Webinar: The State of Operations and Outsourcing 2017

Transcription

1 The Services Research Company Webinar: The State of Operations and Outsourcing 2017 January 12th, 2017 Host: Phil Fersht Chief Analyst and CEO HfS Dave Brown Global Lead, Shared Services & Outsourcing Advisory KPMG Stan Lepeak Director & Head, Research & Thought Leadership, Global Management Consulting KPMG Jamie Snowdon EVP Market Forecasting HfS Research

2 Phil Fersht, Chief Analyst and CEO, HfS Research Overview: 20 years business experience in the global IT and business process outsourcing and shared services industry Coined the As-a-Service Economy in 2014 Industry analyst, author, speaker, strategist and blogger Advised and cogitated on 100 s of global IT services, BPO and shared services engagements Meddles with the largest global network of enterprise services and operations professionals phil.fersht@hfsresearch.com Career Experience: Practice Lead, IT Services & BPO Research, Gartner, Inc Global BPO Marketplace Leader, Deloitte Consulting Consulting Practice Lead, IDC Asia/Pacific IT Markets Practice Lead, IDC Europe Education: BS with Honors in European Business & Technology, Coventry University, United Kingdom Diplôme Universitaire de Technologie in Business & Technology from the University of Grenoble, France

3 The all-star panel Dave Brown Global Lead, Shared Services & Outsourcing Advisory KPMG Stan Lepeak Director & Head, Research & Thought Leadership, Global Management Consulting KPMG Jamie Snowdon EVP Market Forecasting HfS Research

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6 With a More Serious Side Too!

7 About KPMG s Shared Services and Outsourcing Advisory practice KPMG member firms have the ability to support clients transform enterprise services and help improve value, increase agility and create sustainable business performance. Who The Shared Services and Outsourcing Advisory practice brings a specialized team of more than 1,000 professionals within KPMG s global network of independent member firms operating in 155 countries. They help clients design, build and manage information technology and business processes across the enterprise. What KPMG professionals help clients align their business strategy, organization and execution to enable them to manage the entire IT and business process life cycle, improving business performance and laying the groundwork for genuine business transformation. How KPMG professionals apply focused research, automating tools, proprietary data, clear business acumen and a forward-thinking mind-set to provide timely, objective and actionable advice and practical approaches for clients.

8 Agenda Managing through the Digital Fog Approaching Robotic Process Automation in 2017 Operating Model Dynamics and the Global Business Services Evolution Offshoring is Dead, Long-live Offshore? Wrap Up

9 Agenda Managing through the Digital Fog Approaching Robotic Process Automation in 2017 Operating Model Dynamics and the Global Business Services Evolution Offshoring is Dead, Long-live Offshore? Wrap Up

10 The What: Services Today Core Digital Holistic View of Customer OneOffice Data Shared Services, GICS Centralization/Efficiency Self Learning, Cognitive Continuous Process Improvement, Innovation Value Levers Of As-A-Service Global Labor Cost/Expertise/Scale Data Software Platforms Standardize processes, Scale, Write Off Legacy Intelligent Automation Efficiency, Labor, Data Augmentation

11 B2B Digital Spend Could reach $2 Trillion in North America in 2020, as high as $7 Trillion Globally

12 The Innovation Killer Org Chart

13 C-Suite wants OneOffice integration, predictive real-time data and speed to market while aggressively driving down costs How critical are the following C-Suite directives to your operations strategy? (SVPs and above) ) Mission Critical Increasingly Important Emerging Not a Directive Drive down operating costs 42% 43% 8% 7% Align middle/back office operations to improve customer experiences 31% 48% 15% 6% Create real-time data that supports predictive, not reactive decisions 31% 48% 15% 6% Accelerate speed to market with new products 30% 45% 20% 5% Scalable / Flexible services 29% 50% 17% 4% Improve the quality of operations talent 26% 55% 13% 5% Policies that restrict the hiring of people 24% 38% 17% 21% Invest in process automation and robotics to reduce reliance on low-skilled labor Invest in cognitive technologies and machine learning to reduce reliance on mid/high skilled labor 22% 20% 46% 48% 19% 19% 12% 12% Source: HfS Research in Conjunction with KPMG, State of Operations and Outsourcing 2017 Sample: n=454 Enterprise Buyers 2017 HfS Research, Proprietary

14 The Endgame: The Digital OneOffice TM Organization Source: HfS Research HfS Research, Proprietary

15 The Service Providers will bifurcate into two groupings OneOffice Enablers Data Orchestration and Human Collaboration Back Office Outsourcers Efficiency, Automation, Labor Arbitrage and Scalability

16 C-Suite Directives: Hi-tech most focused on change and growth How critical are the following C-Suite directives to your operations strategy? ( Mission Critical responses all buyers) 80% BFSI Manufacturing Healthcare & Life Sciences Retail Software & Hi Tech Energy & Utilities 60% 40% 20% 0% Drive down operating costs 2017 HfS Research, Proprietary Accelerate speed to market with new products Create real-time data that supports predictive, not reactive decisions Align middle/back office operations to improve customer experiences Improve the quality of operations talent Source: HfS Research in Conjunction with KPMG, State of Operations and Outsourcing 2017 Sample: n=454 Enterprise Buyers Policies that restrict the hiring of people Invest in process automation and robotics to reduce reliance on low-skilled labor Invest in cognitive technologies and machine learning to reduce reliance on mid/high skilled labor

17 Agenda Managing through the Digital Fog Approaching Robotic Process Automation in 2017 Operating Model Dynamics and the Global Business Services Evolution Offshoring is Dead, Long-live Offshore? Wrap Up

18 Enterprise Leadership has Automation as top Investment Priority for Q. How much investment is your organization intending to make in the following initiatives in the coming two years? (significant investment selected) Robotic automation of processes 25% 43% Customer-centric digital enablement (Social/Mobile/Interactive) 33% 30% Analytics solutions 29% 34% SaaS platforms replacing on-premise solutions Training and workforce development / change management Cognitive computing solutions 32% 27% 28% 23% 28% 20% SVP+ VP and Below Public cloud investments Hiring millennials 19% 20% 20% 30% Source: HfS Research in Conjunction with KPMG, State of Operations and Outsourcing 2017 Sample: n=454 Enterprise Buyers 2017 HfS Research, Proprietary

19 Recessions destroy jobs, not robots 3.0% Annual Job Growth US 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% Source: Bureau of Labor Statistics, HfS Research Analysis (data to 2015)

20 Total Impact of Automation on IT/BPO Services Workers by Major Country (likely scenario, low-skilled workers) % Change % Services Workers (Millions) % -25% -20% -15% % Decrease in Workforce % -5% 0.0 Philippines UK India US 0% Research sources: 1477 industry stakeholder interviews , NASSCOM, US National Bureau of Labor Statistics, UK ONS, Selected others, HfS Analyst judgment

21 Total Impact of Automation on IT/BPO Services Workers by Major Country (likely scenario, mid-high skilled workers) % Change % Services Workers (Millions) % 30% 20% % Increase in Workforce % Philippines UK India US 0% Research sources: 1477 industry stakeholder interviews , NASSCOM, US National Bureau of Labor Statistics, UK ONS, Selected others, HfS Analyst judgment

22 Agenda Managing through the Digital Fog Approaching Robotic Process Automation in 2017 Operating Model Dynamics and the Global Business Services Evolution Offshoring is Dead, Long-live Offshore? Wrap Up

23 Operating Models Continue to Drive Toward Full GBS Please indicate which of the following best describes your organization's operating model for delivering services today? (Please refer to operating model diagram) Decentralized operating models continue to decline as enterprises shift right toward GBS 16% 34% 18% 20% 11% HfS Research in Conjunction with KPMG, State of Business Operations 2017 N=454 Enterprise Buyers 2017 HfS Research, Proprietary

24 Operating Model All Models Expect to Grow Except Decentralized Over the next 2 years will your company increase / reduce its reliance on the following operating models for your general and administrative functions? (Stay the same not labelled) Increase moderately Increase significantly Reduce moderately Reduce significantly 26% 21% 22% 24% 13% 36% 38% 40% 35% -7% -7% -4% -1% -7% -2% -3% -1% 25% -16% -10% IT Outsourcing Business Process Outsourcing Shared Services Global Business Services De-centralized processes HfS Research in Conjunction with KPMG, State of Business Operations 2017 N=454 Enterprise Buyers 2017 HfS Research, Proprietary

25 The world around us is transforming faster than we think Trends in technology transformation As a service economy, i.e., Platform as service Natural language processing Quarter of the world s energy needs are set to be met by renewables in 2020 Virtual assistants Cognitive computing and machine learning Percent of U.S.- based companies undergoing business model transformation* 98 % *KPMG CEO Survey Trends in employment transformation The rise of robots will lead to a net loss of over 5 million jobs in 15 major developed and emerging economies by % of today s grade school children will be employed in jobs that haven t yet been invented One in 3 jobs will be converted to software, robots, and smart machines by 2025 Our view is transform or wither, transform or lose pace. We take the perspective that the concept and the execution of transformation are never complete, because the marketplace changes, and so do the needs of our clients and customers and the digital era just accelerates all of that. Catherine Bessant, Global Technology & Operations Executive, Bank of America At Tupperware Brands, our belief is that transformation is a continuing process. We benefit from the mindset that there is no such thing as competitive advantage and that you constantly have to be ready to transform. Rick Goings, CEO, Tupperware Brands If you aren t innovating, you re managing your exit. Paul Perreault, CEO, CSL Behring 25 Document Classification: KPMG Confidential

26 And these changes are causing GBS leaders to rethink their strategy Our transformation journey included linking IT within GBS to support processes whether in or outside of GBS. It is critical to have a cultural link to the organizing the different parts of the delivery organizations wish to serve. European Pharma We try to perfect process but don t know outcomes in most cases movement away from process optimization to automation. Global Pharma GBS optimization is not just about improving SS operations but also changing nature of retained organization and possibly reducing staff there too. Global Retailer With robotics we can give center mangers both operational and regional responsibility. This is a general trend to having people wear two or three hats. Money Center Bank All of our new people are mainly focused on process and risk. We think of information processing not RTR. Away from product to process. European Bank Some of our service locations will not survive the automation process, a major AP location being one. We need to move to locations to provide high value added services as low cost transactional mission diminishes in value. Money Center Bank 26 Document Classification: KPMG Confidential

27 GBS is on the cusp of another major leap 1990s Shared services 2000s Multi-sourcing Since 2010 Integrated GBS 2020? Internal delivery of core services; predominantly regional models Outsourcing/multire gional outsourcing with select global providers Focus on transactional activities Emergence of right shoring; near-shore becoming key element of delivery models Vendors delivering niche services Introduction of multivendor deals Emergence of COE solutions Integrated service delivery models Lower value activities typically outsourced; increasing focus on analytical, judgment, and expert services 27 Document Classification: KPMG Confidential

28 with key change drivers looming large on the horizon Human-centric process is morphing to human-centric design Robotics has disrupted the traditional levers of an optimal service delivery model Cloud has hit mainstream and is driving the as-aservice revolution Big Data riding the as-a-service wave available to all corners of the organization New value generation and ROI models based on shift from labor to capital Social and Mobile have disrupted the buy-sell relationship Shifting focus to external customer facing services Change is accelerating and solutions are converging 28 Document Classification: KPMG Confidential

29 Agenda Managing through the Digital Fog Approaching Robotic Process Automation in 2017 Operating Model Dynamics and the Global Business Services Evolution Offshoring is Dead, Long-live Offshore? Wrap Up

30 Changing Use of Offshoring Outsourcing How will offshore use change in outsourcing and shared services over the next 2 years? (Net increase/decrease) Increase 22% 13% -4% -3% 18% 20% 5% 12% 23% 16% 12% 7% 15% 19% 15% 3% 3% 6% Decrease 2014 Today HfS Research in Conjunction with KPMG, State of Industry 2014 N=312 Enterprise Buyers 2017 HfS Research, Proprietary

31 Changing Use of Offshoring Shared Services How will offshore use change in outsourcing and shared services over the next 2 years? (Net increase/decrease) Increase 20% 2% 16% 16% -1% 5% 10% 11% 14% 6% 12% 13% 14% 4% 1% -2% 10% 9% Decrease Finance and Accounting Human Resources Procurement App maintenance & dev'ment IT and Network infra Spt 2014 Today Customer Service / Sales Spt Supply Chain and Logistics Industry-specific Process Marketing HfS Research in Conjunction with KPMG, State of Industry 2014 N=312 Enterprise Buyers 2017 HfS Research, Proprietary

32 Average Quarterly Growth for 75 of the Leading IT and Business Process Service Providers to Q % 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% Average Weighted average 6.0% 4.0% 2.0% 0.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Source: HfS analysis of individual company financials (adjusted for acquisitions over half the revenue of original company) The graph shows the average and weighted average revenue growth of these tracked providers, which represent 75 of the largest IT and business service companies HfS Research, Proprietary

33 All Outsourcing - Traditional v As-a-Service ($b) USD billion $ $ CAGR $350 $300 $250 $ % $150 $100 $50 $ % Traditional Outsourcing AAS Outsourcing Source: HfS Research, HfS Research, Proprietary

34 Agenda Managing through the Digital Fog Approaching Robotic Process Automation in 2017 Operating Model Dynamics and the Global Business Services Evolution Offshoring is Dead, Long-live Offshore? Wrap Up

35 What would you change about the Outsourcing Industry if you had one wish? If you could change one characteristic of this industry, what would it be? Buyers Advisors Service Providers More women in leadership roles 10% 19% 25% Clients / service buyers telling their stories 10% 20% 24% Less hype around automation 10% 14% 18% Bad quality teleconference lines 5% 11% 10% Less PowerPoint 10% 20% 22% Eliminate rate cards 8% 13% 14% No more visa issues 3% 6% 10% Other (please specify) 3% 4% Source: Making that leap from effective to strategic BPO/BPM" Study, HfS Research % Sample: 343 Industry Stakeholders (Enterprise Buyers = 115, Advisors = 55, Service Providers = 173) 2017 HfS Research, Proprietary

36 Actions to drag ourselves into the Digital World Work as a team: Heal the disconnect and unrealism between leadership ambition and middle management operational challenges... Internal and external Think big! with an attitude to write-off legacy. Incremental fixes clearly do not work for all stakeholders. Stop retro-fitting! Become a student again: This is about humans creating more creative value, finding more problems through collaborating and learning how embrace the Digital and Intelligent Automation tools available This is not about jobs going away, it s about the nature of work changing. A third of today s workforce is made up of Millenniums seeking different work experiences To create a new experience in the industry and for results we must be brave to begin writing-off or legacy or we ll never evolve

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38 About HfS Research: The Services Research Company HfS Research is The Services Research Company the leading analyst authority and global community for business operations and IT services. The firm helps organizations validate and improve their global operations with world-class research, benchmarking and peer networking. HfS Research was named "Independent Analyst Firm of the Year for 2016" by the Institute of Industry Analyst Relations which voted on 170 other leading analysts. HfS Chief Analyst, Phil Fersht, was named Analyst of the Year in 2016 for the third time. HfS coined the terms "The As-a-Service Economy" and "OneOffice ", which describe HfS Research's vision for the future of global operations and the impact of cognitive automation and digital technologies. HfS' vision is centered on creating the digital customer experience and an intelligent, single office to enable and support it. HfS core mission is about helping clients achieve an integrated support operation that has the digital prowess to enable its organization to meet customer demand - as and when that demand happens. With specific practice areas focused on the Digitization of business processes and Design Thinking, Intelligent Automation and Outsourcing, HfS analysts apply industry knowledge in healthcare, life sciences, retail, manufacturing, energy, utilities, telecommunications and financial services to form a real viewpoint of the future of business operations. Read more at