Tag: customer centricity

Digital Marketing? Digital Will Kill Marketing | Sherpas in Blue Shirts

“When you have a hammer, everything looks like a nail.” This quote from The Psychology of Science easily, and disconcertingly, applies to many of today’s marketers, who are vigorously using digital technologies to “nail” the multiple customer touch points – e.g., context-based services, IoT, mobility, and social collaboration – at their disposal.

Indeed, there is significant vendor sponsored “research,” from the likes of Adobe, IBM, Microsoft, Oracle, Salesforce.com, SAP, and marketing consultants, that hammers home the idea that marketing has no future without digital technologies. Volumes of literature debate and explain how digital technologies are changing the role of traditional e-marketing, and that these technologies are providing the needed ammunition in terms of social conversations, mobile interfaces, and consumer analytics.

But there’s been surprisingly little discussion on whether marketers are overdoing it, whether all marketers are equally equipped to drive such technology-heavy initiatives, and whether digital marketing strategies benefit everyone, all organizations, across all industries. Here’s my take on a couple of these points.

  1. Most marketers do not fundamentally understand technology: For example, they get carried away by Facebook likes, and overwhelmed or too excited by what they see from marketing technology vendors, such as a new content management platform, irrespective of the value delivered. Though there is “hot money” flowing for digital marketing, this should not drive the adoption of digital technologies. For example, the business case of data analytics may become an “availability heuristic bias” without realizing whether it delivers good or bad data, or whether it can produce meaningful insights and business value or just become another academic exercise to please business leaders.

  2. Digital marketing is not about only marketing anymore: Earlier marketers could operate in their ivory towers with somewhat limited integration with the broader organization, as digital technologies were limited to email marketing, surveys, and/or occasional mobility projects. Today, however, with the plethora of customer touch-points, the fundamental shift in consumers’ interaction with a brand, the confluence of big data, the IoT, context-driven services, and mobility, marketers must realize that digital impact is broad-based across the organization. Many different departments, including production, support, supply chain, procurement, operations, customer service, and IT, need to be in synch to drive a meaningful digital marketing strategy. If the entire organization is not geared toward this transformation, the digital marketing efforts will eventually turn into traditional e-marketing, creating little business value.

Effective digital marketing should result in seamless excellent customer engagement, and requires an overhaul of multiple interconnected processes within an organization to avoid actually driving a disconnect with the customer. A plethora of digital technologies cannot improve a bad business process. Therefore, marketers have the difficult task of taking the entire organization together, explaining why process changes are required, how to improve customer touch-points, and how to build a customer experience lifecycle.

But, are marketers capable of doing this? Do they have the needed support and mandate from senior executives? Do they have the required organizational standing and stature to drive these changes? Can they fathom and swim across the political landscape and inertia of their organization?

Most importantly, marketers must keep the customer top of mind when considering use of digital technologies. The reality is that extreme technology leverage may confuse, frustrate, and overwhelm the customer. The branding message may get convoluted, confusing, and irrelevant. Though increasingly marketers are becoming more tech savvy, they should never forget their role is not to adopt latest digital technology but to serve their customers.

Digital channels are means to an end, not the end by themselves. For marketers, it is easy to get carried away by believing new technology is “digital marketing.” But what they may not realize is that “digital” may actually be killing marketing.


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Adapting to Evolving Client Needs – the New Mantra of Growth for Smaller Contact Center Service Providers | Sherpas in Blue Shirts

As a USD$70-75 billion market that has been growing steadily at 5-7 percent over the last few years, contact center outsourcing (CCO) has captured the interest of multiple non-CCO specialist service providers in the recent years. In fact, the more generalized ITO and BPO providers that have started CCO operations in the last decade have realized appreciable growth and success in recent years, some of them outdoing the market growth and growing in excess of 8 percent CAGR.

However, it’s not been an easy journey for these relatively new entrants, given their relative small scale and scope of operations compared to the incumbent players, some of which make billions in revenue through contact center services alone and have operations across all major geographies. To differentiate themselves, these new players have tried to stand out from crowd through innovation, and by tapping areas within the CCO space that have showed the maximum growth in the last few years and have emerged as value propositions for CCO clients.

Most of these high-growth players are, in fact, relatively smaller players, such as Genpact, HCL, HGS, TCS, and WNS. While many have had long-standing contact center capabilities, it has only been more recently that these firms have taken a more strategic go-to-market approach to pursuing the stand-alone CCO market. Their revenues from CCO operations are in the USD$100-450 million range, which is miniscule in size when compared to some of the bigger players such as Convergys and Teleperformance. To sustain their above market growth, these providers have adopted multiple steps to emerge as serious contenders. Instead of merely tapping the traditional CCO markets such as North America and Europe, these players have aggressively expanded their footprint in emerging buyer geographies such as Asia Pacific, Eastern Europe, and Middle East & Africa. By building their capabilities in languages specific to these areas, they have been able to cater to client demands better. They have also been making their presence felt in some of the fastest growing verticals in the CCO market, such as retail, healthcare, and travel & hospitality. Many of them have effectively leveraged their organization’s overall investments in vertical industry expertise to further enhance CCO capabilities and offerings. A key differentiator for many of these players is their ability to link the consumer interaction in the contact center with downstream industry-specific processes by delivering front-back office integrated solutions. These investments seem to have paid off well, as the revenues from these verticals have shown sharp growth for these service providers.

Our research shows that buyers are looking more towards building deeper working relationships with fewer CCO service providers. This means that buyers no longer expect service providers to just deliver on SLAs, but are looking for value beyond labor arbitrage. More contracts being signed now involve value-added processes, and include non-voice channels such as email, chat, and social media. To address these new value propositions, these high-growth players have invested in multiple technologies to build their capabilities in these domains. Most of them have leveraged their vast IT and BPO expertise to deliver solutions specific to contact center needs.

They have also made it a priority to focus on building strong relationships with their clients. They have performed quite strongly on Everest Group’s buyer satisfaction survey, and have frequently been cited for their flexibility, responsiveness, consistency, and execution. With buyers looking to consolidate their portfolio of work with fewer strategic partners, it becomes more essential to have a stronger client-service provider relationship, which the service providers can only achieve by walking that extra mile to keep clients happy with their services.

With the changing scenario in the CCO market, where the focus has shifted from improving the bottom line to adding more value to the operations and thus improving the top line for clients, scale can no longer be considered the primary metric for assessing a service provider. The focus has shifted to cost savings through process improvement and business outcomes, and this provides these relatively new generation high-growth players enough opportunity to prove their mettle in the market where they have been aligning their capabilities with changing client needs. Everest Group’s findings show that clients are taking notice and giving these providers a chance to prove themselves.


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A Light Bulb Has to Want to Change | Sherpas in Blue Shirts

There’s an old joke that asks how many psychologists it takes to change a light bulb. The answer is it doesn’t matter; the light bulb has to want to change. I think this has a deep truth when applied to the services market.

Almost every service provider looking for growth sees that capturing a share of the transformational marketplace is key to their success. In their effort to pursue this, they come up with arguments and proof points that they can do a business function better, faster and more cost-effectively than shared services or the target organization. They then conduct significant analysis, looking at which customers would be the best fit for their strategy.

Unfortunately for these providers, their efforts often are frustrating and come to very little reward. The reason can be seen in the light bulb joke. The key to significant transformational change has less to do with the potential impact and more to do with the motivations of the client and its willingness to change. Few people can be squeezed to undertake the risk of a significant large-scale change and transformation.

Key for service providers

Service providers seeking to capture transformational deals must first identify senior executives with a change agenda and then gain an understanding of how they wish to change. That is where the transformation journey must start. Although this sounds obvious, my experience has been that providers rarely approach the problem from this perspective.

When you couple this starting point with the changing objectives of customers focusing on business value and cycle time instead of costs that I’ve blogged about before, it’s easy to understand why so many providers’ strategies fail. Looking for transformation opportunities through the lens of cost savings is a mistake, and increasingly the provider’s efforts will go unrewarded.

Just like the light bulb joke, transformation opportunities won’t happen unless the customer wants to change and the provider understands what the customer wants to accomplish through the change.


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Technology Specialists – The New Dinosaur in Making | Sherpas in Blue Shirts

Are you a brilliant Java coder? An expert in the R programming language? A phenomenal database administrator? A brilliant software seller? Sorry to say it, but you’re likely to soon be a member of the “extinct club.”

In corroboration of Scottish economist Adam Smith’s concept of the division of labor, organizations have historically preferred and hired specialists to develop their technologies, and other specialists to sell them. These masters of their craft had acclaimed expertise in their specific areas. And despite the evolution from mainframes to microcomputers to PCs to client server to ERP to the web, it was relatively easy for them to upskill or move to an adjacent skill, as the technologies adopted by companies rarely changed in their fundamental structure.

This gave rise to an “I am a developer, let me develop, I am in sales, let me sell” model within technology companies. It worked well, as enterprises persisted with outdated technologies they had intertwined their business models, and the cost of replacement was prohibitively high. This persistence created the specialists, who were assured of their place in the high echelons of technology as the landscape was not changing fast enough. This also gave rise to the outsourcing industry, which was leveraged to support these outdated systems and reduce the cost of management.

However, those times are gone. Due to digital transformation, organizations expect their professionals to understand not only the technology, but also business users’ perspectives, technology ease of use, consumption flexibility, and creation of top line impact. Development or sales specialists lacking a comprehensive business view are quickly losing their relevance and competitive edge.

Lack of relevance and competitive edge can, and will, also effect many technology providers. This is due, in large part, to the fact that as the cost of consumption of hardware and software decreases, organizations are increasingly willing to dismantle their existing systems and embrace newer models, e.g., migrating from one SaaS CRM to another. The idea of “fail fast, fail better” is gaining traction within enterprises, and technology companies need to align their business models accordingly to serve them.

The reality is that this sea change requires full-scale overhaul of technology providers’ entire business model – including their investment strategy, product roadmap, partnership ecosystem, and go-to-market approach. Yet executives in these businesses have made their careers and big money by developing and selling technology in a certain manner that promotes status quo. Think about a large software vendor and its partners who earn millions of dollars by just providing “certificate training” for their technologies. If the technologies become redundant, their bottom line will be severely impacted. Therefore, they will invest all their efforts in ensuring their clients stick to their technology platforms, irrespective of whether they are outdated and unable to cater to the business. Of course, there are buyers that do not want to rock the boat by changing something until it is really broken. This comfortable nexus has been going on for ages.

But the times are changing very fast. Technology providers that view their buyers as “cash cows,” rather than valuable partners to be helped to achieve business objectives, will fast lose relevance. The providers that succeed will: 1) embrace this new world of disruption, and create meaningful solutions that are more than beautified version of their outdated platforms wrapped in a pretense of user friendliness; and 2) make their prized specialists realize the new norm of the business wherein they need to at least understand, if not master, the art of viewing the world from a business and end-user perspective that incorporates a holistic paradigm beyond their usual tunnel vision.

If he were alive today, Adam Smith might well have changed his tune, instead suggesting malleable skills to enable technology companies’ success in these uncertain times of technology.


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Customers Changing Core Objectives for Services Industry and IT Delivery | Sherpas in Blue Shirts

There is a secular shift occurring within IT services. Many businesses are shifting from functional orientation – where cost and reliability are the key objectives – to a new focus where business value and cycle time are the new objective functions. This shift has big and very serious implications for organizations that encompass the technologies they use and the third-party services ecosystem they use to meet these needs. Accommodating these needs requires a significant rethink of traditional IT delivery, whether it’s through internal centralized IT services or third-party IT services.

Cost and reliability are still important; but these are now secondary issues and no longer dominant issues. C-level executives now drive IT spend. They increasingly focus on aligning IT and business value with the voice of the end user/customer as well as the speed at which IT can make changes and respond to the business needs.

I’ve blogged many times over the last few years, observing this shift of influence out of centralized IT into the rest of the organization (business units, CFO, CMO, etc.) These powerful stakeholders now believe technology more than ever is central to their moves to change the game. They want better value – technology that meets their needs and also responds far more quickly to their needs.

Functional IT structures has disciplines that frustrate these stakeholders because:

  • Projects or initiatives take too long (often a year to 18 months) for them to get the functionalities/capabilities
  • IT often focuses on how to do those functionalities cost-effectively instead of focusing on the customer or user experience and the value derived from that.

Therefore, their requirements can’t be met through a traditional structure of IT where technology orientation is based on functions (data centers, applications maintenance, application development, etc.).

To accommodate the change in demands – the new core objectives – enterprise IT must realign by service lines and have persistent teams that align from end to end on the service lines that focus on achieving business value instead of aligning on performing excellence in a functional way.

Therefore, organizations are rethinking their IT services and a new Enterprise IT-as-a-Service model is taking off. I’ll discuss this new model in upcoming blog posts. The implications are profound for internal services as well as third-party IT services.


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FOMO (“Fear of Missing Out”) – the Service Provider’s Ebola | Sherpas in Blue Shirts

FOMO is reaching epidemic proportions among service providers. We see it particularly in the Indian firms, but it’s not confined to the Indian providers. It starts in the sales teams as they fall behind in their sales goals; then it spreads and infects the entire organization.

You can easily identify the providers infected with FOMO. In the marketplace, there is no RFP or opportunity they don’t want to contest. The FOMO infection causes them to run from client to client with the newest PowerPoint presentations of great promises. But the decks aren’t compelling and lack depth, so the buyers don’t believe the providers’ messages. The buyers aren’t infected with FOMO, so they aren’t blind enough to believe that one company can be great at everything.

Because of FOMO, the providers don’t spend enough time with the existing or potential client to be able to develop the necessary depth.

Those free of FOMO actually outperform in the market consistently and build a much more relevant perspective unique to a client because of their effort to gain a more in-depth understanding of the client.

They focus on a client’s issues rather than chasing every RFP. They only go after opportunities where they have developed a perspective. They put most of their sales resources into focusing on existing clients instead of developing go-to-market schemes for yet-uncaptured clients.

Paradoxically, not only do disciplined providers outperform other providers with their existing clients, but they also outperform in the marketplace with new clients. This is because when they do engage, they engage in a thoughtful, impactful way.

Fortunately for services buyers, FOMO hasn’t infected the entire services industry.


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Services Sales through the Looking-Glass | Sherpas in Blue Shirts

Lewis Carroll is famous for his novel, “Through the Looking-Glass, and What Alice Found There.” In this whimsical world, everything starts out as familiar things but, on examination, turn out to be nonsense. It puts me in mind of many service providers’ sales pitches.

Perhaps my favorite part of the Looking-Glass novel is Jabberwocky, a poem in which Carroll strung together nonsense words. When put together, they sound impressive and one wants to believe they tell a story. But as you can see in the verse below, the words are just nonsense.

’Twas brillig, and the slithy toves

Did gyre and gimble in the wabe:

All mimsy were the borogoves,

And the mome raths outgrabe.

It’s like service providers’ sales teams that talk to potential clients about a transformation agenda and driving business value from IT. They throw in words such as “agility,” “flexibility” and “cloud.” Or phrases such as “consumerization of IT” and “as a service.” They even sprinkle in entire sentences such as “outsourcing will allow you to variabilize costs.”

These pitches sound wonderful and sound like there is deep thought associated with what the speaker says. But on examination, one finds the claims are largely nonsense. For instance, there is no variabilization of costs; it’s virtual, and there is little time to business value. And the supposedly agile environment is anything but agile.

It’s very easy to grasp for platitudes and read blogs and take the ideas without really understanding them.

So just like Alice, we find ourselves asking, “Which way should I go?” Well, like the Cheshire Cat says to Alice, “It all depends on where you want to get to.” Providers’ impressive-sounding presentations, on examination, are often just gobbledygook and attempts to intrigue the audience and get them to buy services. But they fall apart on close examination.

Successful sales depend upon a clear understanding about what the customer and provider will try to accomplish, how they will do it and the steps necessary to accomplish the goals. The best presentations use common, plain language to identify the issues and how to meet the goals.


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Oscar and the Emergence of Consumer-Centric Healthcare | Sherpas in Blue Shirts

As I’ve blogged before, the healthcare space is at the cusp of a transformative change. Consumers are assuming greater ownership, control, and responsibility of health outcomes. Consequently, the decision making is shifting to the individual. Consumption patterns have undergone a significant change owing to disruptive mobile computing, rapid adoption of social media, next-generation sales/engagement channels, and ‘‘anytime-anywhere’’ information access. As individual consumers (patients and physicians) become more empowered, healthcare is transitioning to a principally patient-centric operating paradigm, with focus on cost, efficacy, and equity.

Analogous to what Uber has done to transportation, in progressive (and controversial) ways, there is a fundamental transformation in healthcare, placing patients at the center of all the action. These changes are reflected in the way reimbursements are distributed (moving from volume-based to outcome-based) and the onset of personalized medicine therapies based on real-world evidence. These gamut of changes are also aided by various cultural and socio-economic forces. The disruptive shift – from a healthcare provider-centric to a more customer-centric model – is driving significant healthcare investments in digital enablers of consumerization – social media, mobility, analytics, and cloud.

Healthcare consumerization levers

The New Kid on the Block

These winds of change have given rise to an immense opportunity to cater to this new patient-centric paradigm leveraging next-generation technology channels and enablers. Which brings us to Oscar, a New York-based health insurance start-up. Health insurance in the United States has conventionally been complex and non-transparent. With the advent of PPACA and health insurance exchanges (HIX), there has been a greater sense of accountability. Oscar aims to bring big data/analytics, design thinking, and transparency to the often-puzzling world of health insurance, making it smart, intuitive, and simple for consumers.

The idea for Oscar was born when one of its co-founders received his health insurance bill and realized that none of it made sense to him. The complexity and high entry barriers to health insurance can be gauged from the fact that Oscar was the first new health insurance provider to launch in the state of New York in more than a decade. The start-up sells coverage to individuals through insurance marketplaces in New York and New Jersey. The insurance plans offer free basic care including doctor visits, phone calls with doctors, preventative care, and generic drugs.

The company is backed by seasoned venture investors Peter Thiel and Vinod Khosla as it attempts to bring Silicon Valley mojo to health insurance. It was co-founded by venture capitalist Josh Kushner (an early stage investor in Warby Parker and Instagram), Kevin Nazemi (a Microsoft veteran), and Mario Schlosser (MIT Media Lab and hedge fund experience). The company’s strong digital health ethos is reflected in the senior leadership team – CTO Fredrik Nylander is a former Tumblr executive, Dave Henderson (ex-Cigna and EmblemHealth) is Oscar’s president of insurance, board member Charlie Baker is former CEO of Harvard Pilgrim Health Care, and senior medical executive hires from EmblemHealth, a leading health plan in New York state.

Oscar

What’s different?

Oscar’s value proposition is on being a more personalized health insurance provider, with a strong sense of convenience and personal attention, aided by marketing, design, and consumer service practices that are aligned to the needs of the millennial generation. It has a sizable emphasis on telemedicine (offering it free of charge), and lets customers speak to doctors 24×7 with a goal of 10 minute wait time or less. To help answer medical questions, the company has doctors on call to chat online or over the telephone with customers. Oscar also lets customers check prices for procedures ahead of time and offers three free in-person doctor visits and free generic drugs.

The company faced minor bumps in the beginning with poor reviews and complaints (an average Yelp rating of 2 stars), but has instituted a feedback input mechanism based on customer interactions. The company aims to productize every customer interaction by implementing feedback as soon as it receives it. It has a slew of partners and tie-ups in line with its strategic focus.

In December 2014, Oscar announced a partnership with Misfit (a wearable tech company), by offering members free fitness trackers, along with Amazon gift cards, as part of an attempt to incentivize healthy behavior and bring down employee healthcare costs. Oscar also offers services at many hospitals and retail locations such as New York CVS CareMark. It is a health insurance company that resembles a technology start-up rather than a faceless insurance behemoth, sort of a health insurance start-up for “born digital” natives.

The future

Since commencing operations in July 2013, Oscar has had a reasonable start. It had about 15,000 members and estimated revenues of U$72 million in 2014. It doubled that member base to 30,000 in January 2015, with one month of enrollment left to go. Oscar is seeking approval to enter California’s individuals exchange by 2016. The primary litmus test for Oscar is going to be the same as for any health plan – managing risk, keeping premiums reasonable, maintaining margins, handling payer-provider convergence, and improving health outcomes. Oscar is a prime example among modern companies looking to shape consumer-driven healthcare in the United States leveraging next-generation technology. As it looks at a reported valuation of significantly more than US$1 billion (implying a handsome 14x sales multiple!), the bet might just pay off.


Photo credit: Oscar

Service Providers are Killing the Goose That Lays Golden Eggs | Sherpas in Blue Shirts

I blogged last year about the growing anti-incumbent bias in the services industry. That’s not to say that clients are biased against incumbent providers, but there are more clients who want to switch out providers than there used to be. This is true across every segment of global services (applications, infrastructure and BPO). We can trace at least some of this client mindset back to providers’ actions that are similar to the farmer in Aesop’s Fable who killed his goose that laid golden eggs. In their haste to get more golden eggs (more profitability), providers unintentionally kill the golden substance inside their goose (existing client base).

At the heart of the issue is providers’ wrong view of their clients. As a result, they take actions that cause clients to believe the provider exploits them, as the actions benefit the provider’s revenue. When a client believes the provider is only interested in maximizing its revenue, the client no longer sees the provider as a trusted advisor.

Here are three examples I’ve observed in which providers appear to act for their own interests, which results in clients no longer trusting them.

  1. The provider moves from an FTE-based model to a transaction-based model, but the provider’s revenue stays the same. Basically the provider finds a way to charge the client more for volume, which wouldn’t need to happen under the FTE-based model. Clients see through that, and the provider loses its trusted position. Clients realize the provider is exploiting them rather than serving them.
  1. The provider moves to a productivity model, promising to support portfolio apps at lower cost through a managed service. What actually transpires? The provider nickel-and-dimes the client, which ends up paying more money over time. Functions that were delivered in the FTE model are now a la carte, outside of the new model; so the client actually pays twice for the service.
  1. The provider flattens out its factory model and optimizes it to use junior resources instead of senior resources. The net result for the client is churn in the provider’s resources, so the provider doesn’t build client or industry knowledge. On top of the churn, the client actually ends up with lower productivity because junior people now do what senior people were doing.

And that’s how providers kill the goose that laid golden eggs.


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Why Everest Group Changed its Point of View on Infosys | Sherpas in Blue Shirts

Since publishing our two most recent blogs about the business situation at Infosys (Connecting All the Dots and Silicon Valley company) and comparing those perspectives to our blogs over the past two years, people have asked us: “Why did you change your point of view about Infosys?” Here’s why – it’s because most of what we predicted about Infosys came true.

We have a relentlessly objective point of view, and our blogs over the past couple of years pointed out the internal problems we observed at Infosys. We called the firm out early on its arrogance and hubris in the marketplace, evidenced in its commitment to premium pricing despite the unsustainability of its pricing vis a vis the marketplace, along with its inward-looking focus instead of focusing on customer intimacy.

Because of these actions, in the midst of the maturing AO market and changing customer expectations, we predicted a slow down at Infosys. And it happened.

As the board at Infosys started to understand the same things that we called out, they made some interesting moves; and we’re largely supportive of the moves. If they want Infosys to be a leading high-tech firm, they need to bring in different leadership. They did that by bringing in an external executive as the new CEO in 2014. And it’s clear that the firm’s leadership is now deploying a customer-facing strategy rather than continuing to be inward-looking. This isn’t just a story line; Infosys is backing up its statements with investments in new leadership talent over the past two months as well as in other actions.

Before, we saw a once-proud firm with internal problems, which talked the talk but didn’t walk the walk. We increasingly see Infosys pivot strongly to next-generation leadership, taking steps to give the firm a chance at success again.

It’s too early to say whether the recent moves and strategy will work. And as I said in my earlier blog, execution eats strategy. But the next step in strategy is putting their money where their mouth is, and there is every sign that Infosys is starting to do that. As such, we applaud Infosys’ progress.

As we called out Infosys when we saw problems, we now comment on it as it moves forward. To date, history validated our point of view. Now that Infosys is dealing with its issues and taking consistent actions to move the firm forward, we’ve acknowledged their progress and amended our point of view accordingly.


Photo credit: Infosys

 

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