Predictions, Redactions

At their annual Gartner Symposium event in Orlando yesterday, Peter Sondergaard predicted:

“AI will be a net job creator starting in 2020”

To that, Jason Hiner at TechRepublic snarkily commented

“Gartner’s research chief couldn’t have opened the company’s flagship conference with a more astounding proclamation if he had claimed that next year’s event would be held on the International Space Station and Gartner was offering free rides.”

Actually, I agree with Peter – I wrote  a whole book, Silicon Collar which looks at a century of automation and how humans go through panic attacks every couple of decades about automation and impact on jobs. Automation tends to target tasks, not complete jobs. In general, it transforms jobs, not destroy them. And societies have “circuit breakers” which slow down rapid mass adoption of automation technology as I wrote here.

What I would I have liked to hear from Peter was “we were too pessimistic just 3 years ago”, when he said from the same podium

“Gartner predicts one in three jobs will be converted to software, robots and smart machines by 2025…New digital businesses require less labor; machines will make sense of data faster than humans can. By 2018, digital business will require 50% fewer business process workers.”

And I would liked him to say “we really fxxked up” when we predicted that by next year (2018)

  • 20 percent of business content will be authored by machines.
  • more than 3 million workers globally will be supervised by a “robo-boss.”
  • 45 percent of the fastest-growing companies will have fewer employees than instances of smart machines.

In contrast, Oracle Co-CEO Mark Hurd shared with the OpenWorld audience a few hours later some of the “mean tweets” as he called it about some of the predictions he has been making about the cloud market.

Later in a Q&A, I joked with Mark that as an industry analyst he would have the luxury of hedging and assigning a probability to his predictions and then never publicly having to audit or redact his predictions.

Source: enterpriseirregulars-Predictions, Redactions

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The most attractive European countries for outsourcing

European outsourcing locations can hardly compete with India or China when it comes to lower costs or the availability of labour. But the progress of collaborative technologies is helping countries such as Poland, Romania or Bulgaria to attract British companies that want to take IT services abroad while keeping them at close touch.

Nearshoring is on the rise thanks to a number of reasons such as the affinity between British companies and their European peers and a pool of highly qualified workers. “With increasing digitalisation, we see nearshore locations being better equipped for some types of processes that require close cultural alignment with Western Europe”, says Sarah Burnett, vice president of research at the Everest Group.

In Eastern Europe, economies offer lower costs than in more developed economies, as well as plenty of engineering and IT skills, a heritage of the education priorities from old communist times. “It is much more convenient for a company to set up a development centre in a European country than in India, mostly because of cultural reasons,” says Boris Kontsevoi, president and chief executive of Intetics, an outsourcing company. “In Eastern Europe, education levels are higher than in India. They also have a strong tradition in fields such as engineering and mathematics.

It is much more convenient for a company to set up a development centre in a European country than in India, mostly because of cultural reasons

“Choosing between India our Eastern Europe for general services, skills make little difference. When it comes to more sophisticated services, like programming, skill differences do count.”

Tax incentives

To make their markets more attractive, governments in countries such as Poland and Romania have implemented tax incentives for IT companies to set up shop in their territories, and the fact that many of them belong to the European Union provides a degree of regulatory certainty companies appreciate. “Nearshore locations in Europe are the best choice for some types of back-office work dealing with sensitive customer data within EU data protection laws,” Ms Burnett says.

“Nearshoring makes it much easier to integrate activities and also to handle confidential material,” says Richard D. Sykes, a London-based consultant. Furthermore, European workers feel more comfortable providing valuable input to the development of projects than in other parts of the world, an advantage in times of constant technological change, notes Catherine Sherwin, managing director at AlixPartners. “Workers in European locations are more likely to question and challenge what they are asked to do, which helps to deliver higher quality end-products,” she says.

Another perceived advantage is the facility Eastern Europeans have to learn foreign languages, a useful trait for companies with supply chains and customers spread around the world. “In Poland, Bulgaria or Romania, companies can find good technical skills and linguistic capabilities in addition to English,” says Ramyani Basu, head of the Digital Transformation Practice at A.T. Kearney in the UK. Telus International, an outsourcing firm, estimates that about 98 per cent of all Bulgarians speak a foreign language and that four out of every five Romanians speak English.

But an emerging reason why nearshoring is attracting companies is that they are close at hand and occupy a similar time zone to their UK customers. As IT projects are increasingly developed and implemented in real time, the physical proximity element has gained a whole new relevance in recent years.

“Companies are moving from fixed-infrastructure datacentres to a cloud-based environment. Projects are delivered in a different way and support is provided differently as well,” says Jonathan Tate, the UK, Europe, Middle East and Africa technology consulting leader at PwC in London. “It is a much more agile way of constantly changing, improving and upgrading technology that lends itself more to nearshore rather than offshore locations.”

Time zones

In the past, large technology projects were developed in the course of several months, sometimes even years, following a structured methodology where each step followed a specific time frame. Now, however, companies are increasingly employing cloud-based technologies to work in their projects. Products are quickly put to work, and they are improved and updated as customers make use of them. Closer time zones allow teams located in different countries to work at the same time and the ability to make an instant travel decision to head a workshop or check how things are going at the outsource partners constitute further advantages of nearshoring.

“The time zone makes a big difference when you are building IT solutions,” Ms Sherwin says. “In today’s world, companies use many collaboration tools such as knowledge-sharing portals and real-time screen-sharing. If you remove the time-difference issue, the IT team in the outsourcing location can become an extension of the UK team.”

The emergence of Eastern European outsourcing locations is attracting specialised companies that are expanding their offer of services in that part of the world. An example is Wipro, an outsourcing giant from India, which has maintained an operation in Romania for over a decade.

But customers who are looking for nearshoring locations should keep in mind that there are some drawbacks. Labour costs are the most important one, even though the advantage traditionally enjoyed by China and India in this particular regard has been somewhat eroded by higher wage demands in recent years. However, wages in Eastern European countries also tend to follow the EU average, which could put them in competition with closer nearshoring alternatives in more developed nations, such as Spain and, especially, the Republic of Ireland.

“Additionally, nearshore locations are typically smaller cities, in terms of population and graduate output, compared to offshore centres, and are relatively less mature,” Ms Burnett adds. “They present some constraints in terms of scalability potential, especially for some skills and senior positions.”

NEARSHORING LOCATIONS

The development of outsourcing locations in Europe means UK firms have several options to choose from if they want to nearshore IT services.

In Eastern Europe, Poland is the largest economy and one that offers some important advantages compared with its neighbours, according to Ramyani Basu, head of the Digital Transformation Practice at A.T. Kearney in the UK.

“Poland has a stabler economic situation and offers good tax incentives,” she says. “Cultural affinity with the UK also makes it an interesting outsourcing destination. It has more than 400 outsourcing centres, and enjoys substantial foreign capital investment around research and development and business process outsourcing.”

But the Poles face determined competition from some emerging challengers in the region. “Bulgaria has become a hot location specifically for high level activities such as computer-aided design and manufacturing,” says Ms Basu. Bulgaria’s education system produces a wealth of engineering and technical skills, which makes it a particularly suitable place to look for very specialised technology and programming skills, she says.

Another emerging nearshoring market is Romania, where labour costs are lower than in other countries in the region, without compromising the quality of the workforce. “Romania is a rising star in the market,” Ms Basu says. “There is huge government support for outsourcing services, including significant tax incentives for IT professionals.”

The Czech Republic and Hungary are other options seen as low risk in the region. Outside the European Union, Ukraine offers a large army of IT specialists and has improved business conditions, although the country’s political and economic instability constitute a hurdle to the development of the market.

Companies that do not mind to spend more have options that are even closer to the UK, both culturally and geographically, and present a lower perception of risk. “Spain is trying to make the most of the financial markets situation to position itself as a low-cost nearshoring geography,” says Catherine Sherwin, managing director at AlixPartners. For its part, the Republic of Ireland has plenty of IT infrastructure and highly qualified workers, although costs are an issue there.

Top image: Poland is the most attractive market for outsourcing in Europe, according to A.T. Kearney

Source: raconteur.net-The most attractive European countries for outsourcing

Global Procure-To-Pay Outsourcing Market Growth of 15.77% CAGR by 2020

Research and Markets has announced the addition of the “Global Procure-To-Pay Outsourcing Market 2016-2020” report to their offering.

The global procure-to-pay (P2P) outsourcing market to grow at a CAGR of 15.77% during the period 2016-2020.

The report covers the present scenario and the growth prospects of the global procure-to-pay outsourcing market for 2016-2020. To calculate the market size, we consider revenue generated from P2P outsourcing vendors in the market and total contract value (TCV) of P2P outsourcing deals.

The report, Global Procure-To-Pay (P2P) Outsourcing Market 2016-2020, has been prepared based on an in-depth market analysis with inputs from industry experts. The report covers the market landscape and its growth prospects over the coming years. The report also includes a discussion of the key vendors operating in this market.

Questions Answered:

  • What will the market size be in 2020 and what will the growth rate be?
  • What are the key market trends?
  • What is driving this market?
  • What are the challenges to market growth?
  • Who are the key vendors in this market space?
  • What are the market opportunities and threats faced by the key vendors?
  • What are the strengths and weaknesses of the key vendors?

Source: businesswire.com-Global Procure-To-Pay Outsourcing Market Growth of 15.77% CAGR by 2020

Virtual Labor Will Fuel Digital Initiatives

It’s now a strategic imperative that business leaders conceptualize how business and IT services can be bundled with “smart” technologies, like cognitive computing or machine learning, to create innovative service models and intellectual property (IP) for new revenue streams.

Speaking ahead of the Gartner Sourcing & Strategic Vendor Relationships Summit 2016 in London, Frances Karamouzis, vice president and distinguished analyst at Gartner, said, “Smart machines are not future fantasy. They are commercially available — it has been estimated that more than $10 billion of smart machine technologies have already been purchased through more than 2,500 companies. Services related to smart machines may be five to 10 times the size of the aggregate technology market.

The New Normal

The new normal is that “recruited” smart algorithms, smart machines, robots and cognitive bots (with artificial intelligence) will occupy the domains of expertise historically fulfilled by people. Smart machines and algorithmic business models will challenge the idea that “talent” and human beings are synonymous.

By 2018, 40 percent of outsourced services will take advantage of smart machine technologies, rendering the offshore model obsolete in terms of competitive advantage.

“The concept of hyperautomation arbitrage will be used to describe the displacement of human labor by smart-machine-enabled services and algorithmic business models,” she added. “This will lead to the obsolescence of the offshore business model for competitive advantage as, historically, it was used to recalibrate the cost of labor and provide scale.”

Gartner predicts that, by 2018, 40 percent of outsourced services will take advantage of smart machine technologies, rendering the offshore model obsolete in terms of competitive advantage.

Offshore Services Are Here to Stay

Does that mean the disappearance of offshore services and long-standing contracts? The answer is no. “It means that it is not going to be the primary means of cost optimization or speed to competitive advantage,” said Ms. Karamouzis.

Smart machines are not always complete replacements for subject-matter experts or other labor. There could still be a role for offshore centers, albeit changed and refocused. Human labor is still part of the mix, and cheaper human labor will always appeal to business leaders.

IP and Smart Machine Revenue Opportunities

Nevertheless, smart machines and the services they enable are a reality. Hundreds of organizations are adopting smart-machine-enabled services to achieve short- to midterm savings, new revenue sources or profitability structures. Few, however, have fully understood the depth and magnitude of the potential value of the intellectual property (IP) being created.

The IP developed alongside smart-machine-enabled services has the potential to add significant revenue, as it may be patentable. Due to the need for speed, business leaders tend to partner with providers to engage them in proofs of concept without involving sourcing executives or their teams, which exposes the organization to long-standing sourcing risks (including selection of the wrong partners, negotiation mistakes and vendor management issues).

There is, however, a much larger and more dangerous risk unique to smart-machine-enabled services. This risk is the loss of potential future revenue from patentable IP — including business processes, process ontologies, algorithms and knowledge capital — that is not properly protected.

Sourcing leaders should investigate new options for virtual labor, or fall behind the competition.

As a result, sourcing decisions for smart-machine-enabled services will be the most strategic decisions that any organization will make in the next 10 years.

With 2,500 organizations in the “machine intelligence” segment, and more than 35 major service providers investing in the development of “virtual labor,” sourcing leaders should investigate new options for virtual labor, or fall behind the competition.

Sourcing managers should also take the lead in enabling their organizations to seize the opportunities offered by smart-machine-enabled services. These services raise the prospect not just of immediate savings, efficiency and competitive advantage. They also enable potential future revenue from patentable IP.

Gartner Sourcing & Strategic Vendor Relationships Summits

Gartner analysts will provide additional analysis and information on sourcing trends at the Gartner Sourcing & Strategic Vendor Relationships Summits 2016 taking place in London, Tokyo and Grapevine, Texas. You can follow news and updates from the events on Twitter using #GartnerSSVR.

Gartner clients can read more in the report, “Predicts 2016: The Rise of the Machine Leads to Obsolescence of Offshoring for Competitive Advantage”.

Source: Gartner-Virtual Labor Will Fuel Digital Initiatives

Opportunities and risks in 5 global outsourcing locations

A look at some of the key trends impacting IT and business process outsourcing locations around the globe—from U.S. veterans entering the IT outsourcing talent pool to currency fluctuations in China and Latin America to the geopolitical situation in Ukraine.

Everest Group’s 2015 outsourcing year in review report included a quick peek at some important trends taking place in five global outsourcing geographies around the globe including India, China, the United States, Latin America, and Ukraine. CIO.com talked to Aditya Verma, practice director in Everest Group’s global sourcing practice in detail about the opportunities and risks that are arising in these areas.

1. United States: Inflows of military-trained talent

Hiring veterans has become a key focus for a number of U.S. companies in the IT and business processing space, says Verma. JPMorganChase, Bank of America, HP, USAA, Wells Fargo, Amazon, Intel, Shell, Accenture, CSC, CGI and IBM all having dedicated programs for hiring former military personnel. “While companies have been hiring veterans for a long time, there has been an increased push lately as companies are looking at them as an alternate talent pool to mitigate the higher competition for traditional sources such as college graduates,” says Verma. And that increased competition is of rising demand for onshore deliver of IT and business process services, particularly in tier-three and tier-four cities.

Federal and state governments provide incentives (usually in form of tax credits ranging from $2,000 to $10,000 per year) to companies for hiring and training veterans with additional benefits often negotiated for, say, building a delivery center near a military base with a specific veteran recruitment plan. The military provides relocation costs for veterans, saving employers that overhead. “Regular hiring of veterans provides a stable and consistent talent pipeline,” says Verma. “Veterans also typically have a higher retention rate than traditional talent.”

Veterans of the Navy, Air Force, and intelligence branches also typically have prior training on technology and related platforms and may have security clearances that make them very attractive to companies working in the public or government sector.

2. Brazil and Colombia: The upside of depreciation Currency fluctuations impacted almost all leading offshore destinations in 2015, says Verma. But the impact is more prominent for certain Latin American countries, especially Brazil and Colombia. Brazil saw its labor arbitrage benefits double in comparison to Dallas (from 20 percent savings in 2014 to 40 percent in 2015). Similarly, Colombia Peso depreciation is creating a positive outlook for the country. “This fluctuation has impacted both countries in a positive manner, improving their relative attractiveness for global services, and is likely to impact both existing players and companies considering these countries,” says Verma.

However, there are other mitigating factors. “Even with a significant change in its currency, players have remained cautious in making fresh investments in Brazil due to the uncertainty in macroeconomic scenario and recent changes in tax regulations that impact the IT and business process services sector.”

3. Ukraine: Uncertainty benefits neighboring countires

“Ukraine has been an important location for global services, especially for IT services,” says Verma. Some of the the war-torn nation’s talent and IT service operations are migrating to nearby central and eastern European countries.

“There was a spurt in outward migration of IT talent from Ukraine resulting in improvement in talent availability in other countries such as Poland, Bulgaria, Romania, Slovakia and the Baltic States,” says Verma. “While migration among CEE countries has always existed, the geopolitical situation in Ukraine has seen heightened activity, including specialist IT workers (such as game development).” The biggest beneficiaries have been countries, like Lithuania, with relatively small talent pools some of whom have simplified visa procedures for IT and software professionals.

Some companies serving global clients have shifted their employees to neighboring countries to ensure uninterrupted delivery. Luxoft, for example, shifted 500 Ukraine-based workers further west to Poland, Bulgaria and Romania.

“The geopolitical situation in Ukraine has also led players (both foreign and Ukraine-based) to adopt a wait and watch approach to Ukraine and consider alternate locations in for expansion or new operations,” says Verma. “This has also impacted areas in which Ukraine has typically led its peers, such as web design and gaming. Consequently, countries such as Poland and Lithuania have reported higher growth in non-traditional IT industries. Lithuania, for example, has attracted a number of computer game development companies from Ukraine and Russia, including Insight, Melior Games, Charlie Oscar, Flazm and Alternativa Platform.

4. India: Pune gets big and digital India takes off

Pune is officially a tier-one location for global services delivery. The city saw a surgey in activity in 2014 and 2015 with companies like Deutsche Bank, MasterCard, Allstate, Volkswagen, Tech Mahindra, and TCS setting up shop. However, says Verma, Pune offers several advantage to its peers like Mumbai and Bangalore, including lower attrition, wage inflation, and operating costs and better quality of life.

Source: CIO.com-Opportunities and risks in 5 global outsourcing locations

Digitalisation top priority for IT managers in 2016

Maturity, the European IT benchmarking company, has published its yearly Strategic IT Agenda – a survey of European IT managers on the hottest topics in the industry.

Unsurprisingly, costs and security are still top concerns for IT managers around Europe. However, this time digitalisation – a new entry – managed to outdo both, appearing in the survey as the number one strategic priority for 2016.

Maturity introduced digital transformation to the survey for the first time this year in response to the growing buzz surrounding the subject in the financial media. IT security was the second-highest priority on the list. IT managers pointed to the growing importance of internet business models for businesses everywhere, as well a string of recent high profile incidents, as the reasons for the increased standing of company security issues. The past year saw an unprecedented number of cyber-attacks – both in terms of scope and scale – take place around the world, from the theft of customer data from Telecoms companies to attacks on banking systems; even the German parliament’s IT was subject to cyber-attack.

Costs dropped to third place on the list of concerns, falling in importance for the third year running. However, the report did highlight that the minimisation of resources is still very much at the heart of company strategies around Europe where the motto “do more with less” still heavily applies.

Maturity also points to a trend of the last few years which has seen “classic” topics (such as optimisation) lose standing in relation to recent entrants such as IT sourcing strategy, which increased in importance by 10 per cent within the last two years. Budgetary concerns are still the main driver for action in IT, followed by business innovation.

According to the survey, outsourcing in IT seems to have come to a standstill over the last year and is expected to continue to stagnate throughout 2016 – more than half of the companies surveyed have no plans to increase the weight of outsourcing in the business, stating that the relative amount of work done in-house will stay the same.

The report mentions both the increasing professionalisation of internal IT personnel and the expansion of cloud usage as the two main factors driving increased user operation of infrastructure as opposed to contracting out of operations.

Source: Sourcingfocus-Digitalisation top priority for IT managers in 2016

UK outsourcing sector wants to remain in a reformed EU

Just under three quarters (73%) of UK outsourcing service providers said they want the UK to remain in a reformed EU, according to a survey.

The findings of the National Outsourcing Association (NOA) questionnaire revealed that 35% of those that want to stay in the EU think doing so will protect outsourcing trade relationships.

Meanwhile those that want to leave (27%) said they only wanted those elected by the British people to govern.

The status quo certainly can’t continue according to the survey. Over a third (34%) think a better deal with the EU can be secured, while 31% think the deal David Cameron got is sufficient. But 17% don’t think a deal can be secured that will justify Britain’s EU membership.

“The views of the NOA membership reflect those of Britain’s outsourcing industry as a whole, the same views held by the C-suite at the likes of BT, HSBC, IBM, Serco and Unilever,” said Kerry Hallard, CEO of the NOA. “We’re all for keeping Britain in a reformed EU, where we can continue to have influence and be seen globally as a key player – ‘Brexit’ would certainly diminish Britain’s appeal on the world stage.”

She said leaving the EU would diminish the UK’s role in the global business services industry. “I was in India just a few weeks ago and had many conversations on this subject with key Indian players. They want and expect the UK to stay part of the EU,” she said.

EU migration chokes off skills

Hallard also took the opportunity to criticise government plans to cap the number of Indian workers coming to the UK. She said the fact that migration is open in the EU – with no skill level requirements – is having a negative effect on attitudes to migrants from elsewhere.

The UK government wants to reduce the number of workers coming into the UK from outside Europe, which could result in a major cut in the number of Indian IT workers in the UK working on outsourcing projects.

A proposed increase in the minimum salary paid to staff brought to the UK by overseas suppliers – which could make it a less attractive option – will be fast-tracked by the government.

IT workers brought to the UK to work on contracts from overseas – from India in particular – use intra-company transfer (ICT) visas, part of the Tier 2 skilled worker category, to work in the UK. This route means that, if the offshore parent company has a UK presence, it can bring workers to the UK for limited periods of time.

IT staff from India comprise a substantial proportion of such migrants.

She described the government’s current plan as “knee jerk”.

“It is wrong that the UK is restricting access to the skilled labour we so desperately need access to in order to grow, because we have no control over the mass unskilled migration [from within EU] we are suffering,” Hallard said.

 

Source: Computerweekly-UK outsourcing sector wants to remain in a reformed EU