“Our clients come back from conferences demanding they need an Automation and a Digital strategy, with no idea what they are”, said a senior partner in a Big 4 consultancy yesterday.
I have never known a time in the world of business when there is no much hype, confusion and unsettlement. Sadly, we are now living in a world where snippets of soundbites are so intensely shared across the variety media we use (I nearly said “omnichannel”) that our industry is completely dominated by hype, as opposed to reality.
Data from our recent As-a-Service study just shows how alarming this disconnect is… the C-Suite is just living on a different planet from the teams below them trying to keep their businesses functioning:
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“Cannibalization” is merely the C-Suite waking up to the realization they can spend less with their service providers
Let’s stop beating around the bush on this one – services providers (in most cases) make nice profit margins on their outsourcing deals. What’s happening is that supply is now outsripping demand – there are too many competitors vying for a pool of enterprise clients who want to decrease their external spend. The “demand” is coming from the next layer down of clients (the proverbial “mid market”) which just don’t have the size and resources to warrant the attention of the top tier providers. What’s more, the top tier of service providers is simply not structured to go after the mid-market – they can’t afford to – and are stuck circling the same legacy enterprises like vultures trying to find new ways to squeeze money out of them.
Terms like “Digital transformation” are being used as the new levers to encourage gullible C-Suite executives to part with budget in an oddly similar way ERP was used 20 years’ ago. The only difference being that, with ERP, you would buy a specific product and find very expensive ways to retrofit it into your enterprise, with “Digital” you just spend wads of cash on consultants to try and help you rethink how you do things… and they proceed to retrofit whatever new tech they can sell you to make those things happen.
So… when 58% of leadership sees a lack of willingness to cannibalize, it’s because they have wizened up to the games of the service providers and realize they can get away with spending less, not more. They want their providers to find smart ways to deliver the same (or more) for less cost. So the onus is moving onto the service providers to decrease the headcount provision for their clients and save them money. However, the middle managers actually running the operations know just how hard that is.
You can’t just remove staff from engagements because you automated a process, or eliminated some unnecessary sub-steps in that process. In most client scenarios, they just rely on too much unique (and usually legacy) technology to be able to create a true technology underbelly, where Automation and Digital functionality is native, that can help them unearth a lot more value for a lot less effort and cost. In their minds, the cost of the pain and disruption it could cause is just not worth the “desired outcomes”. Until those outcomes are proven, the status quo of inertia shall remain.
There’s just a lack of capability and incentive to do anything different
27% of middle management see the lack of change-agent leadership a significant obstacle, and 25% just admit they don’t have the talent. Only 9% of the C-Suite feels this way. The two go hand-in-hand – you need change-agents to incentivize workers to do things differently, and you need workers with the skills and expertise to learn use new systems, technologies, analytics and understand evolving business models. The middle management working the real operations realize this, while their leaders are convinced they can just saw-off their legacy and move to the promised land of As-a-Service. It’s a worrying disconnect and something that needs to heal for progress to happen.
The Bottom-line: The industry is piloting the next generation of solutions, but real action won’t happen until we see real, proven business cases
I’ve been amazed at the sheer number of Robotic Process Automation pilots and deployments that have sprung up over the past 18 months. Our forthcoming F&A-as-a-Service blueprint report will reveal just how widespread this is. Providers like HP, Accenture, TCS and IBM have been particularly active here.
In addition, there is a lot of enthusiasm for Digital initiatives – Genpact’s Lean Digital initiative is being talked about by several clients, and I have been highly impressed with Cognizant’s approach to “Being Digital” – they really get that this is a business model transformation, not just another app-dev play with Digital sugar-frosting. And I like the approach to As-a-Service which Wipro’s new CEO, Abid Neemuchwala, is driving. Plus, there is some pretty cool stuff being cooked up from Accenture’s operations group with its innovation networks and rethinking how they deliver their services.
So let’s not get too despondent about the world of confusion in which we currently live – once we really start to see the results of these early phase initiatives, I predict we’ll see a lot more “real” investments from enterprises to saw-off their legacy and changing how they run their businesses. This disconnect between leaders and managers will heal over time, just like it did 20 years’ ago.
One of the cleverest (and most subtle) pieces of branding you will ever see… but just think of the Design Thinking the branding agency applied to come up with this:
So how do you build a business where not a lot of people understand how you make money and many assume you’re a not-for-profit that provides the industry with free research?
The answer is simple: flood the market with a daily dose of insight and have everyone feel part of what you are doing. Make your information company open, social and collaborative; make everyone feel like they are a “client”, even when they are not. Make people want to spend time reading your stuff and also invite them to weigh in with their views and opinions.
Do you feel like a member of Facebook, or LinkedIn, even though you probably never gave them a dime? Of course you do – and you probably don’t think too much about their business models… However, because we do get asked about ours’ frequently, we thought is high time to reveal the secret source of our business model… in all its naked glory:
We make money selling premium research.
In case you haven’t noticed, we are producing over 30 awesome flagship Blueprint reports this year, each encapsulating an entire market, profiling and rating all the key service providers and defining the process value chain, the key trends and dynamics. That’s the core 30 services markets in the industry across IT Services and BPO. That’s a lot of research. On top of this, we produce service provider profiles, market sizing forecasts and a services price benchmarking service, PriceIndicatorTM , that is widely adopted by the services industry. Service buyers, providers and advisors all pay us subscription fees to access these services. More and more service provider selection decisions, today, are being made with the insights from an HfS blueprint.
We make money selling access to our analysts.
You want to find out how to get value from today’s RPA platforms, or how much you should be paying to process insurance claims in Colombia, then call us up. But I have bad news for you – you’ll need to be a subscription client if you want us to answer the phone. Our subscription clients get time allowances to have on-tap analyst support with their strategies – whether these are quick fire one-hour inquiries, or half day strategy sessions. We also do custom strategy projects from time to time, whether it’s a new market assessment study, a marketing strategy review or simply interviewing buyers to write about their experiences.
We make money orchestrating a huge global community.
We attract over a million visits a year to our websites and have well over 100,000 subscribers who regular access our ongoing research insights. We are constantly conducting both quantitative and qualitative research studies with our network, which forms the lifeblood of everything we do – sharing real-time market insights and dynamics with our clients, and performing exhaustive interviews with buyers to learn about their experiences and the performance of their service providers. We also get an average number of 500-1500 people on our regular webcasts, which provide a genuine window to interact with our community and share research insights.
Plus, our analysts get to conduct service provider reference calls independently of the same old rose-tinted clients who are the few willing to go on record regarding the performance of their service providers.
We make money selling research to buyers.
At HfS, we diversify our business across service buyers, service providers, consulting firms and investors to make our money. The biggest issue here is that if you are restricting your firm only to selling to tech vendors/ service providers, your growth is restricted to a small universe of clients. If you can cater your research to tech users and service buyers, you have literally tens of thousands of prospects out there. And you have to be objective when selling to buyers – they know when your research is too biased towards your sponsors.
We run the best buyer summits in the services industry, that bring together the physical experience with the electronic.
In today’s era of information overload, digital bullsh*t, fantastical claims of “disruption”, impending employment apocalypses, and just general confusion, there is more appetite than ever from enterprise service buyers to get together and decipher reality from the marketing hype. At HfS, we have created the community platform to bring together the global services community in private, unvarnished discussion forums. When we invite senior service buyers to attend specific summits to get involved in our community, many sign up as research clients because they see close up how valuable the HfS experience is. This is how we sell – we share the experience with people and they want to become clients. Simple or what =)
The Bottom-line: The HfS experience sells itself
Our golden rule is simple: if you’re going to give something away for free, it better be worth reading! Enticing someone to give up their precious time to read your insights is one of the hardest things to do. If you can’t create compelling insights, then just stuff all your “research” behind a paywall and invest heavily in sales people to convince clients it’s worth signing up.
However, if you can share a little bit of your experience up front, it’s a much less aggressive sale when your prospects have already seen a glimpse of the goodies they will get when they sign up to the premium stuff. What’s more, you can’t build a global analyst brand in today’s market, if no-one is reading your stuff, networking with your analysts at your summits, and listening to edgy and informative webcasts. What worked 10 years ago no longer works today. The big established analyst brands will survive because they are a destination amongst the confusing clutter of information and wannabe experts all putting their stuff out into the market. The second and third tier analysts are struggling – and some are fading fast – because they just can’t command a global audience with a compelling research experience.
You may have heard we just announced our first-ever Working Summit for Buyers in San Francisco at the St. Regis Hotel May 26th – 27th. The summit’s theme—Vision 2020 for Intelligent Operations—brings together the IT and business process services industry’s brightest minds and stakeholders. Seats are limited and available at no cost to well-qualified senior buyers. So, if you are interested, pencil us in your calendar and apply for a seat now.
Unvarnished Discussion Sessions
The State of the As-a-Service Economy and Intelligent Operations: Is It Here?
Evolution or Revolution: What does the Future really Look Like?
The Current State of Intelligent Automation – what’s working and what’s not for buyers
Service Automation: Robots and the Future of Work
The Digitization of the Finance Function
Co-inventing for the As-a-Service Economy
Hiring for As-a-Service Skills and the Role HR must play in the As-a-Service Economy
The evolution of Omni-Channel for CRM: What is it really, and does is exist?
Analytics and Big Data in the As-a-Service Economy… what’s really coming next?
Getting ahead of Trust and Security in the As-a-Service Economy
The C-Suite Advisor – Buyer Face/Off
The C-Suite Service Provider Shootout
Featured Discussion Leaders
Mary Lacity, Curators’ Professor, University of Missouri
Lee Coulter, CEO Shared Services, Ascension Health
Allison Sagraves, Chief Data Officer, M&T Bank
Phil Fersht, CEO HfS Research
Carol Britton, CPO, Bank of New York Mellon
Charlie Aird, Global Leader, PwC Shared Services and Outsourcing advisory
Chip Wagner, CEO Alsbridge
Dave Brown, Global Lead, Shared Service & Outsourcing Advisory at KPMG
Dennis Howlett, Co-Founder, Diginomica
Dilip Vellodi, Chairman and CEO, Sutherland Global Services
Jay Desai, Senior Director, Enterprise Outsourcing, AbbVie
Gajen Kandiah, Executive Vice President and General Manager Cognizant Digital Works and Business Process Services
Harry Wallaesa, CEO, The W Group
Jesus Mantas, Head of Global Business Services, IBM
Joe Frampus, Partner, Avasant
Kevin McDonald, VP of BPO Governance, The E.W. Scripps Company
Leslie Willcocks, Professor, Workforce and Globalization, London School of Economics
Mark Voytek, Partner, Ernst and Young
Michael Corcoran, Head of Strategy, Accenture Operations
Pradip Khemani, Head of Global Business Services, Blue Shield of California
Scott Furlong, Partner, ISG
Shantanu Ghosh, SVP & Global Head – CFO & Transformation Services, Genpact
Srinidhi Rao, Head – Service Management and Process Excellence, Juniper Networks
Tony Filippone, Senior Vice President, Outsourcing Management, AXIS Capital
Robin Rasmussen, Partner, HR SSOA KPMG
Vishal Sikka, CEO Infosys
Wesley Bryan, Co-Founder, OneSource Virtual
HfS Analysts
As usual, we’ll have a full contingent of HfS analysts on site to present the latest data and stimulate discussions. In San Francisco, we’ll have Phil Fersht, Charles Sutherland, Barbra McGann, Fred McClimans, Melissa O’Brien and Reetika Joshi.
Stephen Hawking warns us that AI would be the biggest – and possibly the last – event in human history;
The Guardian (bless them) even highlights Scientist Moshe Vardi’s view that the oldest profession in the world is under threat of being robotized (interesting…).
The beauty of all these wild predictions is that few will remember who made them in a couple of years – or the fact they were made at all. That’s the beauty of being an analyst/visionary in today’s market – you can make up any old fantastical crap and never be held accountable for it in the future. (Not that I have ever been guilty of said behaviour…)
Most of these claims are moot, as most of these “jobs” have already been automated away, or moved offshore
Let’s dissect this quickly:
Rote B2B sales and customer service jobs have already gone away. Forrester’s jaw-dropping prediction is a simple case of analysts predicting things that have already happened to create some headline noise. Most B2B transactional customer service tasks have already been automated, or at least offshored. I’m sorry, but I can barely think of a single instance where I have spoken to a customer service rep, except some instances when I needed to make a large purchase, or I had an inquiry so unique, there was no way to automate it. And even when I do need to talk to someone, I often get scripted responses from some rep in India or the Philippines – my recent complaint to British Airways received some impressive canned email responses from Mrinal Samant, essentially telling me “Bugger off, you’re not getting anything out of us, and the only communication you can ever have with us – these days – is through scripted emailed responses from offshore call center workers.” If the likes of even a BA (long-famed for good service) is doing this, you can bet there’s not a whole lot of fat left for these enterprises to trim in their sales and support ops.
Manufacturing jobs have already been automated out. Sorry to be the bearer of bad news, but if you entered a car plant 30 years ago you may be greeted by scenes of 3,000 workers beavering away. Today, that same plant will be about 50-100 workers and a bunch of machines. It’s already been automated. Of course there is more to come, but I would argue we’ve already seen the worst of it. The biggest future threat are the Apple jobs outsourced to FoxConn in China, where over one million people are employed to make our iPads and iPhones, largely because the circuitry is too intricate for robots. However, new developments in robotics are even threatening to displace these Chinese workers, which could be a travesty for their economy.
Transactional back-office and IT work has already been moved offshore. We cover thousands of IT services engagements, over a 1000 F&A deals and several hundred industry-specific BPO deals – the main proponents of offshore. True, there is room to automate / offshore more processes from enterprises’ operations, but we’re talking relatively small numbers here – maybe 10-20% more labor reduction from some stagnating back office operations (in many cases) over the next 3-5 years. Much of the fat has already been trimmed…
Automation in the back office is about productivity improvements, not direct headcount reduction. Automation is only reducing small tranches of an employee’s time – it’s very difficult to remove an entire office job through automation, you are just making that job more efficient and freeing up that employee’s time to work on something else. Automation in the back office is about closing the books faster, about monitoring systems more effectively, about throwing off better data for analytics, about giving management much greater visibility into their operations, and integrating the back office with the middle and front. Better run companies can then look for people with more creative, socially-intelligent, analytical, innovative skills, once the rote work is chugging along the way it should be. Hence, the bigger impact is coming in the guise of productivity improvements from Robotic Process Automation platforms, better analytics and customer engagement through Digital technologies, and companies simply operating more effectively with better data to make decisions, and staff more focused on providing business value, than merely turning widgets.
Let’s dial back to reality and be honest about what is really happening
Enterprises want to restrict hiring people to do operational jobs – it’s not that today’s jobs are going away, it’s the simple fact that large numbers of operational jobs will not be created in the future, as enterprises can get what they need with less people. Just revisit our Value Beyond Cost study we ran with KPMG last year, where we asked 168 senior executives about the priorities of their C-Suites with their operations:
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What is startlingly apparent here, beyond the fact that well over 90% of C-Suite directives are obsessed with cost and flexible services as operational priorities, is that less than half (48%) view improving their operational talent as important, 65% are exploring efforts to restrict the recruitment of labor where possible, and 62% are looking, with varying levels of interest, at automation and robotics with the specific purpose of reducing their reliance on labor. The bottom line here is very clear – C-Suites are caring less and less about their people, and more and more about their services.
The big question many are facing now isn’t whether to invest heavily in their people – it’s whether to invest in technology to lesson the need to hire staff, or use outsourcing partners to reduce the burden of inhouse staffing cost, while improving their access to flexible services. Or use a combination of the two… or use an outsourcer which is using robotics on itself and is willing to pass on the benefits to its clients desperate to move from a legacy labor-centric operational infrastructure.
The Bottom-line: We have to stop the attention-seeking hype and refocus on the reality of our world
In recent years, the insane uptick of social media and information sharing has warped viewpoints and predictions out of all proportion. Now it feels that the only way people believe they can get noticed is by claiming armageddon is upon us. And the sad truth is, declaring doom and gloom may be their only avenue left to get some attention.
As we’ve analyzed, the future is more about the type of jobs we need to create, not the ones we could protect. I can assure you -right now – that the new generation of kids coming out of college are not clamoring to process insurance claims, sit on IT help-desks, input data into payroll systems or manage customer orders. Even if we still had demand for these jobs, we’d struggle to fill them! And most enterprises have figured how to shift these jobs offshore, where there is a cost-effective supply of labor to do these tasks.
Under the bigger threat from automation is the offshore locations which deliver these services, as most are, by and large, very robotizable tasks that smart service providers are already figuring out how to automate using the various RPA and IT automation tools available on the market today. If I were Narendra Modi or Xi Jinping (perish the thought), I would be very concerned that a whole workforce generation needs reorienting to address work activities that are growing in demand, as we are fast approaching a time of labor oversupply for the demand coming from North America, Europe and ANZ. The shift has already happened, we are now experiencing the aftershock of the shift towards the As-a-Service Economy.
So let’s stop trying to peer blindly into an uncertain future, and instead address an exciting present where there is real potential to achieve new thresholds of business value.
Last week, the HfS Leadership team went all in on the 2016 NASSCOM Industry Leadership Forum (ILF) in Mumbai with 4 presentations and panels, dozens of meetings with industry leaders from providers and clients, multiple media interviews and local delivery center visits thrown in for good measure. So myself and Charles Sutherland jotted down our thoughts as we fought off the lurking jet-lag demons on our way back to the States yesterday…
Most refreshing this time around, has been the toning down of the rhetoric and hype, as most of the providers tackle the winds of change threatening a worrying decline of growth in the global services industry.
From this year’s proceedings, we have taken to heart the near ubiquitous discussion of “Digital enablement and Disruption” to construct a sentiment analysis of where the stakeholders in ILF currently find themselves in their transition from a world of legacy operations to delivering what HfS has termed the “As-a-Service Economy”.
From enthused to unsettled, service providers sober up as reality sets in
In a word, we felt the sentiment of the ILF sessions in 2016 is best described as the global IT services industry being “unsettled”. Last year, we saw the pervasive adoption of “Digital” as the driver of future growth for every service provider at ILF, with a different definition in every instance as to what it meant. The ILF sentiment in 2015 was “enthusiastic” in a word. Over the the course of the past year, we believe most of the service providers are awakening to the degree of change necessary to move to a new model that delivers Digital value based on technical capable offerings, untethered to huge incremental headcount investments.
While seeing some early client successes, most smart service providers are also questioning whether each is as differentiated in their capability and messaging as they believed a year ago. It is becoming abundantly clear, as the industry wakes up to the reality of what is really needed to evolve to the As-a-Service economy, that the differentiation points between service providers has become blurred – and being able to demonstrate true distinctiveness and differentiation from each other has become a very difficult task.
If in 2015, every service provider at ILF wanted to brief HfS on the excellence of their Digital offerings, in 2016 the conversations were inquiries, seeking to test the efficacy of a service provider’s messaging against that of competitors and against buyer requirements and expectations.
Six Factors causing this “State of Unsettlement”
So what has caused this change to a State of Unsettlement, amongst the service provider community in just 12 months? In short, we believe it has been a mix of six factor factors, namely:
A rise in global economic uncertainty, exacerbated by the instability of the Brazilian, Russian and Chinese economies, record oil price lows, a volatile and unpredictable stock market globally and the creeping threat of deflation;
The rise of new “born in the cloud” competitors, such as: Aason, Bluewolf, Equiniti and OneSource Virtual which can offer significantly more cost effective solutions and different delivery models;
The increasingly viral adoption of Intelligent Automation in service delivery;
A recognition that Digital is not just a supplemental technology spend to the legacy business, but a fundamental change in how the underlying business model operates (for clients and for service providers);
The increased relevance and disruptive competitiveness of nimble mid-sized service providers (IT and business process) that can scale up and down aggressively to win deals, based on client needs and their own intentions to invest in the future model, such as EXL, Genpact, Hexaware and Virtusa;
Increasing engagement with mid-market clients, which frequently have requirements as complex as the high-end, but cannot spend anything like the same amounts. Many of these clients will form the FORTUNE 500 of the future and most traditional service providers are simply not equipped to take these clients on profitably with their current delivery models.
We believe these six factors are culminating to provide a growing recognition of the level of change required in sales, solutioning and delivery, in order to achieve or maintain market leadership in the emerging As-a-Service Economy.
Why the Global Services industry must align to the Eight Ideals of As-a-Service as to find its path to a Digital Future
We came to this view after we analyzed all of our discussions during the week with the lens of the HfS Ideals of the As-a-Service Economy. These Eight Ideals – as shown in the following exhibit – are the necessary change management and solution capabilities required to succeed in this new world.
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These Ideals resonate with leaders of both service providers and enterprise clients, looking for a way to understand the path that needs to be followed to succeed in the future. Yet, their adoption is not a binary achievement. No existing service provider suddenly executes against an Ideal at the flip of a switch, however much that might be wished. Instead, it is a journey of change and internal transformation as these Ideals are often dramatically different in nature and intent from what has previously created success in IT and business process delivery for the last few decades.
There are nuances to the realization of these eight Ideals across the different service providers, which all demonstrate varying vertical and horizontal capabilities. In short, no service provider can boast they are “all things to all people” like so many claimed in days gone by, but instead they need to focus on those areas where they can be truly distinctive and have real capability to take their clients to the As-a-Service promised land.
This sense of unsettlement at ILF 2016 comes down our recognition that the leading service providers are still very much swimming in a state of transition towards achieving these Ideals. Every one of these Eight Ideals formed part of the discussions on service provider strategies and investments, however, the depth and breadth of client experiences to-date against each Ideal is still very much at an early stage. Hence, the level of inquiry and intrigue form service providers as to how they were faring against each other, and how to make each Ideal more extensive in the year(s) to come.
Why we view Intelligent Automation and Design Thinking as the initial critical ideals to address
This was the first NASSCOM event, or any services industry event for that matter, where we had experienced a genuine atmosphere of honesty and humbleness that the winds of change are upon us and real shifts and investments need to occur for healthy industry growth to continue. There was a wide recognition that simply focusing on driving down costs and selling more aggressively will become futile as those service providers, which can genuinely decouple headcount from delivery, and can scale their offerings to suit the needs of clients of all sizes, will take over the leadership of the market.
The two main Ideals we believe service providers must urgently address over the course of 2016:
1) Intelligent Automation. Automation, coupled with offshore delivery, is the future of the industry and the only true way to decouple labor costs from scaling service delivery. Having a more automated offering allows service providers to take on the emerging mid-market deals more profitably. It also allows incumbent service providers to defend client contracts at the high-end, where the threat of disruptive competitors offering large efficiency savings through automation is emerging in an increasing number of competitive contract renegotiations. In addition, those service providers with great confidence in their automation capabilities, will be the most successful at stealing business from legacy incumbents failing to do enough to protect their existing contracts when they come up for renewal.
2) Design Thinking. The biggest single issue with today’s services relationships is the fact that only 20% (see link) are considered “collaborative” by clients. However, both the C-Suite and middle management recognize (see link) that having joint creative problem solving and “Design Thinking” with clients is a real way forward to embrace the Ideals of As-a-Service.
Click to read more about the move to the As-a-Service Economy
It is our firm belief that if service providers and clients can embed the principles of Design Thinking into their relationships, they will quickly become more collaborative in nature, and both buyer and service provider can really begin working together in earnest to achieve common goals and business outcomes. In short, As-a-Service is about a business model transformation – and how it can be empowered by Digital technology, made more effective and Intelligent by Automation and Cognitive Computing, made possible by smart change management and made trustable by proactive security deployment. Hence the need to design this seismic change, in terms of both talent and solutions, is what holds the keys to the promised kingdom.
Design Thinking is helping several relationships inject lateral thinking and renewed motivation to work together, not only in the customer-facing front office, but also in the back office operational functions. Design Thinking in services is based, primarily, on both service buyer and provider coming together to create business outcomes that are mutually beneficial – and motivational – for both parties. However, this must be established as ongoing collaboration across all key relationship stakeholders, and not simply two days of senior management putting sticky notes on each others’ foreheads. There must be senior pressure and buy-in to adopt Design Thinking as a means to move away from Six Sigma-obsessed old world models, and really change the way the service buyer and provider teams work together.
The Bottom-line: What to watch for in 2016
We firmly believe 2016 will be the year in which both Intelligent Automation and Design Thinking come to the forefront of the sourcing and services market. It will be the year when service provider leadership teams are sent to design camps, and a whole new set of conferences and workshops will feature Intelligent Automation and Design Thinking as their theme of the moment. Some of this may be hype, or even unnecessary, but at the root of it, the arrival of Intelligent Automation and Design Thinking into the mainstream of the IT and Business Process services world makes sense to us as a way to re-imagine more effective process-based solutions for this increasingly digitized As-a-Service world.
Further out, we really see the development of solutions comprising more Ideals of As-a-Service, most notably advances in predictive analytics for Accessible and Actionable data, Holistic Security and cognitive computing extensions to Intelligent Automation as providers and buyers seek the ultimate nirvana of Plug-and-Play Digital Services, but we firmly believe that Intelligent Automation and Design Thinking are the major Ideals to help write-off the legacy of the past and prepare for the value that is possible to attain in the future.
We’re excited to speak at four sessions at Nasscom in Mumbai, culminating with our State of Industry session at 11.15 this morning. Come along and discuss what’s really going to hit us down the road…
No more legacy as HfS reels off the insights at the 2016 Nasscom India Leadership Forum
The pharma industry has been in a state of constant flux for a very long time. I can recall intense discussions at the turn of the Millennium, when we debated how the industry could survive the demise of the blockbuster drug model amidst the rise of generics… yes it still prevails.
The quirkiest issue I have observed with pharma, over the years, is that their leading firms like to outsource all the high-value work, such as contract manufacturing, drug discovery and R&D, while keeping the back office stuff inhouse, namely IT, HR and F&A. Pharma has been the weird stepchild of outsourcing – moving out the core, while retaining the non-core.
Fortunately, we have Barbra McGann, our Executive Vice President, Business Operations Research, to lead the charge in researching our first-ever Blueprint Report on Pharmaceuticals Industry-Specific BPO to delve into how our leading pharma are behaving, and how the service providers are performing to attend to their needs.
So let’s ask Barbra to take few minutes to tell us about the report…
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Why produce this Blueprint report now, Barbra?
Barbra McGann is Executive Vice President, Business Operations Research (click for bio)
There is some pretty spectacular and mind-boggling activity today in the pharmaceuticals industry, with the 3-D printing of pills, use of IBM Watson to cull through reams of data and help diagnose and personalize therapies, and edible devices that can transmit data and images. Behind the scenes, too, there are some significant changes underway that are also critical to helping this industry—enabling it to operate in a way that re-focuses on the patient, and helps pharmaceutical, biotechnology and medical technology companies shorten trial times and accelerate time to market, increase medical adherence, reduce risk, and manage compliance. This operations support, having taken shape over the past two decades as the Pharma BPO industry, is on its way now to the As-a-Service Economy—with service providers bringing together industry and operations experts, digital technology and new operating models to collaborate with willing service buyers.
Two of the significant ways that pharmaceuticals companies “touch” consumers are in the R&D process and through sales and marketing (aka commercial services). The pharma BPO market in this Blueprint covers clinical data management services, safety management services, regulatory affairs support, and related sales and marketing—all activities that we recognize are part of a highly regulated, complex market in the midst of global expansion and change. The objective of the Blueprint report is to evaluate the nature of engagement and support between the service buyer and the service buyer across these tasks.
How did this Blueprint take shape?
In this Pharmaceuticals Industry-Specific BPO HfS Blueprint, we take a look at the evolution of Pharma BPO to “As-a-Service”: a services market that is increasingly agile, collaborative and consumer-centric. HfS considers this transition in outsourcing a move to the As-a-Service Economy, placing increasing value on diverse talent, analytics, and collaboration, as well as increasingly on platform-based services. To develop this Blueprint, we spoke to service buyers and service providers to understand the innovation and execution capabilities of seven multi-national, multi-functional service providers with industry-specific pharmaceuticals business process support capability in their portfolio: Accenture, Cognizant, Genpact, HCL, TCS, Tech Mahindra, and WNS.
And how did the service providers perform, based on your research with the buyers?
We want to understand a variety of different things in order to compile this Blueprint. How do service buyers approach business process outsourcing—what is working well and what could use a “rethink” or refresh? How are service providers extending their capabilities for data management, analytics, and talent development and management? And how are digital technologies such as automation, social, mobile, and cloud being approached and used; what value are they providing for BPO? In short, how is this market changing to become more “As-a-Service”—business-outcome oriented and flexible through the combination of capable people and digital technology.
As-a-Service Winner’s Circle:
Accenture stands out for its grasp of technology from a business mindset—how to architect a best of breed technology solution with platform and services. In this case, it’s for data aggregation and analytics by the Accenture Life Sciences Cloud Coalition with 8 biopharmaceutical companies and Oracle among its network. The vision is in place, and it needs to really execute holistically.
Cognizant is making progress with both its “run better” and “run different” approaches to services. In this case incorporating automation into targeted accounts to progress the former; and receiving accolades for its SmartTrials tool for centralized monitoring, reporting, and analytics. Cognizant is building out an impressive suite of solutions for supporting drug development and marketing, and has the clinical and non-clinical resources globally to support it.
With its Digital Clinical Trials, TCS is also bringing a platform for clinical data management, patient engagement, and analytics; and has defined a program for developing Data Scientists. The approach seems mostly technology-led, and needs to pivot to a focus on business outcomes and impact, with expertise and technology mapped into the business case.
WNS has established a niche in market research and analytics that to date is mostly about the people, but it is building out a toolset for bringing together multi-dimensional data for analysis and decision-making through the product life cycle. WNS’ approach has them integrate well into an organization and work as “partners” not “vendors.”
High Performers:
Genpact started in pharmaceuticals BPO with finance and accounting work where it has a strong presence; and then started expanding with PharmaLink for regulatory affairs support, and EmPower for social media research, adding to its marketing capabilities. It is on a path to help clients better leverage their existing capabilities and systems, and bring in Genpact to complement, using its very sound LeanDigital and Systems of Engagement approach.
Broadening from its IT start in pharmaceuticals, HCL is developing a robust set of tools using automation, analytics, and cloud-based services but lacks a cohesive story and momentum with BPO. There is quite a bit to work with, however, so HCL shows promise in partnering with clients to deliver in clinical support and patient services in particular.
Execution Powerhouse:
Tech Mahindra has added – and grown – point solutions to support artwork and labor management, creative services support, supply chain analytics, and transportation management in particular. While it is small by comparison to the other players and still is primarily a labor-based offering, it has carved a niche in these areas.
What do we see changing in the future, Barbra?
In general, HfS believes that service providers need to make their services more accessible. There are a lot of technology solutions being developed, a lot of skilled resources with advanced degrees and training, and a lot of change underway. The entrée point for a service buyer is getting more complex, not less so, in an industry that needs simplification. Service buyers need to be open to sharing problems and asking questions of service providers, challenging them to look outside their industry and their ready-made pharma toolbox for ideas and examples that while they may not be usable in pharma directly due to regulations, can still inspire and lead to relevant solutions. That means buyers –and we heard a mix of this during our interviews—need to consider service providers “part of the team,” and even an extension within their leadership. Accenture and WNS have made considerable progress along these lines with some of their clients in pharma R&D and research and marketing respectively.
Due to the significance of change required in an operating model, and with the added complexity of regulation and the possibilities of digital technology, Pharmaceutical companies can take advantage of the existing and developing depth in their service provider partners. One area where multifunctional service providers can add value is in bringing together consulting, subject matter expertise, practices from other industries for ideas and inspiration, and internal and external partnerships with software and digital technology companies.
And what do you see, Barbra, along the road, for Pharma BPO?
HfS sees a few areas taking shape in which these service providers can play a valuable role, although it does require a service buyer to be willing to be collaborative—versus the more traditional directive role in outsourcing—and for both parties to share risk and investment. These include:
Clinical trial data management: Many of the service providers in this study have or are developing platforms with complementary business services expertise to manage clinical trials and data from multiple sources, and create real-time dashboards for analysis that can also be supported. Accenture, Cognizant, HCL, TCS, and WNS. There is no shortage of options, so the key is to work with a trusted partner that can also collaborate with the service buyer’s ecosystem.
Patient Support: As ensuring that clinical trials are successful increasingly means better understanding patients and engaging both them and their physicians, service providers are also developing expertise and solutions that help identify patients for studies, reach out and engage them, and also help provide support during clinical trials for “life” challenges such as getting to appointments. Accenture is working on an Intelligent Patient Platform, and Cognizant has HealthActivate.
Remote Site Monitoring: A high-cost area ripe for applying new operating models and use of digital technologies that almost every service provider in our study is addressing in some way. Cognizant and TCS have the most advanced models, but HCL and Genpact also have capability to help address this area, to help minimize and strategically target on-site visits, reduce risk, and overall, enhance patient safety.
• Sales and Marketing Content and Campaigns: Cognizant has the most comprehensive business process as a service offering for supporting sales and marketing operations in pharma; but Accenture (particularly for asset management and campaigns) and Genpact (with analytics expertise) are also providing services in this area. The WNS research and analytics services dive into clinical, sales, and marketing for enabling targeted campaigns.
As more than one service provider pointed out, these efforts are to help change an industry that has a lot of players to bring together. Regulators are in the same learning process as pharmaceutical, medical device, and health care organizations in terms of understanding what digital technology and new operating models can do, how it can impact drug development and health care, and how therefore does regulation need to change accordingly. From a broader industry perspective—considering the client base of today and tomorrow for these services—HfS sees the opportunity and heard from the service providers expansion from the “traditional” client portfolio of the “top” pharmaceutical companies to also provide established services to smaller start-ups, medical device, and biotechnology companies. We see the industry changing to not just be about providing services to the largest pharmaceutical companies, but also to a growing number of these other industry participants around the world.
Derk Erbé is Research Managing Director covering Digital Business Transformation and Energy, Utilities and Resource Industries for HfS (click for bio)
You may have noticed we’ve been doing a little expansion at HfS recently… And a big part of this was building out our European presence and adding more industries to our research coverage.
One industry we’ve always been passionate about is energy, and how that sector is dealing with huge regulatory impact post the Paris Climate Agreement – where both energy providers need to rip up their operating models to survive, and enterprise energy consumers can take advantage of new sources of renewable energy to gain a competitive edge.
So who better than to hire an Amsterdam-based energy expert with a penchant for technology and research? So without further ado, let’s introduce you to our new Managing Director for Research, Derk Erbé…
Welcome, Derk! Can you share a little about your background and why you have chosen research as your career path?
Thanks for the warm welcome. I’m very excited about joining HfS. I feel research, and the role of the industry analyst brings everything I experienced in my career and found to be critical together. I have been in the trenches of technology implementations, business transformations and operating model changes. I’ve managed the backlash of failed implementations on the business, designed business and IT functions. And last but not least, I founded and ran a business, Kea Company. Helping vendors with Analyst Relations, I’ve been on the other side of the table with analysts for years.
As a sociologist, I have an interest in the change management side of transformations. And in the human condition, something we can’t escape from.
As an analyst, I’m able create a helicopter view perspective and dive deep into trends, hypes and powerful forces of change. I love poking around at the underlying dynamics of the things we see happening around us.
Why did you choose to join HfS… and why now?
It feels like the right time and the right place. Analysts are here to find new truths and help buyers and providers of technology and services make sense of the world around them—help them to make the best possible buying decisions. In my years at Kea Company, I have built a deep understanding of the analyst world and the way analyst services are consumed and valued. Not every analyst firm is as forward looking, but in my opinion, this is a critical component of value and purpose.
I have gotten to know HfS as a company that always pushes the agenda and is not afraid to go against the grain. This is what I admired and a big reason for me to join.
Technology and internet services touch so many lives in a positive way. But let’s not forget the darker sides. A deep understanding of both is required to navigate this Technology Revolution, or rather Internet Revolution—the Industrial Revolution was a de facto Technology Revolution as well, of course. In my opinion analysts should play a significant role.
What are the topics and big issues that you will focus on in your analyst role?
My focus is on three big topics. The first is digital. Digital is all around us. A big part of the current disruptions in industries are fuelled by digital technologies. But as every vendor and service provider has a digital transformation story, change is hard, especially if there is a lot to change. So big enterprises have a mountain to climb regarding the adaptation to the digital opportunities and threats. New business models will be born, will envelop or replace old business models, and will challenge the position of incumbents.
I’m fascinated by the strategies, business models and business transformations technologies that cloud, mobile, social and big data analytics have enabled. And it is even more stunning how fast people adapt to this new reality, the new opportunities. Although I have a ton of grey hair, I’m not very old, but I grew up with an old-school telephone in the house, one with a wire and a horn. I see people I never expected to adopt new technology quickly—my parents for example—using Skype, emailing, texting like they’ve been doing it for ages. And on the other side of the spectrum, my 4-year-old son is so savvy and intuitive with technology he probably will never understand the world of just 15 years ago. I see an analogy to “born in the cloud” enterprises and older firms that have their roots in a pre-Internet era.
The second focus is on Energy, Utilities and Natural Resources. This is an industry on the brink of a revolution. We need to change our production and consumption of energy dramatically. Energy companies and their service providers are at the center of this process. And they need help. HfS is expanding the coverage of these industries to be a source of dependable knowledge and insight to energy companies and the service providers.
My third focus will be on custom research projects. The syndicated research agenda of a firm says a lot about its ability to provide guidance to clients about current and future business challenges. For instance, the moment HfS called the As-a-Service Economy shift I knew this was going to be an incredibly powerful framework for enterprises and service providers to guide their journey for the coming decade.
The custom research is a way to push the agenda even more. Clients want to find out how they can find competitive advantage, make the next big thing. Custom research projects are an excellent way to explore the new frontiers. It is a method for HfS and our clients to keep sharpening the axe. I’m excited to contribute to this. And get stuff done.
And what disruptive trends and developments are capturing your attention today—especially with the impact of Digital technology on industries such as energy?
I see a role for all eight ideals of the As-a-Service Economy in the energy transition journey. Many service buyers are still looking around and figuring out what the hell is going on. While the Solution Ideals hold the real promise, the Change Management Ideals can help energy providers and service providers cope in the shorter term. So the ideals that are closest to home in the coming period are Design Thinking, Writing off legacy, Brokers of Capability and Collaborative Engagement.
Digital technologies will be useful in finding answers for disrupting challenges from non-digital forces. Energy providers have to deal with a lot. The plunge in oil prices means oil producers are operating at a loss. The looming departure from fossil fuels will mean finding investments in non-renewable energy becomes next to impossible. I’m carefully looking at whether energy providers and service providers can find each other in collaborative engagements, co-investing in As-a-Service-based platforms that enable new operating models and business models, creating new value.
And what are you working on first for our clients, Derk? Any sneak previews into what we can expect?
I started of with a Point of View about the Paris climate agreement and its impact on energy providers, operating models getting ripped to shreds. This piece is setting the scene for our research in the Energy, Utilities and Natural Resources vertical, such as a new Blueprint Report on Energy Operations. Next month, we will write a Point of View on the top industry processes that are impacted by Digital transformation and the move to As-a-Service.
Welcome to HfS, Derk. We’re delighted you have chosen HfS as your analytical home and can’t wait to see you first Soundbites hit the presses =)
You can reach Derk by email here and follow him on twitter here.
Oh boy – the amount of fantastical claims we are being spoon-fed by some experts in the market today is just getting a bit absurd:
Most refreshing this time around, has been the toning down of the rhetoric and hype, as most of the providers tackle the winds of change 
