Coronavirus cruelly exposes the fragility of the offshore outsourcing industry: Will clients trust all their eggs in one basket again when this is over?

March 22, 2020 | Phil FershtOllie O’Donoghue

The outsourcing industry is fast-becoming be the first vital piece of the global economy to come under the microscope as nations, businesses, and societies try to build a blueprint for what the post-coronavirus economy may look like.

India and Russia, in particular, are now being widely seen to have the slowest response to the coronavirus pandemic across all the major economies, and the situation is forecasted to worsen rapidly in the coming days and weeks - perhaps at the most alarming scale of all the current major global economies.

In addition, the current curfew (just announced) in India is going to have serious and immediate consequences for the smooth delivery of IT and business process work conducted for both overseas and local clients. Many IT support staff are poorly equipped to support work-at-home staff, not owning laptops, often living in unsuitable accommodation for work, and often with poor internet / wireless connectivity.

In short, like our governments and healthcare systems, the offshore outsourcing industry just wasn't prepared for this.  All the warnings were ignored and now some very sick chickens are coming home to roost...

We're running out of global locations to source service delivery, while work-at-home measures are proving woefully inadequate for offshore IT service provision

In short, the global industry is quickly screeching to a halt as a consequence of this pandemic. Most of the leading service providers have been instilling "safe distancing" in their centers, increasing onsite medical facilities and sanitary measures. However, with the death rate spiraling massively in Italy (almost 800 per day and rising) and US and UK expected to accelerate significantly because of their slow response to locking down public gatherings, workplaces and travel, the increased curfew measures just announced in India render these efforts from services firms pretty much moot.

In short, all global businesses are being significantly disrupted because of major restrictions mandating employees to work at home, and not having sufficient resources in India is going to exacerbate the situation for supporting critical IT delivery. Global enterprises may be forced to source local service providers to plug critical gaps, such as security monitoring, disaster recovery etc. which is going to put a strain on their budgets and my least to some major contract disputes (although many of the IT service contractors should be protected by Force Majeure provisions). In addition, service providers with strong delivery resources in locations such as Russia, which is resisting a lockdown, may take on additional business at this time, though most nations with strong IT delivery, such as Poland and Ukraine, are already in lockdown situations. The Philippines is also seemingly open for business, which is keeping the lights on for delivering a lot of voice-based services, but we expect them to shut down their centers soon with Duterte discussing emergency measures with the Philippines Congress on 23rd March.

Finally, the robustness of outsourcing will be tested to its maximum.  And - most likely - well beyond its maximum 

Discussing the issue with multiple executives in leading offshore IT Services firms paints a telling picture of how broad and painstakingly detailed business continuity plans are now. And, by inference, how woefully inadequately designed they were for a situation of this magnitude. Executives are telling us they have never seen such widespread implementations of business continuity in their multi-decade long careers. For their clients, while more measures from key offshore locations are understandable and, frankly should be applauded given their laissez-faire approach thus far, could still not come at a worse time. Outsourced service desks are already overwhelmed as they move to support huge volumes of end-users trying to access systems remotely and, in some instances, using technology stacks with which they have no training or familiarity. While it's not clear how the curfew will impact these engagements, one possible outcome is enterprises - out of desperation - start to develop and stand-up their own in-house capabilities to handle the glut in core IT work.

In terms of outsourced customer support, leading call center firms are showcasing their ability to shift a lot of work to their WAHA (Work at Home Agents) if the need arises, and most are still able to utilize their large Philippines centers because of Duterte's confusing attempts at a lockdown. However, we will only witness the true reliability of whether WAHA can actually deliver at a massive scale, when these workplaces are finally locked down... which is surely coming very soon.  In addition, after more than a decade of hype surrounding crowdsourcing, we will finally witness whether that can really do more than plug a few gaps for occasional developer needs.

The Bottom Line: Will enterprises still have an appetite to keep outsourcing when this is all over, or are those days fading fast?

Should this become widespread - we may emerge from this situation with a very different outsourcing landscape and a reluctance from enterprises to put all their eggs in one basket again - in-line with broader comments about de-globalizing supply chains. In short, the outsourcing industry may be the first vital piece of the global economy to come under the microscope as nations, businesses, and societies try to build a blueprint for what the post-coronavirus economy may look like.

Keeping enterprise clients' critical support services functioning is becoming the biggest challenge ever facing India's IT industry as it tackles this exacerbating health crisis. Provisioning laptops to essential IT staff, ensuring internet infrastructure is functioning under the strain while enforcing staff takes the necessary self-distancing and hygiene precautions are the critical functions of service provider management at this time. They have to operate on an immediate short-term footing to keep the lights on for enterprise clients, and with a medium-term focus on surviving the next few weeks with the right emergency provisions in place to keep staff healthy and a financial fallback to keep the wheels on the track as we go through these very painful motions. Whether governments will be bailing out outsourcing firms and laid off contract staff is very fuzzy right now, and the concern is whether there is an outsourcing industry to save after all this is over - even if there are some emergency financial relief measures in the interim.

Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT ServicesPolicy and Regulations



In times like these you need to pivot your business model... now!

March 20, 2020 | Phil FershtTom Quigley

Posted in: Absolutely Meaningless Comedy



Quarantine... there is no choice

March 20, 2020 | Phil Fersht

Posted in: None



Covid-19: Learn to live and work with it... Fast

March 15, 2020 | Phil Fersht

Firstly, we are not going to shut ourselves at home and lose our minds for the next few weeks.  This is the first time we are experiencing a truly global pandemic and we’re all learning what the hell to do.  However, rather than staring into a paralyzed abyss of a suspended reality of virtual conference calls, binge-watching the entire five seasons of the Wire (again) and watching your son’s best friend’s mom forbid them sharing Pokémon cards, take a deep breath.  This thing is not going to ruin our lives.  We just can’t let it.

Getting from abnormal to normal... quickly

The next 3-4 weeks we’ll figure out what’s going on.  Firstly, we just don’t have all the data points yet.  We don’t know how many people will get infected, and the speed that this will move – but it’s getting clearer everyday.  In 3-4 weeks, we’ll all have much better data on the longevity of this thing, and how to manage ourselves accordingly for our families and our jobs.

We must quickly find our steady-living-state where 'abnormal is normal'. Once we have a clearer picture, and we’re all taking sensible measures of self-distancing and avoiding risky gatherings, we can start planning our life again.  We’ll know many people with whom we can meet, the houses we can visit, have small gatherings with colleagues we all know are observing sensible routines, even clients we can visit with in non-crowded sanitized offices, meeting rooms for hire which are Covid-19 compliant – or even each other’s houses, if the relationship is that good.  We won’t be hopping on planes for a few weeks, but we can make the most of our social and professional networks around us.

Its time to get to work rapidly framing our new future, or we could quickly get left behind. Economies are changing, and most clients’ needs are radically changing with it.  Business models that may have worked just a couple of weeks ago may already be dead in the water.  Emerging technologies such as effective automation suites and the need to redesign processes will be more needed by companies more than ever.  The hyperscale cloud will be the platform where global business is done.  Turmoil forces change, and the current maelstrom will create rapid opportunities for some, and significant challenges for many caught in the headwinds.  Keeping right on top of this is critical, and having research, advice and validation to support quick decisions has never been so critical.

This may not be going away anytime soon, so we just have to learn how to live with this.  When reading what the experts in viruses are researching, it’s pretty clear that things thing will probably dissipate in warmer weather, but is highly likely to return again in the winter.  In fact, it may just become a really nasty strain of flu that comes back in phases – and many of us will become immune because we had a strain of it, while there will also be preventative drugs and (touch-wood) a “Covid-19 shot” we can take that will negate our catching this.

We’ll emerge into a more virtual, hygiene-conscious world, and I really hope we’ll all be wiser for the experience as the whole value equation of society changes for the better

I’d be very surprised if this comes and goes in several weeks and we never hear from it again.  It will take weeks to dissipate, there’ll be recurrences in various geographies, and there’ll be constant speculation about new strains emerging.  Yes, this is a huge pain in the backside.  But it’s here and will likely lurk around our lives and society for much longer than we expect.  However, it has raised awareness of core hygiene issues so many people always ignored, and it has made the issue of fake news and lack of real, credible data the most critical issue today. It is also forcing many countries to address their woefully underfunded health systems and may even create a new value system where critical issues like climate change become more important political issues than merely the growth of the stock market.

The Bottom-line: it’s time to face up to this new normality… and we hope a new societal value equation

We’ll be back on planes eventually and grandstanding the next awesome technology innovations at conferences.  But I hope we’ll all emerge a little more humble, human and socially conscious than we once were. 

However, what we can’t do is wallow in paranoia, fear and allow ourselves to get sucked into a vortex of negativity.  The stock market will most likely get hammered, we’ll tackle a difficult recession and many people will likely lose their jobs.  However, our global economy will recover and we’ll find prosperity again.  Let’s just hope it’s a world where we care more for our people, our health, our education, and our planet.

Posted in: Policy and Regulations



Tackling Coronavirus.. The good ol' UK playbook works everytime

March 12, 2020 | Phil FershtOllie O’Donoghue

Posted in: Absolutely Meaningless ComedyPolicy and Regulations



Coronavirus: Why You Must Act Now

March 11, 2020 | Phil Fersht

Highly-respected writer Tomas Pueyo conducts a bone-chilling analysis on the speed of Coronavirus spread if we don't act now.  Just observing the cases in China show how rapidly the virus stopped spreading as soon as it was locked down.  These were his conclusions:

Let's examine some of the data highlights from his research - all based on real-time data being reported in the virus spread.  Firstly, see how quickly the number of cases in Hubei Province declines once the government implemented its lockdown:

Click to Enlarge

Pueyo goes on to perform some data modeling to show how sensitive every single day can be when implementing social distancing:

Click to Enlarge

The Bottom-Line:  Social distancing policies reduce the exponential spread to the most vulnerable

In short, we need to buy time to make sure the elderly and young people do not catch this.  The data from Taiwan already shows how effective social distancing and travel restrictions can be if implemented immediately as the country currently has the lowest incidence rate per capita.  The broad data set from Hubei clearly tells us that, although the government acted late, its impact on decreasing the spread was massive.

While most businesses in our industry must be commended for enforcing swift travel restrictions and events cancellations, the same cannot be said for many governments which seem to be adopting more of a "wait and see" policy. Will we regret not acting swiftly enough?  Only time will tell...

Posted in: Policy and Regulations



Meet Rajesh... in the flesh

March 09, 2020 | Phil FershtSarah Little


When the legendary Chandra moved on from his TCS leadership role three years ago, his successor had a very big pair of shoes to fill to lead, not only India's most valuable company, but also to sustain its position as a truly global IT services heavyweight that could rival the likes of Accenture and IBM on any deal.  Step up Rajesh Gopinathan, a quiet unassuming man who had focused on designing the internal workings of the firm for 16 years away from the spotlight.

So when presented with the rare opportunity to get time with Rajesh at the recent NASSCOM event in Mumbai, we couldn't resist grabbing the chance to get him to share some of his views with the HFS audience... no scripting, just straight from the heart. Within his words you’ll find his formula for success, key areas of focus, commitment to people, ability to engender both transformation and regeneration, all while maintaining a commitment to make technology work for its customers.... enjoy.

Phil Fersht, CEO HFS Research: Good afternoon, Rajesh. It would be great just to hear a little bit about you and your role at TCS, and how you’ve evolved in the company. Maybe you could just give us a little bit about your background, where you started out and whether you ever expected to be doing this job that you’re doing today?

Rajesh Gopinathan, CEO TCS: That’s an easy one, the last part of it. No. [Laughs]. I am an engineer by education; I did an MBA and then joined the Tata Group, and, pretty much, that’s been where I have been throughout. But I moved around within the group, worked in a few of the operating companies, and then the last 20 years have been with TCS. And, in fact, as is the culture in TCS, I have moved across multiple areas, so I’ve been in operations, I’ve been in sales, then I was in finance, and finally ended up in this current role. When I joined the company, we were less than $400 - 500 million, so it’s been a phenomenal journey.

The good news is all of us have worked together right from the beginning, so none of us quite knew what the future held, but it’s always been run by aspiration, you know? We saw the possibility, and we knew that this is something that can be attacked systematically, going after it one after the other. That’s the biggest part of TCS. Right? That we have all grown together, and different people are in different roles throughout. …It’s a unique company, to that extent; I don’t think, of this size and scale, there are too many around.

Phil: We talk a lot with clients about what got them here and the journey they came on for the last ten years to today. So, as you look at where you’ve come from, and where the company’s going, do you think the same formula is going to work for the next five years, that worked in the last five? Or do you think things are changing radically?

Rajesh: There are formulas that have worked for the last ten years which will continue to work in the future, and there are formulas that have worked which will not. The formula that has worked, and which will continue to work, is this unrelenting focus on the customer, and unwavering belief in our own talent. As long as you stay very close to the customer, don’t get too coy, or too ahead of trying to think that you know what’s better for the customer. Stay very close to the customer, stay relevant and be in cadence with them, one step, two steps ahead. I keep characterizing our business in this way, that, if you think of a product company, a product company, by definition, needs to be ten steps ahead of the customer. They need to reimagine what the future is. They need to think about the possibilities, and they need to take a bet on where the future will be. I would say a more management consulting-oriented company needs to be five steps ahead. It needs to have answers and frameworks for when a customer starts to think about things. A technology services company needs to be a couple of steps ahead of the customer. It should be ready to be able to provide the customer with a trusted place where they can experiment with the things that they want to experiment with.

These are three different business models, and you need to be clear in your head which business model you are operating with. So we have been very, very focused. It’s like surfing the wave. The waves will keep changing, but you need to define yourself as surfing the current wave. And, as the wave changes, you’ve got to keep on readjusting yourself. But the value proposition is unwavering in its focus; it’s to make technology work for our customers. 

Phil: Rajesh, do you think there’s a distinct shift happening, from technology change to culture change, to business change?

Rajesh: That’s an interesting way of putting that question, Phil. From a technology perspective, there was a period of massive heterogeneity, and now it’s coalescing, which has been the nature of technology. It keeps getting compressed; therefore, we need to equip ourselves to be able to deal with it again and again. So the way we think about it is, every time we hire a kid out of college we believe that the person will have a 30-year-plus career with us. So, with the speed that we are going, you are going to see three, four, five, eight cycles.

We have to be able to make sure that we can get our talent through each of those cycles. How do we build both the culture for that, as well as the infrastructure and the systems? That is the focus, so we massively invest in training. This last time around, we have taken a very fundamental relook at our training infrastructure. We have always been leaders on training, but we have built up a training infrastructure which was optimized for the last generation - large training campuses, classroom training, a course curriculum, three-month training, three-week training, those kinds of areas. About five years back, we started relooking at it. We said, “How do we break this up and align it to the current learning culture which is more tool based?” So massive changes. We broke down the course content, which was more aligned for this kind of push training, to be more pull-based. We changed our learning management system. We were on an off-the-shelf product; we threw it out and rebuilt our own training management system, completely reimagined it, gamified it and integrated that with our social platform internally, called Knome, that’s similarly gamified.

We changed the infrastructure. It’s a cloud-first, mobile-first approach, it’s available, on the fly, anywhere.  So across, you know, seven, eight different dimensions of learning, we completely changed it, and scaled it massively. We’re talking around 300,000 people being trained in 12, 18 months. So massive changes. So, it’s not just culture; you’ve got to back it with infrastructure and with the systems to be able to do it. 

People are inherently open to change.  There’s a saying that we use: There’s a flood. And as floodwater started going up, all the people got on top of a building. And there was a very god-fearing person. So, as the floodwater rose, a boat came along. A lot of people there jumped down and got into the boat, but this guy said, “No, no, God is going to save me,” and waited. The floodwater increased. Then a raft came along, quite a few people were on the raft. They said, “Come on, jump; we’ll take you along.” Most people left. The man said, “No, God is going to save me.” The floodwater kept on rising. A log came around, with four or five people hanging on to it. They said, “Jump. We’ll go together to safety.” “No. God will save me.” Finally, the floodwaters got to him; he drowned. He goes to heaven and says, “I was such a god-fearing person, and how come, god, you didn’t save me?” God said, “I sent you three saviors that you didn’t use.”

The individual has an onus to change. And the organization has a commitment to make sure that it won’t sink. But that jump has to be done by the individual. So that’s the culture that we’re building internally, that change is inevitable, but it is something that we as the business will facilitate, and there is a lot of emphasis on retraining.

 Many organizations, Phil, when they think about talent, it is something that is going to come from outside, they create a sense of fear internally. We have a very supportive culture, and it gives us the ability to regenerate internally, which puts us in a unique position because we can then retain knowledge, and acquire the new knowledge. Knowledge is not something to be used and thrown away. It is to be invested in. Our retention rates are the highest in the industry - that’s our biggest competitive advantage. We are almost 10 percentage points ahead of the competition on retention, and that’s where our advantage comes from. We are very focused on that. 

Phil: If you had one wish – from God – to change the services industry for the better (beyond salvation from floodwaters), what would that wish be?

Rajesh: Slow it down a little bit, [Laughs] and give a bit of breathing space. 

I think that’s about it. But, to some extent, it’s self-correcting. Unlike consumer tech, enterprise tech needs to work in the context of what exists. And new technology comes, by definition, not from the people who understand how to make it work. So, before technology gets permeated inside an enterprise, there is a real physical lag, and that is the period of time that you have to scale it up. And the fact is that, if it is not scaled up, enterprises cannot use it. You can’t just infinitely change technology at an enterprise level the way it happens in the consumer [space]. At least that’s the belief that I have. 

We need to find what that sweet spot is. But we will, we can - we can afford to change faster than what we are changing today. We are not in a situation like processors or memory where you are constantly on a collapsing timeline. I do believe that we have some physical boundaries that we can rely on. 

Phil: Well, thank you very much, Rajesh. It was wonderful to hear from you for the first time here. Am sure our readers will be very excited!

Posted in: IT Outsourcing / IT ServicesDigital OneOfficeOutsourcing Heros



Covid-19: Opinions are like assholes, everyone has one...but listen to the qualified one (weekend rant)

March 08, 2020 | Ollie O’DonoghuePhil Fersht

First of all, we are not epidemiologists, healthcare professionals or medical experts. Sadly, in our industry right now, this important distinction is moving into a grey area as everyone chimes in with their opinion.

Opinions are like assholes, everyone has one... especially when you can back them up with fake data

This post is a disillusioned response to the materials, opinions, and general wonderings now prolific on social media from people who, like us, don’t know anything outside of what their favorite newspaper columnist or news channel is telling them. If you want genuine medical advice about Coronavirus/Covid-19, please consult your local medical experts and healthcare practitioners – you won’t find much use in the musings of the technology analyst community, regardless of how passionately they pepper their opinions over social media.

As an employer where the health and safety of our employees, clients, families, and friends are paramount, we have been just as glued to the rapidly changing and seemingly unpredictable

Read More »

Posted in: Policy and Regulations



Welcome to the New Abnormal, where this post-corona business environment will never be quite the same

March 03, 2020 | Phil Fersht

Well, what a difference a few weeks make!  Our business environment had never become so social, so connected, so personal, so networked... Life had become a logistical quandary of constant air travel, hotels, conferences, meetings, workshops.  Just doing one's day job and spending time with one's family was becoming a huge challenge for so many. Then suddenly it's all changed overnight. Wow.

Welcome to the New Abnormal everyone...

As of March 3, 2020, over 90,000 cases of COVID-19 have been confirmed worldwide across 73 countries, with over 3,200 deaths. With over 100 cases now confirmed in the United States, including cases of undocumented origin, the virus is now spreading faster outside of China for the first time.

With the WHO, the CDC and various key government health bodies making it clear that this novel virus is “highly likely” to spread worldwide, we are now entering unchartered territory. While the current death rate seems to be hovering around 2%, indicating that while highly contagious it is not highly deadly, it is unclear how this virus will behave once it has a widespread stronghold in the community.

We have never before seen a respiratory pathogen that is capable of community transmission, but which can also be contained with the right measures. The unprecedented measures China put in place, albeit later than optimal, has helped curb the spread and taught us all the advantages and the perils of locking down entire cities or regions. Last week was a clear example of how emotions were guiding the stock market, as panic about manufacturing slowdown, fears of global recession and the unknown path COVID 19 will take, really set in. World leaders are trying to straddle the line between the strict safety measures that would halt spread, and not bringing entire economies to a halt.

Without clear guidelines, companies are trying to find their own balance between keeping their employees safe and not bringing their businesses to a standstill. Here at HFS, we are thinking of the same issues and are trying to find our own balance. In doing so, we wanted to share our thoughts on how we can all move forward in ways that protect both our businesses and our staff and without panic.

Make this a Quarter of “Hunkering Down”. Unlike after Sept 11, 2001 or even the 2009 H1N1 pandemic, we are technologically poised to create a new virtual business environment. We have the technology to empower our employees to work locally or even remotely, as well as the ability to do very tech savvy virtual meetings. Strategy sessions, client visits, internal meetings – these are all things that can be temporarily moved to a virtual setting if and when needed, limiting travel to essential travel only. Without clear travel guidelines, this technology will allow businesses to let their employees choose which travel they are and are not comfortable undertaking.

It was estimated today that during the peak of COVID-19, an estimated 1/5th of all UK workers could be off sick at the same time. Allowing flexible virtual working environments by empowering employees with the technology they need to do it will undoubtedly help reduce the numbers off sick and help keep companies stable.

Discuss openly with clients and business partners what they are comfortable with. While some companies have strict new travel policies that have just kicked in, issuing a wave of what will be the new abnormal, for others it may be business as usual unless directed by governments to do otherwise. Discuss openly with clients and business partners their comfort level to travel and attend meetings/conferences and share your own polices. Make it very clear that in this new environment, most if not all work can be done virtually.

Discuss openly with your employees what they are comfortable with.  Some of your staff will be gung-ho to risk the virus while others will be nervous to travel on business, especially internationally.  Firstly fully understand your liability here - you may have to cover hotel expenses if staff are help for screening/quarantine periods (and some screening costs alone are in the thousands).  Once you are comfortable with your exposure as an employer then you can work sensibly with your staff to make sure everyone is comfortable.  In the coming weeks, everyone will be accepting of staff who just do not want to travel and those firms who are simply not willing to risk their staff hopping on planes. This is part of the new normal folks!

Invest in getting far more hands-on with the technology needed for this new environment. Companies must ensure that all employees have adequate access they need for teleconferencing and video conferencing capabilities. Make sure you have the tools in place match the need will be critical, as suddenly everyone's going to have a lot more time on their hands behind their desks, so we need to use video far more than we were, get much more comfortable using sharing apps such as Microsoft Teams, Slack, Google Hangouts, Apple Facetime, Skype etc.  In short, the culture of doing business is changing dramatically from the physical to the digital, and we have to get used to it fast.  We've yearned for digital for so long, now we have to use it!

Keep up to date on information. From reliable sources like WHO, CDC, or government health agencies only. Not passing on misinformation will be critical to ensure that this virus does not become worse for our minds than our bodies.

Unfortunately, it is not all up to us as companies or individuals. As more world leaders try to straddle the balance between keeping economies going and keeping their country’s safe, concerns have crept in. In addition, it is unclear the path this virus will take and therefore uncertain if the emergency response will be enough at the peak of the pandemic. It is HFS’ opinion that all countries need to prepare.

Learn from the example set by China. While much data points to an initial Chinese cover-up in early December, it cannot be argued that China’s move to lockdown Hubei Province hasn’t helped stem the tide. Despite the great risk to their own economy and the global economy as a whole, China acted in a manner that has bought other countries time to prepare for likely spread. Global leaders must now be ready to do the same kinds of school and government office closures if needed.

Prepare for worst-case scenarios and nothing less. Over-preparedness has never harmed anyone. Ever. It’s been annoying and it’s been frustrating but it never hurt anyone. Governments must adopt this philosophy and put plans in place to prepare for possible office closures, school closures and travel freezes as well as the need for medicine, ventilators, doctors, hospitable beds, etc.

Make widespread testing available and accurate. After returning to Miami in January from a work trip in China, Osmel Martinez Azcue was developing flu-like symptoms, just as coronavirus was taking over the country he had visited. Recognizing the seriousness, he felt like the responsible thing to do was check himself into one of Miami's largest hospitals. The hospital staff followed the proper protocols, took the necessary precautions, and put Azcue in a closed-off room. Fortunately, blood analysis found that he simply had the flu.

Mr. Azcue was rewarded for his diligence with thousands of dollars worth of medical bills. If governments are going to fight this via as much containment as possible, this cannot happen. People cannot avoid testing because they are afraid of the cost of finding out. What would happen when the coronavirus outbreak spreads in the United States if Americans avoid seeking medical care because they're concerned about bills they can't afford? It would be catastrophic in terms of containing the virus, devastating to the economy and even more crucial, critically dangerous for those who may become ill. Testing should be made available for all so we can all work together to contain and mitigate the risks facing the global community right now.

The Bottom-Line:  Life just changed but at least we can finally become Digital with how we do business

When we polled 355 enterprise leaders across the global 2000, the shift to digital from physical / face-to-face ranked number one as their primary business pressure.  Well now they're going to be forced to make these pressures come true:

So - right now - it feels as if the whole fabric of our industry is being ripped apart all around us - and in some ways it is.  However, this forces us to brave up to the world around us in a way we never envisaged... 

Less travel = more family time and staff time.  For me, personally, this is revolutionary.  I was hopping from country to country like it was just normal ...and this has made me take stock.  Fortunately, I have spent so much face time with my clients, industry friends, and colleagues that I am sure we can survive for a while on videos and phone calls.  I can also spend more time with my family who saw me as little as much of my team!

This will pass, but it may instill some better work and life habits... more time behind a desk means I can call all those people I have neglected, write more research pieces, think deeper about the future and where everything is going.

Peace out friends, we'll get through this one =)

Posted in: Policy and Regulations



Big is no longer as beautiful as Mid-Tier IT service providers surge with double-digit growth

March 01, 2020 | Phil FershtJamie SnowdonMartin Gabriel

Just a few short years ago, the world of the mid-tier service providers ($500m-$3bn revenues) was a pretty depressing place - many clients were wary of using lesser brands with smaller scale and high attrition and preferred to stay loyal to the Tier 1 brands and beat them up on price.  Growth was pretty stagnant and most of them just wanted a lucrative exit, such as IGATE selling to Capgemini, Syntel to Atos, Luxoft to DXC etc. Fast-forward to the last 2-3 years and suddenly the smaller service providers are in vogue, being seen by many clients as more agile, more capable of client intimacy, more flexible and eager to take on complex projects and avoid the exhausting turgid RFP bake-offs which squeeze the value out of engagements before they have even started:

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EPAM ensures not all roads lead to India. While we have been overly-focused watching the success of the Indian-heritage IT service providers, the biggest standout performer is the predominantly Eastern-European provider EPAM Systems, which has quietly built out its app development capabilities over the years with its powerful access to tech talent in places such as Minsk, Moscow, St Petersburg, Katowice, Budapest etc.  The firm's focus on complex app development, software engineering, IT security and a recent investment in Blockchain is positioning the company well for strong growth in the foreseeable future.  It's also taken advantage of DXC's acquisition of Luxoft's to become Eastern Europe's standout IT service provider.

Hexaware, Mindtree, Mphasis, LTI, and NIIT lead the Indian-heritage Mid-tier growth spurt.  With an IT services market barely growing at 5% annually, for the five Indian-heritage Mid-Tier firms to grow at rates between 13% and 17% is quite remarkable. Clearly, the bias over brands is reducing dramatically as clients seek greater intimacy, focus, and dedication to their needs.  We can dive into all these firms to call out where each iswinning, but the main factor in common is the fact that client needs are changing - they increasingly demand shorter projects as opposed to these clunky frustrating multi-year relationships that take many months to set up.  I cannot tell you how many executives from these firms have said to me that more and more of their clients simply want work done - and fast - and do not want to jump through all the hoops of the legacy outsourcing world. With the need for systems modernization, digital app development, data management, and automation at an all-time high, clients are more willing than ever to trust those IT services partners where they can still get the CEO on the phone, who understand them, and are willing to move mountains to succeed for them.

Let's take a deeper look at what is going on at enterprise intentions when their current primary outsourcing contract expires:

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Only 23% of clients are prepared to settle with their current partnership.  The traditional model is only working for a minority of outsourcing clients today.  If you're a service provider leader and you haven't identified who these clients are (and who are not), then you are in serious trouble.  Smart Mid-Tiers avoid these clients - no point wasting valuable resources on lethargic clients who really only care about keeping the lights on.

Another quarter (26%) wants to move the needle but may opt for a hybrid model. Meanwhile, 27% are getting itchy to kick their service provider up the rear end and get them embedding some real automation and outcome-focus into their delivery if they are to renew with them.  This means they want to see real commitment to reduce the dependence on the staff army and see real investments in process automation to digitize their delivery.  These are relationships where Mid-Tiers are frequently being brought in to snaffle pieces of the pie to create competitive tension.

A third is more decisive and likely to make the switch.  31% have clearly got to know their current outsourcing provider only too well over the years and have zero hope they can get any real co-investment out of them.  As we have discovered over the last couple of years, some providers have made real investments in competencies like automation and AI, while others have merely added a little sugar-frosting and persist with selling the same old model with some cost shaved off the package, and some added incentives for performance (i.e "outcomes").  Moreover, ambitious outsourcers and Mid-Tiers are heavily targeting their competitors' disaffected clients and are willing to offer eye-catching deals to win their custom.  This can include attractive pricing tied to aggressive delivery staff reduction over a 3-5 year amortization plan that is offset by efficiency savings due to automation and digitization.  In other instances, clients are breaking up the provider mix and opting for multi-source relationships with shorter engagements to drive more value and innovation.

In some cases, it may also prove more attractive for the legacy provider to shed the business than fight to keep a client that will quickly become unprofitable (and the industry is littered with those engagements). In several services markets, we are seeing emerging offerings from providers where they are offering fully digital offerings (with vastly cheaper support), such as TaskUs in the customer call center market, or nDivision in managed IT operations, which can undercut traditional outsourcers so aggressively, there is no feasible way the traditional providers can compete.  In addition, we are seeing several India-centric service providers offer $-per-chat support models for some transactional services that are essentially chatbots offering basic-level support services at costs as cheap as 15 cents a chat... we are finally seeing "digital disruption" attack the traditional outsourcing market that has somehow staved it off for years thanks to lethargic clients and lock-in contracts.  

20% have given up and will just look at something very different.  Maybe the cost of changing the model is just so abhorrent it's time for clients to pull the work back and fix it themselves.  Some are so fed up with the lack of innovation in changing anything they've realized they have smarter people on staff who are better deployed to take the work back, staff up to execute it while they explore all their digital and automation options.  Maybe they will invest in an integrated automation platform, and use the funds saved by backsourcing the work to invest in a digital backbone that enables them to perform work in a touchless, smarter manner?  Again, there are ample opportunities here for smart Mid-Tiers to pick up new client work and prove themselves to shrink legacy IT systems, develop new digital backbones and help their clients achieve real business outcomes.

The Bottom-Line:  In this current climate, the time is riper than ever for these Mid-Tier service providers to grab more market share

The IT services industry really needs this healthy competition as it gives clients more choice and forces the Tier 1 juggernauts to change their delivery model and entire approach to engagements.  And during a time when there is worrying economic uncertainty, global panic about some nasty flu virus, clients will need more support than ever to work with smart partners which can support them remotely, jump in to help critical situations are a moment's notice, and show the ability to really listen to their needs.  

Posted in: IT Outsourcing / IT ServicesService Provider Analysis



RPA died. Get over it. Now focus on designing processes that deliver superlative experiences.

February 21, 2020 | Phil Fersht

Seriously folks… there’s the hype, then the excitement, then even more hype… and then the realization that it wasn’t quite what you thought... and then, finally, coming to terms with the fact you're no longer going to hit that elusive jackpot.  To hear some people still showering us with cryptic unaudited revenue numbers, and from neolithic analysts still parroting their marketing, just spanks of desperation to keep faking a market that simply isn’t there.  Can we just push the off-button on this charade, please?

What, exactly, is "dead" and where are the signs of life... when it comes to process software and enterprise automation?

The RPA that "died" is the poorly-defined "RPA" that got hyped up to create hockey-stick growth excitement for investors. It wasn't defined correctly, was a mash-up of desktop automation with pure-RPA (unattended back office) and all the deals that got signed were "attended" so weren't even "robotic". 

The pieces of RPA that survive are the process orchestration tools (discover, design, automate and mine) that form part of what we see as the evolution towards "Intelligent Digital Workers" which augment human experiences and help with real customer-to-employee intimacy. Let's also not forget these apps also need to be enterprise-grade, compliant with ITIL and security factors etc. Scale only occurs when the business designs and IT enables... The winners in the future are smart enterprises with leverage technologies to anticipate where their customers are going... often before their customers even know themselves.

It's been a year since we declared RPA "Dead"... so what's been happening since?

It’s been nearly a year since we penned our now-infamous blog “RPA is dead.  Long Live Integrated Automation Platforms”. Coming from the analyst firm that first introduced RPA to the world in 2012, this caused quite the stir.  In fact, one of the leading service providers even shutdown its RPA practice as a result and most of the others are left scratching their heads still trying to figure out where the money really is…Since the “dead” post, we’ve seen a swift realization from investors that the RPA “market” was being engineered by a small handful of marketeers attempting a reincarnation of the dot-com bust era where everyone goes nuts over robot butlers and a bunch of naïve enterprise clients who’d been oversold too many RPA licenses that they had any idea how to deploy.

We weren’t helped by a small handful of analysts who really should know better than to pontificate false marketing in exchange for an ego-stroking and glittering robo-stardom they’d never before experienced... and a great big Vegas party that precipitated the most embarrassing collapse we’ve seen in the history of process technology. Many good people had bet their careers on hype, false hope – and blatant lies – and are still on the job market trying to get their lives back on track. In fact, the whole fiasco very nearly destroyed the real market that these tools can help catalyze, if they are allowed time to develop and form part of a broader, integrated solution.  Our recent HFS Top 10 covers this form the view of 300+ current adopters, however, this market is changing very quickly and it won't make sense in the future trying to put a lot of products in the same "market" that is changing into one that encompasses so much more than basic screen scraping, macros, and process loop recorders.

Instead, we need to focus on the development towards an intelligent digital workforce that help us deliver real customer and employee experiences

What isn’t dead is the fact that RPA created the path (and conversation) to a much bigger market that’s evolving, once you get real about business process issues and the true path operations leaders need to take to make them awesome.  But, if you can’t accept we’re in the early stages of a marathon, not midway through a 110 meters hurdles dash, we can define an exciting future for the world of automation.  But a “bot for every desktop”, or “hyper-automation”? Really, folks?  Can we just start talking again in plain English about what is actually realistic, what works and how we need to change ourselves to get there?  Can we start talking about an Intelligent Digital Workforce?  Can we start looking at how to move from dumb admin bots that keep old process loops and apps stitched together, and how enterprises can invest in intelligent workers that help us achieve much more intelligent interactions and experiences?  Can we focus on intelligent digital workers tuned to deliver (and learn) superlative experiences from processes we have designed to bring our customers and employees together?

The emergence of an Intelligent Digital Workforce is a key component of developing a OneOffice Experience.  RPA creates the foundation, but the next phase is to evolve to Intelligent Digital Workers

This shift toward intelligent digital experiences is a foundational element of HFS’ OneOffice Experience for Employee Experience (EX) and Customer Experience (CX). CX will increasingly be considered an umbrella term for the experience interacting with an entire organization, whether it’s the customer, partner, employee or any other entity. An EX culture is one where people work together shifting from transactional interactions to deeper relationships. Organizations need to ensure they get the balance right; which includes optimizing the use of emerging technology with a robust business case to improve CX to the long-term benefit of the business, getting the right information flows in place, eliciting strategic advantage and ensuring exceptional CX:

The HFS OneOffice Experience typifies how customer, partner and employee experience are coming together to drive a unified mindset, goals and business outcomes.  OneOffice conceptualizes how customer-centric experiences can be designed and supported by end-to-end processes across what we used to term front and back offices. Today's RPA bots essentially are embedded in the "Digital Underbelly" where they form part of the foundational processing layer for enterprises, while the emergence of smarter tools that can truly augment humans are where the future of RPA lies. Iftoday's current crop of software providers can develop their bots beyond the current static tools that really just keep old processes chuntering along. Digital Workers are emerging as the enabling technologies that are slowly becoming a critical component of developing CX design and delivering on the experiences smart process operators are designing processes to support.

HFS highlights five important principles of using Intelligent Digital Workers that all companies looking into implementing these solutions need to consider:

The Bottom-Line:  Intelligent Digital Workers are a powerful tool for connecting customer and employee experiences to drive a unified mindset, goals and business outcomes.  The RPA vendors need to get there if they want find their edge in the market

Experiencing a OneOffice enterprise with Intelligent Digital Workers looks different for every organization, but considering the HFS 5 principles will help your company define and execute on a strategy that benefits all of the stakeholders in your ecosystem rather than just having a “tick the box” approach to the technology.  Some companies will focus first on customer-facing, others will start with making internal processes easier and more intelligent.  Implemented well, Intelligent Digital Workers can better connect CX and EX, helping to provide the digital insights and intelligent support that a OneOffice experience requires. This is where the real market for process automation is heading... whether the current cast of RPA characters can make this shift is not inconceivable, but do they have the time and patience of their investors and clients to make the shift?  Time will tell... but not much time!

Posted in: Design ThinkingDigital OneOfficeRobotic Process Automation



NASSCOM 2020... no Coronavirus excuses as India comes bowling back

February 16, 2020 | Phil Fersht

Not quite middle-stump, but India's bowling a better line these days, as NASSCOM is graced by cricketing legend Kapil Dev

After last year's effort, our expectations were set at a pretty low bar for the annual NASSCOM extravaganza in Mumbai last week. The IT services industry had surely reached its rock-bottom when it comes to death by PowerPoint and the same old bleh!

But no... we were pleasantly surprised that bottom has - seemingly - been reached and we're actually clawing our way back!

Ten Takeaways from the NASSCOM India Leadership Forum 2020

1. Coronavirus.... what Coronavirus?  Unlike those wimps crashing out of Mobile World Congress, the IT services dignitary did not think for a second of finding a germophobic excuse to bail... In fact, attendance was visibly up from last year. I did suggest to some suppliers that they should dish out face masks brandishing their logos, but no-one seemed to care.  

2. Start-ups and emerging service providers and were out in force.  One of my personal gripes with NASSCOMs past has been the dominance of the old guard services founders and less of the emerging slew of providers and startups.  This was the first time the emerging Indian IT sector drowned out the marketing glitz from the establishment.  Here's a decent survey on the Indian startup sector from the Reserve Bank of India.

3. Big, big focus on changing talent needs.  One key theme that dominated conversations was the recognization that Indian service providers must invest very heavily in training their talent which really understands business processes and applies it to IT.  Only having business process understanding... or only IT... was a fast track to legacy.  "We have enough IT guys" was stated by more than one senior executive.

4. "Experiences" dominating the conversation.  The rapid growth being exhibited from the mid-cap service provider sector (Hewaware, LTI, Mindtree, Mphasis, NIIT, Persistent, Virtusa, Zensar et al) is being driven by enterprise clients' desire for great intimacy and experiences from their services partners.  The days of big, bulky, multi-year contracts are being replaced by rapid, high-impact projects where customers have quicker routes to outcomes and can demand greater value and complex support.  Brand is being superseded by expertise and speed-to-market and the mid-cap sector is clearly benefitting. Five years ago, working in a small-scale provider was depressing, with the sector stagnating from flat growth and an inability to compete with the tier 1s. Now the mid-sector loves taking on the juggernauts in deals where the client has deep intimate requirements warranting immediate attention from the A-team.

5. Some big hitters (and bowlers on stage) energized the whole event.  Hearing from Tata's Chandra was a much-needed boost for NASSCOM... he still cares about his first love of IT services, even now as he lords it with world leaders at Davos these days.  It really was terrific to hear the energy from Rajesh Gopinathan (CEO, TCS), Salil Parekh (CEO, Infosys) and Rishad Premji (Chairman, Wipro) duking it out on stage, and we also were treated to a strong session from Tech Mahindra's CEO, CP Gurnani, on the FutureSkills Prime initiative.  However, none could surpass the awesome appearance of one of cricket's all-time greats from the Hadlee, Botham, Viv Richards era... Kapil Dev (pictured above). 

6. Lack of presence from BPMs (BPOs).  Only WNS, the industry's highest growth services firm, was out in force.  The other emerging BPM firm of note was Datamatics, which is making a determined effort to get noticed.  Very little from EXL, Genpact, Sutherland etc. which is disappointing considering the rapid blending of process and technology in client engagements.

7. Lack of presence from non-Indian centric service providers.  While it was great to have Capgemini's India head, Ashwin Yardi, grace his presence, there were few hitters from the likes of Accenture, IBM and DXC present, despite their seismic armies of Indian IT talent.  NASSCOM needs to be about embracing global business investing very heavily in India (and close to half of the employees of Accenture, the IT services leader, are India-based).  

8. Automation fading fast from the agenda.  Perhaps the biggest surprise was the noticeable lack of presence from the automation firms.  A couple of sales booths for AA and UiPath were seen, but the only leaders from any of the automation firms to grace their presence were Govind Sandhu at AntWorks and Atul Soneja of EdgeVerge.  The days of cheesy robot posters and embarrassing robots on stage seem to be in the past as automation software becomes part of the fabric of services, as opposed to a major differentiation point.  Are the marketing coffers of the automation firms running dry, or do they feel they need to focus on marketing themselves beyond partnering with service providers these days?  Hmmm...

9. The gossip surrounding Wipro's successor dominated the chitchat.  Whether or not this is a good thing, the rotating cast of personalities leading the heritage Indian service providers dominates the headlines in India.  Whether Wipro likes it or not, they have now achieved an Infosys-level feverish status in the gossip columns, regarding Abid's successor.  I think about 30 executives from Wipro's competitors have now been linked with the job...

10. The lack of Cognizant executives also added to the gossip circles where their former one-zeros are heading... from Frank to Raj to Gajen to Prasad... people want to know where all these dudes will end up.  Surely not Wipro =)  Speaking of former Cog-natives, we were also lucky enough to meet MindTree's new CEO, Debashis "DC" Chatterjee (a former Cognizant leader) who's clearly enjoying the challenge of driving one of the mid-caps in Mindtree, and Harish Dwarkenhalli, who recently joined Wipro as President of Cloud Enterprise Platforms. 

The Bottom-line:  The energy is back as growth picks up and clients really need agile IT services partnerships

For the past three years, we've all argued whether India's IT services growth was going to be anything more than a puny 2-3%.  Suddenly, we're back at double-digit levels for the market leaders and most of the mid-caps, while the profit margins seem to be holding true.  There is a broad services industry recognition that quality of execution and the ability to deliver real client experiences trumps a few cents on the rate-card in a bullish global economy. The reality is, with IT, the more the India-heritage IT service providers invest onshore near its core enterprise clients, the better this is for India's growth as the IT services industry's dominant home. Coronavirus?  What Coronavirus...

Posted in: Digital TransformationIT Outsourcing / IT ServicesOutsourcing Events



Wipro must appoint a ruthless CEO with teeth to escape its current predicament

February 09, 2020 | Phil FershtOllie O’DonoghueSaurabh Gupta

When Wipro’s CEO Abid Neemuchwala announced his resignation it was a shock for employees and the industry as a whole.. but it was less of a surprise to those who knew him well. Abid's a humble, really nice guy with an incredible work ethic and intelligence.  He also has a smile that lights up a whole room.  

The poor man was clearly exhausted after four grueling years trying to steer an oil tanker that clearly needs a more aggressive leader with a clear mandate to make painful changes.  Don’t mistake us here – Abid is one of the service industry’s greatest strategists and inspirational figures, but Wipro is not ready for this type of leader.  It needs someone who can drive aggressive change - and fast - to a company that has lost itself in its heritage culture and is slipping behind several the India-heritage services leaders in this cut-throat market.  Being a "safe pair of hands" is table stakes these days for offshore-centric services, and the winners are moving aggressively with onshore investments and outcome-driven delivery models to win the hearts and minds of clients.  While Wipro has its bright spots (read on), it's lost ground to some of its competitors and its next CEO has to make some deep changes to personal, structure, leadership and strategy if it wants to closes these gaps quickly.

With the recent CEO changes at IBM and Cognizant, Wipro needs to look more at Cognizant’s recent changes if it wants to set itself on a new course for growth

Meanwhile, leadership changes elsewhere in the market have seen IBM change CEO’s – a prospect that could see the lumbering firm recover market dominance and growth after several years of confused direction and taking a pounding from the likes of Accenture and TCS.

In addition, Cognizant went through a similar situation with Francisco D’Souza, who’d overseen an incredible rise of the firm, but struggled to make painful changes as the firm’s leadership became complacent and lost their edge in the market.  Their response has been to appoint a dynamic young leader in Brian Humphries, whose goal is to reenergize the firm’s leadership and culture.  He has already made many leadership changes, brought in several outside executives and created a culture of urgency right across the firm.  “It was like Cognizant suddenly woke up after falling asleep” was the feedback we received from several of its clients.

While both IBM and Cognizant seek deep changes within their internal culture with new leadership, they are very different beasts and require very different leadership styles.  IBM requires someone who's lived and breathed the culture and knows how to make the right changes to align with the right strategic direction.  Cognizant needed a leader to shake up a terrific firm that had become a victim of its own success and was suffering from complacency. 

Wipro’s board must seize this opportunity to redefine itself – and fast

However, that change was planned, Wipro’s doesn’t seem to have any real plan behind it – and belies a degree of chaos and anarchy that could become disastrous for the firm. In a complex and unstable global political environment, clients look to providers to bring stability and simplicity – impromptu leadership changes and boardroom dramas, while fodder for analysts and journalists, go straight to the top of the risk register in existing engagements and can see some clients back our before the ink is dry on new deals.

Infosys learned this the hard way, when its leadership troubles became an almost comic roadshow in 2016/2017. Wipro already has enough to contend with in a market gripped with buyer cynicism, hyper-competitive incumbents, and geopolitical uncertainty – at the very least it must find a replacement for Abid who will get the firm back on track and reassure the market that 2020 will be a year of progress, not chaos, for Wipro.  In addition, the next CEO must have the empowerment to make tough decisions without the constant micromanagement of the Wipro board in order to making rapid improvements to its...

  • Current vulnerable market position;
  • Mostly middling performance across market segments;
  • Articulation of "Why Wipro" to clients, partners and prospects.

The market reacts to the shock exit of Wipro’s CEO

Unsurprisingly, the market has reacted somewhat negatively to the impromptu departure of a leading IT services firm’s CEO – stock price dipped on the news after a relatively healthy opening to 2020. Under Abid, the firm pushed hard into the digital services space – and since he took up the mantle in 2016, closed the acquisition of cloud services firm Appirio, as well as design agency DesignIT among others to support the firm’s strategy to move out of highly commoditized IT Services and BPO, and take a bite out of the more lucrative and rapidly growing, albeit ill-defined, digital technology and services market.

The firm push to build out digital and design capabilities has, to date, had mixed success. While the firm has been able to blend technology, strategy, and design successfully for some core clients – it has struggled to expand at the same rate as some of its competitors (see below). Furthermore, its traditional IT services business came under more pressure from the hungrier mid-tier firms, such as LTI, Mindtree and Mphasis, while its closest market competitor, HCL, has been playing a market-cap neck-and-neck race with the firm as it elevates its reputation in the market.

Under Abid, Wipro also struggled to keep its market share – falling further and further behind the rapid growth of TCS and Infosys. A market signal not lost on investors and market commentators when the CEO announced his resignation.

Unlike some of its competitors – such as Infosys – which have managed to keep their heads above the double-digit growth waterline for the majority of recent quarters, Wipro has only just managed to keep itself in positive growth territory. Under Abid, growth accelerated briefly at the start of his tenure, but has been on a bumpy decline since as the firm struggled to make the most of its digital acquisitions and take on rivals in the highly competitive IT services market. Even with relatively high margins, the results just weren’t healthy enough for an industry that thrives on scale – and its subsequent success is marked on revenue growth. With the last few

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Posted in: Business Process Outsourcing (BPO)IT Outsourcing / IT Services



If you don't ease your process debt, you'll never benefit fully from automation

February 08, 2020 | Phil FershtSarah Little

How many times do you have to scream at people to make them realize that they will never be successful tinkering with shiny new automation tech tools if that cannot design end-to-end processes that achieve their desired outcomes?  Automation tools can truly help make processes work effectively across disparate systems, once you have got rid of the awful process debt weighing down your organization. 

So what, exactly, is "process debt"?

When you are head to head with competitors, you must have your business processes designed on solid ground to accelerate the delivery of value – using technology and integrated automation to connect the dots.

Tech entrepreneur Ben Horowitz quoting Shaka Senghor, who he considers the CEO of a prison gang, in What You Do Is Who You Are, sums it all up perfectly... "Imagine you’re a developer and someone says, ‘Here’s some land, and here’s a million dollars. Could you build me a house on this land?’ So you build this guy’s dream home. And he moves in and then his family starts getting sick. Because what they didn’t tell you is that the land is toxic and it was a f***ing dump site …Nobody was digging into the dumpsite itself.” 

Net-net, technology isn’t necessarily the heart of making the connections from front to back – it’s making good choices about what you automate and having the business process in place to back it up. 

You can read more about our recent HFS Leadership Roundtable here, where we got deep into the weeds of process debt issues.

Posted in: Intelligent Automation



Why on earth would IBM buy an RPA firm now?

February 02, 2020 | Phil Fersht

UiPath's "Chief Evangelist" Guy Kirkwood (who once famously proclaimed "AI is bollocks") has predicted that new IBM CEO Arvind Krishna will soon turn to RPA and make an acquisition

Of course! Ginni was driven out because she failed to get the Blue Prism deal over the line, and Arvind is now in the hotseat to make damned sure they don't miss out on UiPath...

Of course!  All this "hypercloud" nonsense and the $34bn of loose change they dropped on Red Hat was just a diversion from their real intention... to make IBM the Big Blue RPA monster!

In all seriousness, we were speculating about IBM and Blue Prism during RPA's infancy in 2016 (see blog)... and while it made sense back then (and at a far cheaper price tag), it sure doesn't make any sense now. SAP, Microsoft, Pega, IPSoft and Appian have all made modeinvestments to have their own RPA capability, and all of them chose either very small scale acquisitions or developed it themselves (in Microsoft's case).  I also fully expect Salesforce and Oracle to tick the RPA box at some stage, but it is highly unlikely to be with one of the big three with a nine-figure price tag.

Now there is a small chance I could be wrong and IBM has suddenly decided to take the plunge several years too late, but it really makes no sense at this point. 

Posted in: IT Outsourcing / IT ServicesRobotic Process Automation



IBM changes leadership just in time to survive in today’s punishing IT services market

January 31, 2020 | Ollie O’DonoghueJamie SnowdonPhil Fersht

Gini Rometty, the queen of Big Blue is stepping down after a turbulent few years at the helm, where her “imminent” retirement has been one of the industry’s most discussed topics since the failure of Watson to reach its early potential.  However, the rapid shift in direction towards hybrid cloud - with the Red Hat acquisition just over a year ago - has rapidly paved a new direction for Big Blue and, perhaps, leaves Gini with a lasting legacy that won’t be all about her supercomputer that found fame on Jeopardy!

The appointment of Arvind Krishna, the architect of IBM / Red Hat, signified its full-throttle scramble to take the Global 2000 into the hybrid cloud

And in here place steps up the head of the firm’s cloud business, with Jim Whitehurst, the CEO of Red Hat, moving in as president, but more significantly, Arvind Krishna, IBM’s architect behind the deal, being voted in as the new CEO.  With Krishna being the brain behind the Red Hat double-down, he knows how to take the calculated risks which IBM must take if it’s going to turn the aircraft carrier around.  Moreover, he can move fast, with the Red Hat play being barely more than a year old and the emerging IBM cloud business quickly becoming the most coherent and unified of all its business units that HFS has encountered.

This speed and clarity of direction speak to Krishna’s ability to pull what was a rapidly evolving team together with a clear mission and vision.  Again, if he can replicate this at scale across IBM, it might be able to solve the firm’s biggest challenge - rationalising a sprawling estate that has been left to grow wild for almost a decade.

Hybrid Cloud is where IBM has made its bed, and the new IBM leadership team is determined to take full advantage

New HFS Research shows this market is expected to ratchet up by more than 20% this year to $72 billion as the market for hybrid private/public cloud becomes the most vital progression corporation need to make to scale and survive in today’s global digital business environment:


Source: HFS Research 2020,  Click to Enlarge

While all the cloud talk has been about the rampant growth of the digital juggernauts Microsoft, Amazon, Alibaba and Google, no one has stepped up to support complex hybrid public/private cloud transitions better than IBM in recent times.  It’s one thing providing the capacity, containerization and scalability, but another to layer on all the global support to tackle the complexity of integration with corporate legacy IT systems, along with all the ongoing support and security needed to manage this transition effectively.

The new leadership must unite the warring factions within IBM

IBM’s new leadership team has a wealth of experience and can reverse the fortunes of the firm – but they have their work cut out for them. It may have been the king of the services market a decade ago, but the firm has been too pre-occupied with siloed business units scrabbling around on their own initiatives trying to be the next big thing. Over the years, IBM has moved from a trusted dominating force to a whale gradually bleeding out as IBM Watson became somewhat less relevant in a world where business leaders were struggling to make RPA work, and newer faster rivals in the mid-tier started eroding their market share with competitive pricing and flexible delivery. Above all, IBM needed a clear vision, one that cuts through the digital drivel that pre-occupied buyer mindshare. And sadly, that just didn’t come under Rometty.

Battling the complexity of IBM is something clients of the firm tell us is a major inhibitor to contract growth. Disparate sales and delivery teams make it, at times, impossible for clients to expand engagements into new areas and as analysts, we’re often told ‘seriously? I didn’t even know they did that?’ when we talk about IBM’s broader capabilities. If the new leadership team are going to reverse the fortunes of the leaking oil tanker, they’ll need to address this first. And can do so by implementing the following:

  1. Incentivizing sales teams to cross-sell across the whole of IBM’s services. Clients dont care which business line recognizes the revenue or which sales team gets the commission.
  2. Build a layer of consulting as the window to the rest of IBM. Simplifying a complex and sprawling empire will take time, and while important won’t change quick enough to match buyer expectations. Building genuine service-agnostic consulting capabilities to lead engagements across IBM will go along way to plastering over the cracks while the rest of the business is modernized.
  3. Loosen the purse strings and be prepared for flexibility. The services ecosystem has changed rapidly, and IBM’s now competing with firms willing to take a gamble on client engagements and offer flexible pricing models. IBM can’t rely on its reputation alone to compete anymore, and must be willing to invest in clients and take risks – at least to a greater extent than it has in the past.

IBM has a powerful reputation – but this is no time to be complacent

The phrase ‘nobody got fired for bringing in IBM’ has been a boon for the firm and isn’t far from reality. The firm’s reputation for delivery and innovation proceeds it which means sourcing teams get off the hook, even for disastrous engagements. But over time even this lofty position has become hard to maintain as a new generation of buyers pours into senior positions and competitive pressure force enterprises to look for partners outside of the usual suspects.  

The new IBM leadership team has a unique opportunity under Krishna, to re-position IBM in the market as a dynamic and modern services firm, leveraging its heritage brand and reputation to push a clear message. If you pulled a representative sample of the market and asked them what IBM’s strategy is, its vision for the future is, or even what their big bets are, you’d be met with stony silence. IBM must urgently figure out what its story is, and what it wants to be in the future if it’s to claw back its position as the IT Services firm of choice.Is the new leadership team a warning shot for the hyperscale cloud giants?

In cloud, however, IBM has always had a relatively consistent story, supported by an enviable track record of delivering complex infrastructure services to clients. While the emphasis on public cloud pushed IBM out of the limelight as executives piled into hyperscale, IBM has made a killing pulling together the full-stack enterprise infrastructure. The Red Hat acquisition showed IBM was ready to put its money where its mouth is and commit to targeting the hybrid cloud market – a rapidly growing segment as the lure of ‘cloud only’ and ‘all-in-with-AWS’ became recognized for the fantasy that it is for most enterprises.

The debate will no doubt rage on over whether IBM has a place amongst the hyperscale firms – AWS, Google, Microsoft, and more recently Alibaba Cloud. Whether born-in-the-cloud purists like it or not, IBM’s infrastructure and enterprise cloud business puts it firmly in with the biggest of the bunch on PaaS revenues alone. The Red Hat acquisition in 2018 bolstered this even further and fired a warning shot in an already punishingly competitive cloud war.

The new leadership team can bring a level of focus and commitment to cloud – with senior representation from IBMs Cloud Business in Arvind, and Jim from Red Hat as President. With this combined experience and a commitment to hybrid cloud, there’s every likelihood IBM is in a position to bite a huge chunk out of one of the fastest-growing enterprise services segments. And while it’s unlikely IBM will need to go to war with the major cloud giants to make its mark – the hyperscalers would be wise to watch the new strategy market out by IBM’s new leaders – this may be the most valuable partnership they ever have.

Bottom Line: The change in leadership will provide the jump-start IBM desperately needs to survive this punishing services market

Gini stepping down is a big moment for IBM – She has had her hand on the tiller for close to a decade. But IBM has continued to struggle to return to growth, even with a reputation and trust in the market that it’s peers envy. The new leadership must leverage this reputation, and return some meaning to the brand – by swiftly unifying disparate IBM functions and modernizing the structure of the sprawling business. IBM simply cannot survive another 8 years of tumbling revenues.

Posted in: Cloud ComputingIT Outsourcing / IT ServicesCloud and Business Platforms



Automation Anywhere leads the RPA market as the industry transitions to the Triple A Trifecta

January 29, 2020 | Phil FershtElena ChristopherMiriam DeasyErica Bisognano

We can finally draw a line under the market that was RPA as we transition to the broader value of integrated automation, AI and analysts solutions (the "HFS Triple A Trifecta" - see definition below): 

Our analyst team conducted the most exhaustive research process ever conducted in this space... here's the overview:

RPA Customer Experience Survey.  HFS fielded a detailed RPA satisfaction study with 255 super users of RPA (enterprise clients and product partners) that yielded 311 product ratings across 30+ CX dimensions

Detailed References. HFS conducted reference checks with 75 active clients of RPA product companies, including detailed interviews with ~20% of the sample

RFIs.  Each participating vendor completed a detailed RFI

Vendor briefings.  HFS conducted briefings with executives from each vendor

Download your copy of the 'HFS Top 10 RPA Software Products 2020'


So without further ado, let's hear from our lead analyst, Elena Christopher, for this Top 10 exercise:

Phil Fersht, CEO & Chief Analyst HFS Research: Elena... 7 years on, is the RPA bubble bursting or is something else happening?

Elena Christopher, SVP HFS Research: In 2012, HFS launched the concept of robotic process automation (RPA) to the world via a seminal report and blog. In the seven years since, the ugly truth is that we’ve simply succeeded in using RPA to move data around enterprises faster with less manual intervention rather than to rewire our business processes and create new thresholds of value. We are largely missing the opportunity to transform business operations. RPA gets loads of guff for creating technical debt. But the reality is that it has the potential to clear enterprise decks of years of process debt! Process transformation is the still unfulfilled mission. As we said last year, RPA is dead, long live integrated automation platforms. RPA alone is a great tool. But no singular tool can deliver broad transformation. As I’ve been saying of late, RPA needs friends. Sort of my own weird children’s show – RPA bot, cognitive capture, machine learning algorithms, APIs etc all work together to reinvent processes and create value. But honestly this is just another way of reflecting our Triple-A trifecta of automation plus analytics plus AI. Powerful alone, but better together.

With transformation on the brain, we focused our 2019 RPA Software Product Top 10 on how the RPA product companies are supporting and enabling their clients to scale their automation programs and drive real change. We looked at our normal mix of execution, innovation and voice of the customer criteria with special emphasis on factors such as customer scale, richness of ecosystem partners, product roadmap and R&D, embedded intelligence, and ability to drive business outcomes.

We expect that vendors can talk well and compellingly about their capabilities, thus we also conducted deep due diligence with their customers to get a straight story

What stood out during the Top 10 analysis? Who are winners and who needs more development, Elena?

Well before getting specific, the most important point to make is that no single RPA software vendor is truly leading compelling process transformation at scale. Those that are headed in the right direction have clear roadmaps and deliver enhanced product functionality that clients need to grow their automation programs, have strong ecosystems of well-trained implementation partners and technology partners that extend functionality, and they focus on driving success beyond the sale. Technology may be the enabler, but getting companies to change how people work and processes are executed is tough business.

Now for specifics – Overall, the big three (Automation Anywhere, Blue Prism, and UiPath) all had a strong showing. Automation Anywhere prevailed overall buoyed by a decent base of scaled, or perhaps more fairly, scaling customers. Of the big three, they offer the most native capabilities and have actively been working to address unstructured data for a few years. UiPath, who was the media darling of 2019, came in second overall. While they are doing many things right, its lower level of scaled customers and unrealized vision for the future of RPA set them back. Blue Prism took the three spot. While it exceled at execution, it fell behind in innovation criteria after a year of major announcements but limited actual impact on clients.

While we share overall rankings, the goodness is really in our subcategories where we showcase different facets of each provider’s strengths. This is our “choose your own adventure” approach to rankings. Consumers of this report can leverage the overall rankings or review the subcategories that are most important to their business needs. For example WorkFusion and AntWorks were recognized as leaders for their embedded intelligence. Kryon and Softomotive were recognized for their ease of use, NICE and Pega snared the top spots for delivering business outcomes, and EdgeVerve was a leader in security and governance.

So what's your expectation for this market as it matures? Are we settled with the key players, or do you expect this market to turn upside down?  What must these current firms need to do to survive?

RPA really is the gateway drug for AI and cognitive tech. As we move deeper into 2020, we expect to see more examples of Triple-A trifecta integrations emerge. Right now most enterprises are Frankensteining these, piecing together various tools and components to create the solutions they need – either directly or with service partners. We’ll see more integrated platforms come to fruition - some natively developed and some acquired a la Appian’s acquisition of Jidoka earlier this year. We’re also keeping a close eye on enterprise software vendors like Microsoft who announced Power Automate as its entry into RPA and let us not forget SAP bought Contextor in late 2018.

Meanwhile, enterprises can take a gander at our RPA Manifesto for Success for the Next Seven years. Among the recommendations, it reminds us that technology alone cannot drive business transformation.

Great insights Elena... Now have a stiff drink =)

Damn dry(ish) Jan!!!



The Trifecta elements intersect with each other. While each element of the Trifecta has a distinct value proposition (RPA drives efficiency, Smart Analytics improves decision-making, and AI can solve business problems), there is increasing convergence between the three elements. For instance, smart analytics are increasingly reliant on AI tools such as NLP to conduct search-driven analytics, neural networks to do data exploration, and learning algorithms to build predictive models. In fact, the Holy Grail of service delivery transformation is at the intersection of automation, analytics, and AI

The Trifecta is nonlinear without a definite starting point. Transformation is not a linear progression. Enterprises can start anywhere across the Trifecta. It is not necessary to start with basic automation and then advance to AI-based automation. However, it is critical to understand the business problem that you are trying to solve and then apply the relevant value lever or a combination of value levers.

Posted in: Robotic Process AutomationIntelligent AutomationArtificial Intelligence



RPA isn't having a renaissance, it's catalyzing broader White Collar automation and AI to top $16bn

January 23, 2020 | Phil FershtJamie Snowdon

So it's taken seven years since HFS introduced RPA to the world, lots of blown investor cash, many failed careers, so many great parties and declarations of death for the industry that is, in reality, White Collar Automation and AI, to find a rhythm and a real sense of purpose.

While we can argue the oddities and vagaries of what is essentially attended desktop automation (which isn't really robotic as you need someone there to keep it functioning), plus the original concept that was real back office unattended robotic process automation, we can celebrate the fact that "RPA" is a $4bn industry today, that has helped drive a further $9.6bn in incremental internal and external expenditure on what we are terming "Intelligent Process Automation".  IPA caters for the process transformation, discovery, mining, data ingestion, computer vision, NLP etc that truly supports that broader automation and AI strategy across business silos:

Ultimately, what we are talking about here is the whole digitization, automation and self-learning data intelligence that is changing how white collar employees conduct their jobs.  So how is this burgeoning white collar automation and AI market redefining itself?

Robotic Process Automation (RPA): RPA is inherently capable of recognizing and adapting to deviations in data or exceptions when confronted by large volumes of data. In effect, it can be intelligently trained to analyze large amounts of data from software processes and translate them to triggers for new actions, responses, and communication with other systems. RPA describes a software development toolkit that allows non-engineers to quickly create software robots (known commonly as "bots") to automate rules-driven business processes. This includes Robotic Desktop Automation (RDA) which is essentially surface automation, where desktop screens (whether desktop-based, web-based, cloud-based) are "scraped", scripted and re-programmed to create the automation of data across systems.  A well-designed RDA solution can automate workflows on several levels, specifically: application layer; storage layer; OS layer and network layer.

Intelligent Process Automation: is the use of technology to allow a business function or part of the operation of a process workflow work automatically that is not enabled by RPA technology.  It includes the use of process mining and discovery, BPM suites, data ingestion, machine reasoning, cognitive machine reading, automated chatbots, OCR, IVR, document process automation, and related technologies.

IPA comprises of two core elements:

  1. i) External professional services: Relates to all external spending focused on developing business process automation strategies / roadmaps and the use/ implementation of automation with business functions.
  2. ii) Internal operational spend: Includes internal and external spending on automation – change management, IT and operational teams focused on process automation and automation use as part of existing business process management initiatives.

Artificial Intelligence (AI): refers to the simulation of human thought processes across enterprise operations, where the system makes autonomous decisions, using high-level policies, constantly monitoring and optimizing its performance and automatically adapting itself to changing conditions and evolving business rules and dynamics. It involves self-learning systems that use data mining, pattern recognition and natural language processing to mimic the way the human brain works, without continuous manual intervention.  It includes cognitive (digital) assistants, AI Watson-type reasoning apps, Natural Language Processing, Machine Learning and Computer Vision.

The Bottom-line:  RPA has opened the gateway for augmenting White Collar roles, now we're progressing far beyond that

C'mon folks, it's time to quite the 'bot for every desktop' claptrap and focus on the real what next.  With firms like Microsoft, SAP, Appian, and co now offering RPA and much cheaper prices, the value is shifting firmly to the broader automation driven transformation that is enterprise-grade, involves both business and IT leaders, scalable in the cloud, and truly capable of augmenting human workers.  Yes, RPA provided a gateway to many new possibilities... and now the gate is firmly open, the horses are bolting!  Now catch them, tame them and ride them to the AI promised land =)

Posted in: Robotic Process AutomationIntelligent AutomationArtificial Intelligence



Big 3 RPA vendors: it’s time to show your strengths in co-opetition because Appian just bought Jidoka for full stack automation

January 09, 2020 | Miriam DeasyElena ChristopherPhil Fersht

The recent HFS predictions for 2020 boldly state that none of the big three RPA vendors will get acquired this year. By logical extension, this means smaller and less expensive RPA vendors have a higher chance of exiting to the comfort of bigger players with broad shoulders and deep pockets, especially where they fit a pressing market need and round out an existing integrated automation proposition. HFS also predicted the continuance of technology convergence as low-code / no-code platforms continue their surge.

Barely days into 2020, Appian, a low-code development platform vendor, announced the acquisition of Novayre Solutions SL, the developer of the Jidoka RPA platform. Appian recognized relatively early the complementary nature of BPM and RPA, establishing partnerships and agnostic no-code integrations with Blue Prism in 2017 and later with Automation Anywhere and UiPath. Now it has its own RPA and it’s talking about a compelling pricing strategy for its enterprise customers to boot. We’re curious to see how the dust will settle here with the “big three” RPA leaders.

Appian probably snagged a bargain here, in comparative RPA vendor purchase terms

Financials were not disclosed, but it’s likely this acquisition is at a very favorable price for Appian as compared to the astronomical valuations of some of its RPA brethren. Despite being on HFS’ radar in recent years, it was becoming increasingly hard to see noticeable progression in terms of Jidoka’s customer base and ecosystem development. So, it comes as little surprise that Jidoka was keen to sell. Appian is one of the low code players that actively embraced RPA as part of the overall conversations they have with customers about process automation. It describes Jidoka as the platform it would have built itself if it were building an RPA platform, citing its proven strength in unattended automation coupled with attended (albeit nascent) capabilities, along with its cloud-native development and java architecture.

Hailing from Seville Spain, with less than 20 employees, Jidoka’s customer are mostly small and midmarket firms spanning financial services, outsourcing, utilities, consumer products and other broad markets in Spain and Latin America (Jidoka robots operate in Spanish and English). A notable big logo client, Pepsico, uses Jidoka’s RPA in its finance department.

Appian RPA will come as an additionally priced feature of the Appian platform

Appian will rebrand Jidoka as Appian RPA once the acquisition dust settles. Much of rebranding effort has in fact been completed before this acquisition announcement in the months since the letter of intent was issued. There are no plans to launch it as a standalone feature or product, so don’t anticipate a pureplay RPA product coming from Appian. Existing Jidoka customers will be supported whether they are using Appian’s other products or not. One of its immediate integration priorities is with its recently launched Robotic Workforce Manager.

Appian RPA will be offered as an add feature for Appian Cloud platform customers for $5,000/month maxing out at $60,000 / year for unlimited use. This should be attractive at the enterprise level, especially to those looking to use RPA extensively. More importantly Appian can’t lose out with this pricing strategy as it is guaranteed the license revenues from the Appian platform itself, which are applied per user, per application.

The Bottom Line: Long live integrated automation. Appian’s acquisition of Jidoka is the latest example of the push towards full stack automation.

Low-code and RPA are a solid tool combination to tackle process automation, with each hitting their own sweet spots. Appian has born this out via partnerships over the past couple of years. We expect to see more examples of it in action as organizations progress their journeys beyond initial RPA-in-isolation piecemeal attempts into organization-wide impactful automation programs. While RPA has been dominating conversations around process automation for the past several years Appian is seizing the opportunity to bring low-code and RPA together. Its inherent process automation capabilities are complemented by RPA for hard to reach systems and as an alternative route instead of API development when speed is needed.

We see this acquisition as evidence of push towards what HFS terms the Triple-A trifecta of automation, AI and analytics into integrated automation. The BPM and low code players were super sane about embracing RPA rather than fighting it. And we see a lot that makes sense in this purchase if everyone can play nice and get along.

This acquisition has similarities with SAP’s acquisition of Contextor in 2018 as a technology tuck in and is closest in direct competitive terms to Pega’s Infinity platform encompassing RPA as a standard capability since Openspan opted to become part of something bigger in 2016. The essence of each is a holistic approach supplementing the rigor of low-code and APIs with the flexibility and speed of automation at the surface level as a tactical tool.

However, Appian will be bumping up against RPA vendors, and how this plays out remains to be seen. Appian says it does not intend to supplant its partners’ (e.g. Blue Prism) technology, but RPA vendor partners will have to make a call on how these relationships work moving forward with an all-important eye on avoiding customer disruption. Coopetition isn’t for everyone. Appian has been through this scenario before with Mulesoft before developing its native integration capability. The integration and shared standards live on but not the formal partnership.

Posted in: Robotic Process AutomationIntelligent AutomationArtificial Intelligence



HFS predictions for 2020. Oh lord, not more... but you know you'll read them anyway

January 05, 2020 | Phil Fersht

Lord, do we hate predictions.  But as analysts we get treated like robots sometimes and are expected to churn them out like some pre-defined analyst chatbot algorithms.  So, in robotic fashion, here is a splurge of stuff we think could well happen from the HFS analyst team…

1) The consequences of taking out Soleimani may make all the following predictions moot

This really matters. Just as we were hoping for another year of investor money sloshing everywhere trying to find a meaningful home, the trigger we were dreading that sparks a dramatic finale to this unprecedented 11 years of economic growth may just have been pulled. 

Iran's regime there has little to lose, with its economy in tatters, being reliant on Russian and Chinese imports, it's people close to desperation. But this is no Venezuela, North Korea or Iraq that can be pushed around at whim... this is a country with a 500,000 strong army now united in this act of war.  Iranians for and against the current regime have now united in their desire NOT to have outsiders determine their fate. More dangerously, pro-Iranian and anti-Iranian factions in Iraq who were fighting each other are now bonded together in their one desire that America not decide their fate and get out. ISIS grew out of Iraq the last time we stepped away, and I fear what will grow this time. If intelligence exists that showed an attack was imminent, this needs to be shared now to break this blind unity the US move created. The main point is that the middle east, particularly Israel, Europe and the US are all less safe than they were 3 days ago. We need to learn from the messes we have created in Iraq, Syria, and Afghanistan that if there is not a viable option to form a government backed by the people and the military, then military conflict leads to a situation of less stability for the world - not more. 

We must also not underestimate Iran's cyber-terrorism capabilities - we know they've been throwing money at it. They also have good links with North Korea and Russia - both experts at using it (they are also looking to grow their empires in the region, so it's possible they will lend a hand). Iran knows it couldn't win a conventional conflict with the west - it will look to fight their war in a way that means it doesn't risk invasion. We think they will follow in the footsteps of North Korea and look to inflict financial damage, with sophisticated attacks, which will likely further come in combination with the small raiding boats that will look to target shipping.  Of course, this may well lead to a ground invasion in any case if the US (and any allies) decide to go for regime-change. 

Net-net a major global downturn, which is a likely outcome from a messy widescale conflict where oil prices rocket, confidence tanks and our digital lives get violated, will have a huge impact on how enterprises decide technology and people investments.  We're not even sure many businesses will know how to handle a rapid downturn and simply fold.  The global economy sits on the precipice right now as geopolitics and other political agendas dictate behaviours that could have a savage threat on the health of the world... let's pray this all gets resolved quickly. 

2) The Rise of Process Orchestration will fill the void RPA never really filled

2019 marked the year the 7 year RPA hype journey hit a major roadblock after UiPath’s $8m Vegas party culminated in half the firm getting canned the following week.  What was left was the void of promise unfulfilled and a market that needed urgent redefinition and a new manifesto.  Almost going unnoticed was the iconic process mining firm Celonis raising a colossal $290m series C finding round and Automation Anywhere raking in $290m as part of its series B, notably with Salesforce dabbling in the investment.  “Why is this different?”, I hear you cry… well, the discussion noticeably switched to end-to-end process and workflow optimization rather than the whole “bot for every desktop” nonsense.  RPA was even touted as “bridging the gap between front and back offices” by Automation Anywhere… clearly a message to excite its new romance with Salesforce and an effort to steer the conversation into more a meaningful, realistic place.

2020 will see a new narrative emerge as smart enterprises explore a broader tool box of process discovery, process mining, process automation and data ingestion to help them orchestrate true end-to-end processes that actually bring an enterprise’s customers, employees and suppliers closer together.

3) The OneOffice progression will bring customer and employee 'human' experiences much closer together

We’ve droned on for years now about “Bringing the front and back offices closer together”.  2020 will see this narrative move beyond nice graphics and a narrative that makes back-office people feel more customer-centric, with the focus shifting to enterprises driving an employee experience similar to that of their customers.  This entails the use of digital associates for internal needs in addition to “humanizing” digital customer interactions.  Customer Experience (CX) will increasingly be considered an umbrella term for the experience interacting with an entire organization, whether it’s the customer, partner, employee or any other entity:


Click to Enlarge

An employee experience (EX) culture is one where people work together shifting from transactional interactions to deeper relationships. Organizations need to ensure they get the balance right; which includes optimizing the use of emerging technology with a robust business case to improve CX to the long-term benefit of the business, getting the right information flows in place, eliciting strategic advantage and ensuring exceptional CX. The HFS OneOffice Experience typifies how customer, partner and employee experience are coming together to drive a unified mindset, goals and business outcomes.  

Rolling out technology and hoping “box ticked, job done” will suffice, is unlikely to end well. Only customers, employees and key partners can judge the success of an enterprise's endeavors,  and smart firms will start measuring what matters: sentiment, preferences, engagement levels, propensity to consume, customer lifetime value, employee satisfaction and experiences of key partners and suppliers.

4) Digital Associates become a real part of our work-life

We’ve become very comfortable with using digital assistants as consumers, and 2020 is the year that we’ll start to see them more actively in our work lives.  Companies that are pioneering cognitive assistants in the workplace, like IPsoft, have been quietly implementing them to assist with IT tickets, HR queries, and as a whisper tools to help customer service agents resolve problems.  Next year we’ll see these become more commonplace as an enabler of the OneOffice within our organizations, helping us do our jobs more efficiently and intelligently.  What’s more, the conversation around cognitive assistants will start to mature, with less of a focus on how “human” the assistant can be, and more of a discussion about how it can accomplish tasks and understand people to help them rather than mimic them.

5) Technology convergence continues as low-code / no-code platforms continue their surge

While each element of the HFS Triple-A Trifecta (Automation, AI, and Smart Analytics) can be deployed individually, there is increasing convergence between the three elements to solve real business problems. For instance, smart analytics are increasingly reliant on AI tools such as NLP to conduct search-driven analytics, neural networks to do data exploration, and learning algorithms to build predictive models. Process mining and discovery is increasingly emerging as the front-end means to best assess automation potential and the post-automation means to track progress.  Low-code platforms will allow enterprises to deploy the Triple-As to quickly and easily create modern enterprise apps. While the speed implication is massive, so too is the potential impact on business enablement. Low code technologies will enable greater participation from business operations constituents. However for this to work, as we have seen played out on the RPA stage, there has to be tight partnership between IT and business. We expect an increasing intersection of other emerging technologies like IoT and blockchain to this mix over time. 

6) DXC and Cognizant will be the most acquisitive IT service providers as the market tightens

We predict DXC to be the most active in the market as it sheds some business and adds new ones into its portfolio.  With Mike Salvino at the helm do not be surprised to see him looking at sharpening his firm’s business process teeth with an eye at Genpact.  Cognizant could also spring a surprise or two after years of rampant growth and now shifting to a more disciplined focus under Brian Humphreys.  Perhaps a foray into a high-growth banking-centric provider like Mphasis could be in the cards?

7) Most of the Indian-heritage providers will be dull as dishwater in the M&A market

As the big founder-driven firms seek to maintain margins in this flattening market, do not expect to see much at all of note from any of Infosys, TCS, Wipro, HCL or Tech Mahindra.  The odd “tuck-in” service play may occur, but nothing that will raise eyebrows or drive the Times of India wild.

8) None of the big three RPA’s will get acquired

It just won’t happen – everyone’s looked and noone’s biting… the Salesforce interest in Automation Anywhere will be a big test as to whether one of the software big-runs make a major play.  We thought Microsoft would make a play with UiPath, but clearly got sticker shock and dusted off some old tech to tick that itchy RPA box for a while.

9) Google and Amazon could make big plays into enterprise IT services

Yes, we could well see a Wholefoods style Amazon play into enterprise IT at looks at ingesting Big Blue – just think it completely solidifies cloud supremacy in one go (if it ever needed it) and has a household American name to go after the enterprise in a very big and ugly way.

Meanwhile, Google is trying to make a very enterprisey play adding the likes of Thomas Kurian and Robert Enslin to its expensively assembled enterprise catch-up team.  If they take the plunge, expect them to move for the more affordable DXC or Cognizant to fill out their services portfolio. 

10) Alibaba Cloud will leapfrog Google and Microsoft in PaaS and IaaS Revenues

We can expect to see the hyperscale applecart upset by Alibaba cloud. Alibaba Cloud will leapfrog Google and Microsoft in PaaS and IaaS Revenues.  With Alibaba Cloud, Google and Microsoft all boasting limitless investment potential, it's hard to call who's winning the battle. But if we were to put on our more speculative 2020 prediction hats on, we'd turn our attention to Alibaba Cloud, which has been quietly gaining significant ground over the past two years, doubling revenues between 2017 and 2018. While Google has developed a compelling long-term strategy for substantial growth, in the short-term we can expect to see Alibaba come up through the ranks as it consolidates it’s control in APAC and significant 2019 investments start to pay off in 2020.

11) Quantum leaves the lab and moves into the modern enterprise

We believe the cloud giants will spend more time and money on the emerging technology, having already seen quantum offerings delivered via the cloud from IBM and Amazon. Given the current levels of investment from Google and Microsoft we expect them to have quantum capacity on their cloud platforms by the end of 2020.

HFS expects to see Quantum make waves more broadly as it leaves the lab and moves into the modern enterprise in 2020. 2019 was an amazing year of progress for Quantum computing. Googles claims of quantum supremacy, some success with commercial quantum experiments, VW’s battery development tests and the growing investments from enterprise organizations, particularly those with existing high-performance computing. Although we haven’t changed our long-term forecast for full quantum computing, we expect genuine business use cases to emerge over the next 12 months. As current experiments start to bear fruit.

12) 2020 will see more record GDPR breaches, IoT cyber-security investments and cyber-insurance products

All of these clouds and qubits will need protecting from those grinch-like hackers and regulatory killjoys desperate to harsh the Christmas buzz of CISO’s everywhere. We can expect a rise in nation state hacking – with naughty national bodies targeting private enterprises with euphoric abandon in 2020. HFS also warns that this new threat will come in lockstep with strengthened regulatory bodies, and we’ll see a record breaking fine for GDPR… you might have thought the British Airways £183.4 million fine was bad – but that won’t be the last mega-fine to be handed out by regulators. 2020 will also see an increase in ransomware and hackers targeting enterprises who have been quick to stump up cash to unlock data in the past.

The increased sprawl of IoT networks will see the provider community race to embed cybersecurity into offerings and open up the warchest to buy what they need and look out for massive purchases in this space, alongside startups and SMEs partnering with service providers.

As data breaches, hacking, and all-round cyber-nastiness continues we can expect cyber-insurance products to increase in value and prevalence – we suppose we’ll need someone to pay BadDog1998 the bitcoins he wants to hand back our world of warcraft accounts.

13) Close to half of Enterprise AI engagements will shift from pilot to production as investments in explainable and interpretable AI boom

we’ll see more AI engagements move out of pilot to production environments with 80% of enterprise AI projects sitting in POC stages, and barely 20% in production. We expect this to flip in 2020 with close to 50% now making it into production.  The areas we can expect to see the most value come in will include autonomous invoice processing, legal document validation and extraction, fraud detection, and similar business and process areas.

HFS also predicts a significant increase in R&D spend on explainable and interpretable AI as enterprises push vendors control and transparency. Most SP's and AI technology vendors will invest more than 50% of their AI related R&D and CTO funds into the areas of explainable & interpretable AI, and also in building frameworks and solutions for AI governance, audit, lifecycle management, security, ethics and maintenance.

14) Supply chain will overtake financial services in terms of blockchain adoption and we will also see more public initiatives

Global supply chains are becoming increasingly complex and opaque—and less trustworthy. The multi-fold increase in product variants and the drive for speed to market, a shift toward mass personalization, growing logistical complexities, and increasing globalization necessitate a more connected and nimbler, yet flexible, supply chain. Supply chain problems are not new, but solutions were not forthcoming until distributed ledgers and blockchain began making inroads into the world of supply chains. The financial services sector was the first mover in enterprise blockchain adoption, but supply chain initiatives leveraging blockchain (especially provenance tracking) are  catching up quickly. Global giants (like Walmart, Maersk, AB Inbev, and Nestle) as well as smaller and emerging players across logistics, CPG, agriculture, pharmaceuticals, and retailers are more interested than ever in applying blockchain technology to solve supply chain issues. The TradeLens ecosystem started by Maersk and IBM today is comprised of over 100 diverse organizations including carriers, ports, terminal operators, 3PLs, and freight forwarders. The power at the intersection of blockchain with other emerging technologies (IoT, AI, and advanced analytics) is making supply chain aficionados salivate!

2020 will bring more public blockchain initiatives, however, as firms like EY continue their investment into ZKPs, announcing in the final month of 2019 that they could offer private transactions for $0.24 per transaction, it’s possible that public blockchains could see favor, as they offer the scalability required alongside the previous missing ingredient; privacy.

15) 3D Printing and Drones will really come of age to drive manufacturing 4.0

HFS also looks forward to other exciting technologies – particularly 3D Printing and Drones – which will move off of the faux industrial racking at the sides of every vendor ‘ideation lab’ and out into the real world. While both 3D printers and drones are still at the periphery now, we predict that leading service providers, vendors, and manufacturers will continue to innovate and partner to set the groundwork for a future when technology bugs and market barriers have been removed. Many will find it too late to catch up, while the pioneers will either leverage existing solutions or partner with vendors to co-develop the technology.

16) Sustainability will come back into vogue as our environment decomposes further – and the UK gears up to host a critical COP26

HFS anticipates growing demand for sustainability services. And while most of the market is chewed up by the major consultancies, by 2020 we’ll see a move as providers take leaning from internal initiatives to professionalized customer facing offerings.  We advise everyone should watch the space for one big legacy provider making the jump – whether by partnership, acquisition, or leveraging their existing internal sustainability expertise.

Moving to 2020's COP26 (the UN’s latest climate summit – to be held in Glasgow): a lot of key decisions from this year's COP25 in Madrid were delayed to 2020, and a a result there's going to be a lot of hype surrounding COP26. Keen sustainability providers like KPMG, Accenture, and friends – alongside consulting giants like McKinsey and sustainability boutiques – will ramp up their CSR and sustainability services/consulting activity... while many legacy providers who’ve not yet moved whole-heartedly into this space will have to struggle to cut through by only marketing CSR projects and a few LED lightbulbs.

The EU could also play a massive part if they can get some climate clause into the UK’s Brexit withdrawal agreement – and everyone’s eye’s will be peeled to see if Boris Johnson will decide to unveil some big commitment given the UK is hosting COP26... whether or not that is a tangible commitment that spurs action is another matter… be he might yet surprise us by going beyond an arbitrary net-zero deadline. Any businesses residing in or dealing with the EU should watch the space surrounding November’s COP26 with a great deal of interest and scrutiny!

17) The S4 HANA migration deadline will get postponed

Now this one’s a real risky bet – and given we have five years to see if we’re right it’s more for fun than anything else. The S/4 HANA migration date is set for 2025 in a bid to drive clients to bite the bullet and stump up for the new technology. But we’ve been doing some digging over the last year and it’s fair to say, sentiment from business leaders is lukewarm at best – and even some of the most bullish proponents of migration in the services market have cooled off. In part, we think the appetite isn’t there to make plans for something so far off – when there’s so much quantum and blockchain to pay for. But there are also real logistical issues around getting trained professionals in to help do the work. And an already dicey talent pool is keeping prices high, a rush as the deadline gets closer will only push costs higher. Making those all-important business cases much harder to get passed the board. Something business leaders are already telling us is like banging their heads against a wall as they justify an upgrade on a system they’ve only just finished implementing. Our bet is as the deadline approaches – SAP will acquiesce and offer clients a rope rather than risk lifelong clients heading off to Oracle or Microsoft

18) Transactional F&A will start to become “invisible” to elevate finance as a strategic business partner

Enterprises have always wanted far more for far less from their F&A function. But the old days of finding cheaper labor and some better packaged software have pretty much been exhausted. The new thinking is to change how finance is delivered, where the routine F&A work becomes invisible to focus completely on the strategic value finance brings to the organization. HFS defines “Invisible F&A” as the state of an F&A function where accounting transactions run like water and finance professionals focus on driving strategic objectives. Leading F&A service providers like Accenture and Genpact are starting to take their clients on a journey towards continuous accounting requiring no waiting to close books, effortless payables and receivables with near-zero cycles, and real-time analytics capabilities enabling proactive decisions. In 2020 we will start hearing more success stories about pioneering enterprises achieving a near “invisible” transactional F&A.

19) The boundaries between finance, procurement, and supply chain start to blur

Back-office operational transformation journey started nearly two decades ago with the rise of shared services and outsourcing around payables, receivables, and general ledger management. These mostly siloed tasks evolved into end-to-end processes as payables became procure-to-pay (P2P), receivables evolved to order-to-cash (O2C), and general ledger expanded into record-to-report (R2R). Finance was already expanding into procurement and sales organizations; however, it was still mostly back-office focused. The future calls for a boundary-free organization where silos around the front, middle, and back offices collapse to create a “OneOffice” — the office that caters to the customer. To create this Finance OneOffice, P2P needs to expand into source-to-pay (S2P), O2C needs to expand upstream into the CRM space (lead-to-order) and downstream into after-sales services, and R2R should extend into enterprise planning management (EPM).

20) 2020 will mark the start of a new decade where we focus on the “How”

A new year and a new decade is upon us. The last 10 years were dominated by digital everything! As we enter the next decade, the “why” is relatively well understood. Data explosion, digital disruption, and customer experience emerged as the three most important drivers impacting business operations. Clarity around the “what” is emerging. The promise of emerging technologies across the Triple-A Trifecta (Automation, Analytics, and Artificial Intelligence), cloud, IoT, and blockchain is unquestionable. But the “How” continues to be a black hole. The talent question needs to be resolved. Siloed and piecemeal technology solutions need to get more integrated. Stakeholder alignment across business and IT is crucial. Success needs to be defined by digital change management versus digital adoption. And transformation needs to increasingly be driven by better experiences – customer, employee, partner – not faster and cheaper. 2020s will be the decade of the “How.”

21) .... and finally the 2020s will see the start of a debate to understand the "New why”

The focus on business outcomes helps us do the same things better, faster, or cheaper (often in a ‘pick two’ mode) but is that sufficient to succeed in today’s world? Some of the most highly valued companies are not even profitable. Investors are replacing price to earnings ratios with price to sales ratio. This often creates “hyper-hype” because the reality is, we no longer know “why” we are doing digital! We are just doing it because others are and we are in the rat race for better, faster, cheaper – none of which actually means “transformation!” The new “why” will be based on a value algorithm that combines traditional definition of business impact (better, faster, cheaper) with:

  • The Social impact (values, sustainability, and diversity/inclusion)
  • The OneOffice impact where internal silos cease to exist and there is only One Office that matters which caters to the customer
  • The Hyperconnected Ecosystem Impact (can a car manufacturer even aspire to deliver ultimate customer experience without its ecosystem of insurers, government and other supply chain entities?)

Or will the “WeWork” debacle push us back to unfashionable but tried and tested methods of creating shareholder value?

Happy 2020 folks... and Peace Out 

Posted in: Digital OneOfficeRobotic Process AutomationSustainability