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
Decide quickly which of Vishal Sikka’s initiatives to keep investing in, namely the Nia platform, the Design Thinking strategy;
Keep driving forward its localization investments, especially as DevOps increases the demand for immediate access to onsite resources;
Decide how much emphasis to put on EdgeVerve;
Evaluate the success and effectiveness of its BPO business and determine where to take that business;
Determine Infosys’ approach to “Digital” – is it worth playing the mimicry game, or is there a window to attack the market with a different approach? A lot of building blocks are there, but it is not as articulated and joined up, when compared to Accenture, Cognizant and Wipro;
Definitively nail-down Infosys’ approach to automation and AI (including AssistEdge and Nia) and set appropriate investment levels to make it work;
Assess current leadership team;
Identify its competitive set and determine who is wants to emulate and to compete with. Is Infy still the “Indian Accenture”, or time for a renewed focus?
Evaluate the recent investments in Californian talent and infrastructure.
Medium-term challenges:
Align the strengths of aligning Infosys’ DNA and culture with the future strategy and direction of the firm (without upsetting the Founders);
Ensure the right investments are made across industries based on Infosys’ strengths;
Continue to globalize the firm across North America, Europe and India;
Make significant investments in consulting, either through a major acquisition or a series of smaller tuck-in additions.
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.
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:
What are the top obstacles to IoT adoption, and how can Service Providers help overcome them?
What IoT platforms are winning out, and why? And, is there a trend to using “standard” platforms as opposed to a Service Providers’ proprietary offering?
What reasoning lies behind the Edge vs Cloud computing decision in a project?
Why do customers choose different Providers for different projects?
What comprises a true end-to-end IoT solution?
What proven business benefits of IoT are emerging in each of the industry Verticals?
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!
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.
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.
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!
We seem to have suddenly shifted from the doom and gloom of robots taking our jobs to people proclaiming that AI is going to create millions of new jobs. And if you haven’t endured this latest round of hype, I envy your unique skill in removing fake news from your life.
Suddenly AI is the antidote to automation! Really?
Don’t we have a responsibility to inject some reality into this conversation? Today’s business world is about removing physical touchpoints, about fixing our data, about running processes faster, smarter, more autonomously, and cheaper… So where are the real links between the universities, the politicians, and the businesses? Why aren’t we really debating this stuff in the senates and parliaments if today’s organizations are on an inexorable drive to sub people for better data? Instead, we have academics and “analysts”, desperate for attention, making unsubstantiated predictions that are only fuelling the tech firms, desperate to sell their wares without this negative connotation that the real ROI of selling their products is tied to labor elimination.
Let’s just make the call – AI is indirectly and inextricably tied to the elimination of “unnecessary” labor, by nurturing systems that get smarter with each incident and transaction. The smarter and more autonomous your operations become, the more agile and efficient your business becomes. That’s not a terrible thing – in fact, you are doing your valued staff a huge favor by keeping them employed and keeping them relevant to your business. But you are not creating a net influx of jobs into your organization, you are becoming more fluid and competitive. Sure, you’ll probably look to add some Python and R developers, Machine Learning experts, serious data geeks and design thinkers – or you may just pay consultants to do it all for you – but the bottom-line, here, is that you’re going to be shedding a lot of your left-brained staff performing jobs that can be artificially automated, at a much faster rate than you’ll be adding the data-oriented people you need to digitize your business. AI is about doing more with less, not more with even more – let’s get real.
Don’t get me wrong, the possibilities of faster, smarter, touchless data flows between the customer and the operations of the business, are critical to promote competitiveness and survival, but let’s stop sugar-coating the true purpose of data driven intelligence – the less businesses need to rely on people and the more autonomously they can run processes, the more nimble and profitable they will become. Now if these businesses then choose to reinvest their new-found wealth hiring loads more people, I will tip my hat to these purveyors of job hope, but let’s fact facts, the companies of the future will be running a lot of smart technology with a smaller group of savvy people to manage it all.
Let’s take our much-loved services industry, which is pretty high up the tech-savvy ladder and comprises firms where efficiency and competitiveness are its very DNA
The global IT and BPO services industry employs 16 million workers today. By 2022, our industry will employ 14.8 million – a likely decrease of 7.5% in total workers (see our research methodology and full blog here). This isn’t devastating news – we’ll always lose this many people through natural attrition, but what this data signifies is this industry is now delivering more for less because of advances in automation and artificial intelligence technologies. The new data also shows how job roles are evolving from low skilled workers conducting simple entry level, process driven tasks that require little abstract thinking or autonomy, to medium and high skilled workers undertaking more complicated tasks that require experience, expertise, abstract thinking, ability to manage machine-learning tools and autonomy.
All major service delivery locations are expected to be impacted at the low-end, but the higher the wage costs, the higher the expected role elimination (750,000 roles in India and a similar number in the US)
Medium-skilled roles are picking up across the board, especially in roles that are customer/employee facing with the need for more customized support, the ability to handle basic customer and data queries, and more customized service work with virtual agent models in 2nd / 3rd tier escalations:
As this data illustrates, the more we automate, and digitize, and the more we adopt human + machine technologies, such as machine learning and cognitive solutions, the more we need people to develop skills in managing automated workflows, Machine Learning mechanisms, being able to interpret data, and service increasingly complex customer and employee needs. So when we take into account the total impact of automation and AI on services jobs, the impact is not nearly as severe as so many of the hypesters and fear-mongerers are prophesizing, but the reality is we’re definitely not creating jobs faster than we are digitizing them out of existence:
Philippines should actually increase its service delivery population due to its dominance in voice and capabilities to support increasingly complex and personalized customer models, the UK should be flat, especially with the challenges of Brexit and the slowdown in low cost worker immigration, while both India and the US will see a total worker reduction estimated at the 10% level between by 2022. You can view the total impact on the global services industry – a worker population decline of 7.5% here:
The Bottom-line: Many jobs that can be digitized are going to disappear, but there is time on our side to develop the new skills we need
The big narrative here isn’t about what’s going away, but more about what is emerging in its place. The next fives years we can manage, it’s the five after that when the impact on labor becomes much more challenging. Transaction roles at the bottom of the value chain have been under threat for many years now – with the impact of low cost location delivery and better technology. Now the emergence of RPA is eventually going to sound the death knell for most high-throughput, high-intensity jobs, as both service providers and enterprises master the ability to apply these technologies effectively. The good news is this takes time and there is no huge burning platform to do this overnight from most enterprises.
So our message to all stakeholders of operations and services is simply to get out of your comfort zones, accept that new skills are replacing old ones, and it’s critical we have a plan to train, develop and invest in changing what we have. I will leave you with six things to think about as you ponder your own value to this industry and your firm:
Which customers have you delighted recently?
What new relationships have you made that add value to our business?
What work have you done that excited people inside and outside of the business?
How are you helping energize your colleagues and exciting them with new ideas?
How have you helped add value to new business wins?
How have you contributed to new initiatives that improve productivity and effectiveness?
Well someone actually said it – and it may not come as a complete shock that it’s come from everyone’s favorite RPA evangelist Guy Kirkwood, of UIPath fame. Even more impressive is guy’s beautiful command of the English language to describe the latest hyped term “AI”, now that most the hypesters have got bored touting the massively disruptive impacts of IoT and digital – and the automation conversations have just got a bit rinse and repeat. Guy is saying that true AI is when we arrive at the “singularity” (which Ray Kurzweil predicts will happen in 2029), when machines will become smarter than humans, abruptly triggering runaway technological growth, resulting in unfathomable changes to human civilization.
Guy basically claims it’s incorrect that we are dubbing the conglomeration of tools, such as NLP, Machine Learning etc as “AI”. While I agree with Guy that the inane use of the term AI is driving me (and many of my colleagues) to scream “Please just stop the bollocks!”, my point to him is: what else do we call tools which are all about “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.” So if this isn’t Artificial Intelligence, what is it?
And my further point, here, is that these tools are already here and being heavily piloted and evaluated, according to 400 major enterprises in our recent State of Automation and AI Study:
Sorry, Guy, but while we all want to scream “bollocks!” at all the bollocks, I think we’re stuck with AI until the next buzz term comes along =)
HfS recently hosted the debut session of the newly-formed Future of Operations in the Robotic Age Leadership Council (FORA) in Chicago. The purpose was to bring together stakeholders across all corners of enterprise operations, services and intelligent automation software arenas to lock heads and map the course of this emerging industry: business operations being fundamentally redesigned by the impact of intelligent automation and digital technologies. We believe this is becoming known more broadly as the “digital operations industry”. So let’s hear the consolidated feedback from the industry’s key stakeholders:
The FORA Mandates, Q4 2017
1) Automation technologies can collapse the barriers between front and back offices
While there’s a lot of noise and scaremongering in the public sphere around job losses, the real story is that automation technologies of various flavors and deployments — RPA, RDA, AI, etc. – are quietly creating a new execution layer on top of the IT “stack,” one that offers a flexible, reconfigurable operations platform for the business. Freed from the costs and rigidity of legacy systems, savvy enterprise architects see automation technologies, together with the data they capture and generate, as a way to digitally connect their back-, middle-, and front-offices for greater throughput, quality, and responsiveness.
2) Commercials of engagements must be reconstructed around the economic value of robots
Automation is destroying the traditional FTE-based cost/value equation for service delivery, and we need a new “post-FTE” commercial model, one based on partnership, business outcomes and joint value creation for buyers, advisors, and provides. The economic value of a robot is vastly different in kind, cost and scale from that of a human being, and is forcing us to rethink the value of different kinds of work – separating rote transaction work from judgment-based work. Ultimately, this will require all parties to re-think their offerings and value propositions and to demonstrate imagination, creativity and flexibility, while educating their respective stakeholder communities and managing the financial and human impacts.
3) From the C-Suite to the manager, enterprises need people who appreciate and understand the value of data
Success in achieving the OneOffice future requires a blend of strategy, business design, and technology skills to re-think and re-configure core processes with a singular focus on improving the customer experience v. just cutting costs. Automation per se looks deceptively simple (and is often sold with that promise) but can fail to deliver true value if simply retrofitted on existing processes; coupled with artificial intelligence and cognitive, automation can support new services and capabilities at speed and scale. But thoughtful tool selection and disciplined deployment is crucial. And as data grows exponentially, it becomes the essential raw material for every enterprise in every industry. At every level of the organization – from the C-Suite to manager – enterprises need people who appreciate and understand the value of data and who can identify/extract the most important customer-relevant insights.
4) Businesses must be redesigned from a logical rather than physical perspective
Native digital businesses have demonstrated the value and power of a digital operations approach by thinking about their business from a logical rather than physical perspective – focusing on customer outcomes rather than internal inputs. They begin with an intense focus on identifying their customers’ most important ‘priorities’ (as distinct from ‘needs’) to design a differentiated and dynamic customer experience. They then build and optimize a collaborative partner ecosystem to deliver that experience, leveraging specialist capabilities and resources. The result is a more disaggregated but fiercely cooperative business model. The challenge for non-digital natives is to re-imagine their businesses from this logical perspective and to demonstrate what one executive called the “willingness to let go.” That implies – and requires – a fundamental re-thinking around control and governance as well as motivation and reward, supported by deep and enduring commitment to change management.
I hope to see many of you in London on 7th December for our next round of pivotal discussions. A big thanks to all of you for your terrific support with the FORA Leadership Council initiative,
