Stuck between ‘process’ bread and ‘legacy’ butter?

Pratima H

INDIA: ELEVEN out of ten people never touch the first slice in a bread packet. Because it is ugly? Because it has always remained neglected? Because it covers others?

Some questions have either too many answers or none at all. Is sourcing always going to be about basic slices of bread? Would businesses ever start to stack full-blown sandwiches? It is hard to ignore these hunger pangs specially when the marmalade of agility and the fresh cut lettuce of innovation have started appearing on some tables. The plate of sourcing was all about driving out costs and achieving incremental improvements to processes so far but the next threshold of value has suddenly shifted and is moving towards new spreads. Spurred by appetite for As-a-Service Economy, businesses have and should start using different flavors and strokes of their sourcing knife. Unless they want to be someone else’s breakfast.

We get a hint of this very taste when we read Accenture’s latest report “Beware of the Smoke, Your Platform is Burning” exploring dynamics of sourcing in the digital age. Anoop Sagoo, Senior Managing Director – APAC, Accenture Operations helps us bite in more as he slices the fate of legacy platforms which are ill-equipped to provide the agility and flexibility as well as of enterprises still caught up with cost reduction and incremental process improvement. Chew on.

What does the report show – in a capsule?

The services industry is going through a huge transformation as enterprises are looking to reduce their reliance on labor arbitrage and outdated legacy technology in order to better compete in the digital world. And the As-a-Service model is what will enable this next wave of value. It’s about delivering value via on-demand, highly scalable plug-and-play services that impact business outcomes.

So labor arbitrage and cost can no longer be deal-breakers or makers?

The report finds that while cost effective business services will always be important, achieving the next threshold of value creation is dependent upon transitioning to the emerging “As-a-Service Economy”. In this model, value is delivered via on-demand, highly scalable plug-and-play services that impact business outcomes. Simplification is now the king—eliminating complexity, poor processes and manual intervention in favor of working smarter through simplified, but intelligent operations.

If you were to sum up three unusual points that catch your eye with respect to this report, what would you pick?

The research we launched with HfS found that 53 percent of senior executives view As-a-Service as critical for their organization, yet 68 percent of enterprises report that their core enterprise processes will not be delivered As-a-Service for five or more years. So there’s a gap between recognizing that change is needed and in taking action to implement those changes, which is surprising given the significant business benefits that can be achieved as a result.

The report also reinforced the important of analytics, automation and proactive intelligence. Half of enterprise buyers (51 per cent) believe having these capabilities today would have “massive impact.” Sixty-nine percent of buyers expect to make “some” or “significant” progress over the next two years around analytics and automation.

Another eye opening finding was the fact that senior leaders want change but middle managers and delivery staff do not. More than half of service buyer senior leaders view As-a-Service as critical and 61 per cent are ready to replace legacy providers in order to align with more visionary providers to achieve their desired end state. But these leaders need to motivate and enable their middle manager and delivery staff, as just 29 per cent see the value of As-a-Service in the same way.

What shapes this disconnect between senior and delivery staff?

Many middle managers and delivery staff are comfortable with the status quo and don’t feel a pressing need to do things differently, adopt new technologies or learn new skills. Senior executives, on the other hand, are more apt to recognize the need to position the organization for future growth and adapt to new ways of doing things in order to achieve or sustain competitive advantage.

Is this reckoning of the sourcing landscape vastly different from what the last two years showed? Why or why not?

The ways in which enterprises buy and receive services to augment their operations is no doubt changing but the research shows that two thirds of enterprises aren’t ready for what’s ahead. The majority of organizations are still stuck in the past, focusing on cost reduction and incremental process improvement.

Any waves of change?

Over the past few years, we’ve seen some pockets of transformation, with high performers embracing advanced technologies and putting an emphasis on talent to prepare for the As-a-Service economy. But progress has generally been slow and there is still a lot of work remains to be done to move the industry toward one that’s more collaborative and value-driven.

What makes the argument strong for a big-bang change as the research hints?

Not adapting to the As-a-Service Economy means companies could be locked out of the market, bested by competitors who are able to align themselves to a service delivery model that creates premium value and innovation instead of just base-line efficiency. The urgency comes from the poor state of legacy platforms which are ill-equipped to provide the agility and flexibility that businesses require. Organizations need to take large strides to move away from legacy technology that’s no longer providing value in favor of new As-a-Service models.

Does this new milieu change what the buyers want? Or how they structure contracts, especially in a customer-oriented, agile, sharply-competitive, and heterogeneous (in terms of technology and IT) era?

The new realities of the market does shift what buyers are buying. The emphasis now is moving into the cloud and applying the right digital technology, automation, artificial intelligence and analytics to unlock competitive advantage and utilize talent smartly.

How?

Buyers will need to collaborate with operational experts, create new teams of cloud and process experts, and work more closely with partners to benefit from the As-a-Service ideals. Businesses will be more agile and dynamic, featuring on-demand plug-and-play services in a one-to-many fashion targeted to impact what matters to consumers as well as business. Forward thinkers across the industry seek catalysts for acceleration beyond traditional labor arbitrage and transaction processing into a more collaborative, entrepreneurial and value-driven business world.