If you’ve been covering the legacy world of Business Process Management (BPM) software and the emergence of Robotic Process Automation (RPA) software for the past two decades, it’s fascinating to see the two solutions to mesh together, as customers need the full gamut of automation help: the digitization of manual work, the scripting, and integration of static data that provide the foundation for the automation of the digital processes.
Then you can get to the really exciting stuff of recognizing data patterns, taking advantage of machine learning to make systems self-remediating, and, ultimately, the injection of intelligence to make them absorb everything around them to become predictive and human-like in the way they operate. This is why we’re seeing the likes of Pega peering into the RPA space, Blue Prism partnering with Appian and AutomationAnywhere now partnering with IBM’s BPM software solution. We’re also seeing some novel approaches, such as intelligent automation provider WorkFusion donate free RPA software to the world to bridge the divide between the manual and the digital quandary.
Yes, people, there appears to be a fair bit of life left in the HfS Intelligent Automation Continuum. Despite some critics who believe RPA is a very separate solution than digital autonomics, machine learning, cognitive and AI, the fundamental thought-process behind the HfS Continuum model still rings true: all the approaches illustrated are both overlapping and interdependent:
Notwithstanding all the feverish excitement on RPA and Cognitive, we still need to include all the less exciting – but critical – activities, like runbooks and scripting, and how these approaches must be integrated into broader digital process workflows. True Digital OneOffice only works when all breakpoints and silos are effectively automated. If you truly want all touchpoints and processes across your organization focused on executing your vision of customer experiences and building foundational capabilities that support this entire philosophy, you have to address the entire Intelligent Automation Continuum if you want a data backbone that operates in synch across your customers, partners, and employees.
This is the context in which the announcement of IBM’s partnership with AutomationAnywhere comes in.
As part of the agreement, the two companies plan to integrate Automation Anywhere’s RPA platform with IBM’s portfolio of digital process automation software. The main focus will be on integrating Automation Anywhere with IBM’s Business Process Manager and Operational Decision Manager. Crucially, integration is meant to be on code level and therefore goes beyond more loosely integrated partnerships between BPM and RPA players. These enhanced products will be part of IBM’s software catalog. And lastly, both companies plan to build out a Center of Excellence around Automation Anywhere’s RPA capabilities. Condensed and in plain English, this means that IBM is planning to expand its BPM offering through RPA capabilities. Thus, it is a defensive move against Pega’s acquisition of OpenSpan that has seen the integration of BPM, RDA (Robotic Desktop Automation) and RPA. At the same time, we’re seeing the rise of more loosely integrated partnerships such as Blue Prism and Appian.
IBM needs to develop a holistic corporate strategy for RPA
While the partnership makes a lot of sense for IBM’s BPM division, from a narrow BPM angle, from a corporate and market facing point of view this announcement raises many questions. As part of its Cognitive Process Automation strategy, the GBS side of IBM has a focused and strong relationship with Blue Prism. It is unlikely that executives at Blue Prism (or GBS) are overly-pleased with these developments as it could curtail their mindshare among stakeholders. If anything, in contrast to most of its peers, GBS had chosen a single partner in order to scale its RPA deployments. Almost all of IBM’s peers have moved to a portfolio approach on RPA by offering and integrating a broad set of tool providers. In our discussions with IBM executives there appeared to be a lack of understanding as to the different RPA strategies of the various business units, let alone a nuanced understanding as to how RPA is being discussed in the broader market. In a nascent market with blurred market communications and relentless marketing rhetoric, this could add to the reluctance of customers to engage on a larger scale and a more holistic approach around RPA.
For those already engaged in RPA activities, questions begin to crop up about the firm’s current RPA engagements. Can clients expect to continue on their journey with BluePrism or should they anticipate a migration over to Automation Anywhere solution in the long-term? Of course, this is dependent on the level of exclusivity surrounding the partnership alongside other factors. In recent engagements with HfS analysts, the firm has championed its vendor and IP agnosticism, offering customers the opportunity to broker a broad range of solutions and services through them to find the best fit for the client business. We will continue to monitor this space to see if this partnership also signals a move away from this philosophy. If there’s one thing for certain, the deal may make commercial sense to IBM, but it opens them up to a lot of questions about current and future engagements for RPA, alongside broader IBM services.
And where does this really leave Watson? While the rest of IBM grapples with the digital underbelly of pulling the pieces together in a way that makes sense for the process wonks, the engine that is Watson, with all its cognitive analytics grunt, is nowhere to be seen in this story. Surely IBM needs to pull together all these internal factions (and from within the Watson group itself) to develop an integrated data orchestration story that the industry can actually understand. Talk to anyone about Watson and noone is particularly clear where this is all headed, even from within Blg Blue.
For Automation Anywhere it is all about scale
The RPA market is still lacking scale. Most deployments are client specific and on sub-process level. In a nascent market that might not be surprising, but more fundamentally there is a lack of education as to how to get to scale with deployments. Against this background Automation Anywhere could leverage IBM’s know-how and IP to understand better how data is being transported and what the critical bottlenecks are. This could provide a critical differentiation in a nascent market that lacks an understanding how those innovative toolsets are impacting process chains and workflows. The talent with such an understanding is extremely scarce and is difficult to keep in an organization. However, for Automation Anywhere scale is also important from another angle. The main strategic objective is still moving toward an IPO. Therefore, the leverage of IBM’s sales channel could conceivably reach many new customers which in turn would enhance Automation Anywhere’s valuation by financial stakeholders. To achieve that goal, Automation Anywhere needs to mitigate any potential negative reaction by its other main partners. Suffice it to say one could argue, that Blue Prism’s close relationship with IBM has not harmed its potential, yet with more scale and consequently value, the balancing of partner interests could become more intricate. Having said all that, should the partnership prove successful, M&A rather than an IPO might be on the cards.
The broader market is likely to get more confused in the short term
In a market blighted by smoke and mirrors as well as the mis-selling of RPA, without a focused and clearly articulated marketing push, this announcement is in danger of confusing the market at least in the short term. Many stakeholders don’t understand the differences between RPA and RDA, how cognitive is coming into play or even how RPA could be integrated into BPM toolsets. By adding BPM as another starting point to the RPA discussions on top of the front-office centric RDA approaches and the more back-office focused RPA engagements, further confusion is likely. Suffice it to say IBM has the marketing muscle to act as (a long overdue) educator. IBM’s BPM team should urgently leverage the robust insights and capabilities from its peers in GBS.
Bottom-line: The proof will be in the pudding, but the move could give Automation Anywhere real industrial scale
IBM urgently needs to develop buyer stories that demonstrate to the broader market the success of its strategy. A critical component in those narratives needs to be the depiction of how BPM and RPA work together. As it is sold as a product rather than a service, it could follow the many failed RPA projects that neglected a more consultative approach leveraging the specialist capabilities of organizations like the RPA pure plays such as Symphony Ventures, VirtualOperations or Mindfields. Automation Anywhere has less to lose yet more to gain. The understanding of how to scale deployments while simultaneously broadening its client reach is as tantalizing as it could be value enhancing. As the proof will be in the pudding, HfS will follow those developments with great interest.
The big questions marks with the likes of AA and other RPA solutions are whether these products will hold up in situations of industrial stress where they have to cope with very high throughput, high-intensive processing. If AA can prove it can delivery both the RDA and RPA grunt to power the broader IBM BPM solutions, then the firm will be in a strong position to increase its valuation as a bonafide enterprise class solution. Perhaps even IBM itself wants to have an up-close and personal experience of the AA software in these intensive client environments, before making its own acquisitive move… the future is unraveling, and this is just another piece of a much larger automation jigsaw that is quickly coming together…
Another year another top 50 list of service providers can be found on HfSresearch.com. We have included some new providers – including a couple of interesting BPO firms in Japan and adjusted for the recent wave of consolidation in the market.
I just wanted to repeat the advice I gave out last year about the report and the list – this report is all about the money. Being on the list or not, doesn’t make a service provider good or bad – hopefully market forces mean that better/cheaper providers rise through the ranks, but it isn’t necessarily so.
The Top BPO FAQ:
You’ve made a mistake can you correct it?
We are human and from time to time this happens – just send me an email and with your thoughts and we’ll correct. By all means, call me names on Twitter – but I may shout back…
We can miss companies from time to time and define where revenues go incorrectly. And, occasionally, spell your name incorrectly 😉 Also we may define things differently from you – we are trying to compare like with like as close as possible. Remember this is an estimate – so if you have further guidance, I’d be happy to have a conversation to let you know how we came up with any of the numbers.
I should be on the list / What do you have to do to get on the list?
Sending us evidence (a financial report or two, would help) that shows latest annual revenues. We use calendar years for our lists usually, so something that shows the relevant quarters would work. But happy to have a discussion with any private firms – just so we can properly establish position. I am not a miracle worker so private companies that don’t publish results and don’t provide guidance may not make the list.
How much do I need to bribe you to change my position?
It (still) pains me to say it but no – we just can’t. The pesky tax man (and our boring accountant) frown on it 😉
That said it is also free to be on the list – you just need to demonstrate that you have the revenues to make it. But I will check against public sources and validate.
I really want to be part of this but I just don’t have the revenues yet – is there anything I can do?
We are happy to engage regardless of the absolute market share if a vendor has an interesting service – we are interested in up and coming providers. And we may profile interesting firms.
Tired of the Blockchain hype? You should be, but the emergence of Hyperledger Fabric 1.0 gives us a sense of the reality to come and where this is all heading. Let’s dive in…
Hyperledger announced the release of Hyperledger Fabric 1.0 yesterday (see press release). Hyperledger Fabric is an open-source platform, hosted by the Linux Foundation that allows organizations to develop Blockchain applications. Version 1.0 marks the release of a production-ready platform that goes beyond pilots and proof of concepts. 159 engineers from 28 organizations collaborated over a 16-month period to make this happen.
There are multiple Blockchain platforms that exist today. Ethereum is the most mature public platform (besides Bitcoin) with tremendous potential and over 500 use-cases in various stages of development. There are multiple other private or semi-private platforms such as Ripple and Chain. Hyperledger Fabric is younger than many others, but there are three characteristics that make it important for enterprises that want to solve business pain points, leveraging Blockchain:
Flexible. The architecture of Hyperledger Fabric can run like a private or hybrid or public platform, making it potentially more secure from a data-privacy standpoint thus rendering itself enterprise ready
Open-Source. Hyperledger is an open source collaborative effort created to advance cross-industry blockchain technologies. It is a global collaboration, hosted by The Linux Foundation, including leaders in finance, banking, Internet of Things, supply chains, manufacturing, and Technology. This structure gives it the potential to become the de-facto standard which will become an important adoption criterion going forward
Not crypto-currency based. Hyperledger does not have a crypto-currency (such as Bitcoin or Ether) which potentially renders it more usable for business applications as not every potential use case needs a currency
The announcement marks a significant move forward to leverage Blockchain for business use cases. The Hyperledger Fabric project started in March 2016 based on merged codebases from IBM and Digital Assets Holding. It moved out of incubation 12 months later and was ready for pilots and POCs. Now four months later, they have released Hyperledger Fabric 1.0 – a production ready version.
Does this mean that Blockchain can now become mainstream for enterprise adoption? No.
These are the three challenges the Blockchain pioneers must address to make the technology truly enterprise ready:
1) Technical challenges. Blockchains by design will never be able to complete thousands of transactions in a second, but the technologies do need to be able to scale up for enterprise-grade performance, efficiency, and costs. Hyperledger Fabric promises to solve this by not using consensus-driven Proof of Work (PoW) that most other Blockchains are built upon and requires major computing power
2) Policy challenges. There are no Blockchain standards, there exist multiple platforms with no interoperability, and there are no regulations in this space. And these are not easy questions to solve. For example, given that all Blockchains are Distributed Ledgers, which geographical jurisdiction will be applicable?
3) Nascency challenges. Several challenges stem from its nascency and novelty. Lack of proven use cases, limited understanding of technology and its potential, limited talent and skill-sets shortage across IT and business, etc. The inherent power and potential of the concept with the help of some pioneering risk-takers will help pull it through such nascency challenges, but it will take time
Bottom-line: There is still a long road ahead for Blockchain, but real progress is being made.
Notwithstanding these challenges, the advancements in Blockchain technology are happening at a frenetic pace. Market developments such as this Hyperledger Fabric 1.0 release are important milestones in the development of this space. It’s important for enterprises to take notice and start investigating.
One of the leading service providers is also one of the most understated: Hindustan Computers Limited, or its better-known abbreviation, HCL. This company has grown its revenues by more than 75% in the last 5 years and maintained its profitability to surpass $7 billion this year, while running Wipro close to being the 4th largest Indian heritage IT services firm. Its reputation is one of having a very strong engineering pedigree, a “roll the sleeves up” attitude and a no-nonsense approach to business. The fact it has never bothered to spend millions on a fancy new logo, or glitzy marketing posturing, speaks volumes for this determined, humble and very focused firm, quietly – but aggressively – going about its business as becoming one of the heavyweights of the IT services industry, and one of the best positioned to weather the current malaise caused by flagging demand, too many competitors, and creeping automation.
So when I got a chance to spend some time with its new, young dynamic CEO, C Vijayakumar, or “CVK” as everyone calls him, I just had to share some of our conversation with the HfS community…
PhilFersht,CEOand Chief Analyst,HfSResearch: CVK, tell us about your journey to becoming the CEO of HCL Technologies? What is your secret sauce?
CVijayakumar(CVK), President and Chief Executive Officer, HCL: More than the secret sauce that I bring to the table, the question is, what is really special about HCL, and what is that secret sauce that has developed a range of leaders within the company. They may seem different and diverse on the surface, but all our leaders embody a core culture within, and that’s fairly constant. I have had the good fortune to be part of some great milestones and worked with some excellent teams at HCL. I have also worked across multiple business functions – strategy, practice, product management, sales, business development and delivery. This has helped me to get a well-rounded view and brought me to this position today.
Phil: So what is the number one issue with HCL and the business… what is keeping you up at night?
CVK: The number one issue is the speed at which we can evolve our next generation of services. I believe if 40% of your revenues are from next generation services, then we have crossed a threshold to be relevant and do well. 20% of our current revenues are coming from next generation services. How can we get this up to 40% in the next 2-3 years? Or how fast we can get there? That’s what we are working on and that’s what keeps us up at night. We have a strategy, our “Mode 1-2-3 strategy” we are driving on a three-lane highway where we need to maintain a steady pace in the lane we are driving on, Mode 1 – our core services. Moving to the adjacent lane, Mode 2, we have an opportunity to overtake and finally working our way to the high-speed lane which is Mode 3. That’s how we and a lot of global leaders look at it, especially in the IT industry. Technologies themselves may not be the big things you are worried about, I think every business is trying to reinvent themselves, reimagining and rewiring their business using new technologies. Every aspect of the IT industry, infrastructure, application, business services, even the talent, and skill is undergoing significant change or disruption. My focus is to evolve the business in line with the changing dynamics and rapidly changing customer dynamics. That’s where the focus of the company and the leadership team lies. Our Mode 1-2-3 strategy has been built to address theses issues:
Mode 1 – is our core services: infrastructure, applications, BPO and engineering services. They contribute 82% of our revenue as measured in the last quarter. The differentiator is the industry leading autonomics platform called DRYiCE. We are still the most significant player in these services offering practical benefits for our clients.
Mode 2 – our experience-centric digital services or outcome orientated IoT services enabled by a foundation of cloud and security, leveraging what we call DRYiCE orchestration. This is where cloud and security are already enabling digital which offers a great growth opportunity for us.
Mode 3 – this is unique to us and is about using the ecosystem to future-proof our business. Building a products and platform business, by creating innovations enabled by creative partnerships. The products are stable, long-standing products and we make them relevant for the new world. This is different from creating products from scratch. You buy the IP and see how you can modernize and make them relevant. A good example would be our work with Workload Automation, we bought the source code license from IBM and created a cloud Workload Automation solution which is very relevant in data centers, which are becoming hybrid cloud solutions. This strategy is working very well. We have numerous products in the pipeline, they are all traditional products but they are being reinvented to be relevant in the modern world. That’s the Mode 3 strategy, we not only have this on the technology side, we are doing this on the business functionality as well. We have a few things in the pipeline that we will announce shortly. We are building a strong products and platform business. This is an in-depth answer, but technically this is what is keeping us up at night.
Phil: Very well-articulated! What do you think, CVK, is going to have the biggest impact in the next 3-5 years? Is it blockchain, automation, cognitive or something else?
CVK:I think it’s a confluence of all these things, not just one thing. These and some more things will all have an impact. We have now identified 5 distinct areas that will have a huge impact on the services industry and they are: Digital, IoT, Automation, Cloud and CyberSecurity. There could be many sub-themes in and around these areas, but broadly these are the 5 key themes. We recognize that clients’ ability to adopt these will vary based on the maturity of their existing environments, hence we have created separate focus groups with a leeway to invest adequate management support to the three Modes that we are operating in. I believe having the right investment and right management across all the various aspects of operation is critical to our Mode 1-2-3 strategy.
Phil:A lot of this is going to require ‘unlearning’, changing the way things have been done in the past. When you look at your company and where you are going, how can you unlearn the last couple of decades to make yourselves truly relevant for the next decade?
CVK: I open a lot of presentations with a quote from Alvin Toffler – “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn” – I keep emphasizing this to our business leaders and the technical talent – learn, unlearn and relearn – is a very important aspect. The outsourcing business is definitely changing. Even if for a moment we believe it’s not changing dramatically, it’s always good to believe it’s changing dramatically, which will propel us to do the right things and be ready when these changes have to be implemented for a client, or to change your business model. I believe the industry is changing significantly and we have to change ourselves. Traditionally there were many subject matter experts with in-depth knowledge in technologies, but today the silos have broken down and IT is a vast horizontal plain, cutting across technology, businesses and different functions. The challenge is to create a breed of inter-connected specialists who can traverse different domains. This is where we need to focus our talent – continually building capabilities that will make them a full stack engineer or a converged engineer who can look at not just running infrastructure but who can program application API’s and micro-services etc. Creating talent that has a broader view than the siloed view of the last few years.
From an industry and services perspective, it’s no longer a labor and a cost arbitrage game, it’s about how you can deliver a business outcome and encourage your teams to have skin in the game, by committing to a solution, committing to an outcome, that will deliver through that phase and ensure the outcomes happen. Customers today are looking for a partner who will have skin in the game and ensure business outcomes. We are therefore encouraging our teams to take some risks, learn something on the way and deliver outcomes.
Phil:That’s great to hear, and it’s difficult to have a conversation like this without talking about the impact of politics. For the first time politics and technology are becoming entwined in a business model. In terms of HCL business have you seen a major impact on your own financial performance, as a result of some of the political changes and noise that we have had in the last few months?
CVK:Yes, due to the political changes, I think some decisions have been delayed, people are reviewing their decisions a lot more carefully and thoughtfully. Everyone is worried about being visible. It has definitely slowed down the flow of some new deals. But most customers strongly believe in the business model, the outcomes that they expect in the services outsource space. There is some delay but I don’t think that people are fundamentally rethinking this. They are being a little bit more cautious, so it has an impact to that extent but I do not believe it will fundamentally change the way customers are thinking about a business case.
Phil:So, my final question, if you were to be anointed the ‘Emperor of the Service Industry’ for a whole week and you can make one change, what would that be?
CVK:We have an internal communication platform called MEME where I communicate directly with all HCL’ites every day and I actually posted this question there. There were lots of very interesting responses, some of them very closely aligned to my own thoughts on this subject. I believe the IT industry is an open source world and cannot have one Emperor, but to answer your question I would probably aggregate the forces of IT to really use them for the less advantaged and unleash its benefits to the common man – in today’s world that is not the central piece which drives investment. We could really leverage IT in unimaginable ways – help the disadvantaged, help to fight crime in a very meaningful manner. The other decision would be around AI. Currently, there is a lot of nervousness about automation and AI. I am a strong believer that if you use Automation and AI in a thoughtful manner, it will give more benefits to humanity. But how do you get that done in a very thoughtful and disciplined manner? There’s a very good analogy that we can draw from the ‘Nuclear non-proliferation treaty’, signed across many countries in the world. Something like that should be done for AI, an AI treaty that mandates the use of AI in a meaningful manner to augment what humans can do and improve lives. I hope that makes sense.
Phil: This is the most thoughtful answer I have had from this question and it makes a lot of sense. It’s been a great interview and good to hear what HCL is doing to continue to be successful… excited to share with our audience, CVK!
When we revealed Gartner’s bullish 96% of clients are getting real value from RPA bombshell (see post) six weeks ago, everyone close to the action was incredulous:
Now we have the real data to prove where satisfaction levels currently sit, where we interviewed 136 major enterprises currently experiencing RPA installs:
My personal experience has tended to be about half of enterprise RPA clients today are experiencing positive progress, while the other half are struggling or aborting RPA projects altogether, so this data is pretty positive, especially when you consider that the same number are positive about both the cost and business impact of RPA.
The Bottom-line: RPA is making sense in this era of renovation and the current satisfaction results reflect this
What I love about RPA is the fact it’s making us fix a lot of the systems we’re currently stuck with, using sensible, affordable technology. We spent years bemoaning the fact that enterprises couldn’t just “saw off” their broken processes and replace with costly new systems and services, but the reality is that most enterprises are not ready to write off their technical debt and invest in change, especially when the outcome is not particularly clear. What is clear is that most enterprises prefer to invest in making their broken processes function better, operating in a digital fashion where they can manage the change themselves and the cost isn’t abhorrent. Taking it one broken process at a time, fixing it, proving the ROI then onto the next one is the step change strategy that is working for the majority.
Yes, RPA is predominantly operating as a retro-fit solution for most enterprise clients, getting rudimentary processes functional by eliminating high-throughput, high-intensive manual interventions and helping applications and systems manage digital workflows effectively. Yes, RPA keepslegacy alive for many organizations, but in a way that you can build digital overlays over these systems, once the manual elements are eliminated and workflows are joined up effectively. Our emerging conversation, beyond RPA, is all about automating the automation and deriving the right data patterns to promote more intelligent machine learning and cognitive capabilities.
The good news is the general adoption of RPA is on the right path and the next challenge for enterprises is to figure out the next wave of digital building blocks to drive more intelligent and predictive capabilities into their data backbone. Software firms, advisors and service providers alike all have to create much more dynamic partnerships to help enterprise their clients get to this stage – this is much more about how to start innovating together and understanding each others’ capabilities. Just talk to any services provider, such as an Accenture, Genpact, IBM, TCS or Wipro etc., and they will tell you a whole new plethora of smart digital competitors are emerging and you just can’t afford to acquire them all – you need to learn how to work with them and give them some skin in the game.
We’re in an era when technological needs are complex, and there is no defined rulebook explaining how to develop a holistic data strategy. We’re in an era of discovery and making the most of what we currently have, before we can truly understand what we will need to be successful at some far-flung point in the future. In my view, being “disrupted” is when you don’t collaborate and explore… being a disruptor is being forever bold and unafraid, in order to define your own curriculum as this digital future unravels. Stay tuned for a lot more analysis from this study…
Last week, Accenture announced the latest in its 2017 $1.8 B shopping spree with Boston-based mobile design and development company Intrepid. This is a part of Accenture’s strategy to dominate the Digitally-driven Front Office with the vision to offer its clients a model with no business silos where the barriers between the front and back office are removed forever; as described in HfS’ Digital OneOfficeTM. Accenture’s strategy goes beyond the ambitions of growing and maintaining the largest digital agency in the world. It’s about building capabilities to impact its clients’ transformation, finding unique capabilities in opportunistic Geos, opportunities for pull-through with its other services, and a keen focus on impacting the customer experience.
Intrepid’s 150 employees will join Accenture Digital, the division where many of Accenture’s customer experience focused services reside. Intrepid’s engineering talent and capabilities, such as it’s work with Saucony Stride lab — an app that helps runners analyze their stride for better performance– falls right in line with the kind of digitally-driven customer experiences Accenture is looking to help its clients achieve. There are also great client synergies between Accenture and Intrepid, in particular around P&G, Accenture’s marquee client for front office services and an organization which is at the forefront of value creation from front office services.
Accenture was recently placed in the Winner’s Circle of our Digital Marketing Operations Blueprint. This acquisition will further solidify its position, in a space where Accenture’s ability to replicate its Digital Front Office services across industries is also emerging as a competitive differentiator. The ‘string of pearls’ M&A strategy across the core pieces of digital transformation is illustrative of the service provider’s forward thinking vision for the evolution of this market. These acquisitions span across various core pieces of digital transformation, such as include aVVenta for content, Cimation for IoT consulting and Chaotic Moon for digital technology design and prototyping, complementing customer experience services and helping the service provider double its digital marketing operations business over the last two years.
Accenture is putting together a differentiated and bold story for the digitally-driven front office. In fact, Accenture accounts for approximately 50% of the M&A activity since January 2017. Let’s look at some of the more recent Accenture recent acquisitions in 2017:
MediaHive, May: Digital commerce strategy and design to platform delivery and managed services
Monkeys and Maud, May: Creative ad agency, Australia and New Zealand
Kuntsmaan, April: Belgian communication agency focused on customer experience
SinnerSchrader, February: German digital agency
What is the common theme in each of these selections? A clear focus on digital customer experience and design. Accenture also stands apart from the competition in the sense that it seems to avoid falling to the temptation of talking immediately about technology and software (in spite of the strength of its technology assets and partnerships), and instead focuses on the business value. This management consulting legacy and mindset is part of the company’s DNA and a big part of how it builds trust with its clients.
This flurry of M&A activity is bold, but not without risks and potential problems. One of the greatest potential issues is addressing the clashes of so many disparate and vastly varying organizations both operationally and from a cultural perspective. Accenture’s culture is built on thought leadership, delivering operational excellence, and not necessarily in sync with more “creative type” cultures that will inevitably come with the acquisitions, it’s been targeting. For now, the strategy seems to be running these entities independently, almost using them as R&D centers wherein their original cultures remain intact. But inevitably over time, some cultural transformation will occur, morphing the digital giant and its entities into something new-the question is whether legacy Accenture becomes a more creative, innovative organization-or it’s subsidiaries turn more corporate, potentially snuffing out some of the creative fire and losing key talent in the process. It also risks its size becoming a deterrent for buyers who prefer the niche specialized agencies and the attention, flexibility, and experience they receive from a smaller player.
Another potential threat is that Accenture might become complacent in delivery and execution given its dominance from a capability perspective in this space. This acquisition moves it up on our innovation versus execution grid, but will Accenture also move toward the right? We will be watching that as Accenture continues to enhance its capabilities with these innovative firms.
As Anatoly Roytman, head of Accenture Interactive for Europe, Africa, Middle East and Latin America said (of the Kuntsmaan acquisition): “Together, we’re bringing our unique model to the market: part creative agency, part business consultancy and part technology powerhouse – all laser-focused on creating the best customer experiences on the planet.” The refrain we hear constantly from service buyers — Accenture’s included—is “more innovation!” Accenture has certainly amassed an array of building blocks to address this demand globally; now the hard work begins to pull these pieces together – a ~$10B digital agency with many moving pieces, specialized skills and domain capabilities – to execute on transforming the digital customer experience for its clients.
Now available in select “HR supply stores”: IoT (Internet of Things), one of the five tools discussed in my latest POV – “The HR Power Tools 6-Pack for High-Impact Service Delivery.” Much like the double-edged sword nature of its companion power tools, IoT in workforce management can usher in unprecedented and significant business benefits, but only when the right capabilities are selected and potential risks and adverse outcomes are accounted for.
IoT is a process in which people, machines, and devices are connected to one another via a single network in order to automatically exchange data without any manual involvement. IoT can, for example:
track the productivity of workers in the field
confirm overall fitness or fatigue when relevant
assign tasks based on the nearest worker
tie scheduling real-time to customer flow
offer real-time training based on an employee’s time on job, credentials or performance
All of this sounds pretty compelling, but a couple words of caution. The first word: Volkswagen, whose engineers illegally programmed IoT-like software to sense when the car was being tested during an emissions inspection, which then activated more costly equipment that reduced emissions. This resulted in a roughly $3B fine this year. Additionally, IoT solutions will generate lots of new, often very valuable data related to people and how they perform their jobs, and not every HR Department is adequately staffed to handle the current explosion of people data or supported by data scientists.
Cause for Optimism with Early Adopters of IoT in HR
While not many HR Technology solution providers are occupying the IoT market category just yet, one company caught our attention: Triax Technologies, and specifically with their “spot- r” solution for companies with workers in the field, particularly on constructions sites. Certainly, accidents are more common there. My briefing from Triax’ COO Peter Schermerhorn enlightened me that U.S. construction companies pay out $1 billion annually for claims related to slips, trips or falls; that the construction industry pays more than twice the national average for workers’ compensation insurance; and that an estimated $7.2 billion in fraudulent workers’ compensation claims are filed annually in the U.S.
spot-r by Triax provides data-driven, real-time visibility into construction operations and safety incidents, leading to an improved safety culture on site and can result in reduced insurance costs. Automatic, geo-tagged “slip, trip, fall” alerts improve response time to accidents and record surrounding conditions (temperature, height, location of witnesses in the area, etc.), self-alert buttons empower construction workers to stop working due to unsafe conditions and alert supervisors to hazardous conditions, and high-decibel evacuation alerts are included in the mandatory wearable devices used on many of the company’s pilot projects with customers. Peter also offered a glimpse into the near future when the company’s sensors will be used in new ways to promote safety and visibility on the job site. Imagine knowing in real-time where your workers, equipment, machinery, and tools are onsite and how they’re interacting with each other.
Who said technology innovations related to HR and workforce management usually lag other business areas?
Bottom Line: As with all the other power tools (i.e., sophisticated capabilities) recently added to the HR practitioner tool belt, IoT’s potential to be a game-changer cannot be overstated, but neither can the surrounding considerations for avoiding possible misuse or sub-optimal deployment.
One of the things I’ve been at pains to convey is the critical link between digital transformation… and the role RPA plays it making so much of it possible. Digitally-driven organizations must create a Digital Underbelly to support the front office by automating manual processes, digitizing manual documents to create converged datasets, and embracing the cloud in a way that enables genuine scalability and security.
Organizations simply cannot be effective with a digital strategy without automating processes intelligently – forget all the hype around robotics and jobs going away, this is about making processes run digitally so smart organizations can grow their digital businesses and create new work and opportunities.
So click here to download my full session at the recent packed-out Blue Prism World in London town:
I was struck by the similarities between Global Business Services (GBS) and Empires after reading ‘Sapiens: A Brief History of Humankind’ by Noah Harari. He says:
“An Empire is a political order with two important characteristics. First, to qualify for that designation, you have to rule over a significant number of distinct peoples, each possessing a different cultural identity and a separate territory….Second, empires are characterized by flexible borders and a potentially unlimited appetite…”
These two characteristics of an empire are uncannily similar to Global Business Service (GBS) organizations. GBS is:
Multi-function. GBS organizations aim to deliver services across multiple business functions (aka distinct peoples with different identities) such as F&A, HR, IT, procurement etc. all under one organizational umbrella.
Multi-geography. GBS organizations also aim to deliver its services across all regions and countries (aka flexible boundaries) that a company operates in.
The basis of the creation of Empires and GBS also has similarity. For Empires, it is about basic unity of the entire world around a central ideology. For GBS, that ideology is around standardization, collaboration, and effectiveness.
This all becomes troubling when you realize that we all have a very negative connotation around the word “Imperialism”. We tend to associate wars, brutality, coercion, oppression, and so on when we talk about imperialism.
So, is GBS also this brutal? I think it depends on what lens you view it from:
People lens. GBS makes total sense if you are sitting in the corporate headquarters but will be a bitter pill to swallow if you are the one who loses your job because of what you and many others consider to be some corporate mumbo jumbo and the latest consultant gimmick
Time lens. It feels like an achievement in hindsight but it is really challenging during set-up. Have you thought why almost everyone describes their experience of setting up a GBS as ‘war stories with battle scars to prove it’? I’ve not met anyone who has told me that the journey was smooth and they did not meet any resistance.
Bottom-line: GBS will work as long as we keep people at the core, define our outcomes and keep an eye on the future
However, I don’t think there is any value in painting GBS as black or white. Like almost everything in life, it has shades of gray. The most important question is ‘how can we make it better?’ And I think this is where GBS organizations can learn from the rise and fall of Empires.
Lesson #1. Focusing on developing talent is at the crux. GBS is about people and will not succeed without buy-in from people. The tone from the top helps but cannot be the only driver for sustainable success. Phil’s recent rant on this subject is spot on – too many enterprises are obsessed with achieving a scalable operational backbone centered on technology, as opposed to talent
Lesson #2. Make sure you know what “success” looks like. Balancing efficiency with empathy is an important concept to keep in mind. Also, there is a diminishing return to efficiency improvements and cost reductions. After a certain point of time, it really does not matter. What matters is business outcomes and for that, you need motivated talent.
Lesson #3. All good things come to an end. Every empire eventually falls. GBS is the concept that we are all rallying behind in recent times, but you can be pretty sure we will come up with an even better framework for organizing ourselves to deliver work in future (such as the HfS framework, the Digital OneOfficeTM). The life expectancy of ideas is coming down dramatically, as we jumpS-curves in years not decades. So it is extremely important that we keep looking out at the future. Keep testing, keep piloting, keep investigating. This is how we at HfS Research are designing our future research agenda – but more on that later!
Disclaimer: I am a firm believer in the value and concept of GBS. My sole objective of this post is to make it more human.
Our industry requires a shift in mindset from providers, buyers, AND investors. We need to rethink shareholder value and the integral link it has with the very element it seems to be bent on eliminating – people. In a thought-provoking post, my colleague Phil Fersht called out the fact we are in the people elimination business, wondering how it got so bad. My take: there are two key aspects in this debate; the way we view talent and the (unintended) consequences of decades of shareholder value doctrine.
The importance of talent for the future of services
Buyers need to deal with their cost reduction obsession and recognize talent is still the differentiating factor for their business success – and will be for the foreseeable future. Domain expertise, talent, and local people are critical components of the value service providers produce. This is true in any industry, but for example in oil & gas and the utility industry, the service providers that are perceived as delivering the most value by buyers are those that invest in talent, local people with deep industry expertise, and innovation prowess. These folks are not the cheapest, but bring exponentially more insight and impact on results. Buyers have shared ample examples of service providers that help them tackle the sticky industry problems by bringing the talents of industry experts, data scientists, technology experts and the client’s domain experts together. This teaming leads to multidisciplinary cross-pollination to design and deliver solutions that combine technology, industrial process and ideas and proven concepts from other industries.
We are on the verge of a shift in the way we work, and the outcomes we produce
The future value delivered by the outsourcing industry won’t be people running the accounts payable process, but in knowledge-intensive, decision-rich processes. You need the talent to make the technology work effectively – to drive the results and business outcomes. If we again look at the oil and gas and utility industry, organizations are starting to recognize the talent they need to compete in the new economy aren’t smitten with the work and reputations of the oil & gas industry or utilities. The reality is that the competition for data scientists, for instance, is not Shell versus Exxon Mobil, but Exxon Mobil versus the likes of Apple, Google, Facebook and a host of start-ups. Service providers can offer more interesting career paths and are a source of talent that can plug the quantitative and qualitative skills gap these industries face. Long story short; focusing on talent, continuous education and business value creation is the viable path forward for service providers.
The creed of shareholder value and its disconnect from reality
Too many people are still worshipping the totem of shareholder value, a theoretic and flawed notion from its conception. We are in a slow transition to more stakeholder value focus, more fitting our interdependent world that needs more cohesion and inclusiveness.
Ever since the invention of the term shareholder value, it was adopted as the dominant discourse by Wall Street and institutional investors. It, among other factors, has led to a short-term, myopic circus that reduces the horizon of executives to 90 days, de-humanizing our enterprises. It’s a fact that we are richer than ever before and there is less sickness, famine, and war (you wouldn’t say it if you watch the news). But there are still large swaths of the world struggling to improve the standard of living. And even in the world’s richest countries, large groups of people don’t feel better off. They feel left behind, disenfranchised and powerless. This is about half the population in countries like the US, the UK and France, evidence Brexit, Trump and Marine Le Pen’s rise.
We need to go full circle on shareholder value Coming back to shareholder value; it’s time to go full circle. Take a minute to think who is behind the vast pools of capital institutional investors manage… It’s us, the people saving money for their pensions. Shareholder value is a construct that served the money managing industry well but forgot to look at the wider interests of the actual owners of the money…. those shareholders are also your employees. Shareholders are not the clever folks on Wall Street, they are the representatives of the ‘normal people’ in your neighborhood and your company, the people who save their money in a pension fund or 401k.
If you take a narrow interpretation of ‘fiduciary duty,’ you can get away with the fallacy that returns on investment is the only metric of interest. But what if you fail to let that money you invest create prosperity for the people you invest it for in their real life? If your addiction to dividends and higher share prices is ruining the jobs of your future beneficiaries? It is time to bring the financial economy and the real economy closer together.
We can’t ignore the externalities of business any longer. People elimination is one of the challenging externalities that is a short-term lever executive in our industry seem to see as the inevitable answer to competitive pressures and new technologies (RPA, AI).
The Bottom Line – Taking social responsibility seriously is a critical and foundational aspect of doing business anno 2017
Only ten years ago, when I was doing research about investment preferences of pension fund beneficiaries and their ability to influence pension fund investment policy, corporate social responsibility and socially responsible investing were a theoretic discussion, often painted as the domain of idealistic, money-hating tree huggers. Not anymore. Since the 2008 financial crisis, everyone understands CSR is a real thing, a source of durable value creation, competitive advantage and not a fad you only use as window dressing. CSR has come a long way since. It’s time for service providers and buyers, along with governments, to come up with credible policies to make sure talent is up for the new tasks at hand, to truly augment people with the new technologies instead of using this as an excuse for the next round of layoffs.
