Forces of Change Shaping Outsourcing Solutions | Article

Like a pre-storm sky, a look at the investments outsourcing service providers are currently undertaking presents evidence of tremendous change over the next five years. They’re mapping out a new course, and buyers of outsourcing services need to understand where providers are headed so they can make informed decisions.

Outsourcing Center asked 12 leading ITO and BPO service providers about the forces driving their investments for solutions over the next five years. Market volatility, market differentiation, lack of investment capital, collaboration, globalization, and rethinking how work gets done are among the top business needs for which buyers are asking outsourcing providers for help.

Speed is the theme that emerged in the interviewed providers’ descriptions of their investments in solutions addressing these forces. Here’s a rundown.

Cloud technologies

Wipro Technologies is establishing strong system integration capabilities in private clouds and in integration of public and private clouds. Rajan Kohli, CMO, says, “Our investments are geared at creating platform cloud solutions that successfully deliver business value to clients.”

According to DonSchulman, General Manager for IBM’s global F&A and SCM business, IBM continues investing in its BPO Business Process as a Service (BPaaS) offerings. He says, “Our cloud-based BPO solutions are specifically designed to enable quick deployment of this technology in order to drive rapid benefits. This includes immediate cost-efficiencies, increased scalability, and easier access to technology innovation as well as sustainable performance improvements for client organizations.”

Infosys BPO is investing in services for the cloud as well as services on the cloud “to help clients achieve faster process efficiency and effectiveness,” says Ritesh Idnani, COO.

Joanne Olsen, Senior Vice President, Oracle Cloud Services, points out that “The economy may be officially out of a recession; but organizations have learned that, in the ‘new normal,’ extreme volatility and uncertainty will persist.” Making large capital investments without a fast return on investment is no longer an option; yet, given the uncertainty, organizations need to accelerate the pace of innovation and become more agile and responsive.

“Flexibility and speed are the key attributes for any outsourcing solution for the foreseeable future,” predicts Olsen. Oracle has invested in cloud services to enable clients to achieve financial flexibility and business agility to adjust to changing market conditions and demands quickly and efficiently. With cloud services, they pay for what they use and move their capital expense to an operating expense.

Allied Digital Services is also investing in the cloud delivery model to help companies move from the own-and-operate (cap-ex) model to a services-based (op-ex) model. Kevin Schatzle, President, refers to this as an “IT evolution” enabled by advances in virtualization technologies and the development of remote management tools. As part of the evolution, Allied Digital invested in an integrated delivery framework with customized best-in-breed infrastructure management tools integrated on a common platform that enables visibility to all critical components of an organization’s IT infrastructure.

Partha Sakar, CEO at Hinduja Global Solutions, says “Cloud concepts certainly will disrupt the playing field, but success in many of the disciplines will continue and always require well-trained, compassionate, culturally compatible and, as appropriate, proximate resources.” Therefore, HGS is also investing in building more remote data centers in proximity to current and future growth markets.

Industry-specific solutions / platforms / collaboration

“Companies are looking for new ways to harmonize business processes on an end-to-end basis across their enterprises, so we’re responding to that and investing accordingly,” says IBM’s Schulman. “Our strategy has been to focus on a tighter linkage between F&A and SCM businesses to facilitate more cohesive end-to-end capabilities.

Schulman says companies are increasingly recognizing the need to address both the outsourced and retained portions of their finance and procurement back-office processes in a more integrated, holistic fashion. This requires technology that enables visibility across all processes including non-outsourced scope. He says clients are also looking closely at creating vertical integration of their business to find new ways to interact with their vendors and customers in a consistent manner.

“In fact, we now have the technology available to establish a shared platform that goes beyond individual processes,” says Schulman. “We are able to drive standardization across companies and even industries by connecting data from many disparate sources. Access to this kind of information enables companies to proactively identify and respond to emerging trends, both large and small, for enhanced business agility. At the same time, this technology will help clients innovate their processes in ways that differentiate their enterprise.”

Gordon Coburn, Chief Financial & Operating Officer at Cognizant, says “Tectonic shifts in the economy, society, and technology are driving organizations to create an environment where work becomes a more fluid and intimate collaboration between employees, customers, suppliers, and other stakeholders, delivering continuous business value.” New virtualized platforms are enabling real-time collaboration within organizations and with external partners, leading to new ways of working, managing, and innovating.

To achieve new ways of working, Cognizant is investing in frameworks and methodologies that help companies assess their ability to create more collaborative and virtual ways of working.

Deepak Patel, CEO of Aditya Birla Minacs, also predicts “virtualization” of enterprise business models will accelerate business opportunities for the BPO industry. Aditya Birla Minacs is investing in robust process capabilities aligned to vertical domains. He says market forces are now providing outsourcing service providers with “a unique opportunity to dive deeper into the core processes of their clients and move up and across the value chain.”

TCS is investing in building a strong pool of industry domain experts. It is also investing in acquisitions (such as Citigroup Global Services Ltd and Supervalu’s India captive) to gain vertical expertise.

In addition, TCS continues to invest in building beyond its current seven vertical platform BPO services. These services deliver a process as a service, leveraging the cloud. “Over the next few years, we will invest in strengthening our platforms and increasing service coverage,” states V. K. Raman, Head, Domain Services, TCS BPO Services.

Infosys BPO is investing in vertical domain competencies not only by lateral hiring but also mandating certifications and process trainings that enhance employees’ domain capabilities. “Inherent in the vertical approach is the deeper understanding of the industry nuances. If you are talking to a publishing company, you need to know about royalty accounting. If you are talking to an insurance carrier, then knowing about blue book reporting is where the conversation will veer,” says Idnani.

In its vertical approach, Infosys BPO is also investing in offerings that focus on its clients’ revenue. For example, the provider is focusing on warranty administration in the manufacturing space and sales effectiveness improvement by managing trade promotions for the consumer packaged goods sector.

Wipro is making focused investments in “productized” solutions that combine software, services, infrastructure, consulting, and BPO skills to provide industry-specific reusable solutions. The service provider is identifying platform solutions that address specific vertical industry needs and combine BPO, IT, and infrastructure insights to offer “full-function outsourcing.”

Analytics

IBM remains focused on innovation, including continued investments in integrated analytics that drive additional process optimization. Schulman explains, “Advanced analytics capabilities through mature BPO providers is going to empower companies with game-changing business insight that would be difficult to achieve on their own. When data is standardized across companies and even across industries, analysis of that information will drive insight and visibility into behavior patterns that clients have never had access to before. This information will enable rapid, actionable business decision making from a big-picture perspective that will help drive better overall performance that is sustainable over time.”

Infosys BPO is also investing in high-end analytics services.

Terrence McCrossan, Division Vice President, Marketing & Strategy at ADP, says the forces driving ADP’s investments over the next five years include a growing need to address clients’ focus on financial compliance and controls, globalization, and user expectations. Together, the forces cause an increased emphasis on reporting/analytics and flexibility.

Flexibility

According to Angela Hills, Executive Vice President at Pinstripe, “Market fluctuations are creating demand for companies to scale up and down at a moment’s notice. The need to be scalable and flexible are two of the driving forces in how we are investing in solutions.” She points out that the ability to resource appropriately to meet client needs not only impacts clients but also “has a huge impact on the success of our organization.”

Wipro has invested in multi-tenanted managed services to offer clients a flexible delivery model with just-in-time capacity and predictable high-quality standardized services. The provider is also investing in Centers of Excellence and widely available third-party tools to build accelerators to improve the delivery schedule.

Green technologies

In addition to adding solutions to its IT for Green portfolio, Wipro is now partnering with SAP to collaborate on perpetuating green IT through “green consulting.” Kohli says more such investments will likely follow.

Core processes

Aditya Birla Minacs’ vision is “to be firmly embedded” in its clients core processes, says Patel at Minacs. He predicts that the depth and breadth of outsourced services will grow. Accordingly, one of Minacs’ growth strategies includes “acquiring the right assets that enhance our solutions portfolio and strengthen our capabilities to take on even those processes that are considered core today.”

Time to value

Some of HP’s investments in response to market forces also focus on speed. Buyers’ increased interest in multisourcing means provisioning IT products and services from multiple providers. This leads to smaller, shorter-term relationships. “With higher volumes of smaller deals, HP is investing in a smarter application of technology to ease the cost and complexity of on-boarding new clients and speed time to value in these quick-turn contracts,” explains Russ Daniels, Chief Technology Officer for HP Enterprise Services.

A market shift in expectation of configure-to-order instead of build-to-order for provisioning IT is causing HP to invest in standardization and fully managed, globally delivered IT services that help clients achieve execution speed as well as reduce cost and achieve greater reliability.

Daniels says that faster time to value is also the driving force behind HP’s investment in fully automated self-service delivery of infrastructure, application, and business services that help clients realize the full potential of “IT as a Service.”

What are we to conclude from all the change on the horizon? First, the providers are addressing buyers’ needs. Second, whenever there is a great degree of change, there is also a high degree of risk – especially when speed is a major factor. For advice about risk mitigation, read Eight Biggest Areas of Risk for Buyers of Outsourcing Services, Upcoming Changes Point to Need for Buyers of Outsourcing Services to Alter their Way of Thinking, and Buyers Face Decisions around New Opportunities and Risks in Outsourced IT Solutions.


3 Comments on "Forces of Change Shaping Outsourcing Solutions | Article"

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  1. Tanya says:

    Definately, culturally compatible,flexibility. All in on that.Making it fun works too.

  2. Red Klahr says:

    There’s a lot of information here, most of it sounds good. The question is that there is so much of it, the amount of metrics involved evaluating the value becomes another labor intensive human process.

  3. Stella says:

    I read in one of those insider newsletters that IBM is investing in South America too. Sounds like a good bet with all the growth and Obamma visiting down there in March.

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