Am excited to have HFS’ Saurabh Gupta lead our session on de-mystifying Blockchain at our December NY Summit… but let’s put this all into context and learn about the Hyper-Connected economy and the need to manage these merging technologies in a business context, where integrating them at scale is really the same of the game.
Posted in : intelligent-automation, OneOffice
At HFS, we have been increasingly concerned about the plethora of business models and articles bombarding us on social media, media websites, research and consulting firms’ websites, many of which are seemingly replicating similar terminologies and concepts. And this trend seems to be worsening. For example, we highlighted the recent direct usage of an HFS headline to drive traffic to a well-known media website. Just blatant!
We also have been observing the dizzying array of ‘intelligent automation maturity models’, especially being the first analyst to develop them, starting in 2014, refining in 2016, 2017 and this year. We recently had our attention drawn to the “Four Stages of Intelligent Automation Maturity” by Avasant, that initially gave us cause for concern, but when we communicated with them this week, they shared a presentation recording from earlier this year describing their model in much more detail, assuring us their “phases to maturity” are actually quite different from the HFS viewpoint. While there are always many shared common best practices when investing in a solution such as RPA, Avasant convinced us they had developed their own methodology and approach to automation maturity. We apologize to Avasant for making this assertion that it closely resembles the 2018 HFS Intelligent Automation Maturity Model. You can read a really decent interview with CEO Kevin Parikh here, espousing his views on the future of the consulting business.
The Bottom-line: We have to focus on our own concepts and ideas and avoid the regurgitation game
In general it is getting harder and harder to differentiate experts across the industry as many are very adept at hiring marketing resources to create whatever spin they feel they need to win business, while others simply extract another firm’s creations as their own. With the daily deluge of terminology being thrown at us, we just need to try harder than ever to provide our own original thought leadership and insight, as any smart enterprise today sees straight through the glossy veneer.
Posted in : Confusing Outsourcing Information, intelligent-automation
IBM’s ingestion of RedHat, the third largest IT purchase in history, is all about Open Source and dominating cloud transformations.
Commentators are already pitching this deal as long-awaited reinforcements to the trench-warfare of the cloud wars. But in reality, we need to look much deeper to understand what persuaded IBM to part with such an exorbitant sum of money for Open Source giant RedHat.
Even for budding venture capitalists, the princely sum of $34bn is more than enough to make your eyes water – especially when it’s hurled at a firm with annual revenues of just $2.9bn and headcount that will be just a drop in the Big Blue Ocean. So there must be more to IBM’s thinking than a quick financial return – it’s either a play to kick the other hyperscale players out of play, or a push to get the upper hand in the increasingly valuable Open Source sharing economy.
If we dig into the financials, it’s clear that RedHat is a profitable firm with a strong track-record in the space – describing itself as the leader of Open Source capability. In many ways RedHat
has been a champion firm in the growing enterprise adoption of Open Source – a service line that has moved a long way since its one-man-band and hobbyist background. Open Source is now big money, and all of the major providers want a piece of the action. In exhibit 1, we can see, alongside the financial information, a look at the number of partnerships both IBM and RedHat have among the major IT Services providers.
It should come as no major surprise that RedHat has a larger pool of big providers in its partnership ecosystem – IBM, while having a relationship with many has always struggled to balance its role as a major competitor and a partner. This challenge is likely to impact RedHat now, which has been able to play neutrality to build a strong partner network – some of which are likely to be sheepish now they’re an arm of rival IBM. However, this risk has been addressed by a clause in the agreement which pushes for RedHat to continue enjoying relative independence.
James M. Whitehurst, CEO of RedHat advised after the announcement that “Importantly, Red Hat is still Red Hat. When the transaction closes…we will be a distinct unit within IBM, and I will report directly to IBM CEO Ginni Rometty. Our unwavering commitment to open source innovation remains unchanged,” and went on to argue that “the independence IBM has committed to will allow Red Hat to continue building the broad ecosystem that enables customer choice and has been integral to open source’s success in the enterprise.” However, partners and clients may question how much of this lies in a carefully orchestrated marketing narrative, and how long IBM will hold true to its word given experiences with previous acquisitions. And the open source community can be quite unforgiving of commercial entities moving from benefactor to owner of IP – unless they tread carefully, IBM and RedHat may find themselves alone on the playground while all of the other open source kids play football, all because they held on to the ball for too long while they were in goal.
Even so, the formal press announcement from IBM and RedHat should settle some nerves – it advises that “upon closing of the acquisition, Red Hat will join IBM’s Hybrid Cloud team as a distinct unit, preserving the independence and neutrality of Red Hat’s open source development heritage and commitment, current product portfolio and go-to-market strategy, and unique development culture.”
So that’s all we know at this stage about how IBM plans to slot in $34bn worth of company in its leviathan and, frankly, unforgivingly complex structure. Let’s just hope RedHat’s reputation in the open source community isn’t tarnished by selling out to a major player. Which brings us to our next point…
One thing should be made clear, the narrative a lot of pundits are pushing is that this is all about forging fresh weapons to take on the big cloud players – AWS, Azure, and Google. If it is, that’s a woefully misguided objective. All of the major hyperscale firms have consistently built up assets and developed innovative cloud layers to meet the insatiable demands of the modern enterprise. RedHat – despite its credentials in Linux and Virtualization – isn’t going to give any of the big three much pause for thought. If IBM was genuinely eyeing up targets to give them a leg-up in the cloud wars, RedHat wouldn’t be at the top of the list. And although the marketing collateral from both firms is already championing the value of the tie-up to put a fresh spin on multi-cloud – this is far from fresh thinking in a market already packed with services and solutions.
So what it’s really about, is cornering the growing appetite for Open Source in the enterprise IT services market. As Paul Cormier, President of Product and Technologies at RedHat recently announced “Today is a banner day for open source. The largest software transaction in history and it’s an open source company. Let that sink in for a minute. We just made history.”
IBM and many of its rivals have been scrambling around to win plaudits for the most engaged or best contributor to a raft of open source projects, and with them the attraction of key talent in a competitive labor pool. IBM is no stranger to open source, it’s one of the original Linux Foundation contributors – but many of its rivals are also heavily engaged – Google, for example, is rated as one of the most generous contributors to GitHub. What this acquisition is really about is cornering off a large pool of talent, capability, and IP in the Open Source space – and with it core cloud capabilities across containerization, viurtualisation and a raft of other capabilities that are soon to be the essential building blocks of the new enterprise IT.
Bottom Line: $34bn is a steep price tag, but as enterprises look to replatform to make sense of digital, this could be a stroke of genius from IBM
One thing we’ve been tracking a lot here at HFS is the enterprise push to replatform to build the utopian ideal of a touchless IT environment. In many respects, RedHat brings with it many of the core components to achieve this business goal – the firm has innovated for countless years in the space to be at the forefront of changes in technology that standardizes operating environments across enterprises. The firm, along with traditional IT providers like IBM have worked to help enterprises bridge the gap between their on premise assets, old IT capabilities, and the newer technologies coming to the market. Increasingly we are moving away from a world which dictates businesses need to overhaul their environments overnight, and instead into the more realistic thinking that the modern platform will be a hybrid of the old and the new. The providers that can help enterprises link these systems and technologies together, and build a layer over the top to support the stresses and strains of the modern business will capture mindshare, and marketshare in equal measure.
So in many ways, although RedHat comes with a steep price that will leave most financial analysts puzzled – to analysts in the Digital and IT Services space, once you get passed the price tag and the old cloud wars narrative, this deal starts to make a lot of sense. There’s also the interesting inference to make that IBM has taken a decided pivot away from poster-boy IA giant Watson, to go back to its enterprise IT core and solve real challenges for real people – and in the modern world, that will always involve cloud.
Posted in : Cloud Computing
And here we go again… Our now-infamous headline “RPA is the gateway drug. AI is the drug…” has now magically appeared on the Forbes website in an article entitled “Robotic Process Automation: A Gateway Drug to AI and Digital Transformation” authored by Babson Professor Tom Davenport and Carla O’Dell, Chairman at AQPC:
Posted in : intelligent-automation, Robotic Process Automation
Disruption is more ripe in the call center space than any other corner of the services industry, and $1.6bn provider SYKES just upped the ante to feverish levels by becoming only the second-ever service provider to acquire deep RPA and intelligent automation expertise, since Accenture picked up Genfour 18 months ago. And $70m cash is a not insignificant sum to invest in consultative talent in this fast-emerging space in desperate need of experience and scale.
More significantly, Accenture is not a call center provider, SYKES actually is one – and now has the unique capability of attacking the market with automation-led customer experience engagements. While the market recently cogitated on the impacts of Concentrix/Convergys and Teleperformance/Intelenet, neither of these mergers had a genuine focus on intelligent automation (IA). And our new global study on AI covering 590 Global 2000 firms worldwide (conducted with KPMG), clearly shows intelligent automation is in unique demand across IT and customer service areas more than any organizational function:
So why is SYKES acquiring Symphony meaningful?
None of the “traditional” call center providers have upped the ante with automation. Until now. We have found this bizarre, as there are so many opportunities to improve broken processes, speed up customer response capabilities with both Robotic Process Automation (RPA) and Robotic Desktop Automation (RDA). There’s no surprise many of the Indian-heritage providers are jumping back into call center, sensing an easy opportunity to take business from vulnerable traditional call center providers with a disruptive automation-centric approach.
SYKES is not beset by legacy enterprise deals choking the life out of it. Call center providers that got too beholden to legacy clients with dinosaur FTE pricing models are really struggling. This was one of the prime reasons Convergys (despite being one of the industry’s finest purveyors of customer care) struggled to maintain market growth and ended up being acquired for an extremely attractive price by Concentrix earlier this year. SYKES is currently the 7th largest player in the contact center space (3% market share) with revenues of $1.7bn – enough to compete at the high-end, but still nimble enough to build a base of automation-led clients, chase strategic deals and be a disruptive nuisance in a market with razor-thin profit margins.
The OneOffice is here and Symphony can link the front to back office with its approach to digital operations. Digital organizations must have an operating framework that maps out how they have to operate in the future. Traditional operating models, while creating some incremental productivity value, if managed effectively, struggle to drive the unification of digital business models with emerging technologies across a business’s operations. The only true way to create a OneOffice experience is to be able to integrate the front office processes and interactive technologies (most of which are embedded in the call center) with the operations of the organization:
The Digital OneOffice is where teams function autonomously across front, middle and back office functions to promote broader processes with real-time data flows that support rapid decision making. It’s where front, middle and back offices will cease to exist, as they will be, simply, OneOffice. SYKES has a unique opportunity to consult to enterprises to make these front to back connections and weaves these capabilities into their managed services offerings. The merged entity can offer real expertise to provide automated processes as-a-service and help their clients through the journey. The only missing pieces, in the short-medium term, may be to diversify further into the middle office areas and analytics to add some real end-to-end process value, but much of this can also be accomplished through some smart partnerships.
SYKES has already been making serious investments in digital capability. The Clearlink acquisition gave SYKES capabilities in the digital marketing space, which is complementary to its core business and also a differentiator from its peers in the contact center world. SYKES’ strategy here is to connect across the customer lifecycle for an “omnichannel” solution— really digital CX. Qelp is another acquisition that expanded SYKES’ value proposition outside of core contact center services — a call center software firm specializing in self service on mobile phones, a real boon for its telecom clients.
SYKES has a sizeable WAHA delivery workforce (acquired through Alpine Access in 2012) which is a particular strength for its retail clients. The scalability and virtual training of this program is particularly effective. OneSYKES, its cloud delivery and WFM platform enable this capability. The platform also enables customer interaction analytics.
SYKES’ strength in the retail and telecom businesses. These are two of the most prime industries for automation-centric offerings, and where demand is very high (see earlier post on vertical focus in RPA). Added focus in the financial services sector would also be beneficial post-merger.
What does a SYKES/Symphony really bring to the table?
One of the last remaining automation services independents with credible global scale. With Genfour long out of the picture (and submerged somewhere inside Accenture) there are very few independent automation consultancies left worth evaluating that can impact a business the size of SYKES. Sure, there are some boutiques, such as Virtual Operations, Mindfields and Roboyo, that add some domain expertise, but nothing close to the scale of Symphony, which has 200 FTEs across Europe, North America, India and Mexico. It will be hard for any of SYKES’ competitors to respond in kind, and we are quite amazed that only one of them had made a serious move to acquire Symphony prior to SYKES’ interest.
Skill+Scale. Enterprise clients want the skill of the small guys (but not the risk), the scale of the big guys (but not the baggage). This sends out a shot across the bow to the likes of Accenture, Capgemini, Cognizant, Deloitte, EY, Genpact, KPMG etc., all competing in the quasi-consultative / managed service market… that is automation-led capability.
Appeals to the RPA software firms. The likes of Automation Anywhere, Blue Prism and UiPath will welcome any deal like that that takes them more into the front office of enterprises. This will also attract the attention of Nice, which has a strong call center automation focus. Other aspirational RPA firms, such as Pega, WorkFusion and Kofax, will also take notice and want to engage with this new entity.
Streetwise expertise. The four founders all bring a “hands-on” credibility to the table, which most organizations like to deal with: David Poole, Ian Barkin, David Brain and Pascal Baker. Many enterprises are already frustrated dealing with some of the usual suspects and may be tempted to switch to this new entity to take its OneOffice play to a new level. Obviously, much depends on SYKES leadership’s ability to retain the Symphony talent and engage them with a compelling global story.
Hands the Symphony team significant enterprise access. This will catalyze growth and disruption by giving Symphony access to a unique portfolio of 200+ enterprise clients including more than 50% of the world’s top 100 brands. While the Big 4 RPA experts struggle to convince their global partner colleagues to let them near their deep-pocketed clients, SYKES should have no problem opening the kimono to its finest differentiator that none of its competitors can (currently) boast.
Can start to heal the ‘scale disease’ threatening to derail the RPA and Intelligent Automation industry. As our (soon-to-be-unveiled) global study of 590 leaders of Intelligent Automation initiatives reveals, barely more than one-in-ten enterprises has reached a place of industrialized scale with RPA – and the word from so many clients is loud and clear that they need help:
This struggle to get to a point beyond pilot exercises and project-based experimentation could prove to be a serious point of failure for the whole industry drivthese solutions. There needs to be a much stronger melding of enterprises with implementation and consulting capability to fix these issues. This has to be an area where a SYKES/Symphony can profit.
The Bottom-line: Kudos to SYKES for making a bold bet, which has real potential. But it needs to move fast and aggressively post-acquisition to make this bear fruit
If I had to count the number of truly successful services / consulting mergers over the past decade, it wouldn’t take me very long, or require too many fingers. In so many cases, the acquiring firm is checking a box before moving onto the next shiny new object. What excites me about this move is the size of SYKES to make this really significant for the firm, the fact Symphony gives it a capability truly differentiating and hard for its competitors to replicate, and the fact it becomes the first customer-centric service provider to tackle the unquenched thirst for automation across customer processes to drive genuine OneOffice endstates.
But this is a market that simply refuses to stand still… this has to be a merger that both parties fully embrace with the verve and energy that took Symphony from a great idea in 2013 to one of the most disruptive and exciting consulting businesses in the business operations industry. That means SYKES needs to do a much better job of articulating to the world what it brings to the table, especially in the cut-throat world of customer experience BPO. SYKES leadership needs to make Symphony front and center and refuse to blunt its edge in driving narrative – staying ahead of the curve and forging great industry relationships.
In addition, SYKES needs to add to the OneOffice capability, search the globe for expertise in regions such as China, Philippines, Japan,South America and Canada. This can be with further tuck-in acquisitions and smart organic talent acquisition. It will also need to work extremely hard defining its brand and articulating the new generation of OneOffice solutions to industry. This is an exciting merger, but the hard work really starts now…
Posted in : OneOffice, Robotic Process Automation
After all the fun and games we sparked with our recent blog “Seven deadly misnomers why these billion dollar RPA valuations are insane” we thought we’d give the CEOs of the leading two RPA firms (see the new HFS TOP 10 RPA report), Automation Anywhere (Mihir Shukla) and Blue Prism (Alastair Bathgate) a chance to face/off on stage to thrash out why their firms’ valuations are on such an exciting trajectory – and engage with the HFS FORA crowd to debate where the hell this space is really going and how we need to prepare for an intelligently automated future.
Yes, people, this year’s HFS FORA Summit in New York from December 11-12 is shaping up to be at our boldest, most brazen and brash best. Ever!
If you’re looking to up your RPA game and see who comes out on top, sign up to reserve your seat now, or forever hold your peace.
I look forward to seeing you in New York,
Cheers!
Phil
Posted in : intelligent-automation, OneOffice, Robotic Process Automation
Anyone failing to escape the swirl of intense hype threatening to destroy everything great about RPA is probably thinking that these cute products are going to solve all their artificial intelligence needs and deliver them with a “digital workforce” that will go way beyond scraping screens, producing scripts and running unattended recorded process loops.
Now, don’t get me wrong – I LOVE RPA… jeez, I bloody helped create the space when I first wrote about it in 2012. I don’t want to toot my own horn, but this space probably never have would have got off the ground if we hadn’t been curious enough to get deep into it and articulate its value to the world. And no one’s paid me a billion dollars (well not yet, anyway).
RPA creates a genuine experience, where the underlying fabric of decades-old processes can finally be altered
When we released the first “Intelligent Automation Continuum” in 2015, we made it very clear that RPA was clearly the first step in a much broader roadmap to achieve beautifully-automated intelligence across your enterprise. And today, this gateway philosophy has never been closer to reality. RPA, when executed well, delivers a digitally-transformative experience to business operations executives, where they can – for the first time – fundamentally change how a process is designed to process data much, much faster. Suddenly, firms have the chance to make fundamental changes to how they design workflows, instead of persisting with doing things the same old way, but with lower cost people and more efficient delivery models. Isn’t that enough for now? Why does the hype take it to a place where it’s only going to disappoint? If IBM’s leadership already thinks these firms are massively overpriced, are there really others out there which will take the plunge?
When I see executives who previously stared at excel sheets all day (while beating up BPO providers for overcharging for insurance clerks in Delhi) actually getting trained to redesign workflows using scripts and GUIs, it warms the soul. We are actually trying to do thing better... not just cheaper! So why can’t we be content with making this actually work before we get too carried away?
Time for a reality check: RPA is firmly on the radar, but let’s see it become properly industrialized and scaled before we get too carried away
The vast majority of these initiatives are project-based, not scaled – only 13% of RPA adopters are currently scaled up and industrialized, according to new data from 590 enterprises worldwide. Most RPA adopters are still tinkering with projects and not rushing towards enterprise scale adoption:
Suddenly, the whole RPA value proposition, which has carefully matured from the “Oh my God, a robot’s going to take my job” to “OK, I get it now, RPA actually frees up time and fixes process breakages and staves off costly investments” has been injected with some serious hype-steroids, where suddenly these firms are worth billions of dollars, some are actually declaring they are going to deliver their own consulting services (really) and quickly move up the continuum to offer real cognitive and AI capabilities. I’m sorry, but when were the RPA firms going to compete with Google and Microsoft? Am I missing something here?
The Bottom-Line: Enjoy that RPA high a bit longer before you graduate onto the harder stuff…
The real data shows just how not-ready we are to declare some kind of robo-victory – executives must evaluate how all intelligent automation technologies can work together to take us to the promised land. RPA provides a terrific first stop for executives to make real underlying changes to their processes. Once processes are digitized, there is so much more we can do with the data being produced, which is where other automation and AI tech comes into play, such as Machine Learning and predictive analytics and sophisticated cognitive computing.
Now it’s always critical to focus on the “what next”, and in the case of RPA the possibilities are limitless, but only when you have mastered how to digitize your underlying mess that has plagued your organization since before the days COBOL was the next big thing. Then it’s about how you reel in the analytics and AI possibilities that truly take your business to a new level of data heaven. But let’s get past the gateway first… let’s not get ahead of reality and mess this one up, folks.
Posted in : intelligent-automation, Robotic Process Automation
One firm that’s kept driving consistent growth above the industry average, despite the cries of “commodotization” and “cannibalization” in the business process management arena, is Genpact. This firm blitzed the offshore-centric BPO industry in the mid 2000’s, with its focus on the “virtual captive”, its obsession with process excellence (emanating from its GE roots) and the willingness of enterprise operations leaders to invest in its energetic culture.
As times evolved and other aggressive outsourcers rolled up their sleeves, Genpact has increased investments in higher-end process and operations management expertise to maintain its early tranche of enterprise customers, while focusing on the next wave. Making a concerted focus on building a Design Thinking competency out of its LEAN roots, while adding skills in AI-enabling and digitizing processes, Genpact has not been afraid to stay ahead of industry disruption. In fact, its process roots have often bolstered the firm’s credibility when driving industry narrative, as it understands the real changes enterprise need to make at the process and cultural level, if they are genuinely serious about a OneOffice Framework.
The one major constant behind these phases of change has been CEO Tiger Tyaragarajan, who’ve I’ve personally known for more than 15 years, when he was the North American market-maker for the firm, before becoming CEO in 2011. Today, Tiger talks a lot about the Instinctive Enterprise, which is very similar to our view of the OneOffice Framework, so I thought it time to reconnect before he joins us at our December FORA Summit in New York…
Phil Fersht, CEO and Chief Analyst, HFS Research: It’s great catching up again, Tiger. We’re looking at a lot of serious tinkering and experimentation with new technologies in the business process management (BPM) space. How has a company like Genpact evolved over the last 18 months, and where do you think things are going in the next couple of years?
Tiger Tyagarajan, President and CEO, Genpact: Phil, thank you for the opportunity to spend some time talking with you.
I like the word you used—evolution—and the period that you applied it to—18 months. In the world we are in, evolution is the way to think about things. I distinguish that from revolution, which is to drop everything that you’re doing and go after something new.
In our business, we think about many of our journeys as evolutions. We’ve always had depth and process; we understand how to bring the science of process to problems and how to generate value. We’ve always looked at process outcomes as important metrics to improve, and we’ve used methodologies like Lean and Six Sigma enough that we’re effective with them.
We’ve added new capabilities that didn’t exist six years, four years, and 18 months ago. Six years ago, we had nothing on digital; four years ago, we started building out our capabilities; 18 months ago we started scaling those capabilities and continue to scale them.
In the last three years, we’ve made nine acquisitions. Of the nine acquisitions, seven were in consulting and digital, and two were in deep domain areas, such as supply chain and insurance. We continue to add domain, but the ratio includes much more digital, analytics, and consulting. That piece of the puzzle is growing at 25% per annum; it’s now 20% of our business. The other 80%, which is operations and managed services and the run side of our business, is now growing at 7% or 8%. The combination is growing at 13% to 15%, outside of our GE (General Electric) business.
We never thought of customer experience in the past; we think a lot about customer experience and user experience now. That’s new language for us, and we’ve added it to our lexicon.
Phil: Market expectations are moving faster and becoming demanding more than ever, but at the same time, the pace of change within many enterprises is slow and painful. That seems to have been creating several pressure points. How is that impacting your business, though, Tiger? How do you find your traditional clients, where finance is still finance and procurement is still procurement, reacting to the pace of change? How are you viewing that whole paradigm?
Tiger: That’s a great question, and the answer has many parts. First of all, we have two kinds of clients and two kinds of engagements. We have managed services and what we call transformation services, which is digital analytics consulting. Managed service contracts are still for about five years, but in many cases, we’re entering into seven-year and ten-year contracts, which is amazing. I think that’s happening because some of those journeys are becoming high profile. Our clients are investing up front in building new technologies – these are not ERP solutions, and therefore don’t cost a billion dollars, but they do cost millions of dollars. We have to recover the costs jointly over a longer period of seven to ten years, and longer contracts work very well.
At the other end of the spectrum, we have quick consulting engagements that typically last four-to-six-weeks. These are “Hey, can you come in, and in six weeks, take a look at my consumer products business,” or, “My pharma business,” or, “My credit card business, and come back and tell me the top five areas that you would pick, to apply AI and machine learning to. Tell me how you came to that conclusion, tell me the pros and cons of your choices, the prioritisation metrics, that then allows me to choose the top two AI/machine learning opportunities that I want to go after.” That’s a four to six week engagement, it’s classic consulting engagements and, strategic assessments that clients sometimes extend, but often not longer than 12 months.
The third example includes digital, RPA, AI, machine learning, and so on. Often these engagements end up being a proof of concept (POC). No customer is going to turn over their entire operation to a machine, so they pick a subset of products, contracts, or retailers, for example, for a POC. If the POC delivers great results, the customer might gradually expand it across wider geographies. I think the most important thing here is to be flexible and not get married to one contract or commercial construct. That would be a dangerous thing to do. We have to be agile enough to construct a contract for each particular case.
Phil: So, how do you become agile enough, Tiger? In the old days, it was all cookie-cutter. You could train 10,000 people to do 10 things, 10 ways, and then multiply those capabilities across as many clients as you could. Now clients ask for so many things in so many different ways and push for more experimentation. This creates huge pressure to acquire skills. Everyone wants the A-team. It’s harder and harder to find people with algorithm capabilities, Python capabilities, and things like that. How do you win, in this market?
Tiger: There are a few things to do. One trick here is to make sharp choices, then drive the organization to buy into those choices. So, no one starts talking to a potential telecom client, for example, because we don’t do telecom. We tell our ecosystem where we operate and where we are strong, and then we stay disciplined about it. The second trick is a combination of building, partnering, and buying. I don’t think any one of those is going to be good enough alone. Historically, this industry, including Genpact, has thrived on building scale for the long term. Those days are over. If you assume that everything that you do has to be built by you, you’re going to miss staying ahead of many key developments.
The last thing is that culture becomes incredibly important. At my team level, I think about culture as a combination of three groups of people. The first group is made of people who have been in the company a long, long time. Another group includes people who have grown through the system and who don’t have that much experience, but bring new thinking because they’ve grown from doing much smaller jobs in the company. The third group includes people who have joined the company from the outside and bring very different thinking. My job is to allow those three groups to work together to create value. I think CEOs across all businesses and industries are challenged with that problem.
Phil: Do you think, Tiger, as we look at the change we’re going through, that this is becoming much more about people, purpose, and planning and less about the next shiny new gadget that’s the flavor of the month? I think we all got a bit obsessed with the gadgets, but it’s really the people, the purpose, and the planning that give us forward momentum, right?
Tiger: You nailed it, as usual, Phil. I’ll start with purpose. I think people underestimate the importance of purpose in an organization. We are approaching purpose at two levels. One is the purpose that can charge up, motivate, and create passion for 80,000 people in our company.
That purpose has to be anchored on three things. First of all, themselves. “What is the value for me?” That value proposition, for us, is all about learning. Genpact is actually a university. You continuously learn, we will provide you with the weapons, the curriculum, the opportunity to learn, but you have to self-learn and self-skill. You have to be curious, which is why curiosity is a big value driver for us. Curiosity is one of our values, and it’s one that I love a lot.
Second, you’ve got to drive business motivation, and business motivation for 80,000 people has to be around value for clients. You can’t make 80,000 people say, “I’m trying to create value for Genpact.” That’s wrong; it won’t work.
Third, you have to find a way to connect value for yourself, for clients, and what you do to a purpose in society. I think millennials want that. They want to be able to go home and say, “The work I do saves patients’ lives. The work I do makes an aircraft run more safely. The work I do allows a customer to quickly get their insurance claim after a major fire.” I think if you don’t have that, you are missing something important in today’s environment.
Phil: We’re starting to see some weird consolidation happening; some of these dinosaur-type businesses are coming together, while others are making more strategic bets – both big and small. And then we have all the insane valuations making M&A almost impossible. How do you see this unfolding? Do you think we are going to have an increase in consolidation in the next 12 months? Do you think that things are markedly different now, and we’re ready for more M&A movements with the market at a peak? Or do you think things are still going to be slow and uncertain for some time to come?
Tiger: I would say both, and they play into each other. I think uncertainty and change are givens. Does that drive consolidation? Yes. Does that drive consolidation driven by commoditization? Yes. Does that drive commoditization that drives a search for scale, because the only way you win in commoditization is scale? Yes. Is that unique to our industry? No.
I think it’s happening in every industry. One part of the journey of change and disruption is that some things are going to become commoditized in every industry. The only way to win is scale. Some people will go after that scale.
Now, there is also a reverse game. Some people are going to say, “Okay. If that’s commoditizing, I want to get out of it. I want to carve this out, and give it to the person who wants to get scale.” In the consumer goods industries, so many companies have split along a very simple dimension. This is a commoditized, high-cash generation, “I want to extract margin” business. Scale is important, and they want to run low-cost operations.
Cisco is an example of a third trend—acquiring for capability. Around 20 years ago, Cisco’s performance was amazing, and it became an acquisition machine. Every one of those acquisitions—100% of them—were capability acquisitions. Some of our much larger peers are going down that path. When we acquire seven or eight digital companies, all of them have about $5 million to $50 million in revenue. We’re continuously bringing in new capabilities and taking them back to our clients.
Phil: Things are changing—10 to 20 years ago, businesses wanted fresh new ideas on how to change business models. Now I think most enterprises understand their digital needs very well and understand where the competition is coming from. They want someone to come and translate what they need into a solution. They don’t need the next crazy new idea. If the client understands what they need now, they need somebody who can understand automation, applications, and processes. If anything, the strategy piece is dissipating into more of a “bringing it together.”
If we look at the last 30 years of industry, we can see two parts of the business that digital connectivity has transformed. First, the back office transitioned from nearshoring and shared services to outsourcing and offshoring and then to basic digital. The front office transitioned from e-commerce models and e-digital marketplaces to where we are today. But, how do you bring those two together?
It’s not just responding to needs as they happen; you have to anticipate your clients’ needs before they happen. That’s why it’s so important to understand your supply chains and those in related industries. How do you understand how to leverage intelligent cognitive assistants better? How do you know how to take in macroeconomic information, predictive market data—all these external inputs—and bring them into the company? I think where this is challenging companies now… This dramatic convergence of business, ideas, and forward thinking, and I think we need a bit more patience and pragmatism as we take things forward.
Something else I’ve seen that is dramatically different is this desire to embrace millennials and Gen Z-ers—these kids behind millennials that are about 14 to 22 years old—because they’re bringing a whole different mindset into the game. They’ve only ever lived in this digital world that we’re in today.
I heard something interesting the other day: there’s a big drop-off in Gen Z-ers learning to drive – they just use Uber and Lyft, and that’s why Uber is going crazy trying to figure out the self-driving car. What’s going to happen to the automotive industry, if the young generation doesn’t want to drive cars anymore, as they’re just too expensive to own. I think the habits of the younger generation—the big spending generation of the future—are changing dramatically, and that’s going to impact some industries beyond recognition.
Tiger: That’s a great example, Phil. My son is 25. He has been working as a consultant for three years since he graduated from college. He doesn’t have a driver’s license, and he never wanted one. He doesn’t know how to drive. Can you imagine life as a consultant in the US without knowing how to drive?
He said, “Why do I need to know? I can hail an Uber any time!” He produced an Excel spreadsheet that convinced my wife and me that it’s a wiser decision financially. He proved to us that car depreciation plus gas, insurance, and maintenance was higher than him having to use Uber everywhere he went every day. He has a bunch of friends that also don’t know how to drive and don’t have driver’s licenses.
To get us back to how the front and back offices are changing, I think the piece we are missing is the middle – it just hasn’t received as much attention. One good example is finance. On the front end, finance organizations partner with businesses to understand their problems. Then finance brings all the analytics and insights from the back office and helps businesses understand what kind of predictive analytics will be useful—then makes sure the back office creates them. The toughest jobs today in finance are the business partner finance groups.
You can find that scenario in many similar functions—where the middle isn’t strong enough.
They should run as end-to-end processes—you call it a OneOffice process, we call it an end-to-end process—and these processes must have owners. Businesses also must map customer and user journeys so that they can improve experiences. I think that’s finally playing out with digital.
Phil: Well, I think in the interest of time, Tiger, I’ll ask you just one more question. You’ve been running Genpact for many years now, and you were one of their top salesmen back in the day, I seem to remember. So, what keeps you going, and what do you think you’ll be doing in five years’ time?
Tiger: I think what keeps me going, Phil, is everything that we just talked about. It’s all so new. I often feel as though I am in the first year of my job. I’m not talking about 2011, when I took over as the CEO. I’m talking about 1999, when we first set up this business.
I’m learning new things after 20 years in the business. I look at them and think, “Wow. What a great opportunity!”
After being in the same business for 20 years—in the last 24 months, I know what R and Python is and how it works. I know how in-memory databases work now, and I didn’t know the meaning of in-memory databases two years ago. I’ve learned how you scale a cloud-based workflow platform.
Our acquisition (in Tel Aviv) of PNMsoft, which we now call SeQuence, has taught me a lot. We had to scale it from being able to manage 300,000 transactions in every instance per year to 9 billion transactions per year for a client. “I’m learning, and I’m going back, actually, to my engineering days—it’s very interesting.
At the same time, I am transforming our culture. I thought I’d done enough cultural transformation in the company over the last 20 years. I now realize I’m in one more cultural wave, and it never really stops. All of a sudden, after 20 years thinking I’ll be working with the same people, I’m dealing with a whole set of new people. So, what keeps me going? Just the fact that I can learn so much every day. I also try and keep myself fit so that I have the energy to learn and run at 100 miles per hour.
Phil: Well, that’s fantastic, Tiger. So good to hear about all the new developments at Genpact and how much you’re enjoying it! We look forward to hosting you at the HFS FORA Summit in New York this December.
Posted in : OneOffice
It’s not been possible to escape the wild world of RPA valuations these past few months, culminating in the recent claim from UiPath and its investors that the firm is worth $3 billion, despite the reality that AA’s annual revenues this past year are ~$100m, Blue Prism’s ~$55m and UiPath’s ~$65m (HFS estimates).
As much as I would love to celebrate my friends Daniel Dines’, Mihir Shukla’s and Alastair Bathgate’s untold wealth, I have done my homework with my analyst colleague Elena Christopher and, while these three gentlemen and their teams will undoubtedly become exceedingly wealthy from locking up the RPA market, valuations as high as $3 billion are, sadly, pure science fiction. I welcome any of these three dudes to save a copy of this post and proclaim to me “I told you so” in a couple of years – and I will gladly accept a glass of their champagne – but we hate to burst this bubble with seven misnomers why RPA is not your typical Silicon Valley software fantasy:
1. RPA directly replaces people. This is incorrect, its all about augmenting processes and the improving the quality of the workforce, not eliminating actual employees with bots. As our recent State of Operations Study with KPMG, across 381 Global 2000 operations leaders, illustrates, only 7% go into automation expecting direct FTE reduction. Consequently, the C-Suites from 70% of these organizations are happy with the ability of RPA to reduce reliance on labor. Hence RPA augments labor, it doesn’t replace it.
2. RPA can scale rapidly to have a dramatic impact on enterprises in months. Incorrect. The vast majority of these initiatives are project-based, not scaled – only 13% of RPA adopters are currently scaled up and industrialized, according to new data from 590 enterprises worldwide. Most RPA adopters are still tinkering with projects and not rushing towards enterprise scale adoption.
3. RPA tools can achieve amazing benefits all by their lonesome. Incorrect. RPA has to be driven by a motivated business line, and supported by capable IT. This isn’t the typical software sales model where licenses are sold en masse and distributed willy-nilly across the business. Without a genuine buy-in and partnership between business units and IT, RPA fails. There has to be a balance.
4. RPA delivers intelligence. Incorrect. RPA is a gateway drug to digitize low-value processes and free up human-time to focus on higher value activities. RPA is a catalyst to drive a more intelligent enterprise operations but is not intelligent itself.
5. RPA will be a unique game-changing product in the market for years to come. Incorrect. Most organizations take a couple of years to learn and understand how to incorporate the benefits of RPA, but after that it’s merely a tool in the enterprise toolbox.
6. We will still be talking about “Robotic Process Automation” in two years time. Very unlikely. The narrative is already shifting to a broader Intelligent Automation roadmap. RPA is very good at breathing new life into legacy processes and technologies but isn’t driving genuine digital business model transformation. RPA helps digitize the underbelly that supports the ultimate digital business outcomes by digitizing manual processes and fixes system integration points. It is a gateway to achieving front to back office workflows that are critical for digital business to service the needs of their customers in real-time. However. once RPA has performed these tasks, the real challenge for enterprises in going beyond simple RPA to drive real intelligence into the processes. Hence, RPA is a gateway to creating basic digital infrastructure across the organization, but other AI tools are needed in the future to help organizations anticipate their customer actions before they happen.
The more intelligent your business operations, the more you can stay ahead of the game, but none of this is possible if your processes are not automated effectively to create this knowledge for your business operators:
Once the digital baseline is created, enterprises need to create more intelligent bots to perform more sophisticated tasks than repetitive data and process loops. This means having unattended and attended interactions with data sources both inside and outside of the enterprise.
7. Valuations of $2/3 billion per firm are realistic. Incorrect. While software vendors such as Mulesoft and Marketo have recently fetched insane multiples of $5bn-$6bn, these are very established IT applications that augment multi-billion dollar industries. RPA tools are supporting backend automations that require a very unique combination of business/IT aligned delivery, as opposed to being front-end apps that can be sold to IT budgets en masse. RPA is a BandAid, not your new enterprise platform. These are not the typical products an SAP or Oracle can easy ingest into their apps portfolios – the needs are too process heavy, too consultant dependent to fit their sales models.
The Bottom-Line: Let’s love RPA for what is it, not what some people, who do not understand it, pretend it to be
RPA has dramatically altered the narrative among middle/back office process owners. We predict a market approaching $2 billion this year alone and growing fast as traditional process outsourcing models are hugely impacted. We’ve even gone as far as declaring RPA the “new outsourcing”. RPA has been a major game changer in the world of operations and outsourcing…. but $3 billion valuations of software firms barely hitting $50m in revenues? We don’t think so… let’s learn to keep nurturing this great business and not squeeze it until it breaks.
While the industry is busily adding fancy new words to their résumés and job titles, we have to remember that our technological journey is gradual. Change comes slowly and incrementally and you can’t just rip off the proverbial Band-Aid, hire a bunch of Millennials and Gen-Z kids… and it’s mission accomplished. As the Hyper-Connected journey illustrates, it took 30 years to get where we are today – and that’s because both front and back offices needed to go through major, secular changes to become efficient and digitized.
But the next phase is not a trade-secret – this “Future of Work” is merely a phased transformation of the present. Dumb robots evolving into intelligent assistants… ineffective supply chains plagued with manual breakpoints becoming fluid, autonomous and intelligent – with the ability to interact with other supply chains. Quantum computing and blockchain emerging to challenge the very logic of TCP/IP and computing architectures. But to get there, we need to be experimenting, tinkering, exploring and disrupting with the kit that available today to get our organizations in a place where all these far-flung innovations can have some real possibilities.
So let’s have less talk about the future of work and focus on the present… we know where we are and what we need to do. So let’s do it!
Posted in : intelligent-automation, Robotic Process Automation
