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Summary

Omdia’s post-COVID-19 business priorities survey found that nearly half (45%) of global premium content owners plan to shift their focus on business continuity information communications technology (ICT) spend away from the long-tail transformation journey and toward creating a highly tailored, localized direct-to-consumer (D2C) ecosystem. The cancellation of sporting events, offline trade exhibitions, physical cinema admissions, casino gaming, and print publishing (e.g., newspapers, periodicals, and books), has led to a decline in revenue. Declining revenue, especially from advertising, has heightened the urgency of the need for a reimagining of operational processes. Premium content owners will face the challenge of a highly volatile business environment over the next 12–18 months. This demands that premium content providers explore new digital business models to offset cashflow margin risks in the short to medium term.

In May 2020, HCL launched its Captive Buyout framework (e.g., customer relationship and experience operations, content production facility, internal and shared operations, infrastructure, billing and payments, rights and partner contract management, etc.) to assist margin-pressed enterprises to not only stay on their transformation journeys but also reduce business uncertainty in the near term.

Omdia believes that this socioeconomic win-win value proposition is a unique “inverse partner as a business” approach. Moreover, HCL’s long-tail captive optimization, modernization, and legacy reengineering core competencies will be the key differentiation in delivering better return on investment for both parties in the new, post-COVID-19 era. Reduction of other overhead costs along with this transformation offering is unique and reasserts HCL’s strategic partner vision beyond legacy ICT services contracts with every media enterprise in the long run.

Captive Buyout might be the gateway to third-generation ICT services contracts in the media space

Omdia’s Media Transformation ICT Services Forecast: 2019–24 estimates that global premium content owners’ spend will decline by roughly 15% to $21.1 billion in 2020. It is also expected that media transformation services spend will recover to 2019 levels in the next two years. The uncertainty of the business environment and current financial cashflow pressures will drastically shift the ICT services procurement strategy across enterprises in the long run. Premium content owners’ transformation frameworks have traditionally been incomplete and have changed continually, resulting in the creation of islands of automation (i.e., expensive, siloed, nonuniform, internal resource-dependent modular content supply chain orchestration). This leads to the formation of slightly inefficient captives. With margins under pressure, this approach is insufficient and in need of a divergent model with strategic enablement between enterprises and ICT service providers fulfilling the end goal of sustainable competitive edge.

The Captive Buyout niche offering encompasses the following:

  • Execution of short-term business continuity measures across operations and workloads

  • Synthesis and assessment of the captive ecosystem including operational, IT, and human capital (i.e., business processes, workflows, ICT services such as platform engineering, support and maintenance, infrastructure [on-premises, cloud] management, and shared services for improving operational productivity, agility, and optimization)

  • Migration of operational, IT, and people-based services such as infrastructure, workflow assets, facilities, and workforce (complete reinstatement of people on HCL’s payroll) on a pay-as-you-go or usage-based cost model

  • Reduction of cashflow margin risks for the premium content owner during these uncertain times through payment and billing credits and refocusing on a unique solution and workflow best practices to generate quicker business value and incremental ICT services top-up for HCL

  • Reducing total cost of ownership by discontinuing obsolete and near-end-of-life third-party technology vendor contracts

  • Reassessing human capital competencies with long-tail reengineering goals with absorption of residual tangible assets for multifaceted internal new projects such as IP, cognitive services (AI), and blockchain

  • Streamlining, standardization, automation, and orchestration of processes and a reduction in inefficiencies to improve operational productivity and cost synergies

  • Unification of data, cloud, IP, and cognitive services (AI) capabilities to transform the workflow to meet next-generation audience preferences, especially D2C

  • Application of lessons learned and best practices in the creation of in-house proprietary technology and solutions to assist in new customer acquisition and improve the industry-specific ICT share of wallet

HCL plans to acquire these captives, orchestrate and automate the workloads and processes within them, and reengineer the internal resources with niche value add-ons for premium content owners to meet short-term cashflow obligations. Furthermore, premium content owners will be offered a niche flexible transfer fee-based re-inception of the transformed captive in the future, once the economic turmoil has subsided. It’s a win-win proposition: premium content owners can utilize the next-generation captive to exploit newer monetization avenues on a continuous basis, and HCL can build economies-of-scale-based best practices to extend its footprint across industry-specific transformation projects. HCL’s Captive Buyout framework, when coupled with the current market dynamics, is well positioned to accelerate cooperative third-generation ICT services market share in the media and entertainment space.

Appendix

Further reading

Media Transformation ICT Services Forecast: 2019–24, SPT004-000066 (April 2020)

Author

Kedar Mohite, Principal Consultant, Media & Broadcast Technology

[email protected]

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