One of the age-old knocks on the HR profession is that it attracted those who prided themselves on “being good with people.” I was never really sure what this meant when I selected HR / HR Systems as a career path way back when, but it seemed better than being good with hazardous waste. This notion was eventually borne out by the fact that my shortest corporate HR stint was with a Waste Management industry leader.
So how does this relate to the recent HR Tech Conference? Well, beyond what was discussed in my last post about smaller players doing their share to drive product innovation, another realization hit me: Dozens of newer HR technologies are not just “good with people,” but “really smart about people.” This means knowing personal if not unique drivers, how to engage and motivate, and leveraging that context for the benefit of both the organization and its individuals. Employing different talent management and employee engagement approaches for different talent pools (e.g., early career vs. later career or more experienced employees, high potentials, high-value candidates, change-resistors, etc.) makes very good sense.
The personalization theme was indeed ubiquitous at this year’s HR Tech conference, and since forms of personalization within HCM solutions are potentially limitless, I suspect we’ll be seeing more product innovations relating to this theme with each passing conference. The reasons are indelibly clear. Personalization in a user experience drives user adoption and system stickiness, which drives value realization and ROI. It’s also a key by-product of cognitive computing; e.g., the system determines what data, metrics, other content, activities or actions is most relevant for the individual, making them more efficient and effective. And both of these benefits lead to other critical business benefits like engagement, retention and productivity.
Personalization is “killing it” in the recruiting space
It’s no revelation that thousands of recruiting professionals are tripping over each other vying for the attention and interest of the same top talent, many of whom are not looking for a job change or even interested in discussing one. Overcoming these challenges requires not just shiny objects, but shiny objects with initials engraved on them so to speak.
Why all the fuss about engaging passive candidates? Well, the quality of job candidates is generally better within this group for a few reasons: They have not been displaced by their previous employer, they are likely well regarded by their current employer and treated accordingly, and the best opportunities come to them so they are less frequently on the market. Engaging anyone that generally doesn’t want to be engaged isn’t easy, let alone engaging people already bombarded by social media and other technology-driven interactions.
Below are four impressive examples of personalization I observed from recruiting solution vendors at the conference; and I’d also suggest checking out HfS’ recent research on the talent acquisition services BPO market. It provides solid examples of how vendors differentiate with respect to their ability to engage top talent. You can find it here: http://www.hfsresearch.com/pointsofview/hfs-blueprint-guide-to-talent-acquisition-services
ENGAGE’s customers source from one of the largest pools of passive candidates available anywhere; and based on continuously refreshed industry and company data points, insights and inferences, recruiters get alerted real-time when a target candidate is likely to be receptive to a job conversation based on relevant triggers. Timing and receptivity are everything when competing for the best candidates.
The Muse, a relatively new but well-funded player whose first wave of customers would make any established vendor envious, is a career development and employment tool that allows prospective employees to immerse themselves in the experience of working in a particular organization or even role in the way that satisfies their curiosity and interest. This is achieved while getting coached with employment / job search tips along the way that are also highly personalized.
GetTalent helps organizations craft the right (personalized) message and recruitment campaign to attract and engage customer-defined pools of candidates, easily assign target (largely passive) candidates to pools, and track the efficacy of the various communications and campaigns.
1-Page also allows companies to find, qualify and engage passive job seekers; and breaking down technology and other common barriers to communicating with candidates — in the ways they prefer to be communicated with — is one of this vendor’s product strengths.
Not at all limited to Recruiting solutions
Certainly the personalization theme abounds outside the recruiting domain too. A company called Enboarder demonstrated how on-boarding is really meant to happen from a new hire engagement and emotional connection perspective. This is achieved using automated, highly personalized texts from managers and other colleagues based on personal info the new hire shares about themselves in a fun Q+A texted to their mobile.
Bottom Line
Almost all of the major themes swirling around the HR tech space these days seem to have some connection to the personalization theme, from user experience and solution design, to driving system adoption and usage, to – arguably most importantly — more effective ways to identify, engage, manage and truly leverage talent.
Notwithstanding having my 13th HR Technology Conference participation cut short by needing to return home to Florida to deal with a hurricane, one major observation stood out for me. It was also a fairly pleasant surprise, something that doesn’t come easy after attending so many of these events—as enriching as they usually are.
In fact, the hurricane actually contributed to the observation. How? Well, in having to unfortunately cancel briefings with major HR Tech vendors to leave early on Thursday, I had to rely more on quick-hitting discovery sessions in the exhibit hall, generally with lesser known vendors. They are typically not as schedule-constrained at the conference.
So, here it is: I found it just as easy to see meaningful HR Tech innovations in the booths of “little guys” and emerging players as I did in their much larger and more established counterparts. I’ll define ”meaningful product innovations” as practical, obviously value-creating (vs. largely “wow factor”) advances where the system’s intelligence is leveraged without a lot of heavy lifting or major change adoption needed by the customer organization … dependencies often under-estimated by vendors and customers.
This phenomenon of smaller players excelling so much in the innovation department is arguably a function of basic math: There’s only a small group of market-leading solution vendors but roughly 400 HR Technology companies exhibited at the event. And no matter how large and well capitalized a solution provider is, it is just impossible to make every functionality area or module in their product portfolio a priority every release cycle, or even every second or third release or enhancement cycle.
Added to that is the more subtle notion that a large customer and product footprint can also be a double-edged sword. While they logically lead to more robust revenue channels, they also cause a correspondingly larger list of potential enhancements and R+D investments needed to maintain a leadership position across the portfolio, prevent customers from defecting, attack new markets, etc. This allows smaller players, for varying periods of time, to lead the way with innovative solutions that solve fairly specific, often vexing HCM-related business problems.
Below are four examples I encountered on the exhibit hall floor, and these particular upstart vendors were all borne out of HCM-related consulting practices having pockets of expertise not typically found in classic HCM software companies. This is perhaps another contributing factor to why (and how) smaller players are driving so much product innovation.
TalentQuest leverages validated assessments and related behavioral information to help managers give employees the most meaningful feedback and coaching, but in ways that will resonate the most — a great example of personalization (more on this theme in my next post). TalentQuest’s technology also guides employees in pursuing roles in which they will excel and find the most satisfaction.
TalentGuard, with a heritage in career development and robust competency models, uses well designed behavioral frameworks to meaningfully tie together performance tuning and coaching with ideal, personalized development options and career pathing guidance. The result is fully engaged employees who perceive a fair and transparent process that has their best interests in mind.
eeStrategy’s flagship product, eeCompensation, serves up recommended compensation decisions based on the system knowing which data points are the most relevant for each employee, and therefore should be considered the most in a compensation decision. Data points might include skillsets becoming more important but also scarce internally/externally, or key employee retention risks. Coming from someone who used to manage year-end bonus processes in global investment banks, basically eliminating all the data and spreadsheet manipulations is a beautiful thing.
TheChemistry Group, one of 8 startups recognized by conference organizers as offering the most promising HR technology solutions, also has its origins on the consulting side – specifically, assessments that predict star performers for different roles and organizational contexts. These folks, whom I met while sharing a table at the recognition luncheon, are actually moving from using structured to unstructured data (e.g., social media and other publicly available data) as the basis for predicting great hiring outcomes.
These lesser known solution vendors, and many others I didn’t have time to connect with or who weren’t at the conference, are clearly doing their part to drive increased demand (and therefore funding) for HR services and solutions from HR’s internal customers.
I’ll get to other examples of lesser known players offering compelling HR Tech product innovations in a follow-on Conference post being published shortly. It will focus on an obviously huge industry trend: Finding and engaging with the right passive candidates at the right time, using personalization and other advanced forms of system intelligence.
And if you’re an HCM/HR Tech solution provider that wants to schedule a briefing with me, kindly use this form.
Focus everyone on the shared outcome: The healthcare consumer experience
“We are, frankly, still at a stage in which healthcare technology often hinders, rather than helps, physicians trying to provide better care,” says Andy Slavitt, Acting Director of Centers for Medicare and Medicaid. The examples he shared at HIMSS16 still resonate with me: feedback from physicians who have told him, “To order aspirin takes 8 clicks on the computer. To order full strength aspirin takes 18.” Another said, “I can’t track my patient’s referral; I sent them to the hospital and can’t track them.”
Despite the increased, even prolific, use of IT in healthcare with member and patient portals, electronic records, and online billing and payments, the clinician or healthcare consumer experience has yet to change fundamentally for the better. To truly become digital, healthcare organizations have to rethink their use of IT. In many cases, where they have software vendors and service providers involved, they also need to revisit their engagement strategy, especially as the industry shifts to value-based care and payment based on results.
A single-minded focus on the customer—patient, member, employee, clinician, etc.—can break down the barriers in and across organizations to drive meaningful processes and use of IT
Digital healthcare, in its purest form, is all about transforming the healthcare business to create, support and sustain the healthcare customer experience – customers being, at times: plan members, patients, physicians, caregivers, etc. The “end user” can be the same person in different roles, or working with people in other roles, creating a complex network of constituents with varying wants, needs, and motivations. So, creating a healthcare experience is not a job for a solo artist, either – it takes the whole orchestra playing together to create a musical masterpiece and not just a cacophony of sound.
Simply stated, a pivotal factor for being truly effective in delivering the vision of better health and care at a more reasonable cost for the industry is a coordinated, interactive, and interoperable approach in operations, what we at HfS call the Intelligent OneOffice. OneOffice is all about how people use data and digital technology to bring together the front, middle and back office to enable a user experience that matters, thereby having an impact on health, care, and the viability of healthcare organizations and businesses.
Everyone in the industry has a role to play in supporting this person-centered approach. In some cases, the impact is more obvious and intuitive, such as the front line staff of doctors, nurses, and pharmacists directly discussing a patient’s care plan, therapy and medications. However, roles that are more removed from these direct touch points also have an impact on health, medical, and administrative outcomes. For example, operations support staff processing claims are analyzing data to identify care gaps and opportunities for new interventions, making sure patients are informed through the design and input into systems that automate outreach and reminders through phone, email, or text, for example. So much of how the touch points in healthcare can be more effective depends on the data, digital technology, and relationships that extend from “hidden” roles in “the back office.”
People who can identify and articulate problems and coordinate across internal and external organizations to focus on the end-consumer, are key to bringing together IT and operations
Generating the kind of synchronistic flow from less customer-facing processes to support the healthcare customer experience is no easy task. What will help drive change is finding and/ or cultivating “brokers of capability”—people who can articulate a business problem or opportunity, the desired outcomes, and then coordinate and facilitate across internal and external entities to reach those results. In healthcare, we see brokering going on to create networks such as for ACOs and hospital systems leading to data stores and insight-driven interactions to better manage a patient’s health and care, end to end, covering socio economic/financial and medical needs.
Who are your brokers of capability? People you identify in your organization with critical thinking and networking skills, people who put people first. Taking this approach also creates a more attractive workplace and can play on a naturally altruistic synergy as many people enter the healthcare profession to “help others.” No matter what role they play, as a nurse, doctor or physician, or a claim processor or medical coder, there is an opportunity for everyone to impact the customer experience and gain a greater level of satisfaction and engagement.
Note to readers: Our study on achieving Intelligent Operations, with input from Cognizant’s Center for the Future of Work and Business Process Services practice, canvassed 371 major buy-side enterprises and had 45 healthcare executive participants. Link to The Journey to Intelligent Operations in Healthcare and download for free after registering on the site.
With the realization firmly sinking that the new normal in Oil & Gas is “lower for longer,” it is hard to find service providers investing heavily to build out their Oil & Gas Practice. That is, until Cognizant announced plans to acquire Frontica’s IT outsourcing and BPO business for $128 million, a service provider born in the Oil & Gas industry.
Frontica hails from one of the largest hydrocarbon rich areas in Europe—Norway—and specializes in ITO and BPO services for Oil & Gas. Frontica has been on a transformative journey the last couple of years, reorienting itself from the internally focused shared services unit of oilfield service company Aker Solutions until 2014. At that time it started operating as a separate ITO and BPO service provider in Oil & Gas. It has a healthy portfolio of contracts such as the 5 year deal signed in February 2016 with former parent Aker Solutions, which is valued at between $ 116 million and $ 145 million annually.
Frontica’s ITO services are focused on SAP consulting, application maintenance and development, IT infrastructure, implementation services, IT support for mergers and demergers (good business in Oil & Gas). BPO services focus on HR and payroll, F&A, operational procurement, category management and sourcing.
Cognizant, a High Performer in our 2016 HfS Energy Operations Blueprint, already has a strong Oil & Gas practice. We commended Cognizant for its vision for Energy Operations and its depth of industry specific capabilities. We felt Cognizant lacked industry specific acquisitions that would build out its capability and credibility in Oil & Gas, especially compared to some of its competitors, such as Infosys (acquired Noah Consulting in 2016) and Accenture (acquired Schlumberger Business Services in 2015).
Some smaller Cognizant clients in Europe mentioned they would appreciate more engagement, especially when navigating challenges around outdated legacy applications. This acquisition brings in local knowledge and delivery power, which can provide clients with increased interaction and closer engagement.
Although HfS sees this $128 million deal as a significant investment in the Oil & Gas practice, it’s not a game changer for domain specific processes, as Frontica’s expertise lies more in the process-enabling sphere. Nevertheless, the merits of this acquisition include:
Support for SAP customers who continue to struggle with a move into the world dominated by cloud and digital.
Delivery capability in BPO, a market currently dominated by Accenture and IBM. This acquisition gives service buyers a credible alternative, especially in Northern Europe.
A client base and network in a market very much in flux. Turmoil in the Oil & Gas market not only impacted service buyers, but also service providers’ ability to invest in their Oil & Gas domain expertise, capabilities and innovation.
Frontica, which has global aspirations, is better off as part of Cognizant’s Oil & Gas practice and wider ecosystem than it is trying to build its presence alone.
Bottom Line
With this acquisition, Cognizant bolsters the profile of its Oil & Gas practice, and shows a seriousness supporting clients in this vertical, with the addition of industry specific talent and capabilities. In the process, Cognizant also shores up its geographic presence in one of Europe’s largest Oil and Gas markets. The challenge is to integrate Frontica into the O&G practice quickly and leverage Frontica’s knowledge of the market and position in Europe, particularly in the Nordics.
This is my inaugural blog post for HfS Research, an analyst firm I’m very pleased to now be part of.
I joined HfS because of the deeply held belief that HCM solution vendors could be bringing more clarity to the buying decision and even drive more compelling business outcomes for customers, and that a certain type of analyst firm could help pave the way.
I also joined HfS because, like hockey players go where the puck will be vs. where it is, HfS struck me as a firm that is not only going where the puck will be, but arguably laying down the ice for a new arena. And in the spirit of “I’ll try almost anything twice,” I had an opportunity in 2011 to work with someone I (and legions of others) greatly admire, Josh Bersin, and I also covered the HR Tech landscape then.
Attending the annual HR Tech Conference, as I’ve done 12 of the last 15 years, is like going to a family reunion for me, only a bit less gossip and lamenting about getting old (given tech sector demographics). Re-nourishing the relationships cultivated over the years is frankly as important to me as the intel gathering done at the conference, although the latter makes for a much easier cost justification.
I started going when I served as PeopleSoft’s HCM Product Strategy head, and would have gone when I was an HRIS practitioner from the mid-80s to late 90s but no equivalent conference existed in my view. This one rules the roost.
My esteemed colleagues at HfS, Phil Fersht (founder and CEO) and Barbra McGann (Chief Research Officer), asked me to do a pre-event post on what I’d like to see, and then a post-event post on how much of my wish list was fulfilled – AND BY WHICH HCM VENDORS IN PARTICULAR.
My list follows, and I strongly encourage appropriate vendor contacts to reach out to me at [email protected] so you can brief me in Chicago on the extent to which your offerings align with any of the items mentioned here:
HR-user configurability of the solution, even not-very-technical HR users.
Prescriptive analytics (i.e., analytics that also guide the user in addressing or solving a problem vs. just reporting the news).
Examples of cognitive computing that demonstrate real machine learning such as pattern recognition and appropriate actions automatically initiated at either the micro (employee) or macro (workforce) level
Product innovations that can drive significant business results for customers without major operational dependencies (e.g., change management, process changes, competency re-alignments, etc.), or innovations that will be central to solving customer business problems or pains that are likely to become more acute over the next 5 years. Examples of the latter might relate to the impending mass exit of baby boomers from the workforce, more reliance on freelancers, etc.
Technology that mirrors the way end-users think and solve problems, often in idiosyncratic ways.
Evidence of how a vendor’s customer success model is helping customers achieve measurable user adoption and business value targets.
… and in general, more acknowledgement that no matter how great the solution is, technology by itself is no more than perhaps 40-50% of the answer to solving business challenges in the HCM domain.
Bottom Line
I’m genuinely excited about once again navigating the HR Tech vendor and solution landscape at the annual HR Tech event, culling and calling out nuggets that buyers will find valuable; and very keen to do so on behalf of HfS Research.
How many of you go to a store without a list of what you need? Personally, I never go out to the store without a specific need. I guess I am not the type of clientele the retailers are looking for since I don’t buy just because there’s a discount. And definitely, don’t go shopping randomly.
Recently, I needed some new pillows and ended up at Ikea, which is a great store if you ask me. I was done within 15 minutes because I grab what I need, and off I go. But whenever I go to Ikea I love to hang around in the parking lot for another 15 minutes just to see nature at work. I just love to see the stupidity that I claim it is. You come to Ikea for napkins or a bag of tea lights, and you go out with a new couch or side table. And then the fun begins. People start the process of blaming each other. The first complaint is about the car: it is a piece of sh*t and far too small. Then we blame it on the kids; we could have used the back seats, and this would not have been a problem. And so on. I think we get the point; people just don’t think too often about consequences when they lack focus.
In business, we see it all the time, and without strong leadership, this happens very quickly. People make a plan, talk about it and come to the conclusion that this is the way forward. Very soon people start tweaking agreements to make it more perfect. But for who? “Yes, but I think we need to be flexible?” or “Yes, we need this to be less black-and-white because otherwise, we will lose!” It is all in your minds, folks. Focus is the word you are looking for, and that is why we made a plan. Make sure you go back to that plan and stick with it.
When you focus, and others get sidetracked, you need strong leadership to remind you and your team what the plan was all along
You can use the Ikea example for everything in life. The car is your business, and the folks in your vehicle are your personnel, the space left is growth—and it is not unlimited in the current setup. The same goes for spending the money on that couch or side table. Did you really budget for it? If so, you could have used the extra service Ikea offers at a very small fraction of the price to deliver that same couch or side table to the place you need it. Saves you a fight in the parking lot and keeps you focused because you do not have space at that point in your current plan.
We all know that switching tactics all the time is not a good way to run a business. You need focus to reach your end goal. We are not only talking material discomfort here—it causes a lot of mental distress. When people make plans, they often see and measure that with success. Personal success and business success are not always the same. The moment you switch the focus you get contradictions, and that means people will get hurt in the process of making that switch.
Bottom Line:Focus and contradiction do not go hand-in-hand. When you focus, and others get sidetracked, you need strong leadership to remind you and your team what the plan was all along, and there is no room for excuses, just focus. Change as often as you want, but remember that means there will be zero focus, and that means the results will be disappointing as well. My tip: follow one course until successful.
How can enterprises make automation core to their operations strategy and not merely a peripheral activity? Let’s be blunt here, many service providers have been automating routine tasks with their clients for years, yet as my HfS colleague, Tom Reuner, has noted, the innovations referenced by the notion of RPA and Intelligent Automation are “often at sub-process levels…not at the heart of a delivery backbone.” We are seeing the momentum pick up here, though, particularly when automation is a shared strategy between service providers and their clients. We heard one such case highlighted by Peter Quinn, Managing Director of Automation at SEI Investments Co., (NASDAQ: SEIC) a wealth management solutions company, at the recent NIIT Technologies Industry Analyst/Advisor Day.
Service buyers want to partner for automation, but where – and how – is it actually working?
When we asked 53 service buyer executives what would improve the quality and outcome of their current outsourcing engagement, 45% of them selected “roll out an automation strategy in tandem with our provider.” (see Exhibit)
Exhibit: Service Buyers Could Improve Quality and Outcomes by Changing the Nature of Their Engagement
There are risks to be taken by buyers and providers – but is the greatest risk avoiding core automation?
For service buyers, challenges include getting the IT department on board and addressing concerns about data security while selecting and licensing the appropriate software. Service providers also face the investment challenge of taking hits to their existing FTE-based revenues and margins in order to safeguard existing clients and win new ones. So, how can buyers and providers truly get to a shared automation strategy that’s genuinely core to the engagement? It’s simple: both need to be willing to take risks to drive new business outcomes. But you can also look at the risk of not taking the risk – failure to achieve effectiveness through automation could ultimately lead to the buyer enterprise leaders falling on their swords, while those service providers clinging to the legacy FTE model will eventually be displaced by those with a genuine automation capability and offering.
The SEI and NIIT Technologies Experience with Governing Core Automation
Here’s one such story: It starts with SEI getting excited about the potential impact of automation on security, quality, speed to results, and employee engagement.
Peter Quinn, Managing Director of Automation at SEI, set out the expected outcomes for an extensive use of automation:
Improve SEI employee quality of work experience by eliminating the repetitive, mundane tasks, thereby transforming the culture and eliminating the revolving door in certain departments
Reduce risk of off-shore data privacy breach – corporate investment to ensure all offshore access to data is secure was still being met by the question of “what if”… no matter what the effort to address it
Eliminate risk of geopolitical event impact on BPO
Reduce human error and associated costs (financial, client impact, SEI industry image)
Achieve rapid deployment
Create instant and profound scalability: license robots versus on-board and train people
Achieve cost reduction through staff savings
“Yes, of course we are looking for lower cost,” as Peter Quinn, Managing Director of Automation, SEI says, “but if you can get rid of human error… that’s key, because errors have financial, client experience and brand impact.” A data security breach or other human error on an investment portfolio of a client can have expensive short- and long-term consequences on customer experience and brand loyalty, for example, for a company that builds its business on its clients’ trust. And it seems like no matter how much is invested in time, money, and resources on security, it’s never quite enough for regulators. Automation helps drive more predictable and reliable results.
To get full benefit from the use of robotic process automation, end-to-end processes need to be automated to the fullest extent possible. SEI would be evaluating all the work they do from end-to-end, including considering what is done in-house, what is outsourced, and where the hand-offs are. That means work that had been outsourced and managed by its partner, NIIT Technologies, would be in scope. NIIT Tech, for its part, typically evaluates the work it does, looking for opportunities to increase efficiencies, including the use of automation.
This is the point at which the two parties come together in a more strategic approach to automation
“We will automate as much as possible, and that includes potentially repatriating work that had has been outsourced for years,” Peter Quinn of SEI told NIIT Tech. Pause. The response from NIIT Tech: “How can we help?” This response may or may not have been immediate – perhaps there was a little surprise involved—but the point is that NIIT Tech took a step forward to stay involved. Yes, NIIT Tech would lose current work, but from their perspective, this move takes their efforts to the next level of efficiency and relevance to SEI’s business; it also gives their own organization the same benefits as those listed above by Peter Quinn regarding employee quality of work and business results. Participating in discussions about what and how SEI wants to run their business and the supporting operations also gives NIIT Tech the context and opportunity to share new ideas for their role going forward.
A critical part of the automation strategy – governance – includes representation from internal stakeholders and external partners
While as an industry we agree automation is increasingly integral to business operations and outsourcing roles and results, how to bring automation into outsourcing partnerships and engagements – from strategy and governance to contracting – is still a work in progress.
Quinn, reporting to SEI’s CIO, chairs the Automation Governance Committee, which includes NIIT Tech so that they can be an active participant in all discussions. It also has representation from all market, geographic, and operating units, and includes business managers, legal counsel, and IT. The committee serves as a forum to:
Exchange ideas and needs, find commonalities, and build the business cases
Assess new requests
Determine best tool / best fit
Prioritize 90-day inventory for each tool (e.g., company impact, ROI)
Review tool capacity saturation
Evaluate new products as the market changes
The intent of the Automation Governance Committee is to weave intelligent automation into the fabric of the company. Too often, we hear stories of automation being used piecemeal in different areas of companies, which can lead to the use of it being sub-optimized at a point in a process versus as part of an end-to-end strategy, and complicated and expensive with separate licenses and approaches. The automation strategy should drive the ecosystem of partners within and outside a company to ensure that all the participants supporting the operations of a business are aligned and integrated.
The Bottom Line: The challenge for service providers is pivoting to meet clients’ future goals
Can NIIT Tech develop the capabilities to achieve the clients’ goals, still deliver value as a long-term partner, and realize margin for their business by having “sacrificed” the FTE-based work? “I believe the days of FTE-based work are coming to an end,” says Dan Spaventa, NIIT Tech’s client partner for SEI. Looking ahead, the service provider is developing automation-based solutions in targeted market areas like “SmartTransfers” in financial services, to bring automation into the core as part of the regular cadence of work in the service industry. These are moves that NIIT Tech – and other service providers – have to make to be a viable service provider partner in the future of outsourcing in the As-a-Service Economy.
Refusing to change our ways in today’s energy sector is a certain recipe for failure. There are a lot of inefficiencies in Oil & Gas, which in times of high oil prices and high margins, are largely hidden and/or ignored. In today’s continued low oil price environment with low margins and profitability—what we believe to be the new normal—Oil & Gas companies need to take out inefficiencies and find new ways to optimize production and bring down operating costs like never before. Our Energy Operations Blueprint highlights the way Oil & Gas companies are looking at digital technologies, automation and outsourcing as avenues for change, and levers to pull to drive new efficiencies and value creation.
Sustaining the current momentum of change in today’s environment is a huge challenge for Oil & Gas companies and their service providers. Changing for new results requires progressive change from within, not just rearranging the deck chairs hoping for a different result. The Blueprint identifies eleven trends that are currently taking place, and while they all serve a purpose to address the trends impacting their world, there are a few that bubble to the top.
Four trends that we see as an opportunity for focus by service buyers and providers to increase the value of their engagement over time:
Evolve analytics capabilities to cater for energy-specific applications. Analytics offerings have started to progress from being based largely on access to data science talent and unique algorithms to include industry specific analytical applications delivered by service providers that deeply understand a client’s enterprise and marketplace. We see good progress in analytics that improve the drilling process and analytics capabilities underpinning the 24/7/365 monitoring of thousands of units of critical equipment from a central support center in Exploration & Production.
Leverage data to look into the future, not the past. Predictive and prescriptive analytics are starting to enable more real-time decision-making and continue to have a huge impact on the operating models in the industry. The industries’ strict requirements for safety, reliability and uptime in operations, often in harsh circumstances and remote locations can be better met with advanced analytics capabilities offering real-time and actionable insights. Knowing what went wrong through descriptive analytics simply doesn’t cut it.
Put IoT at the heart of your planning. The (Industrial) Internet of Things holds tremendous promise and we expect adoption to accelerate as there are already huge numbers of connected assets in the industry and providers and Oil & Gas companies have to focus on connecting those assets to the internet to bring tremendous value. Think about how in Midstream, pipeline sensors providing data on transportation of product and the health of the pipes replaces the need for field workers to get sensor readings in person. And using drones and connected sensors to inspect the gigantic stretches of pipeline in difficult terrain instead of visual inspections by field workers.
For future effectiveness, focus on IT/OT integration and the Digital Oilfield. The digital footprint is increasing in Energy Operations, bridging the gap between Information Technology and Operations Technology. In Upstream, advanced analytics improve operations in drilling, reservoir modeling and engineering and remote monitoring.
Bottom Line: It’s time to dare the industry to build—not inhibit—momentum for change
Here are two dares I want to put forward to Oil & Gas executives and service providers respectively, both of them critical to sustain the change momentum and achieve the innovation that is so desperately needed:
Energy Buyers – Dare To Reinvest Cost Savings into Innovation Funds: It is very attractive to put cost savings achieved by outsourcing in the hands of the CFO. However the CFO isn’t going to turn around and say “great job, let’s all sit back and celebrate that 20% off the bottom line”. We recommend to reinvest these savings in further innovation, perhaps make it a part of a Collaborative Engagement arrangement: “Service provider, save us 20% and we can both reinvest the 20% as next year’s innovation budget”. For example, saving driven through the offshoring of application development and accounting work could be funneled into a digital oilfield project.
Energy Service Providers – Put Your Money Where Your Mouth Is: Pro-actively and aggressively push the innovation agenda around automation, analytics, drones, 3D printing for MRO, simulating with digital twins, machine learning, deep learning, cognitive computing. Present clients with use cases, examples and capabilities to “unfreeze,” inspire and build credibility in innovation.
In her recent blog on outcome-based contracts, Christine Ferrusi Ross challenges the industry with Outcome-based Contracts Are A Nightmare –Do Them Anyway, and offers guidance and experience to rally the troops. What is also intriguing about this outcome-based approach is the potential to shatter the so-called “watermelon effect” that often takes shape in an outsourcing engagement that is based solely on key performance indicators (KPIs) and service level agreements (SLAs)… and use those traditional metrics as seeds for new value-based engagement.
What Is the Watermelon We Want to Shatter?
The outsourcing industry grew up on contracts that clearly articulate KPIs and SLAs, providing an agreed upon set of targets for the service providers to get the work done at a level that is satisfactory to the client. As transitions take place and Lean, Six Sigma and continuous improvement methods iron out processes and make them more efficient, these metrics regularly appear “green” on the scorecard. But, even when all the indicators are green, service buyers can be left feeling red—the so-called watermelon effect of green outside and red inside. There is often a sense that while all the targeted metrics for turnaround time, uptime, and transactions processed are being met, clients and service providers “feel” value is still missing.
This effect often leads to questions about the value of the contract and challenges for achieving innovation, price reductions, and competitive re-bids. The key issue is that perceived value changes as relationships evolve; therefore, the benefits received and the associated metrics to measure and manage real performance need to change with it. We once joked that “if outsourcing was an employee it would be fired,” meaning if you took a job and were judged on the same performance metrics every year, you wouldn’t last very long!
There is a Step Along the Path to Outcomes-Based Contracts
As Christine’s blog points out, outcome-based contracts can be incredibly difficult to create, but you can still address the watermelon effect right away while sorting out the outcomes desired. In one such example, we heard of service buyers and providers addressing this point by including a metric and payment based on Net Promoter Score in the contract. That way, all parties in the engagement have to figure out, and proactively address, that feeling of missing value. An example is a simple performance evaluation, on a regular basis, that asks for a rating of partner satisfaction on a scale of one to three. If the feedback comes back as a one, a percentage of the payment is held back, if a two, no movement of money, and, if a three, then a percentage bonus.
The intent is to drive the right attitude, behaviors and cadence of interaction and measure, not just the service levels and performance indicators, but that “feeling.”
Yes, it’s subjective, but isn’t any relationship subject to “feelings”? This “feeling” can be an indicator that the engagement is at a stalemate—that the engagement is no longer driving step change, helping the business to improve or address what matters to their customers today.
Using KPIs and SLAs As Seeds to Grow Outcomes-Based Contracts
How does a business outcome differ from a KPI or SLA? In practice, a business outcome often encompasses multiple KPIs and SLAs. For example, a business outcome in retail could be “increased sales closed by visitors that start a shopping cart,” versus an SLA which could be “ensure website has availability of 99.999%.” In healthcare, “decreasing the cost of care for a targeted population” could be a business outcome, while a KPI may be “percentage of targeted population enrolled in a relevant wellness plan.” They are not mutually exclusive, and when used together, can help advance an outsourcing engagement towards a structured, but more interactive and flexible arrangement for today’s dynamic business environment.
Looking at business outcomes puts the focus of the outsourcing engagement directly on the client and the client’s customers and stakeholders—the ones who are judging and measuring the client’s performance. The business outcomes for an outsourcing engagement in operations are broader than simple transactions, like website uptime or number of bills, invoices or claims processed. Using a healthcare industry example, what matters to a healthcare payer today could include retaining members in their plans, and that means KPIs that could include member satisfaction scores, and SLAs like payer web site uptime, claims processing throughput, and accurate provider data.
The Bottom Line: The point is not to move away from KPIs or SLAs in a contract, but to use them as building blocks for achieving real outcomes that make a difference to the client’s business goals… and in a way that can flex and change in order for the partnership between the service buyer and the service provider to stay relevant over time.
Who Are the As-a-Service Winners in Energy Operations? HfS’ inaugural Energy Operations Blueprint reveals frontrunners Accenture, EPAM, Infosys, Wipro and TCS
Why An HfS Research Blueprint for the Oil & Gas Industry?
Tumultuous times in the Oil & Gas industry. Understatement of the day I hear you say… Time for a rigorous look at the role service providers play to help Oil & Gas clients battle adversity.
The Oil & Gas industry is on the cusp of a significant transformation. Economic, societal, market, political and regulatory pressures are coming together bringing immense challenges for companies to solve through more effective and lower cost operations.
HfS sees a significant role for next generation services providing flexibility to scale up and down, agility to deal with a volatile environment and fully leverage digital technologies and digital enabled business and operating models now and in the future.
What does this Blueprint cover?
This is not a beauty contest about size, revenue and global scale. There is a place for smaller providers that excel in a niche and help clients on their As-a-Service journey.
One of the key attributes we looked for in this Blueprint process was if the service provider has a real Oil & Gas practice, not a collection of contracts with a sign “Oil & Gas Practice” slapped onto it. In this light we are interested in the way service delivery is organized, the availability of industry domain expertise, investments in industry talent, acquisitions of companies with industry specific capabilities and partner ecosystems. Another point of emphasis in our research is the move to As-a-Service, how service providers are enabling new ways of working, how automation and analytics are used to tackle industry specific challenges and the level of innovation brought to clients.
Key Market Dynamics
Two dynamics jumped out at us during the Energy Operations Blueprint process:
Oil& Gas Companies Looking for NewLevers: As the focus of the industry is on cost reduction, production optimization and operational efficiency, automation and outsourcing are two principal levers available to the industry. The name of the game for Oil & Gas is: Fix the basics and leverage new technologies. Oil & Gas executives are forced to have a good look at their strategy. Key questions include:
What is the core of our enterprise?
What do we need to do internally, what differentiates us from the competition?
What parts of our processes can we automate?
Can we outsource what we can’t automate?
Buyers Perception of Service Provider Becoming More Strategic: A pivotal changing dynamic in the market is how buyers look at their service providers. With the renewed focus on outsourcing as a lever to deal with the pressures in the volatile business environment, Oil & Gas clients tell us they look beyond labor arbitrage and see service providers as an extension of their organization. They want deeper relationships with their providers and forge stronger ties between internal and external staff. They look at their service provider(s) to help the organization become more flexible and scalable, ramping up and down in the cyclical business of Oil & Gas.
Who is Standing Out? The Service Provider Landscape and Blueprint Grid Performance
All of the 13 service providers that participated in this Blueprint share the conviction that innovation is crucial to helping their Oil & Gas clients through this volatile environment. Most of them have a unique set of offerings and capabilities. There are a couple of clusters of expertise. For example, KPIT and HCL, focus on a specific area of the value chain; TCS, Infosys, Wipro, Accenture, IBM and Cognizant, focus on strong domain expertise and consulting-led delivery; and EPAM, Atos, Luxoft, Harman and Tech Mahindra, lead with engineering or Digital Transformation with credible experience from other industries.
As-a-Service Winners are service providers that are in collaborative engagements with clients, and making recognizable investments in future capabilities in talent and technology. These providers are also leading in incorporating analytics and BPaaS to deliver insight driven services: Accenture, EPAM, Infosys, TCS and Wipro. I’ll highlight two Winners here:
Accenture has tremendous breadth and depth in its capabilities and experience serving the oil and gas industry. Its commitment to innovation in technology and service delivery and bringing digital platforms to the industry make it one of the leading service providers in the move to the As-a-Service Economy.
Wipro’s Oil & Gas practice holds a lot of domain expertise, which Wipro combines with innovation in digital, cognitive computing and automation (Holmes) and commercial models. What stands out is Wipro’s ability to bring valuable, new As-a-Service propositions to the market, enabling the introduction of clients’ new reimagined digital business models, a crucial capability for success in Energy Operations.
High Performers show solid performance in either technical execution or services innovation but may not show an innovative services vision or lack execution momentum against what is potentially possible: Atos, Cognizant, HCL, KPIT and Tech Mahindra. Atos impressed us with their vision on Holistic Security and Industry 4.0 experience, two key areas for the future of Oil & Gas.
Harman, IBM and Luxoft are ranked as High Potentials, emerging players bringing highly innovative approaches and overall vision to the market, but lacking in the complete build-out. IBM is struggling to transition from being firmly entrenched in ‘traditional’ services, and has been on the wrong end of consolidations in the industry. However, what caught our attention is IBM’s capability that puts it on the forefront of advanced analytics services, with heavy investment in cognitive capabilities. We have seen a number of interesting applications of Watson with Oil & Gas clients, for instance using predictive data science to leverage more than 30 years of collective knowledge and experience in a cloud based knowledge platform. With the Big Crew change firmly underway, this an important area for Oil & Gas companies.
What is Next? Sustaining the Momentum of Change The downturn in the Oil & Gas industry and sustained low oil price has created a momentum for change in the industry. But will it continue if the oil price goes up again—what happens when it hits $60 per barrel? Many industry executives shared a concern that without the economic necessity of cost cutting, the industry will return to a complacency that will slow the pace of innovation and change.
This Blueprint shows that, in addition to cost reductions, the industry needs to be focused on business outcomes relating to talent, operational efficiency, organizational flexibility and scalability and time to market. The way forward is through more collaborative engagements that incorporate the achievement of these business outcomes. The Energy Operations Blueprint provides a comprehensive overview of the industry and identifies ingredients for long-term business value along the As-a-Service Journey.
I’ll wrap this up by emphasizing again the importance of true partnerships. To survive the oil price slump and come out stronger Oil & Gas companies need partners that proactively bring innovation and are willing to co-invest in technology, collaboration and talent.
HfS Premium Subscribers can click here to download their copy of the new 2016 Energy Operations Blueprint Report.
