Tag: next generation global services

Pick or Pass on BPaaS? | Gaining Altitude in the Cloud

While buyers have typically approached, evaluated, and made third-party business process service delivery sourcing decisions at the operational level, and separated out decisions on the underlying software applications and/or technology infrastructure, they are increasingly realizing the value of looking at IT and BPO in an integrated manner.

Enter Business-Process-as-a-Service (BPaaS), a model in which buyers receive standardized business processes on a pay-as-you-go basis by accessing a shared set of resources – people, application, and infrastructure – from a single provider.

There are many potential upsides of BPaaS…but is it right for your organization? The answer lies in evaluating the model based on a holistic business case that looks at a range of factors including total cost of ownership (TCO), the nature of the process/functional area under consideration, business volume fluctuations, time-to-market, position on the technology curve, and internal culture and adaptability to change.

Let’s take a deeper look at the TCO factor, which must be analyzed in terms of both upfront and ongoing costs for all three layers of service delivery.

TCO cost elements to evaluate BPaaS versus traditional IT+BPO model

For our just released research report, Is BPaaS the Model for You?, we developed and used a holistic evaluation framework that compared TCO for BPaaS and the traditional IT+BPO model across three buyer sizes: small (~US$1 billion revenue/5,000 employees), medium (~US$5 billion revenue/20,000 employees), and large (~US$20 billion/100,000 employees.)

Our findings?

Small Companies

BPaaS brings big benefits. It is independent of deal duration, delivers 35-40 percent savings compared to traditional IT+BPO, enables leverage of the provider’s economies of scale, provides access to otherwise cost-prohibitive technology, and allows entry into BPO relationships that as stand-alone’s lack the necessary scale. Small buyers are also highly amenable to BPaaS’ process and technology standardization requirements.

Medium Organizations

BPaaS is pretty impressive. It delivers 25-30 percent savings over the traditional IT+BPO model, which while less than what small buyers reap is still significant in driving a successful business case. Medium buyers’ increased scale allows them to capture some of the economies of scale benefits even in the traditional IT+BPO model, thereby having a lower differential between the two models.

Large Enterprises

BPaaS is not too shoddy. While it only provides ~10 percent cost savings compared to traditional IT+BPO, the absolute differential in cumulative TCO can still be substantial given the high base. And, in certain buyer-specific situations such as technology enhancements, exploration of new BPO/IT infrastructure relationships, and expiration of legacy technology licenses, BPaaS can be a good model for large buyers to evaluate. But…their tendency to balk at following a tightly defined, standardized approach – unless significant configuration features offset a good portion of customization needs – reduces BPaaS’ appeal for them.

As you see, our evaluation framework shows an inverse relationship between buyer size and cost savings from BPaaS – i.e., the larger the buyer, the lower the percentage savings. In fact, as buyer size increases, the scale benefits of renting versus owning infrastructure and applications can dip into the negative column over ten years. Of course, the assumptions in our BPaaS to IT+BPO model analysis are ideal, and your organization’s individual reality may be quite different.

To learn more about how to evaluate BPaaS’ applicability to your company, select a BPaaS provider and solution, and implement the selected solution, please read our report, Is BPaaS the Model for You?

When is a “Hybrid” Sourcing Model not a Hybrid? | Sherpas in Blue Shirts

During a panel on which I participated at the recent Shared Services and Outsourcing Week conference in Orlando, the topic of “hybrid models” came up again. Most of the market bandying about the term were illustrating their, or their clients’, “sophisticated” mix of outsourcing and captive shared services, when in reality – with all due respect – they were actually describing a non-complementary mish mash of uncoordinated legacy delivery model decisions made across business units, operating entities, etc.

If we are to get any tangible – and extra – value from hybrid model, we need to get real about what creates that value. Further, a hybrid is not appropriate for every process or function.

What is a real hybrid sourcing model? Let’s look at automobiles as an analogy. You may have an electric motor-run Chevy Volt and a gas-powered Honda Civic in your garage, but that only means you have two different types of cars that get you to your desired destination using different power sources. On the other hand, the hybrid Toyota Prius uses both gas and electricity, switching back and forth between the two power sources as needed to achieve optimum efficiency, performance and cost savings (and, of course, to be kind to the environment.)

By extension, true hybrid sourcing combines the strengths of outsourcing and captive shared services into a single model designed to capture added value – e.g., delivery speed and flexibility, operational resiliency and investment leverage – not available, or not as easily attainable, when integration of the above two delivery models is lacking.

Against that description, I encourage you to step back and ask yourself, “Is the services delivery model in use within my organization really a hybrid, or did I, or my service provider, simply rebadge it with the provocative, sophisticated-sounding hybrid moniker?”

Of course, the name you ascribe to your delivery model isn’t of much consequence. But it is critically important to determine whether or not a hybrid model is appropriate and advantageous for your organization, as there are times when separate outsourcing and captive shared services models are a better fit. Key indicators that hybrid is right for you include: 1) if there is a service delivery platform that can be shared and re-leveraged; and 2) if a given process is prone to volume and budget changes.

So…is your delivery model really a Prius? Should it be?

Social Network Platforms: A Missing Link in Global Delivery Models | Sherpas in Blue Shirts

Put aside for a moment the growing noise about social networking being the next bubble, as users are flooding to social networks like there’s no tomorrow, and both corporations and non-profits are jumping on the bandwagon at a dizzying rate to build brand and interact with customers and targets. What’s surprising to us is that although global service providers have invested heavily in creating well distributed global delivery models, they have largely neglected social networking’s capabilities to improve and augment this delivery model. Rather than building out valuable social network or collaboration platforms, they instead have continued to invest in knowledge repositories and Q&A forums for answering queries, mostly technical in nature.

Everest Group’s just completed research report analyzed the key challenges with today’s global delivery networks, and evaluated the role a well designed social network can play to address these challenges. Key global delivery network challenges include:

  1. Project delivery: The distributed nature of a global delivery model makes the difficult task of project delivery even more challenging (e.g., decision-making, accountability, inconsistent practices, coordination, and collaboration costs).
  2. Staffing: Service delivery managers cite staffing as their biggest challenge. They believe that the needed resources are available in the system, but identifying and on-boarding required staff members in a reliable time frame are a critical challenge in a distributed delivery model.
  3. Communication overload: Efficient global delivery requires finely-detailed process, methods, documentation, and communication. While this is of course advantageous to clients, it creates tremendous overhead for the provider.
  4. Training: As the churn rate is high, service providers keep on hiring new talent, but all new hires require basic training to become productive.
  5. Knowledge sharing: There is a plethora of knowledge available within providers’ systems across service lines. Yet, apart from the typical Q&A forums, little investment has been made to enable tapping this vast source of knowledge during a project life cycle.

To address these challenges, service providers need to revamp their existing silo based social networks and enable them for global delivery. Indeed, a social network can have positive impact on delivery management, staffing, communication, training, and knowledge sharing.

Internal social platforms of service providers

The crux of this next generation platform is its integration across different global delivery management and other systems to support staffing, skills training, unified communication, and project management. Service providers can even extend these platforms to their strategic clients, enabling improved project governance, a partnership model, reduced management overhead, and co-creation of IP.

Our research suggests use of an Integrated, Tracked, Cool, Holistic (ITCH) framework to create next generation social platforms that can seamlessly integrate with global delivery systems and enhance the delivery of services.

Bottom line is that those service providers that transform their stand-alone and silo-based social platforms to enable them for global delivery of services will be the winners in the game.

To learn more about social networking and global services delivery, download the report Social Networks for Global Delivery – Get that ITCH.

Helping Pharma Cliff Dive | Sherpas in Blue Shirts

In late November 2011, the world’s largest branded drug by revenue – Lipitor® – went off patent. The forecasted fall in revenues for Pfizer is expected to knock it off the perch of being the world’s largest pharmaceuticals firm. By 2015, industry analysts expect the patent cliff (revenue loss due to patent expiries) to cumulatively knock out more than US$200 billion in pharma industry revenues. For an industry that brings in just under a trillion dollars annually, this is a major revenue hit.

Exacerbating the problem is continually dipping R&D productivity that has constrained pharma firms’ capacity to replenish their pipelines. While R&D spend has doubled to nearly US$50 billion annually over the last decade, new drug approvals across the industry have more than halved.

To manage this unprecedented change, pharma firms are taking a re-look at their business profiles and cost structures.

Emerging market expansions are the industry’s new mantra for growth. IMS, a leading provider of information services for the healthcare industry, estimates the industry’s share of revenues from emerging pharma markets to double to nearly 40 percent by 2015. And all players, from the big pharma companies to generic manufacturers, are expanding their footprint in these markets, aggressively building and buying distribution capacity, and expanding sales and marketing networks. For example, Pfizer teamed up with ITC in India last year to leverage its distribution network to sell drugs to rural consumers.

In the face of steep revenue declines, productivity and cost optimization are but a given. The R&D function is being restructured into leaner and more collaborative partnerships, with growing industry-academia interfaces. For example, in 2011, Pfizer aimed to reduce its R&D budget by US$1.5 billion.[1]. And in the commercial function, sales force reductions have become the norm. In December 2011, AstraZeneca announced that it would cut its U.S. pharma sales force by over a quarter (even as it announced plans to scale up its emerging markets sales force).

Further, as the industry tries to manage its risk profile, it has begun to diversify into new consumer-centric business areas including generics, consumer healthcare, diagnostics, nutritionals, health management and animal health. For example, GlaxoSmithKline (GSK) today lists the creation of a ”diversified global business” as its top strategic priority.

In this era of significant change, technology and business service providers have a great opportunity to exhibit leadership and step up to stronger partnerships with the industry by:

  • Helping drive innovation in the pharma industry
    • Bringing in ideas from other industries, not just in R&D, but also in manufacturing, retail, and distribution, e.g., helping pharma improve field-force design based on fast-moving consumer goods (FMCG) principles, and its manufacturing and supply chain per ideas from logistics
    • Enabling a more effective use of technology to drive business results, e.g., through use of collaboration technologies to improve research, and by leveraging digital media more effectively for a more effective consumer presence
  • Helping pharma firms address the myriad of complexities they face as they enter and expand in emerging markets, e.g., establishing local market relationships, navigating regulatory issues, building distribution setups and partnerships, structuring low-cost solutions, etc. Established service providers with significant emerging market presence also have the potential to enable the industry with more holistic propositions to address a number of these complexities end-to-end.
  • Helping the industry optimize its cost structure:
    • Improving field-force effectiveness – where nearly one-third of pharma spend is concentrated – through enabling sales force management tools, data and analytics (in next generation areas such as effectiveness research and digital analytics) and back office services (sales operations)
    • Driving manufacturing and supply chain efficiencies through more integrated technology architectures (e.g., redesigned ERP implementations, and emerging rollouts)
    • Managing regulatory complexity (an area in which pharma firms spend a couple of billion dollars each year) through building validated, compliant technology environments and cost-effective BPO services in areas such as pharmacovigilance
    • Driving R&D efficiencies through collaborative platforms, and helping manage large volume high-throughput data environments
    • Increasing flexibility in the face of rapid change, e.g., through cloud-based models

Today, service providers seem focused on servicing the pharma industry’s IT-BPO requirements largely in a “vendor” capacity. Traditionally, the pharma industry’s cash rich and risk-averse culture often drove this arms-length positioning. However, in this time of massive change, a more proactive approach is called for, and smart technology and business service providers will not miss the opportunity to challenge the industry’s status quo and support its growth through bold, provocative offerings and thought leadership.

 


[1] Source: FiercePharm, “Pfizer top 10 Pharma layoffs 2011

Expanding the Wings of RIMO | Sherpas in Blue Shirts

For the past few decades, Infrastructure Outsourcing (IO) was a proverbial elephant in the outsourcing room – huge deals, led primarily by multinational corporations (MNCs) and so capital and hardware intensive that some would beat the revenues of some medium-size businesses. At the turn of the 21st century, most non-MNC service providers, especially those based in India, did not even have Infrastructure Management Services (IMS) as a separate business line. Investments required for traditional IO were massive, and none of these providers had the capacity to manage the scale. Only application development & maintenance (ADM) had the scope, size and convenience to suit the global delivery model that the offshore providers championed.

However, as it turned out, IO was too big a piece of cake to cater to the appetite of just the MNCs, and soon offshore providers, cloud players and other boutique IO firms (like IPsoft) arrived on the scene with a commitment to stay in the marketplace. Soon thereafter, with the advent of next-generational concepts such as Remote Infrastructure Management Outsourcing (RIMO), cloud and consumerization, IO achieved some of that nimble-footedness we have come to associate only with ADM.

More buyers, especially the large ones, started to explore the scope-breakdown model that RIMO offered. The huge size and scope of traditional IO required little buyer focus on the nuances of their outsourcing strategy. RIMO provided the buyers with an option to focus decision making not only on opportunity costs but also on strategic choices, i.e., whether and what aspects of infrastructure to outsource. Though traditional IO continued to retain major share of the IO market, RIMO steadily supplanted itself as a viable option (see below).

Infrastructure Outsourcing Market Size for MNCs

While RIMO continues to be small as compared to traditional IO, it is a model that traditional IO providers can ignore only at their peril. Astra Zeneca’s recent replacement of IBM with HCL Technologies as its provider of data center hosting and migration is a case in point. Offshore providers may indeed be leveraging RIMO to enter the space dominated by MNCs for so long.

However, this is not a David vs. Goliath story. The IO market is witnessing numerous such evolutions, not only because of what providers are doing (e.g., RIMO and cloud) but also because of what buyers are demanding. The following illustration only partially exhibits the incredibly interesting forces currently influencing the IO market. How the balance tilts will be determined by the innovations that providers bring to the table to align with the growing strategic focus that buyers now have on IO.

Infrastructure Outsourcing Demand and Supply

Want to know how this story pans out? We’ve covered it in our latest research report on RIMO: Expanding the Wings of RIMO.

We would also love to hear your comments on what you think of RIMO and the related trends.

Maybe Old Dogs Can’t Learn New Tricks, but Can We? | Sherpas in Blue Shirts

During the past 25 years, I’ve seen many evolutions in IT, outsourcing, and advisory services. And one thing I’ve learned about these industries is that changes are constant and to succeed one must adapt to the changes. Yet the landscape of service provider firms is large and continuing to expand with organizations that do not adapt, and only try to maintain status quo on their solutions and services.

The global services market has been especially fraught with rapid and complex changes over the last several years, and these changes are forcing organizations to adapt how they address next generation sourcing to achieve their objectives and goals. Today it’s far more complicated than simply how to execute an outsourcing RFP process; outsourcing is one option, but is it the right sourcing option for your enterprise? Organizations need to take a step back, assess the available sourcing opportunities, and solidify a sourcing strategy that will leverage one or multiple options to achieve their objectives.

Drivers impacting the requirement for change include:

  • Maturing service recipient community – clients have Centers of Excellence (CoEs), better governance, more experience, etc.
  • Commoditization of outsourced services, standard offerings, and lower prices
  • Increasing service delivery location options
  • More service provider options – Tier 1 providers, offshore providers, niche providers, etc.
  • Increasing technology options – XaaS, VDI, private or public cloud environments, etc.
  • Mature sourcing options – outsource, out-task, maintain in-house, shared services, captives, etc.
  • 2nd and 3rd generation sourcing deals, which makes further savings more challenging

While facing these changes, organizations are still experiencing the same pressures and have the same requirements for cost savings, service improvements, access to skills, innovation, and best practices. As a result, organizations must now ask and address a very different set of questions than previously. It’s no longer, “What do I outsource, how do I do it, and how much can I save?” Instead, it’s, “What should I fully outsource/out-task/retain in-house, where can I leverage new technologies, what is the best blend of onshore/offshore, what is the ideal mix of Tier 1 and Tier 2 service providers, and what service delivery locations should I pursue/are required?”

Changes in the global services industry are not only impacting service recipients; advisors must also adapt their approach to appropriately serve their clients in the face of these new and more complex situations. It should no longer be about running a sourcing transition to determine what and how best to outsource, but about understanding all the potential strategies, how to optimize them, and how to operationalize the results. Advisors need to respect and appreciate their clients’ view of their environments, and should not encourage or try to force fit them into a standard or traditional solution. Taking this approach will allow for better decision making on how each individual client can best leverage the increasingly complex ecosystem of global services.

Here at Everest Group, next generation sourcing has become one of our key focuses. While we continue to assist with traditional outsourcing initiatives, we see the market changes quickly increasing the requirements for next generation sourcing.  An organization’s approach to this must address the creation of strategies that allow it to take advantage of multiple sourcing opportunities, service providers’ capabilities, technologies, and service delivery locations.

How is your business adapting to address next generation sourcing requirements, and what new tricks have you learned?

Musings and Pontifications after Infosys’s BPO Event | Sherpas in Blue Shirts

Infosys’s BPO Colloquium late last week, in Boca Raton, Florida, was a good event and a nice chance to catch-up with old friends. A couple of day’s worth of sessions covering a wide range of forward-looking topics yielded several standouts for me. They are not necessarily new trends but, rather, greater progress on key themes that used to seem further away.

First, the overall level of conversation is so much more advanced than even three years ago. The state of the art for global services has clearly advanced, and almost everyone is now focusing on how to take things to a new level. Questions and strategies are more multi-layered, with less of an underlying hope or expectation that there is a single, simple, optimal-for-all answer. True services strategies with enterprise-wide thinking are no longer the rare exception – the “sign a deal and save some money quick” mentality has matured into a more thoughtful and strategic mindset.

Second, the march of technology into BPO is both unavoidable and a force that will create significant variation and differentiation among BPO solutions and service providers – and not just three to five variations but hundreds. While labor arbitrage continues to be an anchor of business cases, technology is what provides the opportunity to change the equation and better respond to business needs. And technology is going to take many, many forms – tools with which to suck value from data or plug gaps in existing functionality, service integration platforms, small-scale platforms (five-30 users), large scale platforms (SaaS), industry-specific platforms, mobility capabilities, etc.

Quite simply, many of today’s technology plays require more meaningful investment (not to mention new skills and management disciplines) than has been true in legacy BPO. And service providers – none of which can be, if they ever really were, everything to everyone – will have to pick and choose where they invest, which in turn will guide the areas in which they become distinctive and higher value-add. So what started more than a decade ago as a fairly universal proposition around cheap, skilled, and abundant labor is being quickly redefined by technology, leading to much greater variation in competencies than we have seen to date.

Finally, it is good to see Infosys putting more definition and precision around its Infosys 3.0 vision. This has advanced a fair bit in the last three to four months and will continue to do so as it works through the implications of increasing its focus on platform-type business models and more closely linking its consulting and systems integration businesses. From my perspective, the key thing to watch with Infosys (and every other service provider) is what significant investments it makes, in which areas, and how those are intended to advance the business model – industry focus, client segmentation, role of technologies, end-to-end process approach, pricing and service structures, etc.

The next level of investments is becoming far more differentiating than the ramp-up investments of several years ago, which focused on setting up centers in the right places to support FTE volume growth. Most of the emerging investments will naturally benefit some clients (those to whom the solution applies), while providing little, if any, value to other clients (e.g., does a retailer care if a new banking platform is receiving investment?).Overall, a lot to look forward to as BPO settles into the next phase of maturity. The rapid growth of BPO was led by the fairly universal pursuit of labor arbitrage, but the real innovation is just now getting started (not to mention the need to continue changing!).

Overall, a lot to look forward to as BPO settles into the next phase of maturity. The rapid growth of BPO was led by the fairly universal pursuit of labor arbitrage but the real innovation is just now getting started (not to mention the need to continue changing!)

Going Mobile… | Gaining Altitude in the Cloud

A few weeks ago I committed to exploring the mobile world. And while I’m not a neophyte – my Blackberry is strapped to my belt and, according to my wife, my addiction to constant email connections is worse than a two pack a day habit – I’m still not a truly mobile convert. Yet, my conversion to date is inconsistent as I aspire to engage in intensive web surfing (remember, I have a Blackberry), triple digit smart phone apps, and alas, a connected tablet in lieu of my laptop.

So, how is it going?

[Feel free to insert your favorite “you can’t teach an old dog new tricks” joke here.]

I’m typically a relatively early adopter, but not necessarily a gadget freak. However, I accused Apple of just enlarging the iPhone – nay, an iPod Touch – when it introduced the iPad. Thus, my pilot in a completely wireless connected world is somewhat of a stretch.

The biggest change (read, challenge) I’ve encountered so far is doing without a keyboard and mouse, and surviving as much as possible with a touch screen tablet. However, pecking this out on my iPad suggests that I’m making some progress.

In the plus column, consuming or reviewing content is extraordinary. The instant on, always connected convenience is great. In fact, if I had to summarize in a single word the impact of mobility today, CONVENIENCE represents the best synthesis of value add. Even the wiz bang new capabilities such as iCloud have their greatest utility along this dimension.

However, the mobile experience is not devoid of frustration:

  • Creating content is painful, especially for business communications. Today’s mobile devices and apps are consumption-oriented, not creation-oriented.
  • Finding an app that does what you need is difficult. The popularity of mobile apps and the apparent ease with which they can be developed is both a boon and a curse. Word of mouth seems to be the most effective way to find really useful apps, but even then personal preferences and specific needs have often sent me down a path of frustration and further hunts for something to get the job done. (I’m open for suggestions on “app managers” that facilitate this search – I’m sure they are out there…)
  • Getting help is elusive. Although many apps and interaction models are extremely intuitive, trying to do something slightly nonstandard is decidedly nontrivial. Finding relevant help is not easy – even Apple’s websites for help are beautiful to look at, but quite thin on useful content.
  • None of the devices have really cracked the code. The iPad’s handling of multi-tasking is clunky. RIM’s Playbook shines on the multi-tasking front…would that it had more than a couple useful apps! And I’m still TBD on my Android experience, as I eagerly await shipment of a KindleFire in a few weeks.

Going mobile hasn’t yet changed my life, yet. I still relapse to my laptop to create rich content (of course some of my colleagues will undoubtedly quibble with its richness, regardless of the device on which it was created). But I do see the potential for game-changing opportunities around global services:

  • Data collection. I sense that the ability of mobile devices to collect relevant, context-sensitive data has the potential to have astonishing impact. Those who harness the ability to leverage mobility to collect the right data, and avoid being overwhelmed with huge volumes of inconsequential data, are likely to unlock great value.
  • Interactivity. The convenience factor will drive (actually, is driving) greater use across an ever-widening breadth of activities. This intensity of use creates a heretofore unknown opportunity for interaction, real-time feedback, and truly personalized response. The opportunities are unbounded.
  • Ease of use. Comparing the ease of use of most mobile solutions with their non-mobile counterparts isn’t a fair fight. The selection and ease of purchase, installation, and use (generally conforming to expectations) of the mobile experience is – again – convenient on a different scale than alternatives. This will compel consumers (individual or corporate) to use the solutions, and the marketplace to continue to innovate with broader and deeper capabilities.
  • Innovation model. Fast. Responsive. Cheap. Most mobile apps subscribe to these design and development principles, fueling innovation based on rapid feedback on actual use. Lots of minor changes to reflect real usage, rather than perceived needs, results in enormous benefits for developers and users alike (although, as noted above, finding the right fit is often more frustrating than productive).

What do you think the impacts will be on global services?

Every Crowd has a Silver Lining | Sherpas in Blue Shirts

We all hate crowds. We leave places early to beat the traffic, avoid flea markets on Sundays, and wrap up Christmas shopping before the last minute rush. But on the Internet, it’s far different. We follow high-volume Twitter posters, aggregate on pages with maximum “fans” and “likes,” are quick to view viral videos, and trust the content that’s vetted by most. On the web, crowd is a value proposition.

In business, crowd was initially used by Internet start-ups looking to tap a large pool of low-cost labor to contribute, create, and market online products. However, in the wake of the ongoing recession, corporations are increasingly experimenting with crowdsourcing in three ways:

  • as a model to support new areas such as content localization, translation, and advertising, in addition to low-end tasks
  • as an alternative to traditional BPO models
  • as an option to more quickly, and less expensively, access talent around the world

Besides the unparalleled access to rich skills and experience, crowd sourcing offers a compelling economic proposition. Crowd resources can cost 60 to 70 percent less per FTE than traditional models. And the on-demand nature of the crowd provides additional 10-15 percent savings due to full resource utilization.

Yet, as with any service delivery model, crowdsourcing also has its challenges. Given the amorphous nature of the crowd, organizations using crowd labor may well face accountability, quality, and timeliness issues. They also run the risk of initiative and/or intellectual property plagiarism.

Also, crowd workers, especially those with higher-end skills and work experience, are wary of crowd tasks and larger projects. With tasks, workers only receive minimal information until after signing up; if they then quit, their “completion rate” and follow-through employability is negatively impacted. With projects, employers can reject unsatisfactory work, refuse to pay, and yet still retain the right to use the work. These aspects coupled with low pay and benefits make this model yet unacceptable by workers.

The onus to drive crowd adoption rests with the crowd vendors. They will need to take greater ownership of understanding the client’s scope, staffing the crowd accordingly, creating wage levels that are win-win for clients and workers, and developing tools and platforms to ensure ease of delivery and service level compliance. They will also need to bring structure to the inherently unstructured crowd in order to accelerate the penetration and utilization of crowdsourcing. All these responsibilities are hard to undertake unless you already have the expertise.

For more information on crowdsourcing, its upsides and its downsides, please read Everest Group’s viewpoint entitled, Every Crowd has a Silver Lining.

Report from the Doctor’s Office: Complexities of a Modern Day Integrated Delivery Network | Sherpas in Blue Shirts

We recently met in our offices with a practicing physician leader for a major healthcare organization selected to direct development of an Accountable Care Organization (ACO) and a regional Health Information Exchange (HIE). The mission he is embarking on is highly complex, and managing it effectively will require cooperation from competing internal and external constituencies.

Our discussion focused, from a physician’s viewpoint, on the intricacies and hurdles that will need to be bridged before the new organizations can be launched. For example:

  • Government-mandated compliance needs are still under debate but have short implementation timeframes
  • The executive management-appointed board lacks clarity on the nature of a multi-entity Integrated Delivery Network (IDN)
  • Internal disruptive forces require leadership make some tough choices and commit to a plan for structure development and governance models before it can make decisions
  • The need to share information with competitors within a community creates an extremely complicated situation with a further exacerbated and delicate decision-making process, and attempting this without first gaining commitment will ensure unnecessary costs due to delays, and may well result in failure

Here’s the follow-up summary I sent to the Everest Group team members who participated in the meeting:

“Team,

As we heard – confirming what we already knew – the complexities Any Hospital System will face in its effort to address healthcare reform with the development of Accountable Care Organizations and Health Information Exchanges are tremendous. The political nature of dealing with multiple stakeholders can be daunting to say the least.

To be successful, executive leadership at Any Hospital System must commit to defining a plan with a top-down approach that clearly identifies an end state and the steps required to achieve its goals. Finding the right entry point will be difficult because of the political implications, the individual ambitions of the stakeholders, and their lack of leadership.

IDNs nationwide will face similar hurdles. Finding that entry point where commitment can be obtained will be a significant challenge. Defining the point of view for the company and taking it to the C-suite will be a necessary step. It will become clear along the way which organizations are not prepared to make the commitment, and where leadership changes will need to occur before we invest in the effort. Part of that change will be a direct result of how reform plays out for the development, or not, of ACOs, HIEs, and other key components of the healthcare reform effort. There is clearly uncertainty in the political landscape that will cause delays in commitment to organizational development and the accompanying procurement of services.

Our physician friend is a primary example of the frustrations physicians encounter and the increasing pressures they face not only in practicing medicine but also in changing the way they operate their own business and deliver care. The implications of this reality will eventually cause a shortage of physicians, clinicians, and care givers as regulatory compliance becomes more complex. The existing professionals will opt out (retire) and there will be fewer trained experts to take their place.

We’ll be speaking again with our physician contact in two weeks. The purpose of the meeting is to discuss how Any Hospital System can move forward in establishing a plan and committing to an organized, structured approach to this IDN initiative. Best, Gary.”

The development of a point of view for the complex issues IDNs will face due to federal healthcare mandates has created this scenario nationwide. Developing a strategy for and the ultimate provision of necessary services are complex tasks that will challenge the industry to reach viable solutions. There is clearly a need for the development of a strategic direction that not only allows mandates to be met but also fits healthcare organizations’ needs for a sustainable model.

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