Tag: Digital Transformation

Avoid This Pitfall In Data-Driven Decisions In A Digital Transformation | Sherpas in Blue Shirts

A business model change often overwhelms transformation initiatives. As I blogged previously, digital transformation collapses business processes into data. When organizations start looking at their business through the lens of data instead of the lens of a business process, serious issues arise. How the people in a company use the data and make decisions about data issues requires significant change management.

Read more in my blog on Forbes

Digital Dynamics Disrupt Market Winners and Losers | Sherpas in Blue Shirts

The effects digital transformation reminds me of the beginning words in Charles Dickens’ “A Tale of Two Cities” – it was the best of times, it was the worst of times, … it was the spring of hope, it was the winter of despair …. One of the interesting aspects of digital transformation is that it affects companies (and their stakeholders) and industries differently. I’ll illustrate this dynamic market situation with several examples as well as what happened at Microsoft and at a major US insurance company and the resulting consequences for their industries. Let’s look at how digital disruption upends market winners and losers.

Read more in my blog on Forbes

Enterprises are Betting Big on India GICs for Driving Digital | Sherpas in Blue Shirts

The rise of India-based Global In-house Centers’ (GIC) role in supporting enterprises’ digital transformation through digital technologies, such as RPA, mobility, and IoT, has been significant in the past few years. In 2017 alone, over 50 percent of the GIC set-ups in India were focused on building/enhancing enterprises’ digital capabilities.

Indeed, enterprises are making their India GICs the hub for developing solutions and products for next-gen technologies, such as machine learning, NLP, predictive learning, cognitive, and blockchain. Recent examples include Samsung, State Street, and Western Union.

Why India?

  • Talent availability: The ability to scale next-gen skills at low cost is a key differentiator. For instance, India accounts for 50-60 percent of the talent pool employed for delivery of automation services from offshore/nearshore locations. A strong base of third-party service providers has also established digital and technology labs in India
  • Mature delivery model: India accounts for 30-35 percent of all nearshore/offshore GIC set-ups, and more than 45 percent of their FTEs. Mature operations and middle-/back-office delivery presence in India give them a strong foundation on which to build their digital efforts. And it allows them to develop more integrated operations, technology, digital, and analytics solutions to address the evolving business needs of their parent organizations
  • Strong start-up ecosystem: India has one of the most evolved technology start-up ecosystems in the world. As of 2016, it had more than 4,500 tech start-ups employing a pool of around 100,000 FTEs. This situation not only allows enterprises to access next-gen technological solutions, but also to tap into the ecosystem to accelerate progress when additional resources are needed
  • Economies of scale and cost benefits: While cost may not be the primary driver, it certainly is a key differentiator. Budgets are always scarce, and needs are always plenty. India offers quality talent at lower cost and allows companies to drive low cost innovation and development

Digital Pinnacle™

How are the best-of-the-best enterprises and GICs leveraging India and other locations for digital? To expand our insights beyond the work we conduct with our clients, we’ve launched a Digital Pinnacle™ survey to learn more about successful GICs’ digital journeys.  We invite you to participate in the survey and/or to share your thoughts and experiences with us at [email protected] or [email protected].

Watch this space for more insights on GICs and for the deep-dive survey results.

IT modernization: Fool’s Gold for Transformation and Gainshare | Sherpas in Blue Shirts

Contracting exemplars for digital transformation are not to be found in IT modernization deals

If your enterprise is expecting digital transformation from a service provider and the incentive in the contract is based on cost savings, you’re likely barking up the wrong deal tree. Why? Because it likely signals that the provider will be approaching it as a legacy IT system modernization engagement, rather than a true digital transformation.

And there’s a big difference between the two, as Everest Group’s Founder and CEO, Peter Bendor-Samuel, talked about in a recent Forbes blog post. He explained that while big IT deals may contain transformational elements such as moving legacy infrastructure to the cloud or DevOps adoption, they are IT modernization programs, not digital transformation, unless they are motivated by fundamental business model change.

Don’t get me wrong: although IT modernization programs are important and big, they are not transformational. And in a competitive environment where experience and reputation count, enterprises need to be able to spot the differences between reference projects driven by the need to modernize or integrate infrastructure and those that genuinely transform their business models.

Here’s some food for thought

At an analyst briefing a few days ago, a senior executive from a global service provider described its firm’s recently completed multi-year transformation project for a major European banking client. I asked him afterwards about the delivery incentives for contract that was inked back in 2014. Had he, the service provider, been incentivized on business model transformation, or just cost take-out? Was there any element of shared risk or outcome-based incentive?

He was delightfully candid: to his knowledge, there isn’t a single major ITO contract in Europe or North America in which a service provider has accepted a gainshare incentive, and his case was no different. Programs of this sort that are being completed now are all about modernization. They are cost reduction exercises, albeit on a huge scale, but they are not business transformation.

Indeed, exemplars of shared risk incentives are few and far between. Even those in the public domain, including IBM’s 10-year, $700 million contract with Etihad in 2015, and ACS/Atos’s 10-year $500 million contract with Allscripts Healthcare in 2011—which had significant transformation scope such as data center consolidation or private cloud implementation—may have shined with the fool’s gold of transformation, as they were likely driven and funded by cost reduction, not business model transformation.

There is one public domain deal that is a genuine transformation exemplar: IBM’s 10-year $1 billion deal with Banorte in Mexico, which started in 2013. It is a top-down, long-term vision, driven by a strategy to deliver value through a customer-centric focus, rather than a requirement to upgrade creaking technology and save cost. The original press release hints at shared risk, and a joint venture-like governance model, in the way it was to oversee the project and measure progress.

But Banorte is an exception. In Everest Group’s own experience of analyzing dozens of ITO contracts over the past three years, gainshare constructs are exceedingly rare in the digital transformation space. And the evidence base of completed digital business transformations, as opposed to completed IT modernizations, is pretty much non-existent.

To gain deeper insights into digital transformation contracting incentives, we will be conducting extensive research among enterprises over the next few months to investigate the mix of output versus outcome-based pricing metrics. Keep your eyes on this space to read more about how the best enterprises are evolving their outsourcing models in this new digital frontier.

What A Retail Bank Learned About The Value Of Persistent Teams In Digital Transformation | Sherpas in Blue Shirts

In digital transformation, it’s an undeniable fact that many companies end up getting nowhere close to hitting their goal. But a major US retail bank undertook a highly strategic project to build the back-end support system for a digital payments transaction platform, and it achieved outstanding results. A compelling high level of productivity. A superb product that delivers competitive differentiation. Plus, the system was delivered in agile, fast way, and the overall total cost outcome was very low. How did the bank achieve this outcome when many companies fail to get traction in digital transformation? I want to share with you how the project played out because I believe the bank’s experience illustrates the future of IT services.

Read more in my blog on Forbes

Technology Influence Pendulum Swinging Back to CIOs | Sherpas in Blue Shirts

For the past few years, the pendulum for control over technology decisions moved into the business, and the stakeholders other than the CIO gained increasing flexibility to deploy technology. Now we’re seeing a bit of a pendulum swing back towards the CIO’s influence. It isn’t that we’re going back to the days in which all technology decision making happened in IT. What’s happening now is a move towards a more integrated approach.

Why is this happening?

As digital transformation projects become larger, their implications cut across business units and across functions. These projects are not small pilots. The transformation is an end-to-end experience that requires substantial change from integrating legacy systems through new digital systems.

As these end-to-end journeys become larger and more complicated, the business is less able to drive them. The CIOs’ existing responsibilities naturally drive them to play a larger role. Also, the project management and change management skills within an organization are often vested in IT or closely aligned with IT. So, IT is in the best position in terms of its skills to manage end-to-end journeys.

Digital transformation involves more than collapsing a business process into a set of data

As companies drive deeper and further into the journey of digital transformation, many aspects of the business model must change, as processes and data are interrelated throughout the organization. As digital transformation starts taking hold and these projects begin making substantive business impacts, the CIO or CTO needs to be responsible for integrating existing enterprise apps and digital technologies to make the digital promise effective.

An interesting phenomenon is happening as the business unit leaders start relying more and more on IT. As the business gives more influence back to the CIO, it results in an imperative for CIOs to become more flexible, more business oriented and sensitive to business needs. It’s also causing CIOs to recognize the need to modernize the IT environment so that the business can operate in a more integrated, end-to-end manner.

The bottom line is IT is increasingly in a better position to deal with large digital projects and end-to-end transformation journeys; so, CIOs and CTOs are gaining a little more influence in technology decisions. Note that I said, “a little more influence.” Currently, CIOs and the business are sharing decision making and influence. But at least for the time being, the pendulum seems to be moving slowly back to the CIO. However, I don’t believe it will swing back to the old command-and-control world of IT.

 

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