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At a time where alternative facts and fake news open doors to a parallel universe, where global labor markets are being disrupted by various flavors of travel bans to the United States, the specter of a wall being built at the US-Mexico border that costs more than the entire Space-X program, a reform of H1B visas that could likely dismantle the traditional outsourcing model, and a curious thing called Brexit that could change the global trade landscape forever, one might be forgiven for feeling slightly disoriented. Yes, people, we've arrived at a time where the very foundations for service delivery models across the industry are being put at risk, where there is no written rule book for how to get ahead of this. So what better time than to add a sprinkle RPA into this global potpourri of disruption? Maybe a food dose of process automation will give us all something to cling onto during these heady days?
Against this slightly perturbing background, what is the state of the RPA market, the emergence of the virtual workforce - and how will it affect the broader markets? Is RPA the silver bullet to overcome many of these issues and obstacles? Back in December, we already chartered the service provider capabilities around RPA. As a result, we not only got a strong endorsement for our findings, but stakeholders were asking us to provide a similar assessment for the RPA tool providers themselves. To get more clarity on these pressing issues, we have sent our automation overlord Dr Tom Reuner back into the RPA community to separate the wheat from the chaff... the bots from the clots.
Based on his findings, Tom and I went into conclave, compared notes and war stories, as well as cranking the numbers for the evaluation. And finally, we have white smoke. Thus, we are pleased to share the new 2017 RPA Blueprint grid and the key findings with you.
Phil Fersht, CEO and Chief Analyst: Despite all the noise, many stakeholders still struggle to comprehend what RPA is all about. Tom, can you help these lost souls to get up to speed before we dive into the details?
Tom Reuner, SVP Intelligent Automation: I wish that would be so easy, Phil. Despite all the noise RPA is still an undefined market. To make matters worse, the IT juggernauts, the service providers, and management consultancies are only very gingerly educating the market. Two key reasons for that. On the one hand, it is still a nascent, albeit fast maturing market. On the other hand, it is a classic case of Innovators Dilemma: The large service providers still make more money with system integration and labor arbitrage. A cross-industry working group under the leadership of Lee Coulter and AJ Hanna from Ascension Health under the umbrella of the IEEE standards body, with the participation of the leading RPA tool providers and consultancies, is doing sterling work to drive a taxonomy and common understanding of the different building blocks of Intelligent Automation and thus also RPA. Yet, it will take considerable time until these suggested definitions will be adopted by the broader industry. The IEEE definitions of RPA are a useful reference point to describe the scope of this Blueprint evaluation: "Robotic Process Automation (autonomous)": Preconfigured software instance that uses business rules and predefined activity choreography to complete the execution of a combination of processes, activities, transactions, and tasks in one or more unrelated software systems to deliver a result or service with human exception management.”
While nothing is defined in the context of automation, the common denominator of all the approaches to automation is decoupling routine service delivery from labor arbitrage. This is not only the common denominator but also the cause for the widespread disruption that we are expecting, largely on the supply side. But the providers are not always helping either. The biggest misconception and confusion is caused by the related proposition of desktop or Robotic Desktop Automation (RDA). It is here where there is so much smoke and mirrors in the industry. In simplistic terms, RDA has evolved from screen scraping in the front office where disparate sets of information were integrated to support call center agents. Thus, RDA is focused on quick deployments on desktop level, typically customer contact agents. In RDA, activities are being automated, while in RPA (back-office) processes are automated. On the danger of over-simplifying, in RDA the agents are passing on tasks to robots, while in RPA the robot passes on tasks to agents. And as we are on the topic of subterfuge, it is difficult to ascertain how much scripting and coding is actually needed to get solutions off the ground? Many contracts are largely a Managed Services agreement. This is confounding what automation and RPA should be all about, namely the decoupling of routine service delivery from labor arbitrage.
Phil: So, clear as mud. Against this background, what really is going on in the RPA community?
Tom: Well, yes. But I think the reason for so much smoke and mirror is that there is so much at stake. The large service providers fear an erosion of their profits, while the RPA providers have often banked their pension pots on the success of their companies. Looking at it from a more positive angle, most providers are evolving their offerings toward the notion of operational analytics and the broad bucket of cognitive. In particular, the integration of semi-structured content through Machine Learning or through partnerships with providers like Celaton or Loop AI who help to create patterns in unstructured environments.
Aligned with this maturation in the market, we see more funding coming through. The latest example is WorkFusion who raised $35m in January. However, the biggest shift in the market, underlining the increasing maturity, is the shift of mindset from RPA as a non-invasive turn-key solution that marked the early phase of market development to the notion of RPA as a conduit for transformational projects, looking at end-to-end processes rather as a short guarantor for cost takeout. And RPA as an enabler for transformational projects is the cornerstone for our evaluation of RPA providers.
Phil: So Tom, what was your methodology behind putting together the 2017 RPA Blueprint Snapshot?
Tom: Rather than taking a function and features centric evaluation that is more appropriate for software products, we are taking a market-led approach which we feel is more aligned with the need of buyers in the sourcing industry. The RPA Blueprint Snapshot is building on and expanding the discussions with stakeholders as well the research of HfS’ Intelligent Automation practice. Our Blueprints are based on multiple client interviews, interviews with advisors, service providers and internal analysts who have experience working with the RPA platforms. Our scoring system only allows for 10% of analyst judgment, where we made the case for your strong innovation. Our weightings are partially based on importance criteria we glean from our State of Industry survey with KPMG which covers over 450 major enterprises. As RPA is not yet commonly defined, we are taking a strong steer from the evolving RPA strategic partnerships of the leading system integrators and BPOs.
Against this background, and in addition to the above inputs, we have reached out to the RPA providers with an RFI set out to help us evaluate them against a set of criteria across both execution and innovation. As we have outlined above it is not an easy undertaking as there is so much smoke and mirror in the market. But given the strong endorsement for both our Intelligent Automation Blueprint and our RPA Premier League Table, we are confident that our approach is providing stakeholders with relevant information and guidance.
Phil: Not beating around the bush, who is standing out as RPA performer?
Tom: There are many ways to look at the RPA market given the caveats that we have called out. But painting with a broad brush, the companies in the Winner’s Circle - AutomationAnywhere, Blue Prism, UiPath, and Pega - are the providers of choice for the channel partners focusing on transforming back-office processes. Behind this leading group, the positioning is becoming decidedly more blurred. The best way to think about it is to be clear about the use cases and requirements to add more specific providers for tender or RFI. Be it WorkFusion for broad cognitive capabilities, NICE for front-office activities, Redwood for ERP-centric automation or OpenConnect for a focus on operational analytics. Almost below the radar, there are providers like Jidoka with core RPA capabilities who carved out a niche in the Spanish-speaking world. Similarly, Contextor who are evolving from an RDA position to broader RPA capabilities, have a strong position in the French market. Beyond a geographical focus providers like Kryon Systems or Softomotive have made significant progress evolving from attended to unattended scenarios, while KofaxKapow through acquisitions offers a broad portfolio from OCR capabilities to process analytics.
Drilling down into the specifics, the market is dominated by the “duopoly” of AutomationAnywhere and Blue Prism. AutomationAnywhere is strongest in F&A, offshore delivery centers, and the US market. Conversely, Blue Prism is leveraging the first mover advantage with strong partner relationships, having the strongest impact on industry specific services, headquartered CoEs and the UK market. Behind the two market leaders, UiPath is growing strongly as clients cite the effective partnership culture and attractive commercial terms. Thus, for mature clients, UiPath is increasingly seen as the third strategic option in multi- vendor environments next to AutomationAnywhere and Blue Prism. Adding to this mix, iPega is being credited for its the quick deployments as well as the integration of both RDA and RPA in attended or un-attended scenarios. At the same time, Pega offers broader functionality by extending bots to it BPM suite.
However, the biggest surprise in our evaluation was AntWorks that thus far have been below the radar of industry’s stakeholders. Their value proposition is about linking core RPA capabilities with machine reading including semi-structured content such as handwriting in forms as well as broader cognitive capabilities including pattern recognition, even in images. Furthermore, similar to providers like RAVN, AntWorks has Enterprise Search and Machine Learning functions to support extraction of data from legal documents. The combination of Computer Vision and pattern recognition allows AntWorks to provide one solution where many service providers have painstakingly integrated different tool sets. Even though around the broader cognitive capabilities, AntWorks is competing with IBM Watson, it goes without saying that AntWorks is still early on their journey and therefore needs to demonstrate client references to the broader market.
Phil: Despite the market being nascent, albeit maturing market, WorkFusion has announced a free RPA product. What do you think will be the impact?
Tom: When WorkFusion announced a free RPA product dubbed “RPA Express” back in December, many executives in the automation community went pale. In defiance, and sometimes confusion, executives were quick to suggest that WorkFusion does not have a “proper” enterprise grade RPA product. There are many different ways of looking at this announcement. First of all, credit where credit is due: WorkFusion has one of the best, if not the best, marketing programs in the Intelligent Automation community. And sometimes there is a hint of jealousy creeping in when we discuss WorkFusion with their peers. More pertinently to the RPA discussion, while WorkFusion might lack the enterprise-grade capabilities in core RPA that the providers in the Winners’ Circle have demonstrated, they have strong credentials in adjacent capabilities such as crowdsourcing, the integration of Machine Learning or enhancements to the RPA Object Library such as the capability to drag and drop entire processes (e.g., “KYC,” “corporate actions,” “OCR”). What is boils down to in the end is to get access to the table where the sourcing discussions and decisions on automation are being taken. WorkFusion has successfully demonstrated exactly that. Not having enterprise grade core RPA capabilities has thus far not harmed their revenue stream. Thus, the announcement might not disrupt the market, but it still might end up negatively impacting valuations of RPA providers as many look for an exit strategy.
Phil: Gazing into a crystal ball, what can we expect for 2017?
Tom: Phil, if I would have all the answers, I should probably change my job and could make a lot of money. But here are three scenarios that I am seeing for 2017:
- RPA will remain undefined. Over the next 12 months, the perception of RPA will remain blurred. RPA capabilities will fold into broad propositions such as Digital Workforces or Cognitive Automation. This is adding to the continuing confusion around RDA. Extending on that, in 18 months we won’t talk about RPA anymore. Most of the leading technology providers will have been acquired and RPA is a reality in the back-office.
- M&A through ISVs. Buyers will have to do scenario planning for acquisitions. While this might bring broader capabilities, licensing costs are likely to increase as well. Pega’s acquisition of OpenSpan is the template for such developments. Beyond the tool providers, the automation pure plays such as Symphony and GenFour are likely to be equally absorbed by larger consultancies.
- The emergence of an Automation Ecosystem: We already have seen the impact of Watson, as it is starting to evolve into an ecosystem. Suffice it to say, IBM could be the driving force to extend those capabilities, as we have argued some time ago. But it could equally be one of the tool providers significantly expanding its reach. As stated, we are seeing the providers in the Winner’s Circle moving toward the notion of orchestrating much broader automation capabilities. At the same time, we are seeing providers like Blue Prism and UiPath being deployed in IT-centric scenarios such as IT Help Desk and Application Management, pointing to a convergence of scenarios and tool sets.
HfS premium subscribers can access the RPA Blueprint Snapshot here.
There's never been a better time than this for the specialized midtier services partner which isn't dragging around billions of dollars of legacy contracts and isn't reliant on massive people-scale deals to sustain its growth and profit margins. Clients are increasingly looking for shorter, sharper engagements - with immediate impact - that drive executives and their staff back to the classroom... the type of engagements which may simply not be attractive enough for a Tier 1 service provider which isn't built for smaller, focused engagements that require higher level talent to lead real change management programs. In addition, most clients today do not want to drop millions of dollars on consultants to change things for them... they would rather have someone come in who can teach
NASSCOM 2017: Indian IT services paralyzed by Trump, but being a deer in the headlights is not an option
When, in history, has there existed a market that keeps relentlessly growing at 5-10% each year, with profit margins consistently at a 15-20% level; and for well over a decade? Yet you attend the annual flagship Indian IT conference only to experience an atmosphere of acute paranoia and paralysis. Is change really that frightening?
Even most clients are openly declaring they haven't had their budgets reduced - many simply aren't ready to make investments while there is such uncertainty surrounding the market because of an unpredictable US President. Even NASSCOM itself adds to the uncertainty by deferring its usual business outlook...
However, acting like a deer in the headlights is not an option. The smart strategy is to expect the worst and make measures now to get in front of it.... don't let the juggernaut, that is a protectionist US administration, squash you flat in your tracks.
Breaking out of this paralysis cycle
However negatively this could turn out for some of the Indian IT services industry – here are six simple ways to break out of this paralysis and reinvest some of these bloated warchests, before greedy investors who got rich off your spoils demand to cash in their chips...
1) Invest internationally beyond the US. Those Indian IT majors in the strongest position are those that are least reliant on their US clientele for future growth. In fact, HfS estimates $7 Trillion in B2B digital expenditure by 2020 - with only $2bn being in the US (traditionally 50% of worldwide IT spend came from the US, but digital spending - both B2B and B2C - is changing that picture dramatically). For example, the British PM is already deep in discussions with Modi about closening UK/Indo ties even further in the wake of Brexit. The UK has the potential to become a major digital hub, fuelled by Indian talent. While Brexit appears like a terrible idea on paper, change forces action and these actions will be all about increasing the flow of trade and talent with emerging nations and creating new wealth. We also see a real appetite for digital business model investments and automation by Australian businesses - and many of the Asian nations are only too happy to move from zero to hero to take advantage of the humongous digital B2B expenditure in Asia/Pacific and the rest of the world.
In addition, many of the European regions, such as Nordics and Germany, are now rapidly exploring more global resources to support their digital growth. If America - as it appears - is on the path of becoming a protectionist anti-globalization country for the next four years, perhaps its time to broaden your horizons?
2) Invest in a smarter onsite/offshore model that gets you closer to your customer's customer. Yesterday's IT services model was all about helping legacy traditional enterprises keep their lights on by maintaining clunky old ERP implementations keep operating, adding extra sauce to spaghetti code and keeping an eye on server outages from afar. Tomorrow's winners have moved all this stuff into the cloud and automated much of their infrastructure management. The future growth is working much closer to your customers to help them design and implement digital business models by building mobile applications, testing customer sentiment, forging partnerships and developing APIs with new digital business partners and communities. Technology skills such as DevOps, Agile, Hadoop, Blue Prism and AutomationAnywhere are the watchword, and a global race is on to access these skills. Moreover, the developers need to be closer to the business designers and customer strategies of the clients to make this effective. So Indian IT majors need to focus on developing these skilled resources where all their clients are situated, in addition to India itself. This will require re-investing some of that lovely cash sitting around - and, heaven forbid - take a small margin sacrifice for a few quarters.
3) Partner with digital agencies to get it done. Be realistic for once and accept the fact that most customers are not going to come to you to design highly creative digital business solutions. You have an IT services brand, not a creative digital brand. Most clients will go to the advertising firms, the Design Thinking consultancies and the digital specialists for that work. However, all those firms are pretty clueless when it comes to actually communicating their business designs to technology firms and having them just get it done. This is where you can really do well - by working with these agencies and consultancies as their IT partner - bring them into your clients and they will being you into theirs! Believe me, most the digital firms worth acquiring have already been hoovered up by the Accentures and Deloittes... most the stuff left on the market is overpriced, too small, and most their nose-ringed designers will jump ship the moment you buy them.
4) Become great intelligent automation intermediaries to manage broad automation and analytics environments for enterprises. Clients are crying out for providers to partner with them on their automation journeys – in fact, 45% of buyside operations leaders, when polled privately, view rolling out automation in tandem with their service provider as adding the most quality to their service relationship (see below). Several of the leading Indian heritage IT services firms are making impressive strides with their enterprise analytics and automation solutions – such as Infosys with MANA, TCS with ignio and Wipro’s Holmes – the key now is their ability to twin their solutions with the cream of the third party intelligent automation apps, such as AutomationAnywhere, Blue Prism, Pega, UiPath, Workfusion, Redwood, Antworks etc to become their clients’ intermediary for automation and analytics value. While some proprietary tools and bots can add great value, especially when aligned to specific industry processes, clients want to have the choice of adding their own independents tools to enjoy the biggest impact on their process value. The Indian IT leaders need to become great partners and facilitators in these emerging environments – they have the development talent in spades and the passion to bulldoze their way to the front of this market.
5) Keep investing in start-ups. One of the best cultural shifts in the Indian IT industry in recent times has been the emergence of the start-up scene in Delhi, Mumbai, Bangalore and other areas. Ambitious Indian IT talent is no longer desperate to walk that slippery steep treadmill of the IT juggernauts – many of whom are already too big, clunky and corporate for their own good. Moreover, tech investors are fed up having to invest $20-100m in US start-ups to develop one product or technology, when you can get the same value from the likes of India, China or Eastern Europe for a fraction of the cost. Having heard about the 400+ emerging startup firms who are already members of Saurabh Srivastata’s network (the original founder of NASSCOM), it gives me real hope for India’s future that the next generation of IT talent is already being healthily incubated.
6) Just make a plan and stick to it. The one big element of NASSCOM which I found most infuriating was the lack of a plan from most of the service providers. Most are simply playing a game of denial and react. This is a recipe for failure. Accept the fact there will likely be some uncertainty for six months before some new draconian measures are forced on businesses seeking to do business with the US. Net-net, it'll be more expensive to deliver services to US clients and also harder to send your own talent over there to train US staff and manage projects. So set aside funds to hire more people in the US and budget for a margin squeeze on future US contracts. And forecast a 10-25% hit on deal flow due to longer decision cycles and US clients veering away from using highly visible offshore services suppliers.
Bottom-line: Take the tough blows now to roar to the front of the global IT industry when sanity returns
While the global IT world waits with baited breath, paralyzed by the ramblings of an unstable and determined US President, our beloved IT services firms can either remain numbed by fear, or actually use this opportunity to make some key strategic investments and initiatives. Those mountains of cash need to be used sensibly before those greedy investors demand their piece back, so act now, swiftly and decisively to organize an IT business that isn’t so reliant on lifting and shifting labor to and from the US, and puts you in the driving seat to lead in the $7 trillion dollar digital world, where automation is native and access to skills absolutely critical. India has a great shot at emerging as the world’s great IT pioneer, and so much more than a low cost labor provider for greedy legacy US corporates. Trump won’t be around forever, and he might actually be doing India a massive favor without ever realizing it…
Am looking forward to seeing many of you in the warmer climes of Mumbai this week... so having some "Beef Wellington" to protect myself against what threatens to be a mudslide of confusion this week! I hope many of you can attend our opening session "“The Digital OneOffice - Getting Ahead of Today's Disruption”... cheers PF
Harman, Accenture and Atos are bossing emerging IoT Services, but we need real IoT algorithms and security standards
I plugged my iPhone into my new (fuel-emission friendly) VW this week and - for the first time - my car was connected to by digital life. Siri (finally) came alive and started sending my contacts voice to text messages, my favorite Spotify soundtrack was arranging itself in all its glory on my vehicle dashboard, and I didn't have to worry about tuning radio stations, pairing devices that barely talked to each other, or getting stuck using some horrible proprietary technology my previous car had forced me to use, or those awful attempts at being "appy" from the cable TV providers that look nice, but require months of frustration to figure out.
My car was finally seamlessly connected with my personal apps that run my life, and my suicidal urge to text and drive has been cured by Siri finally doing it for me! While it's been pretty cool to program the air-con using a mobile app or have automated replenishment of new coffee capsules... being able to take your digital life into your moving vehicle is what IoT is all about. It's high-time to get past the buzz about IoT being bigger than IT itself - it's really about sensors, data and most importantly what we can do with this data, and how we can create digital experiences outside of our traditional mobile and laptop screens.
So, without further ado, let's take a look at the 2017 landscape for IoT service providers and have a chat with report co-author and manufacturing-engineering analyst guru himself, Pareekh Jain, about the emerging landscape for IoT services...
Phil Fersht, Chief Analyst and CEO, HfS: Pareekh, how do you see the IoT market evolving and what are the key IoT trends you have been observing?
Pareekh Jain, Research Vice President, HfS: Phil, the current state of IoT revolves around sensors and data collection and its use in sub-process or process optimization, but there is not enough visible thought or action by IoT service providers in exploiting the potential of data for the business reimagination of the Digital OneOfficeTM. Take the example of Amazon Go – the concept store where there will be no checkout queues (seriously). Shoppers can pick... and just go. The combination of IoT with artificial intelligence and machine vision is what makes Amazon GO possible. This is just one of the business reimagination possibilities of IoT, where these true digital experiences come alive, and we're finding this kind of conversation depressingly absent in our discussions with some of the service providers.
Having said that, we do see real progress with the foundations of IoT over the last couple of years and are observing five key trends in our IoT research.
1) IoT is for real, but is limited in scale and scope at present. We found many examples of PoCs and actual customer engagements. The customer engagements are small and limited in scope to a couple of business or geographical units. The organization-wide IoT strategy and implementations examples are rare.
2) IoT update is pervasive and use cases are cropping up across all industry sectors. The highest number of IoT examples we have seen are in manufacturing or Industrial IoT, smart cities, and connected cars.
3) Efficiency or cost optimization are the major drivers in IoT projects at present. This is
In the post-digital world, no one cares much about “offshore” as a strategy - it has become part of the fabric of managing a global operating model, where operations leaders just tap into whatever global resource they need to achieve their desired outcomes. This doesn’t mean that traditional “offshore” global delivery locations, such as India and the Philippines, are going bust overnight. But it does mean the playing field is leveling out as the need for emerging skills trumps the desire simply to reduce labor costs.
Our new State of Industry Study, conducted with KPMG (see above) of more that 450 major global enterprises – shows an increasing majority of customers of traditional shared services and outsourcing feel they have wrung most of the juice offshore has to offer from their existing operations, and aren’t looking to increase offshore investments. When we compare enterprise aspirations for offshore use between the 2014 and 2017 State of the Industry studies, we see a significant drop, right across the board, with plans to offshore services. Organizations are now either looking to make their existing offshore operations more effective, or even reduce them where they can (especially in F&A and HR), using new technologies and smarter process management.
It’s all about future scalability without the linear resource investments
The difference between new style of automation-rich intelligent operations and offshore-centric traditional operations is growing. It’s a bit like comparing the growth of Walmart to that of Amazon – (although it has started to change with its belated online strategy and acquisition of Jet.com), for many decades, the success and growth of Walmart has largely been tied to
Let’s cut to the chase – there have never been times as uncertain as these in the world of business. There is no written rule-book to follow when it comes to career survival. The “Future of Work” is about making ourselves employable in a workforce where the priority of business leaders is to invest in automation and digital technology, more than training and developing their own workforces.
As our soon-to-be-released State of Operations and Outsourcing 2017 study, conducted in conjunction with KPMG across 454 major enterprise buyers globally, shows a dramatic shift in priorities from senior managers (SVPs and above), where 43% are earmarking significant investment in robotic automation of processes, compared with only 28% placing a similar emphasis on training and change management. In fact, the same number of senior managers are as focused on cognitive computing as their own people… yes, folks, this is the singularity of enterprise operations, where cognitive computing now equals employees’ brains when it comes to investment!
My deep-seated fear for today’s workforce is that we’re in danger of becoming this "Lost Generation" of workers if we persist in relying on what we already know, versus avoiding learning new skills that business leaders now need. We have to become students again, put our egos aside, and broaden our capabilities to avoid the quicksand of legacy executives no longer worth employing. We need to become hybrid corporate animals.
So let’s give some examples of these "new skills" we need to develop for ourselves:
Sales people: it’s no longer just about selling and relationship development, it’s about understanding evolving business models, understanding the impact of technology and the importance of smart marketing. You need to be a trusted consultant, not simply good with a 9-iron. Clients needs are increasingly complexifying and you need to be the arbiter of helping them simplify their requirements. Understanding business models is what will make you successful in the digital world.
Software people: it’s no longer about data management, security and making apps function, it’s also about understanding the desired business outcomes associated with these investments and helping your enterprise stakeholders articulate them better, so you can work with them to