From staring at his fish tank to working on an IT service desk… to becoming an analyst, then ending up at HfS. Now that is unlearning personified for Ollie O’Donoghue (see bio), our latest recruit covering the IT services landscape from the UK…. so let’s learn a bit more about this curious fellow…
Welcome Ollie! Can you share a little about your background and why you have chosen research and strategy as your career path?
Hi Phil! My career started in IT Services after I graduated from University with a History degree. Luckily for me, by the time I graduated, IT organisations had become more focused on service as opposed to technical ability – of which I have none.
I joined a large public sector organisation and moved around to a few different positions in the three years I was with them. I thoroughly enjoyed my time there, but my real passion lies in research, so I jumped at the opportunity to join an organisation as an Industry Analyst covering IT services. After a year or so, I made the jump to Head of Research and Insight which allowed me to develop and drive the research agenda.
It was around this period I started on the IT Service speaker circuit. At the time, the industry was particularly concerned about the impact of automation, so I tailored my presentations to bring data and research to the party which, at the time, was being overrun with sensationalism from the mainstream media. Finding good data and sources for my sessions brought me into contact with HfS who, unlike some of the other analyst firms, were mirroring what I saw taking place in the industry.
Why did you choose to join HfS… and why now?
As they say, all good things come to an end. Covering the service and support industry was great fun, and I made some amazing friends and contacts. But after a few years, I felt the need to expand my coverage to encapsulate a lot of the other key areas and trends at play in the wider business landscape.
When it came down to it, moving to HfS was an easy decision, I just asked the question: Do I want to join the Blockbuster of the analyst industry, or the Netflix?
HfS have been busily disrupting the industry for years with their freemium model and high impact research and content. The reason I first engaged with HfS analysts – who were always happy to reply with advice and knowledge, by the way – was that the research produced tallied up with what was taking place in the real world. Which is something you can’t say for some of the legacy firms.
Now is the perfect time to join HfS. You’re steadily growing coverage will give me the access to the broader industry trends taking place – no doubt supported by the exceptional team of analysts already covering them – while allowing me to focus on the area where my career and experience have been built in so far: IT Services.
What are the subject areas and topics that you will focus on in your analyst role?
My primary focus will be on IT Services although it’s tough to focus on just one area. These days, almost all technology and business areas have significant crossover with each other. I’m particularly keen to explore how modern IT Services fit in with broader technology developments like Blockchain and RPA.
I’m also a big fan of the HfS OneOffice concept. It’s a much more detailed extension of a trend I had been investigating in my former role called Enterprise Service Management. Without a doubt, it’s the future, and IT services have a significant part to play.
What trends and developments are capturing your attention today that are impacting IT professionals and the services industry at large?
Without a doubt, the impact of automation and cognitive are at the forefront of most industry professionals thoughts. Broadly speaking there’s a bit of a for and against dynamic working in the industry at the moment. Some professionals understand the value automation brings at an individual and an organisational level. They appreciate that the areas of work that automation will impact on the most are those tedious, repetitive processes that they don’t particularly enjoy working on. This is the category I fell into when working in IT Services – ultimately I didn’t want to copy and paste information from one area to another, or manually allocate work. Frankly, there are better things to be doing.
The other camp is concerned about the impact automation will have on their job. As capabilities develop, I can understand some people losing out to change but ultimately humans will be working on more engaging and fulfilling tasks.
When I look at developments in the services industry, I like to contextualise it with socio-economic trends. A short while ago, I considered how the characteristics of the new working generation would influence automation. Ultimately, the new generation is exhibiting preferences that make them more selective and mobile when it comes to employment changes. Soon, organisations will be expected to have a degree of automation because, quite simply, the new workforce won’t want to do the work that the “against” camp are so vigorously defending.
So, Ollie, what are you working on first for our clients?
First on the cards, Phil, is to work with Jamie and your good self on the IT Services Blueprint reports. I’ve already started to explore the data collected so far and can promise plenty of interesting analysis to come. For buyers, these reports offer tremendous value, and it’s great to be part of them.
I’ve spent some time with the honourable Jamie Snowdon already, discussing some of the exciting data projects planned for the coming year and, if I play my cards right, I’ll be making a contribution to these as well.
And, what do you do with your spare time (if you have any…)?
Spare time’s a bit of an odd one. My girlfriend is a project manager, so I tend to find any free time is accounted for before I realise I had any. If I can get away with it, I like to read non-fiction, drink good beer and play computer games. Often, but not always, in that order.
Non-fiction and beer? I think you made the right career move, Ollie =)
Being a trained historian, I was delighted when on a recent HfS webinar on “Beyond RPA”, I got dissed by participants for a slide that I had drawn up four years back for a similar webinar, albeit for a different organization. When I say being drawn up for a webinar I really mean it, as I would never have expected that this slide would still be in use today albeit in expanded versions and some refer to it as an industry model. And to make my smile even bigger, I revisited those old slides and the title at the time was:” Beyond the Hype: Assessing the Evolution of (Robotic) Process Automation”. You can see the original slide above. As HfS is all about facilitating discussions among the industry’s stakeholders, I am truthfully delighted for all those questions and challenges. That being said, it is time to take stock where the industry is actually at!
Whyare we still talking about RPA?
On the danger of sounding like a broken record, we have to stop confining discussions on service delivery to the topic of RPA. Last year I wrote a blog that summarized many of those arguments. Yet, despite a lot of noise in the industry we are getting pulled back and end up discussing RPA time and again. Granted, as nothing is defined, for many RPA is just a placeholder for what HfS would term Intelligent Automation. But beyond semantics, why are we paying lip service to broader notions of automation such as cognitive computing, AI, and self-learning as well as self-remediating engines? Service delivery is not just about business processes. If HfS’s contention about the journey toward the As-a-Service Economy and the OneOffice has any merit, we have to overcome those organizational silos and mental stovepipes. But we also urgently need to expand the set of stakeholders educating and talking about automation. While we have to give a lot kudos to the RPA providers and consultancies who singlehandedly educated the market, the reluctance of the IT juggernauts to enter those discussions is leading to distortions of the direction and dynamics in service delivery.
Revisiting the “Continuum” – and a plea for service orchestration
To go back to my academic roots I am tempted to quote the Cambridge English Dictionary which describes a continuum as “something that changes in character gradually or in very slight stages without any clear dividing points”. If truth being told, I didn’t consult the dictionary before drawing up this slide four years back. But from the beginning, the thought-process was the following.
To help overcome the blurred perception and often confusion that I have tried to call out, HfS did introduce the Continuum of Intelligent Automation to start discussions on the evolution and innovation in service delivery. It is not meant to be an answer to the ever-increasing questions. This model is by no means perfect and we have developed additional slideware that is trying to capture the evolution toward more data-centric models. In this context, I would like to call out just a couple of the points that we are trying to get across with this model:
First and foremost, the term Intelligent Automation is a placeholder for a set is disparate innovations in process automation encompassing the concepts that you can see on the slide. Intelligent Automation is a critical building block for the As-a-Service Economy as it decouples routine service delivery from labor arbitrage thus supporting the ideals behind the As-a-Service Economy.
Second, the main idea behind the notion of the Continuum is that all the approaches you see here listed are both overlapping and interdependent. Despite all the focus on RPA and Cognitive, we still need all the less exciting stuff like runbook and scripting, mostly in the data center. From an operations point of view of particular importance is the integration of data into process chains and workflows.
And the third point I would like to call out is the evolution or direction travel for the broad notion of Intelligent Automation. You can see 3 dimensions here on the slide. First, probably less surprising toward unstructured data. Second, probably less obvious toward less well-defined processes. And thirdly, toward the broad notion of cognitive and artificial intelligence as they are meant to overcome the limitations of the first two dimensions. Especially from a business process perspective, AI is meant to integrate semi and unstructured data as well as allowing this data to be routed through less well-defined process chains. But it really is a broad bucket because the boundaries between cognitive, autonomics and AI are not well defined. Having said all that, we shouldn’t look at these segments as binary choices. AI is being integrated into or bundled with RPA tools and all these tools should be discussed within the notion of service orchestration. An attendee at recent conference condensed this to following pearl of wisdom: “Make sure crap doesn’t get into your production and then throw Machine Learning at it.” Although he used a slightly more lyrical language.
Having said all that, the questions and at times challenges boil down to largely three issues. First, the suggestion that there is a linear development from RPA toward notions of AI? Second, the temptation of trying to pigeonhole tool sets into any of chevrons on the Continuum. Third, having the wrong starting point for discussing service delivery. To start to answer those from the end: service delivery is about service orchestration. All the leading service providers and the mature buyers have moved in that direction. It is all about having the right tool sets for the required use cases. Whether this based on microservices, on leveraging orchestration engines or other means: RPA is just a footnote in those discussions. And just to shout from the rooftops, orchestration implies that there is no linear development. In parts, this answers also the issue on pigeonholing. On the recent webinar, Guy Kirkwood from UiPath used the analogy of a golf course with RPA tools being the putter, while AI is more a drone that drops the golf ball into a hole. While thought provoking and entertaining, this analogy implies the old pigeonholing. Moreover, automation is in the eye of the beholder and RPA is no exception. While nothing is defined, all RPA tool sets evolve toward operational analytics and the broad bucket of cognitive. And lastly, the starting point is not how do we sell RPA but how do we innovate service delivery. It all comes down to use cases and requirements. For many of those requirements, RPA is the wrong approach.
Bottom-line: RPA is dead! Long live Intelligent Automation!
Having uttered this plea many times before, I am not overly confidence that I will get more listeners this time. But we urgently need to broaden the discussions from a narrow(minded) RPA mindset. We need the service providers come to the fore and educate the broader market. We need the buyers tell the stories from the trenches. We need new models and ideas to advance the learnings from the deployment and the best practices. Perhaps we should invite stakeholders of the automation community and undergo a Design Thinking process. The goal should be to reimagine service delivery to support the journey toward the OneOffice. The secondary goal should be to get rid of the Continuum. We would love to hear from volunteers and curious minds!!
We’ve previously written how interoperability will hold back blockchain adoption, at least until we can find ways around the problem. The cost and friction of joining multiple blockchains may hinder widespread adoption until we can figure out how to get them to talk to each other and reduce the cost of joining a blockchain implementation. However, recent thinking suggests there are some shortcuts we can take to make better use of blockchains in the short term, as their development and adoption matures.
For example, recently I met with the Deloitte blockchain team, and Principal Eric Piscini disagreed with my premise. He believes that interoperability really isn’t that big of an issue. First, he points out that, today, we have multiple environments that don’t connect to each other and the work still happens effectively. For example, different credit card payment vendors each have unique systems but everyone can still use any of them without an issue.
He also notes that interoperability seems like a bigger issue if you look at the blockchain implementation as needing to do every part of a transaction. However, he thinks of blockchain as having three layers:
Recording (actual transcribing of data into a block)
Transacting (an activity or transfer, such as moving money from one participant to another)
Business logic (the rules and controls of a process coded into the system)
You don’t have to do all three things in blockchain. You can use it for any of the three, or some combination. And as a result, you start to see how it’s possible to use blockchain technology and not necessarily have to worry about interoperability. It’s not dissimilar to evaluating automation technology, where you will, simply, fail if you try to automate everywhere possible – you’d run out of time, money and patience trying! Most experts will tell you to first focus on what not to automate, which is similar with blockchain: first figure out where you can carry on just fine without all the expense and disruption of a blockchain implementation.
Piscini also believes, in some instances, that firms do not need interoperability, but more a single blockchain per asset class, as it will be near impossible to transfer the same value across multiple blockchains.
So, where does this leave us with our interoperability decisions?
1) Blockchain interoperability needs both a technology choice and business reason to exist. We need to separate the technology of blockchain from the business application of blockchain and from the business model of blockchain-based systems. From a technology perspective, for example, multiple blockchain implementations can exist and drive value even if not connected to other blockchains.
2) Network ownership may be more important than technical interoperability. For networks that are, essentially, owned and controlled by one party (the credit card examples above) and other parties just access those networks but don’t need to integrate per se, then Piscini’s view makes total sense. It also works in situations like Ariba’s, which we’ve written about before, where participants on don’t need blockchain implementations themselves to use Ariba’s blockchain. (Ariba also notes that clients can choose to do just recording on the blockchain, further supporting Piscini’s point of separating blockchain into layers.) However, in networks where the peer-to-peer aspect is more important, and no one participant has strong power, we believe interoperability will continue to be a barrier to widespread adoption.
Bottom Line: Clarity around when/if/how interoperability is really needed for the blockchain market to mature.
We expect that, by the end of this year, as companies continue to tackle implementation challenges like interoperability and the development of common industry standards continues[1], will the market will begin to pick winning platforms and technologies.
[1] Many consortia are dealing with this issue as we speak, and government agencies are beginning to weigh in. Expect a lot of activity in standards development this year.
We just wanted share another finding from our “State of IT Services Survey 2017” – this survey has been conducted largely to support our IT Services blueprint process. We have interviewed 302 IT service decision makers to find out what they think of the IT services providers infrastructure management services, digital-focused consulting and their application management services.
We asked IT decision makers to pick their most important selection criteria for choosing an external service provider for IT Services generally, and specifically when choosing an infrastructure management, application management and consulting/IT strategy provider. The chart shows the difference between these main groups – displaying the proportion of buyers selecting each option for each type of provider.
Bottom Line – results count more than the method
Overall buyers are looking for Innovation, financial stability, quality of service. Consulting buyers care more about quality and skills (as well as innovation) – prior engagements are much less important. Buyers are starting to care less about the technology that drives the innovation – at least as dominant factors driving selection. Digital/SaaS/Cloud and automation are increasingly table stakes.
SaaS applications are on the rise. Everyone’s moving to the cloud. But, pray tell, why?
What are the real reasons enterprises are selecting SaaS applications? We have had analyst interviews directly with 200 SaaS buyers in the past couple of years, and their motivations for buying SaaS are not as strategic as we would have expected.
Generally, most buyers have succumbed to marketing that promotes SaaS as faster to deploy, cheaper to run and generally has better functionality than its on-premise counterparts. All of which sounds terribly attractive when faced with a costly legacy on-premise upgrade that could take you up to 18 months to implement. Some enterprises even told us that they had a corporate-wide ‘cloud first policy’ that encourages all departments to consider seriously cloud options for all IT projects. There is no doubt that SaaS applications can be deployed a lot faster than on-premises solutions, and yes, some have some fantastic user interfaces as well. Two of the biggest benefits of SaaS are predictable costs and the ability to stay current on vendor releases. However, the biggest operations business objective of recent times – cost reduction – isn’t automatically achieved by moving to the cloud. The reason for this is three-fold.
Firstly, buyers are investing in functionality they do not need. Most software providers bundle in as many modules as they can muster into a sale, regardless of which specific functionalities the buyer actually wants and needs to use immediately. It’s nice to have these extras in the bank for when you may want to unlock their magic but, in the meantime, do you really want to pay an astronomical monthly rate simply for having them?
Secondly, deployments are not the end, but the beginning of the SaaS journey. As SaaS applications have continual updates, new functionalities, and even new modules several times a year, SaaS services support becomes an ongoing cycle of consulting and implementation work. This, of course, costs money and effort, which needs to be taken into consideration. And, don’t forget one of the biggest drawbacks of SaaS, potentially you have less control over your data.
Thirdly, cloud policy must be aligned with defined business outcomes. It makes sense for this to be a strategy for IT departments, which are charged with providing cost-effective technology to the business. It should not, however, be a specific focus for any other department in the enterprise. As highlighted in The SaaS Buyers’ Guides: Five crucial steps to ensure you get it right, business line leaders should have defined business outcomes and objectives, and approach technology as an enabler for these. The actual technology used should be irrelevant.
Bottom Line: Deciding to switch to a SaaS model doesn’t mean you can abandon good business practice – you still need to weigh up the options and make the case.
SaaS buyers need to employ the same selection rigor to SaaS selection as they did when they evaluated procuring on-premise applications. This includes an in-depth cost analysis of the implications of deploying and managing SaaS on an ongoing basis, and the ability to read between the lines of the vendor marketing hype that does such a great job of selling the products. And most importantly, do these SaaS solutions help them achieve their defined business goals and outcomes? Buying technology for technology’s sake has never been the answer, and nothing has changed!
For those of you who made our New York Digital OneOffice Summit a couple of weeks ago, we had a rumbustious mix of seasoned outsourcing buyers, service provider leaders, advisors and robo vendors under one roof to cogitate, discuss and argue where the hell the industry known as outsourcing and operations is truly heading. Let’s just lay down what the hell is really happening in the only unvarnished way we know how…
There is a fast realization that the outsourcing industry has reached a phase of almost insufferable tension. Why?
Several of the RPA (Robotic Process Automation) solutions vendors are painting an over-glamorous picture of dramatic cost savings and ROI. RPA software firms are claiming – and demonstrating – some client cases where ~40% of cost (or more, in some cases) is being taken off the bottom line. While some of these cases are genuine, there are many RPA pilots and early-phase implementations in the industry that have been left stranded because clients just couldn’t figure out the ROI and how to implement this stuff. This isn’t simply a case of buying software and looping broken processes together to remove manual efforts… this requires real buy-in from IT and operations leaders to invest in the technical, organizational change management, and process transformation skills.
Buyers are backed into a corner with broken delusions of automation grandeur as their CoEs fail. Buyer leaderships are being fed all this rosy information and are under incredible pressure to devise and execute an RPA strategy, with some sort of set of metrics, that they can demonstrate to their operations leadership. Many are quickly discovering they simply do not have the skills inhouse to set up automation centers of excellence and are frantically turning to third parties to help get them on the right track.
Outsourcing consultants are selling RPA before they can really deliver it. Sourcing advisors are claiming they are now “RPA experts” who can make this happen, while struggling to scale up talent bases that can understand the technology and deal with the considerable change management tensions within their clients. RPA is murky and complex, and not something you can train 28-year-old MBAs to master overnight. Meanwhile, we are seeing some advisors simply do some brokering of RPA software deals for small fees, only to make a hasty exit from the client as they do not have the expertise to roll-out effective implementation and change management programs.
RPA specialist consultants few and far between. Pure-play RPA advisors are explaining this is not quite so easy and requires a lot more of a centralized, concise strategy. There are simply not enough of these firms in the market, especially with Genfour having been snapped up recently by Accenture. With only a small handful of boutique specialists to go around, these firms can pick and choose their clients and command high rates.
Service providers will set the pace, but many will destroy each other in the process. Service providers are claiming they can implement whatever RPA clients need, but are not willing to do it at the expense of reducing their current revenues. Meanwhile, smart service providers are aggressively implementing RPA into their own operations to drive down their delivery costs and reduce their own headcount. So we can expect to see providers aggressively attacking competitive clients with automation-led solutions that should create unbearable pricing pressures for service providers looking to retain the talent they need to implement this stuff. Hence, services providers will be hell bent on destroying each other and the winners will be those who eventually succeed in winning more work than they lose amidst all the destruction. This is a war of many battles being fought – and the winners will be those who are in this for the long haul, who can absorb some short-term losses to pick up the larger spoils further down the road when they have a fully equipped intelligent automation delivery capability that can deliver highly-competitive and profitable As-a-Service offerings.
The good news is that half of today’s buyers want to turn to service providers to make this work
When we privately polled 60 senior outsourcing buyers, at the recent HfS New York Summit, on what would improve the quality and outcomes of their current services relationships, the answer was pretty conclusive – half want to work with their providers to rollout their automation and cognitive roadmaps, while only a third think they should pull back work in-house to figure this stuff out for themselves:
The Bottom-line: The automation gauntlet is now in full effect and the casualties will mount up as the outsourcing industry plays out its most perilous battle for survival yet. But all is not lost if we eye a longer-term prize…
So we’ve reached crunch time. Whichever way we look at it, RPA has created a lethal environment, which was only just coming to terms with providers and buyers working together to get the basics of delivery right. Most outsourcing buyers have to look to automation to save their jobs and please their ambitious leaders, no longer content with the ~30% they saved on offshore-centric outsourcing just a few short years ago (see our recent State of Outsourcing and Operations data on 454 major buyers).
So, in the meantime, for all the reasons outlined above, this industry will literally go into a destructive war over automation. The skills to make automation a massively profitable reality are few and far between, while greedy corporate leaders demand cost savings that simply are not achievable if their organizations fail to make the necessary investments and partnerships to make this achievable. Did companies become world class at HR overnight because they bought an expensive Workday subscription? Or stellar at sales and marketing because they slammed in a Salesforce suite? So why should they become amazing at cost-driven automation simply because they went and bought some licenses from an RPA vendor promising bot farms and virtual labor forces?
RPA and Intelligent Automation have sparked a major war in the worlds of outsourcing and operations, where many battles are being fought – and the winners will be those who are in this for the long haul, who can absorb some short-term pain in order to benefit from the larger spoils further down the road. While automation is killing outsourcing today – costing many people their jobs, their reputations and destroying the profitability of legacy engagements, those who can hunker down, focus on self-contained projects where they can fix one broken process at a time, can get stakeholders onside by demonstrating meaningful, impactful outcomes without major resource investments, will be the winners. Start with one process at a time, prove how to fix in, then onto the next, then the next… that is the only true way to be successful in this destructive automation-infested world.
We are just analysing our “State of IT Services Survey 2017” at the moment – this survey is being conducted largely to support our IT Services blueprint process. We have interviewed 302 IT service decision makers to find out what they think of the IT services providers infrastructure management services, digital-focused consulting and their application management services.
We are hoping this will add an additional buyer perspective when we rate and review the global IT services companies – getting away from the usual marketing blurb and focus on what is important for the organizations buying external services.
As part of this work, we asked these business leaders to rate their familiarity with infrastructure management service providers and then rate them on, amongst other things, service quality. This gave us the opportunity to see whether familiarity with the providers has an impact on the ratings -the infographic chart shows the findings.
The Bottom Line – buyer respect is earned through good service delivery
The good news for the industry is that, except for a couple of notable exceptions, as buyers start to use a providers infrastructure services the rating for quality of service delivery increases. With a big leap from merely heard of a provider to extensive knowledge.
We are analysing and publishing more of this survey over the next few weeks.
In today’s perilously paranoid services industry, many ambitious executives are resurfacing in smaller sized service providers, which can compete on smaller scale contracts that are arising with mid-market firms, in addition to being nimble enough to compete for business at the high end. What’s more, many savvy buyers are feeling more secure investing in emerging providers that are not weighed down by the legacy contracts of older times and greedy investors eager to jump ship once they sense the gravy train has stalled.
One such character is the affable Manish Tandon, who made his name at Infosys, where he led some major divisions, before recently popping up at customer experience and IT provider CSS Corp. So let’s hear what life is like moving from the very large to the medium-sized provider…
Phil Fersht, Chief Anaylst and CEO, HfS Research: Good morning Manish. It’s great to have you on HfS today. You’ve had a very illustrious career in the services industry, spending a long time at Infosys where you climbed the ladder, and you recently took the CEO job at CSS Corp. Did you expect such an illustrious career in services – and what’s exciting about this move for you?
Manish Tandon, CEO, CSS Corp: Thank you, Phil for having me, and great talking to you, as always. I would say I have always liked the services business tremendously. As a graduate from one of the top management institutes, I had the pick of jobs in most of the top financial institutions and so on, but I always liked technology and particularly technology services. Primarily, because this is one area you get to work on something new, something different, something challenging every one or two years, every assignment is different, so I have always been excited about the services business, primarily from an intellectual perspective but also from a variety perspective.
Regarding CSS, it’s a great company it has a great delivery engine and a fantastic client base, we work primarily with the innovators which are the high-tech companies and also innovators in retail and to some extent in banking. It has been an exciting place to start – it is not very big and it is not very small, which means that the transformation ideas you have, can more easily be implemented without causing a lot of disruption. The company had a lot of people strength, in terms of people with the right attitude and people who have built their careers and there was technical depth in the company. There were lots of things that one could work with to transform the organization. That’s what really excited me about CSS Corp, so when this opportunity came about I grabbed it with both hands.
Phil: Manish, you talk about the fact that you are “not too big but also not too small”. Looking at the environment we are in right now, is it advantageous to be in a mid-sized service provider based on client requirements, or do you feel it is disadvantageous compared to being in one of the very large established firms. How is that experience playing out for you?
Manish: I think it is a huge advantage to be a relatively mid-sized player, because you have seen how the big players are doing. Companies like IBM and HP suffered when the first wave of disruption came in by the Indian offshore providers and now I think the mid-size companies will perform the next level of disruption for the typical large Indian outsourcers that are out there. The reason primarily is that there is a dramatic change happening in the industry, when you look at Cloud and Digital, and people keep talking about Cloud and Digital, there are two intrinsic forces happening here, in my opinion, one is digital where suddenly technology has become a revenue enabler instead of just a cost and the second thing is as people have got accustomed to a pay-as-you-go model, or as a service model on the hardware and infrastructure side, they have realized that they can get the same on the services side and none of the large players are doing that. For example, if there is a million-dollar deal, most of the large players would say it is too small for us and the large deals like the two hundred million dollar implementations are no longer there. They are struggling for credibility and I believe that companies like CSS Corp will cause a lot of disruption in this space and will move in a more rapid agile fashion, doing what I call, “cloudification” of services.
Phil: Cloudification of services… it certainly is a very transitional time for the industry! What is the number one issue that is keeping you awake at night?
Manish: Normally, Phil, I sleep very well! I have a very clear conscience, however, I think one of the key issues, that one must grapple with, is how to position the company in this rapidly evolving landscape, when evolution like this is happening there are no right answers. You essentially look at how other industries in the past have disrupted and you try to draw some parallels and position the company accordingly. As one of the hockey coaches said, ‘it’s more important to not follow the puck, but to be there where the puck is going to be’ and I think that is the thing of paramount importance. You are never sure whether you’re on the right track or not in the way you are trying to position your services.
Phil: Manish, do you think the industry really is changing that much, or do you think we are getting ahead of ourselves a bit in this current environment?
Manish: I think the industry is definitely changing. What has happened is what I call the democratization of technology. Price points will continue to come down both for hardware and software. The skill base that is needed has expanded, but you need a very different skillset of people, both at the upper end and at the lower end. In the industry, the deal sizes have become very small compared to what they were a few years back and more importantly, technology used to be the domain of the geeks and a few specialized guys in an organization, but now most of the good business guys understand technology really well because this is how they make their money. Hence, what has happened is that a broader set of people have become much more comfortable in buying technology. So more and different people are buying technology, deal sizes are becoming smaller, as-a-economy is becoming more prevalent, data is forcing companies to think about mass customization and technology is pervading deeper, wider and broader. There are lots of changes happening and I think the industry is not reacting fast enough.
Phil: So how on earth do we unlearn much of the last 20 years and make this a more exciting environment for some of the younger talent? What can we do to make a pivot… do you have some ideas based on your experiences?
Manish: Phil – good question. I think there are two parts to your question, one is how does the industry change and the other is how can we make it more exciting for the younger generation? I would say in answer to the first one, you need to look at the more fundamental things that are time invariant rather to look at things that are time variant. Let me elaborate that a little bit, people say that offshoring was a big disruptor because of the labor arbitrage and so on and it was, but the underlying theme was the time invariant theme of customer value. What the industry must do is go back to basics and look at those time invariant themes like, how are we going to deliver value to the clients? One method of that was offshoring in the past. Now that advantage is not so emphatic, so what are the next set of value levers that can be applied. That is where I think the industry needs to change to distinguish between the time invariant and time variant part of their value proposition.
On the second part of your question regarding talent. Rapid industry evolution brings about tremendous opportunities for talent in the industry. This means that the workforce has to be able to quickly adapt to new skill requirements and new technologies. This calls for a shift in the employee mindset. Gone are the days when one could choose a technology, specialize in it and work on it for years together. The new mantra is to come out of our shells and be open to continuous and lifelong learning. The younger generation of today, in fact, gets an adrenalin rush in an environment like this. Organizations can enable them by investing in relevant and ongoing training programs that equip the employees to tackle the latest challenges. Over time, the so-called repeatable white collar roles will gradually be replaced by more challenging and exciting career opportunities.
Phil: So we now have an official date announced for Brexit, we have obviously had a maelstrom of excitement from the US with President Trump. Now we are a few weeks into all this change, what concerns you about what’s happening in the political environment, where many of our clients are situated?
Manish: I think any change, if you are in the services business, any change is exciting, that’s the way I approach it. Because if Brexit is happening we have a huge amount of technology disruption and Mr Trump is coming in, he has been a very astute business man, so he will be bringing a few changes and as leaders and managers I think or primary job is to figure out how the environment is going to change and how to adapt ourselves in the changing organization/environment. Darwin talked about the survival of the fittest, but actually it was about the survival of the most adaptable of the species. I would say I am excited about any change and again I run an organization that is small enough, agile enough and nimble enough to adapt to the change much better than some of the larger organizations. I am excited by both the changes because change is opportunity.
Phil: S finally, Manish, we talked a lot about what’s changing in the industry and how we need to get ahead of ourselves a bit more, so if you were anointed the leader of the services industry for one week and you could make one thing come true, what would that be?
Manish: That’s a tough one. I think too many contracts in the industry are not outcome based contracts and I would mandate that we shift the pendulum significantly towards outcome and value-based contracts in our times. I think in the new world that is needed for survival of the industry.
Phil: Best of luck with the new job, Manish – am sure many of us here who’ve got to know you over the years wish you well!
Security is a complex space – changing and emerging threats, multiple interconnected technologies that each do one small piece of the security landscape, and an ever-changing regulatory and legal environment. And frankly, most senior executives don’t have the patience to really understand the threats to their business in great depth.
So what can a smart security executive do to capture and hold management attention on security issues? Become a great storyteller. There are lots of reasons storytelling helps in the security space:
People remember stories much more than they remember a bunch of data points or random facts
Stories connect emotionally as well as intellectually, making them more impactful, and increasing stakeholders’ investment in the topic
Having people re-tell stories is both a great validation of your original point but also a powerful way to make sure that your point is shared throughout the organization so that everyone understands security better
Start by studying storytelling. There are some basic plots for stories, such as boy meets girl, hero vanquishes evil, etc. There’s also a basic narrative structure you can use (see Exhibit 1):
So with this structure, you can explain security threats to your executives.
Exposition – threat the business faces, including what part(s) of the business, are affected (sales, brand reputation, data, etc.)
Rising action – how that threat is evolving
Climax – impact on the business if that threat occurs
Falling action – steps being taken to address the risk and protect the business
Denouement – any residual implications, requests for support or budget, etc.
You leave out the details that will take the focus off the overall story but leave the ones that add color and help people connect with the story. So, examples of how other companies are handling the threats can stay, but likely the reporting spreadsheets of the quarantined threats should go. This balance of the details is key to effective storytelling. Your team may find deep data invaluable, but it may cause your audience to give up trying to follow your story.
You’ll also save a lot of time. How? Typically, when something happens, you give the details and then try to explain those details in context. If you’ve told a story people understood, then when you have a conversation about details, you can refer back to the story and have the person “get it” faster. You can tell this works when stakeholders start asking more, and more relevant, questions. People who don’t understand a topic don’t ask as many questions.
How will you know the storytelling approach is working? When more people in your organization start to change their behaviors to support your security goals. And when senior executives begin to get more invested in your work.
Bottom line: To really improve security, get outside of security data and details and become a great storyteller.
Oil & Gas has gone through a crippling crisis in the last three years. What are service providers doing to help Oil & Gas recover? This question plays a central role in our 2016 Energy Operations Blueprint, HfS’ inaugural report on the services provided to the oil and gas industry. Infosys is an As-a-Service Winner’s Circle provider with strong roots in the oil and gas industry and a clear vision for the services needed to pull the industry out of the slump it has been in since the oil price collapsed in 2014. Since the 2016 Blueprint, the oil price has rebounded and is stabilizing between $50 and $55 per barrel, giving the industry some more breathing room and a momentum for change. Time to have a conversation with Robin Goswami and John Ruddy. Robin heads Infosys’ Energy practice in the Americas. John in the president of Noah Consulting, Infosys’ 2015 acquisition that bolsters its capabilities in Oil & Gas.
Robin Goswami
John Ruddy
Derk Erbé, Research Vice President, Supply Chain, Procurement, and Energy: Robin and John, thanks for sharing your vision for the Oil & Gas industry with our audience at Horses for Sources and candidly discussing the challenges of operating in a struggling industry. Infosys impressed us in the Energy Operations Blueprint, with its vision for the evolution of services that this industry needs to pull itself out of the downward spiral since 2014. Even though this is a very volatile environment with challenging economic circumstances, Infosys has continued to invest. How do you see the current situation in Oil & Gas?
Robin Goswami, Vice President and Head of Energy Practice Americas, Infosys: We are starting to see some recovery but there is a growing realization that this is not going to be a quick recovery, but more of a gradual one, like what we saw in the ’80s downturn.
In 2014, everybody thought this would be a six-month downturn, by early 2015 it looked like a one-year downturn. Only in late 2015, was there a realization that this could last a lot longer and would be much harder to predict. The last ten years now seem more like a spike, with the market having settled to a new normal of $50 a barrel of oil.
Due to the downturn of the last couple of years, companies have stopped most capital projects, whether in IT or the field. They are trying to optimize what they have. At some point, they must start looking at different ways of doing things including radically different ways of leveraging technology. This is where offerings like Infosys Mana – the knowledge based artificial intelligence will play a significant role in driving automation and innovation. So far, this has happened in spurts and pockets. We’ve seen a couple of companies try to do it, but most of these have been the smaller to medium sized ones in a desperate situation. We have not seen the bigger companies do this just yet, but lately, are starting to see a changed mindset and some positive signs as a result.
We’ll see a lot more interest in the things that we’ve been trying to talk about for the last year, year and a half or so. Automation, how can that help to significantly reduce operational expenditures? Analytics, how can you leverage analytics to get a lot more efficient and predictive analytics around equipment failure.
John Ruddy, President, Noah Consulting: The industry is learning how to be profitable in a $40 per barrel world, and that the days of anything more than $60 are over. They are learning that they need to be profitable at this price point, and that’s driving much leaner, much more efficient operations and much more reliance on automation, machine learning, and analytics. We’re starting to see modest growth because our clients recognize that this is their direction. They’ve stabilized following the workforce reduction, which was very significant. I believe they’re now starting to become leaner, more agile organization that they need to be to survive in today’s market.
Derk: Do you feel they are making the shift in mindset from cutting down costs in existing processes and with workforce reduction towards how to create value in a different way and create new value?
John: Now that the price is somewhat stabilized, we see the emergence of a focus on how they become a lean, responsive organization. We see a big focus on operational technologies around real-time data, and that the digital oil field wave that happened 10 -15 years ago is now re-emerging with IoT being the main catalysts, with even more sensors, and even more data and even more automation are happening.
We see a big push into more Cloud based As-a-Service models out there. In fact, the operators are forcing the software providers to move there more quickly than the software providers had anticipated. There is a very strong desire on the demand side for an As-a-Service ecosystem and the operators at one point were reluctant and are now pushing very hard for that type of a model to be offered by the vendors.
Derk: We’re on the verge of a very interesting period in oil and gas. Would innovation go slower or faster if the oil price were slightly higher?
Robin: Innovation would go faster if the oil price were slightly higher. Our clients have been focusing on primary goals, ensuring that they stay just cash flow positive. They don’t have the cushion to invest in innovation. If the oil price was slightly higher, I think that the money would be there. I also feel that if the price were to push 80 or 90 a barrel all of this would be forgotten, and we would be back to doing business the way we were before. But if the price consistently stays in the 50s, it will drive some efforts and activity to bring up the level of investment in innovation.
Derk: There is this fine line for innovation, investments and having the ability and willingness to innovate. Where do you think we’ll find the sweet spot?
John: I think $50 to $60 per barrel might be the sweet spot for a lot of innovation, a lot of demand to be addressed, especially with the smaller workforces that are out there and to a certain degree, a refreshment of the workforce regarding the average age coming down. I think you’re going to find more millennials driving automation as well. The voice for innovation will be a little bit louder perhaps than it was pre-downturn. I do think that the $50 to $60 sweet spot would have allowed more innovation to be applied to the clients. There are modest pockets of it happening with prices in the $40 range. $50 to $60 will open the floodgates for people to be innovative. Anything more than that ($60) and people don’t care about innovation anymore.
Derk: The industry has adapted to this ‘new normal’ of $60 per barrel as the peak price. What does that mean for the focus of your oil and gas practice and your competitors?
Robin: Oil and gas is a cyclical industry, and we’re in a down cycle, but we’ve got to continue to invest. I strongly believe that when it does come back, the folks who have invested will reap the rewards of their investments. We continue to focus on oil and gas and are seeing some positive movement. The tough part is the fact that our work is split between OpEx and CapEx and the CapEx side of the work really came to a halt. We’ve got clients who are doing work on analytics, data lake projects, or initiatives to get more efficient, but it’s small compared to the amount of work pre-downturn. You can count the number of ERP implementations currently happening in the industry on the one hand. That was completely different four years ago. At any given point in time, four or five projects were kicked off. That has not happened recently at all. In terms of competition, we used to have eight or nine competitors bid for the same projects. That has drastically changed, a lot of competition has re-focused or exited this space.
We have seen a lot of companies that in the past never looked at outsourcing who have now started to approach the market and say, “Let us explore working with outsourcing companies that can do IT a lot more efficiently than we can do it ourselves.” It has opened some opportunities. But the opportunities are still few and small. We are doing well from a perspective of winning them, but the squeeze in capital expenditure has hurt all the service providers.
We acquired Noah Consulting in late 2015. We continue to invest in oil and gas. We see a modest growth of some CapEx-projects, though not in a big way. The significant change that happened over the last year was people trying to find more efficient ways of doing their expansion. Whether it is the large or the small players, everybody is trying to use this down phase to optimize how their operating expenditure is leveraged.
We are focusing on delivering value by proposing automation (Infosys Mana) and leveraging digital to optimize the operational costs and are starting to see success.
Derk: What is the key to creating more of an innovation-minded culture and boost As-a-Service adoption in this hundred-year industry that doesn’t like to change and frankly lacked the incentive to change most of the time?
John: The key is education. A lot of it is repetition. A lot of it is helping to stimulate some of that demand and get our industry comfortable with new ideas. I’ll give an example. There is a lot of innovation happening in Infosys, for instance in our Palo Alto offices. We were out there a couple of months ago. The first thing you notice when you walk into the lobby is a science lab type experiment set up with plants. There are different basil plants. Each plant has sensors measuring the nutrients in the soil and the amount of light and the amount of water that they’re getting. Each plant is generating a growth curve, and they’re learning from each other. They’re looking at each other’s growth curves and adopting best practices and dropping bad practices, and are using our AI platform Mana.
That’s being used in the other industries, but not yet adopted by oil and gas in a large manner, but it’s applied to this little science experiment. That was an inspiration for us. We looked at that and take that same exact concept and took it out to an oilfield and have pumpers learn from each other. Have the pumpers look at the Geoscience strata for that field. They’re from the same field, comparing that pad to the one a quarter mile away and the pumpers look at the data and learn from each other and look at economic conditions.
We’re test driving those innovative concepts. It’s an industry that avoids disruptions. We’re working towards it, but it’s an educational process. We show them the possibilities and help them get more and more comfortable with innovation. Some clients are first movers, prove the benefits and the rest of the industry will follow. The onus is on us to find that first mover, and that’s what we’re out there doing.
Derk: If you were given the keys to the oil and gas services kingdom and you can rule the services world for a week, what’s the one thing that you would do to change the industry for the better?
Robin: That’s a tough one. John, I’ll let you go first.
John: Having the keys to the kingdom, one very broad-based public relations thing that I would do is I would promote natural gas as a clean fuel alternative. Why aren’t there more compressed natural gas vehicles? Why aren’t there more natural gas power plants? I know there is an uptake in those, but not to the degree it could be. There is a huge environmental and climate change concern, and our industry has the answer to that, and that’s natural gas. As king, I’d be out there to get the public comfortable that natural gas as a clean fuel alternative that should be embraced and not pushed away.
Robin: I would like the companies to look at the industry and say “Look, we all know, oil and gas will be there in our lifetimes. We will come out of the downturn at some point. Lets leverage this downturn and look to use technology to change our model. This is an opportunity for us to reset our entire cost model, our entire way of operating with technology for the next decade.”
Right from the beginning of the downturn, we’ve had a view from the outside. We are very much part of the oil and gas industry, but we have the luxury of having the bulk of our business focus on IT services, so any impact from oil and gas is well cushioned by the rest of the Infosys business. That gives us the cushion to make acquisitions, invest and enables us to continue what we are doing. That is not an advantage, unfortunately, that most oil and gas companies have. They are unfortunately dealing with the day to day of trying to keep positive cash flows and are forced to react to weekly, monthly, quarterly pressures and none of them have been able to step back and say, “Let’s assume this is a three year or a five-year downturn and let’s try to do things differently”. Definitely not when it hit in 2014.
I saw this as an opportunity in late 2014, for companies to completely change their model, move to other service models, look at analytics, automation, Internet of Things, to radically work differently with technology, not only IT, technology overall. Most of them were unable to take that opportunity. The longer the downturn continues, the more you are, in a sense, in a hole where you are trying to just survive. The amount of cash that companies had in 2014 and 2015 was just not there in 2016. Those initiatives could have been taken on in 2014 and 2015. It has become way more difficult, a lot more challenging, now. And this is the one thing I would like us to do differently.
If I had the keys to the kingdom, that is what I would do. Try to move away from the quarterly, the monthly survival and look at leveraging technology to change the model.
Derk: The saying is “never waste a good crisis” and they’re wasting a good crisis to change. Would you recommend having a different dialogue with the financial markets, because that’s part of the issue for oil and gas companies? They want to do the same for the shareholders as they did when the oil price was $100. Does that need to change or they’re addicted to doing the same as ever before?
Robin: I don’t think we have a choice, Derk. I think we have reached a stage where $80 barrel of oil is not coming back shortly. The boom won’t be back for a while and we must reset expectations and look to do things differently and leverage technology a lot more.
