Service providers in India have issued several announcements around their intentions to let a fairly sizeable number of employees go. Six thousand at Cognizant, 1,000 at Infosys, more than 200 in the Mumbai office of Capgemini (a French company), and several hundred last month at Wipro with expectations of another 10 percent of the workforce this year if revenues don’t improve. This is unusual in this market and, understandably, it is creating angst among employees in the companies as well as interest outside the companies. However, it’s not just a case of “downsizing” and thousands of layoffs, as many media have reported. Let’s look closer at what’s really happening.
We at Everest Group have been tracing the trends in the traditional arbitrage-first based model, which constituted 78 percent of the services marketplace. The arbitrage-first business shrank in the last 12 months. The rotation into new digital models is another factor. Where it’s applied, the digital business cannibalizes the arbitrage business and compresses that revenue by 30-40 percent. Also, digital revenues at this point are small. Digital models are primarily in the implementation phase; therefore, most projects are small in nature and most are located onshore at customers’ locations.
Because of the arbitrage decline and the change to digital models, service providers now have an excess number of employees for the first time since the global economic crisis and recession in 2008. As market realities have changed, India’s service providers are taking steps to adjust their business models. As digital models often require 30-40 percent fewer people to do the work, I think it would be surprising if they didn’t thin their labor pools as a necessary part of adjusting to the new realities and new business models!
But as I mentioned earlier, the providers are not just laying off workers. They’re also hiring. Their talent models are out of whack to be able to address digital work, which requires different skills and often needs to be done onshore where clients are located rather than offshore. Several are creating new jobs in onshore locations near their customers; Infosys, for instance, announced it is creating 10,000 jobs for US workers. Even in a digital world, the Indian providers need to maintain their pyramids (which rely on steady new hires of junior people) so they can keep their costs low.
India’s service providers are making difficult choices, including thinning their arbitrage-based talent pools. Thus, the layoffs are understandable and, indeed, necessary. It indicates organizations and an industry in transition and undergoing unaccustomed pain.
The service providers’ clients should view these developments as encouraging because the providers are taking the necessary steps to put digital talent in place. But the providers’ employees understandably experience trepidation as they face the new market realities with an increasingly uncertain future.
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India GIC IT talent migration patterns
What if a service provider could build itself from scratch based on the learnings from the past two decades? Liberty Source, launched in 2013 as an impact sourcing provider, is trying to do just that in the highly competitive finance & accounting (F&A) outsourcing market. It has agreed to share its story with us as its business continues to scale.
Our first discussion with Steve Hosley, CEO of Liberty Source, provided an overview of their journey and in the second and third discussion we focused on the talent model. Our fourth discussion focused on the principles behind the culture of Liberty Source. We continue the discussion on culture in this fifth blog.
Eric: In an earlier conversation, you described the culture that Liberty Source has intentionally adopted and why it has chosen to focus so much on culture. I would like to understand more about what Liberty Source has specifically done to structurally build the principles into how Liberty Source operates. What are some of those elements that have been designed into Liberty Source’s operating model?
Steve: The cornerstone of the culture program, and first group we kicked off, was our affinity group, LSVS (Liberty Source Veteran and Spouse) team. This group drives all of our community outreach activities as well as our internal engagement programs. It also allows spouses and veterans the ability to mentor other Liberty Source employees. A big part of ensuring Liberty Source continues to effectively scale, resides in our ability to access top talent, so the LSVS team created a Liberty Source Ambassador program, which is a volunteer rotational assignment where our spouses and veterans, represent Liberty Source at recruiting events on bases and within the community. Although we have a standard recruiting process, we encourage our spouses and veterans to simply be authentic and talk with folks, telling their Liberty Source story. Empowering our employees in this capacity is powerful and engaging. To hear spouses speak of their specific roles at Liberty Source and then speak about the company at the enterprise level is powerful and in the process, that simple exchange has placed their personal credibility and brand upon the enterprise brand of Liberty Source. It also is a big reason that, even after two years, we are still very proud that over 50% of our new hires come from internal referrals.
A second team we established is focused on getting the right tools and establishing the environment. We have an open, productive, and inviting work environment and our shipmates have all the necessary tools to be successful in their job. We are a laptop-driven open environment with no offices, which promotes our employees to exercise one of our operating principles of “Own it,” allowing folks to simply get up from their seat and walk over to another team to get something solved. Pretty basic, but once your employees feel empowered, this basic open concept can be a powerful instrument. Our operations center resides in Virginia, where southern hospitality is alive and well. This polite nature proved to be problematic at times because our shipmates were not culturally equipped to tell a fellow shipmate that they could not talk right now because they were in the middle of something. This committee developed flags for each desk and when the flag is up it signifies the “door is closed and I am busy.” This indicator helps prevent culturally awkward interactions.
Eric: Great idea! I need to get a flag for my office door to keep our CEO away while I am trying to get work done. Beyond the affinity and the committee for design of the environment, are there other elements you have designed into the operating model?
Steve: Yes, there are three other elements that come to mind – a training coalition, our monthly employee communication, and a medals and ribbons program.
Eric: Would you mind describing those in some more detail?
Steve: Certainly. At Liberty Source we have a standard training program that we continue to enhance each year in support of the skills we deem e necessary today and in the future. This group is chartered with developing a supplemental training program focused on tracking and managing on-the-job training experiences and skill achievements. They have targeted a few key areas, roles, and skills, and they work with the folks currently performing the functions to practice and formulate a way to convey what you do to others. They then schedule and arrange job shadowing opportunities for fellow shipmates to learn from each other. This group also finds opportunities for Liberty Source employees to exercise a development skill in “friendly” non-client facing situations, such as putting into practice their PMM certification by running and leading our annual holiday party. Although the military community embraces formalized classroom certificate driven training, and Liberty Source has its share of that, we believe the classroom work needs to be reinforced or validated from seeing and doing real work and achieving and demonstrating tangible skill development. In the works right now, this team is developing a new program to target and track when shipmates demonstrate skill achievement through the attainment of visible badges or metals. This will allow our folks to track their development inside formal classroom settings as well as skill proficiency achievements outside the classroom.
From a communications perspective, our communications team ensures that we have established outlets that allow personal and professional information to be shared on a regular basis among shipmates. One of the key instruments of this team is the monthly LSVS outreach publication that profiles individuals, accomplishments, what’s ahead, and how to get involved. This group also orchestrates quarterly skip level meetings to make sure there is a transparent exchange of information.
The last item I mentioned was medals and ribbons. In the military, they clearly know the value and importance of recognizing individuals for great accomplishments. The commercial world can learn much from the military in this area. What we have learned is that the way you deliver recognition of achievement is actually just as important as the reward that may come with it. Taking the time and thinking through the interaction and exchange of the actual recognition and reward is very meaningful. One of our biggest events is when we reach the first anniversary of a new client. We invite the client to our Operations Center located at Fort Monroe in Virginia for a formal “coin” ceremony. We have a special coin minted that honors the client and its dedicated delivery team at Liberty Source. In the ceremony, we “coin” the Liberty Source employees in honor of their hard work and dedication, which includes transitioning, launching, stabilizing, and delivering for the client day to day. In the same ceremony, we have our spouses and veterans “coin” their client counterparts and key client personnel in recognition of their thanks for all the support over the past year but, even most importantly, for their commitment and belief in the spouses and veteran community. Needless to say this is a powerful recognition event on many levels.
Eric: Very interesting to hear these examples and how the alignment to the military culture has provided an opportunity to extend culture design into business operations. Thanks again for sharing, and I look forward to our next discussion. Might you be ready to explain the automation program and learnings for that effort?
Steve: I think we are about ready to share our learnings. We have automated processed at two different clients and are capturing some powerful learnings. Let’s speak in a few months and we will be happy to share these.
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