Monthly Archives: Sep 2018

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 year will be ~$100m, Blue Prism's ~$55m and UiPath's ~$45m (HFS estimates). 

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

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

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

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

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

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

6. We will still be talking about “Robotic Process Automation” in two years time.  Very unlikely.  The narrative is already shifting to a broader intelligent automation roadmap.  RPA is very good at breathing new life into legacy processes and technologies but isn’t driving genuine digital business model transformation. RPA helps digitize the underbelly that supports the ultimate digital business outcomes.

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.

Posted in: Robotic Process AutomationIntelligent Automation

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

September 13, 2018 | Phil Fersht

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

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

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

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

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

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

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

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

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

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

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

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

Posted in: IT Outsourcing / IT Services

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It's Bots-in-Seats as IBM, Cognizant, Accenture, TCS, Infosys and Tech Mahindra lead the HFS TOP 10 Cognitive Assistants

September 07, 2018 | Phil FershtMelissa O'Brien

The word "Chatbot" is officially banned:  they treat conversations like they're a game of tennis: talk, reply, talk, reply.  There is little to no context and zero intelligence, just pre-programmed responses only set up to deal with a pre-set finite number of frequently asked questions.  It's a  legacy customer experience that most of us go out of our way to avoid.  To be blunt, it's easier to be redirected to an FAQ page, or even some online Q&A forum than try and engage in a dumb one-dimensional conversation.  I've had more intelligent conversations down my local pub after a 3.00am "lock-in"... So let's shift the entire conversation towards chatbots with some form of intelligence...cognitive assistants.

HFS Research sees cognitive assistants as the combination of conversational interaction and process execution capabilities; they combine characteristics of smart analytics and artificial intelligence. These services can include front-office facing elements (e.g., conversations with end customers) and internal employee use cases (e.g., help desk, HR onboarding, assisting contact center agents).These cognitive assistants can self-learn, self-remediate, and execute business processes. They can also often understand structured and unstructured data and then use natural language processing to learn, comprehend, and recommend next steps. Advanced cognitive assistants can also enable predictive decision making using real-time analytics. This distinction is significant as many people use the terms “cognitive agents” and “chatbots” synonymously. While cognitive agents are a less mature capability, interest and adoption are growing rapidly—and their impacts are far greater than traditional automated tools.

So who's delivering these services most effectively today?  Well, who better to consult that HFS customer experience connoisseur Melissa O'Brien, who's just launched the industry's first deep-dive report on the services market for these cognitive assistants:

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We based this research on interviews with 300 enterprise clients of IT and business services from the Global 2000 in which we asked specific questions about innovation and execution

Read More »

Posted in: Cognitive ComputingDigital OneOfficeIntelligent Automation

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Tinker, experiment, explore, then disrupt: The Hyper-Connected Enterprise will be driven by Intelligent Automation.

August 25, 2018 | Phil FershtSaurabh Gupta

As business operations have advanced through several inflections points over the last three decades, the core component at the heart of these changes has been the emergence of digital interactivity driving the hyper-connected global business – only made possible by intelligent automation.

Digital connectivity has transformed both front and back offices over the last three decades. The key now is to integrate and automate these activities to place the customer at the core of business operations

As you can see in our (below) "voyage to hyper-connected, interactive enterprise" we have leveraged digital connectivity to drive productivity and innovation across both the back and front offices of our organizations. Offshoring and outsourcing became a huge bi-product of digital connectivity to run business processes and apps remotely to save Western businesses huge costs through global labor and centralization of resources.

However, until recently, most of these activities have been restricted to improving efficiencies and reducing costs.  At the front end of the business, the advent of ecommerce hit its stride in the late '90s, where customers could communicate digitally with organizations to make purchases, make genuine inquiries and get connected with others with like-minded business interests. Where automation comes into play is being able to pull together these disparate front and back office activities into one single office (aka the HFS Digital OneOffice), where customer needs are placed front and center across all business processes, where staff performance can be measured on delivering customer driven outcomes, where the entire business operations are in-tune with their customer needs... and superior to those of their competitors to stay ahead of the game.  

The urgency to be Hyper-Connected dictates why we have to drive Automation with real Intelligence

“Basic digital” capabilities (where most companies are today) make it possible for business operations to respond to their customers as those needs happen.  Emerging capabilities in data analytics tools, machine learning and cognitive computing are making it possible to anticipate changing customer needs before they happen, where shifts in global supply chains, market and competitive dynamics, economic or political changes, compliance or regularity issues, all combine to change customer behavior. 

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

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

From Experimenting to Disrupting:  Cracking the Intelligent Automation code in Four Stages

The industry is struggling to solve challenges around the process, change, talent, training, infrastructure, security, and governance. There is deafening noise and hype around Intelligent Automation, but there are very few enterprises that have cracked the code of driving transformative impact by leveraging Intelligent Automation at an industrial scale. Why?

Our research and ongoing conversations over the last six years (remember our ‘Greeting from Robotistan’ in 2012?) in the automation space has allowed us to interact, help, and follow automation initiatives at several global 2000 enterprises. And we leveraged this extensive experience to develop HFS’ Intelligent Automation Maturity Model (see exhibit below).  Our experience suggests that the organizational maturity and the resultant impact from intelligent automation typically follow four stages of evolution:

  1. The experimenter – trying out new ideas, methods, or activities. The intelligent automation journey often starts with some maverick individuals in some corner of the organization playing with different technologies. There is no real strategy at this stage, just passion. The objective is simply driven by automating a particular task that is innately boring or transactional but still time-consuming and inefficient. Different experimenters start at different places across the Trifecta. It is not necessary to start with basic automation and then advance to AI-based automation, but experimenter’s automation solutions are typically piecemeal.  
  2. The tinkerer – trying to improve something in a casual or desultory way, often to no useful effect. The early successes from experimentation often result in the most frustrating stages of the intelligent automation maturity model. The tinkerers start to copy and paste what worked in experimentation for everything else. But if all you have is a hammer, everything looks like a nail. Failures are widespread at this stage, but tinkerers who don’t give up are the ones who eventually succeed to move to the next step. This is the stage where enterprises are trying to find some method to the madness but often with limited success. The tinkering stage is exemplified by rhetoric winning over reality!
  3. The explorer – charting out new territories. As reality dawns after extensive tinkering, enterprises start to realize the different pieces of the puzzle. They start investing in organizational management (often through COEs and a hub-spoke model), recognize that they need to invest in multiple technologies across the trifecta to solve problems and start tackling end-to-end processes versus individual tasks.
  4. The disruptor – radically changing the status quo. Intelligent Automation transcends from a program and becomes an enterprise-wide movement at this stage. Disruptors can bring to bear integrated solutions that combine the power of automation, analytics, and AI. Several automations at this stage are scaled up, and there is a high degree of confidence in scaling up others. It is only at this disruptor level when the promise of intelligent automation starts to become a reality.

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The Bottom-Line:  The more hyper-connected we get, the more this is about people, purpose, and planning - and less about whichever shiny new gadget is the flavor of the month

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 BandAid, hire a bunch of Millennials and Gen-Z kids... and it's mission accomplished. As the Hyper-Connected journey illustrates, it took 30 years to get where we are today - and that's because both front and back offices needed to go through major, secular changes to become efficient and digitized.

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

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

Posted in: Digital OneOffice

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Have you got your #fakenews strategy figured out yet?

August 22, 2018 | Phil Fersht

Posted in: None

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Accenture's Allen Valahu: The TOP 10 will allow us to have more regular and meaningful interactions with analysts

August 18, 2018 | Phil Fersht

When you do something to change the status quo, you usually expect those who love the status quo to resist. So why on earth would Accenture's global leader for analyst relations, Allen Valahu, laud the emergence of the HFS TOP 10, when his firm is already hitting top right corners of all the analyst quadrants on a (seemingly) daily basis?  Well, Allen publicly submitted to us his viewpoint:

"Good news. I believe the TOP 10 will allow us to have more regular and meaningful interactions with your team throughout the year. It will put less pressure on our clients as they will have more lead time to talk to the analysts. Finally, the ability to update HFS through timely structured briefings, demos, and reference customers as the opportunities arise throughout the year, is a much more targeted and strategic approach. Look forward to interacting with HFS in a more strategic way going forward."

In short, Allen is seeing the HFS TOP 10 as not only presenting the voice of the customer in a more meaningful way to customers, but it also enables analysts and vendor executives to engage in a less stressful - and political - manner.  Where quadrants force a "lobbying" situation, where the outcomes of the matrix dots are entirely dependent on the analyst getting served up their vendor references within tight deadlines, dictated by the analyst firm, the TOP TEN frees up all parties from these stressful processes and interactions, as the analyst firm isn't 100% reliant on those vendor reference calls. This also refocuses the analyst/vendor relationship more around valuable conversation and strategy, and less around the "he said, she said" tactical bake-off, which the legacy quadrant model forces.  

Bottom-line: Goodbye quadrants...  it was nice while it lasted, but the industry has moved on 

I have been overwhelmed with messages of relief and encouragement from many people right across the industry who are delighted to see a change to a practice that is tainted, tired and viewed negative by all and sundry.  Only one vendor executive voiced objections, based more on the fact that their job is tied to quadrant management, and the HFS TOP 10 threatens to impact their cosy existence.

Full credit to Allen, who runs a tight ship of analyst relations executives to communicate their performance effectively. While the current system works for Accenture, it clearly impacts the quality of relationships with analysts, their own clients and their under-pressure executives. It's too stressful, drives far too many negative, defensive conversations, and, quite frankly, degenerates the whole balance and value of analyst/vendor relationships. While am sure it will take time for many people to fully get used to the more strategic methodology the TOP 10 brings to the table, having the market leaders immediately voice their support (and relief) is heartening. 

Posted in: None

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Time to kick out quadrants, paralyse peaks and wash away waves. Hello HFS TOP 10

August 11, 2018 | Phil Fersht
Yes, folks - the rumors are true.  HFS is officially out of the quadrant business. 
 
We're done, the whole quadrant craze is starting to smell pretty bad and we know the industry is fed up with it. Increasingly, many of these 2x2 matrices are missing several of the market leaders (who refuse to participate) and having them all stacked in the top right just smacks of pay-for-play (even if the analyst has fair intentions).  Let's be honest, noone trusts these matrices and they are harming the entire credibility of the analyst industry.  Sure, there are many honest, quality analysts with integrity, but their craft is being soiled by several quacks who are basing their vendor placements purely on vendor briefings, whether they like a particular vendor, and whether some vendors pony up for their research services.  There are many "analysts" out there who do not bother to do sufficient customer research and we all suspect who these characters (and their employers) are... 
 
If we don't change, we all - as analysts - might as well admit we're no longer in the research business:  we're in the vendor PR business.  Yes, it's that bad... and let's stop sugar coating it.
 
Enterprise executives tell us all the time they get zero value from these grids - they are purely for vendor marketing sales decks (and I talk to a helluva lot of these enterprise folks). However, enterprises desperately need to be informed on vendor performance - they just need a direct ranking that's relevant for their needs, where a credible analyst puts a stake in the ground.  That's what everyone has told me, so that is what we are delivering:  The HFS TOP 10.
 
Quadrants, Peaks, NEATS and Waves - and sadly Blueprints - are all sales tools for vendors as opposed to decision support tools for enterprise customers.  At HFS, we are not in that business - we are in the research business to support informed enterprise decisions. At HFS, we are not ending our involvement in covering the hottest markets in the industry and producing the best competitive analyses, we are merely making our research more relevant, more timely and more impactful with the HFS TOP 10 and much more simplified to support the enterprise customer. What's more, when some firms take six to nine months to get a quadrant to market, that market has often already moved on, and the data, despite its credibility, may already be stale.  We are in a world that doesn't stand still, where enterprise customers are thirsty for timely, credible data that clearly shows the winners, contenders and laggards in a given market. 
 
Customers want rankings where the analyst took a stand, not merely a fuzzy matrix where everyone looks like a winner.  Here is an example of how the HFS TOP 10 ranking looks (the RPA Products in 2018), and here you can download a full report example to see for yourself how we get to the point, how we inform decisions and we clearly profile where vendors are strong - and where they face challenges.

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HFS TOP 10 reports remove the unhealthy involvement of vendors from the analyst evaluation process and are much more timely, relevant and less cumbersome to produce
 
The main difference with the HFS TOP 10 is the fact we're running them purely on desk research, support from our research academy and from our vast repository of current user data. We are eliminating the whole laborious vendor lobbying and briefing processes so we can get these reports out the door faster than ever before, without being tied to vendors schedules and relying on references they provide.  This does not mean analysts cannot do vendor briefings to support their research (if the analyst deems it necessary, or if the vendor requests a timely briefing), it just means we do the research in a timeframe that can't be moved.  It means vendors cannot complain that we "did not do reference calls with their customers" or give them a chance to be adequately represented in the market.  Because HFS already has the data!  We have reams of data on service vendor performances, or vertical markets, on RPA products, on blockchain platforms, on analytics firms, on FinTechs etc.  And where we may occasionally not have sufficient customer data in a niche market, we will invest in gathering it using the HFS network.  Yes, we actually set aside funds for user surveys where most of our competitors only perform custom research when their customers are funding it.
 
Here are some FAQs you probably want answering:
 
1. How is the methodology of the HFS Top 10 different from the Blueprint? There are several key differences in methodology:
 
a. We are Ranking vendors, not Gridding them. The HFS Top 10 is presented as a simple and clear ranking of assessed products / service vendors versus the 2X2 Blueprint grid
b. Voice of the Customer, execution success, and innovation capability. The HFS TOP 10 methodology is driven by customer experience with products / services (voice of the customer) in addition to vendor’s ability to execute and innovate. 
c. Powered by HFS G2000 network. The primary source of data for the HFS TOP 10 reports is HFS’ extensive network of G2000 enterprise customers. HFS will gather information via surveys, analyst interviews, and ongoing dialog with customers versus relying on data inputs from service vendors.  HFS conducts over 5,000 interviews a year with enterprise customers right across the six change agent areas of our research coverage: RPA, AI, Smart Analytics, Global Sourcing, Blockchain and Digital Business Models.
d. Not reliant on vendor RFI responses. The Top HFS TOP 10 report methodology does not rely on the use of old-school traditional approaches of collecting data through vendor RFIs. We welcome vendors to augment our analysts’ knowledge base through structured briefings, demos, and reference customers, but this not a necessary component in the process.  We will not allow vendors to slow-down our research processes.
e. No opt-out. There is no opt-out for leading vendors given HFS is relying 100% on its own network and data sets.  We never produce vendor landscapes where half the leading players are absent.
 
2. Will there still be fact checks with the vendors? 
 
Yes, vendor profiles, including strengths and development opportunities will be sent for fact-checks. However, rankings will not be shared in these fact-checks. An embargoed HFS TOP 10 will be released one-day prior to the actual release of the report, intended to be an FYI versus any negotiation on ranking etc.  We are not in the lobbying business, we are in the research business.
 
3. What data will populate the HFS TOP 10 reports? 
 
The data will be populated from multiple sources of information:
 
- The primary source of data for the HFS TOP 10 reports is HFS' extensive network of G2000 enterprise customers. HFS gathers this information via surveys, analyst interviews, HFS roundtables and summits, and ongoing dialog with enterprise customers, versus relying on data inputs purely from service vendors.
- Providers can augment our analysts’ knowledge base through structured briefings, demos, and reference customers.
- Note that we will minimize the use of old-school traditional approaches of collecting data through vendor RFIs (unless covering a nascent / emerging market where most of the solutions are still in beta mode).
 
4. What is the minimum customer data-set needed to be able to guarantee a voice of the customer? What happens, if for whatever reason, there is not enough customer data? 
 
A statistically significant sample set is 30 datapoints for a report across reference checks, our existing data sources, and our own customer conversations. While most of our current research has a significantly higher sample set than 30 there is rarely a lack of available data to use to source the rankings.  Where a lack of customer data does occur, it may result in delays of the research publication as we make extra efforts to source customer data.
 
5. What can vendors do to maximize customer data access? 
 
Real value usually comes through engaging with HFS analysts throughout the year by providing HFS analysts the opportunity to speak with more of their customers, sharing and collaborating on customer stories.  As mentioned, we make it our business to do our own customer research - that is our purpose in the industry, but those vendors who can persuade many of their customers to showcase their experiences will benefit.

Posted in: Digital OneOffice

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Fired by DXC for refusing to be a nodding dog. Ugh.

August 09, 2018 | Phil Fersht

Yesterday, you may recall we discussed the comments made by Nigel Barron, who spend 13+ years at CSC before the merger with HP (when DXC was formed).  After nine months at DXC, Nigel was sacked.  I was sad to see him go because he was one of the few folks in CSC who pushed hard to persuade its executives to spend time with HFS analysts (as opposed to Gartner, IDC etc).  I remember Nigel would frequently share our work with his team and would put out some pretty cool insights. 

Firstly, I would like to thank Nigel for excusing the behaviour of many people for acting like "nodding dogs" to keep their jobs. Secondly, I would personally like to apologize to Nigel for inadvertently portraying him as one of the nodding canine family, when, in fact, he is anything but.  Nigel asked me to publish his explanation that he was actually sacked by DXC because he was fired for refusing to conform to the nodding brigade, daring to challenge a firm that (let's face it) is in danger of drifting into insignificance. 

"Hi Phil, thanks for the mention. I was the antithesis of the nodding dog at CSC/DXC, so much so that it probably contributed to my being laid off last December. I was a top five company internal blogger on the company’s collaboration platform writing blogs such as ‘The end of management’ and ‘Nowhere to hide’. My bosses kept the faith until the second round of layoffs occurred after the merger. My then boss had an easy choice to make when told to find someone to cut, although there were other circumstances that I won’t go into here (Mike Lawrie refers to ‘Pyramid corrections’ in earnings calls). I do sympathise with analysts who have become nodding dogs for the reasons I mentioned in my comment, but that doesn’t mean its the right thing to do. I’ll be 54 in a couple of weeks, I’ll never, ever be a nodding dog but I’ll always be a supporter of HfS, you and your team. Nigel"

If anyone from DXC is reading this, you need a few characters like Nigel who can shed some light on what your firm is trying to accomplish, as we - at HFS - are flummoxed with the whole premise behind this merger.  Why remove the only people who can challenge you, just because you can? Good luck Nigel - feel free to share any of your views with us in the future, you are developing quite a sympathetic following.  DXC is poorer for your absence and you deserve better, my friend. PF

Posted in: Outsourcing Heros

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Don't dog nod your way to unemployment. Read this and get on your soap box

August 08, 2018 | Phil Fersht

After yesterday's slightly risqué rant, I received an interesting comment from Nigel Barron (pictured) this morning, an avid follower of HFS over the years, who spent much of his career with CSC and subsequently DXC before recently going independent (and clearly off the leash and wagging his tail!):

"Since 2008 every job has become a hustle and analysts are no different. Authenticity is not a winning attribute. To survive, being the nodding dog is the difference between having a paycheck and not having a paycheck and when they’ve got mortgages to pay and kids to put through college truthful, honest and clear research might not be the best bet. That’s not to say its the right thing to do, just an observation. I speak from experience also."

I refused to become a nodding dog. It's simple if you keep at it...

Nigel Barron:  Nodding Dog Sympathizer

Well, Nigel, I also speak from experience here. I used to work for Deloitte Consulting back in the day, and my lead Partner demanded I take my blog offline (having initially been fine with me continuing with it, during the interview process).  The firm literally could not tolerate one of its consultants having freedom of thought and bypassing its painful thought police (aka "risk") process.  I eventually left the firm after that... I just couldn't stomach an employer putting the muzzle on thought leadership.  Especially mine!

A couple of years later, I was working for AMR Research (now part of Gartner) and a huge debate ensued among management whether "Phil should keep his blog up".  Many of the clients insisted one of the reasons they stuck with the firm was because of my blog, so money eventually spoke - they felt they got some real views of the industry and wanted to call me to discuss as part of their research contract. In fact, our Chief Research Officer, Bruce Richardson,

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Posted in: Global Workforce and Talent

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Rant Warning: Nodding dogs and vendor marketing – this is all our industry deserves

August 06, 2018 | Phil FershtOllie O’Donoghue

As an analyst, you spend your time with a lot of other analysts - for better or for worse. And, recently, worse is taking up more than its fair share. It just seems like, as an industry, we've lost our collective teeth, our ability to question, challenge and find out the truth.  We'd even go as far as questioning whether we've lost out soul.  

When HFS launched ourselves  onto the market over eight years ago, the cornerstone of the firm was a blog that was revered as one place you could get the real truth about the industry, where people were safe to make a (gasp) controversial comment where we could all call a “spade a spade”.  One industry leader (from IBM of all places) even went as far as describing this blog as the “Wall St Journal editorial section of the industry”.  More recently, we've been called “Blue Collar” research, which I guess we’ll take as a compliment.  Anything is better than being seen as fully paid and played by the dirty vendor dollar... which is sadly how so many recent pieces of "research" have been described.

Today, most analysts and advisors use hype as their comfort blanket – even if they don’t understand it, they just circulate it because it makes them feel relevant

Sadly, at HFS, we doubt we’d have succeeded with our honesty and bluntness if we launched today.  The industry is too controlled by vendor marketeers who shower their lovely budgets at analysts and advisors alike to keep them all in line… where most just regurgitate the same hype as each other because they just don’t care anymore.  Most barely understand the hype, but

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Posted in: None

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Passionate about #AI? Then look no further...

August 05, 2018 | Phil Fersht

Posted in: Intelligent Automation

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

August 01, 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"

Posted in: Robotic Process AutomationIntelligent Automation

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The Cambridge University FORA Summit recap...

July 31, 2018 | Phil Fersht

Posted in: Outsourcing EventsRobotic Process Automation

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It's time to give these poor Millennials a break

July 28, 2018 | Phil Fersht

What is wrong with us old timers these days?  We go to conferences where we make sure no one under age of 40 comes near the place, and we spend half our time bemoaning the lack of a "digital mindset" from our colleagues because we all have these world-class digital mindsets ourselves. And can someone please explain what the f*** a digital mindset actually is?  And can someone explain why everyone blathers on about their company's inability to change with the times, but never admit they don't really want to change anything either...

But let's be honest, we treat our beloved Millennials like some sort of obscure species whose members only communicate digitally with each other, like to wear these really big expensive headphones, drink far less than we did at their age, and no longer go to bad discos to find romance. Not to mention an unhealthy love of avocado toast that helps their quest for a purpose in life because of failed parenting strategies leaving them permanently depressed because of low self-esteem.  

In addition, we're now accusing them of lacking ambition and only caring about their next vacation. But how can we blame these poor folks from feeling like we stitched up the world before they came along... as most cannot come close to affording the cheapest shoebox in any half respectable neighborhood, the poor folks in the UK are going to get cut off from working in Europe soon, and the lost Millennial souls in the USA had to choose between two septuagenarians as their president, who hardly represent the emerging mindset of the digital youth (even though you do have to be impressed with the President's twitter skills...).

So imagine the refreshing impact when HfS analyst Ollie O'Donoghue, a proud representative of the Millennial race when he's not trying to annoy Amazon, piped up on LinkedIn with the following staunch defense of his species:

Click here to Enlarge

Click here to join Ollie's LinkedIn discussion

The Bottom-Line:  Love them or loathe them, Millennials are the Future

So to quote Ollie directly: "Entitlement goes both ways. It's just previous generations got what they were entitled to. They worked hard, bought a house, paid a mortgage, got relative financial and social security. The reason so many Millennials are checking out of the economy is because they work hard and get, well, nothing. Home ownership is the stuff of legend, even job security is a thing from a bygone era - and something a lot of 'future of work' commentators are making worse."  So let's use this opportunity to bring Millennials into our inane conversations about a future of work with less need for people, about our businesses being persistently disrupted by imaginary digital competitors, about blockchain's emergence to destroy whatever we have left... because if we don't, we'll have a big hole left in our corporate legacies that we'll struggle to fill, as all the talent will be checked out on the beach dreaming of their next avocado latte.

Posted in: HR Strategy

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Clear communication to leadership has never been more critical in today's business environment

July 24, 2018 | Phil Fersht

Posted in: None

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Is Syntel worth $3.4bn? And does this bring Atos to the adult’s table?

July 23, 2018 | Phil FershtJamie SnowdonOllie O’Donoghue

Syntel brings to Atos a larger platform into the North American market, stronger IT automation capabilities to augment its data management and analytics heritage and, above all, access to quality long-term engagements. And not to mention a mighty Indian offshore IT depth that fills a lot of delivery holes for the firm.  And don't forget, this firm tends to know what it's doing when it comes to acquisitions and making them work:

However, even with all this combined, $3.4bn seems like a hefty price to pay, albeit a price that will likely set both industry valuations, and other acquirable mid-tier service provider hearts’ racing. Not only that, competitors with banking pedigree, such as Capgemini, Cognizant, DXC and IBM will not welcome a stronger Atos being welcomed to the dance at a time when competition is already reaching a cut-throat breaking point.

We haven’t seen any meaty M&A in IT Services for over two years... So why now?

We’ve been predicting an increase in merger and acquisition activity across the business process and IT outsourcing space for some time, but these IT services monster marriages are like London buses – you wait ages for yours to arrive, and suddenly several appear right behind it.  

To this end, the only real action of late has come in the call center realm with the feasting of Teleperformance on Intelenet and Concentrix on Convergys.  Not since the dinosaur mating noises of HPE and CSC in 2016, or Capgemini’s nuptials with IGATE in 2015, have we had anything much to chew on in IT services bar lots of digital agencies being round up for slaughter.

Let’s be realistic, there really aren’t too many “heritage” mid-sized offshore-centric IT services providers left in existence which can get you an immediate seat at the adults’ services table, which explains Syntel’s fantastically lucrative exit, and the disappointment of several other suitors which had been eying picking the firm up on the cheap for several years.  Moreover, providers like Atos are feeling the pressure like never before to force their way forward in terms of growth and breadth of offerings and believe the pressure point has been reached and it’s time to act.

A drought in traditional client wins for some firms is literally pushing them to acquire as a way to drive market share.   The IT services industry is no stranger to firms buying out rivals to gain short-term respite from the market in the face of poor market performance – buying time to regroup/transformation, an injection of new clients and scale.

Atos’ recent announcement of its intentions to acquire Syntel has already set tongues wagging in the industry, but before we get caught up in the inescapable hype, let's dig into the facts!

At $3.4bn this could be the start of the M&A silly season where “Everyone’s up for Sale”

It’s hard not to get lost in the number of zeroes in this deal and, frankly, the price tag has left us all scratching our heads a little. At a recent press conference, an investment analyst asked whether Syntel was happy with the deal…why wouldn’t they be? And it’s this sort of seller's market that’s getting a lot of the mid-tier firm’s excited about a potential takeover from a major firm in the space.  “Everyone’s up for sale” proclaimed the CEO of the of the leading service providers recently in a private conversation.  

With some of the world’s biggest IT services firms looking to shore up revenues, capabilities, and access to clients, a lot of firm’s are adjusting pricing expectations, setting the bar far higher than they would have a few years.

And the market is undeniably tough right now, and many firms are struggling to find their way. Recently, brighter horizons have been on the cards for some firms as the HFS Digital tipping point theory started to yield results, with enterprises investing in technology to drive their transformation ambitions. But the same theory argued that many firms would struggle to pivot their business models and offerings to meet the changing demands of the market. In this winner takes all market, it stands to reason that firms will shore up their capabilities through acquisition, at the same time that smaller firms that struggle to gain market traction become more attracted to the idea of a buyout.

Is chasing a “$250m a year synergy target” realistic, or just merger charm?

But, according to Atos, the hefty price tag is supported by some strong arithmetic. The firm stands to gain access to a lot in the deal, including strong long-term banking and financial services engagements and a decent launchpad into North America – a geography the firm has struggled to position itself in from its European stronghold – in spite of its 2014 acquisition from Xerox. But let’s start with what the firm has championed as the main selling point to investors, a $250m boost to annual revenues by 2021 from the synergy of the two firms.

On the face of it, this seems a challenging target to hit. Revenues in Europe have been hit just as hard as everywhere else in the IT Services space, more so in Atos’ strongest line – infrastructure and enterprise cloud. And Syntel’s revenue growth has disappointed financial analysts for years – even if its operating margin is aspirational to many. If the firm can export Syntel’s processes and embed them across Atos, it may stand to drive greater operating margins. Moreover, if it can leverage Atos’ Syntbots RPA technology in new and existing engagements, it could drive out some serious costs. But an increase of $250m a year is perhaps a little more ambitious than the numbers can accommodate. Even with Atos assuring investors that if its current bookings stay put, it should be more than capable of reaching its objectives.

The real motivation behind the price tag is likely to be tapping into Syntel’s existing client base and cross-selling between the two firms. In the current market, where new deals are few and far between, the adage of ‘if you can’t beat them, join them’ has never been truer. For the princely sum of a few billion dollars, Atos has gained access to some major financial institutions and enterprises that Syntel has managed to keep on its books for years (over 30 years in some cases). And many of these are big spenders, Syntel is always pleased to mentions that it has grown a handful of its clients to build out up to half of its overall revenues.

However, the challenge for Atos is to keep these clients happy. We’ve chewed over the pitfalls of some of the major M&A activities in recent research. And in many cases, these clients may be even tougher to please. Syntel’s ‘customer for life’ no questions asked approach has built a fervent loyalty among its client base – while its too early to say now, the sentiment from this client base may prove to be less than enamored with the recent announcement than either Syntel or Atos are willing to admit. 

It is also worth pointing out that the oft-stated criticism of Syntel has been its overexposure to a small handful of large clients, should one get acquired or kick them out.  However, with a massive new owner in Atos, surely there is now some air cover from this long-discussed risk.

A nice deal for Syntel's shareholders, but what’s in it for the clients?

As usual, the bit that’s often missed from the narrative when a big deal like this rears its head is ‘what’s in it for clients of both firms?’ At an early stage like this, we can only be speculative, but there are a few things that enterprise clients of both firms should be cautious and excited about. First of all, for Atos clients, there is the opportunity to get your hands on some real RPA capabilities. Atos has struggled over the past few years to find its place in the market, but Syntel has positioned itself nicely with Syntbots – an intelligent automation platform that while lacking some of the bells and whistles of the others has proven itself time and time again to be a solid cost-reducer. Existing financial services clients can also look forward to more verticalized expertise, and a stronger proof-point around delivery as Syntel brings in its considerable experience to engagements. Finally, Atos’ multinational clients can consider leveraging some of Syntel’s North American and Indian delivery capabilities to expand engagements or move work closer to home or further offshore dependent on the circumstances.

For Syntel clients, it’s a different kettle of fish. Foremost on their mind must be the protection of the partnership culture they have become accustomed to. That’s not to say Atos is miles from the culture of Syntel, but long-term partnerships have been the building block of the mid-tier firm since its inception and may be a tough hurdle to overcome after the firm’s combine. But they can expect some of the benefits that the firm will bring, such as strong credentials in the enterprise cloud space, and the scalable heft that a larger provider can offer over mid-tier players.

Bottom Line: Market conditions and appetite for acquisition mean we’re sure to see more activity like this in the future

Ultimately, there’s a lot of areas where the two firms can create synergy, and cross-sell offerings into each others client bases. But there’s also a huge amount of risk that this engagement is akin to the appetite of the day, which is to stop trying to outbid rivals for engagements and simply buy up rivals. In some of these engagements, clients may come out on top, with access to more experienced and capable delivery partners – but equally, they could lose out on the cultural alignment, and agility that they looked for in a smaller partner.

However, Atos management has a historically strong track record for acquiring and integrating business in both the long and medium term. The firms have a long history of large acquisitions across borders and huge integration challenges, starting with Origin in 2000. Plus we see relatively successful integrations of Siemens Business Services back in 2010, Bull and Xerox IT Services in 2014. Indeed you can trace it’s acquiring prowess back to decent purchases of SchlumbergerSema in 2004 and UK and Dutch KPMG Consulting business in 2002. 

The issue as ever for successful acquisition is making the most of synergy – so that the whole organization is greater than the sum of its parts. This is always a hard trick to bring off measured financially, by the value it can deliver clients and increasingly important, culturally. If the financial boost is only $250m on a $3.4B investment let’s hope gains in the last two are worth it.

What does this say about future mid-tier IT services acquisitions?

The fact remains that in spite of the turbulent market we’re now in, Syntel has attracted a big price tag. This can only mean many of the larger firms are on the acquisition trail. Which means this is unlikely to be the only major M&A activity we’ll be seeing in the coming months. Possible mid-tier targets we can expect to come under the spotlight of some of the big players (if they’re not already) include:

Hexaware – possible price tag $1.50 / $1.25bn: Hexaware is gaining ground quickly and building a narrative that seems to resonate well with clients – however the firm remains small enough for some of the bigger players to see it as a valuable route to inorganic growth.   Has good hybrid BPO and IT capabilities, a strong specialization in HR Tech and promising potential in RPA services. 

Mindtree - possible price tag $1.75 / $2.25bn:  Mindtree has had a scratchy few quarters at the start of 2017, but since then have posted rapidly improving revenue growth – over 20% in Q2 2018. The firm’s strong digital offerings make the firm a good prospect for bigger firms looking to shore up capabilities as well as build out market share.  Has managed to make a strong shift from BI and analytics to adding digital prowess and has a capable suite of offerings and loyal clients to boot.

Mphasis - possible price tag $2.25 / $2.75bn: Has made a strong market impact since freeing itself from a decade-long HP hell... plus CEO Nitin Rakesh is credited a lot for his fine work at Syntel, getting the place in better shape financially.  Strong financial services presences could make this firm the next IGATE/Syntel-esque pick up.  

Virtusa Corporation - possible price tag $2.00 / $2.50bn: Virtusa’s strong consulting background – gained from the acquisition of Polaris – puts this firm as a valid target for large providers looking to build up talent and onshore delivery capabilities in North America.  Very strong offshore business built from the ground up by the irrepressible Kris Canakeratne, with deep presence in insurance IT.

Posted in: IT Outsourcing / IT Services

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Who needs a digital strategy to reinvent themselves...

July 23, 2018 | Phil Fersht

Posted in: None

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HfS slam dunks with Stevie!

July 16, 2018 | Phil Fersht

We've run twenty leadership summits at HfS over the last few years and am sure most of you who've been to some of them love the candid conversation, the zero-selling ethos and absence of plastic booths and cardboard PowerPoint presentations.  However, what most people haven't realised is we've never dedicated staff to running these fulltime, and all we really had to do was invite our network, put together great people to speak and provoke some terrific debates.

However, we really want to start having a series of intimate regular roundtables across New York City and London, where we can drill into the hot topics du jour that we all love so much, such as Intelligent Automation, Blockchain, the Digital OneOffice etc.  But to do that, there are precious few characters in the world who have the tenacity, network and charm to make these happen... and we managed to snag one of the very best, Steve Dunkerley (see bio), to run these for us.  

I have known Steve for 15 years and have always enjoyed some of his terrific CXO roundtables, where he has this uncanny knack to bring some serious hitters together in one room.  So when we had the opportunity to bring in the best guy in the biz to lead our summits and roundtables, we had to convince him join the HfS family and not rekindle his karate career...

Steve - it's just terrific to be working with you at HfS after all these years!  Can you share a little about your background and why you have chosen C-Level events, research and strategy as your career path?

Hi Phil, it is a pleasure to join the HfS family. 

In terms of my background, my life really began in 1999.  This was the year I met my wife to be, got married and started my B2B media career having earned a degree in communication studies a while before that. 

From 1999 until the end of May this year, my employer was the company that is now known as Compelo.  I was initially responsible for industry specific publications in the textile, water, food

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Posted in: Digital OneOffice

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Why AA's investment windfall locks up the RPA market for the Big Three

July 02, 2018 | Phil Fersht

 

We've now seen three pretty small software firms demonstrate 20x valuations... Blue Prism went public on the London Stock Excheng, UiPath received $150m in series B funding and Automation Anywhere has now announced $250 in series A funding.  So it's pretty clear there are three established leaders at the front of the RPA market and investors are convinced that RPA is the start of something much bigger for enterprises. Not only that, it's becoming pretty clear that the barriers to entry are high, and we're unlikely to see new players bulldoze their way into this space in the foreseeable future. So why is this?

RPA is kick-starting the true digital journey for many enterprises by helping create a digital process baseline

People love to espouse that RPA has quickly become commodotized and we'll barely be talking about it in another year, when we all suddenly become experts so good at building algorithms, we can actually train systems to build their own algorithms on the fly. Suddenly, RPA will be some pervasive capability that is so devoid of value, it will disappear somewhere into insignificance. Utter garbage: anyone who's got deep into RPA and tried to incorporate it into processes knows immediately that this type of thinking is naive, and likely coming from someone with no experience of the real world outside of their ivory tower. Firstly, RPA and RDA are not apps you sell to IT people to "rollout", they are low-code solutions, designed for business operators to replicate, fix and digitize their manual processes, or scrape "static" data from screens to integrate into a dynamic workflows. And secondly, "low-code" does not mean "no code".  Talk to anyone with RPA battle-scars and they will tell you about the amount of code customization that was needed in certain areas. 

Digital today is all about an enterprise being able to respond to the needs of its clients as an when those needs happen. Today's RPA and RDA provides integral building blocks that digitizes processes to enable businesses to process the data they need to have business operations support customer needs in real-time. Sure, they may simply be performing dumb tasks, such as running process workflows in recording loops, or scraping data from screens into automated scripts.

The commodization of RPA breeds familiarity - and familiarity breeds innovation.  The market is already established

Commoditization is good for bots, but remember that most enterprise folks have had to train to use the products and we already have very loyal followings for AA, Blue Prism and UiPath.  The tech needs to be simple, low-code and easy to install, scalable and manageable.  Noone wants highly customized solutions these days, so please do not confuse the devaluation of commoditization with the value of familiarization.  You think Workday and Salesforce are not "commodity" apps?  They are successful because they have crushed their markets through effective channel relationships, the creation of cult-like followings and years of building familiarity with their customers.  I've even heard of HR people threatening to quit their jobs if their firms refused to invest in Workday - it's an important part of their entire career path.  You think you can't find quality alternatives to Saleforce, such as ZoHo and Hubspot that are lower cost and even better in some areas, or likewise for Workday with SAP Successfactors and Ultimate? I predict we are already settling on AA, Blue Prism and UiPath as the RPA platforms of choice, as so many business users have already been through the pain barrier of training to understand the whole RPA paradigm.  We'll actually see more "micro-solution" firms, such as Thoughtonomy, which is building a service layer over Blue Prim and reselling that solution with positive results.  Another example is Antworks, which is impressing a lot of people with its data ingestion capabilities and integration with automation needs.

AA, Blue Prism and UiPath already have 700-1000 customers each (depending on what you believe) and have energized many new careers for many people - it can take a couple of years for non-IT people to really learn these products (and many experiment with at least two of them).  This market is only going to get stronger and more robust over the next three years - and beyond that, it's really all science fiction as we observe the speed of development and macro changes to our business environments. Like with all other technology-driven markets where the key stakeholder is the business executive, once they are familiar with a platform, getting them to retrain on something else is a massive effort.  Remember WorkFusion's attempts to offer "free RPA"?  People don't want something just because it's cheap - or even free, they want some skin in the game. 

The Bottom-line: Today's "Dumb RPA" provides a baseline for the development of intelligent bots in the future

You have to start somewhere, and for enterprises fixing their manual process messes, these three tools have provided the answer, with 70% of Global 2000 clients now expressing satisfaction, according to our new 2018 State of Operations study results.  However, if these firms rest on their laurels, this market dominance will be short lived.  Once the digital baseline is created, enterprises need to create more intelligent bots to perform more sophisticated tasks than repetitive data and process loops. Basic digital is about responding to clients as those needs occur, while true OneOffice is where enterprises need to anticipate customer needs before they happen (see below).  This means having unattended and attended interactions with data sources both inside and outside of the enterprise, such as macroeconomic data, compliance issues, competitive intel, geopolitcal issues, supply chain issues etc.  

Click to Enlarge

So we have some clarity for now with three dominant solutions, and enterprises can invest more in learning these tools with more certainty and peace of mind. Some stability, after so much change in the world of business operations, is more than welcome.  Now let's hope these firms will wisely invest in taking their products into the world of intelligent bots, and not splurge all the newfound capital on yet more sales and marketing. 

Posted in: Robotic Process AutomationIntelligent Automation

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Concentrix gets up close and personal with Teleperformance with its Convergys acquisition

June 29, 2018 | Phil FershtMelissa O'Brien

One of the worst-kept secrets in the world of call centers finally went from gossip to reality as Synnex Corp added Convergys to its acquisition portfolio to roll under Concentrix.  As we covered here in 2013, IBM spun out its call center business to the Concentrix brand and - almost five years on - will merge forces with Concentrix under the leadership of Chris Caldwell (recently interviewed here).

So, from 10,000 people (just 5 years ago) to being very close behind the market leader, let's see how the call center market is shaking out right now:

Let's just get right to the nub here... what's good and not-so-good about this lovely marriage?

Pros

  • The price tag is extremely attractive - especially when compared to $1 bn for Intelenet, which is a much less heritage firm in the market.  At these investment levels, this appears like an amazing deal for Synnex, especially with its track record of making sound investments over the past couple of decades.
  • We now have a very strong rival to Teleperformance at the top of the market.  If Teleperformance had made this move, it may have been game over for a lot of these firms.
  • Convergys was stuck and needed a new direction - and here is one with an exciting young firm.  Convergys is a great, traditional contact ctr firm, very dedicated to its craft, but has been hurt by  low-cost competition and struggled to maintain its edge in recent years.
  • Scale can be priceless in a commodity market. When an industry is commodotizing like call center, it's often better to operate at a larger scale, so you can ringfence your legacy business and invest in strategic clients who want to work with a co-investment mentality. Geographical expansion and diversification will help the merged entity drive greater cost synergies and variety for clients.
  • Similar business ethos. As both core contact center service providers, both have a strong global operating model for consistency of services as well as a training and employee-focused culture. The challenge will be integrating the two together, but are generally aligned in terms of employee centricity and ops excellence.
  • Convergys has a very loyal client base that identifies with the firm, its culture, understanding of call center agents, and its understanding of their needs.
  • Microsoft partnership. Convergys has a very promising partnership with Microsoft and capabilities to harness Cortana and other apps.  CNX will need to nurture this relationship.
  • Good technology assets. Convergys brings a solid IVR business and some very popular agent portal platforms.
  • Gives Concentrix strong market visibility and helps shed its "we used to be IBM" tag. For Concentrix, this could help them carve out the message of what they’re doing and want to be in the market. For Convergys, lends some sense of direction in the post Andrea Ayers era.
  • An injection of fresh thinking and new ideas.  Chris Caldwell has a terrific opportunity to take his ideas to a very significant level if he can get this right, especially with acquisitions such as Tigerspike in the digital design space, and Minacs in marketing analytics and support.  Chris has a bold view of where the industry needs to go - this should be a terrific challenge for him and his team.
  • M&A can buy time to take control in a commodity marketplace. Large mergers like this create the perfect distraction to make some discreet investments, keeps the shareholders at bay for a few quarters and can (potentially) help them focus on retooling the offerings and sharpening the whole approach. However, this depends entirely on decisive leadership and swift, focused transition and very strong communication to investors and shareholders.

Cons

  • Is bigger really better? This acquisition seems to be more about bolstering scale and size, with Convergys having little to show in terms of proprietary IP or differentiated offerings (Contrary to Concentrix's investments in Tigerspike and Minacs). However, in a market that has been largely stagnant for years, any movement like this can help shake things up.
  • Convergys lacks a diversification in clientele with AT&T/Comcast being an enormous piece of CVG’s business. Telcos are typically the epitome of butts on seats deals—why choose a company that’s practically half telcos?  Maybe this explains why the price was so attractive.
  • Client overlaps in large accounts will impact some revenues, i.e. Cisco.
  • The potential for culture clash. Concentrix comes out of IBM business and Convergys is essentially a traditional telco out of Cincinatti Bell … one has a background of tech and innovation and the other a very conservative and risk-averse culture. 
  • Convergys’ revenues have been decreasing the last couple of years.  Call volume fluctuations and trying to compete with cost-focused customers and several butts-in-seats service providers in low-cost geos, has made it very challenging to focus on value-based deals.
  • Appetite for automation in Convergys core industry puts ever more pressures on sustain margins and growth. For example, Convergys' strongest vertical, telcos, are increasing their self-service interactions and automation, and have the strongest appetite in the industry for increasing Robotic Process Automation investments, in addition to their outsourcing focus.
  • Desperate mid-tier providers. Many of the midtiers service providers may make the whole situation worse, by forcing price points even lower out of sheer desperation. Let's be honest, we're in a rat-race and the game is all about who can survive the next 18-24 months to emerge ontop.  
  • Low-cost IT/BPO offshore providers making subtle moves into the contact center space as digital customer needs accelerate. We're already seeing many of the Indian heritage firms chasing after call center deals they would not have looked at a couple of years ago. They can be especially effective with "chat-only" engagements and with clients wanting to buy into a strong cognitive / automation story.  Large IT-centric outsourcers, such as Techmahindra, HCL  and Cognizant have been seen picking off some impressive wins with clients, especially where there are very strong IT elements.  BPOs such as EXL and WNS have been much more active in the customer service segment, and EXL is making an impressive repositioning of itself as a digital intelligence provider, with some impressive depth in insurance, utilities and healthcare sectors.

The Bottom-line: As long as this "traditional consolidation" is short-term, this could pave the way for a OneOffice future for the winning contact center providers

Let's cut to the chase here - Convergys is a great call center provider, but lacked the leadership and investment to break into the digital era effectively.  This merger may just provide that opportunity for a very talented employee base with a terrific customer culture.   For Concentrix, they needed one big play to get up-close-and-personal with Teleperformance, and this is the move.  Plus, the price was really damn good, and we're surprised why others with huge financial backing didn't make the move, such as Sitel or Arvato.

On the negative side, these contact center heavyweights appear to be doubling-down on size and scale, rather than pursuing a true OneOffice vision for digital customer engagement. We are more excited about some of the smaller acquisitions happening in the space, such as Webhelp’s recent Sellbytell acquisition from Omnicomm and SYKES’ pursuing digital marketing with Clearlink – connecting the pieces in the front office as marketing, service and sales continue to overlap and converge, and using the vast amounts of customer data they process to better engage with customers. 

The large contact centers can’t seem to get out of their own way—they talk about providing digital, analytics and CX consulting focused services, but the reality is that the bulk of their business is still traditional contact center. Despite some real capabilities, salespeople aren’t incentivized to sell a different way, and customers aren’t ponying up to partner and buy a different way.  Continuing in this paradigm is a short-sighted view… look at what is happening with eroding revenues from the telco sector now, the most mature of the contact centers will eventually happen in other sectors, such as retail and banking. In addition, the wave of "chat only" deals are increasing and threatening the life out of the traditional voice business. Providers like Teleperformance and Concentrix don’t have to disown their core business – there’s always going to be a huge market for traditional interaction management, however, adding some truly differentiated digital offerings would be a much smarter long-term strategy.

Net-net, this is a massive coup for Synnex and the Concentrix management teams - and Convergys has found a good home to focus on the future with confidence.  However, we would like to see some significant investments in intelligent automation and digital technologies to drag contact center BPO into the OneOffice era. Let's hope these guys can work it out, as there is a real war on between the legacy cost-obsessed approach and the OneOffice approach...

Posted in: Contact Center and Omni-ChannelDigital OneOffice

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