HfS Network
Reetika Joshi
 
Research Director, Operations & Analytics Strategies 
Learn more about Reetika Joshi
Fractal plugs consulting gap with 4i acquisition
June 07, 2017 | Reetika Joshi

Fractal Analytics’ bets, on AI and machine learning as its future, are set to be bolstered with its new acquisition of consulting and analytics firm 4i Inc. 

We noted in 2014 in Profiling An Analytics Rising Star: Fractal Analytics, that “Fractal is now more bullish about its analytics consulting presence onshore, and its technology investments – a clear aspiration to move away from the offshore analytics model”. Our interactions and observations of the service provider since that time - including this latest announcement - seem to confirm our hunch about this pivot.

As one of the last few pure-plays left in the analytics services business, Fractal has come a long way from 2000 when it was set up in Mumbai, India to tackle niche analytics projects for U.S. based banks and consumer goods companies. It now has a global presence in 12 locations, serving well-known global brands such as Philips, Kimberly Clark and P&G. Fractal was already growing rapidly (e.g. it has grown at 60% CAGR over the last six years). We expect this move to add to their topline growth with an expanded base of U.S. clients and front-end consulting capabilities to aid sales efforts. In the last few years, it has aligned resources towards a long-term growth strategy focused on high-touch client interactions and machine learning and AI technology-led solutions.

Increasingly high-touch local interactions supported by global network 

Along these lines, Fractal’s acquisition of 4i is interesting because it:

  • Brings CPG consulting chops: Analytics consulting was the critical missing piece for Fractal as it rounded out its services portfolio. With clients like Colgate, Kraft foods, Post, and Del Monte, 4i’s focus on CPG is evident. Its “foresight-driven approach” will align well with Fractal’s focus on predictive analytics that can help clients be more proactive vs. reactive with their analyses and decision making.
  • Improves client collaboration: 4i’s capabilities add to the high-touch client interactions that strategic analytics initiatives need to be successful. Fractal’s clients love the attention they get from the service provider’s management team and its long-standing relationships are a testament to this culture. 4i’s presence in a central location in the U.S. (Chicago) will help deepen client relationships. More importantly, this onshore presence will help Fractal’s analytics services be more impactful. A lot of analytics clients value “high touch” engagements where analysts can spend more time on-location to really understand business context and priorities and with the operations teams to get the best results.
  • Extends the delivery network: 4i brings operations presence in Ukraine and Mexico, which Fractal will need to build out a diversified and global delivery backbone. Analytics talent in India is increasingly in short supply as every IT service provider, analytics startup, and enterprise IT organization tries to scoop up analysts, statisticians and data scientists in the major cities. Add to it the smaller subset of machine learning and AI specializations that Fractal will need going forward, and you can see why tapping other talent hubs around the globe makes sense.

How this local/global expertise is complemented by artificial intelligence

These factors will bring some significant advantages to Fractal, particularly as it rolls out its strategy for incorporating machine-learning into its analytics solutions. Fractal has spent the last two years building out its product portfolio of machine-learning solutions and even reorganized its management structure to give it more focus. Its solutions present “here and now” practical applications to enterprise challenges around infusing insights into every business decision. For example, Fractal Analytics’ Trial Run solution helps teams run experiments on their existing datasets, to see the potential benefits before rolling out to a wider base. Its Customer Genomics “hyperpersonalization” platform is helping companies target customers with more relevant and meaningful dialogues based on individual wants and needs. Enterprise clients that are working with Fractal on these solutions have mentioned to us how valuable their partnership is to access and explore machine learning technology together in these early days.

That word – partnership – is a great way to describe the type of engagement that enterprises need with their technology and service providers to build out AI applications today. As my recent blog post on IBM Watson services pointed out, “Cognitive technology falls in the 'innovation' realm for most enterprises. It requires thorough experimentation, risk/opportunity assessment, project prioritization, steep learning curves on skills development, and above all, education and change management for the employee/customer base that is involved in the process.” Consulting capabilities are thus a critical part of this journey for any hopeful AI service provider. With this tuck-in acquisition, Fractal is playing catch-up to its competitors such as Mu Sigma and Accenture, whose consulting capabilities are at the forefront of their analytics services businesses.

The outstanding challenge is just that: how to stand out, particularly against better-known brands with similar capabilities

Fractal has already made investments in the actual technology, including its own R&D, and acquisitions of Imagna and Mobius Innovations in the last couple years. It has the foundational client relationships that it can leverage. 4i will help it bring all these capabilities together. However, there are several emerging AI-based personal assistants, personalization platforms, etc. that Fractal is competing with through its product group. Its key challenge will be differentiating itself in this new and increasingly crowded market.

What Fractal needs to do next is craft a vision for its AI applications and services specifically within its key verticals of CPG and BFSI instead of the familiar trap of becoming a generalist. 4i has complementary vertical strengths and Fractal will do well to leverage these and build out what HfS calls vertically-infused insights. Overall, we give this acquisition a “thumbs up” verdict at HfS, with an eye on how Fractal articulates its value as a more comprehensive analytics services provider going forward.

Not-So-Elementary Considerations For IBM Watson Services Buyers
June 05, 2017 | Reetika Joshi

Whether you have successfully started working with Watson, are evaluating it, did a PoC 18 months ago and swore off it, or have an enterprise license sitting around, you have realized that Watson is not your average prepackaged software application. As IBM’s umbrella brand term for all things cognitive, Watson capabilities range from analytics to cognitive solutions and virtual agents, available as individual APIs or prepackaged products to develop Watson applications. As cognitive technology like Watson falls in the “innovation” realm for most enterprises, it requires thorough experimentation, risk/opportunity assessment, project prioritization, steep learning curves on skills development, and above all, education and change management for the employee/customer base that is involved in the process.

When you’re working with a service provider through this journey, chances are they are on the same learning curve because of the newness of the cognitive market for business use. While IBM is taking Watson to market through its GBS organization, Watson APIs and products are being used by business and technology services providers in a variety of ways (see our POV paper on this subject here). IBM Watson technology has been around officially for a few years, and PoC projects are the norm so far. However, HfS hears a lot of industry optimism and “gearing up” for 2017-2018 being the years of more substantive implementations through this growing network of services partners.

Considerations for using Watson services

As you explore Watson in your organization:

  • Understand where and how your service provider is investing in Watson to offset cost: Perhaps the biggest barrier to Watson adoption for enterprises has been its high price tag for entry. Service providers have been trying to circumvent this by exploring options to host the Bluemix and Watson licenses plus external databases. Their clients can then access both the technology and data, particularly for proprietary solutions where cognitive APIs are being leveraged. Enterprises that already have access to the Bluemix cloud computing environment are getting started with Watson on it as an incremental investment. As Microsoft Azure, Amazon AWS and other competing cloud environments all have their own machine-learning technologies, the decision to which cognitive ecosystem you go with will likely be influenced by these larger technology-buying decisions.
  • Find the provider that Is collaborating with IBM in areas that matter to you: Watson APIs and products are being constantly revamped, retired, and regrouped and it will help to have advance knowledge from a service provider that is deeply involved with IBM in advancing specific areas. We heard instances of how by providing feedback to the IBM Watson product development team and working collaboratively, some service providers influenced the release of new functionalities that benefitted their clients’ projects directly. Look for the connections that your service provider team has been able to establish that could impact your particular use cases.
  • Find the Service Provider That Is Investing in Your Vision - Or Using Design Thinking to Help You Develop One: Even in these early days, we see industry, functional, and technological strengths developing among service providers. The experience gained and customization achieved with specific solutions – like Hexaware’s superannuation bot or Accenture’s mortgage advisor Collette – are valuable to companies that have already outlined these areas for Watson or are looking for new levers for value to their business and customer base. In areas where there is not a relevant standard solution, your leadership team will often have competing priorities. Consider service providers that offer Design Thinking workshops to establish the top business priorities, the process and technology roadmaps, and the definition of your own version of a future-state with an “augmented workforce”.
  • Don’t Underestimate the Power and Influence of Naysayers - Educate Them First: As shared by a financial services VP, “Internal stakeholders require fundamental lessons on what Watson is and isn’t…Our skeptics didn’t fully understand what cognitive or data mining benefits Watson brings; we should have expected it earlier on and addressed it head first”. Without aligning organizational buy-in, companies in our research have seen significant slowdowns in each stage of their projects. Make sure your key representatives understand the breadth of the technology and its suitability to your use case before kicking off and then check in regularly.

The ripple effect of Watson services 

With these considerations in mind, do note that whatever cognitive initiatives you undertake will invariably impact more than one part of the business and way of working. As a department undertakes the required data curation, reference architecture, process remodelling, and rollout, it will interact with and influence other departments or processes and advance their maturity toward more intelligent operations as well. For example, a retailer could go from a production pilot in personalized shopping on its website into cognitively determined best next actions for its sales channels, then on to cognitively driven merchandising and supply network on the back end to better predict demand. The core customer and product data can be leveraged across these functions and can become a powerful way to reinvent the entire customer engagement process.

The focus on better enabling the customer and/or stakeholder experience is driving significant enterprise interest to explore Watson services.

In our latest report, HfS Emerging Market Guide: IBM Watson Services, we further explore this theme of getting started with IBM Watson – the use cases so far, the progress on and beyond PoCs and pilots and the emergent role of service providers. The investments today are helping establish new norms for people, processes, and technology that will pave the way for “industrial scale” Watson in the future.

Are automation PoCs leaving you in robotic limbo?
May 09, 2017 | Reetika Joshi

Whether its cognitive automation or RPA tools they’re trying to implement, a large percentage of services buyers are stuck in a sort of robotic limbo. As we launched our new automation council “FORA” at HfS, Phil brought up a huge challenge, “Why aren't those [anticipated] 40% cost savings happening each time someone slams in some software and hopes it somehow eliminates manual labor because they can access a bot library? In fact, why are a third of RPA pilots just left hanging with no result?” 

Why are PoCs entering robotic “limbo” or failing, and what is working out there?

Here’s what I heard from two automation practitioners in large financial services organizations:   

PoCs that don’t begin with the right kind of buy-in have a longer time to value

The VP at a financial services company considered using Watson technology to help their sales force be better informed when first interacting with potential customers. They designed a PoC that would allow a sales person to ask questions like, “Who are this customer’s competitors?” Watson could take this natural language query and apply it to the company’s own and external data sets and come back with a synopsis of facts to make it easy to identify trends. However, after the PoC, it became apparent that various stakeholders like the operational heads of the lines of business didn’t understand the breadth or relevance of the technology. Was Watson overkill for their needs? After the PoC ran, these executives asked, “Isn’t this what Google does? Why do you need to invest in this solution?”

With the Head of Sales behind the project, the organization found it easy enough to get started but then got waylaid on the way to the finish line. The team had to backtrack to explain how the fundamental cognitive technology can help achieve more meaningful and timely answers to the questions the sales team could ask. The stakeholders didn’t understand the difference that data mining could bring – versus manual searches for each company or trend. The solution would bring more relevant and actionable data to sales teams that could impact closure rates and revenues. After a rather lengthy “limbo” in educating all parties, the VP involved the top performing account managers and used their ideas to design the front-end user interface. This helped the team build a relevant solution that leverages the capabilities of Watson and build internal acceptability, which accelerated the path to live deployment. The team is now expanding its user base and exploring ways to leverage more Watson APIs in the solution.

PoCs could get dismissed as hypothetical technology proofs with no grounding in reality

Peter Quinn, Managing Director of Automation at SEI Investments Co. started the RPA journey in their organization’s securities processing function late last year. He took a position not to do PoCs, feeling that they are too easy for skeptics to shoot down, and only prove hypothetical scenarios while exhausting time and resources. Instead, his team decided to run production pilots, a hybrid of PoCs, pilots, and production phases. With this format, the solution is designed with more rigor than a PoC, and is deployed in a live production environment with real transactions taking place.

Peter stresses the importance of demonstrating to the larger organization the efficacy and effectiveness of the bots deployed since they are working in a live environment. He shares, “I wanted to do things that weren’t trivial, like RPA tools that just gather information and create reports. When those processes work with 98% accuracy, that could be considered as acceptable. But when they are moving client securities or money, no margin of error is acceptable. We are running functions that are core to the financial operations of the bank rather than something that’s low in criticality. When they work, the results speak for themselves – we are seeing greater accuracy from the lack of manual errors.” The implementation challenges that this team faced with the production pilots were related to other aspects of their technology landscape that needed to be fixed, such as conflicts with how the environments were configured. It could have gotten “stuck in limbo” because to really build automation as part of the core processing backbone, they had to work through a lot of unanticipated factors. It didn’t however because they had relevant business and technical stakeholders involved and a general spirit of collaboration. SEI is now armed with “real-life proof” and is undertaking several more process automation.

Testing and sharing as you go help ensure you are solving the right problem and updating it as needed, as well as adjusting the technology solution.

What is common in these practitioner experiences is the importance of building stakeholder buy-in. You need to have them involved in defining what problem to solve as well as testing the solution and being ready to make quick adjustments to address what else in the infrastructure or environment is impacted as RPA is rolled out.  The problem you are trying to solve, the complexity, and the level of stakeholder involvement are all necessary factors to consider. It can influence the type of approach you take and help identify the issues you need to tackle upfront before even getting started with automation tools, as well as adjust quickly along the way.

The Bottomline: Don’t feel obligated to jump into automation PoCs only to be left in limbo down the road. Iron out the ‘whats’ and the ‘whys’ before getting into the ‘hows’.

There’s more than one way to kick-start your intelligent automation journey. Find the one that works for your organization’s culture and political structure—do you need to educate or provide examples or both?

WNS Finally “On TRAC” To Automate And Increase The Intelligence Of Business Processes
April 24, 2017 | Reetika JoshiMelissa O'Brien

At WNS’ annual analyst and advisor day this week, the provider explicitly addressed concerns we’ve had about its delivery model – namely that it didn’t employ enough technology in its BPO offerings. WNS has always been differentiated by domain expertise and its flexibility in allowing clients to pick end-to-end or point solutions. This differentiation is particularly noticeable in the insurance, travel and leisure, and utilities verticals and in the research and analytics, and finance and accounting horizontal services.

However, coming back to our concerns, we have consistently observed the lack of focus on technology enablement for its services. In fact, our HfS Buyers Guide on WNS recently called out Operations Product Development and Toolsets as a key weakness for the service provider, writing “WNS is behind the competition on some basic areas of technology support, as well as continued advancements in intelligent automation, beyond macros and even RPA… WNS is on the path with developing toolsets in [multiple industries/functions], and needs to continue to develop the capability, usability, and transparency the solution set offers. HfS believes the service provider would do well to cultivate or hire technology expertise in this area to further complement and perhaps accelerate progress.”

So we were pleased to see WNS share details of WNS TRAC –a business process management (BPM) tool suite to automate processes and make them more effective. WNS TRAC integrates with the client’s legacy system environments --  drawing data and information from those systems, and providing efficiencies and insights for industry-specific processes without the need for major system overhauls. WNS also has a range of point solutions for each of its industry verticals, e.g. Verifare Plus, Repax, Qbay in travel. With TRAC, WNS aims to stitch together these point solutions over time into an overarching solution suite for each industry. The service provider has two new F&A clients with whom it is piloting CFO TRAC, describing it as a digital plug and play platform that it will put in at the transaction layer, on top of the clients’ multiple ERPs for greater visibility into end-to-end process and to drive analytics. WNS is also piloting its newly launched Brandtitude reporting and analytics platform with two clients. With this offering, WNS hopes to take its analytics services business into the solution/IP-led era, full of the possibilities of licensing.

TRAC Benefits From A Strong Foundation of Trust-based Client Relationships

One reason we believe TRAC will succeed is that this solution improves already-strong relationships instead of fixing broken ones. Buyer presentations from the analyst day showcased the service provider as a collaborative partner. Multiple clients presented their operations journeys and the role of WNS as an enabler. The client presentations were diverse; across industries and in varying stages of the WNS relationship. Younger relationships already showed promise in increasing the scale and sophistication of the contracts—take for example a utilities company looking to better understand customer sentiment through analytics. The engagement includes understanding propensity to pay and delinquency models, then taking these analytics to the next level in tandem with WNS in creating “personas” for its customer base to improve personalization of service and knowing how to best approach these customers. A client in the online travel space discussed using WNS as a partner in building out its omnichannel capability, using elements of TRAC like its SocioSeer tool, and making it easier for clients to use self-service for booking travel. 

The building blocks are in place, now WNS must hone and promote its message.

HfS believes WNS is headed in the right direction with the investments in the last year – strategic acquisitions like Denali and Healthhelp. And technology enablement like WNS TRAC is absolutely necessary for the next level of growth of WNS’ business process business. But to succeed, WNS needs to market TRAC and its benefits clearly and consistently. For example, some executives stressed that analytics (a key aspect of WNS TRAC) is embedded in all BPO engagements and not seen as a standalone business, even though analytics is, in fact, still a standalone business within WNS. In another session, WNS TRAC technology enablement suite was described as a BPaaS solution, which it isn’t. WNS needs to package and deliver its value proposition more accurately and clearly.

Bottom Line: Buyers Need To Be Proactive In Pushing For Automation And Technology Enablement In Their Deals

  • Call your account manager and ask for a meeting to understand how TRAC could help your engagement and to see a demo.
  • Start thinking through the business case for TRAC. Once you understand how TRAC can potentially help (reduces cost by reducing labor? Increases process accuracy? Improves process speed?) start to model if the ROI would happen quickly enough to warrant implementing now. You may decide that you can wait until your contract renewal to add TRAC.
  • Consider negotiating for TRAC separately if possible. If you want to add TRAC now but aren’t at a renewal point, you can always ask to negotiate for TRAC separately from the rest of the deal – WNS tells us that while the tool is primarily to drive better BPM services, but is getting inquiries about using TRAC discretely and is exploring options. This also allows you to see what benefits TRAC brings without blurring the lines between benefits from labor and benefits from technology.

Genpact earns its CFO Consulting stripes as it seeks to pioneer disruptive F&A services in the digital era
March 28, 2017 | Reetika Joshi

The Business Process Outsourcing industry is going through a significant evolution from a labour-led business model to one that is now a blend of global talent combined with automation, artificial intelligence, and digital technologies.  This is especially the case with the financial function, where CFOs are under immense pressure to deliver the next wave of productivity and value from automation and richer data. 

Genpact as a pioneering BPO provider in the era of Digital Finance

Genpact has always been ahead of the disruption curve in the finance and accounting function, being the first to disrupt the market with aggressively affordable and effective offshore solutions in the mid-2000s, taking a significant stake in the market in its journey to becoming one of the largest pure-play BPO providers to service the CFO’s office today.

In recent years, the firm has quietly developed its own consulting capabilities, which now account for close to 10% of its revenues, where it is supporting clients with its unique flavour of digital design consulting with its Lean Digital offering, its robust operational and process consulting capabilities and a sizeable focus in robotic process automation and artificial intelligence, including touchless machine learning, which is bolstered by its new acquisition of artificial intelligence platform Rage Frameworks.  In addition, its CFO Services consulting line is now involved in piloting some Blockchain implementations and an increasing involvement in Supply chain, risk management and order management transformation initiatives.

Moving beyond the table stakes

The most progressive service buyers consider process standardization, quality levels and cost savings as table stakes. As our recent study, Finance In The Digital Age shows, finance executives are challenged to better manage regulatory compliance and financial reporting, better use financial and non-financial data, make the close cycle more efficient, and have paperless audit trails. Further, at the top of the finance and accounting function, today’s CFOs are more ambitious than ever to become more involved in driving future growth for their organizations, beyond oversight on controllership and bookkeeping.

So it is unsurprising that our last analysis, the HfS F&A As-a-Service Blueprint, focused on As-a-Service design and delivery in finance among 18 leading F&A service providers. The resulting Winners Circle service providers have collaborative engagements with clients and are making recognizable investments in future capabilities in talent and technology to continue to increase the value over time. These providers are also leading in incorporating analytics as a service into Finance contracts.

Making the shift to being a consultative BPO provider

In the Blueprint report, we positioned Genpact as a part of this As-a-Service Winners Circle category. Compared with the other service providers in the Blueprint, Genpact is one of the top two, leading in both the Execution of actual services and client management and Innovation to drive future value in the form through the use of talent and technology. With 18 years in the market, Genpact has evolved its traditional Lean Six Sigma process excellence methodologies into what it calls Lean Digital, a framework for working with clients to use design thinking for identifying, aligning and addressing issues and opportunities. It’s a transformative approach to align digital technology and talent with desired business outcomes from F&A delivery. HfS hears encouraging feedback from early client work.

Furthermore, Genpact has developed vertical-specific strengths in pharma, CPG, and manufacturing. Its “CFO and Transformation Services” approach is addressing the key needs of CFOs, which is in line with the market needs we outlined earlier.

The combination of Genpact’s Lean Digital, CFO, and transformation services has helped its sales teams take a consultative approach with F&A, particularly with new clients.

This has accelerated Genpact’s market performance in F&A, reaching double-digit growth in 2016. Clients in our Blueprint research ultimately point to Genpact’s “feel good” culture, where through extensive interactions with practice leaders, SMEs, and delivery teams, the service provider drives cultural alignment with its clients. HfS believes that Genpact is a good fit for enterprises that are considering operational redesign in their finance and accounting function, particularly in CPG, pharma, and manufacturing.

Genpact was rated highly in the Blueprint for the following criteria:

  • Collaborative Engagement 
  • Incorporating Feedback 
  • Delivering Industry-Specific Solutions 
  • Investing in Future Talent & Technology 
  • Use of Technology to Support Business Processes

WNS and Its HealthHelp Acquisition “Will Not Deny” Health Care
March 27, 2017 | Barbra McGannReetika Joshi

“Denial is not an option.” Contrary to the typical (and here, oversimplified) pre-certification, “approve” or “deny” approach to utilization of services in health care, HealthHelp launched a new model of utilization review based on the premise of non-denial procedures, and that utilization management is about collaboration and education. HealthHelp taps into its evidence-based database and network of physicians and academics to review and approve or to recommend alternatives to procedure requests. In tandem, HealthHelp drives studies and education opportunities to lead to better medical and financial outcomes when providing or using health care services. In short, the company that WNS just acquired is building out a patient- and healthcare provider-centric approach to utilization management designed to match procedure and treatment to the patient’s needs and network.

HealthHelp took roots in the founder’s own pain 

The HealthHelp approach is tied to the experience of its founder, Cherrill Farnsworth, who found the number of denials and appeals she managed for radiology procedures discouraging and painful. Thinking about “how to do this differently… why do we have to deny”? Cherrill tapped into her network of people at medical centers and universities, creating a collaborative model on the premise of using data, insights, and education. Instead of a review, approve/deny, the approach is review, approve and/or educate and/or recommend. The approach uses an increasingly sophisticated system of data, digital technology, and relationships. HealthHelp is taking product development further into the realm of machine learning and artificial intelligence, as well.

What gives HealthHelp the “right” to make recommendations to healthcare providers and patients?

An approach like this one—essentially, a break from the norm—depends on the credibility of the data, technology, and people involved. HealthHelp faced the challenge in the early days of people not being sure that a “non-denial” approach would be effective for containing costs. With 15 years of data, though, the company has been able to ingrain a lot of experience and knowledge into the approach and platform, to the extent that now 75% of prior authorization requests get approved for providers or are responded to with recommended changes that are approved by providers, without any human intervention. In about 25% of the cases, it goes to nurses for review; 6-7% of which are forwarded to doctors, and after that, the provider has the option to and can still disagree and go with treatment, which happens in under 0.5% of cases.

Results to date show improvement in the quality of care, which impacts Star and HEDIS ratings and reduces the cost of care by making sure the right kind of care is provided versus the lowest transaction cost at a point in time.  Also, in a fee-for-service model, a healthcare provider gets paid for the procedure regardless of the result. As the industry shifts to value based care with payments tied to outcomes, approval based on evidence or alternatives becomes more strategic to positively impacting outcomes (and payments). This approach, therefore, seems to have further credibility in the value-based care model and can help healthcare providers move into the new world of healthcare.  HealthHelp worked with CMS to get approval to qualify this program under provider education/quality improvement initiative and thus be included in the 85% Medical Loss Ratio for health plans.

The acquisition by WNS brings a complement of resources to both organizations and its client base

The healthcare industry is so ingrained in a yes/no approach that it took a few years before the model got adoption, primarily with mid-tier healthcare organizations. Joining with WNS gives HealthHelp the opportunity to scale and support a broader range of payers and providers. WNS also has a wealth of analytics capability, talent development and industrialization expertise that is complementary to HealthHelp, with resources that can help expand and develop the services and technology platforms to impact healthcare outcomes more broadly.

The acquisition of HealthHelp is part of the WNS strategy to shift attention from the cost of transactions to the cost of quality care and support—towards patient centricity. To date, WNS’ work in healthcare has been mostly analytical and transactional services: billing, collections, provider network services, and claims processing. HealthHelp brings in clinical and operational expertise to impact medical, as well as administrative outcomes, thus closing the loop. It also brings a human-centered (aka design thinking) approach to solving problems and developing a new business capability that the healthcare industry needs.

Time to go fishing for Fintech in Boston?
March 16, 2017 | Reetika Joshi

"We're driving this community as we try to figure out how to make our over-150-years-old financial institution relevant to the digital age and beyond," said an executive from John Hancock last Monday, as they opened the inaugural Boston Fintech Showcase event. With 16+ startups in attendance, the Showcase was held at John Hancock’s Seaport district location, home to its Lab of Forward Thinking (LOFT) innovation group. The Boston community has growing influence in how modern technologies are making their way to various BFSI segments including payments, capital markets, insurance, mortgage, financial reporting, and taxation. Within the diversity at the showcase, what struck me were two common threads that bound the majority of the showcase participants and their value propositions to the legacy banking, financial services and insurance industry.

  • Reducing customer effort using technology: Driving better customer experiences is usually outlined by most large financial institutions as one of their key focus areas - with just cause, as customer ratings continue to fluctuate for this industry. A large part of financial services experience has to do with the level of effort it takes for end customers to interact with their banks and complete any transaction. Using more straight-through processing, automating redundant interactions, reducing the legalese required, and overall easing of the customer effort was a big theme at the Boston Fintech Showcase. For example:
    • Quilt is trying to streamline the life insurance segment for the new generation of millennial policyholders that want 100% online transactions/interactions with lower legal ease.
    • Rate Gravity is simplifying the home mortgage industry by eliminating salespeople and providing a single source for potential customers to compare lenders and complete their loan process more efficiently using technology.
    • Circle is a social payments platform that is using the open internet to offer secure and fast payments globally all from your mobile device, without any lengthy data entry/form filling (think Venmo for cross-border payments).
  • Leveraging data for new ways of working: A large number of the startups showcased, including the examples mentioned above, have focused on simplified data entry and making more efficient use of external data sources through automation. While this in itself adds to reducing the customer effort, we see ways in which some fintech startups are developing new businesses on the back of big data and analytics. For example:
    • Prattle is a text analysis specialist that offers sentiment data that predicts the market impact of central bank and corporate communications to help traders spot macroeconomic trends and improve their predictive models.
    • Finomial automates aspects of investor services by providing a single platform for fund administrators to process inflows/outflows, track transactions, get compliance dashboards (FATCA) and performance reports, as well as giving investors access to data and documents.
    • Finmason provides independent investment analytics to help customers make better decisions on their portfolio.

Partnering on fintech will drive new results for financial services

From our research, these examples and use cases are aligned with investment intentions that large financial institutions have expressed to advance their digital journey. They are also problem areas that IT and business services providers that run operations for banking clients are trying to solve.

While these startups have a head start with building out solutions, the next step for them is critical market exposure to scale solutions and drive adoption, partnering with clients, technology and service providers to the industry.

The corporate strategy head of a large financial institution brought up during our conversation at the event, "We are trying to prioritize which of these initiatives we really want to double down on in the next two years. We might have to look outside because we cannot create incubators for everything." It is an opportunity for partnerships/acquisitions for service providers looking for innovative solutions, and at the same time, an opportunity to bring their strengths together. Part of the Fintech Sandbox initiative is giving startups free access to financial data to help them develop their offerings. This is another area where service providers could step up, with valuable operational data and expertise.

Overall, we see a strong need for the industry to work together to solve these critical challenges - lowering customer effort to create better service experiences, and making better use of data and analyses available to financial institutions. The event was a great example; many BFSI firms had internal strategy and innovation groups exploring fintech internally and supporting startups with incubator-like capabilities. With that kind of support, the Boston fintech community is quickly becoming a hub for smart enterprises on that journey.

Genpact becomes the first provider to acquire an AI platform
March 14, 2017 | Phil FershtReetika JoshiTom Reuner

While most of the services and operations industry obsesses with Robotic Process Automation to streamline its rudimentary back office processes, one provider that’s never shied away from making bold moves to disrupt illustrious competitors is Genpact, with an imaginative move to integrate true artificial intelligence with its business process service offerings by acquiring the impressive Boston-based Rage Frameworks.

It's almost history repeating itself from a decade ago, when the (then privately held) Genpact turned the BPO model on its head with its disruptive virtual captive proposition that significantly challenged the pricing models and ability to integrate offshore capabilities into the old BPO model. Now, the firm is breaking the mold, yet again, by making real inroads into infusing AI into business processes and introducing these concepts to its huge global community of finance leaders.  

Let’s get to the rub: RPA is all about digitizing the back office, but Artificial Intelligence is where we see the true marriage of business processes with clever technology and self-developing algorithms. We’ve danced for years trying to prophesize when BPO will truly integrate with IT, but we’ve now had reality unveiled: RPA platforms streamline the back office, while AI brings the middle and front together to create that true Digital OneOffice experience. The Digital OneOffice is not about collecting and archiving historical data simply to discover what went wrong, it's about being able to predict when things will go wrong and devising smart strategies to get ahead of them. The Digital OneOffice is about embedding smart cognitive applications into process chains and workflows, it’s about learning from mistakes and new experiences along the way. This is the emerging “organization neural system”, where the needs of the customer can be intelligently supported by real-time, self-learning intelligent operations:

 

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Why is this acquisition significant?

In a nascent market where stakeholders stumble through smoke and mirrors to make any sense of the many claims around Intelligent Automation, M&A is a clear indicator that the market is starting to mature. When in December 2016 ISG bought Alsbridge and CA acquired Automic, HfS suggested that Intelligent Automation was at an inflection point and that the focus on automation tools will shift toward the likes of Google, Amazon, and Facebook around deep learning and the integration of unstructured data. While we have not yet seen the Internet giants play their hand, Genpact’s acquisition of Rage Frameworks is underlining exactly these market dynamics. And this is the first time that a service provider is driving automation capabilities through M&A.

Rage Frameworks drives pre-built automation engines deep into unstructured territory

Whereas the broader market remains misguidedly focused on the intricacies of RPA, Rage’s focus is not on automating specific process steps, often on sub-process level, but on developing a broad ranging platform (RAGE Enterprise) for custom solutions with a deep vertical footprint. While RPA is largely focused on structured information, Rage will take Genpact deeper into integrating semi and unstructured data. Their development effort over the last two years to build enterprise applications for financial industry processes (wealth management, commercial loan processing and financial statement spreading) is shifting the focus from automation tools and capabilities to providing an end-to-end process leveraging a model driven business transformation platform.

In our view, the value proposition of Rage Frameworks is centred on leveraging Machine Learning and Natural Language Processing to build out highly vertical engines in Financial Services, Capital Markets, and Supply-Chain. The functionality of these engines ranges from managing business rules to real-time integrating content to data access and NLP all built around a process assembly engine. These engine building blocks can then be assembled for custom solutions that automate business processes or can be used as one of three pre-assembled financial services industry applications: LiveWealth, LiveCredit, and LiveSpread. In addition, broader capabilities including front desk automation, real-time intelligence, and pricing are transforming how commercial lending, policy underwriting, financial statement analysis, investment research, and multi-system reconciliation can be performed.

RAGE’s industry applications are a big part of the allure for Genpact, which has spent the last few years going deeper into its commercial banking and capital markets operations accounts with data and analytics solutions trying to solve the same client operational challenges as Rage. In our recent HfS Capital Markets Operations Blueprint, Genpact placed in the Winner’s Circle, with an HfS callout about its need to bring more technology enablement to capital markets. The service provider has examples of using emerging technologies such as machine learning, automation, dynamic data extraction, etc., in LOBs as retail banking. What Rage brings to the table for Genpact is a more strategic approach for impacting client operations through technology-led change.

Genpact continues to lead the automation discussion from the front

From Genpact’s perspective, the acquisition is reinforcing the perception of being a pioneer in Intelligent Automation. Having led the market with the first publicly announced partnerships with AutomationAnywhere, Exilant, and Automic around its Rapid Automation program, Rage Frameworks fits in well with Genpact’s holistic approach to automation. Within that context, Rage’ assets will further advance the integration of unstructured data: Genpact has invested heavily in analytics and big data with a dedicated research lab in Bangalore, India. They have developed a Data Engagement Platform using big data technologies, in order to be able to harness structured and unstructured data from multiple sources. Thus, its Lean Digital strategy is aligned with HfS OneOffice concept. But the company has to demonstrate that it is starting to link up back, middle and front-office.

The broader market will follow with accelerated M&A activity

Regulations and risk management requirements are forcing banks to rethink the way in which they capture, store, manage, and distribute the growing volumes of transactional and trade data. Structured data from multiple departments and asset classes are maintained in silos, and unstructured data present new challenges as well as opportunities for automation and analytics.

Despite the continuing noise around RPA, we believe the market will shift toward operational analytics and the broader notion of AI. Not only are the leading RPA tool providers expanding in that direction, but we expect the investment focus to progress toward Deep Learning, Neural Networks, and broad NLP capabilities. While it might sound trite, data really is becoming the new currency. But this currency needs to be integrated into delivery backbones on an industrial scale. Thus, service providers need to reinforce their efforts on service orchestration. We haven’t seen many proof points for a successful expansion into data-centric scenarios, but those deployments will be a clear demarcation between the leaders and the also-runs.

Central to this will be the articulation and delivery of business outcomes for specific industry functions through the use of operational analytics, RPA, BPO and AI. Can Genpact put together a financial spreading function by leveraging its operational expertise in BPO and RPA, the RAGE LiveSpread application and analytics interventions to deliver more efficient and effective credit risk management?

Bottom-line: Genpact is progressing toward True Digital OneOffice capabilities

Genpact’s announcement can be crystalized to its ambition of blending RPA in the back-office with AI in the middle-office, which is why the firm, still regarded by many as a "pureplay BPO" managed to break the top 10 in the recent Digital OneOffice Premier League, despite not dragging a multi-billion dollar IT services business around.

Thus, BPO is ever more changing to becoming technology-led. We expect that this strategy will be increasingly underpinned by neural networks and notions of self-remediation to enhance the Digital Underbelly and the Intelligent Digital Processes of the OneOffice concept. While Rage Frameworks is one of the superior suppliers across the Intelligent Automation Continuum, the more providers that are progressing toward the notion of AI, the more inflated the valuations for M&A will become. Against this background, valuations for RPA providers could look like peanuts very quickly. But then again, M&A is rarely rational in today's foggy market.

Watson and Einstein Sitting In A Tree: IBM-Salesforce join forces to give you more ways to buy AI
March 10, 2017 | Phil FershtReetika JoshiTom ReunerKhalda De Souza

The time for smart partnerships to drive real innovation and new thinking in Artificial Intelligence (AI) and cognitive computing is now. This means we need to see the industry’s deep-pocketed innovators become increasingly open – and eager - to working together to help the services industry make the shift to true digital, intelligent, cognitive capabilities.

Recent HfS research shows adoption of Artificial Intelligence (AI) and cognitive computing to enhance operational analytics and Machine Learning is strongly accelerating, with 72% of senior operations executives citing cognitive as becoming a critical component of the future operations strategy:

Digital and Cognitive are Driving Enterprise Operations

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Source: “Intelligent Operations" Study, HfS Research 2016; Sample: Buyers = 371

While the market perception around these topics remains refreshingly blurred, AI is a critical building block as organizations increasingly look to progress from legacy labor-driven service delivery to progress toward notions the As-a-Service Economy and the Digital OneOffice (see link). While AI is capturing the imagination of many PE investors and VCs and is being used to hype up media reporting and conference circuits, the market dynamics are far from clear.

Against this background, the fundamental question being posed is “Who will be in the driving

Read More »

NTT DATA's Insurance IoT Survey Confirms The Steady Rise Of “Connected Insurance”
February 28, 2017 | Reetika Joshi

The IoT hype in insurance continues unabated, with new research by NTT DATA suggesting that 3 out of 4 insurance carriers believe IoT will strongly influence their future products and services. Titled “IoT: Disruption & Opportunity In The Insurance Industry,” this U.S. based study surveyed end consumers and decision makers in carrier organizations on the subject of IoT devices in the home (thermostats, smoke alarms, garage door openers, door locks and bells). A few research findings for the two groups stood out to us.


Consumers are divided on their readiness to change

Two cohorts emerged from the consumer research, which also reflects in their views about smart home technologies. 64% of consumers surveyed, or the “Seekers” are younger, less loyal to their carrier, price-sensitive and want more personalized products and service. Unsurprisingly, the Seekers want their carriers to be more innovative and are more willing to share varying degrees of smart home data in exchange. The remaining 36% are the “Keepers,” older policyholders that feel protected by their current policies and are unlikely to make sudden switches. Overall, 50% of the consumers expected to buy smart home devices in the future despite privacy and security concerns, but the majority find current products to be expensive and complex: I still haven’t rigged up my “smart bulbs,” gifted over Christmas by a tech-savvy relative!  


Insurance carriers get the importance of IoT

87% believe IoT will improve customer relationships, 83% see it as an opportunity to attract new customers, and 74% see IoT as having a significant influence on products and service. Already, 77% are ramping up IoT initiatives, with customer service and technology use cases at the outset. The major challenges for carriers are the inability to get smart home data (68%), building analytics into underwriting processes (62%) and the expenses of the carrier or customer buying and installing smart home devices (55%).

In my conversation with Normand Lepine, NTT DATA Consulting’s Sr. Director of Insurance Data and Analytics, he pointed out, “Carriers recognize the opportunity to expand their value proposition with clients through IoT. In the next year, pilots, strategy and lab work around smart home technologies will help carriers create new products and services.” We believe each carrier that is experimenting with smart devices will go through a calibration process with customers, all centered around one factor – data and how to use it to create meaningful products and services. NTT’s survey data hints at this as well, with the lack of data being a carrier challenge, and consumer responses suggesting that they are willing to share only certain types of data, depending on their demographics and lifestyles.

Implementing connected insurance solutions requires carriers to rethink major business functions towards becoming digital organizations.

Let’s consider the customer lifecycle as an example. Carriers will need strong, mobile-first, sales and marketing channels to attract and transact with the “Seekers.” They can leverage smart home device technology to offer two key benefits to customers – a more personalized service experience, and cost savings in the form of usage-based risk and premium determination (an “As-a-Service” offering). This customer acquisition effort will need to have straight-through processing, with smart underwriting powered by real-time profitability analysis. When it comes to customer service experiences, smart devices again play a few roles, such as providing insights (e.g. smoke alarm data) that can be made accessible to customers with recommendations on usage. If a carrier is interested in smart home technology to drive new customer experiences, customer interaction touchpoints can be reimagined with the help of interactive personal assistants (e.g. Amazon Echo). These at-home assistants can intelligently converse with policyholders for simple service requests throughout the customer lifecycle (as Nationwide, Grange Insurance and Safeco have started to do).

In addition to home insurance, we also see examples of carriers exploring IoT- enabled auto insurance, and large-ticket opportunities in areas like commercial insurance. What will be interesting to watch is the role that technology and business service providers play in this evolving market. From IoT infrastructure services to the design, development and running of the related data and analytics infrastructure and services, IT services such as IoT app development, platform migrations, and micro-services, consulting/advisory on new product development and rapid prototyping/testing of IoT offerings, partnering with device manufacturers (particularly niche, insurance-related startups), we see several new opportunities for service providers.

While IT and business services providers are investing in IoT offerings as a horizontal capability, carriers will need to find the ones that are doubling down on insurance, with the appetite to invest in the industry specifically. The survey data makes this much clear – both consumers and carriers are getting ready for IoT-led change. The question is—will the service providers be able to embed themselves as “As-a-Service” partners to the emerging “connected insurance” economy?