Latin America could take a leaf out of Europe’s approach to positioning itself as a core nearshore partner for digital transformation. Tony Saldanha, author of Why Digital Transformations Fail: The Surprising Disciplines of How to Take off and Stay Ahead and President of Transformant believes that places like Ireland and some part of Eastern Europe have got it right when it comes to selling their value to nearshore customers in terms of digital transformation services.
Saldanha spent more than 20 years working globally with Procter & Gamble, working his way up to Vice President of IT and Shared Services, before he left just over a year ago to take up his role at Transformant. In his time at Procter & Gamble, he was instrumental in setting up different types of operations including their very first offshore center in the Philippines in 1993 and the outsourcing of two-thirds of IT and shared services for P&G in 2003, in an $8 billion outsourcing project with HP.
Saldanha has pooled that experience and knowledge in his book on digital transformation, in which he defines it very specifically as “the rewiring of the enterprise to be successful in the fourth Industrial Revolution (4IR).”
In prior industrial revolutions – whether steam, electricity or the Internet – it was about one technology, but, says Saldanha, in the 4IR what you have is not one technology, but the effect of that technology changing all of the other technologies, from robotics to biology to social media.
“For companies to be successful in that period, incremental change is not enough,” Saldanha says. He believes that companies need to visibly change three things: their business model, their internal operations to be ten times more efficient, and make their products smarter. As much as 70%of digital transformations fail.
“It is in that context I talk about digital transformation being 90% organizational change and 10% technology because if that is the kind of rewiring that is needed, then swopping some technology or even swopping part of your organization out is not going to do it,” he tells Nearshore Americas.
So where does that leave Latin America’s nearshore providers? Saldanha believes that digital transformation is a great opportunity for the nearshore. “As you are driving this change in your organization – specifically in global organizations – nearshore is a very important component of that change.”
He explains that the financials of the entire outsourcing and BPO industry dramatically change as technology becomes a viable option to headcount. “If you are able to do some of the work that you currently do with low cost offshore resources with software robotics instead, then you start to shift your organization’s balance and you think, ‘maybe I can just automate it.’ It is shifting the entire landscape of the outsourcing industry.”
In that context, Saldanha says, nearshore becomes much more appealing, because of either time in terms of overlapping working hours, or language related benefits. He believes that nearshore allows organizations to capitalize on this new trend of human + machines – and do it in your own language and within your time zone.
But, he says, to really play the role it could play in driving digital transformation, nearshore needs to set up a distinctive voice in the industry to position itself as a partner offering digital transformation services.
“The big players in the outsourcing arena still sell offshore and that’s becoming a bit of challenge,” he says, adding that it is not just automation that is the challenge, but also geopolitics. “When you consider Brexit and the nationalism that is starting to spread across the world, you are starting to have people say maybe I need to shift resources from other parts of the world, from Africa or the Philippines, and that’s the opportunity for nearshore.”
Saldanha does not believe that enough is being done to push nearshore, although he points to Infosys committing to setting up 10,000 people in the US and Tata’s various commitments in the US and Europe as good signs.
“What’s missing is a sales strategy that puts this value proposition together,” he says. “At the moment it’s all reactionary, a reaction to either geopolitics or the rise of software robotics. It hasn’t been a proactive sell as yet.”
Saldanha does not think that skills are an issue in nearshore locations serving the developed regions in the US and Europe. But there is a need for greater critical mass. “What if I need 10,000 people instead of 50 people here or there? The second part of that is putting together the financial value proposition to say maybe you don’t need 10,000 people, maybe you just need 100 people working along with machine and that’s what we are going to offer you. And that offer is what’s missing at this stage.”
Europe, he says, is much more advanced in this. “Dublin, Ireland is positioning itself as a provider of transformation resources. Some of the Eastern European countries, including maybe Poland, are wanting to go there. This is less so in the US nearshore. I think the countries that surround the US haven’t had that critical mass of resources to do that.”
But, he says, the best way for nearshore to make an impact is in the context of digital transformation. “Nearshore is never going to win based on cost; Nearshore is never going to win based on additional services such as time zone and language skills at a higher cost. The opportunity here is digital transformation in putting together proven models of how the industry wants to approach successful changes for their clients. If I were working in the nearshore, that’s what I would do.”