Strategy Archives - Page 3 Of 6

Infosys’ New Strategy Connects all the Dots | Sherpas in Blue Shirts

March 31, 2015

I recently had a chance to sit down with Infosys’ CEO and his team, and they shared with me their new/renew strategy. From what I understand, it resonates with where the market is heading. This is remarkable as it addresses the vexing problems and risks service providers now face in trying to change their business to address new models, new technologies and new customer expectations. It is always easy to drink the Kool-Aid, and I am definitely experiencing a sugar high. However, the Infosys strategy is one to watch as it appears to connect all the dots in a quickly evolving marketplace.

There are a number of things I find attractive about this new/renew strategy. First is the simplicity of its messaging. It’s easy to understand where they’re coming from and that they are focusing on their customers, not on Infosys like their past strategies. That in itself is powerful for customers’ understanding of what Infosys stands for and where they are heading. And it’s also powerful for the Infosys team to be able to understand what to focus on and what not to focus on. That resonates.

The new aspect

Second, I find the direction compelling. Clearly there is much in the market that is new. New technologies and new business models are driving the market and, when combined, are extremely powerful.

Digital changes how companies interact with their customers, and there’s nothing more powerful than that. Cloud changes the speed and agility and price at which companies can move. The consumption-based and as-a-service models allow companies to align services closely with business outcomes and only pay for services as they consume them. Taken together, these new technologies and business models are very relevant to where customers are headed with their business, and these new areas are capturing the growth in the services segment.

Infosys aligning itself with this direction makes perfect sense as they move to redesign their growth and maintain their leadership position in the services industry.

The renew aspect

This aspect of Infy’s strategy is equally powerful. There is a second set of technologies that allows providers to change the way they deliver services. I’ve blogged often about four of these technologies: automation, analytics, robotics and artificial intelligence. Providers such as Infosys are looking to harness these technologies transform their environment, lowering costs and making their existing services far more responsive than they’ve been before.

Customers are more demanding

So Infosys is tapping into the big themes in the marketplace. They’re leveraging new technologies and new models to connect the dots to new opportunities for growth. And they’re renewing their existing business by harnessing new technologies and capabilities to optimize their service delivery.

Underpinning the strategy is a sea shift in customer expectations. Enterprises are increasingly more demanding of their existing services and at the same time impatient to take advantage of new technologies and business models.

I like Infy’s new/renew strategy because I believe it is directly in concert with where we at Everest Group see the market moving – taking advantage of new technologies and rethinking how to optimize existing services. And it embraces the “old wine in old wineskins” concept I recently blogged about.

I think this strategy will position Infosys well. A word of caution: as an often-quoted lines goes, “Execution eats strategy for breakfast.” So we look forward to seeing how they execute in this marketplace.

Photo credit: Flickr

How Automation Will Change the Services Industry | Sherpas in Blue Shirts

March 4, 2015

As we at Everest Group look at the service delivery automation landscape and think forward to where we believe it’s heading, there is truly a lot of disruption in the picture. From working with and talking to service providers and enterprises implementing automation, we recognize that it’s more than just a labor-to-technology substitution. It opens up a lot of issues around service delivery and even how processes should be designed. It could change everything.

Let’s look at four areas of issues that result from automation.

Upgrade cycles

Some of the rationale for upgrading ERP systems or systems of records is to make incremental improvements. Automation eliminated that need. It’s not that you won’t need to invest in an upgrade; but there will be less pressure to upgrade.

Work location

As you automate transactional or rote work, you separate judgment and exception handling. This results in new choices as to where and who does that work and how you manage the talent for that work.

Process design

Automation also requires that organizations build a more intentional view of their business processes; otherwise, they will lose some knowledge residing in the rote staff doing the day-to-day work.

Sourcing

Customers may also change their thinking with regard to the providers that do this work. They will certainly ask more of the provider. Labor arbitrage will become less powerful and the ability to drive and maintain the automation layer will become more important.

Investment upgrade cycle choices, location choices, process design choices, sourcing choices … indeed, automation could change everything in the world of service delivery.

Dangers in Overreacting to Services Industry Challenges | Sherpas in Blue Shirts

March 2, 2015

Timing can be crucial. I recently blogged about trends that are powerful enough to drive substantial changes in the services industry, even to the point of restructuring the hierarchy of the industry. We at Everest Group believe these are very important trends and service providers must develop their strategies for reacting. Here is our guidance to avoid overreacting to the impending changes.

As a provider, if you react to the challenges by putting new emphasis on new models too fast, you will lose focus on your core business. But if you don’t change quickly enough or are not able to make the requisite changes, you run the risk of becoming a dinosaur. The industry saw this happen 15 years ago when the Indian ISPs with their labor arbitrage and factory models caused tremendous disruption in the MNCs that dominated the industry at that time (e.g., Capgemini, CSC, EDS, HP).

Organizations struggle when changing business models. It’s difficult to change a services organization without losing its identity and value. There are basically two strategy paths providers can take in dealing with the industry changes.

Two strategies for changing

First, don’t fall into the temptation of trying to make your company be something it’s not. For example, most of the Indian ISPs are effectively talent companies; they manage and deliver talent. There will always be a need for talent. The kind of talent and the work the talent undertakes will change, but there will still be a need for talent. So one potential strategy is to stay true to your company’s identity and value and manage talent.

Another strategy is to try to develop completely new business offerings and intellectual property (IP).

However, this strategy carries several risks, and some companies that take this route run into significant problems. Some try to build a new business model but use philosophies and structures that evolved for the talent-pool model instead of digital-age models. Others rethink their philosophies and structures and also change their IP, investment model and pricing structure. They also must change their customer interaction model.

It is particularly instructive that there are very few examples where companies were able to develop their new IP in house. IBM is an example of changing IP numerous times, but they tend to do it through acquisitions, not through developing new vehicles in house. If that’s the strategy other providers adopt in reacting to the impending changes, we can look for a big spree of well-funded service firms buying software or as-a-service products.

However, providers need to change their acquisition strategies. Yesterday’s strategy was to buy tuck-in companies at low valuations and leverage them for customer access, but today it’s necessary to buy technology. Should you buy an early-stage startup that’s affordable but hasn’t fleshed out its business model and hasn’t honed its pricing structure or built market momentum; or should you buy one that has – and pay a premium for it? Obviously there is a huge difference in valuation. And the valuation can change in the course of three months for a fast-moving tech company. So the pace at which you make the valuations has to change, and the risk is different. As I mentioned earlier, timing is crucial.

Another acquisition issue: should you nurture the company and hold it separate so it doesn’t get cannibalized and shut down? Should you let them have an independent sales force and marketing arm, or should you roll them under your existing teams?

So there are substantial challenges and some daunting issues along the road to evolving to an IP-driven organization. There will be a huge learning curve at every level of change.

So which is the best strategy?

You basically have three choices in strategies for dealing with the impending industry changes:

Stay the course and stay true to your talent model and refocus it on the opportunities that the new digital-age technologies will present.
Fundamentally change your DNA in order to play in the new services world.
Attempt to do both #1 and #2.

All the necessary change I described above is a difficult and risk-filled proposition. But it’s even more difficult to try to sustain both models at the same time.

The consequence of option #1, to stay the course with talent, could be that your company ends up on the sidelines and has to watch your talent get commoditized, deal with reduced earnings and slower growth while other providers soar to huge valuations.

The consequence of option #2, shifting to the digital-age models, include a huge learning curve. Can you make that pivot fast enough to offset the revenue runoffs or the lack of growth from your shift in direction? Will it confuse your existing client base? Can you learn the new business model quickly enough to compete successfully?

The consequence of option #3, trying to maintain the old while shifting to the new, will feel and look schizophrenic. You’ll have a split focus in every aspect of your business. And all the while, each model will seek supremacy. If you allow that to happen, you’ll lose focus on the other model.

There is no obvious “right” answer to which strategy your company should undertake in dealing with the impending industry changes. Choose the one that you can best execute on and is the best choice for maximizing shareholder value and growth opportunities.

The Golden Rule in the Services World | Sherpas in Blue Shirts

December 10, 2014

One of life’s realities is that he who has the gold makes the rules. I mention this because it’s now affecting the global services world and providers need to be aware of how the rule impacts their business.

Over the last three years we’ve seen companies task their CIOs and shared services organizations with cost-cutting and demand that they deliver more services at a lower price. At the same time, we’ve seen companies give other stakeholders responsible for growth and customer satisfaction access to large discretionary budgets. Thus they’re placing the gold — or budgeting power — in the hands of the business unit leaders, chief marketing officers, and other stakeholder groups.

With their increased access to capital, these business leaders and stakeholder groups now exercise the golden rule. Since they have the capital, they influence how to spend the money.

This influence is rising at the expense of the traditional stakeholder groups that are the custodians of purchasing, IT and shared services. As I’ve blogged before, provider sales and marketing teams need to understand how to avoid being bitten by this paradigm shift in IT spend decisions.

Photo credit: Boullion Vault

Next-Generation Options Change Relationships with Service Providers | Sherpas in Blue Shirts

November 18, 2014

The 16th century political theorist Machiavelli wrote that there is “nothing more dangerous, or more doubtful of success, than to attempt to introduce a new order of things.” I think we should remember his words as we embark on the journey to embrace the next-generation solutions entering the services marketplace. Next-generation options are now changing the nature of the relationship between buyers and service providers. And there is plenty of significant change for both sides.

The traditional structure of solutions focused on cost reductions, RFPs prepared from a proscriptive perspective, and rigid MSAs included in the RFP package along with process descriptions, service level specifications and pricing exhibits. Value was created by onerous contract terms or traps for the provider.

Next-generation solutions give way to a much more fluid partnership approach to create value. The parties distribute the risks and develop a relationship built on flexibility and innovation. Contractual documents evolve with the discussions and negotiations. In a next-gen deal buyers and providers collaborate on how they might execute the buyer’s business objectives. Together they create value through building a framework for a successful relationship rather than through an onerous contract. The contract reflects the principles the parties agree to rather than predetermined contractual terms and conditions.

This highly collaborative process in developing the commercial requirements of the contract covers such issues as who owns the intellectual property. In many of these constructs, buyers ask their providers to develop or bring intellectual property with the buyer using it on a consumption basis. The discussions and negotiations articulate both parties’ risk, understanding of the business impact and the desired solution. They jointly develop the initial governance model and also participate jointly in refining it over time.

In a relationship developing a next-gen solution, the parties need to discuss — not dictate — the commercial requirements. Competitive tension is far less useful than in the traditional RFP structure where price is the dominant issue discussed. Instead, in next-gen deals, the parties discuss capabilities and design as levers for creating value.

There is another significant aspect that differentiates next-gen relationships. The commercial construct must allow for a journey rather than a destination. As the commercial constructs take place, the buyer often faces substantial change in organizational philosophies, policies and processes. This journey of change can be as daunting and significant as the one the provider must go through.

From our experience in working with clients in these kinds of relationships, the first step toward success is for the buyer to build a robust strategic intent that includes both its objectives and its vision of how to get there. Both parties can then use this strategic intent to keep all parties aligned over time and create a North Star to follow as they navigate through a collaborative but complicated process.

Photo credit: Hartwig HKD

Sales Strategy Shift in the Cloud Services Market | Sherpas in Blue Shirts

November 13, 2014

The fact that enterprises are making a strategic intent shift to cloud and as-a-service models changes more than the service delivery model. It also changes the value proposition and therefore causes implications for provider’s sales strategies. For starters, the focus turns away from the provider’s capabilities.

Sure, those capabilities are still important. But with the new models the focus shifts to the customer’s needs.

The old strategic intent and value proposition was to achieve cost savings. Providers presented offer-based solutions touting the provider’s services. For example, a provider selling to a potential client in the P&C insurance industry might describe the kind of clients it services and how many clients it has, as follows:

“We have 25 clients in the P&C space with five million policies, 1000 analytics professionals with advanced statistical knowledge. We have 5,000 FTEs in eight offshore, nearshore and onshore locations. And we have a platform-based solution.”

Competition would take place on which provider’s offer is the most compelling to the customer. Typically in an offer-based solution the winning provider would be the firm with the most experience in the industry that targets the customer’s areas at appropriate price points.

But cloud and as-a-service solutions focus on the customer’s needs. This gives providers the opportunity to shift to needs-based messaging, as in the following example for a P&C insurance company:

“P&C insurers are battling high expense ratios, coupled with low interest rates globally. This is putting strains on their finances. Our solution can help you automate underwriting and shorten quote times by up to 60 percent, improve fraud detection by over 40 percent and facilitate early identification for subrogation helping improve overall margins.”

One of the most significant implications of the enterprise shift to the cloud is that focusing on needs-based messaging instead of the provider’s capabilities offer-based messaging will change the brute force product-selling mechanism that has come to define the market as we know it.

Implications of the Enterprise Strategic Intent Shift toward Cloud | Sherpas in Blue Shirts

October 29, 2014

Since the beginning of 2014 Everest Group has seen a real shift in large enterprise CIO organizations in their strategic intent toward cloud services. What are the implications on the traditional infrastructure outsourcing market from this strategic intent?

Timing

First, we expect that this shift will not happen overnight. As organizations work on their cloud plans, it’s clear that this is a three-to-five-year journey for migrating some or all their environment into this next-generation environment.

Runoff of work from legacy environments

Second, we expect the runoff on traditional outsourced contracts to accelerate. The runoff has been running at about 5-10 percent a year. We expect this will pick up to something close to 50 percent of the workloads to shift over to the cloud in the next three years with 30 percent of that shift happening in the next two years.

So this is a dramatic runoff of work from legacy environments into the next-generation models. This will put significant pressure on the incumbent service providers in that space.

Who will be the likely winners?

The third implication is the likely winners from this strategic shift. We think that at least for the next two years the Indian players or those with a remote infrastructure management (RIM) model will enjoy substantial benefits. Often a move to cloud or next-generation technologies can be facilitated by a move to a RIM model. So we see RIM continuing its torrid growth.

We also believe the providers with enterprise-quality cloud offerings will be players. One that particularly comes to mind is IBM’s SoftLayer, which we think is well positioned for the shift. It has its own runoff and can grab share from asset-heavy or other legacy providers as runoff occurs there.

We expect to see Microsoft and its Azure platform play an increasingly prominent role in cloud services. It will be interesting to see if AWS, Google, and Microsoft can make the shift from serving rogue IT and business users to enterprise IT. At this time we certainly believe IBM can. And it looks like Microsoft is making deliberate efforts to transition its model. It remains to be seen if AWS and Google are willing to shift their models to better accommodate enterprise IT.

Photo credit: Photo Dean

When Is Impact Sourcing the Right Fit with Your Global Sourcing Strategy? | Sherpas in Blue Shirts

October 7, 2014

This is the final blog in a series of three on the topic of impact sourcing. In the first one, I covered the fundamentals of the model and in the second, the value proposition and business case. Now, I’ll share insights on the nature of work it is best suited for and the activities the model can potentially deliver.

Work suited for impact sourcing

Given that the targeted talent for impact sourcing are individuals with disadvantaged backgrounds, their skills levels are typically suited for specific types of BPO activities as given below.

Transactional, repeatable, and high volume: Typically includes non-voice support for back-office work and voice-based work on a selective basis when business needs align with talent capabilities
Bespoke work, not amenable to “industrialization”: Typically requiring human intervention to handle case-to-case customization or work that cannot be fully automated
Work that is generally suitable to offshoring: Typically includes work with no regulatory or legal restrictions on offshoring or in situations where cost savings and efficiencies are key objectives

Having said the above, impact sourcing employees have demonstrated a wide-range of aptitude from basic data entry to complex data processing. For example, Pangea3 used impact sourcing to deliver complex contract abstraction services; Deloitte in South Africa is using impact sourcing to deliver accounting services and is considering hiring impact workers in its other offices across Africa.

Is impact sourcing actionable?

So, what does this mean for companies considering impact sourcing for BPO work? Are there tangible examples of work where companies use impact sourcing in a meaningful manner? The answer is an unequivocal yes! To illustrate impact sourcing in action, consider the example of a typical optical character recognition (OCR) image validation process given in the box below. The blue text represents activities that fit with impact sourcing and may be completed by impact workers.

A typical OCR image validation process

Documents prepared for scanning
OCR software process converts document to TIFF, JPEG, PDF image. Software reads text block by block and translates into machine language
Agents validate translation by software
Agents index data or text to enable content based retrieval
Quality control by supervisor/manager
QA releases to database or document management system

There are many more such processes where impact sourcing can be an attractive fit for delivery of BPO services. Some of these are given in the table below.

Sales & marketing	Sales data capture and validation Telemarketing Content conversion, editing, and tagging Document digitization (e.g., customer forms digitization)
Supply chain management	Data entry (e.g., order entry, package tracking) Document digitization and archiving (e.g., claims forms)
Finance & accounting	OCR image validation Invoice data entry Indexing invoices Paper invoice digitization and archiving
Industry specific operations	E-commerce support (e.g., transcription, translation, content tagging, basic online research) Debt collections Location tagging
Customer service	Domestic voice support in vernacular languages L1 technical helpdesk
Human resource	Document scanning and indexing (e.g., employee expense claim forms) Data entry in HR information systems

The notable point is that there are companies already using impact sourcing to deliver many of the services mentioned above. For example, RuralShores is delivering invoice processing, mortgage document digitization, customer care, logistics management services using impact sourcing. Accenture uses impact sourcing to deliver not only basic F&A processes but also more complex HR, PO, F&A functions. These are also echoed in the examples from Aegis, Infosys, and Quatrro. We also saw earlier how Deloitte and Pangea3 are using impact sourcing for complex work. These examples substantiate that impact sourcing is actionable and a viable alternative to traditional BPO.

Conclusion

In conclusion, in this series of three blogs, I discussed how impact sourcing is an established phenomenon that offers access to previously untapped talent pool, lower attrition and the ability to achieve corporate social responsibility and diversity objectives as compared to traditional BPO. There are many large, global companies that have acknowledged the benefits of impact sourcing and have adopted it in their business process service delivery. It is a win-win business service delivery model with optimized enhancements and creates tangible positive impact on people that extends to communities as well.

Everest Group, supported by The Rockefeller Foundation, conducted an in-depth assessment on impact sourcing (IS) as a business process service delivery construct. The study presents a detailed, fact-based business case for IS that substantiates the benefits of the IS model for Business Process Outsourcing (BPO). Additionally, it sizes the current IS market for BPO work, profiles the landscape, details the business case, and shares experiences of companies through case studies and testimonials. The report focuses on Egypt, Ghana, Kenya, Morocco, Nigeria, South Africa, India, and the Philippines.

The Rockefeller Foundation aims to catalyze the IS sector in Africa through its Digital Jobs Africa Initiative. The Foundation’s role is to ensure positive social and economic impact on 1 million people by supporting high potential but disadvantaged youth to work in the dynamic outsourcing sector in Africa, benefitting them, their families and communities. The Foundation recognizes that the most sustainable and scalable path to achieving this impact is because of the tangible business value impact sourcing provides. Impact sourcing enables companies to purposefully participate in building an inclusive global economy, gaining business efficiencies while changing people’s lives.

Visit our impact sourcing page for more information.

Be sure to join our webinar, The Business Case for Impact Sourcing on today at 9 a.m. CT / 10 a.m. ET / 3 p.m. BST / 7:30 p.m. IST. Register now.

Photo credit: The Rockefeller Foundation

Sea Change in Large Enterprises’ Cloud Strategic Intent | Sherpas in Blue Shirts

September 8, 2014

For five years we at Everest Group have tracked the cloud space in global services. Until this year, there was a lot of talk about cloud, but much true cloud adoption was driven in business units with large enterprises. CIOs basically sat out the game and watched the cloud’s performance. But since the beginning of 2014 we’ve seen a real shift in large enterprise CIO organizations, which signals a significant change for the services industry.

Until recently CIOs in large enterprises were reluctant to put cloud initiatives in place because they felt it was premature. They struggled with compliance and security questions. And they worked to make sure their organization understands and embrace cloud and as-a-service technologies. Their posture is moving from cautiously watching to actively planning and driving, and some have large initiatives underway. Their plans with regard to cloud have moved from the radical fringe to mainstream strategic intent to embrace and drive.

Large enterprise tech budgets are still controlled by the CIO organization because they are best able to drive technology initiatives to scale and to execute initiatives across functions.

This is a very important development and will cause significant changes in the technology and services industry. This undoubtedly will start to drive a significant shift in spend from the traditional structures into the cloud and as-a-service models. As that occurs, we believe it will pick up momentum and pull the rest of the industry through.

IBM Positioning for Dominance in Future of Infrastructure Services | Sherpas in Blue Shirts

August 12, 2014

I recently had the privilege to sit through a two-day session with IBM’s senior executive team in services. I’m someone who tries not to drink the Kool-Aid. Even so, I came away truly impressed by the work that IBM has done to position itself to be relevant and a major player in the future of IT infrastructure.

I’ve written frequently in this blog about the impending crisis that all asset-heavy players face as first RIM and then cloud attack their revenue base. This unrelenting onslaught is already moving share from the incumbents such as IBM to challengers such as HCL and TCS and will only be exacerbated as cloud takes stronger hold.

I came away with from the two days with IBM realizing Big Blue’s profound understanding of this phenomenon and its positioning of offers that allows them to leapfrog the RIM model and play a decisive and significant role in cloud.

Taken as a whole, IBM’s public cloud software and private cloud and automation strategies gives it the capability to move clients smoothly into the future. And it assures capturing the run-off from IBM’s traditional business while at the same time expanding market share. This is truly a formidable set of capabilities that, if executed well, will ensure IBM is a major — if not dominant — player in the future of IT infrastructure.

Everything will come down to execution, and history has seldom been kind to incumbents in the face of major technology and business model disruption. But based on the two days I spent with IBM, I believe that IBM has more than a fighting chance to successfully make this transition.

Photo credit: Irish Typepad

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Tag: strategy