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Swati Khurana

Swati Khurana is a member of the Global Sourcing team and assists clients on topics related to location optimization and benchmarking of global services delivery. Swati’s responsibilities include contributing to and managing Everest Group’s location optimization research offerings.

How Will Brexit Impact Your Europe Delivery Strategy? | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

On June 23, 2016, the United Kingdom (U.K.) voted to leave the European Union (EU) through a referendum, also known as “Brexit.” Indications over the last few months are that it will be a “hard Brexit,” wherein the U.K. makes a clean break from the EU’s common market. If that happens, we can anticipate the following major changes to the global services operating environment:

  • Passporting for companies will become tougher: Banks and financial institutions in the U.K. will find it more challenging to operate/set up new centers across countries in the region, as the U.K. will no longer be a part of the EU free trade market
  • Talent movement across U.K. borders will be a challenge: People will require separate work visas to work in the U.K. and continental Europe. Although this is expected to apply to new work visas, changes to visas for people currently working in these countries are still uncertain.

As many global companies leverage the U.K. and countries in continental Europe to deliver services to all of Europe, passporting and talent movement restrictions could have a significant impact on their business strategy, regardless of their operating location in the region.

Potential Brexit impacts on companies operating in the U.K. and EU

In the wake of the uncertainty, global companies that are planning to service their European customer base would prefer setting up their GICs/back-office centers in continental Europe instead of the U.K. This might cause a surge in back-office activity in continental European locations, and talent demand for multiple IT and business process functions in those countries might go up.

Additionally, companies that are currently operating in the U.K. and the rest of Europe will need to prepare for possible legal/policy changes, and will need to expedite visa, HR, and administrative processes for their employees. We expect this to lead to increased demand for back-office activity in the U.K. and continental Europe.

Moreover, with talent movement restrictions becoming a possibility, companies currently operating only in the U.K. might need to rethink their talent hiring strategy in the region, especially for language-specific needs that were previously easy to fulfill.

To paint a picture of the potential Brexit impacts, following are several sample scenarios about companies operating in the U.K. and EU, and their possible decisions pre- and post-Brexit.

Brexit decision scenarios

What lies ahead for those impacted by Brexit decisions

Until the exact Brexit-related policy changes become clearer, global companies might delay or shelve their investment decisions for the U.K. and rest of Europe. They might also possibly move toward greater levels of automation in their business operations to mitigate potential risks.

While it will be a wait and watch game over the next 10-12 months for companies operating in the U.K. and EU, they’ll need to keep their eyes carefully trained on developments in order to create effective strategies for dealing with the possible changes in the near- and long-term.
For a more detailed discussion on the topic, please refer to the recently released Everest Group viewpoint, “The Road Ahead: A Global Services Perspective on the Impact of Brexit. ”

New Paradigm in ER&D Services: Convergence of Engineering and Technology – Part 2 | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

In New Paradigm in ER&D Services: Convergence of Engineering and Technology – Part 1, we talked about the emerging trend of convergence of engineering services and new technologies, and why it is important for enterprises to deliver an enhanced customer experience. Now, let’s turn our attention to the steps and measures enterprises and service providers are taking to tap into the trend and enhance their value proposition.

Engineering Services and Technology ER&D

  1. Access talent with hybrid (technology + domain + design) skills: Service providers and enterprises are increasingly looking at hiring people not just with the right domain knowledge, but also with cross-functional expertise. There is heightened demand for engineers with niche technology skills, such as IoT and artificial intelligence. For instance, Altran, one of the world’s largest engineering service providers by revenue, has an innovative way of recruiting talent. It filters talent through case studies based on its own real-time projects, such as “connected car” and Solar Impulse . This enables it to select candidates who have both the right skill sets and an innovative mindset, which has become critical for people in the industry.
  2. Capitalize on data to drive business value: New technologies and social media have led to a gush in the amount of consumer data that can be tracked and mined to deliver a better customer experience. Players in the engineering services space are realizing the value of customer data, and taking steps to build infrastructure for analyzing it. For example, ALTEN Calsoft Labs, a global engineering service provider, recently announced that it will acquire ASM Technologies Ltd’s software business division to augment its cloud, analytics and mobility capabilities.
  3. Reimagine product development: With shrinking product lifecycles and ever-changing customer demands, the focus is on providing end-to-end solutions rather than just point solutions. Service providers are partnering with clients to deliver solutions in an as-a-service model. Customer expectations are putting pressures on product lifecycles, and enterprises are trying to innovate and create newer and smarter products at warp speed.
  4. Move towards co-innovation model: The shift in technology complexity and consumer demand for a “connected” ecosystem is increasing collaboration between enterprises and providers for innovation and new product development. For example, Jaguar Land Rover is partnering with Altran to develop and market a unique software platform for vehicle internet connectivity, driver assistance systems, autonomous driving, and analytics. The partnership is aimed at delivering increased customer value by combining Jaguar’s automotive experience and Altran’s expertise in providing solutions for the automotive sector.
  5. Drive efficiencies in design to deliver cost savings: New technologies and methodologies in software development and testing are transforming the product development landscape for enterprises and they are increasingly adopting automation tools to accelerate time-to-market for products. For example, Wipro has a defined test automation framework (Wipro Endur Test Automation Framework) that can help clients reduce overall TCO of test automation by as much as 45 percent.

Implications for the industry
So what does this all mean for the ER&D services industry outlook, and for players in the domain? As it becomes increasingly crucial for enterprises and service providers to gain new capabilities in engineering and technology, there will be increased merger, acquisition, and partnership activity. Enterprises will look at partnering with niche technology firms or innovative startups for new product development. Service providers will pursue targeted acquisitions, and try to strengthen their value proposition for clients by increasing investment and focus on the segment. It will be exciting to see what happens in this space in the next 5-ten years.

For more insights and information on the ER&D services industry, please refer to our latest report, “The Evolving Demand Paradigm in the Engineering and Research and Development (ER&D) Services Industry.”

New Paradigm in ER&D Services: Convergence of Engineering and Technology – Part 1 | Sherpas in Blue Shirts

By | Sherpas in Blue Shirts

It is interesting times for the engineering services and R&D (ER&D) market. Industry demand for engineering services coupled with technology innovations is transforming the market landscape, and leading to the emergence of new business models – in particular, the convergence of engineering services with new technologies, such as digital, IoT, and analytics for product development.

The proliferation of digital technologies is compelling enterprises to relook at their product development strategy, and integrate new technologies with products to deliver an enhanced customer-centric experience. Service providers in the ER&D industry are looking to expand their engineering service offerings by tapping into new technologies that can help them differentiate their position in the market and deliver increased value to their clients.

The convergence trend is manifesting itself in many ways in the industry, and fundamentally transforming the normal course of business for both enterprises and service providers:

  • Evolving consumer needs, coupled with the explosion of digital devices and technologies (e.g., connected vehicles, chatbots, and machine learning based platforms) are dramatically changing the demand landscape in the ER&D services industry. Given that the number of connected or smart devices is expected to grow from 22 billion today to 50 billion by 2020, it’s clear that enterprises must now provide a “connected ecosystem” experience for their customers across devices and platforms.
  • The US$75-80 billion ER&D global services industry is expected to grow at a rapid pace (14-16 percent YOY) and reach US$145-155 billion by 2020. This growth is being driven by evolving customer demands, the need to integrate new technologies with products, shortening product lifecycles, and the resulting cost and margin pressures for enterprises.
  • Facing margin pressures for IT services, service providers such as HCL, Infosys, and TCS are betting big on the fast growing ER&D services segment. For example, Infosys recently opened delivery centers in Croatia and Russia to provide engineering services to its automotive, heavy manufacturing, and aerospace clients. The ER&D services industry is expected to drive the next wave of growth for these players:
    • In the last couple of years, the engineering services segment has grown faster than IT services. Estimates from NASSCOM are that engineering services exports grew by 12.6 percent in India during FY 2016, whereas IT services exports grew by 10.3 percent
    • Infosys’ YOY FY 2016 revenue growth for its engineering services practice (16 percent) was more than the company’s total revenue growth (9 percent)
  • With enterprises’ shift in demand, service providers are looking at capturing a larger share of ER&D outsourcing market pie by investing in the segment and acquiring new capabilities. For example:
    • HCL Technologies recently acquired Geometric to strengthen its engineering services and IoT capabilities
    • Luxoft recently acquired Pelagicore AB, a leader in open source software services for human machine interface (HMI) development. The acquisition is expected to help the service provider bolster their automotive services offerings with next-level technology capabilities.

Time-to-market pressure for product development is making enterprises and service providers look at avenues to deliver enhanced value to their customers. Make sure to visit our blog page later this week to read our follow-up post on the different ways they’re keeping up with this trend.

Accessing Relevant Talent is New Value Proposition for Impact Sourcing in South Africa | Sherpas in Blue Shirts

By | Impact Sourcing, Sherpas in Blue Shirts

Earlier this year, Everest Group and The Rockefeller Foundation partnered on research in support of the Foundation’s Digital Jobs in Africa (DJA) initiative, the goal for which is to demonstrate the value of impact sourcing and promote its adoption in South Africa and beyond.

Impact sourcing is a business process service delivery model that provides employment opportunities to previously unemployed individuals who have not been meaningfully engaged in the formal economy. Generally, the individuals who are employed via impact sourcing belong to economically and/or socially disadvantaged backgrounds, or are differently-abled.

An overview of the impact sourcing market in South Africa in 2016
50 to 55 percent of the ~ 235,000 FTEs in the South Africa BPO market qualify as impact workers. This high share is because there is no, or limited, difference in the profile of impact and traditional workers hired in normal course of operations, meaning that although companies hire impact workers, they do not claim it to be impact sourcing.

Value proposition of impact sourcing in South Africa
As part of the 2016 engagement with The Rockefeller Foundation, our detailed business case included identification of six key elements to the impact sourcing value proposition in South Africa:

 

During our research, companies indicated that impact workers, especially those who have gone through training programs, exhibit better behavioral characteristics. These include higher adherence to timetable, lower absenteeism, higher motivation level, and lower attrition. In fact, as it relates to workforce stability, which is a critical component of the value proposition, the companies indicated almost 50 percent lower attrition among impact workers as compared to traditional workers.

Impact sourcing ecosystem in South Africa
A unique feature about impact sourcing in South Africa is the presence of a robust ecosystem comprised of BPO service providers, buyers, training academies, and government/industry associations. The presence of impact sourcing-focused training academies is a key element of this ecosystem.

These academies, such as Careerbox, Harambee, and Maharishi Institute, help buyers and service providers identify, screen, and train entry-level candidates through job readiness training or learnership programs. The thrust of these programs is on intentional talent development to ensure impact workers are employment ready. These programs include training on technical skills (e.g., computer literacy and language) and soft skills (e.g., adapting to a corporate environment, dealing with stress, and the benefits of stable employment).

In fact, providers including Aegis, CCI, and WNS have established their own in-house learnership programs as part of their intentional focus on impact sourcing.

What has changed since 2014?
Since our last study in 2014, there have been some significant positive developments in the impact sourcing market landscape in South Africa.

Perhaps the most important is the higher level of maturity exhibited by companies in understanding the benefits and challenges associated with impact sourcing, thereby, enhancing intentional adoption. Moreover, there has been a shift in the value proposition toward “accessing relevant talent” rather than just “cost savings.” In the past, companies had expressed concerns related to higher upfront training and the administration cost of impact sourcing programs. But our research established that the total cost of ownership (TCO) for impact sourcing is 3-10 percent lower than that of traditional sourcing. Finally, companies are increasingly adopting impact sourcing for the many different types of value it provides. For example, significantly lower attrition among impact workers not only contributes to improvement of the work culture of the organization, but also translates into better service delivery.

Outlook
As there is an intrinsic link between adoption of impact sourcing in South Africa and the expansion of the BPO market in the country, there are understandably concerns around security risks, the impact of automation technologies, etc. Nevertheless, our study shows that the desire to intentionally adopt impact sourcing in the country has increased, and that the model is expected to grow, albeit gradually.

For more details on impact sourcing see our additional insight infographic.