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How are new digital technologies reshaping externally-sourced operations for the enterprise?

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By Russell Ives from Accenture.It’s an important question, considering more than 90 per cent of large enterprises (with revenues over $1 billion) now use external providers for the operations of one or more of their business processes. The digital revolution is transforming the way such work is designed, sourced and delivered, but to what extent?

A new report from HfS Research, sponsored by Accenture, found that many enterprises that once lauded the initial cost savings achieved through outsourced services are now becoming frustrated that little progress is being made to fuel further efficiencies. About half (49 per cent) of 189 global buyers surveyed described their current engagements as “mainly lift and shift”—that is, a simple transfer of processes and people to a service provider, with limited business transformation involved.

almost half of buyers (49 per cent) expect to be in an operations engagement focused on transformation of the business and its processes.

Only 28 per cent said they are involved in a wide-scale transformation of business processes. However, when asked what they expect from externally provided business services in the next two years or so, almost half of buyers (49 per cent) expect to be in an operations engagement focused on transformation of the business and its processes.

If there is to be a bright future for Business Process Outsourcing (BPO), there needs to be a definitive shift on behalf of both ambitious enterprise buyers and innovative service providers to making investments in the innovations that can drive continuous value creation. Outsourced services must shift from one-time, transactional deals – like buying an oil well and then running it dry – to partnerships that continually improve fundamental business processes.

Opportunities arising from the “SMAC stack”

A key differentiator to achieving transformational goals is the increased use of digital technologies and platforms. How can enterprises and their providers step up to take advantage of the enormous opportunities that innovative digital technologies offer? The Accenture sponsored HfS report focused on five key technologies, the so-called “SMAC stack” of social, mobile, analytics and cloud, plus automation. The research found that analytics and automation technologies are most relevant to buyers of externally provided business services today, but that cloud, mobility and social media are rising and will continue to rise in importance over the next couple of years.

The most urgent capability required by buyers today is the ability to provide effective analytics solutions. Half of the buyers surveyed stated that analytics is a critical component of making the move to value beyond cost reduction. Given the popularity of “big data”, expectations from buyers are high about the ability of service providers to deliver insights from analytics technologies. About one-fourth (26 per cent) expect descriptive and real-time insights; one-third (32 per cent) are already expecting predictive insights about processes and business outcomes; and 16 per cent expect their providers to deliver predictive and descriptive insights about the business, linked to both internal and external data.

The second most important technology noted in the report was “automation,” a finding that may strike some as more mundane than some of the “flashier” technologies usually discussed. In fact, process automation can be key to driving better value from an operations engagement. Automated processes can be much more efficient and effective because they eliminate human interventions that can create unintended errors or delays – a critical source of value creation in processes where even the slightest error has significant negative implications (e.g. payroll processing) or where regulatory compliance is critical to business success (healthcare claims processing, capital markets).

When automation becomes a part of the basic delivery of infrastructure or business process services, increasing amounts of intelligence reside in the infrastructure. The ultimate goal is truly intelligent IT – technologies that function autonomously to learn, predict, monitor and optimise with minimal human intervention required.

When it comes to cloud, social and mobile, the majority of buyers surveyed rated the importance of these technologies today as lower than analytics and automation. However, when asked to look a couple of years into the future, buyers see the importance of all three of these technologies increasing over time.

More than half of buyers (54 per cent) said their provider is not currently leveraging the cloud to deliver services. However, 78 per cent of buyers see cloud technologies increasing in importance over time. The same number of buyers acknowledge that the importance of extending business processes to mobile access points will increase over time. Social technologies score the lowest among the five technologies in the eyes of buyers today. However, almost six in ten buyers realise that social technologies are likely to increase in importance in the coming years.

The four keys to digital operations excellence

Creating a true digital operations environment goes well beyond putting individual technologies into the mix, hoping the whole will be greater than the sum of parts. Automation, analytics, cloud, mobile and social technologies are most effective when integrated into how the business operates as a multi-sourced organisation. To maximise digital operations and business services, it is essential to capitalise on a number of key technologies working in tandem.

To achieve success, organisations should bear in mind these four components of digital operations:

  1. Architecting for resiliency. In the digital era, providers must support wide-ranging demands for non-stop processes, services and systems. This is particularly important given the need for a secure and “always-on” IT infrastructure. Resilient practices can mean the difference between business as usual and erosion of brand value. Operations must adopt a digital mindset to ensure that systems are dynamic, accessible and continuous—designed for resilience in the face of failure or attack.
  2. Incorporating analytics to help deliver real-time, digital insights— anytime and anywhere. Providers and buyers have the opportunity to overcome traditional “reporting” capabilities that merely provide insight into what has already occurred. Predictive analytics technologies offer the promise of helping an operational account team predict what’s coming. Data collection is growing exponentially, and it is important to have tools that can digitise data delivered in any format, from both internal and external sources. Success requires an approach to data management that is integrated across the enterprise.
  3. Connecting the digital workforce. A connected, informed workforce performs at higher levels and has higher rates of job satisfaction. Technologies can significantly change the nature of the work involved on operational engagements and improve performance. A digital workforce platform helps to optimise workflows, automates key work steps, digitises data, incorporates analytics and makes enhanced information available through a digital workflow tool. Workers have access to collaboration tools and social media channels as and when needed. In sum, the digital platform will enable the workforce to become connected knowledge workers that can make higher-level contributions.
  4. Enabling and participating in a digital innovation ecosystem. The world of technology and business is too complex and fast-moving today for any one company to do it all itself. Outsourcing is, by its nature, a collaborative endeavour; however, the larger ecosystem of technology vendors, research institutions, integrators and other entities needed to keep a competitive edge is significantly larger than just a buyer and provider. Effective engagements are constantly tapped into events and evolutions in the marketplace to seek competitive advantage.

Becoming a digital business – and achieving digital operations – is no longer simply about incorporating technology into the organisation; it’s about using that technology to reinvent operations to get in front of the dramatic change that technology is creating. One thing is clear about the future of business services and operations: All roads lead through digital.
June 9, 2014
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