Phil Fersht
 
CEO and Chief Analyst 
Learn more about Phil Fersht
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:

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:

Click to Enlarge

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:

Click to Enlarge

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:

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 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...

Ensure your investments aren't conspiring to bring you pain...
October 19, 2018 | Phil Fersht

Mihir Shukla and Alastair Bathgate in the Battle for the Robotic Billions... only at HFS FORA
October 12, 2018 | Phil Fersht

Click to Apply for your Seat

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

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).

Click to Enlarge

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:

Click to Enlarge

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.

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 »

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.

Click to Enlarge

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.

Click to Enlarge

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:

Click to Enlarge

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!

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.  

Click to Enlarge

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

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)

(Click to Enlarge)

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"

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:

Click to Enlarge

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.