Month: January 2018

Leadership Tips For Driving IT Modernization and Transformation | Sherpas in Blue Shirts

January 16, 2018

Digital transformation and IT modernization initiatives require strong leaders to lead an organization through change – and not just technology and process change. Mindsets, organizational principles and policies, as well as combatting resistance to changing the status quo are major activities in these types of initiatives. I recently blogged about a highly successful initiative at NYU Lagone Health. Now let’s delve into some of their leadership activities and strategies. I believe executives can gain tips from how they handled these challenges at NYU.

Jim Song, former Vice President, IT Infrastructure and Shared Services was brought into the organization to lead the IT change effort. He soon recognized the need to bring other leaders into the organization.

Read more in my blog on Forbes

Why Tier-2 and 3 Cities in Poland Should be on your Global Services Radar Screen | Sherpas in Blue Shirts

January 11, 2018

In the past several years, Poland has become the most prominent global services delivery destination in the European region. But, unlike other countries in which the lion’s share of digital services activity is in tier-1 cities – think India and the Philippines – Poland’s tier-2 and 3 cities have outpaced activity in its tier-1 cities since 2008.

Why? Everest Group research identified two key reasons:

  1. Increasing activity in tier-1 Polish cities, e.g., Krakow and Warsaw, has created intense competition for talent, driving higher attrition/turnover, longer hiring cycles, increased premiums for niche skills and seniority, and faster wage inflation
  2. Increasing maturity of tier-2/3 cities over the past five years has established a critical mass for global services delivery in these cities, leading to a higher degree of comfort in talent capabilities and the ease of scaling up operations in these cities.

Other factors, including less competition for talent, lower salaries and infrastructure costs, better quality of life, stronger government support, and the opportunity to leverage untapped talent pools, have also contributed to tier-2/3 Polish cities’ rise above tier-1 cities in the country.

To understand the full story, Everest Group evaluated multiple aspects of the tier-2 and 3 cities, including relative delivery scale/size, work complexity, extent of digital services delivery, and typical source markets supported.

Here are some of our findings.

Shift in nature of leverage

Historically, tier-2 Polish cities, such as Katowice, Łódź, Poznań, and Tri-city, and those in tier-3, including Bydgoszcz, Opole, Rzeszów, and Szczecin, were leveraged as small spokes to tier-1 city hubs. They were largely meant to accommodate “spill-over” growth, or to host more transactional work. But this is changing rapidly, as more companies, both in captive and outsourced arrangements, are establishing their delivery hubs in these cities.

Largely single functions to multi-functional delivery

While both Global In-house Centers (GICs) and service providers had previously been leveraging the tier 2- and 3 cities largely for IT services delivery, their increased confidence in the breadth of talent has prompted establishment of large, multi-functional centers in these locations.

Digital services CoEs

Most importantly, while where tier-1 cities in other delivery destinations like India and the Philippines account for more than 70 percent of all digital delivery centers, Poland’s tier-2/3 cities are brimming with digital services activity.

Tier 2-3 cities

Of course, any company’s selection of a tier-2 or 3 location in any country depends on its appetite for benefits versus trade-offs, including high cost savings versus low scalability, and early mover advantage versus relatively lower maturity. But Poland’s smaller cities certainly have a compelling digital services delivery proposition.

For a more detailed analysis of the value proposition of Polish tier-2/3 cities, and relative comparisons of these locations with tier-1 cities, please see our recently published report, “Poland Tier-2/3 Cities: Complementing Tier-1 Cities or Carving a Niche for Digital Services?”

Three Truths about H-1B Visa Reform | Sherpas in Blue Shirts

January 11, 2018

The news about pending immigration and H-1B visa reform in recent weeks plowed anxiety into companies and workers in both the US and India. I’ve closely followed the visa reform movement and blogged about how it was evolving many times since 2013. The buzz in recent weeks was so hot it carried a “the sky is falling” flavor because of rumors of ending the policy of extending visas for workers already in the US. But the US Customs and Immigration Services agency announced this week the policy is not currently changing. So, what does this really mean? I believe there are three truths we should not overlook.

Truth #1: It’s not over til it’s over

As the Yankees’ baseball legendary Yogi Berra pointed out about apparent wins, “It ain’t over til it’s over.” There is still real momentum to reform the H-1B visa program. President Trump wants change, and now, for the first time, there is bipartisan support for meaningful legislation being enacted. Both parties agree on a narrow scope of reform to the visa program without the larger contentious issues of immigration reform. In addition, mid-term elections loom, and both Republicans and Democrats want to show accomplishment and want to demonstrate they can work together. Although visa reform had a low-odds chance of enactment over the past few years, the probability now has high odds.

Truth #2: India stands to benefit from the legislation

Despite the intense rhetoric, H-1B visa reform is not draconian. There will be winners and losers; but in many respects, India stands to benefit from the legislation when it’s enacted.

For example, many workers participating in the H-1B program will receive higher wages and will do more interesting work. The individuals that want to work in America through H-1B visas may find themselves more likely to work for an Amazon, Microsoft, Facebook or Netflix type of company.

From an Indian diaspora perspective, India has the deepest talent pool and the most qualified group of workers wishing to emigrate to the US. India has the largest and deepest talent pool and the most qualified workers. India’s talent pool is highly valuable to the US economy, especially high-tech firms; and the pressure to retain this talent in the US won’t go away.

Truth #3: Indian service providers must address the issues

As I said already, there will be winners and losers when visa reform legislation is eventually enacted. The workers will win, assuming the green card processing backlog clears up by that time. But the Indian service provider firms will clearly lose their ability to use the H-1B visa system to their advantage. That’s not to say that it would preclude them from utilizing H-1B visas, but it would increase their costs. They would have to either pay more for the H-1B workers or pay more when they hire domestic talent.

That said, it’s important to recognize that India’s service providers have many levers to address the issue. Most, if not all, service providers have an adjustment process well underway. Wipro, for example, is leading the way and has been working for years to address this issue.

The legislation, when enacted, will cause downward pressure on service providers’ margins. This alone will not challenge their relative profitability but will at least create a headwind for their absolute profitability. Having said that, their margin gap will narrow only modestly. The truth is, the Indian service providers have envious industry-leading margins and will continue to be the most profitable service providers in the world even after they make the necessary adjustments to H-1B visa reform.

Enterprise Use of Contingent Labor Grows as Managed Service Providers Expand Scope, Capabilities | Press Release

January 10, 2018

In 2018, MSPs’ share of labor sourcing will continue to rise as MSPs employ more mature analytics applications and expand capabilities in services procurement, total talent management and consulting.

Everest Group reports that the use of contingent workers across the globe continues to grow at a steady pace—with 2017 ending with a projected growth in contingent workforce management spend of 9-11 percent over the previous year.

Managed service providers (MSPs) and the technology solutions they provide play key roles in bringing together employers and contingent workers, contributing to the steady growth in enterprise use of contingent labor worldwide. In fact, global MSP managed spend for 2017 is projected to be 11 to 13 percent higher than in 2016.

“The overall contingent workforce management industry continues to grow on the back of a strong demand for temporary labor and services procurement,” said Arkadev Basak, practice director at Everest Group. “Procurement outsourcing providers still constitute a majority of the overall contingent workforce management market —largely because a majority of enterprises assign services procurement to their PO providers—but MSPs have made rapid strides in growing their share and continue to significantly outpace PO service providers in the rate of growth.”

Everest Group forecasts that MSPs will further increase their share of contingent workforce sourcing spend in 2018. MSPs will drive this growth by investing in expanded scope and capabilities, such as:

  • Enhancing Statement of Work (SOW) offerings, targeting more strategic processes and leveraging SOW-specific technology
  • Implementing more mature applications of analytics, not only using descriptive analytics to gain useful insights but also applying predictive analytics to predict trends and recommend appropriate actions.
  • Expanding the scope of consulting and value-added services to include talent engagement, talent attraction, technology strategy and implementation, and process re-engineering.
  • Improving operational efficiency with an increased focus on offshoring, creating centers of excellence, applying robotic process automation and leveraging add-on tools for video interviewing, assessment, background screening and onboarding.
  • Offering total talent management—holistic management of all of the talent needs of an organization, including permanent employees.

MSPs make the use of contingent labor attractive to enterprises by providing these benefits:

  • Reduced costs: MSPs offer cost savings through process efficiencies, economies of scale, quality assurance, enhanced visibility of spend throughout the organization, and knowledge of wage rates in the market.
  • Compliance: MSPs manage regulatory requirements, minimize non-compliance risks, and help the enterprise enforce its own corporate policies across divisions by centralizing all requests for temporary labor.
  • Access to talent: MSPs use branding, communication, direct sourcing services, and access to suppliers to help enterprises source hard-to-find talent. They also play a key role in the candidate experience, ensuring that potential workers have a smooth and easy hiring experience.
  • Technology: Enterprises typically have limited technology to support the hiring of contingent labor, so MSPs provide access to cutting-edge technologies such as advanced predictive and prescriptive analytics for staffing and artificial intelligence (AI), machine learning (ML) and natural language processing (NLP) for generating best matches in the shortest possible time.

These findings are discussed in more detail in “Managed Service Provider (MSP) – Annual Report 2018: Towards the Next Frontier – Boldly Going Where Few Have Gone Before.”  The report includes an overview of the temporary labor market, including market size and adoption; an analysis of the evolving market situation; key themes of future development; and buyer adoption trends.

 

***Download the complimentary report abstract.***

The approach to IT modernization at NYU Lagone Health | Sherpas in Blue Shirts

January 9, 2018

I’ve consulted with and observed many organizations undertaking IT modernization initiatives. An organization that achieved impressive results is NYU Lagone Health, the academic medical center at New York University. The initiative started with the vision of the chairman of the board and the CEO to grow the business and make NYU the best hospital in New York. But the hospital’s IT capabilities at the time couldn’t enable the business to accomplish these objectives. To make matters worse, Hurricane Sandy blew through and destroyed key systems that were in the main hospital’s basement, which included connectivity. And this happened while the hospital was undergoing a major shift to replace the electronic medical record (EMR) to the new Epic system and acquiring many specialty group health practices throughout New York’s tri-state area annually. To learn more about the approach the hospital took in modernizing its IT and growing the business amid major challenges, I recently had a conversation with Jim Song, former Vice President, IT Infrastructure and Shared Services.

 

Insurer of the Future Will Use Technology to Shift from ‘Insuring Loss’ to ‘Ensuring Protection’ | Press Release

January 9, 2018

Also, bundling of insurance with products and services across industries is on the rise, creating a new breed of ‘invisible insurer’

Everest Group reports that two major trends are shaping the future of insurance, driving insurers to redefine their business strategies and IT outsourcing engagements. First, insurers are moving from passively “insuring loss” and managing claims to proactively “ensuring protection” for customers. Second, insurers are bundling insurance with products and services across a broad spectrum of industries, with insurers themselves increasingly becoming invisible to the end customer.

To navigate these shifts, the insurer of the future will leverage next-generation technologies such as analytics, artificial intelligence (AI), blockchain and IoT.

For example:

  • Insurers are already using IoT to “ensure protection” by monitoring homes (smoke and carbon monoxide alarms), cars (mileage, driving patterns), persons (exercise, lifestyle patterns), and businesses (boilers and water systems).
  • Insurers will use digital channels to sell hyper-personalized products; for instance, an insurer’s mobile application might use geo-location data to offer travel or airline insurance to a customer who is at the airport.
  • Insurance will be bundled with products and services. Market leaders have already begun bundling insurance with remittance transfers and real estate purchases. As this trend expands across all industries, insurers will become “invisible” to the end user.
  • Insurers will tap the connected ecosystem to underwrite risk in near actual time. Analytics and AI will be used on real-time as well as historical data to assess risk, generate quotes, negotiate premiums and execute smart contracts.
  • Policy administration processes are already shifting from being highly manual and paper based to automated and digitized, and this will rise to another level as connected systems, blockchain and machine learning applications mature.
  • Machine learning will transform a highly manual, reactive claims management process to an automated, proactive one, and blockchain technology is showing transformative potential for use cases such as claims validation, fraud detection and prevention, and automated claims payments.

These are just a few ways technology will play a major role in the transformation of the insurance industry over the next decade as insurers shift focus from “protection” to “prevention” and as the bundling of insurance with products and services becomes more prevalent. Today, insurers have begun collaborating with IT service providers to build and evaluate proof-of-concepts, develop customized solution offerings, and test use cases in innovation labs and centers of excellence.

“We’re already seeing evidence of insurers beginning to embrace their future reality,” said Jimit Arora, partner and leader of the IT Services research practice at Everest Group. “For instance, insurers are moving from long-term, traditional IT outsourcing projects to short-term, digital projects. These projects allow insurers to adopt emerging technologies, reduce time-to-market, and improve customer experience. We’re also seeing a steep rise in demand for artificial intelligence, blockchain, IoT, and automation in the scope of insurance IT outsourcing contracts.”

Insurance constitutes 30-35 percent market share of the overall US$142 billion BFSI (banking, financial services and insurance) IT outsourcing industry. Over the past four years, the insurance ITO market size has grown by a CAGR of 5.3 percent, and going forward it is expected to grow at a steady rate of 4-6 percent. Digital services components were included in 46 percent of the 348 insurance ITO deals signed in 2016 and analyzed by Everest Group. The deals having automation in scope increased by nearly 250 percent while deals involving IoT, blockchain and AI nearly tripled.

These findings and more are explored in detail in Everest Group’s recently published report, “Insurer of the Future: Insurance ITO Annual Report 2018.” The report explores key trends in the insurance industry and their implications for application services outsourcing.

*** Download Complimentary Abstract ***

Enterprises Mistakenly Conflate Approach To IT Modernization and Digital Transformation | Sherpas in Blue Shirts

January 9, 2018

Two important activities are happening today in IT. One is a requirement to modernize IT. The second is digital transformation. These are the types of initiatives happening now in all enterprises. Both are important. Both drive value. Both prepare IT to make a bigger impact on the business, and both lower costs. But their starting orientation differs, and their sequence of goals differs. Therefore, the approach to deal with each type of initiative is different. Unfortunately, companies are mistakenly conflating the approach to both types of initiatives.

It’s important that enterprises understand both types of initiatives.

Read more in my Forbes blog

Investments in Digital Pay Off for Retail Banks | Sherpas in Blue Shirts

January 9, 2018

Our banking analyst team just finished its evaluation of how the leading North American retail banks are doing in their efforts to create the best digital customer experience, and we want to share some highlights from this breakthrough research. This is our third year of assessing 30 of the largest retail banks. The premise for the research is to examine the new consumption context of financial services – where customers are demanding a SUPER (Secure, Ubiquitous, Personalized, Easy, Responsive) banking experience.

Our research assessed the functionality and pervasiveness of the banks’ consumer-facing digital interaction layer to help establish correlations with superior customer experiences, stronger customer engagement, and higher overall business growth.

Based on our research, nine U.S. banks (Ally Bank, Bank of America, Capital One, Chase, Citi, PNC, SunTrust, USAA Bank, and Wells Fargo) and two Canadian banks (CIBC and RBC) have been featured as “Digital Banking Pinnacle Enterprises™.” These banks demonstrated business results that stood above the rest:

  • Better growth – 3% higher growth in deposits
  • Better efficiency – 9% lower efficiency ratio
  • Better customer experience – 20% higher mobile application ratings

We have also recognized four retail banks as “Agile Performers,” as they made the greatest improvements in 2017. These banks include Ally Bank and Bank of America, both of which launched multiple initiatives to meet millennials’ customer experience expectations, such as virtual assistants for personalized experiences and voice-command enabled banking capabilities. USAA demonstrated best-in-class adoption of digital banking channels and maintained its frontrunner position in customer-centric innovation. USAA also joined the cryptocurrency world by adding the ability to display customers’ bitcoin balances. SunTrust made considerable investments into self-service technologies across its branch network and recorded strong growth in customer engagement on social media.

retail-banking-digital-pinnacle-banks

The retail banking industry will continue to make dramatic changes in the next few years. These shifts will require banks to have increased capabilities to deliver an enhanced customer experience whose key elements include:

  • A paradigm shift from the current “product” mindset to a “customer lifestyle” mindset to combine, package, and offer products/services from banking and allied businesses
  • Open banking and partner ecosystems leveraging APIs to integrate third-party services into the bank’s digital banking platforms
  • Collapsing the siloes across the front-, mid-, and back-office to create a frictionless front-to-back experience
  • Harmonized data repositories to enable a unified view of the customer
  • A technology operating model that embraces automation, AI, blockchain, and cloud to enable the needs of the “new business”

We believe the current Digital Banking Pinnacle Enterprises have created superior customer experiences because they deliberately invested in their digital capabilities. But the bar for success is constantly moving, as the industry continues to witness rapid and significant changes. Nonetheless, our data from the last three years establishes an increasing correlation between digital functionality and business outcomes. Banks that are able to quickly adopt a human-centered design thinking approach, build usable experiences, and create a culture of obsessive customer focus will be able to better differentiated experiences, achieve growth, create shareholder value, and ensure market relevance.

To read all of our research findings, see our report: Digital Effectiveness in Retail Banking | Pinnacle Model™ Assessment 2018: Journey of North American Banks to Build SUPER Experiences

IT Modernization Investments to Dominate 2018 | Sherpas in Blue Shirts

January 8, 2018

What are the major areas where companies will focus their spend on technology or third-party services this year? What challenges will impact those investments? In reviewing the trends in 2017, I believe we’ll see more of the same this year and an increase in digital adoption. However, I believe we’re at the beginning stages of a megatrend for the next five years, and I’m calling the start of this phenomenon: I believe 2018 will be the year of IT modernization.

Over the next five years, large enterprises will drive relentlessly to modernize their IT environment. This activity will range from moving workloads out of legacy environments into the cloud, adopting agile and DevOps and investing much more deeply and thoroughly in world-class security.

I differentiate modernization from digital transformation. I see a different set of initiatives occurring often in the same companies, which I characterize as digital transformation. These initiatives often use some of the same technologies; however, they arise from the business and are focused on achieving competitive advantage. The funding, project management, and impact on change management are different in kind and scope. The rise of IT modernization will not slow the need and velocity of digital transformation, which I believe will continue to grow as well.

With respect to digital transformation,  we can expect the 2017 trend of digital pilots moving to much bigger programs to continue. However, change management and business model redesign will be a major constraining factor for successful digital transformation, and I believe we’ll see companies start focusing more on managing digital change.

As IT organizations prepare for modernization, they increasingly focus on three main journeys:

  • The journey to cloud resulting in establishing cloud as the infrastructure of choice
  • The journey from waterfall to agile
  • The journey to implement adequate security.

IT modernization will sweep across an organization’s entire IT portfolio, rethinking and restructuring infrastructure, networks, applications, and the process and policies that govern them. I expect IT modernization to drive a profound rethink of the enterprise IT structure as it will both collapse the IT stack and cause organizations to align services by end-to-end functions rather than horizontal functions. In contrast, digital transformation goes end to end and integrates the portfolio. In digital transformation, a company considers pulling workloads and activity out of the enterprise IT function or segmenting it into a different organization that is run end to end.

The results of this modernization will lead to a dramatic decrease in IT costs, while significantly increasing the speed and agility of IT’s ability to react in a timely fashion to business demand. This sudden increase in efficiency will have a dramatic effect on the service provider community, shrinking their existing revenue streams while demanding new skills and capabilities.

The new business models that emerge from this transformation are unlikely, at least at first, to be as profitable as the existing business models based on labor arbitrage. The combination of reduced revenues and lowered margins will place the incumbent service providers in a dilemma with very substantial conflicts of interest. The necessity to protect revenues and keep margins high is likely to make the incumbent service providers poor partners in the emerging digital marketplace.

One potential bright spot for the imcumbents, at least in the short run: although the overall legacy services segment will shrink, I believe IT modernization will result in a set of workloads with new workloads for service providers. For legacy workloads that have not been outsourced and are not ready to be modernized, companies will need to put them into a stable environment. I believe some of those workloads will move to the services market so companies can focus on modernization rather than legacy. This new work for service providers will partially offset some of the runoff that is happening because of IT modernization.

As I look forward to spending trends and challenges for this year, I think Robotic Process Automation (RPA) is hot and will continue to grow in adoption. Artificial Intelligence (AI) is starting to build momentum, and I think it will be red hot in 2018. I see AI being more disruptive than RPA and, therefore, causing greater change management and business model changes than RPA. RPA adoption already was constrained by change management issues in 2017, and I believe AI will be even more constrained by these issues because of its deeply disruptive nature.

We will also see blockchain technology grow in adoption. Although blockchain is truly a disruptive technology, its disruption will focus on specific areas where a distributed ledger can be applied (in comparison to AI, which has a broader set of uses than blockchain). 2018 will see a greater number of blockchain pilots, and some pilots will become programs. However, like AI, RPA and other new technologies, disruptive business model changes will be a major constraint to adoption.

Under Salil Parekh, Infosys looks for clarity on growth strategy | In the News

January 8, 2018

Infosys may offer clarity on growth strategies this week as the company gears up to announce its results for the first quarter under new CEO Salil Parekh. The Bengaluru-headquartered software services exporter will announce October-December quarter results on January 12. While equity analysts foresee a muted growth for Infosys in a seasonally weak quarter, they will keenly look forward to Parekh and management’s commentary on future growth drivers and articulate on status of the digital transformation journey at the $10.2-billion company.

While commentary on those decisions are important, the company’s revenue share from software plus services and platforms will, analysts say, be key to set the focus areas for management under Parekh. Peter Bendor Samuel, CEO at global IT research firm Everest Group, has broadly underlined the prospective strategies Parekh may look at.

Read more in The Economic Times

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