Life in Infosys’s board room can’t be easy these days. Founders continue to throw spammers from the sidelines at CEO Vishal Sikka and its fellow board members, the sales engine is stuttering, and the company has to manage the secular shift toward digitization and automation. Macro issues like H1B visas in Trump land must look like gentle bumps on the road in comparison. As Vishal has singled out automation and AI as the key strategic pillars for Infosys, more clarity around these topics will go a long way in supporting their sales teams. If executed properly, Infosys’ broad set of automation capabilities could evolve into a lever to get the stuttering sales engine running again. It is exactly here where the realignment of Infosys’s automation strategy and the acquisition of Skytree, an innovative Machine Learning startup are focusing on.
A holistic automation strategy could put Infosys back in the driving seat
Infosys strategy on automation can be probably be best described as a rollercoaster ride. Having been a pioneer by being the first service provider to publicly announce a partnership on Intelligent Automation with IPsoft back in 2013, the service provider went in reverse and focused its efforts on proprietary tool sets that are difficult to benchmark with the leading third-party tool providers. Only to move to a hybrid strategy that still focused on proprietary tools yet leveraging third-party tools largely on a pragmatic basis where clients were mandating those options. Then back at the last Confluence, Infosys’ flagship event, the company launched Mana as an automation platform that was meant to revolutionize service delivery. However, ever since Mana was launched its capabilities have remained blurred, and in particular, it was never fully explained how Mana was meant to co-exist or even be integrated with Infosys broader automation assets. There was a lack of cohesion but also communication among the different teams driving automation. For example, the EdgeVerve teams were never quite sure or clear how Mana was impacting them, both in terms of branding but also broader delivery issues. Put in a nutshell, the marketing and communication around Infosys’ automation approach were disjointed. But not only that, the value that assets like Mana bring to clients was undersold as the value proposition was never properly explained. This is not to suggest that Infosys has not made progress with Mana as it has engaged in 150 projects with 50 clients, but given the strategic importance the go-to-market and narratives have to be enhanced. And it is here, where the reorganization and rebranding will focus on.
To overcome some those shortcomings, the company launched Infosys Nia, what it describes as “the next generation of the company’s Artificial Intelligence Platform which converges technologies previously known as Mana, AssistEdge, DEEP and IIMSS along with recently acquired advanced machine learning capabilities from Skytree.” Thus, Infosys demonstrated that it had listened to its customers and the odd analyst. For the first time, Infosys is offering a holistic and more importantly an integrated automation strategy that is leveraging the following building blocks. Putting this in context, Infosys is catching up with peers as we have called out in numerous instances (for details see: HfS Intelligent Automation Blueprint). Fundamentally, Infosys is leveraging and integrating the following five assets into the new Nia platform:
Mana – An integrated artificial intelligence platform incorporating big data/analytics, machine learning, knowledge management, and cognitive automation.
AssistEdge – Provides end-to-end RPA. Uses integrated software robots to automate any high-touch, repetitive processes.
DEEP – (Data Extraction and Enhancement Platform) a platform that ingests heterogeneous source documents or images containing structured & unstructured information, then uses embedded OCR, NLP, and Machine Learning to extract data, validate the correctness of extracted data, and automatically resolve exceptions with high accuracy.
IIMSS – (Infosys Infrastructure Management Services) A unified IT operations command center for datacenter, infrastructure, cloud, applications, security, network and business services. This includes a workbench for lifecycle management and business services assurance. Also, it has an orchestration automation engine for event management, correlation, context-driven recommendations, machine learning & knowledge-based self-learning.
SkyTree – Advanced high-performance Machine Learning with automated selection of algorithms and methods to achieve best possible predictive accuracy. This includes advanced tools for feature creation, feature selection, models, training and an entire workbench for creating new models. SkyTree is also to become a Center of Excellence with a team of ML experts to actively evolve ML concepts and technologies for future use cases.
SkyTree is providing the talent to scale Machine Learning
The recent acquisition of SkyTree, a Silicon Valley based startup, focused on speeding up and scaling Machine Learning, is reinforcing Infosys new emphasis on a holistic automation approach. As the market is starting to shift toward transformational projects and an end-to-end process point of view, the notion of data curation increasingly has to become the starting point for transformational projects, not just a by-product or a secondary motivation. As in particular, RPA will start to commoditize, the value creation but also the differentiation has to come from data-centric delivery strategies. SkyTree’s IP will enhance the deep analytical capabilities of Mana. Having said that, Infosys was very clear that the talent of SkyTree was the key motivation for the acquisition, the IP is rather the icing on the cake.
Infosys needs to drive change management as culture eats strategy for breakfast
As management guru Peter Drucker put it, culture eats strategy for breakfast. With that in mind, it is not enough to fix the automation branding and go-to-market issues, but Infosys urgently needs to drive change management through the organization to make automation demonstrably show results. And this change has to happen on different and disparate levels. First and foremost, Infosys needs to develop a narrative (or even better multiple narratives) what automation and AI mean to different stakeholders. Second, it has to demonstrate that automation and AI are are the game changers for Infosys as Vishal tirelessly puts it. Put it other words, is Infosys proactively pushing automation or is it mirroring its peers in being defensive and only push it where a competitive situation requires such change. And lastly, it needs a coherent strategy of understanding automation of being the pivot for innovating service delivery. With Nia, Infosys has done the first step of doing the latter. But having realigned capabilities is just the first, and most likely easier step. Change management if the harder act to follow.
Bottom-line: It is all about sales execution for Infosys
Having realigned its strategy for automation and expanded its AI capabilities is an important step forward for Infosys, but it will only change the fortunes of the company if Vishal can fix the sales execution issues. As he continuously puts automation and AI as the central pillars of his strategy, the narratives need to be more nuanced and most importantly driven through the organization. Both Nia and SkyTree are important milestones of this journey, but to reach for the skies Infosys has to follow through with all the other challenges that we have called out.
When you’re one of the last vestiges of commercial-free television trying to compete in a media world gone mad on digital and traditional advertising, you need to be pretty savvy when it comes to managing the coffers when you’re still reliant on public TV license frees each year to maintain your program quality. So who better to talk with than the Beeb’s Jim Hemmington, who sits on the corporation’s external expenditure on goods and services, which includes several key outsourcing relationships. We also invited Chris Halward of the Global Sourcing Association (which engages with HfS as its preferred research partner), who leads the GSA’s global standards accreditation program to the conversation…
Phil Fersht, Chief Analyst and CEO, HfS Research: Good morning gentelmen. Let’s get started with the introductions, shall we?
Jim Hemmington, Director of Procurement, BBC: Yes, of course, Phil. I’m Jim Hemmington, Director of Procurement at the BBC. I am responsible for external spending on goods and services. That’s about 1.4 billion pounds a year. It’s about 19% of the BBC ‘s licensing. I look after general procurement as well as outsourcing activity. And just for a bit of context, of the 1.4 billion pounds spent, about half of it is in regular goods and services with about 11,000 suppliers. The other half, or just under 700 million, is with 12 suppliers that are providing a range of outsource services for the BBC. That’s been a big area for outsourcing over the last ten years.
Phil: Thank you, Jim, for joining us. We also have Chris Halward, who’s at the newly rebranded Global Sourcing Association (formerly the National Outsourcing Association). Welcome, Chris…
Chris Halward, Global Standards Director, Global Sourcing Association: Thanks, Phil. I’m the Global Standards Director at the Global Sourcing Association. I’ve been with the GSA for about eight years, focusing particularly on training and development initiatives. This includes the development of various standards and the qualifications that we have
Phil: So, let’s get started with the conversation, and I think maybe Chris, we can start with you. People often talk about outsourcing as something you learn on the job. So, why have standards in global sourcing today? What is the real benefit clients receive from them, in your experience?
Chris: I suppose the first thing to say is that outsourcing can be a complicated activity. There’s more than one party involved, which means there are a lot of different views going around as to how something can best be achieved. With that complexity comes challenges, because it’s often done on an international stage where you’ve got jurisdictions involved and so on. What you need is something which helps people work through that complexity in a structured, organized, and efficient way.
One more thought is that regulators around the world have been particularly interested in outsourcing for all sorts of reasons, not all of them good. They’re very keen to see standards being applied, being adopted as a way of developing people’s confidence in the system. I’m sure Jim has some further views on all of that.
Jim: I think that’s right, Chris. I am looking at it purely from a buying perspective, for the moment. I’ve been working on outsource deals since the mid- to late-80s. And still, at the BBC, we have an occasional problem with an outsource arrangement. What you find is that it’s still the sort of problems you had years ago. Relationships break down because expectations are different, or there are surprises on either side. That might have a commercial or quality impact, with misunderstanding about things like risk transfer and transparency.
Standards align expectations, take out surprises. Having standards allows you to have more transparent and meaningful conversations, and ensures that you’re both acting professionally and in a way that suits each party’s interest. So, if you can get that alignment, you should neutralize, really, all disputes, and you should see much more success in those relationships going forward.
Jim Hemmington, BBC
Chris Halward, GSA
Phil: Okay, so Jim, when you look at your experience at the BBC, with the Global Sourcing Standard, what would you say has been achieved to date? What have been your successes? If you could start today again, would you do anything differently?
Jim: We do have a very mature outsourcing function. We started outsourcing back in ’96, and some of our agreements are now third generation. We’ve learned lots of lessons on the way. But back in 2015, we wanted to get an external view of whether we are good at this activity and where we can learn to be better. That coincided with the emergence of what was then known as the lifecycle, which turned into the standard.
What we found was that when we applied the standard and became accredited to it, we found there were gaps in what we thought were best practices. When we filled those gaps, we started to see some significant benefits coming through. I think one of the big areas where we found the most benefit was the lifecycle approach. Things like business planning going through procurement, the hand-off in procurement into transition, and transition into business as usual. We found we were a little bit clunky in some of those hand-offs. We’ve smoothed quite a few of those now. Our finance procurement that went live in November was the first time we kind of approached a major outsource with a plan and addressed gaps the GSA Standard pointed us towards. We started to see some financial benefits, and I’m confident that as we go to replenish our outsource portfolio, the savings are going to be significant. I reckon between four to seven percent of our spending on outsourcing. Because we’re just getting better at it, and we’ll engage more effectively with the market.
Phil: With a lot of the changes happening in the market, particularly innovations emerging, such as robotic process automation and the impact of digital. How does the standard support disruptions as they evolve? How does it cater to some of these emerging technologies and disruptive business models?
Jim: Okay. Again, from my perspective, I think what the standard does is give you a stable and steady state platform from which you can then explore disruptive technologies. Particularly in areas of transformation, it enables you to take more risk because you can assess things like the impact of disruptive technologies.
Chris: Just to amplify that, Phil, I think one of the things the GSA Standard does is to have a very clear focus on what we describe as Strategic Leadership. It’s about ensuring that the underpinning strategy is as rigorous as it is robust. So, what I have seen in the past is that outsourcing arrangements succeed or fail quite often based on how clear, how effective, and how well-thought-through the underpinning strategy was.
All too often, people tell me about arrangements that don’t work. They’re bemoaning the fact that they didn’t really think these things through. They didn’t look at the options. They didn’t look at whether a particular way of doing things is going to be right. What the Standard does is it really encourages people to focus on that aspect of their sourcing strategy. And to ensure that they continue to concentrate on that aspect throughout the lifecycle.
The other point that links into this is that the lifecycle approach enshrined in the Standard ensures a joined-up approach. That is what Jim was alluding to. You need to address the tendency of going into silos. You’re trying to link everything together so it all flows through and can remain aligned to the appropriate needs of the business. As we know, and HfS Research has talked about it a lot, when things are changing, you need to be really nimble. You need to be flexible, and that’s something that maybe too many organizations over the years have not been able to do. The Standard really encourages them to do exactly that: to be nimble.
Jim: Yes, I agree. Certainly in the BBC, we’ve been reluctant sometimes to adopt emerging and disruptive technologies because of the risks and uncertainty involved. Whereas, I think if you’ve got a standard and you are using that to track the journey and help you understand better how you can manage, you do start to adopt disruptive strategies more readily, and it gives you a competitive advantage.
Chris: I think that as well, Jim. You would probably agree that when you’ve established the Standard within the organization, people in the organization understand how outsourcing works and how it impacts the business. Then it’s much easier to explain to them. They don’t need to understand every single detail of the Standard, but they get a sense of, “What are the important things that we really need to focus on?”
Phil: So, gents, we’ve just completed our annual seminal study on operations outsourcing with the KPMG globally, covering 450 major enterprises. What we got from the study was clear intention to keep expanding the outsource model. There was a notable pullback (see blog) in intentions to invest in offshore resources and instead invest more aggressively in automation initiatives. It sounds a little bit counter-intuitive. How do you increase your outsourcing if you’re not going to increase offshoring? Is this something you believe is a long-term shift? Or do you think this is more about outsourcing leaders needing to be seen as moving beyond labor arbitrage as a prime resource of value? What’s your take on what’s going on here?
Jim: That’s an interesting one, Phil. I don’t think it’s a short-term thing. I think it’s more of a progressive thing. Because you’re right; I think the fact that we’ve offshored is being primarily driven by labor arbitrage. Because that created huge cost savings for us. But now we’re starting to explore automation, and other things are coming down the line.
A couple of years ago, we were having discussions around contract terms, because there were huge capital investments to be made, and the BBC didn’t have cash for capital investments. But so many services now are available, such as the cloud and other sorts of sharing mechanisms. The change continues to be progressive, and I think organizations will now look at all elements of outsourcing. It’s not just labor arbitrage. It’s how technology can be used to improve their outsourcing activity. That, we haven’t seen in the past.
Chris: Let me just come back with a couple of comments as well, guys. Because what I really believe is that globalization provides opportunity. If I’m a business leader of a large, global organization. I have a pool of skills, a pool of labor to draw from across the world. I think in the past, labor arbitrage has clearly been an important driver and has encouraged people to address the challenges of managing offshore arrangements. I also believe there are many reasons why you source from overseas, not just labour arbitrage. Having said that, we have things going on around automation which have given people pause for thought that there may well be other ways of doing things that will deliver the same or more value.
I think we do need to see the apparent paradox as a short-term reaction to the perceived opportunity and risk; that’s become particularly clear over the last couple of years. But I think we also have that long-term, globalization scenario. There will always be a strong case for organizations to collaborate across the whole globe. Wherever opportunities arise, using capabilities from across the globe will add value to their business.
Phil: Okay – so you can both have a stab at our final question! If we convene in three years’ time, do you think we’ll still be talking about outsourcing in the same way? How dramatically will all the changes we’re seeing in the political dynamics and the emergence of new solutions affect the conversation?
Jim: I think we’ll be having very different conversations. I think it goes back to this progressive point, Phil. Just a couple of years ago, we saw outsourcing was all about agreements, with the likes of Capital One and IBM and and all the big guys. Outsourcing now comes from all over the place. It’s coming from different organizations, coming up with different ideas. It’s coming from, as you say, the use of technology and automation.
The link world that we deal with now, where geographical location is not a boundary anymore, means there will be lots of things that we’ll be buying in the future, and my end user, it might be the audience. Or it might be someone in the BBC who has no idea where that service comes from and won’t really care if it’s adding value. I think the term outsourcing will become more and more of an issues sort of term. It’s more of sourcing really and about how organizations are buying the right activity to support their business. I think more organizations are trying to get into sourcing space. The more they can be agile the more innovative they can be.
They’re the sort of conversations that we’re going to have in the future. So, I think the big monolithic contracts and the kind of well-known names at the moment, kind of lead to that. There will be many, many more organizations providing these services. There will be a huge variety of service propositions that organizations can choose to go with, depending on what they want to achieve. So I think it will be a very different industry in the future.
Chris: I’d go along with that, Jim. I think there are going to lots more, probably smaller organizations that will be new sources in the ecosystem. There will be different services required, from client organisations that result from changes in their markets. The BBC is a great example of this given the massive changes that the BBC has had to address in recent times.
I think we’re going through that period where people are suggesting that maybe everybody will sit around and do nothing because robots will do everything. But the reality, I suspect, is that we just come up with more ideas, that we can’t think of at this moment, that take up people’s energies. What we will end up with are sourcing managers who are much more central to an organisation’s success. We’ll need to find different solutions and often, we will need to be finding suppliers of those solutions that are more agile, more flexible. It means that we’ve probably got to have shorter contracts, more flexible contracts.
I think it means that we’ve got to have better relationships between buyer and supplier. Because there’s got to be much more reliance on driving towards outcomes both organizations clearly understand and want to deliver together. That’s the critical thing, and I’m not sure that’s been the case in the past. I think the notion of having an outsourcing standard becomes even more important, because change is much more apparent and complex.
Jim: Yes, I agree. Tracking back to what makes the GSA Standard unique, I think for me, what was refreshing about it is that there are lots of patches and procedures that the BBC adopts to buy goods and services, and lots of organizations that we deal with have their own set parts, too. What the GSA standard does is provide them a very flexible framework on which you can hang your current processes and procedures and align them to very different processes and procedures your suppliers might be adopting.
That’s where you’ve got this sort of ease on the alignment, without having to go through the rigmarole of fundamentally changing the way you do things. What the standard does is provide a central core of activity that just aligns different things to achieve the same outcomes.
Chris: It’s fantastic to hear that. Because we’ve worked so hard over the last few years trying to ensure we have a robust and rigorous standard that covers all the critical areas that are good-quality buyers or providers. Because it’s appropriate for both sides.
Phil: I think it’s great that you could share that with us. I thank you both for your time, Chris and Jim, and I look forward to sharing this interview with our leaders. Have a great weekend.
At WNS’ annual analyst and advisor day this week, the provider explicitly addressed concerns we’ve had about its delivery model – namely that it didn’t employ enough technology in its BPO offerings. WNS has always been differentiated by domain expertise and its flexibility in allowing clients to pick end-to-end or point solutions. This differentiation is particularly noticeable in the insurance, travel and leisure, and utilities verticals and in the research and analytics, and finance and accounting horizontal services.
However, coming back to our concerns, we have consistently observed the lack of focus on technology enablement for its services. In fact, our HfS Buyers Guide on WNS recently called out Operations Product Development and Toolsets as a key weakness for the service provider, writing “WNS is behind the competition on some basic areas of technology support, as well as continued advancements in intelligent automation, beyond macros and even RPA… WNS is on the path with developing toolsets in [multiple industries/functions], and needs to continue to develop the capability, usability, and transparency the solution set offers. HfS believes the service provider would do well to cultivate or hire technology expertise in this area to further complement and perhaps accelerate progress.”
So we were pleased to see WNS share details of WNS TRAC –a business process management (BPM) tool suite to automate processes and make them more effective. WNS TRAC integrates with the client’s legacy system environments — drawing data and information from those systems, and providing efficiencies and insights for industry-specific processes without the need for major system overhauls. WNS also has a range of point solutions for each of its industry verticals, e.g. Verifare Plus, Repax, Qbay in travel. With TRAC, WNS aims to stitch together these point solutions over time into an overarching solution suite for each industry. The service provider has two new F&A clients with whom it is piloting CFO TRAC, describing it as a digital plug and play platform that it will put in at the transaction layer, on top of the clients’ multiple ERPs for greater visibility into end-to-end process and to drive analytics. WNS is also piloting its newly launched Brandtitude reporting and analytics platform with two clients. With this offering, WNS hopes to take its analytics services business into the solution/IP-led era, full of the possibilities of licensing.
TRAC Benefits From A Strong Foundation of Trust-based Client Relationships
One reason we believe TRAC will succeed is that this solution improves already-strong relationships instead of fixing broken ones. Buyer presentations from the analyst day showcased the service provider as a collaborative partner. Multiple clients presented their operations journeys and the role of WNS as an enabler. The client presentations were diverse; across industries and in varying stages of the WNS relationship. Younger relationships already showed promise in increasing the scale and sophistication of the contracts—take for example a utilities company looking to better understand customer sentiment through analytics. The engagement includes understanding propensity to pay and delinquency models, then taking these analytics to the next level in tandem with WNS in creating “personas” for its customer base to improve personalization of service and knowing how to best approach these customers. A client in the online travel space discussed using WNS as a partner in building out its omnichannel capability, using elements of TRAC like its SocioSeer tool, and making it easier for clients to use self-service for booking travel.
The building blocks are in place, now WNS must hone and promote its message.
HfS believes WNS is headed in the right direction with the investments in the last year – strategic acquisitions like Denali and Healthhelp. And technology enablement like WNS TRAC is absolutely necessary for the next level of growth of WNS’ business process business. But to succeed, WNS needs to market TRAC and its benefits clearly and consistently. For example, some executives stressed that analytics (a key aspect of WNS TRAC) is embedded in all BPO engagements and not seen as a standalone business, even though analytics is, in fact, still a standalone business within WNS. In another session, WNS TRAC technology enablement suite was described as a BPaaS solution, which it isn’t. WNS needs to package and deliver its value proposition more accurately and clearly.
Bottom Line: Buyers Need To Be Proactive In Pushing For Automation And Technology Enablement In Their Deals
Call your account manager and ask for a meeting to understand how TRAC could help your engagement and to see a demo.
Start thinking through the business case for TRAC. Once you understand how TRAC can potentially help (reduces cost by reducing labor? Increases process accuracy? Improves process speed?) start to model if the ROI would happen quickly enough to warrant implementing now. You may decide that you can wait until your contract renewal to add TRAC.
Consider negotiating for TRAC separately if possible. If you want to add TRAC now but aren’t at a renewal point, you can always ask to negotiate for TRAC separately from the rest of the deal – WNS tells us that while the tool is primarily to drive better BPM services, but is getting inquiries about using TRAC discretely and is exploring options. This also allows you to see what benefits TRAC brings without blurring the lines between benefits from labor and benefits from technology.
From staring at his fish tank to working on an IT service desk… to becoming an analyst, then ending up at HfS. Now that is unlearning personified for Ollie O’Donoghue (see bio), our latest recruit covering the IT services landscape from the UK…. so let’s learn a bit more about this curious fellow…
Welcome Ollie! Can you share a little about your background and why you have chosen research and strategy as your career path?
Hi Phil! My career started in IT Services after I graduated from University with a History degree. Luckily for me, by the time I graduated, IT organisations had become more focused on service as opposed to technical ability – of which I have none.
I joined a large public sector organisation and moved around to a few different positions in the three years I was with them. I thoroughly enjoyed my time there, but my real passion lies in research, so I jumped at the opportunity to join an organisation as an Industry Analyst covering IT services. After a year or so, I made the jump to Head of Research and Insight which allowed me to develop and drive the research agenda.
It was around this period I started on the IT Service speaker circuit. At the time, the industry was particularly concerned about the impact of automation, so I tailored my presentations to bring data and research to the party which, at the time, was being overrun with sensationalism from the mainstream media. Finding good data and sources for my sessions brought me into contact with HfS who, unlike some of the other analyst firms, were mirroring what I saw taking place in the industry.
Why did you choose to join HfS… and why now?
As they say, all good things come to an end. Covering the service and support industry was great fun, and I made some amazing friends and contacts. But after a few years, I felt the need to expand my coverage to encapsulate a lot of the other key areas and trends at play in the wider business landscape.
When it came down to it, moving to HfS was an easy decision, I just asked the question: Do I want to join the Blockbuster of the analyst industry, or the Netflix?
HfS have been busily disrupting the industry for years with their freemium model and high impact research and content. The reason I first engaged with HfS analysts – who were always happy to reply with advice and knowledge, by the way – was that the research produced tallied up with what was taking place in the real world. Which is something you can’t say for some of the legacy firms.
Now is the perfect time to join HfS. You’re steadily growing coverage will give me the access to the broader industry trends taking place – no doubt supported by the exceptional team of analysts already covering them – while allowing me to focus on the area where my career and experience have been built in so far: IT Services.
What are the subject areas and topics that you will focus on in your analyst role?
My primary focus will be on IT Services although it’s tough to focus on just one area. These days, almost all technology and business areas have significant crossover with each other. I’m particularly keen to explore how modern IT Services fit in with broader technology developments like Blockchain and RPA.
I’m also a big fan of the HfS OneOffice concept. It’s a much more detailed extension of a trend I had been investigating in my former role called Enterprise Service Management. Without a doubt, it’s the future, and IT services have a significant part to play.
What trends and developments are capturing your attention today that are impacting IT professionals and the services industry at large?
Without a doubt, the impact of automation and cognitive are at the forefront of most industry professionals thoughts. Broadly speaking there’s a bit of a for and against dynamic working in the industry at the moment. Some professionals understand the value automation brings at an individual and an organisational level. They appreciate that the areas of work that automation will impact on the most are those tedious, repetitive processes that they don’t particularly enjoy working on. This is the category I fell into when working in IT Services – ultimately I didn’t want to copy and paste information from one area to another, or manually allocate work. Frankly, there are better things to be doing.
The other camp is concerned about the impact automation will have on their job. As capabilities develop, I can understand some people losing out to change but ultimately humans will be working on more engaging and fulfilling tasks.
When I look at developments in the services industry, I like to contextualise it with socio-economic trends. A short while ago, I considered how the characteristics of the new working generation would influence automation. Ultimately, the new generation is exhibiting preferences that make them more selective and mobile when it comes to employment changes. Soon, organisations will be expected to have a degree of automation because, quite simply, the new workforce won’t want to do the work that the “against” camp are so vigorously defending.
So, Ollie, what are you working on first for our clients?
First on the cards, Phil, is to work with Jamie and your good self on the IT Services Blueprint reports. I’ve already started to explore the data collected so far and can promise plenty of interesting analysis to come. For buyers, these reports offer tremendous value, and it’s great to be part of them.
I’ve spent some time with the honourable Jamie Snowdon already, discussing some of the exciting data projects planned for the coming year and, if I play my cards right, I’ll be making a contribution to these as well.
And, what do you do with your spare time (if you have any…)?
Spare time’s a bit of an odd one. My girlfriend is a project manager, so I tend to find any free time is accounted for before I realise I had any. If I can get away with it, I like to read non-fiction, drink good beer and play computer games. Often, but not always, in that order.
Non-fiction and beer? I think you made the right career move, Ollie =)
Being a trained historian, I was delighted when on a recent HfS webinar on “Beyond RPA”, I got dissed by participants for a slide that I had drawn up four years back for a similar webinar, albeit for a different organization. When I say being drawn up for a webinar I really mean it, as I would never have expected that this slide would still be in use today albeit in expanded versions and some refer to it as an industry model. And to make my smile even bigger, I revisited those old slides and the title at the time was:” Beyond the Hype: Assessing the Evolution of (Robotic) Process Automation”. You can see the original slide above. As HfS is all about facilitating discussions among the industry’s stakeholders, I am truthfully delighted for all those questions and challenges. That being said, it is time to take stock where the industry is actually at!
Whyare we still talking about RPA?
On the danger of sounding like a broken record, we have to stop confining discussions on service delivery to the topic of RPA. Last year I wrote a blog that summarized many of those arguments. Yet, despite a lot of noise in the industry we are getting pulled back and end up discussing RPA time and again. Granted, as nothing is defined, for many RPA is just a placeholder for what HfS would term Intelligent Automation. But beyond semantics, why are we paying lip service to broader notions of automation such as cognitive computing, AI, and self-learning as well as self-remediating engines? Service delivery is not just about business processes. If HfS’s contention about the journey toward the As-a-Service Economy and the OneOffice has any merit, we have to overcome those organizational silos and mental stovepipes. But we also urgently need to expand the set of stakeholders educating and talking about automation. While we have to give a lot kudos to the RPA providers and consultancies who singlehandedly educated the market, the reluctance of the IT juggernauts to enter those discussions is leading to distortions of the direction and dynamics in service delivery.
Revisiting the “Continuum” – and a plea for service orchestration
To go back to my academic roots I am tempted to quote the Cambridge English Dictionary which describes a continuum as “something that changes in character gradually or in very slight stages without any clear dividing points”. If truth being told, I didn’t consult the dictionary before drawing up this slide four years back. But from the beginning, the thought-process was the following.
To help overcome the blurred perception and often confusion that I have tried to call out, HfS did introduce the Continuum of Intelligent Automation to start discussions on the evolution and innovation in service delivery. It is not meant to be an answer to the ever-increasing questions. This model is by no means perfect and we have developed additional slideware that is trying to capture the evolution toward more data-centric models. In this context, I would like to call out just a couple of the points that we are trying to get across with this model:
First and foremost, the term Intelligent Automation is a placeholder for a set is disparate innovations in process automation encompassing the concepts that you can see on the slide. Intelligent Automation is a critical building block for the As-a-Service Economy as it decouples routine service delivery from labor arbitrage thus supporting the ideals behind the As-a-Service Economy.
Second, the main idea behind the notion of the Continuum is that all the approaches you see here listed are both overlapping and interdependent. Despite all the focus on RPA and Cognitive, we still need all the less exciting stuff like runbook and scripting, mostly in the data center. From an operations point of view of particular importance is the integration of data into process chains and workflows.
And the third point I would like to call out is the evolution or direction travel for the broad notion of Intelligent Automation. You can see 3 dimensions here on the slide. First, probably less surprising toward unstructured data. Second, probably less obvious toward less well-defined processes. And thirdly, toward the broad notion of cognitive and artificial intelligence as they are meant to overcome the limitations of the first two dimensions. Especially from a business process perspective, AI is meant to integrate semi and unstructured data as well as allowing this data to be routed through less well-defined process chains. But it really is a broad bucket because the boundaries between cognitive, autonomics and AI are not well defined. Having said all that, we shouldn’t look at these segments as binary choices. AI is being integrated into or bundled with RPA tools and all these tools should be discussed within the notion of service orchestration. An attendee at recent conference condensed this to following pearl of wisdom: “Make sure crap doesn’t get into your production and then throw Machine Learning at it.” Although he used a slightly more lyrical language.
Having said all that, the questions and at times challenges boil down to largely three issues. First, the suggestion that there is a linear development from RPA toward notions of AI? Second, the temptation of trying to pigeonhole tool sets into any of chevrons on the Continuum. Third, having the wrong starting point for discussing service delivery. To start to answer those from the end: service delivery is about service orchestration. All the leading service providers and the mature buyers have moved in that direction. It is all about having the right tool sets for the required use cases. Whether this based on microservices, on leveraging orchestration engines or other means: RPA is just a footnote in those discussions. And just to shout from the rooftops, orchestration implies that there is no linear development. In parts, this answers also the issue on pigeonholing. On the recent webinar, Guy Kirkwood from UiPath used the analogy of a golf course with RPA tools being the putter, while AI is more a drone that drops the golf ball into a hole. While thought provoking and entertaining, this analogy implies the old pigeonholing. Moreover, automation is in the eye of the beholder and RPA is no exception. While nothing is defined, all RPA tool sets evolve toward operational analytics and the broad bucket of cognitive. And lastly, the starting point is not how do we sell RPA but how do we innovate service delivery. It all comes down to use cases and requirements. For many of those requirements, RPA is the wrong approach.
Bottom-line: RPA is dead! Long live Intelligent Automation!
Having uttered this plea many times before, I am not overly confidence that I will get more listeners this time. But we urgently need to broaden the discussions from a narrow(minded) RPA mindset. We need the service providers come to the fore and educate the broader market. We need the buyers tell the stories from the trenches. We need new models and ideas to advance the learnings from the deployment and the best practices. Perhaps we should invite stakeholders of the automation community and undergo a Design Thinking process. The goal should be to reimagine service delivery to support the journey toward the OneOffice. The secondary goal should be to get rid of the Continuum. We would love to hear from volunteers and curious minds!!
We’ve previously written how interoperability will hold back blockchain adoption, at least until we can find ways around the problem. The cost and friction of joining multiple blockchains may hinder widespread adoption until we can figure out how to get them to talk to each other and reduce the cost of joining a blockchain implementation. However, recent thinking suggests there are some shortcuts we can take to make better use of blockchains in the short term, as their development and adoption matures.
For example, recently I met with the Deloitte blockchain team, and Principal Eric Piscini disagreed with my premise. He believes that interoperability really isn’t that big of an issue. First, he points out that, today, we have multiple environments that don’t connect to each other and the work still happens effectively. For example, different credit card payment vendors each have unique systems but everyone can still use any of them without an issue.
He also notes that interoperability seems like a bigger issue if you look at the blockchain implementation as needing to do every part of a transaction. However, he thinks of blockchain as having three layers:
Recording (actual transcribing of data into a block)
Transacting (an activity or transfer, such as moving money from one participant to another)
Business logic (the rules and controls of a process coded into the system)
You don’t have to do all three things in blockchain. You can use it for any of the three, or some combination. And as a result, you start to see how it’s possible to use blockchain technology and not necessarily have to worry about interoperability. It’s not dissimilar to evaluating automation technology, where you will, simply, fail if you try to automate everywhere possible – you’d run out of time, money and patience trying! Most experts will tell you to first focus on what not to automate, which is similar with blockchain: first figure out where you can carry on just fine without all the expense and disruption of a blockchain implementation.
Piscini also believes, in some instances, that firms do not need interoperability, but more a single blockchain per asset class, as it will be near impossible to transfer the same value across multiple blockchains.
So, where does this leave us with our interoperability decisions?
1) Blockchain interoperability needs both a technology choice and business reason to exist. We need to separate the technology of blockchain from the business application of blockchain and from the business model of blockchain-based systems. From a technology perspective, for example, multiple blockchain implementations can exist and drive value even if not connected to other blockchains.
2) Network ownership may be more important than technical interoperability. For networks that are, essentially, owned and controlled by one party (the credit card examples above) and other parties just access those networks but don’t need to integrate per se, then Piscini’s view makes total sense. It also works in situations like Ariba’s, which we’ve written about before, where participants on don’t need blockchain implementations themselves to use Ariba’s blockchain. (Ariba also notes that clients can choose to do just recording on the blockchain, further supporting Piscini’s point of separating blockchain into layers.) However, in networks where the peer-to-peer aspect is more important, and no one participant has strong power, we believe interoperability will continue to be a barrier to widespread adoption.
Bottom Line: Clarity around when/if/how interoperability is really needed for the blockchain market to mature.
We expect that, by the end of this year, as companies continue to tackle implementation challenges like interoperability and the development of common industry standards continues[1], will the market will begin to pick winning platforms and technologies.
[1] Many consortia are dealing with this issue as we speak, and government agencies are beginning to weigh in. Expect a lot of activity in standards development this year.
We just wanted share another finding from our “State of IT Services Survey 2017” – this survey has been conducted largely to support our IT Services blueprint process. We have interviewed 302 IT service decision makers to find out what they think of the IT services providers infrastructure management services, digital-focused consulting and their application management services.
We asked IT decision makers to pick their most important selection criteria for choosing an external service provider for IT Services generally, and specifically when choosing an infrastructure management, application management and consulting/IT strategy provider. The chart shows the difference between these main groups – displaying the proportion of buyers selecting each option for each type of provider.
Bottom Line – results count more than the method
Overall buyers are looking for Innovation, financial stability, quality of service. Consulting buyers care more about quality and skills (as well as innovation) – prior engagements are much less important. Buyers are starting to care less about the technology that drives the innovation – at least as dominant factors driving selection. Digital/SaaS/Cloud and automation are increasingly table stakes.
SaaS applications are on the rise. Everyone’s moving to the cloud. But, pray tell, why?
What are the real reasons enterprises are selecting SaaS applications? We have had analyst interviews directly with 200 SaaS buyers in the past couple of years, and their motivations for buying SaaS are not as strategic as we would have expected.
Generally, most buyers have succumbed to marketing that promotes SaaS as faster to deploy, cheaper to run and generally has better functionality than its on-premise counterparts. All of which sounds terribly attractive when faced with a costly legacy on-premise upgrade that could take you up to 18 months to implement. Some enterprises even told us that they had a corporate-wide ‘cloud first policy’ that encourages all departments to consider seriously cloud options for all IT projects. There is no doubt that SaaS applications can be deployed a lot faster than on-premises solutions, and yes, some have some fantastic user interfaces as well. Two of the biggest benefits of SaaS are predictable costs and the ability to stay current on vendor releases. However, the biggest operations business objective of recent times – cost reduction – isn’t automatically achieved by moving to the cloud. The reason for this is three-fold.
Firstly, buyers are investing in functionality they do not need. Most software providers bundle in as many modules as they can muster into a sale, regardless of which specific functionalities the buyer actually wants and needs to use immediately. It’s nice to have these extras in the bank for when you may want to unlock their magic but, in the meantime, do you really want to pay an astronomical monthly rate simply for having them?
Secondly, deployments are not the end, but the beginning of the SaaS journey. As SaaS applications have continual updates, new functionalities, and even new modules several times a year, SaaS services support becomes an ongoing cycle of consulting and implementation work. This, of course, costs money and effort, which needs to be taken into consideration. And, don’t forget one of the biggest drawbacks of SaaS, potentially you have less control over your data.
Thirdly, cloud policy must be aligned with defined business outcomes. It makes sense for this to be a strategy for IT departments, which are charged with providing cost-effective technology to the business. It should not, however, be a specific focus for any other department in the enterprise. As highlighted in The SaaS Buyers’ Guides: Five crucial steps to ensure you get it right, business line leaders should have defined business outcomes and objectives, and approach technology as an enabler for these. The actual technology used should be irrelevant.
Bottom Line: Deciding to switch to a SaaS model doesn’t mean you can abandon good business practice – you still need to weigh up the options and make the case.
SaaS buyers need to employ the same selection rigor to SaaS selection as they did when they evaluated procuring on-premise applications. This includes an in-depth cost analysis of the implications of deploying and managing SaaS on an ongoing basis, and the ability to read between the lines of the vendor marketing hype that does such a great job of selling the products. And most importantly, do these SaaS solutions help them achieve their defined business goals and outcomes? Buying technology for technology’s sake has never been the answer, and nothing has changed!
For those of you who made our New York Digital OneOffice Summit a couple of weeks ago, we had a rumbustious mix of seasoned outsourcing buyers, service provider leaders, advisors and robo vendors under one roof to cogitate, discuss and argue where the hell the industry known as outsourcing and operations is truly heading. Let’s just lay down what the hell is really happening in the only unvarnished way we know how…
There is a fast realization that the outsourcing industry has reached a phase of almost insufferable tension. Why?
Several of the RPA (Robotic Process Automation) solutions vendors are painting an over-glamorous picture of dramatic cost savings and ROI. RPA software firms are claiming – and demonstrating – some client cases where ~40% of cost (or more, in some cases) is being taken off the bottom line. While some of these cases are genuine, there are many RPA pilots and early-phase implementations in the industry that have been left stranded because clients just couldn’t figure out the ROI and how to implement this stuff. This isn’t simply a case of buying software and looping broken processes together to remove manual efforts… this requires real buy-in from IT and operations leaders to invest in the technical, organizational change management, and process transformation skills.
Buyers are backed into a corner with broken delusions of automation grandeur as their CoEs fail. Buyer leaderships are being fed all this rosy information and are under incredible pressure to devise and execute an RPA strategy, with some sort of set of metrics, that they can demonstrate to their operations leadership. Many are quickly discovering they simply do not have the skills inhouse to set up automation centers of excellence and are frantically turning to third parties to help get them on the right track.
Outsourcing consultants are selling RPA before they can really deliver it. Sourcing advisors are claiming they are now “RPA experts” who can make this happen, while struggling to scale up talent bases that can understand the technology and deal with the considerable change management tensions within their clients. RPA is murky and complex, and not something you can train 28-year-old MBAs to master overnight. Meanwhile, we are seeing some advisors simply do some brokering of RPA software deals for small fees, only to make a hasty exit from the client as they do not have the expertise to roll-out effective implementation and change management programs.
RPA specialist consultants few and far between. Pure-play RPA advisors are explaining this is not quite so easy and requires a lot more of a centralized, concise strategy. There are simply not enough of these firms in the market, especially with Genfour having been snapped up recently by Accenture. With only a small handful of boutique specialists to go around, these firms can pick and choose their clients and command high rates.
Service providers will set the pace, but many will destroy each other in the process. Service providers are claiming they can implement whatever RPA clients need, but are not willing to do it at the expense of reducing their current revenues. Meanwhile, smart service providers are aggressively implementing RPA into their own operations to drive down their delivery costs and reduce their own headcount. So we can expect to see providers aggressively attacking competitive clients with automation-led solutions that should create unbearable pricing pressures for service providers looking to retain the talent they need to implement this stuff. Hence, services providers will be hell bent on destroying each other and the winners will be those who eventually succeed in winning more work than they lose amidst all the destruction. This is a war of many battles being fought – and the winners will be those who are in this for the long haul, who can absorb some short-term losses to pick up the larger spoils further down the road when they have a fully equipped intelligent automation delivery capability that can deliver highly-competitive and profitable As-a-Service offerings.
The good news is that half of today’s buyers want to turn to service providers to make this work
When we privately polled 60 senior outsourcing buyers, at the recent HfS New York Summit, on what would improve the quality and outcomes of their current services relationships, the answer was pretty conclusive – half want to work with their providers to rollout their automation and cognitive roadmaps, while only a third think they should pull back work in-house to figure this stuff out for themselves:
The Bottom-line: The automation gauntlet is now in full effect and the casualties will mount up as the outsourcing industry plays out its most perilous battle for survival yet. But all is not lost if we eye a longer-term prize…
So we’ve reached crunch time. Whichever way we look at it, RPA has created a lethal environment, which was only just coming to terms with providers and buyers working together to get the basics of delivery right. Most outsourcing buyers have to look to automation to save their jobs and please their ambitious leaders, no longer content with the ~30% they saved on offshore-centric outsourcing just a few short years ago (see our recent State of Outsourcing and Operations data on 454 major buyers).
So, in the meantime, for all the reasons outlined above, this industry will literally go into a destructive war over automation. The skills to make automation a massively profitable reality are few and far between, while greedy corporate leaders demand cost savings that simply are not achievable if their organizations fail to make the necessary investments and partnerships to make this achievable. Did companies become world class at HR overnight because they bought an expensive Workday subscription? Or stellar at sales and marketing because they slammed in a Salesforce suite? So why should they become amazing at cost-driven automation simply because they went and bought some licenses from an RPA vendor promising bot farms and virtual labor forces?
RPA and Intelligent Automation have sparked a major war in the worlds of outsourcing and operations, where many battles are being fought – and the winners will be those who are in this for the long haul, who can absorb some short-term pain in order to benefit from the larger spoils further down the road. While automation is killing outsourcing today – costing many people their jobs, their reputations and destroying the profitability of legacy engagements, those who can hunker down, focus on self-contained projects where they can fix one broken process at a time, can get stakeholders onside by demonstrating meaningful, impactful outcomes without major resource investments, will be the winners. Start with one process at a time, prove how to fix in, then onto the next, then the next… that is the only true way to be successful in this destructive automation-infested world.
We are just analysing our “State of IT Services Survey 2017” at the moment – this survey is being conducted largely to support our IT Services blueprint process. We have interviewed 302 IT service decision makers to find out what they think of the IT services providers infrastructure management services, digital-focused consulting and their application management services.
We are hoping this will add an additional buyer perspective when we rate and review the global IT services companies – getting away from the usual marketing blurb and focus on what is important for the organizations buying external services.
As part of this work, we asked these business leaders to rate their familiarity with infrastructure management service providers and then rate them on, amongst other things, service quality. This gave us the opportunity to see whether familiarity with the providers has an impact on the ratings -the infographic chart shows the findings.
The Bottom Line – buyer respect is earned through good service delivery
The good news for the industry is that, except for a couple of notable exceptions, as buyers start to use a providers infrastructure services the rating for quality of service delivery increases. With a big leap from merely heard of a provider to extensive knowledge.
We are analysing and publishing more of this survey over the next few weeks.
