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:
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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The first thing to think about in the nature of Internet of Things security is that you have to recognize this is not “one and done.” The fight to secure your IoT environment is an activity that continues in perpetuity. The resources you initially allocate will be substantial, but they will escalate and costs will increase over time. It’s a very different way to think about a process than the services world’s normal engineering approach where you have a large up-front cost that becomes smoothed out, so you spend less and less money on it over time.
In the IoT, we can segment into two kinds of security. And there are different ways you approach the two. And both have a different level of funding.
The first segment is security at the edge, or device level. Here you need to be sure that each level is secure and monitored, from the device at the edge all the way through the network and the apps in an ecosystem. Think of this as a hygiene or compliance role in which you need to ensure that security exists, it’s adequate, you monitor it for effectiveness, and that any attack is limited and limited to only a small segment and can’t spread. Those are the things you need to look for at the compliance level.
The second kind of security is around architecture and end-to-end monitoring. This requires a thoughtful end-to-end view of the objective you want to accomplish through the IoT, how you view security in the total ecosystem, how you architect it into systems, and how you monitor it at a systems level for the entire process that you define within the IoT. This security level typically reports to the chief security officer and requires a different level of thinking, talent, and investment.
If you’re not doing both the hygiene approach and the architectural view, black hats potentially can use any holes to corrupt the whole chain.
Even though you believe you have adequate security by levels, that doesn’t mean you’re safe. The inventiveness of the black hats is so robust that you’ll have to continually invest in protection. You first need to invest in architecting your solution from end to end and then continually monitor it and adapt it as new threats emerge.
One thing you can be sure of is that threats will continue to emerge.
Increasing maturity and new industry entrants are driving an exponential increase in demand for technology in BPS, and service providers are partnering with technology providers to access the latest technologies at a lower overall investment for the service provider
Shakespeare said a rose by any other name would smell as sweet. However, what the eternal bard did not say but easily could have is that it would not have sold as well. The rose that’s catching fire now in the marketplace is as-a-service offerings. But service providers are confusing the market.
As-a-service offerings take a business function (CRM, HR recruitment, etc.) and provide it on a consumption basis (pay for it as used) and bundle the entire end-to-end process including hosting the application, the network and often some business function.
It’s interesting to see these function ideas brought to the market, and it’s the most powerful and disruptive force in services today. Providers range from startups such as ZenCash, which delivers receivables as a service, to more established companies such as Salesforce for CRM as a service. Many of the Indian providers’ as-a-service offerings come in the model of platforms or as managed services.
No matter what the providers call their offerings, all the marketing terms are names for very similar business constructs. The providers seek to differentiate themselves by naming the offering using different terminology in an effort to claim that they’re different. But the market largely ignores these efforts. Why?
Because, a rose by any other name may be just as sweet, but people looking for roses don’t stop to look at flowers called something else. Buyers adopt offerings that they recognize as something they want. The sweet thing the market now recognizes it wants is the power of consumption and end-to-end functionality — which it recognizes as buying an “as a-service” offering.
Providers can deliver an as-a-service offering off a common platform or build it unique. But the market is signaling that “as-a-service” has become the recognized term for what the market wants — simplicity and easy-to-adopt functionality instead of past experiences with big, complex projects that require long lead time and are complicated and risky to implement.
Calling as-a-service offerings by different terms just confuses the market and slows down growth.
Photo credit: Yannis
I recently had a briefing with HP Enterprise Services about HP BPO Flight Deck, a visual F&A performance monitoring and reporting tool focused on processes such as order to cash, source to pay and record to report. The flight deck is based on MooD software, which produces visual performance reports based on an enterprise business model that is built to reflect the client’s organization. This typically includes interrelationships between components and processes. HP is offering the tool as part of its BPO proposition in every deal, to engage with clients on transforming processes from the earliest stages of a procurement cycle.
The intention is to help clients increase visibility of F&A performance across the organization to manage operations better and to help with achieving business outcomes. Views can include specific initiatives such as electronic invoicing or dynamic settlements. HP also highlights the application in multi-sourced outsourcing deals, with HP BPO Flight Deck used to measure and monitor service provider performance as well as outcomes and issues. Other features include trending information and scenario-based planning capabilities, e.g., what would be the knock-on effect on processes if certain factors were altered.
This tool could potentially addresses the kind of F&A issues that Everest Group’s buy-side clients often highlight to us, including:
Getting that end-to-end view of processes is not easy though. One of the biggest challenges that organizations face is getting their data in order. Data challenges typically include:
HP and MooD have worked together to address some of the typical data integration issues that organization face when seeking this kind of end-to-end view of operations. The offering includes pre-built data dictionaries, templates and ready-built connectors for major enterprise systems and their reports.
Deployment can be done by degrees starting from a consulting engagement to map out the enterprise business model, and data taken for a sub-set of processes. A hosted proof of concept can be built, if required, before the full deployment is taken live in the client’s production environment. The software can also deal with data quality issues as part of its extract, transform and load (ETL) processes which include automated checks and fixes for standard types of issues, such as different date formats or typing errors in standard terms.
With HP BPO Flight Deck, HP aims to address many of the data challenges that organizations face when going for global process views but at the end of the day, organizations still have to get their data practices in order to be able to make the most of such tools. That said, in these days of intense global competition in business, there are strong drivers, such as year-on-year efficiency and profitability improvement targets, for coordinated group-wide action for every organization to improve its data. Many organizations are also proactively looking to gain end-to-end views of their F&A operations.
HP’s product addresses growing demand and adds an edge to its F&A offerings with the flight deck and its price built into every deal. It also supports HP’s strategy to provide a new style of BPO, based on data and performance analytics.
HP’s challenge is to help potential clients build the business case for the technology. As part of this, it highlights the case of an oil company that saved circa $23m in the first six months of deploying a similar MooD-based tool for its IT. HP believes the savings were possible because the client’s management team got visibility of problems and was able to take immediate action to fix them.
HP BPO Flight Deck has been deployed at one major client in the U.S. and is currently being implemented for another client in the UK.
In the earlier days of the recruitment process outsourcing (RPO) and broader talent management services industry, partnerships between providers as a means to deliver enhanced service offerings and greater geographic coverage were common. Yet, in the past couple of years, many of these partners have taken the M&A path in response to increasing buy-side desire for consistency and standardization in their recruitment operations.
The Pinstripe/Ochre House merger – announced on July 18, 2013 – certainly plays to the market’s preference for a single provider model. Yet, in their case, the drivers extended beyond buyers’ preference for a single provider model, complimentary capabilities, and a time-tested partnership construct. In fact, Pinstripe could have faced serious client, potential new business, and time-to-market losses had it not taken the merger route.
So what does Everest Group see as the key implications of Pinstripe’s and Ochre House’s union? As excerpted from our just-released breaking viewpoint on the merger:
For more details on the merger and its impact on the market – both buy-side and sell-side – please see Everest Group’s breaking viewpoint, Pinstripe Merges with Ochre House: Demise of Partnership-Based RPO Model.
Service Delivery Automation (SDA) encompasses cognitive computing as well as RPA (robotic process automation). Software providers that provide SDA come to market with an enterprise licensing structure that basically requires the customer to license a number of agents for a specific length of time. But in using this licensing model, service providers unintentionally constrain adoption and open the door for competitors’ differentiation. Along with the average Joe becoming increasingly accustomed to downloading an app to a smart phone in seconds and receiving immediate gratification utilizing powerful, easy to use technology comes uncomfortable questions for corporate IT. “Why can’t you do this? If it only cost me $5 to get this from Apple, why does it cost me millions to get a much worse product months, if not years, later from you?”
Behind this new sense of entitlement is the growing reality that these new apps offer dramatically increased levels of automation, allowing for activities that were previously the providence of experts but are now self-service, giving the user far greater control. Even more profound is the complete reorientation of perspective as technology is developed and deployed from the consumers’ ease-of-use rallying cry, increasingly far away from delivery organizations’ focus on efficiency and corporate control.
These same secular forces that are creating a profound change in IT are also beginning to drive change in shared services organizations and how they address business processes. Think end-to-end processing for talent management and learning in HR, and purchase-to-pay and record-to-report to name in F&A. As with their IT counterparts, these processes are increasingly being automated and shifting toward a self-service delivery structure. This not only reduces costs but also places increased power in the hands of the user community.
Now those internal groups that deliver IT and business processes are facing a harsh reality. They are no longer dominated by stovepipe delivery organizations designed to capture the efficiency of specialization, centralization and labor arbitrage. Rather they are quickly turning into flatter organizations that are delivery-oriented around a user’s view of the process, with emphasis on the transparency of information flow, and process designs that prioritize ease of use over traditional corporate command and control.
As these changes rework the business process landscape, they portend coming shifts in how third parties will be utilized. It is likely we’ll see a reversal in the current trend that allows for increased provider control of processes, with firms increasingly choosing to design solutions that place control within the firm and wherever possible in the user community, thereby also reversing the current provider push for outcome-based pricing. And increased levels of automation may diminish the amount of labor arbitrage which is utilized.
All of this is best summed up by a client who recently told me, “I am no longer looking for a delivery vendor that provides high quality silent running. I am now looking for a transformational partner that will help me implement my new vision and then play a supporting role.”
More and more companies are recognizing the value of end-to-end business process management as it breaks down functional and organizational silos to enable a more holistic approach to enterprise performance management.
Of the common sets of end-to-end processes – which include Source-to-Contract (S2C), Procure-to-Pay (P2P), Order-to-Cash (O2C), Record-to-Report (R2R), and Hire-to-Retire (H2R) – P2P is most often identified as the priority for optimization. There are two key drivers of this trend. First, compared to other end-to-end processes, P2P activities are typically more common across the enterprise, making them easier to standardize. Second, the business case for P2P is frequently the most compelling. Through process standardization, workflow automation, system integration, and rigorous compliance enforcement, companies have been able to achieve rapid and significant spend and operating cost savings while simultaneously gaining the ability to better manage risk.
A case in point: a global software and products company achieved an initial operating cost reduction of 35 percent. It subsequently realized spend savings of US$700 million (~9 percent on a spend base of US$8 billion) and captured more than US$10M in Early Payment Discounts (EPD). The savings and benefits accrued generated a break-even on the business case in less than six months.
Based on Everest Group’s experience, one of the most critical success factors of P2P transformation is the institutionalization of a common set of well-defined performance metrics across the entire organization, including both internal and third party delivery partners. The performance metrics should be closely linked to desired business outcomes, and applicable across segments and geographies. Moreover, both P2P efficiency and effectiveness should be easily quantified, measured, and benchmarked.
The table below presents a P2P metrics framework that starts with clearly defined business objectives that are measured by a small set of outcome-based metrics to reflect the overall efficiency and effectiveness of the P2P process. The diagnostic measures are designed to identify specific process breakdowns and improvement opportunities, and are tracked and reported at the operational level.
We strongly recommend companies follow a structured approach to develop a holistic P2P performance management framework:
There’s no question that the old management adage “You can’t manage what you don’t measure” holds true in the case of end-to-end process management. Having a common set of appropriately-designed performance metrics is both an enabler for and indicator of successful P2P transformation.
It’s all the rage. Global organizations are starting to take a more “user” centric view of process workflows and operations. As opposed to organizing their delivery capabilities around discrete functions like procurement, finance and accounting (F&A), and HR, the world’s leading firms are organizing around end to end (E2E) processes like Procure to Pay, Hire to Retire, and Record to Report. But is E2E simply a “Hail Mary” pass, a wishful attempt to find value beyond labor arbitrage? Or, as evidence suggests, are the benefits – e.g., better EBITDA, tighter compliance, and greater financial control – real and proven?
A comprehensive CFO survey IBM conducted last year clearly demonstrated that organizations that consistently outperform their peers in EBITDA do, in fact, organize and deliver their global services around principals consistent with an E2E approach. Additionally, these companies all have standardized finance processes, common data definitions and governance, a standard chart of accounts, and globally mandated, strictly enforced standards supporting these E2E processes.
Everest Group’s experience supports IBM’s survey results. And while it seems clear that every large, complex global organization should be chasing E2E in order to improve results and reduce risk, it’s important to note that doing so is neither easy nor without challenges.
To realize the benefits of E2E, Everest Group typically recommends a developing a three- to five-year roadmap with a heavy focus on building the business case, defining the target operating model, and managing stakeholder expectations and change.
Yet even the best game plan will have to address key challenges, including:
No, E2E is not a Hail Mary pass, but rather a sustained and balanced drive down the field for a game winning touchdown. Success will require strong leadership, talented personnel, technology, a sound game plan, and solid coaching staff to pull it all together, building momentum and confidence along the way.
Related Blog: Building a Robust Global Services Organization