Tick, Tock – Timing is Essential to Contract Renewal Leverage

Steven Lytle Blog

Steven Lytle, Managing Consultant – 

The end of a contract term can be an ideal time to take advantage of new product offerings, pricing structures and technology innovation. But starting early is essential to an effective renewal strategy. Clients need time to engage business and technical teams to thoroughly assess new products against requirements and to effectively leverage the negotiation process to get optimal terms and conditions.

Early attention to renewal can also prevent unpleasant surprises, particularly for Microsoft customers who use an “honor system” of self-reporting estimated year-on-year growth of assets.  While rough guesstimates of asset growth are easily done, a detailed inventory is a time-consuming process. If a customer comes to a renewal discussion poorly prepared and conveys doubt and uncertainty regarding specifics on software assets and licensed users, that customer will likely be tagged as a prime candidate for a software audit – which can be an expensive and onerous proposition.

Given the importance of early attention to the renewal process, customers surprisingly often find themselves running out of time and coming down to the wire when a contract is due for renewal. If deadlines are looming and customers’ backs are to the wall, they often have to settle for a sub-par agreement. Or worse, leave themselves vulnerable to a potentially costly compliance review.

Why the foot-dragging? One reason is simple inertia and basic human nature – customers see that their renewal is due in, say, eight months, and make a note to set up a meeting with their vendors to assess their options to add new capabilities and optimize spend. However, other projects and priorities arise and, best intentions notwithstanding, next thing they know the renewal is due in a month and they haven’t prepared.

But procrastination is not the only factor at play. When negotiations are done in a last-minute, deadline-driven manner, vendors own the leverage and are better positioned to drive the outcome in their favor. This means vendors have a vested interest in delaying the process as much as possible. Typical stalling tactics are subtle and seemingly benign – “I need to get back to you,” or, “We need to have Joe involved and he’s on vacation for two weeks.”

Subtle or not, customers need to be prepared. The basic message: prepare for the renewal process well in advance of the contract termination date. Six months out is a good place to start. Equally important: assume that your vendor team will be in no mad rush to get things done and pad schedules accordingly.  Renewals of larger deals should be a priority, and ensuring involvement of the right mix of individuals is imperative.

Negotiating leverage is key to any contract discussion. For customers renewing software agreements, the longer they wait, the more that leverage slips away.

A Quest for Vendor-Agnostic ERP Implementation Partner Selection and Value Realization

Ralph Billington Blog

Ralph Billington, Managing Director –  

Enterprises expend significant resources to evaluate ERP packages and select the one best suited to the specific needs of their organizational structure and business requirements. Ironically, however, they don’t take an equally analytical approach when defining their implementation strategy, selecting their provider or determining and defining the value contributors the program has to deliver against to be a resounding high five.

That’s a problem. First off, implementation comprises the lion’s share of an initiative and determines the ultimate success or failure of an ERP initiative. Mistakes made during implementation account for most of the value leakage that takes place over the long term. In this context, to prioritize package selection over implementation is a bit like agonizing over what kind of hammer to buy when you actually need and should select a carpenter.

More importantly, the approach that most enterprises take to selecting a provider to manage the implementation is inherently flawed, and contributes significantly to the consistent underperformance we see with ERP programs. The problem is that client organizations rely on providers and integrators that have a vested interest in recommending a specific solution that, while it appears focused on increasing the value of the outcome, is in fact driven in part by maximizing the integrator’s involvement and fees. This dynamic leads to over-selling of package capabilities, overselling the business impact the program will deliver (specifically with regard to pre-configured solutions) and a glossing over of business and process challenges that need to be addressed. (“That can always be done on a change order, right?”)  The result is often unanticipated customization, significant cost overruns, scheduling delays and lack of ROI.

The alternative is to engage an independent third party that doesn’t have a stake in the outcome and has no incentive to sugarcoat or downplay the potential obstacles and challenges that may occur during implementation. An honest assessment upfront can prevent many unpleasant surprises down the road.

Taking RPA Mainstream (Part Two of Two)

Bill Huber Blog

Bill Huber, Managing Director – 

Alsbridge Managing Director Bill Huber recently interviewed Sean Tinney, Global Head of Innovation and Transformation at Sutherland Global Services, on the current state of the Robotic Process Automation (RPA) market and on where the technology is headed. Part One of their discussion examined how RPA redefines the concept of “full-time equivalent.” In Part Two, they look at practical considerations involved in implementation.

BH: How long do you think it will be before RPA becomes the prevalent form of delivery?

ST: For Sutherland it is how we go to market, and how we deliver. Every new agreement has an element of RPA embedded in our delivery.   There still seems to be a good deal of marketing rather than deployment.  Actual delivery is still limited.  I believe that we are 12-18 months away from wide scale deployment in the market, and about six months until most of Sutherland’s clients have RPA deployed.

BH: What are the change management challenges on the client side?

ST: Change management is huge.  Clients look at it contractually, how do we go from a sourced to a retained environment?  How do we manage the process changes: What are the new quality metrics?  The challenge becomes one of [bringing] together all of the constituents and process implications.  Any change to any of the systems on the client side will impact the robotic programs.  You need to have good visibility to manage the risks at a much more granular level.  This needs to be managed as a separate stream with strong project management.  It requires careful synchronization to avoid problems.  We need to solve for both the project and for changes to the client’s organization.  The client may not always be able to communicate their internal changes because they can be siloed internally.  Robotics truly is transformative, but like anything that you are changing on a mass scale, you need to over invest in change management.

BH: What are going to be the biggest areas for RPA in the next year?

ST: Next year, we expect a nice push into human resources processes.  The push will be to get all inquiries to a help desk or employee self-service.  There are so many repeatable tasks — like onboarding — where we will see adoption.  Also — within health care — credentialing, claims processing and revenue processes will provide a large opportunity.

This will be followed closely by insurance and then the banking and mortgage industries.  How can you use robotics as an audit and quality tool?  Subjectivity and exceptions are kicked out of the process.  When you look at comparing information to a system of record against a source file and an application, you can use robotics to automate those checks and reporting.  Audit, compliance and quality as a service in multiple industries.

There are three things that make a successful RPA deployment:

  • Quality
  • Productivity
  • Visibility

The base of all of this is quality.  Inherently all [RPA] allows [us] to offer a quality as-a-service offering.  All of the data points that [are] created by going through greater detail on process documentation allows a whole new level of analytics.  The reality is that robotics is one small component.  The secret is how exceptions [are managed] and how analytics [are implemented], which will drive toward outcome-based and gainshare-based pricing models.

BH: What do advisors like Alsbridge need to do differently to address the age of RPA?

ST: Create a separate group to understand Robotics, and how to work with clients to identify opportunities for robotics.  Help clients to understand what a programs is; to define a program; and to assist a client in selecting the right service provider.  Educate the clients and help them to understand where there may be an opportunity.  Not only bring the right provider to the table, but help the clients prepare for RPA.

BH: What keeps you up at night?

ST: Change management keeps me up at night!  As good as the best change management programs can be, there is always something that happens or someone who doesn’t communicate accurately.  If virtually any change falls through the cracks, bells and whistles will go off.  The best RPA implementations are still mini solutions.  If the change management is nailed down, there is little cause to worry about the system slowing down or breaking.

The RPA Manifesto and the Onshoring Revolution

Derek Toone Blog

Derek Toone, Managing Director –

A specter is haunting offshore outsourcing — the specter of Robotic Process Automation…

The cost and availability for a given skillset is a key driver in determining the location of a service delivery center. Due in large part to its thousands of highly skilled and competitively salaried labor resources, India is today the recognized global center of outsourcing operations. And in general, the value proposition of any sourcing location – be it China, Eastern Europe or Latin America – is based to a significant degree on skillsets and labor costs.

Other considerations contributing to service delivery location decisions include language capability and cultural affinity, as well as existing infrastructure, government stability, physical and IP security and time zone. Ultimately, though, if the same skillsets are available in two locations but cost less in one versus the other, the location decision will most often go in favor of the one with the lower cost of labor.

This is changing in a fundamental way, as the emergence and rapid adoption of RPA transforms how businesses approach service delivery location. By enabling more work to be performed with fewer people, RPA undermines the basic premise of labor arbitrage. Put simply, cheap workers – however skilled or capable – now present a significantly diminished competitive advantage compared to software that doesn’t require a weekly wage and never takes a holiday.  Moreover, the processes most suitable for RPA – digital inputs and outputs, with rules-based decision making and no requirement for voice or in-person interaction – are the also the ones most likely to be offshored.

As the cost and availability of labor becomes a smaller component of overall service delivery, the weight of other factors such as language, culture, time zone and IP security will no longer be additional considerations; rather, they will be primary drivers of service delivery location decisions. This change in priorities will force global enterprises to re-think their service delivery models, which today combine a complex mix of onshore and offshore locations designed to maximize the advantages of each location while making the hand-offs and touch points between locations as seamless as possible.

We are seeing these shifts occurring already with some of the smaller, up-and-coming ITO and BPO providers who are using early adoption of RPA to compete against the larger established players. These upstarts are using an optimal mix of skillsets from onshore and offshore labor, with a focus on maximizing quality of service rather than minimizing cost of labor.

Many of the established global providers recognize what the future holds as well – consider recent reports of Wipro’s plans to reduce headcount by 47,000 in the next three years by leveraging automation, artificial intelligence and digital services.

Bottom line: RPA, artificial intelligence and cognitive computing will over time make geography increasingly irrelevant to more and more job functions. While this Brave New World may be closer than we think, the immediate reality is that RPA is already having a significant impact on sourcing location decisions, by redefining the criteria and priorities used to determine where work gets done.

The impact of RPA on onshoring was the topic of a panel discussion at the recent RevAmerica Conference in New Orleans.

RPA Doesn’t Begin with FTE-Based Assumptions (Part One of Two)

Bill Huber Blog

Bill Huber, Managing Director – 

Alsbridge Managing Director Bill Huber recently interviewed Sean Tinney, Global Head of Innovation and Transformation at Sutherland Global Services, to discuss the current state of the Robotic Process Automation (RPA) market and to examine where the technology is headed.

Bill Huber: Tell me about your background and current responsibilities.

Sean Tinney: I have been in the BPO space for 13 years. My career began with a focus on O2C, transitioned into management, then account responsibilities. My current role is running innovation and transformation from a delivery perspective at Sutherland Global Services. I work with the Platform Development team — beginning at the pilot phase, determining what works best as a point solution and what the appropriate scale should be. Our focus is bringing innovation and scalability to our customer solutions.

BH: What does RPA mean to you?

ST: That’s the million dollar question. There are multiple definitions out there. To me, RPA is another way to have a virtual workforce handling transaction-based or decision-based transactions. The software itself is not a substitute for front end automation but it is software that automates process exceptions. It thrives when subjectivity is driven out of a process and improves the use of rules-based decisions, keeping quality and efficiency up, and driving errors out of a process. It can be a substantial differentiator or value-added service if you are fundamentally committed to changing the process.

RPA is designed around automating process exceptions that are a result of not having automation up front. It quantifies all of the various secession points. We believe that it will move up the cognition scale. You are seeing a degree of it now, in terms of fuzzy logic and historical trends. True cognitive robotics is a ways away, as there are so many different variables, both in horizontal process and all of the vertical variants of the same.

The next level of integrating analytics into the process will enable the software to make better educated guesses. That will be a major step toward improved cognitive processes.

BH: What are the advantages of using a provider for RPA work?

ST: It goes back to the sensitivity of the process, and the software. It requires hands on maintenance. Anything occurring upstream affects the coding of the robots, requiring a dedicated team to stay on top of it. It requires a whole new level of change management and necessitates an ingrained transformation organization that can be cost prohibitive or impractical for a client organization. Working with a provider, an organization can leverage the economies of scale, the process expertise, as well as the collective learning of a BPO organization. They get faster deployments that are more cost effective, with more impactful implementation when using a provider. The provider knows the vertical, the horizontal and the technology.

BH: How is contracting different for an RPA solution vs. a normal BPO solution?

ST: There is significantly more flexibility with an RPA solution. An RPA solution does not even begin with an FTE based assumption, but rather goes immediately to a transaction-based model. It opens up outcome based pricing opportunities because there is a new level of detail in process documentation and transformation, it provides a comprehensive view and thorough understanding of upstream and downstream processes. For example, when you apply an RPA enabled solution to a traditional manual order processing process it provides a better understanding of how it impacts billing, cash applications, DSOs, etc. This enables gainshare, with a more lucrative revenue stream because of the benefit of reducing bad debt or improving working capital. As we see RPA mature and become more adapted, there will be changes to contracting, with the FTE model slowly dying out. There will be a natural shift toward analysts and advisors. RPA will erode the traditional size and scale of resources involved in BPO. This will be an evolutionary process as the market will have to shift.   Some analyst firms base rankings on the number of contracts and people. I believe that this will become less and less important. For a company like Sutherland, it plays into our sweet spot. We have flexible commercial terms and have always leveraged technology and platforms.   RPA will be an opportunity to further differentiate ourselves.

This is nothing different than what Sutherland has been doing for nearly 30 years, RPA just reflects a continuation.

BH: What Are the Barriers to Client Acceptance?

ST: Some clients are innovators and some are more cautious. Clients are reading about new and emerging technologies. There is a natural concern about anything that could impact our client’s customers. We have two different approaches that we take. The first is proof of concepts – a small selection of sub processes or an individual segment of accounts. We will demonstrate what is possible and develop a transformation roadmap to roll into larger scale. The other approach is a traditional lift and shift, with transformation after we have control. Sutherland builds a transformation roadmap after we have control of the process.

Good Microsoft Customers Beware

Louis Pellegrino Blog

Louis Pellegrino, Director – 

If you’re a loyal Microsoft Enterprise customer, you’ve likely exercised your option to leverage volume licensing agreements. You’ve diligently taken advantage of new offerings, and your environment is a poster child of Microsoft products.

Be careful.

The trouble is, Microsoft account teams are assigned aggressively high bars to grow revenue. In Microsoft’s view, there’s no such thing as a saturated customer. More specifically, there’s no such thing as a customer who shouldn’t produce more revenue this year than the year before.

If you already have a significant installed base of products, your Microsoft account team will likely focus on selling you myriad high-edition value-added products, or they will pressure you to convert your on-premises workloads to their Cloud Services.  If you dutifully sign on and acquire these upgrades, or if you move hastily to online, there’s a good chance you won’t use many of the features, which means you’ll be buying capability you don’t need.

If, on the other hand, you push back and say your existing product suite is adequate for your needs, you will very likely become targeted for a software audit aimed at identifying unauthorized use of licenses and assets and extracting significant fines and penalties.

While audits of enterprise software customers were traditionally an exception, that has changed, and today all software publishers increasingly rely on audits to fill revenue pipelines depleted by declining sales of new products.  For large and established Microsoft customers, the risk is especially high because, by virtue of their size and scope, they are by definition targeted to produce significant revenue growth.

Customers can regain control of their relationship with Microsoft and other software providers by demonstrating compliance and complete and detailed oversight of their software assets.  Equipped with a detailed inventory of volume licensing agreements, deployment landscape and purchase history, you can respond to an audit with confidence, strengthen your negotiation position and improve your relationship.

Check out a recording of a recent Alsbridge webinar that discussed how customers can respond to Microsoft licensing strategies.

EU Network Strategy: Don’t Delay Mobile Consolidation

Margot Wall Blog2

Margot Wall, Managing Consultant – 

Recent moves by the European Community (EC) have opened up the competitive landscape and created opportunities for global enterprises to consolidate network operations in EC countries.  Mobile operations are especially promising, and we’re seeing a number of client organizations move forward with plans to consolidate and rationalize plans from multiple carriers.

At the same time, other enterprises appear to be content to wait until their existing mobile contracts expire before taking advantage of these emerging market opportunities. That would be a mistake. The time to start a consolidation initiative is now, even for organizations with a number of contracts still in force.

Consider: With multiple countries and multiple in-country teams, and with at least one provider in each country, getting a consolidation deal to market – and then getting to contract – both take longer than you might expect.  If you wait between 6 and 18 months to go to market, by the time you’re done with the project another 8 to 18 months has gone by – and now your rates are more than three years old.

However, by going to market now, by the time you’ve signed new contracts the old agreements you were waiting on to expire are ready to migrate to the new deal, instead of sitting at the old rates. Bottom line – you save money sooner.

We’ll be discussing network and telecom issues, contracting strategies and the European marketplace at the 2015 Alsbridge European Vendor Summit, to be held May 19th in London.

WTF(S)?

Questions, questions, questions... the Concept photo

Jeff Seabloom, Managing Director – 

I’ve recently been involved in a number of Unlimited License Agreement (ULA) negotiations where the contracts were full of arcane, intricate and complex terms and conditions – nothing new there, that’s the nature of the beast. However, I was struck by the fact that on three occasions, my team and I – all industry veterans – encountered no less than 20 items that we had never seen in an agreement. What was more surprising was that in two instances we discovered specific terms that directly negated or contradicted other specific terms – within the same agreement.

This led to several hours of consideration and head scratching, after which we deemed the items in question as falling into the category of “Why the Final Signature?” (WTFS). In other words, why bother? Why spend days and weeks pouring over the minutiae of a complex agreement in the belief that this attention to detail is necessary to build a partnership that benefits both parties – only to learn that the agreement is so one sided to the provider that very little “partnering” is considered.

Existential musings aside, the answer is that the Ts & Cs in today’s contracts have to be painstakingly analyzed, parsed and understood in all their complex glory.  Otherwise, clients are likely to have those minutiae used against them later in the contract term.  As hardware and software agreements – particularly ULAs – become increasingly impenetrable, clients need access to narrow, deep and specific expertise around individual vendor licensing strategies and sales techniques.

Lacking that expertise, clients are at risk of signing bad deals. One trap is that the myriad intricacies and multiple price points in the contract come back to haunt you. Customers will sign on to a ULA only to learn after the fact that the additional licenses they expected to acquire may be excluded from the umbrella agreement. Or they’ll realize that vague language on assignment and usage – such as, for example, how “North America” is defined – doesn’t mean what they initially thought.

This “fine print” strategy of the ULA works hand in hand with the “you’re getting a special deal” approach. Vendor account teams plead year-end management pressure to make their numbers, and convince clients they have “leverage” to drive a favorable agreement. The ULA   that is offered upfront as a prized concession loses its luster downstream when specific language and clauses turn out be not an advantage or premium after all.

Bottom line: Negotiating a software contract is a challenging proposition under the best of circumstances. Proceeding without technical and contractual expertise and specialized knowledge of vendor strategies makes it downright scary.

Feeding the Microsoft Money Machine

Louis Pellegrino Blog

Louis Pellegrino, Director – 

If you’re a Microsoft Enterprise Agreement customer these days, you might be feeling like a walking ATM. It seems that the more products and licenses you purchase, the harder the sell becomes to buy even more.

The reality is that Microsoft Enterprise sale teams are assigned aggressive growth targets for increasing account spend year over year. And the bigger the account, the greater the pressure to grow revenue from that customer.

The problem is that the opportunity for organic growth simply isn’t there.  Many large customers – those with 5000 devices or licenses – are already well-stocked with core Microsoft products.  Ironically, however, it’s the customers with a lot of products – who would seem to have the least need for more – are the ones most aggressively targeted to drive additional revenue.

One common tactic employed by Microsoft sales teams is pushing new online services that customers either don’t need, aren’t ready for or already have from other providers.

Another ploy is to use a dizzying mix of licensing metrics, shifting pricing models and executive relationships to fragment and confuse the buyer and convince them they’re getting a great value-proposition – but only if they Act Now.

Customers who push back can expect to be played the compliance card and threatened with software audits or with significant price increases.

In addition to finding themselves under constant siege, many customers ultimately come to realize that they don’t have the time, resources or know-how to leverage any of what was sold to them as a great value proposition.

Bottom line: If you’re a large Microsoft customer, be aware that your wallet is at risk.

I’ll be hosting a webinar on Thursday, April 30th at 11 a.m. to discuss how customers can effectively respond to Microsoft compliance audits and sales strategies, specifically focusing on volume licensing agreements.

What Makes Healthcare Different? (Part Two of Two)

Bill Huber Blog

Bill Huber, Managing Director – 

What Makes Healthcare Different? (Part Two of Two)

The dramatic changes transforming the Healthcare industry are having a dramatic impact on outsourcing service providers, as payers and providers increasingly focus on new delivery models and the integration of disruptive technologies. I recently spoke with HCL’s Healthcare head, Gurmeet Chahal on the concept of “Patient Centricity” in today’s environment.  Our conversation continues below, as Gurmeet discusses what makes Healthcare different.

BH For you as a service provider, what is different about healthcare from other areas?

GC: We have a very strong domain-led technology which is consistent across all of our verticals. In healthcare, we believe that we are unique in the degree to which we work across the entire healthcare ecosystem. This gives us the capability to be front and center. An example is how we are leveraging our strong medical device expertise to create next generation solutions that benefit patient, payer, provider & the device manufacturer.

BH: How are regulatory changes driving increased use of service providers?

GC: The Healthcare industry is among the most regulated. New regulations do have impact on IT services consumption. As an example ICD10 had driven growth in IT services, and is expected to have an ongoing impact in areas like RCM going forward based on the complexity of codes. All of the quality, compliance and regulatory mandates require payers/providers to upgrade their existing IT infrastructure and in some cases to build entirely new capabilities.

BH: As applicable to your services, what are common priorities for both payers and providers?

GC: We believe that new business models are emerging that encourage the payers and providers to improve collaboration. The first is based on the need to drive distinctive customer experience management. This is what will differentiate both in the long run and drive patient retention levels
Secondly, to run effective care management, claims information is insufficient. The payers need to integrate clinical data, lab data, etc. This means that they need a flexible, agile and external focused operating model.
Lastly, both payers and providers have a string need to reduce cost while improving care quality, and to accomplish this while investing in new capabilities such as analytics, social, mobility and so on.

BH: What are the things that HCL is doing to address these priorities?

GC: HCL’s approach is twofold. First, we leverage our strong technology and process capabilities, and secondly, we are investing in frameworks and accelerators where we are leveraging domain experts. For example, we have come up with a solution that we call Member Experience Management. This allows our customers to build a multichannel engagement and communication strategy. It provides a framework the gives a single view of the customer and drives the customer experience. It includes a view of workflow, CRM, infrastructure, next generation CTI Similarly, we have a solution called population care management, which allows providers to engage and drive the medical protocols that they have designed for a population pool

BH: You offer services across infrastructure, applications and business services. Is there a natural evolution among these services when you are engaged with a healthcare client?

GC: It’s very rare that we see a customer take a big bang approach of bundling the whole thing. A lot of times, we get engaged in a business solution kind of discussion. For example, in a successful population health management program, you will need a specialized application, underlying infrastructure and analytical and business services. In these cases, it’s an integrated solution with all three layers. If you look at the conventional towers of ITO. There was a lot of application development work that was happening given the exchange readiness rush. Currently there is a surge in developing front end transformation and analytics capabilities. There is a recognition that a lot of cost can be saved by outsourcing basic infrastructure and in back office functions like claims processing. While there is need and desire to move on all tracks, depending on customers’ readiness there may be a phased approach.

BH: What are unique service levels for HCl associated with healthcare? Are any of these outcome-based? 

GC: We have a number of outcome-based examples. One of the solutions that we have is a combination of applications and BPO in fraud, waste and abuse. The contract is linked to recovery through the process. Another example is revenue cycle management where a focusing on improving customer satisfaction year over year.

BH: Final thoughts?

GC: There is so much change happening in health care, but I believe that this is a great opportunity for healthcare to transform itself. There is a lot of change, but this is the opportunity to gain from this change. It is very rare to see any industry witnessing so much change at one time. On a recent airplane ride, I sat next to a retired IT executive. When I explained what I was working on, he said, “I’m really jealous. Your industry is going through so much. Through technology, you can make such an impact on the lives of humans. I wish that I had that opportunity.” That has stuck with me. We should be grateful for this opportunity, and it’s time to make that impact and gain from this change.