Don’t you just love being in Denial? That wonderful place where all you have to do is show up for work, do the same old, same old… and everything just keeps on ticking along. Isn’t it so cool to wake up in the morning and proclaim to the world that you’re just so excited to plonk your behind down in your tried and trusted swivel chair and keep those lovely green lights staying on?
Well, I have bad news for, Denial-lovers, because we finally all accepted, at the HfS Cognition Summit this week in Westchester New York, that we have to bid our fond farewells to that nice cosy place, where linear growth and green light happiness were taken for granted, where it was OK to have lots of manual workarounds to keep workflows going, when robots were visitors from the future, as opposed to appearing on your desktop to run repetitive loops on your invoice processing…
As our recent study of 371 major enterprise shows, well over half (56%) of senior leaders now expect to see major moves towards intelligent operations within two years. Compared to our 2015 study, where 70% were still looking at a 5 year horizon:
Two years is real, it’s a time span that impacts us all today, not one where we are procrastinating, or simply leaving the problem to someone else, once we have left our current job.
By why now? What’s wrong with a few extra years wallowing peacefully in Denial?
Social media is leaving us with nowhere to hide. Let’s face facts here – RPA technology, by and large, is nothing new – much of it has been around for the last decade and beyond. “Cloud” has been around for so long, we’ve almost forgotten about it. Cognitive tools are still largely smart macros and algorithms (again, nothing new), while Rolf Faste was harping on about Design Thinking to Stanford students in the 1980s. The reality, today, is that we’re educating ourselves (and hyping ourselves) at a breathtaking daily pace and, suddenly, if you don’t have an automation strategy, are tinkering with cognitive capability and have some clue how to make your enterprise behave more “digitally”, then you are officially legacy. The way we think, operate, manage and communicate is becoming brutally exposed – in almost every business situation with which we deal. If you are behind the curve, everyone knows it very quickly and you are typecast as the walking corporate dead. There is nowhere to hide, people… it’s time to purchase that one-way ticket out of Denial, before that long-awaited career move making sandwiches becomes your future.
Offshoring never was a permanent solution, it’s part of the gearbox of value levers. Remember all those times we debated the accidental “career” that is outsourcing? When shifting back office work to cheaper labor pools around the world was a special skill, a unique capability that only a very select group of us, endowed with this blessed experience, could boast? What we weren’t really considering, back in Denial-day, was that offshoring work was only the first phase in a quest for better efficiency and value. Just because you signed a five year deal to shift the work of 500 headcounts to a be carried out at lower cost elsewhere, didn’t mean you weren’t intending to search continually for new ways to innovate in the future? Most enterprises that have outsourced IT and business process work today are already putting real pressure on their operations leadership to commit to new, identified value levers, with an automation strategy being the prime lever that is the natural sequential transformation phase for most operations, whether or not they are outsourced.
Digital disruption is driving more urgency and paranoia among enterprise leaders. In many industries today, digital business models can completely take established legacy enterprises out overnight. If you are (for example) an insurance firm with 10,000+ people processing claims onshore using green screen computers, a bank which still has hundreds of branches employing tellers from the 1970s, or a retail outlet with no mobile app strategy, you are at dire risk of competition coming at you with a completely app-ified, user friendly, intuitive and cognitive business model, supported by low-cost sourced operations. If you have failed to see what could be coming at you, and do not have that salvage plan already in play, where you are ripping out that costly, unnecessary legacy, with a plan to compete against your potential “uberized” new competitor, you really are doomed. If you are a highly paid enterprise leader who is not aware of what could happen, without a plan to counter it, you might not be in a job for much longer…
The Bottom Line: Leaving Denial is one thing, but make sure you arrive successfully in Optimistic Reality
If there’s one thing that we all need to stamp out, it’s the pessimism and fear-mongering – most of it’s unwarranted, unfounded and irresponsibility created by people who should know better. The reality is, we are dealing with some disruption to jobs, as automation, when implemented well, can reduce some transactional headcount (which we predict as having a 9% negative impact over the next five years, and will be largely offset by natural attrition and workers evolving their skills into other areas).
In my view, the real threat comes in the form of disruptive competitors using digital platforms and cognitive computing that can wipe out your enterprise overnight. Imagine a new bank appearing, with a great mobile app, immediate customer service via chat / phone etc. Or a rival insurance firm that delivered everything you needed at half the premiums, but twice the usability? You’d switch in a heartbeat wouldn’t you? And these capabilities are here today, they’re not coming tomorrow.
And also remember that the threat of legacy extinction is with mid/advanced career folks, not our kids… they’ll always adapt and survive, as they have the digital skills and awareness to do what modern businesses need. It’s the 35+ generation that needs to get with the program and grasp how to manage automation initiatives, how to understand a cognitive workflow, how to determine and execute a digital business model. It’s the mature executives who have been basking far too long in the delights of Denial and must make a hasty exit to Optimistic Reality.
Over the last few weeks we’ve written a few blogs about the leading BPO/IT services players in EMEA, more recently the leading BPO/IT services players in North America. Now is the turn of Asia and the Pacific region. This region is more awkward, with a list containing a few familiar faces, but many less familiar to those outside of the region. The most dominant force in the Asian market are the Japanese players – Fujitsu, NTT Data, NEC ad Hitachi – with some notable players from Korea such as Samsung SDS.
Although most of the trends are familiar – the traditional players struggling to grow, while battling to gain mindshare in new As-a-Service business models like cloud infrastructure, BPaaS, and SaaS. Although
Perhaps surprising to many outside of the region is the lack of presence of the big offshore firms apart from TCS, no Cognizant, Wipro, HCL, or Infosys. Although they have significant revenues in India, this is still a relatively small market, and they have little elsewhere in the region, especially in the big markets like Japan. TCS has made bigger strides in gain a presence outside of India – with a sizable business in Japan and Australia. Wipro is second in the region, just off the bottom with success in Japan. Frankly, the key to scale in the region.
The large global integrators like IBM, Accenture and HP have never been as strong in Japan as the local players and so in spite of strong presence in China/Pacific are dwarfed by Fujitsu.
The biggest changes we expect over the next two years are the rise of more Chinese players – with firms like Digital China, Alibaba and Neusoft building on and offshore business. Additionally, we see AWS as a key player shortly, particularly given the recent investments made by the firm in the region with centers in India and Korea launched earlier this year.
Bottom Line: The AP market is poised for major change… but not just yet
There is still plenty of room for growth in IT services and BPO within the region. Particularly in emerging super economies like India and China – but the beneficiaries are likely to be local providers and international providers with a distinct value proposition – like AWS and its best in class cloud infrastructure. Although we anticipate stiff competition from regional champs like Alibaba.
The lack of success of the offshore firms in the region is mainly due to the reduction in their key value proposition – labour arbitrage. However, we may start to see other members of the Indian WITCH group rise the list as labor takes a less important role within the market and within these providers, some of which are making real efforts to develop “as-a-service” offerings that blend low-cost talent with automation capabilities.
It doesn’t really matter what part of the world we are in, the competitive landscape is pretty much being shaped by the same overriding forces – the endless client demand for productivity improvement, rapid technology adoption around client engagement and data, the drive to simplify infrastructure, whilst providing a more comprehensive service and the shift to more platform-based services. This means the criteria for success for the providers, particularly in the enterprise space will be the same. If anything when we survey Asian companies they are more progressive about technology adoption and business process change. So agility is the key differentiator for providers, the world over. Given the uncertainty across the world, we are sticking to our mantra: the main differentiators for any service providers is the ability to adapt to the market conditions and the capacity to deliver intelligent (and adaptive) solutions to clients.
HfS Premium Subscribers can download the full report here.
Translation Service LanguageLine Accents the Teleperformance Portfolio
Contact center outsourcing powerhouse Teleperformance has seldom ventured outside of its core of contact center services, so it was with great interest we learned of its recent $1.5 billion acquisition of LanguageLine Solutions, a provider of over-the-phone and video translation services. In today’s world of “going digital,” this acquisition is more about filling a market gap and increasing the value of non-automated interactions, and fulfilling the talent strategy that supports “OneOffice” than about enabling the automated or digital interactions themselves. This is a smart move that complements Teleperformance’s business and will help to better serve its clients.
Translation service fits well into a comprehensive talent strategy
LanguageLine fits well into Teleperformance’s portfolio, as one of the many contact center service providers trying to carve out a new value proposition and maintain relevance in a rapidly changing market. LanguageLine’s 8,000 interpreters, supporting 240 languages, are largely work at home employees; the home based delivery option is one we’ve watched grow in recent years as a solid strategy to find and retain better talent. Companies like LanguageLine have created a common market for interpreters, most of which are formerly self-employed contractors. It provides these contractors with a network, benefits, and corporate culture, but the flexibility of the work-at-home, and the satisfaction that comes with assisting customers with higher value services.
We can surmise that much of the translation service are of higher value than the average contact center interaction; the majority of the interpreters’ calls are over 10 minutes long, indicating more calls greater in complexity than average. LanguageLine is protected from (simple) automated interpretation services due to the majority of clients coming from highly regulated industries including healthcare and BFSI, supporting our that automation generally isn’t replacing contact center jobs, it is making them more challenging and interesting.
LanguageLine will help Teleperformance better serve the healthcare vertical
We see the greatest opportunity here in particular to increase the value of the service provider’s healthcare offerings (LanguageLine’s revenues are close to half from the healthcare vertical). Teleperformance has a sizeable and growing presence in the payer space, and we speculate that using the video translation services of LanguageLine could help create a unique value proposition at those sites where Teleperformance runs the interactions for people enrolling in health insurance. Healthcare organizations are highly sensitive about interactions with their constituents, and the context and finesse needed to handle these translations are great, so Teleperformance’s ability to handle these interactions well would be a big differentiator.
Taking the LanguageLine service and integrating it into Teleperformance’s already well rounded customer experience portfolio will be the key to success. Teleperformance is no stranger to adeptly integrating major acquisitions (i.e. TLS Contact, Aegis U.S.). LanguageLine has proven to be an adaptable organization, starting off as a translation service for Vietnamese refugees in 1982, and was owned by AT&T from 1990-1999, before being sold to a private equity firm. Teleperformance shares a number of clients with LanguageLine and partners with them on specific projects, something the service provider has proven works well through the TLS Contact acquisition. Teleperformance should in theory be able to position complementary services for business results with clients that overlap.
The Bottom Line: LanguageLine’s expertise helps Teleperformance further hone its already smart talent strategy.
The acquisition confirms the service provider’s focus on home based agent delivery and higher value interaction services. The fact that LanguageLine already has a well established remote video interpretation service shows that it is pivoting the business toward important trends and keen to serve the customer of the future. This acquisition takes a talent and vertical expertise focused approach to support OneOffice; it is a really smart move to fill a market gap, reaffirming Teleperformance’s commitment to sustained growth and serving its clients by developing and retaining the best possible talent.
EXL just announced its acquisition of IQR Consulting, a small but fast-growing marketing and risk analytics service provider to the banking industry. This follows EXL’s acquisition of RPM Direct early last year to augment its insurance data and analytics portfolio (read more in our coverage here), which it is also starting to use in healthcare. With IQR, EXL is continuing its focus on adding analytics and data assets with a vertical flavor.
On the surface, this looks like a typical acquisition to build scale, but IQR brings some interesting downstream opportunities for EXL:
Access to regional banks and credit unions: EXL has developed client relationships with some of the largest banks and financial services institutions in the world, providing them with much needed scalability for analytics and reporting functions over the years. IQR will help the service provider forge new relationships with smaller BFS segments, credit unions in particular. Regional and supraregional banks and credit unions have differentiated needs, challenges and levels of internal capability with analytics functions when compared to the BFS majors that EXL primarily works with. IQR has found a way to network and grow its presence in these segments, partly due to its board members’ industry backgrounds. These new categories of clients present EXL with new opportunities, not just for analytics work, but to cross-sell BPO and BPaaS solutions in the future.
BFS-specific marketing analytics to complement EXL’s breadth: EXL has comparatively more of a reputation and experience in the portfolio and risk analytics space in the banking and financial services industry. IQR will augment its BFS marketing analytics portfolio, in particular bringing data insights to formulate brand strategies, communication tactics, promotional offers and pricing strategies for banking clients.
Access to an analytics talent hub: This is an exciting one – Ahmedabad, India, where the majority of IQR’s workforce is based, is a new location for EXL’s analytics practice. As wage inflation for analysts soars across other metros, EXL will want to find newer locations for sourcing – and even shaping – analytics talent. IQR presents this opportunity with operations out of a city growing its engineering, math and statistics talent base.
The Bottom Line
We placed EXL in the Winner’s Circle for our BFS Analytics Services Blueprint this year, noting its interest in working with smaller players in the BFS industry (fintech clients, etc.), while its competitors go from blue chip to blue chip. This acquisition further outlines the service provider’s broadening of its BFS analytics portfolio to service different client segments. Overall, the combination of EXL and IQR brings regional banks and credit unions the opportunity to work with an analytics specialist that can bring both scale, process rigor and greater resources to invest in program development, as well as the domain experience to cater to their data and analytics needs to achieve business outcomes in the marketing realm – increasing member lifetime value, brand loyalty, and smart omnichannel servicing. The next step for EXL will be to further outline its vision for smaller BFS players, and how the amalgamation of these acquired and homegrown analytics and data assets help it address their unique challenges.
It’s time to end the hype and get real about the evolving world of digital! Later this month, I’ll be sending out Requests for Information for our forthcoming HfS Digital Blueprint where we will truly flesh out where this market is today, and the path we need to take to close the gap between Digital potential and the ability for ambitious organizations to achieve it.
‘Digital’ is a word which has been hopelessly mangled by market forces. The huge societal change wrought over the last eight years by the advent of the iPhone and Android and improved connectivity – the prime as catalysts for the proliferation of social network connections, conversations and data, has created havoc for the vast majority of companies, still firmly anchored in previous generations of technologies. Digital marketing has evolved very quickly to allow the positioning of products, services, buying opportunities, customer support and feedback, and digital marketing budgets have exploded in so many ambitous organizations eager to hop on this “bandwagon”.
Marketing, by its very nature, evolves and changes constantly to seek competitive advantages and differentiation, and these techniques have also been used to position countless companies as ‘digital’, much as previous generations added an ‘e’ prefix to everything (or Apple’s ‘i’ prefix)- so we had eShopping, eCommerce etc etc. In most cases, this posturing was to cover up the fact that the ‘e’ suffix was being added to tart up legacy offerings as market repositioning, and this is often the case today with ‘digital’.
While these digital branding activities can be highly effective for specific sales motions and targeting, it has arguably hurt broader digital evolution, creating mass confusion about what ‘digital’ actually is beyond marketing speak. A few years ago ‘SSMAC’ – Security, Social, Mobile, Analytics and Cloud – were considered core components of ‘digital’, floating offshore from IT on a sea of ever more valuable Data. Since then, legacy IT has soldiered on in a business climate made ever more complex by digital and budget pressures, while ‘digital’ has grown to become ever more ubiquitous.
Bymid-2016, and moving forward, many firms have high level ‘digital first’ imperatives in place, and some understanding of strategic goals and threats. What’s problematic is all those pesky legacy ways of doing things – the workflows, ring binders, filing cabinets/ Sharepoint, technologies and relationships that choke any sort of change management. Like ivy in a garden, the old ‘we know how to do this’ culture grows back fast. Add to this the reality of multiple vertical budget P&L’s, organizational politics and rivalries along with a percentage of management and most of HR sleeping on digital opportunities and threats, and we have a growing vacuum.
Fortunately, enterprise service providers have been tireless in creating and learning new ways of doing things in a digital world, having seen the threat to their livelihoods in continuing to merely servicing last century IT and associated business processes. Where a couple of years ago it was quite challenging to find scale resources to execute digital initiatives, today there is an appetite to help businesses compete in the ever more data and collaboration driven world.
I’m right in the middle of briefings with both providers and buyers of services for our upcoming ‘internet of things’ (‘IoT’) blueprint and having a fascinating time discussing approaches, projects, methodologies and business outcomes with scale vendors. Sensor-driven data flows are a critical dimension of digital, from real time industrial machine intelligence feedback (‘I’m going to need a new solenoid soon’) all the way to smart factories creating smart products that communicate regularly throughout their life, to both the seller, owner and manufacturer to be as efficient as possible.
During the coming months I’ll be meeting various industry luminaries to discuss the state of ‘digital’ – perceptions of opportunities, stresses and pressures, and what it takes for companies to take the leap and place big bets on a holistic, ultra interconnected digital framework to replace the fragmented, heterogeneous environment most IT infrastructure evolution grapples with. This takes vision, confidence and courage to achieve in mature companies, but the reality is that failure to grasp this opportunity will result in modern ‘full stack’ digital startups, rapidly superseding legacy firms and taking their markets.
Interesting times and this is going to be an interesting, timely piece of research in a fast moving world…
One of the business mantras we hear far too often is the concept of “fail fast”, but like other all-or-nothing business slogans, it’s majorly flawed. Although digital technology is disrupting many industries and business processes, “failing fast” is not a great approach to decision making: yes or no, or on or off is too simplistic. Decision making needs to be more analogous, much more nuanced, based on real context, and, most importantly, real-time data.
That said, failing is vital to any business, but simply failing and moving on to the next idea? Throwing your business thoughts against the wall and seeing what sticks, like some perverse infinite monkey approach, is not smart. Failing and limiting the damage from a dead-end pursuit is a good idea, but the real value of failure is what you learn , and how your subsequently apply that learning experience to your business. This is what provides the value.
You may have seen the OneOffice operating model that Phil has shared on his blog here.
The goal of the OneOffice is to engineer processes to ensure that the whole of an organization is greater than the sum of its parts. Any system, within any organization, is likely to become inefficient or will require maintenance or over haul at some point. The issue with current business practices in many industries, is their systems and processes have typically been operated using closed feedback loops.
The “innovation cycle” in legacy traditional business models has been driven by the experience of business leaders who have not had the benefit of accessing and interpreting the vast amount of data – particularly around the cause and effect of changes to business practices. The biggest change driven by Digital is not the better interaction or access to new markets, but analyzing real-time data from interactions right across the customer, supplier and employee value chain to make informed decisions on the future. It gives companies instant (or near instant) feedback on its decision making loops – which can be used to create a massive open feedback loop for decision making that helps business leaders create their markets, not simply react to historical facts.
In such a feedback loop, the impact of changes made, at any part in the system, can be tracked and analyzed. This data can determine, for example, when and how products are launched, the level of training a new product will require – and perhaps, more importantly, whether this strategy was correct. The open feedback loop is the heart of Design Thinking and the key to successful OneOffice schema. All parts of the organization are joined so cause and effect can be judged. Failure can be measured and learned from. Equally, the real reasons for success can be measured and replicated.
The Bottom Line: Embrace your mistakes – and Learn from them
The most important feature of Design Thinking, or any business system designed to drive data driven decisions, is to create a culture where mistakes are embraced and learned from, rather than hidden and repeated. A good example of this is the “Aggregation of Marginal Gains” ethos used by the British Cycling team, which helped it go from 2 medals in the 2004 Olympics to 12 in 2016 (6 of which were gold). The assumption being that any process can be improved. When you look at a system as a whole it’s hard to see how to improve it, but if you look at the components it’s easy to see how small improvements can be made. When a customer outcome isn’t as good as it could be, what can be done to make it better?
Refusing to change our ways in today’s energy sector is a certain recipe for failure. There are a lot of inefficiencies in Oil & Gas, which in times of high oil prices and high margins, are largely hidden and/or ignored. In today’s continued low oil price environment with low margins and profitability—what we believe to be the new normal—Oil & Gas companies need to take out inefficiencies and find new ways to optimize production and bring down operating costs like never before. Our Energy Operations Blueprint highlights the way Oil & Gas companies are looking at digital technologies, automation and outsourcing as avenues for change, and levers to pull to drive new efficiencies and value creation.
Sustaining the current momentum of change in today’s environment is a huge challenge for Oil & Gas companies and their service providers. Changing for new results requires progressive change from within, not just rearranging the deck chairs hoping for a different result. The Blueprint identifies eleven trends that are currently taking place, and while they all serve a purpose to address the trends impacting their world, there are a few that bubble to the top.
Four trends that we see as an opportunity for focus by service buyers and providers to increase the value of their engagement over time:
Evolve analytics capabilities to cater for energy-specific applications. Analytics offerings have started to progress from being based largely on access to data science talent and unique algorithms to include industry specific analytical applications delivered by service providers that deeply understand a client’s enterprise and marketplace. We see good progress in analytics that improve the drilling process and analytics capabilities underpinning the 24/7/365 monitoring of thousands of units of critical equipment from a central support center in Exploration & Production.
Leverage data to look into the future, not the past. Predictive and prescriptive analytics are starting to enable more real-time decision-making and continue to have a huge impact on the operating models in the industry. The industries’ strict requirements for safety, reliability and uptime in operations, often in harsh circumstances and remote locations can be better met with advanced analytics capabilities offering real-time and actionable insights. Knowing what went wrong through descriptive analytics simply doesn’t cut it.
Put IoT at the heart of your planning. The (Industrial) Internet of Things holds tremendous promise and we expect adoption to accelerate as there are already huge numbers of connected assets in the industry and providers and Oil & Gas companies have to focus on connecting those assets to the internet to bring tremendous value. Think about how in Midstream, pipeline sensors providing data on transportation of product and the health of the pipes replaces the need for field workers to get sensor readings in person. And using drones and connected sensors to inspect the gigantic stretches of pipeline in difficult terrain instead of visual inspections by field workers.
For future effectiveness, focus on IT/OT integration and the Digital Oilfield. The digital footprint is increasing in Energy Operations, bridging the gap between Information Technology and Operations Technology. In Upstream, advanced analytics improve operations in drilling, reservoir modeling and engineering and remote monitoring.
Bottom Line: It’s time to dare the industry to build—not inhibit—momentum for change
Here are two dares I want to put forward to Oil & Gas executives and service providers respectively, both of them critical to sustain the change momentum and achieve the innovation that is so desperately needed:
Energy Buyers – Dare To Reinvest Cost Savings into Innovation Funds: It is very attractive to put cost savings achieved by outsourcing in the hands of the CFO. However the CFO isn’t going to turn around and say “great job, let’s all sit back and celebrate that 20% off the bottom line”. We recommend to reinvest these savings in further innovation, perhaps make it a part of a Collaborative Engagement arrangement: “Service provider, save us 20% and we can both reinvest the 20% as next year’s innovation budget”. For example, saving driven through the offshoring of application development and accounting work could be funneled into a digital oilfield project.
Energy Service Providers – Put Your Money Where Your Mouth Is: Pro-actively and aggressively push the innovation agenda around automation, analytics, drones, 3D printing for MRO, simulating with digital twins, machine learning, deep learning, cognitive computing. Present clients with use cases, examples and capabilities to “unfreeze,” inspire and build credibility in innovation.
We often ask this question. Customer quantity is a no brainer because more customers can bring more revenue. Similarly, customer quality is also important because the better the customer quality or size, the better the revenue potential for service providers. But what is more important—customer quantity or customer quality?
We all have the anecdotal answer to this question based on our experiences but what does the data say?
In one of our engineering service studies, we tested this on data and found interesting results. In our software product engineering services study, we correlated service providers’ software product engineering services revenue with the quantity and quality of their customers (see the Exhibit). For customer quantity, we took the count of service providers’ ISV customers. For customer quality we took the count of service providers’ ISV customers that are among the top 100 ISV customers by revenue because the larger the size, the better the potential of account mining.
We found that the correlation between service providers’ revenue and quality of customers is very strong (Correlation = 0.92 and R2=0.85) in comparison to the correlation between service providers’ revenue and quantity of customers (Correlation = 0.56 and R2=0.31): As a student of mathematics, I will be the first one to point out that correlation doesn’t mean causation. But it nevertheless gives us the opportunity to step back and ask ourselves the following: What if the quality of customer drives revenue more than the quantity of customers? What are the implications for engineering service providers and how can they position themselves to grow in a more future-oriented way?
Service providers should focus on the quality of customers and persistently target large customer accounts: This is a no-brainer as a strategy but sometimes difficult to execute. Getting a foot in the door of a large account and displacing incumbents can be difficult and requires persistence. Sometimes, with quarterly pressures mounting, service providers give up on these large accounts and target easier options. In my earlier gig, I came to know that it took seven years to penetrate a large customer account (Yes, seven!). In quarterly reviews, leaders sometimes lose focus on long-term targets, but in this example, leaders kept asking for an update on this particular account in every quarterly review I attended. What is happening in that account? Who has the account manager met with in the last quarter? Are there any RFIs or RFPs they’ve heard about? Any chances of proposing free PoC? Any firm they can partner with? And the list goes on. It requires the persistence of leaders to pursue this long-term strategy and luckily the business leaders in that firm were for the long haul (they are still working there when I last checked =) ).
Once the service provider has got a foot in the door, grow the account by making it real and not over-selling: In engineering services, especially at this time, service providers are competing more with the non-outsourced spend than with other service providers to grow the accounts. Service providers have told me that even after signing the contract and setting up the ODCs, the accounts just don’t grow. One piece of feedback I heard from the buy-side is that many product leaders are skeptical of outsourcing and somehow service providers need to convince them. Service providers typically approach this by hiring good sales and account managers. But the problem is most of the product owners or decisions-makers are technical guys and they don’t like sales guys or account managers showing their face every month. But they do like to know industry trends, what their competitors are doing, where the industry is moving. So, in my opinion, service providers will do better if they invest in “making it real” (something Phil Fersht has also written about in the larger IT services context). In other words: share prototypes, case studies, and demos. But don’t sell!
Mid-tier and emerging service providers should focus on smaller customers and develop their solution value proposition: The mid-tier service providers might not have the luxury of time and manpower to focus on the big customers. They will do better to focus on smaller customers that are not natural targets of the larger service providers. They should grind it enough to make themselves ready for the bigger customer later. The disruption often starts at the bottom and slowly moves to the top. Amazon has done the same with the cloud. Its initial value proposition was aimed at startups and SMBs. Now it is ready to compete in the bigger customer segment. One Fortune 100 buy-side customer told us that they gave a few projects to a mid-tier engineering service provider because it was more cost-competitive than many leading engineering service providers. Although the customer is satisfied with the service provider’s delivery quality and timelines, the customer feels that the service provider has limitations in domain knowledge, solutions, organizational maturity and the customer is unlikely to give that service provider any major additional work. In a way, this mid-tier service provider wasted the opportunity by entering the account early without sufficient capability. The mid-tier service provider should have defined its value proposition beyond cost reduction when they bid to enter large accounts.
The Bottom Line: Both large engineering service providers and mid-tier engineering service providers can use this correlation research to review their client acquisition and account growth strategies based on quality and quantity of customers.
Clients are being subjected to such a load of nonsense about the impending impact of robotics and cognitive computing on enterprise jobs, many are literally terrified. Conversing with the “head of automation” for a F500 organization today, is akin to meeting a Secret Service agent in a clandestine alleyway. These people do actually exist, but most have to conduct their work under a veil of secrecy, due to the level of discomfort and panic our robo-commentators are making in the presses.
Remember the panic about jobs getting shipped offshore? Well, that is child’s play compared to the emerging tumult of fear being generated by jobs being completely eliminated by robotics. Net-net, people are frozen stiff with fear, and it’s the responsibility of respected analysts, consultants, academics and journalists alike to educate and world using real, substantiated facts. Sadly, the likes of Gartner, McKinsey, Oxford University and our beloved Stephen Hawking, all seem hell-bent on capitalizing on the panic to grab the headlines (read my post earlier this year) as opposed to dispelling much of the ridiculous scaremongering about the impact of automation on job losses.
At HfS, we published a very thorough analysis on the impact of automation on global services jobs, showing there is likely to be modest downsizing of ~9% over the next five years as low-end tasks are increasingly automated across major service delivery locations. And this 9% will be immersed in natural attrition and redeployment of workers to other industries, as global services streamlines and matures as an industry. Yes, there will be impact, and it will be somewhat painful to absorb for some enterprises, but it’s not the impending workforce apocalypse these people are predicting.
So why, pray tell, is Gartner, a respected voice in IT research, continually pounding us with continual scaremongering that we’re all doomed to the will of the robot, and we may as well start preparing for a life of unemployment, or sandwich making? Oh wait, robots can even make sandwiches, right?
Peter Sondergaard, Gartner’s Head of Research, predicted one in three jobs will be converted to software, robots and smart machines by 2025. OK, that’s so far out in the future, I think Peter’s on pretty safe ground here – he’s probably going to have cashed in his Gartner stocks long before then, in any case, and be on a golf cart somewhere, when one very earnest soul decides to dig into the Gartner archives of previous decades to read very old research, with very dodgy predictions, that absolutely noone care about anymore. So we’ll let Peter off the hook here – he wanted to make a splash at his Symposium and he achieved exactly that.
But then we get treated to this almighty whopper from Fran Karamouzis, a vice president and distinguished analyst at Gartner…
By 2018, more than three million workers globally will be supervised by “robo-bosses”. Wow – isn’t this barely more than a year away? Excellent, so Fran’s going to be around to declare automation glory when global employment goes through a robo-geddon so seismic, it’ll be like all three terminators visited from the future at once to change the world? My god – what is going on here? The suggestion that an employee will be supervised by a machine simply cannot be corroborated by any meaningful research…
So why do we, at HfS, view claims like this as factually incorrect and irresponsible?
There is only one very shaky example of “robo advisors” in the industry. The most cynical implementations of automation that HfS has come across, thus far, where direct replacement of human labor by robots is the declared outcome, are examples such as Royal Bank of Scotland, where virtual agents, deployed as “robo advisors” are solely deployed to replace FTEs. We’ve also witnessed a service provider radically downsizing some delivery staff claiming success of its robotics strategy (only to find out later these staff were simply redeployed elsewhere). Let’s be honest here, the onus so far seems to be about firing people and using “robotics” as the smokescreen. While Intelligent Automation decision-making will undoubtedly increase (view our Continuum here), we see no examples of employees being supervised by bots. At HfS, we are covering every deployment in the industry, and are just not seeing it.
We still haven’t had a real debate on the ethics of automation and cognitive computing in the B2B environment. Suggestions that employees will be supervised by bots can be traced to the broader discourse on Artificial Intelligence, where more consumer-facing technologies are discussed with undercurrents of movies, such as the Matrix. These discussions tend to focus on technology capabilities of providers like Google and Facebook. However, we haven’t seen a similar debate in the B2B space. If anything, the B2B urgently needs a debate on the ethics of automation, in light of these nascent cognitive capabilities. But to surmise that robobosses will be so prevalent in barely over a year before we’ve even had these debates is quite absurd.
The speed of internal organizational change is painfully slow. The tendency from clients with automation is to pilot first, rather than to go full scale, and every ambitious forecast is always waylaid by the reality of interacting with legacy systems. Most of today’s Robotic Process Automation(RPA) tools are simply being retrofitted into smoothing over manual processes within legacy technology environments with obsolete processes. They are adding efficiency to broken operations, which may, in the future, lead to a lesser need for headcount in low value work areas. Talking about today’s enterprises being so close to investing in Robo bosses is just very wide of the mark. What’s more, much of this RPA technology has been around for more than a decade – this stuff isn’t exactly revolutionary, it’s just becoming more popular as enterprises figure out further efficiencies beyond initiatives such as offshore outsourcing and shared services
Cognitive tools are only just emerging. While IBM has done a stellar job aligning its Watson capabilities with the healthcare industry (read our report here) and software experts such as IPSoft’s Amelia and Celaton have some compelling client stories to tell, the focus on self-learning and intuitive cognitive solutions are mainly confined to customer service technology and virtual assistant chatboxes. Talk to the call center BPO providers and they’re really only just figuring this out…. forget robobosses, we’re still just trying to figure out some basic software to make chatboxes work better these days. Moreover, with Watson, our research shows it’s best application today in the medical field is helping flesh out the bad science and saving scientists serious amounts of time doing their research. Meanwhile Celaton, in the UK, has created a really cool tool to help Virgin trains handle emailed customer queries. But the long and short, here, is that Intelligent Automation solutions today are great at augmenting processes and unstructured data pools, not replacing real people who make real decisions doing real jobs.
The definition of robo bosses, and the potential value, of robobosses is missing. There is, however, something to be said for the value of increased automation combined with analytics to better understand the impact — measured by targeted business outcomes — in a more realtime way during a contract with a “gig economy” worker (or any worker). Such knowledge can help us intervene and train/coach a project “going south” sooner, or catch fraud fastest, or identify a worker to “gets it faster”. Along these lines, we see value in “robo advice”, but the point also needs to be made that these “robobosses” (give me a break) do not work alone, such as with Watson and health / medical diagnosis and treatment, they work in tandem with doctors / clinicians, changing and refining the dr/clinician job (freeing up that person to be more targeted and more of a coach than a statistician) with the intent of better medical results. These robo tools (or whatever we call them) do not replace the doctor / clinician.
Monitoring software has existed for decades… so when does it become a “Roboboss”? Currently, there are probably a million or more workers just in the UK (for example) managed by extreme monitoring of some kind. The Amazon style warehouse pickers, fast food cooks, many call center agents, delivery drivers, assembly line factory workers are subject to time monitoring and computers giving them tasks. We’re just not sure when this turns into a roboboss?
Bottom Line: The real “roboboss” is the human worker who can use Intelligent Automation tools effectively
It today’s swirl of gibbering noise around the social media presses, it’s the responsibility of leading analysts, advisors and academics to be the voices of sanity and reason, when it comes to topics as critical as the future of work elimination through Intelligent Automation technology. The vendors love the hype as it gets them attention with clients, but analysts who like to take money from these vendors have a responsibility to articulate the realities of these technologies to their clients. They are great at augmenting work flows, and even aiding medical discoveries, but this is the real value – it’s not about sacking people. It’s about making operations function better so people can do their jobs better. The real “roboboss” is the human enterprise operator who can use smart Intelligent Automation tools to enhance the quality of their work.
Net-net, industry analysts, advisors, robotics vendors, academics and service providers need to engage with clients around how all these disruptive approaches will affect talent management as well as organizational structures. Even without these apocalyptic scenarios, some job functions are likely to either disappear or be significantly diminished (as our 9% forecast reveals). Equally, we need to talk about governance of these new environments, touching upon ethical, but also practical, issues. This is not only a necessity for the broader adoption, but also offers high value opportunities.
I’ll probably get a few nasty messages as a result of this piece, but I sincerely hope this has the outcome of steering our industry conversation in a more realistic direction, backed up by real data and experts who prefer realistic conversation that mere headline-grabbing and panic creation.
A special shout out to Cartoonist and Innovation evangelist Matt Heffron for penning this little gem:
