Friday, May 23, 2014

Transition and Transformation or Transformation and Transition

Not having blogged for a long time, I managed to get a few spare moments on the bus ride home and tried to use it for sharing my thoughts; so here we go….please note these represent my personal views and not of my organization.

For the past couple of years I have been involved in number of Business Transformations (that has involved some form of Shared Services) and Technology outsourcing through Managed Services. In both these instances I have seen stakeholders grapple with the above question of should they transform to standardized processes and then transition or transition it into a controlled environment and then transform it within that environment.

What I have seen in traditional outsourcing or BPO models is that the vendors will come in and promise standardized processes and then transition the current environment into their control. They will then try and attempt to transform the client's processes to standardized way of working within that environment. They do manage to offer some savings through labor arbitrage in the first couple of months but the quality of service takes a beating.

Couple of factors do work against the vendors favor as the customer on the client side is still used to the high touch, low process adherence and high tacit knowledge kind of service. After taking couple of beating either the vendor reverts to what the client wants or beats the client into submission and force them to accept the low quality of service (BTW all these observations are anecdotal and not based on any factual data). Both way efficiency gains promised through adoption of standard services evaporate and neither party wins. As the client also compensates on their end by adding more resources and any gains from labor arbitrage quickly disappear. After a few years of difficult marriage they decide to call a divorce and go to find other partners and the journey starts all over again.

Recently a new kid on the block called "anything as a Service" is trying to change the game. I am talking about true "as a service" players who offer commoditized and standardized Easily Repeatable Processes (ERP J) run on commodity infrastructure leveraged on a global scale (BTW I am not talking about cloud washed legacy stuff). On these platforms you are not able to change the core process but are forced to adopt them. Then in order to uses these platforms you are forced to transform your processes before you transition (or start using them). If done properly adopting "as a service" model properly can provide sustainable advantage to both the client and the vendor provided neither party blinks during transformation.

Forrester in their Tech Market outlook for Asia Pacific observed following in Australia "Cloud-enabled services are replacing traditional outsourcing contracts…Forrester has witnessed a number of clients like AMP that have started migrating out of traditional contracts and moving workloads to cloud-based services. This shift will continue to accelerate in 2014". It looks like some clients have woken up to the challenges of traditional managed services and are fast transforming their processes and transitioning them to "as a service" model.

The benefits might appear to be tantalizing, transformation is hard; trust me I have been through four of them and it was not easy. One CFO I worked with told me mid-way through the process "If I had known this was going to be this hard I would have never started the process".

Often organizations are not able to standardize completely and land somewhere in the middle (due to variety of reasons); in this scenario they need some kind of translators who can bridge the gap. Now you see the rise of another set of service providers called brokers who do the heavy lifting of the translation and hide the complexity (BTW they do lot more than this). Some call them Services Integrators…..