Tag: digital

TCS is now valued more than Accenture | In the News

Tata Consultancy Services (TCS) not only touched $100 billion in market capitalization on Monday, but it also in the process overtook the market cap of Accenture, a company whose revenue is almost twice that of TCS.

Rod Bourgeois, head of research in US-based DeepDive Equity Research, said that the root driver of TCS’s success is that it has built a position as the low-cost value player at scale – backed by the execution ability to maintain low costs while still delivering quality work. “This industry positioning by TCS supports good revenue growth, and this low-cost execution supports distinctive margins. Good growth plus distinctive margins over many years produces a huge market cap,” he said.

Peter Bendor-Samuel, CEO of IT consulting firm Everest Group, however, wonders if TCS’s valuation premium would persist over the next few years. Accenture, he said, is further along than TCS in its move into the new digital marketplace. “We anticipate that it will be difficult for TCS to maintain its traditional margins in digital as the business model as we understand it seems likely to demand lower margins. However, if TCS is able somehow to maintain the margin premium by some combination of IP ownership, and digital labour arbitrage, then it will be able to maintain its equity premium,” he said.

Read more in Gadgets Now

Infosys draws up a 4-pillar plan to meet clients’ needs | In the News

With its four-pillar strategy that pivots around “Digital”, Infosys is refocussing on its client’s needs and has chosen to shift away from products, which was Vishal Sikka’s legacy.

At its fourth-quarter results announcement, CEO Salil Parekh revealed the final contours of a four-pillar strategy, which to a lot of industry watchers had resembled predecessor Sikka’s gameplan.

 

So, what has changed? Jimit Arora, Partner, Everest Group, explained that as part of the strategy review, the leadership has been decisive in terms of what aligns with Agile Digital. In this regard, Skava and Panaya were not fitting in strategy and hence being divested. This clear articulation of what the company seeks going forward seems to have convinced industry watchers.

Read more in The Hindu Business Line

What Global Services Can Learn from the Facebook-Cambridge Analytica Scandal | Sherpas in Blue Shirts

Were you as riveted as I was by Mark Zuckerberg’s testimony about the Facebook-Cambridge Analytica scandal?

Here are my key takeaways on the future of the services industry supporting social media and the increasingly digital world.

Data is the New Currency

We are hurtling towards a truly digital economy where data is the key commodity. In such an economy, companies with access to data and, more importantly, the ability to make sense out of it through analytics tools will reign supreme.

It is not difficult to imagine a world where most corporate movements and conflicts center around data – lack of it, desire to access it and acquire better analytics tools, improper/unethical/overuse of it, and inadequate protection of it.

Internet of Things (IoT) and Social Media Will be Mines, but Not Necessarily Filled with Gold

Internet of things and social media platforms can capture zillions of data points, and will potentially be important tools that supply this new currency to the ecosystem. However, market success will depend heavily on who has the business acumen and analytical power to churn data into insights and useful products. This will apply across sectors, but will be critical for BFSI, CPG, retail, and healthcare segments.

Data will not just be hard, like names, addresses, and IP addresses. It will also be soft, such as sentiments, propensity to buy, satisfaction, and the likelihood that a given customer will be a leading adopter. IoT and other data capture/analysis tools will need to change rapidly to accommodate these factors. Whether the claims of Facebook storing 29,000 data points on each individual are true or not, the data it does store keeps track of not just actions but also interest and intent, e.g., browsing but not actually buying a product.

Safeguarding Data Will be Critical – for Companies and Countries

In this new world, data security will be paramount – akin to safeguarding money! That makes cybersecurity a critical prong of a digital strategy.

The U.S. legislative bodies have demonstrated considerable interest in introducing new legislation oriented around this new data economy. My expectation is that the U.S. will mirror the EU General Data Protection Regulation (GDPR,) at least in intent and punitive measures, although the exact tenets may differ, and may be more expansive.

In order to continue to be amenable, operating locations for U.S. and European firms and their back-and middle-offices and IT centers, offshore services delivery countries like Argentina, Costa Rica, India, the Philippines, Malaysia, and Mexico will have to mirror the EU GDPR and U.S. regulations, and upgrade their data protection laws.

The Cold War has Gone Digital

Alleged Russian interference in the Brexit vote and the 2016 U.S. presidential election, purported hacking by Western nations into Iranian nuclear reactors, political propaganda on social media, and the umpteen social media wars fought by even governments and elected officials all mean one thing: the Cold War has now gone digital. Against such a backdrop, technology and digital tools have come out of the back rooms of global businesses and into the front rooms of politics and governments.

With their strong emphasis on digital, we foresee governments increasingly investing in it to out-compete other countries. We also expect the public sector to increase their investments in cybersecurity.

Rise of Content Moderation as an Industry

Huge emphasis will be placed on a breadth of content moderation services – this includes content review, sentiment analysis, context analysis (e.g., distinguishing between hate speech and valid political dissent), and moderation.

While content moderation was previously viewed as low-value and transactional, the intense heat that social media platforms are facing will change it into a far more important process that involves a fair degree of decision-making. We might even see the most complex streams of content moderation leveraging legal professionals as agents. See my next point.

Increased Regulatory Oversight on Social Media Content

Because of the huge impact of social media content on almost everything in today’s world – politics (e.g., Brexit and the U.S. elections), the economy (e.g., Snapchat losing US$1.3 billion after a tweet by Kylie Jenner), entertainment, sports, and arts – content moderation will become a heavily regulated and watched process. Liabilities from social media fails will typically run into billions, and so will penalties.

Senator Ted Cruz raised a question related to the political leanings of moderation agents themselves, bringing into focus the larger issue of biases. Over-moderation will also be under scrutiny, meaning that content moderators will need to walk an extremely thin line.

Exploding Portfolio of Languages

With the explosion of social media across the nooks and crannies of the world, content moderation capabilities will need to keep pace. Facebook already has a team of up to 20,000 professionals moderating content, and that number is bound to leap up significantly in the near term, until AI and automation become smarter.

In our work with global service providers, we are seeing a huge ramp-up in demand for content moderation teams across all developed and emerging markets, and even for languages that were not previously supported by contact center or BPO service providers in any meaningful scale. Mark Zuckerberg himself gave the example of the need to increase Burmese language moderation due to the Rohingya crisis.

The trick for service providers to be successful in such as market will be to have a ready map of where they might be able to access just about any language in just about any kind of scale, because no one knows where the next crisis and related social media content may erupt.

Critical Role of AI and Automation

Finally, but probably the most critical game changer in all this, is the role of AI and automation. At a point it will no longer be financially prudent to support the content moderation process with a people-intensive model, especially with the potential demand that can arise in a matter of hours in languages that are traditionally extremely hard to support. In such a scenario, companies with natural language processing and sentiment analysis tools that can make increasingly smarter decisions related to content management will be successful. Service providers and technology vendors that can develop such tools will find a ripe market to sell into!

While human judgment will still be required, IT tools can potentially be trained in an unlimited number of languages and dialects to take care of the bulk of business as usual content.

That’s as far as the eye can see today. But we are poised to see an exciting new world where entirely new tussles lead to some companies emerging as winners and others fading into obscurity as losers.

I would love to hear your thoughts on this topic, so please feel free to contact me at: [email protected].

Reflections on Atos Global Analyst Conference 2018: Let’s Get Real about Digital | Sherpas in Blue Shirts

Several of us from Everest Group attended Atos’ Global Analyst Conference in Boston last week (April 5-6, 2018). That this is the third consecutive year the €12.7 billion IT services company has held this event in the U.S., even though it’s headquartered in France, makes it abundantly clear how important the North American market is to its growth strategy.

The conference featured an interesting line up of North America leaders, global practice heads, customers, and partners. Here are some of the highlights.

It’s Making Significant Progress Toward its 2019 Ambition

2017 was a year of sizable growth for Atos. It clocked revenue of €12.7 billion, growing at 10.1 percent (at constant FX), with organic growth at 2.3 percent. Its operating margin stood at 10 percent, and its book to bill was at 110 percent. While organic growth is within its guidance, the company plans to leverage its debt-free portfolio to continue its M&A posture.

Partnerships are its Key to Unlocking Value in the Digital Ecosystem

Since 2011, the partnership between Atos and Siemens has resulted in €2.5 billion in combined order intake. In the week leading up to the conference, the companies announced continued investment in their strategic alliance, with another €100 million of investment across AI, data, and cybersecurity. Atos’ ecosystem positioning was also evident as its partnership with Dell Technologies continues to play out in strategic areas including cybersecurity, hybrid cloud, and analytics and big data. It’s clear Atos is looking to tap the potential of the digital market by striking strategic partnerships to accelerate time-to-value.

IoT is Breaking Away as a Mature Digital Market

Within the broad spectrum of technologies that encompass “digital,” IoT is starting to gain significant traction in the modern enterprise. Service providers are moving beyond free pilots as the conversation has turned from experimentation to business value. Atos laid out encouraging progress with actual client successes and measurable outcomes across a range of industries such as CPG, chemical, oil and gas, telecom, etc.

Cybersecurity is Becoming the Foundation of Digital Transformation

In the last couple of years, cybersecurity has become a CXO imperative due to high-profile data breaches and attacks. In the week prior to the conference, Boeing, Lord & Taylor, Saks Fifth Avenue, and Under Armour joined the burgeoning list of recent victims. Atos underscored the importance of security as a bedrock of its digital factory framework, as well as partnerships with Siemens and Dell Technologies.

Digital Trust is Finally a Part of the Conversation

Coming on the heels of the Facebook-Cambridge Analytica scandal, the conversation around data ownership, access, and consent is finally gaining traction. A number of use cases showcased how Atos is establishing digital trust by laying down guardrails on who owns and can access data as their clients embark on digital transformation.

Looking Beyond the Blockchain Hype

Atos fellow Nicolas Kozakiewicz led an interesting discussion about how Atos (specifically Worldline) and Bureau Veritas have partnered on a real-world blockchain engagement named “Origin” to improve traceability of food products. This is one example of the fact that enterprises and service providers are starting to look beyond the initial hype to understand specific problems that lend themselves to a blockchain-based solution. Of course, questions around curation, trust, and scalability remain. And we’ll say it loud and clear here: despite what the market may have you believe, blockchain is not the holy grail solution for every business problem.

Atos’ Vertical Strategy Gets more Definition

In the last few years, Atos has acquired companies in the security, cloud, and data functional areas, in the North American region, and in the healthcare vertical. Healthcare and life sciences is now a €1 billion+ business for the firm, building on its acquisitions of Xerox’s NA ITO portfolio, Anthelio, Conduent’s provider businesses, and Pursuit Healthcare Advisors. It is now tying these investments into a coherent and differentiated value proposition for the segment.

Digital is not Just Front Office – Time to Drink Your Own Kool-Aid

The market is realizing that while digital technologies and operating models impact clients, they can also be used to unlock internal service provider value. In a panel with customer Johnson & Johnson focused on the Future of Work, Atos highlighted how it is using digital internally to improve the employee experience through an interesting chat bot / agent to map and serve personalized employee journeys, dubbed Chief Happiness Officer or CHO.

The Road Ahead

Atos is at an interesting junction as it builds on its core technology strengths around high-performance computing, data analytics, cybersecurity, and IoT, as well its investments to become more meaningful in North America. We’re seeing two distinct “markets” within Atos’ digital services world – IT modernization and business transformation. Conflating the two is suboptimal, as they are driven by different stakeholders with different imperatives, buying behaviors, and needs. While Atos is building on its technology-led story, it will be interesting to see how it builds out its business transformation narrative.

GICs Accelerating the Automation Gear in Their Digital Drive! | Sherpas in Blue Shirts

In the beginning of the digital revolution, GICs were primarily used as hotspots for analytic services. But in their quest to deliver more value-added services to the parent organization, many are accelerating their ability to serve as strategic innovation partners by significantly expanding their portfolio of digital-focused activity. In fact, our most recent Market VistaTM report showed that digital activity in new setups and expansions jumped 900 basis points between Q4 2016 and Q4 2017.

Automation GIC blog_1

Like most organizations dipping their toe into the digital pool for the first time, GICs initially focused on automating processes through technologies such as Robotic Process Automation (RPA). However, in last couple of years, they have also started leveraging Artificial Intelligence (AI) to improve in areas such as customer experience, operational efficiency, risk management, and development of digital products and services for the market. After realizing the benefits of RPA and AI, some of the mature GICs are also now testing the waters for cognitive computing.

Here is a sampling of the digital use cases coming out of today’s GICs:

Automation GIC blog_2

Of course, changes and challenges abound in the rapidly evolving digital environment. Here are several that will impact GICs in 2018.

  • War for talent: Although they’re upskilling/reskilling their existing workforce, GICs will still need external talent for critical skills such as intuition and innovation, design thinking, pattern recognition, leadership, and problem solving. They’ll struggle to find this talent due to demand-supply imbalances.
  • Ecosystem partnerships: We expect GICs to accelerate their technology adoption through increased partnerships with service providers, technology vendors, start-ups, and educational institutions to deliver new forms of value, such as innovation, automation, and speed to market.
  • Delivery locations beyond India: While India will remain a favored location for enterprises to introduce new technologies, our GIC market activity tracking (see our recently released Market VistaTM report) suggests that other locations such as Brazil, Ireland, Israel, Romania, and Singapore may gain traction in near future. Israel is already progressing to support a range of digital functions such as IoT, AI, and data analytics for customer experience and cybersecurity services.

There’s no question that GICs have the ability to drive the digital agenda for their enterprises. To gain a deep-dive understanding of how they’re doing so today, and what they plan to do in the near future, Everest Group is conducting an online survey. This first-ever assessment will be based on our proprietary Pinnacle ModelTM, which identifies what the best performers are doing to achieve strategic business objectives and deliver increased value. We invite you to participate in this survey.

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