Brexit clearly has impacted rates for applications services FTEs in Western Europe due to the depreciation of the pound; however, price per hour is likely to rebound in the second half of 2017
Changing providers? This representative set of tools and accelerators can accelerate and smooth transition services change hands from an incumbent to a new supplier
Buyer expectations are changing – they want service providers to shoulder more of the responsibility for governance management
Service delivery automation (SDA) continues to gain favor, as it promises not only cost savings, but also reduced errors, faster operations, and 24X7 coverage.
But, while SDA offers significant benefits to Global In-house Centers (GICs) and services providers, it also brings a whole new set of challenges.
Client overview and background: As the client was preparing for growth of its India delivery center, it was evaluating opportunities to expand the scope of services delivered in the GIC, especially in software products based on new horizon skills areas (e.g., cloud, mobility, SoA, big data and analytics, design-thinking, customer-centric engineering). The client sought support in identification and prioritization of key talent investment areas involving product engineering based on expected future business needs and market evidence of successful delivery models, capabilities, and services maturity at GICs of peer technology/internet software companies.
Our approach: Everest Group assessed the current talent model and team capabilities in product engineering skills at the client GIC and also conducted a detailed market assessment of how GICs at peer companies are leveraging the India delivery centers (scale, penetration, breadth, and complexity, and level of ownership of global service delivery for product development and digital skills). We identified gaps in the talent model and skills-sets at the client GIC across specific roles, skill-sets, and level of ownership/maturity. Everest Group presented perspectives on key thrust areas for investment and industry momentum in skills/role development by peer GICs. We also identified growth opportunities for client and provided best-in-class examples of increasing ownership and growing talent on niche skills (e.g., data scientists).
Client benefits: Everest Group identified and prioritized skill-areas for investment based on gaps in the client’s current delivery talent/skills portfolio for software product engineering and level of maturity achieved at peer GICs. Through a series of discussions with the client’s leadership in India and the U.S., Everest Group guided the client’s internal thinking on how to grow talent for niche digital skills and establish product engineering teams with higher level of global product ownership.
Client overview and background: The client was facing challenges in hiring mid-level talent in its home markets owing to reducing enrolments in STEM. It was looking to offshore high-end design, engineering, and innovation work and identified Bangalore as a location for setting up its in-house / shared services center. To be better prepared for this, the client wanted a comprehensive assessment of the talent landscape in the city across the following aspects: availability of talent across 7 functional areas, key competitors for talent (including Indian engineering companies), future outlook for talent sustainability, workforce preferences for office location within the city, employee value drivers in choosing an employer, and benchmarking of compensation and benefits.
Our approach: Everest Group conducted in-depth desk research to size talent (at both entry- and experienced-levels) across the 7 functions in focus. This was followed by primary research with engineering companies operating in Bangalore, recruiters, industry experts, and a cross-section of employees to analyze aspects such as future outlook for talent sustainability, employee value drivers, and workforce preferences. Finally, we conducted a compensation and benefits benchmarking assessment in collaboration with a recruitment firm.
Client benefits: The client leveraged this in-depth study to set design parameters for its new delivery center. The mapping of functional areas by scalability and level of possible congestion in the future helped identify possible constraints and frame appropriate mitigation mechanisms (e.g., invest in training, move talent from home market). Our research also enabled the client identify the sources for talent (universities, competitors, other adjacent industries) and the optimum level of compensation/benefits across functional areas and seniority. Finally, the assessment on employee value drivers helped the client finalize the optimum value proposition for candidates.
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.
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.
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.
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.
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].
India’s service providers are slowly coming to grips with the decline of the arbitrage model and the shift to digital models. The digital era brings the providers three challenges regarding talent. Over the next three to five years they will need 30-40 percent fewer people than they needed for arbitrage-based work. Second, digital talent often needs to be located in the US and Europe, but providers face work visa restrictions in the US. Third, they have over-hired freshers and have too many other employees who need training for the digital world. The result: continual churn of the providers’ employee base.
In fact, before too long, we’ll probably see an absolute reduction in the number of people employed in India. It hasn’t happened yet because the growth in digital business has more than offset the shrinking growth in arbitrage-based business. However, in coming months and years, the providers will face cannibalization of their existing arbitrage business as customers’ preference for digital models grows.
Currently, the industry is feeling the early tremors of the huge change that is coming to the talent model. Initially, the providers must deal with the over-hiring already in place. But as they take bigger steps to reshape their talent model for the digital world, their steps will become more draconian. As margins come under more pressure, service providers will need to manage their talent bench more closely. Obviously, anyone not assigned to revenue-generating work is vulnerable to be let go, regardless of tenure.
The good news for laid-off employees is they have employment opportunities in the domestic Indian market. But there’s also bad news: wages are lower, and it may be difficult for the economy to absorb large number of workers in any given month. Laid-off employees may need to move to other cities where there are opportunities for work. They also may face a period of unemployment.
Ironically, the issues the laid-off employees face are similar to US and European workers whose jobs moved to India over the past two decades. As happened in the US and Europe, India’s workers may initially receive limited help from the providers and government programs; but they will likely end up in jobs with lower compensation.
There is a small glimmer of hope. Service providers will capture a larger share of digital work over time. And despite the short-term oversupply of IT engineers, it’s hard to imagine that India will not need engineers for a growing economy in the long run. But this will take time.
I could be wrong about providers’ need for ongoing headcount reduction. But as I speak with senior leaders in the industry, they acknowledge that they face a huge shift in their talent model and will likely need far fewer workers in the future.
Many multinational companies are taking action to turn their vision benefits from digital transformation to reality. Going on that journey in a company with global operations is even more beneficial – but also more complicated. Far-reaching, thorny issues involved in changing a company’s business model and status quo operations become even more disruptive on a global scale. Here are five tips to incorporate into your organization’s strategy for driving change on a global basis.
Consider, for instance, the experience of Vale, a Brazilian multinational corporation engaged in mining and metals, operating in 27 countries on five continents. Its transformation strategic intent was to modernize operations, improve cost-reduction and innovate on simpler ways for the company’s global lines of business to operate. A huge transformation initiative. Phase 1 focused on first transforming IT into a high-performance team and then simplifying hundreds of processes globally.
Infosys, beleagured IT giant in Bengaluru, has brought co-founder Nandan Nilekani back as non-executive chairman with immediate effect, moving swiftly in an attempt to bring stability back after Vishal Sikka resigned as CEO last week.
“Appointing Nilekani as non-executive chairman and the resignation of the other Sikka board members does not of itself resolve the underlying issues which caused this split,” Peter Bendor-Samuel, CEO of Everest Group, a consultancy and tech advisory, told Forbes India in an email.
Eight years after he relinquished all responsibilities at Infosys to take on the task of building the Aadhaar infrastructure, Nandan Nilekani has returned to the company he co-founded in 1981.
Peter Bendor-Samuel, CEO of outsourcing research firm Everest Group, said Nilekani’s return to Infosys signals a commitment from the board to try and heal the divisions between board members, between board and founders, and internally within the ranks of Infosys employees. But he said the board changes do not by itself self-resolve the underlying issues that caused this split.
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