2019 Prediction: Brexit will be abolished and the UK economy will roar back to life

December 07, 2018 | Phil Fersht

I am not normally one for big grandiose predictions - I'm actually pretty dull when it comes to big hyperbole (I hope). 

Honestly, I'd love to declare that AI will destroy a third of the workforce, and then magically perform a 360-degree flip and start creating jobs.  I'd also love to declare that RPA vendors will magically infuse Machine Learning into their apps to produce AI magic.  Because AI is magic, didn't you know? I'd love to declare that software is eating the world... and then declare that it actually won't, because a lot of it is actually pretty crap.  I'd also love to declare that Blockchain will radically impact the entire business ecosystem to such an extent I can prognosticate all these business cases with so many holes in them, I might as well start lauding the transformational capabilities of emmental. 

However, there is one big bold prediction I am prepared to make:  Brexit will be dead in the water in a few weeks

I am an analyst, I explore every permutation of almost anything that impacts economies, business, societies until I drive myself mad.  I also work with other half-crazy analysts who do the same.  Just take a gander at our recent analysis of the hazardous implications of Brexit on the UK economy

So why is Brexit headed for the scrap heap?

It was always an "all in" or "all out".  We did neither.  Seriously, we should have just drawn the guillotine on the EU right after the 2016 referendum, arranged a sensible withdrawal that could be governed effectively and transparently. We should have taken the pain then, and we'd probably be OK right now.  Hell, we'd probably be part of NAFTA introducing delicious microwaved fish and chip pub luncheons to the Mexis and some actual real beer to the Canadians.  And we may even finally get decent burritos introduced to the streets of London and poutine finally replacing soggy chips n' curry sauce. Instead, we dithered, argued, bored ourselves silly arguing until no-one could quite remember what we were doing in the first place.  Instead, we got to see close hand how indecisive, and stupid so many politicians are, how most of these people only care about their self-interests than any actual deep-driven mission or purpose.  We also had many chances to think "Why are we doing this again?  None of our businesses are happy, the Irish are freaking out, the Scots are ready to bolt, so we'll only be left with, er, Wales (and even they are making noises)".  And Mr Trump even thinks it was a bad deal... and he was great in the apprentice, so it must really suck.  

Brexit is a massive Catch-22. You can't just compromise on an issue like this, even though 48% rejected it.  There just isn't any point in doing half-measures with Brexit - both scenarios suck.  The diluted mess Theresa May has served up basically ensures we only get half-screwed by the experience.  We are still tied to the EU, the Irish are still freaking out, we will close our borders in any case, but noone will want to come here anyway, because our economy will stink. In fact, most of the EU immigrant workers will probably flock to Dublin to work in the call centers after the banks have shifted over there... There really isn't a compromise when the issues are this black and white.

The only current scenario is 'no-deal disaster' or 'go back to the people to make a decision'.  Let's get to the point - the "deal" on the table is a plethora of half-measures with little upside for anyone.  So that leaves only one Brexit option:  no-deal and an economic calamity. There is no way 52% of the British folks care that much about putting a middle finger up at Brussels to destroy their livelihoods. When May's deal fails next week, she will really only have one choice - to go back to the people to decide.  And we only need a 3% swing from that heady warm June 2016 evening to fix this calamity.  I occasionally like a bet, and this is one I'd throw a few pounds at...

The Bottom-Line: Parliament will throw this out and the British public will reject a no-deal Brexit... So Auf Wiedersehen Brexit

Firstly, there is no way MPs will vote for the current "soft-Brexit" deal on the table next week.  May must know this too - and will simply go straight to the people to finalize this issue once and for all.  There is no renegotiation with Brussels - that is clear, and there isn't enough time, in any case, with the deadline being 29th March 2019.  Secondly, Calling a general election with Brexit looming so close would be madness. There are now only two real options:

1) A "Hard no-deal Brexit"

2) No Brexit

So there will be a second referendum and it will swing for option 2.  That won't be the end of the matter, as a groveling "take us back" negotiation will take place, but the EU leaders all know they need Britain back to keep the EU strong - and this will drive Putin mad (who would love nothing more than a weakened EU).  Trump liked Brexit for similar economic reasons of weakening Brussels' power, but the US relies on a strong Britain as its gateway to Europe, and may now prefer an EU including the UK than one without.

There will also be considerable public fall-out as half the country did vote "leave" and they will feel betrayed by shambolic politicians.  However, a "deal" was never going to be done and a transition organized in two short years - May was always on a hiding-to-nothing, and the only real takeaway is that referendums on complex issues never work.  You know who loved referendums? One A Hitler... when information was easily controlled and the public easily brainwashed.  In today's age of hyper-connected everything, you simply can't control anything!

Posted in: Policy and Regulations

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EY, Capgemini, KPMG, TCS and Accenture lead the RPA world of services in 2018

December 02, 2018 | Phil FershtElena ChristopherMaria Terekhova

It's been more six years since we broadcast the concept of RPA to the industry and now we have finally unveiled the first comprehensive analysts of service providers and advisors in the space.  Yes - it really does take that long for a discrete software market to build an ecosystem to install, develop, manage and scale.  As my blogging pal Vijay Vijayasankar, one of the world most prominent enterprise software gurus, tweeted yesterday:

And what better than the new HFS Top Ten format where feisty analysts Elena Christopher and Maria Terekhova pull together the hygiene factors of execution and innovation with the "voice of the customer" as the makeweight factor to tell these suppliers apart:

 

Click on charts to enlarge

Key elements of this research

  • Robotic Process Automation (RPA) has emerged as a powerful change agent, with enterprises around the globe embracing it as a means to automate manual processes and create a bridge to a digital future. Despite signs of vibrant growth such as the latest billion+ valuations of the most prominent RPA software firms, RPA is still a nascent

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Posted in: Robotic Process AutomationIntelligent Automation

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RPA will reach $2.3bn next year and $4.3bn by 2022... as we revise our forecast upwards

November 30, 2018 | Phil FershtJamie Snowdon

Well... it’s been quite a 2018 in the fantasy world of RPA (RPA plus RDA), where some of the fantasy dollars have magically become real, as the market hit $1.7bn – an increase of $250m from our forecast last year.  So when the more conservative of forecasters (HFS) undershoots the market by 17%, you know RPA has been sneaking down the growth hormones of late.

So why is RPA growing above initial analyst estimates?

  • RPA vendors, in particularly UiPath and Automation Anywhere (AA), have been able to recognize more revenues than expected. Bots licenses are being sold and deployed faster than we envisaged, due to effective training programs and aggressive support from third-party services firms;
  • The slowdown in new business process outsourcing engagements is driving more focus from enterprises in discrete strategies to drive efficiencies and digitize processes (and encourage more bots plus humans engagements);
  • The shift in the focus of RPA from job elimination to augmenting talent, digitizing processes and extending the life of legacy IT systems has increased the appetite of operations executives to fast-track RPA training programs and invest in broader intelligent automation strategies – even though most enterprises are still in the “tinkering phase”;
  • The initial adoption of "attended RPA", which makes up the majority of RPA and RDA engagements currently in play will eventually drive more "unattended RPA" where the increased value will be created and genuine alignment between RPA models proving to be a gateway to broader AI engagements;
  • The ramp up from service providers and consultants to support enterprise adoption has continued unabated, especially with the flattening of outsourcing investments and the waning interest in Global Business Services models. This reliance on third parties has proven to be a key dynamic behind the growth in RPA as solution providers prefer to sell through the services channel for larger enterprise deals and accelerate client training and development. The strong focus from the likes of Accenture, Capgemini, Deloitte, EY and KPMG has given the RPA market immense credibility;
  • Rapid funding of RPA vendors (in addition to rapid revenue growth) has encouraged these longer-term investments of many enterprises previously skeptical of investing in very small software boutiques. Largest examples have been AA and UiPath, attaining capital investment rounds as high as $250/$300m, but also some lesser-known niche RPA tools firms, such as Softomotive, which recently had a $25m investment round announced;
  • Increased focus from major ERP / orchestration software vendors with Pega’s acquisition of Openspan and SAP’s first foray into RPA adding Contextor.

Click on each chart to enlarge

 

RPA Definition: 

Example use-case: automating invoice processing across multiple business applications handling rule-based exceptions. RPA is different from traditional automation software as it is inherently capable of recognizing and adapting to deviations in data or exceptions when confronted by large volumes of data. In effect, it can be intelligently trained to analyze large amounts of data from software processes and translate them to triggers for new actions, responses, and communication with other systems. RPA describes a software development toolkit that allows non-engineers to quickly create software robots (known commonly as "bots") to automate rules-driven business processes. At the core, an RPA system imitates human interventions that interact with internal IT systems. It is a non-invasive application that requires minimum integration with the existing IT setup; delivering productivity by replacing human effort to complete the task. Any company which has labor-intensive processes, where people are performing high-volume, highly transactional process functions, will boost their capabilities and save money and time with robotic process automation.  Much for RPA is self-triggered (bots pass tasks to humans), but requires human intervention for judgment-intensive tasks and robust human governance and to make changes / improvements.

Similarly, RPA offers enough advantage to companies which operate with very few people or shortage of labor. Both situations offer a welcome opportunity to save on cost as well as streamline the resource allocation by deploying automation. The direct services market includes implementation and consulting services focused on building RPA capabilities within an organization. It does not include wider operational services like BPO, which may include RPA becoming increasingly embedded in its delivery.

RDA Definition:

In addition to RPA, the other software toolset which comprises the emergence of enterprise robotics software is termed RDA (Robotic Desktop Automation).  Together with RPA, RDA will help drive the market for enterprise robotic software towards $2.3bn in software and services expenditure in 2019 (with close to three-quarters tied to the services element of strategy, design, transformation and implementation of enterprise robotics).  HfS' new estimates are for the total enterprise robotics software and services market to surpass $4.3 billion by 2022 as a compound growth rate of 40%.

Example use-case: automating transfer of data from one system to another. RDA is essentially surface automation, where desktop screens (whether desktop-based, web-based, cloud-based) are "scraped", scripted and re-programmed to create the automation of data across systems.  A well-designed RDA solution can automate workflows on several levels, specifically: application layer; storage layer; OS layer and network layer. Workflow automation on these layers requires equally specific technologies but provides advantages of efficiency, reliability, performance and responsiveness. Much of this automation needs to be attended by humans as the automation is triggered by humans(humans pass tasks to bots), as data inputs are not always predictable or uniform, but adaptation of smart Machine Learning techniques can reduce the amount of human attendance over time and improve the intelligence of these automated processes.    Similarly to RPA, RDA requires human intervention for judgment-intensive tasks and robust human governance and to make changes / improvements.

The Bottom-Line: Automation and AI have a significant part to play in engineering a touchless and intelligent OneOffice

However which way we spin "digital", the name of the game is about enterprises responding to customer needs as and when they occur, and these customers are increasingly wanting to interact with companies without physical interaction.  Moreover, the onus is moving to the most successful digital enterprises being able to anticipate the needs of their customers even before they occur, by accessing data outside of the enterprise across the supply chain, or economic and market data that can help predict changes in the market, or emerging offering that customers will want to purchase.

This means manual interventions must be eliminated, data sets converged and process chains broadened and digitized to cater for the customer.  Hence, entire supply chains need to be designed to meet these outcomes and engage with all the stakeholders to service customers seamlessly and effectively.  There is no silver bullet to achieve this, but there is emerging technology available to design processes faster, cheaper and smarter with desired outcomes in mind.  The concept was pretty much the same with business process reengineering two+ decades ago, but the difference today is we have emerging tech available to do the real data engineering that is necessary: However, if these firms rest on their laurels, this market dominance will be short lived.  Once the digital baseline is created, enterprises need to create more intelligent bots to perform more sophisticated tasks than repetitive data and process loops. Basic digital is about responding to clients as those needs occur, while true OneOffice is where enterprises need to anticipate customer needs before they happen (see below).  This means having unattended and attended interactions with data sources both inside and outside of the enterprise, such as macroeconomic data, compliance issues, competitive intel, geopolitcal issues, supply chain issues etc.  

Click to Enlarge

In short, every siloed dataset restricts the analytical insight that makes process owners strategic contributors to the business. You can’t create value - or transform a business operation - without converged, real-time data. Digitally-driven organizations must create a Digital Underbelly to support the front office by automating manual processes, digitizing manual documents to create converged datasets, and embracing the cloud in a way that enables genuine scalability and security for a digital organization. Organizations simply cannot be effective with a digital strategy without automating processes intelligently - forget all the hype around robotics and jobs going away, this is about making processes run digitally so smart organizations can grow their digital businesses and create new work and opportunities. This is where RPA and RDA adds most value today... however, as more processes become digitized, the more value we can glean from cognitive applications that feed off data patterns to help orchestrate more intelligent, broader process chains that link the front to the back office.  In our view, as these solutions mature, we'll see a real convergence of analytics, RPA and cognitive solutions as intelligent data orchestration becomes the true lifeblood - and currency - for organizations. 

Do take some time to read the HfS Trifecta to understand the real enmeshing of automation, analytics and AI.

Posted in: Digital OneOfficeRobotic Process AutomationIntelligent Automation

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The cocktail of SAP (ERP), Qualtrics (UX), and Contextor (RPA): Tastes like the OneOffice, but lacks one critical ingredient - RPA experience

November 21, 2018 | Phil FershtSaurabh GuptaElena Christopher

The software giant and world’s premier system of record, SAP, was on an acquisition spree over the last two weeks. First it spent $8billion on the acquisition of Qualtrics, a User Experience (UX) software that helps to collect and analyze data for market research, customer satisfaction and loyalty, product and concept testing, employee evaluations and website feedback. And then it acquired Contextor, a small little-known France-based Robotic Process Automation (RPA) product to augment SAP Leonardo’s intelligent technologies portfolio.

It appears that SAP is starting to mix a heady cocktail that enables its systems of record with the triple-A trifecta (AI, Analytics, and RPA) and embedded UX capabilities. Tastes like the OneOffice?  

Well, definitely for SAP mighty front office portfolio, but the huge disparity between the $8bn splurged on Qualtric and - whatever negligible sum was invested in Contextor - does not excite us that SAP is in anyway deadly serious about dominating the back-to-middle office automation space, which is critical to knit together disparate processes and systems. 

What is the Digital OneOffice and why it matters?

The Digital OneOffice is where teams function autonomously across front, middle and back office functions to promote broader processes with real-time data flows that support rapid decision making. It’s where front, middle and back offices will cease to exist, as they will be, simply, OneOffice:

 The HFS Digital OneOffice

Click to Enlarge

The OneOffice Framework is a guide to align the entire organization to driving a customer experience (CX) that gives them a competitive edge.  This means breaking down the siloes between front, middle and back office so that information and data flows freely and enterprises are able to predict and cater to customer needs.  OneOffice is realized when the needs and experiences of the customer are front and center to the entirety of business operations.  This means enabling automated data flows between the customer interface, your customer-facing staff and operations staff in order to create common goals and outcomes across the organization. Hence the addition of Qualtrics has terrific potential to bridge critical gaps between customers and employees, and effective RPA provides a real gateway to digitize processes and create a gateway to broader AI possibilities

Qualtrics and Contextor  are attempts to plug SAP’s solution gaps in the OneOffice vision

The reason behind the success of Qualtrics (and the driver for the 20X PSR!) is that Qualtrics-driven UX is not about just a fancy UI. Qualtrics enables SAP to offer solutions that combine front and back-office data. SAP is already a leader in managing organizational transactional data but lacked the capability to understand its implications on customer satisfaction, loyalty, and experience. With Qualtrics this is now a distinct possibility.

Contextor’s addition is focused on providing the missing ‘A’ in SAP’s Triple-A Trifecta capabilities. HFS believes the “Holy Trinity” of service delivery is at the intersection of the Automation, Analytics, and AI or the Triple-A Trifecta. SAP Leonardo already has a portfolio of technologies across Machine Learning, Analytics, IoT and blockchain but lacked the basic automation capabilities that Contextor now provides. Intelligent RPA capabilities are scheduled for inclusion into SAP S/4HANA in the first half of 2019, with other SAP applications to follow.

SAP will still need to justify why embedded capabilities will be better than standalone products

Automation and UX are hot areas with multiple robust Commercially-Off-The-Shelf (COTS) solutions that can integrate well with SAP environments. SAP itself is heavily invested (and rightly so) in building its own ecosystem with the SAP App Center where third-party solution providers can offer solutions that work seamlessly with SAP environments. In today’s world, it is unclear how much more an embedded functionality is worth compared to an ecosystem approach. SAP will need to justify why and how the acquired capabilities will offer a unique or better value proposition than standalone products. 

Qualtrics brings to the table a differentiated value proposition, especially when combined with SAP’s existing operational data and transaction processing market share. But only in theory. Integrated value proposition demonstrated through tangible use cases will be the real proof. The cultural mismatch between SAP and Qualtrics (as pointed out by Dennis Howlett here) will make it even tougher.  

When it comes to RPA, the software giants have been largely MIA. Before SAP’s Contextor acquisition, Pega is potentially the only other software player that recognized the power of RPA with its acquisition of Openspan RPA in 2016. It initially embedded bots into its BPM suite of applications and now gives away unlimited robots with its Pega Platform.

Contextor itself is a very small player in the fast-growing RPA product market dominated by Automation Anywhere, Blue Prism, and UiPath. Power users of Contextor shared with HFS that it is a complex-to-use tool, requires coding experience, and has limited AI hooks. SAP opted not to acquire any of the big three RPA players (perish the thought at their hefty price tags!) and will possibly get basic RPA capabilities with Contextor. However, it will still need to convince clients about the advantages of using embedded RPA capabilities because the stand-alone RPA products can offer the same (perhaps even better). What’s so compelling about Contextor-driven SAP that requires a course correction from clients who are already on their intelligent automation journey? As with Pega, perhaps the answer lies in bundles bots as give aways.

The other open question around Contextor is how SAP decides to position it internally and with clients. Consider the system integration space. APIs are real-time and resilient but RPA-driven integrations are brittle. IT purists love APIs but businesses don’t really care as long as it works. In reality, enterprises need both options as an “API-everything” world is impractical or at least not terribly timely. But will SAP look at RPA as a viable long-term option for automation or just as a temporary “duct-tape” till it gets the more robust (and expensive) functionality developed within the core application?

Bottom-line: SAP’s acquisitions of Qualtrics and Contextor demonstrate that UX is not limited to the front office, but we question the ability to drive OneOffice integration with a paltry investment in automation 

Qualtrics enables the integration of back-office and front-office data while Contextor will enable automation from front to back within the SAP environment and outside. This is the HFS OneOffice vision where organizational silos start to converge to focus on real-time customer and employee engagement.   

However, the deep process requirements on the client side that are critical to find success with RPA, coupled with strong services partnerships needed to provide the technical expertise, reskilling and change management do not bode well for SAP to find much (if any) success with RPA.  SAP has not proven particularly successful supporting complex process transformation needs of clients outside of the traditional SAP product templates (its BPO alignment division was quietly wound down several years ago) and the services partnerships that have been developed by Automation Anywhere, Blue Prism and UIPath are lightyears ahead of anything Contextor has forged (and some leading consultancies in the space had never even heard of the French firm).  While it is understandable that SAP did not want to invest multiple-billions in a leading RPA solution, we believe it could have targeted a more established middle tier solution, such as Redwood (which is specialized with the SAP template), Softomotive, Kofax or Kryon.  

While it is easy to criticize the Contextor investment as lacking real teeth, at least is it a much larger step forward to bring "big iron" ERP into the robotic process automation age, when you compare it with the complete void of RPA investments yet to be seen from the likes of the SaaS giants Oracle, Salesforce, Workday and the AI platform movers Microsoft, Amazon, IBM and Alibaba.  Now what to expect to see next as this industry stumbles into consolidation....

Posted in: Digital OneOfficeRobotic Process AutomationIntelligent Automation

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It's never too late for Tech Humanist Kate

November 17, 2018 | Phil Fersht

The final countdown is on for the end-of-year reality check leadership extravaganza, with HFS' New York FORA Summit where we measure the genuine pace at which we're Hurtling into the Hyper-Connected Economy. 

We've been living through a journey of change agents promising to shake the very foundations of how we do business, how we engage with our customers, our partners and our employees; how we structure our business operations; how we build and source our IT backbones; how we balance our portfolios of legacy systems with super-connected platforms; how we explore the potpourri of analytics, automation and AI solutions to make us smart enough to keep our businesses ahead of the competition, where the front office can anticipate the needs of our customers, with operations geared and finely-tuned to deliver on those needs.

So time to meet one of our keynote speakers, Kate O'Neill, who will be unveiling her new book, "Tech Humanist" during her speech "How to Be Successful with Human-Centric Data and Technology"...

Phil Fersht, CEO and Chief Analyst, HFS Research: Kate, really happy to have you speak at FORA New York this December. So, can you tell us about what you will cover in your keynote, and maybe a little bit about the new book? What is really driving your thinking these days, in terms of where we’re going, and what’s changed in the last couple of years?

Kate O'Neill: Phil, thanks for having me, I am really excited about speaking at the Summit so I can share some insights from my new book, Tech Humanist, and when I last spoke last time I had just published my earlier work, Pixels in Place.  Then it was all about integrated, connected, smart experiences, and the data that’s shared between the physical layer and the digital layer.  I talked about how humans are the connective tissue between those layers of the world, and how that implies that we need to be respectful of that data, and protective of it, and mindful about the kinds of experiences that we’re creating when we use human data to make our businesses more successful, which we certainly can do, and there’s a lot of opportunity for

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Posted in: Digital OneOfficeIntelligent Automation

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Happy 100 years of Independence for the Third Polish Republic... Trzecia Rzeczpospolita

November 11, 2018 | Phil Fersht

Posted in: Sourcing Locations

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Brexit will rip out the underbelly from the British economy - and we'll likely never recover

November 07, 2018 | Phil FershtJamie SnowdonOllie O’Donoghue

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However which way you analyze all the economic indicators, and whatever your opinion may be regarding Britain's relationship with the European Union (EU), removing the movement of EU labour into the UK will create a perilous shortage of labour, particularly for low-to-mid skilled professions.  If anything, removing worker base at the lower end of the skills spectrum is worse than at the high-end, for the simple reason it's much harder to entice people into jobs that may be low-paid, unattractive and - in many cases - require hard graft for low wages.  How are our hotels and restaurants going to find 120,000 staff willing to work for the minimum wage; our food factories to renew a third of their workforces to prepare our food; our cleaning firms going to backfill 132,000 people willing to mop and scrub for a living? The answer is sadly obvious - many of our industries will be under real threat of implosion because they simply cannot access the people they need to keep them functioning.

And without a thriving working class, the economy will suffer due to less money being spent, our businesses will suffer because of rising hotel costs, our entire society will suffer because of rising food costs, our commercial and domestic real estate markets will struggle to complete projects.  While professions like education and hi-tech can source talent from elsewhere (and are less reliant on EU people imports) it's those industries that form the underbelly of the economy which will really suffer.  Forget "trickle down economics" Brexit will cause a "trickle up" effect that will be hazardous for the British economy and its mid-long term sustainability.  In the short-term, many EU workers in the UK should be able to stay on, but the reliable conveyor belt of workers prepared to roll their sleeves up and support our entire economic underbelly will be permanently halted, and the availability of workers will get progressively worse - and much more expensive with this shrinking supply of people.

So, without further ado, let's dive into the fuller implications of this seemingly masochistic self-flagellation known as "Brexit"... 

Nice try Theresa, but even your dancing can’t make us forget about the increasingly no-win Brexit scenario 

For our fellow Britons, these past few weeks have been a refreshing break from the normal Brexit debates as we became distracted instead by our premier literally dancing for trade agreements. Trade agreements that, even for the most dismally poor mathematicians, don’t stack up when compared to the one we’ll soon be leaving.

 

Brexit has been a topic of heated debate for years now - and I'm sure we all have that friend or relative you daren't mention Brexit in front of or risk a lecture based on unfounded inferences and sketchy sources. In many ways, it's these long-winded and often inebriated debates that are the problem - we're close to the day we sever ties with Europe and reclaim some sort of democratic freedom that only a nation with several unelected heads of state can find any ironic sense in. And yet we're no closer to understanding what Brexit means - even if we had a clear picture of how awful it will be at least that's something we can prepare for. Instead of this mind-numbingly irritating narrative from British politicians of 'Don't worry, it'll all work out in the end.' Well, unfortunately, we're not an eight-year-old child looking for reassurance from our

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Posted in: Policy and Regulations

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Intelligent Automation is not about technology, it's about business

November 03, 2018 | Phil Fersht

Am excited to have HFS' Saurabh Gupta lead our session on de-mystifying Blockchain at our December NY Summit... but let's put this all into context and learn about the Hyper-Connected economy and the need to manage these merging technologies in a business context, where integrating them at scale is really the same of the game.

Posted in: Digital OneOfficeIntelligent Automation

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A last word on #fakenews and the need to create our own original concepts...

November 03, 2018 | Phil Fersht

At HFS, we have been increasingly concerned about the plethora of business models and articles bombarding us on social media, media websites, research and consulting firms' websites, many of which are seemingly replicating similar terminologies and concepts.  And this trend seems to be worsening. For example, we highlighted the recent direct usage of an HFS headline to drive traffic to a well-known media website. Just blatant! 

We also have been observing the dizzying array of 'intelligent automation maturity models', especially being the first analyst to develop them, starting in 2014, refining in 2016, 2017 and this year.  We recently had our attention drawn  to the "Four Stages of Intelligent Automation Maturity" by Avasant, that initially gave us cause for concern, but when we communicated with them this week, they shared a presentation recording from earlier this year describing their model in much more detail, assuring us their "phases to maturity" are actually quite different from the HFS viewpoint. While there are always many shared common best practices when investing in a solution such as RPA, Avasant convinced us they had developed their own methodology and approach to automation maturity. We apologize to Avasant for making this assertion that it closely resembles the 2018 HFS Intelligent Automation Maturity Model. You can read a really decent interview with CEO Kevin Parikh here, espousing his views on the future of the consulting business.

The Bottom-line: We have to focus on our own concepts and ideas and avoid the regurgitation game

In general it is getting harder and harder to differentiate experts across the industry as many are very adept at hiring marketing resources to create whatever spin they feel they need to win business, while others simply extract another firm's creations as their own.  With the daily deluge of terminology being thrown at us, we just need to try harder than ever to provide our own original thought leadership and insight, as any smart enterprise today sees straight through the glossy veneer.

Posted in: Confusing Outsourcing InformationIntelligent Automation

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IBM / RedHat: A grand play at out-sharing Microsoft’s open source economy

October 29, 2018 | Phil FershtJamie SnowdonOllie O’Donoghue

It’s really not about the cloud – not at this massive $34bn price tag.  IBM's ingestion of RedHat, the third largest IT purchase in history, is all about Open Source.

Commentators are already pitching this deal as long-awaited reinforcements to the trench-warfare of the cloud wars. But in reality, we need to look much deeper to understand what persuaded IBM to part with such an exorbitant sum of money for Open Source giant RedHat.

Did we read that right? $34bn? – And what will happen to renegade RedHat?

Even for budding venture capitalists, the princely sum of $34bn is more than enough to make your eyes water – especially when it’s hurled at a firm with annual revenues of just $2.9bn and headcount that will be just a drop in the Big Blue Ocean. So there must be more to IBM’s thinking than a quick financial return – it’s either a play to kick the other hyperscale players out of play, or a push to get the upper hand in the increasingly valuable Open Source sharing economy.

If we dig into the financials, it’s clear that RedHat is a profitable firm with a strong track-record in the space – describing itself as the leader of Open Source capability. In many ways RedHat

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Posted in: Cloud Computing

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RPA is a gateway drug - and magically these guys agree too! Don't you just love coincidences..

October 28, 2018 | Phil Fersht

And here we go again... Our now-infamous headline "RPA is the gateway drug. AI is the drug..." has now magically appeared on the Forbes website in an article entitled "Robotic Process Automation: A Gateway Drug to AI and Digital Transformation" authored by Babson Professor Tom Davenport and Carla O'Dell, Chairman at AQPC:

Posted in: Robotic Process AutomationIntelligent Automation

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SYKES acquires Symphony becoming the first call center provider with significant automation capability

October 22, 2018 | Phil FershtMelissa O'Brien

Disruption is more ripe in the call center space than any other corner of the services industry, and $1.6bn provider SYKES just upped the ante to feverish levels by becoming only the second-ever service provider to acquire deep RPA and intelligent automation expertise, since Accenture picked up Genfour 18 months ago. And $70m cash is a not insignificant sum to invest in consultative talent in this fast-emerging space in desperate need of experience and scale.

More significantly, Accenture is not a call center provider, SYKES actually is one - and now has the unique capability of attacking the market with automation-led customer experience engagements. While the market recently cogitated on the impacts of Concentrix/Convergys and Teleperformance/Intelenet,  neither of these mergers had a genuine focus on intelligent automation (IA).  And our new global study on AI covering 590 Global 2000 firms worldwide (conducted with KPMG), clearly shows  intelligent automation is in unique demand across IT and customer service areas more than any organizational function:

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So why is SYKES acquiring Symphony meaningful? 

None of the "traditional" call center providers have upped the ante with automation. Until now.  We have found this bizarre, as there are so many opportunities to improve broken processes, speed up customer response capabilities with both Robotic Process Automation (RPA) and Robotic Desktop Automation (RDA).  There's no surprise many of the Indian-heritage providers are jumping back into call center, sensing an easy opportunity to take business from vulnerable traditional call center providers with a disruptive automation-centric approach.

SYKES is not beset by legacy enterprise deals choking the life out of it.  Call center providers that got too beholden to legacy clients with dinosaur FTE pricing models are really struggling.  This was one of the prime reasons Convergys (despite being one of the industry's finest purveyors of customer care) struggled to maintain market growth and ended up being acquired for an extremely attractive price by Concentrix earlier this year. SYKES is currently the 7th largest player in the contact center space (3% market share) with revenues of $1.7bn - enough to compete at the high-end, but still nimble enough to build a base of automation-led clients, chase strategic deals and be a disruptive nuisance in a market with razor-thin profit margins.

The OneOffice is here and Symphony can link the front to back office with its approach to digital operations.  Digital organizations must have an operating framework that maps out how they have to operate in the future. Traditional operating models, while creating some incremental productivity value, if managed effectively, struggle to drive the unification of digital business models with emerging technologies across a business's operations. The only true way to create a OneOffice experience is to be able to integrate the front office processes and interactive technologies (most of which are embedded in the call center) with the operations of the organization:

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The Digital OneOffice is where teams function autonomously across front, middle and back office functions to promote broader processes with real-time data flows that support rapid decision making. It’s where front, middle and back offices will cease to exist, as they will be, simply, OneOffice.  SYKES has a unique opportunity to consult to enterprises to make these front to back connections and weaves these capabilities into their managed services offerings.  The merged entity can offer real expertise to provide automated processes as-a-service and help their clients through the journey. The only missing pieces, in the short-medium term, may be to diversify further into the middle office areas and analytics to add some real end-to-end process value, but much of this can also be accomplished through some smart partnerships.

SYKES has already been making serious investments in digital capability. The Clearlink acquisition gave SYKES capabilities in the digital marketing space, which is complementary to its core business and also a differentiator from its peers in the contact center world.  SYKES’ strategy here is to connect across the customer lifecycle for an “omnichannel” solution— really digital CX. Qelp is another acquisition that expanded SYKES’ value proposition outside of core contact center services — a call center software firm specializing in self service on mobile phones, a real boon for its telecom clients.

SYKES has a sizeable WAHA delivery workforce (acquired through Alpine Access in 2012) which is a particular strength for its retail clients. The scalability and virtual training of this program is particularly effective. OneSYKES, its cloud delivery and WFM platform enable this capability. The platform also enables customer interaction analytics.

SYKES' strength in the retail and telecom businesses.  These are two of the most prime industries for automation-centric offerings, and where demand is very high (see earlier post on vertical focus in RPA).  Added focus in the financial services sector would also be beneficial post-merger.

What does a SYKES/Symphony really bring to the table?

One of the last remaining automation services independents with credible global scale.  With Genfour long out of the picture (and submerged somewhere inside Accenture) there are very few independent automation consultancies left worth evaluating that can impact a business the size of SYKES.  Sure, there are some boutiques, such as Virtual Operations, Mindfields and Roboyo, that add some domain expertise, but nothing close to the scale of Symphony, which has 200 FTEs across Europe, North America, India and Mexico.  It will be hard for any of SYKES' competitors to respond in kind, and we are quite amazed that only one of them had made a serious move to acquire Symphony prior to SYKES' interest.

Skill+Scale. Enterprise clients want the skill of the small guys (but not the risk), the scale of the big guys (but not the baggage).  This sends out a shot across the bow to the likes of Accenture, Capgemini, Cognizant, Deloitte, EY, Genpact, KPMG etc., all competing in the quasi-consultative / managed service market... that is automation-led capability.

Appeals to the RPA software firms. The likes of Automation Anywhere, Blue Prism and UiPath will welcome any deal like that that takes them more into the front office of enterprises.  This will also attract the attention of Nice, which has a strong call center automation focus.  Other aspirational RPA firms, such as Pega, WorkFusion and Kofax, will also take notice and want to engage with this new entity.  

Streetwise expertise. The four founders all bring a "hands-on" credibility to the table, which most organizations like to deal with:  David Poole, Ian Barkin, David Brain and Pascal Baker.  Many enterprises are already frustrated dealing with some of the usual suspects and may be tempted to switch to this new entity to take its OneOffice play to a new level. Obviously, much depends on SYKES leadership's ability to retain the Symphony talent and engage them with a compelling global story.

Hands the Symphony team significant enterprise access.  This will catalyze growth and disruption by giving Symphony access to a unique portfolio of 200+ enterprise clients including more than 50% of the world’s top 100 brands.  While the Big 4 RPA experts struggle to convince their global partner colleagues to let them near their deep-pocketed clients, SYKES should have no problem opening the kimono to its finest differentiator that none of its competitors can (currently) boast.

Can start to heal the 'scale disease' threatening to derail the RPA and Intelligent Automation industry. As our (soon-to-be-unveiled) global study of 590 leaders of Intelligent Automation initiatives reveals, barely more than one-in-ten enterprises has reached a place of industrialized scale with RPA - and the word from so many clients is loud and clear that they need help:

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This struggle to get to a point beyond pilot exercises and project-based experimentation could prove to be a serious point of failure for the whole industry drivthese solutions.  There needs to be a much stronger melding of enterprises with implementation and consulting capability to fix these issues.  This has to be an area where a SYKES/Symphony can profit.

The Bottom-line: Kudos to SYKES for making a bold bet, which has real potential.  But it needs to move fast and aggressively post-acquisition to make this bear fruit

If I had to count the number of truly successful services / consulting mergers over the past decade, it wouldn't take me very long, or require too many fingers. In so many cases, the acquiring firm is checking a box before moving onto the next shiny new object. What excites me about this move is the size of SYKES to make this really significant for the firm, the fact Symphony gives it a capability truly differentiating and hard for its competitors to replicate, and the fact it becomes the first customer-centric service provider to tackle the unquenched thirst for automation across customer processes to drive genuine OneOffice endstates.

But this is a market that simply refuses to stand still... this has to be a merger that both parties fully embrace with the verve and energy that took Symphony from a great idea in 2013 to one of the most disruptive and exciting consulting businesses in the business operations industry. That means SYKES needs to do a much better job of articulating to the world what it brings to the table, especially in the cut-throat world of customer experience BPO. SYKES leadership needs to make Symphony front and center and refuse to blunt its edge in driving narrative - staying ahead of the curve and forging great industry relationships.

In addition, SYKES needs to add to the OneOffice capability, search the globe for expertise in regions such as China, Philippines, Japan,South America and Canada. This can be with further tuck-in acquisitions and smart organic talent acquisition. It will also need to work extremely hard defining its brand and articulating the new generation of OneOffice solutions to industry.  This is an exciting merger, but the hard work really starts now...

Posted in: Digital OneOfficeRobotic Process Automation

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Ensure your investments aren't conspiring to bring you pain...

October 19, 2018 | Phil Fersht

Posted in: Absolutely Meaningless ComedyContracts, Negotiation and Pricing

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Mihir Shukla and Alastair Bathgate in the Battle for the Robotic Billions... only at HFS FORA

October 12, 2018 | Phil Fersht

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After all the fun and games we sparked with our recent blog "Seven deadly misnomers why these billion dollar RPA valuations are insane" we thought we'd give the CEOs of the leading two RPA firms (see the new HFS TOP 10 RPA report), Automation Anywhere (Mihir Shukla) and Blue Prism (Alastair Bathgate) a chance to face/off on stage to thrash out why their firms' valuations are on such an exciting trajectory - and engage with the HFS FORA crowd to debate where the hell this space is really going and how we need to prepare for an intelligently automated future.

Yes, people, this year's HFS FORA Summit in New York from December 11-12 is shaping up to be at our boldest, most brazen and brash best.  Ever!

If you're looking to up your RPA game and see who comes out on top, sign up to reserve your seat now, or forever hold your peace.

I look forward to seeing you in New York,

Cheers!

Phil

Posted in: Digital OneOfficeRobotic Process AutomationIntelligent Automation

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RPA is the gateway drug. AI is the drug...

October 10, 2018 | Phil Fersht

Anyone failing to escape the swirl of intense hype threatening to destroy everything great about RPA is probably thinking that these cute products are going to solve all their artificial intelligence needs and deliver them with a "digital workforce" that will go way beyond scraping screens, producing scripts and running unattended recorded process loops.

Now, don't get me wrong - I LOVE RPA... jeez, I bloody helped create the space when I first wrote about it in 2012.  I don't want to toot my own horn, but this space probably never have would have got off the ground if we hadn't been curious enough to get deep into it and articulate its value to the world.  And no one's paid me a billion dollars (well not yet, anyway).

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RPA creates a genuine experience, where the underlying fabric of decades-old processes can finally be altered

When we released the first "Intelligent Automation Continuum" in 2015,  we made it very clear that RPA was clearly the first step in a much broader roadmap to achieve beautifully-automated intelligence across your enterprise.  And today, this gateway philosophy has never been closer to reality.  RPA, when executed well, delivers a digitally-transformative experience to business operations executives, where they can - for the first time - fundamentally change how a process is designed to process data much, much faster.  Suddenly, firms have the chance to make fundamental changes to how they design workflows, instead of persisting with doing things the same old way, but with lower cost people and more efficient delivery models. Isn't that enough for now?  Why does the hype take it to a place where it's only going to disappoint?  If IBM's leadership already thinks these firms are massively overpriced, are there really others out there which will take the plunge?

When I see executives who previously stared at excel sheets all day (while beating up BPO providers for overcharging for insurance clerks in Delhi) actually getting trained to redesign workflows using scripts and GUIs, it warms the soul.  We are actually trying to do thing better... not just cheaper!  So why can't we be content with making this actually work before we get too carried away?

Time for a reality check:  RPA is firmly on the radar, but let's see it become properly industrialized and scaled before we get too carried away

The vast majority of these initiatives are project-based, not scaled - only 13% of RPA adopters are currently scaled up and industrialized, according to new data from 590 enterprises worldwide.  Most RPA adopters are still tinkering with projects and not rushing towards enterprise scale adoption:

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Suddenly, the whole RPA value proposition, which has carefully matured from the "Oh my God, a robot's going to take my job" to "OK, I get it now, RPA actually frees up time and fixes process breakages and staves off costly investments" has been injected with some serious hype-steroids, where suddenly these firms are worth billions of dollars, some are actually declaring they are going to deliver their own consulting services (really) and quickly move up the continuum to offer real cognitive and AI capabilities.  I'm sorry, but when were the RPA firms going to compete with Google and Microsoft? Am I missing something here? 

The Bottom-Line: Enjoy that RPA high a bit longer before you graduate onto the harder stuff...

The real data shows just how not-ready we are to declare some kind of robo-victory - executives must evaluate how all intelligent automation technologies can work together to take us to the promised land. RPA provides a terrific first stop for executives to make real underlying changes to their processes.  Once processes are digitized, there is so much more we can do with the data being produced, which is where other automation and AI tech comes into play, such as Machine Learning and predictive analytics and sophisticated cognitive computing.

Now it's always critical to focus on the "what next", and in the case of RPA the possibilities are limitless, but only when you have mastered how to digitize your underlying mess that has plagued your organization since before the days COBOL was the next big thing.  Then it's about how you reel in the analytics and AI possibilities that truly take your business to a new level of data heaven.  But let's get past the gateway first... let's not get ahead of reality and mess this one up, folks.

Posted in: Robotic Process AutomationIntelligent Automation

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Tiger burns even brighter as Genpact makes its instinctive move

October 06, 2018 | Phil Fersht

One firm that's kept driving consistent growth above the industry average, despite the cries of "commodotization" and "cannibalization" in the business process management arena, is Genpact.  This firm blitzed the offshore-centric BPO industry in the mid 2000's, with its focus on the "virtual captive", its obsession with process excellence (emanating from its GE roots) and the willingness of enterprise operations leaders to invest in its energetic culture. 

As times evolved and other aggressive outsourcers rolled up their sleeves, Genpact has increased investments in higher-end process and operations management expertise to maintain its early tranche of enterprise customers, while focusing on the next wave. Making a concerted focus on building a Design Thinking competency out of its LEAN roots, while adding skills in AI-enabling and digitizing processes, Genpact has not been afraid to stay ahead of industry disruption. In fact, its process roots have often bolstered the firm's credibility when driving industry narrative, as it understands the real changes enterprise need to make at the process and cultural level, if they are genuinely serious about a OneOffice Framework.  

The one major constant behind these phases of change has been CEO Tiger Tyaragarajan, who've I've personally known for more than 15 years, when he was the North American market-maker for the firm, before becoming CEO in 2011.  Today, Tiger talks a lot about the Instinctive Enterprise, which is very similar to our view of the OneOffice Framework, so I thought it time to reconnect before he joins us at our December FORA Summit in New York...

Phil Fersht, CEO and Chief Analyst, HFS Research: It’s great catching up again, Tiger. We’re looking at a lot of serious tinkering and experimentation with new technologies in the business process management (BPM) space. How has a company like Genpact evolved over the last 18 months, and where do you think things are going in the next couple of years? 

Tiger Tyagarajan, President and CEO, Genpact: Phil, thank you for the opportunity to spend some time talking with you.

I like the word you used—evolution—and the period that you applied it to—18 months. In the world we are in, evolution is the way to think about things. I distinguish that from revolution, which is to drop everything that you’re doing and go after something new.

In our business, we think about many of our journeys as evolutions. We’ve always had depth and process; we understand how to bring the science of process to problems and how to generate value. We’ve always looked at process outcomes as important metrics to improve, and we’ve used methodologies like Lean and Six Sigma enough that we’re effective with them.

We’ve added new capabilities that didn’t exist six years, four years, and 18 months ago. Six years ago, we had nothing on digital; four years ago, we started building out our capabilities; 18 months ago we started scaling those capabilities and continue to scale them.

In the last three years,  we’ve made nine acquisitions. Of the nine acquisitions, seven were in consulting and digital, and two were in deep domain areas, such as supply chain and insurance. We continue to add domain, but the ratio includes much more digital, analytics,

Read More »

Posted in: Digital OneOffice

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Seven deadly misnomers why these billion dollar RPA valuations are insane

September 21, 2018 | Phil FershtElena Christopher

It's not been possible to escape the wild world of RPA valuations these past few months, culminating in the recent claim from UiPath and its investors that the firm is worth $3 billion, despite the reality that AA's annual revenues this past year are ~$100m, Blue Prism's ~$55m and UiPath's ~$65m (HFS estimates). 

As much as I would love to celebrate my friends Daniel Dines', Mihir Shukla's and Alastair Bathgate's untold wealth, I have done my homework with my  analyst colleague Elena Christopher and, while these three gentlemen and their teams will undoubtedly become exceedingly wealthy from locking up the RPA market, valuations as high as $3 billion are, sadly, pure science fiction.  I welcome any of these three dudes to save a copy of this post and proclaim to me "I told you so" in a couple of years - and I will gladly accept a glass of their champagne - but we hate to burst this bubble with seven misnomers why RPA is not your typical Silicon Valley software fantasy:

1. RPA directly replaces people.  This is incorrect, its all about augmenting processes and the improving the quality of the workforce, not eliminating actual employees with bots.  As our recent State of Operations Study with KPMG, across 381 Global 2000 operations leaders, illustrates, only 7% go into automation expecting direct FTE reduction.  Consequently, the C-Suites from 70% of these organizations are happy with the ability of RPA to reduce reliance on labor.  Hence RPA augments labor, it doesn't replace it.

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2. RPA can scale rapidly to have a dramatic impact on enterprises in months. Incorrect. The vast majority of these initiatives are project-based, not scaled - only 13% of RPA adopters are currently scaled up and industrialized, according to new data from 590 enterprises worldwide.  Most RPA adopters are still tinkering with projects and not rushing towards enterprise scale adoption.

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3. RPA tools can achieve amazing benefits all by their lonesome. Incorrect. RPA has to be driven by a motivated business line, and supported by capable IT.  This isn’t the typical software sales model where licenses are sold en masse and distributed willy-nilly across the business.  Without a genuine buy-in and partnership between business units and IT, RPA fails.  There has to be a balance.

4. RPA delivers intelligence.  Incorrect.  RPA is a gateway drug to digitize low-value processes and free up human-time to focus on higher value activities.  RPA is a catalyst to drive a more intelligent enterprise operations but is not intelligent itself.

5. RPA will be a unique game-changing product in the market for years to come.  Incorrect.  Most organizations take a couple of years to learn and understand how to incorporate the benefits of RPA, but after that it's merely a tool in the enterprise toolbox.

6. We will still be talking about “Robotic Process Automation” in two years time.  Very unlikely.  The narrative is already shifting to a broader Intelligent Automation roadmap.  RPA is very good at breathing new life into legacy processes and technologies but isn’t driving genuine digital business model transformation. RPA helps digitize the underbelly that supports the ultimate digital business outcomes by digitizing manual processes and fixes system integration points.  It is a gateway to achieving front to back office workflows that are critical for digital business to service the needs of their customers in real-time. However. once RPA has performed these tasks, the real challenge for enterprises in going beyond simple RPA to drive real intelligence into the processes. Hence, RPA is a gateway to creating basic digital infrastructure across the organization, but other AI tools are needed in the future to help organizations anticipate their customer actions before they happen. 

The more intelligent your business operations, the more you can stay ahead of the game, but none of this is possible if your processes are not automated effectively to create this knowledge for your business operators:

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Once the digital baseline is created, enterprises need to create more intelligent bots to perform more sophisticated tasks than repetitive data and process loops. This means having unattended and attended interactions with data sources both inside and outside of the enterprise.  

7. Valuations of $2/3 billion per firm are realistic.  Incorrect.  While software vendors such as Mulesoft and Marketo have recently fetched insane multiples of $5bn-$6bn, these are very established IT applications that augment multi-billion dollar industries.  RPA tools are supporting backend automations that require a very unique combination of business/IT aligned delivery, as opposed to being front-end apps that can be sold to IT budgets en masse.  RPA is a BandAid, not your new enterprise platform.  These are not the typical products an SAP or Oracle can easy ingest into their apps portfolios - the needs are too process heavy, too consultant dependent to fit their sales models.  

The Bottom-Line:  Let's love RPA for what is it, not what some people, who do not understand it, pretend it to be

RPA has dramatically altered the narrative among middle/back office process owners.  We predict a market approaching $2 billion this year alone and growing fast as traditional process outsourcing models are hugely impacted.  We've even gone as far as declaring RPA the "new outsourcing".  RPA has been a major game changer in the world of operations and outsourcing.... but $3 billion valuations of software firms barely hitting $50m in revenues?  We don't think so... let's learn to keep nurturing this great business and not squeeze it until it breaks.

While the industry is busily adding fancy new words to their résumés and job titles, we have to remember that our technological journey is gradual.  Change comes slowly and incrementally and you can't just rip off the proverbial Band-Aid, hire a bunch of Millennials and Gen-Z kids... and it's mission accomplished. As the Hyper-Connected journey illustrates, it took 30 years to get where we are today - and that's because both front and back offices needed to go through major, secular changes to become efficient and digitized.

But the next phase is not a trade-secret - this "Future of Work" is merely a phased transformation of the present.  Dumb robots evolving into intelligent assistants... ineffective supply chains plagued with manual breakpoints becoming fluid, autonomous and intelligent - with the ability to interact with other supply chains.  Quantum computing and blockchain emerging to challenge the very logic of TCP/IP and computing architectures. But to get there, we need to be experimenting, tinkering, exploring and disrupting with the kit that available today to get our organizations in a place where all these far-flung innovations can have some real possibilities.  

So let's have less talk about the future of work and focus on the present... we know where we are and what we need to do.  So let's do it!

Posted in: Robotic Process AutomationIntelligent Automation

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IBM, Accenture, Cognizant, Atos and HCL leading the Top 10 infrastructure and

September 20, 2018 | Phil FershtJamie SnowdonOllie O’Donoghue

it's easy to overlook our digital underbelly during these times of AI hype and "let's make a few billion based purely on investor hype" fantasies.  But who's providing the tools and grunt to make all this possible?  HFS analyst Ollie O'Donoghue has pooled our study data from the Global 2000, conducted countless enterprise interviews and driven the providers potty to deliver the perfect poignant viewpoint of this industry:

Click for a detailed view of the leading 18 providers

Ollie, what are the major trends in the infrastructure market?

Over the last few years, the infrastructure market has taken a bit of a battering with the kings of hyperscale eroding market share, and enterprises looking for more exciting things to spend their money on than traditional “lift and shift” engagements. However, that’s all changing, and the market is evolving. The big providers are partnering up with the hyperscale cloud players and making them a valuable tool in their toolbox. Moreover, “digital” has fueled enterprises’ appetite for technology. Which means getting their infrastructure and digital foundations in order. After all, these overhyped technologies like AI and blockchain have to run off something!

The challenge for us as analysts covering the space is rethinking how we assess and evaluate providers. In essence, partnerships have become a much more critical part of this market – if a firm isn’t befriending the big cloud leviathans, then they’re likely to struggle to build offerings that resonate with evolving enterprise appetite. The challenge is that as all providers follow this path, there’s a degree of equilibrium, so the assessment needs to evolve further and evaluate how these providers are leveraging partnerships, and building value-add offerings. We also need to scrutinize how providers are developing automation capabilities to design and build more resilient, scalable and cost-effective infrastructure solutions for clients. So while this is a mature market, it’s one that’s changing all the time – and one that certainly keeps us, analysts, busy.

So who’s winning this infrastructure and cloud war?

IBM’s still the undisputed champion of the infrastructure and cloud market – Big Blue brings with it unrivalled enterprise trust, and is the only IT Services major that truly has the cloud capability and resources to fight alongside the hyperscale leviathans AWS, Google, and Microsoft. It also has true scale and ability to manage the largest most complex engagements in this space. That being said, Accenture has an uncompromised reputation for delivering quality and bringing best in class capabilities to engagements. From an enterprise perspective, the fact that this comes at a premium count against the firm to some extent. And while Accenture executives assure us they’re building commercial models to make pricing more attractive, the reputation for being expensive is relatively well set in, and any changes might be like trying to get toothpaste back into the tube. Although let’s be honest, there are worse problems to have than being known for delivering quality at a price.

And the main movers and shakers in the Top 5?

A couple of firms are worth mentioning – Atos performed well because of a concerted effort from the firm to broaden and deepen partnerships with major cloud players. It’s now shaken hands with all of the big hyperscale players and is doing some exciting work around analytics with Google. Atos has also pulled some fresh thinking out of the bag and built a compelling vision for hybrid cloud. HCL has excelled at large scale transformation, is also doing interesting work in the space and comes with strong client references – the consensus is, HCL will keep working to get the job done, bringing in automation capabilities to get the most out of assets. And then we have Cognizant, another firm that is striving to deliver innovation through all its infrastructure services is producing offerings that focus on specific client’s needs. Ensuring business value is delivered, whilst pushing hard down the hybrid cloud path – in recognition that the future of cloud will be leveraging multiple providers to deliver the best results.

So what about the Top 10 overall, any surprises there, Ollie?

The big heavy lifters hold a competitive position, TCS brings a lot to the party and has an enviable track-record of delivery in some industries and loyal clients that leverage the firms considerable global delivery network. Similarly, Infosys is positioned competitively, reflecting the investment the firm is making in building out nearshore delivery centers and redeveloping talent into higher value areas of work. However, the firm does struggle to get its message out there which is holding it back a tad. And then we have DXC – the leviathan firm can bring considerable brains and brawn to engagements, but its path is still unclear to some clients and all eyes are on its financial reports looking for stability at a time when providers sinking can drag clients down with it. Unisys relies on its strong legacy in the Infrastructure space – and innate trust from some industries, particularly financial services. Supplemented by respectable security credentials and offerings. Finally, Wipro is driving a competitive approach to writing off legacy through a cloud-only approach, a strategy which could see the firm drive further up the top 10 list in the future.

So what does the future look like for the market?

We’ve been charting the major trends impacting the infrastructure space for some time now and it’s a quickly moving market. Partnerships are no longer a nice-to-have, they are mandatory if providers are going to have a chance of survival. Finally, the big providers are warming to the potential value they can leverage from the cloud giants, rather than shaking hands through gritted teeth as their revenues eroded. This is an important step as the market matures. But the biggest shift is the rosier tint the market now has after years of revenue freefall. Shifts to cloud and as-a-service hammered traditional revenues – which often made up a sizeable chunk of vendor revenues. But with some compute-heavy applications and technologies on the cards, spending on infrastructure is very much back in vogue. The smart enterprises are investing in their digital underbelly now, in preparation for their future digital needs.  

Bottom line: Our partners who got us here may not be the ones to take us where we're going - the future’s all about smart partnering as the need for savvy IT talent reaches critical levels

If we take a look at revenue projections for the market, it’s not the good news providers are looking for. With As-a-Service and cloud continuing to batter traditional revenues, the market is unlikely to grow from a revenue perspective. But it’s not going to shrink either - we see this market is bouncing back in other ways as enterprises urgently seek help digitizing their operations and scaling their digital businesses: technology is at the heard of C-Suite strategy these days, and partnerships which provide scarce talent to keep these increasingly data-driven environments agile, scalable and secure are critical for enterprises.

Reputationally, IT infrastructure has always had a hard time – security breaches, server crashes, and integration challenges. But all of that’s changing now as automation drives service quality up, and costs down. And partnerships are supporting providers in offering clients best-in-class cloud capabilities at a time when the contents of their digital shopping list needs to be running on the best. 

There is a massive opportunity to lead in the world of IT services, provided you can plug these skills gaps. The challenge is breaking out of the traditional sourcing model to access niche talent across the globe in areas such as crypto-technology, Python development, Lisp, Prolog, Go and C++. While most traditional firms still rely heavily on bread and butter IT services delivered at scale from regions such as India, the emergence of talent in Central and Eastern Europe, China and parts of South America also need to be brought into play. The IT services world will be a very different place in a couple of years as boutique firms offering niche skills come into the fore. Not to mention the emergence of crowdsourcing for IT talent. Having really savvy IT leaders who can cobble together crack teams on-tap to solve their IT headaches is already becoming a huge differentiator for many firms. The will also be a role for the super services integrator, who can pull together teams for clients to work with them on complex projects.

To this end, we recently presented the Digital OneOffice Concept to 100 C-Suite executives to understand what is holding back both business and IT leaders from reaching the promised land of perfect real-time symmetry of their business operations staying ahead of their customers’ needs.  While the business leaders grapple with changing their mindsets, the IT leaders were quick to call out their skills deficiencies to enable their businesses to achieve a digital OneOffice.  

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Hence, those providers which can pull together the resources and talent can still profit from this disruptive market - the digital engine can only purr when it's aligned with all the core components of the business, right from the front to back office.  Today's market is all about taking bigger bets on bigger risks... and only the smartest and boldest will make it.

Premium HFS subscribers can click here to download: The HFS TOP TEN Report:  Infrastructure and enterprise cloud services 2018

Posted in: Cloud ComputingDigital TransformationDigital OneOffice

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1. #AutomationAnywhere, 2. #BluePrism, and 3. #UiPath make up the top three in the inaugural HfS Top 10

September 17, 2018 | Phil FershtSaurabh Gupta

The rise of RPA is nothing short of spectacular as the market closes in on $2bn this year. It has captivated the attention of the digital operations executives with the promise of cost-savings beyond labor arbitrage, cost avoidance by extending the life of legacy IT, quicker implementation than traditional IT projects, business-user friendliness, auditability and compliance, straight through processing, and let’s be honest – terrific marketing!

And here is the actual report:  Completely free to celebrate our first "HFS TOP TEN REPORT"

However, confusion around RPA deployments is also rife. There are growing questions whether RPA can deliver on the promised ROI and outcomes. Most RPA initiatives continue to be small and piecemeal. Truly scaled RPA deployments are rare. The industry is still struggling to solve challenges around the process, change, talent, training, infrastructure, security, and governance.

With the mission to demystify this confusion and uncover the truth to successful RPA deployment, we conducted a first of its kind RPA CX research to develop the list of “HFS Top 10 RPA Products” (See Exhibit 1). The research is based on interviews over 350 clients and product partners across the ten leading RPA products across:

  • Ability to execute based on product functionality (Ease of integration with legacy IT, Unassisted automation functionality, OCR functionality, Scheduling functionality, Development tools, Exception handling, Required set-up coding, Ease of product configuration); integration and support (Service extensions and connectors, Documentation, Certification program, Training and customer support, Experience in serving multiple geographies, Adoption across multiple industries, Required IT skill-sets), and security and governance (Uptime and SLA commitments, Version control and upgrade management, Centralized controls, Regulatory compliance, Enterprise security, Disaster Recovery (DR) and Business Continuity Planning (BCP))
  • Innovation capability based on flexibility and scalability (Accommodating process / environment changes, Licensing model flexibility, Ability to handle multiple processes, Workflow templates and library of processes, Handling multiple inputs) and embedding intelligence (Processing structured, semi-structured, and unstructured data, Operational Analytics, Dashboards, and Artificial Intelligence (AI) capabilities)
  • Voice of the customer based on the RPA products ability to drive business outcomes (Realizing cost savings, Speed-to-market, Overall satisfaction, and Client reference ability)

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Key highlights from the HFS Top 10 RPA Provider assessment

  • Overall RPA Client Experience has been 'Good.' The aggregated average CX scores across all assessment dimensions is three on a scale of 4 implying a good overall experience. For most clients, RPA has created value in addition to reducing costs (just not as much and as fast as they heard in the first sales pitch!). For almost all the RPA products assessed, security, controls, accuracy, integration, and out-of-the-box functionality performs as promised. Basically, RPA works!
  • Getting RPA “production ready” is not as easy as promised. The client experience with the amount of coding/configuration required is rated amongst the lowest. Management of version control and upgrades as well the training and support offered by RPA providers was also sub-par. The primary reason behind this is a classic expectation mismatch – the RPA providers oversold and overpromised, raising the client expectations beyond normal, that then resulted in less than required client investments towards process and change management. The disappointment associated with RPA is not about the technology itself.
  • RPA is not very smart (at least as of today). The dimension around embedding intelligence in RPA was rated amongst the lowest by clients. There is considerable confidence in RPA’s ability to process structured data but drops down significantly when asked about unstructured or even semi-structured data. Clients are not convinced about the Artificial Intelligence (AI) capabilities of their RPA products. The good news is that most RPA providers recognize this and are investing in building out capabilities especially around Machine Learning (ML). At HfS, we believe that the holy grail of service delivery will be at the intersection of the Triple-A Trifecta – Automation, AI, and Analytics

Bottomline. RPA works but is not a magic wand. Best practices are emerging

Based on our in-depth conversations with the RPA clients, we developed a set of best practices that you need to keep in mind when implementing any of the RPA products:

  • RPA is not a silver bullet. Keep expectations realistic
  • RPA cannot automate everything. Choose the use-case wisely
  • RPA success is not about technology. Treat it as a change agent
  • Automated processes are still processes. Invest in documentation, especially as for complex automations
  • RPA vendors are product companies. Do not expect them to behave like service providers
  • Do not side-step your IT folks. RPA success requires IT-business collaboration
  • RPA products are still nascent. Do not short-change security and testing
  • RPA is not a one-time exercise. Change management and ongoing governance and the keys to continued success
  • RPA is not the holy grail. Business outcomes driven by integrated solutions are
  • RPA does not solve your data issues. Data-centric mindset is the key
  • RPA offers more than cost savings. Think beyond cost-reduction and figure out how to measure success

And here is the actual report:  Completely free to celebrate our first "HFS TOP TEN REPORT"

Posted in: Robotic Process AutomationIntelligent Automation

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Barely a third of outsourcing deals are now safe: Window-dressing legacy engagements is over

September 13, 2018 | Phil Fersht

We’ve been talking about the legacy model of butts-on-seats “mess for less” outsourcing fizzling out for years, but somehow the same old candidates have clung on grimly to the same old model, relying on clients that still find a modicum of comfort negotiating rate cards down to the lowest common denominator, content to hobble along with average service delivery that just about keeps everyone paid… and somehow relevant.

As we’ve bemoaned the decreasing growth rates across almost all traditional areas of business and IT services, no one’s pressed the panic button to do anything wildly different.  In fact, many have used the recent stagnant times to merge with each other to eke out a bit more revenue growth and rationalize costs wherever possible.

Meanwhile, all the providers have slapped the lovely “digital” tag on pretty much ever new client dollar that wasn’t obviously a help desk deal or some server consolidation.  Yes, people, even good old app testing today has managed to be magically reformulated as a “digital” service by some.

The balance of power sits firmly with the enterprise clients, and many have no choice but to jump ship from the old model

Being realistic, the IT and business services business is no different than it was five years ago, except there is a lot more cloud… and a lot more window dressing.  But that is all changing, and our new research reveals a new services economy is upon us.

But, finally, many enterprise clients are wising up to the reality they now wield a lot more power over service providers as the market flattens to a state of hyper-commoditization and negligible-to-pathetic growth.  Many are, finally, awakening to a new dawn that service providers can (and most are) able to takeout delivery cost through better deployment of cloud, less costly SaaS apps, and applying robotic process automation to reduce manual workarounds and augment people delivery. 

Simply put, if your long-time service provider is failing to deliver you any of these benefits to your business, or at least is making some strides to incorporate pricing that is tied to successful service execution and not only people effort, then it’s time to cut bait before you get fired yourself for perpetuating a legacy model that is depriving your firm from finding new thresholds of value your smarter competitors are already enjoying.

As this year’s State of Operations and Outsourcing study of 381 enterprise operations leaders across the Global 2000 reveals, only 30% of these relationships will continue to operate in the old model, while a similar number will stick with their service provider if they can have a shift towards business outcome pricing and a degree of automation applied.  27% have already given up on shifting the model with their current provider and have declared their attention to switch, while 17% want to end the misery and focus on bringing the work back inhouse, and look to simply automate it:

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The Bottom-line: Outsourcing is finally entering the uncomfortable phase of change that’s threatened for several years, and it’s going to get ugly.   

Judgement day is now upon the industry once known as outsourcing and this one will get pretty ugly before it eventually finds a new groove, where enterprises and service providers find real value in each other again. 

History has told us time and time again that nothing in this business changes until deals are lost and the C-Suite is forced to address why this is really happening… and actually act on it.  This is the fine balance in which we find ourselves today, where actions will change dramatically when 2% growth spirals into a 5-10% decline because that is what will happen to many service providers if they truly cannot pivot to deliver value beyond cheap labor. 

Those providers which have the capability to make the necessary investments and adjustments will take a few hits, but rebuild for a new phase… those which think they can keep papering over the cracks, repeating to same old spin, but never fundamentally changing how they invest in solutions, talent and their clients, will quickly start moving backward (and fast) in the new services market that’s emerging.

Posted in: IT Outsourcing / IT Services

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