Tag: SaaS

Genpact Acquires Headstrong – End of Pure-Play BPOs? | Sherpas in Blue Shirts

Earlier today, Genpact (a global BPO-centric service provider) announced a definitive agreement to acquire Headstrong (an IT services player with a focus on capital markets) for US$550 million. Genpact has scaled ITO capabilities, but more than 85% of its US$1.2 billion+ revenues is still driven by BPO. Moreover, Genpact’s ITO revenues have been flat over the last few years. So I think it is only fair to call them a pure-play BPO – that was until today! With the acquisition of Headstrong, the split between BPO and ITO for Genpact will be closer to 70:30.

Genpact’s topline growth has fallen from 25-35% in 2007-2008 to 7.5-12.5% in 2009-2010. Not bad considering a growing denominator; stable to increasing margins; and a bad economy. But growth is slowing, and I believe this acquisition will be important for Genpact to ensure scalability in the medium to long term. Here is why:

  • BPO-only services have a strong value proposition for the first 3-5 years of an engagement driven by arbitrage and operational efficiencies and effectiveness – and Genpact has been successful in riding this wave. However, it is often difficult to drive the next wave of value from pure BPO and often this requires integrated IT-BPO capabilities. With a majority of Genpact’s BPO client base entering this end-of-term phase, Headstrong’s capabilities will allow Genpact to present an integrated value proposition. Genpact’s proprietary add-on tools for BPO (remember the acquisitions of Creditek, Avolent and Symphony) and process capabilities (from Six Sigma and Lean expertise to SEP) with Headstrong’s IT capabilities will be a strong combination.
  • This acquisition will also help Genpact ride the potentially disruptive trends in the areas of cloud, SaaS and BPaaS. Their partnership with NetSuite last year was another step in this direction.
  • Headstrong’s acquisition is also interesting from an industry expertise perspective. BPO is fast morphing from being a horizontal service to a more industry-specific offering. Even in traditional BPO services like F&A, more and more industry-flavors are being included – be it around revenue cycle management for healthcare providers or meter-to-cash for utilities. Within financial services (one of the largest recipients of global services), our research shows that capital markets BPO is the fastest-growing segment. This is where most of Headstrong’s capabilities reside. Healthcare (another strong area for Headstrong) is another industry poised for strong global services growth in the near term.

There are potential challenges (as with all acquisitions) essentially around the integration of the two organizations. Genpact has been running successful sales and marketing engine focused around BPO. With a significant IT component – will it get distracted from its focus? Its differentiation in the market is around process excellence, and it remains to be seen how successful the go-to-market for an integrated ITO+BPO offering will be. Headstrong’s existing clients will also have questions on Genpact’s vision and strategy for them.

Look around the BPO industry and you’ll not find any major pure-play BPOs left. Consider the leaders on Everest’s PEAK matrix for FAO – Accenture, IBM, Capgemini, Genpact, HP, and Infosys. No pure-play BPO except Genpact (until this morning). What will happen to others in the same bucket (WNS, EXL and the likes)? For the moment WNS will probably take the tag of becoming the largest pure-play BPO – but for how long? Will it acquire or get acquired?

Cloud Services and CFOs’ Triple Hat Role | Gaining Altitude in the Cloud

We had the pleasure this week of participating in a CFO Forum hosted by TechAmerica, along with representatives from Microsoft, Softlayer and SOURCE, on the topic of “Navigating the Cloud.” The overall discussion focused on the benefits of the rapidly expanding universe of cloud services, along with key risk, compliance and security considerations for CFOs. During the panel discussion and audience Q&A, it became apparent that CFOs wear three different hats when thinking about the cloud:

CFO as Cloud User – like everyone else, CFOs are potential users of cloud services, primarily via ERP and F&A-related SaaS offerings. Discussion in this area focused on several topics:

  • Cloud ERP and accounting solutions from vendors like NetSuite and Intacct have been traditionally focused almost exclusively on SMBs. Though still early, enterprise options are emerging from cloud-focused vendors such as Workday. CFOs need to keep on top of the rapidly evolving set of alternatives that exist for the F&A function.
  • New cloud deployment models are emerging for ERP, such as the ability to run SAP on virtualized private clouds, and availability of select modules through public multi-tenant models. CFOs need to realize that it’s not just SaaS or nothing – new models are being introduced that capture virtualization and private cloud benefits without the perceived risks of moving sensitive financial data to the public cloud.

CFO as Cloud Buyer – the second major relationship CFOs have with the cloud is as a buyer, given the ownership they have over corporate and IT budgeting processes and spend. Points mentioned during the Forum included:

  • CFOs should give strong consideration to “Cloud First” policies such as one recently announced by Vivek Kundra, CIO of the United States, who is seeking to move 25 percent of the Federal Government’s IT budget to cloud services. The policy doesn’t say that cloud should be adopted whenever available, but rather that it be strongly considered “whenever a secure, reliable, cost-effective cloud option exists.” Sounds like a smart policy for the private sector as well.
  • CFOs should also work with CIOs and business owners to ensure that a comprehensive assessment has been made of the potential value of migrating to cloud services at the SaaS, IaaS (infrastructure-as-a-service) and PaaS (platform-as-a-service)levels, and that an overall transformation plan exists. Many experiments currently exist, but there is little understanding of where adoption goes after that.

CFO as Fiduciary – the panel also explored the impact of the cloud on CFOs fiduciary responsibilities for the organization.

  • Duke Skarda, CTO of Softlayer, described the four categories of risk in the cloud that CFOs need to evaluate: compliance, governance, security, and disaster recovery. As with cloud services overall, there’s no one right answer – organizations need to understand their risk posture, requirements, vendor capabilities, and supporting SLAs and contractual agreements. It was also noted that, in some cases, cloud services can actually serve to decrease organizational risk profiles.
  • CFOs need to understand any potential impacts of applicable compliance or data privacy regulations (especially in Europe) on where and how they can leverage cloud services.
  • IT policies and controls themselves don’t necessarily change with cloud services, but how they are implemented likely will. CFOs need to ensure IT has taken the right steps to implement appropriate governance and control of cloud services.

Overall, it was a great discussion, with interesting questions and comments from a very engaged CFO audience.

Welcome to “Gaining Altitude in the Cloud” — Another Blog on the Cloud? | Gaining Altitude in the Cloud

Does the world really need another blog about the cloud?

Here at Everest Group we believe the answer is a resounding yes.

The “signal to noise” ratio around the cloud is reaching a fever pitch.  In fact, the hype alone has driven most enterprises to dip their toe in the water with initial pilots and “experiments.”  While moving dev / test environments to the cloud is a good thing, we believe most enterprises should be moving faster and smarter.

What’s missing in the current market conversation about the cloud?

Real, data-driven perspectives on the true ROI and business impact enterprises can expect to see, and in many cases are seeing from the cloud.  In what scenarios do IAAS (Infrastructure-as-a-Service) or StaaS (Storage-as-a-Service) offerings make sense in a given enterprise, and from which vendor?  Can IAAS and cloud services make sense today even if data center assets are fully depreciated?  Can 90 percent of the economic benefits of the cloud be captured via private cloud and virtualization?  Or is there more on the table to be gained?  While opinions on these topics abound, fact-based analysis is hard to find.  And we think the answers might surprise you.

Our goal with “Gaining Altitude in the Cloud” is to create a forum to help enterprise decision-makers, cloud service providers and technology infrastructure vendors better understand the underlying customer economics driving cloud adoption dynamics.  Our blog will take a comprehensive view and look across enterprise-class cloud services and major vendors in the areas of:

  • BPaaS (Business Process as a Service)
  • SaaS (Software as a Service)
  • PaaS (Platform as a Service)
  • IaaS (Infrastructure as a Service)
  • StaaS (Storage as a Service)

We’ll be featuring best practices, case studies and insights and analysis on how cloud and other next generation IT technologies and services are driving fundamental changes in the economics of IT.   By providing customer-centric, vendor-neutral analysis of cloud economics, we hope to inject a much better fact base into the market conversation.

We’re looking forward to the discussion – we hope you are as well!

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