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HFS CEO Phil Fersht is in discussion with the industry legend that is Genpact CEO Tiger Tyagarajan along with Katie Stein, Genpact’s Chief Strategy Officer.
The business services industry is in the middle of a major pivot from delivering effort-based processes to performance-driven business value, where the value lies in the quality of data and business impact, as opposed to counting butts on seats and checking boxes.
Phil, Tiger, and Katie dig into Genpact’s 25 year journey that started with the company providing managed services and has evolved to supporting real digital transformation using Data-Tech-AI.
You can listen above or watch the webinar here:
The webinar had debate on the following pivotal questions:
Related research:
You can download a complimentary copy of the HFS view of Genpact here.
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This transcript was auto-generated from the original recording and lightly edited for readability. We've done our best to catch errors, but names, technical terms, and company references may be misspelled or imperfectly captured. For the definitive version, please refer to the original audio or video. Views expressed are the speakers' own.
Good morning if you’re in the US, good afternoon if you’re in Europe, and good evening if you’re in Asia. Welcome to a webinar. It’s been a while since we’ve done one of these, but we felt we’ve done some great research and we have some great guests today, so we wanted to have a live discussion on the future of our industry, particularly around business services and transformation. We have some of the protagonists of this industry, who have been a big part of it over the many years of growth and have been good friends of HFS and myself personally. I thought many of you would love to hear a bit more from my two guests. So without further ado, I’ll ask you, Tiger and Katie, to introduce yourselves. Tiger.
Thank you, and yes, we’ve done many of these, and it’s always a pleasure to do it in this format with you. Tiger Tyagarajan, President and CEO of Genpact. I’ve been in this industry as it’s evolved over many pivots, and I think, Phil, you captured them very nicely in your various articulations of the pivots of the industry. Now based in London, and really glad to be joining this discussion.
Great. And this is Katie Stein, also with Genpact. Phil, can’t wait to get into the discussion, hopefully get some questions from the audience. I lead strategy for Tiger here at Genpact, and Tiger said he’s been through many pivots — I’ve been here six years and I’ve seen many myself. The industry continues to evolve and iterate at a rapid pace, and I look forward to talking about what’s next.
Well, this is great. I think I first met Tiger around 20 years ago, so we’ve been through so many pivots we probably don’t even know where we are anymore. But Tiger is probably known as one of the founders of what is modern-day business services today, in his role at Genpact. He was too modest there, but I think a lot of people will be very excited to hear from him, and about where we see things going in such climactic times. We’ve also completed a terrific study on the future of the industry. We worked with Tiger and his team on this and substantiated it with lots of HFS research. It’s a free-of-charge market impact report you can grab from our website — we’ll share a URL and a copy with everybody who registered today. So let’s talk about how much everything has changed. When we look over the last three or four decades of our industry, we can see many iterations — moving from shared services through the original offshore outsourcing to where we are today, with much more digital outsourcing and shared services as we look at future delivery. We’re now at a point where we can look at the big things that have driven massive change over the years. As much as we’d love not to say this, most enterprises tend to do things reacting to events versus planning ahead; usually it’s big events in the industry that make the difference. The first was around 1995, when the internet came of age and enterprises globalized. This was a massive change for how we did business globally, and a huge driver for global services, shared services and offshore delivery. The next big trigger was 2008 with the Great Recession, which shifted the mindset into how we truly take advantage of global labor and global talent to do things faster, cheaper and more effectively. This was really the beginnings of offshore business services and offshore IT and digital. The ’08 trigger saw the big IT services firms like your Infosyses, Wipros, Cognizants and Accentures grow massively, and they’re still growing. Leading business services firms like Genpact, and Accenture Operations, grew heavily in this period too. We believe we’re just coming to the end of the latest trigger, trigger number three, which is really the impact of inflation — particularly wage inflation — and the unavailability of low- and mid-cost talent. It’s hard to get talent these days. Our research shows many enterprises looking more at third-party partnering, and if you look at the deal pipelines right now there are a lot of first-time outsourcers looking to make the move. This combination of recession, inflation, talent dearth and the need to move fast is really creating this third trigger. As an analyst, I’ve never seen a time with so much uncertainty — a lot of hope, a lot of uncertainty, a lot of shining lights, and a lot of areas for concern. Just to pull some data — this is a survey that hasn’t even finished yet, we got this data two days ago — covering the Global 2000, looking at macro-environmental factors adversely impacting organizations today. The big five coming out loud and clear: cybersecurity is leading the way as the biggest concern — data breaches, the need for ISO 27001 compliance, privacy risks. We’re seeing big issues around supply chain disruption, some caused by the Ukraine war, some by the pandemic, now by the decoupling of globalization. Inflation is rearing its ugly head and not moving down as fast as we’d like, particularly in the US, where we saw record job growth in January and February. While that’s great for economic booming, it’s terrible for inflation, and it’s driving concerns among CFOs — we’re seeing belt-tightening and decisions taking longer. Changing consumer expectations are hitting certain industries: in banking everything is free, people don’t want to pay for anything anymore; in healthcare, mental health is no longer a taboo topic, so people are demanding those services. And attrition of staff is becoming a much bigger issue than even six months ago. Other things, like getting staff back to the office, are less of an issue now, and even recession is less of a concern than inflation. Unfortunately, things like climate change and DEI have dropped off a little in the last year, probably because of prioritization elsewhere. To give you a flavor of the sourcing industry — another study that hasn’t been published yet — we asked over 500 enterprises across the Global 2000 what they were doing with their IT and sourcing budgets. About a third are sticking with their original forecasts, but the rest are reviewing decisions, reducing spend, putting things on hold or going through cost-reduction exercises. So only a third of these contracts are actually staying the course. There’s a lot of change and disruption. It’s an interesting time if you’re a company like Genpact, because you have a ton of potential clients, but the speed of bringing them home and the dichotomy they face with risk and cost is slowing things down. On IT budgets: last year we saw an increase of 11%; this year that’s already down to about 4 or 5%, and that’s not even including inflation. There’s less money to go around and belts are tightening. This is a difficult year, let’s not sugarcoat it, and the need for third-party services has never been more pronounced. We’re calling this a digital dichotomy: enterprises want cost savings and pre-inflationary prices, but they want it fast, and they want innovation as well. How do you save money and get innovation at the same time? It’s a big challenge. If you’re an ops leader or IT leader and you don’t know how to run an autonomous exercise or an AI initiative today, you’re toast. You’ve got to understand this stuff, get real and get quick. This isn’t 10 years ago when we were struggling to do outsourcing; this is how you transform your business, fast and at cost. This drives us to thinking around the autonomous enterprise. If you’re a leader today, you need data to be successful — whether it’s your supply chain, your customers or your internal operations. It’s not just about end-to-end process anymore; it’s about interactions between machines and people, people and people, machines and machines. You need a digital audit trail of everything going on in your enterprise. I believe this isn’t just about machines making decisions — it actually drives power into the people making those decisions, because your AI, automation and service provider give you data, but you’re the one who needs to know what data you need and act on it quickly. You need infrastructure that can house that data securely without silos, automation you can trust that scales rather than brittle, patched-together RPA, AI that finds patterns in your data, and a robust governance capability that can monitor and manage all your key decision touchpoints across the enterprise. That’s what it’s all about: when are decisions made, why, how do you make them fast, and how do you keep refining your data, processes, people and talent to move things forward. So, based on some of this, I’d like to throw a question to Tiger to kick this off: what are the current triggers you see impacting your enterprise clients, both positive and negative?
So Phil, in your slides you teed up a number of the things we’re seeing, both in terms of what enterprises say they’re facing and in terms of their response, and in their attempt to get to what you’ve called the autonomous enterprise. The four words I’d call out that our clients and the enterprises we see are clearly dealing with at a meta level: one, volatility of all kinds. It’s impossible to think of a time when almost anything in the world changes at a cycle time far more rapid than ever before — demand, supply, rules, where am I going to get the next customer. Everything is changing so rapidly that you can’t plan for one- or two-year time frames; cycle times are much shorter. Second, therefore, agility and the ability to predict and respond is going to be a winning formula for everyone. Third, that means you need to connect the front to the middle to the back with a digital thread — I know you call it the OneOffice at HFS. That digital thread allows information to flow at basically the speed of light, so it’s instantaneously available when a change or signal is detected. And the fourth is data. People are realizing the true moat anyone can build around their business is the ownership and use of data that they have and no one else has — data that lets you build insights and predictions. Everyone talks about AI, but the real use of AI is how you use it every day to predict the next decision that allows the human and the machine to interact continuously. So in the search for dealing with volatility, with agility at lightning-fast speed of information flow, and the use of data to build insights, comes the need for partners — no longer is it “I’ll do it all myself.” I need to do it fast, I need people who’ve done it before. That’s driving our industry. I’ll conclude with two things: we’re seeing really smart enterprises say, “I want to protect my long-term strategic imperatives — my transformation agenda, digitizing my middle, front and back. Where am I going to get the investment dollars? I want to cut back on the cost of all the other things I do, and I want it now, because I want to take that money and put it here.” So we’re getting business helping drive change, and helping drive cost to fuel that change. Katie, do you want to add anything?
I think that was super comprehensive, Tiger, so I’ll keep moving.
So do you think stability is ever coming back? It just seems to be getting more and more complex as we progress. Or do you think this is a one-time period where we’re having this global assault on everything we want to do that’s stable?
I’ll jump in there. I actually think this pace of change is our new reality — and it’s not just the pace of change. What businesses are struggling with is keeping up with that change. While the cost and complexity have all increased, your slide earlier, Phil, illustrates how the cost of prediction has decreased. So for all of us it’s how you harness the power of prediction — the cost of which is coming down for the enterprise — in order to be more agile as we have more volatility. Stability will not come back in my mind, but we can harness our information better to proactively respond, as opposed to reactively respond.
So the smarter, more nimble and more effective we are, the more we can move on a dime. Hey, we all managed to move our entire businesses to remote locations in three weeks, right? There’s a decoupling of supply chains I’ve seen where you have to make very quick decisions on markets and products like never before, and being prepared for what’s coming down the road. So let’s talk about the industry we’ve all grown up in. We put out a thought on this: no one’s officially relabeled or branded what happened to what was originally BPO, but until about 2010 — call it “old-school BPO” — this was all about cost savings and efficiency: how do you report data, enable with tech, lift and shift. There was a joke that BPO used to be all the stuff you couldn’t put in an ERP that needed to be done cheaply and fast. Then we had the period from 2010 to 2020 — God bless it, we did a lot of great pontification. We envisaged what good looked like, but things moved very slowly; there weren’t a lot of triggers to get away from the cost-plus approach. Still, data moved to decision-making support, real process experts emerged, and technology emerged as a productivity tool. Lift-and-shift became fix-it-and-lift-and-shift, and there was a lot of talk around SaaS and streamlining. And then we get to today, which we’re calling the Big Hurry. It’s about built-in discipline, accessing scarce skills, data used as an asset, and the full convergence of IT and business operations — some companies barely see a distinction between the two. The provider becomes much more of an orchestrator and a provider of data. Ultimately you need data to be successful, and all the stuff that goes on to get to that data can happen behind the scenes. Do you really need to know every single generator that produces your electricity? So I’ll flip this over to you — maybe Tiger, you want to kick this off — what is your vision for the next five years of this business services ecosystem based on everything we’ve come through?
So I’ll kick it off, but then I’m going to turn to my strategy head to articulate this even better than me. In late 2021 and early 2022 we worked on our Blueprint 2026, our five-year vision, exactly the way you described it, and we revealed it to our investors, the street, our customers and clients in June of 2022. At the core of that is all the things we’ve just described: how do we build an organization that is truly a partner in the strategic journey of our clients as they navigate what I think Katie rightly called a world of high volatility that we don’t think is going to change, because we think it’s the new normal. Part of the reason is that in a highly connected world, any tremor felt in any part of the world for any reason is felt everywhere. Since tremors happen every second somewhere in the world, the whole world continuously feels it. So this is going to be a world of volatility forever, and therefore agility forever. Our five-year game plan is: having chosen the industries we serve and gone deeper and deeper into building expertise in the processes and data that give our clients competitive advantage in those industries, having built partnerships with a range of technologies and brought them into end-to-end services that we orchestrate for clients — building, designing and implementing for them, and sometimes running it for them. So we’ve thought about our business as Data-Tech-AI and digital operations. Today that business is 45% Data-Tech-AI and 55% digital operations, with Data-Tech-AI growing at 15%-plus and digital operations at 6-7%, the total company growing at double digits; over time Data-Tech-AI will probably become more than 50% of the business. Our whole thesis is that we will deliver outcomes for our clients and orchestrate commercial models where we get paid based on those outcomes. Today about 14% of our business is paid on outcomes; we’re on a journey to 20-25%. Katie, why don’t you jump in and add some more to that original framing?
Absolutely. Phil, I think Tiger touched on a lot of the points, but one of the areas I always think of for the future of the industry is evergreen transformation. Think of what we just said: there is no stability, we’re in a constant state of change, customer expectations are shifting, supplier networks are changing, and our clients are stuck in the middle of this, candidly. So it’s about service providers in the business services ecosystem acting as that orchestrator to bring visibility and transparency that does three things. Number one, it pushes end-to-end thinking — the upstream and downstream changes. Number two, it highlights as systems start to degrade and processes start to lack the agility we need to be successful. And three, it signals where the ecosystem is starting to find friction. This is a very different stage of our journey — one that was about securing the foundation, leaning and digitizing the processes, to now being centered on orchestrating and leveraging the data we can harness from the enterprise to do those three things. Providers who have the domain or business context are the ones that can help clients the most as they harness technology, data, AI and process together.
Yeah, and Phil, one last quick one, because you used the word ecosystem. We’ve used the word ecosystem inside the company a lot in the last five or six years. The only other people we’ve found outside of Genpact who use that word a lot are you and your team. We’re big believers that we’re in an era where transformation cannot happen unless it’s an ecosystem transformation. No enterprise can drive transformation without penetrating the walls of their suppliers, their customers and their partners — assuming they’ve already penetrated the walls of their employees. How good is your data but for the fact that it’s actually good when it comes in from the supplier and back in from the customer?
Yeah, so that means a provider needs to work across the different components and players right across the value chain of that industry to start piecing the pieces together, because then you get to know your customers’ customers better and your customers’ suppliers better. So if you’re dealing with a high-street pharmacy, a life sciences firm, a biotech, a pharmaceutical business — you can start to piece together the FDA and that whole ecosystem across the value chain and pull them together, and almost become an orchestrator of these systems, because you’re providing the one thing they all need. We talked a lot about what we call this industry moving forward. It’s an industry that’s evolved with many different names and labels over the years. BPM, about nine or ten years ago, was a term I think NASSCOM came up with, around business process management, but I believe it’s become a lot more than that now — it’s process, technology, data, change, people. What do you guys think when you look at your business and the industry you see yourselves in? How do you view that these days when you talk to your clients?
Yeah, I’m happy to jump in. It’s funny — I talk to my teams about how operationalizing insights is critical; that’s actually how you get to speed and escape velocity. But the industry often started with taking a process and leading with a process. Imagine you’re one of our clients in a space we spend a lot of time in, which is financial crimes. We talked about the cost of doing business going up: the regulations are getting more intense and the number of false positives continues to escalate. More and more transactions you’re looking at means more false positives, which means more labor — if we approached it through just the process door. But when we look at the data we can capture and the technology we can use, and combine and integrate them rather than coming through one door, the answer wouldn’t be to go through each false positive as an exception. It would be to use machine learning to understand and predict whether that false positive has a high rate of risk. If it doesn’t, containerize it, stick it in a cooler, leave it there; next month, if you see another false positive for that same customer, you go back to the cooler and pull it out. So it’s actually eliminating work using these technologies and data, and embedding that into workflow — which is where process comes in — so you have the lineage and transparency to show the regulator what’s going on in this highly regulated space. And it informs back to your prediction models for a higher rate of success in understanding what is actually true and false. So process and operationalizing these components is absolutely critical for our clients, especially at scale and speed, but data and the ability to use that data is changing the way we work.
Now, I’m completely with you on the whole data piece. When we look at relationship maturity — and I think this is key to where the industry is going — a lot of relationships today are still stuck in what we call effort-based relationships: time and materials, focus on cost and efficiency. Around 30% of relationships are now shifting into a performance-based model, where we see more gain-sharing, more performance pricing, more focus on driving business outcomes. And then eventually, as we talked about with ecosystems, an era of purpose: how can you work with your clients and suppliers to find new areas that drive shared outcomes and shared benefits for both parties? Some of the deals I see on the table today aren’t three- or five-year deals — these are going to be 10-, 20-, 30-year engagements, they’re so complex. That builds in a different type of decision-making about the business you go after. Another thing: we ran a study with NASSCOM last year of 300 companies running BPM engagements, and we asked how they would rather pay for these services. This will blow your mind, but two-thirds would prefer to pay on performance or data quality, and only a third would continue paying in the old model of numbers of people or time and materials. So why is there this dichotomy? How can we generally move the business services model from effort to performance? I know you’ve made some commitments in your Wall Street statements to move a certain percentage of your clients onto outcome-driven models — but how do we ultimately do it, and how do we even get them to purpose past performance?
Yeah, so Phil, some of us in the industry, and some people who watch and analyze the industry and predict where it’s going, such as HFS, have been talking about this for many, many years. We’ve been pushing the agenda, and at times it’s almost felt like trying to push a stone uphill. What I’d say is there’s a rolling stone that is now beginning to gather momentum, finally. It has many aspects. One is that everyone is getting aligned to outcomes. There’s a degree of confidence in being able to measure those outcomes in a reasonably clean and simple way, rather than spending too much time being contentious about it, and then being able to orchestrate contracts that align goals and commercially reward each other for delivering those outcomes. So I can see that momentum really building. Having said that, here’s the other interesting phenomenon: a number of enterprises are beginning to look at partnerships and outsourcing for the first time in the history of the enterprise. It’s a little flabbergasting, because your chart started in 1990 and now there are enterprises just waking up. The good news is it shows how under-penetrated the market still is. When a brand-new enterprise starts the journey, we find it more difficult on day one to convince them on a commercial model tied to outcomes. They want it, which is what your chart is saying, but they don’t contract for it on day one. But here’s the good news: they all know they want to get there faster than the others, so they say, “Give us two years, let’s start the journey, and then we’ll sit down together and recontract it” — which we are doing in many cases. So I think the train has finally left the station.
Interesting. Does it take more C-level conversations to make this happen? A lot of these relationships get stuck in procurement or departmental areas — I’ve even seen quarterly pricing emerging. Do the conversations have to be driven up to the top of the organization?
Yeah, there’s no question. Let’s go to one of the core issues. If you’re talking to a supply chain leader and convincing them to build on outcomes and pricing based on outcomes, sometimes those outcomes are benefiting the sales leader of the company. So the supply chain leader says, “I don’t know how to pay for this; the sales leader has to pay for this, because he or she is getting the benefit.” The only person who can broker that conversation is their boss, so you have to go higher. In every one of these cases, there’s zero chance of getting outcome-based commercial models unless you go to the top of the house.
But I would agree completely with Tiger, and Phil, one of the things I’m seeing — and you talked about this earlier — is breaking functional silos and creating joint accountability. The last few years have brought to the top some areas where data services providers can support clients that aren’t your traditional SG&A cost places. So, like Tiger’s supply chain example, I have a client right now where the top leadership team all collectively holds an objective in their scorecards around the success of the implementation of the technology and certain key metrics. Why is that important? Because now it’s not fragmented — it’s not the supply chain leader having to work with the CIO to align. They all hold a common objective, and we as a partner can align to that common objective. So we have a shared set of goals, a shared timeline, and we can structure our contract around that so we can collectively be successful. I’m seeing that more and more — CFOs and our customers are saying, “This is existential. If we don’t fix our supply chain, we cannot meet our commitments to the street.” It’s just not feasible.
Great point. A lot of questions are coming in around education and talent, so I’ll get onto that topic now. We presented some data recently that went out to 1,800 employees of service providers, particularly during the height of the attrition we were seeing at the end of last year. We wanted to get to the bottom of what was happening, because it was hurting the industry and some client relationships. We asked them, “Would you like to feel more challenged in your current role?” Absolutely — close to 90% claim they’re bored. How many would accept a similar job with a competitor for a 30% pay hike? Quite a lot — 54% are fearless to move. Would you find a job as good elsewhere? A lot of them think that’s not a problem at all; they’re not particularly loyal. The one element that is very encouraging for our industry is that we asked if they’re passionate about business services because of the difference they can make to Global 2000 enterprises, and this is where we see 90% of employees within these providers — and we covered 16 of them — see a ton of potential. So how do we do that? We need to build an industry that is sexier and more exciting. I was reading somewhere that services is the fifth choice of industry in India today, behind tech, and people also want to go to startups and other firms. So how do we make this industry more exciting for the best and brightest, so we can build a talent supply chain for ourselves?
Yeah, part of the answer lies in everything you just put out there in that chart. The good news is the bottom: there’s a feeling among the talent base that they can make a difference and want to be passionate about the industry. As an industry, and as Genpact, our job is to articulate that one of the big joys of working in our industry is that you can actually use all these new technologies that come out every day. Let’s talk about large language models — people have only started talking about large language models since December of 2022, so it’s as fresh as it can be. One of the best places to see what you can do with large language models is the kind of services we offer our clients. At any given point today we probably have 50 experiments going on using large language models in our services to add value to clients, while making sure privacy and security are taken into account, which is not easy. So, number one, creating that excitement in the younger population coming into the workforce; number two, providing them the skills, tools and learning opportunity, because two years from now there’s going to be something else that comes in, different from large language models. Are we prepared to teach our people and give them the opportunity to learn and then apply that in their service and their industry — experiment, try? That’s the joy of our industry: multiple industries, multiple clients, global, trying to drive change. I don’t know what other industry provides that opportunity. It’s our job to constantly explain and show that. Katie, do you have a perspective on that?
My first perspective is that our colleagues like to be part of innovation, and the programs we use, like Data Bridge or Tech Bridge, teach them to drive small transformation and innovation in everything they do every day using those technologies — that’s key. The second thing, which I didn’t hear you mention, Tiger, is: what industry do you have the opportunity to say, “Today I work for Google, and tomorrow I work for Morgan Stanley”? That’s the nature of the data services industry, where our colleagues work with some of the largest global brands and some of the most forward-thinking disruptor brands in their industries. If you connect the first point, that they’re driving innovation, with the second, that they’re part of a much larger brand driving disruption, that’s a very exciting proposition — and it’s for us, our customers and our partners to jointly communicate that to our colleagues.
I’ve got a question that’s very appropriate here: we’re trying to get folks back to the office and build more collaboration. What are you having to do differently as an employer — with your management teams, the way you manage and train your staff — today than you were maybe five years ago?
I’ll start, Phil, by saying that we’ve always, as a leadership team, right from the early days of the pandemic and thinking about the world post-pandemic, had a view that there is no one-size-fits-all, cookie-cutter answer. So our answer was not going to be that everything is remote — we thought that was wrong — nor that everyone has to come back to the office, which we thought was equally bad. We think about the world in three buckets. Bucket one is where people come to a common place, the office, where they innovate together, share ideas, do workshops, value-stream mapping and prototype building. They do that for a couple of days, then go back to working remotely wherever they were, and keep coming back with a rhythm and a purpose — and when they come back, they do things together rather than individually in individual rooms. Cohort two is the other extreme, where because of the kind of work, the industry served and the regulations, some types of work — fortunately not a big percentage — always have to be done from an orchestrated office environment, five days a week. And then you have people in the middle, a couple of days a week. So we’ve divided up the workforce, the services and the clients we serve into those three cohorts, and we tell our managers and leaders to orchestrate that. We believe 100% remote with no human interaction is a long-term recipe for failure, because you don’t have learning or sharing. At the same time, we’d lose all the benefits we learned in the pandemic if there’s no need to come to an office and you just sit in a room and do calls. Why come to the office for that? So we think the world is an orchestrated, flexible world, with teams coming together for a purpose in an orchestrated manner.
I have another question, going back to the conversation we were having earlier about outcomes. How do we ultimately get over the barriers to an outcome-based model? Is it confidence, trust, parity of commercials? What do you find is the big block stopping enterprises from making that bolder shift?
Did you want to go for that?
I think, look, we’ve been on this journey now, and thinking about where we’ve had the greatest success — we’ve had many attempts, some better than others, but the greatest success started with things you can clearly measure, like transactions. Moving away from labor to transaction-based pricing, which is the beginning of getting to a different type of commercial model, was the first step, because it’s easier to measure, quantify and agree between two parties. Then you get into areas like sourcing and category management, where again you can measure hard savings. What that signals to me is that to get to this outcome-based nirvana, it’s about defining frameworks with our clients around how we’ll collectively measure the objective we’re driving toward, and it’s different by area — whether it’s inventory management or growth in ad sales. We have to pick the spots where our clients have control over the outcome, where the client signing the SOW can, with us, collectively measure it. Otherwise it becomes very conceptual and clients struggle to see how it comes back to their objectives, scorecards and P&L. So that’s what we’ve been working through: how we find spots where we can put clear metrics and measurements, build a baseline with our clients, and then iterate quickly with them to manage those commercial models.
I think you have a great point around letting the client have some element of control — that’s very important, because if they don’t have that, they’re not going to do it. Give them some control and they get confidence and clarity, and that’s when the magic happens. I think they worry — if they’re a legacy client getting their 200 FTEs a year, they feel control there, because they hit these little green lights and know what they’re spending. How do they maintain some control? That’s important. You’re a customer; you want to feel that if this sucks, I can get out, like if I rent an apartment.
It’s a super important point. We’re talking here more about the constructs of the commercials, but even on a topic like experience, we’ve been working in a space such as record-to-report and saying, everyone says they want a better experience for their business partners in the retained organization — how can you give the retained organization some control over defining, at a granular level, what better experience would look like? Because then we can measure it together and take some of the noise that happens within a company and with partners out of the equation, and come back to those fundamental design principles: what did they want higher quality in? Was it number of days? Was it a measure of quality attributes? That, Phil, is also giving control to our business partners, so they can help us define it.
That’s right. And if they’re demanding pre-inflationary wage rates and innovation at the same time, I don’t think there’s a choice but to start having this conversation — it’s not going to be possible. You can’t provide those same 200 FTEs at the same price they were getting four years ago, unless you want to lose money. So let’s finish up with some predictions about what’s truly going to happen in the next couple of years. If we’re totally honest, looking at the current state of the markets, what do you really expect the next two to three years to look like for the business services industry?
So I think two to three years is a good horizon. In the short term, we’ve just talked about all the complexity, costs and challenges businesses are facing — inflation, the war, interest rates, the cost of capital being more expensive. In the short run, we’re going to see a boom in the industry of both what we’ve known very well — programs that help stabilize a client’s base, build better foundations and give them operating leverage to reinvest in their businesses — and we’re seeing it in our pipelines and bookings. The second is what Tiger talked about: historically the industry may have been more oriented toward areas of the business that were non-core or considered more back office. Over the last few years, we’ve made huge strides using data, technology and AI to illustrate how the scale of a partner can play in the middle and front office. That’s where we’re seeing hypergrowth — clients coming to us and saying, “Look, I need to grow. I can manage my enterprise clients; how can you help me with your scale and your ability to have better client segmentation and manage the long tail for me?” Or in supply chain: “I need to deliver to my customers; I’m managing my large supplier base, but I’m short because of supply chain fragmentation from the long tail of suppliers — how can you help me manage that?” Or ESG coming into Scope 3: “How can you help me dive into this issue and manage it?” All these are things enterprises are set up somewhat rigidly to manage — their highest-priority activities, clients and suppliers — and this is a time for us to leverage all these technologies to truly achieve third-party scale, to help our clients expand the parameter of how they can grow and thrive.
And Phil, to add to that very important dimension Katie called out, again in the two-to-three-year horizon, there’s something we’ve started seeing finally — because we’ve been talking about it for 10 or 15 years, we meaning Genpact, but it’s beginning to resonate dramatically all of a sudden. We’re going to find a lot of mature enterprises that have been there, done that in outsourcing, partnerships and technology come right around and say, “Actually, we’ve always been looking for scale technology. In reality, we only need so much scale. We don’t need this much — we need enough scale. What we really need is: do you know how to use the technology? Do you have people who understand how to use it?” It doesn’t matter which one — let’s pick SAP S/4 on our journey, or a ServiceNow implementation, or Salesforce, or moving everything to AWS in the cloud. In every one of those, “Don’t parade me 30,000 people who understand the tech. Can you show me 1,000 people who understand the tech? Can you guarantee me 30 of the best people from there? But more importantly, can you show me the 5,000 people who use the tech — in supply chain, or in underwriting for insurance, or in claims, or in sales and commercial effectiveness for small businesses,” and on and on. So the coming together of technology chops with an understanding of the industry, the domain, the process and the data is finally beginning to rise. We talked about it on our earnings call, so this is not new information, but all of a sudden our technology pipeline is growing, filled with people who say, “We want your tech chops combined with the domain and data.”
Yeah, I know exactly what you’re talking about. We’ve seen laid bare that clients want more business-contextual, heuristic skills and less of the bread-and-butter IT. How do you produce those? I think it’s taking smart kids from college and training them up — these people don’t just appear by magic. You have to train them, and get people who’ve done this to really get more into the how. So, in the remaining time we have, I’d like each of you: if you had one wish to change this industry for the better, one thing, whatever you want, what would it be? Maybe Katie, you want to pick that one up?
If I could do one thing to change the business and IT services industry, candidly — and it’s a journey we’ve been on at Genpact — it would be to eradicate the word FTE from our conversations. Only then will we get into the grittiness of solving what you talked about, Phil: how do we move toward more purposeful relationships, and toward the greater outcomes that accompany those? For our clients this is super critical, because only then will we find the solutions that actually help their business perform well beyond operating leverage. So for me, it would be to eradicate FTE from everything we say and do as an industry.
We’ll just delete it.
And Phil, along with that, I’d say everything we spoke about in the last hour goes back to building truly deep, trusted, transparent, honest, aligned-goals relationships. In a world of more and more AI and prediction models available for everyone, the real differentiation for the industry is going to be the realization that a true culture — a meeting of the minds on a long-term basis, with true trust between everyone in that relationship — it’s an ecosystem. The faster the industry and its participants get there, the better, because technology is going to be available for everyone to use. Then it’s a question of how we build trust to drive value faster.
OK.
Is that your wish? Phil, what’s your wish?
Oh God, no one’s ever asked me that one. My wish for this industry — more women in leadership roles. There you go.
That’s a good one. Yeah, that is a good one.
You guys set the example, right? So it’s a good one. This has been fantastic. We’ve had a lot of questions come in, but I think we’ve answered most of them along the way, and this has been a very good level-set on where we are as an industry and where we’re moving. It’s been great hearing from you both, Tiger and Katie. We should do this more often. On behalf of everybody — we’ve had a very large number of people dial in for this — I hope they’ve got some value; I certainly did. It’s been a very rich conversation and I can’t wait to keep this moving.
Thanks a lot, Phil.
As always, you cover a full spectrum. Thank you.
This is great, and we’ll have a recording of this available pretty soon — you’ll get it on our website, we’ll put it out on LinkedIn, and we’ll make available the paper we’ve all written, which touches on a lot of today’s conversation. Thank you everybody for your time, and on to the next one.
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