Tag: transformation

EXL Positions Itself for Growth with Acquisition of Blue Slate | Sherpas in Blue Shirts

Earlier this month EXL acquired Blue Slate Solutions and positioned itself for growth through transformation services. But the move also reflects a broader industry move.

Blue Slate is a consulting firm that drives operational transformation. The acquisition looks to be a move to buttress and increase EXL’s ability to add value to clients through driving large-scale transformational projects. It also improves EXL’s industry expertise in critical areas such as healthcare.

And it will better position EXL to compete. The Blue Slate acquisition matches Genpact’s investments to add similar capabilities and also allows EXL to compete more effectively with Accenture and IBM on large-scale transformational opportunities.

So it’s a nice acquisition. But it also has broader significance. As we think holistically about this, EXL is joining a broader industry move ­of players positioning themselves to transcend or add value beyond operational excellence.

The Industry-Wide Significance of Accenture’s PureApps Acquisition | Sherpas in Blue Shirts

Accenture recently announced its acquisition of PureApps, a UK-based Enterprise Performance Management (EPM) provider.  Our understanding is that it’s a full-service provider for all Oracle Hyperion EPM and BA solutions. Nevertheless, PureApps is a small firm and the revenue won’t make a noticeable difference to Accenture. So why is Accenture buying PureApps? My opinion: they are buying a niche player as an influence point with a stakeholder group that is growing in importance in the technology and in BPO services.

PureApps’ services in implementing Oracle Hyperion give them relationships at the office of the CFO. As I recently blogged, the office of the CFO is growing in influence for tech spend, especially in the transformation space. With this acquisition, Accenture gains the advantage of a set of services and immediate credibility in serving CFOs.

This is a nice — and important — acquisition as it gives Accenture the following benefits:

  • Enables more relevance and a counter play to the CFO access sphere that Deloitte and the Big Four consulting firms currently enjoy for large-scale transformation projects.
  • Strengthens Accenture’s position in the European markets.

Bottom line: the acquisition is a smart play for stable growth in the core consulting/transformation space, which will continue to grow as the digital world gains momentum.

ERP Hits the Wall | Sherpas in Blue Shirts

The services industry is facing a big issue. The market for ERP implementation cycle and corresponding transformation projects has matured and is coming to an end.

We can see the ERP decline in the reported results from IBM and Accenture and HCL. These three providers have had very big SI practices around large-scale ERP implementations. I’m not saying there are no more ERP implementations or transformation projects; it’s just that this market is in decline.

Factors driving the market decline

One of the contributors of the decline is maturity. Most large companies that need ERP now have ERP. Furthermore, they are now in their second or third generation of their ERP and are much smarter about how they use ERP. So there is much less transformation.

The green field is gone. Much of the ERP market it now add-ons to the existing base. And companies have learned how to implement ERP within the guidelines of ERP manufacturers, SAP and Oracle, which enables less costly implementation when new releases come out. Further, moving into an as-a-service or cloud future will continue to erode or diminish the re-implementation markets driven by software upgrades because they become a monthly occurrence via SaaS products.

So ERP implementations and its associated SI and transformation projects is hitting a wall, and we’re going to see far less of it in the future.

What will drive future growth?

The decline is a big issue for the industry because much of the discretionary spend used to be captured by the ERP implementation and renewal cycle. It has been one of the big secular drivers of growth in the services space since the mid-1990s, but we’re now seeing its decline as a primary driver for growth.

Many SI consultants, shared services consulting companies and BPO firms that ride the ERP wave have, wittingly or unwittingly, linked their growth engines to the dislocation and transformation activities that happen around ERP implementations.

So the current decline has very significant implications in terms of where these service providers will find growth in the future services market.

What we know about technology is that, given enough time, there is always another big technology disruption that will drive large integration services. Right now the best case for this is the digital revolution and the huge company-wide implications that embrace the digital marketplace for large organizations. Much like ERP, digital affects everything and requires significant transformation for alignment.

So the open question is: will digital take up the mantle that ERP is shedding?

Business Process Outsourcing or Operations or Management or Services? What’s with the Name? | Sherpas in Blue Shirts

Nomenclature for third-party provision of business process related services (typically called BPO or Business Process Outsourcing) has stirred up quite a debate in the industry. Is it just a marketing exercise or a step in the maturation of the industry? Clients have to feel the difference before they are willing to adopt a new name; otherwise it is purely marketing.

Most of the conversation is about replacing the letter “O” in BPO. Accenture retained the “O” but are calling it “Operations.” Nasscom along with several other service providers started calling it BPM (Business Process Management). Several industry stakeholders have asked for Everest Group’s opinion, so here’s my list of different acronyms (in ascending order of my personal preference):

BPM
(M=Management)
My least favorite. The name should at least convey what it means. BPM tends to confuse the BP? industry with workflows and process management tools and technologies that enable BP? delivery but are not truly representative of it. With BPM, I tend to think more Appian and Newgen rather than Genpact, TCS, and Accenture.
BPO
(O=Outsourcing)
It accurately describes the market, but I can understand why people do not want to associate the industry with just outsourcing which often connotes commoditized offerings providing cost reduction through arbitrage. It also has a certain social and political stigma associated with it. A word of caution though – outsourcing is not the same as offshoring but is a superset that may include offshore, nearshore, and/or onshore delivery.
BPO
(O=Operations)
Nice play of words but again seems to imply “operational” value creation and not the “transformational” capability of BP? in terms of value creation.
BPS
(S=Services)
My current favorite as essentially BP? is an industry where a third-party provides enterprises with services across horizontal business processes (order-to-cash, procure-to-pay, hire-to-retire) and industry-specific business processes (mortgage processing, claims management, meter-to-cash). Service delivery requires people expertise, process excellence, and technology capabilities, and service performance can be measured across efficiency, effectiveness, and business outcomes.

The industry is desperately seeking ways to go beyond the cost reduction mindset and evolve into a cost+ value proposition. Changing the name of the industry will not be of much use unless the underlying behavior (both buying and selling), solutions, contracts, and performance of the industry change.

However, I fear the industry is just trying to change the name versus actually working on the value, which will leave it open to criticisms. It’s just like putting a new coat of paint on an old car that needs an engine replacement!

So let’s try and go beyond this “name game” and focus on things that really matter.


Photo credit: Quinn Dombrowski

Digital Transformation: The Non-sense of Customer Centricity! | Sherpas in Blue Shirts

Have you ever spoken to a “digital transformation” enthusiast? The first thing you will notice is the person cannot exactly define digital in any meaningful way. The second thing is that the discussion will invariably include citation of popular consumer mobile apps, portals, and other things such as Facebook, Google Glass, the Internet of Things, PayPal, Pinterest, TripAdvisor, and Uber.

The third, and perhaps the most intriguing, is their obsession with customer engagement. The focus is so extreme that it pretty much excludes anything that is perceived not to be glaringly customer-related. This fixation, which means a sole focus on the front-end sales and marketing engine, fails to take into account that a digital strategy must pervade the entire value chain – customer engagement, business processes, technology operations, and organizational policies – and that a success requisite is transformation of the less attractive, unseen back-end.

Unfortunately, buyers have limited spending appetite and budget, and CIOs coming under intense pressure to add business value are vigorously channelizing these budgets into development of front-end-centric digital initiatives. I believe this myopic strategy is flawed, and will show its glaring weakness in the coming years.

Consider the impact of a sole focus on front-end digital initiatives without augmenting business process or technology operations. For example, a bank’s mobile sales force can open a customer account in 10 minutes or sell financial products using a banking mobile app, However, as the back-end operations and other business processes needed to make the account functional are still the same, the customer does not get the true benefits of this banking mobility. Or, when an online retailer develops a mobile app where customers can place orders, but the back-end processes and technology operations are same as customers placing an order through the online portal, the availability of one more access point for customers does not fundamentally impact the business.

Enterprises need to go full hog to leverage the disruptive power of digital services. A piecemeal approach will eventually hit a wall, and business leaders’ frustration will grow. To ease this, business leaders must understand and collaborate with the operations department, and push the operations manager to introduce digital transformation within the core technology operations and business processes.

Customers have always been at the center of the universe for successful companies, and digital transformation will not change that. However, extreme customer-centricity without suitable investment in back-end operations or business processes that drive customer delight will result in a grand failure. Enterprise buyers need to judiciously invest in technology solutions across their business and internal processes to create a vibrant “digitally aware” organization that understands the impact of this transformation. The impact should be pervasive and touch upon each aspect of the business.

Digitization of business processes across an organization presents a tremendous opportunity to leap ahead of the competition. But make no mistake…it’s a high investment, high risk, and high return game. Organizations that have the required mettle to make technology pervasive in their front-, middle-, and back-end operations will not only survive, but thrive.

Sizing Up PwC’s Acquisition of Booz | Sherpas in Blue Shirts

PwC announced last Friday that it completed its acquisition of Booz & Company — now named “Strategy&.” Why did Booz agree to be acquired and why did PwC want Booz? And what does this mean for the services industry? My opinion: It’s a bold move that has the signs of being a game-changer in the global services world.

Booz had a trouble spot. I’ve blogged before about this phenomenon — the growing power of large consultancy groups and service providers’ ability to utilize access to their existing customer base to increase their revenue. It enables the rich to get richer. The champions of this strategy are the Big Four (Deloitte, E&Y, KPMG and PwC in the consultancy arena) and Accenture, Cognizant and TCS, to mention a few in the provider landscape.

Even though Booz had one of the most venerable, respected brands in strategic consulting for the past 100 years, it became increasingly difficult to drive consistent customer access. Booz believes it will be easier to succeed in this strategy of radiating to advantage by meeting client needs within the PwC family rather than having to blaze its own trail.

Using existing customers to grow a services business is a proven model that Deloitte certainly demonstrates in today’s marketplace, and PwC enjoyed the advantages of this model before the SEC asked it to divest services years ago.

PwC perspective

Bringing Booz into the PwC network is a bold commitment signaling that PwC intends to join Accenture and Deloitte as a major transformational player. PwC has been studiously building back its consulting and advisory services since its divestiture, and the Booz acquisition adds the high-end strategy capability that will enable PwC to be a strong value player in advising and driving major transformation deals.

What it means for the services industry

The arrival of PwC Strategy& in the marketplace changes the provider landscape significantly. It adds another true power with a broad set of capabilities stretching from the boardroom and strategy to implementation. And it will contest the market for large-scale transformational work.

In that contest, it will prove interesting to see which providers lose some market share to PwC Strategy&.  Will this new power inhibit Deloitte’s growth? Will it affect Accenture and IBM? Will it affect the aspirations of Cognizant, TCS and Wipro as they look to join the transformational party?

One thing is for sure: The transformational dance floor is getting crowded.

Enterprise Mobile Apps – Are We Done? | Sherpas in Blue Shirts

The state of today’s enterprise mobile apps industry is akin to the dark side of a jungle: a dense forest and tangled vegetation, inhabited by hundreds of largely unfamiliar animals and plants that rely on its delicate ecosystem to survive, perhaps to thrive. This is creating frustration among stakeholders including the CIO, CFO, CMO, and CEO, who believe they might have over-invested in mobility initiatives.

However, this is far from the truth. Mobile apps have a long way to go in enterprise. Yet, to avoid the earlier pitfalls, enterprises and technology providers need to be fully aware of the following dangers in the mobile apps jungle:

  1. Business process transformation: Few enterprises or technology providers even consider that enforcing mobile access to an existing business process may be a poor idea. Making the end-user consume the same business process albeit through a different, perhaps “cooler,” app is not true mobility. User interest will not last if the business process is itself unsuitable for mobile. At the same time, not all business processes require this change. Enterprises must be selective in changing business processes while undertaking the mobility journey. Consultants, vendors, and others with vested interests will always extol the virtue of business process transformation for mobility, but enterprises should be very wary of this aggressive spiel.

  2. Line of business collaboration: In their desire to be the first movers, many line of business managers are creating all kinds of mobile apps with little collaboration with other business units. Given the increasing influence of non-CIO budget centers to approve technology funding, the tried and tested processes of application development are being compromised under a convenient, self-pleasing argument that mobile apps do not require a structured or “traditional” approach.

    Will this ad-hoc development blow up in our faces? I think it will. Can we prevent this? Unfortunately not. Business users are happy getting the needed application functionality on mobile devices, yet no one is thinking about the mobile application lifecycle. A long-term technology adoption framework is an unthinkable thought for these budget owners. They do not believe collaboration is their mandate or their responsibility. Their KPIs are linked to business outcomes, not to channelizing or seamlessly introducing mobile technology, and thus they will rarely ever have an incentive to create the needed structure.

  3. Cost of mobility: Enterprises and technology providers need to understand that while business agility, flexibility, and access is all good, the cost of these should not outweigh the rewards. Therefore, enterprise mobility should be viewed in its entirety to understand whether the incremental business has come at a greater cost of management and complexity. Yet the existing mechanisms across enterprises, where different unconnected lines of businesses are creating their noodly soups of mobile apps, does not engender great confidence that they will take a view of the broader picture any time soon.

  4. Mobility governance: It is fashionable these days to ignore any advice from someone who wants to instill structure or a governance model on enterprise mobility. Governance is perceived as “anti-growth” and “uncool.” Given this perception, few technology managers, despite their strong opinions, express any sentiments against the ad-hoc enterprise mobile strategy. This is a recipe for disaster.

So what can enterprises do to quash the mobile apps jungle’s beastly flora and fauna?

  1. Be selective about changing/transforming the underlying business process while mapping to mobile apps
  2. Create an environment that incentivizes lines of businesses to collaborate rather than compete in creating the next “cool” mobile app
  3. Adopt a lifecycle management approach to mobile apps
  4. Balance the growth objectives with the cost implications of enterprise mobility
  5. Incorporate an “eagle eye” to govern mobility projects

If you are undertaking an enterprise mobile application initiative and want to share your experiences and perspectives, please comment below or reach out to me directly at [email protected].

What If CSC and HCL Get Brave? | Gaining Altitude in the Cloud

CSC and HCL announced an alliance a few weeks ago, which is more of a go-to-market than structural change. But what if the twosome were to agree to a follow-on alliance to do something really big — something with huge industry and market consequences? It would be extremely brave and very risky. But it would address the inevitable whopping market threat for CSC and position both companies for future growth. Let me paint a picture of what that speculative alliance would look like.

The alliance would address the elephant in the room: CSC losing half its client work 

Such an alliance would first enable CSC to grasp the mantle and really address its big problem — its current huge commitment to an asset-heavy outsourcing model. CSC has invested at least $12+ billion in this model.

Our research and insights reveal that over 50 percent of the workloads currently in an asset-heavy model are able to migrate to the cloud over the next three to five years— and are incented to do so. With half of its work exiting the asset-heavy model, this mass exit would leave CSC with a huge revenue hole.

And that’s only part of the problem. The situation is doubly threatening in that the exit from the asset-heavy model will leave CSC with huge stranded costs on facilities, equipment and people along with the revenue hole.

A really brave alliance with HCL would deal with this situation.

Alliance step one. Step one is to deal with the people. CSC could move its people servicing clients in the asset-heavy model over to HCL, taking costs down and removing the stranded costs. CSC already has a vehicle in its offer set to catch the cloud work but would be replacing this revenue at 50 cents on the dollar. It’s much cheaper to do the work in the cloud than in the asset-heavy model.

Step two. Step two would move CSC’s data centers into an industry REIT to deal with the data center overhang. It would leave CSC with a much smaller set of stranded assets in overhead and equipment to deal with. In this way CSC would be able to navigate the inevitable shrinkage of its asset-heavy business and deal with those stranded assets.

The emerging CSC 

A brave alliance between CSC and HCL would also make CSC “all in” on the cannibalization of its own footprint. Although CSC is attempting to drive this strategy now, it has conflicting incentives as it fights to maintain revenue in its existing asset-heavy model while standing up new revenue. The speculative alliance I’m describing would send a message internally to the CSC organization and to its external market that CSC is “all in” on the cloud transformation issue.

What would emerge from this alliance strategy would be a cloud-based CSC — a smaller, more profitable, more nimble CSC without the huge write-downs that it likely will incur as the cloud transformation happens naturally over the next few years.

The picture for HCL also makes a lot of sense

Such an alliance would create big growth in HCL’s infrastructure because of gaining significant advantages in economies of scale, market credibility and greater profits to invest.

HCL would pick up CSC as a huge client and capture probably 15 percent of the entire RIMO (Remote Infrastructure Management Outsourcing) market in one fell swoop. It would cement HCL into the undisputed RIMO leadership position with a wide margin between HCL and TCS, its nearest competitor.

What do you think? Will the twosome be brave and take the risk of a market-changing follow-on alliance?

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