One of the many nuances of the business process services world is that the same cast of characters just can’t stay away from the action.
Many of the same mavericks who helped build this business from the early days of transformational consulting, CoEs and shared services, through to lift and shift BPO, virtual captives, and, more recently the hybrid services delivery model, are now hopping aboard the train that encompasses the As-a-Service ideals.
These ideals that are centered around the benefits of process delivery in the cloud, where unnecessary manual steps are automated, where systems can interact intelligently with each other, where staff think orthogonally about how things should be done, where enterprises can hive off crappy old back office operations and jump into the world of the new with limited pain. Yes, it’s time to retire ladies and gentlemen – or shall we call the legendary David Poole himself to figure out how to get ahead of this disruptive nightmare?
David will talk about his illustrious background shortly, but I would like to commend his bravery for setting up his own disruptive advisory shop “Symphony Ventures” based in London, where he has picked up some exceptionally talented guys like David Brain and Ian Barkin, who’ve cemented solid reputations in the world of Robotic Process Automation (RPA) – and are already creating trouble for themselves with some big enterprise clients.
So, without further ado, let’s hear what the Robo Conductor has been up to lately with his foray into the world of entrepreneurialism, and what he thinks about where this train of disruption is really heading….
Phil Fersht (CEO – HfS): David – good afternoon! So how did you get into this business?
David Poole (Founder and CEO – Symphony Ventures): I started at Price Waterhouse as a consultant back when BPO was in its infancy. My first job was helping BP set up one of their first BPO centers in Caracas. I then worked in sales, transition and delivery and ultimately it was my job to help close down the BPO business because there was a conflict with the audit practice. We sold most of the assets to IBM & Exult. Cap Gemini purchased the Krakow delivery center. That’s how I first met Cap Gemini.
I went on to help set up Cap Gemini’s BPO practice in Europe and the U.S. Over a period of 10 years we executed some of the landmark contracts and acquisitions in the BPO space. I then did a short tour at Serco and then Sutherland where I focused on developing Innovation capabilities, including setting up User Experience Labs, Incubators and a Robotic Process Automation (RPA) Center of Excellence. At the time, the market was just waking up to the opportunity automation and robotics presented. We sold a large contract to a major US corporation which allowed us to work out what it really takes to implement RPA on an industrial scale with a client.
Phil: And what did you learn from that first RPA engagement?
David: We learned a few things. First, RPA is a significant game changer. So significant in fact, it was clear this was going to be truly disruptive to the BPO market as I knew it. Second, we learned that it’s not as easy as it says on the tin. Doing automation right is as much about the fundamentals like great process redesign, as it is about the ‘robots’. Third, by opening our eyes to creative new ways of working, we discovered there were further opportunities in Crowd Sourcing, Impact Sourcing, Artificial Intelligence and the digital sphere in general. And fourth, we saw the greatest opportunity was in combining these new approaches to create a hybrid solution able to address a client’s end-to-end needs. No one was serving this market so it became just too tempting. I left Sutherland and decided to set about building a new business to address this opportunity.
Phil: So what’s the premise behind your new firm Symphony Ventures, David?
David: Symphony Ventures is a new breed of services firm. It’s a consultancy and managed services business powered by “Future of Work” technologies and approaches including Robotic Process Automation, Artificial Intelligence, Crowd and Impact Sourcing. While services firms today say they deliver innovation for their clients, we know that enterprise needs are not being met. Clients are desperate to improve quality, operational visibility and customer satisfaction, while at the same time managing costs. Conventional modes of work, like BPO, are not cutting it – as your research has shown. Global corporations are in need of, and hungry for, better ways of achieving impactful outcomes. We believe there is a new way of working on the horizon. Symphony’s premise is that successful solutions harness a number of these “Future of Work” technologies in a type of hybrid design. What’s more, the hybrid must be customized for a client’s industry and challenges, and the solution must be dynamic and flexible to adapt to a client’s ever-changing needs. We realized, there is really no place to go for that kind of advice, managed services or implementation help. Hence, “Symphony”.
Phil: There was a lot of talk in Chicago (HfS Blueprint Sessions) about the transition the industry is going through. Can you sum up where we are… and where we are going?
David: Over the last 10 years the BPO industry relied on a labor arbitrage model. Even though a lot of new alternative technologies were emerging, it was easier for the BPO industry to continue to use labor arbitrage because it could be implemented quickly without significant systems or process changes. This was clearly valuable to clients because the BPO industry grew tremendously in the last decade. It’s a good business model where the core skill is managing people and providing incremental continuous improvement. But BPO firms were never the innovation, process or technology champions that large enterprises had expected or needed.
Today, however, things have changed. Cloud infrastructure, software-as-a-service and mobile platforms are significantly altering the way companies design, build, sell and support. There is a lot of very capable technology readily available in the marketplace. This has caused business leaders to stand up and say to their providers: “You have done BPO for us for a while now. What else are you going to bring us?” The expectation is that the BPO business will bring creativity, inspiration and change to the table. But the lack of innovation has been palpable. Leaders at client organizations know the new approaches are working. These changes are forcing the BPO industry to take notice. In order to stay relevant, BPO providers will have to start implementing these “Future of Work” technologies and services. As we’re starting to see, this is forcing BPOs to invest and develop on a scale that is unfamiliar to them. This is where we are today.
Phil: And tomorrow?
David: I think we are at a turning point. We’re very excited about the prospect of what’s coming, and Enterprises should be too – there will be a lot more choices available for them. But with choice comes complexity, so we will see a new breed of Pure Play emerging with a specialized set of skills to help clients assess, design and deploy this range of new work types, including automation.
Phil: I have always taken the stance that disruption doesn’t truly happen until the technology is ready. Clearly that is happening in some areas around SaaS. But I do worry about robotics. I think there is a lot of hype in this space. We can see the potential. But is the technology really there today for what we want to achieve?
David: I agree that disruption happens on the back of technology, not hype. And we’re seeing plenty of hype. But, thankfully, we’re also seeing good technology, compelling business cases, and actual deployments. As for “robotics”, I think the term is catchy but confusing. We believe the industry may soon drop the term, but it’s hard to foresee exactly what will replace it. Every Analyst and Advisor has their own set of terms. Furthermore, we’re currently grouping a lot of different types of automation into one big bucket. As our frameworks mature we’ll begin to more clearly distinguish between basic automation we’ve had for decades (scripting, macros, screen scraping), automation that is beginning to emulate human agents (autonomics, transaction processing), and dynamic automation that is on the horizon (AI, cognitive). This entire class of ‘digital labor’ technologies will be hugely disruptive to the benefit of Enterprises. But, not all automation types are equal or ready for prime time, therefore some can interpret that as hype.
It’s important to note, we are careful to distinguish between automating a desktop (scripting, screen-scraping, etc.) and RPA that emulates the end-to-end transactional tasks of agents, creating a virtual workforce. As far as RPA is concerned, there are only a handful of enterprise-ready RPA technologies available today, but we expect many more to be coming.
I would add, there is a real danger in generalizing. We advise our clients not to assume the available tools are similar, because frankly, they aren’t. Enterprises have to be careful or they will make some big mistakes either choosing completely wrong products or underestimating the rigor, design and control required to make automation useful and not dangerous. These mistakes will be bad for the industry as a whole. So yes, I am worried that organizations rush in and start implementing technology without really focusing on proper process and systems design principles. As I mentioned earlier, solid process design must be the foundation on which automation deployments are built.
Phil: Isn’t pricing the use of automation software one of the biggest issues ? For example, David, we keep hearing of some suppliers looking to charge “per robot” like we were doing previously “per FTE”. Doesn’t that defeat the purpose?
David: Current pricing models do vary widely between vendors. To date, the business case pitch for RPA has been around the number of FTEs being replaced, comparing that savings to the cost of a software license. It’s a convincing argument, but the problem is, RPA is still software, and enterprises procure software as software, and not as human labor replacement – with the knowledge that the marginal cost of each additional license is zero. Furthermore, it’s still early days and each RPA product is different enough that it’s understandable that there would be a wide price range between products.
But to answer your question, yes, we anticipate RPA pricing models will evolve to be more in keeping with the as-a-service or transaction-based pricing models we are seeing for SaaS applications, and even for BPO services.
However, to go one step further, it’s important for buyers to understand that for a large enterprise-wide automation project, the software is actually a fraction of the total cost. It’s the solution design, implementation services and support that make up a majority of the investment. So to focus only on RPA license costs is a bit of a distraction. Plus, the value generated from RPA projects is several times that of a pure BPO project – so in all assessments we’ve performed, the case is clear, automation projects have rapid and convincing ROIs.
Phil: Are outsourcing buyers genuinely ready for this?
David: I think the pioneer buyers are taking a good, hard, judicious look at automation. Some are asking their BPO providers to reveal what they have and others are looking outside at RPA Specific service providers.
In my opinion, outsourcing buyers should pay close attention to this trend. Some very large BPOs are actively evaluating RPA as a way to reduce headcount. Buyers need to make sure they are benefitting from these initiatives.
Phil: What does an “enterprise solution” really look like with RPA?
David: The fact you can install robots on a PC very cheaply is not an enterprise solution and does not comprise a digital workforce. So we need to be careful when we make comparisons or pass judgment between these products. Enterprises need solutions that are reliable, fully tested, controlled and compliant with security protocols. It’s not too difficult to get the software working on a PC for example, but without a proper design and testing process you can imagine that a lot of damage can be done. Secondly, it’s important to think about the end-to-end process. There is a danger that Enterprises end up with a large number of fragmented automated processes rather than a well designed and implemented end-to-end automated process. It may work in the very short term but longer term could lead to significant issues of maintenance and control.
Phil: How will BPO providers adopt automation technology? Do you think they will try to build their own or are they actually going to acquire software firms? How will this play out?
David: First, you have to define the issues. Besides the few firms I was referring to earlier, a lot of BPO players are not really doing modern automation per se; although they are looking and experimenting (and certainly marketing). I fear we will see a number of paper partnerships with players trying to associate themselves with RPA providers because they think that’s a “good” thing to do and there is a Fear of Missing Out (FOMO).
I predict some of these partnerships will work, but most won’t because there is a fundamental conflict of interest between a robotics software provider and a BPO provider. Most BPO providers don’t like investing in technology and they don’t like buying licenses. I think the big companies will make some selective acquisitions once they know what the value of the software is. In the meantime, we’ll see more and more of these paper partnerships forming.
As for building their own, I would be surprised if any BPO homegrown solution is ever considered a reasonable competitor to those on the market.
Finally, the elephant in the room is the RPA Catch-22 for BPOs. Even though robotic automation can create a large impact for the client, providers make money by growing the number of people on staff. So the automation model is cannibalistic to their business model. They will have to balance client satisfaction and margin against dwindling revenue on a per-project basis.
Phil: These labor arbitrage-driven relationships will evolve. Ultimately the decision to automate is going to come from the buyer, right? Are buyers really looking at this? What is their real level of interest?
David: At the Chicago Blueprint Session I got to speak with several outsourcing buyers. They were all frustrated that their providers have not been presenting them with options. Going forward, the question is, are the existing BPOs willing to change their models over time? I think automation will become a challenge to the BPO providers. But I believe they will have to embrace it when pushed by their clients. However, whilst providers may accept revenue decline, they will attempt to maintain absolute margin levels. In doing so they may find they are uncompetitive compared to alternative specialist or pure play automation providers.
Phil: Do you think we need a burning platform for change? Right now there doesn’t seem to be one for many buyers. Everyone wants to drive out more cost and add more effectiveness, but there seems to be a disconnect when you tie that to new initiatives like automation and business platform technology. Do you think automation will eventually set itself alight?
David: I think there is a burning platform, Phil. As your research so often shows, clients expect more from their providers. And, any mature buyer of BPO services has long ago received the step-wise benefit of arbitrage. The slower long-term savings from continuous improvement are not sexy or career-making – and there’s your burning platform. It’s hard to get cheaper than India, so clients are on the hunt for the next step. We’ve clearly seen that automation can create additional savings of 20-50% in some cases, over work already offshored.
Now, I do agree that it is taking a while for the burning platform to crystalize. I think this is for two reasons. First, outsourcing has a 5-10 year maturity cycle – it’s an industry predicated on delivery stability rather than dynamic change. Second, friction between buyers and providers develops because the buyers will always want continued cost reduction and quality improvement. And they want relief from issues around attrition, recruitment and training. But buyer influencing power is strongest every 5-7 years upon contract renewal. So, it takes a while for the pushing to take effect.
Phil: Which model will be the real driver behind automation’s acceptance?
David: I’m much more optimistic about the Global Business Services model. Establishing a capability within the enterprise that has a portfolio of tools at its disposal including automation technology solutions, process as a service, shared services, crowd and impact sourcing as well as conventional BPO. The current bunch of BPO providers just cannot provide this range of choices and the natural conflict of interest between a service provider who wants to make a profit and a customer who wants the best return for their business will ultimately get in the way.
Phil: Do you think we’ll see certain BPOs fade out in the next three years because they don’t adopt the new model?
David: Some of the growth in established BPOs will slow down. Then we will see new entrants coming into the BPO space; some may be real niche players like an HR or AP As a Service provider others may be pure play automation specialists like Symphony. Most will have a technology-driven model using a cocktail of “Future of Work” tools and services that they have integrated to be fit for purpose.
Phil: So outsourcing buyers will have to manage many vendors?
David: Yes. The new entrants will have low cost models that will be attractive. Unless the BPOs can buy them all, there is going to be a broad smattering of providers. Placing GBS or specialist providers as the so called “brokers of capability”, identifying and implementing in very defined process areas.
Phil: David, it appears that many of the existing advisors and consultants are starting to provide advisory services around RPA. What do think about this trend and what do you predict will happen over the next couple of years?
David: This is a sign of the times. Advisors are having to evolve their services to stay relevant in this time of change. This is a wise move on their part, however, in the early stages of this trend, they will struggle to provide informed guidance because they will not have taken part in actual automation design, deployment and support. Many advisors come from BPO, and that is why they are qualified to advise on the topic. Over the next couple of years, we will see natural rotation where experienced RPA practitioners will migrate from delivery to advisory – only then will Advisors be able to speak from experience on behalf of their clients.
Most advisory firms, whilst independent, are not in the business of design, implement and run. They may be able work out the potential for an RPA opportunity, but they will ultimately be handing-off the implementation to another firm which creates a lot of duplication of effort. At Symphony the initial assessment is done at a key stroke level. We provide independent advice and build the design and business case from complete data that can immediately be useful in configuring automated processes without the need to duplicate the analysis
Phil: If you look into your crystal ball, what will our industry look like in five years? How will people be buying services? What types of providers will you see?
David: First, I think we’ll see a lot more specialists, digital services and niche providers. This will drive the standardization of processes. There will be a few places to go to assemble your end-to-end processes, but this will not necessarily be the conventional BPO firm. Of course, there will still be large BPOs handling large managed services businesses.
I think the GBS organization will stitch together traditional processes with the specialist services. The GBS organization will also control its own workflow and analytics on top of all this so it can manage a broader array of providers, be it robot, crowd, impact or artificial intelligence.
We are starting to see that happen today, certainly in the SME space. Look at the accounting software product Xero or the procurement software Coupa. We need to watch companies like this. The day firms like that start providing services on scale is the day we need to sit up and listen.
Phil: Yes, it’s about replacing the old model with more standardized products. Services in the cloud like FreshBooks and LegalZoom which are subscription based and templatized. These new models are creeping into the marketplace and changing things dramatically.
David: Exactly. For large enterprises, it’s all about getting the right price. And having the right people who can work together to achieve all the things they need. People who really understand the services required to achieve their corporate goals.
The concept of “broker of capability” for GBS is an interesting one. Large enterprises will need experts who can pull everything together. This is a promising place for the services industry.
David: It’s been a pleasure to hear from you again – and good luck with your new venture!
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