I recently saw an SAP announcement around its Next-Gen services and got excited. Turns out it is services around its newer products (SAP HANA platform and business analytics, mobility and on-demand).
That’s certainly one definition of Next-Gen. I was hoping to hear about new delivery models, new providers and new business models. While my next book does not focus specifically on services, I saw many examples from various chapters which suggest tectonic changes coming in the next few years> Here is a selection:
Influenced by Apple: “The more than 600,000 (as of November 2011 and growing) applications in the Apple App Store range from the sublime to the silly. But the sheer size of the marketplace is a formidable Apple asset. The head of iOS development, Scott Forstall, has commented that Apple has, in the iOS App Store, “created the best economy in software in the history of the planet.”” What’s remarkable here is the majority of the apps come from entrepreneurs and small businesses, not the IBMs or the Deloittes.
Influenced by Facebook: “Dell’s Data Center Solutions business says it will design and build servers based on the Open Compute Project specification. Presumably so will HP’s. Dell owns Perot and HP owns EDS, and those outsourcers currently run data centers for many corporations—and they are nowhere as efficient as what Facebook has built. So, the ripple effect of this on the industry could be tremendous, as even IBM, Accenture, and other outsourcers will be forced to benchmark against the open standards Facebook is sharing.”
Influenced by Cisco: “More impressively, Cognizant has rolled telepresence out to major clients. That helps overcome at least some of the consultant travel costs and other issues (we mentioned earlier in the chapter). Clients were generally skeptical at first, especially if they had previously used traditional videoconferencing, which was characterized by high cost, frequently dropped calls, and video and audio quality that ranged from poor to mediocre. But they have been much more accepting of telepresence, which delivers a vastly superior user experience. Two areas with high payback have been during transition and training. “
Influenced by Boeing: "Under this umbrella agreement with the Boeing Company, HCL worked as the engineering services partner of choice with multiple sub-tier companies on the 787 program. HCL’s services were utilized by these airborne systems suppliers across all the major design elements of the 787 such as common core systems, open systems architecture and e-enabled architecture. “
Influenced by Best Buy: Its after-sales service with over 18,000 employees in its Geek Squad, and investments like the Remote Service Project. The project allows Best Buy to identify backlogs at stores and re-assign the work [to another] store remotely. “we can level out the work across the enterprise, but above all, deliver a great experience for the customer and maximize the up time of the capability of the product that they’ve sourced from us.”
Influenced by Contract Manufacturers: I am constantly surprised to see outsourcers and service providers who have never heard of Foxconn or Flextronics. “Foxconn, the largest electronics contract manufacturer in the world with over a million employees in China, assembles iPads and other devices for Apple” “Given labor dynamics in China, Foxconn is exploring a diversification with sizable investment in Brazil. Even more significantly, it is looking to robots to do simple and routine work such as spraying, welding and assembling. The company currently has 10,000 robots and the number will be increased to 300,000 next year and 1 million in three years.” “Both Flextronics and Jabil also provide a wide range of warranty and repair services for their customer products. Then there other Taiwanese players like Pegatron, a spinoff from Asus and Quanta.”
Influenced by regulators: Gina Staudacher, tax partner at Baker Tilly, commenting about investments in global innovation projects: “When we work with clients to monetize tax credits globally—we utilize a ‘concept through final completion’ approach to consider all potential project costs that may be eligible for R&D credit inclusion from a global perspective. Hence, consulting fees incurred in a foreign country may not be eligible for inclusion in the US R&D tax credit programs, however, such costs and payments may be eligible in the foreign jurisdiction wherein they were performed or where payment was made.”
Note: the book is going through the publisher’s edits and the text above is subject to change.
PwC-Booz: The seven year itch
The recent PwC decision to acquire Booz took me back to younger days when I was an reluctant accountant at PW (the C came later after it merged with Coopers). I had little desire to do time in auditing or get a CPA certificate, but that was a requirement back them to qualify for its consulting unit. So, in my boredom, I sent out feelers and landed an interview with Booz Allen and Hamilton (which spun off Booz just a few years ago). I got the impression there my auditing experience had actually negated for them some of my top of class MBA allure.
So it is interesting to see PwC make consulting acquisitions, and BAH on the other hand hire tactical, technical talent.
It has actually been happening with regular frequency –the attempt to blend very different strategic and transactional talent. PwC has grown strategic talent organically, used the Sarbanes Oxley cautionary era and post-consulting sale of SAP and other practices to IBM to grow advisory services, and made other strategy acquisitions like Diamond. BAH on the other hand has done plenty of supply chain and other operational consulting for corporations and more recently plenty of government contracting (brought into plenty of focus by recent alum, Edward Snowden)
But some things have remained the same
a) Independence issues keep popping up
Contrast two firms to see the weight accounting independence has on consulting practices. Accenture, freed of Andersen, not only survived the Enron fallout, but has morphed and thrived. Deloitte, which has kept its accounting and consulting integrated, has by many measures underinvested and has a narrow technology footprint (and a less than stellar implementation success track record). Expect PwC to be similarly constrained and have to pick markets dictated by its accounting leadership versus those which make business sense
b) The pyramid business model continues
A client vividly described it as the AWACS model. Multiple levels – boots on the ground, helicopters, fighter planes, all coordinated by the big eye in the sky. Clients pay for it all, he said. The truism in the services market is the base of the pyramid keeps expanding, and that’s where clients see the least value.
So, it will be interesting to see how PwC/Booz navigates the turbulent next few years in services. I will be discussing with Phil Fersht at the HfS Blueprint event five disruptive trends that are rocking that sector:
November 03, 2013 in Industry Commentary, Outsourcing (other vendors) | Permalink | Comments (0) | TrackBack (0)