Mike Ettling is looking to create a new trifecta by following Springbok’s 2019 World Cup win and Liverpool’s 2020 championship with a Unit4 ERP mid-market sweep.
Mike Ettling has a storied career in HR software and services and is looking to create a new trifecta following Springbok’s 2019 World Cup win and Liverpool’s 2020 championship with a Unit4 ERP mid-market sweep. Mike founded two of his own businesses, nurtured eight start-ups in the HCM technology sector, and led SAP SuccessFactors as President for four years. He also served as CEO of NorthgateArinso (when he spoke with us 10 years ago), one of the original HR outsourcing firms, which is now part of Alight. Speaking at the SuccessFactors 2017 Influencer Summit, Mike stated “no one will be logging into HR Systems in five years’ time.” As we rocket through an unprecedented 2020 towards the noted five-year mark, it’s time to check in on faceless ERP and discover the draw to Unit4’s “sizzle” and its people-centric ERP paradigm.
Phil Fersht, CEO and Chief Analyst, HFS Research: Good afternoon, Mike. It’s great to get connected again, after so many years. You’ve been a big legend on the whole HR software and services market, but now you’ve gone, full ERP on us. Can you give the lowdown to our audience about how you got started? Had you always planned on being a tech CEO?
Mike Ettling, Chief Executive Officer of Unit4: Interestingly, I stumbled into tech in an intriguing way. I did COBOL and Fortran at school – I still have my Daniel McCracken textbooks on Fortran and COBOL – but then I went down the path of business studies, became a chartered accountant, CPA, in two countries. When I started my life at what was then Peat Marwick, or KPMG, I very quickly got into the tech side. We were setting up this African Futures Exchange, and we designed the clearing system for futures trading, and then I started my own business at university, and it was all predicated on building a cool piece of tech to do something which people were doing manually. In those days, we were building stuff on PC networks, using Realia COBOL, which people were traditionally doing, very expensively, on mainframe. And that’s how I stumbled into tech.
And then I ended up getting called by a big company in the US called Neodata, which was the granddad of the back office fulfilment industry at the time. They were keen to see what was being done in client server land. At this point, I was still in South Africa. I remember getting this call, and I asked, “How did you find us on the tip of Africa?” and they said, “We heard from the Microsoft user groups that someone in South Africa is building this stuff in SQL Server.”
And that’s how I ended up at EDS. I joined Neodata, and then EDS bought Neodata, so I look at EDS as my school of technology. A very good school in that regard. I think what EDS was brilliant at was service delivery and delivery execution. That ex-marine culture, which Ross had built into that business, translated into how they did service delivery and ran datacentres and operations in that company. So, I stayed in tech, initially on the services side with EDS and then with Synstar, which HP later bought. My work with Unisys morphed to BPO when I went to NGA.
“I had this view that SaaS was melting business processes, and I wanted to do the melting, not be the melted. That was my transition from big-ticket outsourcing into software and the cloud.”
As SaaS came along and cloud came along, it became very clear that BPO was going to go through a fundamental transformation. I remember when I took the SuccessFactors role, HR outsourcing was shrinking because all the SaaS solutions, be it Workday, or SuccessFactors or Oracle, could do this stuff with far less people, far easier. I had this view that SaaS was melting business processes, and I wanted to do the melting, not be the melted. That was my transition from big-ticket outsourcing into software and the cloud.
What was really interesting were the parallels. In those days, there was no textbook for running a cloud business like SuccessFactors, which was $750 million and heading to 1.4 billion. When you’re looking for skill and talent, a lot of people you find who have the talent in cloud, up and down the West Coast, are working in 50 million ARR companies, or 100 million ARR companies. Finding people who have true enterprise customer experience at scale was interesting. Eventually, I learned to focus on hiring for scale and teaching them cloud was way more effective than hiring for cloud and teaching them scale.
“Those who came out of outsourcing, who understood scale, 100% availability, and that type of environment were keen to get into something new. They were great hires. …We were very successful in scaling by bringing those kinds of skills into the cloud world, and not just taking from the West Coast pool who really didn’t have a lot of the scale experience.”
Outsourcing and cloud are opposite sides of the same coin. On-premise and cloud are different coins. Those who came out of outsourcing, who understood scale, 100% availability, and that type of environment, were keen to get into something new. They were great hires. They knew scale, they knew enterprise, and, if they were smart, they’d learn the cloud side of it very quickly. So, we were very successful in scaling by bringing those kinds of skills into the cloud world, and not just taking from the West Coast pool who really didn’t have a lot of the scale experience.
That’s my story. I never planned to be a tech CEO, but I was always passionate about technology, and fortuitously stumbled into it.
Phil: So how has the lockdown treated you, Mike? You are in Boca, right? Have you enjoyed it? Are there some good things or not-so-good things you’ll take away from your experience?
Mike: I’m an eternal optimist, and I think there are a lot of good things that have come out of this experience. I’ve lost 8 kilograms and got fit again, running ten miles. At the start I was saying to people, “Now’s the time not to get paranoid; now’s the time to take on more goals,” because you will have more time, and if you don’t spend that time on something productive, you’re just going to fret about all the noise and the crisis around us. Family reconnecting and spending more time together has been a big positive. Since I started my career, this is the longest stretch of time I’ve been at home without traveling, which has been great. I think there have been some super positive things.
After just a week, I stopped watching network TV. Whether it was the US, or BBC, or any of the channels, CNN or Fox, I just stopped watching it. And, I feel very strongly about the fact that the modern-day news media has let the world down, in terms of how they have covered COVID, and, in many cases, politicised it, sensationalised it, and made it very hard for people to get facts. My father was in the media industry, in the press world; he was what you call a newspaperman. I was always brought up with this mentality of the integrity of journalism, and getting to the facts, and getting to the truth. That’s what he stood for.
I turned to print media, and reading, and data, to try and inform myself and to sift through the noise. That’s been one of the negatives of this whole thing, for me. Too much sensationalism, too much politicising of every aspect of this when, in fact, this was a health crisis which needed to be dealt with factually, and in health terms, not politically with sensationalism.
I would even say there are positive things coming out of this for business. The notion that you couldn’t work remotely for example. We’ve accelerated that concept, many years, by what’s happened in the last few months, and I think good things will come out of that.
Phil: Yeah. Good. So you’ll reappear thinner than you were a couple of months ago. [Laughs].
Mike: [Laughs].
Phil: Tell us a bit about Unit4 and your plans for the firm, and how do you think you’ll fare over the next year, as we try and weather this, not just economic storm, but geopolitical storm. This is the first time we’ve ever had to think about geopolitics when we make business decisions. Right? I’d love to hear a bit more about the firm and how you think you’re going to weather this.
“I was attracted to Unit4 by the strapline, “In business for people.” Having been in the HCM sector since 2009, it got me interested. …There’s really only a handful of us who have built ERP, where the core product has started with a people-centric business paradigm.”
Mike: I was attracted to Unit4 by the strapline, “In business for people.” Having been in the HCM sector since 2009, it got me interested. When you think about this industry, most people think of enterprise and you’ve got the big three, and then they think of midmarket and SME, and then the masses of others. If you now put another line and split that, and say, “we’ve got enterprise and SME/midmarket, but who is building ERP for people-based services businesses? Service-centric, versus who’s building ERP for product-based, manufacturing type businesses?” And now, suddenly, you put 80% of the pack to the manufacturing/product side, and there’s really only a handful of us who have built ERP, where the core product has started with a people-centric business paradigm.
There’s a big West Coast player who’s dominating the enterprise space, and then there’s us, dominating the midmarket space in terms of scale, and size, and reach. And then there’s a lot of single vertical-focused players. That really got me interested and excited about this opportunity, because I think Unit4 is a really interesting platform and positioned in a very unique way to go after and build a billion-dollar revenue-plus market leader, for midmarket, people-centric ERP in the industries we specialize in.
“If you look at the cloud offerings of the big players, I would say 75% are still single tenant hosted type cloud offerings, and there’s only about 25% which are true multi-tenant architected. We are one of those.”
The other thing which attracted me was Unit4’s cool technology. People really liked the product. But more than that I was excited about the strategy for moving the product to the cloud, taking it into the microservices architecture world, and making it multi-tenant. A lot of cloud products today are still single tenant hosted. If you look at the cloud offerings of the big players, I would say 75% are still single tenant hosted type cloud offerings, and there’s only about 25% which are true multi-tenant architected. We are one of those.
“The reaction I got from a lot of peers in the software industry was, ‘Unit who?’ It was a great steak with no sizzle, which was an attractive challenge.”
The reaction I got from a lot of peers in the software industry was, “Unit who?” It was a great steak with no sizzle, which was an attractive challenge. Not an easy one, but one I was eager to take on.
We had a really good Q1, and we’re tracking well in Q2. We are approaching that tipping point, in an on-premise to cloud transformation, where our cloud subscription revenues are going to be equal to our maintenance revenue. 70% of our revenues are recurring, in the business, between cloud and maintenance. We’re getting to a cloud scale which is interesting, and that builds resilience in the business. And the fact that it’s ERP helps. People aren’t going to rip out their ERP in a crisis – that has a double-sided impact on us, it’s good for retention, but makes it harder to find new customers, but overall, we’re weathering the storm well.
Unit4 was originally a Dutch company, so when this crisis started, there were a couple of key things in our approach to it. We agreed from the start we wanted to avoid layoffs. That created a focus in the management team to look at an offensive and defensive strategy. Using a Dutch term, we decided to build dykes to protect us against the wave. We didn’t know how big it would be but let’s build those protective dykes to avoid the water getting to the last dyke (layoffs). We took out tens of millions of cost, immediately, within the first two weeks of lockdown starting.
We also decided that no one in the team was going to get bogged down with scenario planning. We have a budget, and we’re going to go for the budget, and yes, it will be harder, but we’re going to go for the budget in terms of top-line and bookings. If you try to consider, “is this a hurricane? Is it a tsunami? Is it a small wave? Is it a big wave?” you end up picking one and talking yourself into that one. The whole approach was about getting on with delivering the budget. We’ll put all the dykes in place immediately, and if we achieve the budget, we’ll be tens of millions over our profit target. If we miss the budget, there’s a buffer and we’ll probably still make our profit for the year. That approach has enabled us to be more united, more resilient.
“I’ve been on a lot of CEO peer calls, …and what I’ve seen is a lot of people go straight to the defensive stuff, ‘We’re taking headcount down, we’re taking costs out, we’ve got these three scenarios.’ You psychologically talk yourself into the worst case. We’ve taken a very different approach, which has helped in fostering resilience so we can weather the storm.”
You make a really interesting point that this is a health crisis and an economic storm, that is creating a geopolitical storm. The worst one – for me personally – will be the geopolitical storm.
I think we’ll cope with the health crisis. We have, we’ve figured it out. In many countries, there were pockets, like New York that breached their capacity for ICU beds. But if you look at the rest of the US, for example, no other state breached capacity or got near capacity. Countries like Germany, Sweden, and most of the European countries other than pockets of northern Italy, didn’t breach capacity. So, we’ve coped with it quite well from that perspective.
The economic crisis is very different from 2007-08 where you had a financial industry fundamentally causing the crisis. I think you have what I call a consumer-driven economic crisis happening, and particularly for countries like the US, which is a consumer-driven spend economy. I can’t reconcile the stock market and 40 million people out of work in the US. think that consumer-driven dynamic will have to have some impact. But then, if things come back, you could see the W, you could see a W with a U. There are more signs of economic recovery than I expected, at this stage.
“I’m not an economist, but there are some really interesting challenges, definitely a subject for Freakonomics 2 to be written around this.”
The biggest one I’m most scared of is the geopolitical consequences, and how countries now start engaging. You see it already, Japan putting a billion dollars into the subsidies to de-risk and remove themselves from China supply chains. What happens if the balance of payments in China goes negative for the first time in decades? Who then buys the US debt? And you start looking at the bigger geopolitical impacts of this… I’m not an economist, but there are some really interesting challenges, definitely a subject for Freakonomics 2 to be written around this.
Phil: Looking back, we could’ve bailed ourselves out of any type of financial crisis by throwing money at it. This is the one thing that is going to set a whole different sequence of events happening. A lot of uncertainty.
Mike: Yeah.
Phil: And what’s interesting now is that you can get cash in this market. It’s not getting cash that’s the issue; it’s how you deploy that cash. So…
Mike: No, you can get cash so quickly. And, you know, you’ve got governments… the UK issued a government bond with negative interest recently. So, things are really topsy-turvy at the moment when you look at traditional economic metrics and all.
Phil: Do you think people are going to start buying software and services differently, as a result of this? Do you think people are really changing fast now, how customers are viewing their relationships, and how they want to pay for this stuff? How they want to consume it?
Mike: Yeah. I think a lot of things are going to be accelerated, and I think there will be change which we don’t yet foresee. Looking at what happened after every major recession in history, and you go back to the early ‘90s, there was a new tech boom, or tech trend, which escalated. In the early ‘90s, you then had client server. Then you had the 1999-2000 post-millennial recession, and you had mobile and the internet. Then you had 2007-08, and, post that, you had the cloud wave. We have yet to see the wave of tech shift post this recession.
“We have some views around faceless technology, faceless ERP; no one’s going to log into an ERP system, or a core HR system anymore.”
We know the future is faceless technology, faceless ERP. No one’s going to log into an ERP system, or a core HR system anymore. I look at my landing page paradigm. Three months ago, I’d spend most of my day in Outlook; now I spend most of my day in Teams. And when I look on my Teams, I’ve got a little button on the left which says, “U4 Wanda”, which is my Unit4 chatbot, which prompts me with a Teams message, saying I’ve got invoices to approve for example. That’s what I mean by faceless ERP. We’re not going to want to log in to these systems anymore, and we’re going to want to access them from wherever. As a midmarket ERP company, I am certainly not going to take on competing with Microsoft, and ServiceNow, and Google for the landing page ownership; but I can compete with owning the transactions, and the insights, and the data, and enabling people to work better. I think that’s where we’re going to see big change.
“Work-from-where-you’re-comfortable is the future of work. That will help with the myriad of health and safety rules and regulations, by country and personal preferences. It’s too complex to try and write the manual for returning to work.”
It’s clear working from home is here to stay. I think we’re moving to a work-from-where-you’re-comfortable policy and model. We’ll have offices where people can go to hang out, do meetings, and see clients. But if you’re comfortable working from home, work from home; if you’re comfortable coming into the office for a day a week, work from here; if you’re comfortable sitting on your boat and working, work from there. Work-from-where-you’re-comfortable is the future of work. That will help with the myriad of health and safety rules and regulations, by country and personal preferences. It’s too complex to try and write the manual for returning to work.
The rule of business will change. We’re already saying, from our board down, “We have six board meetings a year. Let’s do three this way, going forward, and we’ll do three in person. Out of ten leadership meetings a year, I’ll do five like this, five in person.” We won’t see a return to travel as it was before. In fact, for 2021, we’ve budgeted just 50% of our pre-COVID annual travel budget.
“The other acceleration we’re seeing is… Data residency has now suddenly gone down the ranking, almost to the bottom of the pile.”
The other acceleration we’re seeing is less of a focus on data residency in the cloud, particularly among many European public sector clients. Pre-COVID, data residency trumped GDPR EU compliance. But data residency has now suddenly gone down the ranking, almost to the bottom of the pile. We’re seeing a lot more dialogue around needing resilience, and needing to be in the cloud, irrespective of where the datacentre is in Europe for example.
Phil: Wow. That’s good. Very good. So one final question. How did you celebrate Liverpool winning the Premier League and as a big fan, was it hard not to be at Anfield to see it?
Mike: I watched it from home, the whole family are Reds fans. There was a lot of debate, and some sharp language from my sons about some teams in the Premier League, suggesting they shouldn’t award it at all this year. I’ve been a very patient Springbok and Liverpool supporter, and the Springboks paid off last year, and Liverpool paid off this year, so all in all, it’s been a great time for my sport.
Phil: Alright. There you go…. as a Spurs fan I just wasn’t this season to end. [Laughs]. Thanks for your time today Mike. I really enjoyed the conversation.
The automation game just changed – and most of you barely noticed
It’s sometimes those low-profile moves that make the bigger impacts on markets, versus the big glamor ones. Who would have thought Jurgen Klopp would end Liverpool’s 30-year wait for the English Premier League title when he quietly disappeared himself from Borussia Dortmund? And who would have thought a smallish Brazilian RPA firm, WDG, could propel IBM into the first one-stop services and software automation shop for organizations. This is in stark contrast to the Accenture Synops model, which is focused almost entirely on partnering with 3rd party software. Oh, this is going to be fun… the big services giants are back to duke out automation dominance in the middle of a pandemic.
10 reasons why IBM’s move will have such an extreme impact on the existing automation market
1. WDG adds proven attended desktop automation capability and has already displaced UiPath in a major organization. The technology provides a low code, cloud-based authoring experience for the business user to create bot scripts with a desktop recorder, without the need of IT. These scripts are executed by digital robots to complete tasks. Digital robots can run on-demand by the end-user or by an automated scheduler. Arguably, WDG is on a par with Softomotive – acquired by Microsoft for considerably more money. What is clear is these RPA firms are offering pretty much the same functionality for the basic scripting and recording.
2. WDG is focused heavily on quality customer service ops and is great at integrating with chatbots, digital associates and other AI tools. Pre-Covid, most RPA was focused on low-risk back-office processes, especially in finance. Now customers are desperate to automate the customer-facing and revenue-generating processes and need tools proven to work in the environments. Noone has a huge advantage in the CX automation space so this provides a greenfield opportunity for IBM.
3. The WDG automation software sits under IBM Cognitive and Cloud giving it a broader playing field to compete with the likes of MSFT, Pega, Appian, and even ServiceNow. Arguably, this is the real play that excites IBM’s top brass. This is where the big dollars are and where IBM has powerful potential as the world’s largest IT services provider. Orchestratng processes and data in hybrid cloud environments is where IBM should be leading the market, and now it has plugged some holes to do it even better.
4. This is no desperate measure. IBM software made this investment after seven patient years observing the market. It was not a huge secret that IBM flirted with the concept of acquiring Blue Prism (and others) in recent times, and its software team also partnered with Automation Anywhere in 2017. Of one thing you can be sure, IBM Software does not suffer fools these days and does exhaustive due diligence. They also have in-depth working knowledge of the major RPA products and know exactly what functionality they need to have a one-stop-shop capability.
5. IBM doesn’t want to acquire a huge installed base of messy RPA customers – it wants to create its own customer base bought into its own Extreme Automation vision. The last thing future-thinking services firms like IBM need is a plethora of unprofitable clients which have underpaid for too many bot licences and have little money left to spend on professional services to deploy them effectively. It makes more sense for IBM to go after clients willing to start afresh… and with over 90% of RPA clients struggling to get even 5 bots functional, the market is ripe to pick off many of the failed RPA implementations and move them to the emerging IBM automation platform.
6. Already demonstrated by MSFT and SAP, you don’t need to make insane investments to add RPA functionality. In short, why spend billions on the “Big 3” when you can get perfectly adequate functionality (and standout features) from the likes of Another Monday, AntWorks, Kryon, Jiffy.AI, WorkFusion etc? The big guys did the diligence. Softomotive, Jidoka, WDG, Contextor were all small – but more than good enough to achieve automation goals.
7. IBM no longer has to hang onto the coattails of AA, Blue Prism or UiPath – the power is shifting. While most customers of the “Big 3” will not be ditching their investments anytime soon, IBM can enjoy the freedom to pitch its own automation platform twinned with its own service delivery and choose how to price in the way the clients wants to invest (such as as-a-service). Being subjected to erratic pricing and some of the wacky marketing being purveyed by some RPA firms, where reality takes second place to hype, makes it hard for services partners to build a cohesive automation business. This is why so many have backed away from the market.
8. IBM can leverage RPA as a loss-leader to win larger automation and AI business further down the line. IBM can afford to be brutal on price if it knows it will lead to selling more of its other wares. This will make life very difficult to the standalone RPA vendors desperate for whatever revenue they can scrape in the current abnormal market place. It may also be a smart play to win over disaffected customers who need a whole new direction to fast-track their automation journeys.
9. IBM services will still benefit from its partnerships with AA, Blue Prism and UiPath. They will have no choice but t play ball. This is all about who controls the client in this environment. Forget lovely partnerships in this post-covid economy – this is a cut throat battle to win the hearts and minds of the customers/
10. WDG’ partnerships with Deloitte, Capgemini and Grant Thornton will be challenged, but won’t have a lot of choice but to play ball. WDG’s partners will be desperate not to lose their services business to IBM so will likely have to be very nice to IBM to keep their business with the WDG clients and make efforts to be “collaborative”.
Extreme times call for extreme measures
In a recent conversation with automation leadership at IBM, HFS shared our view that technology is really only 10% of digital transformation. The true heavy lifting is driving change with people, process and data to truly advance to integrated automation. We challenged IBM to showcase their approach to achieving automation at scale without overly relying on specific tools or services. The result is the following “extreme automation” model – showcasing our current anaemic automation reality on the left and the potential “extreme” future opportunity:
Source: IBM Automation / IBM Corporation 2020
The Bottom-line: The automation game is being elevated to low-code cloud-based automation platforms with strong capability to integrate across core customer and employee-facing processes.
The rapidly evolving digital workplace is creating the “have-to-have” mindset and clients need service partners to drive rapid speed-to-outcome solutions, leveraging whatever technology tools can create an immediate impact that are easy to deploy. Complex partnerships, landgrabs and hyped marketing have faded into the memory of the pre-covid world. Clients need real hands-on help to rethink a much more concise – and often extreme – automation strategy, and then need to act fast to execute these plans. Having a one-stop-shop where software firms and service providers are not fighting for attention, where one partner can help clients look at the bigger picture and devise a realistic, measurable plan is the new normal for automation.
IBM’s super patient approach to filling these RPA holes in its portfolio could have just been perfectly timed to take this market in an entirely new direction.
Three serious dudes having a serious conversation – Phil Fersht, Nagendra P. Bandaru, and Saurabh Gupta
The COVID-19 pandemic shock is possibly (and hopefully) the biggest disruption of our lifetime. This is the time when you need real leaders who can see the light and the end of the tunnel and work tirelessly to unleash their organizational potential. We recently caught up Nagendra P. Bandaru (Nag) to discuss the resilient nature of the IT services industry, his bullish outlook for Wipro, and his sage advice for enterprises to adapt to this pandemic shock. Nag has been a constant in the IT industry for more than 30 years. He is responsible for organically doubling Wipro’s BPM business in the last 4 years and currently manages 40% of Wipro’s revenues, from BPM services to cloud and infrastructure. I have personally known Nag since 2006, when he was a feisty young sales and marketing leader helping develop Wipro’s presence in the US during the year growth years of BPO and it’s been great seeing him flourish into one of Wipro’s key minds and personalities as he helps shape the business for this challenging future.
So, Saurabh Gupta, and myself decided it was time to reconnect with Nag to hear more about his views on the current situation and where the industry needs to go to make it through troubled waters to flourish once more…
Phil Fersht, CEO and Chief Analyst, HFS Research: We’ve known each other for more than a decade, Nag, so maybe talk to us a little bit about your background and how you ended up running not just Wipro’s BPM business but other big parts of Wipro such as Cloud and Infrastructure Services. Maybe you could take us a bit back to your earlier days, how you got into this, and what you’re doing now?
Nagendra P. Bandaru, President – Digital Operations and Platforms & Cloud and Infrastructure Services, Wipro: First, thank you for setting up this conversation, Phil. It’s been great knowing you, especially since you have been part of nearly one third of my journey in this industry! The last thirty years have been an extremely exciting experience.
In Wipro, I have undertaken several roles across the organization––beginning with managing the e-commerce practice for Wipro in Europe, and later as the Telecom business unit head for the region when we won one of the largest deals around the year 2000. A brief stint in the data center business of Wipro saw the integration of Wipro Infocrossing in 2007. Post that, I was heading Insurance business unit, and later became the BPM head. I launched Wipro Mobility which is now with Wipro Digital. With the BPM industry undergoing significant changes in both services and business models, I had the opportunity to build several businesses ground up and lead transformation and restructuring of under-performing businesses. Transformation led opportunities, such as our foray in the consumer healthcare through HPS and retire to Wealth through Alight among others, have played a significant role in our growth and success, which have created unique and differentiated competencies. I have been extremely fortunate to work with highly talented people in our teams who have been the foundation of our growth and success. Our continued people-centric approach has been the key driver behind end-customer satisfaction. As the industry matured over time and ushered in an era of convergence, cloud naturally became a big unifier. With that, Cloud and Infrastructure Services (CIS) service line became a logical extension to my current role, which helps us drive transformational growth for our customers. Together, the business is about US $3.2 billion in revenues, 87,000 employees, and 40% of Wipro’s overall business.
Phil: Wow. So that’s been quite an addition to your portfolio over the years. Was this something you always wanted to do? Or did you have other plans when you were younger?
Nag: No, I am a lawyer by qualification. I have an advanced Master’s degree in International Trade Law and Business Law. I was admitted into the Bar Council and I still have the membership, which is fundamentally the first step to becoming a lawyer. My other passion is stock trading and I started my career as a stock market trader. I used to own membership in a stock exchange, and I continue to actively view the world from an investment standpoint. So, I think various disciplines brought me a lot more understanding of the business world. Amongst science, technology, finance—which is where my heart is—and law, you’ve covered most of the disciplines. As a student, I did better in sports and performing arts, so I love those disciplines too. Perhaps that is the reason, in Wipro too, I have covered the length and breadth of the organization.
Phil: And then, recently, Nag, Wipro has merged together under you, the infrastructure and cloud area as well. It’s a very interesting development to see, bringing together BPM with cloud delivery. Is there some method there to the madness? Or have they just given you more responsibility?
Nag: There is a method, definitely. Take employee experience, for example, DOP (Digital Operations and Platforms) is at the upstream of the process from an operations standpoint, the underlying middle layer is the applications, and the fundamental layer is the computing infrastructure. So, when you want to create an experience—whether customer, employee, or any sort of experience—you need to have end-to-end capability. Now, a CHRO might say, “I want workplace transformation,” but he or she is only at the top end of the process; the real issues lie at the bottom of the pyramid around the day-to-day life, in the weeds. The challenges are never at the senior management level. However, at the lowest levels of the organization, the turnaround times are very high as the processes are broken. This makes it very important that we segregate the experience into three types of infrastructure: process, systems, and technology. To that end, we have seen a need for new business models to support contactless commerce, for example, and an acceleration of digital, automation, cloud, and AI in every industry from health to retail to manufacturing to banking. And, that is what generates the synergy between the two units [digital operations and infrastructure and cloud services] from an executional standpoint. We felt that bringing them together would create a very fungible organization.
Phil: Interesting. So, as you look at the current paradigm shock, what do you think the outlook is for the BPM industry? What do you think we’re going to look like in a year?
Nag: I’m very bullish, in general, about the business for three primary reasons. At first, we didn’t know what was hitting us. This is the first time in Wipro’s––or any economic––history, that we experienced a BCP challenge at a global level and magnitude. Our clients across the world were experiencing a meltdown of operations. Plants are shut down; retail stores are shutdown down; everything are shut down. But still, business had to be done and therefore a lot of companies moved to e-commerce and virtual platforms. Enterprises are revisiting business continuity, and they realize that cloud is a massive operating model to ensure always-on-always-scale operations. This big trend will continue, while the physical world will be reserved for things you may want to experience physically––such as visiting an attraction– –the way businesses work will be extremely virtual in the future. Previously, it used to be 80% physical and 20% virtual, but now the scales will tilt to 40/60, with 40% physical and 60% virtual, if not more in certain cases. This presents a host of opportunities for our industry.
Second, there was a great rallying of organizations to be resilient, deliver quickly in the new environment, and react to it. I’m very happy, not only for Wipro but also for the entire IT-ITeS industry as we collectively demonstrated the execution capability of this industry and its resilience. It is one of the largest transitions (moving from office to home) that the industry, and Wipro, has undertaken. This is the first time I have seen a high coordinated action where the entire industry come together along with NASSCOM. I was part of a joint council, which included my peers in the industry, to make sure that we work in a coordinated fashion. The resilience of the execution has been most heartening, and customers are extremely happy with what we have achieved. And, how does the future look? I think the future will have a very different model of work. It need not be a centralized delivery model; it will be extremely distributed, where you have the ability to access talent from anywhere. New and fresh talent pools will be available such as working mothers or people who are differently abled.
I see many disciplines integrating. From a technology perspective, digital technologies will continue to gain momentum because organizations would want operations to be efficient and intelligent. During the crisis, we ensured that customer-centricity was at the heart of driving value. With speed as our mantra to help clients, we ramped up capabilities through Wipro HOLMESTM, our AI and Automation platform, to set up a cloud-based solutions to solve customer problems. Supply chains have been the worst hit during the pandemic. However, our supply chain solutions have helped clients across industry verticals manage excess volumes as well as risks. Rapid deployment of Intelligent Automation has powered our Work From Anywhere solution, which has over 60 use cases right after the outbreak.
And, finally, I see a tremendous opportunity to bring all this together for customers. For example, manufacturing will not be centralized; it will use edge technology to be just-in-time, 5G, and 3D-printing in different cities will gain prominence so that products reach customers very quickly, where the buying and selling happen online. The hunger for computing infrastructure will increase, and new opportunities will emerge from this: whole new focus on health, online education, distance learning, and entertainment. The reliance on real estate will go down, and there will be more virtual infrastructure created. I think workspaces will get smaller and smaller, but the volumes and the complexities will increase. We have already seen a huge increase in demand for VirtuadeskTM, our VDI solution, to enable effective remote working across industries. Wipro itself was able to get about 93% of the employees to work from home in a fully equipped and secure environment to support our clients round the clock. Every business manages technology cycles, economic cycles, and business cycles – but have you ever seen these three come together?
Phil: No!
Nag: Exactly. In the last 20 years, we have witnessed the Y2K, e-commerce boom, the mortgage crisis, and then digital transformation. Now, we see disruption at a global level as a result of COVID, which has ushered in large scale transformation for several companies and organizations. It has brought together technology, business, and economics—everything—for the very first time. The balance between life and livelihood has never been tested in the recent past. Maybe at the time of the Spanish Flu, but the environment at that time was very different, they didn’t have so much technology. I am very, very bullish. We will see leaders emerge out of this; there will be people who will be at the front end of this change, and that’s where we aim to be. We have been rapidly strengthening our competencies to address the emerging opportunities. This has two focus areas––first, building ‘Business Resilience’ solutions that help clients look at immediate and short-term business objectives, and the second is ‘Reimagining the Business’ to help address the “new normal” in way that they thrive in the new world.
Phil: That’s very good. We’ve been talking a lot, recently, about how each company needs to find its bottom in this market. We need to understand what financial resources we need to survive as a business and figure out, “This is where it ends, and this is where it needs to go,” and you see that light ahead, then you can start to plan and make the real investments that you need to make to be successful out the back end. I feel, when we talk to clients, there are some who are still trying to find that. They’re still scrambling. There are others who have found some type of place where they know they can spring from and start to evolve, and then make those investments and grow. As you look at the future of Wipro, how do you help clients find the path? And then, once they’re on that path, how do you take them forward?
Nag: I agree with you that one needs to find the bottom. When the knife is falling, you can’t catch it. The companies that can manage revenue risk and excel in revenue loss mitigation will quickly jump the curve because then there will be a lot of excitement among the employees. Such companies will start investing again and drive growth. As business leaders, it is our responsibility to mitigate risks; those who cannot do so will find it tough. Those who are really unable to do it will be tested on their solvency because the cash will dry up. At this point, leaders must focus on the integration of digital competencies into the company’s core. They could use the current sense of urgency as a force to accelerate innovation through open innovation and crowdsourcing. At Wipro, the good thing is we are debt-free, and we have cash on the balance sheet; therefore, we are better equipped to manage revenue risk.
Saurabh Gupta, Chief Research Officer, HFS: This was a very interesting explanation of where we are headed, Nag. You also mentioned that you were a stockbroker, so how do you explain the soaring stock markets as we head into a recessionary economy?
Nag: There have been seven recessions so far, that we know of. However, in the US alone, the highest unemployment has occurred in this recession, which has affected around 30 million people. Add to that, nearly equal number don’t have health insurance. Definitely, there is a challenge in terms of the overall business climate. However, the IT services and ITeS business is very recession-proof. When companies start investing in growth because they have higher IT budgets, they start spending more; and when IT spending increases, outsourcing increases. Whenever there are downward cycles, the focus is on the variablization of costs and our customers are hungrier to invest in technology. In the current environment, every company will be software-led. Whether you take banks, insurance, or health companies—they will all adopt technology now more than ever. Emerging cloud technology-based solutions such as VDI, Work from Anywhere, omni channel customer experience, and supply chain risk assessment, are seeing an increase in demand. In fact, a large bank in the U.S. wanted to launch a full-fledged digital solution to support thousands of small businesses under the fiscal stimulus program initiated by the U.S. Treasury to provide financial relief amidst the pandemic. A team from Wipro executed the project in 48 hours. In an equally fast turnaround, Wipro helped one of our customers––a Postal Services company in the Middle East––launch a special medicine delivery service as part of the government’s quick response for citizens during the pandemic. Clearly, this is the tipping point for technology.
I see that the world will be led by software, and I see tremendous opportunities for companies such as ours. That’s why you see, in Nasdaq, technology stocks are doing really well. So, my belief is that technology will consume the world more than ever, and a services business such as ours is going to thrive. Therefore, as a stock market trader, I’m very bullish on technology and I am also bullish on wealth managers and health. I have mixed feelings about gloom because when people predict doom, the doom never comes. It is like the weather forecast. Therefore, the models and the predictions…they are fine, but we will land in between. It will not be a V, it will not be a U, it will not be a W, it’ll be a combination of everything. I go back to that important point that I raised earlier, the companies that will manage revenue risk very well are going to have better valuations and market capitalization.
Phil: Fantastic. Wonderful. That was really insightful, Nag. All the best with the upcoming challenges and opportunities!
There’s not much else we can say beyond the fact the impact of the Paradigm Shock on the IT and business industry is seismic. Suddenly, the core value of services is to address what customers have to buy right now… and at prices they can afford. This is a cut-throat market unlike anything we have seen before and the survivors are those who have the nerve, the cash, the luck, the immediate ability to support their clients and the strategic nouse to make quick moves to come out on top as the new business environment gradually unravels:
Forecast Assumptions
GDP impact from Q2 2020 is expected to be10-15% in all major Western European and North American markets. Economic recovery to pre-COVID levels is unlikely until the second half of 2021.
Business not as usual – with a significant amount of work being unable to complete due to local lockdowns and social distancing. Government bailouts will prevent some businesses from failing but will not be universally successful particularly with small businesses.
GDP / GVA forecast analysis for major sectors used as a starting point for forecast variation. Given that the economic impact is industry-sector led.
Previous major economic events used as a primary guide for impact due to COVID, particularly the long-term impact as the wider economy is impacted. In particular, the impact of the great recession on the IT & business services market.
Major decline in professional services new business, most signed agreements go ahead with a larger percentage of delays to existing work (40-50%).
Professional services impact is immediate (Q1/Q2) with a return to pre-COVID spend in 8-10 quarters.
Operational services impact is delayed – so won’t immediately hit revenues in Q1, but will gradually affect the market as deal signings slow significantly and are deferred to Q1 2022. We have seen deal volumes reduce by a half for Mar and April.
Revenue impacts in Q1 small, with the impact of deal signings and slowing discretionary spend, felt in Q2 and Q3.
The Bottom-line: Recessions do end, but this one is going to reshape the services industry more than anything we have ever experienced
We’ve ridden the traditional services model for 20 years and – let’s be brutally honest – while we’ve had some awesome developments in areas like digital technology, cloud and automation, the underlying way services have been bought and sold hasn’t fundamentally changed. Suddenly many clients facing huge survival challenges (such as in travel and manufacturing sectors), coupled with the downward pressure on pricing is sending large parts of the services industry into a tailspin. For those that don’t have the cash reserves to weather this, and fail to reinvest in a plan to attack growth opportunities as the crisis subsides, the future is murky. Customers will demand “as-a-service” offerings, sweetheart deals and all sorts of outcomes in the market that is to come… the old rule-book is being tossed and the emerging situation is putting unprecedented (there, I used the word) pressure on many service providers to survive.
As the lockdowns slowly ease and business returns to a point where big deals can be done, expect some significant M&A activity – and all sorts of “carve-out” deals to take place – as service providers fight to survive, exit or dominate. We may even get a few surprise entrants into a market where there is no pre-written playbook. This is where the brave, the smart and the lucky take control.
As we discussed just before this virus changed our world (see post), Wipro’s next CEO appointment after Abid Neemuchwala had to be someone with teeth and a preparedness to be ruthless. While I know the post upset a few people at Wipro, they clearly read the piece and its Board acted in a similar vein. If anything, the current economic and health crisis may have even driven the board to look harder at a leader with discipline and financial acumen. They seem to have got one, who was ready to make the move.
Wipro goes for a strong operator to make tough decisions who is ready for the challenge
The Wipro board was clearly determined to bring in an outsider to make some changes to the company leadership team, organizational structure, and culture, even though there are some strong internal candidates such as Milan Rao and Rajan Kohli. The search was extensive, lasting several months, and the pandemic clearly slowed down the whole process. Moving for Delaporte, a dyed-in-the-wool Capgemini man with a strong operations and finance background shows Wipro is keen on playing it safe as the industry goes into a long cycle of volatility as we (eventually) emerge from the Covid crisis and deepening recession.
However, unlike the appointment of Salil Parekh at Infosys, another ex-Capgemini executive, we expect Delaporte to make some aggressive changes to the firm. He has a reputation within Capgemini for being a tough, ambitious leader and he was clearly very upset when he lost out in the CEO battle with Aiman Ezzat. His relatively quick move to Wipro shows he is determined to lead a major IT services business, even at a time when travel is challenging and the business climate highly uncertain.
It’s time to break up old fiefdoms, re-energize the leadership talent and make up lost ground to some of the Tier 1 competitors
Delaporte now has a major challenge to break up some of the industry fiefdoms that have plagued Wipro over the years and bring in some new blood to reenergize the firm. He also has to embrace some of the firm’s leadership talent, such as Rao, Kohli and Adlakha, to ensure they have fresh motivation and energy for the challenging times ahead. The extended time this search took leaves Wipro needing to play catch-up with the likes of Infosys, HCL and TCS, so Delaporte needs to move fast. He will also need to make some big decisions surrounding potential acquisitions as the industry goes through its biggest-ever shake-up.
The Bottom-line: A surprise for many, but a leadership decision made with clear intent – and a lot of patience
While the decision to move on Delaporte is somewhat surprising, especially with his living in France and having a lower profile than other potential candidates like Omar Abbosh, it does indicate the determination of the Premji family and the Board to go for outside blood to make some tough changes to the firm. Being the first non-Indian to lead the firm will be a major change to the firm’s culture – especially when you consider only Cognizant opted for a non-Indian to lead their business (from the India-heritage majors). But maybe… just maybe… this decision will prove to be a smart one for a company with a tremendous heritage and a family-owner who has given so much back to his country.
To conclude, Delaporte is core services and a proven tough leader in the space (and talk to anyone at Capgemini, he is highly respected). The only thing I worry about could be his French base, but it may actually strengthen Wipro’s footprints in Europe (esp financial services). Plus he’s a good M&A guy and oversaw perhaps the only successful services merger over the last decade: Capgemini + IGATE.
The more you look at this, the more it starts to look like a bold, shrewd appointment. Give Thierry some time and we can revisit this decision with the lovely power of hindsight…
HFS analyst Cyrus Semmence (pictured right) gives his view on low-code and enhanced automation
After many years of hearing the term “low-code”, suddenly there is an urgency to understand how it can rapidly enhance automation capabilities as we watch the world spiral into madness. In my view, the right blend of low-code platform capability and RPA, alongside process orchestration tools, such as process discovery and mining, will provide the toolbox to create enhanced automation and a much more scalable digital infrastructure… in an increasingly volatile and geographically diverse market. However, the watchword with RPA over the years has always been “low-code does not mean no-code” and you have to work with your tech folks who understand how all these systems and apps can fit together to achieve our goals (which is where it went wrong recently at the US Small Business Administration).
So we decided to poke a few questions at HFS analyst and monkey lover Cyrus Semmence,
What is low-code, Cyrus?
Low code development platforms are platforms that allow the creation of automated workflows and software using visual and declarative statements instead of raw code to create the business or software logic.
However – in the hype to whet people’s appetite – some misconceptions about low code / no code need to be addressed, otherwise, in a few years’ time, we’ll be talking about the failure of low code. The idea that skilled developers can be replaced by citizen developers is false. You still need architects, solution designers, developers, testers, etc to build and deploy your whizzy new automation. The reason is that low code brings to the table the advancement of true rapid application development (RAD) capabilities due to reduced effort and errors as multiple lines of code do not have to be manually keyed in, which is tedious and can be incredibly time-consuming and leave room for errors and bugs. Instead, the logic is created with drag-and-drop types of functionality. To do this though, you still need people that know what they are doing, how to define the logic, create database schemas, understand the integration requirements with other systems, and to design around non-functional risks and requirements.
Why low-code matters and why we need to care
The work environment has changed. What worked when we were all in the office together suddenly becomes much harder to do when we can’t easily pop over to another department and ask a question about something or shout across the desk. This slows down processes and highlights previously hidden problems. For companies that have realized their business processes are inefficient, hard to modify, and are only functioning because of human workarounds, low-code platforms offer a great solution.
Nowadays no senior manager is going to sign off on a bespoke software build project. There is too much risk that some mud might stick to their reputation if it fails and with so many horror stories regarding software development projects who would blame them? However, sometimes that is the right option.
It is true there are many commercial off the shelf software (COT) solutions that could be purchased and avoid the risk of building from scratch, but despite all the best intentions I doubt there are many large scale enterprise software deployments out there that were bought with the intention of keeping them off the shelf that has stayed that way. Instead, they have ended up being customized to the point there are extremely expensive to maintain and sometimes almost impossible to upgrade.
With low-code, you get the opportunity to automate your business processes in a way that exactly mirrors them, and you only build and pay for functionality you actually need, not all the extras that might sit their dormant with a COTS solution.
Why will low-code platforms disrupt traditional software markets?
Once people start to get more comfortable with the concept then it’s likely the uptake of new purchases of CRM, ERP solutions will be impacted. I can’t see large corporates suddenly throwing out SAP or Clarity straight away and replacing it with their own in house low-code version. For smaller organizations that might balk at the cost of SAP and just stick with their old order processing system and excel spreadsheets and make do with the problems, no-code could be the door opener to modernize a lot of their systems. Combined with RPA where integration with the odd irreplaceable legacy system that doesn’t justify spending a fortune to replace, you have a great way to improve your business efficiency and ability to get to market faster. For the larger enterprises adding a low-code platform to their toolbox means they can quickly roll out point solutions to solve business process problems at the fraction of the cost of re-engineering existing software. In conjunction with a longer-term strategy, if planned properly they could be used to gradually phase out existing enterprise systems as a project instead of a major version upgrade on existing platforms.
How do we get started with low-code – do we need to have real experience in developing apps, or can we engage as business executives to get our IT people on the case?
The journey with low code must start with a highly skilled team. If a salesperson is telling you it’s easy, ignore them. Why do you need a highly skilled team on a platform that everyone claims is going to change the way we deploy software (and Gartner predicts by 2023 citizen developers will outnumber professional developers by 4 times)? Because this is not going to happen. Software development is never easy and the last thing you want in your enterprise is a bunch of amateurs building your critical business systems. So, if you don’t want to fail on the journey to replace legacy systems that don’t quite match your way of working and take a long time to change when your business does, give yourself the best chance of success by getting good people to develop for you. Over time as you get comfortable with the platform you might consider devolving responsibility out to the business, but the risks in doing this must be carefully weighed up.
Will the current crisis drive adoption? Will firms who embrace low-code be at a real competitive advantage?
The current crisis could well drive up adoption as flawed business processes need to be fixed rapidly and – to do that – you need a flexible platform you can mold into the image you wish to see, not the image the software vendor has for you.
Thanks for the practical tips, Cyrus – to finish, let’s share the latest research on where enterprises intend to invest in this current “Paradigm Shock”: You may have a point that enhanced automation is very much top of mind for enterprises:
There’s a very strong rumor that Microsoft is in talks to buy Softomotive, unconfirmed by either party which didn’t stop Bloomberg running the story, and we’re happy to wonder what it might mean. There’s lots that’s promising – for Microsoft, for Softomotive and for the RPA category as a whole. And most likely great timing in a market where rapid digitization is the calling card.
The smaller proven RPA vendors are more attractive acquisitions to fill functionality gaps
At the beginning of this year we cogitated that no one would buy any of the big three RPA vendors when we made 2020 predictions – then within weeks when Appian bought Jidoka we noted that smaller RPA vendors are still certainly likely acquisition targets. We even suspected UiPath was positioning itself to be acquired by MS last year but was clearly far too hefty an investment for Microsoft’s appetite as it eyed ticking the RPA box in its catalog of automation and AI solutions. However, an acquisition of Softomotive, which could fetch a low nine-figure number, clearly shows MS is serious about adding this much-needed capability to address the space.
Microsoft has shown up to the RPA party late and it can easily buy its way in
Microsoft has been talking RPA all through the second half of 2019, in multiple earnings calls and announcing the Power Automate launch at Ignite. It recently launched its Power Automate version of RPA to general availability. HFS initial reactions laid out Power Automate (RPA) and its overall fit in Microsoft’s Power Platform. It is mainly what was Flow (close to IFTTT) with some UI screen scraping for the legacy green screens and the ability to record the various keystrokes or clicks. We saw attended automation as per UiPath and Automation Anywhere, but couldn’t help but question the unattended capability as per Blue Prism at that point and called out the need for catching up to RPA vendors’ level of capability.
Softomotive would give Microsoft both attended and unattended capabilities, a significant customer base and real credibility as an intelligent automation solution
What Microsoft could gain here with Softomotive (if this goes ahead) is an RPA veteran with roots in desktop automation, with a solid engineering approach and a decent set of both attended (WinAutomation) and unattended (ProcessRobot) capabilities. It has more than 9,000 customers worldwide and is a longstanding Microsoft partner. For more on HFS’s view of Softomotive and other RPA players see HFS Top10 RPA Products 2020. Softomotive demonstrates sound thought leadership with its “People 1st Approach” and it made an interesting move last year with the launch of Robin, an open-source RPA language. At HFS, we liked the vision and concept of Robin very much but struggled to see how people (especially competitors) would be motivated or incentivized to play along, and it really needs lots and lots of developers playing along to be successful. Softomotive is hitting the jackpot here though and might find a lot more people throughout Microsoft’s extensive installed base readily incentivized to ensure portability and interoperability of RPA using Robin if it becomes part of the Microsoft empire. If Robin proves popular with that critical mass, competitors have little option but to follow.
Microsoft is well on its way to becoming a one-stop-shop for all enterprise software needs
So, there’s the hardware of course, but the real value of this acquisition would be embedding or connecting robust RPA into Microsoft’s many well-established software product families, from MS Office, Teams, SharePoint and Dynamics 365 for ERP, CRM etc. This is all subject to Softomotive’s technology being absorbed at a technical level into the Microsoft product family – not just in slideware. Microsoft Power Platform is not reliant on only MS software, other software will be in use at its customers’ organizations, so its running with a vast array of connectors (300+ at last count) to hook up to the many large enterprise platforms in common use. Considering how many RPA use cases start with or rely on a trigger like an email (with attachment) or an excel spreadsheet it’s easy to see why Microsoft has a vested interest in picking up the baton itself with RPA extending its value proposition, rather than letting third party vendors come in to carry the data along its process journey. What Softomotive could provide to Microsoft is more much needed connective tissue, to help business users with the complexity of business processes laden with process debt.
The bottom line: Microsoft is just one of many big fish menacingly circling the RPA space
Not only does this move validate the RPA category, it also threatens those who pioneered the category. Other independent software vendors (ISVs) are making moves too. Pega has its Infinity platform low-code, BPM, RPA combination fueled by the Openspan acquisition, SAP’s Intelligent Robotic Process Automation (IRPA) offering is based on a combo of previous internal efforts and its Contextor acquisition. Appian acquired Jidoka. Compelling pricing propositions for RPA as an add-on are visible. And these approaches, including Microsoft’s, are broad approaches supplementing the rigor of enterprise software platforms, low-code, BPM, AI and APIs with RPA.
What’s more, Google is tackling the intelligent part of intelligent automation to structure unstructured data with Document AI, in partnership with UiPath, Automation Anywhere and Appian amongst others. Given Google’s intentions to deliver an array of functional and vertical solutions with partners and its technology stack we should anticipate that some of the pain points that RPA addresses will be targeted in these initiatives. And Salesforce is keeping its options open, with MuleSoft in hand already with an API led approach and Salesforce Ventures led Automation Anywhere’s Series B financing.
Other RPA vendors need to pay attention to the fact that while they have undoubtedly proven the market need for RPA, they have no guarantee of keeping hold of the market they created. Their best bet is proving that a third-party layer on top is superior to embedded and connected approaches, and we expect that RPA vendors will make a decent stab at articulating this throughout the rest of 2020.
As changing winds prevail, few things impact an organization better than a consistent, selfless, and stable tone from the top. U.B. Pravin Rao (known as “UB” by his friends) has been the great constant at Infosys throughout his tenure, combining an understated demeanor with sheer tenacity to build, equip and continue pushing a 240,000-person entity into the future.
Notwithstanding corporate honors as Member of the Board and COO of Infosys, Pravin was well-tapped to serve NASSCOM as industry Chairman for the next year. Quite simply, he has the best of the industry at heart and a comprehensive competence to not only steady the sails through the COVID-19 storm, but to demonstrate rapid response in support of the industry and community at large. With his footing firmly set in the present and eyes fixed on the horizon, Pravin clearly sees an infinite future for NASSCOM and the Indian industry as a resilient, ever-relevant, and trusted partner for the global enterprise. So now there is no live cricket to watch, we managed to drag him away from his Sudoku puzzles to share his intentions and vision for the Indian IT industry in his role as NASSCOM chairman.
Phil Fersht, CEO and Chief Analyst, HFS Research: Good afternoon to you, Pravin. It’s always good to catch up, I enjoy our conversations, and it was good to hear about your new role at NASSCOM. Before we get to that, can you just share a little bit about you, and how you ended up as COO for Infosys?
Pravin Rao, Chairman, NASSCOM: Good to talk to you as well. I am an electrical engineering graduate. from Bangalore University and joined Infosys in 1986. Actually, it was my first job, and this is my 34th year at Infosys. When I joined, we were less than 50 people, and today we are over 240,000 people, so obviously it’s been a great journey.
When I joined Infosys, it was a very small company, and obviously not very well known. I had just two motivations. One is that I didn’t enjoy my electrical engineering stint, and I wanted to get out of it. The second one… In those days and probably even today, for a lot of people in India – and particularly for youngsters – going abroad is always an opportunity, and that was one of my ambitions. In those days, I heard Infosys was sending people to the US, so that was the added motivation.
“In those days in India, if you joined the public sector then you were supposed to be set up for life, but I rejected those offers and joined Infosys. Many people thought I was crazy. I just wanted to see the world, and the rest is history”
Once I’d graduated, Phil, I had a couple of interesting jobs, one in the public sector. In those days, in India, if you joined the public sector, then you were supposed to be set up for life, but I rejected those offers and joined Infosys. Many people thought I was crazy. I just wanted to see the world, and the rest is history. I came from a technical background, I joined as a trainee, and I have played several roles. Since the beginning of 2000, I started heading some P&Ls [Retail, CPG, Logistics and LifeSciences] with Infosys. In 2014, I was inducted to the Board of Infosys, and, at the same time, I was also elevated as COO, so I’ve been playing that role since then. For a brief period, I was named the Interim CEO before Salil’s appointment.
Phil: So tell us a bit about this role that you’ve been elected to as Chairman for NASSCOM. What does that entail, exactly?
Pravin: Phil, the Indian technology industry is one of the key contributors to India’s economy; it roughly contributes 8 to 9% of India’s GDP. This year, financial year 2020, the Indian IT industry will contribute roughly $190 billion US dollars in revenue, and it today employs about 4.3 million professionals directly. So it’s a sector with a diverse mix of companies: Indian companies, multinationals, global tech centers of international companies, start-ups, and so on, and NASSCOM is the industry body that is representing the sector.
It’s an honor and privilege, Phil, to represent the sector as Chairman, and a great opportunity for me to serve the industry. Within NASSCOM we have a leadership council, which consists of past Chairman, Chairman, Vice Chairman, and President, and this council is tasked with driving the NASSCOM vision and agenda. From an individual perspective for me, it’s a 3-year commitment – one year as Chairman, Vice Chairman (served one year, last year), and after this year, one year as Past Chairman – it’s a 3-year commitment to the industry. Obviously it’s a part-time role, we have a President who runs the forum full time.
From a Chairman perspective, my immediate priority is obviously navigating around the COVID-19 situation, and ensuring minimum impact to all the stakeholders, to our clients, to our employees, and ensuring business continuity. In the long term, I hope, once we adjust to the new normal, we will focus on some of the work that NASSCOM has been doing, in terms of transforming the industry and making it relevant in the digital era. Obviously, after the current pandemic subsides, we should also gear up for the post-digital era, which is all about distributed ledger technology, artificial intelligence, AR, VR, quantum computing, and so on.
Phil: So this is probably the most critical juncture in the history of Indian technology, what’s been happening this year with the recent paradigm shock? How do you think you can support this, and respond to this, in your NASSCOM role? What sort of things are you really looking to do here?
Pravin: Yes Phil, these are challenging times for everyone, including the Indian technology industry; however, our industry has, time and again, proven its resilience in the past, and I’m very confident that this time, too, we will emerge stronger and wiser. And, as I said earlier, during this time, maintaining business continuity and keeping in mind the safety and wellbeing of the employees was the topmost priority for the industry. Our industry has been enabling work from home since the first week of March and has been shifting assets and configuring the internal networks to make this possible. Today, roughly 85 to 90% of the workforce has been enabled to work from home – it’s much higher on the IT services side, and on the BPM side, it’s slightly lower. A small percentage of staff is working from our office, typically on mission-critical applications and dealing with sensitive data. And, considering the size of the industry, $190 billion dollars, and the scale, a 4 million-person workforce, the speed at which we have achieved this, I think, is a very remarkable achievement. We are also in regular touch with our clients and going the extra mile to ensure minimal business and service disruption.
“Our industry has, time and again, proven its resilience in the past, and I’m very confident that this time, too, we will emerge stronger and wiser”
The industry has worked very closely with the government during this period, both the central government as well as the individual states. First and foremost, we got IT and IT-enabled services categorized as essential services. That cleared a lot of hurdles. Then we had a lot of policies around moving assets out of campuses and policies around taking calls from home, so we worked with the respective departments and got it enabled as well. We are also working with state governments in terms of enabling ease of people movement, transfer of assets. The industry has actually worked very closely.
I think what is very heartening is that we have also come together in supporting the government in leveraging technology to fight COVID-19.
What’s more, Phil, I think what is very heartening is that we have also come together in supporting the government in leveraging technology to fight COVID-19. Each of our companies, individually, have been working both at the central and individual state levels, coming up with apps and other solutions. In addition, NASSCOM has created a taskforce with several companies together, working closely with the government in areas of containment, tracking, testing, and recovery. And, in fact, NASSCOM has also published a compendium of all the solutions that the Indian tech industry has put together to help various stakeholders in terms of dealing with this crisis.
Phil: So, as we look through the other side of this Paradign Shock, Pravin, do you think India will come out the other side unscathed? And do you see a different landscape emerging from this?
Pravin: I think, from a global perspective, the situation at this stage is pretty stark. There are still multiple scenarios being debated and discussed in terms of the global economy and the shape of the recovery. People are talking about V-shaped, U-shaped, L-shaped, and so on, and it’s very difficult to predict. Given the complexity and challenges which are unique to India, I think the government has done a good job so far, and the lockdown, as you are aware, has been now extended until May 3rd, although some activities will start opening up starting April 20th. For IT and IT-enabled services, wherever possible, the government has recommended up to 50% return to work. However, our industries will take a very phased approach. We want to be very responsible, so in the first few weeks, we expect only a maximum of 15 to 20% of the workforce back in the office, and it will actually take a few months before we get back to the old ways of working, probably close to 100% working in the office. From a country perspective, I think it’ll take about three, four months for things to stabilize.
The other aspect is that this industry is part of the global value chain, and any disruptions in that will have a ripple effect on both India and the Indian IT industry. Overall, I’ve seen forecasts talking about GDP being lowered by 1 to 2% than what it was forecast before the virus outbreak, and COVID-19 is obviously creating disruptions globally where businesses across countries and geographies are facing major demand-side challenges. For our industry, it will be impacted by the demand-side shifts as opposed to any supply-side issues, so from that perspective, I think that in the short to medium-term we will see some fall in demand, some of the discretionary spend being pushed out, and so on.
However, I believe that in the medium to long-term the industry will bounce back because as we get into a new normal, every enterprise will start looking at reimagining their ways of working. They’ll look at transforming talent and building resilience into their existing business models, and some changes will probably be permanent and be part of new normal, in these cases, technology and technology services will be very integral in all these models. Even today, technology is playing a huge role in enabling businesses to run remotely, and in the new normal this will be only amplified. So, in some sense, COVID-19 is a tipping point of the digital transformation of the workplace. The sudden shift to remote, digital work has the potential to accelerate digitally-enabled environments and workplace transformations.
So, I’m very confident that in the long-run, Indian technology industries and providers will be more relevant than ever to organizations globally. While what is short term, what is medium and long-term are difficult to predict, I think the industry will bounce back and will continue to be relevant.
Phil: We’ve obviously spoken a lot about the potential challenges this is going to cause and impacts on the economy, etc. What good things do you think are coming out of this? Do you think there’s going to be some positive behaviors, positive outcomes that we’re going to take away from this experience?
Pravin: Phil, I think the speed at which we have been able to ensure business continuity given our size and scale and enabling work from home, and without compromising on employee safety, for me that has been the most impressive one. And NASSCOM has worked closely with the government to enable this. That has been extremely positive.
Secondly, all the industry players….are coming together. I think sometimes adversity brings the best of you, and it’s been amazing how people have come together and shared best practices. And even, I talked earlier about some of the tech solutions that they have provided, working closely with the government, in terms of dealing with the COVID-19 crisis. So from that perspective, I’m very proud of the way the industry has come together to deal with the crisis. And some parts [of this] will become the new normal. In the past, I think clients were very reluctant to allow work from home; hopefully, this experience will help them look at it differently. If we are able to demonstrate productivity and good quality without compromising security, I think clients will get adjusted to this way of working, and that will also help the industry in the long run.
“Sometimes adversity brings out the best of you, and it’s been amazing how people have come together and shared best practices”
In terms of infrastructure side, the country has to improve telecom infrastructure, particularly the last mile connectivity, I think that many people still don’t have fiber connectivity, so that’s one area where I’m sure government and even the telecom providers will focus. And the second area reflects some of the policies, … the government has to make some changes to enable work from home [to be] more permanent. So these are some of the areas where probably we need to improve a lot, mostly from an infrastructure perspective but otherwise on the ability to do stuff and adjusting to the new model – those seem to be going on well.
Phil: How do you think this paradigm shock is going to impact the role of NASSCOM? What do you think its role should be, as things develop, Pravin?
Pravin: I think NASSCOM will continue to play a critical role, Phil, and more so than ever before. Right? Once the new normal happens, it’s important for NASSCOM to play a leading role, in terms of shaping the narrative around how the Indian technology industry was able to respond and with very minimal impact to the business continuity of clients. So, in some sense, NASSCOM has a crucial role in reaffirming India’s technology industry as a trusted partner for global enterprise. So that’s one role it will continue to play.
“NASSCOM has a crucial role in reaffirming India’s technology industry as a trusted partner for the global enterprise”
Secondly, as I said earlier, the Indian technology industry will continue to be relevant in the global context, post-crisis, so NASSCOM has to continue its role of policy advocacy with various governments, ensuring ease of doing business, articulating Indian tech and the technology industry contribution to the global economy and to creating jobs in the local economies. India technology industry is investing millions of dollars in these economies, how its increasing competitiveness of enterprises. So, these are some of the things which we are doing, and they are some things which we will continue to do.
The third aspect is that the skills gap that is there globally will continue, and so NASSCOM has to play a large role in terms of promoting skilling and reskilling, not only in India but globally as well. So that’s a role it can play, and it can bring the Indian technology industry expertise to that. And, in some sense, NASSCOM, NASSCOM in the future will be much more broad-based. It will probably represent companies across the industry. For instance, in India, when there’s been a debate on data privacy law, data strategy, and so on, the NASSCOM voice is heard. So that’s a role I think it can start playing there, and globally, as well. In some sense, every organization today is a tech organization, and NASSCOM can play a huge role in representing the technology industry voice.
“In some sense, every organization today is a tech organization, and NASSCOM can play a huge role in representing the technology industry voice”
My sense is that NASSCOM’s role will continue to be very crucial and as the Indian industry gets adjusted to the new normal – and we are very optimistic and positive about the future – NASSCOM will have a large role to play in that.
Phil: Good. Well, thanks for this, Pravin. I think there’s one final question I want to put to you. If we meet again in a year’s time when you’re finishing your tenure, what do you think we’ll be talking about?
Pravin: I hope, by then, COVID is done with, though sometimes I get scared when people are talking about two, three cycles of COVID, and things like that. But anyway, jokes apart, I hope at the end of one year, we will probably be talking about looking back at crisis how we dealt and we dealt with the crisis and how successful the Indian IT industry has been able to navigate around the situation, ensuring business continuity for our clients and proving our resilience. Hopefully, with COVID behind us, we’ll also be talking about how seamlessly we have adjusted to the new normal, and we’ll probably talk more positively around the growth prospects of financial year 2021, I think, at the end of this year.
Phil: Well, thanks very much for this time, Pravin. This was really insightful to hear your views, and how you’re going to tackle this. And it’s been very heart-warming to hear how the Indian community, in particular, has come together with the government to tackle this crisis so quickly, and I think you guys will all come out of this fairly unscathed, and actually, in a more robust place. I very much hope we’ll all be together, physically, in a few months at your big India Leadership Forum event in February, so I look forward to it very much.
Pravin: Of course, Phil, thanks a lot. I also hope that very soon this will be behind us, and I look forward to more positive conversations in the future. Stay safe.
Best wishes to you and your colleagues and family.
Phil: Yes, absolutely, Pravin. Same to you guys. Stay healthy. Stay sane! We’ll talk again very soon. Take care.
What better to blame – when all goes wrong – than the evil robotic thing you just inserted into your system. Many of you saw the recent article in ABA Banking Journal where they blamed RPA for the “burden on their processing system and diminishing of its capabilities”. We will discuss this debacle in a more detailed POV (stay tuned) but the crux of the issue here is a poorly run government IT function tinkering with software to try and process a mad scramble for many thousands of small business handouts from the recent Covid-19 stimulus package – and most likely in some weird virtual lockdown vacuum. And it appears woefully understaffed.
In short, APIs + humans + bots need to work within system parameters, or we’re always going to have failures of scale like this one.
RPA is a highly useful tool to support this environment, but please let’s start deploying it as part of the overall tool-box
As we’ve said of late, the digital workforce that wasn’t finally has its burning platform chance to shine. Since global lockdown commenced, we’ve been tracking, talking, and learning about the ways in which enterprises and their service and technology partners are using automation to help them function. One of the most prevalent use cases in recent weeks is in the banking and financial services sector where lenders are using automation, largely, RPA, to support loan processing for government-backed loans. RPA is helping lenders grapple with massive loan volumes and get them submitted quickly so loans can be approved and dispersed.
Insert monkey wrench.
The U.S. government’s Small Business Administration (SBA) application and approval portal was overwhelmed with demand as a second tranche of government funds were made available on April 27. The funds are intended to support loans for small and medium-sized businesses (administered via banks) as part of the Payroll Protection Program (PPP) during the Covid-19 pandemic. The SBA E-Tran system receives the loan applications and then the SBA processes and approves them. The system struggled to handle the new surge of applications coming through and repeatedly crashed. As of Tuesday, April 28, the SBA prohibited the use of RPA bots in the application process.
RPA fail, right? Not exactly. It is actually the overwhelming success of a blunt instrument.
The HFS team dug in and spoke with a variety of ecosystem players – banks, software companies, and service providers to get the straight scoop. We also reached out to the SBA, but they have not responded. We view this as a case of RPA being used as a blunt instrument allowing any bank that invested in RPA to automate loan application submissions. RPA very legitimately helped banks and lenders process scads of PPP loans. This presented two immediate issues:
The SBA E-Tran system crashed – it was way overburdened with hundreds of thousands of loan applications.
Banks with automation were potentially able to submit more loan applications than those without thus more effectively accessing a limited pool of stimulus funds.
The SBA responded in a super butt-covering mode with its “NO RPA!!” edict. It will still allow loans to be automatically processed through APIs. So now banks are scrambling to convert their RPA processes to API-led. And the SBA assigned one person. Yep, one person to field all requests for API access. We hope this poor beleaguered contact has some help, but banks have reported the API access option is “very slow”. To address the potential of access bias for those firms with automation – deemed to be the larger banks – the SBA designated an eight-hour window on April 29 for lenders with less than $1 billion in assets to submit loans.
Bottom line: This SBA debacle is why you need nuance and a toolbox approach to automation to get desired results.
It’s too easy to say RPA failed. It’s more complicated than that. Really RPA was a blunt instrument here – for its speed to solution and ability to swiftly process loan applications and it worked remarkably well. Too well. It swiftly overwhelmed SBA’s E-Tran system – which was doomed to be overwhelmed anyway by these unprecedented volumes in a short period of time. But RPA exacerbated it and potentially gave access advantage to automation-savvy firms. While access through SBA’s XML API may allow for more efficient loan submission rather than the RPA model of going through the user interface and clogging the narrow pipes, this did not have to be an ‘either or’ situation. APIs versus RPA is not the point. Automation always lives in an ecosystem with upstream and downstream impacts and these were not adequately addressed. A better approach would have been a toolbox approach that leveraged RPA for loan preparation and access into legacy systems in the lenders’ shops, APIs for submission and humans for oversight with some substantial volume throttling to give the SBA’s system half a chance at doing its job. Automation cannot live in a vacuum.
What better to blame – when all goes wrong – than the evil robotic thing you just inserted into your system. Many of you saw the 