Monthly Archives

April 2018

AI as-a-service: Big Tech Has Provided Platforms, But Where Will the Apps Come From? | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Our digital services research suggests that 40 percent of enterprises have adopted AI in some shape or form. Of course, they’re relying on the foundational platforms from BigTech firms like Amazon, Google, Microsoft, and TenCent – and even from smaller tech start-ups –to drive meaningful business cases.

But while they can leverage Amazon Sage Maker or Microsoft Bot Framework to do the heavy lifting, they still need a meaningful application that operates on the platform in order to solve their business problems.

Enterprise Challenges with AI

Granted, tech vendors like Oracle, Salesforce, and SAP have made initial progress in integrating AI into their application platforms. But their products are very broad and focus on their own planned areas. And enterprises have multiple, complex requirements that fall outside the purview of these generic applications. Therefore, most enterprises must also build their own AI engines to get meaningful insights from these large-scale applications.

Essentially left on their own, enterprises have to build their own applications to address their needs. But Everest Group digital services research indicates that 60 percent of leading digital adopters struggle for the right talent. And because they lack high-caliber AI talent, they can only take scratch some of the surfaces necessary to create truly valuable apps that can deliver specific business outcomes.

Can Start-ups Help?

We believe this leaves the market wide open to an impending burst of start-ups that can build AI-led niche applications to solve industry-specific business problems. Areas like fraud detection in insurance, compliance management in financial services, and industry-oriented employee engagement and customer experience can significantly benefit from these types of applications. But the key to success here – for both enterprises and these start-ups themselves – will be a focus on building applications for specific business use cases, rather than broad-based platforms. Indeed, AI applications focused start-ups need to commoditize the platform and focus squarely on the application logic that leverages AI.

Enterprises will need to partner or invest in these start-ups to incentivize suitable AI-led applications. Going forward these enterprises should focus to procure off the shelf applications to drive business outcomes than over investing in AI platforms. Unlike today, which requires massive bandwidth to build on top of BigTech AI platforms, these applications will be easy to configure, train, and consume.

The Role of System Integrators

Given that system integrators (SIs) have a strong enterprise DNA and understand business processes, systems, and technologies very well, they can build these applications for enterprises leveraging a BigTech platform. Some of them have made early inroads in areas such as service desk, customer support, and IT operations. However, there is a massive opportunity for business applications and processes. SIs will need to develop point as well as platform-led AI applications that can be plug-and-play in an enterprise set-up. These applications must be pre-trained on industry-fed data for quick deployment and better time to value.

The Road Ahead

It is apparent that enterprises cannot leverage the power of AI on their own. They need to rely not only on large technology vendors, but start-ups and their service partners as well. Though each enterprise must have a pool of valued AI resources, they should not go overboard in investing in them. As AI is not enterprises’ core business, they’re better off letting it be done by companies that are experts.

However, if the AI industry continues to generate next-generation smarter platforms that are do heavy lifting for AI without creating meaningful applications, we will surely see one more AI winter in the near horizon.

Consequences For Customers From Current Services Industry Disruption | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

The services industry is in disruption, pivoting from highly profitable but mature labor arbitrage factories to a rapidly growing, immature new market based on automation and software-defined market with digital platforms generating value. Most large companies have outsourced numerous IT and business process functions and now depend on the supply chain of services. However, I’m forecasting a services industry consolidation and substantial change in the supply base. Enterprises should seriously consider the impact and risks this market consolidation means for their business.

Read more in my blog on Forbes

NASSCOM’s 8th GCC Conclave 2018 — April 26-27 | Event

By | Events

Everest Group is the Strategic Partner of NASSCOM’s 8th annual Global Capability Centers Conclave, Leading the New Normal: Speed, Smart & Skill, held in Mumbai on April 26 & 27, 2018. Visit our experts and analyst at Stall #7 during the event.

Global In-house Centers (GICs) are showing strategic leadership in supporting and driving the enterprise agenda. By pushing boundaries and driving innovation, they have evolved into powerful Global Capability Centers (GCCs).

However, today unprecedented digital disruption is pushing GCCs to provide transformational value to the enterprise, driven by GCCs’ ability to own business accountability, increase impact in core business functions, build deep talent expertise, adopt and lead in digital, and be agile in whatever they do.

This 8th meeting of the Conclave will present attendees with the latest thought leadership on how global enterprise GCCs are enabling adaptive enterprises, and share lessons learned from those who are delivering enhanced value in the new paradigm.

When:
April 26 & 27, 2018

Where:
Mumbai
Taj Lands End

 

Global Services Providers in the ‘Right Segments’ Will See Double-Digit Surge in 2018, But Others Will See Revenue Tide Recede—Everest Group | Press Release

By | Press Releases

Everest Group predicts enterprises will express preference for GICs and make significant shifts in their locations strategies in the year ahead.

 Although 2018 will see a modest increase in demand for global services overall, some leading service providers in select segments will experience a double-digit surge in revenues this year, according to Everest Group. Labor-arbitrage focused service providers will continue to create a drag on the market; however, digital-focused service providers will more than offset that, especially in key segments such as engineering services, business process outsourcing (BPO), and consulting and systems integration.

“Throughout 2017, outsourcing transaction activity was driven by an increased adoption of digital services, and this trend will continue in 2018 as more enterprises move beyond exploration and pilot projects to large-scale digital implementations,” said Salil Dani, vice president, Global Sourcing, at Everest Group. “The industry is ready to act: enterprises have undertaken copious research and testing, service providers have invested in acquiring the digital capabilities needed, and the market is being lifted by availability of funding, cheap capital, tax cuts in the United States, and low interest rates.”

Global In-house Center (GIC) setup activity was at an all-time high in 2017, and Everest Group predicts that the Do-It-Yourself, in-house model will become even more popular in 2018, with small and mid-sized enterprises driving Global In-house Center (GIC) setup activity.

Moreover, large enterprise outsourcing adopters will begin to undertake significant, long-term shifts in their location strategies, including the following:

  • Large-scale consolidation of services, as technology takes away huge sections of demand through straight-through processing (STP), self-service and automation
  • Rebalancing of work across locations
  • High-degree of co-location as growing technology and digital adoption blurs the boundaries between IT, non-voice business processes and voice processes
  • Creation of niche onshore and offshore centers of excellence to handle complex, exceptions-based work
  • Increased focus on onshore delivery due to regulatory changes and the need for agile, co-located innovation teams
  • Gradual shift of offshore centers from delivery of transactional to complex work through upskilling and cross-skilling talent bases.

These findings and more are discussed in Everest Group’s recently published report, “Market Vista™: 2017 Year in Review and Outlook for 2018.” This annual report covers the key forces and metrics defining the global sourcing market, including trends in outsourcing, digital adoption, and Global In-house Centers (GICs), as well as insights into location activity in offshore and nearshore geographies. The report also reviews 25 leading service providers on their annual performance, capability enhancements, merger and acquisition landscape, and other key events.

***Download a complimentary abstract of “Market Vista™: 2017 Year in Review and Outlook for 2018”.***

Fresher-heavy talent pyramid of Infy heads to US | In the News

By | In The News

India’s second-largest software services exporter Infosys is taking its time-tested talent pyramid model — with a large base of freshers at the bottom — to the US where it plans to hire more than 10,000 people in two years.

Peter Bendor-Samuel, chief executive at Everest Group, however, expects the increased local hiring on-site to impact Infosys’ operating margin.

“I do not think that the hiring of US talent, which is replacing importing Indian talent, will better position Infosys or any other of the Indian firms in their ability to win business,” he said. “In fact the higher cost of this talent will negatively affect margins. We estimate that over time it is likely to cost Infosys up to 3 points of margin.”

Read more in The Economic Times

 

TCS is now valued more than Accenture | In the News

By | In The News

Tata Consultancy Services (TCS) not only touched $100 billion in market capitalization on Monday, but it also in the process overtook the market cap of Accenture, a company whose revenue is almost twice that of TCS.

Rod Bourgeois, head of research in US-based DeepDive Equity Research, said that the root driver of TCS’s success is that it has built a position as the low-cost value player at scale – backed by the execution ability to maintain low costs while still delivering quality work. “This industry positioning by TCS supports good revenue growth, and this low-cost execution supports distinctive margins. Good growth plus distinctive margins over many years produces a huge market cap,” he said.

Peter Bendor-Samuel, CEO of IT consulting firm Everest Group, however, wonders if TCS’s valuation premium would persist over the next few years. Accenture, he said, is further along than TCS in its move into the new digital marketplace. “We anticipate that it will be difficult for TCS to maintain its traditional margins in digital as the business model as we understand it seems likely to demand lower margins. However, if TCS is able somehow to maintain the margin premium by some combination of IP ownership, and digital labour arbitrage, then it will be able to maintain its equity premium,” he said.

Read more in Gadgets Now

Robotic process automation is reworking supply chains | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

Robotic Process Automation (RPA) is a powerful set of digital tools that is poised to have a dramatic effect on the services industry, particularly the business process industry. RPA tools automate well-understood processes currently being done by hand and that have been outsourced. But from our findings in my employer Everest Group’s Pinnacle Model research on enterprises that undertake digital journeys, we believe companies will inevitably apply RPA to work that is not currently outsourced. This will radically change the supply chain of services over the next five years.

Read more in my blog on CIO