A decade ago, Everest Group made some predictions about the India global services industry; recently we cracked open the time capsule to check out our predictive capabilities. We found that we got some things right, some things wrong, and some things very wrong. The outcome of our recent analysis, though, is a huge boost in confidence for the prospering India global services industry.
Thursday, September 28, 2017 | 2:00 p.m. – 3:00 p.m. ET
Partner Jimit Arora will co-lead a webinar hosted by America’s Health Insurance Plans (AHIP) and presented by Optum on developing a comprehensive cost management strategy to drive greater value.
About the webinar
Membership and revenue growth are being offset by rising medical and administrative costs. As a payer seeking sustainable growth, you need to deliver member and patient value at a lower total cost. This panel discussion is designed to get payers thinking bigger, broader and deeper when it comes to driving greater value. Research shows that payers leave a lot of value on the table when they manage IT, operations, and medical costs separately. With a comprehensive cost of care strategy, they can achieve breakthrough value AND cost savings.
Attendees will learn:
- Best practices to achieving higher quality of care at a lower cost
- How to operationalize a comprehensive cost of care strategy
- Bold moves you need to take and steps to get started
Who should attend
Those who are interested in driving value through modernizing the way care is delivered while reducing total cost of ownership. This topic is particularly beneficial to the payer COO, CIO, CFO, and EVP/SVP/VP of Operations
Jimit Arora, Partner, Everest Group
Eric Peterson, Vice President, Health Care Operations Marketing, Optum
Robert Adams, Vice President, Optum Advisory Services
Many enterprises today are restructuring their existing outsourcing contracts with changes to scope, pricing mechanisms, and SLAs to help ensure they reap the benefits of the emerging digital technologies being used in their engagements.
For example, because the focus has shifted from quality of service delivery to service innovation and business outcomes, we are observing more incentive and benefit sharing mechanisms being added to digital services contracts. And because enterprises are mindful of the uncertainties that exist in the digital transformation journey, they are willing to include some contractual flexibility around scope changes, SLA revisions, etc.
However, one important area that has been somewhat neglected in this digital-driven contract realignment is terms and conditions (T&Cs.) In these contract T&Cs, enterprises must do all they can to safeguard themselves from potential risks, even those that are unforeseen. Consider the case of a global consumer goods company, whose outsourced RPA solution was working incorrectly due to issues with the automation technology platform. It took six months for the base product to be updated and fixed, but the enterprise could not recoup lost opportunity costs from its service provider because such a scenario was not adequately incorporated into the contract T&Cs.
Key outsourcing contract term considerations
Following are just some of the areas that enterprises should consider including in their digital automation outsourcing contract T&Cs.
- Who owns the IP rights to the automation bots? Does this change when the solution has cognitive features that generate business insights?
- Can the service provider reuse the automation solution with other enterprise clients? Can it do so with the buyer’s competitors?
- What happens to the automation solution on contract termination? What part of the automation solution can be retained by the buyer? If the solution is non-transferable, what assistance is the automation provider contractually obligated to provide?
- If the automation solution fails to work as originally designed, who is responsible for the damages that arise?
- Does the outsourcing contract provide flexibility to incorporate additional scope or automation projects, or will separate negotiations and contracts be required?
- What happens if the provider under- or over-performs on the productivity improvement or cost savings targets? Will the parties share the benefits or opportunity losses?
- What happens if there is a change in the process or underlying IT system? Who will be responsible for the subsequent changes in automation solution?
Of course, there’s a double-edged sword here: in general, the more stringent the T&Cs, the higher the price charged by the service provider. So, you need to carefully weigh the risks versus the rewards.
Have you experienced an issue relating to non-inclusion of any clause in your digital services contract? Or did you successfully safeguard your company through a specific term or condition? Please feel free to directly share with me at [email protected].
Entry-level IT jobs will continue to see low wage as the Indian software services industry foresees a slowdown in offshore services to the country in future.
Salary growth prospects for entry-level IT professionals will not be much given the fact that offshore jobs will not come in large quantities in contrast with the sharply growing number of information technology graduates, said a report by Everest Group, a Dallas, US-based IT consulting and research firm.
“More competition will keep the salary down over the 25-35 years horizon. The wage growth will remain muted. People were getting 8-10 per cent growth (on an average), but they will now be getting 4-5 per cent as they move up the pyramid. But the pressure will still remain on the entry-level positions,” said Michel Janssen, Chief Research Guru, Everest Group, Dallas, US-based IT research firm.
Renowned futurist Kevin Kelly once said, “Possession is not as important as it once was. Accessing is more important than ever.” The rise of Uber is a prime example of the shift to an access-based consumption model in the consumer space. Business-Process-as-a-Service (BPaaS) is a similar construct in the enterprise space. At Everest Group, we define BPaaS as a model where buyers consume/access standardized business process services on a pay-as-you-go basis by accessing a shared set of resources – people, software application, and infrastructure.
It’s a reasonable assumption that the move to access-based consumption is great news for the BPaaS model. But the reality is that there are two variants of BPaaS. And there are warning signs for the demise of traditional BPaaS, wherein an enterprise accesses the entire stack – the people, application, and infrastructure – from one provider on a pay-as-you-go basis.
Traditional BPaaS emerged and found traction in the on-premise application era. Essentially, it provides enterprises a more efficient way to access business process services without the large upfront licensing and infrastructure build out costs that were typical of the time. Service providers pushed it, as it offered them the nirvana they had been seeking:
- Non-linear growth – Opportunity to de-link growth from their FTE headcount by driving a standardized set of services that could be leveraged across multiple clients
- Bigger deals – Broader scope of services across the entire stack, and hence larger deal size
- Stickiness – It’s darn hard for a client to divorce its provider when they’re wedded at multiple levels!
However, traditional BPaaS poses several key challenges to enterprises:
- As a boxed solution, it doesn’t allow selection of best-of- breed options
- While stickiness is great for the provider, it is not for an enterprise if the technology or services turn out to be below expectations
- It puts all the enterprise’s “eggs in one basket.”
The new-age BPaaS model tries to address these issues. It gives enterprises the flexibility to choose the technology (application and infrastructure) and processing/people component from best-of-breed providers while still reaping the same pay-as-you go benefits of traditional BPaaS. Central to this is the fast rise of the commercial off-the-shelf Software-as-a-Service (SaaS) technology option. SaaS provides the consumption-based construct at the technology level, while BPO does so at the people/processing level. Of course, some service providers continue to push traditional BPaaS, as the new-age model is not as juicy as the previous one. Their arguments for the traditional model? In addition to having “one throat to choke,” as one provider is responsible for the output and outcome, they claim a more compelling price due to discounts for the entire stack, and potentially better services given tighter integration of BPO services with the underpinning technology
But there are fallacies in their arguments. As far as pricing is concerned, unless the traditional BPaaS model is really scaled up, there are limited levers through which pricing can be made meaningfully lower than the new model. And on the tighter integration point, an increasing number of close SaaS and BPO provider relationship are emerging that can provide a similar, if not better, experience.
Interestingly, as the new-age model accelerates BPaaS adoption, service providers that embrace it have a far better chance of achieving the nonlinear growth they’re seeking. The underlying SaaS construct will provide the required standardized environment, and growth will provide the scale to create a multi-tenant model at the people/processing level as well.
So, is traditional BPaaS living on borrowed breath? The answer is yes. But how many breaths it has left depends on the functional segment it is supporting and time horizon. Where credible commercial off-the-shelf SaaS options already exist and have attained maturity, e,g., for the large buyer segment in HR, it seems like the end of road will come sooner than later. However, where SaaS options are limited or less mature, such as in claims administration, traditional BPaaS model will have a longer life.
But at the end of the day, as more SaaS options emerge and more BPO providers create a delivery model around them, it is more of a question of when, than if, even in these segments.
Everest Group has announced the promotion of Michael Hedegard to the role of partner. Hedegard, who joined the consulting and research firm in 2007, is known for his keen focus on helping clients from across industries solve complex problems and reap optimal value from initiatives related to go-to-market strategies, IT and business services sourcing, and operational design and delivery.
“Michael is a versatile problem solver. He has an ability to unravel complexity and help clients adopt strategies that put them on the path to operational excellence and corporate growth,” stated Peter Bendor-Samuel, founder & CEO, Everest Group. “It’s a promotion well earned. Michael consistently demonstrates the firm’s core values in how he services clients, leads teams, and builds the firm.”
One of Hedegard’s areas of focus includes developing innovative thinking related to the impact of automation, such as cognitive and Robotic Process Automation (RPA), on services. Recognizing the large unrealized value potential, he is guiding enterprises through the transformational opportunities and operational issues of managing a digital workforce. He has developed strategic thinking on fundamental changes traditional service providers can make to shift their business model to embrace the value of automation. Michael advises automation tool providers on creating value in a rapidly evolving services market.
As partner, Michael will be the primary leader of client teams focused on helping clients drive change across a range of IT and business process services models that result in material business outcomes.
Tuesday, September 26, 2017 | 9:30 a.m. CDT
Everest Group’s H. Karthik, Partner, will be a featured speaker at the Bloomberg Professional BI Analyst Briefing webinar: Changing Landscape of Global Outsourcing.
Topics discussed during the webinar will include:
- Impact of digital disruption on global services
- Industry forecast and growth outlook
- Increased investments by offshore IT services companies in high-cost countries
- Robotic process automation and its impact on growth and profitability in the industry
Join this session to learn about the changing landscape of Global Sourcing and how it will impact the offshore IT services industry.
Arkadev Basak recently contributed an article on Total Talent Acquisition in Supply & Demand Chain Executive.
Please note registration is required to read the full article.
Wipro has won a $100 million, five-year integrated outsourcing contract from German reinsurer Munich Re that involves infrastructure management services and application development. TCS was the other major contender for the deal.
Jimit Arora, who leads US-based advisory Everest Group’s IT services research practice, said he has witnessed increased investments from insurers in trying to drive end-to-end transformation of their technology estates.
If Silicon Valley thought that crackdowns on immigration in the U.S. would mean their favorite foreign worker would be hightailing it back to Bangalore, they are wrong.
Over the next three to five years, India will need around 40% less people than they current need for their labor arbitrage-based work, meaning outsourcing, or moving tech related service jobs to where the service can be done cheaper. Second, the real software and digital tech talent usually needs to be located in IT India’s main markets, which are the U.S. and Europe. Third, IT India has “over-hired” entry level computer science graduates and have too many mid-level employees who need training for the digital worlds being created on the backs of new technology like blockchain and artificial intelligence. The result is the continual churn of India’s IT employee base back home, says Peter Bendor-Samuel, CEO of the Everest Group, a global consulting firm with its headquarters in Dallas.
In the early 2000s, industry analysts said India’s advantage as a source for cheap tech talent would end by 2020. The consensus was that as wages rise in the U.S., it might just be easier for the Indian firms to move some labor back home.
“There is no doubt that India is still a a highly attractive and viable option for low-cost labor…and it will likely remain so for another three decades,” Michel Janssen, Chief Researcher at Everest, said. They now think India remains a hub for low cost tech talent way out into the 2040s!