Outlook 2013 by Cybermedia

www.globalservicesmedia.com

January 2013

OutLook 2013 Challenges Ahead

Demonstration City of Chinasourcing-Hangzhou

Case Study:

Hangzhouâ&#x20AC;&#x201D;Bigger and Stronger Competitive Industries Written by Beijing Great-Idea Business Resources Co., Ltd. The Top 10 industries in Hangzhou Hi-tech Zone (Binjiang) are closely linked and integrated. The Cultural and Creative, E-commerce, Information, Software, Internet of Things industries are lead ing in the city and the province. In the next few years, they will keep prominent in the technology and industry competition; Advanced Equipment, Biopharma, New Energy, Energy-Saving and Environmental Protection fields will be strengthened for the dominant feature and strive to lead in the country; at the same time, Financial Services, Tourism and Leisure industries will be emphasized as two supporting services industries. In the field of cultural and creative industries, it will focus on the development of animation and game, design services, cultural exhibition and digital TV, and strive to reach 60 billion RMB with the main business revenue by 2015, with an average annual growth of about 18%, which will make Hangzhou become one of the national core areas in cultural and creative industries. ( The picture was taken at the Headquarter of Alibaba when Great-Idea Delegation visited Hangzhou Hi-tech Zone)

In the field of E-commerce, it will focus on the development of e-commerce platform and mobile commerce services, and strive to reach 20 billion RMB with the main business revenue. It will be built China's e-commerce core demonstration area. In the field of Information Software Industry, it will focus on the development of software services and service outsourcing, digital content services, integrated circuit design, and strive tor each 120 billion RMB with the main business revenue by 2015, which will become the core area of Hangzhou Paradise Valley.

China souring

In the field of Internet of Things and Cloud Computing, it will speed up the development of key equipment of Internet of things, cloud computing services, system integration and services of the Internet of Things, and strive to exceed 60 billion RMB with main business revenue, and to become a national leader in the Internet of Things industry Development demonstration zone. In the field of Advanced Equipment, it will focus on the development of communications equipment, intelligent control systems, high-end mechanical and electrical products, and strive to reach 90 billion RMB with main business revenue. Modern communication devices will focus on the 3G mobile communication equipment, high-performance servers, smart phones, and 3G technology development and industrialization. In addition, Hangzhou Hi-tech Zone (Binjiang) will speed up the development of the Biopharma Industry based on the pharmaceutical research and manufacturing; the New Energy Industry focusing on Solar photovoltaic industry; the Energy-saving and Environment Protection Industry based on energy-saving technology and equipment, Energy-saving and Environment Protection services, Semi-Conductor LED and Financial Services and Tourism and Leisure industries. For more info, please click: http://www.great-idea.com.cn/ GlobalServices20121024/ Contact: salida Liu E-mail: salida-liu@great-idea.com.cn

Contents

January 2013

Outsourcing in 2013

19 Overseas Expansion

is Definitely on the Cards

What Should The Outsourcing Industry Learn From 2012?

What is The Picture For 2013?

What’s In a Name?

21 | January 2013

GlobalServices

3 Trends by Industry Experts

24 Top Trends in Analytics Outsourcing in 2013

Outsourcing outlook in 2013

The key in buyers’ eyes in 2013

Outsourcing industry in 2013

Redefining outsourcing

Your it outsourcing framework 57 Contact center in 2013?

Outsourcing in the “flat world” 62 The changing offshoring market 67

Expert Speaks

GlobalServices

The indian outsourcing space

The cloud services scenarios

Business enablement will set the agenda

Outsourcing companies set to increase marketing spend in 2013

Openness to drive cloud adoption in 2013

Transformation through collaboration

January 2013 |

editor’s note

Encouraging Outlook

he world economy does not seem to be in any better shape than before. The canvas is made up of large patches of bad news with occasional spots of good tidings. The global services industry continues to chug along; there is no cause for any permanent gloom on the horizon even if the sun is not shining so brightly.

The 4Q2012 TPI Index identifies three short-term trends: 1. In the US, the adoption of large deals has expanded to include compa-

Ed Nair, Editor ed@cybermedia.co.in

nies that are ranked Global 200 to Global 500. Between 2010 and 2012, the share of large deals in this segment increased by 32 percent. 2. Emerging markets are driving sourcing annual contract values (ACV). Since 2007, Latin America and Mexico has seen a 150% increase in ACV, while India and China has seen an increase of 100%. 3. The BPO industry has grown by 60% in terms of ACV in the last two years with growth coming in from industry-specific solutions. Interestingly, all the three short-term trends are irreversible and hold great growth potential. Further, these will play out over the next few years and therefore they are not necessarily short term trends. The sourcing industry is moving into a phase of rapid change and growing uncertainty. Technologies such as cloud, big data, analytics, social media, mobile are creating massive disruptions. Add to that the emergence of multiple sourcing models, service delivery models, and engagement models. These amount to significant change in the risk landscape that forces a rethink of governance models, risk management mechanisms, performance management, and vendor relationship management. We see a change in three areas. The first one is about managing technology-driven disruptions. The second one deals with managing sourcing relationships in a far more scientific and evolved manner. The third is about getting the right mix of sourcing- insourcing, outsourcing, various forms of offshoring- and continually optimizing the mix to extract value. Sourcing leadership depends on how organizations master these axes of change, how these new levers of value are managed. The upcoming Global Services Conference 2013 by Global Services and Neogroup deals with these areas. Do look up more details of the program at www.globalservicesconference.com and register to attend. Wish everyone a great 2013!

| January 2013

GlobalServices

Outlook 2013

Outsourcing in 2013 By Smriti Sharma

As buyers and service providers evaluate the sourcing landscape and label their 2013 priorities, a clear agenda emerges. That is return on investment of the sourcing industry continues to be challenged.

n 2013, just like in 2012, the ROI will not come from price arbitrage, rather it will be governed from global delivery models, domain knowledge, resource quality, tools and technology employed, process improvement and innovation. In today’s competitive surroundings, for industries to survive it is de rigueur to approach emerging challenges with urgency while making optimum use of standard services, utility computing and cloud delivery models. Going forward, industry will be stressful as the margins will be less because of increasing competi-

| January 2013

tion. Also, as some clients are not doing very well in their geographies they are demanding attrition. Anup Kapoor, strategic business unit head, finance & accounting, Infosys BPO Service, said, “Service providers have to find newer ways to address this problems such as different delivery models, opt for very large scale automation and use of platforms etc.” During 2012, the demand environment was tentative with clients postponing transformational projects and new initiatives in favor of ‘lights on’ work. However, the second half of last year

GlobalServices

EXPERT

There will continue to be movement away from traditional ‘time and materials’ arrangements, with service providers increasingly looking to move to a shared risk/ reward model. If done correctly, this shift can create a ‘win-win’ for both clients and service providers. Prashant Ranade CEO and president, Syntel, Inc

witnessed increased stability. 2013 will also see a continuation of changes in the manner service providers structure their relationships with clients. Speaking on this Prashant Ranade, CEO and president, Syntel, Inc. said, “There will continue to be movement away from traditional ‘time and materials’ arrangements, with service providers increasingly looking to move to a shared risk/reward model. If done correctly, this shift can create a ‘win-win’ for both clients and service providers. Like any paradigm shift, it takes some time to gain momentum, but we expect to see increased

GlobalServices

adoption of these types of models over the next 12 months.” For Syntel, the biggest lesson learned in 2012 is the importance of continued investment in the business — even during times of uncertainty. Syntel continued to invest in their facilities, their workforce and their service offerings, and the result has been the strongest 12 months of revenues in their history. They also learnt that for clients, it’s not about the size of a provider, but the value that you bring to an engagement. In 2013, Accenture expects BPO clients to increasingly want their service providers to transform back, middle and front offices, to improve business performance, and to nimbly enable shifting business directions. The BPO industry is becoming more focused on delivering strategic business impact, not just operating cost reductions.

January 2013 |

Outlook 2013

In regard to healthcare outsourcing, the outlook for 2013 and 2014 is very bright. It is predicted that in the US there will be 30M additional individuals who will have health insurance through the new Healthcare Reform Act

Clients are looking for solutions that deliver business value beyond cost savings and this will only accelerate in 2013. It is called the fourth, fifth and sixth generation BPO. Michael Corcoran, growth and strategy lead, BPO, Accenture explained, “Fourth generation BPO is about delivering business value through industry insights and analytics. Fifth generation BPO is the ability to take technology assets and platforms leveraging the cloud, social media and mobility to deliver business value. Sixth generation BPO is the creation of business networks to continue to delivery more meaningful business value. “ In regard to healthcare outsourcing, the outlook for 2013 and 2014 is very bright. It is predicted that in the US there will be 30M additional individuals who will have health insurance through the new Healthcare Reform Act. This will create immense pressure on hospitals, doctors, and nurses etc to attend these patients and process the claims and get them paid. Outsourcing will be the solution to get the job done smoothly.

10 | January 2013

EXPERT

One of the biggest trends to watch out for 2013 is the demand for true global delivery and the process of ‘regionalizing operations’. Explaining this further Beni Lopez, chief globalization officer, Softtek, articulated, “True global delivery is not a single, low-cost location or very off-shore centric model but rather the trend is toward less overhead and more regional-based models. For instance, a company with needs in Brazil will look to Latin America rather than India for proximity factors and local knowledge benefits.” For example, one of the companies Softek was dealing with had been trying to develop some additional functionality for their new operations in Brazil for a long time. However, this client had an old, highly-centralized model with HQ in US and offshore entities. It had been unsuccessful because the foreign delivery team was not able to grasp the complexity of the fiscal rules and regulations in Brazil. So, Softek sent a team of Brazilians to work with their operations team in Brazil – that led to great success. This example illustrates it is no longer a model where things get done best by a centralized corporate office. Rather, companies are realizing they need to split tasks and responsibilities according to the knowledge base available in local target markets.

SHIFTING GEARS Arindam Dutta, head, global business analytics & Asia business services, HP identifies four key shifts in dynamics of global services that they are currently seeing and expect to see in 2013  The market is undergoing a shift to ‘configure-to-order’ instead of ‘build-to-order’ solution models. The number of clients seeking a bespoke solution is dwindling and for most solutions, we are providing a configure-to-order solution with some customizations to meet the client’s unique requirements. These standardized, globally delivered services help our clients achieve reduced cost, greater reliability, and execution speed.

GlobalServices

Outlook 2013

 The very structure of business process services

is changing: the vision of “Everything as a Service” is solidifying into new market offerings that will both satisfy and generate new demands for technology-enabled services. These solutions will also, in some cases, displace traditional delivery models and raise client expectations for all service delivery as they begin to standardize and automate how they receive their existing portfolio of services. Moving to a highly automated, configure-to-order delivery model will bring major changes to clients’ business models, operational models, and—more often than not—their company cultures. Enterprises will increasingly look to outsourcers with a combination of BPO, ITO, Applications and Consulting expertise to guide them through this paradigm shift. They need delivery assurance in a multi-sourced world, faster time to value for new business initiatives and requirements, an option to source services flexibly, and direction on improving efficiencies and processes.  The move to Customer Intelligence 2.0 or Live Customer Intelligence with contextual, predictive analysis as well as topical contexts in combination will enable more precise, targeted signals from the social channel. The proliferation of online communities and social networks created a new channel, the Social Channel, for consumers to share their experiences and voice their opinions about everything. The dynamic social channel engages customers, prospects, partners, influencers, and employees—touching virtually every key constituent in an organization’s value chain. These channels are reshaping how customers evaluate and choose products, how brands are perceived, and how business processes interact with the customers. The ability to model, identify, understand, measure, and timely react to sentiment, opinion, preference, and behavior expressed in this unstructured content is transforming the way companies interact and manage relationships with their customers.

GlobalServices

EXPERT

True global delivery is not a single, lowcost location or very off-shore centric model but rather the trend is toward less overhead and more regionalbased models.. Beni Lopez chief globalization officer, Softtek

 Enterprises are moving to a transparent serv-

ices and hybrid technology environment. The combination of bricks and mortar, web-based, mobile, and outside sourcing helps enterprises reach their customers in new ways and explore new business models that were previously cost prohibitive. It sets the groundwork for a step change toward the next phase of technological advancements. However, this opportunity comes with its own set of challenges for executives. They will be managing a mixed delivery model for services: some in-sourced, some outsourced, and some delivered in an ‘as-a-service’ model from a range of compute, platform, application, and business service providers. This means buyers will have a vast increase in service delivery options and have to deal with the increased complexity of selecting the optimal source for each required service, knowing when to shift from one source to another, and assuring that the resulting service portfolio meets all business requirements and delivery commitments. The increasing mix of hybrid models creates greater opportunities and risks for buyers, so it is paramount for service providers to play a significant role in guiding organizations through this maze of options.

January 2013 | 11

Outlook 2013

EXPERT

Viewpoint

Tony Mira group CEO and founder, Ajuba Solutions, articulated

Beni Lopez Chief Globalization Officer, Softtek, The recent scope for increased spend we’re seeing is in 5 major areas: 1. Rationalization of Application Portfolio Management 2. Coding or Migrating Applications to Cloud 3. Mobility, which has been driven by more and more clients and executives experiencing what they can do with their own personal devices and bringing that experience requirement into work and 4. Security, in part also driven by the new “bring your own devices” 5. Data Analytics

As revenues reduce due to taxes and reimbursements from insurance companies, you will see further shift in global outsourcing. The US alone cannot cost effectively handle all the coming changes in healthcare such as the new Healthcare Reform Act and ICD10. There will need to be additional resources to services these needs and the focus will be global, on the company and country that is best equipped with the expertise to get the job done. I believe the focus will be on India. India has a proven track record to get the job done and is well equipped with the human resources to handle the needs.

Companies are finding themselves part of or competing against highly networked systems of partners, customers and suppliers. Multi-company systems are able to innovate rapidly, leap frog the experience curve and quickly attain market leadership. These future networks will be enabled by cheap bandwidth, computing power and online collaboration platforms. These advances in technology enable the flexibility to quickly assemble processes and services that leverage the business networks. Companies that choose to ignore the business network and attempt to do it all themselves, may find themselves increasingly isolated and vulnerable to the failure of any single element of the company, reducing their competitive position. Michael Corcoran growth and strategy lead, BPO, Accenture

12 | January 2013

GlobalServices

Outlook 2013

EXPERT

Increasing an IT organization’s agility while simultaneously balancing efficiency with innovation requires building an agile organization and would mandate changes to four key organizational elements:  Evolving the IT architecture. High performers have mapped out transition plans that take into account short- and medium-term business needs and then match the right architecture components to those needs.  Building flexibility in IT sourcing models. With the IT architecture agenda in place, IT organizations can fine-tune their sourcing model, not simply to improve cost efficiencies but also to use external capabilities more effectively for driving innovation and growth. There is value for CIOs to re-think their deal-making strategies for supporting non-traditional busiBhaskar Ghosh ness models, new technology infrastructure, etc. – by looking for thought Global Lead, Application leadership, innovation and partnership (outcome-based models) and not Outsourcing, Accenture just savings in transaction costs from their sourcing relationships.  Adapting the IT workforce. Shared services models are forcing CIOs to take a fresh approach to their workforce. Accenture research shows that high-performing IT organizations are seven times more likely than other IT organizations to have invested in new technology skills development and three times more likely to be addressing skills development for application and technology architectures and information management.  Running IT as a business. As IT workforce competencies evolve, CIOs have a great opportunity to move from managing a technology organization to managing a business and elevate themselves as leaders of the business agenda for their companies, rather than just be seen as a support function.

We see a couple of important technology trends that will continue into 2013 and beyond. The first is the continuing push by corporations to modernize their technology infrastructure. This is driven in part by the legacy costs involved with supporting older mainframe-based systems, but also by the benefits of moving to a newer x86-based infrastructure. Modernizing systems gives clients the ability to reduce ongoing maintenance costs, increase business agility, and take advantage of new cloud-based service models. The other key trend is the proliferation of so-called “Big Data.” For today’s information-driven enterprises, there is a wealth of business knowledge available in this enormous pool of unstructured data, but the most important factor is to understand how to unlock it. Specialized skill sets such as statistical analysis, predictive analytics and data management are the keys Prashant Ranade CEO and President, to this, and we have made significant investments in attracting and retainSyntel ing associates that can deliver these high-value services to our clients.

GlobalServices

January 2013 | 13

Outlook 2013

What Should

The Outsourcing Industry Learn

From 2012? By Smita Vasudevan

14â&#x20AC;&#x192; |â&#x20AC;&#x192; January 2013

Handling technology disruptions, finding the right mix of sourcing models and identifying the right portfolio of sourcing locations will be important lessons for the industry.

GlobalServices

Lessons From 2012

ver the last couple of years the ‘uncertainty’ element has been a constant for the outsourcing industry. The volatile economic environment, political uncertainties and shift in regulatory policies is has been weighing down heavily on the minds of CEOs. So as we have stepped into a new year, can the industry breathe a sigh of relief? The answer is no. It will continue to be a rough ride but one with interesting opportunities. A change has already started reflecting in the way enterprises are realigning their IT strategies in line with the new realities. While it is a good change , it will also create new challenges for the industry. Service providers that are able to proactively deliver innovative technologies through advanced sourcing models will be able to sustain and those stuck in the old world will be wiped out. Decisions are still made with an inherent cost saving objective, but at least enterprises are more open to new alternatives like business outcomebased and revenue sharing models, and greater inclusion of cloud-based services for more flexibility. As Shantanu Ghosh, Senior Vice President - Practices, Solutions and Transitions, Genpact, puts it, “What will matter to customers, especially in back office functions, is how do you create flexible capability and Scale scale up/capacity in a variable model.” Organizations don’t want to be tied up with a single service provider for long and find it more feasible to break it down to smaller deals with multiple vendors.

Lessons from 2012 2012 was an interesting year for the industry as it laid the foundations for some disruptive changes. Organizations went a step ahead in making their outsourcing relationships more strategic. Cloud and IT outsourcing convergence was another important trend that started shaping up this year. “One of the big trends in 2012 that has gathered momentum is that of movement of Infrastructure to the Cloud (largely Private but some Public as well),” says, Anupam Govil, Partner, Avasant.

GlobalServices

What will matter to customers, especially in back office functions, is how do you create flexible capability and Scale scale up/capacity in a variable model. Shantanu Ghosh Senior Vice President, Practices, Solutions and Transitions, Genpact

In 2013, it will be about exploring ‘new’ options – new technologies, new sourcing and pricing models and new geographies.

New Technologies The three big forces Big Data, Cloud, Mobility are expected to transform the industry in a big way. There is a lot of hype around these technologies but is adoption really picking up? “Despite a lot of hype around it, right now there isn’t much happening on the analytics part right now. Clients are not asking for it much,” says Partha De Sarkar, CEO, Hinduja Global Solutions. The growing preference for cloud-based infrastructure services is making very large, long-term outsourcing deals unsustainable. “One of the main lessons learnt in 2012 is that as the market finds a new equilibrium, it is prudent to keep your options open and not be locked into very long term contracts with vendors,” Govil adds. In the BPO space, the way organizations are interacting with their customers is giving way to new technologies. Customers are interacting in multiple ways-email, web, chat, voice and so on. The use of social media and mobile devices is surging like never before. “By monitoring key search terms related to their industry, brand, products and services, organizations can engage their customers to create buzz, build loyalty and resolve issues proactively,” says,

January 2013 | 15

Outlook 2013

By monitoring key search terms related to their industry, brand, products and services, organizations can engage their customers to create buzz, build loyalty and resolve issues proactively. Andrew kokes Vice President, Global Product Management & Marketing Mandy Edwards CIO, Sitel

Andrew kokes, Vice President, Global Product Management & Marketing, & Mandy Edwards, CIO, Sitel.

New Sourcing Models- Offshore, Nearshore, Onshore...? The industry is clearly moving away from the conventional offshore-centric model to a more balanced and geographically dispersed sourcing model. Offshoring still continues but its attractiveness has lessened as labor costs and attrition rates in offshore countries like India and China goes up. Offshore locations are visibly facing pressure as political ‘anti-offshoring’ interests and the rising

Service providers that are able to proactively deliver innovative technologies through advanced sourcing models will be able to sustain. 16 | January 2013

Lessons From 2012

attractiveness of onshore and nearshore locations are coming up as a big threat. With some Indian IT majors like Infosys and Wipro also going through a challenging phase, the pure-play offshore model seems to be losing its charm. Organizations are looking for the ‘right-shoring’ approach that gives them flexibility and cuts down risk. Service providers will have to strike the right balance between onshore and offshore. “Firstsource has rightshore model with 65% of revenues coming from onshore”, says, Rajesh Subramaniam, MD & CEO, Firstsource.

New Geographies Changing wage rates and currency fluctuations will influence location preferences. Krishna Baidya, industry manager, APAC, Frost & Sullivan, says, “Amid currency devaluation, Baltic states – Estonia and Latvia moves up in the preferred destination list. Improving fundamentals helped Egypt and United Arab Emirates (UAE) gain prominence.” Latin America is a ‘must have’ in the list of emerging destinations, especially for BPO. Its multi lingual capabilities and cultural affinity with the West makes it a promising outsourcing destination. “Mexico’s proximity to the US and the advantages of the NAFTA agreement are being recognized as very attractive nearshore destination factors,” says, Héctor Ortiz Gómez, Hildebrando USA CEO. Despite the economic unrest, the outsourcing scene in Europe hasn’t been dull at all. “Despite the economic volatility, European market has been very good for us in the recent past. We have grown our strengths there.” says Ghosh. According to ISG, half of the mega deals signed in 2012 happened to be in the European market which shows revival of interest and confidence building up. Service providers are also confident about their performance in the region. Romania, Poland and Bulgaria are the promising locations.

GlobalServices

Outlook 2013

Top Trends for 2013

What is The Picture For 2013? By Smita Vasudevan

As organizations continue to seek ‘higher value and more cost savings’ through outsourcing, and service providers get all geared up to make use of the opportunity, the outlook for 2013 is definitely not all dark. We can say it’s still a dark picture with some bright spots here and there.

hile the challenge for organizations would be to identify the best mix of sourcing models and outsourcing strategies, the challenge for service providers will be to stay ahead in terms of technology innovations and project a partnership approach.

GlobalServices

Here are 10 major trends/signs to watch out for in 2013: 1. As cloud and IT services gets bundled up, service providers will be retooling their service offerings to align with the changing demand. Vendor delivery and pricing models will shift in line with this change.

January 2013 | 17

Outlook 2013

BPaaS and other cloud-enabled HR services will allow HR executives to couple more robust data with decreased administrative responsibilities, empowering them to play a more strategic role in their organization. Michael Custers VP global alliances and strategic marketing, Northgate Arinso

Top Trends for 2013

Organizations will require initial hand holding during the transition and service providers will have to provide consulting services directly or through partnerships with consulting organizations. Héctor Ortiz Gómez CEO, Hildebrando USA

2. Geographical diversification will become an es-

6. As new age technologies like Big data, mo-

sential part of outsourcing. Companies will look at having the right mix of onshore, nearshore and offshore. 3. The emergence of new service offerings and delivery models will widen the responsibilities of the IT organization. Héctor Ortiz Gómez, CEO, Hildebrando USA, says, “Organizations will require initial hand holding during the transition and service providers will have to provide consulting services directly or through partnerships with consulting organizations.” 4. In the BPO space, growth of cloud-based contact center solutions and virtual agents will gain momentum. Growth of home-based agents is another trend. Organizations would invest in this area to optimize cost, better flexibility and manage fluctuations in call volumes. 5. In contact centers, self service is becoming more important. There is a clear shift from voice to non voice transactions. “Currently the proportion is 80-20 but it is expected to go up significantly in the next five years,” says, Partha DeSarkar, CEO, Hinduja Global Solutions.

bility and social media are so much in demand, large Tier 1 service providers will be at the risk of losing out to smaller and specialized providers that are more ahead in these areas. 7. Across verticals, compliance and regulatory changes in the Healthcare and Financial services sector will bring in new opportunities. 8. Indian service providers will look at establishing centers in China and other APAC regions to reduce the dependency on the America region. 9. Demand for new skills and competencies will soar in 2013 in areas like cloud-aware application development, data sciences etc. Service providers who can capture that demand will stay ahead of the competition. 10. “BPaaS and other cloud-enabled HR services will allow HR executives to couple more robust data with decreased administrative responsibilities, empowering them to play a more strategic role in their organization,” says, Michael Custers, VP global alliances and strategic marketing, Northgate Arinso.

18 | January 2013

GlobalServices

Outlook 2013

Q&A

Overseas Expansion

is Definitely on the Cards By Smriti Sharma

arasimha Kini, senior vice president and head of the F&A CoE, EXL Service, has served as vice president of advisory Services of EXL Inc. since July 2004. Kini has been the vice president of advisory services of ExlService.com India Private Limited, a subsidiary of Exlservice Holdings, Inc. since January 2004. Smriti Sharma, sr correspondent, Global Services interacts with Narasimha Kini, senior vice president and head of the F&A CoE, EXL Service.

GS: The FAO space has evolved tremendously. How have you changed your strategies to align with the changing environment? NK: According to analyst reports, in terms of spread of service lines, F&A contributes nearly 22% to Indian BPO space. With the BPO space valued at around $16B, the importance of F&A with regards to revenue can be appreciated. EXL has traditionally been a strong player in the finance transformation space and the acquisition of OPI in 2011 helped us expand our portfolio to include the entire spectrum of F&A services. As

GlobalServices

January 2013â&#x20AC;&#x192; |â&#x20AC;&#x192; 19

Outlook 2013

providers are evolving beyond mere operational work. While we are focused on product innovation and development to sharpen clients’ processing engines, we also support clients with stronger decision analytics which enable better decision making. Our Cloud-based MS Dynamics application suite also helps clients attain standardized F&A processes with control over operations. So while we are sharpening our technology augmentation play, we are improving our platform FAO proposition for seamless integration with existing IT infrastructure of our clients. We combine deep domain expertise along with proprietary tools and methodologies to deliver the highest standards of service. Our strategy has always been to innovate and spearhead the best practices for our clients. EXL’s Platform FAO offerings using Cloud-based MS Dynamics application suite enables our clients to achieve standardized F&A processes efficiently, with complete visibility and control over operations. GS: What is your differentiator? NK: In such a dynamic market, we at EXL believe in creating multiple differentiators that build up to create ‘the EXL Advantage’. In a nutshell, the attributes that set us apart as a leading provider of F&A outsourcing services include our talent pool of domain experts, world class infrastructure and proprietary solutions, flexible global delivery model and our thrust on continuous learning and development. Our strategy across FAO revolves around the investment in product development and innovation to improve the fundamental paradigm of clients’ processing engines, as well as to provide stronger analytics to enable better and more informed decision making. All these features make us the preferred partner for our clients. GS: What are your future plans? NK: While overseas expansion is definitely on the cards, India features prominently in our roadmap for the future. We recently opened a facility in Pune and plan to launch a center in Kochi by the end of this year. We foresee huge potential in the Health-

20 | January 2013

Q&A

care vertical. In tune with that, we have a launched a Healthcare academy in Manila, to provide worldclass healthcare training and certification. We also plan to launch a center in Manila early next year. GS: Do you plan to expand your presence? What are your delivery locations? Going ahead what are the future trends in this space? NK: EXL Service employs a “right-shore” global delivery model that encompasses more than 25 delivery centers across 9 countries, servicing 25 languages, to best service our clients’ current and future business needs. Our current delivery footprint comprises centers in India (Noida, Gurgaon, Pune, Bengaluru and Kochi), US (7 cities), Czech Republic, Romania, Philippines (Manila), Singapore, Malaysia. We believe that presence in these geographies gives us the advantage of being able to service our clients’ needs in a number of regional languages and offers natural business continuity (BCP) option to our delivery centers across these locations. EXL has traditionally adopted a strategic long term view of global delivery location selection, and have expanded geographically to either build either capabilities or provide a cost-effective BCP solution to our client operations. We will continue to evaluate the developments in the US, Asia Pacific, European regions and make such expansions as are necessary to best support the needs of our clients.

Some of the trends seen in the space are as follows: The bulk of FAO deals are still with clients who want to source F&A services from low cost locations Vertical market expertise is increasingly becoming important as providers need to know about specific industries’ finance needs such as payment terms and supplier types Providers are going beyond mere transactional/ operational work to achieve productivity by implementing new practices through unique, creative methods of implementing standardization and automation, driving continuous improvement, and assuring world-class performance.

GlobalServices

Outlook 2013

What’s In A Name

What’s

In a Name? Smita Vasudevan

Be it the political impact or be it the industry’s own urge to change and re-brand itself, it seems the word ‘outsourcing’ is not wanted any more. But will a new name in itself bring about change, unless the change reflects in more crucial areas .

GlobalServices

as the name ‘outsourcing’ lost its charm? We all saw how the word got battered and bruised in the recent US elections, not for the first time though. The elections are over now but the ‘negative vibes’ can still be felt. Whatever be the reason-the political impact or the industry’s own urge to rebrand or reinvent itself, it seems that the word ‘outsourcing’ is not wanted any more. Industry people are voicing out their dislikes in using the word ‘outsourcing’. They feel it is not

January 2013 | 21

Outlook 2013

Some industry experts also support the view, that the word ‘outsourcing’ does not make sense any more. It may mean different things to different communities. Only people that are close to this industry and are involved in it can look beyond the name.

sending the right message across and hence does not make much sense anymore. What is needed is a name that reflects the true state of the industry, and quite importantly sounds more “positive”. Outsourcing advisory firm, Horses for sources also came up with an interesting survey some time back that asked for opinions of 871 enterprise buyers, service providers and advisors in the outsourcing industry. The results were interesting but quite predictable as well. While the buyer community does not have much to say in this and were mostly indifferent to the need for a name change, the service provider community was clearly all for a new and better name, as they do not want to be known as ‘outsourcing vendors’ and believe that it does not reflect the true picture of the industry. This is what we too figured in our interactions with numerous service providers. “We would not presume to rename an entire industry. However, we generally do not refer to ourselves as an outsourcing vendor”, says Nick Puntikov, President, First Line Software. The company would rather prefer to be known as a software engineering services

22 | January 2013

provider and technology partner to its clients. Industry experts also support the view, that the word ‘outsourcing’ does not make sense any more. It may mean different things to different communities. Only people that are close to this industry and are involved in it can look beyond the name. When Cliff Justice, Partner and US Leader, KPMG was asked by HFS about his views, he mentioned quite candidly that the word outsourcing has been abused and politicized and the industry needs to find a better alternative. While a new name could be a good change for the industry, especially when almost everything in the industry is seeing transformation. Traditional outsourcing models are being replaced by new models that focus more on optimized results, disruptive cloud based technologies are finding their way into contracts and buyer-vendor relationships are changing as well. But the argument here is that only a ‘name’ change is not going to make or break anything. The change has to be reflected in more than one way. There has to be a fundamental shift in the industry that has over the years been so cost-centric. Buyer vendor relationships, pricing and sourcing models, all things have to move beyond to focus more on ‘value creation’. Unless that happens, a new name is not going to change much. The focus should be on the quality of services and what value does it bring to the organizations. “Just re-branding without enhancing capability, business value creation, innovation is likely to bring the industry not even an inch ahead”, says, Krishna Baidya, industry manager, Asia Pacific, Frost and Sullivan. The need is to move away from the labor arbitrage model and put more emphasis on areas like improved outcomes, value creation, innovation and so on. Once the industry reach there, figuring out a better alternative would not be tough any more.

Will The Change Be Accepted? It might take some time for anything ‘new’ to sink in. But industry people strongly believe that it will

GlobalServices

What’s In A Name

Just re-branding without enhancing capability, business value creation, innovation is likely to bring the industry not even an inch ahead. Krishna Baidya industry manager, Asia Pacific, Frost and Sullivan

change. The word ‘outsourcing’ will go in sometime from now. How long will that take is difficult to predict as of now and is actually dependent on lots of other factors. A lot of work needs to be done before the industry really re-brands itself. Once the changes are visible on all fronts and the industry focuses on building up valuable partnerships, a new name will automatically make more sense and will be accepted.

Challenges to Overcome HFS points out that there are four challenges that the industry has to overcome before this happens: HFS points out four things to be achieved before the industry goes for a better name: Challenge 1:

How can we overcome this singular focus on cost that strips the industry of its value?

Challenge 2:

How can we leverage outsourcing as one of a variety of vehicles to achieve business objectives?

Challenge 3:

How can many of the service providers invest smarter in their account management teams?

Challenge 4:

How can buyers and providers really partner to foster innovations into business process outcomes?

Some Interesting Alternatives Having said that, will it not be interesting to look at some of the alternative names our industry

GlobalServices

We would not presume to rename an entire industry. However, we generally do not refer to ourselves as an outsourcing vendor. Nick Puntikov President, First Line Software

people have in mind. Here are a few suggestions service providers and advisories

Outprocessing (or out-processing) Reason It reflects the trend of service providers being involved in outcomes and the term includes also cloud and BPO.

Collaboration Reason At its foundation is the idea that we all benefit when we work together, globally, to create the right customer experiences, to tap into the best expertise and to deliver support in the most efficient and cost effect ways.

“Cloud-sourcing”. Reason Synonymous to next generation technology, the customer need not know from where the service is provided (all that matters is a proportional and assured quality delivery at the given input cost)

Other Options  Business Process Services or ‘Business Process as a

Service’ as an alternative to platform-based BPO.  Global Collaboration Services  Some variations like business services, global

business services, business process services, managed services or even ‘smart services’.

January 2013 | 23

Outlook 2013

Top Trends in Analytics

Outsourcing in 2013 By Smriti Sharma

Descriptive

Predictive

Perspective

1990s

2000s

Late 2000s

2010s

What happened?

Why did it happen?

What could happen?

What should I be doing

24â&#x20AC;&#x192; |â&#x20AC;&#x192; January 2013

GlobalServices

Analytics Outsourcing 2013

he journey of analytics outsourcing commenced around 15 years back, but the current obsession with this term is completely unprecedented. Analytics and Big Data are the hot topic at every conference, every interaction and every interview. Analytics outsourcing will continue to grow as merely meeting basic service level agreements is not good enough for business. Few years back, only certain specialized functions were considered for analytics outsourcing. However, today all the functions want to make the most of the analytics differentiator. The analytics outsourcing space is growing very rapidly. Today, a lot more data is being captured in real time and in multiple forms. The availability of multiple tools makes it very easy for captured data to be processed. Companies bring it all together, analyze it for their business problems and showcase their results to their end users much more quickly. Hence, what was post facto analysis is now getting into real time. Since the analytics outsourcing domain has transformed tremendously it is essential that service providers align their strategies to meet the changing environment. Talking about the traditional strengths and need to acquire strengths of service providers, Sundar Ramaswamy, COO, AbsolutData Research & Analytics, said, “Traditional strength are the strengths they already have. In the last few years, service providers have perfected the art of outsourcing. They are very good at handling outsourcing, their processes are established and so they really understand the process. The fact that they are known helps them get work from the client. I also think they have made a brand for themselves. Thus, they already have the inroads to the clients.” “The strengths that they need to acquire are – firstly, they need to understand that analytics is not same as outsourcing. It is a completely new ballgame. The kind of skills required and the talent pool required is different. They cannot treat the talent in the same way as they treated the talent for outsourcing. Secondly, they need to move from the mindset of doing what is being told to doing

GlobalServices

In 2013, we expect to see more clients moving from descriptive to predictive analytics (statistical analysis, predictive modeling, forecasting, and optimization) that direct performance towards competitive advantage, and deliver measurable business outcomes. Michael Corcoran growth and strategy lead, BPO, Accenture

something new. Basically, in analytics the advantage is not in the cost benefits given to the clients. The advantage is in helping the client in growing their business and finding out things about their business that they did not know.” Over the last eighteen months, in the marketing business Aditya Birla Minacs has invested approximately $5M in analytics outsourcing. To provide insights into the customer buying pattern that is who is more likely to buy, the types of offers that Aditya Birla Minacs is putting out for their customers vs others. Deepak Patel, CEO, Aditya Birla Minacs said, “Analytics is a set of capabilities that we bring to the table. People are leveraging analytics across various businesses and it will continue to play a major role in all the areas. Different kind of analytics is not something that is outsourced as a stand alone thing. It is taking all pieces of business process and chunks of value chain of the customers and in the end providing high end value to that particular set of processes.”

January 2013 | 25

Outlook 2013

The delivery locations are expected to remain the same. India, China and Eastern Europe are the most prominent destinations on the analytics outsourcing map. Others include nearshore countries to the US such as Mexico and Costa Rica, and offshore destinations such as Singapore and Sri Lanka

26 | January 2013

Michael Corcoran, growth and strategy lead, BPO, Accenture articulated, “Analysis of transactional and other data provides clients with actionable insight into their business operations – for example, enabling them to improve working capital management, claim full discounts from their providers for paid-within-terms invoice processing or improve customer acquisition, satisfaction and retention. Conversely, analytics helps optimize clients’ payment terms and reduce their rogue spend that has not passed through preferred suppliers. This means they can increase control, reduce risk, and capture additional value that would not have otherwise been realized. In 2013, we expect to see more clients moving from descriptive to predictive analytics (statistical analysis, predictive modeling, forecasting, and optimization) that direct performance towards competitive advantage, and deliver measurable business outcomes.”

Real Time Real time analyticals has come up as a big thing. Arindam Dutta, head- global business analytics & Asia business services, HP articulated, “The chal-

GlobalServices

Analytics Outsourcing 2013

lenge we hear most frequently from our clients is gaining timely access to their ever-increasing store of enterprise data. Gaining access to all this data and turning it quickly to insight for decision-making is a competitive differentiator for all firms. Whatever the mix of services provided to clients, one of the constants is helping them gain visibility to their information for improving management of their business. Making this wealth of data relevant, quantifiable, and delivered at the right place at the right time can create an enormous impact on how they operate their business.”

Talent The analytics space will open its doors to diverse talent. People with sociology, psychology backgrounds will be stepping in this space. The reason being, if clients understand consumer behavior from these perspective they will have a head start. Even people with deep computer science background will become more attractive for companies to have. The reason being companies need to have sophisticated technology and algorithms that need to be built in. Rahul Kanodia, vice chairman & CEO, Datamatics Global Services Ltd. said, “Analytics calls for people who understand Psychology, and statistics because it is not just a matter of going through a website and pulling keyword. For analyzing trends, the knowledge of statistics is important. The psychologist will understand human psychology but he may not comprehend the nuisances of insurance, banking, research and telecom. However, the domain understanding is very critical. So, if you are looking at analyzing consumer product than you need to understand the dynamics of consumer product industry. Thus, what is required is a combination of Psychology, domain and statistics. However, it is not easy to have all of these in one

GlobalServices

Analytics calls for people who understand Psychology, and statistics because it is not just a matter of going through a website and pulling keyword. Rahul Kanodia vice chairman & CEO, Datamatics Global Services Ltd

person. So you will have multiple people working on the same project.” Currently, there is a talent gap in analytics outsourcing and various reports predict that there will continue to be a gap. The sources to medicate this gap are very few and India is one of them. Having said that, our education system and the way we are may not fully fill this gap. We need to do a few things differently to fill this gap. Ramaswamy explaining the steps that may enhance the scenario says we need to get the educational institutions that focus on the technical skills that are required. Our training way is still very theoretical. Our MBA programs still tends to be a lot more theoretical than hands on practical. Thus, if we hire MBAs in our office, we need to significantly train them to make them employer friendly in analytics. It is about strengthening their technical knowledge, strengthening their own personal impact, like problem solving skills. That piece needs to be addressed. Industries can tie-up with educational institutions and have analytics as a specific course. Some companies are already doing this .

January 2013 | 27

Weare

aCTIONaBLe INCISIVe eNTerTaINING

WhaT eLSe WOuLd yOu expeCT frOm aN INduSTry

Leader?

PRINT | ONLINE | EVENTS | CUSTOM | TABLETS For ways to engage contact Arvind Razdan@ +91 997 178 2277 or arvindr@cybermedia.co.in

Segment analysis

HRO

User Generated Content

3 Trends by Industry Experts 29 | November 2012

GlobalServices

3 Trends

by Industry Experts By Smriti Sharma, Smita Vasudevan and Sourabh Chandra Push

There has been a lot of talk in the past 4-5 years about managed services. So anyone who – by now- does not know how to truly deliver managed services has no chance to help clients simplify or rationalize their portfolios. It’s best you step up your investment at this point if you haven’t made it that far!

Beni Lopez, Chief Globalization Officer, Softtek

1 2

Make sure you do have readily available regional expertise, as referenced above. No longer will a centralized HQ be able to disseminate and deliver all of an entity’s knowledge requirements. Clients are truly global and BPO operations must be as well. Providers need to adopt a “truly global” perspective, i.e. one in which local knowledge is privileged.

Agility is key! All of the talk around mobile, analytics, big data means that providers need to understand that it is no longer acceptable to take several months for results. There is a need for a tremendous level of agility and impact in a short period of time.

First would have to be the impact of digitization and mobility, which has created new opportunities for enterprises to interact with their customers and redefine the traditional workplace, as well as new ways for their outsourcing partners to add value. I also expect that we will witness the continued shift to a multisourcing model. Fewer and fewer buyers are looking for a “one-stop shop” to supply all their IT needs. They are turning to providers that offer domain-focused solutions and the deep skills and knowledge required to create really compelling value.

30 | January 2013

In a dynamic business environment, the ability to develop and deploy new enterprise applications can be a game changer. Companies that are able to bring new apps to market quicker will have the advantage, so look for enterprises to turn to an Agile model and a multi-skilled workforce to make that a reality.

Prashant Ranade, CEO and President, Syntel, Inc.

GlobalServices

Outlook 2013

The pace of externalization and industrialization of applications, business processes and infrastructure will continue to increase in 2013. Cloud and SaaS will accelerate this trend further. Opportunities for service providers in the future will be driven by bridging traditional outsourcing, utility and cloud-based IT services supported by an agile platform.

The role of the CIO organization will shift from being just service providers to their businesses to that of technology brokers who bring in the best talent and technology from multiple

sourcing partners and enable collaboration between these providers for exploiting IT to its full potential.

Offshoring will continue to expand not only due to increased client acceptance and cost savings (which will continue to be important drivers) but also to drive organizational flexibility through next generation IT services driven by industry skills, consulting, agile methodologies, platforms, assets, tools, accelerators and most importantly, access to niche skills in emerging technologies such as big data, analytics and mobility.

Holistically manage the scope of the BPO relationship. For those that are most successful, the entire, endto-end business process is within scope of the BPO arrangement, including elements managed within the clientâ&#x20AC;&#x2122;s enterprise, those run by third parties, as well as related processes that may impact overall performance.

Michael Corcoran, Growth & Strategy Lead for BPO, Accenture

GlobalServices

Adopt a partnership attitude. Nearly 85 percent of high performers consider their BPO provider to be a strategic partner; by contrast, only 41 percent of typical performers operate according to that mindset. Collaborative BPO governance is

Bhaskar Ghosh, global lead of Application Outsourcing, Accenture

much more than a set of committees or a schedule of meetings; it also comprises the attitudes toward the relationship and the behaviors that strengthen it and drive both parties toward higher levels of performance.

Change management: Managing the effects of change during transition and beyond. Eighty-eight percent of companies working within a highperformance BPO relationship regard change management as important and execute carefully planned change programs, compared with 62 percent of typical performers.

January 2013â&#x20AC;&#x192; |â&#x20AC;&#x192; 31

3 Trends

Don’t try to be the solution for all of healthcare problems. Stay focused and pick an area of interest and do it right

Outlook 2013

Invest in your people and technology. Cutting cost in these areas will cost you more in the future

Execution and responsiveness to customers. You need to take the pain out of outsourcing

Tony Mira, Group CEO and Founder, Ajuba Solutions

Don’t try to be the solution for all of healthcare problems. Stay focused and pick an area of interest and do it right

Arindam Dutta, Head, Global Business Analytics & Asia Business Services, HP

We see a hybrid BPO model increasing in relevance for firms gravitating towards the GBS model. We believe BPO providers must be collaborative and embrace hybrid models with GBS groups. Strategic partners can help clients fill gaps, provide competition

32 | January 2013

for internal groups to sharpen their delivery, provide a fresh perspective on the effectiveness of the organization, supply new ideas on processes and technologies, and act as change agents to push the transformation agenda. We have multiple examples of firms having a GBS and taking a hybrid approach for outsourcing key activities to HP, while other tasks remain at internal centers. It provides for a consistent global delivery model, process owners, and standards. In our experience, clients that are utilizing GBS and working with us as an outsourcing partner can better manage and reduce their risks, realize benefits quicker and with more certainty.

Mid-market clients – with penetration in the mid-market segment (US$500M - $3B revenue) currently relatively low for most areas of BPO, there is great

opportunity to increase opportunities for buyers and providers. With technology advances and willingness of mid-market buyers to consider a “productized” approach, the benefits of outsourcing will accrue to these buyers. The advances that new models like BPaaS and Cloud bring to clients will provide solutions for the mid-market that will be available with little up-front costs and through a “by the drink” pricing model that offer significant benefits. These firms willingness to take a “productized” approach instead of requiring a bespoke solution will provide a competitive differentiator for these firms. Providers need to be able to address mid-market clients unique needs balanced against a more productized approach to solutions. A “take or leave it” approach will not work, but the economics of the mid-market make a bespoke approach chal-

GlobalServices

3 Trends

Outlook 2013

Value-based offerings: Service providers must have a way to deliver measurable outcomes to their customers. Enterprise buyers must be able to define KPIs for their service providers, with established base and improvement goals/targets for their providers. Alan Harlan, EVP and General Manager, ISV Division, Symphony Teleca Corp

lenging for providers. Mastering this balance is crucial for a thriving BPO mid-market.

Change Management - There is a significant amount of planning, communication and change management preparation required for successful BPO engagements. Do not underestimate the amount of effort that change takes. It is very important the organizationâ&#x20AC;&#x2122;s leadership understands that it takes commitment, planning, resources, and a lot of stamina to succeed. With our experience from hundreds of transitions, for an engagement to succeed, there must be executive commitment and support. Another requirement is senior leadership and all stakeholders and employees that are impacted directly and indirectly are regularly kept abreast of the changes.

GlobalServices

Solution offerings: Service providers must be sufficiently skilled to deliver solutions via product ideation, product development best practices, portfolio rationalization, frameworks and IP-enabled services, rather than only providing trained resources. Enterprise buyers must be able to define the solution benefits they seek from their vendors, rather than seeking only piecemeal process improvements or technology skills from their providers.

Technology offerings: Service providers must be sufficiently skilled in enabling complete enterprise solutions for mobile, cloud and big data, and not just provide partial solutions in new technologies. Enterprise buyers must be very clear about which aspects of their businesses can best benefit from technology advancements, and expect their providers to deliver the required revenue impact in the fastest time.

Global delivery model will play a very important role. Companies need to have onshore, offshore, nearshore presence and multi-shore presence.

Another thing that is important is that service providers should ensure that they are able to affect their customers bottom line.

Sandip Sen, Global CEO, Aegis Limited

Combing outsourcing with the right kind of technology or combining outsourcing with multi channel presence.

January 2013â&#x20AC;&#x192; |â&#x20AC;&#x192; 33

3 Trends

Outlook 2013

I think the outsourcing industry is very rapidly looking at platforms - smart platforms. So, platform based outsourcing is critical.

The second is really moving up the value chain and not just playing the cost card. India is doing this very actively. The days of playing the cost arbitrage is rapidly eroding. Many companies are now looking at scaling up the value chain.

SCAM - Social Media, Cloud, Analytics and Mobility. It is a trend and it will continue to be one.

Rahul Kanodia, Vice Chairman & CEO, Datamatics Global Services Ltd

What people call core and what they would like to retain is getting redefined. More and more things that were considered core are no longer that close to clients.

Clients are looking for value. Just meeting the SLAs is not good enough value needs to be added. Service providers have to include leveraging of platforms,analytics tool etc. So, overall creatively how can service provider create value, not just by lower prices, as cost is just one part of the dimension. It is more about value-based result rather than purely costbased result. This is not to say, cost is not important, it is still a very competitive environment and pricing still continues

34â&#x20AC;&#x192; |â&#x20AC;&#x192; January 2013

to be very competitive. Having said that, our customers are evaluating these things more on value bases rather than cost basis. Adding higher set of services, bring domain capabilities,platform, analytics tool, IT capabilities to automate business process, etc is what clients are looking at.

With technology becoming more and more pervasive, where the work is getting done is also getting redefined. In many kinds of processes, people who are not pre-required in offices can work from home as the cost of operating space, cost of real estate are high especially for the kind of processes that are delivered onshore. If you are doing work

Deepak Patel, CEO, Aditya Birla Minacs

in North America then there are more and more options for home based worker.

GlobalServices

3 Trends

Outlook 2013

1 3

Increasing demand and opportunity for domain expertize at industry and process level

Growing preference for multiple locations

Much better leverage of independent tech ecosystem as opposed to proprietary standards

Shantanu Ghosh, Senior Vice President Practices, Solutions and Transitions, Genpact

1 3

Adoption of cloud in BPO will help in the shift from Capex to Opex

Social media and mobile collaboration

Shift from input to outcome – diminishing demarcations between the concepts of on-shore, near-shore and off-shore work, as business will be driven by final outcome.

Manoj Punja, Senior Vice President and Global Head, Wipro BPO

Consolidation of Mobile and Tablet Platforms/Devices

Analytics of unstructured data and Data Security

From a domain perspective, healthcare sector may need new systems given the new standards or emerging government policies

Shrikant Pattathil, Executive Vice President, Harbinger Systems

GlobalServices

January 2013 | 35

3 Trends

Mobile. The rise of mobile puts HR into a unique position. It provides an opportunity to not only report on data, but also collect it in a new, real-time way. This mobile access, however, will give employers new transparency over employee actions and behaviors, highlighting the importance of developing policies and procedures for the use of mobile.

Big Analytics. In 2013, big analytics will trump big data. This new, more strategic use of analytics and information will empower HR to

Outlook 2013

play an even more strategic role in the overall development and execution of a company’s business strategy. Businesses that can pull together all HR data swiftly – and correlate it in a meaningful way – will be best placed.

Global Compliance. As businesses continue to expand beyond their home countries and into new markets, an even greater focus on compliance will emerge, especially as it relates to payroll and compensation.

Growth: Overall global industry will maintain healthy growth prospect. Nearshore forecast is poised for acceleration; Offshore outlook seems little tame; Onshore forecast is rather rosy in the Emerging Nations with continuing domestic market growth.

Michael Custers, VP Global Alliances & Strategic Marketing, North gate Arinso

Technology: Trends in cloud computing, mobility, social, big data and security will offer new growth opportunity and likely to innovate business models. Data security will be of extreme importance going forward.

2 Krishna Baidya, Industry Manager, Frost & Sullivan

36 | January 2013

Destination: Asia-Pacific market prospect remains buoyed with strong domestic growth potential. LATAM will gain further from near-shore trend. Rural sourcing is likely to accelerate with government focus.

GlobalServices

3 Trends

Outlook 2013

1 2

The acceptance of IaaS will grow and more software will be offered as SaaS.

Talent is becoming even scarcer with the ongoing retirement of Baby Boomers. Many of them will stay on the job in one way or another.

Companies will have to train Gen X (and maybe Gen Y) in legacy technology maintain core systems.

The widespread use of virtualization will facilitate the integration of companies merged or acquired.

Héctor Ortiz Gómez, CEO, Hildebrando USA

1 2

Digitalization of all things will continue, so the overall viability of technology services is not in question Asia, apart from being a major supplier of IT services, is turning into a buying force to be reckoned with. Internal demand experienced by Chinese and Indian IT service providers is very significant, and this trend will continue, especially given the contrast between the macroeconomic dynamics

between Asia, on the one hand, and North American and Europe on the other. Demand for skills and competencies in line with the overarching trends (such as data sciences, cloud-aware application development, etc.) will soar, and so providers who can capture that demand will be able to grow ahead of the competition and to command a premium in the market.

1 2

Increased reliance on social media channels as primary customer service method

Nick Puntikov, President, First Line Software

Less reliance on China and India

Enhanced data security

Andrew Kokes, Vice President, Global Product Management & Marketing, and Mandy Edwards, CIO of Sitel

GlobalServices

January 2013 | 37

3 Trends

.Providers will be further retooling their Service offerings to align with the demand for Cloud and Verticalized services.

.New growth driven by several impending compliance and regulatory changes in the Healthcare (ICD 10) and Financial services industries (Federal Reserve Board Discovery process).

Outlook 2013

.Consumerization of IT is accelerating the need for Mobility, Social media and Big Data based applications and analytical expertise. Larger Tier 1 firms are at a disadvantage since smaller and specialized providers are more adept in these areas.

Anupam Govil, Partner, Avasant

insights. This is an emerging trend we are observing and this will see a lot of traction in 2013.

Transformational approach: In general, customer experience would be one of the important transformational themes for organizations apart from revenue growth and cost reduction goals.

Rajesh Subramaniam, MD & CEO, Firstsource

Customer Insights/Analytics- Organizations want their partners and vendors to leverage power of customer analytics and provide actionable

38â&#x20AC;&#x192; |â&#x20AC;&#x192; January 2013

Home based agents: Organizations would invest into this area considering cost factors, flexibility and manage fluctuations in call/chat volumes. Organizations need to look at softer aspects (training, team building etc) as well as harder aspects (security, risk and compliance, fluctuation patterns etc) of the business.

Kamal Karanth, Managing Director, Kelly Services India

As social media becomes a common way for consumers to interact with businesses, companies who outsource their customer service will need to pay greater attention to social

GlobalServices

3 Trends

Outlook 2013

BYOD is one of the trends that some like to cite as a key cloud security issue given that it takes control away from IT and puts it in the hands of users. Look around any organization that’s not part of the government or in a highly regulated industry and, chances are, most of the smartphones you see aren’t company-issued and provisioned. And the tablets that you probably spy as well are far more commonly purchased by employees for some combination of personal and work use—to the degree that we can even still draw a sharp line between such spheres of activity in general. Bring-your-own-PC is a more complicated issue, for a variety of reasons, but PCs are being “consumerized” as well.

Openness demonstrates the power of community innovation. Openness is one of the most important enablers of hybrid IT because it helps users avoid lock-in to vendors and specific ecosystems. And not just open source but openness across multiple dimensions including APIs, standards and the requirement that permission to use intellectual property, like copyrights and patents, must be granted in ways that make the technology open and accessible to the user.

media trends and customer responses. Rapid response to social media complaints and problems will be essential for firms who want to remain competitive and relevant. In addition, as more firms stretch out their services into outsourced overseas operations, they’ll need to think of not only the feedback of customers but the security of customer data online.

with outsourcing. If security concerns and costs continue to rise, companies may decide that it is more cost effective and safe to keep their business all in one location. There have yet to be significant examples of IT security breaches that have become widely known, and therefore the key at this point is for overseas companies to remain vigilant and to communicate clearly their I.T. security plans

As more business is conducted through cloud computing and through other digital means, security has become a huge concern

GlobalServices

Gordon Haff, Cloud Evangelist, Red Hat

Organizations are also increasingly looking to hybrid cloud architectures as a way to have a more dynamic computing architecture over time. There are only a modest number of hybrid computing architectures in production today, but the movement towards hybrid is clear. That’s why industry analysts such as Gartner are recommending that organizations “design private cloud deployments with interoperability and future hybrid in mind.”1 Expect to hear even more about hybrid clouds in the coming year.

As uncertainty looms and competition increases for outsourced business, firms throughout Asia will be experi-

menting with their pricing structures and contract terms. 2013 could prove to be a tumultuous year for outsourcing as some companies pull out, others try it based on attractive (and potentially risky offers), and still others restructure their outsourcing contracts. It will be particularly challenging for overseas companies to determine whether they should simplify by focusing on a single service or continue to branch out into a variety of other areas. As it stands, most companies have been offering a diverse range of services. This may change sooner than later

January 2013 | 39

3 Trends

2013 will be a critical year for many markets and the role that IT plays within them. IT buyers will be looking for stability and ways to prepare for the next few years in their business cycle. Achieving business and IT transformation in a stable format is a complex challenge, and recently bundling has become an increasingly influential component for delivering real change, but with added predictability and control.

With ongoing instability across global markets and even in locations with historically robust growth such as China and India, the outlook

Outlook 2013

for IT services in 2013 is unclear. IT customers are demanding greater predictability and control as a more risk-averse perspective takes hold. Cost cutting has made a slight resurgence in Europe but remains less pressing in other geographies, while raising organizational efficiencies remains the top IT investment driver.

Shifts are being driven by a need within the buyer community for real change – the need for IT to not simply deliver efficiencies from an operational sense, but to integrate with business requirements such as increasing customer satisfac-

Babuji Abraham, Senior Vice President, Emerging Technologies, Mindtree

40 | January 2013

With social media and mobile driving more people on to the internet, this will act as a multiplying factor on the users of any application and scalability will become very critical. This will in turn drive more applications to the cloud to provide just in time and cost scalability since scaling the private data center infrastructure for peak load will work out very costly for the CIOs. The new generation (less than 30 years age group) is more comfortable consuming software services through various apps running on their mobile and tablets which then need a cloud back end.

Jens Butler, Principal Analyst, IT Services, Ovum

tion, facilitating market awareness and making IT a key part of an organization’s competitive advantage.

Year 2013 will see increased adoption of cloud with corporates moving to cloud for non-core applications, product companies for selling their products through SaaS only model and Govt will increase its cloud presence to provide cost effective G2C services. Customer IT departments will push towards offering features similar to those provided by a public cloud, like elasticity and on-demand selfservice. These clouds need not necessarily be present in the current data-centers and could be hosted elsewhere. Since these resources will not be shared, it will be deemed more secure in the absence of regulations

GlobalServices

3 Trends

Vikram Gulati, CEO & MD, Happiest Minds Technologies

In reality, convergence in the five pillars of enterprise disruption i.e. social, mobile, cloud, big data, and uni-

Outlook 2013

fied communications, has led to new innovations and opportunities to apply disruptive technologies to fresh business models. This convergence has been further accelerated with the exponential increase in processor power, decrease in power consumption needed for devices and increase in cheap bandwidth. There are exciting opportunities at the intersection of cloud and big data, social and mobile, social and unified communications, business intelligence and big data, and cloud and mobile.

It is no longer delivering the mere task but is about understanding, partnering

Security continues to be a key concern for the CIOs. Most of the cloud providers like Amazon etc. are putting more money than ever to make their data centers almost impregnable. Such actions will help in improving confidence in the CIOs and increase cloud adoption. There is a need for a good regulatory regime for cloud. Most of the countries are lagging behind in this aspect and is an adverse factor in cloud adoption. Absence of uniform data-security regulations has dogged the cloud computing providers, raising questions about data security and sharing. In 2013, we believe there will be more concentrated effort to bring in this area.

GlobalServices

and expanding scope of work towards customers business needs. Having a strong relationship with the customers opens up new opportunities. I believe that the need to better serve your customer needs will be possible from the implementation of new technologies in the converged fashion.

With networks available everywhere at a massive scale combined with a fantastic price point and pay-per-use basis, there will be no shortage of computing and software services. The fact that Salesforce.com and Workday have become serious options even for the very large companies shows the acceptance of Cloud.

tectures are enabled by adoption of gateways implementing SDNrelated protocols.

Turn-key cloud brokers: Brokers that are designed to address disparity with Identity and Access Management will emerge with a focus on specific SaaS providers.

Anil Pochiraju, Managing Director, F5 Networks, India & SAARC

SDN will begin impacting the cloud: Organizations will start seeing the impact to the Cloud as true hybrid archi-

Focus on enterpriseclass applications: As organizations complete migration of low-hanging fruit to the cloud, focus will turn to enterprise-class applications which will renew interest and demand for architectural similarity in cloud computing environments.

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Outlook 2013

Sanjay Deshmukh, Area Vice President, India subcontinent, Citrix

Given that the business environment is expected to remain volatile, uncertain, complex and ambiguous businesses will be under pressure to reinvent the way they work, the compute and the core business processes. The top most priority for IT will be to help businesses transform work and compute. IT service providers and practitioners will be expected to drive business transformation initiatives which help organisations optimize cost and increase productivity.

ment measures will cease to be effective and the contours of MDM will be redefined. Companies will not want a blanket kill pill but will need to adapt to the changing devices that are coming into the enterprise. In the form of a powerful feature of app delivery, a feature of management infrastructure; a feature of data protection solutions whether in the OS, app delivery or platform, mobile device management will become an enhancement to a much broader enterprise mobility strategy.

With BYOD becoming mainstream, draconian mobile device manage-

Cloud computing is going to revolutionize service delivery across industries, sectors and government programs. No doubt that it is going to enhance the service reach and consumption by the end users. So, one of the key opportunities lies in creating new and innovative services, offerings and programs that are really beneficial and will have a value add to the section of users with a great affordability. SMBs will eventually start counting more on public cloud services to benefit from lower IT spend.

build or acquire cloud services with a strategic objective. IT services business will see a paradigm shift and will have to be the part of future business transformation. Application development and maintenance business will not grow in tandem with the overall IT spend because of the sheer productivity cloud computing adds in terms of saved time and efforts. Â New IT skills will emerge; and people reluctant to change will find it difficult to deliver.

Vendors capable of weaving cloud computing paradigm with the other transformational technolo-

Large enterprises and Government institutions will invest significantly to

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Existing apps must change to accommodate the Cloud. Existing enterprise

Jiten Patil, Cloud Computing Expert & Senior Technology Consultant, CTO Office at Persistent Systems

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3 Trends

apps have always been about the local interface but with anywhere, anytime access, enterprise apps will quickly need to be rebuilt to have cloud context and a cloud interface; not just web-enabled but deep cloud integration. Apps without cloud integrations won’t survive. The other facet to this is that enterprise apps are no longer the only standard. Web-ifying and mobilizing of apps is the future. So apps are synced and can be used on any device. The enterprise level conundrum however would be granting access to any of these apps, regardless of how they were originally built and for what intended use.

gies like social collaboration, mobile and Big Data will get differentiated. Open source technologies, together with cloud computing, will impact enterprise software business. Sectors like healthcare, education, media & communication, entertainment, retail and citizen benefit programs will benefit most from cloud computing. While factors like competing effectively in the marketplace and satisfaction of customers and stakeholders will drive the cloud adoption; security, control and interoperability will be the most discussed challenges in coming year as well.

GlobalServices

Outlook 2013

Anand Naik, MD-Sales, India and SAARC, Symantec

As consumers, we place a high level of trust in social media—from the sharing of personal details, to spending money on game credits, to gifting items to friends. As these networks start to find new ways to monetize their platforms by allowing members to buy and send real gifts, the growing social spending trend also provides cybercriminals with new ways to lay the groundwork for attack.

Attackers will go where users go, and this continues to be to mobile devices and the cloud. It should come as no surprise that mobile platforms and cloud services will be likely targets for attacks and breaches in 2013. The rapid rise of Android malware in 2012 confirms this. According to the India findings of the 2012 State of Mobility Survey, there is an uptake in mobile applications across organizations with half of Indian enterprises at least discussing deploying custom mobile applications and one-third currently implementing or have already implemented custom mobile applications.

Expect more attacks on individuals and non-government organizations, such as supporters of political issues and members of minority groups in conflict. This type of targeting is currently seen when hacktivist groups are aggravated by an individual or company.

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The Cloud bandwagon rolls on, as just about anything and everything is transformed into becoming available ‘as a service’. The five defining elements of a cloud service (elasticity, on-demand, metered consumption, shared resources and web access) made available in the four models (public, private, community and hybrid) to support the four service types (Infrastructure, Platform, Software and Business Process) become the default means by which new IT services are rolled out / implemented.

Outlook 2013

Enterprises lean towards clouds that are inaccessible from the public Internet, with participation by invitation to selected like-minded participants, that are in-country, and usually community or private clouds – all delivered “as a service” by reputable providers who have a pedigree in handling sensitive enterprise requirements.

The cloud continues to offer sales avenues for solution delivery. Organizations will continue to develop cloud based solutions rather than packaged applications that require access points within

Ganesh Swaminathan, Director, Office of Innovation, CSC

44 | January 2013

Big data or you may say “data as a service” is emerging so that enterprises can access insightful information without having to own and analyze the data for it. For example, climate data or consumer financial data. So, in 2013 we would be seeing a trend of Data as a service — and ultimately analytics as a service does make sense because the data must be available to multiple parties, who need to come together and collaborate on the data.

The starting point would be to try and understand the value proposition detailing the benefits, costs and value that accrue to an organi-

Bob Hayward, Chief Technology and Innovation Officer, CSC Australia and CSC Asia the data center that allow the visibility necessary to enable functionality.

sation through their adoption of Big Data analytics initiatives. Once the value proposition aligns with the business objectives then build a business case for undertaking these initiatives. Organizations need to adopt Big Data initiatives as an integral part of their business strategy.

Analytics are being applied to any number of public and private data sources, coupled with the orchestration of visual widgetry to give a rich interactive discovery experience – a new phenomenon that is causing an explosion of creativity for visualizing the invisible.

GlobalServices

Segment analysis

HRO

Expert Speaks

• NelsonHall • Ovum • Absolutdata • PWC • Pace Harmon • Frost • Avasant 45 | November 2012

• KPMG • Zinnov • HFS • Avasant • Ahilia Inc • Red Hat • Symphony GlobalServices

Outlook 2013

The BPO and Outsourcing Outlook in 2013 By John Willmott, CEO, NelsonHall

Overall the current economic environment has led to increased recognition of the role of outsourcing, with 73% of organizations globally now stating that BPO has high relevance within their future global operating models.

elsonHall has just interviewed 480 organizations globally across U.S., U.K., Continental Europe, and Asia Pacific, as part of an annual exercise carried out by NelsonHall to establish the business issues and initiatives faced by major organizations by sector and geography. This includes assessing the relevance of outsourcing to major organizations as part of their future operating models. Overall the current economic environment has led to increased recognition of the role of outsourcing, with 73% of organizations globally now stating that BPO has high relevance within their future global operating models. These organizations recognize that the current economic environment is here for some years to come and that their operating models need to be amended to adapt to this environment.

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This effect is particularly noticeable in Europe where 46% of major organizations perceive that the Eurozone crisis will lead to increased application of BPO during 2013. So how are organizations overall responding to the current economic situation? Well since end 2008, NelsonHall research has tended to identify the same three major priorities induced by the ongoing economic slowdown: the need to increase the efficiency of organizationsâ&#x20AC;&#x2122; mainstream business, the need to retain, and maximize the potential of, their existing customer base, and a need to enter new markets typically increasing the proportion of revenues from emerging country markets.

The most important operational outcomes that major organizations are seeking in 2013 are improved standardization of processes across business units and geographies and enhanced organizational agility. These are followed by the ongoing need for revenue opportunity maximization from the existing client base and a continuing need to reduce SG&A costs. GlobalServices

These priorities have now been overtaken in 2013 by a new factor induced by economic uncertainty, namely the need for improved business agility, now rated as highly important by over three-quarters of organizations globally. So while organizations still expect a low-growth economic environment, they currently have a high level of uncertainty about what the future holds and are looking for the capability to respond quickly to economic threats and the capability to take advantage of new business opportunities immediately they arise. Accordingly, the most important operational outcomes that major organizations are seeking in 2013 are improved standardization of processes across business units and geographies and enhanced organizational agility. These are followed by the ongoing need for revenue opportunity maximization from the existing client base and a continuing need to reduce SG&A costs. On average, organizations report seeking further annual cost reductions of over 5% in SG&A and 3% in core operations in 2013. What does this mean for suppliers? Well firstly process standardization is important with organizations increasingly willing to apply an element of process standardization prior to BPO service roll-out. However, any associated investment may well need to be financed by suppliers. Commercially organizations are increasingly looking to implement increased organizational agility by moving to usage based transactional pricing models. Contrary to much market hype, most major organizations, when they talk about outcome-based pricing mean transaction based pricing rather than gainsharing based on changes in business model. Transactionor usage-based pricing will be an important shift in commercial model in 2013. How else are organizations looking to work with vendors? Another theme in 2012 was the potential for organizations to move to Global Business Services models of service delivery rather than individual SSCs.

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Organizations are increasingly thinking this way, though progress may be slow, with the bulk of GBS implementations identified by NelsonHall scheduled for 2014-16 rather than 2013. Nonetheless, organizations will in 2013 be increasingly looking to achieve greater end-to-end process accountability, with a single global process owner managing internal and third-party resources within a single integrated team. In 2013 organizations will aim to increase their integration with their service providers in order to achieve enhanced process effectiveness and innovation. Vendors will have an increasingly important role with GBS organizations, with two-thirds of organizations interviewed by NelsonHall expecting to adopt a mixed economy within their GBS frameworks. At the same, the importance of “platforms” within BPO will continue to increase, with vendors increasingly using platforms to drive sub-process effectiveness within wider BPO contracts, the major application of platforms within BPO, and to offer standardized services for “edge” processes. In looking at the role of platforms within BPO in 2013, it is important to differentiate between three different process scenarios for BPO adoption. Firstly processes that are already highly automated within the client organization but require further cost take-out and enhancement. In this scenario, vendor technology will continue to be used in wrap-around and supplemental form, to optimize workflow and to improve levels of automation in specific sub-processes beyond what can be achieved within the client ERP. Finance & accounting is a classic example of such a process, where the core client ERP will continue to be supplemented by use of for example specialist order-to-cash, and record-to-report platforms. Secondly there are “edge” processes that are mature but poorly automated such as expenses management and in such cases, where there is no strong prior process expertise and automation within the client organization, organizations will increasingly adopt a platform-based BPaaS service and largely adopt the processes recommended by the vendor.

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Thirdly, there are new processes, typically caused by a change in business model or a need to introduce new products, where there is a choice of implementing systems in-house or using a BPaaSbased service model. In line with this increased importance attached to BPaaS and the need for greater organizational agility, approximately one-third of major organizations expect to adopt BPaaS during 2013. This adoption will initially be predominantly as part of a wider service, with 70% of those organizations planning to adopt BPaaS intending to use BPaaS as a technology enabler within a wider BPO service, rather than in standalone form. Nonetheless BPaaS-based models potentially offer a means of achieving the desired “increased agility”. So BPaaS will increasingly be adopted in support of new process and new market entry in 2013. This approach suits the need for “agile” and the indicated level of BPaaS service take-up represents a major step change in adoption. So in conclusion:  The economic climate will lead to increased adoption of BPO in 2013  The primary focus of BPO in 2013 will be enhancing organizational agility which will lead to increased adoption of transactional pricing models  Organizations are looking to work more closely with their outsourcing suppliers, ultimately integrating them within GBS operating models, and will look for tighter vendor integration in 2013  The bulk of BPO activity in 2013 will remain in support of standardization and cost takeout within SG&A. However, BPO will increasingly be applied in support of geographic expansion and enhanced customer experience  The bulk of platform usage within BPO in 2013 will remain in support of sub-process optimization within wider BPO services. However, standalone BPaaS services will increasingly be used to de-risk edge processes and new ventures often in support of emerging market development. John Willmott at CEO at NelsonHall

GlobalServices

Outlook 2013

EXPERT

Stability, predictability

and delivery will be key in buyers’ eyes in 2013 By Jens Butler, Principal Analyst, IT Services, Ovum

2013 will be a critical year for many markets and the role that IT plays within them. IT buyers will be looking for stability and ways to prepare for the next few years in their business cycle.

chieving business and IT transformation in a stable format is a complex challenge, and recently bundling has become an increasingly influential component for delivering real change, but with added predictability and control. At the start of 2012, the overall global outlook was cautiously optimistic, with the view that although the mature economies of Western Europe (even with the euro crisis) and North America were still struggling to regain their mojo, continuing Asian and Latin American growth would lubricate a much-anticipated rebound – however, the IMF recently re-lowered its projection for global growth in 2013 to just 3.6% (assuming the US will avoid the “fiscal cliff”). With ongoing instability across global markets and even in locations with historically robust growth such as China and India, the outlook for

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Outlook 2013

IT services in 2013 is unclear. IT customers are demanding greater predictability and control as a more risk-averse perspective takes hold. Cost cutting has made a slight resurgence in Europe but remains less pressing in other geographies, while raising organizational efficiencies remains the top IT investment driver. This points to a trend that has been gathering pace over the past 12 months and is expected to continue into 2013: enterprises are looking for greater reliability and stability in their external service providers and as a consequence, substantial focus on governance and control is prevalent. However, governance needs to be seen as more than a set of project support operations. Expect this investment in the governance and management layers to continue in 2013 and beyond as a full suite/portfolio of offerings is increasingly being procured in “bundled packages” by buyers looking for expertise, stability and breadth and depth of technology capability. Given these demands, it is unsurprising the vendor community has generally gone on an acquisition and consolidation binge over the past few years, with over $40bn of acquisitions occurring in the past year alone. A more recent phenomenon that Ovum expects to continue into 2013 is the growth of what we call “acquisitive engagements.” Contracts that involve a substantial equity and/or ownership investment. And this effort to gain a larger footprint is very closely tied to the phenomenon of IT services bundles accounting for a growing share of contract allocations (15 of the top 20 deals in terms of Total Contract Value (TCV) during the past quarter were bundled deals) driving extended contract lengths and greater value contracts. Competence in traditional “tower-based” service offerings will no longer suffice, as the IT services industry enters into one of the most turbulent periods in its history. The exploding interest in newer technologies, slowing demand across many traditional industries, enterprises considering alternative engagement models and an increasingly competitive landscape (with

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With ongoing instability across global markets and even in locations with historically robust growth such as China and India, the outlook for IT services in 2013 is unclear

many new traditional and non-traditional entrants) are creating a wave of change. And these shifts are being driven by a need within the buyer community for real change – the need for IT to not simply deliver efficiencies from an operational sense, but to integrate with business requirements such as increasing customer satisfaction, facilitating market awareness and making IT a key part of an organization’s competitive advantage. As such, buyers are looking for relationships with their suppliers that touch all parts of an organization’s delivery and customer engagement models, which is not something that can be resolved in a two-to-three-year multi-sourced tactical outsourcing deal. Ovum expects bundling and its associated services to become more prevalent in 2013 and continue to grow, especially among providers with a strong local presence and capability across products, services, and industries. Look to suppliers increasing investment in delivery models (both locational and asset-based), expanding their capabilities (both organically and through acquisition), targeting improved consulting and governancerelated solutions, as they seek to increase their footprint and presence. Jens Butler is principal analyst, IT Services, at Ovum

GlobalServices

Outlook 2013

EXPERT

Outsourcing

Industry in 2013 By Sundar Ramaswamy, Chief Operating Officer, AbsolutData Research & Analytics

Global economies are facing the winds of uncertainties; majority of industries including the outsourcing industry is seeing tough times. In this environment, we are seeing the emergence of analytics, which is seen to be leading the next wave of growth in the IT/BPO sector.

Re-Cap of 2012 Analytics Outsourcing witnessed continued strong performance, though with some softening of demand in Q4. The industry growth was much greater than the overall IT/BPO industry growth. Analytics has emerged as the next growth frontier for the outsourcing industry with most providers investing actively in building stronger analytical capabilities. Clients continue to focus strongly on overall value rather than cost. A trend that started surfacing with the financial crisis and continues to be strong till today, clients expect their partners to go beyond just helping them arbitrage cost rather act as ‘Strategic partners’. Clients wish their partners to go beyond antiquated models such as Time and Material to outcomes based ones. Clients continue to ask for a balanced support across strategic and tactical business questions –In

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Outlook 2013

the past, an outsourcing partner’s focus was on tactical issues with very little participation in strategic planning and decision making. But, today partners have moved up the relationship trajectory and clients are increasingly involving them in tactical as well as strategic planning and decision making. This is also helping relationships to become sustainable and be long term engagements.

Outlook for 2013 Emerging new technologies (BIG Data, Cloud, and Social Media) to be dominant themes – Today’s consumer is well informed and powerful and is changing the core dynamics of doing business.

Analytics Outsourcing witnessed continued strong performance, though with some softening of demand in Q4, 2012 . The industry growth was much greater than the overall IT/BPO industry growth. Analytics has emerged as the next growth frontier for the outsourcing industry with most providers investing actively in building stronger analytical capabilities.

52 | January 2013

The consumer is researching online and making a purchase decision. In the process, the amount of data that is being generated is huge. Hence, the companies which want to remain relevant would need to adapt to changing times and leverage new technologies to stay ahead in their business. Analytics to be a focus at board room level across CXOs – Analytics has become a necessity rather than a competitive differentiation, as organizations in all spheres are building their analytical capabilities. CXOs need to align their strategic agenda’s to include analytics. At the board level, analytics today is being viewed as an enterprise wide function which interacts with various departments across the organization. Organizations are looking for analytical solutions which can be embedded within their IT infrastructure and work in conjunction with it. Clients asking for integrated IT Outsourcing and Analytics offerings to have a single window – As the trend towards embedded analytics solutions in IT infrastructure catches momentum, clients expect all their providers to collaborate as never before so that they can interact through a single window. In this age of specialization; one provider cannot be the best in all technological aspects. Hence, we foresee greater collaboration amongst providers to give the clients maximum value.

Implications for Service Providers Develop capabilities in new areas and integrate them into current offerings – Client organisation’s today are rapidly modernizing due to advent of new technologies and rapidly changing consumer landscape. It is important for a service provider to develop capabilities and integrate new service offering in tune with the client demands. Build relationships with senior client’s stakeholders and elevate the selling pitch to overall firm value – As mentioned, the client relationships are increasingly becoming strategic and the conversations often involve maximizing firm value. It is a board level topic and providers need to reach out to CXOs and develop their pitch accordingly.

GlobalServices

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Outsourcing providers need to move up the ladder in their client relationship, building trust in the process. Providers need to get their act together and provide a single window of interactions with clients. Build cross functional capabilities with deeper vertical specific offerings – As analytics becomes an enterprise wide function affecting departments such as Marketing, Risk, Finance, Supply Chain, HR etc. it becomes imperative for an analytics firms to specialization in providing analytic services across different functions focusing on value creation in the process. Additionally, providers need to “ver-

GlobalServices

ticalize” so that they can graduate to thought partners and help build highly contextual solutions for clients needs. Today, outsourcing is again at the cusp of another giant leap, where clients are more demanding than ever before and are looking for wholesome packaged solutions rather than just cost arbitrage. They want strategic partnerships with long term sustainable solutions. Winners of tomorrow will be the ones who adapt to the changed realities. Sundar Ramaswamy is the Chief Operating Officer at AbsolutData Research & Analytics.

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outlook 2013

REDEFINING OUTSOURCING–

THE CLOUD WAY By Rajesh Rajan, Leader, Emerging Technologies, PwC India and Ritesh Pal, Senior Consultant, PwC India

Cloud computing offers tremendous opportunities as well as challenges for IT outsourcing vendors. Their ability to seize the opportunity and maintain the right balance between traditional IT outsourcing services and cloud services will, in fact, determine their ability to prosper in the future

s the hype and confusion over co-mingled public and private cloud starts to dissipate, more CIOs are joining the cloud computing party. This will have an impact on the IT outsourcing service providers, who will see their business models and customer value propositions disrupted. Service providers in the IT outsourcing space have, after all, profited significantly by taking on their customers’ highly complex, one-off collections of IT assets and finding ways to manage them more efficiently than their customers can. But the essence of cloud computing is a move towards highly standardised racks of commodity servers and a software environment that together make for a highly efficient use of resources. Cloud computing, when done right, has the potential to actually replace, and not just augment, legacy

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eXPERT

environments while adding value by reducing costs and increasing agility. PwC surveyed 489 business executives to understand the real state of data center management today, how fast business executives expect to move to cloud infrastructures in the future and who they will turn to—traditional IT outsourcing providers, new cloud-oriented providers or internal staff—to make the shift. Individual interviews with vendors offering traditional IT outsourcing and new cloudbased offerings, including infrastructure-as-a-service (IaaS), complemented the survey.

The PwC IT Outsourcing and Cloud Computing Survey suggested that many, if not most, functions of the traditional data center—internal or outsourced—will gradually migrate to the cloud. The survey revealed a growing interest among IT outsourcing customers and non-customers for infrastructure in the cloud, especially private cloud; and a slight preference for new cloud-focused service providers over traditional IT outsourcing vendors to manage the private clouds. As a result for the next several years, IT outsourcing providers will face the dual challenge of delivering traditional IT infrastruc-

for the next several years, IT outsourcing providers will face the dual challenge of delivering traditional IT infrastructure services while trying to meet the growing demand from their own customers to migrate to cloud computing, including IaaS

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January 2013 | 55

outlook 2013

eXPERT

ture services while trying to meet the growing demand from their own customers to migrate to cloud computing, including IaaS. IT outsourcing providers not ready or able to move with their customers could put the entire relationship at risk. This provides an opportunity for younger cloud-based IT infrastructure providers to aim at the enterprise market for IaaS. IaaS is indeed a boon for IT outsourcing customers who are thinking of moving workloads to the cloud because it gives them many of the same characteristics of IT outsourcing at a lower price and with greater flexibility. But the big question for IaaS providers is : Over the long haul, can they match the spending, innovation and marketing one can expect from IT outsourcing providers, many of whom already offer cloud services. The survey indicated that the migration to cloud will be gradual and the cloud will coexist with traditional infrastructure for a long time. In the near future there is likely to be enough demand for both traditional IT outsourcing and cloud services to keep everyone busy. However, besides deep pockets and trusted brands, one major differentiator for established IT outsourcing providers is the vast experience many of them have with consulting services. Since the IT resource landscape will be a mix of traditional infrastructure, private cloud, and public cloud, customers will need help to determine the when, what, where and how of migration. Many IT outsourcing vendors are realising this trend, and are also gearing up to play that role, specifically aiming to provide three vital cloud services: planning and workload assessment, migrating workloads to the cloud and managing all the moving pieces. Despite such efforts, the PwC survey suggested that in some cases IT outsourcing vendors may

lack credibility as cloud experts. IT outsourcing executives recognise the problem, and are working to increase awareness of their cloud capabilities and are undertaking marketing efforts to rebrand themselves as both IT outsourcing and cloud providers. However, if IT outsourcing vendors over-emphasise the cloud they risk alienating existing customers who prefer traditional infrastructure. The challenge will be to maintain the right kind of balance between traditional IT outsourcing services and cloud services The overall picture that emerges is that the future holds tremendous opportunities and enormous challenges for the IT outsourcing vendors. Established IT outsourcing vendors clearly have a role to play as enterprises move to the cloud. Evidently, there appears to be a new, cloud related business available to IT outsourcing providers if they can offer the right menu of services to customers who have previously shied away from them. Their ability to seize the opportunity and to offer credible private cloud services could, in fact, determine their ability to prosper in the future. The results of the survey did not suggest a clear cut answer to the future of IT outsourcing in the cloud era. Though there is hardly a tsunami on the horizon that threatens the traditional data center, whether managed internally or by IT outsourcing vendors, indications are clear that the business executives know that cloud computing will soon be the single best approach. However, the migration to the cloud would take some time. On the surface this may appear to be good news for IT outsourcing vendors, but only if those vendors are perceived as helping customers to reach the cloud.

if IT outsourcing vendors overemphasise the cloud they risk alienating existing customers who prefer traditional infrastructure

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Rajesh Rajan is leader, emerging technologies and Ritesh Pal is senior consultant, PwC India

GlobalServices

Outlook 2013

EXPERT

Assessing Your IT Outsourcing Framework

in the New Year By Christopher Stacy, Senior Associate, Pace Harmon

As we enter 2013, IT departments are once again determining how to meet new budget demands and better align with corporate objectives. IT outsourcing contract performance and ratios of in-house/outsourced and onshore/offshore IT capabilities come into focus as IT departments assess how their current costs and strategies are affecting the business.

s part of this evaluation, IT groups should determine whether previous outsourcing decision criteria have changed and whether supplier performance is meeting the standards anticipated at contract signature. The results of this assessment will help determine whether and how to take action – from driving improvements through existing contractual relationships to more drastic alternatives such as repatriating services in-house from a current outsourced arrangement.

Have Corporate Objectives Changed? The decision to outsource is often based primarily on cost reduction, supported by a desire to focus on core business activities, leverage best practices brought by outsource providers, and quickly stand up new or modified operations as opposed to

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developing or expanding an internal capability. These decisions are driven by the current corporate objectives - for example, meeting specific operating expense reduction targets, ramping up delivery capabilities in concert with new product development and corporate expansion, or reducing investment in non-core internal capabilities. In the aggregate, these objectives generate relevant decision criteria for selecting an optimal IT delivery model – in-house, outsourced offshore, outsourced onshore, captive center, etc. Periodically, (and when better than with the start of a New Year?), companies should determine whether their previous decision criteria are still

Customers of outsourced solutions need to ask themselves: does our contract allow us to take advantage of these transformations by requiring the provider to propose and implement such changes? If not, do we have the contractual flexibility to deploy such solutions independent of the outsourced provider?

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valid – i.e., whether the lens through which the outsourcing decision was made is still appropriate given the evolving corporate objectives. If you were to reevaluate a “build” versus “buy” decision today, would the same weight be given to cost reduction, speed of standing up the operation, or retaining certain skill sets internally? GM recently changed its target outsourced service mix in part due to changes to these types of criteria, as have other companies.

Has Performance Met Expectations? Labor markets and the outsourcing industry change over time. In recent years there has been significant wage inflation in traditional outsourcing hubs and, as a result, service providers have been expanding their presence in other geographies. The wage pressures are not yet sufficient to tip the scales on the cost basis of major outsourcing decisions (i.e., it is still typically cheaper to outsource basic IT functions such as monitoring and Service Desk, even in those traditional hubs), but the gap is closing and putting pressure on service providers. For solutions previously established in high wage inflation countries, providers may be tempted to cut corners, e.g., replace existing staff with more junior resources, to retain margin - reducing service quality to an extent felt by the customer. Technology is changing and maturing as well. For example, maturation of cloud infrastructure and software offerings is creating viable disruptive pricing alternatives. Service providers should incorporate these technologies in their efforts to continually optimize the service and/or propose discrete efforts with gain sharing of cost savings. Customers of outsourced solutions need to ask themselves: does our contract allow us to take advantage of these transformations by requiring the provider to propose and implement such changes? If not, do we have the contractual flexibility to deploy such solutions independent of the outsourced provider? Service quality also should be regularly evaluated. Companies must determine whether their existing outsourcing relationship is providing satisfactory

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EXPERT

service, not just in terms of adherence to contractual Service Levels, but in the overall health of the customer/service provider relationship. Customers should assess whether the user experience continues to be satisfactory or whether it has deteriorated to the point where the company may prefer to invoke supplier management escalation procedures available in the agreement, establish a remediation plan, re-compete services, or even consider an alternative delivery solution such as insourcing.

What’s Next? Having considered the ongoing suitability of the outsourced relationship, the question becomes: what should a company do in response to the evaluation? 1. If corporate objectives and outsourcing decision criteria have indeed changed, determine whether the adjustment warrants reevaluation of in-house vs. outsourced solutions and/or the variants of outsourcing. Then, refresh the build vs. buy analysis to include possible termination costs and constraints (e.g., perhaps stagger transition away from a service provider based on commitments throughout contract years, benefits of delaying migration to reduce termination penalties, or other contractual constraints) and transition cost estimates. Consider that some companies are making a conscious decision to pay more “per unit” for in-house onshore service delivery, with the additional costs offset by greater agility and responsiveness, increased efficiency, and improved Service Levels. Longer term, strategic advantage may accrue through a rediscovered ability to utilize IT as a strategic differentiator rather than a commodity cost center. 2. If corporate objectives and outsourcing decision criteria remain constant, confirm that initial savings estimates and expected service benefits have in fact been achieved. If results have fallen short, explore which service components are costing more than expected or performing poorly. Formal supplier management and governance

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procedures may be needed to audit and constrain billing scope. Ultimately, you may find that renegotiating portions of an agreement would help align the agreement with your environment and provide the tools necessary to enforce it properly through supplier management. 3. If the service provider is performing well, ask what additional opportunities are available in the marketplace. Effective outsourcing relationships can drive adoption of new technologies and techniques that save the customer money and improve delivery performance. Use the positive relationship to your advantage and test your options for further improvement. 4. If the service provider is not performing well, evaluate remediation options. Use contractual governance and escalation procedures as forums to highlight specific shortcomings in reference to functional requirements. If developing an improvement program for the provider, consider including Legal in discussions so you know your rights for termination for cause and to help structure your remediation plan in a way that may support a future case for termination for cause (not a desired outcome, but a possibility). In this scenario, you may also choose to preemptively conduct a fresh build versus buy analysis, as described above. By evaluating your outsourcing agreement’s alignment with corporate objectives and performance, your company will understand the level of action required to fine tune—or overhaul—the outsourcing relationship. Refinement through governance, improvement plans, new gain sharing arrangements, and other actions enabled through the current contractual arrangement is an appropriate tack to drive changes that preserve the outsourcing relationship. For more drastic changes, you may decide to re-compete your outsourcing agreement or to bring a portion of services inhouse – actions that require substantial planning from all business stakeholders, change management and technical oversight. Christopher Stacy is a senior associate with Pace Harmon

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What will Drive

Contact Center Outsourcing in 2013? By Michael DeSalles, Industry Principal, Frost & Sullivan and Krishna Baidya, Industry Manager, Frost & Sullivan

Contact center outsourcing will continue to expand and grow as businesses focus on core competencies and try to manage call volume fluctuations

s businesses are focusing more on their core competencies and are seeking out workforce solutions that can expand and contract in relation to their business objectives and client call volumes, contact center outsourcing will continue to expand and grow in the coming years. Frost & Sullivan’s research analyzes the global trends that will impact the contact center outsourcing market going forward, such as:  Increasing Complexity in Contact Centers: Contact center complexity is increasing as the number of products and services, intricate systems interfaces, and a large number of measurements of performance (MOPs) and key performance indicators (KPIs) continue to expand.

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 Vendor Consolidation:

There is an ongoing trend of companies working with fewer provider partners across the region. In an era of limited resources, companies are streamlining a large number of customer care outsourcing relationships. Frost & Sullivan has research goes into considerable detail regarding all the forces that are driving such vendor consolidation.  Hosted Contact Center in the Cloud/Software-As-A-Service (SaaS) Hosted contact center technology helps small and medium (SMB) size businesses, and also reduces the cost of provisioning and managing multi-site and multi-sourced contact centers.

 Analytics

Analytics are linked to tools in the performance optimization space, particularly quality monitoring (QM), call recording, and workforce management (WFM) software. Going forward, analytics also will help companies better profile consumers as well.  Vertical Expertise and a Balanced Portfolio Several market participants have moved forward with plans to better align their sales forces and professional services teams around specific vertical expertise. This is especially true in the dominant financial services vertical, but also is true in sectors such as telecom, travel, and healthcare. Michael DeSalles is Industry principal and Krishna Baidya is industry manager, Frost & Sullivan

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Outsourcing in the “Flat World” –

Care for your Goose to ensure Golden Eggs By Dr. Pradeep Kumar Mukherji President & Managing Partner, Avasant

“Yahweh not only liberates the oppressed Hebrews from their slavery in Egypt but also brings them into a land flowing with milk and honey.” Exodus 1-4

The Debate “Exporting America” through Outsourcing has been a heated topic of debate during the recent Presidential campaign in the US. The major contention was job losses and redundancies allegedly as an outcome of outsourcing. However, viewing outsourcing through the sole lens of job displacements is taking a myopic view of very important global economic phenomena. In the new world economic order, protective walls to prevent cross border flow of goods & services are being demolished. Countries are becoming progressively dependent upon each other to fulfil needs of food, livelihood and lifestyle. Success of such changes and dependencies requires that both governments and business ensure that development and growth of the world economy is inclusive. Globalization and outsourcing must ensure that it contributes to

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the progress of those at the “Bottom of Pyramid”, thereby unleashing a new paradigm in global economic growth. Multinational Companies (MNCs) are catalysts of globalization. MNCs view the world as a “Global Village” & Marketplace and depend on multitude of countries, including poor and emerging nations, for their wealth creation. According to a McKinsey report, MNCs in the US contributed 31% to the real GDP and 41% to the labour productivity gains in 2007. MNCs also have a multiplier effect and contribution to the US economy making significant impact on US socioeconomic growth. Is it not in order to expect these MNCs, as a part of their “Global Social Responsi-

The current global ICTBPO spend is $700B and is growing at around 5% per annum. Out of this nearly $120 Bn is spent on acquiring outsourcing services from low cost countries. This demand for outsourcing services has created nearly 2.5 million direct jobs, enhanced their infrastructure and skills and contributed nearly 6-7 % to the GDP in these countries.

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bility”, to give back to the emerging countries, through job creation for the poor and vulnerable sections of society? Outsourcing provides an answer to this question.

The Golden Egg Consider this – goods and services that are imported in the US would have been priced much more if produced domestically. Cheaper imports and lower production costs enable US citizens to save, buy and consume more with their income. Rapid progress of telecommunication industry has given a boost to globalization and outsourcing of services, which can be delivered by leveraging technology. Services industry contributes nearly 70% to US GDP. Today, US MNCs are taking advantage of abundant availability of appropriate technology services skills and labour arbitrage, prevailing in emerging economies, to compete effectively and efficiently in the marketplace. They are able to expand the market size by progressively bringing down the cost of their products and services, catalyzed and enabled by the globalization of technology services. Indeed a great opportunity and a “golden egg” for MNC business.

The Goose Emerging economies and BRIC countries are slowly becoming significant markets for US product and services. Countries in Africa, Middle East and Central & Eastern Europe have taken positive strides towards enabling a more digitized economy. Most of the product and services necessary to drive such an economy, are being sourced from US based MNCs. Organizations like USTDA are at the forefront of driving such initiatives for creating new markets for US firms. Additionally, emerging and BRIC countries offer to US MNCs access to large pool of skilled technical resources that can be easily trained to boost the growth of US services industry. Growth in global demand for services and escalating labour costs in developed economies have given rise to sourcing of ITES-BPO technology enabled

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business services from low cost geographies. US firms are a major beneficiary of such services. For example, they are a major spender for ICT services and acquire these from destinations across the world like India, Philippines, Mexico, Canada and the regions of Latin America, Eastern Europe and Asia. Kaname Akmatsu a leading Japanese author and economist coined the phrase “flying geese paradigm”, in 1960s, which is still very relevant to this very day. The paradigm envisages that production of goods and services move from more advanced economies to emerging ones, due to comparative advantage of labour availability, costs and where the strategies of emerging countries are aligned to those of advanced nations. If US desires to lead the way in world economy, it can do so by guiding and aligning the “geese” represented by emerging economies. The current global ICT- BPO spend is $700 Bn and is growing at around 5% per annum. Out of this nearly $120 Bn is spent on acquiring outsourcing services from low cost countries. This demand for outsourcing services has created nearly 2.5 million direct jobs, enhanced their infrastructure and skills and contributed nearly 6-7 % to the GDP in these countries. The emerging

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economies are continuing to fuel their investments into infrastructure as they see outsourcing as an opportunity for their GDP growth. It is imperative then that the MNCs, who operate in these geographies and derive benefits of lower cost and enhanced skill availability, also focus on taking care of the skill development of local labour pool including the poor and disadvantaged sections. The skilled pool of labour thus created will be the “golden goose” for MNCs operating in the geography.

The Goose and the Golden Egg – Creating an Impact that also makes Business Sense Outsourcing to global locations is in reality an innovative business model which provides a winwin platform for both the buyer and provider countries. US companies who benefit from globalization and outsourcing, instead of worrying about the adverse press opinion such strategies attract, should actively promote CSR (Corporate Social Responsibility) initiatives in the emerging economies, to foster inclusive growth. Impact Sourcing – a variant of outsourcing in the ITESBPO sector is one such vehicle to achieve the CSR goals. Impact Sourcing initiative focuses on employing poor and disadvantaged individuals in the ITES-BPO sector, who would otherwise not have opportunities for sustainable employment. MNCs get the advantage of access to a large untapped pool of skills, from the bottom of pyramid, for an additional 20-30% lower cost. The additional savings envisaged from this pool, which had been ignored so far, makes the CSR initiative

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a viable business proposition, instead of being a mere charitable act. The training provided, not only prepares the poor & underprivileged people for immediate employment in the ITES-BPO sector, but also empowers them to work in a range of sectors in the local economy. Impact Sourcing has the potential to be a vehicle for releasing people out of the shackles of poverty. It is already being leveraged in places like Africa and Asia to contribute to the social goal. The concept can be deployed also in economically depressed regions in developed countries like US, suffering from chronic unemployment. Impact Sourcing serves the dual objective of driving business value in the organization which leverages it, while also meeting CSR goals by contributing to inclusive growth in world economy.

On the road to becoming an “Impactful Buyer” A systematic approach should be adopted for identifying socially responsible causes which meet the dual objectives of business profit and social objective- thus being “Impactful”: 1. Define a hypothesis and concept of a potential socially relevant opportunity 2. Research the potential opportunity from angle of market size, scalability, sustainability, workable business models and risks/challenges. 3. Conduct a pilot project as “proof of concept” establishing viability of the opportunity. 4. Rollout the scalable model. Put in place governance framework to monitor progress and ensure results are being achieved.

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Emerging economies and BRIC countries are slowly becoming significant markets for US product and services. Countries in Africa, Middle East and Central & Eastern Europe have taken positive strides towards enabling a more digitized economy. Most of the product and services necessary to drive such an economy, are being sourced from US based MNCs.

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Samasource is a social business based in San Francisco that connects people living in poverty in East Africa, South Asia and Haiti to work via Internet. It was founded in 2008.

Operating Model 

   

Samasource manages sales and marketing to generate demand for data services from companies in the United States and Europe. Samasource takes a project from a client, breaks it up into micro-work and allocates it to a network of delivery centers that recruit and mange workers from marginalized population. Samasource takes advantage of latent computer capacity at work centers. Places like university computer labs that aren’t used at night, or existing computer training facilities, can be put to good use. Samasource uses a proprietary web platform, the SamaHub, to securely distribute micro-work tasks to the global delivery centers. The SamaHub employs best-in-class technology to manage the collection, review and delivery of judgments, and monitors associated performance and quality metrics in real time. Quality assurance - Samasource takes care to maintain an accessible QA and account management team in San Francisco, which interfaces directly with clients.

Key Clientele Samasource works with several high-profile companies, including Google, LinkedIn and Intuit, and has paid over $1.5million in wages benefiting more than 20,000 people living in poverty. Samasource is a social business based in San Francisco that connects people living in poverty in East Africa, South Asia and Haiti to work via Internet. It was founded in 2008.

Executing the Impact Innovative business models have been developed by organizations to implement “Impact Sourcing” initiatives. One of the models of execution is to outsource to an aggregator: An aggregator being an intermediary who the understands the buyer’s business requirements and aggregates resources in various emerging economies through a collaborative platform and centralized project management. An example of such an aggregator is given above.

Conclusion Global sourcing of services is a modus -vivendi for MNCs to reap the “golden egg” benefits that collaboration with emerging economies provide ... The benefits are scalable and sustain-

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able, if a balanced strategy is adopted – where business profit goals are balance with CSR objectives. In the “flattened” world, the walls of protectionism are giving way to gardens of inclusive prosperity. Economists and policymakers know that the best and most enduring form of assistance developed countries can give to emerging nations is not in direct grants but in open markets. US’s responsibility toward temporarily displaced domestic workers and development of emerging nations along with goal of world poverty reduction, are not mutually exclusive. Both apparently conflicting objectives can be achieved if instead of a myopic view a visionary approach is adopted. Dr. Pradeep Kumar Mukherji is president & managing partner at Avasant

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The changing

offshoring market By Viral Thakker, Partner, Shared Services and Outsourcing Advisory Services, KPMG in India

Organizations remain vigilant with regards to their overall IT and Business Process Outsourcing (IT-BPO) spend. At the same time, there is increased demand for outsourcing alternatives such as cloud computing, and growing trend of companies setting up in-house shared service centers, both in India and elsewhere

umultuous economic and political conditions have defined much of this decade so far, and businesses across the globe have reacted to the uncertainty by taking a “wait and see” approach, slowing down any change efforts. Organizations remain vigilant with regards to their overall IT and Business Process Outsourcing (IT-BPO) spend, which has resulted in cautious demand for outsourcing to a third party vendor – KPMG estimates that in Q3 of 2012 deal demand fell nearly 10 percent1 compared to a year ago. At the same time, there is increased demand for outsourcing alternatives such as cloud computing, and growing trend of companies setting up in-house shared service centers, both in India and elsewhere. With the Indian IT-BPO industry accounting for around 25 percent2 of global exports, it is imperative that

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we seize the opportunities that this challenging environment presents us. As negative economic conditions continue to weigh heavily on organizations’ decisions to invest in outsourced services, the demand for outsourcing as a whole, especially generic back-office or “horizontal” outsourcing, remains weak by historical standards – the year witnessed a fall in average contract value by 10 percent1 and also contract durations. This trend towards smaller, shorter deals is worrying for most vendors. The fall has been sharpest in the Americas, with the EMEA and ASPAC regions showing some growth – the ASPAC region

The year 2012 also saw many offshoring locations catching up to India’s competitiveness in the field – competition between countries is increasing, and many countries and regions offer strong government and taxation benefits to incentivize companies to set up shop.

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grew in double digits in Q3 2012. India has also emerged as a center of activity, with a number of e-governance projects such as Aadhar driving outsourcing activity in the region as well as the rise of India to India (i2i) contracts, where Indian captives outsource a portion of their activities to the Indian arm of an IT Outsourcing firm. Indian companies are also heading to establish centers in China and elsewhere in the ASPAC region to capture the market and create reduce the dependency on the Americas region, which still drives the majority of the world’s outsourcing activity. The year 2012 also saw many offshoring locations catching up to India’s competitiveness in the field – competition between countries is increasing, and many countries and regions offer strong government and taxation benefits to incentivize companies to set up shop. Also, while India is still the de facto destination for off-shored work due to its large Englishspeaking talent pool, and labor costs that are amongst the lowest in the world, businesses today are looking to locations such as Guatemala, Chile, Poland, China and the Philippines for their offshoring needs – and choosing the right location for their needs from a bouquet of locations. The Philippines for example, has become extremely competitive in delivery of voice based BPO services due its cultural affinity with the US and a more American accent. India is poised to maintain its leadership in the non voice BPO and IT segments, especially with regards to complex business processes, Knowledge Process Outsourcing & Application Development, due to its larger technical talent pool but both government and industry should take steps to make sure that we maintain this advantage in the face of upcoming competition from China and other Asian countries. Another trend for offshoring to India that KPMG has observed is that businesses continue to maintain a relatively high interest in establishing their own shared services centers. Busi-

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Global Quarterly outsourcing (IT-BPO) deal movements

Indian service providers today excel at the application modernization and transformation services that are required for moving enterprise applications to the cloud, though we still lack the infrastructure required for offering cloud services out of India.

nesses are moving to a ‘hub and spoke’ model for establishing these centers - The ‘hub’ is a central location which manages and aggregates works sent to the spokes and performs complex activities, while the ‘spokes’ are low cost locations which handle low skill activities. Given India’s established dominance in the global outsourcing landscape, leading MNCs are considering India as a viable global hub in the global delivery strategy, with spokes in other countries such as China, the Philippines, Poland and Mexico. For example, an offshore hub in Gurgaon could coordinate with spokes in near-shore locations such as Chengdu, Manila, and Warsaw. More importantly, clients will

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take best practices in their India center to other captive shared service centers across the globe. This trend could very well drive the next phase of growth for Indian offshoring. We are also seeing increasing demand for ‘Follow-the-sun’ workflows, where tasks are passed around between locations that are many time zones apart – one client sees its IT operations being passed around between an offshore center at Bangalore and an onshore center in Santa Clara to ensure round the clock responsiveness to client needs. As more and more companies look to extend their global reach, India could benefit from this trend in globalizing their operations. Cloud computing and other innovative tech-

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Demand by service delivery model: Net change in demand (Source: KPMG GBS Pulse Survey) – Demand for Shared Service Centers remains relatively high

Given India’s established dominance in the global outsourcing landscape, leading MNCs are considering India as a viable global hub in the global delivery strategy, with spokes in other countries such as China, the Philippines, Poland and Mexico.

nologies will also continue to impact offshoring activity, and Indian IT-BPO companies are watchful of retaining their strength in the face of these opportunities. An increasing amount of data centers are being established by Indian companies, and our industry is developing strong cloud computing strategies, after many years of leadership in this field by the USA and other developed countries - Indian service providers today excel at the application modernization and transformation services that are required for moving enterprise applications to the cloud, though we still lack the infrastructure required for offering cloud services out of India. These opportunities and challenges in the global off-shored services market in this year are expected to continue into the year 2013. Indus-

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tries, markets, technologies and service requirements are continuing to evolve, and despite cautious deal activity, India’s offshoring industry seems poised to take advantage of trends, from hub and spoke offshoring models, to follow the sun workflows, to cloud computing, and continue to lead the global market. It will be interesting to see how offshoring will pan out in year 2013 based on these market trends. KPMG publishes the Global Sourcing Advisory Pulse Survey and its Global IT-BPO Outsourcing Deals Analysis on a quarterly basis. More information is available at: http://www.kpmginstitutes.com/shared-servicesoutsourcing-institute/ Viral Thakker is partner, shared services and outsourcing advisory services, KPMG India

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2013 will differentiate

the boys from men in the Indian outsourcing space By Sundararaman Viswanathan, Manager-Consulting, Zinnov

2013 will be the year of re-structuring and will end with operationalizing of the growth plans. The dust is beginning to settle in Europe and Asia is progressing well on its recovery path. This augurs well for the Indian IT industry

he year gone by set a new normal to the otherwise ever buoyant Indian IT industry. Infosys was in some ways the harbinger of the new normal, just as it was in 2010 when it summed up the mood as “cautiously optimistic”. Though, the industry initially dismissed the trend of lack of visibility into customer budgets and trend of slowing growth, eventually pretty much everybody including Cognizant reconciled to the ground realities. So, what happened in 2012 and what is its impact in 2013? 2012 was an election year in the US. Europe was lurking in the dark and in many ways is still trying to figure its way out of the debt crisis. No one knows who is bankrupt and especially how badly since every system and industry is so tightly integrated? Asia had its own woes with Japan,

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2013 will be springtime for the Indian IT industry with each service provider creating a new services, capabilities and niches

Taiwan and Thailand clawing their way back from natural disasters of epic proportions and the trickle down effects it had on the technology sector. Governments and Corporates spent much of 2012 in taking stock. To add to this, every corporate has taken a sudden liking to “fiscal responsibility”. CIOs are scrutinizing their nondiscretionary spends and are identifying / creating new “semi-discretionary” spends which could be deferred or eliminated with some tradeoffs for the near term. 2013 will be the year of re-structuring and will end with operationalizing of the growth plans. Typically in India, we tend to be insulated from global crisis thanks in part to a resilient economic system and in part to our lack of adventurism. However, the Indian IT industry is a good reflection of the overall global economic and market mood. The Indian IT industry serves all the industry segments and almost all the geographies; also they have a firsthand view of the discretionary spending by businesses which is a leading indicator of the market sentiment. At a macro level, with the US elections over

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there is at least a bit of clarity over the next 3 years. The dust is beginning to settle in Europe and Asia is progressing well on its recovery path. Businesses are realizing that increased discretionary spend on new technologies are going to be the differentiators going forward and are planning to re-invest in technology, systems and processes. This augurs well for the Indian IT industry. As we get into the specific trends for 2013, I see that inorganic growth options will get exercised to appease the markets and build “new to company” capabilities. With discretionary spending expected to be back, the Indian IT companies will get imaginative with their solutions, pricing models and go to market strategies. Already the battle lines are drawn for the contract renewal cycle and the service providers are all out in the market with clear mandates in terms of verticals and service lines of focus. It is now an imperative than an option to work with India captive centers and the service providers will come up with innovative pricing and engagement models for this industry segment.

Acquisitions galore: Apart from regular scouting for regular M&A deals, the service providers will start looking out to acquiring some of the large scale captive centers in India – Over the last 7 to 8 years the captive centers of large BFSI, Retail and even some large Engineering R&D captive centers have been delivering a wide range of services. Now it is getting exponentially difficult to derive further efficiencies in the current form and manner in which the captive center is set up. The only way to derive further efficiencies is by outsourcing to a partner and a viable captive center will definitely interest the service providers. By taking the outsourcing option and rebadging some of their (captive center) resources to service providers, the captive centers could channelize their capacity, capability and management focus towards transformational initiatives of their CIO and Head of Operations. Last but not the least, divesting a portion of a

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mature captive operation that commands a good premium, is a definite booster to the financial statements for large corporations and service providers will leverage this dimension as well in their overall pitch.

Discretionary spends will be back: There will be a spike in ER&D and overall solutioning demand for affordable products, especially in Housing, Cars, Medical Devices and Internet Mobile Devices (like tablets, smartphones). With shrinking wallets and increasing budget cuts (at the end consumer level) all around, it is expected that consumer choices across both the developed and emerging markets is likely to shift to function over form. On the other hand, the enterprise business units believe that emerging technologies in digitization, analytics, mobility and cloud will have a direct impact on their top line and have started having conversations independently with anybody who can help them in their growth plans. The businesses are treating their own IT teams on par with service providers and in some cases are pressing ahead with decisions in favor of some compelling solutions from service providers. The service providers who has had a firsthand experience of such transactions have for over a year been devising compelling industry specific solutions, engagement models and pricing models. All their efforts are expected to pay off in H2 2013 or early 2014.

Captive center strategy– The trump card: Almost 50% of the top 500 global corporations have their own India center. These centers have grown and matured in the range and value of services they provide to their parent entity. With the captive centers of the customers emerging as strong centers of excellence, they now command a seat at the table and have transformed

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the two dimensional relationship between the service provider and the HQ of the customer into a three dimensional one. Though the realization has come in late, the service providers are increasingly realizing that they have no option but to come up with innovative engagement models to work with the MNC captive centers. In my view the service providers should view this as a blessing in disguise. Once the service providers crack a model to work on the same currency, same culture fronts – dealing with domestic market in India should get relatively easier. The reason why service providers have stayed away from engaging with the captive centers is because, they are not currently structured to deal with expense and revenue in the same currency and still maintain the high margins which they make today. So, innovative engagement models and pricing models will emerge to cater to the MNC captive and domestic market segment. Gone are the happy days of black box outsourcing, T&M billing, technology driven projects trumping business requests, all powerful single window clearance CIOs / CTOs. The last of such action happened in 2011 and in some parts in 2012. The Indian IT service providers now have to hunt and farm even in winter. 2013 will be springtime for the Indian IT industry with each service provider creating a new services, capabilities and niches. Some of the transformation work had already begun in late 2011 and well into 2012 – some hard decisions were made and re-structuring had happened. 2013 will be more about execution of the strategies, hitting the ground running and then accelerating on the newly charted path. Gearing up to such a transformation all at one is not something which every service provider can do and hence as we finish 2012 and lead into 2013 we will see the men emerge out from the group of boys in the Indian IT industry. Sundararaman Viswanathan is manager consulting, Zinnov

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SWEATING THE INSIDER

THREAT IN CLOUD SERVICES SCENARIOS By James R.Slaby, Research Director, Sourcing Security & Risk Strategies, HfS Research

Buyers must investigate any prospective provider’s governance, security policies and security infrastructure to determine how well it stacks up against their own native insider threat defenses. The good news? In some instances, providers may be in a better position to defend against insider threats than buyers can on their own

he world outside of the enterprise data center is full of security threats. Viruses take aim at desktops, laptops, tablets and Smartphones. Worms and SQL injection attacks try to exploit vulnerabilities in web applications, databases, and network-based defenses to steal valuable personal information and interrupt IT services. Phishing emails serve as enablers for social engineering attacks. Meanwhile, botnets seek to flood email servers with spam or mount distributed denial-of-service attacks, while hacktivists and sophisticated state actors act on political or military/industrial motivations to breach corporate IT defenses. The external assault is constant and ever-evolving. But CSOs have recognized for several years now that an equal if not greater threat comes from inside the enterprise: current and former employ-

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ees, contractors, and trusted business partners effecting some security breach, including theft or destruction of intellectual property or regulated data, fraudulent use of company resources, and application downtime. Insiders may be motivated by personal financial gain, seeking revenge for some grievance against the organization, or simply guilty of unmalicious ignorance or negligence, but their breaches can be just as harmful in terms of company exposure to financial losses, regulatory sanctions, and reputation damage as external ones. In response, most organizations have made serious investments to mitigate insider threats

Most organizations have made serious investments to mitigate insider threats through a combination of governance, security policy and technology. Some of these measures may become less effective once an application moves to a cloud service

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through a combination of governance (e.g., educating employees on security awareness), security policy (e.g., conducting pre-employment background checks on IT staff), and technology (e.g., deploying data loss prevention and privilegeduser management tools). Some of these measures may become less effective once an application moves to a cloud service: it runs on infrastructure external to the enterprise that is managed by third-party staffers and defended at least in part by the provider’s security policies and threat mitigation systems. Part of the risk assessment behind any decision to migrate to cloud services must effectively weigh how insider threats change when applications migrate from private data centers or shared services infrastructure to private, pubic, or hybrid cloud computing environments. Buyers must investigate any prospective provider’s governance, security policies, and security infrastructure to determine how well it stacks up against their own native insider threat defenses. They must also make a clear-eyed assessment of how any resultant changes in risk posture affect the business case for moving to cloud services. The good news? In some instances, providers may be in a better position to defend against insider threats than buyers can on their own.

Overview of Insider Threats and Their Countermeasures The universe of potential security breaches due to insiders is a broad one, but can be broken down roughly as follows:  Insiders that steal or modify private information for profit. Some may attempt to steal customer credit card numbers or social security numbers for sale to external criminals for use in card fraud or identity theft. Others may make off with intellectual property, product plans, customer names, or unreleased earnings information for sale to competitors or use in insider trading. Another tactic is to create bogus payees, insurance claimants, or other dummy entities for fraudulent purposes.

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 Insiders that vandalize systems, motivated by a

desire for revenge over some perceived slight or injustice: a demotion, firing, unawarded bonus / raise / promotion, etc. They may delete databases or critical software. They may bring down servers, networks, or security protections through the use of time-delay logic bombs. They may exploit illicit back-door accounts they have created or valid accounts that were not disabled after their termination.  Employees that allow sensitive data to be stolen or leaked through their own ignorance, carelessness, or negligence, but without malice or intent to profit from the breach. A stolen laptop with unencrypted customer data, emails with confidential information sent to external recipients, intellectual property retained on a home computer after an employee leaves the company -- all represent potential breaches even though the insider intended no harm.  Enterprises have invested in a variety of countermeasures to mitigate the risks of insider threats, including:  Pre-employment screening. Prospective employ-

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ees are submitted to background checks that may include a check of their criminal history, credit worthiness, drug testing and prior employment references. Identifying potential problem candidates before they are hired is a proven preventative measure.  Change management controls. A well-defined, documented, communicated and enforced set of policies for change management makes it more difficult for users to surreptitiously gain more powerful privileges or subvert systems designed to enforce physical security, system isolation, application access and network perimeter defenses.  Privileged-user management. Through strict policy and with the help of technological systems, users (especially IT staffers) can effectively be limited to access only those systems needed for their jobs, with only the minimum level of privilege authorized, and ideally only at specific and limited times.  Data loss prevention (DLP) systems. These monitor both inbound and outbound data flows to ensure that users are only moving data to and from external destinations in compliance with company policy, including email, instant messaging, web transactions, social-media postings, and file storage on removable media.  Log management and security information and event management (SIEM). These systems provide broad monitoring, alerting and reporting for security events that might signal illicit activity or a breach in progress. Their ability to correlate events from multiple security and network devices is also valuable for detecting suspicious patterns of activity that might otherwise go unnoticed. They also provide valuable forensic information for diagnosing and tracking the sources and content of breaches after they occur.  Security awareness training. Users need constant

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training on and reinforcement of company policies designed to protect sensitive information. Employees and contractors must understand their own obligations under the terms of company non-disclosure agreements, intellectual property protections and acceptable-use policies for company resources.  Other IT-based measures. Enterprises have many options for preventing unauthorized access, protecting sensitive data in the event that it is compromised, and limiting the damage that a successful intruder can wreak. These include tools such as multi-factor authentication, end-to-end data encryption, and network segmentation.  Physical security management. Limiting the physical spaces to which users have access, not allowing non-IT personnel into data centers, and logging employee and contractor ingress and egress throughout company facilities are useful preventive and forensics tools.

ple, some buyers may be unfamiliar with emerging threats like virtual machine breakout exploits attacks, in which malware is able to break the containment of the virtual operating system to attack the host environment or adjacent virtual machines.  Questions of jurisdiction may arise based on where IT insiders reside. A potential inside attacker may be operating in a physical location where the legal sanctions against criminal activities are weaker than in your own jurisdiction. This can remove some of their disincentives to criminal behavior and make court injunctions more difficult to obtain.  Cloud security measures may conflict with some of your native threat mitigation systems. For example, the use of end-to-end encryption to protect sensitive data in transit to and from the cloud may render some of your own security countermeasures inoperable, e.g., network-based intrusion detection and prevention systems and data loss prevention systems.

How Insider Threats Change When Applications Move to the Cloud

Recommendations to Buyers

When assessing the risk associated with migrating applications to cloud services, buyer should focus first on how the insider threat environment changes, as follows:  The most privileged users with the power to wreak the most harm are no longer your employees. The cloud provider’s IT staff are now the ones with unimpeded access to applications, their sensitive data, and the systems they run on. They may be endowed with far-reaching access and powerful privileges in order to do their jobs. And they are by definition more highly skilled and knowledgeable of system vulnerabilities.  Your applications will likely be part of a much larger-scale, more complex IT operation. The typical cloud provider operates in a multi-tenancy environment with many customers. If they have not taken adequate steps to ensure tenant isolation, your applications and data may be exposed to security threats from other co-tenants.  The cloud environment embodies new technologies that may present new attack surfaces. For exam-

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Buyers of cloud services should take the following steps to address changes to the nature of insider threats in three distinct categories:  For threats that largely remained unchanged, mainly non-malicious breaches by your employees: Recognize that you still retain ownership and accountability for mitigating these issues. Continue to enforce extant security policies and controls on users, applications, endpoints, servers, networks and physical facilities of which you retain ownership. Conduct ongoing security awareness training for all employees. Continue to pre-screen prospective employees and contractors using a variety of background checks. Handle employee terminations with care, especially in regards their IT access. Follow industry best practices for good password management, account management and least-privilege authorization. Monitor and log employee online activities, including remote access to internal systems. Have a good data backup and restoral strategy, and a well-defined and rehearsed incident response plan for when breaches occur, as they inevitably will.

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 For threats that arise

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forensics to pinpoint, diagnose and prosecute insider breaches. Look for advanced technologies like privileged-user management systems and correlation of logging and SIEM systems with online activity monitoring. Look for robust procedures for change controls and separation of duties. Ask for details of the provider’s incident response plan, particularly as it relates to any regulated data you might be considering migrating to the cloud. Ironically, what looks on the surface like the scariest potential insider threat, that of the provider’s own IT staff, may in fact be the least of your worries when considering cloud services. After all, a provider can more cost-effectively invest in advanced systems to vet, monitor and control the actions of their IT staff, as it can spread infrastructure and training costs across multiple co-tenants. Further, providers have strong competitive incentives to offer sophisticated, robust assurances against breaches originating in their own houses – providers have more to gain by doing it right and more to lose if an insider breach occurs, as securely running buyers’ applications is their core business. That said, appropriately risk- averse buyers will trust but verify – through careful investigation of their prospective provider’s infrastructure and security policy regime, negotiation of appropriate contractual and SLA protections, and periodic audits to ensure ongoing good hygiene. You still own responsibility and accountability for dealing with the insider threat, but at least in this instance, it’s a security goal on which both you and your cloud services provider are very tightly aligned.

Ironically, what looks on the surface like the scariest potential insider threat, that of the provider’s own IT staff, may in fact be the least of your worries when considering cloud services.

from technology of the provider cloud environment: Make sure you understand and contract for provider policies and technologies to protect against the new threats that arise from your applications and data residing in the cloud provider’s infrastructure, e.g., failures of co-tenant isolation mechanisms. These should also include traditional measures like application-layer firewalls and network-based threat mitigation measures like router ACLs, network firewalls and network intrusion detection and prevention systems. Seek protection against provider outages as you would in any IT outsourcing or managed services scenario by obtaining: a) an understanding of provider mechanisms for fault tolerance, business continuity and disaster recovery; and b) contractual and SLA terms that provide financial compensation to the buyer in the event of outages or unacceptable performance degradation. Consider alternate approaches to data encryption when the provider’s preferred mechanism might disable certain of your own threat mitigation systems. One example might be using a premise-based encryption gateway that would allow you to pass data in the clear through your DLP system, where end-to-end encryption would render it useless.  For threats that arise from the cloud provider support staff: Because the provider’s IT staffers have the most privileges, access and technical expertise among potential insiders, they conceivably represent the biggest insider threat to your sensitive data. Be sure your provider is taking at least the same measures that you would to vet and monitor your own IT staff, limit their access and authorizations to only those activities they need to do their jobs, and conduct appropriate

James R. Slaby is research director, sourcing security & risk strategies, HfS Research

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Business Enablement will

set the Agenda for CIOs

By Kevin Parikh, Global CEO and Sr. Partner, Avasant

The shortened economic cycle has led organizations to witness high growth, financial turmoil and then a process of recovery within a very short span of five years. Such rapid changes in the macro environment require organizations to respond rapidly by displaying maneuverability, nimbleness and adaptability.

ith information technology being the connector between various departments and functions, organizations need to ensure that their information technology can support the tactical and strategic objectives of these functions individually, and the organization as a whole. The IT organization need to recalibrate its strategy by adopting transformational and optimization approaches, evolving Cloud and Big Data services and realigning to the hub and spoke model of managing offshore service delivery locations. In other words, they need to start focusing on business empowerment rather than just IT management. As IT organizations globally prepare to ride another tumultuous year, we take a look at some

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Then – IT as Support Function

Now – IT as Business Enabler



Driver of cost efficiency

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Enabler of business strategy

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Improvise operations, business processes

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Partner to other business functions

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Enable faster time to market

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Improvise use of knowledge within the company

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Integrating supply chain

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Enable faster time to market

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Gather and provide data on company operations and business

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Connect with consumers

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Compliance

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Revenue driver and increase market penetration

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Cost center

IT budgets increasingly catering to end user communication and collaboration, analytics and innovation



IT budgets focused on infrastructure and transaction applications

Moving beyond technological readiness to capture and store data, CIOs need to leverage globalization to gain access to diverse skill sets and cloud technologies, manage coordinate and enable collaboration within to harness the data and bring in the required insights for business empowerment.

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of the trends that we believe will let them achieve their aim of being true business enablers and vehicles of transformation. Going forward, IT Organizations and CIOs will have to see themselves playing a critical role in multiple business areas. IT Organizations of the future will support the business in a manner that will integrate IT functions into the delivery of products and services as well.

The Changing Role of IT The role of IT is changing, not just in how technology managers manage IT but also how the rest of the organizations relates to IT Organization. While IT Organization is expected to be more of a business consultant to the rest of the organization, typically 75% of IT Organization time is spent on maintaining existing technology. CIOs need to realize this, and take a lead in championing their IT organizations to the new set of expectations that lies before them. New expectations from the CIO can be categorized under the following heads: Wear Different Business Hats: Play the role of centralized knowledge guardian in a data driven world, CIOs need to think from a business function perspective Manage Change: The speed of technology change and its impact across business, employees and customers is more than ever before and will

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likely continue. Need to manage change along with technology Play A Strategic Role: Newer developments require CIOs to be able to think strategically and adopt a portfolio approach. Cloud Solution will take care of many of the operational issues allowing focus on strategic issues Technology Mindset to Services Mindset: Not just provide technology but be responsible for sourcing solutions and developing services. Become a coordinator of solutions to cater services to business Focus on Outcomes: Go beyond operational metrics to focus on contribution in customer excellence, revenue growth and innovation in the organization Grab the Cloud Opportunity: Rather than shrinking the role of CIO, cloud is pushing the role of CIO into a strategic orbit. CIOs have the opportunity to be at the center of all the information flow in the organization Nurture Diverse Talent: As CIOs focus more on services and business outcomes, they need to learn to bring in a diverse set of skills into their organization especially ones related to analytical and domain knowledge Be The Source: As businesses begin to access technology directly, CIOs need to be ahead of the technology curve providing the direction and knowledge of technology

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options, innovation in the industry and technology trends Maximize Outsourcing: CIOs need to continue to serve the core needs of managing IT in the organization, which outside vendors can provide. Maximize on outsourcing so as to remain lean and agile to focus on strategy and innovation

Globalizing for the Future Aligning with the emerging role of the IT organization, the outsourcing and globalization strategies need to be optimized to create business value and empowerment and not just limit themselves to achieving cost savings. Globalization initiative within the organization can thus be transformed as the bedrock to achieve business objectives in multiple areas including: Innovation â&#x20AC;&#x201C; Big Data and Analytics: Explosion of data in various forms requires CIOs to not just manage ways of its storage and delivery at lowest cost per unit but also look at the bigger picture that data can produce. Moving beyond technological readiness to capture and store data, CIOs need to leverage globalization to gain access to diverse skill sets and cloud technologies, manage coordinate and enable collaboration within to harness the data and bring in the required insights for business empowerment. No other function within the organization is as critical as IT is to Big Data and a mature globalization

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While IT Organization is expected to be more of a business consultant to the rest of the organization, typically 75% of IT Organization time is spent on maintaining existing technology. CIOs need to realize this, and take a lead in championing their IT organizations to the new set of expectations that lies before them strategy can help CIOs to play the critical role successfully. Corporate Social Responsibility: IT and BPO globalization has the potential of addressing another key corporate objective beyond those of bottom lines and market development. Over the last few

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years the Rockefeller Foundation and Avasant have been championing the cause of Impact Sourcing. This cause focuses on hiring and training Socioeconomically Disadvantaged People (SDP) in rural locations. On a global basis, the potential for employing(SDPs) in ITO and BPO centers can reach $20 billion and employ 780,000 resources by 2015 making a significant and direct impact on poverty reduction and societal empowerment. We believe that is a superior alternative to CSR initiatives where organizations can directly make a contribution to poverty reduction and employment generation during the course of achieving their hard business objectives.

Conclusion With the context of economic turmoil, technological advances and increasing maturity of outsourcing led service delivery vehicles; we believe the fundamental forces of change to Global service delivery will stem from the business orientation of IT departments. As the CIO role becomes more strategic to business outcomes, internal IT organizations will re-orient, so will the scale, texture and significance of outsourcing relationships. Service providers that start envisioning themselves as parts of their clientsâ&#x20AC;&#x2122; business strategy, will be more successful in re-aligning their solutions and delivery models, and in turn be more successful and effective long term partners in growth. Kevin Parikh is global CEO and senior partner at Avasant.

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Outsourcing Companies

Set to Increase Marketing Spend in 2013 By Amrita Tahiliani Joshi, CEO, Ahilia Inc.

What is the best indication of confidence in the Outsourcing industry? People may argue the Nasscom IT Outsourcing forecasts or research analyst firm predictions, but at Ahilia, we would argue that marketing spend is a great indicator of confidence in the industry.

s any outsourcing sales and marketing professional knows, marketing spend is the first budget item to get cut or stalled if outsourcing companies feel that revenue growth is going to be minimal or, god forbid, actually decrease! Here is the good news: 81% of outsourcing companies in our survey anticipate increasing their marketing budgets in 2013. The top four categories of spend showed some surprises and almost 60% of companies plan to increase headcount and agency spend next year.

The Survey This past fall, Ahilia conducted a survey of IT and BPO outsourcing providers’ marketing spend. We conducted this research because one of the most common questions we get asked from clients and prospects is “How much are other outsourcing

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service providers spending on marketing?” While data does exist for various technology segments, there is no research that benchmarks marketing spend for Services Outsourcing firms specifically. Most companies are forced to look at benchmark data that includes some mix of software, hardware and IT services firms, which can reveal a very inaccurate comparison. For instance, product companies, spend on average significantly more on marketing then services companies.

Our Findings In addition to benchmarking 2011 and 2012 spend, we asked respondents several questions regarding

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their predictions for 2013 marketing spend. Of all the respondents in our survey:  40% saw their marketing budgets going up a modest 1%-5%  23% planned to increase overall marketing spend by 6-10%  10% predicted their budget would rise by 1120%  3% predicted a 30+% increase  6% of respondents predicted a decrease in budget  13% said budgets would stay flat How is all this work going to get done? 56% of outsourcing companies plan to increase marketing spend with agencies and outside marketing consultants. 60% of companies plan to increase their internal headcount. So take a deep breath marketing professionals, after 5 years of a grueling survival through the recession, the demand for us is finally on the rise! Where are executives and marketing professionals going to spend their money? The top four categories of spend were New Customer Acquisition, Branding & Advertising, Events, and Online Marketing. At the bottom of the list were Influencer Management, Channel Marketing, Corporate Communications, and Marketing Technology. What we found most surprising about these results is the emphasis on Branding & Advertising, an area traditionally more difficult to retain a budget in outsourcing companies since the ROI is difficult to justify. The biggest surprise is the slow adoption of marketing technology which came in dead last out of twelve marketing spend categories. Outsourcing companies plan to spend only a little over 2% of their budget on marketing technology. Although we know outsourcing companies do tend to invest less in enterprise related technologies, we believed that with the major hype around the CMO’s budget for technology replacing the CIOs, we would see a bit more of a bump. We can only conclude that because most IT/BPO companies do not maintain senior level marketing professionals such as a CMO, technolo-

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56% of outsourcing companies plan to increase marketing spend with agencies and outside marketing consultants. 60% of companies plan to increase their internal headcount. So take a deep breath marketing professionals, after 5 years of a grueling survival through the recession, the demand for us is finally on the rise!

gy spend may be less since it falls under someone elseâ&#x20AC;&#x2122;s budget.

What Service Providers Need to Consider for 2013 So what does this mean for outsourcing providers? Here is our advice for 2013. 1. Your competitors are increasing their spend on events: you no longer have the choice to sit it out especially as attendance rises with buyers. 2. Online marketing requires good content: utilize thought leadership! Increase your thought leadership spend and you will not only have content to make online marketing more effective but sales enablement as well. 3. Forget about traditional advertising: unless you are a Tier 1 service provider, the bang for your buck is just not there. 4. Invest in inbound marketing technology: searching for vendors online is only going to increase, especially for providers targeting small to medium size businesses. 5. Shift spend from new customer acquisition to retention: especially for mid-to-large size providers concentrate on the growth of existing clients. Entering as a new client is difficult, if you already have an MSA with a Fortune 1000 company, focus on forming solid relationships within the company to ensure you receive all relevant RFPs and increase your chances of winning. Amrita Tahiliani Joshi is CEO at Ahilia Inc.

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Openness to drive Cloud adoption

in 2013 By Gordon Haff, Cloud Evangelist

As the cloud platform evolves, we take a closer look at the trends and technologies that are expected to emerge in the New Year and how enterprises are expected to consume some of these to unlock the cloud’s true potential.

Security becomes more consumable If you pay any attention whatsoever to IT industry analyst reports, you know that security concerns about “the cloud” consistently top the list of adoption concerns. This is partly because the “security” moniker often serves as a sort of shorthand for a variety of compliance, audit, regulatory, legal and governance issues that are often only indirectly related. It’s also because, as an industry, we’re dealing often with new approaches to computing and delivering application services that don’t have clear historical antecedents and established approaches to mitigating associated risk. As a result, dealing with security and associated concerns in the cloud sometimes seem to require true experts in the field, who are almost by definition in fairly short supply.

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On the other hand, there are organizations like the Cloud Security Alliance (CSA), whose mission is to promote the use of best practices for providing security assurance within cloud computing, and to provide education on the uses of cloud computing to help secure additional forms of computing. While the CSA’s work benefits everyone, its most important role may be “democratizing” the process of securing and running clouds so that organizations operating and using clouds don’t need security rocket scientists on staff. Expect to see tools for more easily and systematically securing clouds gain more attention in 2013.

We believe that 2013 is going to see all that developer involvement lead to commercial product in the same way that the open source development model has led to innovative products in operating systems, middleware and countless other areas

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But data security and privacy remain vexing, and increasingly high-profile, issues At one level, protecting against data breaches in the datacenter is a fairly straightforward security problem without many new wrinkles relative to the practices that IT professionals have been following for decades. However, in many respects, we are in a place that’s different in kind from times past. Some of this difference is about connectedness and scale. While security models have been shifting from walled perimeters to defense-in-depth since the early days of the web and e-commerce, cloud-based applications made up of composable services from multiple sources vastly increase potential attack surfaces. It’s a vastly more complicated security problem than setting the ports correctly on a firewall. Perhaps even more problematic, though, is even determining how specific data and data relationships need to be treated and which laws apply. We expect the overall data security and privacy situation to get worse before it gets better. After all, some of the issues date back to before the Internet went mainstream. The issues have just become more visible and more complicated. We’ve already seen big fines imposed for even relatively minor medical records breaches. Expect to read about more fines in the coming year but only incremental movement ahead on the macro issues around appropriate uses of data.

Bring-Your-Own-Device doubters reach the fifth step: Acceptance BYOD is one of the trends that some like to cite as a key cloud security issue given that it takes control away from IT and puts it in the hands of users. Look around any organization that’s not part of the government or in a highly regulated industry and, chances are, most of the smartphones you see aren’t company-issued and provisioned. And the tablets that you probably spy as well are far more commonly purchased by employees for some combination of personal and work use—to the degree

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We expect the overall data security and privacy situation to get worse before it gets better. After all, some of the issues date back to before the Internet went mainstream. The issues have just become more visible and more complicated that we can even still draw a sharp line between such spheres of activity in general. Bring-your-ownPC is a more complicated issue, for a variety of reasons, but PCs are being “consumerized” as well. In most cases, BYOD is going to require IT departments to do some combination of rolling out new products, educating users and adopting new processes. At the very least, they need to understand potential exposures and come up with a plan for dealing with them. And that means acceptance is the only reasonable path forward.

Hybrid shows up in ever more conversations IT consumerization is also one component of another cloud computing trend—hybrid cloud computing. Hybrid commonly refers to cloud management that spans both on-premise and multi-tenant public clouds—although clouds can be heterogeneous in other ways as well. The consumerization angle is that early public cloud usage was often characterized by users gaining access to computing resources with a credit

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card because their IT department wasn’t moving quickly enough. Such usage can also be outside the scope of any IT governance practices. That can be good for flexibility and speed but it can have a stark downside if there’s a data breach or if an application developed using a public cloud can’t be easily put into production on-premise. The idea behind a hybrid cloud is that resources can be made available to users as easily as if they were accessing a public cloud while keeping the process under centralized policy-based IT management. Organizations are also increasingly looking to hybrid cloud architectures as a way to have a more dynamic computing architecture over time. There are only a modest number of hybrid computing architectures in production today, but the movement towards hybrid is clear. That’s why industry analysts such as Gartner are recommending that organizations “design private cloud deployments with interoperability and future hybrid in mind.”1 Expect to hear even more about hybrid clouds in the coming year.

Openness demonstrates the power of community innovation Openness is one of the most important enablers of hybrid IT because it helps users avoid lock-in to vendors and specific ecosystems. And not just open source but openness across multiple dimensions including APIs, standards and the requirement that permission to use intellectual property, like copyrights and patents, must be granted in ways that make the technology open and accessible to the user. Openness is also about having vibrant, upstream communities that are at the heart of the innovation that the open source development model makes possible. We believe that 2013 is going to see all that developer involvement lead to commercial product in the same way that the open source development model has led to innovative products in operating systems, middleware and countless other areas. Sundar Ramaswamy is the Chief Operating Officer at AbsolutData Research & Analytics.

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Transformation through Collaboration-

‘The’ Watch Words for 2013 By Keith Higgins, Chief Marketing Officer at Symphony, Teleca Corporation

The traditional model of outsourced product development has undergone a rapid transformation over the last few years, as traditional independent software vendors race to compete in a highly competitive market.

anufacturers realize that it is impossible to build highly differentiated products for a variety of new industries and applications when they go it alone. Gone are the days when service providers were tasked with building non-strategic products only or conducting labor-intensive processes. In 2013 the dynamic is drastically changing, in which service providers are being seen as true partners, working in concert with ISVs to ideate, innovate and collaborate on the creation of core products from conception, through testing, to product development and delivery. What are the market dynamics that will continue to drive this huge transformation?

Software-as-a Service Trend Shifting from a traditional, on-premise software

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delivery model to hosted or software-as-as-service has fundamentally changed the economics of software and also opened up new opportunities for software developers. The nature of SaaS enables companies to reduce capital and operational costs and dramatically improve their business models. Gartner predicts that SaaS revenue will reach $14.5 billion this year, with strong growth predicted through 2015 when the market is expected to reach $22.1 billion. While this delivery model is a key driver in the explosion of software development, since it democratizes software consumption, it is also a highly complex and multi-stage development process that requires

Service providers will continue to become a product ideation partners to help ISVs build superior products and transform core processes to impact the way they deliver those solutions to end-users

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expertise and proven development experience, that requires.

The Expansion of the Connected World Advances in mobile devices and wireless networking have radically changed the enterprise software landscape. To succeed, today’s independent software vendors (ISVs) must find new ways to innovate and differentiate themselves within a highly competitive and increasingly complex marketplace. They must radically change their processes and strategies for designing, developing and commercializing products with speed and precision. Service providers will continue to become a product ideation partners to help ISVs build superior products and transform core processes to impact the way they deliver those solutions to end-users. In addition, NFC by itself is powerful, but when coupled with the wealth of consumer information that a company, such as Apple, has its hands on (credit cards, loyalty cards, frequent locations, travel plans, etc.), the opportunities are endless. Analytics, therefore, will play a huge role in the next year as companies try to make sense of the various information that is available to them when their customers are paying with mobile devices – the same devices they’re using to buy music, watch streamed television, check-in for a flight and keep track of all their loyalty cards. When consumers are able to use NFC to pay with the wave of their smartphone, locationbased technology will become even more critical. Point-of-sale deals and inventory scans will become common-place and advertisers will start to see the much anticipated world of mobile commerce and awareness opportunities unfold. When consumers can pay with their phones, not only will their geographical location be available, but so will their frequent shopping spots and recent purchases. The smartphone company that can best capitalize on this opportunity is likely to come out on top.

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Markets, such as healthcare, automotive and smart energy is being driven by technology innovation that continues to change the way people conduct business, as well as their lives

Building Apps for High Growth Markets In addition to retail, the huge growth in markets, such as healthcare, automotive and smart energy is being driven by technology innovation that continues to change the way people conduct business, as well as their lives. The $80 billion healthcare software market is rapidly transforming as advances in mobility and connected devices are creating a paradigm shift in the way healthcare is delivered. Healthcare technology vendors are leveraging this golden opportunity by changing their business models, and delivering mobile health (m-Health) solutions. Software manufacturers will ramp up their work with service providers to deliver mobile, platform-agnostic solutions that are thoroughly tested for usability, regulatory and certification requirements. We know plenty about how digital technology is reshaping the way we work, use our smart-

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phones and communicate. But what about something most of us depend on every single day — the car? Digital technology is fast changing how we use and interact with our cars. Vehicle-to-vehicle communications, for example, could help automobiles detect one another’s presence and location to avoid accidents. It also could help ensure that cars and their drivers slow down for school zones or stop at red lights. Automotive manufacturers will turn to service providers to rush to the finish line in bringing about this paradigm shift in the automotive experience.

Capitalizing on Real-Time Analytics Given the growth of Big Data, one of the most powerful tools for companies today is their analytics capabilities. For many companies, huge amounts of dynamic, structured and unstructured data must be analyzed in real-time in a secure environment in order to benefit the organization. According to IDC, the business analytics software market grew by 14.1 percent in 2011 and will continue to grow at a 9.8 percent annual rate, reaching $50.7 billion in 2016. The huge growth in analytics technology in 2013 will fuel the need for expert service providers who can help develop solutions that address this pressing need. Software transformation has the potential to open new markets and sources of significant revenue for outsourced product development and service specialists, and smart ISVs will continue to view these providers as true industry partners, helping them build the new generation in technology solutions, establish new processes, testing automation and modernizing traditional solutions for new markets and regions. Leveraging the best practices and expertise of these service providers will continue to grow in 2013, and collaboration will be the new watch word. Keith Higgins works as Chief Marketing Officer at Symphony Teleca Corporation.

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