HfS Network

Monthly Archives: Jun 2017

Why have so many sourcing advisors failed with automation?

June 24, 2017 | Phil Fersht

Remember when sourcing advisors has become the "new analysts" and dominated so many outsourcing discussions?  Remember when it was the norm for clients to bring in the sourcing specialists whenever they needed a deal done, not only to get a good price, but also to make sure they selected the right partner and had a strategic view of the future?  Remember when most advisors were not only contract experts, they were also strategists, researchers, sounding boards and respected brands you could hang your hat on... Just look at our 2011 study when advisors lorded the influence over everyone bar direct peer feedback:

Fast forward to today, with all the sourcing advisors doubling-down in RPA to compensate for the drying up outsourcing deals and confidently hoping their outsourcing clients will immediately turn to them to help them grapple with the new outsourcing-cum-automation model.  Surely their ability to craft deals for clients will put them in pole position to take their clients down the RPA path...

Let's visit our brand new (still-in-the-field) study on the 2017 State of Automation, and it's telling us a very different story when we spoke with 56 enterprises actually deploying RPA:

Less than half the RPA buyers view either consultants of sourcing advisors as influential in their automation sourcing.  Even conferences are impacting automation buyers more.

So what's gone so wrong with advisors in automation?

Credibility. Suddenly many advisors who were previously hawking their deep understanding of HCL versus TCS's FTE rate cards are now suddenly adding their names to white papers on automation and trying to insert themselves into serious client conversations about said topic.  It's just not credible.

Smarter clients.  The swirl of information over social channels is so intense these days that most clients' knowledge isn't that far behind the experts.  In many cases, you'll learn more about RPA talking with a client in beta mode than an advisor or analyst trying to impress you at a conference.  That is why internal channels, such as procurement and plain old desk research is such an influence factor these days.

Archaic focus on headcount reduction. Just because you could create simple cases for headcount reduction with "take the people" outsourcing, doesn't mean you can deploy the same draconian strategy to automation.  Even the most clueless governance executive knows you can just fire people before you programmed some manual activities into a piece of software. Sure, there are serious productivity gain to be gleaned over time through the digitization of manual processes, but to tie this to immediate headcount takeout just doesn't work.  

Competition from service providers.  For the first time, sourcing advisors and service providers are going head to head, and automation is the promoter of the fight.  When clients want to understand RPA and a partner so help them roll it out, they need people who are in the game for the long haul, not a broker to dip in and out and get a deal done.  Many of the sourcing advisors are just not transformation people - they are great at helping clients plan their outsourcing weddings, but marriage guidance councilors they truly are not.  Service providers depend on long-term, complex and often messy relationships to keep them employed and busy... and RPA really fits the bill.  While it poses significant threats to their margins over the long term, they cannot afford to be not playing in the automation game.  What's more, most the BPO service providers are rapidly running RPA in their own delivery organizations, which is giving them the experience and lower cost base to be effective.

The traditional consulting model doesn't work with RPA.  The advisors are 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 bus loads of 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. Quality RPA advisory boutiques, such as Symphony Ventures, are literally turning business away as they cannot scale fast enough to cope with the demand.  

Advisors are not producing research.  There's a reason why procurement folks, analysts and simple desk work actually sit above advisors in the new data - clients want product specific benchmarks and real experienced advice that they are simply not getting from the advisors.  All the advisors are putting out is the same of tired "drama" about robots replacing workers, and how to think "strategically" about RPA.  While I like some of the stuff I see coming out of the likes of McKinsey, KPMG and EY, it's just not giving me the real deal about which RPA vendor I need to be working with, how these tools truly stack up against each other and how I can actually build a bloody bot.  That is why many clients are getting more reality from attending a conference than the lovely lunch they just got bought from their nice friendly consulting partner.  

Turgid, hackneyed marketing doesn't work anymore. Cheesy pictures of robots and the same endless stream of 300-foot view puff that sounds just like the last piece you read on LinkedIn by some weird dude who you can't actually recall allowing into your network, isn't helping matters.  These advisors are relying on their brand and past reputation for credibility in a world where clients want to see some meat on the bones. 

The Bottom-line: Advisors need a vastly different approach to automation to avoid complete irrelevance in this market

This industry has literally entered into a destructive war over automation, and the need for credible, independent and experienced advice has never been so in demand from customers. The skills to make automation a feasible profitable reality are few and far between, while

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Posted in: Outsourcing AdvisorsRobotic Process Automation



A third of enterprises are making significant investments in RPA

June 22, 2017 | Phil Fersht

Tired of the RPA hyperbole?  Well, you'd better get used to it continuing, as key industries have already made significant short-medium term commitments:

Our 2017 State of Operations and Outsourcing study with KPMG, covering 454 major enterprises, shows the hi-tech and financial services industries leading the way with, respectively, 53% and 44%  already making significant investments in RPA over the next couple

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Posted in: HfS Surveys: All our Survey PostsRobotic Process Automation2017 State of Industry Study



Off-Shore-Based Service Providers Look to Develop “Meaningful” Presence in the U.S.

June 22, 2017 | Barbra McGann

The pendulum is swinging back. Over the past year, we’ve seen the increasing focus from India-based service providers to invest in building on-shore presence and capability in the U.S.  While spurred on by H-1B visa limitations and in-flight policies regarding minimum wage and the politics of “protectionism,” the long and short of it is that the U.S. citizens should benefit from local investments. U.S. governments and economic development entities are offering incentives for partnering with these service providers as they seek out “hubs” central to current and potential clients. Two recent examples are Indianapolis, Indiana with Infosys and Jacksonville, Florida with Genpact, where the cities offer tax incentives and colleges and universities can provide a talent pool.

It used to be “too expensive” for service providers to set up on-shore service delivery centers, but with the increasingly integrated and intelligent use of robotic process automation and cognitive computing and the motivation of politics and protectionism, this argument is fading. What is also relevant is when the partnership changes focus from outsourcing a task or point solution such as “collections” to business outcomes such as providing a better patient experience and increasing upfront payment (thereby reducing the need for collections), the service provider needs to be more integrated into the end-to-end process and business operation. That means having a local presence and interaction to provide relevance and create meaning and insight. (See “Recasting the patient billing experience” as an example). 

Our research (see Exhibit) shows the there is a significant drop across the board in the move to “offshore” business and IT work – finance and accounting and HR, in particular.  Case in point, we recently heard from a client about how Sutherland helped set up and recruit into a local service center for F&A services in a matter of a few months for a company that was separating from its parent.

Exhibit: Changing use of offshoring – shared services and outsourcing


Source: HfS Research in Conjunction with KPMG, “State of Operations and Outsourcing 2017”  Sample: n=454 Enterprise Buyers 

Click to enlarge

How service providers are expanding local, U.S.-based presence

Investments by service providers in having short- and long-term U.S-based capability for clients include local service delivery centers and increasing co-location delivery teams as well as work-from-home options; education support through curriculum development in local colleges and universities as well as programs for K-12 to “entice” and enable interest in STEM (e.g., code.org and Girls Who Code) to create the workforce of the future; and transitioning workforces from clients to their own organizations.

Examples include:  

  • Genpact: In July, Genpact will add to its network of 12 U.S.-based service support and delivery centers by opening one in Jacksonville, Florida. This one will focus first on mortgage service support with processing, underwriting, and closing services for residential mortgage loans for a leading financial services institution 
  • Infosys: A new entry into this discussion, Infosys has far outstripped other service providers in pursuing H-1B visas to date and is now refocusing on building local presence and brand recognition. Infosys intends to develop four locations in the U.S., centered in “client clusters” and focused on particular capability areas such as artificial intelligence, user experience, and enterprise cloud. Its approach is to partner with local colleges and universities and offer incentives such as investing in student tuition and curriculum development. Infosys is also preparing for more long-term needs by looking at ways to entice a broader interest in STEM. The first partnership in this effort is in Indianapolis, Indiana, the heart of the U.S.
  • Cognizant: Its recent acquisition of Health Care Services Corporation’s TMG Group adds Medicaid and Medicare support in offices in Texas and Pennsylvania. This move provides its clients access to more local resources – people with knowledge and depth in government health as well as infrastructure.

Bottom line: Indian-based service providers have been building near-shore and onshore presence for a few years now, but it takes on new meaning and significance now as the context changes – politics, the impact of technology, objectives for partnering, and changing priorities around the skill sets that are needed. As a service buyer or government, university or economic development organization, be creative and also take a long-term view as to how these service providers can funnel the investments they are increasingly willing to take to have value locally to grow their businesses.   

Posted in: None



Microsoft Dynamics Gets Saas-y

June 20, 2017 | Khalda De Souza

HfS has just published its first HFS Blueprint Report: Microsoft Dynamics Services 2017. The report looks at the capabilities and vision of nine global Microsoft Dynamics service providers. As this report forms part of HfS’ SaaS services research, a small weighting was applied to the service provider’s specific experience in deploying the cloud products.


What are the Microsoft Dynamics cloud products?

That’s not an easy question to answer! We have traditionally looked at the services market for stand-alone SaaS products (Workday, Salesforce and SuccessFactors). The Microsoft Dynamics ERP and CRM products are different and can be deployed on-premise, on a private cloud, on a public cloud, or with a hybrid model.  Many buyers love this because it gives them maximum flexibility and control which is future proof.

The majority of Microsoft Dynamics deployments have been on-premise, especially for the ERP products, which have also been more popular with mid-market buyers. The CRM cloud product, CRM Online, has been more popular in recent years with mid-sized and large enterprises alike. The new Dynamics 365 platform, launched in Q4 2016, delivers a combination of Microsoft Dynamics ERP, CRM, productivity, and other applications on the cloud. We expect this platform to be a key growth driver for the adoption of cloud in this market over the next few years.

So, which service providers stood out in this Blueprint?

We included leading, global Microsoft Dynamics service providers. They all have good experiences and have made impressive investments to grow this aspect of their service practice. All of the service providers were positioned either in the Winner’s Circle or High Performers category. Notable performances from the different providers include:

  • DXC Technology, which impressed with its overall experience in deploying Microsoft Dynamics.
  • Those with the best cloud experience in engagements were Accenture/Avanade, Capgemini, HCL (PowerObjects), IBM and KPMG.
  • Accenture/Avanade and KPMG also impressed with their investments in consultative tools and technologies.
  • DXC Technology, IBM, Infosys, Wipro and TCS particularly stood out for their industry sector tools investments.

So, where do we expect this market to be headed in the next few years?

As the Dynamics 365 platform gains momentum, we expect increased service opportunities across our Value Chain of consulting, implementation, management and optimization services. One of the biggest challenges service providers have is keeping up-to-date with Microsoft’s product developments and training consultants to meet increasing buyer demand. As with all SaaS service markets, key differentiators lie in the ability to hire, motivate and retain good talent to maintain client project continuity.  Buyers are becoming increasingly selective of the specific team members on projects.  Look out for notes detailing recommendations for service providers and buyers on the HfS research site soon.

Posted in: SaaS



Time to hangout with the real robo-bosses at the FORA Council this September

June 17, 2017 | Phil Fersht

When an industry is enduring a secular shift that is literally redefining how we do work, it's pretty important to get some real, unfettered dialog going among all the key stakeholders this impacts. We need to break free from the glitzy paid-for sales presentations, robot keyrings, stress balls, nasty logo-ed leather notepads and greedy events firms vying for a quick buck from vendors eager to part with cash to promote themselves to all their competitors.

That's why we're assembling 100 of the industry's finest leaders in a single room for a whole afternoon to thrash out the mandate for the future of operations in the robotic age for our inaugural FORA council session in Chicago, 19th September. And we promise no sponsors, stress balls or bad white papers to take away...

Here's just a sample of the industry robo dignitaries who've already committed:

  • Alastair Bathgate, CEO, Blue Prism
  • Chetan Dube, CEO, IPsoft
  • Chip Wagner, President, Emerging Business Services, ISG
  • Cliff Justice, Partner, US Leader, Cognitive Automation and Digital Labor, KPMG
  • David Poole, CEO, Symphony Ventures
  • Daniel Dines, CEO and Founder at UiPath
  • Jesus Mantas, Managing Partner and General Manager, IBM Business Consulting, IBM US
  • Lee Coulter, Chair for the IEEE Working Group on Standards in Intelligent Process Automation
  • Dr. Mary C. Lacity, Curators' Distinguished Professor of Information Systems, UMSL, and Visiting Scholar MIT
  • Max Yankelevich, CEO, WorkFusion
  • Mihir Shukla, CEO, Automation Anywhere
  • Peter Lowes, Partner, and Head of Robotics & Cognitive Automation, Deloitte US
  • Shantanu Ghosh, SVP, CFO Services and Consulting, Genpact
  • Thomas Torlone, U.S. Leader of Enterprise Business Services, PwC
  • Tijl Vuyk, CEO and Founder, Redwood Software
  • Weston Jones, Global RPA Leader, EY

We also have leaders of cognitive and automation initiatives from the following buyside firms already signed up to get stuck into the debate:

So let's cut to the chase - it's time to have the real, hard conversation about where we really are as an industry. Why aren't those 40% cost savings happening, each time someone slams in some software and hopes it somehow eliminates manual labor because they can access a bot library? In fact, why are a third of RPA pilots just left hanging with no result? Yes, people, it's

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Posted in: Robotic Process Automation



HCSC’s Sale of TMG Health to Cognizant Shows A Move to Focus – and Partner– for Better Outcomes

June 16, 2017 | Barbra McGann

Earlier this week, Cognizant announced its intention to expand its footprint to support U.S. Government health operations through the agreement to acquire the TMG Health subsidiary of Health Care Services Corporation (HCSC).  On the flip side of that announcement, HCSC has carved out its Government health support function to be run by a partner – Cognizant. HCSC can benefit from Cognizant’s dedicated, prioritized, and leveraged (cross-client) resources to manage the operations services. However, to impact the health, care, and financial outcomes of its healthcare consumer base, HCSC will need to partner with Cognizant in a way that creates the OneOffice™ – a seamless flow of data, insights, and infrastructure for the front, middle, and back office. 

TMG Health’s relationship with HCSC started back in 2005 when HCSC selected it to provide BPO services in support of its entry into the Medicare Advantage market. At the time, TMG Health provided some measure of enrollment, eligibility, claims, and billing support to a total client count of 30 plans covering 2.8 million lives. In 2008, HCSC acquired TMG Health for $100m, tucking in the BPO provider as a subsidiary. TMG Health has since added support for Medicare and Medicaid claims processing and member services and has local resources in Pennsylvania and Texas – for 32 health plans (+2 since 2009) and more than 4.3 million lives. TMG Health has not really grown its portfolio of clients although the footprint of services has expanded over time.  And public health programs continue to grow – in numbers and complexity as the industry moves to greater coverage and value-based care. The changes in the healthcare market driven by consumerism and compliance are driving healthcare plans to “rethink” their business and operations strategy.  

By exiting the “back office business,” HCSC can focus its investment and resources on becoming a more consumer-oriented company.

While retaining a partnership with Cognizant for its support/back office services, we expect HCSC to focus on becoming more consumer-oriented; to channel its resources to becoming insightful, tech-enabled, and overall “savvy” to impact health outcomes for its constituents. In the meantime, it can rely on Cognizant to provide a steady and increasingly optimized rules-based foundation. We expect Cognizant to tap into the Medicare/Medicaid COE it told us about in our last Healthcare Operations Blueprint research. The consolidation of its subject matter expertise, IP, and tools in the COE is to help manage the tricky business of complying with government policies and the continued growth of Medicare, Medicaid, Medicaid Advantage, and Dual-Eligible consumers – providing support for eligibility, enrollment, billing, claims, and applying its solutions around quality and reporting (e.g., STARServe). Cognizant has the right experience plus industrialization and scale and has the Trizetto and RPA capabilities to drive increased efficiencies and free up resources to support new growth in the Government Health operations business.

The Bottom-line: HCSC and Cognizant will need to partner to keep – or establish – integration between front and back office to impact health, care, and medical outcomes.

One place this arrangement could break down is if the back office support that Cognizant provides is not integrated with the front- and middle-office of HCSC (and its other clients). In order to impact health, care, financial, and quality outcomes, healthcare payers need to be healthcare-consumer oriented – understand the health, financial, economic, and social determinants of their constituency. A lot of that data is part of those back office systems and processes, so HCSC and Cognizant will need to be partners in defining workflows of the future that will support an insightful, consumer-oriented business that complies with government standards and also enables HCSC to better manage the health, care, medical, and financial outcomes of its public health base.

Posted in: Healthcare and Outsourcing



Look into my eyes – I can see the future.

June 14, 2017 | Jamie Snowdon

A question I get asked a lot is what do I think about the future of outsourcing? In this case in a few hundred words. I thought I’d share, but forgive me if it becomes evangelical:

The future of outsourcing is linked very strongly to the future of technology and its use in the enterprise – often it’s very hard to distinguish between the trends of these two things. Essentially outsourcing is the commercial arrangement between technology (and business services) organizations and their customers – it’s how you put a price on an operational service between the two.

The big shift will be the level at which you quantify an amount of service. The most popular way to quantify outsourcing arrangements has been by the number of people, per FTE models. But over time these transformed into a hybrid of FTE, transaction/consumption based and the slightly misleading outcome based pricing – which was often just an emphasis shift toward an achievement or variant of the first two, essentially the same but with a stricter KPI focused on a specific goal.

Cloud and as-a-service types of the contract have made consumption/transaction based pricing the norm for IT and IT services – we expect this to pretty much remain. The twist in its tail will be the unit being consumed will not be an IT measure. The unit of consumption will start to be linked more directly to a business metric, not an outcome. So, for example, all of the costs associated with hiring a bicycle from a city-wide hire scheme could be paid for in bike hire units – the provider only gets paid when a bike is hired – irrespective of the technology being consumed. This is a simple example – but as we see better use of automation and AI within IT and within transaction management, which reduces idle costs and we will reach a point where this type of deal has little risk. The cost of keeping the IT running could be negligible – this won’t be risk/reward in the traditional sense as the IT firm carries very little risk if the client doesn’t achieve the desired volume. The build and run deal, where the client doesn’t pay for the implementation will require the same type of calculation as current build and run deals – but the measure used for payback will be different.

Additionally, as these models develop we expect the level of risk within the contract to be better understood. This means the risk equation can be better calculated into the mix as analytics dictate the acceptable level of risk and the appropriate price points.

We have quantified this shift to more consumption-based services in the chart below – if you look at the proportion of IT services contracts that will be as-a-service by 2021, it is jumping from its current 19% level to almost 40% by 2021. We define AaS is a turnkey managed service solution based on a standardized platform delivered via the Internet – uniform standards across clients with relatively low levels of customization (<25%) – not lift and shift, but adopt, change and adapt. The price of the service is directly proportional to a transaction or measure of consumption. We also include consulting and professional services that advise upon and wrap around this type of service.


Another shift, particularly in IT outsourcing will be the merging of applications and infrastructure – which we have already seen to a certain degree. Cloud and DevOps have helped to break the silos between applications and infrastructure intrinsically linking these two pieces – making separate outsourcing deals for these two parts of an organization increasingly unlikely as the applications and infrastructure continue to merge. This will be particularly true in industries where applications are developed for customers, and the infrastructure requirements are linked to the success of the application. The adoption of the app dictates the scale of the infrastructure – which increasingly means monolithic, inflexible infrastructure deals fade away. Replaced by more application focused deals including the infrastructure paid for based on consumption linked to business use.

Bottom line – outsourcing will continue to exist, but the variable won’t be as directly linked to the cost of people. It will use technology to form new blocks of consumption.

Outsourcing is one of the commercial wrappers for consuming technology and business services. As these services become more software and platform based, the commercial models will become more As-a-Service. So consumption based models will be and already are becoming the norm. However, the most critical shift in will be the commercial parameters changing to fit the technology being outsourced. Automation and AI technologies will be used to allow outsourced IT (and business services) to split into new blocks of consumption, more linked to business requirements. With AI even helping to match risk levels to specific price points. True As-a-Service outcome pricing is born. 

Posted in: IT Outsourcing / IT ServicesThe As-a-Service Economy



It'll be a very windy city this September... so don't miss the flagship HfS Digital OneOffice Summit

June 14, 2017 | Phil Fersht

The windy city will get extremely blustery this September 19-21, when HfS stages the inaugural FORA Council session, immediately followed by our annual HfS Summit "The Digital OneOffice: Redefining How We Get Work Done"


Someone just described going to an HfS event as the whole industry being bludgeoned with a blunt instrument... how dare they? Yes, friends, it's nearing the time for the next, immense iteration of that HfS summit, where we're cementing together the biggest, boldest and

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Posted in: Digital OneOffice



America Last: Why Trump’s running away from ‘Paris’ is so foolish

June 14, 2017 | Derk Erbé

I have refrained from political commentary since Trump took office because so much has been unclear. Not that his stated views during his campaign that climate change is a Chinese hoax and climate rules are designed to hurt American businesses or his appointment of staunch climate change-deniers to the EPA and Department of Energy, promised anything good. But now the long awaited, reality TV decision about the Paris Climate Agreement showed the real Donald Trump meant what was really going to do what he promised: The United States will “withdraw from the Paris Climate Accord,” “seizing all implementations right away."

Trump frames the climate change fight, not as one of our world’s biggest challenges but an economic zero-sum game of the US against the rest of the world. In his speech, Trump tried to tie leaving ‘Paris’ to the protection of the American people. This is a narrative weaned from reality.

Here are some sobering facts to put Trump’s decision in context

  1. Withdrawing from Paris doesn’t impact much in the medium term, regarding real climate policy and action. Withdrawing from the agreement will take a full four-year period. Ironically the US can only officially withdraw the day after the 2020 presidential election.
  2. Paris is a voluntary agreement, of which many critics claim lacks teeth. Every nation sets its own goals. Obama pledged to reduce carbon emissions by 26 percent during the 2005 – 2025 timeframe. The US could have simply adjusted its ambitions and goals if it felt Obama’s goals are unattainable. Trump has already gutted the Clean Power Plan, an essential part of Obama’s efforts to reduce emissions by fossil fuel burning electricity plants and increase the use of renewable energy and energy conservation.
  3. Many “legacy” energy jobs are already gone. Coal jobs won’t come back, nor will the jobs in Oil & Gas that were lost in the downturn over the last three years. Coal has lost its ground and competitive edge to natural gas, solar and wind. Mostly for competitive pricing reasons, not policy reasons. Coal companies acknowledge this, saying they don’t see a future for coal and jobs will continue to diminish. The production of oil and gas has rebounded from the slump of 2014-2016, but jobs have not. This is due to new efficiencies in the field, primarily driven by automation.
  4. The new jobs re in clean energy and Paris promotes their creation. The jobs Trump is so eager to create are not in the fossil fuel industries but in clean energy. The solar industry is the biggest engine of job creation in America. In 2016, one in fifty new jobs was in the solar industry. Grid modernization driven by renewable energy has created 100,000 new jobs in 2016, according to the Department of Energy. The Paris Agreement created a lot of momentum for the adoption of clean energy. For the first time in history, the world united to curb emissions and set a framework to act against climate change. The Paris Agreement provides a big push for the energy transition that is underway across the globe, a transition that some experts expect to create a ten-trillion-dollar economy for renewable energy and is already creating large numbers of blue-collar manufacturing, installation and service jobs in the US.
  5. Any deal on climate change is terminal while Trump is in power. There won’t be a new deal of a re-negotiation of the current agreement, as Trump alluded to in his Rose Garden spectacle.

Will it change US progress in the inevitable move to renewable energy?

The simple answer is no. Besides the damaging effects of Trump’s actions at the federal level, for businesses, states, and cities, the only common sense course of action is to continue down the path of renewable energy.  Directly after Trump’s decision, California, Washington, New York, Connecticut, Massachusetts, Rhode Island, Hawaii, Oregon, Vermont, Minnesota, Delaware, Virginia and Puerto Rico – representing roughly 35% of the US economy – formed the United States Climate Alliance, vowing to uphold the Paris Climate agreement within their borders. Eleven other states, including Maryland, Ohio, North Carolina and Illinois, have also supported the Climate Agreement.

The historic Paris Climate Agreement has already been ratified by most parties to the treaty and was signed by all countries except Nicaragua, who find the agreement not far-reaching and aggressive enough, and Syria, for obvious reasons. The Paris agreement is an agreement with intentions, not with automatic actions. The interpretation and subsequent actions heavily rely on industry and civil society. And they are now further encouraged to take action. While the Trump administration is doing everything to shut down forward-looking energy policy and climate change policy on a federal level, such as overhauling Obama’s Clean Power Plan, on a state and city level, the majority is acting; investing in renewable energy resources, adhering to the Paris Agreement guidelines. Since Trump’s announcement, governors, mayors and business leaders have spoken out and showed their intentions to stick with ‘Paris.' California’s governor flew to China to sign an agreement with the Chinese to collaborate on climate and clean tech, emphasizing the resolve from states to act and move forward.

A symbolic policy shift with diplomatic and reputational impact first and foremost

The announcement to withdraw from ‘Paris’ is a symbolic move more than anything. And it is symbolic for all the wrong reasons 

  • The backlash is starting to show; there is a negative impact on the reputation of the US – the rest of the world effectively sees Trump’s move as the withdrawal of the US from the world stage. The diplomatic backlash will be felt beyond the climate realm.
  • Impact on American businesses - US businesses fear they will be at a disadvantage seizing the opportunities in the renewable energy market, while they, until Trump’s decision, where well-positioned to lead in the global clean energy market.
  • It highlights the missed opportunity to jump on the renewable energy train. Trump is missing a great opportunity to make a concerted effort on infrastructure and the job creation in the renewable energy market. Last year, one in fifty new jobs in the US was created by the solar industry. Think about that. And only 50.000 people work in coal. Pick your battles, Mr. Trump. Instead of trying to save a small number of coal mining jobs with the red herring of ‘clean coal’ and withdrawing from Paris, focus on re-training coal miners for the manufacturing, installation and service jobs in the wind and solar industry.

The bottom-line: Trump will be gone when Mar-a-Lago is swallowed by the sea

As Oscar Wilde famously said: “With age comes wisdom, but sometimes age comes alone.” Trump’s announcement was short-sighted and removed from reality and science, catering to a small fraction of people with extremist and ancient views on climate and energy 

The good news is that the clean energy transition is well underway and won’t be stopped by the Trump administration, not in the US and certainly not abroad. But, as many critics of the climate agreement emphasize, it might be too little too late. The Paris deal was a strong message from all nations, coming together in the endorsement of curbing global warming and the impacts of climate change, but the climate fight needs more ambitious goals and most importantly actions. The world can’t wait any longer and play an economically motivated game of chicken, with the well-being of our planet at stake. 

Posted in: Energy



The Robotic Process Automation market will reach $443 million this year

June 10, 2017 | Phil FershtJamie Snowdon

Have we ever got so excited about a market that isn't even yet past the half-billion dollar spend level? Are we getting over excited about solutions because of their potential before they are fully tried and tested in reality?  Let's get to the realities of RPA by examining the size and five-year forecast for software and related services expenditure:

The global market for RPA Software and Services reached $271 million in 2016 and is expected to grow to $1.2 billion by 2021 at a compound annual growth rate of 36%. The direct services market includes implementation and consulting services focused on building RPA capabilities within an organization. It does not include wider operational services like BPO, which may include RPA becoming increasingly embedded in its delivery.

RPA describes a software development toolkit that allows non-engineers to quickly create software robots (known commonly as "bots") to automate rules-driven business processes. At

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Posted in: Cognitive ComputingRobotic Process Automation



Fractal plugs consulting gap with 4i acquisition

June 07, 2017 | Reetika Joshi

Fractal Analytics’ bets, on AI and machine learning as its future, are set to be bolstered with its new acquisition of consulting and analytics firm 4i Inc. 

We noted in 2014 in Profiling An Analytics Rising Star: Fractal Analytics, that “Fractal is now more bullish about its analytics consulting presence onshore, and its technology investments – a clear aspiration to move away from the offshore analytics model”. Our interactions and observations of the service provider since that time - including this latest announcement - seem to confirm our hunch about this pivot.

As one of the last few pure-plays left in the analytics services business, Fractal has come a long way from 2000 when it was set up in Mumbai, India to tackle niche analytics projects for U.S. based banks and consumer goods companies. It now has a global presence in 12 locations, serving well-known global brands such as Philips, Kimberly Clark and P&G. Fractal was already growing rapidly (e.g. it has grown at 60% CAGR over the last six years). We expect this move to add to their topline growth with an expanded base of U.S. clients and front-end consulting capabilities to aid sales efforts. In the last few years, it has aligned resources towards a long-term growth strategy focused on high-touch client interactions and machine learning and AI technology-led solutions.

Increasingly high-touch local interactions supported by global network 

Along these lines, Fractal’s acquisition of 4i is interesting because it:

  • Brings CPG consulting chops: Analytics consulting was the critical missing piece for Fractal as it rounded out its services portfolio. With clients like Colgate, Kraft foods, Post, and Del Monte, 4i’s focus on CPG is evident. Its “foresight-driven approach” will align well with Fractal’s focus on predictive analytics that can help clients be more proactive vs. reactive with their analyses and decision making.
  • Improves client collaboration: 4i’s capabilities add to the high-touch client interactions that strategic analytics initiatives need to be successful. Fractal’s clients love the attention they get from the service provider’s management team and its long-standing relationships are a testament to this culture. 4i’s presence in a central location in the U.S. (Chicago) will help deepen client relationships. More importantly, this onshore presence will help Fractal’s analytics services be more impactful. A lot of analytics clients value “high touch” engagements where analysts can spend more time on-location to really understand business context and priorities and with the operations teams to get the best results.
  • Extends the delivery network: 4i brings operations presence in Ukraine and Mexico, which Fractal will need to build out a diversified and global delivery backbone. Analytics talent in India is increasingly in short supply as every IT service provider, analytics startup, and enterprise IT organization tries to scoop up analysts, statisticians and data scientists in the major cities. Add to it the smaller subset of machine learning and AI specializations that Fractal will need going forward, and you can see why tapping other talent hubs around the globe makes sense.

How this local/global expertise is complemented by artificial intelligence

These factors will bring some significant advantages to Fractal, particularly as it rolls out its strategy for incorporating machine-learning into its analytics solutions. Fractal has spent the last two years building out its product portfolio of machine-learning solutions and even reorganized its management structure to give it more focus. Its solutions present “here and now” practical applications to enterprise challenges around infusing insights into every business decision. For example, Fractal Analytics’ Trial Run solution helps teams run experiments on their existing datasets, to see the potential benefits before rolling out to a wider base. Its Customer Genomics “hyperpersonalization” platform is helping companies target customers with more relevant and meaningful dialogues based on individual wants and needs. Enterprise clients that are working with Fractal on these solutions have mentioned to us how valuable their partnership is to access and explore machine learning technology together in these early days.

That word – partnership – is a great way to describe the type of engagement that enterprises need with their technology and service providers to build out AI applications today. As my recent blog post on IBM Watson services pointed out, “Cognitive technology falls in the 'innovation' realm for most enterprises. It requires thorough experimentation, risk/opportunity assessment, project prioritization, steep learning curves on skills development, and above all, education and change management for the employee/customer base that is involved in the process.” Consulting capabilities are thus a critical part of this journey for any hopeful AI service provider. With this tuck-in acquisition, Fractal is playing catch-up to its competitors such as Mu Sigma and Accenture, whose consulting capabilities are at the forefront of their analytics services businesses.

The outstanding challenge is just that: how to stand out, particularly against better-known brands with similar capabilities

Fractal has already made investments in the actual technology, including its own R&D, and acquisitions of Imagna and Mobius Innovations in the last couple years. It has the foundational client relationships that it can leverage. 4i will help it bring all these capabilities together. However, there are several emerging AI-based personal assistants, personalization platforms, etc. that Fractal is competing with through its product group. Its key challenge will be differentiating itself in this new and increasingly crowded market.

What Fractal needs to do next is craft a vision for its AI applications and services specifically within its key verticals of CPG and BFSI instead of the familiar trap of becoming a generalist. 4i has complementary vertical strengths and Fractal will do well to leverage these and build out what HfS calls vertically-infused insights. Overall, we give this acquisition a “thumbs up” verdict at HfS, with an eye on how Fractal articulates its value as a more comprehensive analytics services provider going forward.

Posted in: Knowledge Process Outsourcing & AnalyticsIntelligent Automation



Not-So-Elementary Considerations For IBM Watson Services Buyers

June 05, 2017 | Reetika Joshi

Whether you have successfully started working with Watson, are evaluating it, did a PoC 18 months ago and swore off it, or have an enterprise license sitting around, you have realized that Watson is not your average prepackaged software application. As IBM’s umbrella brand term for all things cognitive, Watson capabilities range from analytics to cognitive solutions and virtual agents, available as individual APIs or prepackaged products to develop Watson applications. As cognitive technology like Watson falls in the “innovation” realm for most enterprises, it requires thorough experimentation, risk/opportunity assessment, project prioritization, steep learning curves on skills development, and above all, education and change management for the employee/customer base that is involved in the process.

When you’re working with a service provider through this journey, chances are they are on the same learning curve because of the newness of the cognitive market for business use. While IBM is taking Watson to market through its GBS organization, Watson APIs and products are being used by business and technology services providers in a variety of ways (see our POV paper on this subject here). IBM Watson technology has been around officially for a few years, and PoC projects are the norm so far. However, HfS hears a lot of industry optimism and “gearing up” for 2017-2018 being the years of more substantive implementations through this growing network of services partners.

Considerations for using Watson services

As you explore Watson in your organization:

  • Understand where and how your service provider is investing in Watson to offset cost: Perhaps the biggest barrier to Watson adoption for enterprises has been its high price tag for entry. Service providers have been trying to circumvent this by exploring options to host the Bluemix and Watson licenses plus external databases. Their clients can then access both the technology and data, particularly for proprietary solutions where cognitive APIs are being leveraged. Enterprises that already have access to the Bluemix cloud computing environment are getting started with Watson on it as an incremental investment. As Microsoft Azure, Amazon AWS and other competing cloud environments all have their own machine-learning technologies, the decision to which cognitive ecosystem you go with will likely be influenced by these larger technology-buying decisions.
  • Find the provider that Is collaborating with IBM in areas that matter to you: Watson APIs and products are being constantly revamped, retired, and regrouped and it will help to have advance knowledge from a service provider that is deeply involved with IBM in advancing specific areas. We heard instances of how by providing feedback to the IBM Watson product development team and working collaboratively, some service providers influenced the release of new functionalities that benefitted their clients’ projects directly. Look for the connections that your service provider team has been able to establish that could impact your particular use cases.
  • Find the Service Provider That Is Investing in Your Vision - Or Using Design Thinking to Help You Develop One: Even in these early days, we see industry, functional, and technological strengths developing among service providers. The experience gained and customization achieved with specific solutions – like Hexaware’s superannuation bot or Accenture’s mortgage advisor Collette – are valuable to companies that have already outlined these areas for Watson or are looking for new levers for value to their business and customer base. In areas where there is not a relevant standard solution, your leadership team will often have competing priorities. Consider service providers that offer Design Thinking workshops to establish the top business priorities, the process and technology roadmaps, and the definition of your own version of a future-state with an “augmented workforce”.
  • Don’t Underestimate the Power and Influence of Naysayers - Educate Them First: As shared by a financial services VP, “Internal stakeholders require fundamental lessons on what Watson is and isn’t…Our skeptics didn’t fully understand what cognitive or data mining benefits Watson brings; we should have expected it earlier on and addressed it head first”. Without aligning organizational buy-in, companies in our research have seen significant slowdowns in each stage of their projects. Make sure your key representatives understand the breadth of the technology and its suitability to your use case before kicking off and then check in regularly.

The ripple effect of Watson services 

With these considerations in mind, do note that whatever cognitive initiatives you undertake will invariably impact more than one part of the business and way of working. As a department undertakes the required data curation, reference architecture, process remodelling, and rollout, it will interact with and influence other departments or processes and advance their maturity toward more intelligent operations as well. For example, a retailer could go from a production pilot in personalized shopping on its website into cognitively determined best next actions for its sales channels, then on to cognitively driven merchandising and supply network on the back end to better predict demand. The core customer and product data can be leveraged across these functions and can become a powerful way to reinvent the entire customer engagement process.

The focus on better enabling the customer and/or stakeholder experience is driving significant enterprise interest to explore Watson services.

In our latest report, HfS Emerging Market Guide: IBM Watson Services, we further explore this theme of getting started with IBM Watson – the use cases so far, the progress on and beyond PoCs and pilots and the emergent role of service providers. The investments today are helping establish new norms for people, processes, and technology that will pave the way for “industrial scale” Watson in the future.

Posted in: CognitiveIntelligent Automation



We are in the People Elimination business. How did it get this bad, and can we change course? (Rant warning)

June 02, 2017 | Phil Fersht

Talent is still the most precious asset firms have and it needs to be nurtured as the real proponent of growth and success, not merely the fancy technologies that can automate workflows. Our technology and business services industry desperately needs a mindset shift - and one that requires a longer term view, than the next quarterly Wall St announcement. Whilst we are not the only guilty party here, our technology and business services industry is still rooted firmly in people capability, much more than technology and commodity products, hence the desperate need to correct course and avoid circling the drain...

I was interviewing with the Delhi branch of NPR the other day on the layoff paranoia engulfing the Indian IT industry, and it dawned on me just how inhuman our business has become. These are normal people who still view the world as one where employers have responsibilities to their employees, where people still care about the welfare of others, when you got up in the morning and went to a job that had a purpose and a future.

The poor interviewers simply couldn’t comprehend why major employers enjoying ~20% profit margins and continual 5-10% growth were so focused on making massive staff reductions.  “Don’t these firms have a responsibility to their employees, Phil?” was the question. “Of course they don’t, it’s all about their shareholders” was my immediate hair-trigger response.  Ugh – I suddenly felt ashamed of the business of which I was part. 

We’re in the business of increasing profits for investors, not creating new business value from people

Is our sole purpose now simply to eliminate people? We spend a couple of decades displacing "expensive" workers because we could find less expensive able ones to do the job. Now we’re getting rid of them altogether just to keep the Buffetts and Elliotts happy? And why are we literally obsessing with labels to describe what we do:  Digital, Machine Learning, Intelligent Operations, Robotic Process Automation… or my favorite “Digital Labor”. 

Let’s be honest, what all these things really signify is “how to get work down without the need for people”. And how can you call something “Digital Labor” when the labor is no more… unless we start redefining RPA recording loops based on optical recognition software as “labor”. Maybe we need to revisit what labor actually is, according to Merriam-Webster:

Definition of Labor (Merriam-Webster): 

"1) The human activity that provides the goods or services in an economy; 

2) The services performed by workers for wages as distinguished from those rendered by entrepreneurs for profits."

Correct me if I am completely losing my mind here, but we’re no longer in the business of promoting human activity to stimulate economies… we’re in the business of increasing profits for investors.  Is there any way to dig ourselves out of this hole, or are we on an inexorable nosedive to the lowest common denominator of creating and promoting business operations that no longer require people?

As technology and operations professionals, we must rediscover our purpose or we’re just promoting the end of labor

I wish I had a silver bullet solution to help us take this dramatic U-turn, but sadly, all I can offer are some ideas on how we can re-humanize what we do:

Find meaningful work for our people to do - not just fire them. In the past, when most businesses had some excess staff capacity, there were always useful things for them to do – such as consulting and outsourcing firms deploying their benched consultants to work gratis with existing clients on special projects that could eventually lead to future business – or just

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Posted in: Business Process Outsourcing (BPO)Cognitive ComputingDigital Transformation



Welcome back to the analyst community, Saurabh Gupta

June 01, 2017 | Phil Fersht

I am proud to announce we've unveiled a very exciting analyst talent to lead our global research team, based in Chicago US, as our Chief Strategy Officer (see bio).

Saurabh Gupta worked with me at Everest over ten years ago where I helped train him up to help lead the firm’s BPO research team. After a distinguished career at Everest, where he earned a very strong reputation as a highly focused and respected analyst in the areas of BPO, banking, F&A, procurement, analytics and the underlying technology platforms, he went onto the buyside with AbbVie (the spin off shared services for Abbott Labs), where he helped craft the firm’s BPO and shared services strategy, working across various service lines and service provider relationships. He then had a spell with Genpact, where he has been instrumental helping them devise and shape the firm’s CFO service offerings and digital strategy. 

Saurabh has long eyed a return to the analyst fold and coming onboard HfS is the ultimate challenge for him, where he'll be leading our global research team and working with all of us to write about real buyer experiences and mapping where enterprises are on their Digital OneOffice journeys, how fast they need to move and what is preventing them getting to their ideal states.  I caught up with Saurabh this week to share more with you all what you can expect...

Phil Fersht, CEO and Chief Analyst, HfS Research: Saurabh - it's just terrific to be working with you again after a decade since we were at Everest together!  What took you back to the research industry after your recent years on the buyer and supplier side of services life?

Saurabh Gupta, Chief Strategy Officer, HfS Research: Thanks Phil. I am thrilled to be here. I am passionate about business research and being an analyst was the best thing that happened to

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Posted in: Outsourcing Heros



Training for jobs that don’t yet exist: the AT&T story

May 30, 2017 | Barbra McGann

Let’s turn that common lament we hear of a “talent shortage” on its head. What if you created a pipeline of talent that fit the needs of your business as it is growing and changing? While at the Infosys Confluence event recently, I heard about how AT&T has been taking steps for the last two years to create the very workforce it needs to achieve its vision.


First, determine what skills and capabilities your workforce will need in the future

“Based on industry and corporate direction, we chose six areas, including big data, IP networking, and software-defined networking, that we specifically want to attack as the skills of the future,” shared Candy Conway, VP, Global Managed Services Operations, Business Solutions and International at AT&T.

AT&T defined a set of roles that map to these areas, determined the associated competencies, and evaluated employees against the future landscape. They identified over 100,000 employees who will need to have a different or a more varied or developed set of competencies than they have today. “We then developed a roadmap and plan for getting these professionals into a relevant and meaningful career path that maps to the future of the company and the industry,” said Candy.

AT&T is a little over two years into this program. At this point, each employee has a prescriptive program managed through a learning portal - it identifies the role they are in currently, the one they target the future, the associated competencies for each role and the learning and education path to get there. For example, an employee could be in the network center and want to be a software engineer, and has a learning path mapped out.

The nuances of the skill areas also change quickly. “It used to be that skills would change a decade at a time, and that’s now accelerated,” said Candy. AT&T designed a program that would offer a number of options and flexibility – from internal designed and led courses, to “nano-degrees” in niche areas like web development and virtual reality to online master’s degrees from Georgia Tech and social-media based programs with badges (157,000 options) awarded as people complete courses. 

Investing in future skills is of value to the employee and the company

This plan is mapped to what roles that AT&T believes it needs to have in the future…. so employees can look for open roles and bid on the ones they want to fill. There are no guarantees that these roles will be filled by employees desiring them at AT&T, but the program still provides an advantage to the employee since AT&T is defining these roles (such as data scientist) with a forward-looking view, and therefore helping employees develop these competitive and marketable skills. Certainly, having invested in the person’s training, AT&T has an interest in keeping these people in-house and this is a way of creating loyalty, stickiness and a workforce of the future.

This kind of investment can help a company attract and keep the “best and brightest” with the most potential for helping grow a company. Individuals who feel a company cares enough to invest in their talent development, keep their skills relevant (and competitive), and give them options in a career are more likely to stay with that company.  AT&T also will have skills relevant to the future – the future workforce – without having to go out and 'find them'. 

The bottom-line: Become a learning organization in order to be relevant to your customer base, stay competitive, and grow.

Take a look at the vision for your company. What do you want to be able to deliver to your customers? What experience do you want to create for them? What outcomes matter over time? Determine what roles and competencies, and what training, education, and mentoring will develop your workforce to achieve it.

Businesses need to be increasingly agile to address the rapid changes driven by consumer expectations and digital technologies. That means employees also need to be agile – and managed in a way that encourages and rewards-based learning.  The market is increasingly competitive for candidates who have future-oriented “soft skills” like critical thinking, problem-solving, and creativity, and the ability and interest in learning. This program provides a model for how a well-established, “legacy” brand can embrace a  learning culture to enable an agile workforce relevant for competitively positioning the company for growth long-term.

Posted in: Global Workforce and Talent



HGS Doubles Down on “Digi”

May 30, 2017 | Melissa O'Brien

“We are a customer experience company,” declared Chris Lord, Global Head - DigiCX; Growth, Strategy, and Marketing at Hinduja Global Solutions (HGS). This was in response to a discussion about HGS’ decision to partner for most of its tools and technology rather than to take the road of internal development. During its recent Analyst Day, the ~$550m BPO shared how it will use its expertise as a provider of customer engagement services to fuel growth and adoption of its “DigiCX” vision. HGS focuses on a suite of solutions aimed at finding the right balance between digital and traditional customer engagement for a unified customer experience. 

DigiCX aims to guide the customer to an answer regardless of channel or device.  Components include:

  • DigiWEB: Website self-help that maps out the common issues and has resolutions built in, including videos (made by HGS) for demonstration. One client engagement cited a 97% resolution rate using DigiWEB self-service.
  • DigiMessaging: A chatbot that works inside messaging apps (What’s App, Facebook Messenger) and pivots to a live agent while retaining the conversational context.
  • DigiTEXT: Chatbot capabilities deployed within SMS, with phone number recognition and connection to a business rules engine for greater analytics power.
  • DigiINSIGHT: Post- conversation surveys increasing survey response rates and analyzing customer expectations.
  • DigiSOCIAL: Uses social media sites to derive customer insight and sentiment.
  • DigiEMAIL: Automated email responses. In one client example, was able to cut down the # of email correspondence to resolve an issue by more than half.

Click here to enlarge 

What’s holding these elements together is a vision for “unified CX” designed to find the right components for each client’s customers’ needs.  And with this vision is a keen interest in helping clients understand their own needs and maturity, including a digital maturity matrix assessment.    

It’s refreshing to hear the unified CX discussion in contrast to the hackneyed “omnichannel.”  What these solutions aim to achieve is not a CX strategy that is everything to everyone all the time—it’s about providing the customer with options, guidance and journey paths that make sense.  HGS’ messaging is to intelligently integrate “BOTS and Brains” as the optimal way to transform CX to provide business impact for their clients. HGS is hoping to use its aggressive governance and engagement model to drive adoption of these solutions and become a more strategic partner with clients—engaging in quarterly strategy sessions for example, instead of just the standard QBRs.  It’s wise for HGS to not try and re-invent the wheel, especially with ubiquitous technologies like chatbots.  HGS leadership is well aware and transparent about the need for cannibalization of volumes and revenues that come with this kind of self-service and automated strategy—“we need to get smaller to get bigger,” is the refrain we heard throughout the event.

But when you’re making this kind of play-- focused on the expertise and design, not on the platform--  a service provider then needs to more clearly articulate its value and differentiation that the expertise brings.   It’s the human connection and outcomes that matter—those that impact customer experience and ultimately top line growth at their clients.  For example, what does an improved resolution really mean to clients in terms of CSAT, NPS and loyalty?  What kind of training and differentiated talent strategy is required to serve the higher value customer interactions that leading by self-service demands?  These are the questions that need to be answered in order to prove the DigiCX vision can execute, and are the next steps in HGS’ journey as a customer experience company.

Posted in: Customer Experience Management



Dodge Digital Disaster: Get Your Back Office Ducks in a Row

May 29, 2017 | Ollie O’Donoghue

Over the last few years, it’s been almost impossible to attend an IT Operations conference without Enterprise Service Management (ESM) taking up more than its fair share of the agenda. Before joining HfS, I’d spent about four years covering the trend in its various forms as both a practitioner and an analyst. So it came as a bit of a surprise to see such a huge gap between the businesses I’m covering now to those I had in my previous role.

For the clients and companies I follow now, trends like ESM and Shared Services are old hat – they’ve moved on to other more advanced forms of aligning business services. Whereas for those I worked with in my former role, the trend is only really starting to take shape now.

To best exemplify this difference between organisations, I’ll tell a quick story about the last presentation I gave before joining HfS.

At an ITSM conference at the start of the year, I took to the stage to deliver a presentation using the huge amount of data I’d collected over the years to paint a picture of trends in the industry, one of which happened to be ESM. I argued that by the end of the year up to 85% of organisations will be exhibiting some form of it – from simply sharing best practice right through to the formation of single shared service centres. The audience responded to the prediction with a few reassuring nods. Crucially, no-one chased me off the stage, although a few did come up after the presentation to utter “that was brave” before patting me on the back and walking off.

Ultimately, though, I stand by the prediction, and I continue to do so in the safe harbors of HfS, the home of the Digital OneOffice™ concept. According to HfS experts, ESM is just one fundamental of the framework. A stop on a much larger journey to truly embrace digital transformation. In support of this, they have plenty of data and analysis which, by happy coincidence supports my “brave” prediction. We can pool the dynamics into two camps -  which for anyone with a passing interest in economics will recognise: Supply and Demand.

Demand: Business leaders see greater back-office alignment as critical to their success

First of all, we have demand, and this demand is coming right from business leaders at the top. HfS research shows that there is a considerable appetite amongst leaders for improved alignment of business services so much so that it’s considered to be mission critical by 31% of executives, while 48% believe it to be of increasing importance. While the evidence suggests lower ends of the senior leadership team are embracing it with the same vigor, it’s more than reasonable to suggest the demand at the C-Level will have a considerable impact on the shaping of the modern business environment.

Click here to enlarge

Supply: Providers are shoring up their brains and brawn to build services that deliver greater alignment

Encouragingly, we’re also starting to see evolution in the business services supplier ecosystem. Take Atos’ recent acquisition of Engage ESM – a specialist provider in the field of enterprise service management technology and consultancy – that will add the brains and brawn of 150 ESM specialists to their offering.

Similarly, take the ambitions of ServiceNow to carve up a much larger chunk of business services. Launching from its stable footing in the ITSM space and no doubt leveraging it’s almost ubiquitous partnering of all large IT Service Providers to build a value proposition that takes what it does best in IT and apply it to the rest of the back office.

I have no doubt we’ll soon see even more providers aiming to match their services with the increased business demand.

Bigger Picture: We’ve got to get this right!

Outside of the evolution of supply and demand dynamics, there’s a much greater force at play – the drive towards a digital economy. The source of pressure on modern businesses that will see some succeed and others fail. Crucially, intelligent and aligned business services are the backbone of successful digital transformation.

For some of the organisations I have met over the years, truly aligning back-office services sounds like a pipe dream. However, for HfS, the thought leaders who designed the Digital OneOffice framework, the roadmap is clear, and if businesses want to survive in the modern digital economy, they must get their back office ducks in a row. Without back office alignment, it won’t be a robust enough platform to provide the agility needed in the digital world. By using technologies and providers of analytics, automation and the digitisation of resources and processes, businesses can break down siloed legacy operations to build efficient end-to-end business processes – the perfect platform for business agility and innovation.


So hopefully, the bold prediction I made a few months ago isn’t way off the mark. At least that is assuming businesses don’t swiftly change their minds and yearn for a siloed back office, supporting traditional communication channels and processes because “we’ve always done it this way”. Nevertheless, in a year were political pollsters and researchers have been just as surprised by the results as the winners, I may hold back on celebrating for a little while yet.

Bottom Line: Aligned Business Services are the backbone of the Digital OneOffice – companies need to get this right to survive in the digital economy.

Posted in: Digital OneOffice



Standards in automation? There's only one Lee in the IEEE...

May 27, 2017 | Phil Fersht

Few people can claim to have led shared services and IT for Kraft Foods, built shared services from scratch for Ascension Health, become one of the first true shared services practitioners to kick the tires with RPA... before establishing the industry's first standards body for Intelligent Process Automation with the IEEE.  Plus, he's going to be at our inaugural FORA Council (The Future of Operations in the Robotic Age) as the voice of standards and reason this September in Chicago.  Yes, ladies and gentlemen, meet the reincarnation of the process pontiff himself, Lee Coulter, who's going to give us a little more insight into why the heck we desperately need to adhere to some standards if we're going to find that automation haven that exists somewhere between fantasy, reality and failed promises...

Phil Fersht, CEO and Chief Analyst, HfS Research: Good morning Lee it’s great to chat with you again. You have been pretty deeply involved in developing and working on standards in process automation with the IEEE for over a year, would you be able to give us an update on what has been accomplished, and what we can expect next?

Lee Coulter, CEO Shared Services, Ascension Health and Chair for the IEEE Working Group on Standards in Intelligent Process Automation: Absolutely Phil, it has been quite a journey and I am very happy say that after working through the various societies of IEEE, the Board of Governors realised that this work impacted multiple societies and decided to use their reserve prerogative to sponsor a standards effort at the Board of Governors level. The first standard establishes some common terminology for us, it goes for approval on 5 May and that’s the procedural verification, making sure we have followed all the procedures of setting the standard, and we expect it to be published in June.  At the same time a part of IEEE called NeSCom which stands for the New Standards Committee that reviews all proposals. The next efforts, which will be referred to as P2756 in the IEEE world and their website, will be technology, taxonomy and classification for intelligent process automation products. Incidentally, in the same meeting where our first standard will be approved, they will also be reviewing and voting on the next standard. We have significantly increased attention for the second standard, which is really where we wanted to start but we realised we couldn’t do a taxonomy until we agreed what words meant. Several new members across the spectrum of providers have become advanced corporate members with IEEE and we expect to have a first working group meeting towards the end of June, as we go down the path of establishing a taxonomy.

Phil:  And when you look at the general state of automation in the industry today, where would you say companies are, as a whole, and how does this tie in with the need for standards?

Lee: It’s interesting, I recently presented an update at an event and a bunch of people hung out after the update, these were people new to the world of automation. They came up to thank me

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Posted in: Robotic Process Automation



Blockchain’s Potential To Overturn The Way We Operate The BackOffice

May 26, 2017 | Christine Ferrusi Ross

My colleague Steve Goldberg recently wrote about artificial intelligence finally getting incorporated into payroll processes. And I recently spoke with IBM about how they’re working to reinvent finance processes using blockchain. Intra-company processes present an interesting use case for blockchain, although they don’t actually have many of the common characteristics of the most popular use cases. Why?

Typically, we talk about blockchain being best for processes and operations where there is:

  • Low trust among participants
  • Lower existing technology investments
  • Low transparency or visibility into the process
  • Long cycle times in completing transactions

In contrast, finance and HR tend to be:

  • Medium to high trust (business partners tend to be known and therefore trusted by finance, for example, and certainly employees are known and vetted by the employer)
  • Relatively strong on investment in technology (although worse for HR than finance)
  • Decent transparency for internal aspects of the processes, but still poor for the parts of the process that interconnect with third parties – such as purchase orders, confirmation of delivery of products/services, etc. Transparency of data is less in HR, where the data starts at the individual level and then rolls up to the divisional and corporate levels.
  • Respectable cycle times for transactions. Understanding that companies always want to close the books faster, etc., cycle times aren’t as bad for internal processes as for multi-party processes.

So, if finance and HR don’t meet the general criteria for blockchain use, why would companies consider it as a viable option? We recently heard from IBM and Infosys about blockchain’s potential in finance, and our other research also shows the following likely benefits:

  • Security. A blockchain-based application tends to be more secure. Currently, it’s considered impossible to hack the data in a block, although it’s possible to hack at the edges, such as someone’s access point. However, the security for blockchain transactions and recording are much better than many of the systems companies use today. Consider the risks of letting employee or applicant data being hacked and blockchain becomes more attractive.
  • Immutability. When transactions happen quickly and permanently, then companies reduce the likelihood of duplicate payments for the same invoice and double spending (using the same money twice because it looks like it’s still available for a period of time after it’s actually been spent.) It also helps with employee data such as payroll information and benefits distribution.
  • Smart contracts. The business logic of transactions can be encoded into a blockchain app so that the rules get implemented automatically, taking out human error and increasing the accuracy of the transactions. For example, a contract between a client and a materials vendor can be coded into a blockchain, then the payment of the invoice gets made automatically after data about the materials’ quality, timeliness of delivery, and other terms of the agreement are incorporated.
  • Speed. While finance processes are ok today, any increase in speed helps the company. For example, if international payment transactions can be shortened, it improves the company’s operating margins by getting revenue quicker. The speed improvements will be particularly noticeable in processes that touch third parties.
  • Auditing and compliance. When the data are in a blockchain, there is complete transparency of that data. As a result, searching for records and validating data in order to audit and prove compliance becomes a faster and more accurate effort. Many believe that the reduction in cost and time of auditing and compliance are enough to justify the investment in blockchain for the back office.

Also, it’s important to note that we’re not advocating replacing ERP and other systems right away – you can record data on blockchain without doing the transaction on the chain. So in the interim blockchain can supplement rather than replace.

Bottom Line: Back-office processes may not be as world-changing as other blockchain use cases, but there is still significant potential for finance and HR to get reinvented with the technology.

Posted in: Blockchain



How EXL is taking a “grassroots” approach for incremental digital transformation - for itself and clients

May 25, 2017 | Barbra McGann

EXL is going broad and deep from its core strength in analytics. At its recent EXL Client, Industry Analyst, and Advisor Day, the service provider showcased its theme of “Accelerating Digital Transformation” driven by “look deeper” with analytics.

We heard from both EXL and clients during the day that while clients appreciate that “digital” can help “transform” their staid businesses into one seamless capability that is more flexible and responsive, it doesn’t feel real or short-term. Their businesses are too siloed, risk averse, and focused on the day to day. The sense I got from the day was that EXL is “right there” with its clients facing these challenges – meaning, it is not behind, and it is not way ahead and looking over its shoulder. EXL is working shoulder to shoulder with its clients -- at the grassroots level-- to figure out the vision for a more customer-centric, insight-driven, and agile business, map it out, and take the steps to get there. The service provider is doing this by keeping its focus on the core strength of analytics, and addressing gaps it has had in data management and automation in particular.


The front office is only as effective as the middle and back allows it to be

EXL’s traditional strength is in the middle office with industry-specific services support and analytics and in the back office with finance & accounting BPO. The front office cannot be effectively customer centric—responsive and personalized—if it doesn’t have a flexible data infrastructure through this middle and back office to drive context and act with speed, precision, and fluidity. EXL is working with clients where it sits – in that middle and back office, particularly in insurance, healthcare, and financial services.

For example, with one client that started as a headcount-based cost reduction BPO play in F&A, EXL proposed a number of workflow process and “digital” enablers such as RPA and chat to have a more interactive and responsive function. The client has been able to remove itself from a fairly heavy-handed “oversight” of the day-to-day and EXL has been able to find and implement efficiencies for faster processing, fewer errors or points of confusion, and greater satisfaction all around. A key solution element here was the human-centered approach: the team took the time to interview people involved in the current process at the client and at EXL, understand what was not working, and design and test out solutions that were people, process, and technology oriented (a.k.a. design thinking).

Building out the data chain

Over the past couple of years, EXL has hired, acquired, and developed a broader spectrum of capability in analytics modeling and reporting to build out this core strength. It’s been a differentiator for execution, but not across the full analytics spectrum and not at scale. Now it’s expanding upstream into data and data management, built-in proprietary technology and partnerships for “bots,” and supplementing the shift through its data acquisitions such as RPM Direct and Datasource.

Its viewpoint of the impact of data and analytics was demonstrated through an example in the middle office of an insurance client. EXL created a digital interface for customer acquisition, combined it with its LifePro policy admin system and data analytics. The client uses the database to target and segment customers for campaigns. Interested customers can use mobile or internet portal access to apply. Based on the back end integration with the underwriting and pricing engine, the customer gets a quote and the company can bind the policy online.

The role of robotics

The conversation around robotic process automation and artificial intelligence (the latter less of a focus and still a point of view to be developed, it seems) is constantly tied to analytics.  EXL’s observation is that “clients now seem to be taking a more pragmatic approach to intelligent automation” – how to institutionalize it, not just use it. One client example was of setting up a COE in a “build, operate, transfer” approach where EXL initially builds out the automation strategy, governance, use cases, service orchestration layers and bot skillsets. If you are interested in this approach, it’s one that we haven’t heard quite as clearly articulated from other service providers, and an area that we do hear is a challenge for global business services centers, for example. Some companies like Ascension Health and SEI Investments have to take the leadership on their own, but others may appreciate this kind of support to get RPA not just used but infused into the organization. I do get the sense this is a newer offering for EXL, so do your due diligence on the availability of skills and capabilities across different suites, but we often hear from clients that EXL makes a responsive, transparent partner.

Another place EXL is building scale is in its library of function- and industry-specific bots and partnerships with third parties including WorkFusion, Automation Anywhere, and Blue Prism. With automation, the service provider is willing to guarantee productivity and cost benefit, and change the traditional BPO engagement model. As you consider how you want to partner with EXL, take a look at its bot library, its subject matter experts, and consider the balance with your own capabilities. When you look at solving a problem and impacting an outcome and then designing the solution in between, rather than the previous outsourcing approach of lift and shift, you have more flexibility in your business.

Bottom line: Rethink your partnership style and challenge EXL.

Tap into these areas where it is investing: analytics; platform-based services; “advanced automation”; and human-centric digital transformation.  What to watch: the need to scale in these focus areas and become a more credible powerhouse in consulting to lead the charge.

Posted in: Design ThinkingDigital Transformation