Tag: technology

Reimagining Global Services: How to get MORE out of Technology | Sherpas in Blue Shirts

Much has been written and said about the Bimodal IT model Gartner introduced in 2014 – with forceful arguments for and against. Not at all intending to bash that model, it’s safe to say that the digital explosion over the last three years demands that enterprises’ technology strategies be much more nuanced and dynamic.

The MORE model for global services

Let me explain with the help of the following chart. I call it the Maintain-Optimize-Reimagine-Explore – the MORE – model.

Global Services and Technology in the MORE model

I’ve tried to plot (intuitively) a bunch of technology and service themes on their current and future innovation potential.

  • Maintain: On the bottom right are themes like mainframes and traditional hosting services that are unlikely to go through dramatic changes in the near term. These are exceptionally stable and commoditized, and will not attract exciting investments. Enterprises still need them, and CIOs should Maintain status quo because it’s too risky and/or expensive to modernize them.
  • Optimize: Seven years back, that cool AWS deployment was the craziest, riskiest, hippest tech thing we could do. But, I guess we’ve all aged (just a little bit) since then. The needle of cloud investment for most enterprises has moved from AWS migration (USD$200 per application, anyone?) to effective orchestration and management – a clear case of the enterprise seeking to Optimize its investments in the bottom right corner of my diagram.
  • Explore: On the top right, we have the new wild, wild, west of the tech world. Blockchain can completely transform how the world fundamentally conducts commerce, IoT is working up steam, and artificial intelligence can shape a different version of human existence, much less business models. Enterprises need to Explore these to stay relevant in the future.
  • Reimagine: What we cannot afford to miss out on is the exciting opportunity to Reimagine “traditional” global services into leaner and more effective models using a combination of enabling themes like automation, DevOps, and analytics. These are immediate opportunities that many enterprises consider essential to running effective operations in a traditional AND a digital world. For example:
    • In a world where “the app is the business,” QA is being reimagined as an ecosystem-driven, as-a-service play built on extensive automation and process platforms. The reimagined QA assures a digital business process and a digital experience – not just an app.
    • We are getting into the third generation of workplace services (first hardware-centric, then operations-centric, and now software and experience-centric.) The reimagined workplace service model delivers a highly contextual, user-aware experience, without sacrificing the long-range efficiency benefits.
    • Application management services (AMS) are being reimagined through extensive outcome modeling, automation instrumentation, and continuous monitoring.

Three principles for reimagining global services

It’s interesting to note that many of these reimagination exercises are based on three common foundational principles:

  1. Automation first: Automation and intelligence lie at the heart of our ability to reimagine technology services, because automation helps us deliver breakthrough outcomes without blowing the cost model out of the water.
  2. Speed first: The need to run ALL of IT at speed is driving reimagination and the corresponding investments. If you’re at the reimagination table, throw away your tools to build the perfect (and the biggest) mousetrap. A big part of the drive for reimagination is to move from scale-driven arbitrage first models to speed-driven digital first models.
  3. Alignment always: This is important and good news. For decades, we’ve all complained about the absence of Business IT alignment. Reimagination hits out at this issue by focusing on technology architecture that is open and scalable, and by delivering as-a-service consumption models that are closely linked to things that the business really cares about.

Over the next several months, Everest Group is going to publish viewpoints on each of these topics and more. But we’d love to hear any comments and questions you have right now. Please share with us and our readers!

New Paradigm in ER&D Services: Convergence of Engineering and Technology – Part 2 | Sherpas in Blue Shirts

In New Paradigm in ER&D Services: Convergence of Engineering and Technology – Part 1, we talked about the emerging trend of convergence of engineering services and new technologies, and why it is important for enterprises to deliver an enhanced customer experience. Now, let’s turn our attention to the steps and measures enterprises and service providers are taking to tap into the trend and enhance their value proposition.

Engineering Services and Technology ER&D

  1. Access talent with hybrid (technology + domain + design) skills: Service providers and enterprises are increasingly looking at hiring people not just with the right domain knowledge, but also with cross-functional expertise. There is heightened demand for engineers with niche technology skills, such as IoT and artificial intelligence. For instance, Altran, one of the world’s largest engineering service providers by revenue, has an innovative way of recruiting talent. It filters talent through case studies based on its own real-time projects, such as “connected car” and Solar Impulse . This enables it to select candidates who have both the right skill sets and an innovative mindset, which has become critical for people in the industry.
  2. Capitalize on data to drive business value: New technologies and social media have led to a gush in the amount of consumer data that can be tracked and mined to deliver a better customer experience. Players in the engineering services space are realizing the value of customer data, and taking steps to build infrastructure for analyzing it. For example, ALTEN Calsoft Labs, a global engineering service provider, recently announced that it will acquire ASM Technologies Ltd’s software business division to augment its cloud, analytics and mobility capabilities.
  3. Reimagine product development: With shrinking product lifecycles and ever-changing customer demands, the focus is on providing end-to-end solutions rather than just point solutions. Service providers are partnering with clients to deliver solutions in an as-a-service model. Customer expectations are putting pressures on product lifecycles, and enterprises are trying to innovate and create newer and smarter products at warp speed.
  4. Move towards co-innovation model: The shift in technology complexity and consumer demand for a “connected” ecosystem is increasing collaboration between enterprises and providers for innovation and new product development. For example, Jaguar Land Rover is partnering with Altran to develop and market a unique software platform for vehicle internet connectivity, driver assistance systems, autonomous driving, and analytics. The partnership is aimed at delivering increased customer value by combining Jaguar’s automotive experience and Altran’s expertise in providing solutions for the automotive sector.
  5. Drive efficiencies in design to deliver cost savings: New technologies and methodologies in software development and testing are transforming the product development landscape for enterprises and they are increasingly adopting automation tools to accelerate time-to-market for products. For example, Wipro has a defined test automation framework (Wipro Endur Test Automation Framework) that can help clients reduce overall TCO of test automation by as much as 45 percent.

Implications for the industry
So what does this all mean for the ER&D services industry outlook, and for players in the domain? As it becomes increasingly crucial for enterprises and service providers to gain new capabilities in engineering and technology, there will be increased merger, acquisition, and partnership activity. Enterprises will look at partnering with niche technology firms or innovative startups for new product development. Service providers will pursue targeted acquisitions, and try to strengthen their value proposition for clients by increasing investment and focus on the segment. It will be exciting to see what happens in this space in the next 5-ten years.

For more insights and information on the ER&D services industry, please refer to our latest report, “The Evolving Demand Paradigm in the Engineering and Research and Development (ER&D) Services Industry.”

New Paradigm in ER&D Services: Convergence of Engineering and Technology – Part 1 | Sherpas in Blue Shirts

It is interesting times for the engineering services and R&D (ER&D) market. Industry demand for engineering services coupled with technology innovations is transforming the market landscape, and leading to the emergence of new business models – in particular, the convergence of engineering services with new technologies, such as digital, IoT, and analytics for product development.

The proliferation of digital technologies is compelling enterprises to relook at their product development strategy, and integrate new technologies with products to deliver an enhanced customer-centric experience. Service providers in the ER&D industry are looking to expand their engineering service offerings by tapping into new technologies that can help them differentiate their position in the market and deliver increased value to their clients.

The convergence trend is manifesting itself in many ways in the industry, and fundamentally transforming the normal course of business for both enterprises and service providers:

  • Evolving consumer needs, coupled with the explosion of digital devices and technologies (e.g., connected vehicles, chatbots, and machine learning based platforms) are dramatically changing the demand landscape in the ER&D services industry. Given that the number of connected or smart devices is expected to grow from 22 billion today to 50 billion by 2020, it’s clear that enterprises must now provide a “connected ecosystem” experience for their customers across devices and platforms.
  • The US$75-80 billion ER&D global services industry is expected to grow at a rapid pace (14-16 percent YOY) and reach US$145-155 billion by 2020. This growth is being driven by evolving customer demands, the need to integrate new technologies with products, shortening product lifecycles, and the resulting cost and margin pressures for enterprises.
  • Facing margin pressures for IT services, service providers such as HCL, Infosys, and TCS are betting big on the fast growing ER&D services segment. For example, Infosys recently opened delivery centers in Croatia and Russia to provide engineering services to its automotive, heavy manufacturing, and aerospace clients. The ER&D services industry is expected to drive the next wave of growth for these players:
    • In the last couple of years, the engineering services segment has grown faster than IT services. Estimates from NASSCOM are that engineering services exports grew by 12.6 percent in India during FY 2016, whereas IT services exports grew by 10.3 percent
    • Infosys’ YOY FY 2016 revenue growth for its engineering services practice (16 percent) was more than the company’s total revenue growth (9 percent)
  • With enterprises’ shift in demand, service providers are looking at capturing a larger share of ER&D outsourcing market pie by investing in the segment and acquiring new capabilities. For example:
    • HCL Technologies recently acquired Geometric to strengthen its engineering services and IoT capabilities
    • Luxoft recently acquired Pelagicore AB, a leader in open source software services for human machine interface (HMI) development. The acquisition is expected to help the service provider bolster their automotive services offerings with next-level technology capabilities.

Time-to-market pressure for product development is making enterprises and service providers look at avenues to deliver enhanced value to their customers. Make sure to visit our blog page later this week to read our follow-up post on the different ways they’re keeping up with this trend.

Recruitment Process Outsourcing Market Remains Hot, Posting 17 Percent Growth Rate in 2015 | Press Release

New deal activity tops 18 percent growth as service providers from all backgrounds, diverse regions taste success in highly competitive, fragmented RPO market.

The global Recruitment Process Outsourcing (RPO) market continued to remain one of the fastest growing single-process HRO markets. Buoyed by a resurgence of growth in the North American market, RPO posted a strong growth rate of 17 percent in 2015 over 2014 and touched the US$2.4 billion mark. A majority of the global growth is attributed to new deal activity, which grew at a rate of more than 18 percent year on year.

From a regional perspective, the United States, United Kingdom and Australia are the relatively more mature and bigger RPO markets, and they account for a large chunk of the global deal activity. Nonetheless, many countries in different regions across the world are emerging as strong RPO markets on their own, particularly in Latin America, Continental Europe and Asia Pacific.

“Across the globe, the key challenge in today’s recruitment landscape is the need to find and engage the required talent, especially for high-skilled roles, and buyers are expecting greater proactiveness and innovation from service providers in that regard,” said Arkadev Basak, practice director, Business Process Services, at Everest Group. “Providers are responding to this opportunity by developing niche areas of expertise, adding talent advisory capabilities, and improving their internal efficiencies, by leveraging technology, providing targeted training, and addressing division of labor fundamentals.”

Over 40 percent of RPO deals are bundled with a technology capability. In particular, many service providers are making dedicated investments in developing bundled RPO offerings that include advanced analytic services.

“Service providers are using technology as a productivity lever as well,” adds Ranjan. “For example, we are beginning to see providers adopting Robotic Process Automation to improve efficiency and save on costs, and we expect RPA adoption to rise rapidly in the future.”

These and other research findings are explored in a recently published Everest Group report: Recruitment Process Outsourcing (RPO) Annual Report 2016 – Opportunities Abound in a Buoyant Market.

This report provides comprehensive coverage of the RPO market across dimensions such as market overview, key business drivers, buyer adoption trends, solution and transaction trends, emerging themes and areas of investment, and service provider landscape.

Other key findings in the report:

  • Single-country RPO accounts for a majority of the deal activity. Interest in Multi-Country RPO (MCRPO) engagements is high; however, the size and scope of such deals is witnessing a downward trend. In fact, very few incidents of global mega-sized deals were witnessed of late.
  • Emerging RPO markets, such as India, China, Poland, and Colombia, which were mostly included as part of multi-country deals earlier, are now increasingly witnessing greater single-country deal activity, characterizing the growing maturity of RPO in these markets
  • While cost reduction is an important RPO driver, operational scalability and flexibility is what most buyers, especially the large ones, seek from an RPO engagement.
  • With growing maturity of the RPO market, inclusion of value-added services, such as employer branding, talent communities, workforce planning, etc., has almost become table-stakes in RPO, especially among second- and third-generation buyers
  • Service providers are increasingly offering separate, more targeted offerings around niche areas such as veterans, diversity hiring and outplacement. Not only does this trend help address buyer needs better, it also provides differentiation for the service provider
  • Almost all major RPO service providers are investing in developing talent advisory capabilities. Such services bulk up the value proposition of existing RPO offerings, especially among the first-time buyers, and can also act as potential door openers for new business opportunities

The RPO market continues to remain intensely competitive and fragmented. Providers from all backgrounds (including staffing, broader BPO, and pure-play RPO) have tasted success in this fast-growing market

Capital Market Firms Must Rely on ‘Technology that Saves’ to Fund ‘Technology that Transforms’ | Press Release

High cost pressures, market uncertainty drive decline in application outsourcing deals and rise in vendor consolidation.

Capital market firms—which are operating under difficult market conditions, facing an increasingly complex regulatory environment and competing with aggressive new financial technology entrants—find themselves needing to invest in next-generation technologies while holding IT budgets steady, according to new research from Everest Group. This implies that the only plausible way to continue technological advancement will be to fund change initiatives with money saved by run-the-business initiatives.

“Capital markets firms are struggling with increasing costs, increasing regulation, and a period of low growth,” said Jimit Arora, partner at Everest Group. “In addition, technological advancement, especially digital, has created a new set of competitors that are not weighed down by the burden of legacy in their product portfolio, customer relationships and IT setup. The imperative for capital market firms is to focus on growth, profitability and managing risk, and their IT investment must be focused on cost optimization and improving the customer experience.

“As a result, the implications for IT service providers serving capital market firms are to tailor their offerings with next-generation technologies and offer utility-based services that help clients achieve their business objectives quickly. They also should look to collaborate with clients to invest in innovation and form alliances with leading platform providers.”

These recommendations and research findings are explored in two recently published Everest Group reports available at https://www.everestgrp.com/:

In the 2016 PEAK Matrix™ Assessment of IT outsourcing in global capital markets, Everest Group identifies seven Leaders among the 27 firms assessed: Accenture, Cognizant, HCL Technologies, IBM, Infosys, TCS and Wipro.

In addition, the report identifies five service providers—Capgemini, EPAM, Hexaware, Luxoft and VirtusaPolaris—as the Star Performers based on their positive forward movement over time in terms of both market success and capability advancements.

Other key findings in the reports:

  • Capital markets IT outsourcing spend remains the lowest among the subsegments of the banking, financial services and insurance (BFSI) industry.
  • New application outsourcing transactions in the capital markets IT services saw a minor decline of 2.6 percent compared to last year as clients reduced spending. Only 74 new deals were reported in 2015 against 76 in 2014. Cost pressures and global market uncertainty were the main reasons behind the decline in deal activity. The number of large deals decreased as clients undertook vendor consolidation to reduce spend on vendor management and reduce management overhead.
  • The number of large contracts jumped by 50 percent; however, total contract value (TCV) declined by 45 percent as clients reduced spending on traditional IT services.
  • Digital services continue to expand their share in IT budgets. Nearly 65 percent of all large transactions included digital components in the scope of services, with analytics and mobility being the leading technology themes last year as clients look to monetize data assets and improve customer experience using the mobile channel.
  • Renewals worth US$2.7 billion are up for grabs in the next year.
  • Fixed-price contracts remain the most preferred pricing model as capital market firms demand predictability in their IT spending.

Banks Turn to Technology, Outsourcing in Fight for Relevance in New-Age Market | Press Release

Robotic process automation, analytics and consumer-facing technology solutions drive 10 percent growth in banking BPO market.

“If banks do not get their act right, they might soon lose their relevance,” claims Everest Group in new research addressing the business process outsourcing (BPO) market in the banking industry. The fight to remain relevant in an evolving market of new-age consumer preferences and unprecedented external pressures is driving demand in the banking industry for technology solutions and third-party assistance, as reflected in an approximately 10 percent compound annual growth rate in the banking BPO market.

Describing the future outlook for banks, Everest Group points to evolving consumer preferences, macroeconomic and regulatory pressures, and increased competition from non-traditional players. Traditional, brick-and-mortar bank branches are losing significance as consumer interest in traditional banking channels declines. Banks are also under serious pressure to reduce costs, increase profitability and respond to greater regulatory and compliance requirements. Furthermore, competition from non-traditional sources is on the rise. Financial technology companies (FinTechs) are a serious threat as they provide a better consumer experience and benefits such as ease of use and improved functionality. Also, the market for digital wallets (e.g., Apple Pay), person-to-person (P2P) transfers (e.g., Facebook Messenger and SnapCash) and new-age banking solutions (such as applications for wearables, voice-activated assistances and personalized interfaces) is growing rapidly.

“Consumer preferences are evolving fast, and banks need to align themselves with consumers’ desires,” said Anupam Jain, practice director at Everest Group. “The consumer wants their financial partner to be integrated with their daily life and to be easy to access. They want real-time advice based on their own transactions and behavior. This is why we are seeing growth in banking BPO: service providers can support banks by offering domain expertise and analytics; by leveraging technology to offer modern services; and by using tools like robotic process automation (RPA) to improve efficiency and cut costs.”

Jain points to four case studies cited in the research:

  • A leading bank in Europe replaced its in-house core banking solution with a modern core banking platform and outsourced back-office services with the aim of improving efficiency and cutting the costs of regulatory compliance.
  • A leading UK investment bank leveraged RPA to achieve 80 to 85 percent time saving in its management reporting and indexing processes
  • A leading bank was able to reduce the time needed to identify problem loans from greater than 100 hours to less than 5 minutes using an analytics solution
  • With the support of a service provider, a leading bank was able to streamline its anti money laundering (AML) process and thereby realize a 30 percent cost advantage.

Other key findings:

  • The US$3.8 billion banking BPO market is poised to grow at a steady pace of 7 to10 percent compound annual growth rate, driven by increasing adoption of technology and automation.
  • Traditional banking faces pressures from FinTechs, telecoms, retailers, etc., driving demand for innovation
  • The macroeconomic environment, regulatory concerns, changing consumer preferences, and growth in adoption of automation, analytics and risk management services are some of the key factors influencing the market
  • BPO demand drivers vary by banks’ size, with smaller banks seeking operational support and larger banks using service providers to drive regulatory initiatives.
  • Robotic Process Automation offers an opportunity for service providers to help banks in the short term by fixing broken systems and in the long term by aiding the transition to new-age systems
  • Among the service providers covered by Everest Group, Genpact, TCS and Xerox continue to dominate the banking BPO market
  • Service providers are looking for new opportunities such as delivering more complex processes to counter the fading labor arbitrage and efficiency drivers.
  • The US and UK led the establishment and growth of the BPO market. North America accounts for the highest share of global BPO revenue, followed by Continental Europe and Asia Pacific, which are driving the next growth wave.

These results and other findings are explored in a recently published Everest Group report: Banking BPO Annual Report 2016: Riding on the Digital Wave and Advancing in Automation. The report provides comprehensive coverage of the global banking BPO market including detailed analysis of market size and growth, buyer adoption trends, solution characteristics and the service provider landscape.

 

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