The confluence of systemic challenges and changing expectations is spawning technology development in the healthcare industry, driving significant start-up funding, and creating opportunities for healthcare enterprises and service providers alike.
The confluence of systemic challenges and changing expectations is spawning technology development in the healthcare industry, driving significant start-up funding, and creating opportunities for healthcare enterprises and service providers alike.
Enterprises must adopt a new prism through which they view and evaluate digital services in order to realize the full value of their investments
It’s the middle of the week and despite all the caffeine-induced stimulation I am in a cynically contemplative mood.
Reason? The past 6 weeks have been spent attending analyst events and conferences, listening and debating with business leaders and thought leaders on what will make the global services industry click. There has been a flood of “paradigm-changing” buzzwords, new solutions on the horizon, and yes, the predictions that claim to change the world in the next 24-36 months. I’ll not go into the details but if you have managed to find your way to this blog, you probably have already heard these terms – Innovation, Robotics, Automation, Digital, and Internet of Things! (And are probably thinking – “here goes another blog on digital transformation. Yawn!”)
That “yawn” is a symptom of the problems facing the technology industry. Gone are the days when you would look at a new product or an interface and say – “Wow!” I think the last time I exclaimed wow was more than a decade ago when I first saw a GPS map and the smooth voiceover guiding me to my destination. Since then there indeed have been some “Aha” moments but nothing that made me fall off my chair. The reason probably is this – most of our attention has been on innovation rather than invention.
Frankly, all the innovation that we talk about today is a mishmash of just three inventions – computing, internet, and devices. Robotics – check. Automation – check. Digital – check. Internet of things – check! True, we are working on miniaturizing, increasing processing speed, writing hugely complex analytics code, and building beautiful interfaces. Reality check – we are still just exploring the “art of the possible” with the Legos.
What is wrong with that? Absolutely nothing. Incremental invention (or innovation) is a great thing. My issue is with paradigms that are dime a dozen these days. Here is the problem – We are in the age of the “moolah.” Theoretical or conceptual innovation has lesser weight since anything that is not investor-funded and cannot be in hands 18 months down the line, is meh. And that is why the less than smart pursuit to reset and invent terminologies instead of true touch and feel invention. Due to lack of true innovation, buzzwords and bubbles are what keep investors excited and money mobile. And these buzzwords are finally leading to madness.
Each industry event I went to saw analysts and leaders beating each other up with their own definitions of what “Digital” meant – for some it was “business transformation using digital,” for some it was “SMAC,” for some it was “driving growth and efficiency using digital,” while some lazy ones were resigned to “anything that is not analog”! Frankly, this debate made me cringe. It is only when industries lack true innovation that they resort to chest thumping using buzzwords. Global automotive industry is a case in point. Till Elon Musk came along, it was all about lines and curves, three-year warranties, and miles per gallon.
Hence, while I take another sip of my café Americano, I hope a maverick comes along and says, it’s time for telepathic computing, time travel, and an invisibility cloak. Gulp!
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.
Photo credit: Flickr
What if a service provider could build itself from scratch based on the learnings from the past two decades? Liberty Source, launched in 2013 as an impact sourcing provider, is trying to do just that in the highly competitive finance & accounting (F&A) outsourcing market. It has agreed to share its story with us over the coming months as its business continues to scale. We plan to look at how it optimizes its talent model to align to its social mission, its approach to using automation technology in service delivery, and other key issues which it faces as they look to compete in the market.
Our first discussion was with Steve Hosley, CEO of Liberty Source and a veteran of the outsourcing and shared services industries. We hope you enjoy this unique view into what it is like to start a new service provider company that is attempting to disrupt traditional models.
Eric: What is Liberty Source and how is it unique?
Steve: Liberty Source is an onshore BPO provider of F&A services. Our differentiators revolve around transparency and flexibility with our customers. Business is changing fast and flexible agreements are important to keep up with the pace. By flexible, we mean being able to pivot quickly to a company’s evolving delivery needs with a mix of automation and human capital needs.
We have chosen to run our onshore center with a social compass. Our team members – or as we call each other “shipmates” – primarily have a direct military affiliation as spouses of active duty military members or they are veterans themselves. This represents over 70% of our employee base. Our culture continues to be built around the U.S. military community. We believe that this community makes us look and operate much differently than a typical BPO operation. For example, we have “family meetings” instead of the more stereotypical “all-hands meetings.” Our conference rooms are named after famous U.S. military spouses with our Boardroom named after Martha Washington. Our transformation training revolves around the OODA Loop (Observe, Orient, Decide, Act) rather than the typical Six Sigma.
Lastly, we aim to create a business that is known as a transformation center – where customers come to transform their work and employees come to transform their careers.
Eric: Where is Liberty Source finding this military talent?
Steve: Our current operations center is in Fort Monroe Virginia, near Virginia Beach. It is located near five bases, home to over 70,000 active service members and the largest naval base in the world. 85% of our employees have college degrees and of them, 21% of them are holding Masters Degrees. This helps confirm that we have a talented workforce that is simply seeking big company, multi-national experience. The fort has a storied history and is known as Freedom’s Fortress. Under Union General Benjamin Butler during the U.S. Civil War, it became a beacon for tens of thousands of slaves to come and gain their freedom. We believe, that that in small way, we hope to continue in the spirit of Fort Monroe by providing real commercial technical skills and careers to a population of well-deserving and very talented U.S. military spouses and veterans.
Our spouses are allowed to take their positions with them when they are PCS’d (permanent change of station) so now with over 10 percent of our employees operating virtually, we aim to continue to expand our footprint of Liberty Source coverage to all the major U.S. military bases around the world.
Eric: How is Liberty Source structured, legally and financially?
Steve: Liberty Source was created to capture the growing commercial demand for onshore BPO delivery but do it in a manner that was socially responsible. We established ourselves as a Public Benefits Corporation, or a PBC. This allows us to operate as a commercially viable and market relevant for-profit enterprise, while also holding the company accountable to a social mission. Given that this structure and delivery model was new, we elected to initially go to market as a wholly owned subsidiary of Digital Divide Data, which pioneered the offshore impact sourcing market in the early 2000s.
Eric: What successes has Liberty Source had to date?
Steve: We are a little over a year old in terms of go-to-market efforts and have stabilized our first client, a very large contract with 15 different processes. These were brought back from India from an eight-year incumbent. We transitioned in 100 FTEs and have been live with the client’s work since February. Our first client attained the same price as it did in India, and now the work is only three hours away from them versus being in India.
We achieved price neutrality by doing the work more efficiently. The efficiencies have been gained through three primary drivers. As we stated previously the community we are building is loyal, resulting in single-digit attrition this year. What we have found is that this lack of attrition makes us more competitive in that we are not having to spend time and effort on retraining and extensive review cycles. We inherited an ingrained functional tower orientation and migrated it to end-to-end process teams, which really helped reduce rework. Lastly, we are benefiting from building a business in the era of “As a Service” and cloud offerings so our infrastructure is light and efficient. A combination of things like email from Office365, general ledger from NetSuite, payroll from ADP, and all workstations are laptops to provide DRP (disaster recovery plan) flexibility. Most importantly we strongly believe that we are in the people business and that our success in delivering quality service back in the U.S. on this tough economic contract, is due to the fortitude and dedication of our employees. This is most evident in that we successfully trained 100 people in 120 days with a limited background in SAP and SFDC applications to work effectively in those environments.
Eric: How has the organization and its business matured in the short time Liberty Source has been in existence?
Steve: With the monthly delivery to our foundational client, now stable and our second client underway, the Board of Directors of Liberty Source made the decision last month to exit the foundation stage and enter our next stage of growth given that we have proven the viability of the model and have positive momentum. This growth stage includes investing in pursuing other clients. Our second client, also a large Fortune 500 multi-national, is undergoing a transformation and wanted a BPO provider that was willing to be flexible as its strategy evolved. This translates into taking on work that is initially about providing performance-based labor, which they need now, while also working on a project to automate the work, and then eventually rebalance the delivery mix into the appropriate levels required to be done by humans after the automation is completed.
The market and customers have spoken to us, so we have pulled forward the training, building and management of Robotic Process Automation (RPA) in our business model and invested in it earlier than we had planned.
Eric: How does Liberty Source plan to compete in the market moving forward?
Steve: We are targeting the market through a couple lenses. We are starting in the F&A area. We typically aim for companies that share our social mission of employing military spouses and vets. Finally, we resonate with organizations that have already outsourced before and are able to understand the benefits of our model when we explain things like transparent governance, providing a pathway to outcome-based pricing and how we embrace technology.
Because we have proven the model in Virginia, we would like to continue to scale and grow this location. We are also open to creating another center near an existing military population that may align with some other company’s geographic delivery or customer base and shares our social mission of providing opportunities to U.S. military families.
Lastly, part of our social mission is about providing upward mobility to our employees and we believe that embracing automation will over time elevate the remaining work and fulfill this commitment. In turn, our customers benefit from Liberty Source’s pursuit of these technology solutions though continuous improvement.
Eric: What are some of the things on your mind as you look forward to the next steps of Liberty Source?
Steve: We know the market need – it is seeking agility and flexible arrangements. Ones that can provide innovation and benefit to both parties. We feel our model and culture position us well to provide these differentiators.
Further, we must marry up this to the human capital strategy – we are beginning to build a virtual spouse model, which will give us even more elasticity on how to access and deliver talent. We also believe that bringing RPA into the service delivery model will provide flexibility in how we manage operations and our talent pool.
Eric: Thanks for your time and insights – I look forward to hearing more about how the journey has progressed when we speak again.
Photo credit: Flickr
The irresistible force paradox asks, “What happens when an unstoppable force meets an immovable object?” I think it’s the opposite when it comes to the Internet of Things (IoT) and the already booming as-a-service economy: “What happens when an unstoppable force befriends an unstoppable object?”
Most of the discussion to date around the as-a-service economy has been focused on cloud services, SaaS, and the likes of Uber. At the heart of this economy are the fundamental premises that customers – either business or consumer – can “rent” rather than own the product or service, and can do so, on demand, when they need it, paying as they go.
Although wishing for the utopian as-a-service model may be a futile exercise, the IoT can initiate meaningful models for heavy investment industries and quite a few consumer-focused businesses, and as technologists we should continue to push the envelope.
Let’s step back and think about how the IoT can push the sharing economy to its potential. Can product manufacturers leverage IoT principles, and create a viable technical and commercial model where idle assets are not priced, or are priced at a lower rate, thus saving customers millions of dollars? This would, of course, require collaboration between customers and product manufacturers to enable insight into how, when, and how much a customer consumes the product. But consider the possibilities!
One example is the car-for-hire market. Could a customer’s wearable device communicate with a reserved car, notifying it of approximate wait time until it’s required, enabling the vehicle to be productively deployed somewhere else, in turn enabling the business to offer lower prices to the customer and reduce the driver’s idle time? I think the technology is there, and although the task is humongous and with uncertain returns, I am sure someone, (ZipCar?) will experiment with this model at scale in the near future.
Another example is the thousands of small healthcare labs that cannot afford to own a blood analyzer. Innovative manufacturers of these machines could leverage IoT principles to analyze the blood test patterns of individual labs, and offer them a subscription model by which they are charged per blood test executed, or offered a bundled price of $X per 100 blood tests (much like HP’s Instant Ink offering.)
The IoT has the potential to really bring upon us the power of a sharing economy. In the near-term, businesses face challenges in developing a viable commercial and support model. However, they must overcome this in order for society at-large to truly benefit from this once-in-a-lifetime opportunity. They must remember that most industry disruption these days comes from outside the industry. If they don’t cannibalize themselves, someone else will. Thus, as the traditional competitive strategy levers are fast losing relevance, the IoT most definitely should be an integral part of their strategy.
Photo credit: Flickr
“Google is not an unconventional company. We do not intend to become one,” said Larry Page, co-founder of Google, in his original founders letter in 2004, when Google went public. He reiterated that last week, when, on August 10, Google announced a new operating structure, creating the new entity Alphabet, with Google as a wholly-owned subsidiary.
Much has since been said about the company, its leadership, its transition, and its people. However, the more I read about Google (or should I say Alphabet now) and its reorganization, the more I am inclined to draw parallels between the internet behemoth and service providers, both Indian-heritage and multinationals. The way I see it, here are a few lessons service provides could take from the reorganization:
Most, if not all, large organizations seek to carve out subsidiaries or focused business units to reorganize themselves. These units, with their respective heads, are then entrusted with the responsibility to scale the business. With “digital” being an almost-abused cliché, it is not difficult to hear about service providers hiving off separate digital business units. This unit or subsidiary is like a “child” of the “parent” service provider, which retains control of the child.
Google defied the norm. Rather than creating a specialized business unit, it created an entirely new holding structure, effectively making Google, previously the parent, the child, and creating Alphabet as the parent. This umbrella organization now retains control, with the child (Google) getting a tunnel-vision focus.
Lesson for service providers: Service providers that have attained enormous scale and that are at a stage where they can cause industry turbulence by their initiatives would do well to consider possibilities beyond the conventional norms and innovate even at that scale.
Simplicity and control:
When an organization grows too large, it becomes a management challenge to control it. Simplification becomes a necessity. By breaking down its business units into multiple, independent, and accountable entities, Google has created an operating structure that is much like a conglomerate.
Seems simple enough, right? The challenge, however, is that the leadership of such an enterprise has to relinquish control of at least some of its units. By entrusting Mr. Pichai with the responsibility of running the world’s largest internet-based engine, Mr. Page has relinquished control of the company he co-founded. Surely, founders ceding control has to be personally challenging; however, the need to look beyond itself into something grander has clearly worked well for Google so far.
Lesson for service providers: Management of colossal corporations should hand over control of highly functional cash cows to their number-twos and invest their time on pursuing grander ambitions. When the senior leadership (or the board) is loath to relinquish control, it indicates either a lack of faith in its next-generation leaders or an obsessive need to retain control or both, all of which culminate in lack of relevance and eventual obsolescence.
Culture of radical innovation:
The mention of Google always has the word innovation lurking around and for good reason. Google has always been known to be innovative in the way it perceives and solves problems. When it seemed to reach its comfort zone, it stirred the pot vigorously and conveyed its discomfort with status quo or even incremental changes.
Lesson for service providers: Service providers should embrace such an outlook towards change and not be hesitant to adopt a radical approach. If a US$66 billion enterprise with one primary revenue source can do it, so can a much nimbler service provider with lesser risk exposure and higher market stability.
Google has illustrated that moonshot vision and out-of-this-world ideas are not a necessity to become what it is. Pursuing what they believed were smart ideas and chasing them with relentless passion has given us products that have almost become a necessity.
Often, during our interactions with service providers, we discuss their vision and philosophy about next-generation technologies and services. We seldom see those being relentlessly pursued, as the ideas fall victim to the next flavor of the day, management changes, or “change of strategic direction.”
Lesson for service providers: The trick lies in being fast and nimble so that the idea is commercialized before the market moves on, and also relentless, so that innovators aren’t distracted by the whirlpool of daily business.
Last but not the least nicety of Google’s restructuring is its ability to placate its investors. While the same can be said of many other firms, it is Google’s call to action and time to market that stand out. By creating a more accountable structure, Google alleviated a lot of investor concerns, which had been growing owing to the company’s cash-burning yet low-yielding moonshots.
Lesson for service providers: If your initiatives, especially in the digital landscape, do not resonate with your investors, it is time to reconsider those. Service providers should create a more accountable structure for their digital initiatives and appease both customers and investors.
As much has already been written about Cognizant and its Trizetto acquisition – including Everest Group’s take: The New “Big Blue” of Healthcare IT? – it is time for us to do a post-facto check on Cognizant’s healthcare IT services business, and ruminate on the state of the healthcare IT market.
Let’s put Cognizant’s numbers into perspective with our growth estimates for the overall healthcare IT industry. With the healthcare industry set to grow at a CAGR of 12 percent through 2020, and given what we have seen since we published the following in 2013, the market size projections for healthcare appear well on track to humble the pessimists among analysts.
While services spending growth has been steady, especially for the payer and provider markets, the innovation side of healthcare IT has been sulking for a while. Yes, “sulky” is the word that comes to mind when you sit listening to a panel discussion on digital innovation at #AHIPInstitute2015 and not one panelist cites an example of innovation from the healthcare space. They either talk Uber or Airbnb. This is unfortunate.
Despite the huge numbers up for the taking, a big spike in the booming healthcare IT market will not come by unless there is a dawn of new and nimble technology start-ups that change the game of healthcare enterprises looking to move away from bespoke solutions to as-a-service models that reduce their time-to-value exponentially. For good or bad, the healthcare industry in the U.S. has always had an umbilical cord connection closer to Washington D.C. than to Silicon Valley. That is probably what curbs innovation in this industry from breaking out of its shackles to produce its own Ubers and Airbnbs. In my opinion, except for a few fitness/therapeutic/diagnostic wearable-focused investments, little causes titillation in the healthcare technology start-up space. Despite all the brouhaha on the B2C shift, consumer-focused investments are coming more from the enterprise IT side than from third-party innovation. Frankly, do we want to be in a world where Ford not only makes the cars but also drives the cabs? Hence, the question is – in a world dominated by technology vendors (Epic, GE, McKesson, and Philips) are we ready to declutch third-party innovation and let it bloom?
There was a reason we titled our blog about Cognizant’s acquisition of Trizetto, “The New Big Blue of Healthcare IT?” The simile was not to herald the dawn of a new behemoth, but to provoke the sort of nimbleness and courage in healthcare IT industry that IBM (the original Big Blue) has shown over the last many decades to stay relevant in the overall technology industry. In an industry with a muffled voice of innovation (few exciting start-ups), a few big bullies (large technology vendors, EMRs, etc.), and well-meaning presiding deities (government and legislatures), the push for change will have to come from outside.
Why did I harp on Cognizant while writing this blog? It was a rank outsider in the healthcare technology industry (well, almost, given its offshoring, pure play service legacy). Even if it becomes a US$4 billion healthcare enterprise, it will still be a fraction of the market. Via its investments, growth, and outlook, what it has given the industry is a peek into the kind of bravado that can make this market rock. We require more of this bravado. But, if it is going to be just once in a blue (pun unintended) moon, it will be rank boring. So, as the Joker would have said, let’s put a smile on that face!
This is the first in a series of blogs Everest Group is publishing on exciting opportunities and implications to watch out for in the healthcare IT services market.
We regularly make small adjustments to our PEAK Matrix™ assessment methodology – minor tweaks to fine-tune our approach to align with market evolution. This year, however, we have decided to undertake a more comprehensive modification to the assessment.
Why mess with a good thing? To make it even better and more relevant. In particular, we’re making changes to keep pace with the rapid evolution of IT and business process services, particularly as innovation, intellectual property (IP), digital, and technology-driven solutions take center stage in the delivery of these services.
While our fundamental principle of using a fact-based assessment remains core to our methodology, we are enhancing our PEAK Matrix assessment methodology in three principle areas.
Together, we believe these changes assure that our assessment framework continues to be aligned with the emerging and future direction of the global services market.
We expect these changes to have a couple of implications for service providers. First, those providers that bring innovative programs to their clients will be recognized for their efforts – and expense. Furthermore, overall scale will have less impact on the providers’ ratings, assuming they demonstrate high levels of innovation and good business outcomes.
The recipients of these services, the enterprise buyer, will have a much clearer view of each provider’s ability to deliver innovation and outcome-oriented solutions. And they will gain insights that will help them better understand how service providers’ capabilities align with future objectives.
As the dynamic global services industry evolves, we will continue to make adjustments to our PEAK Matrix assessment methodology – some minor, some major – to ensure that it retains its universal relevance and value.
Because sometimes messing with a good thing is a good thing.
Everest Group had the opportunity to attend IBM’s APAC analyst day in India on 11-12 June 2015. Business and technology leaders from IBM presented their offering portfolio, demos, and real life transformative case studies with active participation from their clients. One thing that stood out was how Big Blue is communicating not only its technology vision, offerings, and organizational commitment toward open technologies, but also its internal transformation to serve clients and reclaim its technology leadership position. It realizes that the “old IBM” ways will no longer work, and it needs to become more nimble and innovative, and play an important part in shaping the technology disruption the digital age has brought onto us.
Earlier this year, IBM aligned its go-to-market strategy around key industry verticals. It also created internal structures to make myriad of its offerings, technology groups, services business, sales and marketing, and its research lab work in sync. It believes this will help create solutions that are required to leverage digital technologies, and thereby not only redefine itself, but also create a new ecosystem of product and service providers around it.
Going back in the history, IBM truly transformed the technology industry when it invented the Mainframe. And while today’s technology becomes tomorrow’s legacy, no one can deny that the Mainframe was a historical system that shaped and created the technology industry as we know it today.
However, since then, IBM became a nuts and bolts company providing middleware, desktops, and back-end efficiency solutions focused on enterprise computing. While it did introduce incremental innovation and acquire many technology companies, it did not play a meaningful role in shaping the industry vision. It continued to invest in its research labs, and its products were always considered leaders in enterprise computing. But it hasn’t been a leader in true enterprise technology transformations such as the rise of ERP, virtualization, SaaS, or IaaS.
This has changed. The analyst meeting demonstrated that digital has become the new pivot around which IBM will take back its earlier pedestal position of being the company that forms, shapes, and guides the technology industry. This story was ably supported by multiple client interactions during the event. Clients say that this is not the IBM they had earlier worked with, or had expected to work with.
IBM’s much publicized partnerships with digital native firms like Facebook and Twitter, and leading user experience and design companies such as Apple, are an important but small part of its digital journey. The bigger part is moving away from its traditional way of working, and realizing that it must play a key role in the digital everywhere environment. Its increased focus and core commitment toward open technologies is highly apparent. And it has always had the technology, scale, and reach to transform businesses. Now, the muscle it’s putting behind Softlayer and BlueMix, its mobility play, and its investments in analytics, the Internet of Things (IoT), and Watson have the potential to transform not only its clients but itself as well.
With its go-to-market alignment with industry verticals, IBM can bring effective solutions to clients looking to transform their businesses. However, disruption in most industries is happening from the outside, (e.g., Uber to the taxi industry, Airbnb to hospitality, Apple Pay to banks, and Google cars to automotive), rather than within. Therefore, a rigid structure around industries may not work well. IBM will need to ensure that its technology, industry verticals, and innovation groups talk to each other, an area where it has historically struggled.
Moreover, monetization of some of these innovations will be a long, drawn out process. IBM has had significant growth challenges, and has shed many of its businesses. For its growth and profitability to return –which should be the big drivers along with reclaiming its innovator status – IBM has to do a lot more. It has historically been viewed as a company that helps clients’ operations run more efficiently; it now needs to carefully position and communicate its willingness and ability to partner in clients’ growth.
In addition to the digital technologies IBM possesses, other of its strong strategic initiatives include: internal transformation around reskilling the workforce toward innovation and design thinking; commitment to open technologies; collaborative alignment between its services business and its technology groups; renewed commitment toward client centricity; improved sales effectiveness; and focus on solving core industry problems.
IBM’s changes have been pushed right from the CEO’s office, and IBM executives believe results will be visible in the next 6 to 12 months. IBM needs to play a dual role in which it helps some clients disrupt their industries and business models, and assists others sail through the digital disruption. It again needs to become a technology innovator. While it’s a difficult task, we believe it has the needed technology, vision, and now internal alignment to achieve these objectives.