At HfS, we’re growing fast in a very competitive and volatile market… and with growth comes change – but change is always good if you ask me! The most fun in jobs is when you have changes – you learn new things, get new ideas and you meet new people to help accommodate the change.
HfS is always on the lookout for serious talent that can help our clients become even more successful. So happy days when I heard that some serious quality was on the lookout for some new chapter in his life. Sunjeet Ahluwalia has joined per August, and today I wanted to give you a little more background about him.
Bram Weerts, Chief Commercial Officer, HfS: Sunjeet, can you share a little about your background and why you have chosen sales as your career path?
Sunjeet Ahluwalia, Senior Director, Global Business Development, HfS: Having completed my Course in Metallurgy and Material Science, I took up my first job in 2001. Traveled all over India and experienced the diversity this great Nation has to offer. Sales were fascinating, and I met various interesting people all during my life.
With a sales career, you have a high level of accomplishment as you are directly the person responsible for making things happen. It is quite an adrenalin rush when you close a sale. You also get the satisfying feeling of providing your customers with products that they truly want and need, and you had a large part in facilitating and meeting their needs. Some jobs can be really redundant, and you might feel that you have not accomplished anything, but with a sales career, every sale is a direct result of your efforts.
Bram: Why did you choose to join HfS?
Sunjeet: While in Gartner, came across clients who spoke highly of this new upcoming company called HfS. I did spend some time to understand HfS and was very impressed by the depth and knowledge they bring to the industry. Two things that stood out were Social Media Impact and premium research that set HfS apart from others in their peer group. I wanted to be a part of this growth and contribute significantly to their success in APAC.
Bram: What are the areas focus on driving in your Sales role?
Sunjeet: Relationship and trust are two key pillars of Analyst and advisory industry. Aligning yourself to your client’s goal and priorities will help you become more credible. Being relevant to what your client needs are and trying to always provide them with superlative value surpassing their investments will be my key focus.
Bram: What trends and developments are capturing your attention today?
Sunjeet: Automation, AI, and Data-driven Analytics Capability are in my opinion redefining the way industries do and conduct businesses. Innovation isn’t mere a fancy term now; rather it is the necessity if you intend to keep the Brand high and retain your clients.
Bram: And what would you like to see different in the research / services industries?
Sunjeet: I wish research / services industries have a wider reach within the audience. It should be able to impact the way people work within their teams and hence enable them to achieve their personal and business objectives. Key decisions are formed using insights and hence its key to be very relevant and objective while we work with clients.
Bram: And, what do you do with your spare time?
Sunjeet:I enjoy reading poetries and listening to music. If I have more time, I probably will go for a swim or cycling.
Bram: If you could change one thing in Sales what would that be?
Sunjeet: People buy from people, and hence we should aim at superior trust based value added relationships. Discounting reduces credibility and hence that should not be a driver for a sales guy’s success.
Bram: Thank you for your time Sunjeet, it’s a real delight to have you onboard and work with you in these fascinating times!
Q2 2016 has been an exciting quarter of results so far, with a few surprises particularly amongst the large offshore providers. We commented on the pressure on Infosys caused by its results last month.
We see a real change in fortune amongst the big players, certainly over the last two quarters. With the players with strongest growth rates over the last three years, TCS and Cognizant dropping year on year growth to single digit.
If you look longer term, the shift left of the big offshore players is accelerating—with these latest results accelerating this trend.
TCS, HCL, and Cognizant will see revenue growth slow dramatically over the last three years. The bubble chart shows the Trailing Twelve Month revenue growth and margin for a period to end June for the last four years. So the TCS 2016 bubble gives aggregate revenue growth and operating margin for the last four quarter to June 2016. Incidentally, the size of the bubble is proportional to revenue.
All of the providers have managed to keep operating margins within a fairly narrow range—certainly better than most of the traditional onshore IT and BPO players.
The reasons for the shift are complicated and intertwined. It is tempting to see the most consistent providers, in this case Cognizant and TC,S as bellwethers of the market—so the slowing down of these firms growth is a strong indication of a slowdown in the market overall. Although this, particularly when you look at Q2 results so far, isn’t borne out by other provider’s results, particularly Accenture, which had a bit of a barnstormer certainly compared to its recent results.
Another possibility is that the scale of these firms is getting to point that maintaining double-digit growth rates is such a large amount of actual dollars that these providers sales engines cannot fuel level of client acquisition. There is probably some truth in this and getting the size and shape of your sales team right is a major challenge for service providers at the moment—particularly given the current uncertainty in the market. However, given that both Cognizant and TCS achieved higher levels of dollar growth throughout 2010 and 2011—while they were half the size—makes this theory less appealing, and certainly isn’t the whole truth. In Q4 2010 (calendar to end December 2010) Cognizant added $408 million in revenue, and TCS added an impressive $607 million year on year. This is compared with $285 million and $326 million, respectively, in the latest quarter Q2 2016.
What has changed most is the market itself. Partly with the size of the engagements, we have seen the outsourcing bills in IT infrastructure tumble by 40-50% and in some cases 60%, which means renewals come in at reduced rates and expectations around cost savings continue to ramp up, especially since automation starts to add another lever to the cost saving toolkit. This is particularly crucial as Tier 2 offshore firms focus efforts on combining savings from even cheaper locations and automation to lick the remaining cream off many deals.
Although outsourcing was the example used, this is also impacting professional services, mainly implementation services. The increasing emphasis on technology driven by digital and customer centric solutions has produced many opportunities, and while the number of deals may have increased, the contracts remain relatively small. Reengineering a bank’s core applications is, in scale terms, 20 or 30 times the design and implementation of a mobile app. Additionally, digital deals are often more involved and have more complex requirements that draw on a broader set of skills. This is undoubtedly slowing the sales cycle and means the upfront effort to engage with these small deals is higher. The promise is that demonstrating competence and the ability to deliver value within these often high-profile engagements will bring further work downstream. The market is still awash with proof of concept digital deals and the converting these into more meaty engagements is taking its time. So, rather than a lack of absolute capacity in the offshore provider’s sales teams, it is the makeup of these teams that is taking the time to adapt to these new types of deal.
The Bottom Line: The market sands have shifted, and the impact is now being felt by offshore firms
OK—so we may start sounding like a bit of a broken record. However, long-term success in the services market is dependent on inertia or the lack of it. Providers that are reacting quickly to the changing market conditions are growing, and they’re not necessarily the low-cost offshore-centric providers. We are sticking to this message: the x-factor for an enterprise service provider is agility—both regarding the provider’s ability to adapt to the market conditions and capacity to deliver adaptive intelligent solutions to clients.
These firms are having to adapt to these changing conditions on the fly. Unfortunately, there is no timeout to use while you have to adjust your processes, bring in new skills or reenergize your sales teams.
We are keeping an eye on all the players in the market and are looking for signs of this agility being reflected in financial results—halting what seems like the inevitable shift left.
But all is not lost! I see some very powerful paths Procurement can take to become a more appreciated and valuable business function in enterprises.
Procurement is suffering from a reputation problem
Many executives express their frustration with procurement frequently claim, “they just don’t understand what I need, and obstruct me from achieving my goals”. Procurement is often seen as that last hurdle before reaching the finish line like a police officer trying to find holes in your story, looking to give you a slap on the wrist if they can. Everyone tries to circumvent Procurement when they need to buy products or services.
The underlying issue often lies in the emphasis on the transactional side of procurement in enterprises. People are subjected to procurement processes and form-filling that are very time-consuming, valueless and inefficient, feeling like they’re being sent from one desk to the other.
Of course, there is a role for Procurement. Of course an enterprise needs to have expertise and capability in contracting, buying and using services from third parties. And of course rogue spending is an issue for enterprises. But it’s time to take the next step. If being restrictive didn’t bring you the seat at the table you envisioned, if ‘the business’ still doesn’t ‘get’ you and doesn’t take you serious, its time to change the tune. But how?
Guides of the As-a-Service Journey
I want to argue Procurement is in a unique position to reinvent itself and that we should love Procurement.
HfS sees a dramatic shift in services towards the As-a-Service Economy. Key characteristics of the As-a-Service Economy are:
More and deeper collaboration between suppliers and buyers
A focus on business outcomes
Usage of digital platforms, analytics and automation to facilitate the convergence of people, technology and process
Services that are multi-client, leverage new opportunities for efficiency and quality and focus on the customers’ customers.
Procurement can be the enabler of the As-a-Service Journey. Don’t look further…. Procurement should be the broker of capability. Haven’t you noticed how “IT Services” and “BPO” and “software” have become procurement categories in so many buyers today? As services and technology become increasingly commoditized, standardized and commonplace, the greater the opportunity for Procurement to take the lead in adding value beyond merely negotiating price points.
The future of the supplier-buyer relationship is collaborative engagement and that starts in the contracting phase. Procurement should have a clear vision on the way the enterprise wants to form relationships with suppliers, what the nature of the collaboration should look like and how contracts facilitate collaborative engagements.
Procurement Brokers of Capability
The key to becoming a broker of capability is to be the spider in the web. In my years as a consultant, I often didn’t have a formal team. I went out into the organisation, identified the people and capabilities I needed to tackle the problem, formed informal teams of the right people and made it happen with them. I was a fixer more than anything, understanding the problem, limitations, possibilities and I knew the right people and brought them together. Not always easy, but a lot of fun. This is how I envision the future of the procurement professional. Identify business needs (you do this by actually talking to these people, understanding what they have to achieve), dive into your network and get the capabilities together that are needed. If you take a partnership approach, look at relationships long-term rather than short-term transactions, people are willing to do a lot for you.
So what is needed to truly become Brokers of Capability?
Be a business function, not a finance function – Procurement should be immersed in business units to understand the business, understand the needs, understand the market. Business executives have to allow Procurement into their world, Bram was right to point to business executives as a source of Procurement’s woes.
Category Expertise – One of the hardest areas to fix for procurement is strategic sourcing and category expertise, especially in the tail of indirect spend. This requires deep expertise of the category and the market, which is a challenge for enterprises to build in-house.
Information – At the heart of every buying decision lies information. Procurement has more data at its disposal than ever before. Information and insights derived from all this data is critical for the evolution of the profession. Digital platforms have emerged and are quickly growing in adoption and capability. Advanced analytics are drastically improving the insights and decision-making processes for Procurement.
Relationships – Building and maintaining relationships, internally and externally, is critical for modern Procurement. Price isn’t everything and it’s definitely not a predictor for the willingness to go beyond the contract and take a relationship approach to the engagement. Time and time again in reference calls for HfS Research Blueprints and in our discussions with services buyers at HfS events, the best service providers are perceived to be the ones investing in the long-term relationship, going above and beyond expectations and contractual obligations to deliver real business value to the client. Incorporate these tenets in your sourcing practices and your enterprise will benefit.
End-to-end focus – Key to realizing business outcomes and benefits of good procurement are closed loop processes and follow through after the ink on the contract is dry. Turning theoretic savings into real ones is still pretty hard to achieve.
Tech savvy – Technology platforms with embedded process automation and advanced analytics are emerging at the core of Procurement. Procurement professionals need to be more tech savvy than ever before to make sure they use and leverage the available technology platforms.
Ok, we agree it’s Procurement’s job to know what is out there, what the quality of products and services are, what going rates are and which terms are acceptable. They are the ‘go to guys’ when you as a business executive need something to achieve your goals.
I’m not naive. I know there are still a lot of people in Procurement hiding behind procedures and forms, terrified of becoming obsolete without them, clueless what your business goals are.
The Bottom-line: It takes two to tango
Friends in Procurement, if you don’t have a vision of Procurement being a business facilitator, now is a good time to get one. And “business”, this asks for different behaviour from you as well.
Question: Why are we becoming so obsessed with Automation and As-a-Service relationships?
Answer: Because outsourcing has worked so effectively, we can now look to new levers to pull to find that next threshold of value
Question: Will the next person who says “Outsourcing is just so Passé” get a punch in the face?
Answer: Yes
Barely three years’ ago, we were still lamenting that nagging lack of innovation in outsourcing relationships and the inability of service providers to deliver those transformational delights to their clients after they had come through with their promised cost savings. But let’s face it, the FTE-based labor arbitrage model has really worked – and a lot better than we thought it would, during those heady days of offshore screw-ups. I can barely remember the last time I sat on the receiving end of a group of clients throwing their service providers under the bus because they couldn’t get the procure-to-pay transition right, or got caught sneaking through change-orders to fix their dodgy coding.
Service relationships are more stable than ever, but focus is shifting to As-a-Service delivery and Intelligent Automation
You only need to look at the intentions of 371 major enterprise buyers towards their outsourcing contract renewals from our new Intelligent Operations Study to get the picture that this isn’t an industry in delivery turmoil, about to self-combust because deal flow isn’t growing at quite the clip it was a couple of years’ ago. In fact, only one-in-four IT services clients today are even considering ditching their current partner, and a even lesser proportion with their BPO provider. However, many do want to make the switch to As-a-Service contracts:
The focus on automation is the logical next phase of value once stability of global service delivery has been reached.
The availability of smart automation tools and platforms from the likes of Automation Anywhere, BluePrism, IPSoft, Nice, UIPath, WorkFusion and Redwood have really been conversation catalysts to get the automation conversation to the table. In fact, most of the buyers we’ve been interviewing in our current Intelligent Automation blueprint are still in the early strategy and roll-out phases of their automation experiments. Moreover, as our research clearly shows, well over half of today’s major enterprises have automation plans firmly in play over the next year:
Bottom-line: From offshoring to efficiency to automation, it’s all a natural evolution
Let’s face facts, when your company hires an outsourcer to provide you with 500 staff to deliver back-office transactional operations, do you really expect this 500 number to stay constant for ten years? Of course not… as operations stabilize, as better technology helps streamline processes, your expectation is always to get the same work done for less hired effort. It’s like when you upgrade your accounting software – do you really expect to have to hire more people to operate it for you? Of course you don’t… you expect better quality for less effort.
So let’s stop berating “outsourcing” as some archaic practice that went out of fashion with the Blackberry. It’s a practice of globalizing operations that we’ve got really good at – and the fact that we’re now obsessing with getting into the weeds of automating processes, is testament to our progress that we’re running our businesses much more efficiently – and digitally – these days.
Usually when there is an acquisition in the tech/services space, you can always appreciate why the deal was done; no matter how cynical you try to be, there is always some gold in there to dig out.
However, in the case of Dutch staffing giant Ranstad buying the shriveled remains of a legacy resumé-based online recruitment firm that made its name during the dot-com days, my reaction is simply one of “Why? Just why?” The business was cratering (albeit slowly, but steadily) in a world where most people just don’t use Monster anymore to do their recruiting and job hunting—it’s a business from a bygone era. But there’s always someone out there ready and willing with the ego to resurrect a dinosaur (or a Monster in this case). So I asked the question to our HR-as-a-Service analyst, Mike Cook, to give us the answer…
Mike, Is there a Monet in the Monster or has LinkedIn already Rinsed the Shop?
Phil, Once Randstad blows off the dust from Monster, will it like what it finds? In the thrift shop of the recruitment market there are treasures to be found but in a market that has been turned on its head by the LinkedIn juggernaut, there isn’t much left.
In its strategic priorities for 2015-2016 Randstad aimed to capture positive growth opportunities as well as be in the top 3 scale positions in each market it participates in. Over the last 12 months this strategy has been bearing fruit—following the acquisitions of twago, Careo Group, Obiettivo Lavoro and RiseSmart.
However, these acquisitions have just been dwarfed with Randstad announcing the acquisition of one of the true veterans of the online recruitment market—Monster, for $429 million in cash. This represents a sale price of $3.40 per share, a premium of 63.7% over Monday’s closing stock price. But it’s worlds away from Monster’s $8 billion market cap achieved in early 2000. With much of the market questioning the 47% premium Microsoft paid for (a still extremely relevant) LinkedIn (see post), one should wonder about the wisdom of paying such a price for a site that is declining in popularity.
Monster was one of the original online recruitment leaders but has struggled to stay ahead of the pack and has lost significant market share in recent years. Direct competition is fierce in this industry and recent acquisitions, such as Indeed.com taking over Simply Hired, have highlighted this.
So what does this acquisition mean for Randstad?
Bolsters Randstad’s staffing and RPO capabilities: The increased footprint this acquisition gives Randstad should prove beneficial and provide improved service delivery to the provider’s staffing and RPO clients. However, the value of Monster’s candidate database is questionable. Unlike LinkedIn, which users update regularly, job seekers usually abandon job search site profiles when they’re not actively searching for a role.
Raise Randstad’s profile, particularly in the US: Currently Randstad’s US operation accounts for around 20% of its revenue. Considering its aim to be in the top 3 of each of its markets, the acquisition of Monster with its US-heavy revenue model (70% revenues from North American operations in 2015) may make sense.
Outside of these takeaways, it is difficult to see the value for Randstad in this deal. Monster looks to be the pensioner still wearing high tops, shades and a tank top, with its platform now largely outdated and its market share no longer what it once was. The likes of LinkedIn have disrupted this market to such a degree that legacy online recruitment sites are struggling to survive. This bid for survival is being played out in the massive consolidation currently taking place in this market. The one card that online recruitment sites still have to play is in the contingent workforce market, but with Microsoft is looking to steamroll its way into this area, through LinkedIn—and the forecast looks less than sunny.
HfS readers are used to us relentlessly preaching the inexorable journey toward the As-a-Service Economy. And you still aren’t get familiar with the Eight Ideals, then you must have locked in solitary confinement for the last year…
But there are many missing pieces in that big jigsaw. Service management, while unspectacular, is a critical component of the digital underbelly of the OneOffice as HfS has termed it. As ServiceNow is aiming to expand the notion of service management to evolving into the “third estate between CRM and ERP,” providing a new cloud-based level of efficiency between front and back office, we have asked our Intelligent Automation expert in residence, Tom Reuner, to take stock as to where the ServiceNow ecosystem has advanced to.
Tom, there appears to be a buzz around ServiceNow in the industry? Is the hype justified and where does it fit in strategically for buyers?
Amidst the marketing noise in our industry, ServiceNow still stands out. And that, Phil, is quite an achievement as service management is really not among the sexiest of topics. You can see that in thousands of developers and partners having made their pilgrimage to Knowledge 16, ServiceNow’s customer event in Las Vegas this year. Crucially though, ServiceNow has expanded from the early focus on ITSM and from the slightly blurry yet smart positioning as “Enterprise Cloud Company.” Industry stakeholders are rather enthusiastic about the single data model, the embedded workflows and new ways of collaboration. As such, ServiceNow has the potential to evolve into one of the key building blocks for moving toward As-a-Service because its core value proposition centers on clients accelerating their time to value through faster actions and interactions, overcoming clunky legacy solutions like ITSM.
With that in mind, the focus is on working toward a real-time single pane of glass: The ability to communicate, collaborate and manage IT and operations in real-time is at the heart of ServiceNow projects and thus strongly aligned with the notion of the As-a-Service. Yet, only few providers articulate this as part of an innovation journey. Leading proponents that actually do this are Linium and Infosys. And this points to a broader challenge. As ServiceNow is expanding its capabilities, providers have to find a common language between IT and business: The marketing and go-to-market messaging is largely stuck in an ITSM centric mindset. The language is dominated by function, features and copious amount of jargon. However, the more ServiceNow is moving beyond the core ITSM capabilities, the more the messaging has to be adapted to this new set of non-technically minded stakeholders.
More broadly speaking, for buyers ServiceNow can help to make business alignment finally a reality: Several stakeholders we spoke to referred to ServiceNow as having the potential to evolve into the “ERP for IT.” Yet, business leaders rarely get involved in the planning process and often wait till “IT got its house in order.” Thus, there is a disconnect between the ambition to establish ServiceNow as the operational foundation and the implications to manage and run the business.
How are the winning service providers approaching ServiceNow services today? What are they doing beyond the bread-and-butter basic ITSM services?
Phil, the market is still in a nascent phase of development and therefore we see a fragmented service provider landscape: Revenues from ServiceNow Services for individual service providers are still below $100m from the leading providers, indicating a small fast growing market. There is plethora of start-ups and boutiques that will drive innovation and find their place in the growing ServiceNow ecosystem. ServiceNow aims to be the Third Estate between the front and the back-office. At same time it aims to expand toward the front office. Thus, comparison with Salesforce is unavoidable.
With that in mind, providers are evolving from the initial focus on ITSM capabilities toward what ServiceNow calls Enterprise Service Management. Thus we see them expanding into business functions such as HR, Facilities, Legal, etc., thus overcoming the traditional barrier between IT and business. Leading proponents are Linium, with CSC and Accenture catching up. But we see also ServiceNow being increasingly integrated into vertical offerings and well as frameworks and accelerators offered. Accenture is leading the space, with Cognizant catching up. Beyond that we would highlight innovative offerings around security and IoT. ServiceNow has acquired BrightPoint Security to close the gap between IT operations and security. As a result, CSC, EY and Acorio have started to build out capabilities. Similarly in IoT, While nascent and at proof of concept stage, providers like Aptris and EY are starting to experiment with IoT scenarios. And lastly, of course SIAM/MSI is the logical evolution from the starting point in service desk projects with Atos, HCL, Wipro and Accenture being the leading proponents.
Surely, it is not all plain sailing, Tom. Where are currently the main challenges around ServiceNow services?
Two issues are jumping to mind: The battle for talent and the lack of clarity for the direction of travel. As the ServiceNow ecosystem is still nascent, talent remains scarce. In many projects staff is being trained on the job with varying degree of success. Consequently, organizations have not always seen an alignment from sales process (and promises) and delivery. On the other hand the direction of travel remains a blurred picture: While an organization’s starting point is firmly rooted in ITSM capabilities with a view to overcome clunky legacy tools, the eventual destination is blurred at best. Crucially, the motivation for ServiceNow adoption lies more in embracing a single data model than the allure of cloud-based services. Yet, consulting capabilities that go beyond ITSM are scarce and many provider follow a “land and expand” approach. Many organizations we spoke to outlined that service providers fail to proactively propose innovation and help buyers with a clear outline of the future state.
The hype around Intelligent Automation keeps bubbling on days, to put it mildly. So where is ServiceNow fitting into that picture?
Phil, the disruptive element of Intelligent Automation is decoupling routine service delivery from labor arbitrage. Therefore, service providers remain comparatively and unusually coy on the topic, so I am struggling with the term “hype.” Rather, I see hesitation and confusion out there. Having that said, the market development is noticeably maturing. A reference point for that is the service orchestration around the notion of Intelligent Automation that is starting to set in. Providers like Atos, TechMahindra and Hexaware are starting to standardize service delivery on ServiceNow, link this up to orchestration engines like Automic or Cortex and put the plethora of Intelligent Automation on top of that. Thus, ServiceNow is becoming part of the broader discussions on service delivery and automation.
Does ServiceNow have the potential to move center stage in the As-a-Service Economy? How do you see the market evolving in the next few years?
As I have outlined, stakeholders suggest that ServiceNow has the potential to evolve into a critical building block for the As-a-Service Economy—not least because of its single code and data model. Yet, ServiceNow itself has been slow in embracing the notion of an ecosystem that goes beyond treating partners as mere sales channels. This is starting to change though, which is critical as the notion of the As-a-Service Economy is predicated on a collaborative partner ecosystem. Partners would like to see more investments in joint marketing and joint capability development such as vertical offerings.
In order to progress toward the As-a-Service Economy, the supply side needs to invest in consulting capabilities that go beyond technical consulting. In our discussions with clients the lack of proactive innovation and the struggle to provide guidance on the future state of operations have been as vocal as consistent. But we will see more M&A activities as the juggernauts will continue to build out capabilities. During the project CSC did acquire Swiss Aspediens and we expect to see many of the boutiques absorbed over time. Thus, we look forward to extend the discussions beyond the organizations that we have covered in this report.
HfS Premium Subscribers can click here to download their copy of the new Blueprint Report, ServiceNow Services 2016
It’s hard to overstate the importance of product support to software and high-tech companies. Good product support helps in customer satisfaction and influences purchase and repurchase decisions.
But what is good product support? Ideally, it’s where no support is required. Although companies should strive to develop products that require minimum product support, they should also look at improving the customer experience and reducing time spent on product support. Overall product support systems should be cognitive, intelligent and self-improving.
This is all the more important because most customers in the As-a-Service Economy are used to a customer-centric user experience and instant gratification. They expect the same for software and high-tech firms in both the consumer and enterprise segments. Companies need to minimize the need for product support, provide an improved customer support experience, and improve the effectiveness and timelines for product support.
Most companies outsource product support. But, whether in-house or outsourced, improving product support typically means adding headcount or seats, which will increase costs. Adding seats may improve responsiveness but may not improve customer support effectiveness.
There has to be a better way to do it. Enter the As-a-Service Economy, in which product support can be re-imagined and existing product support process can be disrupted.
Goodbye legacy product support and welcome cognitive product support
The product support process can be made cognitive or intelligent by leveraging analytics, automation, and engineering approach. The business outcome and productivity gains committed in the contract will drive the adoption of cognitive product support levers and deliver value to the enterprises. Our estimation based on case studies we discussed shows that software and high-tech companies can save about 40% of total product support cost by moving to cognitive product support as shown in the Exhibit. This 40% saving is over and above any labor arbitrage which service providers promise when they leverage offshore resources.
Exhibit: Value Proposition of Reimagined Cognitive Product Support Process
Apart from reduction in product support cost, cognitive product support increases customer satisfaction by
Reduce MTTR by increasing resolution accuracy
Reduction in invalid escalations to backline/frontline
Increase Self Service to maximum extent possible
Improve forecasting accuracy
Both users and enterprise will benefit from cognitive software product support but existing outsourcing relationships need to be revisited
In our research, we’ve found that biggest obstacle for software and high-tech firms in achieving cognitive or intelligent operations is their existing outsourcing relationships. Some of our buy-side customers believe that their primary service providers though are providing the good quality support they are still using legacy ways and nothing has changed in the product support process in the last ten years.
Enterprises should leverage cognitive product support if not for savings then for customer satisfaction. Phil recently had a very bad experience in customer support from a large high-tech enterprise. He had to speak to 16 reps to resolve the issue. No prize for guessing that this large high-tech enterprise will not be Phil’s first choice at the time of repurchase.
Net-Net, software product support is ripe for disruption. Progressive software and high-tech product companies will not hesitate to leverage cognitive software product support and futureproof their value-driven product operations.
HfS subscribers can click here to download the full POV, which details our research and recommendation on cognitive software product support
I have been an avid book reader for as long as I can remember. And when I look back, I am amazed how my process of book selection has changed over time from the wisdom of crowds to the wisdom of experts. There are parallels to the outsourcing industry, including sourcing advisors and analysts.
While I was a student, I had enough spare time (this was before the internet era in India), and I used to read a variety of books. I didn’t care about the advice of experts back then. I used to go to bookshops, browse the books and bought the ones I liked. When I say bookshop, I don’t mean likes of Borders or Barnes & Noble. In India, especially in Delhi, students hang around these kinds of weekly book markets that open on streets—only on Sundays, when regular shops are closed and are student-pocketbook-friendly. These markets have second-hand books, stolen books, pirated books, all in one place—and believe me you can’t tell the difference!
I was amazed at the risk these weekly booksellers would take and physical hardship they endured moving the books books in and out every Sunday. I asked a bookseller once how he decided on his book selection because he’d have to carry unsold books back home at the end of the day via not-so-friendly public transport. He said he asked people around in the trade which books are being sold in the big bookshops, and he tried to procure them in a cost-effective way. I didn’t ask details of his cost-effective procurement ways, but this bookseller—along with other booksellers in this market—relied on the wisdom of crowds.
Fast forward to the internet era: Amazon and its best seller rankings in different categories play the role of the wisdom of crowds. Later on Goodreads came along, which took the wisdom of crowds in book selection to an another level; Amazon acquired Goodreads in 2013.
By the time Goodreads came, I was few years into my professional life and had loyalty cards of many leading bookstores. I didn’t need to visit Sunday street bookstores any more. But my behavior remained same (i.e., I still relied on the wisdom of crowds). I was buying books using Goodreads/Amazon recommendations. But there was one problem—I didn’t have enough time to read.
Also, I was frequently annoyed when I realized that my precious reading time was often wasted on books that didn’t really interest me. I later realized, using analytics on my unread books, that I could now read only 5-6 books in a year. My risk profile has become bigger because my time was now a more precious resource, as I juggled my professional and personal lives. I didn’t want to waste a couple of months reading a potentially boring book. Also, unread books in my library were annoying me because reading them were becoming my to-do list—and I hate to-do lists. The pressure of reading was overwhelming the pleasure of reading.
So I decided to rely on the wisdom of experts and not buy more than 5-6 books in a year. I now rely on book recommendations of few experts I admire, such as Bill Gates, Elon Musk, Warren Buffet, and Mark Zuckerberg. Also, there are a few more folks I know, who are not as famous, but nevertheless give equally good recommendations. I mainly select my books out of their recommendations.
In the outsourcing industry too, the wisdom of crowds and the wisdom of experts come into play but in a different way.
How does the wisdom of crowds play into the selection of service providers? The best example might be a service provider’s performance in the stock market. Service providers that are doing well in the stock market are better companies—at least according to wisdom of crowds. Who has not heard “No one ever got fired for buying IBM” in the last century?
But that was so 20th century! The companies performing well on the stock market might not fit an enterprise’s needs for a particular geography, industry vertical, service line or specific solutions. What about some of the companies that have are not listed in the stock market?
Here comes the wisdom of experts—or analysts and sourcing advisors. Analysts come first in the value chain and give enterprises the overview of the industry and help them identify good companies in their choice of industry, geography and service lines. The sourcing advisors come later. They advise enterprise on their specific needs and solutions and run the sourcing process. Enterprises that can afford to pay for analysts and sourcing advisors can rely on the wisdom of experts. The rest rely on the wisdom of crowds.
What if one firm can offer the wisdom of experts at the price of the wisdom of crowds? I don’t know if any of my sourcing advisor friends can do this (a disclosure: I am a former sourcing advisor), but analysts (not legacy) can do this, and that’s what HfS Research is trying to do by offering 75% of our research free. So enterprises/individuals who can’t pay for the wisdom of experts can also have a view of service providers better than the stock market!
Anyone with a real history in the services industry will be familiar with the insights of one Christine Ferrusi Ross, who spent many years leading the services and sourcing practice for Forrester Research, during the firm’s heighday. And in pre-HfS days, I used to enjoy meeting Christine for lunches when we would bemoan the state of the research analyst industry and what needed to be done to revitalize how analysts do research. Little did we realize back then we would be able to shake up the analyst industry together in an analyst firm not beholden to the whims of their paying suppliers and analysts confined to covering tiny slices of software markets. So when we got the opportunity to bring Christine, or “CFR” as her colleagues like to call her, to help shape our events and research strategies, it wasn’t a difficult decision… especially when you hear her views about moving to outcome-based contracts.
Welcome Christine! Can you share a little about your background and why you have chosen research and strategy as your career path?
Making a career of research and strategy, and then product development, came serendipitously. What I explicitly chose was being an analyst — because it seemed like an easy job at the time! When I graduated college I was working in a public relations firm for high tech companies. A big part of my job was convincing analysts to take briefings with my clients and then hopefully convince them to say something good about those clients to reporters. And I thought, wow, an analyst’s whole job is based on people being nice to them! PR people, tech execs, and reporters chasing analysts around like they were rock stars, who wouldn’t want that kind of a job? So I called some reporter friends who got me connected to some analysts and the rest is history. From the content side, I had done PR work for ERP companies and I understood how databases worked. So the application development and systems integration space was where I landed in my first analyst job.
Can I mention a competitor here? Because I started at Dataquest (now owned by Gartner) and was lucky enough to work with Allie Young, who taught me that the whole “rock star” thing was really not what the job was. She was the one who showed me that being an analyst meant doing good research and making sure you are as accurate as possible. Once I was at Dataquest, I realized I found my path — I love research, strategy, and I love the services space. From that first job, I’ve expanded into strategy and product development because I wanted to get deeper into helping clients solve problems in a tangible way and not just through research.
And why did you choose to join HfS… and why now?
Phil, I was joking with someone the other day that the real question is who thought it was a good idea for you to bring me on? It’s like taking the two kids causing trouble at the back of the classroom and letting them teach the class! That’s exactly what it’s like! You and I have had many conversations about where the IT services market is going, and where the research business is going. I’m not particularly bullish on either in their current forms. And HfS has a braver outlook than most when it comes to pointing out the flaws, but more importantly what hard changes have to happen if the businesses in these areas want to stay viable.
So with that context, why strategy and product development instead of fulltime analyst? I have spent a lot of time over the years with buyers who are frustrated. They have trouble negotiating with suppliers because deals are complex. But they’re also not getting the kind of help they need from consultants, advisors, and analysts. I’m excited to be working on some new products that will make buyers’ lives easier and hopefully make the industry as a whole more productive.
What are the areas and topics that you will focus on in your role?
On the “corporate” side, I spend most of my time on events and building new products. But I always say that analysts are born and not made, so I can’t really stop myself from looking at a few topics, at least. Right now, those topics include supplier risk and security, sourcing governance, contract negotiations, and improving the quality of life of people affected by our supply chains. There are a lot of good things we can do for the world — reducing human trafficking, for example — just by being responsible buyers and vetting suppliers properly. I talk about this more in my first blog post about being a superhero.
And what hot trends and developments are capturing your attention today?
Within the areas I mentioned, I’m particularly interested in compliance with supply chain and supplier risk requirements, as well as how contract negotiations are affected by emerging technologies. For example, it’s one thing to sign a contract with an automation software vendor. It’s another to think about how automation is applied to your services contract and the impact that has on the different cost levers. Related to that, I’m spending time on defining and contracting for outcomes. We’ve been on this ride before, but we really have to get it right. And once we get the definitions and the contracts right, what will be the impact on our industry?
So what do you do with your spare time (if you have any…)?
Hmm, a lot of things blend together in terms of work and personal for me. I’m very interested in fashion, and they have supply chain and sourcing problems too, in fact probably much worse than the tech industry. Especially problems like poor worker conditions and sweat shops, which I already mentioned is a hot button for me. I like music. You’ll hear a lot of my music taste at HfS Events actually, since I pick the playlists. I also go to a lot of concerts. My next concert is Steve Vai, and I’m really excited to see him since I’ve loved his music since college. In the past couple of years I’ve seen a lot of global musicians like Ed Sheeran, Stromae (from Belgium), One Ok Rock (Japan), Hozier (Ireland), Exo (S. Korea), BTS (S. Korea) and Block B (S. Korea.) The whole kpop industry is pretty fascinating. As someone who does product development and management, I was surprised how many product and marketing best practices we talk about in the technology that the kpop industry puts into practice. I love to discover singers from other countries, so if anyone has suggestions I’d love to hear them!
Welcome to HfS, Christine. Delighted to have you choose us as your analytical home!
Last week we wrote a blog about the leading BPO/IT services players in EMEA, this week we’ll look at North America. Conveniently the headline is more or less the same: the Global majors: IBM, Accenture, and HP, still dominate the top of the list. Although the question here is… for how long?
Frankly, much of the same comment applies to the Top three in North America as it does to EMEA:
IBM is struggling to know what to do with its services business. The cash cow days of traditional large scale infrastructure and BPO deals are gone – with the remaining “traditional” large scale engagements much slimmer pickings and being very aggressively targeted by Indian-heritage competitive usually offering lower price points. Its pivot, like many of the technology players (but with more justification), is toward a more intelligent adaptive operations play driven by more advanced cognitive computing and analytics where clients pay for achieving business outcomes, not bill-by-the-hour labor rate cards. However, the industry is caught in a time lag between the old world scale deals and the coming intelligent deals, which could take several years to flesh out. How IBM (and its ambitious rivals) can bridge both old and new worlds of service delivery is a significant challenge.
The “New HP” – is pretty much an unknown quantity in services with the announcement of the CSC merger. Obviously, the new entity will be larger, and likely to be in the number 2 spot next year. However, while, HPE is making announcements about its future, we have heard little about the new services firm. We apologize slightly for still calling them HP, but we just keep thinking there is no point changing it until we know what the name will be, and people understand whom we are talking about even if it should technically be HPE right now. What concerns us about New HP is it appears it could be planning to compete head-on for bread-and-butter IT infrastructure business against the likes of Wipro, TSC, HCL, and Infosys. Brand India is popular among enterprise clients these days, especially for operational delivery at scale. Hence, New HP has its work cut out attempting to preserve its slide of the North American IT services pie.
Accenture has managed to balance the worlds of operational delivery and consulting to become the industry bellwether. The one service provider which has firmly established itself with its 144 diamond clients is Accenture, which expertly manages them through the forces of change at a pace which suits them. Accenture’s path is on the face of it a little smoother, partly down to its market performance, its deep C-Suite consulting relationships and its reputation to bring sanity to complex IT and business process worlds – its services seem as in demand as ever, with many clients boating their “we use Accenture” badge with pride.
The differences appear just after these three service providers. With the offshore-centric firms making a much stronger showing with Cognizant and TCS in number four and five positions, not forgetting Infosys at 12. Ignoring the shenanigans at HP, you could argue that Accenture, Cognizant, and TCS are the top three performing IT/BPO services firms in North America in recent times.
Over the next two years, there isn’t likely to be much change in the top three. Accenture is unlikely to be caught by Cognizant and TCS in that time. This is unless IBM makes a similar move to HP, hiving off another part or parts of its services business. Although there is a question mark, at least in our mind, on the exact final number attached to the new HP entity – and this will depend exactly on what is included and not included in the final deal. However, it is still likely to be significantly bigger than Accenture. So – even with big declines and fair winds behind the offshore players, it’s unlikely they will overtake in this time frame.
Not to spend too much time dwelling on the comparison with EMEA, the lack of the European giants Atos and Capgemini in the Top 15 is worth mentioning. Largely given their recent focus and acquisitions, this demonstrates the level of investment and determination required to make a dent in the North American market.
The US government contractors would have also dominated a similar list to this in the past – with Lockheed Martin, Northrup and General Dynamics all having significant revenues in this space. However, thanks to restructuring and slowdown in US government spend, Lockheed Martin has slipped off the bottom of the chart. General Dynamics and Northrup still have a place in the list, but revenues have slipped significantly for both firms over the last five years.
Amazon Web Services (AWS) remains just off the list, but is likely to overtake CGI next year if it continues its current market momentum, we could also see other cloud players like Microsoft and Google in the years to come.
Bottom Line: Agility to keep ahead of the market headwinds is still the critical X-factor
Although the global majors are likely to dominate the top of the list for at least the next couple of years. The direction of the market is largely being forged elsewhere, and unless they can tap into the zeitgeist more directly, most will end up as another CSC or EDS.
We have observed, in other blogs, that the competitive landscape was increasingly two-tier, with the main differentiator between the two categories being inertia, however, it is those companies that are reacting quickly to the changing market conditions that are growing, and not necessarily the low-cost offshore-centric providers. We are sticking by this fact that the x-factor for an enterprise service provider is agility – both regarding the provider’s ability to adapt to the market conditions and capacity to deliver adaptive intelligent solutions to clients.
Usually when there is an acquisition in the tech/services space, you can always appreciate why the deal was done; no matter how cynical you try to be, there is always some gold in there to dig out. 
