Is contracting the future

Is contracting the future

by | 14 Oct 2016 | Consulting

Is tech turning contract work into the future of employment?

Technology has made it easier than ever for employees to work remotely. This article has gathered comments from experts and CEOs about why more and more companies are using contract workers.

Technology has made working remotely easier than ever. And many companies are taking advantage of this — not just by having workers telecommute, but by outsourcing certain jobs to contract workers. The movement towards contract work — think platforms like Amazon Mechanical Turk, ClickWorkers, CrowdFlower — is part of a larger trend away from regular employment and towards piecing together tasks.

Gartner analyst Diane Morello has been working with companies for years to help them keep up with workforce trends. The movement towards contract work “reminds me of when my immigrant grandparents came to work in New York City and did piece work,” she said.

While the technology is certainly there, she thinks that the success of piecework hinges on the “basics of organisational and institutional competence.”

“It’s about whether or not companies can make this work,” said Morello. “That’s the bigger challenge out there.”
Morello thinks that companies need to catch up with the idea that they need to outsource work. She speaks to 10-12,000 companies around the world, employing about 250,000 people. Among all those companies, she sees “a very small fraction understanding that they can start to break down work into increasingly smaller components and break it apart to some kind of massively parallel processing mode,” she said. “They can have bits and pieces done and then reassemble that onsite.”

There is a trend rapidly moving towards the selling off and outsourcing of utility services.

Most companies she talks to still think of this as outsourcing. “They’re not really advancing their models and thinking around how work is getting done, or more important how technology in this digital technology platform enables them to reach hundreds of people to get work done in smaller chunks in a faster way,” stated Craig Ashmole, founding Director of London based IT Consulting CCServe. “Having spent many years working across the Outsource market and more recently helping business transition elements of their business into better chunks of doing the work, It’s refreshing to see these trends start to move.”

The big difference, is that it’s a shift towards work as a transaction versus a relationship. Not only do business want work done in small pieces, but I see “a consuming audience who wants to do that. Businesses are going back to their core roots by commoditising non-essential utility services.”

“The businesses we talk to who are struggling to find the right talent and the right people say they want the relationship,” he said. “But when you delve into it, what they’re looking for are people who can bring their skills to deliver rapid transition and this comes from experienced Interim management.”

Business owners agree.

“I absolutely see larger companies outsourcing things that are non-core,” said David Chang, entrepreneur-in-residence at Harvard Business School, and previous co-founder of SnapMyLife.

Chang used Trip Advisor as an example, where “the sheer volume of work” created a huge demand for contract work. “At TripAdvisor, we had classifiers who helped with that,” said Chang.

He also sees a distinction between core and non-core functions as important. In core tasks, “the company wants to build up a competency or muscle around a key area,” said Chang. “For Apple, hardware/software is core, so they don’t outsource it,” he said, “while at Microsoft, they happily let others deal with hardware (e.g. Dell, HP).”

It’s all part of meeting a huge demand to complete tasks.

“There are thousands and thousands of companies that are all feverishly looking around for people to do work in the context of information and technology and web design and the like,” said Morello. “This is a channel to get some work done.”

Businesses, Morello believes, will “splinter into two different directions. One will be those businesses that have extraordinary cultures, core sets of values, and taken advantage of all the aspects and ways that they can piece together someone’s expertise in the work,” she said.

The other group “will continue to work with a single pipeline that tends to go through HR. It’s probably not going to operate at the speed that the modern business community is operating at.”

Digital technology, she said, will “blow the employment model apart. It will send people in one direction where there are a lot of users of digital technology to find the expertise they need anywhere on the planet.”

There’s a risk, Morello said, for not taking this seriously.
“You are either leaders or you are laggers,” she said. “Nobody can be in the middle.”

The 4 big takeaways

  1. Platforms like Amazon Mechanical Turk, CrowdFlower, and ClickWorkers take advantage of a remote labour force to get tasks completed.
  2. Outsourcing small tasks is part of a bigger trend that shifts business models from “relationship” to “transaction,” according to Gartner analyst.
  3. Separating core and non-core work is essential to managing flow of work—and many companies are becoming more efficient by farming out non-core tasks.
  4. Business conglomerates are transitioning their utility services to Outsource firms (for efficiency and cost reductions) and keeping their core business in-house.

Having spent a majority of my career working with and supporting the Corporate CIO Function, I now seek to provide a forum whereby CIOs or IT Directors can learn from the experience of others to address burning Change or Transformation challenges.

Craig Ashmole

Founding Director CCServe

Outsourcing and As-A-Service

Outsourcing and As-A-Service

by | 7 Dec 2015 | Outsourcing

Outsourcing is on life support, with many BPO providers failing to invest in As-a-Service

It has been hard to change processes, drive common standards across clients, build a utility model that can be scaled and made cost-efficient, for the Outsource vendors when you’re really just moving work around the world with the goal of getting it done cheaper. Think As-A-Service!

Scouting round the Industry experts on BPO and Outsourcing I came across a very interesting article from Horses for Sources (HfS) which made me just realise how slow some of the larger ‘dinosaur’ vendor players are missing an opportunity to address their clients real business issues, and that’s SERVICE.

“We have seen the Outsource market come back into fashion late 2014 and pick up throughout 2015 but as we close in on the beginning of the new 2016 procurement cycle many outsource firms are still not looking at agility and being able to do a deep dive on their clients real operational needs.” Comments Craig Ashmole, Founding Partner of London-based IT Consulting CCServe. “Customers are crying out for proper service focused delivery models and not just looking at bottom line cost savings.”

The following article from HfS below encapsulates what the Outsourcing market should be looking out for:

HfS analyst Phil Fersht stated, If I have to hear another advisor, lawyer or provider sales executive whining about their lack of business, I am just going to tell them straight – “You’re a dinosaur, you are selling a capability from a bygone era. The reason clients don’t call you anymore is because you are not offering them what they really need – or at least educating them on what they need to haul their legacy back ends out of the dark ages.”

The narrative simply has to change. Today’s enterprise world is littered with literally hundreds of legacy outsourcing relationships where the service providers are unwilling (and many just plain incapable) of making any genuine productivity improvements.

What’s more, the leadership in their clients is quickly wizening up to what’s going on and simply does not trust them to invest in their delivery capability, or share risks with them to find new thresholds of value. Close to half (47%) the enterprise leadership we spoke to in our recent As-a-Service study view their service provider’s unwillingness to cannibalize their existing revenue model as a highly significant obstacle to make the As-a-Service shift, and a similar number (44%) view their provider’s lack of support to share any risk as a key issue:

Providers-unwilling-to-change-the-model

The outsourcing industry is stuck in a legacy holding pattern and is in real danger of decline

This may well be the opportunity for Global In-house Centres (where they exist) move up the value chain, build the competency, and keep the skills developed internally but leverage the economies of the HR and personal hire through the outsource players to create more effective hybrid models.

This would help take the burden off the business by working with its parent as well as leveraging service providers from a commodity service and time for parent organisations to give up the controlling mind set of captives, treat them as partners, and build a better risk-management.

The problem we have, today, is that the leadership within many enterprise “buyer” clients is under huge pressure to take their operations to the next level, but most of their middle and lower management clearly only care about keeping the current status quo. In a nutshell, our industry is suffering from hundreds of stagnating outsourcing relationships, where the service provider has zero incentive to do anything much beyond keeping the margins consistent, while the middle management on the buy side has a similarly lethargic ambition not to do anything much… bar keeping the lights on.

However, when we anonymously polled 60 outsourcing services buyers in a private focus group last year, 43% said that giving more responsibility to their service provider would be the most important factor to improve the quality and outcomes of their outsourcing initiatives. Clearly we have reached a paradoxical situation:

Trust-to-give-providers-more

The Bottom-line: Here’s the great modern-day outsourcing paradox – many enterprises want to give up more to their service providers, but many of the providers are just not interested in investing in As-a-Service capabilities

The reality today is that senior buyer executives want to progress the operating model towards As-a-Service, while their counterpart service provider leaders are talking a big game about delivering Digital and As-a-Service capabilities to their clients, which can spread the wealth generated by better automation, actionable analytics and a multi-tenant model. Hmmm… reminds me a bit of outsourcing 1.0, where the leaderships in many enterprises dove into outsourcing fuelled primarily by lower cost labour, forcing the situation on their underlings. Now a similar pattern in emerging, with the difference being the “tangible” productivity factor is automation, while access to better, more actionable data to make business decisions the ultimate desired outcome.

The challenge today, quite simply, is less of an appetite from the sell side to absorb the risk. Making savings through automation is a lot more “risky” for many providers than the ease of swapping out bodies. However, taking these risks, and investing in the talent and technology to de-risk these situations, is what is key to survival.

Most service providers, while talking a big game, are not convincing their clients they are really prepared to share risk and make genuine investments to build out a true multi-tenant As-a-Service delivery capability. That’s probably because they only really care about making their quarterly numbers, not having a sustainable, well-planned long-term strategy.

This situation spells a near-certain recipe for failure for the outsourcing industry, where the decision-making layers claim they want to shift the gears, but the existing relationships are clearly stuck in a depressing holding pattern. In fact, from many client discussions we are having today, execution from certain providers (you know who you are) is deteriorating further, as they simply cannot say no to the increasingly complex needs of their clients, but are too stingy (or should I say cannibalistic) to invest in better talent and capabilities to up their game. It’s a situation that is going to end in outsourcing failure for many, if steps are not taken to arrest this decline in delivery quality, and investments made in future capability – most notably robotic process automation, real time analytics solutions and a roadmap for self-learning and artificial intelligence.

Those providers with these capabilities can break this cycle by building multi-tenant solutions for the future – and will be the winners. I believe this could happen in barely a couple of years, when you look at the current pace of change and mood in the market. The key is to pick off the next 15-20 deals they can win at lower margins in order to invest in common automation, common analytics, common SaaS underpinnings and common service skills – hence a more competitive, more scalable multi-tenant As-a-Service delivery model.

It’s easy to point fingers at certain service providers for preserving the legacy FTE labour model, but the stark reality is that many of them simply don’t have leadership prepared to invest in the depth of talent, or technology capability to drive genuine advancements. So – let’s face facts here – we’re at an impasse. There are tremendous opportunities to create genuine productivity advancements through robotic process automation, smarter analytics and the onset of cognitive computing, but much of the present service provider bunch are not going to be the ones to take true advantage of them. I predict a few will break out, but the next winners will be from a new breed of As-a-Service provider, many of whom many not even have been formed yet.

Having spent a majority of my career working with and supporting the Corporate CIO Function, I now seek to provide a forum whereby CIOs or IT Directors can learn from the experience of others to address burning Change or Transformation challenges.

Craig Ashmole

Founding Director CCServe

Cloud Affecting India Outsourcing

Cloud Affecting India Outsourcing

by | 29 Jul 2015 | Cloud, Outsourcing

Cloud Computing Is Going To Rain on India’s Outsourcing Parade

There are dark clouds on the horizon of India’s information technology and outsourcing industry.

AstraZeneca PLC is sharply scaling back the business it gives to the Indian outsourcing companies that it has long relied on for tech help. David Smoley, AstraZeneca’s technology chief, said he expects to cut in half the $750 million the drug maker used to spend annually on outsourcing over the next two years. He said the number of people working on information technology also would drop by 50%.

The changes at AstraZeneca are part of a major shift toward cloud computing, which is starting to bite into the revenue and profits as well as hiring in India’s critical outsourcing industry and poses an existential threat to the players that fail to adapt.

Outsourcing executives are bracing for a big disruption. “It’s like what happened when Amazon arrived,” said C.P. Gurnani, chief executive of Tech Mahindra Ltd., a large Pune-based outsourcer that specializes in work for telecommunications companies. U.S. bookstore chain Borders closed and Barnes & Noble had to reinvent itself, Mr. Gurnani said.

Mritunjay Singh, operating chief of outsourcer Persistent Systems, predicts a “bloodbath” in which only nimbler companies will survive.

Outsourcing accounts for around 20% of all of India’s exports of goods and services. The industry employs millions of Indians and has become an important route into the middle class in the world’s second-most populous country.

The impact of the move to cloud computing — where servers and software are accessed via the Internet rather than on local networks or personal computers — is being amplified by other trends, from automated code-writing to increased competition and falling corporate information-technology budgets.

There are dark clouds on the horizon of India’s information technology and outsourcing industry. Profit growth at even India’s most successful and sophisticated software companies could be doused as companies, governments and consumers around the world do an increasing amount of their computing on the cloud, says outsourcing services advisory firm ISG Inc.

Companies that have traditionally used in-house servers running on custom-made applications are putting more of their business on external servers and using off-the-shelf software. Using the cloud often means using fewer people so Indian software companies—once dubbed “body shops” because they could supply as many computer engineers as a project needed—are going to suffer as they lose much of their competitive advantage.

“It is only going to get cheaper and easier for companies to switch to the cloud, outsource providers need to get ready for the storm and modify their business models and move with the digital times”, said Craig Ashmole, Founding Partner of London based IT Consulting CCServe Ltd.

This means, developing software that allows businesses to (interact) faster and more efficiently with their external stakeholders – customers and suppliers, rather than focus on changes to the internal workings of a client.

Around one in four of the deals ISG helped advise involved cloud computing last year. That’s more than three times more than the percentage of cloud deals it saw three years earlier.

India’s software and outsourcing companies are still too reliant on the business model that uses lots of relatively inexpensive Indian engineers and sends them to client sites to build software and fix problems, ISG and other analysts say.

Cloud providers use external servers, sophisticated technology and automation to manage clients’ data using fewer employees. Where a traditional service provider deploys one employee to monitor up to 200 servers, cloud players can use one employee to monitor up to 10,000 servers, ISG estimates.

The cloud infrastructure players are drastically cutting down prices and starting to create pricing pressure on service providers in India and elsewhere who continue to set contracts based on the number of engineers deployed in a project.

Cloud infrastructure providers such as Amazon Web Services, Red Hat, Rackspace Hosting and others are emerging as a formidable threat to Indian outsourcers and other traditional service providers and consultants including IBM and Accenture that earn revenues from managing the technology infrastructure of clients.

Traditional service providers now have to strive to get more cloud contracts–where they help clients shift data to cloud infrastructure providers–rather than focusing on creating their own clouds, ISG said.

Having spent a majority of my career working with and supporting the Corporate CIO Function, I now seek to provide a forum whereby CIOs or IT Directors can learn from the experience of others to address burning Change or Transformation challenges.

Craig Ashmole

Founding Director CCServe