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Life in Infosys’s board room can’t be easy these days. Founders continue to throw spammers from the sidelines at CEO Vishal Sikka and its fellow board members, the sales engine is stuttering, and the company has to manage the secular shift toward digitization and automation. Macro issues like H1B visas in Trump land must look like gentle bumps on the road in comparison. As Vishal has singled out automation and AI as the key strategic pillars for Infosys, more clarity around these topics will go a long way in supporting their sales teams. If executed properly, Infosys’ broad set of automation capabilities could evolve into a lever to get the stuttering sales engine running again. It is exactly here where the realignment of Infosys’s automation strategy and the acquisition of Skytree, an innovative Machine Learning startup are focusing on.
A holistic automation strategy could put Infosys back in the driving seat
Infosys strategy on automation can be probably be best described as a rollercoaster ride. Having been a pioneer by being the first service provider to publicly announce a partnership on Intelligent Automation with IPsoft back in 2013, the service provider went in reverse and focused its efforts on proprietary tool sets that are difficult to benchmark with the leading third-party tool providers. Only to move to a hybrid strategy that still focused on proprietary tools yet leveraging third-party tools largely on a pragmatic basis where clients were mandating those options. Then back at the last Confluence, Infosys’ flagship event, the company launched Mana as an automation platform that was meant to revolutionize service delivery. However, ever since Mana was launched its capabilities have remained blurred, and in particular, it was never fully explained how Mana was meant to co-exist or even be integrated with Infosys broader automation assets. There was a lack of cohesion but also communication among the different teams driving automation. For example, the EdgeVerve teams were never quite sure or clear how Mana was impacting them, both in terms of branding but also broader delivery issues. Put in a nutshell, the marketing and communication around Infosys’ automation approach were disjointed. But not only that, the value that assets like Mana bring to clients was undersold as the value proposition was never properly explained. This is not to suggest that Infosys has not made progress with Mana as it has engaged in 150 projects with 50 clients, but given the strategic importance the go-to-market and narratives have to be enhanced. And it is here, where the reorganization and rebranding will focus on.
To overcome some those shortcomings, the company launched Infosys Nia, what it describes as “the next generation of the company's Artificial Intelligence Platform which converges technologies previously known as Mana, AssistEdge, DEEP and IIMSS along with recently acquired advanced machine learning capabilities from Skytree.” Thus, Infosys demonstrated that it had listened to its customers and the odd analyst. For the first time, Infosys is offering a holistic and more importantly an integrated automation strategy that is leveraging the following building blocks. Putting this in context, Infosys is catching up with peers as we have called out in numerous instances (for details see: HfS Intelligent Automation Blueprint). Fundamentally, Infosys is leveraging and integrating the following five assets into the new Nia platform:
- Mana – An integrated artificial intelligence platform incorporating big data/analytics, machine learning, knowledge management, and cognitive automation.
- AssistEdge – Provides end-to-end RPA. Uses integrated software robots to automate any high-touch, repetitive processes.
- DEEP – (Data Extraction and Enhancement Platform) a platform that ingests heterogeneous source documents or images containing structured & unstructured information, then uses embedded OCR, NLP, and Machine Learning to extract data, validate the correctness of extracted data, and automatically resolve exceptions with high accuracy.
- IIMSS – (Infosys Infrastructure Management Services) A unified IT operations command center for datacenter, infrastructure, cloud, applications, security, network and business services. This includes a workbench for lifecycle management and business services assurance. Also, it has an orchestration automation engine for event management, correlation, context-driven recommendations, machine learning & knowledge-based self-learning.
- SkyTree – Advanced high-performance Machine Learning with automated selection of algorithms and methods to achieve best possible predictive accuracy. This includes advanced tools for feature creation, feature selection, models, training and an entire workbench for creating new models. SkyTree is also to become a Center of Excellence with a team of ML experts to actively evolve ML concepts and technologies for future use cases.
SkyTree is providing the talent to scale Machine Learning
The recent acquisition of SkyTree, a Silicon Valley based startup, focused on speeding up and scaling Machine Learning, is reinforcing Infosys new emphasis on a holistic automation approach. As the market is starting to shift toward transformational projects and an end-to-end process point of view, the notion of data curation increasingly has to become the starting point for transformational projects, not just a by-product or a secondary motivation. As in particular, RPA will start to commoditize, the value creation but also the differentiation has to come from data-centric delivery strategies. SkyTree’s IP will enhance the deep analytical capabilities of Mana. Having said that, Infosys was very clear that the talent of SkyTree was the key motivation for the acquisition, the IP is rather the icing on the cake.
Infosys needs to drive change management as culture eats strategy for breakfast
As management guru Peter Drucker put it, culture eats strategy for breakfast. With that in mind, it is not enough to fix the automation branding and go-to-market issues, but Infosys urgently needs to drive change management through the organization to make automation demonstrably show results. And this change has to happen on different and disparate levels. First and foremost, Infosys needs to develop a narrative (or even better multiple narratives) what automation and AI mean to different stakeholders. Second, it has to demonstrate that automation and AI are are the game changers for Infosys as Vishal tirelessly puts it. Put it other words, is Infosys proactively pushing automation or is it mirroring its peers in being defensive and only push it where a competitive situation requires such change. And lastly, it needs a coherent strategy of understanding automation of being the pivot for innovating service delivery. With Nia, Infosys has done the first step of doing the latter. But having realigned capabilities is just the first, and most likely easier step. Change management if the harder act to follow.
Bottom-line: It is all about sales execution for Infosys
Having realigned its strategy for automation and expanded its AI capabilities is an important step forward for Infosys, but it will only change the fortunes of the company if Vishal can fix the sales execution issues. As he continuously puts automation and AI as the central pillars of his strategy, the narratives need to be more nuanced and most importantly driven through the organization. Both Nia and SkyTree are important milestones of this journey, but to reach for the skies Infosys has to follow through with all the other challenges that we have called out.
Being a trained historian, I was delighted when on a recent HfS webinar on “Beyond RPA”, I got dissed by participants for a slide that I had drawn up four years back for a similar webinar, albeit for a different organization. When I say being drawn up for a webinar I really mean it, as I would never have expected that this slide would still be in use today albeit in expanded versions and some refer to it as an industry model. And to make my smile even bigger, I revisited those old slides and the title at the time was:” Beyond the Hype: Assessing the Evolution of (Robotic) Process Automation”. You can see the original slide above. As HfS is all about facilitating discussions among the industry’s stakeholders, I am truthfully delighted for all those questions and challenges. That being said, it is time to take stock where the industry is actually at!
Why are we still talking about RPA?
On the danger of sounding like a broken record, we have to stop confining discussions on service delivery to the topic of RPA. Last year I wrote a blog that summarized many of those arguments. Yet, despite a lot of noise in the industry we are getting pulled back and end up discussing RPA time and again. Granted, as nothing is defined, for many RPA is just a placeholder for what HfS would term Intelligent Automation. But beyond semantics, why are we paying lip service to broader notions of automation such as cognitive computing, AI, and self-learning as well as self-remediating engines? Service delivery is not just about business processes. If HfS’s contention about the journey toward the As-a-Service Economy and the OneOffice has any merit, we have to overcome those organizational silos and mental stovepipes. But we also urgently need to expand the set of stakeholders educating and talking about automation. While we have to give a lot kudos to the RPA providers and consultancies who singlehandedly educated the market, the reluctance of the IT juggernauts to enter those discussions is leading to distortions of the direction and dynamics in service delivery.
Revisiting the “Continuum” – and a plea for service orchestration
To go back to my academic roots I am tempted to quote the Cambridge English Dictionary which describes a continuum as “something that changes in character gradually or in very slight stages without any clear dividing points”. If truth being told, I didn’t consult the dictionary before drawing up this slide four years back. But from the beginning, the thought-process was the following.
To help overcome the blurred perception and often confusion that I have tried to call out, HfS did introduce the Continuum of Intelligent Automation to start discussions on the evolution and innovation in service delivery. It is not meant to be an answer to the ever-increasing questions. This model is by no means perfect and we have developed additional slideware that is trying to capture the evolution toward more data-centric models. In this context, I would like to call out just a couple of the points that we are trying to get across with this model:
- First and foremost, the term Intelligent Automation is a placeholder for a set is disparate innovations in process automation encompassing the concepts that you can see on the slide. Intelligent Automation is a critical building block for the As-a-Service Economy as it decouples routine service delivery from labor arbitrage thus supporting the ideals behind the As-a-Service Economy.
- Second, the main idea behind the notion of the Continuum is that all the approaches you see here listed are both overlapping and interdependent. Despite all the focus on RPA and Cognitive, we still need all the less exciting stuff like runbook and scripting, mostly in the data center. From an operations point of view of particular importance is the integration of data into process chains and workflows.
- And the third point I would like to call out is the evolution or direction travel for the broad notion of Intelligent Automation. You can see 3 dimensions here on the slide. First, probably less surprising toward unstructured data. Second, probably less obvious toward less well-defined processes. And thirdly, toward the broad notion of cognitive and artificial intelligence as they are meant to overcome the limitations of the first two dimensions. Especially from a business process perspective, AI is meant to integrate semi and unstructured data as well as allowing this data to be routed through less well-defined process chains. But it really is a broad bucket because the boundaries between cognitive, autonomics and AI are not well defined. Having said all that, we shouldn’t look at these segments as binary choices. AI is being integrated into or bundled with RPA tools and all these tools should be discussed within the notion of service orchestration. An attendee at recent conference condensed this to following pearl of wisdom: “Make sure crap doesn’t get into your production and then throw Machine Learning at it.” Although he used a slightly more lyrical language.
Having said all that, the questions and at times challenges boil down to largely three issues. First, the suggestion that there is a linear development from RPA toward notions of AI? Second, the temptation of trying to pigeonhole tool sets into any of chevrons on the Continuum. Third, having the wrong starting point for discussing service delivery. To start to answer those from the end: service delivery is about service orchestration. All the leading service providers and the mature buyers have moved in that direction. It is all about having the right tool sets for the required use cases. Whether this based on microservices, on leveraging orchestration engines or other means: RPA is just a footnote in those discussions. And just to shout from the rooftops, orchestration implies that there is no linear development. In parts, this answers also the issue on pigeonholing. On the recent webinar, Guy Kirkwood from UiPath used the analogy of a golf course with RPA tools being the putter, while AI is more a drone that drops the golf ball into a hole. While thought provoking and entertaining, this analogy implies the old pigeonholing. Moreover, automation is in the eye of the beholder and RPA is no exception. While nothing is defined, all RPA tool sets evolve toward operational analytics and the broad bucket of cognitive. And lastly, the starting point is not how do we sell RPA but how do we innovate service delivery. It all comes down to use cases and requirements. For many of those requirements, RPA is the wrong approach.
Bottom-line: RPA is dead! Long live Intelligent Automation!
Having uttered this plea many times before, I am not overly confidence that I will get more listeners this time. But we urgently need to broaden the discussions from a narrow(minded) RPA mindset. We need the service providers come to the fore and educate the broader market. We need the buyers tell the stories from the trenches. We need new models and ideas to advance the learnings from the deployment and the best practices. Perhaps we should invite stakeholders of the automation community and undergo a Design Thinking process. The goal should be to reimagine service delivery to support the journey toward the OneOffice. The secondary goal should be to get rid of the Continuum. We would love to hear from volunteers and curious minds!!
April 3rd saw the long-anticipated creation of a new IT and BPO powerhouse service provider – DXC.technology. However, DXC’s challenges represent a microcosm of a services industry in perilous transition.
This is a crucial event in the services industry, not only because it isn’t often a “new” $25 Billion services firm is created, but because of what it signifies about the uncertain state of the current market and the huge challenges facing service providers in the near future.
As an addendum, many of you have reached out to us since publishing this blog, regarding whether this was the right time for an emerging star in automation, like Genfour, to sell. There is a lot of runway in Intelligent Automation and there is no doubt in my mind that Genfour's architect, James Hall, could have held out for longer and continued along his growth path as one of the few attractive pureplays in the space worth acquiring.
As our recent analysis of them revealed, the current bunch are not very well established, hence some want a quick cash-out and exit, while others are hunkering down to play the longer game. It is our view that Intelligent Automation and AI will evolve like the digital market, with service providers crying out for "press release buys" that give them credibility. Hence, this is as good a time as any to establish your own pureplay Intelligent Automation shop and throw yourself into the mix. But good luck finding the talent... there's a real shortage of it out there!
So why did Accenture acquire Genfour and does this make market sense?
In times of disconcerting political and macro-economic events, where #fakenews and a traditional outsourcing model officially running out of value, getting predictions right is becoming increasingly difficult for an analyst. Hence, the more pleasing it is when you can gloat about predicting an acquisition.
Case in point, Accenture’s acquisition of UK-based Genfour, a pure-play automation services provider that will become the cornerstone of a newly formed Center of Excellence (CoE) for Intelligent Automation, located in Wales. Back in December 2016 we did gaze deeply into the automation crystal ball and suggested that similar to the acquisition of Alsbridge by ISG, the
Having opened a fair few presentations and blogs with the dramatic proclamation “RPA is dead”, this title of “RPA is growing up” might sound a tad contradictory to some. Forgive me, I’m analyst and some days my glass is half full, others it’s half empty.
I am consistently trying to hammer home my plea that we approach RPA in the context of quality service delivery in all its naked complexity – not simply this obsession with individual tools, not looking for some sort of silver bullet, not looking for simple answers.
That is what our research and this blog itself are all about. Yet, for many, RPA is code for short term, guaranteed cost take out of headcount. For others, RPA is a broader placeholder, more similar to what I would term Intelligent Automation. Despite a lot of noise in the industry, RPA and Intelligent Automation are still a very nascent market. Thus, we continue to have a blurred perception around RPA that gets aggravated by the amount of smoke and mirrors spawned out by some tool providers and well as service providers.
Against this background of #RPAfakenews, I had the pleasure of sitting down with the management team of RPA solution provider upstart UiPath in Bucharest to discuss all those implications as well as getting a sneak preview of their development roadmap.
Culture, both internally and externally, underpins UiPath’ growth trajectory
Before I dive into the details, what struck me in Bucharest was the energy and togetherness of the UiPath team. Romania might not be the obvious location for an innovative start-up, but the country has been seeing a rise shared service centers, BPO delivery centers, and their entrepreneurs are part of the global village over the last few years. UiPath’ founder and CEO Daniel Dines, one of the smartest, humblest and nicest guys in the automation community, spent years coding for Microsoft in Seattle before embarking on building his own company. And this varied experience is showing, with UiPath being one of the fast-growing RPA providers and perceived by most buyers as a mandatory inclusion in RFPs next to the likes of AutomationAnywhere and Blue Prism. Clients reference the company culture, sincerity, lack of arrogance and the flexibility in commercial terms as a key reason for partnering with UiPath. From a capability side, the stability operating in Citrix environments and the expansiveness of it recorder function – features so critical to the effectiveness of RPA - is often added to those reasons. But the growth is also underpinned and enabled by smart hires. The most recent example is Boris Krumrey, UiPath’ new Chief Robotics Officer, who was won over from Atos where he had built out compelling automation capabilities around the notion of service orchestration.
Service orchestration is underpinned by operational analytics and cognitive computing
Service orchestration is the segway to understanding UiPath’s strategy. Aligned with the notion of service orchestration, UiPath is driving towards an integrated platform approach with end-to-end business process automation in mind. To achieve this, the company aspires to be an RPA eco-system player that integrates capabilities, in particular around operational analytics and the broader notion of cognitive computing. Examples include the integration of Google and Microsoft libraries, and also partnerships with providers, such as AABBYY and Elastic Search and Kibana for OCR integration and Data Analytics.
The capabilities of Elastic Search and Kibana will also underpin UiPath’s effort to advance to robot orchestration. However, the journey toward service orchestration goes beyond just tools and technologies. UiPath is trying to change the mindset in many RPA discussions and the notion of knowledge transfer is central in that regard. Consequently, UiPath is working on enhancements and tools to overcome the knowledge transfer challenges to create RPAs on robots quicker, but also in technical complex settings. At the same time, the company is beefing up partner support, training and certifications to put the evolving partner ecosystem on a much more solid platform. In a nutshell, UiPath’s platform strategy mirrors the orchestration efforts of the leading service providers that we have covered at great length at HfS. (link to the RPL)
UiPath’ platform strategy embraces the principles of the Digital OneOffice
Boris’ experiences at Atos can clearly be seen in other elements of UiPath’ roadmap and are aligned with HfS’ Intelligent Automation Continuum. Two examples for that: On the one hand, the integration of broad cognitive capabilities into the platform not least to lower maintenance costs. On the other hand, the extension of integrating automation capabilities to notions of a Virtual Agents akin to Atos AVA which Boris introduced there during his tenure. This extension to digital channels and intelligent sensor aligns UiPath strongly with our Digital OneOffice framework that suggests provider must enable customers to connect their back, middle and front offices. Thus, it is not about individual tools but about enabling a Digital Underbelly. As my esteemed colleague, Phil Fersht puts it, “Digitally-driven enterprises must create a Digital Underbelly to support the front office by automating manual processes, digitizing manual documents and leveraging smart devices and IoT where they are present in the value chain. Enterprises simply cannot be effective with a digital strategy without automating processes intelligently.”
Bottom-line: Service providers must educate, not obfuscate the market
The discussions with UiPath reference the increasing maturity in the market with a shift away from rudimentary process automation towards enabling higher value transformation projects. Yet, for those discussions to become the benchmark for the broader industry, the stakeholders and in particular the service providers, have to start properly educating the market, rather than continue to obfuscate it with smoke and mirrors. RPA clearly is growing up and maturing. But the marketing and broader discussions are not yet reflecting this reality. We urgently need a new set of custodians to translate these insights into publicly available best practices. To support exactly that, we would love to extend these discussions with other RPA providers about their roadmaps and insights.
While most of the services and operations industry obsesses with Robotic Process Automation to streamline its rudimentary back office processes, one provider that’s never shied away from making bold moves to disrupt illustrious competitors is Genpact, with an imaginative move to integrate true artificial intelligence with its business process service offerings by acquiring the impressive Boston-based Rage Frameworks.
It's almost history repeating itself from a decade ago, when the (then privately held) Genpact turned the BPO model on its head with its disruptive virtual captive proposition that significantly challenged the pricing models and ability to integrate offshore capabilities into the old BPO model. Now, the firm is breaking the mold, yet again, by making real inroads into infusing AI into business processes and introducing these concepts to its huge global community of finance leaders.
Let’s get to the rub: RPA is all about digitizing the back office, but Artificial Intelligence is where we see the true marriage of business processes with clever technology and self-developing algorithms. We’ve danced for years trying to prophesize when BPO will truly integrate with IT, but we’ve now had reality unveiled: RPA platforms streamline the back office, while AI brings the middle and front together to create that true Digital OneOffice™ experience. The Digital OneOffice is not about collecting and archiving historical data simply to discover what went wrong, it's about being able to predict when things will go wrong and devising smart strategies to get ahead of them. The Digital OneOffice is about embedding smart cognitive applications into process chains and workflows, it’s about learning from mistakes and new experiences along the way. This is the emerging “organization neural system”, where the needs of the customer can be intelligently supported by real-time, self-learning intelligent operations:
Why is this acquisition significant?
In a nascent market where stakeholders stumble through smoke and mirrors to make any sense of the many claims around Intelligent Automation, M&A is a clear indicator that the market is starting to mature. When in December 2016 ISG bought Alsbridge and CA acquired Automic, HfS suggested that Intelligent Automation was at an inflection point and that the focus on automation tools will shift toward the likes of Google, Amazon, and Facebook around deep learning and the integration of unstructured data. While we have not yet seen the Internet giants play their hand, Genpact’s acquisition of Rage Frameworks is underlining exactly these market dynamics. And this is the first time that a service provider is driving automation capabilities through M&A.
Rage Frameworks drives pre-built automation engines deep into unstructured territory
Whereas the broader market remains misguidedly focused on the intricacies of RPA, Rage’s focus is not on automating specific process steps, often on sub-process level, but on developing a broad ranging platform (RAGE Enterprise) for custom solutions with a deep vertical footprint. While RPA is largely focused on structured information, Rage will take Genpact deeper into integrating semi and unstructured data. Their development effort over the last two years to build enterprise applications for financial industry processes (wealth management, commercial loan processing and financial statement spreading) is shifting the focus from automation tools and capabilities to providing an end-to-end process leveraging a model driven business transformation platform.
In our view, the value proposition of Rage Frameworks is centred on leveraging Machine Learning and Natural Language Processing to build out highly vertical engines in Financial Services, Capital Markets, and Supply-Chain. The functionality of these engines ranges from managing business rules to real-time integrating content to data access and NLP all built around a process assembly engine. These engine building blocks can then be assembled for custom solutions that automate business processes or can be used as one of three pre-assembled financial services industry applications: LiveWealth, LiveCredit, and LiveSpread. In addition, broader capabilities including front desk automation, real-time intelligence, and pricing are transforming how commercial lending, policy underwriting, financial statement analysis, investment research, and multi-system reconciliation can be performed.
RAGE’s industry applications are a big part of the allure for Genpact, which has spent the last few years going deeper into its commercial banking and capital markets operations accounts with data and analytics solutions trying to solve the same client operational challenges as Rage. In our recent HfS Capital Markets Operations Blueprint, Genpact placed in the Winner’s Circle, with an HfS callout about its need to bring more technology enablement to capital markets. The service provider has examples of using emerging technologies such as machine learning, automation, dynamic data extraction, etc., in LOBs as retail banking. What Rage brings to the table for Genpact is a more strategic approach for impacting client operations through technology-led change.
Genpact continues to lead the automation discussion from the front
From Genpact’s perspective, the acquisition is reinforcing the perception of being a pioneer in Intelligent Automation. Having led the market with the first publicly announced partnerships with AutomationAnywhere, Exilant, and Automic around its Rapid Automation program, Rage Frameworks fits in well with Genpact’s holistic approach to automation. Within that context, Rage’ assets will further advance the integration of unstructured data: Genpact has invested heavily in analytics and big data with a dedicated research lab in Bangalore, India. They have developed a Data Engagement Platform using big data technologies, in order to be able to harness structured and unstructured data from multiple sources. Thus, its Lean Digital strategy is aligned with HfS OneOffice concept. But the company has to demonstrate that it is starting to link up back, middle and front-office.
The broader market will follow with accelerated M&A activity
Regulations and risk management requirements are forcing banks to rethink the way in which they capture, store, manage, and distribute the growing volumes of transactional and trade data. Structured data from multiple departments and asset classes are maintained in silos, and unstructured data present new challenges as well as opportunities for automation and analytics.
Despite the continuing noise around RPA, we believe the market will shift toward operational analytics and the broader notion of AI. Not only are the leading RPA tool providers expanding in that direction, but we expect the investment focus to progress toward Deep Learning, Neural Networks, and broad NLP capabilities. While it might sound trite, data really is becoming the new currency. But this currency needs to be integrated into delivery backbones on an industrial scale. Thus, service providers need to reinforce their efforts on service orchestration. We haven’t seen many proof points for a successful expansion into data-centric scenarios, but those deployments will be a clear demarcation between the leaders and the also-runs.
Central to this will be the articulation and delivery of business outcomes for specific industry functions through the use of operational analytics, RPA, BPO and AI. Can Genpact put together a financial spreading function by leveraging its operational expertise in BPO and RPA, the RAGE LiveSpread application and analytics interventions to deliver more efficient and effective credit risk management?
Bottom-line: Genpact is progressing toward True Digital OneOffice capabilities
Genpact’s announcement can be crystalized to its ambition of blending RPA in the back-office with AI in the middle-office, which is why the firm, still regarded by many as a "pureplay BPO" managed to break the top 10 in the recent Digital OneOffice Premier League, despite not dragging a multi-billion dollar IT services business around.
Thus, BPO is ever more changing to becoming technology-led. We expect that this strategy will be increasingly underpinned by neural networks and notions of self-remediation to enhance the Digital Underbelly and the Intelligent Digital Processes of the OneOffice concept. While Rage Frameworks is one of the superior suppliers across the Intelligent Automation Continuum, the more providers that are progressing toward the notion of AI, the more inflated the valuations for M&A will become. Against this background, valuations for RPA providers could look like peanuts very quickly. But then again, M&A is rarely rational in today's foggy market.
The time for smart partnerships to drive real innovation and new thinking in Artificial Intelligence (AI) and cognitive computing is now. This means we need to see the industry’s deep-pocketed innovators become increasingly open – and eager - to working together to help the services industry make the shift to true digital, intelligent, cognitive capabilities.
Recent HfS research shows adoption of Artificial Intelligence (AI) and cognitive computing to enhance operational analytics and Machine Learning is strongly accelerating, with 72% of senior operations executives citing cognitive as becoming a critical component of the future operations strategy:
Digital and Cognitive are Driving Enterprise Operations
Source: “Intelligent Operations" Study, HfS Research 2016; Sample: Buyers = 371
While the market perception around these topics remains refreshingly blurred, AI is a critical building block as organizations increasingly look to progress from legacy labor-driven service delivery to progress toward notions the As-a-Service Economy and the Digital OneOffice (see link). While AI is capturing the imagination of many PE investors and VCs and is being used to hype up media reporting and conference circuits, the market dynamics are far from clear.
Against this background, the fundamental question being posed is “Who will be in the driving
Last week, HfS had the opportunity to meet with the NTT DATA leadership team at the service provider’s first major analyst summit in Dallas Texas, since its acquisition of Dell Services last year. So can the firm live up to its new billing as one of the major tier 1 global service providers?
Making sense of a complex fast growing entity
Analyzing NTT DATA is by no means an easy undertaking, given its complex organizational structure and lower visibility due to its reluctance to invest in marketing.
The CEO of NTT DATA Inc., John McCain, tackled those perceptions head on and vowed to change direction. Much of the purpose of this event was to present the “new” NTT DATA. Building on the acquisition of Dell Services, he pointed to branding campaigns that include TV and broadsheets. This is reflecting that the company has evolved, not least through acquisitions, into one of the largest global service providers. And with these significant investments come higher expectations. So, how should we look at NTT DATA and how does the company stack up in the competitive landscape?
The strategy framework that McCain outlined appeared sound and offers a platform for further expansion. In particular, (re-)packaging the portfolio and industrializing delivery. In the context of the portfolio pillar, McCain was pointing to the aim of deriving greater value from NTT DATA investments and of leveraging the “NTT Group power”. Yet, throughout the two days, we actually did hear very little about the Japanese capabilities and activities that the broader NTT Group brings to the table. When executives actually touched on those capabilities, the differentiation to the broader market appeared at least in contours. NTT DoCoMo, DiData, discussions on how Quantum Computing and Cognitive Computing could solve mankind’s more pressing issues, were providing a glimpse of highly differentiated capabilities. Invariably, the discussion of cognitive evoked strong memories of IBM. However, in contrast, NTT DATA is crucially not constrained by the many legacy deals with which IBM is still struggling. If anything, NTT DATA had hitherto focused on specific project-centric business but is now keen to trade up to larger and broader sourcing deals across multiple domains.
The challenge of bringing together the existing Japanese business units with the newly-acquired international businesses
The marginalization of NTT DATA’s Japanese business points to another crucial issue. The integration of the various business units, including the many acquisitions, is a work in progress. One can point positively to the long-term focus of the Japanese business culture that has seen acquisitions being very carefully integrated over a longer period of time. Yet, I couldn’t help feeling that the cultures of Keane and Dell Services appear to be the dominant reference points in many discussions. Thus, there appears to be a healthy tension between the Japanese core business and the “Global Business” i.e. the multiple acquisitions outside Japan. However, if HfS’ contention that organizations are moving toward to the Digital OneOffice™ (download our POV for a full definition of the Digital OneOffice), where connecting back, middle and front-office is corroborated, then NTT DATA has to eat its own dog food and move toward being a more connected global organization – you can’t deliver true Digital OneOffice capability if you haven’t become a true Digital organization yourself at your core.
NTT Data has real potential to align to the Digital OneOffice
From what we are learning, the seeds for that are already being sown. Around its Digital Services, NTT DATA is suggesting the first focus is through its customer’s eyes. And, similar to our suggestion of a Digital Underbelly, NTT DATA is pointing to the fundamental shift that automation is creating. However, the boldest initiative is to wrap the needs of the customer directly around its delivery priorities through its CUE2, continuous customer experience engineering program.
Let’s start with NTT DATA stance on automation. The prominence in which executives were talking about automation was tangible. Yet, the specifics of the various initiatives might have been lost to many in the audience. Below the radar screen, NTT DATA is running the largest deployments of IPsoft’s IPcenter globally. Tellingly, the Global Management One platform is helping clients with onboarding to NTT DATA’s cloud platform. A task that has been challenged by the many acquisitions that we have called out. Furthermore, the company is helping to adapt IPsoft’s Amelia to the Japanese language and executives were suggesting strong traction. Around more mundane matters, the strategy around RPA was a trifle blurred. While NTT DATA’s BPO business is focused on its proprietary AFTE solution, as executives suggested the solution to be more efficient than any third-party tools, the consulting arm, largely representing the Carlisle & Gallagher acquisition, was pointing to third party tools as the preferred way of engagement. Beyond the nuances of the automation strategy, what really stood out for us at the event, was NTT DATA’s ambitious plan to integrate customers directly into their delivery strategy with the CUE2, continuous customer experience engineering program. This program is not only adapting Agile and DevOps to the requirements of Managed Services but putting the user center stage. In all but name, here it is where the connection to the HfS Digital OneOffice concept is the strongest. Suffice it to say, NTT DATA is still very early in rolling this out across its engagements, but the strategic intent could evolve into one of its strongest differentiators.
Bottom-line: NTT DATA has to eat its own digital dog food to progress toward the OneOffice
As bold as the CUE2 initiative is, in order to catch up with the leading global service providers and to demonstrate its Digital OneOffice credentials, NTT DATA has to advance significantly the integration of its various business units. Only by finding and leveraging commonality across its global delivery units, NTT DATA’s many innovative forays will lead to repeatability and thus margin improvement. In order to reach new clients, NTT DATA should make a virtue of the achievements of the broader NTT Group. While culturally not always accessible, NTT DATA’s strong innovation credentials, often emanating from the Japanese market, provide a platform for a clear differentiation in a market that has been notoriously difficult to achieve a meaningful differentiation. Deep networking and mobile capabilities that can be leveraged in IoT scenarios are jumping to mind. To succeed with the ambitions for the “new” NTT DATA, a broader mix of accents might go a long way, not least Japanese. Then we will start to look at NTT DATA as a truly global heavyweight.
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
I remember vividly reading an article back in 2012 that a new set of software termed “robotic automation” could be a serious threat to offshoring if not outsourcing at large. Suffice it to say I sat up straight in my chair and wanted to find out more. And I am very glad that I not only read that article but started to research those topics. This research not only got me immersed in the small yet highly innovative Intelligent Automation community, but it led to HfS suggesting that we should join forces to push the envelope on how these tools might disrupt our industry. At the time, Phil titled the blog in his inimitable fashion: “Greetings from Robotistan, outsourcing’s cheapest destination.” And the key strategic questions the HfS team was asking included: If you were a buyer, how fast would you jump at the option to hire FTEs at rates that undercut the Indian body shops by 50% -- without sending jobs offshore? (“Hire” isn’t the right word, of course: it’s “create”.) If you were a BPO services provider, how would you like to build a software robot to automate a business process for one client, and then resell copies of that robot to a dozen other clients in the same vertical?”
So, fast-forward 4 years, is the offshoring industry any closer to the abyss? Those questions raised by HfS can be condensed to the suggestion that RPA will lead to a surge in insourcing which in turn will cannibalize large parts of the offshoring industry. This was underpinned by the assumption that scaling those robots is a piece of cake. Suffice it to say those suggestions need to be understood in the context of time, but equally that it were tool providers like Blue Prism and UiPath pushing that narrative in order to get the concept of RPA on the radar screens of the industry’s stakeholders. So where is the industry really at and what are the likely scenarios moving forward? Two recent industry events might help to shed more light at this. First, early in December Capita announced restructuring program. Crucially, the expected job losses are meant to be buffered by both moving services offshore as well as investing into a proprietary RPA solution. Capita is an important reference point as it has been used by the likes of Blue Prism and UiPath as a case study for the suggested trend of increased insourcing through RPA. What this tells us is that we have to stop ask binary questions, namely is one concept supplanting another. This is also demonstrated by the second event. HfS did spend a couple of intriguing days in Vietnam visiting Swiss Post Solutions (SPS) delivery centers in Ho Chi Minh City and Can Tho. SPS is a compelling example for scaling out RPA as part of its Global Sourcing strategy. The company is blending proprietary IP, RPA (UiPath) and Artificial Intelligence (Celaton) to accelerate toward higher value services. Thus, SPS is aiming to expand from its core in document management outsourcing toward BPO services. This journey is incremental, building on its historical strengths around document management and invoice processing but progressing to broader capabilities in F&A BPO and Insurance Claims processing. Unlike many other RPA deployments which tend to focus on client specific activities, often on a sub-process level, SPS is focusing on industrializing the core of its delivery capabilities through RPA and AI.
Before you raise your eyebrows, the point here is not to suggest that the market will necessarily follow SPS, but that we need a much more nuanced understanding of the implications of RPA and Intelligent Automation at large. HfS has been vocal, to put it mildly, on the impact of automation. First and foremost, this impact plays out differently in different scenarios. We see the most pronounced impact on service providers internally. It is here where RPA is being deployed aggressively and as financial earnings calls show, thousands of jobs are being “freed up”. Service providers are much coyer in deploying RPA in Managed Services contracts as top line revenues will be impacted. More recently we see a surge in transformational projects building out captive automation capabilities for clients. However, the boundaries between the last two scenarios are blurted. As part of the sourcing mix both might exist within one organization. But equally, we are seeing failed in-house projects that end up as BPO contracts and vice-versa.
However, to get a better sense for potential disruption, we have to continuously enhance our understanding of what automation really means. The more I think about automation, the more discussions I have with stakeholders, I keep increasingly coming back to one issue that helps me crystallizing my thoughts on the impact: How much of automation conceptually is actually a managed service and how much conceivably could be run as unsupervised learning. Take the example of SPS, business agents are being supported by elements of RPA and AI but their activities continue to require significant manual intervention. You can apply the same logic to the various tool providers and you get a sense when you visit their offices. Do you see hordes of developers doing manual tweaks and coding or do you see largely just R&D capabilities? Unsurprisingly the latter technologies offer higher value moving forward, even though at times it might require more effort to get the deployments up and running. Now combine the emerging notion of Virtual Agents underpinned by those forward-looking technologies and we really are staring at highly disruptive scenarios. On the danger of sounding like a broken record, we urgently need an honest and transparent debate on the various implications of Intelligent Automation.
Bottom-line: Intelligent Automation projects will only be successful with constructive change management
The White House released a report on the implications of automation and AI on the economy, the UK Government undertook an inquiry into robotics and artificial intelligence, yet our industry appears largely to remain in denial about those issues. Almost all service providers we try to engage with around this topic continue to suggest there will be no disruption. People “freed up” from projects will re-trained, re-badged – and you will have guessed it – all be happy. But I keep scratching my as we work in the sourcing industry. I am the last one proposing restructuring and job losses, but we finally have to get to a more honest and transparent debate on all of this. The implications will not only be felt in global sourcing locations but much closer to home in equal measure.