Author: Anurag S

Surprising Sub-saharan Africa and the Continent’s Growing Relevance for Service Delivery: What You Need to Know to Select Your Next Offshore Location | Blog

Looking at offshore destinations for service delivery, Sub-Saharan Africa – particularly Nigeria – is emerging as a surprising location with the potential for forward-looking providers and customers to seize. But what risks come along with the opportunities for doing business in this part of the world? To learn what you need to know to make the right site selection, read on.   

Africa does not immediately come to mind as an offshore destination for service delivery. In the past, the main destinations for low-cost offshore centers, both in-house and outsourced, have been India (for broad BPS operations including customer-facing CXM) and the Philippines (for CXM), particularly when the operation requires a good level of English language proficiency.

However, in recent years, the level of interest in Africa as a destination has been growing as enterprises look for cost-effective alternatives to traditional locations and to balance their risk from too much activity in one country/region.

Within Africa, South Africa has been strong for several years, especially for CXM. North African locations such as Egypt, Tunisia, and Morocco have also experienced growth for IT, back office, and language support for French and other EMEA languages. Up until now, there has been less activity in Sub-Saharan Africa (outside of South Africa), but this is starting to change.

Advantages of Africa

Enterprises are now starting to seriously look at Africa as a destination for outsourcing for many reasons, including:

  • Population – Its huge and youthful population of 1 billion, with over half of the talent pool projected to be under the age of 25 by 2050, makes it a great resource for BPS activities
  • Government support – In many countries, the government helps to enable global services delivery
  • Market potential – Many of the large service providers are yet to enter the market or have small scale operations supporting the local market
  • Infrastructure – Internet and other capabilities are improving. For example, CSquared (a Google subsidiary) announced a four-way partnership in 2017 to build out the shared fiber networks in sub-Saharan Africa
  • Spending growth – The latest African consumer trends show that consumer spending growth in Africa is projected to rise to $2.1 trillion by 2025 and $2.5 trillion by 2030, according to market forecasts

While interest in the continent is growing, enterprises also should be aware of the following risks:

  • Talent – Companies will need to invest in growing and developing talent locally by training recent graduates, building a recruitment engine from the ground up, and other activities to create an experienced talent pool. The low talent availability, limited language support beyond English, and high premiums commands also are concerns
  • Business environment – In comparison to other nearshore European locations, the quality of infrastructure, digital readiness, and safety and security are among the concerns for East and West African countries
  • Low market congestion – While key players supporting global services in most African countries is currently limited, the entry of a few large companies could easily congest the market and quickly increase costs
  • Delivery enablers – Limitations with utilities, transportation, meals/catering, stationery providers, office infrastructure quality, and poorer connectivity to domestic and international locations all present risks

Location selection is key

If an enterprise can balance the opportunities with the risks, we believe sub-Saharan Africa could be a wise choice. But selecting the right location is key. In our report from 2020 Africa: Emerging IT-BP Delivery Force, we reviewed ten of the most mature locations assessing talent availability with the financial attractiveness.

The key takeaway: Egypt and South Africa, the two most mature markets, scored well in terms of both talent availability and financial attractiveness. But a surprising entrant in the top right of the chart was Nigeria. While still relatively immature when it comes to BPS, Nigeria’s high level of talent availability makes it a financially attractive destination.

As an example of recent investments in the region, Microsoft invested $100 million to open a technology development center with sites in Kenya and Nigeria in 2018. Three years later, it released a joint announcement with the Government of Nigeria, detailing several projects aimed at intensifying the nation’s move to become a more digital economy.

Other locations driving conversations with enterprises are Ghana and Kenya, both presenting a high level of financial attractiveness but scoring lower than the leaders in terms of talent availability.

locations

        1    Reflects market average annual costs for English language delivery for steady state of operations blended across the delivery pyramid and excludes capital expenses related to set-up, transition, expat costs, and of economies of scale for large-scale operations

          2    Represents presence of entry level and experienced resources for specific functions blended in a 60:40 ratio

          3    Combination of maturity for services delivery, presence of global / regional GBS and service providers, scaled operations, and other related aspects

Source:   Country-/city-level investment promotion agencies and global services organizations

All the other locations we assessed, apart from Tunisia and Morocco, rated well in terms of financial attractiveness but were less strong when it comes to talent availability, presenting an issue for any enterprise looking to scale.

Talent forecasts

We believe the level of talent available in Africa, particularly in sub-Saharan Africa, will improve over the next few years as global service providers and enterprises begin operations there, and talent from local operators accelerate their development by working for experienced operators. But it may take several more years to reach similar levels to those seen in North Africa or the country of South Africa.

In summary, sub-Saharan Africa is likely to grow in relevance as an offshoring destination for BPS, and forward-thinking service providers are already investing. As an enterprise, if you are considering the use of sub-Saharan Africa as an offshore delivery location, we would recommend several approaches:

  • Undertake a detailed assessment of the location to better understand talent availability and how it aligns with your future business and talent needs
    • Assess talent scalability as well as the capabilities needed to deliver process or skill-specific requirements
  • Understand how it aligns with your corporate strategy and CSR commitments
    • Africa is the main source of impact sourced workers, a growing area of interest for many enterprises
    • Understand how the potential location aligns to target markets for business development. Consider whether the potential location is a key target to grow your business
  • Conduct a detailed review of the service providers with delivery locations in the region to ensure they meet your requirements, especially in terms of talent and skills availability, cost, and business continuity

For more findings from our recent report, 2020 Africa: Emerging IT-BP Delivery Force, and to discuss Africa as a service delivery destination, please reach out to David Rickard ([email protected]) or Anurag  Srivastava ([email protected]).

Service Delivery Location Factors to Consider for WFH Model Adoption | Blog

Before COVID-19, most organizations were reluctant to adopt Work From Home (WFH), viewing it as a hard-to-govern delivery model relevant only for limited functions and employees. However, the pandemic has made WFH a requirement, at least for the short term, for most enterprises. Despite the massive disruption, we believe most organizations will make WFH a business-as-usual component of their “next normal.” But that means they’ll have to take a long, hard strategic look at the locations they use for services delivery, whether they operate in a shared services environment or leverage a third-party provider.

COVID-19 has challenged conventional thinking about location selection parameters

Historically, most location portfolio decisions were based on an evaluation of traditional factors including the talent landscape, market attractiveness and competitiveness, cost of business operations, and the business and operating environment. Now organizations need to factor in and evaluate a location’s business case for WFH adoption, including the interplay of additional drivers like infrastructure, restrictions for remote delivery, presence of strong governance mechanisms, employee security, data protection, intellectual property safety, and determination of additional benefits that can be tapped into.

We’ve developed a framework that assesses 20 additional factors that we have categorized into three buckets: viability, security, and potential benefits.

WFH

Each of these parameters plays a crucial role in an organization’s selection of services delivery locations for a WFH environment.

Understanding a given location’s WFH viability will not only help enterprises carve out their next wave of growth, but also help them tap into the additional benefits offered by the location.

Here’s a look at each of the three overarching buckets.

Understanding overall viability

This category is all about evaluating a location’s business ecosystem through a new WFH lens. It involves:

  • Having a detailed view of the overall WFH infrastructure, like broadband speed and penetration, power/telecom outages, network readiness, and reliability
  • Understanding nuances for local WFH restrictions as imposed by the law, such as regulatory concerns, data privacy issues, SEZ norms, and number of working hours
  • Assessing the overall ecosystem for WFH adoption, e.g., social/cultural acceptance and working from an established location as opposed to a greenfield location.

We believe all organizations should assess each location on these factors as they will play an essential role in WFH success.

Fighting security concerns

Another critical factor enterprises need to evaluate in each location they’re considering is the overall security of their employees and their data. Here, organizations need to look at the robustness and effectiveness of local data protection and cybercrime laws across each location. Understanding local governance mechanisms and laws will help bolster viability for each location and help organizations map suitability for each function. Further, as their employees will be working from home, organizations will also need to understand the nuances around crime rates across employee neighborhoods, civil unrest, and natural hazards, as these can potentially increase the business cost for crime and violence, and also disrupt operations.

Reaping potential benefits

Adopting a WFH model will not only help organizations drive the next wave of cost optimization (significant savings over leasing real estate infrastructure and utility expenses) but also will help them overcome challenges related to availability of real estate across leading talent hubs in tier-1 locations.

WFH adoption will further help organizations establish additional satellite locations, or tertiary sites, in which talent works remotely, either permanently or part-time, with or without a corporate physical presence in the location. This will not only help reduce travel time, but also help improve employee productivity and reduce overall attrition for organizations. Based on a recent survey we conducted with leading enterprises, more than three-quarters of the respondents said their organization’s overall productivity has increased in the current COVID-19 period. The average improvement in productivity was just over 13 percent, as compared to before the pandemic period.

The WFH business case is a win-win proposition for most organizations as they adapt to the “next normal.” While there are multiple factors that potentially sweeten the business case for WFH adoption, taking a detailed view by each location will be an imperative as organizations progress and evolve on this journey. An iterative and continuous thinking approach will further help organizations overcome some key challenges including employee and organization development, legal, and regulatory concerns. Watch this space for more updates.

For additional details on this topic, reach out to us at [email protected], [email protected] and [email protected].

Four Key Trends in Social Media Content Moderation | Blog

While the numbers vary depending on the source, there are give or take three billion social media users around the world in 2019. With the associated dramatic increase in manipulative and malicious content, there’s been an explosion in the market for content moderation services.

Based on our interactions with leading global enterprises and service providers, here are the four key trends impacting the content moderation services industry.

Key trends impacting content moderation services

1. Demand for content moderation is growing

Given the exponential rise of inappropriate online content like political propaganda, spam, violence, disturbing videos, dangerous hoaxes, and other extreme content, most governments have instituted or begun creating policies to regulate social networking, video, and e-commerce sites. As a result, social media companies are facing mounting legislative pressures to curate all content generated on their platforms.

The following image shows how seriously these companies are taking the issue. And note that these numbers only account for outsourced content moderation services, not internally managed content moderation.

Content generation services BPO Market

Orange boxes indicate CAGR / Y-o-Y growth over the years

2. Both technology and humans are vital

Technological capabilities – ranging from robotic process automation (RPA) to automate repetitive manual process steps, to AI-assisted decision support tools, to AI-enabled task automation of review steps – have certainly emerged as key levers to help social media companies protect their communities and scale their content management operations. For example, established tech giants including Microsoft and Google, as well as fast-growing start-ups, have been investing in developing scalable AI content solutions that deliver faster business value and safer conditions.

While technology will continue to play a big role, it certainly isn’t the be-all, end-all. The judgement-intensive nature of content moderation work requires the human touch. Indeed, with the increasing complexity of the work and the rising regulatory oversight requirements, the need for human employees as part of the content moderation equation will continue to grow significantly.

3. Content moderators need a multitude of skills

Content moderation is an extremely difficult job, at times monotonous and at others disturbing. As not everyone is cut out for the role, companies need to assess candidates against multiple criteria, including:

  • Language proficiency, including region-specific slang
  • Local context
  • Acceptance of ideas that may be contrary to self-held beliefs and personal opinions (e.g., on gender, religion, societal norms, political issues, etc.)
  • Ability to adhere to global policies
  • Ability/maturity to review content that is explicit in nature
  • Exposure to a multi-cultural, diverse society
  • Exposure to freedom of expression, both online and offline, and a drive to protect it
  • Ability to understand and accept increasingly stringent regulatory policies.

4. Content moderation services demand a different location strategy

Because all countries have unique cultural, regional, and socio-political nuances, the traditional offshore/nearshore-centric location selection strategies that work for standard IT and business process services won’t work for content moderation work. Companies seeking outsourced content moderation services need to look at regional hubs alongside multiple local centers to succeed. In the short-term, this means working with leading providers with hyper-localized delivery centers and rising local providers in the target countries.

Outlook

Here’s what we see coming down the pike in the increasingly complex content moderation space.

  • Short-term investments/quick fixes might take precedence over long-term investments
  • Until the regulatory landscape stabilizes, companies might need to allocate a disproportionate amount of resources/spend towards compliance initiatives
  • Regulatory uncertainty and ambiguity will increase demand for specialist/niche forms of talent, including legal professionals and consultants. Today’s content adjudicators will be displaced by forensic investigators with specialized skills in product, market, legal, and regulatory domains
  • Companies must make talent development activities a priority through a specialized focus on structured talent sourcing and training, and strong emphasis on employee well-being through various wellness initiatives
  • As AI continues to grow in sophistication, a more defined synergistic relationship between humans and the technology will emerge. AI will be responsible for evaluating massive amounts of multi-dimensional content, and humans will focus on intent and deeper context analysis
  • The need for a hyper-local delivery model will prompt enterprises to increasingly explore outsourcing as a potential solution to benefit from service providers’ diversified location portfolios.

To learn more about the content moderation space, please contact Hrishi Raj Agarwalla / Rohan Kapoor / Anurag Srivastava.

FinTech Sandboxes: Good for Business Growth, Good for Countries’ Economies | Blog

Since the early part of this decade, when technology-backed disruptions started knocking on businesses’ doors, FinTech – or financial technology – transformation has been one of biggest opportunities for BFSI companies. But while they’ve consistently accelerated their transformation journeys, BFSI firms and the FinTech providers themselves have been impeded by multiple complex challenges. These include stringent regulatory requirements, exposure to cyberattacks, lack of customer trust, limited government support, and, most importantly, limited opportunities to refine and train their analytics engines in real environment.

The good news, however, is that now, even government bodies are starting to take up agendas to facilitate and foster FinTech innovation. Over the past two years, multiple countries, including Denmark and the Netherlands, have come up with their own versions of regulatory sandboxes to promote activity in the FinTech space. In addition to attracting a multitude of players looking to innovate and deliver FinTech services, these sandboxes have also contributed significantly to the overall business growth in the countries in which they’re located.

Lithuania’s FinTech Sandbox

Against this backdrop, let’s take a look at Lithuania’s newly-established FinTech sandbox through multiple lenses: what it means for the participants, how it will impact the country’s global services industry, and factors that BFSI and FinTech firms need to focus on to leverage innovation opportunities from these types of initiatives.

On October 15, 2018, Bank of Lithuania kickstarted a regulatory sandbox for FinTech start-ups and BFSI firms. The goal is to enable the companies to test their new products/solutions in a live environment with real customers, while Bank of Lithuania provides consultations, simplified regulations, and relaxations on supervisory requirements. After successfully testing their new products, the companies can implement them in a standard operating environment.

Key Highlights of the Lithuania FinTech Sandbox

Key highlights of the Lithuania FinTech sandbox

Impact on Lithuania’s Service Delivery Market

While the Lithuanian FinTech market experienced 35 percent CAGR growth between 2015 and 2017, we expect it to grow by an additional 35-45 percent in 2019-2020. The FinTech sandbox will contribute significantly to this growth. Other drivers will include:

  • A large, tech-savvy, and growing workforce with relevant skills and educational qualifications (e.g., advanced degrees in science, mathematics, and computing)
  • Unified license providing access to a large EU market across 28 countries
  • Favorable regulatory policies, including expeditious licensing procedures and regulatory sanctions exemptions (e.g., remote KYC allows firms based outside Lithuania to open an account in the country without having a physical presence there)
  • Proactive government policies, including creation of funding sources (e.g., MITA), and streamlining laws and tax relief programs for start-ups
  • A state-of-the-art product testing environment for blockchain, through the country’s LBChain sandbox, which is set to open in 2019

Here are several aspects of Lithuania’s service delivery growth story that we expect to see in the next couple of years.

  • Delivery region: While service delivery demand will continue to be strongest from Lithuania and the Nordic countries, we expect strong growth in delivery to other European and SEPA (Single Euro Payments Area) markets. This will be driven by players looking to hedge their post-Brexit risks of buying/delivering services from only London
  • Segments/use cases: Most of the growth will come from lending and payments platforms, with relatively lower growth in capital markets and insurance
  • Business model: While B2B will remain the dominant model, we expect a significant uptick in in “B2C & B2B,” due to increasing demand for a better customer/institutional experience
  • Collaboration between startups and financial institutions (FI): Startups will continue to leverage FIs as distribution partners, but we expect significant growth in models where FIs partner with start-ups as customers or sources of funding

How Should BFSI and FinTech Players Strengthen their Own Growth Stories?

As BFSI and FinTech continue to walk the transformation tightrope in the everchanging regulatory space (e.g., PSD2 and GDPR), they need to focus on the following factors to successfully grow:

  • Understand the need: Look across your existing and aspirational ecosystem of FinTech delivery, and zero in on key priorities (e.g., solutions, target markets, need for regulatory sandboxes) if any, to enable a future-ready delivery portfolio
  • Establish your approach: Tune your delivery strategy to progressive principles such as availability of talent and innovation potential, not just operating cost. This includes prioritizing geographies with high innovation potential and next generation skills (e.g., Denmark, Israel, and Lithuania) over low cost but low innovation potential alternatives
  • Brainstorm your scope: Build relationships with leading BFSI players and start-ups to share/learn best practices around efficient operating models and promising use-cases. This specifically includes liasing with incumbents operating in sandboxes to prioritize select use cases with transformative potential before testing in a real environment
  • Get ready: Selectively rehash your technology model to simplify legacy systems, become more intelligent about consumer needs, and reduce exposure to cyberthreats
  • Keep an eye out: Look for opportunities (e.g., sources of funding, sandboxes, and partnerships) to help you innovate, develop, test, or successfully implement solutions

The good news is that the push (or pull) towards FinTech transformation is in same direction for all leading stakeholder groups – service providers, buyers, collaborators, customers, and government bodies. But, because the least informed is often the most vulnerable, BFSI, FinTech firms, and companies seeking their services must stay informed and keep looking for opportunities and solutions.

To learn more about other key emerging trends in the FinTech space, please read our recently released report, FinTech Service Delivery: Traditional Locations Strategies Are Not Fit For Purpose.

Why Many Banks Might Have to Dump Their Delivery Location Strategy | Blog

Long gone are the days when consumers were welcomed with toasters when they opened a checking or savings accounts at their local bank. Today’s consumers don’t want toast-making capabilities from their financial institution: they want cheaper, easy-to-use Internet- or smartphone-based financial products and services, including payment applications, lending platforms, financial management tools, and digital currencies, all with hyper-personalization. Most customers are quick to make a move if their current financial institution doesn’t deliver.

So, what do banks need to do to retain their customers? Two things. First, they need to deliver the banking experience their customers are increasingly demanding. Second, they need to reconsider much of their service delivery location strategy.

What do Bank Customers Want?

Let’s first look at banking customers’ requirements for a SUPER banking experience.

Banking Requirements

Few, if any, banks have the ability to deliver on these requirements. So, they’re increasingly partnering with financial technology start-ups – popularly known as FinTechs – to meet customers’ expectations.

FinTech solutions

This brings us to the second thing that banks need to do to retain and grow their customer base: reconsider much of their service delivery location strategy.

Cracking the Service Delivery Location Strategy Code

With innovation and personalization topping customers’ list of banking requirements, banks can no longer rely on the same location strategy they’ve used to deliver traditional functions such as applications, infrastructure management, and business processes. Why? Because FinTech requires a higher proportion of onshore/nearshore delivery compared to traditional functions and co-locating all FinTech segments such as payments, lending, and capital markets in the same region may be difficult given varying maturity of locations across segments.

To help banks find locations for successful FinTech delivery, Everest Group developed a framework – presented in our recently published research report, “FinTech Services Delivery – Traditional Locations Strategies Are Not Fit For Purpose!” – to measure the innovation potential of a location.

With the framework, banks can evaluate all aspects of innovation potential, including the availability of talent with emerging skills (such as artificial intelligence, machine learning, and analytics), adequate cost of delivery, and providers’ financial services industry domain knowledge.

Framework to Measure a Location’s Innovation Potential

Framework to Measure a Location’s Innovation blog image

To develop our FinTech Services Delivery/Locations report, we started with a list of 40+ global cities with leading FinTech investment and market activity. Subsequently, we shortlisted 22 locations based on multiple criteria including overall investment, technology and infrastructure, and talent. Finally, we used our innovation potential framework, coupled with other factors such as maturity of the FinTech ecosystem and cost of operations, to determine the top locations banks should consider for specific FinTech use-cases such as payments, lending, and capital markets solutions.

Here are some key findings from our location strategy research:

  • Banks may need to create a parallel portfolio of FinTech delivery locations, as they may be far different than those that are mature in delivery of traditional functions
  • A location’s innovation potential (not its cost arbitrage or delivery efficiencies) is the most important factor for successful FinTech delivery. This is because the right location will offer depth and breadth of maturity across multiple financial segments, a vibrant startup scene, agile academic institutions, tech-savvy government, ample financing options, modern technology infrastructure, and friendly regulatory environment
  • Locations that are currently regarded as nascent (e.g., West Africa, Southeast Asia, and Latin America) may emerge as attractive alternatives as the market evolves.

For more details, please see our report, “FinTech Services Delivery – Traditional Locations Strategies Are Not Fit For Purpose! Plus Profiles of Emerging Offshore/Nearshore FinTech Hubs” or contact Anurag Srivastava or Anish Agarwal  directly.

Can Indian Tier-2/3 Cities Fit the Bill for Digital Services Delivery? | Sherpas in Blue Shirts

India continues to offer an attractive service delivery location proposition for global companies, given its unique combination of a low-cost, scalable English-speaking talent pool, and the breadth and depth of available skills.

As the global digital services industry matures, and with increasing competition in the tier-1 cities, companies are looking to reduce the costs of talent and access additional untapped talent pools for digital services delivery.

Can tier-2/3 cities in India fit the bill? Let’s start by looking at the current state of digital services delivery in these cities.

Existing Landscape

Today, India is the largest destination for digital services delivery, with 75 percent of the market. Tier-2/3 cities in the country currently hold 14-16 percent of the market share, and we expect this proportion to grow by 15-20 percent in the next couple of years. Ahmedabad, Chandigarh, Coimbatore, Indore, Jaipur, Kochi, Lucknow, T-puram, and Vadodara are the top nine tier-2/3 locations, accounting for 55-60 percent of the digital services headcount in tier-2/3 cities.

Tier-2/3 cities are mostly leveraged to provide social & interactive (41-43 percent), cloud (21-23 percent), analytics (16-18 percent), and automation (10-12 percent) related services. When it comes to sophisticated digital technology services, such as cybersecurity, mobility, and Artificial Intelligence (AI), service providers still prefer tier-1 locations such as Bengaluru.

Major digital services Tier 2 3 blog

Now, let’s evaluate how tier-2/3 Indian cities’ value proposition stacks up against tier-1 cities.

 

Value prop tier2 3 India

What’s ahead for India’s Tier-2/3 Cities?

 Here are some of the key findings from our recently published report, “Will Tier-2/3 Indian Cities Carve a Niche in the Digital Story?

  • Tier-2/3 cities will continue to be leveraged predominantly as spokes to major hubs in tier-1 cities for the next two to three years
  • Because of a lack of skilled talent, delivery of advanced digital services such as machine learning, cyber security, and mobility from tier-2/3 cities will remain a distant dream for the next few years
  • An increasing number of enterprises will set up global in-house centers (GICs) or shared services centers for delivery of digital operations, due to increasing confidence and improvements in infrastructure quality
  • Reskilling/upskilling for digital capabilities will be paramount for companies operating in these cities
  • A few large service providers will invest in training talent, and benefit from early mover advantage by becoming distinguished employers in a less competitive market

To learn more – including the metrics around availability of talent, market maturity, cost of operations, business and operating risk environment, and implications for market participants including buyers, service providers, investment promotion councils, and industry bodies – please read our recently published report, “Will Tier-2/3 Indian Cities Carve a Niche in the Digital Story?.” We developed the report based on deep-dive discussions with leading shared services centers, service providers, recruitment agencies, and other market participants.

What Global Services Can Learn from the Facebook-Cambridge Analytica Scandal | Sherpas in Blue Shirts

Were you as riveted as I was by Mark Zuckerberg’s testimony about the Facebook-Cambridge Analytica scandal?

Here are my key takeaways on the future of the services industry supporting social media and the increasingly digital world.

Data is the New Currency

We are hurtling towards a truly digital economy where data is the key commodity. In such an economy, companies with access to data and, more importantly, the ability to make sense out of it through analytics tools will reign supreme.

It is not difficult to imagine a world where most corporate movements and conflicts center around data – lack of it, desire to access it and acquire better analytics tools, improper/unethical/overuse of it, and inadequate protection of it.

Internet of Things (IoT) and Social Media Will be Mines, but Not Necessarily Filled with Gold

Internet of things and social media platforms can capture zillions of data points, and will potentially be important tools that supply this new currency to the ecosystem. However, market success will depend heavily on who has the business acumen and analytical power to churn data into insights and useful products. This will apply across sectors, but will be critical for BFSI, CPG, retail, and healthcare segments.

Data will not just be hard, like names, addresses, and IP addresses. It will also be soft, such as sentiments, propensity to buy, satisfaction, and the likelihood that a given customer will be a leading adopter. IoT and other data capture/analysis tools will need to change rapidly to accommodate these factors. Whether the claims of Facebook storing 29,000 data points on each individual are true or not, the data it does store keeps track of not just actions but also interest and intent, e.g., browsing but not actually buying a product.

Safeguarding Data Will be Critical – for Companies and Countries

In this new world, data security will be paramount – akin to safeguarding money! That makes cybersecurity a critical prong of a digital strategy.

The U.S. legislative bodies have demonstrated considerable interest in introducing new legislation oriented around this new data economy. My expectation is that the U.S. will mirror the EU General Data Protection Regulation (GDPR,) at least in intent and punitive measures, although the exact tenets may differ, and may be more expansive.

In order to continue to be amenable, operating locations for U.S. and European firms and their back-and middle-offices and IT centers, offshore services delivery countries like Argentina, Costa Rica, India, the Philippines, Malaysia, and Mexico will have to mirror the EU GDPR and U.S. regulations, and upgrade their data protection laws.

The Cold War has Gone Digital

Alleged Russian interference in the Brexit vote and the 2016 U.S. presidential election, purported hacking by Western nations into Iranian nuclear reactors, political propaganda on social media, and the umpteen social media wars fought by even governments and elected officials all mean one thing: the Cold War has now gone digital. Against such a backdrop, technology and digital tools have come out of the back rooms of global businesses and into the front rooms of politics and governments.

With their strong emphasis on digital, we foresee governments increasingly investing in it to out-compete other countries. We also expect the public sector to increase their investments in cybersecurity.

Rise of Content Moderation as an Industry

Huge emphasis will be placed on a breadth of content moderation services – this includes content review, sentiment analysis, context analysis (e.g., distinguishing between hate speech and valid political dissent), and moderation.

While content moderation was previously viewed as low-value and transactional, the intense heat that social media platforms are facing will change it into a far more important process that involves a fair degree of decision-making. We might even see the most complex streams of content moderation leveraging legal professionals as agents. See my next point.

Increased Regulatory Oversight on Social Media Content

Because of the huge impact of social media content on almost everything in today’s world – politics (e.g., Brexit and the U.S. elections), the economy (e.g., Snapchat losing US$1.3 billion after a tweet by Kylie Jenner), entertainment, sports, and arts – content moderation will become a heavily regulated and watched process. Liabilities from social media fails will typically run into billions, and so will penalties.

Senator Ted Cruz raised a question related to the political leanings of moderation agents themselves, bringing into focus the larger issue of biases. Over-moderation will also be under scrutiny, meaning that content moderators will need to walk an extremely thin line.

Exploding Portfolio of Languages

With the explosion of social media across the nooks and crannies of the world, content moderation capabilities will need to keep pace. Facebook already has a team of up to 20,000 professionals moderating content, and that number is bound to leap up significantly in the near term, until AI and automation become smarter.

In our work with global service providers, we are seeing a huge ramp-up in demand for content moderation teams across all developed and emerging markets, and even for languages that were not previously supported by contact center or BPO service providers in any meaningful scale. Mark Zuckerberg himself gave the example of the need to increase Burmese language moderation due to the Rohingya crisis.

The trick for service providers to be successful in such as market will be to have a ready map of where they might be able to access just about any language in just about any kind of scale, because no one knows where the next crisis and related social media content may erupt.

Critical Role of AI and Automation

Finally, but probably the most critical game changer in all this, is the role of AI and automation. At a point it will no longer be financially prudent to support the content moderation process with a people-intensive model, especially with the potential demand that can arise in a matter of hours in languages that are traditionally extremely hard to support. In such a scenario, companies with natural language processing and sentiment analysis tools that can make increasingly smarter decisions related to content management will be successful. Service providers and technology vendors that can develop such tools will find a ripe market to sell into!

While human judgment will still be required, IT tools can potentially be trained in an unlimited number of languages and dialects to take care of the bulk of business as usual content.

That’s as far as the eye can see today. But we are poised to see an exciting new world where entirely new tussles lead to some companies emerging as winners and others fading into obscurity as losers.

I would love to hear your thoughts on this topic, so please feel free to contact me at: [email protected].

Driving Success in Your Automation Center of Excellence | Sherpas in Blue Shirts

Use of Service Delivery Automation (SDA) – which refers to various types of technologies that can automate inputs to a process, the process itself, or the outputs from a process – is surging in the global services industry. When scaling beyond proof of concept, organizations are finding it’s important to bring together the SDA skills and knowledge into an automation Center of Excellence (CoE). Doing so enables the business to develop its SDA capabilities and competencies in a controlled and centralized manner, in turn helping ensure maximum success from the SDA initiative.

Through our research into automation Centers of Excellence, we’ve identified several areas in which organizations struggle.

The right Center of Excellence structure

While there are numerous possible structures for a SDA CoE, we’ve found that a pyramid structure is ideal, as it helps bring the CoE governance in-line with its customers. The pyramid should have three distinct layers, each with its unique set of responsibilities and clearly defined line of communication with the client organization. Clarity around roles and responsibilities across different layers in the pyramid is critical, not only to avoid miscommunications and missteps, but also to help maximize operational efficiency.

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The Service Delivery Automation skills demand-supply gap

Demand for SDA skills has far outpaced the talent supply. Some are filling the gap by locating the Center of Excellence in locations with mature, trainable talent. Others are partnering with specialist firms, e.g., technology vendors and service providers, to leverage their domain experience and access to skilled talent, collaborating with startups, and seeking talent from technology groups and professional communities.

Multiple leading global companies are also training their existing employees on SDA. They typically engage technology vendors and/or external consultants to conduct extensive training programs for three to six months. Further, they encourage employees to join and participate in professional networks /communities and other events to learn from other SDA professionals’ experiences. This approach not only helps build internal skills for automation and reduces dependency on hiring from external sources, but also provides FTEs impacted by automation with alternative career paths.

Conventional location strategies don’t work

The traditional offshore-centric sourcing model based on labour arbitrage has limited relevance for SDA. Because of SDA’s unique requirements, organizations are investing in a diversified location portfolio for SDA in order to leverage the best propositions of each. For example, mature talent markets such as India offer a relatively larger talent pool, are suitable for a large-scale centre, and can deliver quick ramp-up pace. Onshore and nearshore locations offer greater depth and breadth of skills, enable greater interaction with business stakeholders, and provide accelerated time-to-market. And co-locating the SDA CoE with existing global services/digital technology centres can help the organization benefit from greater collaboration and economies of scale.

 

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To learn more about various aspects of the talent model, delivery landscape, and global location hotspots for SDA CoEs, please read our recently published report, “Talent Model and Location Hotspots for Service Delivery Automation (SDA) Center of Excellence (CoE),” which we developed based on deep-dive discussions with leading GICs, service providers, and automation technology vendors. And if you’ve established an automation Center of Excellence, we’d love to hear your story. Please contact us directly at [email protected] or [email protected].

The Equifax Data Theft: What if GDPR were in Force? | Sherpas in Blue Shirts

The high entropy data protection space has once again gained headlines after Equifax, the U.S- based consumer credit reporting agency, revealed that a July 2017 theft compromised more than 143 million American, British, and Canadian consumers’ personal data. The data breach incident, one of the worst cyber-attacks in history, was conducted by hackers who exploited a vulnerability in the company’s U.S. website and stole information such as social security numbers, birth dates, addresses, and driver’s license numbers. (Equifax maintains and develops its database by purchasing data records from banks, credit unions, credit card companies, retailers, mortgage lenders, and public record providers.)

Much about the situation would have been considerably different had this breach happened after May 2018, at which time the General Data Protection Regulation (GDPR) – a regulation by which the European Parliament, the Council of the European Union, and the European Commission intend to strengthen and unify data protection for all individuals within the European Union (EU) – goes into effect. Even though it is not headquartered in the EU region, Equifax would have come under the purview of GDPR, because it maintains and reports the data of British citizens. And the stringency of requirements and degree of implications would have been significantly higher for the credit rating agency.

GDPR and Equifax

Although not directly related to GDPR, another significant business impact is the sudden “retirement” of Equifax’s CEO less than three weeks after the breach was announced.

This massive cyber-attack is a wake-up call for the services industry. Starting today, operations and businesses must regard data protection regulations with the utmost importance. Non-compliance will not only harm firms financially, but also expose them to brand dilution and business continuity risks.

Some of the key imperatives for enterprises operating in the ever-so-stringent data protection space include:

  • Know and understand the data security laws under which your enterprise falls, especially those such as GDPR that have far reaching impacts
  • Redesign your business processes to incorporate privacy impact assessments to identify high risk processes
  • Implement necessary changes in the contracts with third parties to incorporate the stricter requirements of consent
  • Achieve process transformation to inculcate privacy by design; this includes risk exposure reduction by technological changes such as data minimization
  • Appoint a Data Protection Officer to align the business goals with data protection requirements
  • Make suitable changes in contracting and governance practices to ensure adequate emphasis on data protection

To learn more about the strategic impact of the EU GDPR on the global services industry, please read our recently released viewpoint on GDPR: “EU GDPR: Is There a Silver Lining to the Disruption.”

Signs of Structure in a Disordered Global Services World? | Sherpas in Blue Shirts

The global services market is in upheaval, and disorder seems to be the new world order. Geopolitical developments, macroeconomic pressures, and unprecedented pace of changes in technology have resulted in huge disruptions to the usual ways of doing business. However, despite the turmoil, the global services market continues to grow, albeit at a much slower pace compared to previous years.

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When developing our Global Locations Annual Report 2017, Everest Group spent considerable time and effort analyzing the underlying data to determine if there are some signs of structure amidst the disorder. Here are some patterns and trends visible from our analysis:

Pervasive rotation of delivery capability toward digital

There has been significant increase in both number and share of new centers focusing on delivery of digital services. Between 2013 and 2016, the number of such centers grew by ~177 percent.

  • Regions: Most of this growth was concentrated in Asia Pacific and nearshore Europe
  • Segments: Cloud, Internet of Things, and Big Data witnessed the highest adoption rates
  • Sourcing model: While the lion’s share of the growth was with the in-house model, service providers also reoriented their delivery portfolios

Greater leverage of nearshore locations

Both service providers and global in-house centers are growing faster in nearshore locations, such as central and eastern Europe, Latin America, and the Caribbean, compared to traditionally offshore locations (such as Asia Pacific.) This is driven by multiple factors, most prominently the drive towards digitalization and the different talent demands this imposes. The chart below shows the increasing share of nearshore regions in new delivery center setups:

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Complementary growth in onshore locations

There has been a rapid surge in large enterprises’ and service providers’ service delivery footprint in locations traditionally considered onshore. While firms either retained or reduced the pace of growth in offshore/nearshore locations, they ramped up presence significantly in the United States and continental Europe (see the following chart for new onshore delivery center setups of top-20 IT-BPO service providers.)

eg31  20 leading service providers across IT and BPS that Everest Group uses as “Index” providers to gauge market trends

This is largely driven by enterprises’ desire to deliver complex services coupled with the advantages of customer intimacy. However, for many providers, this is in anticipation of strict work visa issuance guidelines which may make it imperative for them to have a foothold in the onshore market for hiring talent

While there’s some “method to the madness” in these pervasive trends, there are many operational risks that are likely to add to the disorder. These include:

  • Increased safety and security risks (terrorism and border issues) in Indonesia, Malaysia, and Thailand, and high crime rates in Guatemala and Jamaica
  • Continuing conflict between Russia and Ukraine
  • Frequent changes in political leadership in Egypt
  • Macroeconomic instability in Brazil and Argentina.

For more such trends and analyses on the value propositions of different locations through Everest Group’s MAP MatrixTM, which will help you frame your global services location strategy, please refer to our report, “Global Locations Annual Report 2017: Signs of Structure in a Disordered World.”

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