Phil Fersht — CEO, HFS Research[00:00]
Hey, Oliver. Good to see you again. Truth be told, we prepared a lot for this last Friday, but we were focused more on food. But Oliver, great to have you here. First of all—you’ve been in so many different roles at Capgemini, in so many different geographies. You were the head of commercial, you were the CFO, you looked after M&A. I’m pretty sure I’m missing a bunch. And now you’re the CEO of Capgemini’s Business Services. How are all these roles and influences of living and working in different places helping you be the Chief Executive Officer?
Oliver Pfeil — CEO, Capgemini Business Services[00:49]
So first of all, great to be here. It’s a great setup, so really absolutely fantastic. A little bit of my background: 22 years within Capgemini. I’ve done a lot of things across finance for many years, have been leading operations for Capgemini in Europe and have been leading operations for Capgemini in the Americas, before taking over the business services leadership role in February 2022. So with all this background, I think there are two things which really helped me a lot. One is—and to be honest, when you look at the organization and the way we have been structured, our business services unit was run, to be really honest, quite in isolation. For good reasons, because when we started all the businesses, it was more people-process led, not so much technology, but things have evolved a lot. And what I’ve seen through the group is obviously all the capabilities we have, a lot of great connections, a lot of good resources that you need to operate. And I think when I took over in 2022, the first thing I said, to really accelerate, is not to operate as a stand-alone entity within the group, but bring the best of the group to the market and to our clients. We have huge consulting, technology, data engineering capabilities—bringing those together, and I think this is a big, big thing for me which has been initiated in 2020 and we’re going for it very, very actively. So bringing the assets together for our clients through our operational transformation and run activities. And I think this is one of the key things to highlight. The other thing is, when you operate—and you have been CFO and you have been operations leader—you know a lot of the pain points. It was obviously specific to my industry, but you think about your value proposition. And we have worked a lot as a team to change, renew our value proposition, and have a big focus on business outcomes and value drivers for our clients. So renewing our portfolio, and renewing a bit the way we bring the portfolio to the client, is what happened over the last, yeah, 15 months.
Phil Fersht — CEO, HFS Research[02:55]
Yeah, that sounds a lot like what we at HFS call the one office, right? Because if you look at any large transformation, it’s not just, you know, hey, I need some IT, or I need some business process, or I need some consulting, or I need some engineering. I need all of the above. And the trick is, how do you bring everything together in a simple-to-understand and easy-to-consume way? And I think you guys are starting to call it the connected enterprise, right? Tell us a little bit more about your thinking behind this connected enterprise—it just sounds so utopia for HFS, because we’ve been talking about the one office for like 7 years now.
Oliver Pfeil — CEO, Capgemini Business Services[03:36]
Exactly. So when I look at it—and I don’t know, for you in the room, but a lot of effort has gone into optimizing functions, and it was also discussed in the leadership panel before. So optimizing your finance function, optimizing your procurement function, or whatever. I think where we were coming from, we started with a frictionless enterprise, because when we looked at where really the value is, it is when you start to eliminate frictions. And frictions are often eliminated already because we made things digital within the function, but the frictions are all in the connection points. So when you connect procurement, sales, CRM, supply chain—and when you and your supplier organization, the ecosystem—that’s where most of the frictions are happening. So when we think about connected enterprise, it’s about end-to-end process transformation. It is really looking at value generation across those end-to-end processes and trying to operationalize them and getting the pain points removed. And obviously—data has been discussed a lot in these sessions before—data is the key point, because one of the big frictions we see, and the issues we see in really creating value, is that data is available; it’s not necessarily broadly available across the enterprise, and certainly not available in a consistent manner across functions. So creating these interfaces, making sure in a connected process, end to end, the same data is available at the same time for various functions, helps obviously to drive the enterprise better, make better decisions, but also be faster, which is a key thing in the current world. I think everything has to go fast. So that’s a little bit about our connected enterprise.
Phil Fersht — CEO, HFS Research[05:25]
Bring it to life a little bit, Oliver—because everybody keeps talking about end to end, right? When I started my life as an analyst 20-25 years ago, we all kept talking about accounts payable, receivables, this and that. Then people started to talk about order to cash, procure to pay. But even order to cash is not end to end, right? There’s stuff that happens before that, and there’s stuff that happens after that. Give us maybe a client, a couple of examples.
Oliver Pfeil — CEO, Capgemini Business Services[05:53]
But obviously, implementing those is a challenge, because it’s not just a question for a service provider. It’s a question for the enterprise—and it starts with the operating model. If the operating model is not right, it’s very difficult to implement. So we have some clients in the CP space, or in the logistics space—I can give two examples where we made some breakthrough together, because it’s happening as part of a partnership and it’s an evolution. On the CP side, it’s really about connecting supply chain and finance, where we drive basically an end-to-end process: from demand sensing, demand planning, material planning, logistics, getting the stuff to the warehouse, dispatching, invoicing, collecting. Those are what we call an end-to-end process in that area. Bringing those processes together and having multidisciplinary teams working across those processes enables us—and here we come to the value part—it enables us, for example, in how we measure results. It is not anymore what is the cost we have driven out through that end-to-end process. It is about how we have, for example, increased the dispatch rate in the warehouse, which is a very critical KPI for a CP company. What is that driving? It is driving actually revenue growth, because you are faster delivering the right goods to the right people in the right area. It reduces costs because you have less logistics costs, less cost of your warehouse, less goods, better inventory. And it obviously also increases your customer experience, because the customer gets his goods and gets the right goods. So that’s one example where we drive revenue growth, cost reduction, working capital improvement, and customer experience through an end-to-end process.
Phil Fersht — CEO, HFS Research[07:33]
Yeah, so that’s a great example of what Phil was talking about earlier—moving from effort to performance to purpose, right? And you’ve talked quite a bit about this value framework that you’re looking at. Are you hopeful that we’ll move from effort to performance and purpose with this kind of value creation, if we start to look at the connected enterprise?
Oliver Pfeil — CEO, Capgemini Business Services[08:03]
I think it starts with talking value, and everybody talks value, which is the first very important step. Obviously, again, it’s a maturity question. You start as an enterprise, you work not necessarily in a value-based, outcome-based contract, but you elevate the discussion by focusing on business value. And what we have tried to do now—to give you a bit of an internal thing—we have created something we call a value office, which is basically looking at the processes we drive for an enterprise, looking at those processes specifically by industry, and creating value maps linked to end-to-end processes. And now we start to industrialize that approach through our value office, meaning not only having very precise and preconfigured solutions with the right value maps upfront, but also what are the commercial aspects—because the most difficult thing is, how do I commercialize that? How do I get actually some real skin in the game? And that is for us the next frontier. So we want to embed outcome metrics in all of our contracts going forward. We’ll probably not contractualize all of them—we will propose, we will not contractualize—but it’s an evolution. And I’ll give you another example, because you can go from effort-based into some first outcome-based things. We do, for example, for the logistics company I was talking about, cash collection as a service. So we don’t anymore charge on FTEs, but we charge basically a service that integrates technology, and we get remunerated based on the cash collected. So clearly, on a macro level, it’s a working-capital-related item. And one of the drivers to improve working capital is bad debt reduction and better collection. So that is one step in moving into outcome-based, where you get remuneration based on what you delivered—tangible outcome—and not on SLA or the cost related to that.
Phil Fersht — CEO, HFS Research[09:58]
Yeah, so Oliver, that brings me to another question. And I think we’ve talked about this—what we call the digital dichotomy. On one hand, we’ve got this macroeconomic slowdown from inflation, recession, supply chain disruption. There’s a war going on in part of our world. But on the other hand, people are just impatient to get it done, right? People are in a big hurry to innovate. So there is this slowdown and the big hurry happening at the same time. What do you advise your clients? How do you balance your priorities and investments? Because while we agree—in your value framework, you need value, but you also need cost, right? And how do you do both?
Oliver Pfeil — CEO, Capgemini Business Services[10:50]
Well, for me, the critical thing is—first of all, everybody sees, we see some slowdown, no doubt. It’s not recession, but it’s slowdown. And what does it mean? Everybody’s a bit uncertain what will happen. Sander said the next three-four quarters will probably be flattish. Hopefully we don’t come into a recession, but everybody is uncertain. And decisions are slowing down, and every investment decision is thought through two, three, four times, and everybody’s focusing on faster, quick results. So what I advise in many cases—first of all, we are in a world where we call it a dual transition towards a digital and a sustainable world, and in that context, nobody can slow down. You have to drive your digital transformation. And for me, the most important thing, when you look at the transformation, is that it is about enterprise transformation first. It is not about thinking about how to optimize the functions. And when you think about enterprise transformation, you think about what is the operating model I need for the future, what are my processes and how should I run my processes end to end. And behind that, maybe you think about what is the right technology and infrastructure to make it happen. But it starts with the operating model and with the process. And in many cases, when you go through that thought process, you think about where you invest and how quickly you get return. And in my view, when you think about it from the start, you have a lot of opportunities to gain early—get early benefits through a new process design, elimination of effort, standardization of processes, optimization of processes—before you even touch the technology. Then you think about where’s my workload, you can adjust. Then the other thing, when it comes to technology: everybody thinks about ERP transformation, the big SAP waves, the Oracle transformation. The question is, how quickly do you transform? And my view is, there are a lot of best-of-breed technology solutions that you can start to implement relatively quickly that bring return on investment. And we think that the core of the enterprise—the digital core—has to be kept very lean. And you can make the change of the digital core at the later stage. You don’t need to start with re-transforming everything. You can start to create value which is important for the enterprise, important for the employees, important for the customers, and at the very end, change your digital core. So there are different ways of approaching a transformation roadmap, but I think it’s about going for operating model, process, quick wins, fast implementation of best-of-breed technology, before you go into a huge program which takes you years, where maybe the value comes in year three, four, five, if it ever comes. So look at one-year programs, look at agile programs.
Phil Fersht — CEO, HFS Research[14:07]
Yeah, so we’ve talked about cost, we’ve talked about value. And you know, we’re not even halfway through the day, and we’ve talked about so many different topics—from data to ChatGPT to generative AI, etc.—but we’ve not talked so much about purpose, right? And I think one of the big bets that Capgemini is making is around sustainability and ESG, right? And if you think about sustainability, I don’t think the question is why. If anybody’s asking you why, why should we do sustainability, then let’s not have that conversation. The question is about how, right? How do you drive this? And you know, people don’t even know what’s the bloody data to collect, leave aside how do you drive your sustainability roadmap. So how do you do it? And as a leader of a business services organization, how do you operationalize sustainability? How do you make it real?
Oliver Pfeil — CEO, Capgemini Business Services[15:16]
Yeah, I mean, we will capitalize on our operational knowledge, because there’s a lot of link between carbon accounting and what we do in F&A and the normal accounting stuff. But let me say two things. One is how you position your enterprise, because when you talk about purpose, it’s also about your own purpose and about your employees. And in general, we put sustainability on our CEO agenda—it’s very high. So we have our own targets in terms of sustainability, and we have a public target to help our clients reduce their CO2 emissions. So that is one: it’s creating an environment where people understand sustainability will be more and more at the heart of what we do; it’s basically embedded in what we do. When it comes to what we try to do, obviously we link it with our consulting practice. The most important thing for me—and it’s not a given—is, I would say, make sure that you get to full transparency on your scope 1, 2, and 3 emissions. I think it’s relatively easy on scope 1 and 2. It becomes much more difficult when you think about your supply chain and the scope 3 emissions related to that. So that is the first thing that we try to achieve. When doing that, we have just launched a new offering we call carbon accounting as a service, which is basically industry-specific, where we try to get accelerators and process models with technology embedded, by industry, to measure, capture—first of all identify the data sources, capture the data sources, get them into a reportable setup, and over time, as we do business services and run services as well, optimize and automate the process. But that’s only the start, because what you need is—if you have the transparency, you can make your net-zero agenda more relevant and more tangible, because everybody has a set net-zero agenda probably in the room, but how to get there? And what we try to do is, through this capturing, measuring, monitoring, we get things into a sustainable data hub, we call that. And from there we have a sustainable data hub and management office, which is basically creating a few insights on how to help clients achieve their sustainable journey going forward. So that’s a way of how to engage, create a baseline, and from there operate new ideas—may it be circular economy in supply chain, may it be product designs for engineering units, and so on and so forth.
Phil Fersht — CEO, HFS Research[17:45]
Do you see a difference between the mindset here in the US versus Europe on this topic?
Oliver Pfeil — CEO, Capgemini Business Services[18:06]
We just had a discussion on this topic. I think there’s a great awareness in the US. There’s maybe a little bit more tangible work going on at the moment in Europe through regulations and so forth, but I think it may come anywhere, and most of the companies operate globally. So it’s not about, am I in the US or in Europe—I’m a global company, so I have to apply to certain regulations, and I have to do it also because ESG or sustainability becomes a criteria when picking a company and a partner. So I think it’s a very important topic on both sides. And let me add one thing, because it’s not just about how we measure. There’s another thing we try to do, and I think it’s very important for generally making progress. When we think about business outcomes, we have business outcomes which drive tangible results linked to profit and loss, but we also have outcomes which drive sustainability improvements and CO2 reductions. So when we think about supply chain, these very tangible outcomes through supply chain services will impact CO2 reduction going forward. So we make that another tangible outcome in our offerings.
Phil Fersht — CEO, HFS Research[19:11]
So look, as an analyst, I can keep asking you questions all day long—that’s what I’ve been trained to do. But my team has told me to make sure we have some audience questions. So this is your chance. Aishwarya—hello Aishwarya, do you want to wait for Rohan to give you the mic?
Phil Fersht — CEO, HFS Research[19:58]
OK, so anyway—so Oliver, I have a question. First of all, great insights in terms of where the market is going and how we’re creating new value through the resources. How much of these insights are data-driven, and how much of that is the cognitive input? As a leader, how much of it is guesswork and how much of it is data?
Oliver Pfeil — CEO, Capgemini Business Services[20:34]
Well, it becomes—I think what has been said all morning, everybody said it—it has to become much more data-driven. So once we have the data—and what we try to do through the process is capture the data through digitalizing our operations, it’s providing that data. So the next thing is creating the right analytics on top of that. And that is—we focus on sustainability analytics, supply chain analytics, and CFO analytics, because I think that’s for me the first insights we have to create. Having been a CFO, you know there’s so much data available. And my ambition is bringing, through analytics, to the CFO the insights that operations can provide. And I think today it’s underleveraged. So I’m not saying it’s fully there, but it’s clearly, in addition, to significantly double down and start to utilize the data much better going forward.
Phil Fersht — CEO, HFS Research[21:06]
So were there any times where you felt that the data was not relevant while taking the decisions and you wanted to course-correct?
Oliver Pfeil — CEO, Capgemini Business Services[21:30]
I wouldn’t say the data are not relevant. I think sometimes the data are not consistent, which makes it painful. It takes you ages to reconcile things to get to the point where you can make the right decision. You lose—I mean, many of you have experienced that as well. You have a request, it takes you two weeks to get to the right answer, and you can make a decision while your management is expecting to make a decision, or at least to get insights related to the decision, in the next hour. I think that’s the main pain point for me. It is about—obviously, when we design processes, we have to make sure the data aspects are embedded into the design of the process, which makes it, from the construction, earlier. That’s why I say think about enterprise transformation, to make it from the beginning, right? But I think the main pain point is inconsistency and reconciliation of all the things we have in the enterprise.
Phil Fersht — CEO, HFS Research[22:22]
There’s one more question that just popped into my head, Oliver. Do you think this industry needs to be rebranded? Do you think we are underselling by calling it ITO or BPO? Because it just feels constrained with these 20-year-old terms.
Oliver Pfeil — CEO, Capgemini Business Services[22:43]
We had a good discussion on that. I think we call it business services. I mean, at the end of the day, it is about—for me, the IT part in our company: we have deep IT roots now, clearly. But again, the question is not about IT. The question is how they use IT with the right process and the right operating model to create value. That’s the point. So that’s why I try to put process transformation and operating model transformation at the front, supported with IT. So I’m not sure if it’s fully responding to your question on how we should call it. We call it business services.
Phil Fersht — CEO, HFS Research[23:15]
Yeah, I think business services is better, because at least—you know, as I look at it, you guys, and not just Capgemini, but if you look at most leading service providers, you’re providing the talent, you’re providing the process or the domain capabilities, you’re providing the technology, you’re providing data, and you’re helping change management, right? So why constrain ourselves by calling it the BPM or the BPO industry, when we’re underselling our own value? It’s certainly not only about outsourcing, because the outsourcing part is a second decision to be made.
Oliver Pfeil — CEO, Capgemini Business Services[23:56]
The first decision is about how you organize yourself, and what is your best-in-class process, and what is your delivery model—to decide, at the end of the day, in that context, how you want to leverage a third-party provider. And I think it’s great to leverage the ecosystem. It has been said also: nobody can do everything, and we are the same. We leverage our ecosystem. We work with BlackLine, HighRadius, with many companies, to really augment our services.
Phil Fersht — CEO, HFS Research[24:28]
Any one final question for Oliver? You know, I have many, but…
Phil Fersht — CEO, HFS Research[24:39]
Thank you. I’m curious—as I’m listening, I’m putting a couple of things together. Phil had a ChatGPT script that had kind of built-in continuous testing, like A/B testing, through just voice. And then we talk about data a lot, and during the panel before, they mentioned the last mile. So I try to build it to the end. I think what we’re talking about—from what your client wants, while we’re emphasizing data—everything is going to become like a recommendation engine: a recommendation engine that, while I’m making this decision, asks, have I made it before? And you mentioned synthetic data before, right? So how close are we, or how close are your clients, to asking that—either for finance or for operations or supply chain? You know, I’m really looking to: do I start to veer left or do I veer right, or who do I select? That’s kind of where all this is driving toward. How close are we?
Oliver Pfeil — CEO, Capgemini Business Services[25:39]
I think—because we’re not going to clean up all the data, right? There’s always going to be some variance in there. I think in some areas we are pretty close. For me, it’s not about productivity, it’s more about the insights. Supply chain is a great example: when you do planning and you have multiple planning systems and you start to integrate those and try to have the right set of data, applying AI and machine learning to that and creating insights—I think we’re very close. We have some very good examples where you can reduce—we have consolidated planning data across seven planning engines and reduced, I think it was, from a couple of days creating the plan for the future into an hour, by increasing at the same time the data quality and the reliability of the forecast. So I think it’s happening already. And by the way, we have contracts where AI has been embedded three years ago in what we do from an AP point of view. So it’s not totally new—there are already good examples. I think it’s just now—it can go to the next level, because more and more data is available, and technology is just much more consumable and scalable in that area.
Phil Fersht — CEO, HFS Research[26:53]
Fantastic. Oliver, we’ve been shown the red light, which means we need to go. But thank you so much—that was wonderful. Thank you, everybody.
