Tag: Peter Bendor-Samuel

I’m happy Infosys has appointed Parekh as Chief. My best wishes to him: NRN | In the News

Infosys said today that its Board of Directors has appointed Salil S Parekh as Chief Executive Officer and Managing Director (CEO & MD) of the company effective January 2, 2018.

Peter Bendor-Samuel, CEO, Everest Group, said: “I think Salil will do a fine job as CEO at Infosys, he was an unexpected selection, however, the board has selected a talented industry executive who is well positioned to continue the existing Infosys strategy. He is not as flamboyant as some of the past Infosys executives but brings experience in building a consulting lead global service transformation business which leverages Indian talent.”

Read more in moneycontrol 

Digital Transformation: Underperforming Or Growing? | Sherpas in Blue Shirts

We’ve moved from a point of the media talking about the digital transformation’s promises and opportunities to a point of media pointing out many digital transformation projects are underperforming in expectations. Adding fuel to that fire is Gartner’s recent claim that digital transformation is going through the trough of disillusionment. But the facts belie that. We at Everest Group struggle with the Gartner claim, given that we are seeing an uptick in the size of digital transformation projects. What’s the explanation for the difference between Gartner’s claim and what we’re seeing?

Here’s what we see: the size of digital transformation projects is exploding. Last year we saw relatively small, focused projects of $500,000 to $3 million. Now digital transformation projects consistently hit $20-$100 million in size.

We find Gartner’s comment interesting, but I think it’s dangerous to take that comment in isolation.

Read more at my Forbes blog

How Cloud Impacts APIs and Microservices | Sherpas in Blue Shirts

Companies considering moving workloads to cloud environments five years ago questioned whether the economics of cloud were compelling enough. The bigger question at that time was whether the economics would force a tsunami of migration from legacy environments to the cloud world. Would it set up a huge industry, much like Y2K, of moving workloads from one environment to another very quickly? Or would it evolve more like the client-server movement that happened over 5 to 10 years? It’s important to understand the cloud migration strategy that is occurring today.

We now know the cloud migration did not happen like Y2K. Enterprises considered the risk and investment to move workloads as too great, given the cost-savings returns. Of course, there are always laggards or companies that choose not to adopt new technology, but enterprises now broadly accept both public and private cloud.

The strategy most companies adopt is to put new functionality into cloud environments, often public cloud. They do this by purchasing SaaS applications rather than traditional software, and they do their new development in a Platform-as-a-Service (PaaS) cloud environment. These make sense. They then build APIs or microservices layers that connect the legacy applications to the cloud applications.

 

Dark Clouds Gathering for Indian Service Providers | Sherpas in Blue Shirts

The effort around reforming H1B work visas in the global services industry has been dangling for years, entrenched in a political battle in Congress. But there’s movement again, and dark clouds are gathering on the horizon, signaling a coming storm. Five days ago, the US House Judiciary Committee passed HR 170 (Protect and Grow American Jobs Act) with solid, bipartisan support, and it carries onerous policies aimed at India’s outsourcing service providers – as well as problems for their clients. It hasn’t passed into law yet; but it could happen in 2018. Here’s my assessment of the situation.

Proposed Requirements

As I’ve blogged several times since May 2013, reform focuses on service providers whose business model depends heavily on a large percentage of H1B workers placed at US clients. HR 170 raises the classification of H1-dependent firms to 20 percent, rather than 15 percent of workers. Providers would be required to pay higher wages to their H1B workers – with the minimum salary tied to the average occupational wage in the US. That’s a raise from the current $60k up to, and potentially surpassing, $135k.

The bill adds authorization for the US Department of Labor to conduct investigations of H1B-dependent firms – without first having to establish reasonable cause – and provides for a $495 fine to be levied on the firms for the investigations.

HR 170 also would require US clients to provide attestations and “recruitment reports” attesting that no US workers were displaced by H1B workers. This would add the burden of new management and compliance processes.

Impact

Obviously, the onerous requirements are targeted at Indian service providers that heavily use H1B workers (especially Cognizant, Infosys, TCS, Wipro). The provisions would raise their costs. They would not be able to pass those costs through to clients, so it would reduce their margins. Making it more onerous to use H1B workers would also negatively impact the Indian providers’ business models, which rely on the high-margin “factory” structure for talent provision.

Is it a Long Shot?

Although HR 170 was passed with bipartisan support by the House Judiciary Committee and has yet to pass the full House. If that were to happen, the bill would still face bipartisan battle in the Senate. We’ve seen that play out this year in efforts to repeal healthcare laws and now in tax reform efforts.

However, it may not be a long shot. The bill’s main sponsor, Darrell Issa, the Republican representative from California, will face re-election battles next year and is likely to push harder for a win in visa reform. And don’t overlook the fact that California’s Silicon Valley firms would benefit from onerous visa regulations targeting India’s firms.

My Takeaway Warning

India’s service providers are already struggling in an uphill battle aside from visa reform. They struggle to gain competence and market share in evolving to the digital world. Investments in rotating to digital raise providers’ costs, take time and often lead to battles with investors and other stakeholders who want to maintain the current margin levels. In addition, margins in the digital models are low, for at least the short term.

H1B visa reform’s dark clouds gathering on the horizon for the Indian service providers will only heap new burdens on providers already struggling with margins and new business models in trying to become leaders on the digital space. I believe the bill, if passed into law, would inhibit their growth.

US clients, which want more valuable digital services from third-party firms – but want to pay the low cost they have enjoyed with offshore providers for many years – must recognize that strategy is no longer in the playbook. They also need to be mindful of providers changing their business model and delivery practices to accommodate the requirements of H1B worker provisions when the reform passes into law and how the provider’s decisions will impact the client’s work.

Success Factors in Driving Digital Transformation at the Social Security Administration | Sherpas in Blue Shirts

The digital transformation at the Social Security Administration (SSA) is remarkable for its approach to ensure a successful outcome. Shifting the process of retiring into a digital world required overcoming a resistant culture, managing multiple stakeholder groups’ needs, surmounting organizational structures and ensuring leaders didn’t lose sight of the end outcome and focus too much on process. The SSA transformation initiative faced the same challenges that commercial businesses face.

Frank Baitman, SSA CIO at the time, recalls the agency experienced management challenges due to its structure using 1,300 field offices across the US. Its 40,000 field workers spent most of their time assisting people going through the retirement process, which didn’t give them enough time to effectively handle disability determinations and claims, and address a backlog in disability case processing. Disability, a more complex process, required far more human attention and support than the relatively simply retirement process.

Design thinking approach

This was a key consideration in the transition plan. The agency involved employees in the design thinking process so that the new business model would satisfy their concerns. As a result, the website includes a validation process so SSA employees can check in with individual retirees, and make sure they made well-informed decisions when using the online system.

 

The Tyranny of Service Providers’ Global Rate Cards | Sherpas in Blue Shirts

As their enterprise clients move to digital business models, which are clearly superior in productivity, business alignment and speed, legacy service providers seek to shift their offerings to the new digital world too. Seems like a great match, right? So, what’s the problem? The problem is the service providers are accustomed to a very profitable offshore factory delivery model. Inconveniently, the new digital business models don’t align well with this old tried-and-true mainstay. Even more disturbing for the service providers is that the new delivery models look to be less profitable than the mature offshore talent factories. I foresee increasing pressures on margins and some potentially unrecognized consequences that will impact clients.

Two reasons for the margin paradox

As the services industry rotates from the old labor arbitrage model to digital business models, service providers expect to achieve higher margins than their typical 40 percent gross margins. Why? Because the digital models deliver a higher level of value. They are better aligned against clients’ business results and are delivered at a faster rate. So, why are providers shifting to digital not getting even close to maintaining the margins they enjoyed in the labor arbitrage space?

One reason is the price of digital talent. The skillsets for the disruptive technologies are rare and command a higher price. Plus, there is a scarcity of talent with skills and experience in implementing the new models.

A second factor is the difference in teams doing the work. The digital world requires persistent teams that remain over time and are located onshore; the arbitrage world depends on low-cost labor in offshore teams that churn over time.

Cognizant Technology Solutions offers cash in lieu of options for senior management | In the News

Cognizant Technology Solutions (CTS) has asked high performing employees in certain bands to take cash instead of granting stock options as is the norm. In a communication sent to senior managers and associate directors who were rated EA (Exceeds All), the company has asked them to take cash instead of taking employee stock options citing reasons of the buyback program it has embarked upon.

The announcement of buyback along with a host of changes including a voluntary separation scheme for senior employees, changes in its board and formation of a financial policy committee came after CTS saw pressure from activist investor Elliott Management which holds 4% stake last November. In February this year, CTS entered into a cooperation agreement with Elliott Management, committing to a strategic plan which includes expanding non-GAAP operating margins to 22%, in 2019.

“This is an interesting development. I believe that it is driven by a need to support the stock price. The equity grants, and stock options dilute the outstanding equity. By converting these to cash they are able to accomplish a version of stock buyback, a strategy which they already agreed to with Elliot,” said Peter Bendor-Samuel, CEO, Everest Group.

Read more in The Times of India

Building Capability For Successful Business Transformation | Sherpas in Blue Shirts

Many studies over the past decade reveal the high rate of failure in business transformation initiatives. I think that’s a daunting record that signals risk for companies considering transformation. Even so, I’ve worked with companies that succeed in major transformation. So, I blog frequently about some of the most significant principles for approaching these initiatives, de-risking the journey and the factors influencing success or failure. Recently, I spoke with an executive who is driving a major, company-wide transformation initiative at an energy company. What they’re doing is noteworthy and a model your company may wish to follow.

The company’s transformation initiative arose because the CEO realized the business needed to be more agile to survive and prosper in this new age of flexible energy production. In addition, except for the IT group, bench marking revealed gaps in departments and business units compared to world-class performance.

Principle: Go Slow To Gain Buy-In And Build A Culture For Change

As the executive explained to me, the CEO understood that successful transformation would first necessitate building a culture of change into the organization – a belief in their ability to transform. Rather than starting with large structural changes, they first created a simple but powerful framework to build the capability for change. The framework focused on starting with smaller initiatives that allow employees and leaders to learn how to drive projects, succeed and build belief in their ability to deliver.

Read more at my Forbes blog

Digital Transformation’s Impact on IT Shared Services | Sherpas In Blue Shirts

Enterprises realized value in IT shared services organizations for the past three decades. Over the past two years, I’ve delved into the nuances of capturing the promise of digital transformation. As I think about the impact of digital transformation on shared services, it becomes clear that shared services are in for substantial changes.

I blogged before about SaaS and SaaS-like products driving the collapse of the IT technology stack (server, operating system, middleware, applications, etc.). For those of you who have not read or can’t remember what I wrote, the following is a quick recap. Much of the innovation in technology over the last few years has been aimed at integrating and automating the IT stack. For example, SaaS combines the infrastructure middle layer of the database and applications layer into a single consumable product. In doing this, it automates and integrates many otherwise automatous components, resulting in lower TCO and tighter alignment with business functions. It may be less clear that this same collapsing IT stack will inevitably set in motion other significant changes in both the enterprise IT organization and it business model.

Related: Learn more about Everest Group’s Shared Services Center capabilities

Enterprises created IT shared services organizations to centralize IT functions, professionalize services and sell high-quality services back to the enterprise at lower prices. The concept worked well improving the reliability and performance of IT, lowering unit cost of IT components and creating a professional team of technology experts for the wider organization to rely on. These enterprise IT functions naturally aligned around the technologies they supported broadly organized by infrastructure, middle ware, application maintained, application development, security, project management and so forth. Each functional team organizes around creating high quality functional services which are then resold to the broader organization. All of this makes a great deal of sense until we consider the collapsing stack which now integrates and automates much of what the functional teams currently do.

Browse all my blogs at peterbendorsamuel.com

Six major IT companies reduce employee strength by over 4,000 | In the News

The $156-billion Indian IT industry, often called the biggest job creator in the organised sector, is seeing a tectonic shift in recruitment.

For the first six months of the fiscal, Cognizant, Infosys, Wipro and Tech Mahindra have all seen their employee strength actually decline — quite sharply in Cognizant’s case (by over 5,000). TCS and HCL Technologies are the only exceptions among India’s top six IT companies, but even TCS’ addition is a fraction of what it did in the first six months of the previous fiscal.

Peter Bendor Samuel of outsourcing research firm Everest Group told TOI, “The employment picture in Indian IT is changing rapidly. The intake of new campus hires in the Indian IT industry is dramatically down and looks to continue to fall. The industry will continue to be a great place for engineers with the right skills in AI, automation, and other digital skills that are in high demand. However, for those individuals who have traditional IT skills, the picture changes dramatically.”

Read more in The Times of India

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