytics

The ability to provide the right service to every unique customer is the key to building customer loyalty in a world of constant change. While most providers have invested in developing reporting and descriptive analytics solutions, buyers expect them to bring in advanced analytical tools that analyze volumes of unstructured data and provide actionable insights on customer needs and behavior, so they can deliver a personalized customer experience. To remain ahead of client expectations, service providers will need to offer predictive and prescriptive analytics capabilities to understand consumers’ future behavior.

3. Co-create customer value by proactively pitching for implementable solutions

Buyers face an uphill battle to constantly evaluate and improve their business processes to respond to changing market forces. Many buyers with whom we have interacted have highlighted their desire for greater input in that effort from their CCO providers. In fact, clients cite greater proactiveness as one of the key areas of improvement for incumbent providers. As the customer-facing entity for enterprises, CCO providers can assist in identifying specific problems customers frequently encounter. And by leveraging their industry expertise, CCO providers can proactively suggest best practices to buyers and participate in business process improvement initiatives.

4. Build differentiated capabilities by investing in technological product and process innovation

Buyers need to constantly innovate their processes, products, and services in order to retain modern customers who now have a wider range of choices and low loyalty thresholds. Therefore, they expect service providers to bring in technological and process-driven innovation to enable a better customer experience. In order to stand out in the market, CCO providers must invest in building innovative, forward-looking capabilities such as cognitive learning technology and AI-powered assisted automation.

We expect the move toward digital contact centers will prove challenging for some providers and empowering for others. The market has already seen a flow of mergers, acquisitions, and commercial investments in the CCO market in the past year. In order to stay ahead of this wave, service providers must act swiftly to transform their contact centers in order to match the challenging needs of buyers and digital consumers.

For more information on the changing buyer requirements in CCO and their expectations from service providers, please see Everest Group’s Contact Center Outsourcing Annual Report 2016 .