Indian Vendors need to look to DXC to understand their future.

In 2008,  you could easily have been run out of town to suggest that within 10 years, CSC, EDS and HP Services would be one company. In 2017 we have DXC, and a onetime online bookseller is the dominant force in infrastructure management globally.  DXC is still working to redefine, re-engage and renew itself internally, let alone from a customer and market facing perspective. It is two steps forward, one step back at the moment, DXC believes it will shift to forward march in the near future. The shift, job losses and disengagement with the core customer base over the last 10 years have been extremely dramatic and incredibly difficult for employees, past and present. At the same time, the likes of Cisco, IBM and remaining parts of Hewlett Packard are struggling to find the revenue to replace what has been lost to the cloud, and more nimble proactive competitors.

This must serve as a warning for the Indian IT services vendors, particularly the big four of Wipro, TCS, HCL and Infosys. Alongside the likes of CapGemini, Genpact, Atos and others, they, and their business model are next in the firing line.

The direction that technology and application services is heading with the shift toward cloud, automation, self-service, AI etc simply means that the demand for commodity offshore leveraged services and solutions will fall dramatically. This is not a passing trend. It is the present and future.

We are seeing it already. capioIT believes that the technology and business services market will rapidly shift to a model that will look like the model below. This is the most transformative issue to face the services market since the rise of offshore outsourcing starting about 20 years ago. It is not about adding people anymore it is about automation. 

Screen Shot 2017-10-02 at 2.32.35 am

The structural weakness for the Indian vendors and the many that followed their once disruptive model is that they followed a business model whereby resources increased in lockstep with revenue. An increase of 15% in revenue was matched by a similar 15% headcount raise. Revenue per headcount didn’t shift, nor did labour flexibility. The model is unsustainable. Resources are not available to sustain it, retention, recruitment and training cannot cope. This is without regard to the challenges for the client of a business that can put limited training resources on site, or more likely, out of site in a delivery centre.

Some of the vendors have started to answer this challenge. HCL has had significant success in transforming to a more automated business model alongside developing strong partnerships with the likes of AWS. Accenture has had similar success. Infosys have had a significant focus on AI based innovation. This success proves that the technology required is not about job loss after job loss. Handled correctly it is about job transformation and retraining. 

Two questions come from this. When will the consolidation happen and who will drive it. It will start more quickly than most people will consider. capioIT believes that by 2019, there will be moves to merge or acquire from one or more of the top 4 Indian providers, with the likes of CapGemini at risk of being caught up in it, given their business model is almost identical. Genpact is at risk as so much of what they do for the financial services sector will be driven by Machine Learning and Cognitive solutions. Of the big four Indian providers, whilst all have their strengths and weaknesses, it is likely that the most pressure will come towards Wipro. They have to be a first mover acquirer or they will be swallowed up.

Of the big four Indian providers, whilst all have their strengths and weaknesses, it is likely that the most pressure will come towards Wipro. They have to be a first mover acquirer or they will be swallowed up.

This perspective is based on financial factors such as their margin and Market Cap, which lags most of their Indian colleagues but most importantly from numerous discussions with partners and the ecosystem. HCL has already made good progress towards automation and has the strongest infrastructure capability. TCS, are TCS, so whilst not immune, have a unique position in the local market. Infosys is going through a leadership transition, but if it can navigate that successfully it should be able to be an aggressive player and drive its own future.

Capture Point

The IT and business services market is at an inflexion point that will completely redefine the industry. Cloud, Automation and other technologies, as well as increased client expectations, are working to ensure that the CSC, HP Services merger creating DXC is only the beginning of the consolidation in the sector. 

The Indian vendors are the next to face the global spotlight. First mover advantage in both automation and acquisition will ensure that the winners can compete in the new ecosystem with models focused on client intimacy and automation. Failure to do so will leave vendors in very vulnerable positions. Given the speed in which the market is moving, there is not the time to wait and let it ride. Proactivity is required.

 

If you require further information, please contact Phil Hassey, CEO of capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology as the world becomes Digital. Phil may be contacted easily in the digital and real world.

phil@capioit.com

+61422231793

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Can Malaysia lead the ASEAN innovation race?

Asia is the powerhouse of the global economy, from enterprise to consumer. 4.5 billion people and some of the most innovative enterprises in the world are testament to the innovation and potential. Malaysia has been a country that for some has slipped under the radar in the overall growth of Asia.

Economically it remains solid. Since the GFC it has annual GDP growth has been consistently around 5%. Average incomes for consumers are growing, reflected by strong retail sales growth. In spite of these metrics, Malaysia faces a number of challenges. It’s old frenemy Singapore takes so much of the investment as the city-state wrings every piece of economic, political and innovation from the magic of its location, social makeup and benevolent dictatorship. It also suffers from a level of corruption that is unheard of in Singapore. According to the Transparency Index benchmark, it is ranked in the mid 50’s well behind Singapore and Hong Kong amongst others.

More broadly in ASEAN, with 31 million people, it does not have the population and thereby, consumers and related investment that is enjoyed by Indonesia, Vietnam, the Philippines and Thailand. There is also an over-reliance on Petronas (state oil provider), that represents almost 30% of GDP, and an economy, particularly in Kuala Lumpur that commonly measures success in the number of skyscrapers it can build.

As a veteran of the commercial property market, the skyline is impressive but typifying Malaysia, cannot meet the likes of Shanghai, Dubai, Singapore or of course, Hong Kong.  The economy is dominated by the Klang Valley Metropolis, with limited exposure to the rest of the country politically, or economically (To be fair, capital city primacy is an issue faced globally, Thailand suffers from it, but also France and the UK have particularly dominant political, social and economic capitals)  It seems to fall between a few of these cracks to be in a middle economy limbo.

Subsequently, it struggles for innovation. The government has made long-term investments in Cyberjaya, but transformational digital innovation is lacking throughout the economy. When one looks at the banking, retail and telco sector, there is very few formats and dynamic customer experiences that are developed by Malaysian based enterprises. It is “follow the leader” from the likes of Singapore, Dubai etc. There is no Malaysian stamp. Education needs to improve as well. Education offshore needs to be balanced with growing a skillset locally that wants to remain, and one that wants to return to work locally in their home country rather than Singapore, Hong Kong, Australia or other markets.

The agencies charged with creating an innovative and digital leading Malaysia are not doing enough to create a great leap forward for the economy. It is all words and talk, but not enough differentiation to enable innovation to be homegrown, rather than imported. It must turn this around, take leadership from diverse countries such as Singapore, China, the UAE, Estonia and Korea and find a way to lead with digital outcomes and innovation that is for the Malaysian experience.

Capture Point

Malaysia is a country that can fall in the middle of the pack, whether it is economically, socially or population wise. It needs to drive digital and innovation outcomes within the local market to avoid this fate for the Digital economy of the future. It needs to develop local solutions, diversify the economy, remove corruption and encourage educated professionals to remain or return in the country. It needs to do this whilst at the same time decentralise the economy to ensure that solutions meet the needs of the entire country, not just Kuala Lumpur. This is a considerable challenge and requires the public and private sector to have more focus on real outcomes rather than just talkfests.

 

If you require further information, please contact Phil Hassey, CEO of capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology as the world becomes Digital. Phil may be contacted easily in the digital and real world.

phil@capioit.com

+61422231793

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Want to be a Digital Leader. Don’t be Corrupt.

Every country and enterprise globally aspires to be a digital leader. Digital is hard to define and measure and is far from mature. As a result, potential has not been fulfilled for both the public and private sector. Of course, there have been some brilliant examples of digital engagement for citizens, and the public and private sector. The likes of Estonia, Singapore, Amazon, Burberry and others set a high bar that many are working to raise.

What makes a digital economy? There are of course as many opinions as there are opinion pieces on this. There are many innovation measures such as education, access to investment capital, broadband investment, private-public partnership that contribute to the success of digital at a national government level.

One factor that has been surprisingly overlooked is the link between the levels of corruption and Digital. Corrupt countries are not digital leaders. Non-corrupt countries are digital leaders. It is as simple as that. 

One of my favourite pieces of regular analysis is the Transparency International Corruption Perceptions Index. It looks at global levels of corruption from the least corrupt to the most. Not surprisingly, North Korea is at the tail of the rankings. It is also no surprise that Denmark and New Zealand lead the list of the least corrupt countries.

The top 10 ranking for corruption according to TI is as follows. (Note – Scandanavia dominates, aside from weather, they have societal wellbeing sorted on most measures)

  • Denmark and New Zealand
  • Finland
  • Sweden
  • Switzerland
  • Norway
  • Singapore
  • Netherlands
  • Canada
  • Germany, Luxembourg, United Kingdom

There is no real surprise with the ranking for these countries. For the record, Australia is 13th, Hong Kong 15, the US 18th, and Japan 20th.

Whilst measures of digital excellence are more subjective, and unlike the Transparency Index obviously do not have a strong historical quantitative analysis available, even at first glance, it is obvious that there is a positive correlation between digital and economic excellence and freedom and corruption. Correlation, of course, needs to be fully understood. Not all positive correlations are cause or effect. They can be a coincidence of course (see http://www.tylervigen.com/spurious-correlations – never swim and watch Nicholas Cage films).

So which countries have digital excellence? In order to have some similar credibility to the analysis, lets use the United Nations ranking of E-Government Development from 2016. (https://publicadministration.un.org/egovkb/en-us/Reports/UN-E-Government-Survey-2016)

The top 10 ranked countries for E-Government Development are

  • United Kingdom
  • Australia
  • South Korea
  • Singapore
  • Finland
  • Sweden
  • Netherlands
  • New Zealand
  • Denmark
  • France

Six nations appear in the top 10 for both lists. The remaining 4 are all ranked in the top 23 (France), highly with the exception of South Korea. Other measures have Singapore at number one, or Estonia. It is obvious at a qualitative and quantitative level that the corruption in a country is a key indicator of digital performance at the citizen,  public and private sector level.

South Korea is an anomaly. It ranks at number 52 in the TI index. The business structure is one that is tied to both very successful economic development, but also significant corruption. The former head of Samsung is serving a prison term for corruption and the former president is set to join him. 

Of course, it is churlish, almost offensive, to mark down countries that face significant corruption for their level of digital services. Provision of basic services for citizens is a challenge for these countries, let alone investments in Digital services delivery. This is a real issue. Digital solutions, particularly around payments, mobility and services access provide significant benefits in countries with marginal economic strength. Unfortunately the levels of corruption from contracting to construction ensure that this is unable to successfully reach citizen service delivery.

Capture Point

Simply if you want to be a digital economy do not be a corrupt country. Economic transparency also dictates that if you want to be a country relatively free from corruption be a digital one. There is no other choice.

 

If you require further information, please contact Phil Hassey, CEO of capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology as the world becomes Digital. Phil may be contacted easily in the digital and real world.

phil@capioit.com

+61422231793

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Cyber Security Investment Requires Procurement Discipline Despite Urgency.

Cyber Security is a high priority issue for enterprises globally. This should not surprise anyone. The risk of underinvestment is enormous, both indirectly and directly. This risk is only matched by the outcomes of significant transgression. Add to this that if there is an issue, as with most crisis situations, the coverup is often even worse than the initial incident.

Equifax is the latest example of a CEO being (finally) toppled by a massive breach, and subsequent inept crisis management. Some small mercy to the 145 million who had their identity compromised.

capioIT has often discussed the lack of senior management education and understanding of the risk and management of cyber and security threats. This is still an issue. Education will take time.

Other issues involve the relationship between the CISO (Chief Information Security Officer)  role and IT. Who does it report to? Where does autonomy lie? Who owns the budget?

Best practice is now focused on having the CISO report into the highest levels of the organisation, with direct board connections, particularly with the risk function. This may be the COO, CFO or  CEO. It is not undermining the role of the CIO, rather reflect where the focus has to be, the education is required and where the cost and negative outcomes will occur if there is any breach (which there will be).

On the vendor side, there is of course, a rush to offer the most easy solution to cyber and security. The problem for the industry is that security technology is the most fragmented sector of the technology ecosystem. A small number of vendors provide a partly comprehensive solution approach to security and cyber, but no one vendor has a full end to end solution. To get a solution that allows the enterprise or agency to be at least standing still in the battle for cyber strength requires multiple vendors, with significant integration that takes time and costs money.

As a result of the speed imperative, it is concerning to that at capioIT we regularly talk with enterprises and agencies that have discarded the discipline around procurement for Cyber Security. Budgets are booming, faster than virtually any other enterprise expenditure.

Whilst for some, procurement, and the CPO role is considered a burden in the enterprise, it does provide a framework and discipline for cyber, just as it does for travel, devices or other categories of expense. Just rushing in and buying with no procurement discipline and as a result without regard to cost, contract, or capacity is in the short-term tempting but runs the risk of further removing or delaying the solution to Cyber from the front line of risk to the organisation.

To achieve this it comes to education. Include procurement up front as you do with any expenditure. Educate them on the requirements. Get them engaged as appropriate with the vendors. Otherwise, run the risk of long-term pain that may impact the entire organisations.

Capture Point

Cyber Security is a critical industry requirement. Unfortunately, a lack of education, understanding of risk and a very fragmented vendor environment have resulted in a situation where the solutions do not match the threat. This is a challenge across the organisation. Procurement is not insulated from this. They must be included in the overall solution for Cyber, and educated along the way. Taking this approach will ensure that long-term investments are sustainable with minimising the risk of exposure.

If you require further information, please contact Phil Hassey, CEO of capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology as the world becomes Digital. Phil may be contacted easily in the digital and real world.

phil@capioit.com

+61422231793

 

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Telco’s have failed at the Cloud and Streaming. What is the future for them?

In a parallel universe, the Telco would be the dominant vendor platform of the modern integrated digital economy for both consumers and enterprise. They could have leveraged their monopolies, network, and utility, and led the way to the digital, cloud and content streaming revolution. Instead, they lag and legislate for survival and relevance.  No Telco has come close to AWS, Netflix or Microsoft. They have spent billions becoming cloud companies and in short, they provide pipe and write down assets. They will not become the dominant player. LIke their interest in application services, the outcomes will be painful and expensive.

There are many many for this. In short, the Telco’s were hamstrung by their monopolistic or near monopolistic positioning. For capioIT one of the most fundamental underlying philosophies is the importance of competition to breed innovation, in the private sector in particular. Why do we have such a creative cloud platform ecosystem? Simply because we have multiple providers who are innovative. AWS, Microsoft, Google are all investing to win and significantly innovating at the same time. A legacy telco cannot do this.

One of the other key reasons for the failure revolves around the culture of the telco. This is at the heart of their issue. I often bemoan the engineering and Capex culture of the telco in 2017. This is incredibly limiting. It also has not fundamentally or sustainably changed. Those who do wish for this sort of radical transformation of culture within the Telco are usually disappointed.

Take one large Australian telco that has spent way too much money for no significant cloud benefit. When a solutions sales person complains loudly and publicly that their parent company finds it easier to use AWS than the own internally developed solution, how can it expect the telco’s sales team to be able to sell? If you cannot get internal buy in, then how can you convince the customer. There is no point being critical of the internal service requirements, get the product right and the customer is much more likely to come.

Secondly, an ASEAN based telco has struggled with the ability to be flexible enough in the current market The reason is the board level obsession with Capex that limits the business ability to look at investments from an OPEX perspective. Offerings that were sent up to the board for approval got pushed back because of an OPEX pricing methodology that was in conflict wit the CAPEX approach of the telco. If the basic culture and investment approach cannot change, and is limiting business, what hope do telco’s have.

Capture Point

Telco’s are in trouble. Their decline was of their own making. Too many tried to legislate monopolistic behaviour and were simply unable to keep to the pace required. The cultural approaches were also unable to migrate to a cloud and digital world. What does it mean? Firstly, the telco will have to reinvent when previous attempts to reinvent have failed. That is a near impossible task. It will have to reinvent without regressing to the normal response of high charges and low service. Secondly it needs to identify relevant differentiated offerings around pipe and networks. It has to ensure that a value is placed on this. Can this be done? Probably not, so the role of the telco is not yet at the bookstore stage, but without a lot of luck and a changing culture it will continue to add to the list started by Kodak among others of industries that arguably created their future then couldn’t win in it.

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Go West in China – Xian and the opportunity for Outcome Excellence

Most business and tourist visitors to China visit Beijing, Shanghai and the Pearl River Delta Megalopolis. Not many blaze a trail further afield and away from the coast. Without becoming a travel agent or spokesperson for the Chinese Tourism Industry, they are missing out.

One of the highlights of central China is of course Xian. Xian has a population of just under 9 million people, making it a tier 2 city by Chinese standards. That statistic alone is one of the many “only in China moments”. As a comparison, the city alone has more people than Switzerland, Austria, and Israel.

Xian was the site of the first capital of a unified China and is the home of the superlative, Terracotta Warriors. It is a major domestic and increasingly, international tourist location in its own right.

I wasn’t there for a holiday, I was there to see the Teleperformance contact centre capabilities and to understand the market capabilities more broadly. Teleperformance had first mover advantage in the city in terms of global contact centre providers. Convergys, Concentrix etc, are in China of course, but not Xian. It is the largest centre in China for Teleperformance which has had a very successful globalisation policy for delivery of customer experience.

The attractions of Xian are obvious.
– Average wages are about 1/3 cheaper in Xian than Beijing and Shanghai, although specific skills carry a premium.
– It has one of the largest university footprints in China
– The city is considered a magnet for central and western China, although for many reasons locals tend to not aspire to shift towards the coastal cities
– A strong innovation and manufacturing led economic basis
– City and provincial government support
– Infrastructure is modern with a strong airport and cultural offerings

Some of the challenges include
– The quality of English is much more limited than the coastal cities. You do not invest there for English skills.
– In general, there is a very Chinese culture. There are limited pools of non-Chinese skills in the market. Any that exist are not likely to be attracted by the call centre space.
– Attracting the expatriate market to the city is a tough call. The climate and environment are tough.

Overall for non-Chinese the primary role of Xian is to develop capabilities as an R&D hub. This has not gone unnoticed. Samsung has a large presence in the city, as does Emerson and other foreign entities, ZTE is one of the many local entities that have R&D based there.

Capture Point

China has more major cities than any other country on earth. That is of course not a surprise. The challenge is identifying what cities are the best source of skills for both local and foreign entities. Xian is one such centre. Whilst the major opportunity for contact centres has largely been successfully captured by Teleperformance, from the perspective of R&D, it has the potential to be one of the top 3-5 centres in China. Innovation has already flowed from Xian and it will continue to do so from semiconductors to battery power.

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The Google Cloud Platform Accelerates as it opens in Sydney, Australia

Finally, the Google Cloud Platform has a legitimate story to tell in the Asia Pacific region. Today (June 20th, 2017), it launched a Sydney region. This makes four regions in the region, following the opening of Singapore just last week. Mumbai is the next in line, opening up India. For more details follow this link from Google – https://cloudplatform.googleblog.com/2017/06/Google-Cloud-Region-in-Sydney.html?m=1

capioIT has closely followed the growth and expansion of Google from an enterprise perspective. Clearly, it has taken Google too long to be robust from a location, scale and strategy perspective, but it has accelerated in 2017. It has new regions open in Asia Pacific, with more to come. Globally, additional regions are scheduled to open in North America, Latin America and Europe. In all, a global footprint with scale is near completion.

What does it mean for organisations in Australia, Singapore and the rest of the region? The most important outcome is that innovation and choice driven by competition. The big three (AWS, Microsoft Azure and Google) are now all present in the region. Other providers such as Alibaba, IBM have facilities in the region with varied growth patterns and strategies. Oracle has an aspiration for the broader PaaS and SaaS market alongside an accelerating SaaS business.

This is positive news, not just on price and cost but from the perspective of capability, new services and redundancy. Competition and the need to gain customer share are fundamentally driving innovation across the IaaS, PaaS and SaaS ecosystems. No-one loses with the pace of innovation we are experiencing, except the laggards and Luddites. 

The challenges for Google is, of course, firstly to fill the capacity locally, but from a longer-term perspective, the most telling issue is to drive local, regional and global partnerships and skills ecosystems to scale out to Google levels of expectations.

Oh, it also has to deal with the momentum and scale of AWS and Microsoft across the region. As virtually every other cloud vendor has paid a high price to understand, AWS and Microsoft are dominant providers. The good news is that they also both have vulnerabilities. Google just has to exploit them.

 

Capture Point

Google has been slow from an enterprise perspective in fulfilling the clear potential it has. This is changing. It has greatly accelerated the pace of growth. Opening regions in both Singapore and Sydney within a week, provide greater scope and capability in the Asia Pacific region. It is now of course up to growth in the market and execution of the capability. Incumbents won’t give up easily, the good news is that the market has shown an appetite for cloud solutions, so it the opportunity lies with Google.

If you require further information, please contact Phil Hassey, CEO of capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology as the world becomes Digital. Phil may be contacted easily in the digital and real world.

phil@capioit.com

+61422231793

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