As a wise man once said: “It has been a mistake living my life in the past. One cannot ride a horse backwards and still hold its reins.” Well, if you’d listened to this horse, you may have turned a pretty profit =)
Kudos to HfS analyst Martin Gabriel for a very interesting analysis of how rich (or poor) we just could have been:
Posted in : Business Process Outsourcing (BPO), Cloud Computing, IT Outsourcing / IT Services
Terrific discussion from the FORA leadership panel featuring (from left to right) Mihir Shukla, Automation Anywhere; Dawn Tiura, SIG; Jesus Mantas, IBM; Cliff Justice, KPMG; Leslie Willcocks, London School of Economics; Mohit Joshi, Infosys and Ahmed Mazhari, Genpact.
Posted in : Uncategorized
Over three years ago, the Infosys board made the brave decision to look outside of its organization to bring in an “outsider” to transform its business and ready itself for whatever wave of disruption was coming to challenge a services model that still makes ~20% profit margins and grows ~5% a year. Yes, they appointed Vishal Sikka, and we all know about the ensuing soap opera that followed…
The decision to look outside was made in 2014, and that hasn’t changed
Hindsight is a terrific practice to follow, if all you really like to do is chew on historical occurrences to learn for the future. However, in the case of Infosys, the only real lesson to be learned from the whole Vishal saga is the firm needs a leader who understands how to grow, divest, acquire and lead a technology services and consulting business. Vishal provided the dreams, the style, technical prowess and the cultural impact… what he failed to deliver was being able to apply these skills effectively to a traditional services business.
Vishal was a software guy and that is the world he lived in – building very expensive platforms and hiring very expensive Californian executives to run them. Having said all that, Vishal did drive a huge amount of change, and most of it was positive – the only major negative was the fact he departed the firm, and everything he contributed left the firm in a state of paralysis. The only saving grace for Infy has been the confused state of the services industry in 2017, where most of Infy’s competitors have been too busy chugging down the Digital Kool-Aid trying to come across as a facade of flashy vernacular, rather than staying true to the secret sauce that made them great in the first place: driving out operating costs and providing innovations… and all at the same time.
The role of the services CEO is to steer the organization away from outsourcing and towards partnering
Another change to the world of Indian-heritage service providers, is the fact that most clients really don’t care all that much these days if the CEO changes – five years ago, they would make a big deal out of it and used it as leverage to change provider, or carve out a further discount for themselves. Today, they buy a service and want it delivered with minimal disruption – noone wants to rock the boat and create a crisis out of nothing. Will IBM customers flock to Accenture if Ginni left? Of course not. The CEO sets the tone and the strategy, while rest of the firms gets on with servicing the clients. What’s more, differentiation between services firms these days is much more subtle – it’s not all about the big vision and fancy speeches… it’s about being able to execute at competitive price points and commit to helping clients achieve jointly defined business outcomes. Winning in today’s services market is about being much more than outsourcing, it’s about clients working with providers as extensions of themselves… as genuine partners in business and technology.
The leader needs to make sure the company is set up with the right investments, people, culture and global resources to achieve this. Clearly, the Infosys board has felt for some years now it needs to bring in an outsider to get that balance right… there are just too many sub-companies, industry units, conflicting strategies and decades of politics to trust an insider with this massive task. Having someone who hasn’t been sucked into this internal quagmire – and can drive change with a little distance from the intense (and proud) history – is the right way to go. Again, this is a brave decision.
Salil Parekh: a pragmatic and sensible choice with the right experience-set
Salil Parekh ticks all the right boxes without upsetting the apple cart – it’s the external play, without the risky unknowns that a guy like Vishal brings. Firstly, Salil is not just a services man, but also a real consulting man. This is a sensible, pragmatic move that will help build and grow Infosys’ higher end consulting business. Salil has lived through two successful mergers – EY and Capgemini in the 2000’s, and more recently the Capgemini / IGATE merger, where there was very little client overlap and the two firms really complimented each other. Infosys has held back from opening the $6bn warchest – a lot of this was because they didn’t have the right guy at the helm whom the board trusted to make the biggest decisions that are still facing the firm: making the higher end consultative plays with the right acquisitions; making the right investments into its automation and AI capabilities; and positioning the firm as a true innovative and trusted partner in an uncertain world being ravaged by the seismic impact of Brexit, political instability and disruptive business models fuelled by digital tech and blockchain.
Yes, these are massive challenges, but the services winners of the last three decades have thrived on change, disruption, and uncertainty, which is exactly where the Infosys of 2018 and beyond needs to focus. Salil also has a career filled with cultural affinity across American, European and Indian business, which is so essential in today’s environment. Keeping Pravin Rao as COO helps maintain the best elements of Infy’s work ethic and culture, but Nilekani clearly wanted some new blood to inject a new direction for the firm. This is also a clear shot across the bow at Capgemini, a firm which Infosys can go after aggressively in the market.
So here’s a quick checklist of all the challenges and opportunities that must be urgently addressed
Immediate challenges:
Put forward an Infosys Brexit plan to support clients as panic starts to set in. With such a strong European presence, Brexit could be the biggest opportunity yet for Infosys to support global business in distress
Medium-term challenges:
The Bottom-line: Infosys can correct-course, given the current market turmoil, but cannot afford another mess
If there is one saving grace that came out of Infosys’ annus horribilis of 2017: it’s the fact that everyone cares about them – and the firm is still chugging along as well as the rest of its competitive set. Just spend time with its executives and you’ll quickly see how proud its people are of their firm and their brand – you don’t get the same arrogance and complacency that some of its competitors give off. The firm has a big chance to make a big move in 2018 with the right man at the helm, but Salil must move swiftly and definitively – and keep these Founders in line – or we’ll just see history repeat itself… a fate not worth contemplating.
There is no doubt that several of its competitors have closed the gap on them (and some, arguably, are slightly ahead), but Infosys still stands proud and has a rare chance to learn from its own – and everyone else’s – mistakes. IT services is a savage business, but Infosys’ standing and financial resilience have gifted it a second chance to rise again.
Posted in : Business Process Outsourcing (BPO), smac-and-big-data
Here are ten big predictions for 2018. And they will all come true (apparently):
1.…The Digital Operations Industry has Emerged
2.…There is only OneOffice that really matters
3.…Enterprise Automation and AI will reach $10 billion
4.…Enterprise Blockchain Services will surpass $1 billion
5.…We’ll see many new “Big impact” deal announcements, but mechanics and metrics will be vague
6.…The power of AND to solve business problems
7.…The rise of change management for digital labor
8.…The war for creative talent
9.…Traditional outsourcing makes way for ‘True Partnerships’
10.…The realization that there is no time for digital complacency
View the recording and download the slides (HfS subscribers) here
Posted in : smac-and-big-data
Ever wondered how you can get your coffee maker to turn on the airconditioning, while your robotic dog pressure-cleans your car… all with a couple of clicks on your iPhone? Well, here is the man to give you the lowdown on all embedded intelligence across all connected devices, the man who practically invented the term “IoT” for Gartner during a distinguished career with the Borg, before joining the HfS rebel forces as VP, IoT Technology and Services Research…. Jim Eastlake:
Jim – it’s just terrific to be working with you at HfS! Can you share a little about your background and why you have chosen research and strategy as your career path?
Hi Phil. I think that I can sum that up in one phrase….. ‘The Big Picture’. I began my career at Texas Instruments in 1981. It was a good place to learn the semiconductor business, but TI was very introverted in those days. So, after 6-7 years I decided to join Dataquest, THE preeminent chip research firm. It would only be for a couple of years, then I’d join another semis company. Little did I know that I would become hooked. I loved the opportunity to talk to senior management and strategists from across the industry (Gordon Moore, Charlie Sporck and Jerry Sanders amongst them), focus on the big issues…… and try to figure out what was going on. I’d then formulate my thoughts in research reports that I hoped would educate and inform, and, amazingly, I got good feedback.
Why did you choose to join HfS… and why now?
The world has changed just a bit since then! We now stand on the cusp of the next industrial age, Industry 4.0 and all that. It is the Professional Services firms that are performing THE vital task of stitching hardware, software and services together. They enable a myriad of “digitalization” projects that deliver huge benefits to society. So, what better place to continue my lifelong exploration of the big picture than at HfS.
Where is the industry right now, Jim? Are things really that different than five years ago when you started covering IoT?
We’re following a classic saturation curve Phil, and it’s very early days. Things change fast. The industry takes big strides forward all the time. In the past five years, much has changed: platform architectures, security, edge computing, contact T&C’s, formation of industry standards – just everything.
So what can we expect to see from you at HfS… can you give us a little snippet of what you’re going to be working on?
Most certainly Phil……
After two weeks with the company, I’m deeply into my first IoT Blueprint, scheduled for February publication. We’ve had a wonderful response from participants, so it will be an insightful report. However, feedback from our clients is also focusing my research thoughts on some meaty topics for 2018:
And finally, is the analyst industry as exciting as it was 10 years’ ago?
Immeasurably more so, I’d say. Simply because of Digitalization. Change has always represented an exciting time for the industry observers, there’s not been a time like this during my, nearly 40-year, career in the industry. Everything from semiconductors to Services is involved in enabling change that is Societal in scale. Also, on a practical matter, it is now so easy to communicate with clients and to get research to them. Social media, chat rooms, Webex, Skype and the likes provide us with a much more effective communications conduit.
Jim – it’s terrific to have you join us and can’t wait to hear about the convergence of OT and IT!
Posted in : IT Outsourcing / IT Services, The Internet of Things
Posted in : Absolutely Meaningless Comedy, Robotic Process Automation
Isn’t it amazing how history has this habit of repeating itself? Especially when it comes to services engagements, where the buyer hopes to shed loads of cost and the providers hope to make a handsome profit, while building a utility model to resell similar engagements to many other buyers.
And that is what we’re seeing, as the services industry evolves from engagements deriving value from lower wage costs to one which combines lower wages with the RPA arbitrage of repetitive tasks being computerized in software recording devices. As one analyst firm once famously declared exactly five years ago: “Welcome to Robotistan, Outsourcing’s Cheapest New Destination“. Or is it?
The difference these days, is that many of the emerging services engagements are being based more on hope than certainty, where many buyers (often naively) think this is going to be just as easy as lumping the work offshore, and many providers simply have little choice but to sell them the dream, and live through the hell with them, if they want to stay relevant in this market. How else can you build an effective automation-led services model, if you don’t have the guinea pig clients to join you on that nice packaged holiday to Robotistan… And, let’s face it, how else are both buyers and providers supposed to behave, when there are so few historical benchmarks to set baseline metrics that both parties know are achievable? Yes people, welcome to the era of Shock and Awe automation deals… it’s the only way.
So let’s skim over the first phase of RPA: The discovery phase: “What is RPA?”, “Do I use AA, BP or UiPath?”, and “This stuff is easy, let’s just PoC it by ourselves”. And don’t forget the “Our attempts at CofEs always fail, but this time will be different because we’ve learned from our outsourcing and shared services experiences”. Let’s begin the new automation-led journey at the phase where they’ve selected their products, appointed the CofE lead, and signed a deal with a service provider daring to escort them to the pearly gates of Robotistan:
The issues that are starting to unravel in this robotic age, is the simple fact that most clients avoided the painful transformation to their data processes and people, during their earlier efforts to source work to lower cost global locations. They were pretty much able to delight their CFOs with 30%+ savings, without having to do much to change their underlying process architectures (the old “lift, shift then transform” approach usually stopped after the “shift”). The reality of moving into an automation arbitrage environment is that you can’t just replicate that work into an even cheaper robotic environment without really figuring out how to do this effectively.
Bot licenses are not cheap, and simply do not make financial sense for a lot of processes, the way they are currently being operated. You can simply end up paying $8K a year for a bot that only is utilized for 20 minutes a day, when you could streamline that process into a broader workflow and use that same bot to process a lot more work for the same cost. Looking at several engagements already in place, clients are committing to significant staff reduction within 12-24 month of contract signing, and many are quickly realizing they are facing some serious complications if they are going to meet the metrics their CFOs are expecting. Either they end up running operations on desperately thin staff numbers, or they own up that they need to rethink that they need a significant transformation on their data infrastructures, processes and people culture, if they are going to enjoy the delightful fruits of Robotistan. As several early RPA adopters will already tell you: You need to do MDM before you RPA.
When you talk to some of the leading consultancies in this space, they will tell you that they are making more of their revenues on pre-implementation transformation work, just getting clients into a place where they can do this. They will also tell you the issues are not about the technology, but much more about the change management necessary to deploy the technology effectively.
The Bottom-line: The early RPA adopters are doing everyone else a huge favor by writing the new rulebook
The biggest issue facing the services industry today is that we have run out of silver bullets, BandAids and scapegoats. In order to get to Robotistan, you need to finally look deeply into your underbelly of messy processes, spaghetti code, manual workarounds and other funky ways of handling exceptions. Moreover, you need to look at your people and figure out how to foster a culture of inclusion and innovation. Most enterprises have been stagnating for years, but as the guinea pigs find their way through their shock and awe of having to conduct real surgery – and psychotherapy – on themselves, a new rulebook that guides us through the steps we have to take to learn, think, calculate and act, will emerge that many of the laggards will gleefully follow.
Posted in : Robotic Process Automation
Japan is currently the only major developed country that is experiencing a population decline and many of its ambitious enterprises are increasingly desperate to find new means to get work done without over-relying on human labor.
Unlike other developed economies, it is not offsetting population decline with immigration, and most its firms have proven very reluctant to engage in offshore labor arbitrage over the years. In addition, Japan has the largest proportion of elderly citizens of any country in the world. In 2014, 33% of the population was over the age of 60 and this percentage is increasing. Hence, getting the most out of its shrinking workforce to keep their enterprise healthy is of utmost importance to a country which loves long-term planning. No joke, but I was once asked to review a 100-year business plan from a major Japanese conglomerate!
Given its shrinking productive population, combined with its wealth, the cost of labor is high. Consequently, its companies are often the first to adopt new technologies, including artificial intelligence and robotics to increase productivity in a market with severe skills shortages. In addition, Japanese firms increasingly struggle to acquire necessary skills to optimize their technology investments which, in turn, raises the cost of these skills. This is leading to increases in spending with third party service providers that help to fill these skills gaps.
A massive automation-led services engagement is announced, placing RPA in a whole new bracket for value and cost impact
Hence, it was no huge shock when major Japanese financial services conglomerate, Sumitomo Group, announced an unprecedented RPA initiative (see the news release), with savings claimed to be in the hundreds of millions of dollars (also see link on UIPath’s website). However, while this is a tremendous public endorsement for the potential benefits of RPA, this appears to be a massive corporate restructuring that is using RPA as a catalyst for labor reduction. We already have discussed (see link) how Japanese firms love to deploy automation to increase productivity and competitiveness – it’s in their DNA as a firm with deep technology and manufacturing roots. In short, most Japanese firms do not suffer from the same negative connotations of automation that their Western counterparts – they are proud to be able to infuse quality and efficiency into their processes.
However, we caution enterprises to take some of the grandiose claims with a bucket of salt, as we’ve not seen anything near these touted levels of productivity gains yet realized, as outlined by HfS analyst John O’Brien in his latest POV.
It’s being touted by some participating suppliers as the largest-ever RPA implementations worldwide, although, ironically, we don’t yet know how many robots are going to be used.
We understand it’s a significant contract in terms of dollar value, and most of the implementation and transformation work is going to IBM. UIPath is doing the (attended) front office RDA automation and the (unattended) back office RPA automation. Blue Prism has also been involved doing some unattended automation in the back office, but SMBC declined to mention them in their press release (see link) which clearly points to UIPath as the prime automation software partner in the engagement moving forward.
According to SMFG/SMBC, the attended digital workforce supports the group’s front-office centric activities, enabling the staff to develop the automation themselves and to work alongside the robot by exerting direct command over it. Complementary, the unattended digital workforce targets all the high volume processes that do not require the human touch, working 24 hours per day and 365 days per year to sustain high-throughput, high-intensity processing. SMFG/SMBC has endorsed UiPath as ‘highly usable and scalable’ supporting the initiative during this week’s UIPath conference in New York.
Bottom Line: Massive kudos for RPA being demonstrated at scale, but this appears more like a massive corporate restructuring using RPA as a catalyst for change
There’s no doubt that right now this endorsement from SMFG/SMBC is great kudos for the RPA vendors aiming to scale enterprise-wide – the most jaw-dropping initiative yet that takes RPA to the 9-figure level in terms of perceived monetary value.
However, RPA initiatives, in general, have not nearly met cost savings and productivity targets anything near these touted outcomes. We’re just not there yet as an industry – sure, many of the more mature deals today are yielding value benefits in the $1m-10m range, once they are being managed effectively, but to jump from these levels to the hundreds of millions is massively far-fetched.
At HfS, while we believe there are genuine intentions from Sumitomo to leverage RPA to free-up and eliminate human labor, there has to be a much broader corporate restructuring plan, way beyond the digital labor initiative, that will get Sumitomo to these lofty targets. It’s also important to point out that these ambitious enterprise-wide deals are already going on in other organizations – for instance, we understand Blue Prism is involved in a number of projects of at least this size across the globe. But these companies are much less willing to share the details of their programs with the wider community – clients, employees, and shareholders are all going to be impacted in some way by the expectations being set, and whether they are realized or not.
Keeping quiet is often the easier way to avoid the kickbacks when things inevitably go wrong. Whether naïve or not, SMFG/SMBC’s level of disclosure means it’s going to be an important test case to assess the success of scaling RPA across the enterprise.
Posted in : Captives and Shared Services Strategies, Robotic Process Automation, Sourcing Best Practises
Accenture’s strategy has always been pretty straight-forward: focusing on its major clients and making sure it stays ahead of the pack, where the marketing is moving. This was pretty much the story when we spoke with Accenture Digital’s Group Chief Executive, Mike Sutcliff, two and a half years ago (view blog)… and today all these intentions have been backed up by billions of dollars of bold digital investments, vastly outplaying the competition:
So we hunted Mike down for an update to talk about these massive recent investments and how this Accenture Digital business is shaping up…
Phil Fersht, CEO and Chief Analyst, HfS Research: Good morning Mike – it’s been a couple of years since we first discussed the big digital push your firm is making. Can you share an overview of how the market has evolved since then?
Mike Sutcliffe, Group Chief Executive, Accenture Digital: Sure Phil. Thank you for having me. I guess the first thing I would note is that companies started thinking about digital as a channel or a technology, and then they started to understand that they had to design omnichannel customer experiences. They really started to think about how the digital channels and physical channels blended together.
But what’s happened in the past two years is they’ve started to understand that this is about the entire business model, the operating practices, the business processes, the organization and skills. Not just in the front office but the mid and back office. They are re-architecting their businesses to create fundamentally better experiences that scale across front, mid and back-office operations.
Phil: Do you feel the confusion has lifted around digital? Are clients more certain, now, of where they are going, when it comes to digital strategy?
Mike: I think most clients have really started to understand what the predictable disruption would look like in their industry. They have made choices on whether they want to become the disruptor or be a fast follower. They have started to think about what their roadmap is going to be as they chart out the course of creating, or depending on, new revenue streams in their businesses. The question though is no longer just “what should I do” but “how do I get it done”.
Phil: We’ve talked a lot in general about digital disruption and how traditional businesses are going to get wiped off the face of the planet if they don’t wake up and smell the roses. However, our recent research clearly shows a lot more organizational leadership today is far more bullish about opportunities than threats when it comes to digital impact on their business environments. Do you think traditional firms have figured this out? And who do you see as leading, and lagging, in your experience, when you look at different industries?
Mike: Well I do believe that most of the players in each of the different industry segments we participate in have understood what the disruptors might be. They have looked at what the start-ups are doing and what they are doing and then started to think about what assets and capabilities they have got, in order to give them an ability to win.
Now when they look at their financial flexibility and strength, their customer relationships, their brands, their knowledge, the constraints they are up against in the industry, they have decided that they have every right to innovate and create the next generation of the industry as well. We started with the consumer-facing industries like retail and consumer products, retail financial services, communications and hi-tech. But now we’ve seen that expand across all the industry groups, even the asset-intensive industries that are dealing with comprehensive disruption, where their ongoing business models are slowly degrading, they have started to really engage in what the right digital strategy is going to look like for their industry as it continues to rotate.
I would summarise by saying most of our clients understand what’s happening. They understand what they intend to do about it and now they are thinking about how quickly they move and how they pay for all this.
Phil: So tell us about this aggressive Accenture strategy, Mike. I think you’ve bought at least 20 digital agencies in the last 2-3 years and several other related firms that drive the digital paradigm. What is the grand plan here? Is it to integrate them all together under one common strategy, or are you trying to keep their cultures distinct, and perhaps take more time to see how this industry plays out? What’s the thinking here?
Mike: Well the first thing is that we are not trying to replicate the model of the agencies that do advertising and marketing work. In fact, we are not even really trying to go after the advertising and marketing market itself.
What we are trying to do is to create a single integrated capability, ‘Accenture Interactive’ that operates as an experienced agency. Their job is to design and create the best experiences in the world not just for consumers but for employees, for physicians, for participants in sporting events. What we really want to do is find a way to create better experiences at scale. In order to do that we need many of the skills in e-commerce and contact management and experience design in executing digital marketing campaigns that the agencies would have had traditionally. So what we have been doing is creating a combination of capability from creatives to content to commerce, experience design etc., bringing them into an integrated team at Accenture Interactive, but at the same time respecting the fact that their cultures might differ in terms of the tools, the techniques, the approaches they used to get the work done.
And what we really focused on is making sure that the cultures are all aligned to a core set of values that we’ve got about creating values for our clients as our primary objective and then doing whatever it takes internally to get the team together to make that happen.
Phil: As you look at the experience you’ve had in the last 2-3 years, meshing traditional consulting with these creative types, do you think you have found the secret sauce, or has this been more challenging than even you had envisioned?
Mike: We’ve discovered that the participants in the existing advertising and marketing world were watching the customer expectations evolve and they knew the model that they were working with was not going to be capable of satisfying the demands of their customers.
What we came to the industry with was just a different point of view on how to string together different types of skills and capabilities to serve those customer’s needs. We found that we are in the creative space because we have to be to serve the customer’s needs. The same thing with content, commerce and experience design. As we think about building Accenture Interactive, what we are really doing is appealing to the same objectives that those people have when they started their careers. They want to do great work for clients. We just take maybe a broader view of what it is going to take to do that work.
Phil: I think you already said you are not, but can you ever see Accenture becoming an advertising firm? I know folks in media who are already looking for jobs in Accenture. Clearly, digital media and advertising are merging. I mean do you think it is a possibility in the future?
Mike: No, I don’t. I think it’s absolutely the case that we will be creating products for clients that the advertising industry would call creative work. We are already doing that. It will absolutely be true that we will be either teaching our clients how to buy media and execute their own campaigns. We are doing some of that work on their behalf as part of a broader assignment. So I am not saying that we won’t be doing the work, but what we won’t be doing is trying to replicate the business model of the current advertising industry.
Phil: A very good answer, Mike… so disrupting the model in a different way =) What do you think we will be talking about in another two years? What do you think is going to become the dominant discussion in this digital sphere as we look at the development, the pace and the velocity of what’s been going on?
Mike: Well, Phil, we believe that all of this work in digital is about extending the capability of humans to do what humans are uniquely capable of doing. So I think we are going to be talking about how artificial technologies and immersive virtual and mix reality technologies can come together to enable humans to do the things that they do uniquely well.
We want to make sure that everything that we are working on is either creating a better experience for somebody or enabling somebody to do their job in a much richer way. I think that’s where the industry is headed, but there is lots of work to do to get there.
Phil: I think you once famously said to me “the future of work is going to be no work.” Do you still believe that’s the case?
Mike: Well I believe we will automate away a lot of the what I would call low-value work that humans are required to do today. But I think we will shift that energy to doing things that we don’t do today. I believe that humans will always be engaged in work but I think we will eliminate a lot of the non-value added things that we do today because we can let the technology handle that for us.
Phil: Thanks for your time today Mike – will be good so air your experiences again with our readers!
Posted in : Digital Transformation
