Tag: predictions

Time for a Locations Strategy Rethink | In the News

Multiple forces are driving unprecedented disruption in service delivery ecosystems, most notably market pressure, cost and margin tensions, and environment constraints. In the face of this upheaval, enterprises are increasingly leveraging their locations strategies to drive transformation and create differentiation. Everest Group digs deep into the research to offer five predictions on what all this means for locations strategy over the next few years.

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Global Offshoring and Outsourcing Market—What’s Hot, What’s Not: Everest Group Highlights 2017 Trends, 2018 Predictions in Feb. 15 Webinar | Press Release

Adoption of digital services is crossing the line from pilots to large-scale programs; will require knowing how to build portfolios of the future, according to Everest Group

Everest Group’s predictions that 2017 would see continued market slowdown and technology-led disruption in sourcing were right on the money. Growth of outsourcing services slowed in 2017 and, for the first time ever, digital-focused outsourcing deals surpassed traditional transactions in Q4 2017.

Other key market trends witnessed in 2017 include:

  • New Global In-house Center (GIC) setups recorded an all-time high activity due to increased preference for insourcing next-generation services.
  • Location activity was led by Asia Pacific and Central and Eastern Europe. Q4 2017 recorded an all-time high activity in Middle East and Africa driven by setups in Israel.
  • Leading service providers made several investments (e.g., expanding onshore presence, exploring opportunities for inorganic growth, and upskilling/reskilling talent) to remain competitive in the market.

So, what does 2018 hold for the sourcing industry?

On Thursday, February 15, at 9 a.m. CST, Everest Group experts, including CEO Peter Bendor-Samuel, Salil Dani, H. Karthik, Michel Janssen, and Eric Simonson, will host a complimentary webinar to review 2017’s industry shifts and share their predictions for 2018.

***Register Here for Complimentary Webinar***

The webinar—“Q1 2018 Market Vista™ Briefing: 2017 in Review & 2018 Predictions”—will cover the key forces and metrics defining the market, including trends in outsourcing, digital adoption, and the Global In-house Center (GIC) market, as well as insights into location activity in offshore and nearshore geographies.

Research analysts will also provide findings from the Market Vista™ quarterly report series. The most recent report, Market Vista: Select Findings Q1 2018, was released yesterday and covers key developments in Q4 2017, such as:

  • Transaction activity increased in Q4 2017, with 365 deals compared to 350 in Q3 2017.
  • GIC market activity increased in Q4 2017 for offshore and nearshore locations, with 46 new setups, four expansions and no divestitures.
  • Location activity in Q4 2017 was higher compared to the previous quarter, driven by significant growth in Nearshore Europe; activity in tier-1 locations was marginally higher than tier-2 cities.
  • Most service providers reported sequential growth in revenue.
  • The share of digital-focused global sourcing transactions increased from 47 percent in Q3 to 61 percent in Q4 of 2017, eclipsing transactions for pure traditional services. Half of all GIC setups during this period were digital focused, with analytics and automation being the primary areas of investment. Service providers focused on digital services in 79 percent of alliances, mergers and acquisitions during Q4, with an emphasis on cloud, automation and analytics.

 “As reflect throughout 2017, outsourcing transaction activity in Q4 was driven by an increased adoption of digital services, and we are certain the trend will continue in 2018 as more enterprises move beyond pilot projects to large digital programs,” said Michel Janssen, chief research guru at Everest Group. “This continuing trend will have implications for all stakeholders – and will only be buoyed by positive economic factors and other geopolitical dynamics at play.”

***Download a complimentary abstract of “Market Vista: Select Findings Q1 2018” here.***

 About Market Vista™

Market Vista —a subscription-based service of Everest Group—provides the research, analysis and insights that enable Global Sourcing professionals to navigate the complexity of today’s sourcing market and make informed and impactful decisions. Market Vista research includes developments related to service providers, locations, processes and sourcing models, as well as a comprehensive outlook of the fast-evolving global offshoring and outsourcing market.

Analytics Services Market Maturing Quickly | Sherpas in Blue Shirts

Analytics has been a bright spot in the services world, particularly for the Indian service providers as their analytics practices have grown faster than the rest of their organizations. They often are able to command premium pricing in this space, and it holds the tantalizing promise of transforming other service lines such as ITO, apps dev, and BPO. However, I’m making a bold prediction: The analytics practices are going to quickly hit maturity and the rate of growth will quickly slow.

We at Everest Group observe three maturity characteristics now happening in this space, so the “recipe ingredients” are in place for this market to start maturing.

  1. Gold rush stage. As companies come to understand and believe in the power of analytics, they are eager to do proofs of concept, which they then scale into a Center of Excellence (CoE). For the most part, the leading providers that offer analytics services establish a CoE or complement an existing CoE with data scientists. But data scientists are scarce, so they often use partners to augment their CoE. But the analytics gold rush is starting to ebb. Many providers have already seen the light and are already on the journey to establish or scale up a CoE. Therefore, the market will mature.
  2. Analytics becomes core. At Everest Group, we see a trend in which the benefits of analytics are so strong that analytics customers over time tend to want to build their own CoE and use their own capabilities, leveraging third parties only as an overflow or extension of what they are doing.With the return on investment in analytics being so high and customers viewing analytics as core or necessary to their business and competitive advantage, they view the expense of building an internal analytics CoE as a justifiable cost and wise decision. Therefore, service providers’ labor arbitrage offerings are less compelling.
  3. Benefit doesn’t pull through to a process. For the service providers that have built a capability around analytics, it should lead to complementing other BPO or IT practices; but we have not seen this as a common occurrence. We believe the reason is that the customers’ stakeholders block providers’ access and seal them off translating the analytics work to a broader business process or IT application. The providers’ hope of pulling through work has not manifested consistently in a large degree.

As we analyze this issue, we believe there are three areas where analytics providers can build distinctiveness:

  • Provide access to proprietary data
  • Build proprietary tools
  • Provide capability

As already explained, we expect the market for providers whose practices are built on capability will slow rapidly. But we see substantial opportunity where a provider combines proprietary data and proprietary tools with capability that focuses on a specific business problem.

An example of a scaled analytics program that has achieved billions of dollars in this way is OptumRx. This solution includes a proprietary data source, proprietary tools and capability focused on a business problem that serves the healthcare industry at scale. And it generates billions – not millions – in revenue.

We believe that providers that transition to a model of creating proprietary data and customized tools combined with capability to solve a business problem will enjoy ongoing and potentially explosive growth.

But those that stay focused on providing capability and data scientists are doomed as they face a quickly maturing marketplace. It’s not that this space will go away; it’s just that it won’t grow fast and pricing pressure will start to take hold.

Although we believe the analytics market maturity will happen in the next two years, we think a lot of room and potential remains for providers that combine the three analytics components (data, tools and capability focused on a specific business problem).

Global Services Trends and Tipping Points for 2015 | Sherpas in Blue Shirts

It’s the season when analyst/advisory firms flood the media their predictions and top-10 lists. One problem with those lists is the services world rarely has 10 things that are different from the year before. Another problem is we tend to hype new technologies and business models and make predictions about their impact in the next year, when in reality they take multiple years to validate and start to build traction. So rather than falling into this trap that I and others fall into every year, here are my thoughts on a few big secular services trends and their tipping-point positions.

Cloud

We’re over the tipping point here. As I blogged previously, the cloud experiment is over. The last three years have been a grand experiment in examining cloud and the cloud products family. 2015 will see enterprises increasingly planning and implementing new functionalities in the cloud environment.

Labor arbitrage

We’re now atop an inflection point for change in the labor arbitrage market. It’s alive and well and still powerful, but in 2014 we saw value propositions that are dominantly arbitrage based diminish in effectiveness. We also saw the growth areas increasingly shifting to an “arbitrage-plus” model in new areas. The implications are that arbitrage-based offerings will be less effective and their growth rates will continue to drop.

2015 will be a year in which provider growth is driven by differentiation around industry knowledge, firm knowledge and functional knowledge, rather than cheap resources from India. Firms that pivot and provide more and better resources in country, more focus around industry and function, more specialization for those that will succeed.

Service providers talked the talk of differentiation in 2013-2014, but they didn’t walk the walk. In 2015 providers that are successful in growing share will execute really great, meaningful differentiation rather than just giving lip service to differentiation.

Automation

The tipping point for automation is still in the future. The industry has had a couple of years of experimentation with automation, but we don’t think the experimentation phase is finished. We have yet to see the automation play done at scale either on infrastructure or BPO; it is yet to move into the mainstream and is yet to be acknowledged for the full power and capability that it possesses. So the stories of automation destroying the arbitrage game are premature.

We think that, much like cloud in the last three years, in 2015 the automation journey will continue its experimentation and advance toward a time where it is implemented at scale and is able to change the value proposition in a meaningful way.

In 2015, we do not expect automation to take meaningful share from the BPO or infrastructure players. But we expect many more proof points to develop and more hype or industry attention to focus on automation.

As a service

We’re not near a tipping point in moving to a consistent as-a-service model, but we’re definitely seeing a growing uptick in experimentation with this model. In 2014, we saw a number of important companies experimenting with implementing as a-service solutions, but they weren’t multi-tenant. What they’re doing is taking their entire supply chain and turning it into a consumable, as-a-service supply chain and achieving similar benefits that are derived from a multi-tenant SaaS offering but without having the multi-tenant characteristic.

The implications of early experimentation are very significant for legacy environments. We expect 2015 to have a number of announcements of leading firms implementing this approach. We believe this is an important development but will not become an industry standard for several years to come.

Service provider landscape

As to the service providers, in 2015 we expect some changes in dominance and success. Cognizant and TCS always do well and will do so again in 2015. What’s interesting is to look at those that are going to change their fortunes. Specifically we’re watching two companies: IBM and Wipro. In 2013-2014 both made structural changes that position them well for entering 2015.

IBM decided to address the cloud issue head on. Big Blue’s purchase of SoftLayer, the moving of IBM’s middleware suite to an as-a-service delivery vehicle and willingness to deal directly and forthrightly with customers on cannibalization issues positions IBM for a potentially strong turnaround in 2015. We already see signs of that in the three megadeals IBM announced in the last quarter of 2014. We believe IBM is in for a strong year in 2015 if it stays the course.

Likewise, I’ve blogged before about Wipro laying the groundwork for a resurgence. Specifically I call out the firm’s early adoption of automation and increased focus on the large megadeal space. We believe Wipro’s adoption of automation allows the provider to be a cost challenger without giving up margins in the multi-tower megadeal space. I expect Wipro will continue its momentum into 2015, building on early successes.

This is not to say that other service providers won’t do well. I highlight these two because they took big steps to turn around their business and position themselves for the future and for velocity coming into 2015.


Photo credit: harmish khambhaita

Enterprise Technology 2015: Heavier Apps, More PaaS, Troubled Security… and more | Sherpas in Blue Shirts

As enterprises freshen their technology mandate for 2015, they stand at the cusp of a multi-dimensional interplay of agility, flexibility, and rising security considerations. Beyond the usual SMAC stack, enterprises are also grappling with challenges to the status quo in terms of faster application development, automated IT operations, the Internet of Things, and process fragmentation.

Following are five technology trends that rose to the top of our list for the important role they will play in enterprise technology in 2015.

    1. Mobile Apps – Will Need a RethinkThe IBM-Apple partnership to tackle enterprise mobility is a significant development that validates our earlier hypothesis. However, the enterprise apps now require a rethink. These apps were conceived to be “light weight” and easy to use, focused on a specific range of capabilities. But, due to increased adoption and constant demand for additional functionality, enterprises are going against this fundamental tenet by coding in multiple features that are making mobile apps heavy and difficult to use. Yet, this same “overhead bulk” has become compulsory to provide features such as analytics across apps usage, offline access, and cloud collaboration that help enterprises perform meaningful tasks. In 2015, enterprises will need to walk a fine line between honoring the basic principles of mobile apps and the persistent demand for increased functionality.
    2. PaaS – The Needle Will Move FurtherWhile Platform-as-a-Service (PaaS) has been touted as the “next wave” since its inception, it never fulfilled its purported potential of adding meaningful value. However, enterprise technology may see that change in 2015 given the push from leading vendors such as Microsoft (Azure), IBM (Bluemix), Red Hat (OpenShift), Salesforce (Salesforce1), and AWS (Elastic Beanstalk). The PaaS business case will be enhanced by IaaS providers offering “PaaS-like” features (which is already happening), as well as PaaS platforms getting integrated with IaaS (e.g., the recent partnership between Apprenda and Piston Cloud). Although we do not believe PaaS will become the face of the cloud, we indeed expect 2015 to push its adoption within enterprises.
    3. Cyber Security and Open Source – Conundrum Won’t be SolvedThe Sony hacking scandal reiterated the importance of enterprise security – which is often taken lightly as compared to most cool next-gen initiatives – and has turned cyber security into a top priority for 2015. However, with the proliferation of Open Source Software (OSS) in enterprises, this “insecure” perception will surge. Enterprises are aggressively looking toward OSS with a host of next-generation technology areas such as cloud (OpenStack), Big Data (Hadoop), mobility, IT operations automation (Chef, Puppet), and content management (Drupal, Joomla!). With marquee B2C corporations such as Netflix, Samsung, and Facebook already having undertaken major, well-publicized OSS initiatives, other traditional enterprises will be pushed hard, despite a concern for security. Google teaming up with Samsung to include Knox (additional enterprise security features) to make Android more appealing for the enterprise is a step in answering this conundrum. However, it won’t be solved in 2015.
    4. Battle for Container Supremacy – Docker Will be ChallengedApplication development is getting a relook within enterprises with increased interest in container technology. Docker, the poster child for containers, whose open platform helps developers to build, ship, and run distributed applications, was rocketed in 2014 with competition from CoreOS. While Docker container technology is now supported by most platforms such as Amazon, Google, IBM, Microsoft, and VMware, its shortcomings are becoming visible. Developers believe Docker “replaces” virtualization but provides limited platform-type support, and its containers are becoming resource intensive. Moreover, given Docker’s early foray into container management, it will be pitted against the might of Google Kubernet and AWS, as well as nimble players such as Giant Swarm. This may dilute Docker’s focus on developing next-generation container technology, leaving an ample field for competitors to exploit.
    5. Analytics – Focus Will be on Bread and ButterWith millions of dollars invested in data analytics initiatives, 2015 will make enterprises reassess the opportunity cost and value of data. While tools such as Hadoop and NoSQL have greatly reduced the entry barriers to analytics, they have witnessed middling adoption. Enterprises still have a long way to go to embed analytics in their existing processes. Therefore, despite the Internet of Things and wearable devices taking off and generating more machine data for organizations to tap into, these new initiatives will not be an immediate priority for 2015. In 2015, enterprises will get their analytics act together to focus on existing processes, consolidation, rationalization, and targeted spending, with data management, governance, and security taking priority.

Danish physicist and Nobel Prize winner Niels Bohr once commented that, “prediction is very difficult, especially if it’s about the future.” So, please join us out on the limb. What are your predictions for 2015 enterprise technology?

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