Monthly Archives: Sep 2019

HFS has hired Lisa Ross. Yes we did...

September 13, 2019 | Phil Fersht

Just when you thought we'd had enough services legends making big moves this week, we have our very own to announce:  Lisa Ross (LinkedIn) is joining us as SVP and client partner for major accounts, based out of our Boston office.  Lisa will lead - and advise on - several of our strategic client relationships and work across our sales, marketing, and research teams to ensure we are maximizing value for our research clients. 

I have known Lisa for 20 years as a colleague, client, and friend and know she will be a terrific fit at HFS with her focus on relationships, her keen interest in the services industry and love of research.  During her career, she has been an analyst at IDC, has run her own research venture before spending the last 11 years in senior roles in Genpact, Capgemini, and most recently Tech Mahindra.  She is a consultant, sales expert, has a marketing brain and has a good research grounding.  Lisa also has run advisor relations functions and knows all the key advisors in the Big 4 and is very well connected in the industry with a strong personal brand.  In the little time she will have left to herself, Lisa is completing a graduate certificate in digital marketing from Harvard Business School and teaches Zumba fitness class for older adults (whatever that is). She also has a 9-year-old miniature Schnauzer called Mercedes, a strapping 20-year-old son Zak in Penn State, and a lovely 94-year-old mum who still drives around happily in Massachusetts...

So let's hear from Lisa why she has made this move back to the research world and what she hopes to accomplish with HFS...

Lisa - you've been a very active figure in the world of global sourcing for two decades now - can you share a bit of background about yourself?
 
So delighted to be here, Phil. I feel as if my career truly has come full circle!  In this new role, I've returned to my heritage in research which started 23 years back (!), with IDC, Ross Research and FAO Research while leveraging the marketing and new logo sales expertise gained supporting revenue growth in the supplier space since 2008.  How exciting to be in a position of interfacing with many of the sourcing leaders who I've worked with over the years plus the leading sourcing advisory firms that I know so well.  Teaming with you and the HFS Research team on strategic growth and new business opportunities is so very exciting, so...thank you for this opportunity.
 
And why HFS Research?  Why make a return to the analyst advisory business now?  And what will you be doing at HFS?
 
As most industry folks realize, you and I have known one another for 20+ years...as colleagues, competitors, clients, and friends...so there is a huge level of trust between us that served as the impetus for our initial discussions about this role only a few weeks back.  I'm a huge believer in serendipity, so the development of an innocent conversation that turned into a job offer and my decision to join HFS was unexpected yet exactly as it was meant to occur.  I 'get' the value of research and insights as drivers of supplier, advisor and investor knowledge and how to use the data/info to propel growth.  With HFS at the forefront of where the market is heading, I've been impressed by the breadth and depth of what your research folks have done and the buyer-facing education and networking opportunities that your team has enabled.  My hope is to bring different perspectives and fresh ideas as a leader here and position to help your biggest clients get the most benefit out of their engagements.
 
How is the services industry different these days than 5-10 years ago?  You've been very involved with business process and IT services for several years now - where do you see us headed next?  Is the game-changing? 
 
It's quite interesting - so much has changed, yet so much has remained the same.  Whenever I check LinkedIn or see folks at industry conferences or supplier events, it's always fun to see the same faces but oftentimes with different company affiliations.  And many of companies I have followed are no longer, either integrated into new ones or rebranded, even though they contributed significantly to this industry.  The biggest change, however, is the positioning that suppliers have embraced, either real or perceived, in terms of their offerings and positions of strength.  There are many areas that have stagnated, in my opinion, but have so much potential to be game-changers - like sales tactics that work the best, how to treat employees better, how to be stronger leaders and, most of all, how to be more likeable (!), and I'll share insights with the HFS community in due time.  And like you, I'll be helpful yet unabashedly honest.
 
And how about the research industry - you've been on both supplier and research sides of the fence, so how do you see it evolving?
 
The draw of research firms, back in the day, was the primary research data and information that we could strongarm and the insights we shared.  Reports with the "thud" factor commanded the highest prices.  There was a finite number of suppliers and a broad yet deep array of topics/subjects to cover.  Suppliers and advisors had few opportunities to interact, and there were only a handful of industry conferences at which influencers could showcase their knowledge and suppliers could interact directly with existing and potential customers.
 
Today, we have what I see as a convergence of business and IT opportunities and an expansion of opportunities beyond the word "outsourcing" that make it nearly obsolete.  RPA, digital and AI are at the forefront of thought processes, enabling a slew of new entrants with possibilities we had not even considered.  And investors are chomping at the bit, not even fully understanding the value (or not) of their investments.  We're all trying to make sense of it all, and there's certainly is no shortage of "friends" willing to charge more than an arm and a leg to provide counsel (when even they do not have a full handle on what's outside their limited purviews).  Advisors are trying to make money off of suppliers (talk about strong-arming!), advisors are masking digital expertise with thousands of more dollars of proposed spend by their prospects, and buyers are like WTF do I do now?!  
 
Throughout it all, and as cliché as it sounds, the research world has remained constant while upping the ante - still providing thought leadership in addition to now advising suppliers on how to sell, market and operate more effectively and moreso working with the buyer community to educate and inform and help build community.  That last bit...the connection piece, is what I enjoy the most; we all want to feel as if we're part of a community.  People do business with people they like in the Services space, so if research firms are trustworthy, likable and smart AND continue to focus on what the rest of us do not even know we do not know, I have a feeling that HFS Research will continue to be valued highly in our space.
 
Finally, what issues would you like to see our services industry address to make it more attractive to folks working in this space?  And in an ideal world, what would you like to change?  
 
Hmmmm...you've touched a nerve, as I've worked with and for some of the largest organizations in the world as well as privately held, culturally diverse, global organizations, so...I've seen a lot (not to mention my age!).  Some immediate areas for improvement, off the cuff, focus on people issues: 
 
1) Education:  I'm a big proponent of growing and learning; yet, for some of us, it's been quite some time since we've invested personally and/or professionally in bettering ourselves - leadership skills and topically...and we risk becoming dinosaurs which clearly would have ill effects on our employers;
2) Employee Engagement:  Across the board, we need to focus more on how we treat our employees...empowering them with better culture, support, growth opportunities, encouragement and diversity, and inclusion (ahem!)...as we risk revolving doors or really expensive, ineffective employees and colleagues with depressive disorders or worse;
3) Sales Effectiveness:  This issue revolves around back and front office:  Internal - motivating our salespeople differently, in ways that encourage them to succeed continually, and External - making it less about us and more about them...the client or prospect...speaking to their needs and how service providers can help versus 100's of slides on their cookie-cutter skillsets;
4) Connection:  We spend the majority of our waking hours in a people business, so inasmuch as we can find opportunities to interact with actual people, even in an era of social media engagement, we need to do more of that.  For me, at least, I've built my career and reputation on relationship management.  We all need to get much better at that stuff, myself included; and
5) Self Care:  We've all been guilty at some point/s in our careers of eating too much, not exercising enough, sweating the small stuff and ignoring what really matters, both professionally and personally.  Lack of spirituality, focusing non-stop on the state of affairs, and working incessantly makes us no good to anyone. Having stayed in the vortex that is the Services space, I know firsthand the importance of self-care and struggle to stay centered. Connection helps.
 
Welcome back to research, Lisa...there couldn't be a more interesting time to be in this space! 

Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT ServicesOutsourcing Heros

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Time to walk Mike's way... Salvino to run DXC

September 11, 2019 | Phil Fersht

Just as the industry was running out of steam, just as we're writing the obituary of the outsourcing model... suddenly we have sal-vation.  We're an industry desperate for leadership, for new ideas, for personalities we want to work with, for a new culture that inspires us to get out of bed in the morning.

So how about one provider many of us were giving up on recruiting one of the most charismatic, energetic and determined leaders who grew Accenture Operations from $1.5bn to more than $7bn.  How about the guy who jump-started one of the most impressive machine learning businesses in the industry? How about the guy who pioneered whole new approaches to service delivery with the Six Generations of BPO and the As-a-Service Economy?  How about the guy who drove an acquisition so smart it locked up an entire market vertical

Just as we thought DXC was caught in a perennial treadmill of mere survival, they have made one of the most ambitious, creative - and smart - CEO appointments the services business has witnessed in Mike "Sal" Salvino - someone I have known as a friend and industry peer for two decades.  Sal is proven to take legacy business, mine the gold, bring in the talent and make strategic moves, which is exactly what DXC needs at a time this industry is in transition. We'll have Mike at our HFS Summit on 2nd October to have a more candid discussion with industry leaders if you want to try and grab a last-minute spot.

So what are Mike's challenges and opportunities according to the HFS analyst team?

Developing market position and messaging. The new combined entity still trying to find its unique market positioning. DXC needs to hit the ground quickly to consolidate and clarify its combined offerings and transform internally to cater to the changing market needs.

Double-down on tech where it can win.  DXC has oodles of capability and talent in automation, digital enablement and AI, in addition, to a $2bn business process services business.  There is gold here if it can bring it to the surface and take it to market in the right way.

Expanding its base. DXC has a significant existing client base of nearly 6,000 customers especially in healthcare, public sector, and CPG. Large deal heritage from CSC and HP.
they have capabilities across OneOffice but have been reduced to a me-too player. No one knows what they stand for... Mike needs to change that, and fast.

Find a way to highlight some of the hidden gems in their incredibly complex patchwork of assets and capabilities from past acquisitions. The "blanket DXC" is drowning out some of their areas of differentiation because they're not talking about them anymore.

Verticalizing their offerings effectively. DXC spent a bunch of time slinging what HP + CSC can do and came up with 8 master offering buckets. But it was all horizontal. They are struggling to build relevance by industry. If they could fill the white space with their gigantic customer base alone would ensure success. 

Finding a thumb for the dyke. Stemming the flow of long term infrastructure customers getting poached by aggressive ITO competitors and AWS.

Build a true brand association and a mission. DXC doesn't have a clear story for anyone outside of very specific groups, and that's really dependent on who you speak to. It's the same for clients - as part of a major branding project where we interviewed some industry luminaries who all struggled to understand what DXC is up to, what differentiates them, or why they should even think of working with them.

Target (and execute) on acquisitions that provide true differentiation. As Mike looks at strengthening vertical offerings and service delivery areas, there will me boundless firms on the block to evaluate. Time is not on DXC's side and the right targets need to be integrated effectively, alongside the current firms in the organization.

Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT ServicesIntelligent Automation

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Why going straight to digital from your legacy outsourcing engagement is like buying a Tesla

September 01, 2019 | Phil Fersht

As we discussed last week, the 2019 State of Operations data shows a strong appetite from enterprises to dump legacy outsourcing practices and reinvest in operating models that can take them straight to digital. 

While the desire to invest in an outsourcing model nose-dived from 62% in 2018 to 28% this year, it's also worth looking at the definitive actions enterprises plan to take when their current outsourcing engagement come up for renewal:

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There is a clear appetite for change and complacent service providers are in serious trouble

Several service providers have already commented that they "just don't see their clients wanting to change this aggressively" since our recent roundtable in London and the recent blog post which amassed huge attention across the industry. However, many are clearly in denial that we're deep in a critical transition from the traditional labor-driven model to one that is much more touchless and less physical in nature.  In my view, the issue here isn't that these peoples' observations are wrong, they're just not having the right conversations.  Most of the BPO executives admit they are "feeling their way" to address their clients' needs for more RPA and digitization of their processes, but simply do not have the scale of people on hand with the necessary training and skills to help them.  Instead, they are simply waiting for a burning platform that forces them into some sort of action.  Worryingly, when we look at this data, when this burning platform finally appears under their posteriors, it's already going to be far too late for them to save themselves. 

Why going straight to digital with your outsourcing engagement is like buying a Tesla - it's a big change, can be expensive and requires a very different type of service partner to make it viable 

Most enterprise operations leaders are unlikely to tell their provider's client partner "we're fed up with spending the same dollars each year for the same tired old processes and small army of staff to deliver them".  That is like going to your car dealer and saying you're sick of paying extortionate sums for gas to fuel your car, and you're also sick of polluting the environment.  Unless your car dealer is fully up on electric cars and has a great financing model to switch you up, you're more likely to find a dealer who specializes in what you need.  The only way your existing car dealer is going to have a chance of retaining your business is if his firm has invested in mechanics who are trained in electric car maintenance, sales people who know enough to sell you one, and a financing partner to get you "fully electric" with a financially affordable package.  

So what can we expect today's enterprises to do when their current outsourcing engagements expire?

Barely a quarter of enterprises content to stick with their gas-guzzlers.  As the data clearly tells us here, not even a quarter of clients intend to stay true to their tried, trusted, stable (and stale) relationship.  Perhaps they just don't care that much and can quietly drift along to retirement by merely "keeping the lights on" with their legacy business practices that just about get the job done.

Another quarter wants to move the needle, but may opt for a hybrid model. Meanwhile, 27% are getting itchy to kick their service provider up the rear end and get them embedding some real automation into their delivery if they are to renew with them.  This means they want to see real commitment to reduce the dependence on the staff army and see real investments in process automation to digitize their delivery.  This could perhaps be the car dealer selling you a hybrid vehicle as you look to move to an electric model, but need a defined transition period to get there. It is also less extreme for a car dealer to invest in hybrid cars as they require less specialization than fully electric vehicles, so this is often a great compromise for both parties.

A third is more decisive and likely to make the switch.  32% have clearly got to know their current outsourcing provider only too well over the years and have zero hope they can get any real co-investment out of them.  As we have discovered over the last couple of years, some providers have made real investments in competencies like automation and AI, while others have merely added a little sugar-frosting and persist with selling the same old model with some cost shaved off the package, and some added incentives for performance (i.e "outcomes").  Moreover, ambitious outsourcers are heavily targeting their competitors' disaffected clients and are willing to offer eye-catching deals to win their custom.  This can include attractive pricing tied to aggressive delivery staff reduction over a 3-5 year amortization plan that is offset by efficiency savings due to automation and digitization.

In some cases, it may also prove more attractive for the legacy provider to shed the business than fight to keep a client that will quickly become unprofitable (and the industry is littered with those engagements). In many of these cases, this is more like a car customer moving towards a brand they haven't driven before, most likely a hybrid, and having an acrimonious split from their current model because their dealer tried to sell them a car that just didn't check the boxes.  However, in several services markets, we are seeing emerging offerings from providers where they are offering fully digital offerings (with vastly cheaper support), such as TaskUs in the customer call center market, or nDivision in managed IT operations, which can undercut traditional outsourcers so aggressively, there is no feasible way the traditional providers can compete.  In addition, we are seeing several India-centric service providers offer $-per-chat support models for some transactional services that are essentially chatbots offering basic-level support services at costs as cheap as 15 cents a chat... we are finally seeing "digital disruption" attack the traditional outsourcing market that has somehow staved it off for years thanks to lethargic clients and lock-in contracts.  

The 17% who have given up and will just look at something very different.  Maybe the cost of changing the model is just so abhorrent it's time to pull the work back and fix it yourself.  Maybe you're so fed up with the lack of innovation in changing anything you've realized you have smarter people on staff who are better deployed to take the work back, staff up to execute it while you explore all your digital and automation options.  Maybe you want to invest in an integrated automation platform, and you want to use the funds saved by backsourcing the work to invest in an automation backbone that enables you to perform work in a touchless, smarter manner?   Maybe you've seen that shiny new Tesla in the showroom window and decided to take the plunge and to hell with the upfront cost...

The Bottom Line - after years of providers complaining about their clients being unwilling to invest, the outsourcing chickens are coming home to roost

The problem with outsourcing is that it has always been underpinned by financial models that give the buyer or provider little wiggle room to make investments to do anything differently.  Most firms still run most of their processes exactly the same way as they did 20/30/40 years ago, with the only “innovation” being models like offshore outsourcing and shared service centers, cloud and digital technologies enabling those same processes to be conducted steadily faster and cheaper.  However, fundamental changes have not been made to intrinsic business processes – most companies still operate with their major functions such as customer service, marketing, finance, HR and supply chain operating in individual silos, with IT operating as a non-strategic vehicle to maintain the status quo and keep the lights on.  

And the poor whipping child over the past couple of decades has been the poor outsourcer, who's taken on the putrid old processes and attempted to deliver them for their clients at lower cost, where the necessary investments needed to redesign the processes and improve the technology backbone would far outweigh the slim profits being eked out through using cheaper labor and following sensible process delivery templates.  Sadly for our lovely outsourcers, they have little choice but to suck up the fact that they ventured into this business to turn a profit, and if they want to remain in it, they need to make some new investments to get into a position to turn more profits in the future.

As we can see, 59% of their clients are open to doing things differently or using a different partner altogether, so the opportunity is there if you're willing to take some short term pain for longer-term gain.  This means retraining current delivery staff; this means adding skills in areas like RPA, ML and AI; this means smarter partnering with software firms and specialist consultancies.  This means you need to get out of your niche and provide solutions that your customers need, not merely force them to buy what is convenient and profitable for you to sell them.  This means you may need to start selling Teslas, not gass-guzzling SUVs....

Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT ServicesDigital OneOffice

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As 47% of enterprises seek to reduce their reliance on outsourcing... we're going straight to digital

August 19, 2019 | Phil Fersht

It's taken more than 12 years - ever since the first-ever blog post written right here - but the outsourcing marketing is on the cusp of its most seismic change since the offshore revolution... the majority of enterprises are seeking to pull away from their stale outsourcing relationships and replace people with intelligent cognitive workers which learn context - or simply bots that perform transactional tasks.  And the reality of outsourcing is that it's far easier for an enterprise to eliminate workers that are contracted via a service partner than have to go through all the painful change and resistance when trying to eliminate their own staff directly with software investments. What's more, enterprises rarely want to bring outsourced work back inhouse until it has been fully automated and the outsourcing offers little future value.

All the lovely fluff about "automation and AI creating jobs" is being proved to be utter claptrap for the services industry when we look at fresh new data from the 2019 State of Operations and Outsourcing Study across 355 operations leaders in the Global 2000, conducted with the support of KPMG:

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What's shocking here is the degree of change in mindset from operations leaders since a year ago, where 62% were still pretty gung-ho positive about investing in their outsourcing model, which has nose-dived to only 28% this year, and a startling 47% actually seeking to decrease their reliance on outsourcing.  So if they're looking at new models to deliver their business operations - and traditional outsourcing no longer fits the bill - what are they looking to do?  Let's take a deeper look:

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In short, up to half of major enterprises are looking to find another provider to break their years of painful status quo, while a similar number are looking to embed significant automation into their current engagement. About one-in-six are looking to pull the whole lot back in house and have given up on the delivery model. 

Why this change to outsourcing... and why now?

When we look at our reliance on staff to run our operations, we're seen a substantial reduction over the last couple of decades, mainly due to advances in software applications that embraced process standards (and natively automation).  For example, most G2000 enterprises had hundreds of people running finance processes a decade-plus ago, and likely barely have 50-100 based on advances in financial software, combined with efficient outsourcing labor arbitrage models delivered by the likes of Accenture, Genpact, Capgemini, and WNS.  Procurement probably had 150 and today barely needs 30... and HR is down to its barebones across most large enterprises.  The division most affected by outsourcing - IT - has shrunk from the thousands to the hundreds in most major enterprises over the past two decades.  Net-net we've been through a very long, sustained period of labor osmosis from enterprises to outsourcers, while shared service functions have stayed largely static.

At the same time, people-driven outsourcing engagements have continued to deliver similar process work back to its enterprise clients with the same number of staff, where the outsourcers have had little incentives to make investments in automation and digital technologies, unless they can directly benefit financially, or have contractually agreed to reduce staff numbers over the course of a long term contract.  We are already witnessing the likes of Automation Anywhere, UiPath and AntWorks making significant investments in their own implementation staff as they are frustrated with their lack of traction many outsourcers to incorporate automation and AI technology into the people-focused delivery models. 

The new solution is to bypass staff-intensive processes and go "straight to digital"

The big change we are seeing now (and we'll share more data to back this up shortly) is that the outsourcing models we know and love have long reached their saturation points, and the only real value enterprises can get from them (in the near future) is to remove the number of staff delivering the work and replace them with digital technology.  For example, a bank we spoke to recently that is replacing hundreds of staff whose job it is to create customer appointments with a conversationally-intelligent cognitive worker solution.  The savings are massive.  However, if the bank had outsourced those workers, the only way to force their service provider to replace them with a digital solution would be to demand it upon contract expiry, or bring it back inhouse and do it themselves.

The key is for software and services providers to develop aggressive adoption programs to create the real "straight to digital" ROI

In recent years, we've seen many of these digital models evolve - from simple software apps, to chatbots, RPA tools and now more conversationally-intelligent cognitive workers (such as IPSoft's Amelia, IBM's Watson, Automation Anywhere's IQ Bot, TCS's partnership with Amazon Connect, HCL's Lucy and Wipro's solution of Holmes with Avaamo).  However, the earlier models where enterprises were being forced to invest multi-millions upfront just to get a cognitive or RPA solution actually functioning without constant human intervention and training, have failed, with the notable inability of IBM's Watson solution to reach anything like the heights the firm had promised because the market a) wasn't ready and b) wasn't convinced the massive outlay would reap massive rewards.  And the high-profile struggles of many RPA solutions to replace people with technology (merely augment processes) threaten the rapid rise of those solutions as investors pile on with unrealistic expectations.  So the answer is staring us in the face, and it's pretty straight forward... the winners in this tough new transition market are those which can guide enterprises to take existing processes and move them straight to digital and remove the layer of people delivering them. 

The Bottom-line: The only true ROI which created the traditional outsourcing model is now repeating itself with digital solutions

As much as we can spin wonderful stories about augmenting people and enriching jobs etc., the goal of most Global 2000 enterprises is to maximize profits and the stated goals of C-Suites and Ops leaders are to a) reduce operating costs and b) move away from physical to digital environments:

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The industry has spoken and it's clear where they will invest - in partnerships that can accelerate the move to digital without all the painful and costly steps to get there.  And the areas most primed to make this happen are where the staff have already been outsourced and the logical next step is to reduce or eliminate them altogether.  

The challenge for outsourcers. Defend the clients you really want to keep and attack ones from competitors to backfill the inevitable losses as the model shifts from people to digital.  This means you need to develop programs that get your clients leveraging the benefits of automation and AI quickly by hiring talent to make this happen, and forging deep, mutually-be partnerships with software firms to work with you.  As we recently discussed at our Robotic Business Outsourcing Roundtable in London, outsourcers face a stark choice between embracing digital models that require less labor, or fading into insignificance.

The challenge for enterprises.  Forcing your service providers to cannibalize your business is not an easy task, but if you are willing to work with them to build real digital models that work and become a showcase client for them, you should find a cooperative (and hopefully) ambitious partner to work with you.  If you do not, then look further afield for partners willing to invest in your business. If noone wants to transform your operations your business clearly isn't very attractive (especially if you got a cheap deal to begin with) so you may well be better off bringing operations back inhouse and digitizing them yourself.

The challenge for advisors.  Today's environment should be gravy for you - I've heard from several advisor friends that deal flow is really healthy - and it's mainly outsourcing renewals demanding digital enablement and less people-centricity.  Hence deal amounts are declining and demanding more complex tech skills to enable new solutions.  Your problem is going to be finding providers willing to embrace disruptive models and work with thinner margins in the short-medium term for longer-term gain.  There are several providers out there willing to be aggressive to "land-grab" deals and increase market share, despite thinner margins and scarcity/cost of tech talent.  However, you really need to flesh out the providers prepared to put skin in the game, versus those paying lip service. 

End of the day, many of the outsourcing partnerships that got so many of us here are unlikely to be the same ones to take us to the next phase...

Posted in: Business Process Outsourcing (BPO)Robotic Process AutomationArtificial Intelligence

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HFS goes bigly... with Tom Quigley

August 13, 2019 | Phil Fersht

At HFS, we're approaching ten years' in existence - yes 10 bloody years' of this stuff - and we're still the "new analyst kid on the block".  As we approach this new phase in our journey, we're focusing heavily on the massive impact our research has across all corners of the services and tech industry.  The traditional channels of slapping stuffy reports behind a firewall and blackmailing suppliers with scatterplot grids are still the predominant way the analyst industry persists in operating (or simply regurgitating supplier press releases dressed up as "insight"), which has helped HFS expand our operations across three continents and bulldoze our way into a small elite group of analysts firms. 

However, we're not stopping there... we want to engage even more digitally and effortlessly with our global community, using video, blogs, podcasts, webcasts, summits, roundtables and various other forms of social media.  So were gone and added some serious firepower to our digital prowess with our recent acquisition of Quigley Media, where the founder, Tom Quigley, joins us as Chief Marketing Officer.  So let's hear a bit more from the unassuming Scotsman and his plans for HFS, while he's not practicing his blackbelt in karate on his three wee lads...

Tom - you've been a pretty active figure in the world of global sourcing for some time now - can you share a bit of background about yourself?
 
Sure. For this first half of my career I worked in mostly operational roles for two large insurers, Commercial Union (now Aviva) and Prudential UK & Europe. During that time I designed and delivered a 3 year programme of events for the CEO whereby he and the executive directors would travel around the country meeting hundreds of policyholders and doing impromptu Q&A sessions with them, which was pretty disruptive back then. I also delivered conferences in Mumbai and Dubai.
I joined BPO provider Capita in 2009 and headed up the marketing function in one of their nine divisions. When I left in March 2016 I was Head of Marketing, Design and Events for a consolidated number of divisions, overseeing a team of 2 Business Partners, 5 marketers and 8 graphic designers.
 
I joined the National Outsourcing Association as Marketing Director and we rebranded to the Global Sourcing Association (GSA), which we launched in Sofia in October 2016. It was at the time I recognised the emerging talent from central and eastern Europe, and so I set up my own marketing agency providing services to CEE businesses looking for market entry or engagement with the UK and Western European countries. During the last two years I also co-founded and was the CEO of the Alliance for Business Services, Innovation and Technology, with members including Pwc, Cushman & Wakefield, Convergys, Stefanini as well as institutions like IAOP, Nordic IT Association, Bulgarian Outsourcing Association etc. I also met with and successfully persuaded the Bulgarian President to be our honorary Chairman!
 
I stepped away from that role at the beginning of the year to focus purely on the agency and we've enjoyed working with clients from Poland, Romania, Bulgaria, the UK and US during that time. 
 
So you recently sold your firm and its digital assets to HFS... what was behind this move and what can we expect to see from you in the next few months in your new role?
 
Well its quite ironic because I'd been spending the last 2 years telling anyone who would listen that I would never work inside another company again as I was having too much fun being my own boss, so it did take me by surprise at how quickly I said yes when the offer to acquire QM came about. We were just completing brand perception study for HFS Research when I got a Skype message from you late on a Friday night. We met on the Monday, signed contracts on the Wednesday and I was in the Cambridge HQ at my desk on the Thursday - it really did happen that fast!
 
But I've known HFS Research for a number of years and was very well aware of its unique stand in the market. I am a big admirer of the quality of insight and unfettered views it provides - and when the offer came I genuinely had goosebumps, that told me it was the right move to make.
 
As for the months ahead we will launch a new website with improved functionality and integrated multi-platform analytics that gives us a more unified view of our customers, we've just set up a digital studio in the Cambridge HQ giving to open up some new channels and give us more control over our digital content, and we're currently building a number of great marketing campaigns to land some important messages in the coming months. We're also mapping out customer journeys to see how we can improve client experiences as well as establishing a more structured, tier-based relationship with our supplier partnerships to improve speed and innovation. In addition to that we have our New York Summit in October as well as events going on in Paris and Stockholm, so there's lots to come. Our clients will definitely notice a new, more emboldened brand overall with a clear focus on building closer, more meaningful relationships with our communities - not only through our research, thank tanks and other market activations, but also through more targeted communications. 
 
How is the industry different these days?  You've been very involved with emerging locations for several years now - where do you see this headed next?  Is the game changing? 
 
We're in a market of perpetual change now. Technology has overtaken consumer needs as the main driver of innovation, and the lines between BPO and ITO are dissipating. It really is about the provision of integrated digital services and one office. Contracts are increasingly focused on partnership agreements delivering outcomes, providing access to innovation and sandbox environments that will enable businesses to deliver more personalised services to their customers at scale. Central and Eastern Europe has been producing STEM resources for years but they are becoming more even more prevalent because they are forming better and more active networks and alliances, backed by their governments and funded by the European Commission in some instances - they are becoming more adept at integrating themselves into the connected ecosystem. Going forwards location will be come completely irrelevant as technology will enable the proliferation of agile - scaleable - teams that will form virtually to work on multiple projects, before disbanding and reforming on other assignments. I believe we'll eventually see the end of the permanent employee contracts as more millennials become a part of our economy.
 
And how about the research industry - you've been on the outside looking in for your entire career... how do you see it evolving?  Is it looking any different from the inside? 
 
Well I've only been on the inside for a couple of weeks now, but I'm not sure the analyst industry IS actually evolving at the same pace. Sure the analysts are reporting on technology and how businesses are thriving or otherwise in industry 4.0, and the means of capturing research and analysing data has advanced but for the most part I don't believe the research industry has become transformative enough. Some companies appear to have become machine monoliths, churning data and reports that seem pretty vanilla and without much of a voice; if you laid out reports and magic quadrants from a number of them and then covered up the logos I doubt many people would be able to distinguish who is who. Let me be clear, the analysts themselves are highly credible, very clever people regardless of what organisation they work for, but I think the 'corporate machine' sterilises a lot of what they actually produce.
 
This is where HFS Research stands apart, and the reason I'm so excited to be here. I know how different it is observing from the outside but I can see how different it is operating from the inside. Our purpose, our culture and how we operate has completely different DNA from other analyst firms. Last week I listened to Mark Hillary's first ever podcast talking to you about why you progressed from writing a blog to starting your own analyst firm, and I can see that the values that drove that decision are still very much alive in everyone involved with HFS today - and that podcast was recorded 10 years ago. My job is to make sure our clients and the market at large are aware of that, and recognise the value in choosing HFS Research as their partner going into the hyperconnected future-state!
 
And finally, there's a rumor going around that HFS is going to be ten years old soon... any plans to celebrate?
 
Next March marks the 10th birthday of HFS Research, and yes we will definitely be celebrating with our people, partnerships and communities. But you'll have to wait a little bit longer to discover exactly how..!
 
Welcome, Tom - and we're hopeful that many of our clients can meet you in New York this October 1 and 2 for our next major HFS Summit!

Posted in: Outsourcing Heros

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With 44% dissatisfaction, it's time to get real about the struggles of RPA 1.0

July 31, 2019 | Phil Fersht

Who remembers this classic "statistic" from a couple of years' ago, where we caught some friends declaring RPA fantasies that are simply miles from reality:

We've been keen to share with the world that RPA satisfaction has been in positive territory for more than half of the adopting enterprises, which is OK for a relatively complex new type of solution that takes a while to get right, and we revealed a 58% a satisfaction rating a few weeks later.

Sadly, two years on, satisfaction ratings have not improved

Our brand new study of 355 operations leaders, conducted with the support of KPMG, has revealed that only 56% of the Global 2000 express a positive experience from process automation and robotics:

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What's alarming about this is we asked operation leaders to assess the satisfaction levels of all key C-Suite directives, such as the adoption of AI/ML, enabling hyper-personalization, ever the old faithful of "driving down operating costs" ...and process automation finishes dead last.  I would argue this isn't because process automation and robotics initiatives have been a disaster, but more likely, expectations from the sell-side have been vastly over-inflated.  While this may sell more licenses and consulting days in the short-term, it will stunt longer-term growth for the industry.  Let's delve deeper here...

Why are process automation and robotics lagging in terms of satisfaction?

The over-hyping of how "easy" this is. The problem we have in this industry right now is an obsession with glittering outcomes and not enough real-world guidance on how to achieve them. The majority of robotic adopters have never ventured into double-figures of bots deployed, and many simply have little idea how to progress their adoption beyond a handful of pilot projects. The focus of the narrative needs to be directed to helping clients develop broader robotics strategies across organizational areas. We're also hearing about some enterprises aborting some major RPA projects because they just didn't expect the cost and scale of the effort to be so large. So we need to be realistic and balance the great benefits of robotic software with the challenges of training people on it, scaling the technology and gaining buy-in across business units.

Lack of real experiences being shared publicly.  Enterprises RPA adopters are fed up with the constant deluge of "motherhood and apple pie" being served up by the industry when they know full well these deployments are among the biggest challenges their customers have ever faced.  The RPA vendors - and several of the leading services firms - will be far more appreciated if they started sharing the real customer experiences with the world. For enterprise operations and IT executives, being successful at automation and AI is career critical - they want to learn how to be effective and how to invest their time wisely.  If this stuff was easy, they'd be out of a job pretty quickly, but fortunately for them, it is not, and they can embrace these experiences to increase their value to their firms and their careers.

Huge translation issues between business and IT.  Simply put, most IT folks have little understanding of RPA and think all their world problems can be solved with an API.  RPA - for most operations executives - is the first time they have had to work with actual software development and get involved in some low-code activities.  And they approach it with a "process first" context - how can I use these tool to integrate these apps / screen views / objects / documents etc?  I can honestly say I have been to two major software developer conferences where RPA is on display and the developers are simply clueless with regards to how RPA fits into their world of platform modules and APIs. If we can't bridge this divide, we run the risk of RPA being relegated to the scrap heap of failed technologies.

Obsession with "numbers of bots deployed" versus quality of outcomes.  If I hear another executive claim he/she has deployed over 100 bots, and that is their prime measurement of success, I will start naming and shaming =)  In all seriousness, there is no race the finish-line with this, and can see many enterprises still grappling with automation projects for many years to come.  The ones whom I have met who have expressed the most dissatisfaction are those who have bought far more licenses than they know what do to with, and have real issues trying to explain this their over-investment to their bosses. I've even seen some fired because of it.

Failure of the "Big iron" ERP vendors and the digital juggernauts to embrace RPA.  Let's be honest, with the exception of SAP's small acquisition of Contextor, which didn't even warrant a mention at the recent Sapphire event, the IT bellwethers haven't fallen in love with RPA.  It's just not sexy and scaleable enough for their suites, and if you read some of the guff on social media from IT "thought leaders", they have no bloody clue what RPA really is - and does. IT people just struggle with a technology that starts with a business process headache - they prefer to work with code-intensive products that can be shoe-horned into businesses, which they can make really complicated to install and manage.  Only Pega, from the world of large enterprise software, has made greater efforts to embrace process automation with its 2016 acquisition of OpenSpan, and I was quite impressed with the prominence it gave digital process automation at the recent PegaWorld event, but, even at Pega, it's clearly a challenge to communicate the true benefits of RPA to the Pega traditionalists, whose entire world revolves around its shiny CRM orchestration platform.  While we can point to all the lovely partner announcements we hear from the big three RPAs about their Google, Microsoft, Oracle, Workday, IBM etc partnerships, the truth of the matter is excitement and investment levels from the IT glitterati have been nothing close to what we were hoping/expecting just a couple of years ago.

Bottom-line: Over-setting expectations is putting the automation industry at risk of failure, not setting it up for the success it should be

The lesson here is that the sell-side is pushing too hard to sell too much too quickly and is setting up too many clients for disappointment.  We just need to set expectations better and get the balance right.... Rome wasn't built in a day.  We need to hear the RPA big daddies talking about how enterprises are grappling with real issues of internal change management, training and education.  We need to hear our IT leaders finally reach their "aha!" moment when they finally understand how robotic software is pulling in their frustrated business operations leaders into their world of embracing technology to help achieve real business outcomes.  Because one adage has rang true for 30 years now - design your processes the way your business needs them to achieve the business outcomes you crave... then invest in the right technology to make this happen.  RPA has the potential to be the first true catalyst to make this a reality, and we mustn't waste this opportunity.  Let's create an industry that can flourish for the next 30 years, not one that we'll break in the next couple with our greed to get rich and close that next contract...

Posted in: Robotic Process AutomationRobotic Transformation Software

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Wow... the UK really is becoming an attractive nearshore sourcing location

July 28, 2019 | Phil Fersht

While the UK government is busily doing a tremendous job destroying the country's position as one of the world's great financial centers and multi-cultured commercial environments, one unlikely scenario is unraveling: the steadily devaluing currency, availability of labor (especially in its former manufacturing cities), and adequate education system is placing the country up the league as, now, the third-most attractive location to source business operations and IT support.  This is according to the brand new data from the HFS 2019 State of Operations and Outsourcing study, conducted with the support of KPMG, where we interviewed 355 operations leaders from 355 of the Global 2000:

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Bottom-line: As value from low-cost labor levels out, the focus shifts to increased complexity and talent closer to the business

As we reveal more of the new survey data, you'll see a prominent shift away from enterprise intentions to invest in traditional outsourcing pivot towards a strong desire to find partners which can support technical complexity in AI, hyper-personalization, and automation.  Net-net, enterprises need support staff close to the business with the ability to understand process and technical complexity that they have never before needed.  This doesn't mean that popular locations like India and Philippines will see their service industries plummet, it just means outsourcers and GBS leaders need a healthier balance of onshore/nearshore/offshore to bring it all together.  It also signifies a shift from "outsourcing" to "expertise partnering" that changes the location playing field significantly.  While the USA and China are no surprise as their host the world's largest economies and businesses, the UK is the surprise mover, as political conditions have created a more competitive market to invest in support services. 

Watch this space for more as we drip-feed you this incredible data over the next few weeks...

Posted in: Business Process Outsourcing (BPO)Global Business ServicesIT Outsourcing / IT Services

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Accenture, KPMG, Cognizant, Atos and TCS lead service delivery on Microsoft AI and Google AI Platforms

July 22, 2019 | Phil FershtReetika Fleming

We've reached a stage where we can start to assess the capability of leading service providers to deliver comprehensive services across key AI platforms, especially Microsoft's Azure AI platform and Google's emerging AI platform suite.  So without further ado, let's ask HFS' Research Vice President, Reetika Fleming, how she fared leading the two major Top 10 efforts this year...

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Reetika - how are services around AI platforms progressing?  And specifically, what have you learned with regards to Google and Microsoft platforms?

We’re continuing to see AI ecosystems evolve around the big cloud vendors – Microsoft, IBM, AWS, and Google. From our recent deep-dives into the AI services alliances developing around Microsoft and Google, I can tell you that there are different strategies at play here. Google and Microsoft themselves have their own strengths and priorities, and the SI and consulting alliance partners are collaborating with them in different ways.

  • Google’s portfolio of AI components, such as text-to-speech and computer vision, is a great starting point for a fundamental development layer. Google’s AI R&D leadership is

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Posted in: IT Outsourcing / IT ServicesArtificial Intelligence

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Want to survive the AI era? YOU have a simple choice to make...

July 07, 2019 | Phil Fersht

When it comes to staying relevant in today's workforce, let’s get to the heart of the matter – YOU have a simple choice to make:

  • Do nothing and be part of the “Frozen Middle”. Decide you can’t be bothered to learn anything new, so make sure your firm has the same attitude (or has a thin veneer of innovation masking a cesspool of lethargy and love of perpetuating legacy processes and business practices). And ride this next wave of hype out for a few years before you can quietly ride off into a comfortable sunset, or…
  • Become a change-driver. Decide you have to get ahead of emerging technologies and their massive impact on business ecosystems and make sure your firm has what it takes to sponsor your burning ambition to drive cultural changes, new learning and ability to rethink how business processes and practices are wired.

Once you decide which of these two categories which you wish to belong, then make sure you’re in the right company to execute your survival plan… otherwise, leave and find one that is.

Because the data from the recent World Economic Forum jobs study shows half of enterprises are being held back because their staff fails to understand the disruptive changes in their industry, and an alarming 37% of enterprise leaders do not feel their current

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Posted in: Digital OneOfficeGlobal Workforce and Talent

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Is your Robotic Software really supporting business transformation at scale beyond piecemeal projects? Time to have your say...

July 06, 2019 | Phil FershtSaurabh GuptaElena Christopher

Are you as confused are we are with some of the recent analyst matrices floating around the industry this year?  Some products are performing completely differently depending on the analyst and how they "define" the market and whatever methodology they used to score each product.

However, one thing is clear:  at HFS we ensure we rely on a lot more than a briefing and a handful of rose-tinted clients served up by the suppliers themselves.  We reach out across our global network of power users (enterprise clients, advisors, and service providers) to get the true unvarnished experiences of robotic software. 

This is why we scrapped the 2x2 matrix last year and went for a direct ranking of suppliers, based across three critical variables:  execution, innovation and the voice of the customer.  HFS subscribers can click here to access the full 2018 RPA Top Ten report. 

On 2018, we introduced the "Voice of the Customer" to rank the leading RPA products across the experiences of 352 power users

In short, there are growing questions about whether "RPA" can deliver transformation on the promised ROI and outcomes, especially as most RPA initiatives continue to be small and piecemeal, with truly scaled RPA deployments are rare (only 13% of client boast any true scale to date). The industry is still struggling to solve challenges around the process, change, talent, training, infrastructure, security, and governance - hence our shift to re-categorizing and

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Posted in: Robotic Process AutomationRobotic Transformation Software

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The present and the future is... Robotic Business Outsourcing

June 24, 2019 | Phil Fersht

BPO (Business Process Outsourcing) grew up because of all the exceptions enterprises have to process that were not able to be absorbed into the standard ERP software.  Yes, we found people equipped to do this work at lower wages housed by efficiently run service providers.  And that work we couldn’t initially send to the BPO providers we just found manual workarounds to get it done until we eventually found an outsourcer who would find a model to take on that work for you.

However, just as many enterprises were running out of places to find (yet) more and more hidden costs they could quickly remedy through (yet) more outsourcing, along came their perfect new toy to unearth costs they had never thought possible to eliminate: RPA.  

Yes, folks, this stuff is just the thing to keep you occupied for the next few years to keep your greedy CFOs at bay - and even includes the word "robot" to conjure up images of human work

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Posted in: Business Process Outsourcing (BPO)Robotic Process AutomationRobotic Transformation Software

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Blue Prism buys Thoughtonomy. Clearly a great deal for…Thoughtonomy

June 20, 2019 | Miriam DeasySaurabh GuptaElena ChristopherPhil Fersht

Blue Prism yesterday announced the acquisition of Thoughtonomy, a SaaS-based integrated automation platform with Blue Prism RPA baked into its core. After six years and much flirting with potential suitors, Terry Walby’s Thoughtonomy successfully exits into the welcoming arms of Blue Prism. This was always the logical end-game for Terry's business, which he bootstrapped from day 1 and tirelessly pushed at the automation world. HFS was particularly inspired with the firm's work at the UK's National Health Service (NHS) (which you can read here). 

Essentially Thoughtonomy is RPA + cognitive capabilities + cloud. Net-net, Blue Prism is buying a cloud (SaaS) wrapper for its own product; arguably, it could have (and should have) built that itself, but decided instead to pay a tidy sum. However, this cloud wrapper puts Blue Prism in the ring with Automation Anywhere's V12 cloud product, which is drawing a lot of plaudits from enterprise users (our forthcoming Robotic Transformation Software Top Ten will reveal its performance across several hundred enterprises). More importantly, it increases Blue Prism’s attractiveness as an acquisition target itself by upgrading its cloud-readiness from “available cloud reference architecture” to a legitimate SaaS-based offering.  We touted Blue Prism as a potential target for IBM three years ago, and with a scalable cloud story and IBM/s major pivot around Cloud with its RedHat acquisition, surely this Cloud-ifying of Blue Prism makes the firm even more attractive to them.

Finding the synergies to justify the price tag – cloud with a potential side of cognitive capabilities, but the focus is too UK centric

Now, Blue Prism can contend with Automation Anywhere’s claim that “BotFarm is the first and only enterprise-grade platform for scaling bots on demand”. The midmarket can benefit from Blue Prism’s RPA technology, with very little setup cost or initial investment.  Mid size companies that considered automation out of their reach can enjoy the democratizing effects of cloud, avoiding the hassle of on prem infrastructure.

The shopping basket also contains Thoughtonomy’s gross assets, reported at 31 May 2018 as £5.6m and established relationships with Thoughtonomy’s big-name clients including NHS, AEGON, and Sony. Partner implementation and reseller arrangements are in place across many of the usual suspects in SI and consultancy such as Computacenter (from where Terry Walby moved to IPsoft before setting up Thoughtonomy).

Like Blue Prism, Thoughtonomy is UK based so there’s not much by way of additional footprint synergies to be realized. Blue Prism, therefore, will only be adding a limited new channel and will have to rely on its existing sales and delivery channel to make this acquisition pay off. The US market is where the bulk of new demand for automation solutions is surfacing, and Thoughtonomy isn't adding to Blue Prism's US team, which is under huge

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Posted in: Robotic Process AutomationArtificial IntelligenceRobotic Transformation Software

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She's bright and breezy... HFS hires Miriam Deasy!

June 18, 2019 | Phil Fersht

Miriam Deasy (see bio) joins HFS as Research Director, Integrated Automation 

Just when you thought this little analyst firm wouldn't dare add another rock star brain into our "Triple A" coverage (analytics, automation and AI) we've gone and done it again, adding Miriam Deasy to our global analyst team (based in UK) to cover integrated automation and AI platforms, alongside the likes of Elena Christopher, Reetika Fleming, Tapati Bandopadhyay, Melissa O'Brien, Saurabh Gupta, Ollie O'Donoghue and myself.  Miriam has develop a career across the world of technology and services with roles at EDS (HP) and Amdocs back in the day, before taking out time to raise two boys and a girl William (12), Kayleigh (10) and Darragh (9) before making her move to the analyst world with IT and telecoms firm Ovum three years' ago.

Miriam adds to our growing Irish contingent (from one to two), brings deep sense of wit and

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Posted in: Robotic Process AutomationEnterprise Integration PlatformsArtificial Intelligence

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Wipro needs a bold and differentiated strategy to elevate its middling market position post-Premji

June 12, 2019 | Phil FershtJamie SnowdonSaurabh GuptaTapati Bandopadhyay

We all remember when Jack Nicklaus played his last Masters, and when Sir Alex Ferguson managed his last game for Manchester United. These guys were godfathers of their trades, not unlike Azim Premji has been for IT services, the man who oversaw a firm which diversified from diapers and vegetable oil into one of the largest IT services firms in the world. However, when they retired, they left a legacy that enabled many to follow in their footsteps (albeit noone has come close yet). Premji's legacy, which forever is written into the annals of IT services folklore, is still unfinished, which may be a good thing for his successors... there is still a lot of work to do to get Wipro to the place Premji always envisaged. 

The current market situation facing Wipro's leadership

To recap, Wipro’s Executive Chairman, Managing Director and philanthropic champion Azim Premji is retiring by end July. His son and Wipro’s Chief Strategy Officer, Rishad Premji will

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Posted in: IT Outsourcing / IT ServicesOutsourcing Heros

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When did you earn the right to stop learning new skills and abilities?

June 02, 2019 | Phil FershtOllie O’Donoghue

When you have to listen to literally hundreds of people a day spouting advice about reskilling, unlearning, change management, relearning etc., I am going to respond with “great, so what are you doing yourself to stay ahead of today’s digital environment and increase your value as a superstar worker?”  You may love to pontificate constantly weird definitions of digital transformation on twitter and harp on about today's digital talent needs, but do you truly practice what you preach?

Is it just me, or have we entered an environment where everyone loves to talk about change, but most aren't actually doing anything (themselves) about it?

I mean, if your accountant hadn’t bothered to brush up on the latest tax changes, or your personal trainer didn’t know how to use a Fitbit, you probably would seek to replace those relationships in your life.  So what gives IT professionals the right not to learn Python, or learn how to deploy data management / automation tools?  And what gives business executives the right not to learn how to use non-code analytics tools to help their decision-making, or social media products to help them communicate in the market?  And operations executives the right not to learn low-code automation and AI apps that can help them free up people-hours on work that adds no strategic value to the business?  And who told sales and marketing executives it was fine to ignore really learning the products / services they were selling because all they had to do was to follow a set of pre-defined processes to do their job effectively?

Why have so many of us become so complacent?

It just seems that the majority of workers today just think they need to learn to follow a few processes and that’s all they need to do to command a tasty salary and remain employed for years and years…. so few people actually realize that the whole nature of people value is changing for enterprises – they just love to do things the same old way they have always done them, and simply cannot be expected to learning anything new.  "We just don't have the talent in-house to do that" is the constant whine we hear from enterprises; and "our IT managers are project managers, not consultants" is what we hear from service providers.  Then why don't you train them?  Is our agonized response.  Why does everything have to stay paralyzed in this constant vacuum of sameness

Much depends on the approach our enterprises take to driving change

The biggest problem with enterprise operations today is the simple fact that most firms still run most of their processes exactly the same way as they did decades years ago, with the only “innovation” being models like offshore outsourcing and shared service centers, cloud and digital technologies enabling those same processes to be conducted steadily faster and cheaper.  However, fundamental changes have not been made to intrinsic business processes – most companies still operate with their major functions such as procurement, customer service, marketing, finance, HR and supply chain operating in individual silos, with IT operating as a non-strategic vehicle to maintain the status quo and keep the lights on.

As our Hyperconnected journey illustrates, many industries have now reached a place where they have maximized all their delivery methods for getting processes executed as efficiently and cheaply as possible.  They have tackled the early phases of digital impact by embracing interactive technologies to help them respond to their customer needs as those needs occur, whether electronic or voice.

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In short, most enterprises have been able to keep pace with each other without actually changing the underlying logic of processes.  Simply doing things the same old way has been enough for many, until a competitor comes along with an entirely unique way of servicing your

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Posted in: Digital OneOfficeRobotic Process AutomationEnterprise Integration Platforms

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The Life of Brian: Prettying up a baby that's got a bit ugly

May 11, 2019 | Phil FershtJamie SnowdonOllie O’Donoghue

What has happened to the Indian-heritage IT service provider that stoked fear into every Accenture client partner?  “They think like we do” was the declaration one of Accenture’s leaders made at an analyst briefing in 2016.  Well, the slide from grace has been alarming, leading to the appointment of a new leader to stem the bleeding. 

However, when the problems cut this deep, you can’t just apply lipstick to the pig, you need to reconstruct the whole farm, or you can quickly find yourself in the zombie services category alongside the likes of Conduent and DXC, where finding any sort of direction and impetus would be a major accomplishment.

Yes, it could really get this bad, as Cognizant has posted its slowest revenue growth and worst dip in profit margins. Ever. A mere 5% annual revenue growth, when in its heyday it was posting well over 40% (and slipping below double digits was unthinkable until last year). Yes, declining revenue growth is one thing, but declining profit margins is when the panic button gets pressed.

Frank should have left when Elliott came along to poison the well

It’s clear to see why Francisco “Frank” De Souza, the poster boy CEO of the emerging power of the Indian IT Services industry, jumped ship (or more accurately was made to walk the plank a burnt out husk due to the unenviable pressure Elliott Management placed him under to keep the gravy train on the tracks and kick back billions to shareholders.)  If anything, Frank should have considered making a move in 2017 as Elliott started squeezing Cognizant’s margins at a time is needed to keep pace with Accenture’s aggressive digital investments.  He’d grown the firm to over $15bn by then and could have exited with a legacy no one could rival in the tech business. 

And in his place comes IT Services newbie Brian Humphries – well we’re sorry to say this Brian, but the baby you just adopted has got a bit ugly, and is screaming for attention. Let’s just look at the numbers– now we’re going to be generous and forgive Cognizant’s dip in margin, a likely result of a reclassifying activity to meet fresh regulations. But the sinking revenue growth is much harder to look past:

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In 2012, Cognizant invented the Digital concept before everyone else jumped on it.  They were that cool...

In a punishingly competitive market, it looks like Cognizant has started to lose traction. Back in the good old days, the firm could do little wrong by challenging Accenture’s strategy – driving a hard-digital bargain and bringing in design consultancies along with their pony-tailed

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Posted in: IT Outsourcing / IT Services

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15 initiatives UiPath and its competitors must take to prove they are serious about transformation

May 07, 2019 | Phil FershtSaurabh GuptaElena Christopher

We've been pretty vocal regarding the unfocused direction the industry which has called itself "RPA" has taken, and the obsession some of the firms are having with their self-declared valuations. So let's change the story from how much these firms actually believe they are worth to where they need to invest their funding to show they are serious about being part of a transformative industry.  

Don't get us wrong, in software world, it's common practice to get attention that your company is valuable and investors are falling over themselves to hurl money at it - this is common practice in markets that are very focused on selling to IT executives.  And we've seen far more ludicrous "valuations" than the 35x earnings ones the robotic software firms are claiming (just look at Blockchain and AI). 

So why aren't we seeing firms like UiPath shift the focus to the investments and changes they intend to make to propel a truly transformational value proposition with their products?  Especially where the prime target for growth is the business executive who is far less accustomed to a world where his/her suppliers are obsessed with how much they're worth, as opposed to how they can help you take your business through painful change.

It's critical now to shift the vision to reality of making these bot dreams come true

UiPath, more than its competitors, has always pushed the vision of democratized IT. Literally, RPA or a “bot for every worker” and not just a sanctioned crew of IT professionals (or even a sanctioned crew of enterprises) is a brilliant marketing gimmick. However, with UiPath’s hypergrowth and rapid-fire funding, the time has come to connect the dots between a folksy vision and how UiPath can truly enable the transformation of work.

As HFS recently articulated in our blog “RPA is dead. Long live integrated automation platforms”, RPA is being used to automate tasks and prop up legacy processes. Broad business transformation is decidedly lacking and arguably cannot be achieved without supporting tools like artificial intelligence and analytics as well as digital change management to address how change is driven, managed and perpetuated. The one perhaps notable shift in the change winds is the on the democratization front – RPA is being bought and consumed primarily by business units not central IT. However, as enterprises push towards integrated automation, with a higher order of technical complexity of tools and data challenges, IT once again becomes essential. Integrated automation may drive the ultimate democratization – the balance between IT and business operations.

Despite its growth and funding, UiPath is a very long way from achieving this vision

Our recent survey work with "power-users" of robotic software products (what we were calling RPA and RDA) clearly highlights the top three strengths and challenges of the UiPath solution (with sampled comments):

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The Bottom-line: To democratize technology and drive business transformation beyond task-oriented robotics activities, here are 15 key initiatives UiPath (or its competitors) must take on:

1. Must bring IT and business visions together as one integrated approach. Education must focus for technical and non-technical resources – into communities and educational institutions globally

2. Must shift focus to integrated automation – expansion of functionality beyond RPA/RDA to AI and smart analytics. Badging everything as RPA is definitionally incorrect and gives clients no roadmap to follow to advance beyond basic repetitive task, desktop and document automation

3. Must drive digital change management – help enterprises grapple with transformation with its services investments.  Relying purely on Big 4 advisors and service providers for change management will cost clients a fortune and drive many away.  This is a key area UiPath needs to take the lead on.

4. Must include unattended and attended processes (not just focus on attended)

5. The developer ecosystem must be expanded to extend functionality, libraries etc.  Commit to specific goals for how much of the UiPath codebase will be available on Github to build an industry solution skewed against technology-vendor lock-in

6. Demonstrate commitment to building a stronger QA team, and fully transparent local customer support and customer success teams to drive customers (as per the number 1 challenge outlined above)

7. Commit specific sums to meaningful partner relationships with leading service providers and consultants, including opensource partner technical support systems, events, education resources and people to help the industry grow

8. Commit to funding UiPath local academies (building on their online academies) especially in blighted neighborhoods near its biggest offices to bring young coders and potential customers together with UiPath employees for on the job real-world training

9. Must get focused on core business processes by industry, such as supply chain in manufacturing, core banking in BFS, underwriting in insurance, billing in telecom etc

10. Revisit its client engagement model to ensure it is best serving its customer base – its rapid growth in salespeople may expand capacity, but if sales lacks vision, then clients may not be well served (as per comments in our recent survey above)

11. Commits to drawing down technical debt (Every SW company has it, some more than others.  As illustrated above, our customer surveys point out which elements of the UiPath platform and solution are known to need immediate re-engineering and investment

12. Identify and subsidize hands-on automation industry experts and influencers whose independent thinking deserves funding and not just focus on checking boxes with legacy analysts.  The automation industry is being impacted by many unique stakeholders.

13. Kick off an enduring and sustainable initiative modeled after Salesforce's 1-1-1 program (of which the Notre Dame announcement by Daniel Dines was a great a start) 

14. Invest in cross-technology customer events that will expand overall value creation, for example partnering more aggressively with the likes of Salesforce, Microsoft, Amazon, Google etc.

15. Spearhead an Automation Industry Manifesto that shows a clear path for enterprise clients to progress from basic robotic task automation through to integrated automation and then to achieving genuine AI value

Posted in: Robotic Process AutomationEnterprise Integration PlatformsRobotic Transformation Software

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RPA is dead. Long live Integrated Automation Platforms

May 02, 2019 | Phil FershtSaurabh GuptaElena Christopher

The biggest problem with enterprise operations today is the simple fact that most firms still run most of their processes exactly the same way as they did 20/30/40 years ago, with the only “innovation” being models like offshore outsourcing and shared service centers, cloud and digital technologies enabling those same processes to be conducted steadily faster and cheaper.  However, fundamental changes have not been made to intrinsic business processes – most companies still operate with their major functions such as customer service, marketing, finance, HR and supply chain operating in individual silos, with IT operating as a non-strategic vehicle to maintain the status quo and keep the lights on.

Enter the concept of Robotic Process Automation (RPA), introduced to market in 2012 via a case study written by HFS and supported by Blue Prism, which promised to remove manual workarounds and headcount overload from inefficient business processes and BPO services.  However, despite offering clear technical capability and the real advantage of breathing life into legacy systems and processes, RPA hasn’t inspired enterprises to rewire their business processes – it’s really just helped them move data around the company faster and require less manual intervention.  In addition, most “RPA” engagements that have been signed are not for unattended processes, instead, most are attended robotic desktop automation (RDA) deployments. Attended RDA requires a loop of human and bot interplay to complete tasks.  These engagements are not the pure form of RPA that we invented – they are a motley crew of scripts and macros applying add band-aids to messy desktop applications and processes to maintain the same old way of doing things. Sure, there is usually a reduction in labor needs - but in fractional increments - which is rarely enough to justify entire headcount elimination. Crucially, the current plethora of “RPA” engagements have not resulted in any actual “transformation”. 

The major issue with RPA today is that it is automating piecemeal tasks.  It needs to be part of an integrated strategy

Real research data of close to 600 major global enterprise shows just how not-ready we are to declare any sort of robo-victory. In our recent survey of 590 G2000 leaders, only 13% of RPA adopters are currently scaled up and industrialized. Forget about leveraging RPA to curate end-to-end processes, most RPA adopters are still tinkering with small-scale projects and piecemeal tasks that comprise elements of broken processes.  Most firms are not even close to finding any sort enterprise-scale automation adoption.

RPA provides a terrific band-aid to fix current solutions; it helps to extend the life of legacy. But does not provide long-term answers. The handful of enterprises that have successfully scaled RPA across their organizations have three things in common:

  1. A unifying purpose for adopting automation,
  2. A broad and ongoing change management program to enable the shift to a hybrid workforce, and
  3. A Triple-A Trifecta toolkit that leverages RPA, various permutations of AI, and smart analytics in an integrated fashion.

So HFS is calling it as we see it. RPA is dead! Long live Integrated Automation. And by integrated we mean integrated technology, but also, and all importantly, we mean integration across people, process and technology supported by focused objectives and change management. Integrated Automation is how you transform your business and achieve an end-to-end Digital OneOffice.

Integrated Automation is not about RPA or AI or Analytics. It is RPA and AI and Analytics.

Business problems are not entirely solved by one stand-alone technology but by a combination of technologies. While only 11% of the enterprises are currently integrating solutions across the Triple-A Trifecta, there is emerging alignment. The supplier landscape is also starting to realize that clients will buy integrated solutions (see Exhibit 1) and examples below:

  • RPA products are seeking to underpin AI and data management capabilities. WorkFusion was arguably the first to combine RPA and AI with its “smart process automation” capability. Other subsequent examples include Automation Anywhere with its ML-infused IQBot, Blue Prism announced its AI Lab to develop proprietary RPA-ready AI elements, and AntWorks embeds computer vision and fractal science in its stack to enable the use of unstructured data. What these products having in common is their use of robotics to transform tasks, desktop apps and pieces of processes.  Hence, we need to refer to these "RPA" products as Robotic Transformation Software products which is a far more appropriate description.
  • AI and analytics focused products are starting to embrace Robotic Transformation Software, instead of undermining it. IPsoft launched 1RPA with a cognitive user interface. Xceptor’s data-led business rules and AI-based approach to automation leverage RPA to help extend its functionality. Arago is starting to go to the market where it can help orchestrate RPA capabilities within its platform.  
  • Enterprise software products are integrating the triple-A trifecta capabilities in their products. SAP Leonardo aspires to harness the emerging technologies across ML, analytics, Big Data, IoT, and blockchain in combination. It also acquired RPA software company Contextor (late 2018) similar to Pega when it acquired OpenSpan in 2016 adding RPA functionality to its customer engagement capabilities.
  • System Integrators are orchestrating the Triple-A Trifecta across multiple curated products. This typically combines some of their IP and service capabilities. Accenture launched SynOps in early 2019, offering a “human-machine operating engine.” Genpact’s Cora, a modular platform of digital technologies, similar to HFS’ Triple-A Trifecta, is designed to help enterprises scale digital transformation. IBM’s Automation Platform includes composable automation capabilities that orchestrate responses and alerts between Watson and Robotic Transformation Software solutions. KPMG’s IGNITE brings RPA, AI and analytics tools together with KPMG IP and services.

Click to Enlarge

Integrated Automation is not just about Technology. It is Technology + People + Process.

The real point of Integrated Automation is actually to move beyond the tools. Yes, the Triple-A Trifecta offers more functionality, but it still does not work unless you change your business, your people, your processes.  Integrated automation is the effective melding of technology,

Read More »

Posted in: Cognitive ComputingRobotic Process AutomationIntelligent Automation

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Why is UiPath obsessed with this "Funding Arms-Race" when it should be focused on scaling its clients?

May 01, 2019 | Phil Fersht

 At the HFS Summit this week, we asked 200 enterprises if they cared about automation software vendors bragging about self-inflated valuations.  Not a single person did.

The robotic transformation software industry has three problems right now:

i) Defining itself;

ii) Scaling Bots and being Transformational;

iii) Obsessing with this "Funding Arms-Race"... so let's dig in

1) Defining itself correctly... "RPA" is not correct. Most of "RPA" in its current form is incorrectly defined, and this market is dying if it doesn't have a radical overhaul. Only a small portion of "RPA" it is actually “process automation” - most of it is desktop apps, screen scrapes and doc management. RPA in current form is incorrectly labeled and the way forward is to integrate these tools. When we introduced the term RPA in 2012 (with Blue Prism) the focus was on unassisted automation, it was self-triggered (bots pass tasks to humans) and centered on increased process efficiency. Only a small portion of "RPA" today is actually “process automation". Most “RPA” engagements today are not for unattended processes - they are attended desktop automation deployments, a loop of human and bot interplay to complete tasks (not processes). These engagements are not the pure form of RPA that we envisioned back in 2012 – they are a motley crew of scripts and macros applying band-aids to messy desktop applications and processes to maintain the same old way of doing things. We need to refer to these "RPA" products as Robotic Transformation Software products which is a far more appropriate description. Now if these firms cannot partner with their clients and the services ecosystem to support transformative automation as part of an integrated automation platform, this market balloon will burst as dramatically as it got inflated...

2) Scaling bots and finding a transformation story versus a "fixing legacy" one.  The more these robo tools can be used by clients - not only to do things better and more automatically - but also to help re-wire their operations, then we have lift-off to something fr more strategic than merely getting crappy tasks working better and moving data round the company better. If you just work on steady-state fixes without focusing on the real changes needed, we will see many firms stuck in legacy purgatory, unable to switch out bots in the future. Sure, there is usually a reduction in labor needs - but in fractional increments - which is rarely enough to justify entire headcount elimination. Crucially, the current plethora of “RPA” engagements has not resulted in any actual “transformation”. 

As our global study of 590 leaders of Intelligent Automation initiatives, supported by KPMG 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:

Click to Enlarge

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.  There needs to be a much stronger melding of enterprises with implementation and consulting capability to fix these issues.  Just like we realized that throwing bodies at a problem does not solve the problem, we need to recognize that merely hurling software at business process will not drive transformation. The real genius lies in understanding what to use when and how. The software also needs to come with support and services. Otherwise, we’re just selling more snake oil and magic. 

3. End this "Funding Arms-Race" obsession nonsense.  Now.  While Automation Anywhere was busy with its Imagine conference in London, on 20th March, "news" about UiPath's self-proclaimed valuation, based on its much-discussed future Series D funding round, was conveniently released the day before, claiming the $3 billion touted last year was now a whopping $7 billion.  It was also widely rumored that UiPath was pushing to announce their Series D during Automation Anywhere's New York event last week.  Here are some snippets from the Business Insider news publication, which was also picked up by Tech Crunch:

So what, pray tell, is the point in all this?

UiPath is putting the whole automation industry under unnecessary pressure. If the UiPath Series D round has yet to be signed, these antics could be placing the negotiating power into the hands of the investors, who can clearly see UiPath's management is obsessed with embarrassing its hated rivals as opposed to focusing on the first 2 items discussed above.  Fortunately for UiPath, they have officially secured Series D this week, but these antics and obsession with fictitious valuations do the industry no favors and put incredible pressures on the automation software companies and enterprise to deliver genuine scale and results on months when the reality is this integrated automation journey will take years.

UiPath is creating the perception that this whole industry is after a short-term cash bonanza.  Our automation industry cares about making these solutions work, and this ridiculous noise about inflated funding isn't adding any value anywhere - this valuation noise only makes most people think these software firms are obsessed with a quick IPO or a quick sale, as opposed to a true long-term journey that will help enterprises enter the hyper-connected age.  I can guarantee you all - right now - that none of today's enterprise operations leaders are basing their robotic software selections off these crazy media-fuelled "valuations".  It is also an entirely separate debate about why robotic software firms with revenues under $200m can claim 35x valuations... stay tuned for that.

I can only hope UiPath CEO Daniel Dines' classy announcement (in Paris) to contribute 1m Euros towards the reconstruction of Notre Dame is an about-turn in this behavior.

Posted in: Intelligent AutomationRobotic Transformation Software

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Forget Brexit...Immerse yourself into the Hyper-Connected Economy at the HFS European Summit

April 24, 2019 | Phil Fersht

 

Date: April 30th, 2019

Venue: Chartered Accountants Hall, 1 Moorgate Place, London

Topic: The Hyper-Connected Economy... How do we immerse ourselves in it?

Key Message:  Until we get Brexit sorted, what else should we do to kill the time?

Info on the superstar line-up and how to apply: click here

 

Posted in: Digital OneOfficeSourcing Change ManagementEnterprise Integration Platforms

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