Like many Americans, I’ll spend this coming “Black Friday” nursing a turkey hangover and shopping the Amazon iPhone app from the couch instead of battling mall crowds. By most accounts, this year’s seasonal retail projections are better than last, but surviving in an increasingly intense competitive environment is no easy feat for retailers. At the heart of the issue is a clear call to arms to understand and satisfy a digitally savvy shopper. So how can retailers and their service providers rise to the challenge of supporting the digital end customer?
Retailers have to embrace disruption or risk replacement
The retail industry is in the midst of monumentous disruption, with the advent of ecommerce and rapidly increasing shopper expectations for an easy, seamless experience. It isn’t just about the shiny front end experience with sexy websites and mobile apps, it’s about an integrated back and middle office that supports those experiences, much like the OneOffice endgame we’ve been talking about.
Most important for retailers now is bridging online and in-store experiences. While online sales are still a relatively small percentage of retail revenues today, smart retail organizations are paying close attention to ecommerce trends in order to avoid a slip into obsolescence, “Blockbuster style.” Traditional retailer bankruptcies and store closing announcements seem constant, while competition among brick and mortar and online shopping sites alike is fierce. Some traditional retailers are betting on unique in-store experiences to revitalize flagging sales, while others are leveraging their vast physical presences to bolster omnichannel sales as points of pick-up or shopping of online purchases. Traditional retail giants like Walmart are betting big on competing in the online shopping space, with its recent acquisition of Jet.com, and it seems like all business are trying to live up to the expectations of the quick, seamless, personalized experience—the “Amazonization” of consumer culture. Meanwhile, the need to support customers who expect to shop using mobile apps on their smartphones and tablets adds another dimension to ensuring competitive relevance.
Automation and cognitive at the front of retail’s journey to OneOffice
Recent survey data shows that the vast majority of retail buyers agree that the impact of cognitive and automation is going to be a critical component of future operations, as well as the necessity to leverage new technologies in order to become more effective. Retailers (along with banking and travel) are leading in experimentation with some of these pilots. For example, the Watson- powered “Macy’s on call” is a pilot in several Macy’s stores allowing customers to type in questions while in store to help them navigate products and facilities. Staples is using IBM’s Watson for ”on-demand ordering”(which by the way, could really impact some outsourcing contracts which are heavily dependent on faxed B2B orders and manual data entry). Banking/ credit card use of bots will also impact the space, for example, Mastercard’s foray into bots which allows shopping on messenger apps.
Use of bots is aimed at improving the customer experience, but creating a simpler, more personalized experience. While bots are changing how retailers communicate with customers, the human touch becomes even more relevant. Even as bots continue to mature, their role is often to simplify the self-service process and/or augment the agent’s work, rather than completely replace it. HGS’ DigiCX platform is an example of a service provider working on an app that “pivots” between agent and bot, a solution which is archetypical for for retail customers.
What this means for service providers:
Greater requirements for service providers: Engagements may be insourced due to decreased volume as a result of automation/ self-service, placing a greater focus on more complex engagements requiring more from providers. As the data above shows, 83% of retail buyers are expecting their service providers to deliver both technology and process expertise. Areas such as planogramming, supply chain analytics, storefront operations support, core marketing operations, and ecommerce support may often be outside of the traditional definition of BPO skills but will become requirements to do business with retailers. Successful service providers will stitch together a multidisciplinary band of skillsets to successfully target retail operations.
Flexibility is still a key requirement. Ultimately what will continue to drive a lot of the outsourcing of customer service in retail is the requirement for flexibility, where retail has a unique need for seasonal ramping and flexing. Retail clients we speak to look to service providers as “uber when we need a ride.” We are seeing certain service providers try to address this with alternate delivery models. Examples include relying on a much higher percentage of work-from-home agents that are retained long term and leveraging part-time university talent pools at nearshore destinations (i.e. Jamaica). The challenge of seasonality is not going to go away, and cracking the code on it has the potential to impact revenues at peak times—making retailers particularly amenable to working with innovative service providers in this area.
The Bottom Line: Creating an intelligent retail operation is critical for survival
There is so much more on the horizon for retail today, given the potential capabilities around IoT, augmented reality and other advancing technologies to be used in store and for mobile shopping. For an industry awash in data– review data, social data, shipping data, etc.—the retail industry still has many more opportunities to get to know its customers, which will only get more complex with time. Given the pace of development and technology, being students of observation and having flexibility to change is critical for retailers to remain in business.
A former colleague had a penchant for using phrases that stuck with me… One of them was – “I have questions for all your answers.” It took me years of working with Charles Edward “Skip” Odell to learn that his middle name was Edward, thereby explaining why the letters “CEO” on his cuffed shirts were not just aspirational.
During those same years, the HR technology domain was very much growing up, and the topic of predictive capabilities wasn’t generating many questions or answers in most customer or solution vendor circles.
While HR technology solutions have clearly matured in many ways (e.g., engaging user experiences leading to broader usage outside HR Departments, mobile computing’s dominance and increasing cognitive capabilities), the use of science within HCM platforms is arguably still at the adolescent stage. Lots of promise, seemingly random growth spurts, daunting challenges and some really pleasant surprises along the way.
Pulling Back the Curtain on Predictive HCM Analytics Capabilities
What are some of the pleasant surprises? Well for starters, literally — as these were in-fact the first predictive capabilities introduced in the HR tech arena — more customers are now using tools that highlight employee retention risks, or future star performers among job candidates. Both of these predictive capabilities, and most others, are of course generally based on validated algorithms adapted to the customer’s business context and data relationships; and either the customer’s data scientists or the system itself (via machine learning) does the adapting and periodic re-calibrating.
But as Skip astutely pointed out, interesting answers often beget more good questions. So relative to predicting retention risk or future star employees — or any other situation or outcome that is attracting predictive HR tech capabilities, here is a small sampling of questions that arise:
What are some of the most impactful and innovative examples of predictive analytics available to HR technology customers today, and which are being widely leveraged?
How long does it typically take for a particular HCM system’s predictive capabilities to start becoming evident, valuable and/or reliable?
Do the predictive capabilities within enterprise HCM software apply to most organizations using them, or is the predictive value sometimes more robust in certain industries or types of organizations?
What are some of the operational factors that might enhance or impede the business value to be derived when deploying predictive HR technology?
When should the guidance and insights delivered by predictive HCM tools be acted upon – including on the basis of prescriptive analytics; i.e., when the system prescribes specific and generally reliable actions to take?
What are the key trade-offs (e.g., benefits and risks) inherent in predictive engines that adapt themselves through machine learning … vs. engines (=algorithms) that rely more on customers to adapt them?
Finally, how will these capabilities evolve over the next few years, and will most customer organizations be ready and equipped to take advantage of these advances?
Announcing Groundbreaking Research
HfS Research will be pulling back the curtain on the above questions and many other interesting nuances related to leveraging these emerging HR technology capabilities. We’re very excited to announce our first-of-its-kind research and Blueprint Report entitled “Predictive Analytics in HCM Systems.” Publication is set for March 2017, and we expect many of the major HCM vendors – both HRMS and Talent Management Suite vendors – to participate.
A Point of View (POV) “Time-to-Predictive Value in HCM Solutions” is also being published this week and is available (complimentary) with a registration if you are not already a member of the HfS research and knowledge-sharing community.
Bottom Line
There are some amazing capabilities being brought to market that clearly demonstrate the arrival of science in HCM systems. For customer organizations wanting to take advantage of the increasing scope of these predictive capabilities, and for solution providers wanting to continue differentiating through related product innovations, the research we’ve just initiated should be quite valuable.
Wait, what is RPA symphony and why does my shared service center need it? This blog is about exactly that – the use of robotic process automation (RPA) by shared services centers, where we found two different but equally effective approaches that share a few common traits. I learned these stories on the RPA panel at the NASSCOM BPS Summit in Bangalore a couple of months ago and followed up with the speakers to learn a little more. Capturing the essence of the two practitioner experiences from global in-house centers, we have the following approaches to getting started with RPA:
The iterative jazz version
Umesh NV, Sr. Director, India Shared Services at EMC Data Storage Systems in India got started early with RPA by “seeking forgiveness rather than permission” after hearing about the potential of RPA at the previous BPM Summit. Exhibiting an impressive sense of resourcefulness, agility, and spirit of experimentation, Umesh’s team dove straight in and rapidly built their own bot based on open source technologies. They picked a small use case as the first test ground – automated notifications to renew annual maintenance contracts as and when they came up. It took EMC three months to go live, and the team used video to capture and document the journey through every step. This video helped secure stakeholder buy-in after the initial implementation, which generated $2M in revenues as a result of the automation.
Within a short time, EMC is now working with an automation vendor to begin larger projects. Umesh picked up ambitious talent from the operations floor to train themselves to build what he calls a “rapid RPA COE”. They have 50 processes outlined already that are in various stages of initialization to institutionalization.
The well-planned orchestra version
Aithal Sachidananda, head of Honeywell’s finance shared service center in India shared his story, that differed from EMC. His team had been looking at RPA for the last six months. The first three months were spent poring over the available research and examples in the market that could help lead the way. In particular, Aithal called out the works of HfS Research and our Intelligent Automation He then threached out to practitioners for guidance, particularly relying on the progress that Umesh and team from EMC had made.
When it comes to starting down the path of incorporating RPA into your business, there are merits in both approaches or even a hybrid version of the two. The point, both panelists agreed, is that the time to start is now, with the help of pilots and ‘roadshows’ and build on the organizational culture to define what type of ‘COE’ or competency will emerge.
Umesh’s team is retaining its “hands-on” experimental approach, including its automation vendor as a partner in the effort. They are now testing cognitive automation technologies in the areas of fraud, and know there’s a long way to go to develop scalable solutions in this emerging area, but it is their long term strategy. Honeywell has instead crafted a roadmap towards developing their own COE, and are working with their largest BPO service providers – who Aithal says are currently ahead of the game – to implement automation tools across other functional areas like HR and procurement.
We are keeping an eye on automation initiatives like these that are cropping up in offshore shared service centers across industries. A COE approach – whether it’s built in a Jazz or Orchestra way – will help in-house centers position themselves as brokers of capability within the larger organization, managing business-driven outcomes. Getting adept at different types of automation technologies in these formative days will go a long way towards internal stakeholders perceiving their in-house centers not as a pool of cost-effective resources but rather, as providers of value that deliver business outcomes.
We can obsess about losing our jobs to robots, our traditional industries being wiped out by digital transformation, our politicians losing the plot… but it’ll all count for nothing if we abuse our valuable natural resources and pollute the air we breathe. So without further ado, let’s hear the real deal about on what’s going on in the energy sector these days – and how it impacts our world of operations and technology. And who better to talk to than HfS analyst Derk Erbé, who likes to take a long hard look at things…
So Derk…what do we need to know about the energy sector these days, with climate change, crazy oil prices etc? What are the key issues we need to care about?
First off, it really is a perfect storm at the moment. We’ve seen the world coming together to curb global warming in Paris, only a year ago. Rising social and political pressure in conjunction with technology advances and economic shifts are combining to create a positive atmosphere to address one of the biggest challenges of the coming decades.
We’ve also seen the sharp fall of oil prices from above $100 per barrel to $27 per barrel in February 2016, currently stabilizing around $45. The reaction from Oil & Gas companies to the crazy oil prices has been focused on survival for much of the last 18 months. Cost cutting was the primary reaction, resulting in the loss of 250,000 oil workers’ jobs. Two out of three oil rigs has been decommissioned and many capital projects postponed and canceled. This was not enough to save many oil and gas companies from bankruptcy. The initial hope of short-term recovery has faded and the realization has hit the market that this is the new normal; we are in a period of ’lower for longer.” Lower for longer means there is a protracted necessity for drastic change in the operating models of Oil & Gas companies. Service providers can play an important role in the internal transformation and conception of operating models that radically change the way the industry works.
The reality is the world needs a drastically different energy infrastructure in the future. Oil & Gas companies can be a part of that, but they are so busy surviving their contribution to the energy transition isn’t quite clearly defined yet. But the status quo is not going to help them survive, that is for sure. Refusing to change our ways in today’s energy sector is a certain recipe for failure. The low oil price environment created a momentum for change. What we need to care about is making sure the oil industry uses this momentum to start contributing to the energy transition and be a real player for the Paris Climate agreement goals.
I heard Al Gore speak recently and he gave us a lot of hope about the effectiveness of clean tech, solar power, wind farms etc. Is the future bright for our environment and which energy providers can profit from this?
The future is bright, with a couple of dark clouds gathering. There have been enormous advances in technology, policy and economics of renewable energy. The beautiful development the last couple of years is that renewable energy resources have become economically viable, so much that we reach a new record of price per kilowatt hour for solar and win every month or so. This has taken renewable energy out of the domain (and prejudice) of treehugging, green-loving hippies (nothing wrong with them by the way). That means it is now rational and economical to invest in renewables. A great example is MGM Resorts in Las Vegas. The epitome of capitalism is paying to leave the power grid, willing to take the $86 million exit fee in order to build their own solar capacity and buy cheap solar power on a long term deal. That is how fast the adoption of solar has changed. Winners will be those energy providers that are willing and able to accommodate a rapid move to renewable energy, integrate distributed generation into their production, sales and marketing operations seamlessly, catering to the changing needs of businesses, consumers and ‘prosumers.’
Storage is the next wave of innovation that will become economically and technically viable to take the market. This is an important part of the puzzle to make our energy systems futureproof, cleaner and more resilient.
Not all Oil & Gas companies have come out of denial when it comes to renewable energy and the fact fossil fuels will be replaced. We have recommended service providers to Prepare for the reality that renewables are here to stay. They need to have a strong story and accompanying service offerings about how to help O&G integrate renewable energy sources and build business and operating models around them.
So what is the impact of the digital economy on the energy sector? Is it being disrupted as much as other industries?
The disruption is taking a different shape than in many other industries like advertising, news or transportation. Digital has most impact on the operations side of the industry. The products are still the same, oil based products and gas, no way to digitize those or the delivery platforms of these products.
Digital technologies are a big part of the answer to the disruption of the industry that has been driven by the current oil prices. As mentioned, the imperative to drive out inefficiencies has long been low in Oil & Gas companies. Now they are operating at a loss.
New commercial and operating models are essential for survival. Both commercial and operating models that have been in effect for decades need to be overhauled as a result of these pressures of changing energy production and consumption.
There are major new opportunities for new services and revenue streams emanating from these changing regulations, hinging on digital technologies. We will see new commercial models emerge, providing greater flexibility for disaggregated power generation and further unbundling of the energy stack. These new models will be introducing new services and product offerings with a big role for Internet of Things services, bringing to life Machine Learning, network effects and enhanced management of consumption patterns, for both energy providers and consumers.
And how can IT / BPO services firms help energy firms today beyond saving them on operations costs? Are they really doing more than merely running the same old IT and business processes at lower operating costs? Is automation being widely talked about in the sector?
In a world of high oil prices and cash abundance, most Oil and Gas companies let inefficiencies exist. Now Oil and Gas companies are torn between short-term cost savings and investing in wide scale adoption of new technologies with a longer time horizon and time to value.
We are starting to see a strategic shift. After several waves of cost cutting through layoffs, delaying or canceling capital projects, selling off assets and slashing third party costs, the focus of Oil and Gas companies is shifting toward finding operational efficiencies, productivity and new value creation through the adoption of new digital technologies, analytics and intelligent automation. All part of a fundamental transformation of the operating model.
In 2015 and 2016 the name of the game was fixing the basics and starting to leverage new technologies. We will see a more pervasive and strategic push on transformation in 2017. As the focus of the industry is on cost reduction, production optimization and operational efficiency, automation and outsourcing are two principal levers available to the industry. In determining the right strategy, key questions we hear from Oil and Gas executives are:
» What is the core of our enterprise?
» What do we need to do internally, what differentiates us from the competition?
» What parts of our processes can we automate?
» Can we outsource what we can’t automate?
Service providers can play a role in this transformation, bringing more efficiency into processes, fueling innovation, implementing new technologies and preparing Oil and Gas clients for a new era.
One of the key attributes we looked for in this Blueprint process was if the service provider has a real Oil & Gas practice, not a collection of contracts with a sign “Oil & Gas Practice” slapped onto it. In this light we are interested in the way service delivery is organized, the availability of industry domain expertise, investments in industry talent, acquisitions of companies with industry-specific capabilities and partner ecosystems. Another point of emphasis in our research is the move to As-a-Service, how service providers are enabling new ways of working, how automation and analytics are used to tackle industry-specific challenges and the level of innovation brought to clients.
A couple of highlights:
Accenture has tremendous breadth and depth in its capabilities and experience serving the oil and gas industry, bringing digital platforms to the industry, making it one of the leading service providers in the move to the As-a-Service Economy.
Wipro’s Oil & Gas practice is innovation in digital, cognitive computing and automation (Holmes) and commercial models. What stands out is Wipro’s ability to bring valuable, new As-a-Service propositions to the market, enabling the introduction of clients’ new reimagined digital business models, a crucial capability for success in Energy Operations.
Infosys has a strong vision for Energy Operations that centers around actionable and accessible insights. A key driver behind the acquisition of Noah Consulting is their strategy of building foundations for clients that enable data management and data-driven decision making, further use of data and analytics is They are seen as a solid partner for oil and gas companies, helping solve industry specific challenges and build new, digital, operating models.
How to do view the whole energy operations landscape in another 5 years? How different will it really look when you look at the pace of change?
The value chain will not change dramatically in the next 5 years. Oil & gas will remain an important part of the energy mix for the next two or three decades. Peak oil is expected anywhere between 2030 and 2040, depending on who you ask.
For the buyer landscape, the Oil & Gas companies that will survive are those who are able to adapt to the reality of lower for longer, an oil price between $40 and $50 per barrel, drive out inefficiencies and become more nimble. But that means getting out of cost cutting mode and heavily invest in new operations models. Operations driven by data, harnessing new digital technologies. And breaking down silos. Our OneOffice concept is a great way to depict the journey Oil & Gas companies need to embark on in order to build a strong, intelligent, resilient, cost competitive organization.
On the service provider side, the winners will be those providers that are investing in deep domain expertise, in the form of talent and capabilities. Who are truly partnering with clients, providing expertise, tech and domain, flexibility and scalability in volatile circumstances. And show a willingness to co-invest and co-innovate. As-a-Service is a huge part of that and we’ve seen tremendous enthusiasm for this concept from service providers and Oil and Gas companies.
Bottom line, we are on the cusp of a reinvention of the operating model. No one knows exactly what that will look like, but it will take providers and buyers to come together and put all their resources and creativity to deal with this challenge.
And finally… good old Mr Trump doesn’t seem to outwardly care much about climate change and alternative energy, etc… What’s the inside scoop within the energy sector on him? Are people worried, or confident he will come around to furthering Obama’s support for Paris etc?
People are definitely worried. Because there is no time to waste for our planet, climate change is a process that doesn’t wait for the next president…. We must reduce our usage of fossil fuels and invest heavily in renewable energy resources. By and large there are two camps; those who fear deeply Trump will turn back the clock and renege on the Paris Climate agreement and meddle with the progress made over the last decade, with catastrophic consequences. The United States only trails China in carbon emissions, so them pulling back on promises and actions to decarbonize the economy would be a blow.
The other camp is also pretty negative about Trump’s vision and policy. The first signs, from his campaign claims that climate change is a hoax, a Chinese invention, to the appointment of a staunch climate change denier on his transition team, are not positive. But this group believes there is only so much damage Trump can do, as it’s really the market forces that drive the Renewable Energy revolution that is going on. Natural gas has replaced coal as the cheapest source for power generation. It’s not only much cleaner, It’s now also cheaper. Solar and wind have become economically competitive alternatives, with many wind and solar projects now cheaper than generating power from coal. A president can make a big positive impact, but it remains to be seen if he can hinder and/or slow down the forces of the market, civil society, business and the rest of the world.
I would say to President-elect Trump; focus on the future, not the past and put your energy and resources behind natural gas, solar and wind. Those resources have the future, coal is not coming back. It’s foolish to invest in bringing back coal, unless you like smog. And probably the argument Trump will be privy to, the solar industry has been a motor if job creation in the United States and the energy infrastructure needs a major overhaul, so put your infrastructure trillions to work there.
Thanks, Derk – great to hear your views on the space… for all HfS premium subscribers, click here to download your copy of the 2016 HfS Energy Operations blueprint report.
This is the age of the mid-size, aggressive, feisty service provider that can scrap for the traditional business but also has the flexible cost-base and freedom from legacy to go after the new stuff. There are so many exciting opportunities with clients that are simply too small, or too cannibalistic for the traditional services providers… many of whom are still waiting – in denial – for those $200m SAP rollouts that no one wants to do anymore, or those $500m infrastructure deals that will never, ever happen again. Where better to be that at a service provider which can lead with automation-led offerings, where being disruptive is the business model – where all new opportunities are greenfield… and causing many of the traditional service providers to squirm in their boots, pretending their world isn’t falling apart all around them.
So welcome to HfS to Chinmoy Banerjee (see bio) who heads business process services for Hexaware – whose entire go-to-market strategy is based on disrupting the legacy outsourcing model…
Phil Fersht, Chief Analyst and CEO, HfS Research: So, good morning, Chinmoy. It’s great to get some time with you today. Perhaps you could start by telling us a bit about yourself?
Chinmoy Banerjee, Global Head of Business Process Services, Hexaware Technologies: Sure, Phil. So, I grew up in India and after finishing my MBA in Finance I joined a bank. I spent a few years there and the last job I did was as a Forex trader. I then moved to PwC Consulting for a few years, and in 2004 moved to the US in the BPO sector. Along the way in the US, I completed an Executive MBA from TRIUM as well—which is a combination of NYU Stern, London School of Economics and HEC Paris. I’ve been disrupting the industry for the last three years with Hexaware, running their BPO business.
Chinmoy Banerjee surrounded by members of his Hexaware team
Phil: For those of our readers who might not be that familiar with Hexaware, could you give us a very quick snapshot of the company and what it’s doing today? What are the core areas where you feel that you win against the competition?
Chinmoy: Sure. Hexaware has been around for a while. This is our 26th year of existence, but in 2013 Baring Private Equity acquired about 70% of the company and Keech, our CEO (R Srikrishna or Sri, aka Keech), came in soon after that. Since then we have been going to market in two areas: Shrink IT and Grow Digital. Our view is that the industry is disrupting in a big way, and Shrink IT which is our major go to market as its name suggests, involves shrinking technology and the operations footprint.
It’s largely applicable to full-service lines, including application managed services, which is support, infrastructure management services, testing and, of course, BPO. Essentially, we have seen a lot of success in these areas. In 2015 we saw about 15% growth, which was the highest among Indian-heritage providers. But most importantly for us, we see that disruption is a will issue and not a skill issue. Given our size and our ability to be nimble, we have been able to pivot very quickly over the course of the last few quarters.
For us, cannibalization is not an issue. So we necessarily do not have to put our head in the sand, if you will. Because for us it’s an offensive play. We see that we can gain much more by being disruptive to ourselves, and cannibalizing ourselves as we have much more to gain in terms of acquiring new customers.
Phil: When I met your team recently in Boston, what excited me was that you don’t have all these legacy clients behind you to protect. You can go in with very disruptive offerings, particularly around automation, to win business. Can you talk a bit about that strategy and how is it working for you? And can you share a couple of current examples where you’ve found a way into a client because of the disruptive model you’re pushing?
Chinmoy: Absolutely, Phil. So, as a principle among all these offerings, we’re saying automation first, self-service next and people last. That’s kind of the shift-left strategy we have. Specifically, for BPO, we’ve come up with this offering called Digital Managed Services, which essentially updates automation concepts, largely through using RPA. But also through other disruptors, like OCR and other workflow tools. We’re working with a very large bank that has outsourced thousands of people to India, and we’ve started on a pilot with them. Essentially, we went in, did a quick assessment of about 350 people that they have, and we showed that, by using automation, we can automate about 50% of their headcount.
So what it means is that when we looked at the processes that are being done by the people, almost 50% of those processes could be automated using RPA. More importantly, what we said is we will be able to provide those benefits in a step-change manner from month one of go live. Of course, it’s a financial model construct, but in contrast to a BPO industry that saves 5% year-on-year or 10% year-on-year, this is significant.
These processes have already been outsourced for many, many years out of India and other lower-cost geographies.
The second thing that we say is that we will use best in class technologies. So a client does not have to be constrained by home-grown applications. Many of our larger traditional providers are peddling home-grown platforms. But we believe technology is an enabler. The price of technology, especially in automation, will keep coming down and it’s best left to the product companies to build that.
So we’re kind of using best in class. We’re not constraining the client to say that after three years, if they want to leave and go somewhere else, they won’t get locked into you, because they’re using proprietary technology.
The third point that we’re saying is that automation is real, but it’s also pragmatic. You can’t just automate and think that from tomorrow, everything is going to get better. There are multiple scenarios, multiple variances for complex processes that continuously need learning. The automation implementation itself might take a few months. But to get the bots better is a continuous process, and this is standard RPA. I’m not even talking about cognitive and artificial intelligence here. So all of this, in combination, we’re calling it as a Digital Managed Services offering and primarily our examples today are in the back-end. So by back-end I mean, it is payments processing for banks, reconciliations, settlements—things that do not have a voice component to them.
The other area that we’re working on that we’re very excited about is on the front-end side. We’re talking about customer service, and we’ve tied up with two partners here that we will announce very shortly. We’re taking the digital managed services offering to the front-end, and ultimately the goal is in the next six months to build an end to end model. On the front-end will have a disruptive partner, on the back-end will have a disruptive technology. But how do we integrate the two?
We see a lot of talk around machine learning and artificial intelligence, that is confusing, if you will. Because today there is more automation potential from an RPA perspective, that has really still not happened.. still not penetrated. We’re seeing our DMS offerings really fly a lot with most clients today. Because we’re taking US$30 million or US$35 million in TCV and are reducing that to US$15 million or US$18 million. Now, that US$18 million is still a lot of new work for us, but we’re disrupting the existing incumbents that do US$30 million.
The other component here that we feel is very interesting for our clients, and where we’re seeing a lot of traction, is the fact that we’re doing everything on a transaction pricing basis. Almost all the contracts that we’re disrupting are on a BPO FTE, or time and materials model. But we’re going in and doing it on a transaction pricing model from day one because, given that the data is available, these are all processes that have been outsourced, so we already have the data and we’re able to implement transaction pricing. In fact, 70-75% of all of our BPO contracts today, are on a transactional pricing model.
Phil: In your role, leading the BPO business for Hexaware, where do you see the most opportunity, when you look at the processes and offerings and needs from a client side?
Chinmoy: Disruption is happening in every area. But given our size, we want to be focused on a few areas. Our focus is largely in BFS and in the insurance space. Because here we don’t see too much competition trying to disrupt. As opposed to the traditional F&A and HR worlds, which are exceedingly mature and you see the larger players. Plus, the amount of RPA that is a possible it is good, but it’s not as much bang for the buck—as you can see when you do loans processing or payments processing, or settlements or reconciliations. Because to change those core platforms takes a lot more money—to make it truly disruptive and grow digital—as opposed to changing an F&A platform or an HR platform because you have more as-a-service models available. So we see most bang for the buck in those vertical solutions.
The second area that we are working on, which we’re very close to actually closing our first deal there, is on the customer service side. Traditionally, we have not done too much work in the customer service side simply because there wasn’t too much disruption that we were able to bring to the table. However, now with the virtual assistant platforms available and at least two, three players, we’re able to disrupt. As we speak, we’re doing a due-diligence with the large bank, looking at their call center that is being run by a traditional provider. It’s been run for five, eight years without any disruption, without any automation. We’re trying to implement Digital Managed Services using the front-end technologies.
Phil: That’s interesting that you talk about virtual agents, a scenario that we’re working on with a lot of clients with right now. Can you talk a bit more about how you see that evolving? Because you’ve got a lot of classic call center firms which are offering their own chatbots and that sort of thing. And then at the same time, you’ve got offerings like Amelia from IPsoft, which are focused on being more cognitive in nature. What kind of role can Hexaware play in supporting those types of business models?
Chinmoy: So that’s very interesting. Essentially, chatbots have been around for a very long time–over 10 years for sure. We see two kinds of opportunities and of course I’m talking about it from a BPO perspective, given that’s where my interests are. And both of them are disruptive, they’re Digital Managed Services—exactly the same principles that we use for, let’s say, reconciliation, but on the front office side.
So the first opportunity is a cost play, right. Essentially, if you have 200 people doing the work, using a virtual assistant kind of a tool, how can you reduce the 200 to 120 or a 100? Now, the second opportunity, which is a little bit more transformative, if you will, is to truly shift left.
So the first one is also a shift left, because you’re shifting it left from a person to a virtual agent. But the second one is where that particular customer doesn’t use old channels. They’re probably not using the chat channel as much because chat agents are traditionally more expensive than voice. So they’re not disrupted or they’re not using apps for inbound customer service.
So the second one is a little bit more transformative, to see how they can make this more of a revenue generating opportunity and not just a pure cost play.
So these are the two broad themes that we see as areas of interest for us, Phil. In the first area, we’ll do DMS and it will be more of cost- and risk-reduction play. It’s a huge opportunity because there must be 100 to 200,000 people outsourced today—across India and Manila and much more.
There is a huge play for disruption and unlike the data side, where there is a lot of automation that is already being done, on the voice side, the amount of automation and shift left that has happened, is very minimal. You have the IVR and some chatbots, but apart from that there isn’t much. What I don’t want to do is just go and implement the technology because that’s a very small play for us.
We want to take this as an end-to-end offering and kind of lift out entire pieces of work that some other traditional call center providers are providing, but do it at half the TCV, with probably half the number of people shifting left most of the remainder of the work. I am in the process of actually cannibalizing one of our larger accounts today using this technology, which will enable me to then go to market with a ready case study. This is the same approach that we used when we took RPA, using DMS for the back-office.
Phil: Chinmoy, there are a lot of the traditional BPOs out there right now talking about a big game around RPA and these areas. But ultimately it goes against their business model. Do you think they’re going to make the shift, or do you think some are going to cling onto the old model for as long as they can? How do you see it playing out?
Chinmoy: I definitely think people are clinging on, and the reasons are not hard to decipher. If you look at these large companies, and I’ve worked in a few as well in my past life, the CEOs or the top management are saying the right things. But I am not sure if their KPIs are aligned to the people who will actually execute. So someone who is managing, let’s say, a US$10 million account, has KPIs to grow 10% that year. If they have to cannibalize and take out 30% off its revenues, it just doesn’t add up. It doesn’t make for a perfect execution scenario.
So I think the cling-on phase, the put your head in the sand phase, is going to continue for a while. Honestly, even on the client side, if you look at middle management, that’s a big deal as well. It’s a big issue because people do not want to believe that this is still real. They’re doing pilots that have been going on for a year or two. And still the pilots are on—some of them successful, some not. That’s what I can tell you from the market.
Phil: Final question for you, Chinmoy. If you could change one thing about this industry, what would it be?
Chinmoy: I think I have a few, but if it is just one thing, then I would say, this cultural aspect and training is a big need for the industry. The people who are freshers, or who have been working in the industry for two, three years, I think training them is not a big deal. They’re very interested to change, they’re at the start of their career, and they can quickly learn. That training is not an issue. But the training of the middle management, people who have been around for a while, both on the client’s side and on the vendor side, is a big challenge.
For too long this industry has been recognized by, “How many thousands of people do you manage?” versus, “What innovation have you brought to the table?” So that is something that I’d love to change, because if you want transformation, then you need metrics that will enable you to improvement transformation and assess vendors who are also trying to transform. These are different metrics—both in terms of measurement of people who want to do stuff and actually promoting people who are different, who are more innovative, rather than someone who just has 10,000 people and that’s it. So that is the one thing that I’d love to change, Phil.
Phil: Very good answer! I really appreciate the time today Chinmoy. I know our readers will enjoy it your views!
Even a few days after the US elections, I am still shocked.
Most people in the world are shocked, apart from outliers such as Vladimir Putin. It is difficult to brush off the xenophobic tirades, sexism, protectionism, misogynist outbursts, etc., etc., as sheer rhetoric or just a means to an end. Yet, we really don’t know what is coming. Can one individual really change the US political system and break the influence of the vested interests? And more poignantly, can we believe any politician, let alone Donald Trump, on the many promises made on election campaigns (and beyond)? Even more pertinently, the notion that Trump will stand up for the long-suffering (white, male) working class just seems incredulous.
While it is utterly tempting to let my emotions get the better of me and just let rip, from a narrow sourcing point of view, two issues stand out: Immigration and, intrinsically linked to that, whether automation could fill the void if global sourcing is being disrupted by immigration policies.
The following is not meant to be a comprehensive analysis. Rather, as it is a blog, it is meant to stimulate debate. At the same time, dissecting populism is always contingent to context. As we have seen with Brexit in the UK, and as we are likely to see in the US, political decision-making is not based on a set of consistent policies or even on policies aimed at the majority who voted for Brexit and Trump. In my humble opinion, populism is all about being self-serving to the whims of politicians. However, as these politicians increasingly make it to the highest offices, we have to start thinking about scenario planning. Put another way, there is little value in discussing potential policies in an abstract way.
The immigration debate is complex and thorny
The threat of curbing immigration in the US is nothing new and tends to reach boiling point whenever elections are close. Yet, as Phil has pointed out, Trump’s campaign has already outwardly promoted raising the H1B minimum salary to $100,000 per year (from $60K). This makes managing complex IT projects a lot more expensive and negates much of the cost advantage for complex engagement requiring “landed” IT staff.
However, how much of this is sheer ideology and how much will be actually pursued in the political process? Will we really see Muslims being banned from entering the US and Mexico really paying for a wall at its border?
Invariably, there are many parallels to the unfolding of Brexit in the UK. For politicians (not necessarily voters), the topic of immigration is largely ideology. Thus, for immigrants the change cannot solely be measured by legislation being forthcoming. It is as much about a change in mindset, the depiction of the media and changes in everyday life as it is about deconstructing possible legislation. In the UK at least, the political culture and more alarmingly the attitude towards immigrants, has changed. In particular, immigrants from Eastern Europe are being bullied at school and violence against immigrants is sharply on the rise.
In terms of legislation in the UK, the battleground in the negotiations with the European Union will be about the access of the European Single Market.
For the European Union, this is intertwined with Freedom of Movement, yet only the negotiations will show where the red lines really are. Conversely, for the UK, Brexit proponents immigration and access to the Single Market appear to be separate issues. The point here is not to delve into specifics on the political details but to call out that the rhetoric and the promises made by those politicians. Moving the perspective back to the US, it appears to be implausible to expect Trump’s own empire to be able to run without immigrants – legal and illegal alike. Rather, expect the reality of political decision-making on Capitol Hill to sink in over time – yet with the big caveat that you can’t discount The Donald.
Beware of the automation pipedream
So what could buffer or even remediate some of Trump’s suggested excessive policies? I think Phil was very emotional and exaggerated to make a point when he wrote that President Trump is the death-knell for traditional outsourcing. For the foreseeable future automation is not quite the new labor arbitrage, but Intelligent Automation is decoupling routine service delivery from labor arbitrage. The market is too nascent to be able to compensate for any potential disruption of Global Sourcing. To change the current market dynamics, the IT juggernauts have to start to properly engage with stakeholders around the topic. I have to smile when I read reports that Brexit might give birth to Brexit-bots as a means to counter the negative impact of that momentous decision. It is surely just a matter of time before we will read about Donald or Trump-bots.
But joking aside, the serious issue is: What will be the impact of automation and who will be the winners and losers? I think our industry is largely in denial in suggesting that nobody will be made redundant through automation, but that employees will be happy bunnies as they will be freed from mundane and boring tasks. While all service providers sing from the same hymn sheet, I am scratching my head as we work in the sourcing industry… Without a more open and honest discussion on the transformation of knowledge work, organizations will struggle to make this transition. There is a scarcity, if not war, for talent out there for people that can actually deliver Intelligent Automation.
Thus, bringing automation back to the discussion on the US elections, non-linear legislation could conceivably accelerate the build out of automation capabilities, but the suggestions of a seismic shift (at least in the shorter time perspective) appears to be slightly off the mark. More importantly, though we have to equally clear who will the beneficiaries of accelerated automation. It is largely not the people who have voted for Brexit and for Trump. Those who feel left behind from Globalization will not be saved by Brexit, Trump or automation.
Bottom line: The disenfranchised will become even more disenfranchised
In my humble opinion, one of Phil’s best recent blogs was his assessment of reasons behind Brexit.
The central assertion was it was a big thumbs down for the establishment from over half the UK voters who feel disenfranchised.
The US election appears to mirror exactly that assessment. Yet, the voters who feel left behind by Globalization are unlikely to find any solace by the developments that are likely to happen. Automation (and other measures) won’t challenge the fundamentals of Global Sourcing. If anything, they will accelerate a shift to higher value jobs. Yet, many British voters are dreaming of Britain’s green shires in a foregone era, many US voters are dreaming of a time when the rust belt wasn’t rusty and America was seen as the beacon of the free world. That is why we need a fundamental debate about the transformation of knowledge: to contain the number of people who will get even more disenfranchised.
Remember all that wide-eyed excitement when we first started using the “Information Superhighway” known as the Internet? Remember how we were all going to use this amazing new media to share information, to learn from millions of new information sources, and – even more importantly – to learn from each other?
So what’s gone wrong? Why has the Internet also become a mechanism to block out information and promote factless discussion and news, often based on misinformation, lies, propaganda and emotion?
How have we managed to survive a year and a half of election campaigning, where we endured two sides obsessed with battering each other with insults, almost completely devoid of any smart new policies, practical debate and absolutely no ability to listen to each other. Our whole world of politics has become driven by emotions and personalities, not facts, ideas and policies.
I am sure I am among many of you who have fallen out with friends, unfriended people (or been unfriended) on Facebook, received abuse on Twitter and been sucked into nasty arguments with others who just refuse to listen. And if I had to dig deep into my conscience, I have to admit I may not have always listened to the rationale of the other side also.
But can we all get past this experience and learn to listen to each other again? Can we learn to have rational debate and conversation, where we can express our views, back them up with real facts and ideas – as opposed to this closed, angry style of discourse, that is threatening to divide entire nations?
I like the steps I am seeing from Facebook’s CEO Mark Zuckerberg to clamp down on “fake media”, especially when you consider that more Americans admitted to relying on Twitter and Facebook for their news sources, than any other media source. And can you blame them when the likes of Fox, CNN, the New York Times and many other outlets – all have their biases and did little to bring together real discourse and debate. All they did was whip up more hatred, panic and emotion to divide us further.
So… we all ended up take to social media to get our news and views away from the blurred lines…. and instead of sharing facts, all we are doing is winding ourselves up, blinding ourselves from finding compromise and hiving off social contacts we once considered “friends” (both the physical and electronic varieties).
The Bottom-line: It’s time for all the stakeholders in society to get meaningful and respectful again
Whether we like it or not, we now have four years of President Trump – he got himself elected. He won – seemingly against all the odds. Now let’s sincerely hope he can work to bring together a divided nation and bring together people across this divide of hate which he helped create. If he is to be successful as a President, it’s healing this awful culture of factless, meaningless squabbling. The US doesn’t need it’s own half-Brexit, where the country can’t decide what it wants anymore and people have to move forward clouded in uncertainty and confusion.
In the last week, President Trump has made appointments to his cabinet that are concerning for many. But sensationalist reporting devoid of actual facts has also skewed the true merit for concern and the weight of the issue. We need our media to provide information so we as citizens can express our voice based on facts and not fear that may or may not be warranted. The last thing we need are our already-fractured social networks being further eroded by all this emotion, paranoia and hype.
We need decisive policies, politicians working together and (at least try) to develop some mutual respect with people, whose views may not be entirely aligned with us. I don’t like the way the world has become, and I think most of you here will agree that it’s time for our media, our politicians – and ourselves – to get meaningful and respectful again.
The latest acquisition targets for large system integrators are SaaS services providers. And why not? It’s one of the hottest, fastest growth areas in the IT services market today, and a natural evolution for the traditional IT services providers, whose revenues from supporting legacy on-premise ERP engagements are in gradual decline.
Unlike the obedient, tuck-in acquisitions of yesteryear, however, system integrators realise that the acquired SaaS services specialist providers need to be highly visible and prominent to clients, and even lead the newly-combined practices.
The reason for this, is that system integrators are buying a new generation mindset and client engagement approach in their SaaS services acquisitions that they are struggling to adopt themselves. Yes, they also gain access to some new strategic clients, and boost their certified consultant pool, which remains important to maintain credibility and scale in the market. But the real nugget to succeed in delivering SaaS services, lies in understanding the massive change management challenges enterprises face, when migrating from an on-premise environment to a SaaS one, and the ability to offer the emerging flexible services that support clients through their SaaS transformation journeys. The traditional IT services life cycle of old, that includes consulting, implementation and management services, requires a serious overhaul to meet emerging client requirements (see: Thinking Outside The Box To Support SaaS Applications and SaaS Services Success Requires A Different Approach).
Clients want to work with service providers offering more flexible services, including access to skilled resources, whenever and wherever they are required, supported by flexible pricing models. Moreover, the service provider needs to demonstrate commitment and focus to its chosen SaaS service area. Clients also appreciate a service provider that is not afraid to challenge their decisions. In fact, they increasingly expect this, as service providers have the experience to understand the implications of all steps taken during the deployment phase.
System integrators’ understanding and development of the new SaaS approach to services vary, and convincing prospective clients about their renewed approaches often remains a challenge. Enter the SaaS specialist service providers, many of which have an established position and credibility in delivering SaaS services. They don’t just have an impressive pool of techie consultants that could slot into a larger practice seamlessly. They get it. They have developed a modern approach that is appreciated by enterprises and the SaaS software vendors alike. For this reason, we are seeing system integrators position their acquired SaaS service providers up front and central. Meteorix has a leading place at the IBM Workday services table (IBM makes a meteoric rise into the HR-as-a-Service big three) as does Bluewolf in the IBM Salesforce practice (IBM Culls The Pack Of Salesforce Partners By Buying Bluewolf). CEO and co-founder of Workday specialist, DayNine, Tim Ramos, will lead the new Accenture DayNine group to deliver Workday services, (Accenture Acquires DayNine and positions itself at the forefront of the race for Workday services) . And Wipro executives talked about a ‘reverse integration’ of Appirio’s business into Wipro’s cloud business (Wippirio could leave its Indian heritage competitors in the cold… if it gets this one right).
The Bottom line: It’s more about learning a new culture of service delivery, than simply retaining key clients and talent
Some analysts focused on whether there would be a culture match, and the challenges of client and talent retention, as the main success criteria for these and other SaaS services acquisitions. While these are important points to consider, the real question is whether the acquiring system integrator is willing to change their culture and approach, and learn from the acquired entity. Arguably, this is a harder task, but one that many of the recent acquirers seem to be embracing.
After blowing $17 billion in the Note 7 fiasco, what could Samsung have done next? Well, it could blow more money – and this time on IoT.
On November 14, 2016, Samsung announced the acquisition of HARMAN for $8 billion, taking the Korean giant into the HfS Winner’s Circle of IoT service providers, where HARMAN has performed for the last couple of years.
This acquisition follows the Samsung’s investment of $450 Million in Chinese Electric Car Company BYD, which it announced in July 2016. These acquisitions sparked the idea that Samsung is finally entering the automotive industry to diversify its portfolio from its stagnating consumer electronics division.
However, in our opinion, acquiring HARMAN is not all about a foray in the automotive industry for Samsung – the rationale goes beyond automotive and extends to the IoT market, which is an opportunity worth hundreds of billions of dollars. The acquisition gives Samsung complete end-to-end capability in the IoT value chain, as we show here:
HARMAN has four business divisions that cater to different part of the IoT value chain:
Connected Car: Navigation, Multimedia, Connectivity, Telematics, Safety and Security Solutions
Lifestyle Audio: Premium Branded Audio products for use at home, in the car and on the go
Professional Solutions: Audio, Lighting, Video Switching and Enterprise Automation for Entertainment and Enterprises
Connected Services: Cloud, Mobility and Analytics Software Solutions along with OTA update technologies for Automotive, Mobile, and Enterprises
Samsung Electronics has three business divisions that cater to different part of the IoT value chain:
Consumer Electronics: Digital TVs, monitors, printers, air conditioners and refrigerators
IT & Mobile Communications: Mobile phones, communication system, and computers
Device Solution: Memory and system LSI in the semiconductor business and LCD and OLED panels in the display business
The combination of Samsung and HARMAN will be a formidable force in IoT. We rated HARMAN in our “Winner’s Circle” in our IoT Blueprint.
In IoT, HARMAN and Samsung will have a very strong position in the connected car or automotive IoT segment. In our IoT study, we found out that connected car is the third largest segment after industrial IoT and smart cities. The HARMAN’s hardware capability also gives Samsung chance to play in the hardware IoT space.
Samsung has been investing in IoT from some time. In 2014, it acquired SmartThings, provider of the smart home platform. In June 2016, Samsung acquired Joyent, a leading cloud provider that can help Samsung connect the users of its devices to the cloud and IoT platform. Samsung has developed ARTIK IoT platform solutions. The HARMAN acquisition augments its IoT capabilities further with the connected car expertise and full IoT services portfolio. The combined HARMAN and Samsung offerings will get a strong foothold in both consumer electronics and connected car IoT market, developing an end-to-end solution for design, data, and devices.
IoT expertise has one additional benefit. It can help Samsung to differentiate its core consumer electronics products. HARMAN has already differentiated itself in the commoditized infotainment business with innovative connected car solutions.
Bottom Line
HARMAN brings real differentiation to Samsung and open the firm up to a huge future opportunity of it gets this right.
HARMAN is a strategic fit for Samsung for IoT and the combined HARMAN and Samsung will have strong IoT capabilities and credentials. Will Samsung blow this again or will HARMAN be the man for Samsung. Keep watching our IoT coverage.
Are you using robotic process automation (RPA) as a way to drive better outcomes for your healthcare organization?
In our research, we are hearing that companies using RPA find the greatest value from it in the quality, predictability, and speed that results from the use of the software to automate rules-driven business processes (there’s your definition of RPA, by the way). And we’d like to hear more examples –stories to share –of how it is being integrated into healthcare operations to impact health, medical and financial outcomes.
Notice in Exhibit 1, that 65% of the respondents in our cross-industry survey say the most value they get from RPA is in driving more predictability and quality in the processes, and half add that speed is of value, while rounding out the top three is freeing up staff to move to other projects. Healthcare respondents mirrored this top three, adding that number four is “creating more reliable datasets for analytics.”
Exhibit 1:
I’d venture to guess that the value of more reliable data sets will increase exponentially as value-based care and reimbursements take center stage in the industry. Predictable, accurate data will be increasingly important in, for example, segmenting patient populations, identifying appropriate and timely care interventions, and capturing and reporting appropriate feedback and insight for reimbursement. Reporting results for reimbursement are absolutely dependent on accurate and timely data.
Where to use RPA in healthcare operations
We heard from one enterprising organization that “every activity, every process is an opportunity for RPA.” Most of the examples we see are in claims processing and coding changes, followed by provider data management where there are many steps that require checking and/or moving data from multiple systems. EXL will share examples of the applicability in care management, for example, on an upcoming webinar, Robotics: A Call To Action In Health Care Management.
But while a number of tasks, activities, and even processes are automated, it is still too often in isolation from a broader process, which can really make an impact. What we have yet to see is dramatic change and impact on the healthcare consumer experience through the use and integration of RPA into a business operation. We’d like to see a significant change to the experience of a healthcare consumer in their patient visit to payment processed, for example, involving RPA, analytics, and customer service.
Think big, and start small—and find your champions. Start where there is the greatest interest in the benefit from the use of it, and the willingness to experiment. It can be anywhere in the operation, really. The key is to identify people who have a passion for using RPA; and in them, you will also find the people who will help drive interest, momentum, business rationale, and results. Results should be about business outcomes, such as reduced fraud or waste, increased medical adherence, reduced readmissions, or better member or patient satisfaction.
In order to get people excited about the prospect of these potential results, it’s important to develop a story around RPA for your internal stakeholders. At a recent HfS Summit discussion with operations leaders, Lee Coulter, Senior Vice President at Ascension and Chief Executive of the Shared Services Subsidiary said that what worked for them was to build a 10 second message, a 30 second speech, and a three-minute story that should include a demo or video clip to “show” how it works. Focus on the impact and results that RPA can drive—the accuracy, speed, and predictability, for example.
Partnering for results
Service provider partners can play a strategic role in identifying opportunities to better leverage RPA. While they are at different stages of maturity, they have been developing capabilities and tools over the past few years on the processes they manage. The use of automation is becoming increasingly sophisticated, especially when you as a service buyer partner with an operations service provider to use RPA in a shared strategy. You’ll find a snapshot of how service providers and service buyers are incorporating automation into their operating models and infrastructures in my recently published POV, Getting the Ball Rolling with RPA in Healthcare Operations.
What’s your greatest challenge, success story, or tip to share?
Just with any change, it takes learning and collaboration to create something meaningful. We look forward to your questions, comments, examples, and stories over the coming months as we figure out how as an industry, healthcare can better leverage RPA to drive better health, medical, and administrative outcomes over time.
