In today’s perilously paranoid services industry, many ambitious executives are resurfacing in smaller sized service providers, which can compete on smaller scale contracts that are arising with mid-market firms, in addition to being nimble enough to compete for business at the high end. What’s more, many savvy buyers are feeling more secure investing in emerging providers that are not weighed down by the legacy contracts of older times and greedy investors eager to jump ship once they sense the gravy train has stalled.
One such character is the affable Manish Tandon, who made his name at Infosys, where he led some major divisions, before recently popping up at customer experience and IT provider CSS Corp. So let’s hear what life is like moving from the very large to the medium-sized provider…
Phil Fersht, Chief Anaylst and CEO, HfS Research: Good morning Manish. It’s great to have you on HfS today. You’ve had a very illustrious career in the services industry, spending a long time at Infosys where you climbed the ladder, and you recently took the CEO job at CSS Corp. Did you expect such an illustrious career in services – and what’s exciting about this move for you?
Manish Tandon, CEO, CSS Corp: Thank you, Phil for having me, and great talking to you, as always. I would say I have always liked the services business tremendously. As a graduate from one of the top management institutes, I had the pick of jobs in most of the top financial institutions and so on, but I always liked technology and particularly technology services. Primarily, because this is one area you get to work on something new, something different, something challenging every one or two years, every assignment is different, so I have always been excited about the services business, primarily from an intellectual perspective but also from a variety perspective.
Regarding CSS, it’s a great company it has a great delivery engine and a fantastic client base, we work primarily with the innovators which are the high-tech companies and also innovators in retail and to some extent in banking. It has been an exciting place to start – it is not very big and it is not very small, which means that the transformation ideas you have, can more easily be implemented without causing a lot of disruption. The company had a lot of people strength, in terms of people with the right attitude and people who have built their careers and there was technical depth in the company. There were lots of things that one could work with to transform the organization. That’s what really excited me about CSS Corp, so when this opportunity came about I grabbed it with both hands.
Phil: Manish, you talk about the fact that you are “not too big but also not too small”. Looking at the environment we are in right now, is it advantageous to be in a mid-sized service provider based on client requirements, or do you feel it is disadvantageous compared to being in one of the very large established firms. How is that experience playing out for you?
Manish: I think it is a huge advantage to be a relatively mid-sized player, because you have seen how the big players are doing. Companies like IBM and HP suffered when the first wave of disruption came in by the Indian offshore providers and now I think the mid-size companies will perform the next level of disruption for the typical large Indian outsourcers that are out there. The reason primarily is that there is a dramatic change happening in the industry, when you look at Cloud and Digital, and people keep talking about Cloud and Digital, there are two intrinsic forces happening here, in my opinion, one is digital where suddenly technology has become a revenue enabler instead of just a cost and the second thing is as people have got accustomed to a pay-as-you-go model, or as a service model on the hardware and infrastructure side, they have realized that they can get the same on the services side and none of the large players are doing that. For example, if there is a million-dollar deal, most of the large players would say it is too small for us and the large deals like the two hundred million dollar implementations are no longer there. They are struggling for credibility and I believe that companies like CSS Corp will cause a lot of disruption in this space and will move in a more rapid agile fashion, doing what I call, “cloudification” of services.
Phil: Cloudification of services… it certainly is a very transitional time for the industry! What is the number one issue that is keeping you awake at night?
Manish: Normally, Phil, I sleep very well! I have a very clear conscience, however, I think one of the key issues, that one must grapple with, is how to position the company in this rapidly evolving landscape, when evolution like this is happening there are no right answers. You essentially look at how other industries in the past have disrupted and you try to draw some parallels and position the company accordingly. As one of the hockey coaches said, ‘it’s more important to not follow the puck, but to be there where the puck is going to be’ and I think that is the thing of paramount importance. You are never sure whether you’re on the right track or not in the way you are trying to position your services.
Phil: Manish, do you think the industry really is changing that much, or do you think we are getting ahead of ourselves a bit in this current environment?
Manish: I think the industry is definitely changing. What has happened is what I call the democratization of technology. Price points will continue to come down both for hardware and software. The skill base that is needed has expanded, but you need a very different skillset of people, both at the upper end and at the lower end. In the industry, the deal sizes have become very small compared to what they were a few years back and more importantly, technology used to be the domain of the geeks and a few specialized guys in an organization, but now most of the good business guys understand technology really well because this is how they make their money. Hence, what has happened is that a broader set of people have become much more comfortable in buying technology. So more and different people are buying technology, deal sizes are becoming smaller, as-a-economy is becoming more prevalent, data is forcing companies to think about mass customization and technology is pervading deeper, wider and broader. There are lots of changes happening and I think the industry is not reacting fast enough.
Phil: So how on earth do we unlearn much of the last 20 years and make this a more exciting environment for some of the younger talent? What can we do to make a pivot… do you have some ideas based on your experiences?
Manish: Phil – good question. I think there are two parts to your question, one is how does the industry change and the other is how can we make it more exciting for the younger generation? I would say in answer to the first one, you need to look at the more fundamental things that are time invariant rather to look at things that are time variant. Let me elaborate that a little bit, people say that offshoring was a big disruptor because of the labor arbitrage and so on and it was, but the underlying theme was the time invariant theme of customer value. What the industry must do is go back to basics and look at those time invariant themes like, how are we going to deliver value to the clients? One method of that was offshoring in the past. Now that advantage is not so emphatic, so what are the next set of value levers that can be applied. That is where I think the industry needs to change to distinguish between the time invariant and time variant part of their value proposition.
On the second part of your question regarding talent. Rapid industry evolution brings about tremendous opportunities for talent in the industry. This means that the workforce has to be able to quickly adapt to new skill requirements and new technologies. This calls for a shift in the employee mindset. Gone are the days when one could choose a technology, specialize in it and work on it for years together. The new mantra is to come out of our shells and be open to continuous and lifelong learning. The younger generation of today, in fact, gets an adrenalin rush in an environment like this. Organizations can enable them by investing in relevant and ongoing training programs that equip the employees to tackle the latest challenges. Over time, the so-called repeatable white collar roles will gradually be replaced by more challenging and exciting career opportunities.
Phil: So we now have an official date announced for Brexit, we have obviously had a maelstrom of excitement from the US with President Trump. Now we are a few weeks into all this change, what concerns you about what’s happening in the political environment, where many of our clients are situated?
Manish: I think any change, if you are in the services business, any change is exciting, that’s the way I approach it. Because if Brexit is happening we have a huge amount of technology disruption and Mr Trump is coming in, he has been a very astute business man, so he will be bringing a few changes and as leaders and managers I think or primary job is to figure out how the environment is going to change and how to adapt ourselves in the changing organization/environment. Darwin talked about the survival of the fittest, but actually it was about the survival of the most adaptable of the species. I would say I am excited about any change and again I run an organization that is small enough, agile enough and nimble enough to adapt to the change much better than some of the larger organizations. I am excited by both the changes because change is opportunity.
Phil: S finally, Manish, we talked a lot about what’s changing in the industry and how we need to get ahead of ourselves a bit more, so if you were anointed the leader of the services industry for one week and you could make one thing come true, what would that be?
Manish: That’s a tough one. I think too many contracts in the industry are not outcome based contracts and I would mandate that we shift the pendulum significantly towards outcome and value-based contracts in our times. I think in the new world that is needed for survival of the industry.
Phil: Best of luck with the new job, Manish – am sure many of us here who’ve got to know you over the years wish you well!
Security is a complex space – changing and emerging threats, multiple interconnected technologies that each do one small piece of the security landscape, and an ever-changing regulatory and legal environment. And frankly, most senior executives don’t have the patience to really understand the threats to their business in great depth.
So what can a smart security executive do to capture and hold management attention on security issues? Become a great storyteller. There are lots of reasons storytelling helps in the security space:
People remember stories much more than they remember a bunch of data points or random facts
Stories connect emotionally as well as intellectually, making them more impactful, and increasing stakeholders’ investment in the topic
Having people re-tell stories is both a great validation of your original point but also a powerful way to make sure that your point is shared throughout the organization so that everyone understands security better
Start by studying storytelling. There are some basic plots for stories, such as boy meets girl, hero vanquishes evil, etc. There’s also a basic narrative structure you can use (see Exhibit 1):
So with this structure, you can explain security threats to your executives.
Exposition – threat the business faces, including what part(s) of the business, are affected (sales, brand reputation, data, etc.)
Rising action – how that threat is evolving
Climax – impact on the business if that threat occurs
Falling action – steps being taken to address the risk and protect the business
Denouement – any residual implications, requests for support or budget, etc.
You leave out the details that will take the focus off the overall story but leave the ones that add color and help people connect with the story. So, examples of how other companies are handling the threats can stay, but likely the reporting spreadsheets of the quarantined threats should go. This balance of the details is key to effective storytelling. Your team may find deep data invaluable, but it may cause your audience to give up trying to follow your story.
You’ll also save a lot of time. How? Typically, when something happens, you give the details and then try to explain those details in context. If you’ve told a story people understood, then when you have a conversation about details, you can refer back to the story and have the person “get it” faster. You can tell this works when stakeholders start asking more, and more relevant, questions. People who don’t understand a topic don’t ask as many questions.
How will you know the storytelling approach is working? When more people in your organization start to change their behaviors to support your security goals. And when senior executives begin to get more invested in your work.
Bottom line: To really improve security, get outside of security data and details and become a great storyteller.
Oil & Gas has gone through a crippling crisis in the last three years. What are service providers doing to help Oil & Gas recover? This question plays a central role in our 2016 Energy Operations Blueprint, HfS’ inaugural report on the services provided to the oil and gas industry. Infosys is an As-a-Service Winner’s Circle provider with strong roots in the oil and gas industry and a clear vision for the services needed to pull the industry out of the slump it has been in since the oil price collapsed in 2014. Since the 2016 Blueprint, the oil price has rebounded and is stabilizing between $50 and $55 per barrel, giving the industry some more breathing room and a momentum for change. Time to have a conversation with Robin Goswami and John Ruddy. Robin heads Infosys’ Energy practice in the Americas. John in the president of Noah Consulting, Infosys’ 2015 acquisition that bolsters its capabilities in Oil & Gas.
Robin Goswami
John Ruddy
Derk Erbé, Research Vice President, Supply Chain, Procurement, and Energy: Robin and John, thanks for sharing your vision for the Oil & Gas industry with our audience at Horses for Sources and candidly discussing the challenges of operating in a struggling industry. Infosys impressed us in the Energy Operations Blueprint, with its vision for the evolution of services that this industry needs to pull itself out of the downward spiral since 2014. Even though this is a very volatile environment with challenging economic circumstances, Infosys has continued to invest. How do you see the current situation in Oil & Gas?
Robin Goswami, Vice President and Head of Energy Practice Americas, Infosys: We are starting to see some recovery but there is a growing realization that this is not going to be a quick recovery, but more of a gradual one, like what we saw in the ’80s downturn.
In 2014, everybody thought this would be a six-month downturn, by early 2015 it looked like a one-year downturn. Only in late 2015, was there a realization that this could last a lot longer and would be much harder to predict. The last ten years now seem more like a spike, with the market having settled to a new normal of $50 a barrel of oil.
Due to the downturn of the last couple of years, companies have stopped most capital projects, whether in IT or the field. They are trying to optimize what they have. At some point, they must start looking at different ways of doing things including radically different ways of leveraging technology. This is where offerings like Infosys Mana – the knowledge based artificial intelligence will play a significant role in driving automation and innovation. So far, this has happened in spurts and pockets. We’ve seen a couple of companies try to do it, but most of these have been the smaller to medium sized ones in a desperate situation. We have not seen the bigger companies do this just yet, but lately, are starting to see a changed mindset and some positive signs as a result.
We’ll see a lot more interest in the things that we’ve been trying to talk about for the last year, year and a half or so. Automation, how can that help to significantly reduce operational expenditures? Analytics, how can you leverage analytics to get a lot more efficient and predictive analytics around equipment failure.
John Ruddy, President, Noah Consulting: The industry is learning how to be profitable in a $40 per barrel world, and that the days of anything more than $60 are over. They are learning that they need to be profitable at this price point, and that’s driving much leaner, much more efficient operations and much more reliance on automation, machine learning, and analytics. We’re starting to see modest growth because our clients recognize that this is their direction. They’ve stabilized following the workforce reduction, which was very significant. I believe they’re now starting to become leaner, more agile organization that they need to be to survive in today’s market.
Derk: Do you feel they are making the shift in mindset from cutting down costs in existing processes and with workforce reduction towards how to create value in a different way and create new value?
John: Now that the price is somewhat stabilized, we see the emergence of a focus on how they become a lean, responsive organization. We see a big focus on operational technologies around real-time data, and that the digital oil field wave that happened 10 -15 years ago is now re-emerging with IoT being the main catalysts, with even more sensors, and even more data and even more automation are happening.
We see a big push into more Cloud based As-a-Service models out there. In fact, the operators are forcing the software providers to move there more quickly than the software providers had anticipated. There is a very strong desire on the demand side for an As-a-Service ecosystem and the operators at one point were reluctant and are now pushing very hard for that type of a model to be offered by the vendors.
Derk: We’re on the verge of a very interesting period in oil and gas. Would innovation go slower or faster if the oil price were slightly higher?
Robin: Innovation would go faster if the oil price were slightly higher. Our clients have been focusing on primary goals, ensuring that they stay just cash flow positive. They don’t have the cushion to invest in innovation. If the oil price was slightly higher, I think that the money would be there. I also feel that if the price were to push 80 or 90 a barrel all of this would be forgotten, and we would be back to doing business the way we were before. But if the price consistently stays in the 50s, it will drive some efforts and activity to bring up the level of investment in innovation.
Derk: There is this fine line for innovation, investments and having the ability and willingness to innovate. Where do you think we’ll find the sweet spot?
John: I think $50 to $60 per barrel might be the sweet spot for a lot of innovation, a lot of demand to be addressed, especially with the smaller workforces that are out there and to a certain degree, a refreshment of the workforce regarding the average age coming down. I think you’re going to find more millennials driving automation as well. The voice for innovation will be a little bit louder perhaps than it was pre-downturn. I do think that the $50 to $60 sweet spot would have allowed more innovation to be applied to the clients. There are modest pockets of it happening with prices in the $40 range. $50 to $60 will open the floodgates for people to be innovative. Anything more than that ($60) and people don’t care about innovation anymore.
Derk: The industry has adapted to this ‘new normal’ of $60 per barrel as the peak price. What does that mean for the focus of your oil and gas practice and your competitors?
Robin: Oil and gas is a cyclical industry, and we’re in a down cycle, but we’ve got to continue to invest. I strongly believe that when it does come back, the folks who have invested will reap the rewards of their investments. We continue to focus on oil and gas and are seeing some positive movement. The tough part is the fact that our work is split between OpEx and CapEx and the CapEx side of the work really came to a halt. We’ve got clients who are doing work on analytics, data lake projects, or initiatives to get more efficient, but it’s small compared to the amount of work pre-downturn. You can count the number of ERP implementations currently happening in the industry on the one hand. That was completely different four years ago. At any given point in time, four or five projects were kicked off. That has not happened recently at all. In terms of competition, we used to have eight or nine competitors bid for the same projects. That has drastically changed, a lot of competition has re-focused or exited this space.
We have seen a lot of companies that in the past never looked at outsourcing who have now started to approach the market and say, “Let us explore working with outsourcing companies that can do IT a lot more efficiently than we can do it ourselves.” It has opened some opportunities. But the opportunities are still few and small. We are doing well from a perspective of winning them, but the squeeze in capital expenditure has hurt all the service providers.
We acquired Noah Consulting in late 2015. We continue to invest in oil and gas. We see a modest growth of some CapEx-projects, though not in a big way. The significant change that happened over the last year was people trying to find more efficient ways of doing their expansion. Whether it is the large or the small players, everybody is trying to use this down phase to optimize how their operating expenditure is leveraged.
We are focusing on delivering value by proposing automation (Infosys Mana) and leveraging digital to optimize the operational costs and are starting to see success.
Derk: What is the key to creating more of an innovation-minded culture and boost As-a-Service adoption in this hundred-year industry that doesn’t like to change and frankly lacked the incentive to change most of the time?
John: The key is education. A lot of it is repetition. A lot of it is helping to stimulate some of that demand and get our industry comfortable with new ideas. I’ll give an example. There is a lot of innovation happening in Infosys, for instance in our Palo Alto offices. We were out there a couple of months ago. The first thing you notice when you walk into the lobby is a science lab type experiment set up with plants. There are different basil plants. Each plant has sensors measuring the nutrients in the soil and the amount of light and the amount of water that they’re getting. Each plant is generating a growth curve, and they’re learning from each other. They’re looking at each other’s growth curves and adopting best practices and dropping bad practices, and are using our AI platform Mana.
That’s being used in the other industries, but not yet adopted by oil and gas in a large manner, but it’s applied to this little science experiment. That was an inspiration for us. We looked at that and take that same exact concept and took it out to an oilfield and have pumpers learn from each other. Have the pumpers look at the Geoscience strata for that field. They’re from the same field, comparing that pad to the one a quarter mile away and the pumpers look at the data and learn from each other and look at economic conditions.
We’re test driving those innovative concepts. It’s an industry that avoids disruptions. We’re working towards it, but it’s an educational process. We show them the possibilities and help them get more and more comfortable with innovation. Some clients are first movers, prove the benefits and the rest of the industry will follow. The onus is on us to find that first mover, and that’s what we’re out there doing.
Derk: If you were given the keys to the oil and gas services kingdom and you can rule the services world for a week, what’s the one thing that you would do to change the industry for the better?
Robin: That’s a tough one. John, I’ll let you go first.
John: Having the keys to the kingdom, one very broad-based public relations thing that I would do is I would promote natural gas as a clean fuel alternative. Why aren’t there more compressed natural gas vehicles? Why aren’t there more natural gas power plants? I know there is an uptake in those, but not to the degree it could be. There is a huge environmental and climate change concern, and our industry has the answer to that, and that’s natural gas. As king, I’d be out there to get the public comfortable that natural gas as a clean fuel alternative that should be embraced and not pushed away.
Robin: I would like the companies to look at the industry and say “Look, we all know, oil and gas will be there in our lifetimes. We will come out of the downturn at some point. Lets leverage this downturn and look to use technology to change our model. This is an opportunity for us to reset our entire cost model, our entire way of operating with technology for the next decade.”
Right from the beginning of the downturn, we’ve had a view from the outside. We are very much part of the oil and gas industry, but we have the luxury of having the bulk of our business focus on IT services, so any impact from oil and gas is well cushioned by the rest of the Infosys business. That gives us the cushion to make acquisitions, invest and enables us to continue what we are doing. That is not an advantage, unfortunately, that most oil and gas companies have. They are unfortunately dealing with the day to day of trying to keep positive cash flows and are forced to react to weekly, monthly, quarterly pressures and none of them have been able to step back and say, “Let’s assume this is a three year or a five-year downturn and let’s try to do things differently”. Definitely not when it hit in 2014.
I saw this as an opportunity in late 2014, for companies to completely change their model, move to other service models, look at analytics, automation, Internet of Things, to radically work differently with technology, not only IT, technology overall. Most of them were unable to take that opportunity. The longer the downturn continues, the more you are, in a sense, in a hole where you are trying to just survive. The amount of cash that companies had in 2014 and 2015 was just not there in 2016. Those initiatives could have been taken on in 2014 and 2015. It has become way more difficult, a lot more challenging, now. And this is the one thing I would like us to do differently.
If I had the keys to the kingdom, that is what I would do. Try to move away from the quarterly, the monthly survival and look at leveraging technology to change the model.
Derk: The saying is “never waste a good crisis” and they’re wasting a good crisis to change. Would you recommend having a different dialogue with the financial markets, because that’s part of the issue for oil and gas companies? They want to do the same for the shareholders as they did when the oil price was $100. Does that need to change or they’re addicted to doing the same as ever before?
Robin: I don’t think we have a choice, Derk. I think we have reached a stage where $80 barrel of oil is not coming back shortly. The boom won’t be back for a while and we must reset expectations and look to do things differently and leverage technology a lot more.
A product strategy executive at ADP recently told me ”employees generally spend more time picking out a color TV than they do selecting their Benefit plans.” At that moment I knew the conversation would be different than any of my previous chats about payroll services. After all, I’ve never known an organization that cited a well-run Payroll operation as a major source of competitive advantage. In contrast, achieving only modest (e.g. 4%) upticks in employee productivity, perhaps from focusing more on improving employee engagement, can be a pretty big deal. The math: A 2,000-employee company that goes from $150,000 revenue per employee to $156,000 (or a 4% improvement) generates $12 million in new value ($6,000 x 2,000 employees).
Payroll Services in the digital age is where “intelligent automation” and the constancy of innovation empowers and enables all participants and customers – ergo, makes them more engaged and productive. And for newer readers of HfS fare, we basically define intelligent automation as moving from legacy technologies to a more on-demand environment that enables (as warranted) plug and play solutions/services, cognitive/AI elements, impactful analytics, highly engaging user experiences, mobile taps over mouse clicks, etc., often based on design thinking and always involving genuine customer advocacy.
To cut to the chase, my new Blueprint Report “Payroll-as-a-Service: 2017”, being published this July, will delve deeply into how Payroll Services are being transformed based on the best that intelligent automation has to offer. The Report will examine where this market is today and where it’s going, include actionable guidance for services buyers and providers, showcase innovations that are driving real business value, incorporate customer perspectives from around the globe, and of course, utilize our “As-a-Service Winners’ Circle” evaluation framework to separate market leaders from high performers and high potentials – replete with service provider analyses.
Readers wanting to see who offers great pricing for tax filing and reporting services should look elsewhere, but for those interested in digital capabilities in the form of impressive chatbots (for maximum responsiveness), benefit plan cost/benefit optimization and financial wellness support at the individual level, other types of “personalized value adds,” predictive and prescriptive guidance for managers, and other capabilities which take routine tasks out of the daily life of Payroll staff and its internal customers, we will have you covered.
Bottom Line: Payroll Services providers are jumping on the digital bandwagon with gusto, and the results belie that long-time characterization of Payroll not being sexy.
We have recently published our Blueprint Report on Industry 4.0 Services. This is our fourth engineering services Blueprint in which we analyzed and positioned twelve Industry 4.0 Service providers according to their execution and innovation capabilities. In the first one, we focused on the mechanical engineering services. In the ”second” engineering Blueprint, we looked at Software Product Engineering (SPE) services in detail. The third Blueprint was about Product Lifecycle Management (PLM) services.
What does Industry 4.0 Services Blueprint cover?
This Blueprint includes the Industry 4.0 offerings of different service providers across verticals for shop floor manufacturing. This includes their capabilities across the HfS Industry 4.0 Services Value Chain of R&D, Plan, Implement, and Operate for thirteen technologies that are relevant to Industry 4.0. These technologies are Manufacturing Data Analytics, Robots, Manufacturing Automation, Digital Clone or Simulation, 3D Printing, Manufacturing IoT, Plant Cybersecurity, Manufacturing on Cloud, Augmented Reality in Manufacturing, Virtual Reality in Manufacturing, Artificial Intelligence in Manufacturing, Visual Analytics in Manufacturing, and Small Batch Manufacturing. This report also provides insights into the internal R&D, capability, vision, investment, and partnership priorities of the service providers. We also outlined the strengths and challenges to take into consideration for these service providers. The report also mentions market analysis of the Industry 4.0 Services industry, the current focus area, and the future growth areas over the next few years. The service providers included in this report are Accenture, Altran, Atos, Cognizant, Genpact, HCL, IBM, Infosys, L&T Technology Services, TCS, Tech Mahindra, and Wipro.
What is unique in this Blueprint?
Our focus is not solely on size, revenue and global scale of the Industry 4.0 service providers but our emphasis is also on the Industry 4.0 use cases, customer case studies, service provider strategy, way service delivery is organized, the availability of industry domain expertise, investments in industry talent, academic partnerships, industry body associations, acquisitions of companies to augment industry 4.0 capabilities, etc. Also, the Blueprint includes recommendation sections for buyer enterprises as well as the service providers. Another point of emphasis in our research is the effect of digital and emerging technologies in Industry 4.0 and how service providers are enabling new ways of working with these new technologies to address industry-specific challenges and the level of innovation brought to clients. For example, we covered how service providers are leveraging existing digital capabilities (analytics, cloud, automation, IoT, AI, cybersecurity etc.), and emerging areas (robotics, augmented reality, virtual reality, 3D printing etc.) in Industry 4.0.
This Blueprint also includes Industry 4.0 market analysis. This is first of its kind of Industry 4.0 Services study where we tried to collect details of Industry 4.0 engagements and arrived at the overall current adoption level of Industry 4.0 across verticals, technologies, service lines, and geographies. This should help each Industry 4.0 service provider, Industry 4.0 software provider (technology providers related to the mentioned thirteen technologies), and enterprise to benchmark their Industry 4.0 footprints and identify their strengths as well as areas or levels of improvement. The intent of this report is to provide valuable intelligence and a reality check on what is going on in the Industry 4.0 services world.
As part of this work, we are launching Digital OneManufacturing framework (refer Exhibit 1) that provides our view of the Industry 4.0 operating model. The framework represents an integrated manufacturing operation center that has digital prowess for a manufacturer to meet future manufacturing complexities.
In brief, Digital OneManufacturing is the platform on which digital technologies meet manufacturing engineering technologies and controls a manufacturing landscape in real time to serve clients. It’s where all the process elements are combined: Connectivity, the processes, and the intelligence come together as one integrated unit, with one set of unified business outcomes tied to manufacturing organizations.
Digital OneManufacturing is the ability to do mass customization at scale so that manufacturing enterprises manufacture for one customer economically and efficiently. Please refer our PoV on Digital OneManufacturing to get more details about the framework.
What is the current state of Industry 4.0 Services market?
Since Industry 4.0 is a relatively new concept, manufacturing organizations are conservative to implement Industry 4.0 across the enterprise. Big enterprises are committing modest investment, and resources in digital manufacturing for specific manufacturing functionalities and once they realize the benefits enterprises will go for digital factory and then connected factories. Geography wise, North American manufacturing organizations are at the forefront of Industry 4.0 adoption followed by European and APAC enterprises. The automotive, aerospace and industrial equipment verticals are the leading verticals for Industry 4.0 services. Service providers are also developing industry-specific Industry 4.0 platforms, and plug-and-play solutions in partnering with Industry 4.0 related technology providers (Siemens, GE, Dassault etc.) to address specific client challenges. The biggest challenge manufacturing organizations are facing in Industry 4.0 implementation is the lack of digital maturity and enterprise readiness. Once the Industry 4.0 technologies mature, and the adoption increases, the expectation about Industry 4.0 benefit realization will be realistic.
What are we expecting in the coming years?
As discussed, Industry 4.0 is gaining traction in the manufacturing industry, and in the next few years, we will see more Industry 4.0 adoption, and increasing integration of Industry 4.0 with ERP, PLM, and other enterprise applications. It will take decades for manufacturers to implement Digital OneManufacturing at scale but surely manufacturers will make progress with the help of progressive service providers in this area in the next couple of years
Consulting is often starting point for the large Industry 4.0 programs, so service providers are augmenting their consulting capabilities. We expect to see an acceleration of this trend in the near future. Also, the market will see M&As as the global and Indian service providers will look for specific capability augmentation in Industry 4.0 space. Industry 4.0 will generate a huge amount of data in real time from every connected digital asset, so actionable intelligence from the data is of paramount importance. Thus data analytics is a differentiating factor for successful Industry 4.0 implementation. Security is also one of the most important features of Industry 4.0 as critical manufacturing, and customer data is generated and stored as a part of Industry 4.0 services.
We think there’s a high chance the grid could be very different again next time round! Stick with HfS to monitor the important changes in this rapidly evolving market!
HfS subscribers click here to access the new HfS Blueprint Report, “HfS Blueprint Guide: Industry 4.0 Services 2017“
As enterprises embark on their SaaS journeys, we’ve compiled a quick no-fuss list of tips for buyers to keep in mind. With all the marketing hype created by tech firms, certain analysts, journalists and pundits, enterprise SaaS buyers, more than ever, need to stay focused on their strategic missions and desired business outcomes. Here are five top tips to consider:
Focus on your business strategy, not a technology strategy: Business leaders, such as HCM and CRM business managers, constantly grapple with outlining a technology strategy to support their business requirements. Why? Business leaders are just that – they have a mission to improve their business performance, aligned to specific business outcomes. For example, an HCM manager may need to create a particular culture to engage and motivate employees, or a CRM manager may be charged to increase customer satisfaction. Either way, these missions should not be to use a particular type of technology or procurement method.
Don’t select SaaS because it’s cool and looks good on your CV: Too many buyers today are selecting SaaS solutions without tight alignment to the overall business strategy. Too many marketing executives’ eyes light up when you mention “Salesforce” or HR executives “Workday”.Without this, these deployments will ultimately fail. Buyers may achieve automation of mundane tasks but they will fall short of engineering any real business transformation.
Don’t care as much about which technology you use: IT is and always will be an enabler to the business objectives and requirements. It’s no more than that. One of the most important advantages of SaaS applications is that buyers are not tied to them for years, or even months. If the solution no longer works, you can drop it and find something else. Yes, there are some cost implications, but technically, it is not nearly as painful and cumbersome as trying to swap out an on-premises application.
Be careful of believing the hype – whatever the source: The ISVs are, of course, aware that you can switch a SaaS solution relatively easily. They are, therefore, laser-focused on making you stick with their solution. Antics include bundling in solutions and modules you don’t need (but will pay for) and stressing the importance of using one complete solution for integration simplicity.
Only buy what you need: The ability to integrate easily between cloud and on-premise applications is obviously very important, but SaaS buyers need to focus on exactly which modules they need to fulfill their business mission and only use and pay for those. If an alternative solution or application meets a specific business need, then don’t be afraid to use it. Let system integrators pick up the headache of integrating it all – that’s what they are paid to do.
Bottom Line: You achieve business transformation through organizational and cultural change – not with a software tool or a procurement method.
April 3rd saw the long-anticipated creation of a new IT and BPO powerhouse service provider – DXC.technology. However, DXC’s challenges represent a microcosm of a services industry in perilous transition.
This is a crucial event in the services industry, not only because it isn’t often a “new” $25 Billion services firm is created, but because of what it signifies about the uncertain state of the current market and the huge challenges facing service providers in the near future.
As an addendum, many of you have reached out to us since publishing this blog, regarding whether this was the right time for an emerging star in automation, like Genfour, to sell. There is a lot of runway in Intelligent Automation and there is no doubt in my mind that Genfour’s architect, James Hall, could have held out for longer and continued along his growth path as one of the few attractive pureplays in the space worth acquiring.
As our recent analysis of them revealed, the current bunch are not very well established, hence some want a quick cash-out and exit, while others are hunkering down to play the longer game. It is our view that Intelligent Automation and AI will evolve like the digital market, with service providers crying out for “press release buys” that give them credibility. Hence, this is as good a time as any to establish your own pureplay Intelligent Automation shop and throw yourself into the mix. But good luck finding the talent… there’s a real shortage of it out there!
So why did Accenture acquire Genfour and does this make market sense?
In times of disconcerting political and macro-economic events, where #fakenews and a traditional outsourcing model officially running out of value, getting predictions right is becoming increasingly difficult for an analyst. Hence, the more pleasing it is when you can gloat about predicting an acquisition.
Case in point, Accenture’s acquisition of UK-based Genfour, a pure-play automation services provider that will become the cornerstone of a newly formed Center of Excellence (CoE) for Intelligent Automation, located in Wales. Back in December 2016 we did gaze deeply into the automation crystal ball and suggested that similar to the acquisition of Alsbridge by ISG, the leading pure plays will be quickly absorbed by the leading management consultancies. Gloating aside, the point that this acquisition reinforces is that Intelligent Automation is at an inflection point and we are poised to see these Intelligent Automation deployments scale far beyond just RPA.
The shift from bots to data
The sense of increasing maturity and the progress toward transformational projects was also tangible at HfS’ Digital OneOffice Summit last week in New York. While tired of all the buzzwords and the lack of education and definitions, buyers were clear what they expect from their partners. They want support on their journey from bots to data and their move beyond technology. Buyers want guidance on the best organizational model to leverage and integrate automation, but also a realistic guidance on the throughput of data of the leading RPA and automation tools. Similarly, they are desperate for tapping into the talent that can advise them on the most effective architecture in order to accelerate the journey toward truly Intelligent Automation. At the same time, buyers were almost unanimous in expecting the industry to move beyond an FTE-centric mindset on automation, be it around go-to-market messages, around discussions on business cases or where exactly they require support from their partners.
The messages from New York to automation vendors, service providers and advisors were loud and clear. Yet, another message was equally clear, when we asked the buyers in the room what would improve most the quality and outcomes or their current (primary) services relationship, 49% responded with rolling out a long-term RPA and Cognitive Computing roadmap with their providers’ expert management and support. Thus, the opportunities are far greater than any challenges.
Accenture’s Genfour acquisition is all about execution
Against this background and despite the fact that financial terms were not disclosed, we view the acquisition as a strong positive for both sides. Genfour gives Accenture proven execution capabilities in Europe that allow both to fulfil strong demand around RPA but also to leverage Accenture’s broad Intelligent Automation capabilities in those deployments. (For Accenture’s and Genfour’s Intelligent Automation capabilities see the HfS Intelligent Automation Blueprint). Another way of looking at it is that Accenture gains nearshore capabilities. Crucially those capabilities are at the top end of the market as the Genfour team are the first mover with proven credentials on integrating RPA and other innovative technologies into process chains and workflows. These skills sets are extremely scarce in the market. Conversely, Genfour is selling its business just at a time when the RPA market is starting to commoditize. To move forward, it would have required deeper, external investments as the market is moving toward broader automation capabilities in particular around AI and Cognitive. And culturally it is a good fit as Genfour founder James Hall spend his formative years at Accenture.
From an IP point of view, Accenture will add its holistic automation strategy to Genfour’s Autonomic Platform which did integrate broader automation partners such as Celaton or Enate. Accenture’s capabilities focus on the Accenture Intelligent Automation Platform that integrates Business Workflow Management, Delivery Management, Intelligent Automation, and Analytics and Insights, with a neutral ERP interface at the core. This is further enhanced by the Accenture AI Engine that provides an architecture abstraction layer for interacting with various Autonomics services, such as natural language processing (NLP) and machine learning. Thus, the combined entities will accelerate deployments geared toward more data-centric models.
James Hall will move into a more sales-oriented role driving customer engagement across Europe, while Accenture will move the CoE to Cardiff and ingest as well as expand existing capabilities. There is another reference point, in addition to the depth of Accenture’s capabilities, that the deal should be seen largely from an implementation and execution perspective. But again, on the danger of sounding like a broken record, these implementation capabilities are scarce. In summary, the only challenge for Accenture is to keep the Genfour team happy in a bigger and much more process-centric, if not bureaucratic, environment.
Bottom-line: Change in mindset and forward-looking strategy on talent is where the automation rubber hits the road
The key value that the automation pure plays like Genfour add to the market, is having the talent that can assess innovative technologies like RPA as well as AI and advise on the implications of those tool sets on process chains and workflows. As the first mover of those pure plays, GenFour deserves credit for educating the market while the service providers remain coy at the side lines. This education always focused on understanding RPA as part of holistic automation strategies with a view to progress to an end-to-end process view. Not that we intend to gloat yet again, but we expect that the leading pure plays will be absorbed with a similar deal logic. That is unless we will see somebody take the bold step and invest significantly to scale out and to accelerate the journey toward an AI-enabled OneOffice strategy.
We’ve talked long and hard about the extent of digital disruption of traditional business models, so we decided to extend our research coverage into growth markets where the impact of digital is always positive. When you look at the premium whisky, for example, our research shows its impact promotes new ideas, helps foster greater team collaboration and can even provoke new Design Thinking principles. Let’s have a look at how the leaders in this space are positioned, based on our Blueprint Research Methodology:
At HfS we are expert analysts at peering into markets and evaluating the performances of the major players, so we thought “why not extend our coverage into adjacent markets where some of our analysts have years of practical, hands on experience?”. Personally, I have had more innovative client discussions comparing the various merits of single malt whiskies than which automation tools vendors have better control features.
So let’s talk to a few of our contributing analysts to understand how this market played out:
Bram Weerts, COO, HfS Research:
“I’ve tried each and every one of these buggers and you can’t beat the old Yama 18. I do love the Mac, but Yama hits the spot everytime”
Tom Reuner, SVP Intelligent Automation Research:
“I believe I’ve sampled all of these whiskies, especially when I am out at analyst conferences. I haven’t a clue which is the best, but wanted my name on the report, so I endorse whatever Bram and Phil came up with.”
Derk Erbé, VP Research:
“I believe the whisky market is ripe for digital transformation. Emerging brands like the Walmart Fireball are poised to rip the bottom out of the market”
Jamie Snowdon, Chief Data Officer:
“There’s no way I could get through our quarterly forecasts without sampling a few of these first. And the way the industry’s going, the old Walmart Fireball will only increase in popularity”
Phil Fersht, CEO:
“We may worry about robots stealing our jobs, but those bastards will never be able to drink our Scotch.”
Bottom-Line: This is only the beginning, HfS is going to extend into new markets everywhere as digital disruption takes hold
We believe we are qualified to become experts on any market where money changes hands and greats ideas emerge. Stay tuned for our forthcoming blueprints:
“Tequila Transformation – it can really change things”
“The least disgusting low-carb beers of 2017” and
“Organic wines that you really want to avoid As-a-Service”
And of course… this was an:
Please, please don’t tell me you fell for this again! …And I know some of you did =)
And while we’re reminiscing about falling for April Fools’ gags, here is 2016’s classic:
