Bertrand Barthélemy's Blog

The promises of the Internet bubble made true

The promises of the « Internet bubble » are becoming real today

 

9 years later the Internet bubble ‘s promises become true. I see more and more actual projects with outstanding results leveraging the  “Internet principles”.

 

I know a project where we cut costs by 10 and saved 2 years in achieveing the project. The idea was simple: keep the current machnies and put the “smart soft” outside while plugging it to the machines trough webservices; and it works.

 

I know another project where no CRM software was needed but a CRM solution was implemented in 3 monthes only leveraging a smart definition of the data. For 30 millions users…

 

And another one where we cut costs by

5 in communication tools within a company. On top of that saving, instant collaboration was made available with their suppliers and clients….

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China's labour arbitrage is changing dramatically

China is modernizing its Labour market

At the beginning of 2008, China passed a new law protecting the workers.
Companies have to pay benefits for individual subcontractors who are working for the same contractor year after year and pay severance if they want to get rid of them.
Hence the cost advantage of subcontracting to an army of low paid workers is over. Over is the flexibility.

This law is pushing big chinese companies to optimize their practices. It will trigger a wave of outsourcing of tasks to professional outsourcers.
It is a plus for low paid chinese workers…and it is triggering a profound modernization of the chinese economy with the emergence of a modern offer of professional services.

Retail 2.0

I visited the Technology show room of Galeries Lafayette, the high end French retailer and consumer loans bank.

They are displaying prototypes of new technologies, applied to a department store.

I got a glimpse at what could be a retail store in 3 or 4 years from now;

Innovation can be split into 3 categories:

- ways of getting a much better recognition of the brand, of the ads

- ways of improving the buying experience by displaying instant information about the product the customer is looking at or by providing the customers in real time with profiled information or rebate

- ways of simplifying the action of paying your purchases.

1. Better recognition of a brand

The key idea is to use videos or moving pictures. The best example can be seen in the video of the pool and the red fishes.

It has been used in stores to advertise soft drinks:the customers was walking on ice and made the name of the drink appear below their feet. The recognition results were ten times higher than a traditional ad.

On the Internet we find the same level of efficiency: the transformation into an actual purchase of a product after an Internet ad is 8 times higher when you use rich media (video, animation) than with a traditional static web site.

2. Improving the buyer experience

You can display on a flat screen information about the product the consumer is handling or simply looking at. It’s a simple use of RFID tags or video recognition. You can even recognise which type is the customer(eg: male, between 25 and 45, or female above 50) and display information profiled for this type of category.

A supermarket manager can monitor the sales by product and send SMS to the clients present in the store in order to offer focused rebates on the products which are selling slow. The biggest hurdle for this type of service is not the technology, but the internal rules of retail companies!

3. Speed up the payment of your purchases

In Japan 98% of the mobile handsets enable the customer to read electronic tags put on goods or ads, or to pay their subway card, to buy drinks from machines, to pay their purchases at their local department stores, and a multitude of new applications….

The USA are catching up very rapidly with pilots at Safeway for example where you pay with your mobile: you pay in 3 seconds instead of 19 seconds!

Visa and Mastercard are now allowing to use your mobile phone instead of your credit card.You just enter your pin code and send it by SMS.

Google is about to launch new services and Apple is partnering with Starbucks…

Europe is coming too with experiences in Austria, in Amsterdam.

In japan, the two biggest Telecom operators have just bought two banks..

Who is going to drive the Mobile marketing?

The banks, the retailers or the telecom companies?or Google?

The winner will make big money.

The next wave : KPO and BPM

There will be a shortage of 40 millions educated employees in the western countries before 2020!
In France alone, we will be short of 3 millions!

Where will the work be done?

The first answer comes with an optimisation of the way we work . Many processes will be industrialized, leveraging Technology.
The second answer will originate from who is doing the work: a lot of the processes will be done where there’s an available educated workforce: that means offshore.

Until now, offshore companies grew in ITO (Information Technology Offshoring) and BPO (Business process outsourcing).
In ITO it began with simple projects or maintenance of generic applications (such as SAP backoffice appliactions)
In BPO, the businesses wich are outsourced are usually low value processes: call centers , helpdesks, run of generic processes (digitalization of documents, of invoices, HR payments,….).
Few of these outsourced processes require a good knowlegde of the business of the client.

Running back office processes will bound the BPO market to be a commodity one: hence a need of big volumes and low costs.
A few big players will emerge.
On ITO, we’ll see the same story for the back office applications. It will end with a concentration of these markets served by few suppliers, most of the task being sent to offshore.

For the companies who want to escape the commodity market, the name of the game is how to go up the value chain by running processes enabled by IT.

I see three strategic options:

1. The classical one:
The critical IT projects, where a client will subcontract a business IT project to a classical IT company. The winners will be the IT companies able to produce the project at a competitive cost (hence the need to be industrialized) and to understand the business requirements of the client. The companies (or Business units of big companies) focused on a sector and having invested in business consulting will prevail.

2. The new trend:
The BPM, business process management, where a company runs a critical process for a client. A excellent knowledge of the business of the client is required.It can be processing claims for an insurance companyfor example. Or in the case of an airline, running marketing campaigns or web based sales campaign.
Usually this puts the BPM provider in direct touch with the clients of its client. That’s a gold mine. As soon as you can collect data about the behaviour of the end clients, you can add value every day and become the center of the ecosystem.

That’s a real challenge for traditionnal IT companies which will become subcontractor to the BPM company and not to the “client” anymore.
But also for the “client” which will be cut from its own clients!

The logical winners of that new game should be the IT companies which are able to build the complex IT business applications and willing to run them.
But it could be smart BPO companies selling the service to the “client” and subcontracting the complex project to classical IT companies.
The threat for traditionnal IT companies is huge.As is the opportunity for the bold ones.

3. On a totally different level, the KPO, knowledge process offshoring will be a booming market.
KPO covers a large spectrum of services: market studies, law research, competition benchmarks,…
These are high added value businesses which can be done from anywhere, as soon as an internet access is available. Hence, there’s no need to pay analysts in Manhattan or Paris if you can have them in Dehli. Mac Kinsey has already over 700 employees in India for its own internal research work.

KPO is a totally new territory. A lot of players can be the winners. The only key factor is to be able to leverage offshore qualified workers and to understand the importance of knowledge. The winners should be high end companies , with a strong brand needed to attract bright Indian highly qualified staff.

Another opportunity for IT companies.