Tag: digital investments

Digital Investments are Helping Offshore Service Providers Reinvent Themselves | Blog

Just a short five or so years ago, digital capabilities were a competitive differentiator for major service providers. Today, they’re a competitive must. As a result, global and offshore-heritage service providers alike are making significant investments in digital technologies such as blockchain, Artificial Intelligence (AI), Robotic Process Automation (RPA), and Internet of Things (IoT).

While the global players took the lead in building what is now a billion-dollar digital landscape, offshore-heritage service providers such as Infosys, TCS, and Wipro are quickly catching up. And their strategies to build and deliver greater value through digital-driven productivity and IP are clearly paying off. For example, our research found that their digital revenue jumped from 20 percent to 30 percent of their total revenue between Q1 2018 and Q1 2019.

Let’s look at how offshore-heritage service providers are upping their game with digital investments.

Internal digital-based capabilities

One of their strategies is to enhance the customer experience and improve efficiency through internal development of digital-based capabilities. For example:

  • Infosys launched AssistEdge Discover to increase the rate of automation implementations at the enterprise level through process discovery
  • TCS launched the connected intelligence data lake software on Amazon Web Services (AWS) to help clients build their own analytics services
  • Wipro made its AI and Machine learning (ML) solutions available on AWS to govern supply chain processes and enhance productivity and customer experience
  • Tech Mahindra launched NetOps.ai, its network automation and managed services framework, to speed up 5G network adoption
  • HCL launched iCE.X, an IoT device management platform, to bring intelligent IoT device management to telecom and media services, and increase IoT use case adoption.

Digital-focused acquisitions

As their initial reskill/upskill approach left them far behind global service providers’ inorganic approach, offshore-heritage service providers have taken the leap and started acquiring companies to obtain direct access to already-trained talent. For example:

  • Genpact acquired riskCanvas to access its suite of anti-money laundering (AML) solutions
  • Tech Mahindra acquired Dynacommerce, a computer software provider, to support its digital transformation strategy and enable a future-proof and future-ready digital experience for its customers
  • HCL acquired Strong-Bridge Envision (SBE), a digital transformation consulting firm, to leverage its capabilities in digital strategy development, agile program management, business transformation, and organizational change management. With this acquisition, SBE will become part of HCL’s global digital and analytics business
  • Tech Mahindra acquired K-Vision, a provider of mobile network solutions, for US$1.5 million to build and support the roll-out of a 4G and 5G telecom network in Japan. The acquisition will leverage the local presence and expertise of K-Vision to build its network services business in the country.

Partnership with startups

In order to develop skills and knowledge about these next-generation digital technologies in the general workforce, offshore-heritage service providers are partnering with niche start-ups to improve their agility/flexibility, reduce costs, and access stronger and better insights. For example:

  • Wipro partnered with RiskLens, a provider of cyber risk software and management solutions, to deliver quantitative cyber risk assessments to enterprise customers and government organizations
  • Tech Mahindra partnered with Rakuten Mobile Network to open a next-generation (4G and 5G) software-defined network lab. The partnership will help both the firms drive innovation and disruption in the 5G space
  • TCS partnered with JDA software to build next-generation cognitive solutions to optimize supply chains for customers. The partnership will develop joint, interoperable technology solutions for supply chains of the future, and accelerate human-machine collaboration to solve complex business problems
  • HCL partnered with Kneat.com, a software firm, to provide and implement next-generation digital solutions for facilities, equipment, and computer systems validation processes leveraging Kneat’s paperless software platform.

Future outlook

With digitalization on the rise across industries and product segments, and a bearish economy outlook in key markets such as the United States and Europe, offshore-heritage service providers will continue to invest heavily in next-gen technologies. This will help them to emerge as strong partners for global organizations to wade through their economic pressures.

To learn more about offshore providers’ digital strategies, key market trends, global locations activity, and service provider activity in Q2 2019, please see our Market Vista™ : Q2 2019 report.

General Electric and the Harsh Realities of Digital Transformation | Sherpas in Blue Shirts

Last week, General Electric (GE) replaced CEO John Flannery (after just 13 months in the top seat) with former Danaher chief Lawrence Culp, in response to Flannery’s slower-than-expected turnaround efforts.

GE has been a lynchpin of the American economic narrative, having pioneered the light bulb and the jet engine. During its vast and distinguished history, it has survived the Great Depression, the dot-com bubble, and the 2008 financial crisis. It was one of the original components of the Dow Jones Industrial Average, and had the longest continuous presence on the index before being removed from the index in June 2018. GE’s shares recently nosedived to fall below the $100 billion market cap threshold, effectively wiping out US$500 billion in value since its peak market cap of ~US$600 billion in August 2000. For such as iconic enterprise, the fall could not have been more dramatic.

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How Did We Get Here?

While much of the market commentary has tried to blame GE’s decline on everything from short-sighted leadership (even under the legendary Jack Welch), expensive (and often inexplicable) M&A deals, and poor cash deployment, the truth is that it has suffered from a not-so-uncommon problem… lack of a future-proof digital operating model.

The company has struggled to reorient its portfolio in time, something for which Welch, Immelt, and Flannery were criticized. It has witnessed sluggish growth, despite divesting what it perceives are “non-core” businesses. Over the years, it overpaid for assets in “legacy” businesses – a typical sign of hubris – e.g., its US$9.5 billion acquisition of Alstom, which represented a doubling down on fossil fuels.

A combination of these short-sighted decisions has led to sluggish growth in emerging areas, such as healthcare. Its healthcare unit is now looking to spin out into a separate and independent company by 2019, despite being an important profit center with US$3.4 billion, or 18 percent in profit, in 2017. Essentially, it accounted for 16 percent of GE’s sales, but ~50 percent of its operating profit in 2017, which is a prime example of the misplaced bets GE has made over the years.

This not to say that GE has failed invest in upping its digital game. It has positioned itself as an industrial leader of the digital revolution, with major bets in software players and the Predix industrial IoT platform.

Digital is still a US$4 billion business for GE, but its aspirations seem dramatically cut short. Former CEO Jeff Immelt established the GE Digital business in 2015 as a part of a grand vision to transform the conglomerate into a “digital industrial” company. And yes, invested US$4 billion into the unit. After Immelt’s resignation last year, Flannery has scaled back these ambitions to focus on what it considered the “core” businesses. As of July 2018, GE was reportedly looking to hive off its digital assets, including Predix.

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But is GE Alone?

Not really. Our recent research on the evolving digital services market reveals that three in four enterprises have failed to realize sustained returns on their digital investments. Leading enterprise executives singled out the operating model – or lack thereof – as the most important crucial determinant of success in this journey. Amongst various issues, 69 percent of enterprises consider organization structure a barrier while scaling up their digital initiatives.

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Enterprises that do not meaningfully reimagine their operating models cannot sustain digital transformation initiatives. Most organizations take a half measure by just focusing on digital strategy. If the enterprise operating model is not aligned with the digital strategy and business model, the desired returns from a transformation initiative cannot be achieved.

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A Future-Proof Digital Operating Model

Enterprises need to focus on five key areas to evolve their digital operating model and sustain transformation initiatives:

  • Organization structure: Leaner organizational structure aligned with the business model and digital strategy
  • Organizational culture: Ownership-driven culture with focus toward experimentation to reduce the fear of change
  • Communication channels: Decision-making aided by 360° communication involving internal and external stakeholders
  • Technology: Broader scope of technology adoption involving the entire value chain
  • Governance: Portfolio-based technology investments with aggregate business benefits such as ROI.

Adding F.I.R.E. to Scale

To achieve digital-first success, enterprises should embrace a F.I.R.E. operating model framework that defines a blueprint to scale up their digital initiatives:

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  1. Fluid organizational structure: Simplifying the organizational structure and its processes in selected pockets of the organization that require agility
  2. Innovative system and culture: Redefining existing processes needs a culture that is driven by innovation and experimentation
  3. Responsive workplace: Creating a workplace aided by intelligent automation and collaboration practices can act as a foundation for any transformation project
  4. Experience-centricity: Moving beyond customer-centricity to focus on the experience of the ecosystem.

Related: Learn more about our digital transformation analyses

Enterprises need to stop looking at digital transformation as an end-goal in and of itself. Rather, it’s a means to an end. When undertaken for short-term incentives and playing buzz word bingo, digital initiatives are more often than not doomed for suboptimal returns if not outright failure. Enterprises need to define the objective functions, and work backwards to establish a resilient and nimble operating model in order to stay relevant and thrive.

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