Category: Blog

New Capability to Harness Advanced SciTech for Your Company’s Competitive Advantage | Blog

June 6, 2024

How can you reduce the level of uncertainty and risk as you drive innovation and growth and disrupt your competitors in today’s changing market dynamics and emerging technologies? For instance, how could the arrival of a disruptive technology such as viable sodium-ion batteries strategically impact your company?

What if your company could stay intimately aware of emerging technologies in sci-tech fields and assess their potential impact on your company’s products, services, and operations so that you can gain a first-mover advantage? What if you could identify future disruptive opportunities and pivot quickly in response to changing market dynamics and technologies to create new sources of value? How can your company be better prepared to act with conviction and clarity when dealing with the risks in such instances? This is now more critical than ever as the pace of SciTech development increases even more rapidly than we have seen.

We at Everest Group have long had a vision to build a practice around Advanced SciTech to bring some of our applied research principles to identify and understand forthcoming innovations in such areas as chemicals, materials, food, IT software, micro-electronics, and semiconductors. We understand that making confident long-term decisions is a truly difficult, complex process.

Think of this practice as an early warning system for technologies and science that will ultimately be disruptive to many industries and markets. It will help companies find technologies that matter and do something with them (build something, partner with someone, license it). The early warning system gives companies the knowledge and power to make decisions before their competitors and turn those warnings into positive opportunities.

Richard Sear, who has 30 years of deep expertise, has joined us as Managing Partner of our new Advanced SciTech practice. Richard says that you can’t provide practical context to any technology without understanding the environment into which it has the potential to be introduced.

“To understand the environment, you need to understand econometric factors, people, business models, regulations, and the landscape of litigation and legislation,” says Richard. “The context translates into how a technology will ultimately arrive at a meaning … or not. How will it evolve? What will it replace? What will it need? How will it thrive and develop? Who needs to partner in that ecosystem?”

“With that context, you’re telling the future,” Richard continues. “But you’re telling it with breadcrumbs that actually lead you to the place you need to go versus no breadcrumbs, and you end up wandering around the forest for the whole time.”

Three horizons comprise the trajectory

Three horizons comprise our framework for building a trajectory arc. We first help companies understand their current horizon.

The second horizon is one to three years out, given your strategic road map. You will understand if you implement your plan where that will place you against how the market has evolved in three years, what customers will be looking for in three years, how the market may change regarding risk regulation and other issues, and how your competitors are investing and where they will be against that.

Advanced SciTech then extends that horizon to what the world will look like three to 10 years from now. We call this approach futurecasting. What are the challenges, technology changes, and megatrends that will affect your company three to 10 years out? This requires understanding the core drivers in how innovative technologies develop and fundamental things that change society and competition.

Sixty percent of the team in our Advanced SciTech practice have Ph.D.s and advanced degrees in fields such as biotechnology or chemical manufacturing. They have worked in government and science laboratories, developing solutions. They track a multitude of technologies and their progress to understand where the technologies may be commercially viable. For instance, for a given technology, this helps executives understand such aspects as the following:

  • Is this technology likely to enter the market three years from now?
  • Does it have velocity?
  • Should we plan to invest in it now, or is it likely to be here in 10 years? And is it outside the horizon where we need to actively invest?

Sodium-ion battery trajectory

Richard cites sodium-ion battery development as an example. He and his team have tracked the progress of solving its technical problems for years. Developers have solved the raw material challenges and the heat dissipation challenges. The main problem is the density challenge, and he forecasts that this will be solved within the next three years.

“So, now what are the car manufacturers – which use lithium-ion extensively for a car’s key component – going to do about this? Sodium-ion is low cost, has better safety characteristics, and is more environmentally sensitive. Lithium-ion is very high cost and has a faster rate of energy dissipation. Sodium-ion batteries will be cheaper, and they can be manufactured in the same place as lithium-ion batteries.”

He continues the considerations: What are the implications to cell phones? Or a mining company that makes a 20-year bet on a lithium mine could see the world shifting rapidly to sodium in three years. This would also be relevant to IT companies trying to get power to their large data centers to run generative AI programs.

To what degree will the two technologies run together, and then when will the more dominant one by itself? The economics change investments into certain types of resources. That affects the design of a product.

Companies typically have a road map for two or three years and some have a meaningful five years plus. They need to understand the efficacy of those road maps because, in our experience, the future usually happens faster than most forecast. What will they invest in? What will they do to change their situation? The market will change in those years, and customer expectations will evolve. And how will they project beyond the three years? How can they understand forthcoming innovations and the potential applications of those innovations in a future market?

The answer is to look at the underlying science of where technology is going, and Advanced SciTech does that. We at Everest Group have put in place the capabilities to help companies with their longer-term-horizons trajectory for the majority of the world’s SciTech advancements.

Reach out to us to learn more or discuss further.

Anticipating The Next Disruptive Technologies Is Hard But Essential | Blog

June 5, 2024

Technology runs the world. It affects every aspect of our lives. This immutable fact is doubly true for large organizations. Not only do we rely on technology to run our organizations, but it is at the heart of the value propositions we offer to customers and the business models we use to compete. Often, the most crucial bets companies make are those based on technologies. Many existential threats to companies come from failing to correctly anticipate how technologies are changing and failing to make the necessary adjustments and investments to capitalize on these changes.

Read more in my blog on Forbes

Why Don’t GBS Leaders Last Very Long? | Blog

June 4, 2024

Earlier this month, I was asked by my friend Niklas Oldiges why GBS leaders seem to be moving jobs at a higher than usual rate. And as a sucker for a good provocation, I took the bait, pondering why some of the industry’s best and brightest don’t seem to be able to hold onto a job. Is it the nature of the beast—does GBS as a model attract more than its share of job hoppers? Is the model so fragile that short tenures are de rigueur (see Another One Bites the Dust: Why GBS Organizations Are Pulled Apart )? So, I sat down to parse out the root cause.

Based on some research, I’ve come up with the observation that any GBS leader who celebrates a four-year anniversary—or more—is indeed a rare bird. While some are turfed out and others decide to leave of their own volition, the fact remains: the majority either get the model up and running then go where they think the grass is greener or fall prey to a business context that doesn’t “get” the model.

Don’t believe me? Well, one day I was surfing LinkedIn and notching the tenure of a sampling of GBS leaders. Seems to me that, based on that sample, only 20% change jobs each year. And other studies—some of my own and those of search consultants—confirm the fact.

Now before you think I am dissing GBS careers, please know that nothing could be further from the truth. I can’t think of too many leadership opportunities with the scope to make an indelible imprint on the enterprise, with so many (solvable) challenges and a myriad of tactics to deploy. Add a global stage and purview across the enterprise, and what’s not to like?! So, consider this in the spirit it was intended—does the beast of running a GBS drive mobility, or do GBS leaders shoot themselves in the proverbial foot?

Let’s unpack this, first looking at the model. Does the revolving door result from:

  • The nature of the beast? Continual evolution of the model requires different leaders at different stages. Enterprises tend to go to market with an “I want one of those” (rockstars from a company they want to emulate). What they don’t get is the continual evolution of the model means that the right leader persona at the helm at the right time makes all the difference. Some are good fixers, some are good orchestrators, some are experts at driving change. Want to know which persona is right when? Take a gander at (What’s your GBS and Shared Services management persona?).
  • Churn, churn, churn? Revolving executive sponsorship strongly impacts the GBS thesis. How many GBS leaders have endured three or more CXOs in a short span of years, being forced to change direction because the next dude at the top of the house has a different view of GBS’s value or is imposing a new mandate? The ultimate in agile models, GBS—and its leader—has to adapt or risk deconstruction. And sometimes it’s nigh on impossible for the incumbent leader to do so, forcing them to exit stage right.
  • Knives out? Since GBS represents for many enterprise leaders a loss of control or the building of new empires (because they don’t know how or refuse to work collaboratively or virtually) it can be the focus of high-stakes political games. As a target that’s not hard-wired into the enterprise’s fabric, GBS models and their leaders can become collateral damage.
  • GBS positioned as a (not so blunt) instrument? GBS models are imposed to transform the way the business works; therefore, they and their leaders become the symbols of often unwelcome or misunderstood change.
  • No way up? Moving to another enterprise leadership role is often not in the cards for GBS leaders. Enterprises often “forget” that a GBS leader has the capability to go into the business or become a COO or similar role. As a result, the only way to advance is to leave.
  • Throw-away mentality? Is the GBS model synonymous with fungibility in the enterprise? Some enterprises see the role as temporal—get centers and capabilities up and running, then turn the operations over to their respective client functions or the business.

And how do leaders screw up?

  • Tone deafness? Leaders, especially those brought in from the outside, sometimes don’t pace change at a rate that the enterprise can absorb. Rather, they may read the mandate as “make change in a hurry” as opposed to listening intently to their stakeholders and customers and moving accordingly. When tissue rejection occurs, said leaders find themselves escorted out the door.
  • Grass is always greener? Some GBS leaders are always on the hunt for new roles, comparing themselves against their peers. And when they see a company where the brand is believed to be better, the scale and scope are larger, and the pay packet is amazing, their heads can be easily turned. But in the search for fame and glory, many candidates are too dazzled to ask the right questions, and do not bother to assess the “fit” with the enterprise’s vision for GBS, its tolerance for change, or its ways of working. It can be a vicious cycle.
  • Inability to master the secret handshake? Some leaders, usually those bought in, find it difficult to form critical networks and integrate into the culture quickly enough. By comparison, those brought in from a function or the business have a leg up when it comes to assimilation.
  • Boredom? GBS runs in cycles—transform/run/transform/run. Some leaders are good at making change in the business; others run the business. Transformers seem to have shorter attention spans and may not like silent running. So when the change is nearing completion, they move on.
  • Perpetual motion? When GBS leaders start to hop from role to role, they tend to keep hopping (trust me, I see it all the time).

So, what does all of this suggest about GBS leader tenure?

  • Role mirrors model. GBS models are by their very nature designed for ephemera. They form, they change, they deconstruct, they rise again from the ashes. This puts pressure on the leader’s longevity.
  • Lack of enterprise career paths forces folks out. When the leader’s ambition is to master new roles and deal with new challenges, and their enterprise looks at their role as separate and apart, orphaned and not on stated succession plans, it makes it difficult to stay.
  • Corporate fortunes have a high impact on the role. Enterprises acquire or spin-off businesses, impacting scale, which in turn drives value creation. GBS requires investment at various stages in its lifecycle, often.
  • Enterprises like shiny new toys and don’t always hire the right leader. Brands often play a big role in hiring; it’s easy to look to an admired company and snatch the person at the GBS helm only to find out that the culture and context are so very different, resulting in a mismatch.
  • Few GBS leaders are transformers/operators. GBS value creation is a long game, requiring a leader to have both change and run skills. Yet those with both capabilities can be rarer than unicorns, causing high levels of mobility at certain junctures in the GBS lifecycle.
  • When the going gets tough, those that are not tough get going. GBS leadership roles are not for the faint of heart. With new formations and short tenures the norm, a flattering call from a headhunter on a bad day can prompt a move.

Now you have it—my take on why new GBS role announcements have become almost a daily occurrence. Some mobility is driven by the enterprise, but just as often, leaders don’t do their homework and end up in the wrong environment, or like to hop, hop, hop. Will we see greater longevity? Don’t count on it.

Salesforce and IQVIA’s Partnership – A Match Made in Heaven? | Blog

June 3, 2024

What impact will Salesforce’s upcoming global partnership with IQVIA have? Get the expert view here, or get in touch to understand how this significant move in the life sciences CRM sector might impact your business.

Once again, the winds of change are blowing in the life sciences CRM landscape. The usual suspect, Salesforce, has announced its strategic global partnership with IQVIA to enhance the capabilities of its Life Sciences Cloud.

This is noteworthy, more so in the backdrop of the Veeva and Salesforce separation in 2022, where Veeva fully embraced its home-brewed offering, Veeva Vault. The Salesforce-IQVIA partnership marks a significant move in Salesforce’s commitment to delivering robust life sciences customer engagement solutions.

However, whether this move will truly propel Salesforce to the industry apex remains to be seen. Veeva has already established itself as the go-to solution for life sciences enterprises; on the other hand, Salesforce carries the baggage of being a jack-of-all-trades, master of some in the customer engagement arena. The hiring of Frank Defesche – a former Veeva executive – by Salesforce to lead its life sciences division is one of several initiatives that drives home the point that the battle for market leadership is going to be fierce.

Key takeaways of the Salesforce-IQVIA partnership

  • In this expanded partnership, IQVIA licenses its OCE software to Salesforce, accelerating the development of Salesforce Life Sciences Cloud for customer engagement that is slated for release in 2025
  • IQVIA will continue to market the OCE product and support its nearly 400 global OCE customers in over 130 countries up until 2029
  • IQVIA will collaborate with Salesforce to jointly market the new offering, with System Integrator (SI) partnerships being leveraged to provide support services (data migration, maintenance, etc.) for OCE customers

Clash of the CRM titans: potential prospects and pitfalls of the expanded partnership

Historically, Veeva has been at loggerheads with both CRM incumbents: IQVIA (Veeva’s Antitrust Lawsuit against IQVIA) and Salesforce (halting its partnership with Salesforce Cloud). However, currently, IQVIA and Salesforce have allied to confront the Customer Engagement Platform (CEP) market. This partnership brings forth several prospects and pitfalls, as illustrated in the exhibit below:

Slide2

Prospects: While IQVIA continues to lead the market in life sciences data management, it faces formidable competition from Veeva. However, the recent collaboration between IQVIA and Salesforce has fostered innovation and equipped Salesforce with data management expertise to leverage. Furthermore, this partnership extends Salesforce’s customer engagement market influence by granting access to IQVIA’s clientele. By integrating the data and analytics of IQVIA with the powerful CEP of Salesforce, the partnership promises a holistic overview of customer interaction and insights. This potential end-to-end, industry-specific solution will go on to streamline operations and efficiency through integrated systems and workflows.

Pitfalls: As the IQVIA-Salesforce transition gradually unfolds until 2029, they will encounter increased expenses for training, upskilling, onboarding, and more operational processes. Integrating existing legacy systems with the new IQVIA-Salesforce solutions will be challenging. Changing the status-quo will require a relook at data privacy and regulatory compliance by enterprises, which can be quite resource-intensive. The partnership also adds an uncertainty variable, as transitioning from the existing CRM may lead to concerns around the overall impact on business operations and workflows. As enterprises transition to the new system, there will be a risk of data migration, system downtime, and a potential loss to business. Currently, the Salesforce customer engagement platform is distinguished by its premium licensing fees, which might further increase due to the ongoing partnership. While this presents opportunities for SIs for project management endeavors, the new Salesforce Life Sciences Cloud should still demonstrate its value.

Amid the transition journey, the selection of appropriate SI will be paramount

The world of CRM is seeing a gigantic wave of customer-centricity, and service providers who still hold on to horizontal approaches will be swept under it. The days of a one-size-fits-all solution are over; now, enterprises seek solutions that can withstand the ever-changing dynamics of the market with technological and operational flexibility. Service providers must look beyond consultation and implementation by taking up change management initiatives that deliver long-term value for their clients. They are expected to stay abreast of the latest developments, and provide solutions tailored to the unique needs of enterprises.

Service providers will play a critical role in strategic consulting, data migration, implementation, customization, and ongoing support to ensure smooth transitions for enterprises adopting new customer engagement systems. It can cash in on these opportunities by monetizing various aspects of the collaboration, as elaborated below:

Slide3

Enterprises face a trilemma

Enterprises are weighing their options carefully as the life sciences CRM market continues to evolve in its trajectory. The three broad options for enterprises are as follows:

  • Adopt Salesforce’s Life Sciences Cloud: Enterprises may choose to be early adopters of Salesforce’s Life Sciences Cloud, embracing the perfect blend of IQVIA’s life sciences expertise and Salesforce’s customer engagement platform capabilities. This option promises a transformative engagement platform with enhanced data integration so that enterprises can leverage the best of both worlds
  • Shift to Veeva Vault: Enterprises familiar with Veeva’s industry-specific solutions may adopt the Veeva Vault for its proven capability. This option provides stability and continuity given Veeva’s deep industry focus and comprehensive suite of offerings, including closed-loop marketing, built-in compliance, and data-driven suggestions
  • Explore budding alternatives (such as TrueBlue, Exeevo, etc.): Enterprises that are open to experimentation, such as alternatives like TrueBlue and Exeevo, make for an interesting proposition. The emergent life sciences CEP players offer a fresh perspective with an emphasis on agility and customer-centricity. Compatibility, scalability, and support are some of the factors that are essential to evaluate for maximizing the value of CEP investment

Implication of the partnership to the broader CRM narrative

This partnership signifies the eventual departure of IQVIA from the competition by the decade’s end, leaving only two dominant incumbents, Veeva and Salesforce, in the market. Presently, Veeva commands the lion’s share of the life sciences CRM market, but this landscape is expected to evolve in the years ahead. Additional implications within the CRM market are depicted in the exhibit below:

Slide4

Is this the start of happily ever after for the industry?

With the life sciences commercial landscape evolving consistently and the ongoing evolution of Generative AI technology, the pace of innovation is frenetic within the life sciences industry. This rapid progress is also giving rise to a new wave of specialized providers catering to niche needs. Consequently, enterprises must continuously assess the evolving landscape of commercial technology offerings and augment their tech infrastructure accordingly.

If you have questions about the life sciences IQVIA’s extended partnership with Salesforce or would like to discuss developments in the life sciences commercial space, please reach out to [email protected] or [email protected] or [email protected]. For a deeper understanding of the shift to next-gen customer products in the life sciences sector, read our blog.

Watch our discussion on the critical shift from CRM ecosystems to CX platforms in our session, Key Insights: The Evolving Commercial Technology Landscape in Life Sciences.

Unlocking the Power of Data-driven Insights in Subscription Management Through Digital CXM | Blog

May 30, 2024

Cutting-edge digital technology is revolutionizing subscription management by providing organizations with real-time data-driven insights to enhance personalization, increase sales opportunities, optimize revenue, expand offerings, and retain customers. Explore the transformative impact of the latest advancements on customer experience management (CXM) for subscription services and gain valuable insights into the future outlook in this blog.

Subscription-based services have experienced exponential growth in recent years across various industry sectors, including streaming, gaming, media and entertainment, as well as retail and Consumer Packaged Goods (CPG). The rise of subscription box services has further fueled this trend by offering customers a convenient and personalized way to access products/services on a recurring basis.

Organizations offering subscription-based services have access to vast customer data, encompassing demographic information, purchase history, browsing behavior, engagement metrics, and feedback. In the digital customer experience (CX) era, organizations can better grasp their customers’ preferences, behaviors, and pain points by thoroughly analyzing this extensive consumer repository data. The use of AI to support this analysis has accelerated the pace at which organizations can respond to trends and changes in customer behavior or CX needs. This understanding can help these enterprises deliver superior CX, foster long-term loyalty, and achieve sustainable growth in today’s competitive marketplace.

Let’s delve into how technological advancements have transformed the approach to subscription management and the advantages it brings to organizations.

Traditional approach to subscription management

Historically, subscription management has been characterized by a reactive, post-facto approach to data analysis with data stored across multiple disparate systems and departments. In this traditional model, organizations or their outsourcing partners would collect customer data throughout the subscription lifecycle in an isolated approach. Analysis and decision-making would occur afterward to form future strategies, product development, and customer engagement initiatives. While this approach has its benefits, it is constrained by the following issues:

  • Lack of a unified customer view: In many organizations, different departments handle various aspects of subscription management, such as sales, marketing, customer support, customer retention, and finance, with each department storing data independently. Without a unified view of customer data, organizations may struggle to analyze the entire customer journey to identify patterns or trends that could inform strategic decisions or improve customer engagement efforts
  • Delayed decision-making and inability to implement real-time interventions: The reactive nature of post-facto data analysis often leads to delays in decision-making, as insights are generated after the fact. Without real-time data analysis capabilities, organizations may miss opportunities to intervene proactively during the subscription lifecycle, resulting in a less agile response to customer needs and market dynamics. Additionally, while certain analytics tools can identify customer concerns, the process still entails hours of listening and data collection, further delaying responses and increasing agent workload
  • High dependency on the IT group: In the traditional subscription management approach, organizations were heavily dependent on their internal (or outsourced) IT group to respond to requests for change, build requirements, prioritize the work, and finally implement

 Advancement in technology redefining CXM for subscription-based offerings

The rapid progression of digital CX tools, including advanced analytics, automation solutions, Contact Center as a Service (CCaaS), conversational AI, and the emergence of generative AI (gen AI), have significantly transformed CXM for subscription-based models. This has eliminated data silos and provided real-time data-driven insights. As a result, these technological advances have ushered in a new era of data-driven CXM management, revolutionizing the following aspects:

  • Personalized subscription offerings and recommendations: Advanced digital CX tools can analyze customer data to deliver highly personalized subscription plans and recommendations tailored to individual needs. Leveraging Natural Language Processing (NLP) capabilities, gen AI can engage in conversational interactions, guiding customers through subscription options and providing tailored advice
  • Identification of upsell/cross-sell opportunities: Real-time analytics enable organizations to identify product or service enhancement opportunities based on customer needs. This includes determining the optimal time to introduce premium products or services and suggesting relevant upgrades or add-ons. Furthermore, organizations can create personalized product bundles, discounts, or rewards tailored to individual preferences
  • Dynamic pricing and revenue optimization: Gen AI models can analyze market trends, competitor data, and customer behavior to recommend dynamic pricing strategies and optimize revenue streams from subscriptions. By dynamically adjusting prices based on demand, seasonality, and customer preferences, organizations can maximize revenue potential while remaining competitive by facilitating discount strategies for new customer acquisition, as well as for customers who are at churn risk
  • Augmentation of product/service offerings: Organizations can use advanced analytics tools, such as speech analytics, sentiment analytics, or tone analytics, to identify the areas of concern for end-customers and address them by augmenting their offerings. Digital-first service providers have leveraged gen AI’s analysis and conversational capabilities to develop solutions that can identify the root cause of consumer concern without requiring extensive call listening or data collection time
  • Increased customer retention: Organizations can identify patterns indicating potential customer churn risks for subscriptions. By leveraging advanced analytics and machine learning algorithms, they can proactively intervene to mitigate these risks, offering personalized incentives, targeted communication, or proactive customer support. Additionally, organizations can continuously monitor customer engagement metrics and feedback to iteratively improve subscription offerings and enhance overall customer satisfaction, fostering long-term loyalty and retention. As businesses mature, effective churn management emerges as a paramount concern, rendering these tools indispensable for support

Outlook for subscription-based services

The CXM landscape for subscription-based services is rapidly evolving, driven by technological advancements and the imperative for organizations to deliver superior customer experiences. Moving forward, organizations must recognize the importance of partnering with CXM providers that offer comprehensive capabilities to address the evolving needs of subscription-based models. Some leading CXM providers have already begun to leverage AI and gen AI to support analysis of high-volume clients, leading not only to deeper insights on the interaction but also allowing them to create models for churn and NPS prediction based on the interactions that their clients are using to make business decisions.

By leveraging these capabilities, organizations can not only enhance customer satisfaction and loyalty but also drive revenue growth and market competitiveness in today’s dynamic landscape. Therefore, organizations must prioritize investments in digital CXM and strategic partnerships with digital CXM providers. This can empower them to navigate the evolving subscription economy effectively. As the subscription-based service model continues to gain traction, organizations that embrace data-driven CXM strategies will be well-positioned to thrive in this ever-changing market. Furthermore, organizations relying on outsourced CXM providers must be ready to utilize their outsourcing partners’ technology and provide the necessary data to fully capitalize on the emerging benefits these companies offer.

To discuss CXM strategies and subscription management further please contact David Rickard, [email protected], or Divya Baweja, [email protected].

Watch our LinkedIn Live session, Leveraging AI for CX, to learn about how to utilize AI and gen AI for anticipating CX needs and creating adaptive strategies.

Decoding the EU AI Act: What it Means for Financial Services Firms | Blog

May 24, 2024

How will the EU AI Act impact the financial services sector, and how should enterprises and service providers structure their compliance activities? Read on to learn about what this new legislation means for financial services firms looking to implement AI tools, or get in touch to understand the direct impact on your specific business.

In recent years, the rapid advancements in artificial intelligence — in particular, generative AI — have revolutionized various sectors, including financial services. Technology giants such as Microsoft, Google, Amazon, and Meta have heavily invested in developing AI models and tools. However, this unprecedented growth has also raised concerns about the potential risks associated with the unchecked use of AI, prompting the need for regulations to ensure the responsible development and deployment of these powerful technologies.

Recognizing the urgency of the situation, the European Union has taken a proactive step by introducing the AI Act, a pioneering piece of legislation that aims to establish a comprehensive framework for the development and use of trustworthy AI systems. The Act adopts a risk-based approach, categorizing AI systems into four distinct levels:

  • Unacceptable risk – Systems deemed a serious threat, such as predictive policing, real-time biometric identification systems, and social scoring and ranking are banned
  • High-risk – Systems with potential to harm people or fundamental rights, such as AI-powered credit assessments, require strict adherence to new rules regarding risk management, data training, transparency, cybersecurity, and testing. These systems need to register with a central EU database before distribution
  • Limited risk – Systems posing minimal risk, such as chatbots, need to comply with “limited transparency obligations,” such as labeling AI-generated content
  • Low or minimal risk – While not mandated, the Act encourages providers to follow a code of conduct similar to high-risk systems for market conformity

The AI Act and financial services

The financial services industry heavily relies on AI, from personalized banking experiences to fraud detection. The high-risk applications especially require financial institutions to prioritize the following:

  • Continuous risk management – Focus on health, safety, and rights throughout the AI lifecycle, including regular updates, documentation, and stakeholder engagement
  • Comprehensible documentation – Maintain clear, up-to-date technical documentation for high-risk systems, including characteristics, algorithms, data processes, risk management plans, and automatic event logging
  • Human oversight and transparency – Maintain human oversight throughout the AI lifecycle and ensure clear and understandable explanations of AI decisions
  • Rigorous governance – Implement robust governance practices to prevent discrimination and ensure compliance with data protection laws
  • Fundamental rights impact assessment – Conduct thorough assessments to identify and mitigate potential risks to fundamental rights
  • Data quality and bias detection – Ensure training and testing datasets are representative, accurate, and free of bias to prevent adverse impacts
  • System performance and security – Ensure consistent performance, accuracy, robustness, and cybersecurity throughout the lifecycle of high-risk AI systems

To align with the EU AI Act, enterprises must take a structured approach. First, they should develop a comprehensive compliance framework to manage AI risks, ensure adherence to the Act, and implement risk mitigation strategies. Next, they need to take inventory of existing AI assets like models, tools, and systems, classifying each into the four risk categories outlined by the Act. Crucially, a cross-functional team should be formed to oversee AI risk management, drive compliance efforts, and execute mitigation plans across the organization. By taking these steps, enterprises can future-proof their AI initiatives while upholding the standards set forth by the landmark regulation.

Final Everest Group Decoding the EU AI Act What it means for financial services
Opportunities for service providers

  • AI governance expertise – Service providers can offer expertise in building and implementing AI governance frameworks that comply with the EU AI Act. This includes developing policies, procedures, and tools for responsible AI development and deployment
  • Data management solutions – Service providers can assist financial institutions in managing their data effectively for AI purposes. This includes data cleaning, labeling, and ensuring data quality and compliance
  • Large Language Model operations (LLMops) – As financial institutions explore the use of Large Language Models (LLMs), service providers can provide expertise in LLMOps, which encompasses the processes for deploying, managing, and monitoring LLMs
  • Use case classification & risk management – Service providers can help financial institutions classify their AI use cases according to the EU AI Act’s risk framework, and develop appropriate risk management strategies
  • Quality Management System (QMS) – Implement a robust QMS to ensure the AI systems consistently meet the Act’s requirements and other emerging regulatory standards

The road ahead

As the AI Act progresses through the legislative process, financial institutions and service providers must proactively prepare for the upcoming changes. This includes conducting AI asset inventories, classifying AI systems based on risk levels, assigning responsibility for compliance, and establishing robust frameworks for AI risk management. Service providers will play a crucial role in supporting financial institutions in their compliance efforts.

To learn more about the EU AI Act and how to achieve compliance with the regulations, contact Ronak Doshi, [email protected], Kriti Seth, [email protected] and Laqshay Gupta, [email protected]. Understand how we can assist in managing AI implementation and compliance, or download our report on revolutionizing BFSI workflows using Gen AI.

The Future of the Wealth Management Industry: The S-curve Shift and the Modernization Opportunity | Blog

May 24, 2024

The wealth management industry has evolved over the years, transitioning from reputation-driven models to technology-led advisory services. Read on to uncover how wealth management firms can develop a digital blueprint to navigate the next digital frontier and better serve their clients in an increasingly hybrid and personalized landscape. Get in touch to discuss further.

In our earlier blog, How Technology Can Help the Wealth Management Industry Navigate Coming Changes in 2023, we discussed how digital disruptions will impact the wealth management industry and the role technology and service providers can play in helping wealth management firms navigate the choppy waters ahead. Continuing with our two-part blog series in the wealth management space, this blog will touch upon how this industry has transitioned through the different eras and how we are now on the cusp of a new digital future. The current question is, what will the digital blueprint be to help wealth management firms be better prepared for this new normal?

Wealth management eras – is the industry undergoing another S-curve shift?

The wealth management industry has witnessed several s-curve shifts in the past and has evolved from being a reputation-driven business to a technology-led advisory model. We are now witnessing the next inflection point, moving from persona- to person-based personalization through the hybrid trust model. The initial journey of the wealth management industry was about family-based offices and reputation-driven businesses. It was all about having the right intimacy with the client, nurturing the exclusivity, and delivering that strong advisory model. It was driven by large systems of records, but experience remained bespoke and in-person.

After this era, the wave of customer expansion hit with the emergence of mass affluent customers. It became less about serving HNIs and UHNIs and more about capturing the mass affluent segment that demanded access to similar asset classes and WM strategies as HNWI and institutional investors, which led to the rise of robo-advisory models to democratize access to these services. Enterprises wanted to serve this new segment better in a cost-effective model that could help them meet their margin targets as well. This led to rapid technological disruption in the wealth management industry and pushed us into the digital advisory model that we are currently in. We saw this in the case of UBS in late 2022 with the launch of WE.UBS, a digital wealth platform for mass affluent clients in China in partnership with technology provider Tencent.

Currently, we can see that enterprises are focusing on developing a hybrid trust model. In this model, they utilize emerging technologies such as AI to transform end-to-end customer journeys and give their clients access to new products such as digital assets, ESG-linked investments, and overall financial wellness services. This could be seen in action a couple of years ago when HSBC introduced HSBC Prism Advisory in Asia, blending face-to-face and digital interactions in private banking. This service leverages BlackRock’s Aladdin Wealth™ technology, combining data analytics with HSBC advisors’ expertise.

Another notable example is when Citi announced its plan last year to utilize AI as a tool to simplify and automate procedures, enabling private bankers to dedicate more time to client service.

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However, the top-of-mind questions are “Are we nearing the end of this era?” and “Is there a new world order coming for the wealth management industry?” This space has already seen a rapid expansion of products to cater to different customer segments, but now enterprises need to provide assistance to customers in navigating the buying experience while creating trust in a model that is now both human and digital. The wealth management industry has multiple siloed channels where the human-assisted channel enables great advice, but as soon as it moves to digital channels, the level of experience starts getting non-uniform and disjointed. Customers often talk about a lack of contextualization as they interact on such channels.

Psychographic segmentation – can it fix what is broken?

Hyperpersonalization has become one of the key focus areas as wealth management firms are trying to drive competitive differentiation in the current macroeconomic landscape. The emerging client segment, comprising of millennials and Gen Z investors, expects tailored services as per their preferences and values seamless experiences across both digital and human advisory channels. In light of these demands, we see the approach towards hyper-personalization shifting from demographic-based to a more psychographic-based segmentation.

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Enterprises are now moving away from utilizing broader aspects such as age, gender, occupation, and location to create different personas and are utilizing individual personality traits such as lifestyle, attitudes, beliefs, interests, and values to create unique experiences for clients. This strategy promises to be especially effective in captivating and retaining young investors, a highly desirable client demographic poised to emerge as a lucrative segment amid the intergenerational transfer of wealth spanning diverse geographic regions. To embark on this journey, HSBC recently partnered with a European consulting firm, Zühlke, to revamp its mobile wealth management services for UK clients. Zühlke’s experts conducted a study on the investment preferences of British customers, providing insights that enabled HSBC to tailor its services to better meet their needs.

To excel in this approach, enterprises must possess the necessary technology to seamlessly monitor, acquire, and leverage customer data in real time, empowering them to dynamically create personalized experiences with agility and scalability. They need to establish trust with their customers so that they feel comfortable in sharing this private personality traits-related data, which can eventually lead to personalization-led value creation and drive customer delight. In late 2023, Morgan Stanley announced plans to roll out a gen AI bot for its HNWI clients that will provide functionalities such as summarizing a meeting, drafting a follow-up email for suggested next steps, updating the bank’s sales database, scheduling a follow-up appointment, and acquiring knowledge to aid advisers in managing clients’ finances, covering aspects like taxes, retirement savings, and inheritances.

Future of wealth – can the roots of a modular core system power the tree of wealth?

As enterprises embark on this experience innovation journey, it is important for them to have the underlying technology stack to support the industrialized delivery of these data-driven experiences at scale. Currently, they are facing challenges in establishing digital workflows as most of them still have the legacy architecture consisting of Excel spreadsheets and siloed data systems, which makes streamlined data management and analysis difficult.

They are increasingly looking at leveraging cloud-based data management systems that can help them optimize their IT infrastructure costs and improve their ability to process structured and unstructured customer data in real time and at scale. We also saw that a few months ago, Northern Trust collaborated with Finbourne Technology, a UK-based data solutions provider, to adopt its cloud-native data management solution. This partnership aims to modernize Northern Trust’s technology by offering cost-effective and scalable data calculation and processing, enabling near real-time delivery of valuations and other crucial data to clients.

Integrating the cloud into their business and technology operations will also help them roll out new features quickly and keep up with the constantly changing customer demands. In this process of driving data and intelligence in their operations, one of the key focus areas for enterprises is prioritizing and sequencing this migration of workloads to the cloud across the various elements in the wealth management value chain. They want to identify the quick wins that would have the maximum impact while having lesser complexity associated with the transition.

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The wealth tree, as seen in the graphic, is what we believe the future of wealth would look like. The fruits and leaves represent wealth for end customers by creating customer delight through innovative products and personalized experiences. This was seen in action in early 2024 when Kinecta Federal Credit Union announced a strategic partnership with cloud-based wealth management solutions provider FusionIQ to enhance its digital investing services by leveraging the platform’s features, such as digital advice, self-directed investing, and other financial well-being solutions. Also, in 2023, J.P. Morgan partnered with TIFIN to launch TIFIN.AI, aiming to accelerate AI-powered fintech innovation in wealth management. This initiative includes using AI for client portfolio insights for advisors, alternative investing, workplace wealth management, and insurance, among other applications.

In this world of personalized experiences, customers want to feel trusted and safe with wealth enterprises as they enable these multi-channel experiences. They want customers to be able to invest in alternative assets and grow their wealth as wealth management enterprises orchestrate all of it.

As enterprises think about this, they want to be compliant and provide a secure and protected environment. There is a need to have a core system that is modular, composable, and automated. There needs to be a lot more API enablement, which can be continuously optimized in terms of the infrastructure and the applications that are running on top of it. To industrialize the data-driven personalization engine, the core system needs to enable it in a trusted, safe, and secured manner so the security aspect becomes paramount. The two big enablers to this journey will be running operations and having data on the cloud.

In the journey to build out this wealth tree, all ecosystem players, from wealth managers and technology providers to service providers, will have a role to play and a different journey to traverse.

We would be interested to hear about your journey in this evolution. Please feel free to reach out to Ronak Doshi, [email protected], Kriti Gupta, [email protected], or Pooja Mantri, [email protected] to discuss further.

Watch the webinar, Transforming to Thrive: Building Winning Operating Models Amid Disruption Across Industries, to learn how enterprises should think about disruptive changes as they go about their transformation agenda.

Everest Group Talent Demand Growth Index | India IT Services | Blog

May 24, 2024

Welcome to our monthly India IT services talent demand index. We are excited to bring you this comprehensive analysis, powered by Talent Genius™, our AI-powered insights platform purpose-built to guide IT and Business Process Services location and workforce decisions. To gain a deeper understanding of the capabilities of Talent Genius and learn how to book a demo, watch this quick 2-minute video, Introducing Talent Genius™.

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Monthly India IT services talent demand tracker

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Here is our in-depth analyses of the India IT services industry demand:

June 2024

The Indian IT services market saw a further decline of 5% compared to the month of May. Job postings decreased by 4% in Q2 2024 compared to Q1 2024, and on a year-on-year basis, the market dropped by a notable 24%. Additionally, GBS center setup activity also significantly declined in Q2 compared to Q1.

At the city level, among tier-1 cities, Mumbai, which experienced the highest decline last month, saw the highest growth of 8% this month. Conversely, Bangalore faced the steepest decline of 16%. Among tier-2 cities, Thiruvananthapuram saw a 21% increase in IT services job postings. At a quarter-to-quarter comparison level (Q2 2024 vs. Q1 2024), most of the Indian cities have seen a double digit decline in IT talent demand.

At the industry level, retail saw a significant increase of 34% in June. The cyclical commodities industry continued its momentum with 14% growth. However, the BFSI and technology and communications sectors experienced the highest declines, at 16% and 11% respectively.

May 2024

In May 2024, the Indian IT services market saw an additional 11% decline compared to the previous month. This trend is anticipated to be temporary, largely influenced by the ongoing nationwide elections.

Hiring has declined across all experience levels, except for executives with 16-20 years of experience. Entry-level hiring has been particularly affected and experienced a decline of 17%. While traditional roles such as developers and help desk engineers continued to witness a decline in demand, niche roles such as AI/ML engineers, data scientists, and UI/UX architects showed positive hiring trends.

At the city level, Chennai was the sole Indian city to observe an increase in talent demand. Among tier-1 cities, Mumbai saw the steepest decline at 17%, followed by Bangalore and Delhi NCR with declines of 12% and 11% respectively. Among tier-2 cities, Ahmedabad saw the largest decline at 33%.

In terms of sectors, the hospitality and tourism sector, which had seen the highest growth in talent demand in April, experienced the highest decline in May 2024 at 14%. This was followed by service providers, consumer packaged goods, and professional services sectors. Cyclical commodity was the only sector that saw a growth in this month.

April 2024

After experiencing robust growth of 23% in March 2024, the Indian IT services market saw a slight 3% dip in talent demand in April. However, on a year-on-year basis, the market has grown by 39%.

At the city level, among tier-1 cities, Kolkata experienced the highest growth at 17%, while Pune and Mumbai saw moderate growth of 5% and 3%, respectively. In contrast, Hyderabad and Chennai witnessed declines of 16% and 12%, respectively. Among tier-2 cities, Jaipur and Ahmedabad showed the highest growth at 8% and 7%, respectively, whereas Coimbatore and Thiruvananthapuram both saw a 10% decline.

The hospitality and tourism sector experienced the highest talent demand growth in April, increasing by 16% compared to March, fueled by a surge of tourists during summer breaks. Conversely, healthcare and retail saw declines of 12% and 10%, respectively. On a year-on-year basis, all sectors saw growth in demand, with transportation and logistics, and business and professional services recording the highest increases at 85% and 68%, respectively.

AI/ML and Data science remain highly sought-after skills, propelled by a growing emphasis on technological advancements and the integration of AI expertise.

March 2024

Following a 14% decline in job postings for IT services in February, the industry regained momentum, showing a 23% month-on-month increase in job postings. At a year-on-year level, talent demand grew by 20%.

Some of the most in-demand roles include artificial intelligence engineer, machine learning engineer, virtual reality engineer, and UI/UX architect, showcasing sustained demand in the India IT market for niche roles. Demand growth for specialized roles has been consistently higher than traditional IT roles, especially since the latter half of 2023, driven by the gen AI revolution.

At a city level, all the major cities experienced double-digit growth in March, except Mumbai, where the demand increased by only 3%. Tier-2/3 cities continue to consistently experience higher demand growth than tier-1 cities, pointing to increased leverage of tier-2/3 markets for IT services.

From a sourcing perspective, both service providers and enterprises experienced an increase in demand. Enterprises recorded a solid 29% increase (compared to service provider’s 9%), reflecting the strong inclination and propensity toward insourcing.

All sectors, except transportation and logistics, saw heightened demand for IT talent, with technology, communications, and retail experiencing the most traction.

February 2024

Following robust growth in January, the Indian IT services market experienced a 14% decline in February. Talent demand for IT services this month declined 23% compared to the same period last year and 50% from February 2022.

Most cities saw a decrease in demand except for Thiruvananthapuram. After showing the highest increase in January, Jaipur had the sharpest decline of 25%. Among tier-1 cities, Mumbai saw the steepest drop at 20%.

All sectors, except transportation and logistics and cyclical commodities, witnessed a decrease in talent demand, with retail, hospitality, and tourism showing the most significant declines.

Looking at role rankings, demand for artificial intelligence engineers, machine learning engineers, analytics consultants, and UI/UX architects climbed compared to the previous month, indicating continuing interest in niche roles.

January 2024

The demand for IT services in India surged by 31% month-on-month, following a 25% decline in December 2023. However, demand increased 11% year-on-year.

Roles such as artificial intelligence engineer, machine learning engineer, security engineer, and UI/UX architects experienced significant increases in demand in January 2024 compared to the prior year, primarily driven by the heightened need for niche roles in India.

All major tier-1 and tier-2/3 cities saw an uptick in monthly job postings, with Hyderabad leading with a 40% growth rate. Among tier-2/3 cities, Jaipur experienced the highest demand growth, with a 34% increase in job postings.

Demand for IT services rose across all industry segments. Healthcare and BFSI showed the most strength, with a 40% increase from December 2023.

December 2023

Demand for IT services in India hit a 17-month low due to declining spending and clients postponing projects. As a result, most Indian IT service providers are reexamining revenue and hiring forecasts. The overall demand across service providers decreased by 28% from last month and 11% from the previous year.

Many service providers slowed hiring, realizing they posted jobs too early and hired ahead of the demand. Service providers are now focusing on improving employee utilization rates and do not anticipate the job requirements returning to the original levels anytime soon. Demand for IT services also declined by a notable 20 percent across enterprises from November.

Overall, the second half was slower than the first half, with demand falling by 7% for service providers and 4% for enterprises. Service providers were impacted more as enterprises cut discretionary spending and insourced some work.

At the city level, demand for employees declined consistently across tier 1, 2, and 3 cities. After peaking in November, the workforce requirements in Hyderabad and Chennai fell significantly by 32% this month.

Demand hit its lowest point of the year across all segments. Despite relatively stable employment over the last few months, retail and healthcare had the biggest drop at 35%. While it is uncertain if this is the bottom, a full recovery is not expected in the near future.

November 2023 update

IT services demand in India increased by 9% month-on-month and 5% year-on-year. Demand for IT application data management (ADM) grew 9.5%, and IT infrastructure increased 5 percent compared to the prior month. However, the surge is expected to be temporary because macroeconomic conditions pushed IT project timelines ahead for most companies.

Talent demand increased more in tier 2/3 cities than tier 1 cities, indicating that enterprises are increasingly confident in hiring outside tier 1 cities to gain a labor cost arbitrage advantage.

The number of available positions increased in all tier 1 cities, except Kolkata, where the job postings fell for the second consecutive month. Since the prior month, job openings increased 18% in Hyderabad and 14% in Chennai, representing the highest month-on-month increase.

Among tier 2/3 cities, Jaipur recorded one of the highest month-on-month increases in open positions at 34%. All the other cities experienced increased monthly postings – except for Chandigarh and Thiruvananthapuram.

IT services demand increased across all industry segments, with service providers and manufacturing demonstrating the most strength, up 5% from October.

Demand fluctuates more for service providers than other enterprises. As clients cut back on outsourcing spending, the talent need from service providers is expected to decrease in the coming months.

October 2023 update

The demand for IT services in India declined by 9% from last month but increased by 5% year-on-year, with significant variation over the past few months. Despite the shifts, demand remains near the same level as May 2023, when IT services demand increased after being at its 12-month lowest the prior month.

Tier 2/3 cities continued to be more attractive for companies seeking employees. Hyderabad and Kolkata had the biggest monthly drop in talent demand among tier 1 cities at 15% and 12%, respectively. Employee talent needs remained the most stable in Pune, with only a 5% drop compared to the previous month.

Although demand for most roles declined, help desk engineer, data analyst, and business analyst roles continued to increase by about 5% monthly. Only the retail segment maintained net positive month-on-month growth rates at about 7%. Cyclical commodities and service providers declined the most by 12% and 7% month-on-month.

Over the past few months, India IT talent demand has been volatile across roles, cities, and industries. Talent demand is expected to continue to fluctuate as major Indian IT service providers lose contracts and enterprises explore more insourcing opportunities.

September 2023 update

The demand for IT services in India jumped by 19% on a month-on-month basis after declining for two consecutive months. The year-on-year increase of 22% pointed to a significant uptick in hiring activities this month, rebounding from the slowness over the previous few months.

On a month-to-month basis, demand again surged in tier 2/3 cities compared to tier 1 cities. The increased reliance on tier 2/3 cities suggests a growing client preference for cost-effective IT service delivery locations.

Among tier 1 locations, Hyderabad and Kolkata bounced back the strongest with 36% and 35% growth in demand on a month-on-month basis. All locations in the three top tiers showed increased IT services demand – except for Pune, which dropped slightly.

Every major industry segment, except for banking, financial services, and insurance (BFSI), returned with increased demand. Service providers led the chart with a 22% increase in job demand compared to last month. However, BFSI declined 23% from the prior month.

August 2023 update

The demand for IT services declined for two consecutive months after recording a 14-month high in June 2023. Demand fell by 16% month-on-month and 32% on a year-on-year basis. At a segment level, IT ADM and IT infrastructure declined from July.

This trend could be a result of a quick fix by employers to adjust for the hiring surge in the second quarter of 2023. If the pattern continues, employee attrition will rise. However, the demand will likely pick up in the next few months as the end of the year nears.

Tier 1 cities continue to experience a higher decline in demand than tier 2/3 cities on a month-on-month basis, indicating the preference by enterprises to leverage low-cost talent from tier 2/3 cities.

At a city level, Kolkata witnessed the sharpest decline in demand at 47% and had an all-time low in the last 20 months. Among leading tier 2/3 cities, Kochi and Thiruvananthapuram showed the least decline in month-on-month demand.

The surge in demand by industry sectors halted, with consumer packaged goods registering the greatest decline since July. Business and professional services also reversed the growth trend.

A slightly higher decline in month-on-month demand across service providers that has continued for several months now clearly indicates increased insourcing by enterprises.

July 2023 update

While the month-on-month view showed a 9% drop in the IT services talent demand trend in India, demand grew 17% over the prior three months and by 32% year-on-year.

Tier 1 cities witnessed a relatively higher decline than tier 2/3 cities month-on-month, showcasing the increased leverage of tier 2/3 Indian cities. This trend is consistent across most tier 1 and tier 2/3 cities. Jaipur and Coimbatore are the only exceptions across tier 2/3 cities, showing 10% and 3% growth, respectively. Among tier 1 cities, Mumbai and Kolkata witnessed the highest decline, while Pune recorded the lowest decline of approximately 2%.

Service providers witnessed the highest decline of all industry verticals for IT services demand over the past year. Business and professional services and consumer packaged goods saw a slight uptick in demand.

June 2023 update

The demand for IT services in India showed further recovery and grew by 15% compared to May 2023. For the first time in the last six months, demand also showed growth on a year-on-year basis (21% growth compared to June 2023). At a segment level, both IT ADM and IT infrastructure segments witnessed 14-month high demand levels in June 2023, with IT infra talent demand growing 40% on a year-on-year basis.

The growth trend, which started in May, is solidifying and was consistent across all cities, though the extent of recovery varied. Chennai saw a modest recovery, whereas Mumbai saw a significant spike in demand. We believe the demand surge in Mumbai may not be entirely due to net new demand but could be due to talent management/attrition challenges arising from the hybrid/in-office model and the need to back-fill resources.

The demand from service providers continues to grow, and we believe there is more focus on hiring laterals this year compared to the previous year, which saw a significant uptick in campus hiring. This increase could also be due to multiple large deals that are at play in the market and providers hiring in anticipation of winning large business in the medium term.

May 2023 update 

The demand for IT services in India showed a recovery in the month of May, growing by 34% compared to the previous month and staying flat compared to 2022. This spike compared to March and April could be attributed to buyers placing demand ahead of the summer in key onshore geographies, which tend to be slower from a business perspective. The increase in demand was consistent across both tier-1 and tier-2/3 cities; however, the recovery was much steeper for tier-1 cities (growing 14% YoY) compared to tier-2/3 cities (shrinking by 20% on a YoY basis). Among the tier-1 cities, all showed an uptick in demand; however, Pune set a demand record of a 17-month high. The service provider segment, while it showed recovery compared to the previous month, on a YoY basis, registered a 7% decline in demand. On similar lines, BFSI and technology & communications verticals continue to show a declining demand trend on a YoY basis. 

April 2023 update

The demand for IT services in India further shrunk by 17% in April, reaching a 16-month low, and declined by 29% on a year-on-year basis. The impact of the anticipated global economic slowdown is clearly visible in the latest demand trends. 

The declining trend is consistent across both tier-1 and tier-2/3 cities. Among tier-1 cities, Chennai, followed by Delhi-NCR, witnessed the highest decline. Tier-2 cities saw an even higher decline on a year-on-year basis at 32%. At this point, the demand for IT services talent in India is almost 50% of the demand in January 2022. However, this trend needs to be observed over a slightly longer period. If this trend continues for a few more months, the already reduced attrition numbers are likely to come down further. 

Being the first month of the new fiscal year for many leading India-heritage service providers, this indicates a not so good start to the year 2023-24, and declining talent demand is deeply correlated to reduced business growth.

March 2023 update

After five consecutive months of demand growth/stability, the demand for IT services in India dropped significantly (21%) in March and by 36% on a year-on-year basis. The declining trend in March was consistent across all tier-1 cities, though Mumbai witnessed the lowest decline among all tier-1 cities. 

The demand in tier-2/3 cities also reduced by 26% on a year-on-year basis. This overall declining trend is expected as Q1 2022 witnessed a significantly higher demand due to attrition and talent wars faced by the industry, and with the current economic environment, most companies are not in an expansion mode.  

Stay tuned for regular monthly updates as we monitor the landscape of the India IT services industry demand market. We’ll continue to provide the latest insights and trends, so you stay well-informed on locations and workforce developments.

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Services Industry Growth is Bottoming Out, but How Much Does It Matter? | Blog

May 22, 2024

The latest Forces & Foresight™ research by Everest Group highlights the beginning of a turnaround in the services industry’s growth. However, the significance of this recovery is unexciting, as balancing forces exist that both impede and support industry growth. How a service provider aligns with the right set of forces will become key to competitive success. Read on to learn about the necessitating strategic foresight and tailored approaches for industry players to thrive in the post-downturn landscape.

In my last blog, Driving Factors for IT Services Recovery in 2024: Insights from Everest Group’s Forces & Foresight™ Research, I highlighted three forces fueling our services industry growth turnaround foresight. We are seeing more points of evidence validating those. Let’s revisit these forces and their progression:

  1. Stabilizing base – We spoke about seeing a pause in deteriorating demand trends. The turnaround in growth (see Exhibit 1) and forward-looking views of service providers validate this thesis
  1. Fixing revenue leakage – We noted signs of stabilization in leakage, such as bookings not commensurate with revenue. While the differential still exists, we are seeing more confidence in service providers. Almost all the growth guidance estimates are dependent on the booked business translating to revenue over the next 12 months
  1. Pockets of additional growth – As previously highlighted, cybersecurity, ER&D, and data and analytics continue to thrive. For instance, cyber security players like Zscaler have surpassed expectations, leading to upward revenue projections

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Turnaround is a given, but does it really matter so much?

As we outline our growth outlook in the next Forces & Foresight edition, we roll forward our forecasts to the next 12 months (ending March 2025). From this analysis, we have narrowed down two convictions:

  1. The IT services industry will see a turnaround in growth
  2. In the absence of an extraordinary event, we expect the magnitude and speed of this turnaround to be “unexciting” (unlike comebacks in previous downturns)

 

The reason for this unexciting recovery is that the magnitudes of industry forces, supporting and impeding the industry growth, are roughly equal, as portrayed in Exhibit 2.

Exhibit 2

Forces impeding services industry growth Forces supporting services industry growth
Over-influence of macro sentiments on services spend

Spend cautiousness will impact quick and big pickup in major segments like BFSI despite any signs of turnaround

Enterprise confidence levels are still far from promising pickup in discretionary spend

Elongated durations of large contracts don’t allow for high ACV contributions

 

 North America is showing recovery, driven by a notable turnaround in Hi-Tech spend resilience in the public sector and energy

Less matured geos are playing a strong role in the industry growth contribution

The new wave of productivity demand is providing better avenues vs. strict cost-cutting on volume and pricing

Newer revenue streams are playing out (e.g., net expansion in GIC-generated revenue)

Our inference from the balance of these forces is that, while the positives will outdo the negatives, the latter are sticky and emerge from a somewhat changing psychology of demand – a topic we are consciously tracking. This stickiness negates a euphoric pickup in services industry growth, which was observed in previous downturns (we presented these in our previous blog).

As we mentioned, the industry will be an interesting mix of performance of segments and providers based on their portfolios and part of trajectories. Simply put, segments and providers that could be at a higher risk of longer recovery cycles are the ones with heavier exposures to (a) discretionary revenue, (b) negative geo-specific dynamics, and (c) non-flexible delivery and commercial models.

Things are not so straightforward

The devil lies in details. Every segment has its own set of near-term palpable possibilities as well as challenges. Take the example of banking, financial services, and insurance (BFSI). On the one hand, it is the most severely impacted segment (Exhibit 3), with the future seemingly still tied to economic events like rate cuts. On the other hand, we are seeing signs of tech spend pickups by banks. For example, tech and comms spend by major banks is on the rise, and small deals are picking up in BFSI, as evidenced by small service providers’ performances in this segment. See Exhibits 4 and 5.

In our Forces and Foresight research, we are conducting a detailed analysis on each of the major geo and vertical segments with the aim of uncovering the not-so-obvious aspects that contribute significantly to their forward-looking direction of growth. We are also linking those to segment and industry-wide forecasts.

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Implications for market participants

One would need to work harder to earn their position coming out of this downturn, as industry forces will be less kind than in previous downturns.

A (somewhat) naïve implication for service providers would be to put focus on high-growth potential areas of services. We call it naïve because portfolio changes and decisions can’t be made overnight, leave apart the actual portfolio change. Coming out of this downturn, a well-defined playbook will be instrumental in navigating these changes. A simplistic model could include steps such as:

  1. Classification of parts of portfolios (verticals, capabilities, geos, customer size, and type of deals) by demand recovery cycles
  2. Sales focus on the quick recovery segments and immediate results-generating areas (like GICs)
  3. Having account-specific playbooks – mining vs. new accounts
  4. Investment focus on longer-term (but promising) recovery areas

 

Such playbooks have been the reason why every downturn creates a distinct separation between the new set of winners and the rest of the industry. And with the unique set of challenges associated with this downturn, the winners will need to work much harder than before. Learn more about Forces & Foresight™, or reach out to Prashant Shukla to discuss further at [email protected].

Are Investors Right to Be Nervous about CXM Providers? Well, It Depends! | Blog

May 22, 2024

Generative AI (gen AI) is transforming the customer experience management (CXM) landscape, challenging traditional contact centers. While concerns about declining revenues and increased costs are valid, many traditional methods, like human interaction, are still needed for complex customer issues. Read on to discover strategies to improve CXM provider success in a technology-driven market. Reach out to discuss this topic in depth.

Over the last 12+ months, we have seen a massive drop in the stock performance of nearly every publicly traded customer experience management (CXM) service provider. This has mainly been driven by nervousness in the market about how generative AI will impact the need for contact centers, especially in the way they are operated today, which is very reliant on vast numbers of people.

In this blog, I will explain why, in answer to the question, “Are investors right to be nervous?” I give the very vague answer of “It depends.”

The possible impact of generative AI on traditional contact centers and CXM providers

Firstly, we need to understand what could be causing some of the angst among investors, and full disclaimer: I am not positioning myself as an expert investor. There may be very technical reasons why investors are right to be nervous, but I am looking at it as someone who has bought contact center services for some of the world’s leading brands and has a good understanding of how this environment works.

Let’s explore the ways gen AI or next-gen technology could impact traditional contact centers and CXM providers:

  • Traditional contact center businesses have been successful in building large workforces and real estate portfolios, and there is an expectation that the use of technology, brought to large-scale attention by the hype around gen AI, will dramatically reduce the need for humans and, in turn, the need for large real estate portfolios. This assumption means that service providers will have dramatically increased exposure to their real estate costs and will see their main source of revenue, i.e., humans, reduced or removed completely
  • Therefore, the revenues of the impacted service providers will decline over the coming years as more customer interactions are handled by technology, making the companies operating in this space less attractive, if judged on revenue performance alone
  • There is constant talk about new entrants to the CXM market and how a pure technology play, for example, Conversational AI, much improved by the use of gen AI, could replace the need for human interaction, therefore giving birth to a whole new set of CXM providers who only bring technology. This, if true, would have a dramatic impact on traditional players

Any sensible person looking at the factors I have outlined above would be right to be nervous about the future of traditional contact center players. However, this would be missing a few key factors often overlooked or at least given less priority than the concerns. Some of these factors include:

  • People still want to talk to people at times of high stress or when they perceive the problem as complex or emotive. Despite the rapid rise of technology aimed to reduce the amount of human interaction in the contact center, such as robotic process automation (RPA) or Conversational AI (CAI), which has been around for many years, over 70% of service provider revenues are still coming from the voice channel. This proves customers still want to talk to people, and even with the inclusion of gen AI, the shift to non-voice channels is not going to happen overnight
  • When having a negative outlook for traditional contact center players, it assumes that they are standing still and doing nothing to embrace the new technologies, which is totally incorrect. Most of the leading CXM service providers we assess as part of our CXM PEAK Matrix © Assessment are investing heavily in a wide range of technologies that will improve the customer experience and reduce the need for human-assisted contacts, but also, and equally as vital, allow support agents to be more effective and efficient, therefore reducing total cost to serve for customers
  • Many providers, mainly since the pandemic, have already been working hard to reduce their real estate exposure driven by the increased use of work-at-home models (which have reduced since the pandemic abated but are still very prevalent in certain markets)
  • Additionally, we know from recent research that enterprises are increasingly looking to service providers to support them in deploying technologies such as gen AI. These providers bring a high degree of domain expertise and understand customer’s problems, and therefore, are best placed to deploy solutions using the latest technologies. This will present additional opportunities for providers who can demonstrate capabilities in this area

So why did I say it depends? I strongly believe that CXM service providers can thrive in this new market but need to embrace a new reality, which includes working hard in a number of areas.

Strategies for enhancing CXM provider success in a technology-driven market

  • Build solutions that address business problems – This entails not just the generic “reduce cost” or “improve CSAT” but real business challenges where CX can drive significant change in the business metrics
  • Demonstrate differentiation – With a large percentage of the market trying to move away from the traditional moniker of a “call center provider” and trying to demonstrate a shift toward digital solutions; it is important that they demonstrate, not just tell, the story of how they are solving real business problems for their customers by bringing together the power of their people with the available technologies to offer the best solution for the customer
  • Build strong technology partner ecosystems – Partnerships allow providers to deliver technology solutions across the customers’ journey – this includes, of course, the use of LLMs and gen AI, but can be as simple as having solutions in place to improve the employee experience or to provide timely insights through analytics. Most buyers want their providers to be able to bring an end-to-end solution and are no longer just looking for a provider that can only provide people. Humans, supported by and, where possible, improved by technology, are the type of solutions customers are demanding. Those that are pivoting in this direction can continue to grow their customer base
  • Develop flexible delivery models – Providers should leverage work at home as well as other sources of talent (GIG and Impact Sourcing, to name just two) to meet the changing demand both in terms of when support is needed and the type of skills that are required
  • Build commercial models that allow both parties to benefit from efficiencies – Commercial models should go beyond the traditional per FTE, per transaction, or per minute models and allow buyers to visualize and, more importantly, realize the value that a more efficient operating model can deliver
  • Use technology to solve operational challenges – This helps operations run smoother and more efficiently. While using all the technology available to resolve a customer’s issue is an obvious application, those providers that will thrive in the future will also be investing in technologies and skills within their organization that address operational challenges most effectively
  • Develop a culture that recognizes that revenue is not the only metric – While important, it is more impactful to focus on the margin of the work because as a business deploys more technology-led solutions, the revenue may decline, but the business that replaces it should be more profitable
    • This will also require a total evaluation of how people are rewarded within the business to recognize the value of deploying solutions that may bring lower revenue but provide a better and longer-lasting business benefit
  • Be forward-looking when it comes to skills that will be required in the future – Build location and talent strategies that will provide the talent required for the future in order to maximize the benefits available from a human and technology model
  • Develop strong account management disciplines – We know from recent studies that when there is limited differentiation in the market, as there is in the CXM space, the one deciding factor that tips a decision in the service provider’s favor is the strength of their account management
  • Use the technology to improve the employee experience (EX) as well as CX – Leverage the available technologies to remove mundane and frustrating tasks from employees, allowing them to focus on value-adding work. We all know that happy agents deliver a better experience

In summary, I am not pessimistic about the future of the CX arena. We know that the markets tend to overreact in the short term to new stimuli, gen AI in this instance, and underreact in the longer term, and this could be the same.

Will every provider in this space today be successful in three years? Probably not, but the size of the CXM environment (we estimate it to be well over US$330 billion, including insourced and outsourced activity) represents an excellent opportunity for those businesses that can evolve and meet the fast-changing needs of customers.

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