TBR perspective

The first theme to emerge in TBR’s discussions with industry participants — coping with COVID-19 — centered on the maturation of approaches, solutions and ongoing concerns across the IT services space. Vendors continue to prioritize employee safety while increasingly looking to employee productivity measures, and continue to prioritize sales and go-to-market motions around retaining existing clients. Not surprisingly, some vendors have seen the pandemic’s sustained presence as an opportunity to organize offerings and solutions around pandemic-dedicated business units. The second theme, based on extensive discussions with IT services and consulting leaders over the last six weeks, focused on positioning for 2021 and recognizing that this annus horribilis must end before enterprises can truly return to growth. While IT services vendors and consultancies have seen some profit and growth pockets, notably in cloud and security, the overall sentiment can be summed up as, “Survive and operate now; grow next year.” The final theme, emerging from the vendors’ earnings releases last quarter and in-depth discussions with subject matter experts in areas such as supply chains, healthcare IT and outsourcing operations, was scale. Many people TBR spoke with believe scale matters more now than ever, in large part because sustaining operations and retaining talent through what will be a chaotic end to 2020 and a likely rocky start to 2021 require sound financials, the ability to pivot resources to new areas, and the wherewithal to acquire talent and serve new clients when smaller vendors collapse. TBR expects this last theme to carry well into 2021 as federal, state and local budgets begin to feel the pinch of dramatically reduced tax collections caused by the COVID-19 lockdowns. With the overlay of these themes, TBR sees the following six topics as key for 2020.

COVID-19: Coping with employees

Having managed or muddled through the shift to all-remote working and delivery, IT services vendors and consultancies have now begun to face challenges around reopening their offices, including establishing newly defined roles and restructured physical spaces, with variations across every region and country. Companies need to wrestle with setting new work-from-home policies, right-sizing real estate and addressing lingering worries around the virus. In this transitional phase, IT services vendors and consultancies can test their own technology solutions and change management even as they roll out return-to-workplace offerings for clients. For the most aggressive companies, IT services will encompass areas as basic as connectivity and as pandemic-specific as biometrics, telemedicine, enhanced IoT and contact tracing. As vendors do begin allowing employees to return to their offices, some are looking to embrace a hybrid approach with employees working both remotely and on-site, which requires further adapting to remote-working tactics.

Coping with clients

Retaining clients and securing a larger piece of a shrinking budgetary pie continue to be IT services vendors’ and consultancies’ primary concerns with respect to clients as the pandemic continues depressing economic activity, particularly in hard-hit industries, such as transportation and retail. Further disrupting traditional sales motions, attracting and landing new logos has become vastly more difficult in an all-virtual environment, challenging IT services vendors and consultancies to develop novel ways to promote new offerings to existing and potential clients. TBR expects to see changes in marketing spend, particularly as companies begin learning what promotional efforts do and don’t work in an all-virtual reality.

Moving into a third quarter of pandemic-caused disruptions across the entire IT services and consulting space, TBR has spoken with vendors and clients across three broad themes — coping with COVID-19, positioning for 2021 and scaling — leading us to focus our 2H20 intelligence gathering and analysis on six topics.

Understanding the risks of returning to the physical office

As PwC and its clients begin the slow and uncertain return to physical offices, the firm has responded with solutions to help navigate business, health and safety concerns, while keeping a close eye on risks. With clients across the full spectrum of industries and geographies, the firm’s insights into factors challenging a return to workplace, opportunities presented by compelled changes, and risks both obvious and unexpected have become invaluable as the firm assists clients in what Risk leaders described as the mission to “help clients navigate massive disruptions and uncertainty.” Risk leaders shared that clients are reimagining the workplace and the workforce, questioning which roles are best performed in the traditional workplace; what kinds of physical offices meet business, health and safety needs; and how to mitigate the risks around a feared second wave of coronavirus.

While PwC has been active in assisting clients with immediate challenges, such as navigating the coronavirus relief bill, helping them organize for the massive change management related to Libor’s replacement, and addressing essential safety and productivity issues (see TBR’s special report on PwC’s “Check-in” solution), the firm has also accelerated efforts to pull together PwC-wide assets into newly configured platforms that specifically address the risks associated with returning to physical offices. The firm described its Workforce Planning for a Return to Workplace Dashboard as a technology-enabled tool designed to facilitate clients’ data-driven decisions around a wide range of risks. The tool creates a client-specific dashboard with data and analysis around health, safety and operational risks, as well as analysis around business considerations and employee sentiment and preferences.

In TBR’s view, zip code-specific healthcare (COVID-19) data paired with local regulations around return to work provide an immediately relevant operational view for clients evaluating risks around returning to the workplace, essentially providing a curated way to look at the complexities of all the locally specific issues when planning at the national or international level, knowing one size does not fit all in the COVID-19 world. The platform also provides clients with insight into employees’ remote working preferences, historical trends and risks broken down by region and by employee role. In PwC’s efforts to help clients operate with greater agility, gain better visibility into their business and risks, and anticipate what is next, these newly developed products should provide the firm sustained opportunities to engage with the full range of services.

During an hour-long analyst briefing session, PwC Risk leaders, including Tim Ryan, PwC US chairman and senior partner, shared with TBR recent developments around the firm’s response to COVID-19 as well as shifting client sentiments around the macroeconomic picture for 2020 and 2021. While the following special report contains information provided by PwC as well as TBR’s analysis, a more complete assessment of the firm can be found in TBR’s recently published semiannual Management Consulting Benchmark.

With technology a given, cultural readiness differentiates Egypt IT sector

In a recurring point of discussion, CrossWorkers CEO Hans Henrik Groth described Egyptian technology professionals as creating an atmosphere of high “cultural readiness” for working with Europe-based clients, partly because Egyptians travel frequently to Europe for business and Europeans travel frequently to Egypt for tourism. The cross-cultural experiences have provided many Cairene software developers with a useful level of cultural understanding for European clients and have made working for Europe-based companies attractive, given the likelihood of travel to the continent as part of the job. As an example of cultural readiness, Groth contrasted different ways of handling client concerns regarding the European Union’s General Data Protection Regulation (GDPR). In his experience, IT professionals with little cultural context will see GDPR as an obstacle to be circumvented or a set of checklists to be papered over. More attuned professionals understand the European mindset around GDPR and the (general) willingness to adhere to the standards and demonstrate compliance. Overall, Groth cautioned that the technology requirements of providing managed services from an offshore location could be easily met in most situations. The challenges arose with making a cultural match between the lead software engineers and their European clients.

During our discussion with Groth, TBR asked about three aspects of doing business in Egypt: government, IT and physical infrastructure. On the first, Groth noted the gaps and delays between political decisions and practical impacts, but added that the talent pool in Egypt and the country’s current political and economic climate did not necessitate a heavier role from the government overall. On IT, he lamented the high cost of internet service in Cairo, explaining that CrossWorkers needs two means of connectivity — airborne and traditional cable — to ensure constant communications. Even the best fiberoptic cables, as Groth noted, could be undone by someone with a shovel. For an offshore IT services vendor, high internet costs and unreliability would be constant concerns. Lastly, regarding the physical challenges of working in a city as large and densely populated as Cairo, Groth acknowledged traffic presented a constant source of pain and commented on the three-hour drive — on a good day — from Cairo’s airport to the Information Technology Industry Development Agency (ITIDA), located west of the city. To combat this problem, Groth located CrossWorkers’ offices closer to the airport, allowing clients from Europe to see the facilities and meet the talent without enduring too much of Cairo’s traffic. Groth’s depiction of Cairo’s infrastructure confirmed many of TBR’s previous discussions and assessments and pointed to potential areas for immediate improvements, which could accelerate IT services offshoring growth in the country.

After reading TBR’s assessment of Egypt as an offshore IT services hub, Hans Henrik Groth, CEO of CrossWorkers, contacted TBR to provide additional insights and commentary about Cairo’s IT services environment, highlighting the differences between Cairo and other cities Groth has worked, including Islamabad, Pakistan, and various locations in eastern Europe. This special report reflects the hour-long discussion and TBR’s analysis, including from our Spring 2020 Global Delivery Benchmark.

Putting people first, so they can put the customer first

In the early weeks of the pandemic, Fujitsu’s global delivery centers quickly shifted to all-remote work environments, transitioning in waves as COVID-19 lockdowns moved from Asia to Europe and the Americas. Fujitsu’s leaders and on-the-ground managers passed along lessons learned in Japan, China, the Philippines and elsewhere in Asia to colleagues facing imminent transitions. Perhaps surprising even Fujitsu’s leadership, some of the later transitions happened in less than 48 hours. In Poland, for example, the entire delivery center adopted all-remote work arrangements over a single weekend as the news coverage of COVID-19 shifted opinions and raised concerns about being in close proximity to coworkers in an office. Fujitsu experienced similarly rapid transitions at other facilities, including global delivery centers in Portugal and India. According to Fujitsu’s global delivery leadership, the transitions had no impact on Fujitsu’s delivery or customer satisfaction: “The SLAs [service-level agreements] hardly twitched.”

In TBR’s view, Fujitsu’s emphasis on its own people — ensuring safety, providing assurances around employment and meeting technology demands — likely had a positive ripple effect on the way employees delivered to Fujitsu’s clients. Fujitsu’s leaders noted the company’s commitment to “focus on people, and enable those people to focus on customers,” underscoring Fujitsu’s overall approach of putting its own people first. One example Fujitsu’s global delivery leaders shared with TBR centered on the company’s travel and visitor policies. Early changes reflected a slowdown in travel, but “not a strangulation.” Fujitsu’s employees believed they were still empowered to deliver to clients, traveling for work as necessary, but cognizant of coming changes and able to include their own feedback on company policies.

As February ended and the virus’s global sweep became apparent, Fujitsu employees were prepared for a shift from limiting travel to limiting visitors to office locations, primarily to provide employees with additional safety and protection from COVID-19 exposure. Another example centered on employee communication and support to ensure well-being. Fujitsu holds ongoing check-ins with employees through coffee sessions and distributed surveys to keep everyone connected and engaged, confirming the employees responded positively to the company’s approach to COVID-19. Fujitsu executives noted to TBR that over 80% of employees felt positive about the approach and execution of its COVID response. The meetings recognized employee needs beyond workload constraints, taking personal COVID-19 challenges in consideration. Overall, TBR believes Fujitsu’s global delivery leadership made a critical decision to focus on employees first, which eased the challenges related to moving to all-remote working through Fujitsu’s additional protection for employees’ well-being as well as protection for their families from COVID-19. Further, by coordinating across countries and regions so that successful strategies could be repeated and mistakes could be avoided, Fujitsu made it possible to sustain customer satisfaction and consistent services delivery.

In a wide-ranging discussion with Fujitsu’s global delivery leaders, including Head of Global Delivery Tim White, Head of Global COVID-19 Response and Chief Information Security Officer Clive Tillotson, and Specialist Marketing Manager Charlie Ayling, TBR analysts heard about the company’s immediate responses to the COVID-19 pandemic, ongoing operations and expectations for the post-pandemic world. This special report includes some highlights from the discussion. Additional information will be included in TBR’s quarterly analysis of Fujitsu Services.