Posted in : Business Process Outsourcing (BPO), gbs-shared-services-and-captives, IT Outsourcing / IT Services, Robotic Process Automation, the-industry-speaks

This is my inaugural blog post for HfS Research, an analyst firm I’m very pleased to now be part of.

I joined HfS because of the deeply held belief that HCM solution vendors could be bringing more clarity to the buying decision and even drive more compelling business outcomes for customers, and that a certain type of analyst firm could help pave the way.

I also joined HfS because, like hockey players go where the puck will be vs. where it is, HfS struck me as a firm that is not only going where the puck will be, but arguably laying down the ice for a new arena. And in the spirit of “I’ll try almost anything twice,” I had an opportunity in 2011 to work with someone I (and legions of others) greatly admire, Josh Bersin, and I also covered the HR Tech landscape then.

Attending the annual HR Tech Conference, as I’ve done 12 of the last 15 years, is like going to a family reunion for me, only a bit less gossip and lamenting about getting old (given tech sector demographics). Re-nourishing the relationships cultivated over the years is frankly as important to me as the intel gathering done at the conference, although the latter makes for a much easier cost justification.

I started going when I served as PeopleSoft’s HCM Product Strategy head, and would have gone when I was an HRIS practitioner from the mid-80s to late 90s but no equivalent conference existed in my view. This one rules the roost.

My esteemed colleagues at HfS, Phil Fersht (founder and CEO) and Barbra McGann (Chief Research Officer), asked me to do a pre-event post on what I’d like to see, and then a post-event post on how much of my wish list was fulfilled – AND BY WHICH HCM VENDORS IN PARTICULAR.

My list follows, and I strongly encourage appropriate vendor contacts to reach out to me at [email protected] so you can brief me in Chicago on the extent to which your offerings align with any of the items mentioned here:

1. HR-user configurability of the solution, even not-very-technical HR users.
2. Prescriptive analytics (i.e., analytics that also guide the user in addressing or solving a problem vs. just reporting the news).
3. Examples of cognitive computing that demonstrate real machine learning such as pattern recognition and appropriate actions automatically initiated at either the micro (employee) or macro (workforce) level
4. Product innovations that can drive significant business results for customers without major operational dependencies (e.g., change management, process changes, competency re-alignments, etc.), or innovations that will be central to solving customer business problems or pains that are likely to become more acute over the next 5 years. Examples of the latter might relate to the impending mass exit of baby boomers from the workforce, more reliance on freelancers, etc.
5. Technology that mirrors the way end-users think and solve problems, often in idiosyncratic ways.
6. Evidence of how a vendor’s customer success model is helping customers achieve measurable user adoption and business value targets.
7. … and in general, more acknowledgement that no matter how great the solution is, technology by itself is no more than perhaps 40-50% of the answer to solving business challenges in the HCM domain.

Bottom Line

I’m genuinely excited about once again navigating the HR Tech vendor and solution landscape at the annual HR Tech event, culling and calling out nuggets that buyers will find valuable; and very keen to do so on behalf of HfS Research.

Posted in : HR Strategy

You’re not alone in thinking that the age of the physical long service award is well and truly dead. A trophy, medal or pin for long standing service now seems horribly outdated, doesn’t it? However, this is not the case. Far from it, actually: There has been an evolution in the way firms in the long service award space now operate with most having expanded into the service reward market whereby employees can be rewarded for great work accomplished as well as the traditional long-service awards.

In a recent piece of research, Can HR be an Innovation Incubator?, I identified how the right people can be sourced, assessed and incentivized to deliver enterprise wide innovation. For organizations looking to stay ahead of the curve, it is essential to have the right people and to also provide incentives for these people to behave in a way that drives revenue and profitability growth.

Now it’s all well and good investing in new assessment criteria, interview techniques and bonus schemes. But if your workforce doesn’t hang around for long, these new measures are worthless. Voluntary employee churn is incredibly pricey, both in terms of opportunity and replacement cost—not to mention the loss of IP. Increasing employee engagement is a key means with which to drive employee engagement and therefore retention. The simple act of recognizing great work, and in some cases physically rewarding it, goes a long way toward building and incenting a motivated workforce.

Service providers doling out long-standing awards are still alive and well but are now, by and large, evolving service provision into Recognition-as-a-Service.

At a recent event, I had the opportunity to go under the bonnet, so to speak, of one of these employee rewards and recognition service providers—OC Tanner. The company is looking to modernize rewards and recognition—both the practice of it, and the services that support it. In its early days, OC Tanner simply provided “thanks for your years of service” awards, which it still manufactures. The company added recognition awards and now also provides end-to-end recognition solutions and services with a design lab and SaaS.

Although it keeps evolving, OC Tanner, like the HR industry, is having an identity crisis

The company has evolved with the market but it’s not clear where it is headed over the long term. Is it now a software company? What does it want to help its clients achieve and how? The development of its SaaS offering and its continued development of additional HR bolt-ons would suggest it’s moving into the talent management software space. That said, at present SaaS only makes up one tenth of revenues and clients can use differing software and channels to run rewards and recognition programs that OC Tanner fulfills. This seems to disenfranchise the service provider’s SaaS offering. OC Tanner has also made extensive investments in an on-site storage, fulfillment and distribution service for employee rewards. With the Amazons of the world freely available, and with a global reach, this seems unnecessary.

So, while it has branched out into the digital world with SaaS-based services and mobile capability, OC Tanner seems a bit stuck in its roots. The founder of the company put the organization in a 100-year trust in which it could not be sold or offered to IPO, and family members continue to hold positions on the board. Perhaps these two factors keep it emotionally tied to its manufacturing origination. However, the company drinks its own medicine, running an extensive in-house employee recognition program.

It is important to note that the service that organizations such as OC Tanner provide do not simply reward great work but they actively encourage and facilitate it. As such, Recognition-as-a-Service can be a crucial arrow in today’s CHRO’s quiver. In order to continue to speak to the member of the C-Suite, OC Tanner needs to continue down the path of Recognition-as-a-Service and steer clear of diluting itself and its go to market with IT based HR services that are already supported by other providers.

Posted in : Talent in Sourcing

Lisbon, Portugal is the home of contact center giant Teleperformance’s crown jewel of consumer research, its CX Lab.  I was fortunate enough to visit this center back in 2012 and to return again earlier this month.  What’s different for Teleperformance since that last visit? This market leader has retained all of the features that made its Portugal operations special, while expanding its consumer research and keeping an eye on upcoming industry disruptors.  Teleperformance’s size is making it harder than ever to move the needle on growth, but the service provider is continuing to invest in analytics and talent to continue on the path of innovation.

So what’s new? 

• Internal Recruitment Analytics:  Teleperformance’s R&D team based in Lisbon conducts 130,000 consumer interviews across 11 countries annually. A noteworthy addition is its effort to study and analyze its own recruitment efforts; leveraging its analytics engine to assess a candidate pool of applicants.  As one attendee adeptly put it, they’re “drinking their own Merlot.” The candidate assessment algorithm was performed on 300,000 candidates and achieved much higher accuracy rates in predicting employee success than the recruiter’s decision making alone. The service provider has also noted lower absenteeism, better employee experience and customer experience as a result. 

• Acceleration of Social Media Expertise: There were also great examples of the e-Performance and social media command center in action. The center employs researchers specializing in buzz monitoring, social media strategy design and best practices. The company is looking more at social media as a verticalized offering and taking into account the maturity of its clients as well as some of its clients’ status as “born digital” companies to create the most effective campaigns.   For example, Teleperformance implemented buzz monitoring and social engagement for a retail client where their social SMEs were able to respond to 95% of customer responses within 2 hours.  They were also able to increase the retailer’s following on Facebook by 500%.

• Consumer Research with a Security Focus: On this trip I found the same level of keen focus on understanding consumer experience—what was different this time around is a newfound appreciation of the complexity that understanding customer dynamics entails.  Along with this healthy paranoia about understanding consumer behavior is the staunch devotion to protecting that consumer data. This is particularly important for a service provider that employs 190,000 people across 65 countries.  Especially for Europe, the new standards imposed by the GDPR legislation will significantly elevate the requirements to comply with security regulations.  Teleperformance’s goal is to get operations up to those standards globally to stay out in front of future changes.  The service provider prides itself on keeping rigorous security measures ahead of its competitors.

 The future of omnichannel is immersive client experiences

An investment in integrated omnichannel strategy is about connecting the consumer research with clients, and bringing those insights directly from the end consumer.  Teleperformance will be rolling out “Customer Journey Showrooms” over the next 6 months, looking at ways to showcase the potential for omnichannel experience, where clients can touch and feel what omnichannel could be for them.  This will also include experimentation with intelligent automation and bot channels, as they progress in pilots with those solutions. 

One aspect that hasn’t changed is Lisbon’s resolute status as a hub for attracting talented multi-lingual professionals from across Europe to service clients in 29+ languages.  Comments from this tour echoed that of four years ago, in that Teleperformance is committed to recruiting talent from around Europe to service its multinational customers. About half of the Portugal staff has been recruited from abroad, and the service provider helps significantly with relocation and assimilation in Portugal.  Floor tours of the Lisbon multi-lingual offices have a laid back hipster vibe you might expect from the kind of “born-digital” logos we saw there, and clearly they are attracting the talent to match. 

Moving forward, a reality check

However, I sensed from this return visit a palpable and healthy sense of discontent among leadership—one that comes from being the biggest player in an industry facing disruption.  The most obvious change was the announcement of a committee formed to study the impacts of artificial intelligence on the industry.  For this BPO leader to say “we need to become more of a software company” and admit that they’re constantly nervous and on their toes, signals a big shift in the industry.  Teleperformance is backing up that strategy– doubling the number of software developers in the next 12 months to enhance proprietary platforms like TP Observer, CCMS and TP Client.  For the largest BPO organization in the contact center space, this kind of focus on potential disruption is incredibly important right now, and needs a lot of further development, in particular in partnership with clients.

The feel of the commitment to research and thought leadership at the CX Lab is what resonates in my memory from both visits.  My favorite quote from the event was from Paolo Righetti, founder of Teleperformance-owned GN Research: “We’re teaching clients how to work differently, and they’re teaching us. We’re learning together.”  This is the kind of collaborative approach that is needed to move this industry forward, regardless of location. 

Posted in : Contact Center and Omni-Channel

How many of you go to a store without a list of what you need? Personally, I never go out to the store without a specific need. I guess I am not the type of clientele the retailers are looking for since I don’t buy just because there’s a discount. And definitely, don’t go shopping randomly.

Recently, I needed some new pillows and ended up at Ikea, which is a great store if you ask me. I was done within 15 minutes because I grab what I need, and off I go. But whenever I go to Ikea I love to hang around in the parking lot for another 15 minutes just to see nature at work. I just love to see the stupidity that I claim it is. You come to Ikea for napkins or a bag of tea lights, and you go out with a new couch or side table. And then the fun begins. People start the process of blaming each other. The first complaint is about the car: it is a piece of sh*t and far too small. Then we blame it on the kids; we could have used the back seats, and this would not have been a problem. And so on. I think we get the point; people just don’t think too often about consequences when they lack focus.

In business, we see it all the time, and without strong leadership, this happens very quickly. People make a plan, talk about it and come to the conclusion that this is the way forward. Very soon people start tweaking agreements to make it more perfect. But for who? “Yes, but I think we need to be flexible?” or “Yes, we need this to be less black-and-white because otherwise, we will lose!” It is all in your minds, folks. Focus is the word you are looking for, and that is why we made a plan. Make sure you go back to that plan and stick with it.

When you focus, and others get sidetracked, you need strong leadership to remind you and your team what the plan was all along

You can use the Ikea example for everything in life. The car is your business, and the folks in your vehicle are your personnel, the space left is growth—and it is not unlimited in the current setup. The same goes for spending the money on that couch or side table. Did you really budget for it? If so, you could have used the extra service Ikea offers at a very small fraction of the price to deliver that same couch or side table to the place you need it. Saves you a fight in the parking lot and keeps you focused because you do not have space at that point in your current plan.

We all know that switching tactics all the time is not a good way to run a business. You need focus to reach your end goal. We are not only talking material discomfort here—it causes a lot of mental distress. When people make plans, they often see and measure that with success. Personal success and business success are not always the same. The moment you switch the focus you get contradictions, and that means people will get hurt in the process of making that switch.

Bottom Line: Focus and contradiction do not go hand-in-hand. When you focus, and others get sidetracked, you need strong leadership to remind you and your team what the plan was all along, and there is no room for excuses, just focus. Change as often as you want, but remember that means there will be zero focus, and that means the results will be disappointing as well. My tip: follow one course until successful.

Posted in : Outsourcing Heros, Talent in Sourcing, The As-a-Service Economy

Why do the eyes of HR people always light up when you mention the word “Workday”?  Has Workday become the “complete suite” for the HR function, in a similar vein that SAP did with the CIO in the 1990s? 

Well, judging by the feverish excitement from the leading service providers to scoop up the best and brightest of the star niche players, the battle for Workday services supremacy has hit fever pitch, with Accenture following IBM’s and KPMG’s recent acquisitive forays in the space with the purchase of DayNine.

So over to HfS analyst, Khalda de Souza, author of our Workday Services Blueprint 2016 report to giver her take on what this means to the future of Workday services:

What did we tell you last week? Workday Services Blueprint 2016: Lots of Changes in this still Immature Market . Yes – this market is moving fast with even more consolidation in the Workday services market!

Accenture’s latest move in this competitive game has potentially check-mated its closest competitors, at least in the short-term. Instead of just acquiring a set of specific technical or geographical delivery capabilities, Accenture has targeted one of the leading Workday services partners in the market.  Both service providers did very well in the recently published Workday Services Blueprint 2016 report. We positioned Accenture and DayNine in the Winner’s Circle because they both demonstrated depth of experience and capabilities, impressive investment in tools and technologies to support deployments, and a focus on talent retention, all supported by strong client references. In fact, we positioned DayNine as the best executor in the Blueprint.

We estimate that the combined entity has a total of 1,275 people in the new Workday practice, including an estimated 1,152 certified Workday consultants. This is bigger than the largest Workday practice we have seen so far at Deloitte. Moreover, Accenture consultants hold an average of 2 Workday certifications each, and at DayNine this figure is 3.5, among the top 4 in the Blueprint.

Of course, it’s not all about pure scale. DayNine gains access to Accenture’s broader consulting capabilities and innovation around service development. Accenture gains access to medium sized enterprises and additional skills in Europe, which is a hot growth area for Workday services next year.  This initiative also aligns neatly with Accenture’s Cloud First growth agenda. It acquired Salesforce services partner, Cloud Sherpas last year (see: Why Accenture’s acquisition of Cloud Sherpas is both an offensive and defensive move) and  more recently, Italy-based Salesforce solutions provider, New Energy Group.

The Bottom Line:  DayNine was one of the last “hidden Workday jewels” waiting to be snapped up… now Accenture needs to make 1+1=3 to deliver

By acquiring DayNine, Accenture will have the opportunity to create genuine synergy from this acquisition, if they can realise the ’1+1=3’ value proposition that this appears to be on paper. Yes, there is a lot of work to do as there always is when acquiring any IT services entity. But if the strategic alignment and energy from Accenture Cloud First Applications lead,  Saideep Raj,  Accenture Workday practice lead, Beth Boettcher,  and DayNine CEO and co-founder, Tim Ramos (who will lead the new Accenture DayNine group), is anything to go by, the main recommendation for competitors is to Watch Out!

Premium HfS subscribers can access the new HfS Blueprint Report: Workday Services 2016 here. 

Posted in : Business Process Outsourcing (BPO), HfSResearch.com Homepage, human-resources-as-a-service, SaaS, PaaS, IaaS and BPaaS

How can enterprises make automation core to their operations strategy and not merely a peripheral activity? Let’s be blunt here, many service providers have been automating routine tasks with their clients for years, yet as my HfS colleague, Tom Reuner, has noted, the innovations referenced by the notion of RPA and Intelligent Automation are “often at sub-process levels…not at the heart of a delivery backbone.” We are seeing the momentum pick up here, though, particularly when automation is a shared strategy between service providers and their clients. We heard one such case highlighted by Peter Quinn, Managing Director of Automation at SEI Investments Co., (NASDAQ: SEIC) a wealth management solutions company, at the recent NIIT Technologies Industry Analyst/Advisor Day.

Service buyers want to partner for automation, but where – and how – is it actually working?

When we asked 53 service buyer executives what would improve the quality and outcome of their current outsourcing engagement, 45% of them selected “roll out an automation strategy in tandem with our provider.” (see Exhibit) 

Exhibit: Service Buyers Could Improve Quality and Outcomes by Changing the Nature of Their Engagement

Click to Enlarge

There are risks to be taken by buyers and providers – but is the greatest risk avoiding core automation?

For service buyers, challenges include getting the IT department on board and addressing concerns about data security while selecting and licensing the appropriate software. Service providers also face the investment challenge of taking hits to their existing FTE-based revenues and margins in order to safeguard existing clients and win new ones. So, how can buyers and providers truly get to a shared automation strategy that’s genuinely core to the engagement? It’s simple: both need to be willing to take risks to drive new business outcomes. But you can also look at the risk of not taking the risk – failure to achieve effectiveness through automation could ultimately lead to the buyer enterprise leaders falling on their swords, while those service providers clinging to the legacy FTE model will eventually be displaced by those with a genuine automation capability and offering.

The SEI and NIIT Technologies Experience with Governing Core Automation

Here’s one such story: It starts with SEI getting excited about the potential impact of automation on security, quality, speed to results, and employee engagement. 

Peter Quinn, Managing Director of Automation at SEI, set out the expected outcomes for an extensive use of automation:

• Improve SEI employee quality of work experience by eliminating the repetitive, mundane tasks, thereby transforming the culture and eliminating the revolving door in certain departments
• Reduce risk of off-shore data privacy breach – corporate investment to ensure all offshore access to data is secure was still being met by the question of “what if”… no matter what the effort to address it
• Eliminate risk of geopolitical event impact on BPO
• Reduce human error and associated costs (financial, client impact, SEI industry image)
• Achieve rapid deployment
• Create instant and profound scalability: license robots versus on-board and train people
• Achieve cost reduction through staff savings

“Yes, of course we are looking for lower cost,” as Peter Quinn, Managing Director of Automation, SEI says, “but if you can get rid of human error… that’s key, because errors have financial, client experience and brand impact.” A data security breach or other human error on an investment portfolio of a client can have expensive short- and long-term consequences on customer experience and brand loyalty, for example, for a company that builds its business on its clients’ trust. And it seems like no matter how much is invested in time, money, and resources on security, it’s never quite enough for regulators. Automation helps drive more predictable and reliable results.

To get full benefit from the use of robotic process automation, end-to-end processes need to be automated to the fullest extent possible. SEI would be evaluating all the work they do from end-to-end, including considering what is done in-house, what is outsourced, and where the hand-offs are. That means work that had been outsourced and managed by its partner, NIIT Technologies, would be in scope. NIIT Tech, for its part, typically evaluates the work it does, looking for opportunities to increase efficiencies, including the use of automation.

This is the point at which the two parties come together in a more strategic approach to automation

“We will automate as much as possible, and that includes potentially repatriating work that had has been outsourced for years,” Peter Quinn of SEI told NIIT Tech. Pause. The response from NIIT Tech: “How can we help?” This response may or may not have been immediate – perhaps there was a little surprise involved—but the point is that NIIT Tech took a step forward to stay involved. Yes, NIIT Tech would lose current work, but from their perspective, this move takes their efforts to the next level of efficiency and relevance to SEI’s business; it also gives their own organization the same benefits as those listed above by Peter Quinn regarding employee quality of work and business results. Participating in discussions about what and how SEI wants to run their business and the supporting operations also gives NIIT Tech the context and opportunity to share new ideas for their role going forward.

A critical part of the automation strategy – governance – includes representation from internal stakeholders and external partners

While as an industry we agree automation is increasingly integral to business operations and outsourcing roles and results, how to bring automation into outsourcing partnerships and engagements – from strategy and governance to contracting – is still a work in progress.

Quinn, reporting to SEI’s CIO, chairs the Automation Governance Committee, which includes NIIT Tech so that they can be an active participant in all discussions. It also has representation from all market, geographic, and operating units, and includes business managers, legal counsel, and IT. The committee serves as a forum to:

• Exchange ideas and needs, find commonalities, and build the business cases
• Assess new requests
• Determine best tool / best fit
• Prioritize 90-day inventory for each tool (e.g., company impact, ROI)
• Review tool capacity saturation
• Evaluate new products as the market changes

The intent of the Automation Governance Committee is to weave intelligent automation into the fabric of the company. Too often, we hear stories of automation being used piecemeal in different areas of companies, which can lead to the use of it being sub-optimized at a point in a process versus as part of an end-to-end strategy, and complicated and expensive with separate licenses and approaches. The automation strategy should drive the ecosystem of partners within and outside a company to ensure that all the participants supporting the operations of a business are aligned and integrated.

The Bottom Line: The challenge for service providers is pivoting to meet clients’ future goals

Can NIIT Tech develop the capabilities to achieve the clients’ goals, still deliver value as a long-term partner, and realize margin for their business by having “sacrificed” the FTE-based work? “I believe the days of FTE-based work are coming to an end,” says Dan Spaventa, NIIT Tech’s client partner for SEI. Looking ahead, the service provider is developing automation-based solutions in targeted market areas like “SmartTransfers” in financial services, to bring automation into the core as part of the regular cadence of work in the service industry. These are moves that NIIT Tech – and other service providers – have to make to be a viable service provider partner in the future of outsourcing in the As-a-Service Economy.

Posted in : Robotic Process Automation, sourcing-change, The As-a-Service Economy

The stills from the James Bond movie, “From Russia With Love” flashed in my mind when Infosys SVP and Global Head of Engineering Services, Sudip Singh described the latest multi-million and a multi-year engineering services outsourcing deal with Ansaldo Energia. As part of the deal, Infosys will open engineering service delivery centers in Moscow (Russia) and Karlovac (Croatia) leveraging a rich pool of engineering talent in both these countries.

The Context of the Deal

GE acquired Alstom’s Energy business for €12.4 billion in 2015. The EU Commission and the US Department of Justice approved this acquisition conditional upon the divestiture of parts of Alstom’s R&D gas turbine projects. In 2016,  Ansaldo Energia acquired these R&D gas turbine projects from Alstom.  

Infosys has been a strategic partner of Alstom’s Energy business and has delivering engineering services to Alstom for the last few years. This merger and de-merger of GE-Alstom Energy business provided an opportunity to Infosys to upscale its engineering services engagements with both GE-Alstom and Ansaldo Energia.

Why Is this Deal Important for Infosys?

Strengthens engineering services footprint in Europe and Russia: Infosys is one of our As-a-Service Winner’s Circle service providers in our Engineering Services Outsourcing Blueprint. We advised Infosys to improve its business and footprint in Europe. We are glad that Infosys has acted on it.

Augments expertise in turbomachinery: Infosys has strong engineering services capabilities in turbomachinery with Alstom as its anchor customer. This acquisition augments Infosys’ turbomachinery capabilities with specific skills in heavy duty gas turbines, industrial gas turbines, steam turbines, etc. These are hard-to-find skill sets in the highly specialized industry and Infosys can leverage them to provide engineering services to other customers as well.

Additional skill sets in other engineering verticals: Turbomachinery Engineering is one of the most complex engineering skill sets. This deal allows Infosys to access high-end turbomachinery engineering skill sets, that augment Infosys’ engineering design and analysis capabilities in the automotive and the aerospace verticals (aero structures and aero engines).

Position Infosys to leverage Russia and Croatia: Infosys had no engineering delivery presence in Russia and Croatia. In fact, the broader Infosys operation had no major delivery presence in both these countries. Infosys only had a few support and business development professionals in Russia. This deal will change that and provide an opportunity for Infosys to leverage a delivery presence in Russia as well as Croatia to win more deals for both engineering services and larger IT services in the region.

Why Is this Deal Important for Ansaldo Energia and GE-Alstom?

Provides continuity and future proof engineering support: This deal ensures that Ansaldo Energia will have the engineering support of Infosys in providing continuity to the customers of GE-Alstom. Otherwise, it would have been a challenge for Ansaldo Energia to bring the dedicated focus to turbomachinery design and analysis, invest in future skill development, and manage spikes and trough in demand.  There was always a danger of rationalization and right sizing but now under Infosys umbrella, engineering team can look for a long-term career option. Infosys will leverage this engineering team to provide engineering support to other customers too and overall grow Russia and Croatia operations.

Why Is this Deal Important for the Engineering Services Industry?

Leveraging manufacturing and technology mergers and de-mergers: The manufacturing and technology industries are going through global turmoil. A lot of the big mergers happening in the industry are subject to regulatory approval, such as Nokia-Alcatel, GE-Alstom, Dupont-Dow, Holcim-Lafarge, Electrolux-GE, Dell-EMC, Inbev- SABMiller, Halliburton-Baker Hughes, Shell-BG, Avago-Broadcom, etc. One of the rationales of the big mergers is synergies or consolidation in R&D and procurement spending where engineering service providers could be at the disadvantage. The corollaries of these big mergers are de-mergers or selloffs either for regulatory approval or for generating cash. These mergers and de-mergers can also provide an opportunity for engineering service providers to leverage discontinuity and build their strengths and move up in the value-chain as Infosys Ansaldo Energia deal shows.

Russia as engineering talent base for the engineering services industry:  Russia has the incredible engineering talent and despite a good history of Indo-Russian relationships, Indian IT and engineering services has failed to tap it. This could be the start of one of many deals where Indian engineering service providers will augment their delivery capability in Russia.

The Bottom Line: This interesting deal gives Infosys an opportunity to drive its strong turbomachinery strength in engineering services and leverage its engineering delivery presence in Russia and Croatia to grow both engineering services and overall IT services business.

To close, I’d like to twist the opening line of one of my favorite songs – “From Russia and Croatia with love, Infosys provides engineering services to you!….”

Posted in : Procurement and Supply Chain

Just one year after the industry’s first ever in-depth competitive intelligence report on the Workday Services market, HfS has just published the updated HFS Blueprint Report: Workday Services 2016. We analysed and positioned sixteen Workday service providers according to their execution and innovation capabilities.  

So, what’s changed since last year?

What a year it’s been! Workday service providers have been busy investing in service offering expansion, tools and technologies development and talent retention programmes to remain competitive in this hot growth market. There’s also been some consolidation, including:

• The Aon Hewitt acquisition of UK-based Kloud
• KPMG’s acquisition of Towers Watson HR Service Delivery Practice
• The IBM acquisition of Meteorix
• And the Mercer acquisition of CPSG

And we’re sure the consolidation will continue!

Last year’s report focused heavily on service provider’s capabilities to deploy and support the Workday Human Capital Management (HCM) product, as that formed the majority of the market at the time. Since then the Workday Finance Management (FM) application has grown in popularity, with enterprises either deploying this in phase 2 projects, considering HCM and FM together as a platform deployment, and some enterprises even leading with the FM application deployment.

We have seen the focus of work shift. Last year enterprises were largely concentrating on implementing the applications, with lower demand for consulting or management services.  Although the focus on implementation remains this year, with buyers still demanding fast deployment cycles, more additional service opportunities have appeared.  Particularly, as buyers  realize the importance of preparation prior to rolling our any SaaS initiative. We have seen a greater emphasis on Workday readiness services that provide guidance and some visibility of their Workday journey. Plus consulting work that positions Workday at the heart of their HCM and finance business transformation initiatives. Management services were hardly considered last year, but this year, buyers are realizing the need for ongoing, flexible support services to keep their deployments relevant to business requirements and outcomes.

So, all in all, the market has changed that much that it almost felt like doing a completely new Blueprint rather than an update.

So, which service providers stood out?

We should note that all of the providers we included were very strong, which is not surprising, given that Workday works very closely with each of its service partners to provide guidance and assistance.  All service providers were either in the As-a-Service Winner’s Circle, High Performers or High Potential categories. In other words, they all had excellent vision of where this market is headed and are investing in services and solutions to meet the emerging demand. This remains however, an immature market, with client demands still largely focused on requiring fast technical deployments. Most client references across the board were unsurprisingly very positive. As a result we have a cluster of providers in the As-a-Service Winner’s Circle this time round. As the market matures and continues to change over the next year, we expect a few clear winners to break away from the pack and create some clear differentiation.  DayNine, Aon Hewitt, Deloitte and Collaborative Solutions particularly impressed with their execution capabilities.  We saw a lot of impressive innovation, at Accenture, Deloitte and DayNine, IBM, PWC, Appirio and KPMG. And OneSource Virtual continues to standout with its focus on BPaaS solutions.

What are we expecting next year?

More consolidation! The acquisition game is not over and we expect some more consolidation before we refresh this Blueprint in approximately 12 months. Those who acquired this past year, have a massive opportunity to integrate, market and deliver the combined capabilities to strengthen their position in this market. And we expect the service providers who invest in developing consulting and management services to do well as demand for these services picks up in the next year. We think there’s a high chance the grid could be very different again next time round! Stick with HfS to monitor the important changes in this rapidly evolving market!

Posted in : SaaS, PaaS, IaaS and BPaaS

If you had dropped by our new Bangalore office last month, you would have found fellow HfS Research analyst Tanmoy and me poring through loads of engineering services data for the Q2. The end result was that we prepared a comprehensive 29-page report (which even our Editor-in-Chief Mark Reed-Edwards had a hard time editing!) highlighting Q2 Engineering Services Trends with a large number of data points and charts.

I have picked three charts from this report to convince you that automotive is in the driving seat of engineering services growth.

The first chart is the percentage breakup of the engineering services outsourcing deals announcements by verticals in Q2 2016 (see below). This chart shows that automotive vertical bagged the  highest number of deals in the last quarter at ~30% of the total.

The second chart is the percentage breakup of the engineering services partnership announcements of service providers by ER&D services in Q2 2016 (see below). This chart shows that smart vehicle, at 33%, is the most preferred partnership area in the last quarter. There is a lot of investment in smart vehicles globally with the likes of Tesla, Google, Apple, Uber along with the traditional automotive OEMs investing in self-driving vehicles, connected vehicles, etc. Engineering service providers are developing their value proposition in this fast evolving space by partnering with other firms.

The third chart is the percentage breakup of the engineering services captive center announcements of either new centers or expansion of the existing centers in Q2 2016 (see below). This chart shows that though automotive vertical is at number three position, the gap between automotive verticals and other top two verticals is small. The top two verticals are from emerging areas such as software and high tech where R&D needs are higher. Among traditional industries, automotive leads all the way as there are a lot of R&D requirements in connected vehicles, self-driving vehicles, etc. which OEMs and Tier 1s will like to research and test in-house.

These charts show that automotive customers are actively outsourcing to engineering service providers and also setting up their own engineering centers across the world. Also, engineering service providers are augmenting  their automotive capabilities with partnerships. These are all good signs for the automotive vertical.  Also, in one of my earlier blog I discussed the spike in vehicle recalls and its implication on the growth of automotive testing, verification and validation services.

The Bottom Line: We believe that automotive may become the largest vertical in coming years as a result of the growing interest of automotive customers and engineering service providers.(In our Engineering Services Blueprint Report we discovered that automotive is the second-largest engineering services vertical after telecom and hi-tech)

HfS subscribers can click here to download the full POV on Q2 engineering services trends.

Posted in : Procurement and Supply Chain