There is a staggering gap between C-level executives and middle managers when it comes to dealing with the change digital-enabled business models and new services paradigms force upon us. The journey to the As-a-Service Economy is met with enthusiasm by the C-Suite (see Exhibit 1). But their middle management has a different take: shying away from big transformational initiatives and focusing on more tactical interventions. Are you all living in the same world?
We should not blame middle management for the inertia we witness in many industries, including the business and IT services industry.
Anxiety and resistance are logical reactions to change. People don’t like change, as it threatens the status quo, what they know and worked hard for. This is the playground of the sunk cost fallacy. “We worked so hard to get to where we are: we can’t throw that away. We need to keep going to maintain what we have”. C-Suite respondents in our large surveys show they’re not willing to throw good money at keeping the status quo. That is the big point: change is inevitable. The way a company deals with change will increasingly be a deciding factor for survival and competitive advantage.
The Ball is in the C-Suite’s Court
Having a vision is one thing, enabling implementation and executing the vision is significantly different. Middle management’s lukewarm reaction to change is understandable and frankly not surprising. There is a lot of uncertainty about new technologies such as autonomics, robotic process automation, artificial intelligence, and cognitive computing. There are wild predictions about robots destroying people’s jobs. People are wondering how they will be impacted; what do the changes mean, what will my job look like in this As-a-Service economy, do I have the skills to be successful?
Uncertainty is the enemy of the ability to embrace change.
The answer? Educate, show results and impact. Also, are people incentivized in the right way to lead sweeping change? Or are they incentivized to drive incremental improvement? Aligning incentives to the ultimate goal is paramount.
“Beam me up, Scotty”
Wouldn’t we all want to just be there, at the destination? Counting the times, you would love to say, “Beam me up, Scotty” … But alas, if you need to go somewhere, you must endure the journey.
It is a journey to change, and all road warriors know making a journey is not always fun, it is pretty exhausting, and you often have to deal with unpleasant adversity.
Investing in disruptive technologies is one thing. Successfully implementing them and going through the change process as a business is another. C-Suite respondents are likely to bring in external help in the form of transformational leadership or change agents to redesign the operations. However, to be successful, they need to inspire, motivate, and properly measure and provide associated incentives and rewards for the team.
Often when a sports team is dysfunctional, the leadership tries to shake things up by firing the coach and bringing in new blood. On the one hand, a new perspective can change the dynamics of the team for the better. On the contrary, there is an entirely pragmatic reason to fire coaches; it is much easier and cheaper to fire one coach than to fire all players. This logic holds true for enterprises as well. An external stimulus is good, but getting rid of the middle management is impossible and threatens the going concern (aka the revenue generating machine). See here the dilemma for the large incumbent with legacy operations trying to fight off the nimble new entrants, who simply don’t have to drag all the baggage with them.
A Plan is as Good as its Implementation
Leadership is critical; don’t let there be any doubt about the destination, the Northern Star. But, involve the rest of the company to map out the journey. Let them be a part of the solution. Our research shows the gap between C-Suite and middle management is significantly smaller when asked about using creative problem solving (Design Thinking) to reach the As-a-Service end-state. 54% of C-Suite and 43% of middle management think Design Thinking will have a significant impact on the journey.
Unleash the Knowledge and Creativity of the Company
Years of operational excellence, Lean and Six Sigma have beaten all creativity out of operations and middle management. You get what you pay for. So if you pay for hundreds of green KPI’s, you get hundreds of micro-managed green KPI’s.
C-level leadership has to set creativity free, unleash the innovative power of the workforce. Granted, corporate Japan is not the prime example of free-spirited creativity, but they have a thorough understanding of the power of expert knowledge. Toyota’s concept of the Creative Idea Suggestion System brought them a lot of good (and paradoxically they copied it from the American firms they tried to beat). For service providers, a big challenge will be to integrate the innovation labs and all the beauty created there into the legacy beast. Innovation labs can quickly become ivory towers. And no-one likes the people shouting from ivory towers.
Revamp Imagination by Creating a Culture Capable of Dealing with Constant Change
Our take on change? Use the old concepts of Total Participation and Employee Engagement and focus it on creative, lateral problem solving and Design Thinking (instead of operational excellence and Lean Six Sigma) in an era of increasing volatility, uncertainty and technology driven change. Bring in academics, analysts, practitioners, other ‘thinkers’, but most of all the company’s own brain trust.
We are not arguing everyone will be a good fit in the new era, or that the goal is to keep everybody on board and happy. But an inclusive strategy to alter the culture is ultimately the most promising trajectory for change.
Technology was first and foremost on the minds of the over 42,000 people who gathered in Orlando for HIMSS2017 last week – or was it? And should it be? There is a groundswell rising at HIMSS for not just talking but acting when it comes to putting the individual—the person—at the center of healthcare. In a word: empathy. How does what you do with IT, or as an IT professional impact the way a person experiences healthcare throughout their lives? There is a lot of attention on security, cognitive computing, analytics, and so forth – the enablers of how healthcare can better serve its constituents. But at the end of the day, it’s about the people for whom you are designing these systems because if they can’t or won’t use them, it won’t impact health, medical, and financial outcomes. So an undercurrent of themes is swelling around social, behavioral, and environmental aspects of healthcare.
Effective healthcare IT systems need alignment and collaboration inside the hospital system—but need to also include what is outside of it
After the conference, on the way back from the airport, I sat next to an IT project manager. She told me how she had coordinated across five hospitals in a system to prioritize a list of IT projects that would enable these hospitals to create an interoperable network to exchange data more effectively and enable communications. After the agreement, one hospital came back and said, no, we have a different priority this year. This is the real challenge in healthcare—not whether the technology will work because it can and it will—it’s about whether the people will work together to define and achieve common goals.
Community collaboration as shown by the Value Care Alliance (VCA) in Connecticut
Earlier in the week, I attended a session about a group of hospitals in an ACO called the Value Care Alliance. They share a goal to increase quality and to build capabilities to assume and manage risk in a move to value-based care, with efforts to improve the health of the local community, reduce ER instances, and to reduce the number of attributed ACO members who go outside their community and their provider network for healthcare services.
To be successful, the alliance knew they needed to have a shared view of the community members – in technical terms, a population health platform with a data repository that would bring in data from disparate systems. However, each member of the alliance had a different platform; and they didn’t know each other’s platforms. They had started the alliance with a governing body that over time had saved money through shared services and group purchasing, thereby funding the investment in infrastructure needed for the population health initiative.
How has VCA approached it?
The VCA aggregated claims and electronic health record data, the hospital and physician practice medical records. The group then cross-referenced medical data with geographic data, looking at maps in the neighborhood: what is the health of the community when looking at, for example, a group of people with high HbA1Cs… is there local access to clinical care; what are the community activities offered; where are the grocery stores; can they see physical elements and conditions of buildings. They started reaching out to other community organizations such as the YMCA and a local parish nurse program to conduct health education, screenings, and other outreach activity. They also applied to CMS for a community health grant that will help them fund activities for further identifying high-risk individuals and connecting them to resources.
Back to the IT: the local hospitals all had legacy population health IT and didn’t know each others’ systems, and getting them to abandon what was already in place was complex. They brought in a facilitator to assist with defining shared goals and IT decisions; and every organization had one vote, regardless of size, to show commitment to the collective. The group also defined the value of the data to each and to the collective, to come to an agreement on multi-stakeholder data sharing. The underlying theme throughout, is how to get to a community health program – where the hospitals are enabling greater health in the community, where people locally come to their hospitals for treatment as needed, and have local support for being healthier, staying healthier, and receiving the right care at the right time and right (local) place.
To strategically use Health IT to drive health, medical, and financial outcomes, you need to balance internal and external efforts in coordinating care with shared community goals.
While walking the halls at HIMSS, I saw an endless variety of technology offerings—and among them, people—physicians, EMTs, nurses, patients, caregivers—all of whom want a healthier society. We need to not only connect the systems for interoperability, we need to connect the individuals. IT professionals need to be just as excited as doctors, nurses, and caregivers about truly changing people’s lives through healthcare, in order to really have an impact. We need to get our security experts, IT project managers, coders, consultants, and data scientists all thinking about the impact they can have on helping the people in their community live healthier, and therefore less expensive, lives. Because when we care, we make a difference.
“I’m putting more money behind women-run businesses because of return of capital and performance; this is what matters,” said self-made millionaire Kevin O’Leary, in the closing keynote at HIMSS2017 last week. When it comes to growing a business, Kevin has a proven track record you can easily find online if you don’t already know it from the U.S. hit show, Shark Tank. He has invested millions in startups over eight seasons of the show that hosts entrepreneurs pitching businesses and requesting support.
When taking a look at the returns in his portfolio, Kevin O’Leary noticed the ones with the greatest returns are owned or run by women. And what he called out about their management style is universally applicable in business.
It may also be a reason why we’ve seen in our research at HfS that the #1 thing that executives would change about the outsourcing services industry – per 25% of respondents – “more women in executive roles.” What we can learn from women-run businesses that are realizing higher results:
Allocation of Time: “If you want something done, give it to a busy mother.” This is about focusing on what you know needs to get done first to impact the outcomes that matter; and about delegation, not trying to “do it all.” As an example, Kevin pointed to Honeyfund, which is approaching ~$500 million. He describes CEO and co-founder Sara Margulis’ approach with her team as: you have goals to achieve on a monthly or quarterly basis, period. It’s not about “how” or watching to see it done. It is closely linked, however to #2…
Achievable Targets: In the companies run by women, the teams achieve revenue targets over 90% of the time, in Kevin’s experience with his portfolio. He claims this is because women tend to set realistic goals and motivate productivity. When individuals and teams achieve goals, there is a feeling of satisfaction, turnover is lower, and productivity is higher. In some circles, it’s called employee engagement. The opposite approach is to set goals that are too high to be achieved … leading more often to higher staff turnover, lower morale, and lower return on capital.
Along with the management style, Kevin also pointed out that successful business (and project) pitches have three characteristics: (1) Articulation: Ability to articulate an opportunity in 90 seconds or less; (2) Uniqueness: Why you are the right person or the right team to execute; (3) Numbers: Know the numbers on the size of the market/opportunity, margin, etc. Altogether, these three, with the passion of a leader for her cause, can take a pitch from a spark to a sizzle to an explosion.
While Kevin’s observation comes from a review of his portfolio of start-ups that survive the explosion to move into operations, these two “T” characteristics can be universally applied to management in current business as well.
Bottom line: Today’s businesses need this type of outcomes-focused performance management with meaningful and achievable targets in this day and age when so many businesses that have been in existence for years are having to undergo transformation to become more customer-focused, interactive, and flexible.
The IoT hype in insurance continues unabated, with new research by NTT DATA suggesting that 3 out of 4 insurance carriers believe IoT will strongly influence their future products and services. Titled “IoT: Disruption & Opportunity In The Insurance Industry,” this U.S. based study surveyed end consumers and decision makers in carrier organizations on the subject of IoT devices in the home (thermostats, smoke alarms, garage door openers, door locks and bells). A few research findings for the two groups stood out to us.
Consumers are divided on their readiness to change
Two cohorts emerged from the consumer research, which also reflects in their views about smart home technologies. 64% of consumers surveyed, or the “Seekers” are younger, less loyal to their carrier, price-sensitive and want more personalized products and service. Unsurprisingly, the Seekers want their carriers to be more innovative and are more willing to share varying degrees of smart home data in exchange. The remaining 36% are the “Keepers,” older policyholders that feel protected by their current policies and are unlikely to make sudden switches. Overall, 50% of the consumers expected to buy smart home devices in the future despite privacy and security concerns, but the majority find current products to be expensive and complex: I still haven’t rigged up my “smart bulbs,” gifted over Christmas by a tech-savvy relative!
Insurance carriers get the importance of IoT
87% believe IoT will improve customer relationships, 83% see it as an opportunity to attract new customers, and 74% see IoT as having a significant influence on products and service. Already, 77% are ramping up IoT initiatives, with customer service and technology use cases at the outset. The major challenges for carriers are the inability to get smart home data (68%), building analytics into underwriting processes (62%) and the expenses of the carrier or customer buying and installing smart home devices (55%).
In my conversation with Normand Lepine, NTT DATA Consulting’s Sr. Director of Insurance Data and Analytics, he pointed out, “Carriers recognize the opportunity to expand their value proposition with clients through IoT. In the next year, pilots, strategy and lab work around smart home technologies will help carriers create new products and services.” We believe each carrier that is experimenting with smart devices will go through a calibration process with customers, all centered around one factor – data and how to use it to create meaningful products and services. NTT’s survey data hints at this as well, with the lack of data being a carrier challenge, and consumer responses suggesting that they are willing to share only certain types of data, depending on their demographics and lifestyles.
Implementing connected insurance solutions requires carriers to rethink major business functions towards becoming digital organizations.
Let’s consider the customer lifecycle as an example. Carriers will need strong, mobile-first, sales and marketing channels to attract and transact with the “Seekers.” They can leverage smart home device technology to offer two key benefits to customers – a more personalized service experience, and cost savings in the form of usage-based risk and premium determination (an “As-a-Service” offering). This customer acquisition effort will need to have straight-through processing, with smart underwriting powered by real-time profitability analysis. When it comes to customer service experiences, smart devices again play a few roles, such as providing insights (e.g. smoke alarm data) that can be made accessible to customers with recommendations on usage. If a carrier is interested in smart home technology to drive new customer experiences, customer interaction touchpoints can be reimagined with the help of interactive personal assistants (e.g. Amazon Echo). These at-home assistants can intelligently converse with policyholders for simple service requests throughout the customer lifecycle (as Nationwide, Grange Insurance and Safeco have started to do).
In addition to home insurance, we also see examples of carriers exploring IoT- enabled auto insurance, and large-ticket opportunities in areas like commercial insurance. What will be interesting to watch is the role that technology and business service providers play in this evolving market. From IoT infrastructure services to the design, development and running of the related data and analytics infrastructure and services, IT services such as IoT app development, platform migrations, and micro-services, consulting/advisory on new product development and rapid prototyping/testing of IoT offerings, partnering with device manufacturers (particularly niche, insurance-related startups), we see several new opportunities for service providers.
While IT and business services providers are investing in IoT offerings as a horizontal capability, carriers will need to find the ones that are doubling down on insurance, with the appetite to invest in the industry specifically. The survey data makes this much clear – both consumers and carriers are getting ready for IoT-led change. The question is—will the service providers be able to embed themselves as “As-a-Service” partners to the emerging “connected insurance” economy?
As the market for enabling and supporting the digital organization reaches fever pitch, HfS’ analyst team has run a detailed assessment of service provider capability to deliver the Digital OneOffice™ experience across the five pillars that align the front, middle and back offices. We believe it essential to evaluate how service providers’ emerging capabilities are stacking up, not just in each distinct category, but how they align to the holistic Digital OneOffice Framework across these five key pillars:
Pillar 1) The Digital Customer Engagement (Weighing 25%)
Pillar 2) Design Thinking: Designing Digital Outcomes (Weighting 15%)
Pillar 3) The Digital Underbelly (Weighting 20%)
Pillar 4) Intelligent Digital Support Functions (Weighting 20%)
Pillar 5) Intelligent Digital Processes (Weighing 20%)
This is HfS’ very first Digital OneOffice Premier League ranking exercise. We have taken the 5 key components of the Digital OneOffice described above, and scored each service provider on each category and subcategories as applicable (see the Digital OneOffice Organization illustration below). Using materials from recent research projects, namely Blueprint reports and many client reference discussions, we leveraged our broad analyst team’s collective knowledge of the industry to perform this analysis, involving analysts Phil Fersht, Melissa O’Brien, Barbra McGann, Jamie Snowdon, Tom Reuner, Derk Erbé, Reetika Joshi, Pareekh Jain, Khalda de Souza and Steve Goldberg.
The result below is the ranking of the top 25 service providers and how comprehensively each is aligned to the Digital OneOffice framework overall and enabling its clients to become more intelligent organizations that ultimately improve customer experience.
Why The Digital OneOffice is the Future of Outsourcing
The Digital OneOffice Framework is all about the design and implementation of the organizational digital experience and the creation of an intelligent, single office to execute and support it. In a few months, we won’t be talking nearly as much about intelligent automation and digital technology as the critical “value levers” for operations, as they become an embedded part of the fabric of the future operations platform for new generation organizations. Instead, we will be talking about an integrated support operation having the digital prowess to enable its organization to meet customer demand – as and when that demand happens. Everything about the digital organization is about engaging people by responding to their needs instantaneously, giving people their choice of medium to interact with it, be it voice, chat box, text, Facebook messenger, email, virtual agent, etc.
In this context, “Digital” describes the interactive channels that drive customer engagement, such as cognitive agents, interactive tools, mobile, social, text and chat. “OneOffice” describes the enabling technologies, such as unified analytics and cognitive automation, that enable real-time predictive capabilities and an engaging digital experience that unifies all the stakeholders across the organization: the customers, partners and employees. In short, the Digital OneOffice is where the organization’s people, intelligence, processes and the infrastructure come together as one integrated unit, with one set of unified business outcomes tied to exceeding expectations.
The Bottom-line: The Winning Service Providers are those who can become Digital OneOffice Organizations themselves
The bottom line is that digital is all about realigning the organization to the customer; even those processes and roles which aren’t even remotely customer facing still play a critical role in supporting the digital customer experience. The service providers we have evaluated all play different roles in enabling that for clients. Those which scored well in the rankings are doing the best at bringing together the cross-organizational Digital OneOffice concepts for clients, but in the age of frequent and abrupt disruption, things can change. In 2017, we’ll continue to see service providers making moves to invest in and build out more comprehensive Digital OneOffice capabilities as well as those which will double down in the pillars of The Digital OneOffice where they excel. These are still early days, and we anticipate the next iteration of the Digital OneOffice Premier League will produce winners which have proven they can integrate the pieces most effectively, driving transformation across the pillars leveraging their strategy, consulting, Design Thinking and operational enablement prowess.
To conclude, people simply want to operate digitally these days, whether they are an employee, customer or partner. They want to use interactive technology, mobile apps, social media, text, online chat, etc. to get things done. We are used to using sophisticated digital technologies in our personal lives, and now expect to use them in our professional lives. Whether we are buying products, groceries, renting accommodation, ordering Starbucks, takeout, applying for mortgages, insurances policies etc., digital technology is the new language of business. The issues facing many traditional businesses today is the fact that while the consumer is increasingly digitally sophisticated, many organizations are still beholden to legacy technologies and processes that are fast sinking into obsolescence. In addition, many have employees in the “back office” who are so steeped in the legacy way of doing things, they are facing a double-edged issue: how do they drag their operations kicking and screaming out of the dark ages to support their digital customers? The answer, believe it or not, is quite simple: break down the barriers between departments, involve the digital customer experiences into all the business processes and practices, by creating a Digital OneOffice where an organization’s customers, partners and employees are all entwined together to deliver the end customers the ultimate experience, and the operations function a genuine connection with the true running of the business from back to front.
Net-net – every touch point of the modern business needs to be digital – and to achieve that you need to be a digital business right at your core, where the most rudimentary of processes are automated to enable the building blocks of the digital experience. The winning service providers will be those which are true digital organizations that can partner with their clients to feed off their DNA and culture.
Salesforce remains one of the most important and established enterprise SaaS products in the market, with a vast ecosystem of service partners from the smallest consulting firms to large global integrators. This makes the choice of service partners increasingly complicated and ever more vital as the competitive landscape for these services grows. This is especially important for enterprise organizations that are looking to SaaS projects as more than just IT initiatives, but as catalysts of wider business innovation and to drive business value throughout their lines of business.
HfS concentrated its recently published HfS Blueprint Report: Salesforce Services 2017, on the large enterprise service providers, the winners being those that are able to add the most value to a large scale adoption of Salesforce. This report outlines trends in service delivery and profiles twelve of the leading service providers in this increasingly dynamic market segment. It identified key selection criteria which included the ability to understand enterprise clients’ business imperatives and provide timely and flexible services. In addition, buyers need to look at providers who invest in Salesforce tools, on achieving specific Salesforce certifications, have relevant experience and the requisite geographical scale. These were the main considerations to ascertain service providers’ capabilities and commitment in the Salesforce services market.
In the Blueprint report, we positioned Persistent Systems in the High Potential category. Compared with the other service providers in the Blueprint, Persistent Systems has a relatively small Salesforce services practice, focused on US enterprise clients. However, its Salesforce services business is in high growth, and the service provider is investing in all the right areas to achieve success. Although Persistent Systems serves clients in several industry sectors, it is primarily focused on Healthcare. This is reflected in its investment in tools, including a healthcare accelerator tool, and the Physician and Patient Relationship Management, which has Fullforce Industry Solution certification. Moreover, healthcare clients commend Persistent Systems for its understanding of their business specifics – one commented that their chief architect’s understanding of their business was “outstanding”. In addition, Persistent Systems achieved high customer satisfaction scores from its client references, who were mostly impressed by the strength of its resources, and their ability to provide both business and technical advice. This is also backed by a flexible and cost-effective offshore delivery model. Moreover, Persistent Systems helps drive innovation within the Salesforce development community, where it helps software vendors, App Innovation Partners, to develop SaaS products using the Salesforce App Cloud.
HfS believes that Persistent Systems (www.persistent.com) is a great fit for enterprises needing strong resources, with offshore delivery capability, particularly in the US healthcare market.
Persistent Systems was rated highly in the Blueprint for the following criteria:
Quality of account management
Strong resources
Incorporate client feedback
Vision for Salesforce effectiveness
(HfS Soundbite snapshot of service provider capability on Horsesforsources.com is part of the HfS Blueprint™ Digital License agreement)
HfS is about to publish our quarterly analysis of the service provider and shared service center location announcements by Hema Santosh. As a taster, we would like to post the highlights and the infographic from this work.
Highlights for the quarter:
We see expansion of jobs in both the US and India – of the estimated 9,000 jobs that these new locations will house, 4,350 will be in the US and 4,300 will be in India.
Industry specific BPO drives expansion with 3 new BPO sites in the US in Q4 2016.
Downsizing – we saw some down sizing of in-house centers with eBay, Standard Chartered and Verizon all shrinking some centers.
There are already more mobile connections (over eight billion in 2016, according to GSMA) than people on this earth and some forecasters are already predicting we’ll have 20 billion devices or things connected in a couple more years. Yes indeed, people, the internet of things (IoT) has truly come to life in recent months, and this is only going to escalate on a massive scale.
However, is simply having this obscene level of connectivity really going to have a transformational impact on us? Won’t we reach a point of connectivity saturation where the net benefits almost become negatives in our lives, or will IoT be extended to true commerce and the banking of things?
Up until very recently, these discussions have been more science fiction than reality, however, a news item this week raises our hope that IoT will evolve in this direction and we can start talking about a world beyond mere prolific device connectivity.
IBM is partnering with Visa to offering Visa’s tokenization services to its IoT clients. Every IoT device or thing can be made a point of sales (PoS) terminal and be able to enable transactions itself, such as a car ordering spare parts and a refrigerator ordering groceries. (Read here.)
Aside from the operational complexities, analysts have liberty to think about future scenarios. We can visualize this evolution of things in two dimensions. In the horizontal dimension it is human, and different categories of things (industrial things and consumer things). In the vertical dimension, it is digital activities. It starts with connectivity and then extends to payment, commerce, and banking.
The mobile revolution has been providing connectivity to humans from late 90s. Now the era of connectivity of things has started. On the digital activity dimension, humans are using digital payments, digital commerce, and digital banking.
Getting connectivity to things is the start. It will become interesting when connectivity of things is extended to the payment of things and ultimately to the commerce and banking of things.
Internet of Things (IoT): Things have a unique identity by SIM, RFID or similar identification technologies and can be connected to each other by different communication technologies. Things produce data with sensors attached to them, which can be used for generating information and insights.
Payment of Things (PoT): Things have the capability of paying themselves. Things can do commercial transactions and pay automatically, without human intervention.
Banking of Things (BoT): Things have a legal and a commercial identity of their own and can bank on their own. They have their own existence and bank accounts. They can take a loan, generate revenue, make deposits and can do all commercial activities which humans do with banks.
The use case of banking of things could be a machine or a car, which is not owned by anyone, and it can have its own identity. Banks can give a loan to a machine and the machine can use it to pay its initial cost to the manufacturer. The user can use this machine and pay usage charges for the machine in its bank account. A single machine can be used by multiple users. The machine can pay interest back to the bank, pay for its own maintenance, pay for insurance, upgrades and can decide what to do with its profit.
Similarly, an autonomous car can benefit from the banking of things. A car can have its own identity. It can operate like a taxi and available on demand like Uber. But unlike an Uber cab of today, it will not have any owner or driver. Users can use them and pay charges to car’s bank account. The car can pay interest to the bank, pay for insurance, taxes, gas (or electric charge), maintenance, upgrades and can decide what to do with its profit. Combine this with artificial intelligence, the car can decide how to optimize its activities for maximizing profits. Combine this with robo advisors, the car can invest its profit for maximum returns. Combine this with blockchain, the car can enable smart contracts between passengers and cars.
Why is this important?
As noted in our earlier IoT research, IoT is real but not yet transformational. For transformational impact, IoT needs to be combined with other technologies and commercial activities. The IoT combined with PoT and BoT can have transformational impact as discussed in earlier use cases. Earlier waves of mobile connectivity and its evolution have produced Uber, AirBnB, WhatsApp which decimated the business models of many industries. Even internet businesses of Google, Amazon, Facebook leveraged this evolution to consolidate and expanded their positions by dis-intermediating so many traditional business models. Now IoT and its evolution to PoT and BoT will have potential to disrupt many more business models and industries.
Bottom Line: IoT provides the initial building blocks and it will evolve to Payment of Things and Banking of Things to disrupt many more business models.
The service provider ecosystem can play an active role enabling enterprises in their journey towards IoT and beyond. Enterprises now need to embrace the Digital OneOffice more than ever to thrive in this era. There is a lot of advice enterprises can still use to prepare themselves for the future. So this leaves us with the next trillion dollar question: Can enterprises really bank on service providers to take them to the world of Banking of Things?
When HfS Research community members check back here later this week they will have access to my first major research effort for HfS since joining late last year: “Predictive Capabilities in HCM Systems”. This Blueprint Market Guide includes trends, themes and related implications for both buyers and solution vendors, an evaluation of these capabilities within 9 HRMS or HR System of Record vendors, what to watch as this emerging area continues to evolve, and – of course – our recommendations for driving business value and ROI from these capabilities.
The aforementioned 3 reasons are:
Surprising trailblazers … such as some of the HRMS players blazing the trail for other vendors to follow (aka our High Performers group) are probably not who you’d expect; e.g., none of the top 3 rated vendors on these specific capabilities are in the top 3 from a market share perspective.
Insights … as well as market intelligence that will likely make you say to yourself “Hmmm, I haven’t thought of that.” As just one example, there are very logical reasons why a number of the 9 HRMS vendors covered selected ‘predicting flight or retention risk’ for their initial foray into this product investment area, but also some not-so-obvious reasons. Among the latter ilk, the “consequences of being wrong” are probably not as severe as with a number of other examples of predictive HCM use cases (actual and hypothetical) highlighted in the Report.
Recommendations … including why investments from both vendors and customers in this exciting product innovation area should arguably be ratcheted up, and ways that both parties can do that and start reaping corresponding benefits while proactively managing risks and costs.
Bottom Line:This first-of-its-kind industry research from HfS will shine a bright light on one of the most promising advances to hit HR Tech since on-premise, client-server deployments went the way of the dinosaur.
Yes, the costs to hop onboard are not insignificant, but you can perhaps start with an economy ticket (modest investment) and then go further into this realm when business impacts are obvious. In time, HfS believes they will be, and early adopters often hold onto competitive advantage once they have it.
At a time where alternative facts and fake news open doors to a parallel universe, where global labor markets are being disrupted by various flavors of travel bans to the United States, the specter of a wall being built at the US-Mexico border that costs more than the entire Space-X program, a reform of H1B visas that could likely dismantle the traditional outsourcing model, and a curious thing called Brexit that could change the global trade landscape forever, one might be forgiven for feeling slightly disoriented. Yes, people, we’ve arrived at a time where the very foundations for service delivery models across the industry are being put at risk, where there is no written rule book for how to get ahead of this. So what better time than to add a sprinkle RPA into this global potpourri of disruption? Maybe a food dose of process automation will give us all something to cling onto during these heady days?
Against this slightly perturbing background, what is the state of the RPA market, the emergence of the virtual workforce – and how will it affect the broader markets? Is RPA the silver bullet to overcome many of these issues and obstacles? Back in December, we already chartered the service provider capabilities around RPA. As a result, we not only got a strong endorsement for our findings, but stakeholders were asking us to provide a similar assessment for the RPA tool providers themselves. To get more clarity on these pressing issues, we have sent our automation overlord Dr Tom Reuner back into the RPA community to separate the wheat from the chaff… the bots from the clots.
Based on his findings, Tom and I went into conclave, compared notes and war stories, as well as cranking the numbers for the evaluation. And finally, we have white smoke. Thus, we are pleased to share the new 2017 RPA Blueprint grid and the key findings with you.
Phil Fersht, CEO and Chief Analyst: Despite all the noise, many stakeholders still struggle to comprehend what RPA is all about. Tom, can you help these lost souls to get up to speed before we dive into the details?
Tom Reuner, SVP Intelligent Automation: I wish that would be so easy, Phil. Despite all the noise RPA is still an undefined market. To make matters worse, the IT juggernauts, the service providers, and management consultancies are only very gingerly educating the market. Two key reasons for that. On the one hand, it is still a nascent, albeit fast maturing market. On the other hand, it is a classic case of Innovators Dilemma: The large service providers still make more money with system integration and labor arbitrage. A cross-industry working group under the leadership of Lee Coulter and AJ Hanna from Ascension Health under the umbrella of the IEEE standards body, with the participation of the leading RPA tool providers and consultancies, is doing sterling work to drive a taxonomy and common understanding of the different building blocks of Intelligent Automation and thus also RPA. Yet, it will take considerable time until these suggested definitions will be adopted by the broader industry. The IEEE definitions of RPA are a useful reference point to describe the scope of this Blueprint evaluation: “Robotic Process Automation (autonomous)”: Preconfigured software instance that uses business rules and predefined activity choreography to complete the execution of a combination of processes, activities, transactions, and tasks in one or more unrelated software systems to deliver a result or service with human exception management.”
While nothing is defined in the context of automation, the common denominator of all the approaches to automation is decoupling routine service delivery from labor arbitrage. This is not only the common denominator but also the cause for the widespread disruption that we are expecting, largely on the supply side. But the providers are not always helping either. The biggest misconception and confusion is caused by the related proposition of desktop or Robotic Desktop Automation (RDA). It is here where there is so much smoke and mirrors in the industry. In simplistic terms, RDA has evolved from screen scraping in the front office where disparate sets of information were integrated to support call center agents. Thus, RDA is focused on quick deployments on desktop level, typically customer contact agents. In RDA, activities are being automated, while in RPA (back-office) processes are automated. On the danger of over-simplifying, in RDA the agents are passing on tasks to robots, while in RPA the robot passes on tasks to agents. And as we are on the topic of subterfuge, it is difficult to ascertain how much scripting and coding is actually needed to get solutions off the ground? Many contracts are largely a Managed Services agreement. This is confounding what automation and RPA should be all about, namely the decoupling of routine service delivery from labor arbitrage.
Phil: So, clear as mud. Against this background, what really is going on in the RPA community?
Tom: Well, yes. But I think the reason for so much smoke and mirror is that there is so much at stake. The large service providers fear an erosion of their profits, while the RPA providers have often banked their pension pots on the success of their companies. Looking at it from a more positive angle, most providers are evolving their offerings toward the notion of operational analytics and the broad bucket of cognitive. In particular, the integration of semi-structured content through Machine Learning or through partnerships with providers like Celaton or Loop AI who help to create patterns in unstructured environments.
Aligned with this maturation in the market, we see more funding coming through. The latest example is WorkFusion who raised $35m in January. However, the biggest shift in the market, underlining the increasing maturity, is the shift of mindset from RPA as a non-invasive turn-key solution that marked the early phase of market development to the notion of RPA as a conduit for transformational projects, looking at end-to-end processes rather as a short guarantor for cost takeout. And RPA as an enabler for transformational projects is the cornerstone for our evaluation of RPA providers.
Phil: So Tom, what was your methodology behind putting together the 2017 RPA Blueprint Snapshot?
Tom: Rather than taking a function and features centric evaluation that is more appropriate for software products, we are taking a market-led approach which we feel is more aligned with the need of buyers in the sourcing industry. The RPA Blueprint Snapshot is building on and expanding the discussions with stakeholders as well the research of HfS’ Intelligent Automation practice. Our Blueprints are based on multiple client interviews, interviews with advisors, service providers and internal analysts who have experience working with the RPA platforms. Our scoring system only allows for 10% of analyst judgment, where we made the case for your strong innovation. Our weightings are partially based on importance criteria we glean from our State of Industry survey with KPMG which covers over 450 major enterprises. As RPA is not yet commonly defined, we are taking a strong steer from the evolving RPA strategic partnerships of the leading system integrators and BPOs.
Against this background, and in addition to the above inputs, we have reached out to the RPA providers with an RFI set out to help us evaluate them against a set of criteria across both execution and innovation. As we have outlined above it is not an easy undertaking as there is so much smoke and mirror in the market. But given the strong endorsement for both our Intelligent Automation Blueprint and our RPA Premier League Table, we are confident that our approach is providing stakeholders with relevant information and guidance.
Phil: Not beating around the bush, who is standing out as RPA performer?
Tom: There are many ways to look at the RPA market given the caveats that we have called out. But painting with a broad brush, the companies in the Winner’s Circle – AutomationAnywhere, Blue Prism, UiPath, and Pega – are the providers of choice for the channel partners focusing on transforming back-office processes. Behind this leading group, the positioning is becoming decidedly more blurred. The best way to think about it is to be clear about the use cases and requirements to add more specific providers for tender or RFI. Be it WorkFusion for broad cognitive capabilities, NICE for front-office activities, Redwood for ERP-centric automation or OpenConnect for a focus on operational analytics. Almost below the radar, there are providers like Jidoka with core RPA capabilities who carved out a niche in the Spanish-speaking world. Similarly, Contextor who are evolving from an RDA position to broader RPA capabilities, have a strong position in the French market. Beyond a geographical focus providers like Kryon Systems or Softomotive have made significant progress evolving from attended to unattended scenarios, while KofaxKapow through acquisitions offers a broad portfolio from OCR capabilities to process analytics.
Drilling down into the specifics, the market is dominated by the “duopoly” of AutomationAnywhere and Blue Prism. AutomationAnywhere is strongest in F&A, offshore delivery centers, and the US market. Conversely, Blue Prism is leveraging the first mover advantage with strong partner relationships, having the strongest impact on industry specific services, headquartered CoEs and the UK market. Behind the two market leaders, UiPath is growing strongly as clients cite the effective partnership culture and attractive commercial terms. Thus, for mature clients, UiPath is increasingly seen as the third strategic option in multi- vendor environments next to AutomationAnywhere and Blue Prism. Adding to this mix, iPega is being credited for its the quick deployments as well as the integration of both RDA and RPA in attended or un-attended scenarios. At the same time, Pega offers broader functionality by extending bots to it BPM suite.
However, the biggest surprise in our evaluation was AntWorks that thus far have been below the radar of industry’s stakeholders. Their value proposition is about linking core RPA capabilities with machine reading including semi-structured content such as handwriting in forms as well as broader cognitive capabilities including pattern recognition, even in images. Furthermore, similar to providers like RAVN, AntWorks has Enterprise Search and Machine Learning functions to support extraction of data from legal documents. The combination of Computer Vision and pattern recognition allows AntWorks to provide one solution where many service providers have painstakingly integrated different tool sets. Even though around the broader cognitive capabilities, AntWorks is competing with IBM Watson, it goes without saying that AntWorks is still early on their journey and therefore needs to demonstrate client references to the broader market.
Phil: Despite the market being nascent, albeit maturing market, WorkFusion has announced a free RPA product. What do you think will be the impact?
Tom: When WorkFusion announced a free RPA product dubbed “RPA Express” back in December, many executives in the automation community went pale. In defiance, and sometimes confusion, executives were quick to suggest that WorkFusion does not have a “proper” enterprise grade RPA product. There are many different ways of looking at this announcement. First of all, credit where credit is due: WorkFusion has one of the best, if not the best, marketing programs in the Intelligent Automation community. And sometimes there is a hint of jealousy creeping in when we discuss WorkFusion with their peers. More pertinently to the RPA discussion, while WorkFusion might lack the enterprise-grade capabilities in core RPA that the providers in the Winners’ Circle have demonstrated, they have strong credentials in adjacent capabilities such as crowdsourcing, the integration of Machine Learning or enhancements to the RPA Object Library such as the capability to drag and drop entire processes (e.g., “KYC,” “corporate actions,” “OCR”). What is boils down to in the end is to get access to the table where the sourcing discussions and decisions on automation are being taken. WorkFusion has successfully demonstrated exactly that. Not having enterprise grade core RPA capabilities has thus far not harmed their revenue stream. Thus, the announcement might not disrupt the market, but it still might end up negatively impacting valuations of RPA providers as many look for an exit strategy.
Phil: Gazing into a crystal ball, what can we expect for 2017?
Tom: Phil, if I would have all the answers, I should probably change my job and could make a lot of money. But here are three scenarios that I am seeing for 2017:
RPA will remain undefined. Over the next 12 months, the perception of RPA will remain blurred. RPA capabilities will fold into broad propositions such as Digital Workforces or Cognitive Automation. This is adding to the continuing confusion around RDA. Extending on that, in 18 months we won’t talk about RPA anymore. Most of the leading technology providers will have been acquired and RPA is a reality in the back-office.
M&A through ISVs. Buyers will have to do scenario planning for acquisitions. While this might bring broader capabilities, licensing costs are likely to increase as well. Pega’s acquisition of OpenSpan is the template for such developments. Beyond the tool providers, the automation pure plays such as Symphony and GenFour are likely to be equally absorbed by larger consultancies.
The emergence of an Automation Ecosystem: We already have seen the impact of Watson, as it is starting to evolve into an ecosystem. Suffice it to say, IBM could be the driving force to extend those capabilities, as we have argued some time ago. But it could equally be one of the tool providers significantly expanding its reach. As stated, we are seeing the providers in the Winner’s Circle moving toward the notion of orchestrating much broader automation capabilities. At the same time, we are seeing providers like Blue Prism and UiPath being deployed in IT-centric scenarios such as IT Help Desk and Application Management, pointing to a convergence of scenarios and tool sets.
HfS premium subscribers can access the RPA Blueprint Snapshot here.
