Tag: BPaaS

Wipro’s HPS Acquisition: What’s for Sure … And Not So Sure | Market Insights™

Wipro Acq of HPS

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Wipro’s February 2016 acquisition of HealthPlan Services (HPS), an IT and Business-Process-as-a- Service (BPaaS) provider to U.S. payers and managed care organizations, is its fourth in less than a year, and the largest since 2007. The acquisition is part of Wipro’s effort to access non-linear revenue models as the global services landscape experiences ongoing churn.

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The Empire Strikes Back in the Services World | Sherpas in Blue Shirts

I’ve been blogging about the changing world of services and how the growth is in the SaaS and BPaaS space. However, capturing SaaS and BPaaS opportunities is incredibly frustrating for large service providers, especially incumbents. Their efforts to win these deals often end up like David defeating Goliath.

That’s because, for the most part, customers select the new players in the SaaS and BPaaS space, like Salesforce and ServiceNow, instead of existing providers. This is similar to where we were in the dot-com era with startups threatening to sweep away the traditional players. Why is this happening?

Two frustrating challenges for providers

First, SaaS and BPaaS tend to originate in SMB markets, which is not where the revenue is for the large incumbent service providers; large enterprises adopt SaaS and BPaaS as point solutions. As point solutions, SaaS and BPaaS hold relatively modest opportunities for large providers’ growth and revenue.

Secondly, SaaS and BPaaS offerings are based on a different business model. The as-a-service business model requires a complete rethink of traditional service providers’ delivery systems. This forces providers to move to either a multitenant environment with all the implicit change management issues for clients, or to an automated vehicle that is likely still in the early stage.

Like the Star Wars movie saga, the empire will strike back

At Everest Group, we believe that now, as happened in the dot-com era, the empire will strike back. We think the way this will happen is through switching to an Enterprise IT-as-a-Service model. Borrowing from the Star Wars movie, we believe the dominant providers will strike back and reassert their role in services.

Instead of coming at IT services from a point solution and multitenant environment like SaaS and BPaaS, Enterprise IT-as-a-Service moves the entire service supply chain, component by component, into an as-a-service model. Rather than trying to have the entire supply chain operate on a single platform, it allows enterprises to migrate the individual components – data center, platform, talent factory, software licensing, etc. – into a supply chain model with components aligned with service lines.

Not all providers will be able to make this change, but those that do will be able to flourish and reignite their growth. The Enterprise IT-as-a-Service model favors large incumbent providers over startup SaaS and BPaaS providers.

SaaS models are most robust in SMBs. In the large enterprise, they manifest as point solutions, thus breaking the Dillinger principle – you rob banks because that’s where the money is. Service providers go after large deals in large enterprises because that’s where the money is.

Increasingly, the investment thesis on Wall Street favors the SaaS and BPaaS providers and rewards them with higher valuations because of their potential to disrupt industries. But we think the empire has a good chance of striking back. Traditional providers’ existing knowledge of the enterprise environment and ability to orchestrate the entire supply chain through the Enterprise IT-as-a-Service model will be favored over the SaaS and BPaaS players entering the market.

Services Buyers: Don’t Overlook Technical Debt in New Techs | Sherpas in Blue Shirts

Any replacement of new technology for an old technology, or a new approach to technology acquisition, incurs a technical debt that the consumer of the technology must pay down. Providers make all kinds of promises around SaaS, BPaaS and platforms, which lead buyers to believe they can avoid the technical debt when they adopt these newer technologies. But avoidance is just a myth.

A good example of technical debt is companies that move from waterfall to agile. They must invest in a DevOps platform with automated testing, invest in training new and existing talent and invest in changing the way they architect applications to allow for frequent updates.

Let’s consider a Salesforce (SaaS) implementation. In theory, it’s very easy to start using Salesforce.com for your CRM. But in practice, it turns out to be more complicated. Data must be loaded, APIs must be connected, Salesforce must be configured, user training must be conducted and, finally, all this must be tested.

The technical debt tends to increase the more disruptive the change and, unfortunately, the more impactful the changes on the business. In the case of SaaS or BPaaS, which in large enterprises tend to be point solutions, there is a modest technical debt. But in the case of platforms, where the buyer must make large structural changes to important systems of records, the technical debt is significant.

The technical debt creates complications that slow down migrating to SaaS, BPaaS or platform technologies. It also creates user frustration because of ongoing issues in transition/migration. The business users are eager to get to the resulting capabilities and are impatient with the time it takes to get there and the learning curve they must go through to be productive in the new environment. Users are unwilling to invest in the cost and effort to pay down the technical debt, but it surrounds the users’ ability to integrate the new technology and make necessary changes to be able to use it effectively.

As your business moves forward with adopting new technologies, be aware that the technical debt is a key issue in successful adoption. Service providers must be clearer and more honest about the scale of the technical debt and work on approaches that limit it. Nevertheless, buyers need to remember that the technical debt resides with the consumer. And no matter what the provider tells you, the debt is there and it’s likely to be large.

Software Eats Everything | Sherpas in Blue Shirts

A widely quoted phrase these days is “software eats everything.” It refers to the great value that software delivers. I believe it also applies to the profound impact it’s making in the services world. Software is disintermediating the industrialized labor arbitrage model and also infrastructure services. Let’s look at the huge implications for the services industry.

How is software eating services? It’s happening in a number of important ways and areas.

Software eating BPO

First, software enables automation and RPA to replace much of what the current industrialized arbitrage model does. Much of this work is repetitive and screams for a more automated approach. BPO work, for instance, bridges the gap between the labor that interfaces between records and the system of records. As I’ve blogged before, software is about to eat BPO labor.

DevOps and software eating infrastructure services

The DevOps revolution’s impact on infrastructure services is another example of software eating everything. A fully integrated DevOps platform allows defining code for infrastructure hardware at the same time as defining code for functionality. Increasingly in a software-defined infrastructure, companies can build an integrated DevOps platform that enables simultaneously configuring the entire supply chain from functionality all the way down to the number of cores it requires to run and test it.

Prior to the DevOps movement, all these steps were labor based, and much of this work migrated into the industrialized arbitrage model. They now become largely automated and software controlled.

Software and virtual services eating infrastructure services

Another example within infrastructure is the infrastructure itself. Five years ago, companies operated in a world where they were trying to move from 20 servers per FTE to 50. Most of the infrastructure service providers succeeded based upon their ability to make that shift.

Today, the services industry tries to get up to somewhere in the range of 200 to 500 FTEs per server. But the highly automated world in Silicon Valley has over 100,000 virtual servers per person. They’ve completely severed the link between people and servers. Again, a dramatic example of software eating everything.

SaaS, BPaaS impact

Another dramatic example of software eating everything is the Software-as-a-Service (SaaS) and Business Process as a Service (BPaaS) offerings. These software-based services offerings completely automate and configure the software, hardware, and business process experience for customers. SaaS and BPaaS completely upend the classic functional model previously used to deliver these functions.

Implications for the service industry

Software eating everything is a relentless focus on different ways to sever the traditional link of labor (FTEs) to service. The dislocation to labor-based businesses will be immense over the next few years as this journey to a software-defined world continues and existing business models struggle to adapt.

A software-defined marketplace will dramatically change the current services market. It will create opportunities for new industries to emerge and force tremendous tension on the incumbent service providers to survive by embracing the change and cannibalizing their existing work.


Photo credit: Flickr

Why Is ADP So Successful? | Sherpas in Blue Shirts

At Everest Group, we’ve been assessing why some service providers are so successful. Using a framework we created that focuses on six characteristics, it’s easy to understand why ADP is so successful. At the heart of their success is the fact that they live up to their promise of being the most trusted firm in payroll services.

As the figure below illustrates, branding, go-to-market approach, and portfolio are three key characteristics in successful companies.

Assessment framework technology service companies

I think what’s remarkable about ADP is that they align their brand of trusted payroll services with all their operational aspects. They go to market in a way that aligns with their brand choices and allows them to dominate or at least serve every geography, both large and small. They design their portfolio of products to be payroll itself and surround the payroll system to reinforce or deliver their complete promise.

They have the most comprehensive ecosystem around the payroll process, connecting with tax jurisdictions and integrating into a wide range of HRIS, financial, and ERP systems. As such, ADP may not at any one point be the leading provider of technology, but they are the most trusted provider. They achieve this through the breadth of their ecosystem, the breadth of their global offerings; there is no jurisdiction in the world in which they don’t keep up with the regulations of tax and payroll.

This allows them to service something very rare – both very large and very small companies. And they are the safest pair of hands in payroll.

Assessing the other characteristics necessary for success, it’s clear that ADP is always relevant in terms of technology. They continue to invest in technology, never allowing their technology to become out of date or antiquated. Staying relevant with technology doesn’t necessitate that they be leading edge; in fact, the leading-edge role would take away from their “most trusted” status.

They largely grow their own talent and don’t rely on large recruitment from outside. Therefore, they are able to deliver a high degree of quality and consistency in their talent. They ensure that ADP is a rewarding place to work and grow a career, which allows them to nurture talent.

ADP’s business model is completely aligned with where the services industry is headed. For example, any way you look at it, ADP was one of the first users of SaaS – before most of us knew what SaaS and BPaaS were.

All of these characteristics make ADP incredibly formidable in all things payroll and able to serve an incredibly wide variety of customers in almost every industry and geography. Bottom line: ADP delivers a nice, steady return to shareholders and trusted services to clients.


Photo credit: Flickr

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