Why offshoring doesn’t matter

Recently, an enterprise client was debating whether the offshoring ratio — the percentage of resources located off versus on shore — proposed by a service provider was too high, too low or just right. About a half-hour into the conversation, I realized we were asking the wrong question altogether.

Trying to discern what constitutes too much risk when it comes to offshoring has been a common exercise for years. After all, the cost implications are significant. Service providers tend to get aggressive with offshoring because a) they have more people there, and b) it allows them to present a lower total cost when competing for business. Sourcing buyers, however, especially less mature ones, feel more comfortable with a larger onshore presence and may or may not understand how it impacts their business case.

Does the question about percentage of resources offshore matter? I’d say, not very much.

The world has changed. First of all, most providers that work with Fortune 500 clients are large and experienced — they are not in the business of taking on more risk than is reasonable. More importantly, as long as they commit to service levels their customers find acceptable, who cares where the work takes place? The challenge, contractually, is to make sure service levels trump all else to keep the provider focused on what does matter.

But the real reason the offshoring question doesn’t matter is because it is an obsolete one. It asks: Do you want expensive human resources close to you or do you want cheap human resources far away from you? And the answer to both of these is no. What you really want is a non-human resource. You want to automate as much as possible so human creativity can make a difference elsewhere, where it counts.

When software robots reduce the volume of work related to repeatable processes, humans can then focus on what the robots cannot do. Instead of counting bodies, you want an aggressive rationalization program that reduces the number of applications you have to maintain (and thus the number of people maintaining them, regardless of where they sit). You want strict compliance where it matters — places where robots are demonstrably better than humans — and extreme creativity elsewhere. (Some humans still have the edge here, but they are rare, and you should hire them wherever they are.)

It will take time for companies to move away from the obsession with offshoring ratios and what they consider to be the risks they pose. Today’s outsourcing buyers and providers should be asking a different kind of question about risk: What are the risks of not automating these functions? And what new risks does automation create?

The offshoring debate is yesterday’s debate. We need new incentives to encourage no-shoring — an environment where physical location is meaningless because code does the work.

Source: cio.com-Why offshoring doesn’t matter


How application development and maintenance has become a loss leader

Few providers and their customers have noticed it, but Application Development and Maintenance (ADM) has become the loss leader in IT Services.

With everyone scrambling for everything digital, enterprises now are focused on how to buy the next generation of technologies, not how to support the last generation. Maintenance was already low on the totem pole and has become highly automatable, but agile, cloud, ready-to-buy platforms and other advances have eroded the status—and the margins—of development. ADM has to be a loss leader now, not only because it is suffering from low demand, but because it is what allows service providers to walk the right customer halls in search of digital opportunities.

Digital initiatives, while highly valuable, tend to be smaller in scale. ISG’s preliminary research shows that about 85 percent of them are under $5 million. Competition to land these deals has heated up, especially with an exploding ecosystem that offers literally thousands of choices beyond the large service providers. Most of the time, enterprises will choose from their existing providers, so being already “in the building” is an enormous advantage when it comes to capturing digital market share.

If you are an enterprise buyer, congratulations! You have a new source of leverage. You should expect that your service providers will automate your ADM portfolio aggressively to lower your costs and free up funding for digital programs. You also should expect those same providers to showcase and demonstrate their digital innovations and investments so you are aware of what they have to offer. But you also must follow through on the promise. If they meet your expectations at streamlining the old portfolio, you should reward them with helping you build the new.

If you are a service provider, your situation is trickier, but the path is still clear, because if you don’t reduce the unit costs of ADM services with disruptive technologies, someone else will—and you will lose that all-important ability to walk the halls. But cannibalizing your own ADM revenue isn’t enough. You must be willing to invest in digital showcases, and be assertive in bringing innovation to your client.

Even more difficult, you must be willing to collaborate with many other technology companies that have built point solutions and/or superior technologies; since many of them are small, you also must know how to find them. Then, you have to figure out a way to make money when, at best, you have a primary orchestration role in a complex digital ecosystem.

And finally, you must re-invent account management to speak to business benefits that appeal to different buyers, while drastically reducing the cost of sales—the old model simply won’t work for these smaller deals. If you do, you will not only replace the revenue forgone in traditional ADM, but you will give yourself opportunities to grow for at least the next decade.

All of this only works if enterprises and their providers have honest, transparent conversations about the future. The temptation to try someone new will be enormous for the buyer, but they shouldn’t discount the institutional knowledge of an existing provider as a benefit; remember most of the barriers to digital transformation are human, not technological.

And providers will have to step up their game—speak to business buyers about business benefits, while taking on some risk and showing they have the digital chops to play outside their old sandbox.

The shifts are subtle, and there’s money involved, but get them right, and together the buyer and seller can build a sustainable digital business relationship.

Source: cio.com-How application development and maintenance has become a loss leader

AI & Automation are playing a major role in transforming businesses

Criticization and appreciation is a part of the game. And, something similar is happening with disruptive technologies such as Artificial Intelligence (AI) and advanced automation. Many see it as a force of change which will lead to growth, whereas few others criticize disruptive technologies for being the reason of job loss.

Putting aside all such debates, it is high time to admit that disruptive technologies have led to new forms of competition and it has become imperative for businesses to duke it out. However, if we turn history pages, we will be convinced that automation has always led to the creation of a new set of jobs. It is only that transformations in technologies demand patience, as it takes some time for the transition waves to settle down.

Similarly, advanced automation and Artificial Intelligence (AI) are in its stage of evolvement but at the same time, it has also encompassed people, businesses, and economies. It opens the world of enormous opportunities – where businesses can evolve at an incredible speed and the workforce can learn new skills to perform modern-day business operations.

According to a report published by Accenture, “companies that will grow and dominate their industries will be those that systematically embrace automation across their organizations using it to drive the changes to their products, services, and even business models as they continue to transform themselves and their industry.”

Advanced Automation Set to Change Business Landscape

Processes are becoming efficient, dependency on the human workforce has significantly reduced, tasks are being completed with more accuracy and precision, customers get an engaging and interactive platform – Artificial Intelligence (Ai) and advanced automation are changing the business landscape at an unprecedented speed.

It won’t be wrong to say that these disruptive technologies introduce a paradigm shift in the way companies function and the human workforce carry out diverse business activities. Enhancing efficiency is not the only aim, but with advanced automation, businesses can go beyond traditional boundaries of maximising productivity and profitability. Disruptive technologies rather support in long term growth of business organizations, where main focus lies on building a personalized relationship with customers, becoming a brand, delivering true value and enhancing customer loyalty and retention. In short, disruptive technologies such as intelligent automation enables business in remaining fit for even future performances.

Time for Humans to Team-Up with Their Digital Co-Workers

Gone are days when humans guided machines to perform various business operations. With cognitive abilities turning into a reality, it is the automated business system that guides the human workforce. Programmed machines are now performing tasks exactly as a trained employee. And, in some cases better than them.

With cognitive abilities, advanced automation solutions enable the business system to analyze and respond in an urgent situation. This gives businesses a responsive platform, which supports businesses in eliminating performance bottlenecks both inside and outside the organization. As a result, streamlined process supports in seamless business workflow, which significantly helps in achieving organizational goals efficiently.

It is high time the human workforce must team-up with their new digital co-workers. And, it can bring innumerable benefits for them. Programmed machines share much of the workload; employees get an opportunity to learn new skills required for modern business processes; advanced automation saves much of their time, which enables them to be more creative while performing diverse business tasks.

Benefits that Businesses Can Gain

Technologies have always supported business organizations in performing operational and productional activities. But with evolving technologies such as advanced automation, it is time for businesses to reap innumerable benefits.

Advanced automation solutions are designed with advanced business models such as SaaS, Six-Sigma, and Lean production. There various proven business models together play a key role in cutting operational costs. By enabling in updating the business system with the latest development in technology, ability to control entire business activity even from a remote location, supporting in optimum resource utilization and many more – advanced automation solutions in cutting costs by a great margin.

Disruptive technologies are being widely recognized for making business processes robust and efficient. With approaches such as Six-Sigma businesses can ensure that tasks are completed within allocated budget and time; variations in finished product and other services are kept to a minimum level, and most importantly it supports in reducing the error-rate. Lean production, on other hand, supports in eliminating wastes from processes which further aids in achieving organizational goals successfully.

Besides, advanced automation also enables in creating an interactive and engaging platform for customers. With automated processes such as Sales and Marketing, businesses can ensure that customers are informed of sales, discounts and other promotional offers right on time. Customers can put their queries and businesses can deploy advanced measures for an instant solution. This encourages customers to be loyal and also largely impacts their buying decision.

Therefore, it won’t be wrong to say that disruptive technologies enable business in performing robustly at all fronts. With competition getting steep, technologies such as advanced automation is key to success as it can play a larger role in delivering complete satisfaction to customers.

AI and Automation Is the Greater Force

With advanced automation technologies transforming businesses at a breakneck speed, leaders are set to gain a wider market share. As the report published by Accenture further informs “Intelligent automation will enable enterprises to innovate and evolve by increasing their agility, reducing the complexity of systems and operations, accelerating their time to market, and creating the ability to experiment continually with new products and services.”

In the prevalent technology-driven environment, businesses cannot grow using traditional business approaches. They should rather adapt to the change introduced by the new age disruptive technologies. Embracing intelligent automation, companies can drive demands and can successfully deploy advanced business methods to fulfill customer preferences.

Technological solutions are playing a larger role in transforming businesses and is helping them in securing long-term growth. But what matters is – how soon business leaders realize this fact that AI and intelligent automation solutions are the greater force, which can in no way be overlooked?

Source: itproportal-AI & Automation are playing a major role in transforming businesses

Digital done wrong

For readers in the U.S., the following is an all-too-familiar—and painful—story I need to tell to make a point. Warning: reading this may raise your blood pressure or tie your stomach in knots.

Jeannie is a middle-aged woman who takes medication for two chronic conditions. She will likely take both for the rest of her life and is grateful for her employer-provided health plan.

Because of the long-term recurring nature of these medications, her health insurer insists they be purchased from its in-house mail-order pharmacy. One of the medications is generic and inexpensive—it has been around for years and is supplied by the normal pharmacy in 90-day intervals. The other is a brand-name, recently launched drug that costs almost $3,000 per month and is supplied by the insurer’s specialty pharmacy in 30-day intervals.

On any given day, Jeannie may receive a robo-call from the insurer stating one of her prescriptions is ready to be shipped, but they must speak to her to confirm her order. She thinks this is likely the more expensive, brand-name drug she takes, so she immediately presses the button to be connected to an agent. The Interactive Voice Response (IVR) system takes her information, including her birthday and ID number, and she is quickly connected to an agent. The agent immediately asks for the exact same information, and then asks her what she is calling about.

Jeannie says, “Actually, you called me! But I suspect it’s about shipping my regular prescription X.” The agent responds that her request is handled by the specialty division and needs to transfer her call. This happens quickly, but the new agent again asks for the exact same identifying information before processing the order. Jeannie wonders why the smartphone app she was asked to download by her insurer doesn’t make this any easier. Days later, Jeannie receives an email from her insurer asking her to call in. Thinking it might be about the second medication, she calls and repeats the process of providing the same information three times to a machine and two people. At this point, she discovers it is about the same drug she already addressed in her first call! A few days later, she gets the same email, judges it to be yet another repeat, and ignores it.

A few days after that, she gets a letter in the mail saying the company has been unable to reach her and is unable to fill a prescription unless she calls immediately. She does call, goes through only the two-step process (the specialty pharmacy isn’t needed in this transaction), and her other prescription is filled.

She again wonders why she can’t handle all this on the app, which uses fingerprint recognition for extra security. She investigates on the website and it turns out she can refill her generic directly on the website, but not on the app. The specialty drug requires a phone conversation and cannot be filled by website or app—so she is stuck with two processes.

Jeannie goes through this tedious exercise at least once a month. Almost always, within a few days, there is a follow-up call to survey her on her experience. A heavily accented voice reads a script. When she is able and willing to answer, she gives the call center rep detailed feedback on how to streamline the process for her: “Tell me which drug we are talking about, verify my information only once. Better yet, let me do everything on my smartphone and save us both some time!” Nothing changes.

Here comes the point: The irony is the insurer has all the tools at its disposal to provide a successful omnichannel digital experience. It is hindered by what are obviously some legacy processes and organizational silos that just don’t make sense.

As with so many digital stories, the technology to make this a great experience is all there—the barriers are human and organizational! Why hasn’t anybody noticed that fingerprint verification is easier (and more secure) for both the customer and the company? Why hasn’t anybody written code to alert the agent that the person on the other end is responding to a call from the company? Why have two completely different divisions deal with the same customer’s medication?

CIOs that want to stay relevant must understand that digital experiences have to start with the customer and work backwards into the enterprise. The enabling technology is, in most cases, already there. Is your company willing to make the hard changes required to go digital successfully?

Source: cio.com-Digital done wrong

Turning the ship toward automation

My recent post about whether the proportion of offshoring in a sourcing portfolio matters anymore got a lot of attention. As I wrote in that piece (“Why Offshoring Doesn’t Matter“), sourcing buyers are eager to incorporate automation into their environments, but some service providers are struggling to adapt to the new digital world, largely because that pivot requires them to cannibalize existing revenue to implement automation and digitization. Not only does the financial impact slow them down, so do their corporate cultures.

Let’s take a look at the obstacles to automation from a service provider’s perspective:

1. The risk of changing. Traditional service providers have built their businesses selling services that are delivered by people. Even if the price of automation was the same as the price of people (which it is not), revamping an entire portfolio is a big job. And selling services that are entirely new to the market is risky. Service providers that embrace automation risk underbidding the solution and losing money or paling in comparison to a competitor that already has it figured out.

Despite the risks, service providers today cannot afford to stick their heads in the sand. Even cautiously adding digitally automated components to a solution at or close to renewal time is not enough to keep up with changing market demand. The fact is, buyers are not looking for service providers that are lukewarm about automation; they are finding and investing in service providers that embrace it.

And many service providers are investing in digital, automated solutions, as I was fortunate enough to see during a recent tour of several campuses. What remains unclear is whether their sales forces and internal bureaucracies are as willing to embrace the change as their technologists.

2. The challenge of changing. Turning the barge is hard. Service providers have built efficient machines that keep hundreds of thousands of people busy day in and day out. Their cultures emphasize safety over risk. Offering cost-effective services by following carefully-laid-out processes (considered safe) is often seen as preferable to investing in innovative, new solutions (considered risky). Service provider management bonuses are tied to profitability, and profitability is tied to keeping big workforces busy. Career paths at these firms have been designed for engineers who graduate from writing and maintaining systems to managing people who write and maintain systems.

We are now at a point where conformity to process can be a barrier to progress. Yet, for most service providers, the prospect of overhauling an entire business model is daunting. How will managers earn bonuses when their clients demand fewer people, not more? What would management even look like if it involves supervising software robots? Knowing the magnitude of this kind of change, and knowing what we know about human nature, it’s easy to see how such an obstacle will not be easy to overcome.

Some argue that demand for advances in internet of things (IoT) technologies, automation, cognitive computing and digitally savvy robots will keep the legions of developers at IT services firms busy for generations — they will simply write different kinds of solutions than they do today.

And while this may be true, most traditional service providers will struggle in the transition from today’s business model to tomorrow’s. They may understand what is happening in their markets, and they may understand the technology that’s required to meet the new demands of their customers, but they are still saddled with an infrastructure built around people-based services.

The nature of the challenge itself is new to service providers. I have no doubt they possess the technological wherewithal to compete in tomorrow’s market. Will they recognize that the barriers are cultural? Or will they try to solve what is fundamentally a behavior challenge with more technology and more people?

In this new era, I give the smaller players the advantage. Changing the hearts and minds of 10,000 people is a lot easier than changing the hearts and minds of 100,000 people.

Source: cio.com-Turning the ship toward automation

Is your digital transformation process truly transformative?

Digital transformation is what big data was for organizations just a few short years ago. Everyone is talking about it, and organizations are scrambling to make sure it is a strategic initiative by having some sort of digital transformation process.

Just like big data, the term digital transformation gets its popularity from the size of its potential impact rather than being a new tool for improving operations. Since the first days of robotic automation in manufacturing, people have been using technology to improve and simplify work. Now, we are shifting the use of technology to a wider array of complex work, such as customer interactions, reporting and decision-making.

There are several reasons for this increased attention to digital: the pace of disruptive technology, the need to do more with less, the need to maintain competitive advantage and, above all, the need to be more customer-centric. Though digital tools and technologies significantly affect the way business is conducted, many organizations continue to struggle with them or struggle to put into place a comprehensive and effective digital transformation process.

Why are organizations struggling?

A report on the 2015 global digital business survey conducted by Deloitte and MIT Sloan Management Review said “maturing digital businesses are focused on integrating digital technologies, such as social, mobile, analytics and cloud, in the service of transforming how their businesses work. Less-mature digital businesses are focused on solving discrete business problems with individual digital technologies.”

The root cause of organizations’ struggles seems to start with a key word — transformation — that often either gets overlooked or misinterpreted. Transformation can be defined as a significant organization-wide change that orients the organization in a new direction. This can include a change in its business or operating model. Transformation, however, is not merely an incremental improvement or transition to a new system or application.

Unfortunately, many organizations are not embarking on transformations. Instead, they are solving discrete business problems with digital technologies. This means they are creating one-off solutions for a single business problem rather than looking at an integrated approach to solve multiple business problems. Because these types of projects have digital components, they get mislabeled as digital transformations.

When this occurs, organizations struggle because the digital transformation process lacks an overarching purpose and plan to tie the efforts together. Ultimately, this lack of an overarching strategy results in confusion among those tasked with execution because they don’t know the following:

  1. What’s in. There are often no parameters or criteria to define what parts of the business need digitization projects or to help scope and prioritize efforts. For example, an organization that wants to use digital technology to improve its finance function will have no guiding criteria to help pinpoint which processes should be automated.
  2. What the right solution is. There are no criteria for determining the fit of the plethora of solutions available. Without clear goals, the organization can’t clearly articulate what features it needs, potentially resulting in overbuying or making expensive modifications afterward.
  3. How the pieces will fit together. There is often no holistic perspective on digital projects to help the organization understand the intersections and interdependencies between projects and the work they are accomplishing. This can result in post-implementation integration projects and add-ons.

How to tell if your efforts are transformational

Understanding the difference between a digital project and digital transformation is easier said than done, especially given that digital transformation should be comprised of interconnected digital projects.

However, strategy, rather than technology, should be the guiding principle of the digital transformation process. Additionally, digital transformation tends to hinge on two characteristics: a focus on customer experience and its organization-wide impact.

The purpose of digital transformation is creating value, and that includes for the customer’s experience. Hence, organizations not only need to understand their customer’s journey, but must also use the impact on customers as one of the key criteria and measures of their digitization efforts.

The transformative work of an effective digital transformation process requires looking from the outside in, and that includes value chains and cross-functional, end-to-end processes. To ensure organizations stay focused on the end user, digital efforts must help break down operational silos and improve collaboration for managing customer value.

To categorize the initiatives in its digital transformation process, each organization should ask itself these four questions:

  1. What’s the value to the customer? Is the effort focused on creating customer value, and is that value clearly quantified to measure success? If the focus is on the steps and efficiencies of a business process and not on establishing the customer value, it’s not transformational.
  2. Are we changing how we work? Is the initiative going to change how we conduct business or does it simply apply a new technology to how we’ve always done things? As noted earlier, there is often a misconception that digital tools are equivalent to digital transformation.
  3. Who’s involved? Is the effort limited to a specific business silo — e.g., marketing or finance? Because transformations are organization-wide, they are cross-functional by nature.
  4. Why are we doing this? Transformations are focused on changing how the organization conducts business in an effort to create value. If the focus of the effort is solely on cost reduction, then it’s not transformational.

Though only a high-level start, the answers to these questions can help organizations start to clear up some of the confusion around their digital transformation process.

Source: searcherp.techtarget.com -Is your digital transformation process truly transformative?

Outsourcing Advisors: 6 Tips for Selecting the Right One

When it’s time to outsource, selecting the right outsourcing advisor may be the single most important decision you make—one that sets up your future relationship with an IT services provider for success or failure. Given that IT outsourcing transactions are complex and vendors are savvy at setting them up to their advantage, solid sourcing advice from a third party can help to level the inherently uneven playing field, particularly for less experienced IT services buyers.

But deciding which sourcing advisor is right for you is trickier than it may seem. All sourcing advisors are not equal. A big name firm may not give you the attention you need. A start-up may not have the depth of experience you require.

“There has never been as great a need for outsourcing advice as there is today, and there has never been such a plethora of advisors competing to give their advice,” says Phil Fersht, former AMR analyst and author of the outsourcing blog Horse for Sources. (Fersht now works for vendor Cognizant Technology Solutions.) “Whether you are a highly-sophisticated enterprise with your outsourcing experience or a complete novice, you will most likely have to engage a third party at some stage during the outsourcing lifecycle, whether it’s simply to administer and negotiate a complex contract or to hold your hand through the entire evaluation process.”

There are some general qualities that make for a good outsourcing guide. “The very best advisors are not only guardians of the clients’ interests, but are also excellent facilitators, who understand both sides’ perspectives, risks and interests, and can work creatively and constructively to find solutions that permit both sides to succeed,” says George Kimball, an outsourcing attorney in the San Diego office of Baker and McKenzie.

Here are six tips to help you choose your outsourcing consultants wisely.

1. Know your goals. “Make sure you define your basic sourcing strategy before selecting the sourcing advisor,” says Richard Matlus, research advisor for Gartner IT Services and Sourcing. For example, is your impetus for outsourcing to reduce costs? If so, adds Matlus, select an advisor that will help you achieve that goal. Some advisors excel at holding vendors’ feet to the fire on prices, while others specialize in other areas.

2. Bigger is not always better. Outsourcing advisors come in all shapes and sizes, from the big name firms that charge correspondingly high fees to independent individuals with lower hourly rates.

“When dealing with third party advisors, you usually get what you pay for,” says Fersht. “However, we have seen situations where enterprises have paid top-dollar for third-rate advice and others where customers received great service from one of the smaller, cheaper firms.”

A large, well-known consultancy may be a good option, but don’t make the decision based on name recognition alone. Now more than ever, there are great lower cost options available, thanks in large part to experienced sourcing advisors who were laid off during the economic downturn and who are now in business for themselvesand, as such, available at a large discount to you.

3. Get personal. You hire a consultancy, but you work with a consultant. “The individual advisor in charge of the project is at least as important as the firm,” says Kimball. “The (best) firms all offer good people, sound methods and a wealth of experience, but individual chemistry between advisor and client is crucial.”

Adds Matlus, make sure you’re not getting stuck with the rookie.

4. Check—and double-check—those references. You’ll want to talk directly and discreetly with multiple clients of your prospective sourcing advisor who are at least a year into their negotiated outsourcing deals. They’ll be in the best position to tell you whether the advisor’s guidance was worthwhile. The best references, as always, will come from people you know and trust.

“References from enterprises not put forward by the advisor are even more valuable,” says Fersht. “Try networking with peers at other companies who have experience working with outsourcing advisors.”

Make sure the references you talk to were involved with the consultancy at the start, or better yet, are those who’ve had experience working with the individual professional who would lead your process, adds Matlus.

5. Test drive the tools. Take a close look at the processes and methodologies the advisors use. The advisor should have a proven approach for taking enterprises through the outsourcing lifecycle.

“Ask them specific questions on how they applied it in previous client cases and how they would work with you during each stage of the cycle,” says Fersht. “You will learn a lot about how much they have thought through your issues when asked how they will apply their methodology to your specific situation.”

The better the advisor’s tools, says Matlus, the better and more expeditious the sourcing process will be.

But don’t forget about the need for flexibility, as well. “Look for the ability to vary usual methods to suit circumstances and client needs,” says Kimball. “One size does not fit all, especially now.”

6. Investigate conflicts of interest. There’s no doubt that you want an advisor who engenders respect from the vendor community, but when consultants get too cozy with providers, you lose.

“They must be focused on your best interests, not theirs,” says Fersht. “Investigate other business divisions and service lines within the advisory firm to ensure where their interests lie. Also prod them about their relationships with outsourcing vendors to make sure you’re getting an independent view of the market.”

Source: cio.com-Outsourcing Advisors: 6 Tips for Selecting the Right One