Vishal Sikka, the new CEO of Infosys, has some candid commentary on the state of the IT services market
"It's like a treadmill of increasingly lower cost, hiring people faster and faster, from more and more mediocre places, training people less and less, putting them into job faster and faster. I think that is a wrong direction."
Problem is someone like him should have been sounding the alarm bells years ago. The comments I heard during interviews for SAP Nation showed significant customer and market watcher disappointment with systems integrator/outsourcing performance
Here are some of those comments from the book:
Chris Day, AstraZeneca’s VP of IT Transformation which is looking to revert its 70/30 outsourced/insourced model
“Outsourcing leads to a culture of generalist service and contract managers on both sides who don’t understand the technologies they are accountable for — so everything is “we’ll get back to you” as they seek out those that do understand, which is especially painful when issues cross supplier boundaries. The end result is service is put at risk with costly, non-agile project delivery and no improvement in user satisfaction scores. Any idea that outsourcing partners are able to drive down ticket volumes and raise user satisfaction scores without considerable involvement and expertise from AZ is now long gone.”
Ben Stewart, at Inteva, discussing SAP outsourcing
“The SAP partner support experience was even less appealing. We had offshored application management to TCS, hosting to HP and had a program manager in CSC. In a crisis situation, it took half-an-hour to figure out who everyone was and what they did before we could even get started.”
A customer describing a SAP data center of one of the larger outsourcers
“I would grade it as a Tier 1 data center (Tier 4 being most robust). The disaster recovery site was only about ten miles away — not exactly comforting from a redundancy perspective. For a multitenant setting, there appeared to be too much glass to feel comfortable. Several portions of the center did not have a raised floor. And, it appeared very quiet for the suggested customer count or related support staff.”
Amit Bendov, describing upgrade project experience while at Panaya
“SaaS vendors do have the advantage of being able to upgrade their core at thousands of customers at one go. In the SAP world, the upgrade was one customer at a time….Most SIs who chased after upgrade business viewed it as a loss leader, a stepping stone to other business at the client or a way to preclude other firms from getting in the door.”
Shaun Snapp about the numerous project failures and unwillingness of outsourcers to fess up or fix things
After reading a number of articles on SAP project failure, I have noticed a consistent theme in much of the coverage. This is another example of how every time an SAP implementation goes sour, it seems as if the official publications put more of the blame with the clients
On the conflicts of interest in the services sector
“In many ways, SAP’s relationships with accounting firms grew even more complex. As an example, Deloitte auditors opined on internal controls around SAP systems, their consultants helped implement SAP software, and their advisors helped clients evaluate competitive BPO and offshore services around SAP. So, the conflicts of interest grew even more thorny.”
On business models that need to evolve
“Clearly, SAP partners were not ready for the utility computing
model in 2006. Heck, Nicholas Carr would not write his
best seller on the topic, The Big Switch, till 2009. As I researched this book, I asked several outsourcers if they offered the model today. More are starting to offer managed clouds, business process, and HANA-as-a-service, but there are still only a few customer references for such offerings.”
“Consultant travel continues at staggering levels even as telepresence has improved and many project phases should be done in “factories” — not at client sites.:
It’s not all negative. The book describes some of the pioneering work Appirio has done around cloud projects, the “outcomes based” implementation Cognizant did for British Gas and the low-fuss, low-cost way DeVry implemented SAP at several Brazilian locations with a local firm.
There is considerable coverage of how cloud data centers and SaaS vendors are showing how a new form of “outsourcing” which leverages automation and innovation.
In many ways, SAP/ERP are “old services markets”. There are many new ones with vertical apps which leverage mobile, social, analytical, wearable, sensory, robotic and other technologies. There are digital transformation opportunities.
But Vishal is correct – the tendency of the industry is to keep building pyramids of staff. Not automate. Not continually improve. Not surprisingly, the SAP economy model is 70% labor related costs.
He is right to “cry wolf”. The question is how many of his peers are willing to acknowledge the industry has many challenges. The bigger question is whether it is too late for many customers.