Category: Blog

Generative AI and Cloud Integration Keep Mainframes Alive in the BFSI Industry | Blog

Though a recent Everest Group survey revealed the pressing need for mainframe modernization, the technology is far from dead in the banking, financial services, and insurance (BFSI) industry. The rise of generative AI (gen AI) will encourage more BFSI firms to adopt a comprehensive technical architecture, integrating cloud and mainframe technology at its core. Read on for insights from the survey or get in touch. 

Are BFSI firms really ditching mainframes? The BFSI industry is indeed grappling with the prospect of abandoning this approach. According to an Everest Group survey, about half of the respondent firms have shifted their peripheral tasks away from mainframes.  

Concerns about mainframe system scalability loom large for more than 50% of sizable BFSI firms, while about 60% of smaller firms struggle primarily with finding talent skilled in older programming languages such as COBOL.  

Operational complexity with mainframe systems is also reported as a challenge by over 90% of BFSI respondents, underscoring the pressing need for mainframe modernization. Evolving priorities such as building data-driven workflows, digitalization, and enhancing customer experiences further fuel this urgency. 

Cost efficiency and talent unavailability are the main drivers for mainframe modernization, closely followed by the imperative for innovation. North American firms prioritize core banking and CRM workloads over modernization, while European players emphasize digital channels and payment infrastructure. 

Despite these challenges, mainframes are expected to remain integral to BFSI operations. A significant majority, about 60% of the respondent firms, have not yet started modernizing their core systems. In the coming years, non-core applications will continue to have a higher migration rate than core applications.  

However, industry research underscores that BFSI enterprises optimize and enhance their mainframe ecosystems, presenting a promising opportunity for service providers to assist. Let’s explore this further.  

Capturing cloud value through a hybrid infrastructure

With mainframes here to stay in the BFSI industry, enterprises can gain a competitive advantage by investing in the private cloud to capture the underserved and large demand for hybrid IT. Hybrid cloud is a constant across all our BFSI industry enterprise conversations.  

Of the respondent BFSI firms, 35% utilize private cloud for their modernization initiatives — mainly in a hybrid cloud environment — while 65% rely on a multi-cloud strategy.  

IBM’s focus on transforming the mainframe’s interface to other environments validates this trend. The launch of z15 and z16 is the company’s answer to the age of cloud computing. It is an evolution to meet the needs of hybrid cloud deployments, leveraging investment in data, generative Artificial Intelligence (gen AI), and applications, adding features and functionality to complement this strategy. IBM is focusing its messaging on rightsizing over downsizing. The strategy to provide more flexibility, predictability, and cost-effectiveness is evident in the company’s push for tailored fit pricing.   

The survey reveals many firms believe the disconnection between mainframe environments and new cloud-native systems and applications is a big challenge. Further investments in technologies like application programming interfaces (APIs), in collaboration with technology and service providers, will help bridge this gap in the coming years. 

Will banking’s AI revolution enable cloud-based modernization? 

We expect a symbiotic relationship between gen AI and IT modernization, each complementing the other’s growth. Cloud computing is the foundational block providing the right computational power to run AI applications, while AI’s enhanced speed and efficiency will support cloud migrations.  

BFSI firms are channeling investments into gen AI, crafting use cases to support their modernization initiatives and business operations. The survey found that 40% of the BFSI firms have proof of concepts or use cases for gen AI to support mainframe modernization.  

Firms have moved beyond experimenting with gen AI. Goldman Sachs and Deutsch Bank have started using gen AI to generate code and refactor their modernization initiatives, closely watching the impact. They are building and rolling out use cases to improve operational efficiency. We believe that the banks poised for future success are identifying use cases that solve specific business problems aligned with their organization’s strategy. This can enable them to measure the results easily and encourage leadership buy-in.  

With mainframe modernization services growing at a steady 4-5%, the ability to adapt and innovate using newer technologies such as gen AI will drive more BFSI firms to adopt a more robust and holistic technical architecture with both cloud and mainframes at its core. 

However, the question remains: will gen AI bring exponential change in the next three years? There is one certainty: the need for a strong IBM, service provider, and hyperscaler value proposition will continue to grow for BFSI clients. 

To discuss mainframe modernization further, please contact [email protected] and [email protected]. Understand more about the future of the enterprise mainframe, or watch our on-demand webinar on the future of generative AI implementation at enterprise level.

Gig Worker Benefits Collective: Transforming Benefits Delivery in the Gig Economy | Blog

The rising trend of gig work, especially among Gen Z and Millennials who favor nontraditional employment, is garnering attention. However, the lack of workplace benefits for many gig workers is a significant concern. A viable proposal for this urgent need is a Gig Worker Benefits Collective. Read on to learn more.

Reach out to discuss this topic further.

With more than 70 million individuals in the US engaged part or full-time in the gig economy, the notable lack of workplace benefits and life insurance coverage for these flex workers has sparked widespread debate.

About half of Gen Z and millennials, who constitute over 50% of the workforce, gravitate toward nontraditional employment. Consequently, employers are reconsidering benefits for gig workers while navigating various legal and tax complexities.

Employees access benefits in the following ways:

  • Employer-provided benefits – Employees typically offer benefits, using them as an incentive to attract top talent
  • Purchasing individual policies – This alternative provides individuals flexibility and control over coverage
  • Government assistance – This serves as many employees’ safety net. However, the ongoing debate in the US over classifying an “employee” and “independent contractor” complicates matters for gig workers

While this issue appears daunting, finding an answer is possible. Let’s explore this further.

Proposing a solution: The Gig Worker Benefits Collective

One proposal is to create a Gig Worker Benefits Collective for these short-term workers across various employers. This centralized hub would bring together multiple employers or gig platforms under a comprehensive benefits umbrella.

Here are some benefits a Gig Worker Benefits Collective could offer:

  • Centralized administration: A central administration entity or pooled plan provider would manage benefit plans, including health insurance, retirement savings, and other relevant benefits. Technology and digital platforms would streamline administration and communication
  • Flexible benefit options: Through the collection, gig workers could choose from a wide range of benefits based on needs. Options may include health insurance, retirement plans, disability coverage, and more. Furthermore, this would give gig workers the flexibility to customize benefit packages
  • Cost sharing: Participating employers would contribute to the collective pool to cover administrative expenses, potentially reducing costs for individual employers. The collective could leverage economies of scale to negotiate better rates with insurance providers and service vendors
  • Portability and continuity: This solution would ensure gig workers could continue their benefits even when transitioning between different gigs or employers within the collective. Having seamless benefit continuity would enhance worker satisfaction and retention

The Gig Worker Benefits Collective represents a professional, tech-enabled solution designed to address gig workers’ unique needs, potentially changing the landscape of life insurance and group benefits for the gig economy.

To discuss gig worker benefits further, please contact [email protected] and [email protected].

Watch the webinar, Locations and Workforce Strategy 2024: Insights, Trends, and Key Priorities, for insights into strategic workforce decision-making for 2024.

2024 is an Inflection Point For IT Services | Blog

We are now in the digital world with operational platforms. In the platform world, looking for stability in processes no longer works because platforms collapse business processes to align with improving the user experience and objectives and key results (OKRs), thus creating new value. Consequently, in IT, we are at an inflection point, a point in time where the attention for IT or IT services is moving away from building out infrastructure and moving to achieving demonstrable business value.

Read more in my blog on Forbes

Navigating Cloud Portability and Exit Strategies in Banking and Financial Services | Blog

Cloud service providers are vital partners in helping Banking and Financial Services (BFS) institutions build robust systems for cloud migration and exit strategies to maneuver complex regulatory and operational environments. These approaches promise to ignite technological innovation. Discover actions the world’s leading banks are taking and their importance in today’s financial landscape in this blog. Contact us to discuss further.

In the BFS industry, cloud has become synonymous with innovation and agility. Yet, as the space matures in its digital transformation journey, a crucial pivot is taking place. The focus is not solely on cloud migration but on nimbly and cautiously maneuvering within it. This shift brings to the forefront the importance of cloud portability and exit strategies – concepts rapidly gaining traction as BFS enterprises seek to future-proof technology investments. Let’s explore this further.

The strategic imperative of cloud portability

Cloud portability has risen to a strategic imperative within the BFS space. It encapsulates the capability to seamlessly transition applications and workloads between cloud environments, ensuring operational resilience and uninterrupted compliance. This degree of agility is fundamental in mitigating risks associated with vendor lock-in. Additionally, it enables BFS enterprises to adapt rapidly to evolving regulatory requirements and market conditions.

Major banks have spearheaded the charge towards cloud portability by embracing technologies that allow flexibility. Adopting containerization technologies and microservices architecture, notably through Kubernetes, is a case in point. These technologies provide a layer of abstraction, decoupling applications from the underlying cloud infrastructure, which empowers banks to maneuver digital assets across platforms without the burdens of significant downtime or exorbitant costs.

For instance, major financial institutions such as Bank of America and JPMorgan Chase have been at the forefront of embracing cloud-native technologies. Bank of America has utilized Kubernetes to enhance its application deployment processes, enabling faster innovation and improved customer service. Similarly, JPMorgan Chase has invested in containerization to streamline its IT infrastructure, demonstrating the significant efficiency and flexibility benefits these technologies offer to the BFS industry.

Navigating exit strategies in a regulated landscape

While less discussed, cloud exit strategies are vital to a comprehensive cloud governance framework. In an industry where strategic pivots or regulatory mandates can necessitate a change in cloud service providers, BFS enterprises must have clear, actionable plans for such eventualities. Crafting a cloud exit strategy involves thoroughly understanding service agreements and ensuring the transition can be executed with minimal disruption to operations and compliance protocols.

Goldman Sachs’ adoption of a multi-cloud strategy exemplifies a preemptive approach to exit planning. By distributing workloads across AWS, Azure, and Google Cloud, it is poised to maintain continuity of service and positioned to negotiate the transition of services, should strategic or regulatory circumstances change.

The formulation of cloud exit strategies is intricately linked to the BFS industry’s regulatory environment. Institutions must have actionable plans to transition away from cloud providers as strategic, regulatory, or operational landscapes evolve.

Over the last decade, regulations such as the General Data Protection Regulation (GDPR) in Europe and the Federal Financial Institutions Examination Council (FFIEC) guidelines in the United States have necessitated that banks maintain strict data governance and security protocols during such transitions.

These regulatory frameworks compel banks to plan their cloud engagements meticulously. For instance, compliance with GDPR requires that any BFS institution operating in or serving customers in the European Union (EU) must ensure its cloud exit strategy does not compromise data protection standards, even during service provider transitions.

For BFS enterprises, investing in cloud portability and a strategic exit plan is a direct response to the industry’s complex risk profile. These strategies protect them against the uncertainties of the cloud market and the evolving regulatory landscape. The goal is to safeguard investments and ensure that cloud engagements remain agile, compliant, and aligned with the overarching business objectives.

How can service providers become strategic partners in this roadmap?

Cloud service providers are pivotal in facilitating the BFS sector’s cloud transitions, having evolved from mere hosts of workloads to strategic partners. Mid-market providers illustrate this evolution by aiding BFS institutions in cloud migration and strategically planning portability and exit. These service providers ensure that cloud architectures are crafted to be vendor-agnostic and that exit strategies are incorporated into the engagement from the outset, aligning with the BFS industry’s stringent standards.

Elements of a comprehensive cloud strategy

The evolving cloud landscape necessitates a proactive and all-encompassing approach to strategy development. A holistic cloud strategy should incorporate the following:

  • Prioritizing open standards and application programming interfaces (APIs) to facilitate easy transition between cloud environments
  • Evaluating technology stacks in detail to uncover and mitigate potential lock-in risks
  • Negotiating transparent and favorable contractual terms with cloud providers that account for the potential need to exit
  • Developing robust business continuity plans that include cloud service transitions

The road ahead

As the BFS sector looks to the future, the trajectory of cloud computing strategies points toward greater flexibility, regulatory compliance, and strategic agility. The increasing importance of cloud portability and exit strategies is set to catalyze a new wave of technological innovation and strategic foresight. The pioneering steps some of the world’s leading banks are already taking demonstrate this evolution.

Large banks have been front-runners in leveraging cloud technology to enhance their financial services. Collaboration with hyperscalers, such as AWS, Azure, and Google Cloud, is part of the broader strategy to adopt a cloud-first approach by distributing workloads across different cloud providers.

Goldman Sachs has been using AWS’s capabilities to innovate in financial data management, leveraging cloud technology for scalability and efficiency and ensuring its architecture supports portability and compliance. This move indicates a broader trend among BFS institutions to harness the power of cloud computing while emphasizing the importance of cloud portability and the ability to adapt and exit in line with strategic and regulatory needs.

Moving forward, collaboration between BFS institutions and cloud service providers is expected to deepen, focusing on creating more robust frameworks for cloud portability and exit strategies. This partnership will be crucial in navigating the modern financial world’s regulatory complexities and operational demands, setting new standards for innovation, security, and customer-centric services in the banking sector.

BFS enterprises that diligently incorporate cloud portability and strategic exit planning into their operational frameworks are setting themselves up for enduring success. They will safeguard current investments and position themselves to leverage future technological advances and adapt to an ever-evolving regulatory landscape. We foresee that these proactive enterprises and service providers will spearhead the next wave of innovation and resilience in the BFS sector’s cloud journey.

To explore how to achieve cloud-first transformation in tandem with safeguarding the existing technology estate, contact Ayan Pandey, [email protected], and Pranati Dave, [email protected].

Don’t miss the webinar, Global Services Lessons Learned in 2023 and Top Trends to Know for 2024, to learn about the successes, challenges, and transformative trends that defined the global services industry in 2023 and discuss the opportunities that lie ahead for business leaders in 2024.

Five Tactics for Technology Service Providers to Guard Profit Margins Against Generative AI Impact | Blog

Technology service providers are committing to gen AI-related benefits to clients without a clear path to realization, which will negatively impact their deal margins. Uncover five strategies providers can use to optimize the productivity benefits of gen AI without denting profit margins in this blog.

The notion that generative AI (gen AI) can negatively impact technology service providers’ profit margins is counterintuitive. Service providers have assumed leveraging gen AI would improve margins by amplifying productivity and efficiency. Unfortunately, this has not been the case.

Most technology service providers commit to delivering gen AI-driven productive gains to clients. However, they will struggle to achieve these benefits in the short term due to the highly contextual and probabilistic nature of gen AI tools and their niche impact on specific tasks. This is hard to guarantee in solutioning.

Consequently, service providers must adopt other methods to realize these productivity benefits. This often involves a combination of people and intellectual property (IP) assets that cannot be charged to clients, hurting near to mid-term profitability.

Let’s look at the following five options that CEOs and CFOs of technology service providers have to address this issue:

  1. Monetize generative AI assets: Service providers have struggled to monetize their IP and assets because they are mostly used as service enablers and differentiators. Clients do not perceive additional value and are not incentivized to pay for these assets. However, gen AI assets could change this trend. Investing in gen AI assets can significantly vary from weeks to months of effort. Monetizing these assets should go beyond implementation and support fees and focus on IP value. If service providers can demonstrate genuine value, clients will be willing to pay the cost through better service pricing, an innovation fund, or direct monetization
  2. Educate sales teams and clients about the realistic impact of generative AI: Sales teams often fear their competitors are moving faster than them. In this rush, they commit gen AI benefits to clients without involving the practice, solution, or delivery teams. Leaders should coach the sales team and engage with strategic clients to have realistic gen AI discussions. Providers should create gen AI literacy services that peel away the hype of eye-catching Big Tech productivity announcements about gen AI offerings. Educational initiatives can help moderate client expectations and limit margin erosion
  3. Transform deal-related enabling functions: Generative AI has significant potential for summarizing and querying knowledge repositories. Service providers already use it to enhance the sales function through requests for proposal (RFP) bots, translating documents, and understanding service level agreement (SLA) requirements and the nuances of client needs. Accelerating such initiatives across sales, pre-sales, delivery management, deal finance, and business reviews can lower deal-related costs and alleviate margin pressure from productivity commitments
  4. Identify the right clients: Service providers need to identify the right set of clients for committing and delivering gen AI productivity benefits. This crucial aspect of the puzzle is frequently overlooked. The selection process should be driven by data, the client’s AI maturity, and the nature of the relationship and services used. Choosing the right clients can increase providers’ margins in their gen AI service delivery adoption journey. These clients will be more supportive of letting specific units experiment with gen AI productivity benefits, provide realistic feedback, and set internal expectations
  5. Transform effort and pricing models: Service providers are struggling to transform their effort and pricing model in the wake of gen AI committed benefits. Providers continue to rely on traditional approaches mainly because they are uncertain about linking gen AI committed client benefits to effort and pricing to manage deal margins. However, this problem must be solved to prevent it from significantly denting profitability. Apparent solutions, such as delinking price from effort, value-based pricing, and outcome-based commercials, have not worked. Since clients are more accommodating to collaborate with providers in this journey, providers should reignite these conversations, educate procurement and vendor management offices, and refresh their solutioning playbooks

While account and delivery leaders are held financially accountable for managing margins, linking this specifically to gen AI-related commitments can backfire. Instead, the focus should be shifted upstream during deal bids, solutioning, and client engagement.

To share your experience and discuss the impact of generative AI on profit margins for technology service providers, contact [email protected] and [email protected].

Watch this webinar, The Generative AI Odyssey: A Year in Review and What’s Ahead in 2024, to hear our analysts discuss the hype vs. reality of generative AI, production-level use cases, and the future of this transformative technology.

Are Expectations For Gen AI Lower Than Planned? | Blog

I am coming to the conclusion that the hoped-for gen AI spending wave for both tech and tech services could be longer in developing than both the investors and companies are planning on. In a recent blog, I talked about the realization that most (perhaps as high as or above 90%) of the Proof of Concept (POC) initiatives that launched during 2023 will not make it to production in 2024. Yet, the tech firms are plowing hundreds of millions of dollars into building AI tools and building the capabilities for running them. What has changed? And where are there still opportunities for this important technology?

Read more in my blog on Forbes

Unpacking The Potential of a Hybrid Copilot Strategy: A Roadmap for Success | Blog

“We are the Copilot company; we believe in a future where there will be a Copilot for everyone and everything you do.” – Satya Nadella, CEO Microsoft

A hybrid Copilot strategy delivers the benefits of purchasing ready-made Copilots and developing custom solutions. Discover a six-step roadmap for devising a successful hybrid Copilot strategy and compare buying versus building in part two of our blog series.

Read our previous blog to explore the emerging Copilot trend, M365 Copilot opportunities for service providers and enterprises, and why a hybrid strategy represents the future for Copilot. Reach out to us to discuss more in depth.

Hybrid Copilot is an innovative approach that seamlessly blends out-of-the-box offerings procured directly from vendors (Buy Copilots) and customized solutions built by the user with native tools or no-code/low-code platforms such as Microsoft Copilot Studio, Azure Open AI Service, Google Vertex AI, Open AI GPT Builder, AWS PartyRock, and others (Build Copilots). This synergy empowers enterprises to overcome the limitations of purchasing or developing, unlocking unprecedented potential within their environments.

While the traction for out-of-the-box Copilots like M365 Copilot is palpable, enterprises are increasingly recognizing the value of building Copilots. A shift is underway with more customers developing Copilots rather than defaulting to M365 Copilot.

The exhibit below summarizes the rising momentum for Build Copilots among enterprises in various sectors, signaling a growing demand for custom solutions tailored to unique requirements.

Build Copilot Blog Exhibit 1 scaled

In two months, more than 10,000 organizations have used Copilot Studio to either tailor Copilot for Microsoft 365 or create their own custom Copilots, Microsoft announced in its second quarter earnings call.

Contrasting Buy versus Build Copilot

The exhibit below captures the differences between the two approaches:

Picture2 2

In navigating the Copilot landscape, enterprises find themselves at a critical juncture where the choice between buying and building carries profound implications. Let’s look at the pros of each:

  • Buy Copilot: Offers the allure of rapid deployment, lower upfront investment, and access to a vast array of pre-packaged functionalities. Additionally, it requires minimal IT support, streamlining implementation processes, and reducing overhead costs
  • Build Copilot: Provides unparalleled customization capabilities. By developing Copilots internally, enterprises gain complete control over the development roadmap, enabling tailored solutions fine-tuned to address unique business requirements. Furthermore, building provides integration flexibility, allowing seamless alignment with existing business applications and workflows

Economies of scale also come into play. While the upfront investment might be higher, the total cost of ownership (TCO) decreases as the adoption of custom solutions scales. Conversely, pursuing a Buy Copilot strategy may lead to constant TCO increases due to ongoing licensing fees and dependencies on external vendors.

Roadmap for a hybrid Copilot strategy

In charting the course forward, enterprises must strike a delicate balance between buying and building Copilots.

Build Copilot Blog Exhibit 2 scaled

The following six-step roadmap outlines a path to craft a successful Copilot strategy:

  1. Assess enterprise needs: Begin by comprehensively evaluating enterprise requirements, including workforce dynamics, operational workflows, and strategic objectives

 

  1. Identify use cases: Determine specific use cases and essential functions to maximize productivity and efficiency in the enterprise environment

 

  1. Evaluate Copilot categories: Weigh factors such as the number of use cases needed, customization and integration requirements, and budget constraints to determine what option is better

 

  1. Design and implement the hybrid strategy: Formulate a hybrid Copilot strategy that blends the strengths of buying and building by providing employees with either Buy or Build Copilots as required

 

  1. Monitor and optimize: Continuously monitor Copilot performance, gather user feedback, and optimize the strategy iteratively to drive ongoing improvements and maximize value

 

  1. Establish change management: Provide employees with training and adoption workshops to ease them into working with Copilots, helping boost productivity

 

The roadmap for a hybrid Copilot strategy empowers enterprises to leverage the best of both worlds, harnessing the rapid deployment and diverse functionalities of Buy Copilots while capitalizing on the customization and integration flexibility Build Copilots offer.

By strategically aligning with organizational needs and continuously optimizing, enterprises can confidently navigate the Copilot landscape, driving innovation, efficiency, and success.

Everest Group will continue to follow development in this space. To discuss, contact [email protected] and [email protected], or share your views at [email protected].

Watch the webinar, Global Services Lessons Learned in 2023 and Top Trends to Know for 2024, to learn the latest on delivery locations, sourcing strategies, deal trends, talent strategy, and cost optimization strategy.

Leveraging Contract Benchmarking: Strategies for Negotiating with Veeva Systems | Blog

This blog shares how Everest Group helped a large life sciences company negotiate best-in-class rates for Veeva Vaults and CRM during contract renewal negotiation. Continue reading to discover how contract benchmarking can empower your enterprise to make effective deals, or get in touch.

Veeva Systems, a cloud-based software provider, has established a prominent market position in the global life sciences industry. The business’ market success often leaves customers with limited to no leverage during commercial negotiations, with prohibitively high costs of switching to a different provider and few other viable market alternatives. This leads to difficulty when attempting to negotiate better contract prices with Veeva.

However, by gathering accurate contract benchmarking data for the various Veeva products, procurement teams can negotiate top-tier rates and contract terms.

Let’s explore an example of how Everest Group helped this large US life sciences company identify savings opportunities in their Veeva Vaults and CRM contract renewal negotiation.

The supplier background

Veeva Systems offers several software products to help clients capture clinical trial data, enhance regulatory compliance, control quality, manage adverse events for clinical and post-marketed products, and more.

In addition, the company’s full-fledged CRM suite, Veeva Commercial Cloud, enables sales, medical, and marketing teams to work together more seamlessly. Customers also use Veeva professional services to implement Veeva products, manage programs, configure applications, integrate or migrate data, and garner sampling expertise.

Veeva has created a strong foothold by leveraging its state-of-the-art product suite. Most major pharmaceutical companies use one or more Veeva products. We have observed that Veeva’s wallet share has significantly increased with most customers over the years, due to the widespread adoption and use of their software products.

How we helped the customer 

Like many other existing Veeva customers, our client’s spending with Veeva increased significantly over time. The renewal proposal was nearly 2.5 times their current spend. To help the client get the best rates, we leveraged our internal contract database to identify similar large Veeva deals for the same Vaults, CRM, and professional services.

We followed our standard rigorous normalization approach to identify deals in our contract database that were similar in nature and size to the client’s deal with their software provider. This ensured a like-to-like comparison and offered contextual benchmarks for the client.

In addition to providing the client with the price benchmarks for various Veeva products and services, we also shared some tactics to help them negotiate effectively with Veeva.

Some of the key recommendations were:

  • To seek a ramp-up plan instead of further negotiating peak prices. This provides the customer with the flexibility to pay a fee lower than the peak price for the initial one or two years, allowing them to optimize the total contract value (TCV)
  • To leverage year- and quarter-end sales team targets to get extra discounts. Veeva may agree to higher discounts in contracts signed during the close of their fiscal year or quarters than other times

While each relationship with Veeva is unique, we firmly believe these recommendations and the right contract benchmarking can put any enterprise in a better negotiating position.

To discuss software contract negotiation or for a detailed analysis, contact Rahul Gehani and Udit Maheshwari or [email protected]. Explore Everest Group’s contract benchmarking offerings, or join our LinkedIn Live discussion on delivering commercial value in outsourcing contracts on.

Leveraging Strategic Partnerships to Unlock the Potential of Gen AI in Customer Experience Management | Blog

By strategically partnering with third-party providers, enterprises can fully harness the potential of gen AI in customer experience management. Learn insights from our latest survey on enterprise readiness for gen AI adoption and how collaborating with providers can help overcome the major obstacles.

Reach out to us for more information or to further discuss this topic.

Generative Artificial Intelligence (gen AI) is emerging as a game-changer in customer experience management (CXM) by offering the potential to personalize customer interactions, enhance operational efficiency, and provide a competitive edge. As enterprises adopt gen AI, third-party providers have an increasingly vital role. Let’s explore this further.

Current demand for gen AI

Demand for gen AI solutions is skyrocketing among enterprises across industries. According to a recent Everest Group survey of top executives and CXM leaders of 200 enterprises worldwide, nearly 75% believe gen AI will significantly impact their CXM strategies within the next two years.

Enterprises highlighted personalized interactions, cost reduction, and operational efficiency as the top three drivers for gen AI adoption.

  • Personalized customer interactions: Gen AI can produce customized content, product recommendations, dynamic pricing, and marketing campaigns tailored to individual customer preferences, enhancing customer satisfaction and loyalty
  • Increased efficiencies and automated CXM processes: Gen AI can empower customer support agents with intelligent tools such as agent assist, next-best-action recommendations, language translation, and accent neutralization. These tools enhance productivity, reduce response times, and enable agents to focus on more complex and value-added tasks. Using gen AI to automate routine tasks and repetitive processes can further boost operational efficiency
  • Reduced cost: By automating repetitive tasks, streamlining processes, and enabling advanced data and analytics capabilities, gen AI adoption can increase operational efficiency and productivity, optimizing cost

Current enterprise capabilities

Despite growing gen AI demand, the technology is still nascent. Most enterprises and service providers are investigating gen AI operations use cases or piloting solutions to test feasibility. Given the technology’s evolving nature, enterprises currently face or will likely encounter challenges in adopting and implementing it effectively.

Our survey asked enterprises about their readiness to adopt gen AI to identify significant areas where enterprises need specialized support. Below are the results of the preparedness of enterprises across industries and key parameters:

Picture1 2

EXHIBIT 1, Enterprise readiness for gen AI by industry, Source: Everest Group (2023)

Challenges in gen AI implementation

Based on the readiness levels and significant challenges identified by enterprises in the survey, the following overarching issues for enterprises emerged:

  • 55% of enterprises reported a shortage of the right talent pool, including AI/ML engineers, data scientists, and software developers needed to integrate gen AI with existing tools and create agent interfaces
  • 56% of enterprises highlighted the scarcity of high-quality training data required for training and testing models
  • Between 45-50% of enterprises expressed concerns about computing power required for gen AI adoption and their ability to scale
  • Regulatory compliance concerning the fairness of the output, data security, and privacy, and misuse of the models also stood out as significant issues for enterprises

How can enterprises navigate these challenges?

The gaps in enterprise capabilities identified in our survey underscore the need for strategic partnerships to ensure successful implementation. While executing gen AI in-house offers greater control over the development and implementation process and allows enterprises to tailor solutions to specific needs, it requires significant internal expertise and resources that may be limited. Outsourcing gen AI implementation can provide access to specialized knowledge and resources, accelerating the implementation process and reducing the time to market for these solutions.

Our survey revealed that nearly 89% of the enterprises are looking to either outsource the implementation of gen AI in customer experience management to specialized AI companies or contact center providers or follow a hybrid approach involving in-house and outsourced development.

Picture2 1

EXHIBIT 2, Implementation plan for Gen AI solutions within CXM, Source: Everest Group (2023)

The top three areas where enterprises are seeking service providers’ support are:

  • Building gen AI solutions and enhancing technical capabilities: Enterprises need partners who can help train gen AI models on enterprise data, customize foundational models to build tailored solutions, and set up necessary computational systems to run these solutions
  • Integrating gen AI solutions with existing technologies: Enterprises need partners who can create necessary bridges to integrate gen AI with existing business intelligence tools, providing a more comprehensive view of customer interactions
  • Supporting and complimenting in-house teams: Enterprises need partners who can support in-house technical teams, aid in maintenance, troubleshoot activities, and supervise the functioning of gen AI solutions

Future outlook

Gen AI has the potential to revolutionize CXM, enabling enterprises to deliver personalized, efficient, and innovative customer experiences. However, successfully adopting and implementing gen AI requires overcoming expertise, data quality, and change management challenges. Strategic alliances with third-party providers can bridge these gaps, providing enterprises with the necessary industry-specific knowledge, resources, and guidance to unlock the full potential of gen AI.

Third-party providers have a crucial role in helping enterprises translate the perceived potential of gen AI into practical applications. These partners can help enterprises identify specific CXM use cases where gen AI can deliver tangible benefits, develop gen AI strategies, design and implement solutions, and provide ongoing support to ensure successful gen AI adoption.

Read Everest Group’s Generative AI in CXM: Assessing Enterprise Readiness for this Disruptive Transformation to better understand gen AI in Customer Experience Management and how providers can help enterprises adopt gen AI. If you have questions or want to discuss digital CX strategies and solutions, contact Anubhav Das at [email protected] or Mohit Kumar at [email protected].

Don’t miss our LinkedIn Live, How Will Next-gen Technologies Be Financed in CXM Delivery?

The Capital One Merger with Discover Potentially Signals a Shift in the US Banking Landscape | Blog

Capital One’s planned US$35.3 billion acquisition of Discover Financial Services would combine two of the largest credit card companies, creating the most dominant US credit card firm. This deal holds the potential to significantly impact the banking and financial services (BFS) IT services market and providers. Read on to learn the looming risks and what to pay attention to.

Contact us to discuss the topic further.

Acquiring Discover would give Capital One access to a credit card network of more than 300 million cardholders. If the Capital One merger clears antitrust regulations, the combined entity would become the sixth-largest US bank by assets and a leading card issuer and network provider for the US payments market.

Let’s explore the following four implications of the Capital One merger on the BFS technology and IT services sectors.

  1. Increased deal activity will help banks sharpen their focus on core operations

Macroeconomic uncertainty and rising interest rates slowed financial services dealmaking in 2023. However, S&P predicts regional and community banks will be interested in mergers of equals this year. In these challenging times, banks want to understand the potential synergies of the merged entities clearly. They also require deeper due diligence than in the past, as exemplified by the failed merger of TD Bank Group and First Horizon.

Traditionally, acquisitions were an opportunity to enter new product lines and geographies, gain new capabilities, and achieve cost savings and operational efficiencies through technology modernization and streamlining processes and systems.

Recent banking sector acquisitions underscore a clear strategic focus on directing resources to targeted areas. Banks are divesting or seeking partners for non-core or insufficiently scaled units that lack a distinct competitive edge and demand substantial investment.

  1. Investments in data and Artificial Intelligence (AI)/Machine Learning (ML) will rise

Our analysis indicates that merger and acquisition (M&A) activity among regional and community banks will increase, driven by the need to achieve greater scale. This strategic move is essential for these financial institutions to compete effectively with larger players, particularly as customer engagement transitions from physical to digital platforms.

By joining forces, these banks will be better positioned to develop new competencies in data management, AI/ML, open application programming interfaces (APIs), and advanced analytics, aligning with the growing digitalization of banking services. The merged entities will benefit from larger resource pools, facilitating improved alignment between skills and talent.

  1. Service provider portfolios will likely reshuffle

Discover and Capital One have traditionally relied heavily on outsourcing to two or three major service providers. In mergers, providers with significant contracts with both entities typically stand to lose revenue because spending by the merged entity will not be as large as it was under the separate relationships unless they gain wallet share from competitors.

Capital 1 Discover 1

 

Suppliers that solely provide services to Discover are at risk of having their portfolio consolidated and moved to Capital One. However, providers who bring intellectual property or a niche capability may maintain the business through the consolidation.

Discussions about increased regulatory scrutiny are emerging, as even the regional banking market is at the cusp of such transactions. Moreover, this transaction can potentially increase competition for giants Mastercard and Visa.

  1. Banks will require substantial consulting and system integration support

M&As spur increased short-term spending on post-merger integration and consulting services. By rationalizing vendor portfolios and IT infrastructures, merged entities can substantially cut costs by eliminating redundant applications and platforms. BFS firms will need partners to devise modernization roadmaps to create long-term value.

Merged entities must swiftly adapt their operational models, delivery strategies, and sourcing decisions to excel in the evolving landscape. Investing in specific technologies and tools is essential to foster growth and ensure operational continuity. Emphasizing core operations becomes a prerequisite as firms assess the appropriate valuation before crafting their integration strategy.

The road ahead for the Capital One merger

Richard Fairbank, founder, chairman, and CEO of Capital One, has emphasized that the merger with Discover presents a unique opportunity to unite two highly successful companies with complementary strengths and franchises.

The Capital One merger aims to establish a payments network capable of rivaling the industry’s most extensive networks and companies. However, the potential impact of increased market concentration from this combination will face regulatory scrutiny.

Providers should closely monitor system integration opportunities, as Capital One plans to expand its 11-year technology transformation initiative to encompass all of Discover’s operations and network.

The new entity will invest in growth initiatives, including faster time-to-market, innovative products and experiences, and personalized real-time marketing efforts. Operationally, underwriting, efficiency, risk management, and compliance enhancements will drive data and technology investments.

We are closely watching the market and regulatory actions. To discuss the Capital One merger and its impact on the US banking landscape, reach out to Ronak Doshi, [email protected], Kriti Gupta, [email protected], or Pranati Dave, [email protected].

Join this webinar to hear our analysts discuss Global Services Lessons Learned in 2023 and Top Trends to Know for 2024.

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