Can we please use this Memorial Day to put aside ancient differences to prevent these tragedies from happening over and over again?
Senators must move forward on this years-long legislative effort that would require background checks on all gun sales: H.R. 8.
Posted in : Uncategorized
Self-insured or self-funded employers underwrite the medical risk of over 84 million of their employees and their families in the US. In 2020, self-insured enrollment by employers themselves surpassed the enrollment in health plans underwritten by health insurers, becoming the single largest market segment for healthcare. I caught up with our healthcare practice leader, Rohan Kulkarni, to learn more…
The 2020 inflection point at the start of the pandemic is a seismic event that passed off with little attention given our combined attention was on COVID-19, the economy, and yes, the 2020 US elections. Still, the growth of enrollment in self-insured employer plans holds tremendous promise of systemic change in US healthcare without the drama of national politics. It opens new opportunities for service providers, technology enablers, and consumers. It will unleash new business models, better health outcomes, and potentially address the runaway train of healthcare costs.
Health insured enrollment decline is offset by self-insured employer enrollment growth
Posted in : Healthcare, Healthcare and Outsourcing
If there’s one industry that has struggled with its identity over the past two decades, there’s no bigger culprit than Business Process Outsourcing (BPO). Ten years ago India’s IT body NASSCOM* voted among its BPO council leaders to rename itself “Business Process Management” (BPM) to amplify the nature of services being undertaken as “managed” by service providers as valued business partners, and not merely low-cost providers of outsourcing via cheap labor. However, most of the tech industry associates BPM with Business Process Management software and it’s arguable that the nomenclature only served to confuse enterprises further.
Data and processes are inextricably linked. The focus on value has shifted firmly to the strategic value of data and how designing processes can help you achieve the data outcomes that create the value. Enterprises must re-think what should be added, eliminated, and simplified across their process workflows to source this critical data. In short, enterprises want to buy continuous access to data outcomes and experience great service partnerships to achieve them. That is what BPO is all about why HFS has termed the phrase “Business Data Services”.
Despite the obvious brand identity challenge, BPM did represent the emerging era of BPO beyond cost savings (see 2010-2020 below), but after a decade, surely it’s time to revisit the very identity of business services to address the most critical need 600 of the G2000 enterprises really want… data:
When we reflect on the phases through which BPO has evolved we can clearly identify three different eras: (1) Globalization, (2) Digital Pontification, and (3) Business Data Services:
We can date BPO back to Adam Smith’s Wealth of Nations in 1776 where he discussed the “gains from the trade that exists in dynamic, free markets. Companies and countries that overcame the barriers to trade would reap the rewards. Those that did not overcome the barriers would forever be beholden to those that did.” He also declared that “Wealth is created through productive labor, and that self-interest motivates people to put their resources to the best use”. Was he thinking about core/non-core? Had he planted the very kernel of partnerships to drive customer impact and competitive advantage?
However, we have to fast-forward to the 1940s when ADP started handling payroll for companies outside of their own operations, and the ’60s when EDS developed an integrated system to process health insurance claims. In the ’70s and ’80s, we saw the rise of call centers first in UK and US before work was shifted to Ireland and Canada in the 1990s because of cheaper salaries and lower employment benefits. We also saw American Express, British Airways, and GE open ‘captive’ units in India to take full advantage of moving non-core work out of the main enterprise to have the work executed at a much lower cost over the medium-long term. Basically, any processes that couldn’t be tied to an ERP rollout – and executed as such – became a target for outsourcing. The advent of the Internet and real-time access to data had made many news things possible to run a virtual business that could access talent and technology anywhere in the world.
Old school BPO (pre-2010). Once the ambitious Indian entrepreneurs saw how effectively these major globals could run operations out of India, upsprung hundreds of BPO delivery firms over the next decade, with India at the heart of functional data-centric work, the Philippines becoming the epicenter of voicework. From customer services, to finance and accounting, to HR, to procurement to insurance claims processing and payment processing… the half-trillion-dollar a year BPO business was born with offshore labor at the core, and getting the work shifted as expediently as possible the hook to the eager enterprise clients.
Digital ponitification (2010-2020). This was the era where we cogitated and really saw the art of the possible. We saw the value and potential of end-to-end processes bringing employees closer to their customers aligned by common goals (OneOffice), and the blurring of the boundaries between business and technology as business executives invested in the value of SaaS and automation, helped by advancements in low-code technologies. In short, these BPO providers were making the shift from order-takers to partners. However, there needed to be a catalyst to drive the rhetoric to reality – we knew what was possible, but there wasn’t much of a burning platform for change during these years of economic growth.
Business Data Services (2020++). The collision of disruptive forces has provided the catalyst to take BPO from its pontification decade to enacting these ideas into reality: the rush to operate in a global business environment, the pandemic-induced talent crunch upping the ante to invest in an automation backbone, and providing a more challenging and rewarding work environment. Throw in spiraling inflation, a military conflict in Europe, and a desperate need from enterprises to hurry into functioning virtual models and hyperconnected supply chain ecosystems, and enterprises need more help than ever from third-party outsourcers and their armies of millions of staff to keep their businesses moving forward.
When enterprise leaders look at their operations, they need data on their people and performance, their accounts and cash flow, their spend management, their customer engagement and satisfaction, their inventory levels, their sales effectiveness, their marketing impact etc. Do ambitious business leaders really care about the effort levels being made to get this data anymore? Whether it was 150 FTEs, 50 RPA licenses, some smart AI feedback loops, and a few chatbots? Of course not. What they care about is getting the data they need to stay in the game and be successful. Having the best possible partnerships to achieve that data on an ongoing journey provides them with the ecosystem they need to be competitive.
*HFS is partnering with NASSCOM to study these dynamics of business services in-depth to shape the future of this industry
Posted in : Business Data Services, Business Process Outsourcing (BPO), OneEcosystem, OneOffice, Uncategorized
All the excesses of the past 14 years are colliding into a maelstrom of converging dynamics – the likes of which we have never experienced in such a worrying combination. The US economy is contracting and we’ll soon learn about many major economies following suit. The post-pandemic growth bubble has burst and we must open our eyes to the new reality of our business environment. Anyone who claims they can clearly visualize what the world will look like in a year simply isn’t human. Or isn’t a robot either…
Moreover, 43% of today’s US workforce is Gen-Z and Millennial and only the older Millennials may have some recollection of what it’s like to work in a contracting economy. A good tranche of today’s w0rkforce simply has no idea what’s likely to hit them in the coming months as corporate belts tighten.
My only words of comfort are that recessions rarely last more than a few quarters and we will re-emerge from this – and (hopefully) learn from this.
So how best can we prepare ourselves in the meantime?
We are entering a recession and we don’t know how deep/long it will last. 8% inflation doesn’t equate to a 50% payrise, so be wary that you could find yourself in a precarious position with your new employer. The current wage-hike situation is not sustainable, and businesses struggling in a recessionary economy will have no choice but to downside/shed costly staff, and “last-in/first-out” could well apply. We are already seeing many staff seeking to return to their former employers as they quickly discover the shiny new laptop and paycheck didn’t really equate to stability and happiness. There might be a talent shortage, but when businesses struggle, they’ll look to lower their headcounts in any case. Loyalty still means something and many of those who kept the faith will be glad they did so.
The champagne days of the post-pandemic start-up bubble are over. Savvy start-ups are looking to conserve cash to ride this out and come out the other side. Most mature start-ups have delayed IPO plans. Sure, they all let you work from home, but will they keep you employed in-between Netflix binges? In my view, everyone should experience the start-up thing at some point in their career, but you gotta question the wisdom of doing it right now.
Spare a thought for the business leaders having to keep the wheels on their businesses with this collision of disruptive forces threatening to derail them. Employees demanding to work from home; salary demands to retain key staff; mental health of staff; cost and scarcity of people with specific skills; fractured supply chains; unscalable automation models; massive challenges to mine and manage data; broken process flows; corporate politics and executing reral change in a remote environment; customers needing immediate help; the impact of war on the European mainland… I can go on and on, but leading people in this quagmire of disruption is a huge challenge. The key is to stay focused, develop short-medium plans to keep the wheels on. Long-term planning is almost impossible amidst such business and economic uncertainty. But you can see ahead a few months to tackle these issues head-on until the fog clears.
This is a huge worry for economies and our living costs, and something not experienced for decades. Inflation is one of the world economic diseases: once it kicks in it’s almost impossible to keep a lid on it, especially with broken supply chains, rising energy costs, rising food costs etc. We have to refocus on how we manage our finances and look at making real changes to our lives to compensate, such as where we live, being astute with our energy consumption, cutting back on overpriced food (learn to cook?), and saving more money for the future as this could get worse – or investing our money in things that hold their value in line with economic fluctuations.
We’ve got pretty used to tackling uncertainty since March 2020, and one thing is clear today – the only certainty is that these times are uncertain. It’s a shame that we have to face up to a global recession just as we are enjoying seeing colleagues and clients again, but things need to cool off and economies need to return to normal. My hope is that we – as people and workers – become a little bit less selfish, and a little bit more appreciative of working in the technology industry which is essential for the very continuity of business. If everyone’s simply out for themselves, this isn’t going to end well for many people and many organizations. We need to be better collaborators, better empathizers, and better communicators if we are to pull through the next few months and come out the other side on top.
Posted in : Economics and Geopolitics, Employee Experience
Anyone close to the coal-face of IT and business process services engagements knows it, but few are admitting it: staff attrition is out of control and threatening to destroy the whole fabric of outsourcing if service providers fail to get ahead of it.
And it’s abundantly clear what the biggest catalyst behind attrition is: remote working, especially in the services providers whose staff are predominantly based in India. Throw in a spike in demand for people with tech / business services experience and this is the impact:
Four reasons why we need services staff back in the office
1. Most developing staff struggle to learn to be innovative or creative stuck at home. Most staff will only focus on doing the basics of their job when they have no people around them to learn from, share ideas, test theories, etc. Let’s be honest, if people get their basic deliverables done by lunchtime, will they really make time to learn new things, call their colleagues to share ideas, etc when they have so many other distractions to absorb their time? If they are in an office, they will find other work-related things to do, they will talk to their teammates, ask questions of their managers and become far more productive. These staff will quickly develop themselves and warrant ongoing salary increases.
2. Many experienced staff can deliver their current jobs from home, but run the risk of their activities being automated away. There are very impressive platforms to manage call center work, basic IT support, accounting tasks, insurance claims, etc in remote environments, and we can be secure knowing these remote working platforms will keep the wheels on service delivery if/when future pandemics – or other crises – force us back into Zoom-land. However, if repeatable tasks are run at scale remotely, pressure to keep costs to a minimum will drive ambitious providers to invest in more sophisticated automation that can keep staff numbers low and combat wage inflation. Employees who choose to work remotely have to keep training themselves to keep improving their value, otherwise they may find their jobs gradually disappearing. Net-net, work tasks are being automated regardless of whether or not staff are present in the office, however, people who do predictable, rules-based roles remotely are more prone to automation than those who are office-based and developing their creative/innovative skills through team building and collaboration.
3. Most managers pushing for “hybrid” work environments were hybrid workers pre-pandemic in any case. How many people have told you they “intend to go into the office 1-2 days a week”? Yes, am sure many have and you may be intending the same for yourself. But these folks pre-2020 spent a good deal of their time on planes, visiting clients, attending conferences, visiting other global offices in any case. So they are really just looking to continue the hybrid office/remote lifestyle they were accustomed to in the past. The only difference now is there is less reason to travel, and travel costs are a lot higher than before. This will level out as the pandemic fades and the world returns to something similar to 2019. The main difference today is that we’ve become more efficient with our time and take much better advantage of video calls and a better-disciplined home/work life. We also focus a lot more on our mental health and a better work/life balance these days, which is a good thing for most of us who are becoming smarter and more creative, with a healthier appetite to develop our skills with less fear of change.
4. Work cultures are suffering in today’s remote-confusion, which has been a major factor driving up attrition rates. When your employment becomes servicing a brand from a corporate issue laptop with little interaction with your colleagues, you lose much of the emotional ties you may have had for your organization. So why not jump for another faceless employer offering more money, longer holidays, and a promise of “learning new things”? Service provider leaders need to accept that they will struggle to retain many remote-based employees for long, as they simply cannot create a culture that drives loyalty and long-term commitment. They have little choice but to get these folks back to the physical workplace, or plan to replace them with staff willing to work in-office.
The Bottom-line: Service providers with armies of developing people must bite the bullet and recreate dynamic work environments
The harsh reality is this remote-working culture simply is not working for most service providers. The numbers do not lie (and may actually be even more severe than reported). Service provider leaders worry that forcing staff back to the office will exacerbate their situation even further – and they may be right in the short-term. However, in the medium-long term, they cannot scale people and execution to satisfy the rampant client demand in today’s complex environment (as we discussed recently here). Smart service providers are biting the bullet and pushing hard to bring back their physical work cultures, as they already realize they are playing a dangerous zero-sum game trying to deliver critical services to huge global customers when a third of their people aren’t sticking around to keep the very fabric of their service delivery ticking along. They have to get the balance between adding freshers, expanding into Tier 2 and Tier 3 cities, and investing in keeping the talent they need to retain. People, ultimately, are not a commodity…
Posted in : Business Process Outsourcing (BPO), IT Outsourcing / IT Services, Talent and Workforce
Even before the pandemic, business decision-makers were looking for new and unique ways to achieve growth in an increasingly connected, rapidly changing, unpredictable and complex business environment. The current global crisis intensifies the need for businesses to cooperate with each other more broadly and develop new business models to stay in the game.
Enterprise innovation is moving beyond the walls of an organization as the “OneEcosystem” emerges, where like-minded organizations with common objectives collaborate to find entirely new sources of value. We introduced the concept of the “OneEcosystem” earlier this year (read here), and now we are double-clicking on it:
“OneOffice” is the core of the “OneEcosystem” as people and culture even trump technology in today’s talent-starved environment
While “digital transformation” focuses on resolving (often) decades of technology debt, the OneOffice mindset (end-to-end organizational alignment across the front, middle, and back offices to drive a great stakeholder experience) allows enterprise leaders to manage the ballooning talent and process debt that continues to be overlooked by many. It is one thing to invest in the shiny new tech, but if you fail to bring your people together with shared goals and incentives, motivated by a common set of values and mission, you will struggle to survive in today’s business environment. The pendulum has swung firmly towards talent and culture over technology in most organizations that are hurrying into this new future.
The clearest barometer that shows the major changes facing Global 2000 enterprises over the next 12-18 months (see below) are the clear priorities to develop “Digitally Fluent” workforces to be best equipped to function effectively in the cloud.
Digital Fluency describes the ability to drive the seamless interplay between business and technology:
Enterprise Success = CX + EX + PX
In our obsession to deliver the best CX in pre-pandemic days, we ignored EX, and the current talent retention predicament which is creating unprecedented challenges to keeping many enterprises functioning. Hopefully, the “Great Resignation” has already become the burning platform in 2022 to resolve our talent equation as enterprise leaders. But we are still missing an important stakeholder – the PX (Partner Experience). No-one-can-be-everything-to-anyone and the OneEcosystem brings our partners to the forefront, along with customers and employees.
Enterprise innovation is also defined at the intersection of Customers, Employees, and Partners.
“Data-as-an-asset” is the OneEcosystem strategy and rapid technological innovation is making it a reality
The scalability, flexibility, and faster speed-to-market promised by a hybrid cloud and edge computing environment is allowing enterprises to get a handle on their large underlying data-sets that previously required huge investments in storage and servers. Machine Learning (ML) and more advanced Artificial Intelligence (AI) algorithms allow enterprises to make sense of their humongous data-sets that makes humans far more efficient, drive data-based decisions, and enable autonomous processes. The emergence of blockchains is starting to make the vision of OneEcosystem a reality by enabling distributed and trustworthy information. Blockchain’s “six-pack” makes it an attractive ecosystem technology – distributed shared data, automated smart contracts, hash-based cryptography, consensus-driven trust, permissioned and permissionless options, and immutable transactions. Ubiquitous connectivity from 5G with much faster speed and lower latency allows for the creation of virtual networks where large amounts of data can be shared at real-time speed. The exciting emergence of Web 3.0 will allow further allow decentralization of data.
Don’t forget culture and mindset
The pandemic has further exacerbated the need for ecosystems. The escalating global crisis requires us to cooperate with each other and develop new models that enable us to succeed as a society. Post the pandemic shock, the individualistic capitalist economy (where shareholder value supersedes stakeholder value) is also starting to get questioned. People want to partner with (or work for) organizations that have a purpose beyond profit, whether it’s aligned to philanthropic goals and/or highly invested in sustainability or diversity or other purposes.
Organizations must be designed to develop a sense of community
Organizations will become more networked (decentralized and flexible where managers coordinate both internal and external relationships), matrixed (where people with similar skills are pooled together, resulting in more than one manager), and flatter (eliminating many levels of middle management). Finding common ground and designing shared goals and incentives for all partners are critical success factors to establish the OneEcosystem.
The Chief Executive Officer should be the leader who drives the infinite mindset across the organization and its ecosystem
He/she must continuously define the purpose for the organization and relentlessly drive a fearless collaborative culture that values stakeholder value beyond shareholder value. As a leader, it’s so easy to obsess with operational functions of the business during times of disruption or distress – in this case, a global pandemic – that it can create knee-jerk, often short-term decisions that could inherently damage your long-term vision, your business’ culture and your raison d’être. With no defined time horizon, no clearly-defined rules, and with players that may enter and exit at any time, the primary objective of an infinite game is quite simply to keep playing. The goal for businesses is to have the will and resources to stay in the game, through thick and thin.
Having lived and worked through four recessions, we understand the rapid change in leadership mindset that can occur when a firm goes from peacetime and growth to one of survival and all-out war. According to author Simon Sinek, people look to leadership to serve and protect, to “set up their organizations to succeed beyond their lifetimes.” But in the modern landscape, most organizations place an unbalanced focus on near-term results that may ultimately prove to be self-defeating, like casting aside your umbrella in a storm because you haven’t been getting wet. In short, business is no finite endeavor. This pandemic lays plain for all to see the game we are really playing.
The CEO is the ultimate collaborator, forcing the change that is needed and balancing the desires of the various stakeholders (the board, key clients, key partners, the employees). His/her team to make this happen must be responsible for the full gamut of their customers, employees, and partners, working with a transformational wizard to bring together the process and technology with the real innovation ingredient: the people.
The Chief Transformation Officer must link front to back office and ensure processes run smoothly across functions to deliver the data/outcomes the organization needs
This should ideally be someone who understands the challenges of enterprise operations, and how to align them with the market facing/client impact areas of the firm. Forget the old GBS head / shared services head role, as this just has repeatedly failed to get out of the transactional back-office world and the “finance factory”. This person must oversee both technology and operations, understand the value of automation and AI, be able to design and implement change programs and work closely with the employee experience leader to eliminate the back office mindset from antiquated business functions into one that is aligned with the direction of the business.
The Chief Customer Experience Officer lives and breathes the world of the customers and obsesses with how to engage them as effectively as possible – right across the entire customer life-cycle
This ideally is someone who understands how to design customer interfaces, how to service customer needs leveraging both digital tools and physical support and ensuring the entire employee base is unified around (and incentivized on) driving customer impact. In addition, the CCXO must ensure the marketing mindset is to communicate with the customer, educate the customer, and to develop specific programs that have a real impact on driving customer engagement and business growth.
The Chief Employee Experience Officer is responsible for making the company a great, energizing place to work, where staff of all backgrounds, ages, experience levels cultures are energized by the values and desired outcomes of the firm
This individual must be the person who can manage the expectations of the board, the CEO, the shareholders to create a company culture and values that everyone believes in. Moreover, the CEXO must be intimately involved in the creation and execution of training programs across the firm to attract talent who want to work for a company that will develop them, as well as establishing a culture and values they can identify with. This should ideally be a strong leader with broad experience of the business and staff development, who knows what it takes to be successful, and who understands how to motivate people beyond pure compensation. The best leaders today are also great people managers – and the CEXO role must be at the core of the business leadership, not some ancillary executive painting lip service and not having any real impact.
Chief Partner Experience Officer must become a prominent leader in the OneEcosystem organization
As the OneEcosystem environment evolves, the need to collaborate with entities with common objectives, across the entire customer value chain, has never been so prominent. Net-net, your partners are no longer just your suppliers. Suppliers are essential partners to deliver your goods/services, but the OneEcosystem looks at the collective organizations more holistically, where they play critical roles in providing the customer experience across the entire customer lifecycle.
Bottom line: EcoSystem is not some sci-fi movie. It is happening right now.
Building a successful ecosystem strategy is challenging. Creating the elusive network effect is not easy. Then there are regulatory and compliance issues, fear of the loss of proprietary information, and concern over the ability of competitors to cooperate. However, these challenges are not insurmountable if there is a business case, shared goals, and common purpose. Consider the following examples:
OneEcosystem is unraveling right in front of our eyes if we are willing to open them and see the change.Don’t be an ostrich with your head in the sand. Start collaborating. Get going. EX+CX+PX = Innovation…
Posted in : OneOffice, Sourcing Best Practises
On September 13 and 14, HFS will bring together enterprise leaders for a no-holds-barred, two-day HFS Super Summit. Live from New York!
Posted in : Artificial Intelligence, Business Process Outsourcing (BPO), intelligent-automation, IT Outsourcing / IT Services, OneOffice
In today’s highly complex, uncertain, and difficult business environment, outsourcing might just save your business. The whole focus on pricing and scoping outsourcing engagements is being completely rethought, as are the strategies of the leading service providers to support them. The IT and BPO services industry is reaching its most defining moment since Jack Welch doubled down on India in the 1990s…
The old 1-many outsourcing model only half works in today’s virtual environment. In pre-pandemic days, outsourcing deals were rapidly moving away from the old “take the people” model, where the outsourcer rebadged a bunch of their clients’ staff, usually housed in service centers, and re-employed them as their own. Adding staff to deliver fairly low-value work was treated with revulsion by Wall St – the Holy Grail was to take on new deals that required minimal labor additions to the outsourcing service provider, thus maximizing the immediate profitability of the deal.
Automation became the antidote to this revulsion by enabling service providers to reduce labor dependency over the course of multi-year deals – however, this only works when the service provider takes ownership of the automation and has hard targets to hit to sustain delivery standards at lower costs. Moreover, it’s proving more and more that automation rarely replaces people, it merely augments efficiencies and smooths workflows in a virtual environment.
Forget “mess-for-less”… we’re now doing “mess-for-more”. The 1-many model worked in the past when there was a fierce determination from the client end to make a rapid transition to the existing service provider model, and a workable transition plan was set out in advance, to which both sides could commit. However, this invariably needed a LOT of in-person sessions – at junior, mid and senior staff levels – to make possible. Attempting to perform a fast-track transition from a messy enterprise set of processes to a standardized delivery model hosted by the service provider in today’s largely remote environment is practically impossible. Talk to anyone attempting this and they will show you the lumps on their head and smashed laptop screens…. So forget about challenging remote-centric transitions and just move the whole lot across – people, processes, and technology (under the guise of an “asset transfer”) – and then figure it all out. The only difference being many enterprises will be (or already are) willing to pay a premium to get to a deal. And besides, it’s cool to have people again!
Today’s humungous people challenges and business risks actually make “taking the people” half possible. We can go back to my very first blog (here) on BPO value in 2007, and we were droning on about moving to standard processes and new technologies back then to make BPO add value beyond the labor savings. Fast-forward 15 years, throw in a two-year pandemic, spiraling inflation, chronic attrition, a military conflict in Europe, and a desperate need from enterprises to hurry into functioning virtual models and supply chains, and enterprises need more help than ever from third party outsourcers and their armies of millions of staff to keep their businesses moving forward. Outsourcing deals that involve talent moving to the service provider, many of whom may actually welcome their new employer, are looking a lot more appealing to many services providers in today’s environment.
The cost to enterprises today is far greater than merely adding 10-20% onto staff salaries… it’s the massive attrition hurting the very continuity of their business operations, their customer engagement, their supply chain feasibility. Pre-pandemic outsourcing “value” was calculated on highly tangible and legally contracted cost-savings, offset with the promise of future value from innovation. While the benefits of innovation, how it was devised and achieved, is hard to quantify and attribute to actions and decisions taken many years in the past, you could always rely on the good old hard math to quantify whether an outsourcing engagement made sense from a financial standpoint.
Today, the onus to outsource is far greater, for many enterprises, than merely saving on the bottom line and benefitting from greater efficiencies. One can argue that outsourcing could keep enterprises alive if done right. For example, if you had a team of crack cybersecurity experts and they got snapped up by Microsoft or some start-up awash with cash, you are in serious trouble… most providers are reserving their scarce cyber resources for their largest clients. But if you have a major partnership with an outsourcing provider and your business is highly important to them, they will prioritize your needs. If you’re a major FORTUNE 500 enterprise, you can likely rely on your major relationships with major service providers to help. If you are a smaller client, having a large relationship with one of the mid-tier service providers could be extremely valuable as they will prioritize you, whereas the juggernaut providers will not.
Service providers that can retain, train, and develop talent to expand their skills are already becoming critical orchestrators of the business ecosystem. We are in a war to retain people to keep our businesses functioning, and this is likely to be the case for several years to come as people reject employers who fail to develop them, pay them well, and offer them career expansion. This is especially the case for staff working in operational roles, whether it’s part of a shared services organization, or a professional services firm. Smart service providers are getting ahead of this with increased investments in their talent development efforts, wage increases across the board, and announcements of plans to open new service delivery centers in locations that have pools of concentrated talent that can be fast-tracked into their model. We are also seeing several service providers target talent from community colleges and high schools, where they can offer them their own development experience that is highly relevant to their clients’ needs.
The Bottom-line: The old math behind outsourcing decisions are dead because you just need your firm to breathe… and oxygen is priceless if it’s on offer.
Clients are quickly evaluating what talent is core to their differentiation and then determining whether they have the ability to attract, retain and develop it themselves, or whether they are better placed (and the risk lower) to partner with a service provider.
Conversely, service providers are more hungry than ever to take on people they can integrate into their model to mitigate their own attrition risks, and cement deeper and far more strategic relationships with their key clients. The main question now is whether the right firms are engaging with the right service providers to achieve mutual long-term success. Those that get these new relationship decisions right to stay in the game will emerge as the leaders in their business ecosystems.
Posted in : Business Process Outsourcing (BPO), IT Outsourcing / IT Services, Talent and Workforce
If there’s one voice moving tech markets more than most these days it’s ServiceNow CEO Bill McDermott. After a decade at the helm of SAP, where he articulated the firm’s vision to embrace the cloud, he made the intriguing move to take the CEO role at ServiceNow, just a few months before the pandemic. Since then, he has more than doubled NOW’s stock price, and the market cap has rocketed to an eye-watering $110 billion.
HFS has led the industry’s coverage of the services market for automation, data and IT orchestration since we launched RPA onto an unsuspecting industry in 2012, and ServiceNow has propelled itself as the darling of the CTO in recent years as the industry’s leading IT orchestration platform with a key focus on low-code and automation. What’s also highly intriguing is the recent partnership with process intelligence platform Celonis where the orchestration darlings of both IT and finance are making a go of building an engine that finally combines process design and intelligence with IT orchestration and automation. So let’s hear a bit more about what makes Bill tick, as we grabbed some time with him…
Phil Fersht, CEO and Chief Analyst, HFS Research: Bill, it’s great to get some time with you. So, from a personal standpoint, was being a tech CEO something that you dreamed about when you finished up in college? Did you expect your career to go like this, to end up doing what you’re doing now?
Bill McDermott, CEO, ServiceNow: Well, at that point in my life, you know, I was a teenage entrepreneur, running my own business, going to high school and college. And I loved running that business. But my dream, when I graduated from college, was to get a job with a corporation. And in that era, you know, getting a job with Xerox or IBM, that was probably the pinnacle. It might’ve been like getting a job at Google, or perhaps Apple, today. And I got the job at Xerox, which is quite a story, I tell it in my book Winners Dream. But, you know, at that time, I just wanted a shot. I wanted to be somebody in the world. And I got my first job at Xerox, knocking on cold doors in New York City for a living.
Now, I will tell you a story. When I left that day, from Long Island to New York City, I was reading the annual report about the then CEO, David Kearns, who was reinventing Xerox into something called Total Quality Management, which later became known as Six Sigma. They call it design thinking and innovation today. But I was so impressed with Kearns that, by the time I got to New York City, I had my sights set on being the next David Kearns, at least in my mind. So when everybody else was going for the sales job, I told them that my dream was to be the next David Kearns. So, you know, maybe to some extent I did have a spark of that CEO dream inside me.
Phil: I remember TQM well, from when I just was starting out in the 90s, so that brings me back! I’d like to move to the Celonis partnership. How do you see this evolving, now you’ve had a chance to see each other up close? Is this what you expected? And where do you think it’s going to take you?
Bill: Well, it kind of brings back memories of when I was CEO of SAP because I was the one that approved Celonis in the partner network of SAP, back in the day, and they were all about collaborating with ERP, and really bringing process innovation to the equation, with a company like SAP. And Celonis CEO Alex Rinke will tell you, what he enjoyed about working together back then is, he’d send me an email in December, and he’d be like, “Hey,” you know, “Basti and I just got a deal with such-and-such,” and within a few minutes he’d get a, “Congratulations,” and, “Let’s go get another one,” note from me. So we kind of got on very well.
And then, when I came here, I recognized the idea of business process innovation, as a big elixir to the whole platform automation concept. So the reason why it works is Celonis does the x-ray of what’s broken, and then that immediately gets activated in the workflow automation platform of ServiceNow. So we can rethink the way business is being done in a hyper-automation context. And that, to me…it’s really special.
So we’re partnering at the engineering level, at the go-to-market level, and obviously at the executive level. And what’s interesting – and you can check this, Phil, and I want you to – Alex’s note to me was congratulating me on the deal that we just got together in the marketplace. So what I find quite interesting, as much as things change, some things do stay the same.
Phil: [Laughs]. That’s great. Is the tech industry very different today than it was two years ago? And will it be different again in another two years?
Bill: Yes, and yes. I think one of the things that is only now gaining full understanding and recognition is that the 20th Century architectures, some were on premise, some were first-generation SaaS, they cannot keep pace with an ever-changing digital world. And I believe that this hyper-automation concept is going to play out in IT, it’ll play out in the employee experience, the way you service the customer, and obviously in the low-code revolution that’s taking place.
So I believe that hyper-automation platforms like ServiceNow, and I believe ServiceNow specifically, will be the control tower for digital transformation. And that’s not at anybody’s expense. Nobody has to lose for us to win. But I think companies are now realizing, “Hey, if I want to keep my operation secure,” “Hey, if I want to give my employees a great experience and win the talent war,” “Hey, if I want to go direct to consumer, and rethink the way I relate to my customers and predict their next needs,” or “I want to build the applications of the future, but I want to do it in minutes or days, not months and years,” you’re going to need a platform like ServiceNow.
“I believe ServiceNow specifically, will be the control tower for digital transformation. And that’s not at anybody’s expense. Nobody has to lose for us to win.”
So where do I think it goes in a few years? I think the platforms that are consumer-grade, like ServiceNow, become even smarter, even more predictive, and even more agile, to deal with the world’s biggest challenges. I’ve always said that the world’s biggest challenges are the world’s biggest opportunities.
So you say, “Well, give me an example.” Think about hyperinflation. The greatest combat tool for hyperinflation is digital transformation. It’ll be $10.7 trillion invested in digital transformation, in the next few years. Platforms like ServiceNow can be revolutionary. If you think about an environment where the consumer isn’t going to come to you anymore, and you have to go to the consumer, you now have a chance to create new channels of innovation. It doesn’t mean the old ones are completely gone, but it does mean frictionless business is going to replace everything. And a lot of that is because companies have to do more with less, inflation, interest rates, supply chain dislocations, moving from global, to regional, to local, all these transformations will have to be platform-driven, and the smarter platforms will play out in the metaverse, they’ll play out in 3.0, and obviously, the enterprise participants, if they’re not consumer-grade level, they will lose, and they will lose fast.
So that’s what I see in a couple of years.
Phil: Is there anything from your decade-leading SAP that’s helped you at ServiceNow, Bill?
Bill: Everything that I did for a decade at SAP has helped me at ServiceNow, Phil. I have very high respect for my experience there, and all 100,000 of my friends at SAP. I loved every minute of it. We were a truly global company, and that’s the way I ran it, that’s the way we had the strategy, and that’s the way we evolved the company into the cloud, and many other things. So I learned so much, and I’m grateful for my experiences. But I also learned, and what I already knew, going into SAP, that it’s all about people, and if you can lead people, you can do a lot. And I have felt, my whole life, that the art of leadership is developing followership, and the bigger the company, the better I like it, because that’s the more lives that you can touch, and the more followers you can gain, to achieve great missions. So it’s been an honor of a lifetime having jobs like these. I’m the luckiest guy. No, I really am.
“Companies have to do more with less, inflation, interest rates, supply chain dislocations, moving from global, to regional, to local, all these transformations will have to be platform-driven, and the smarter platforms will play out in the metaverse, they’ll play out in 3.0, and obviously, the enterprise participants, if they’re not consumer-grade level, they will lose, and they will lose fast.”
And, Phil, before you go, just real quick, you know us well. Is there anything you can share about where you think we are?
Phil: Sure, Bill. I think this whole push around workflow platforms and automation is absolutely the right place to go. And we are in the biggest talent crunch we have ever experienced. This is a long-term thing that we’re going through, this is three, four, five years in the making. So creating platforms that can enable the automated business is where things are shifting.
But being able to bridge, I think, the divide between technology brilliance and process redesign is the key. And if you can get into that, if you can bridge that gap, as an orchestration engine, you’re going to be the envy of the industry. I think there are still some ways to go, but I think the partnership with Celonis is really fascinating. The mindshare that you’ve built, in the last two, three years, in particular, has been very, very strong, and now the ability to build cross-process platforms is the holy grail. So it feels like you’re getting there.
Bill: Thank you very much, Phil. That’s great insight. You know, I start my days very early in the morning, and I end them with Asia at night, from California, and I can tell you, there isn’t a single CEO conversation, including many that I’ve had today, that doesn’t always start with this whole idea of IT has become the business strategy, because these companies have to be secure. They’re very concerned about the environment that they’re operating in, for all the reasons that you know. They have to service the business. Because of this talent war, the employee experience, from recruiting and hiring, onboarding, training, managing, all the services for the employees, at a consumer-grade level, is on everyone’s mind, because the greatest asset you have, if they walk out the door tomorrow, it doesn’t really do you a lot of good to have big buildings. Right?
Phil: Yeah of course…
Bill: And, you know, it’s so funny, Phil, we had 97 CEOs from around the world at the event Alex was at. The direct-to-consumer revolution, and how you can predict experiences, and really get the Net Promoter Score, and the whole idea of customer loyalty, end-to-end digital, is hitting a complete breakneck speed now. And, you know, these 20th Century architectures, they weren’t designed for that, so we’re very fortunate to have a clean sheet, 21st Century design.
I just got off the phone with a bank that’s modernizing 5,000 applications, and I said, “Well, you might want to think about low-code because you’ll never get there any other way.” And then we talked about the next steps on the Now Platform, that they didn’t even know we did that. So part of what our brand is driving is: “The world works with ServiceNow,” which describes the bandwidth of what we can do in the global economy, by geo, by industry, by persona, to fundamentally simplify the complexity that’s been built over a half a century, and give people the consumer-grade experience across the enterprise.
Phil: Well, that’s brilliant. Thank you very much, Bill. I appreciate the time and it was nice to meet you. I know our readers will love your insights!
Posted in : Digital Transformation, OneOffice, SaaS, PaaS, IaaS and BPaaS
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