{"id":2236,"date":"2017-11-20T10:39:00","date_gmt":"2017-11-20T10:39:00","guid":{"rendered":"http:\/\/localhost\/projects\/horsesforsources\/sumitomo_rpa_massive_deal_112017\/"},"modified":"2017-11-20T10:39:00","modified_gmt":"2017-11-20T10:39:00","slug":"sumitomo_rpa_massive_deal_112017","status":"publish","type":"post","link":"https:\/\/www.horsesforsources.com\/sumitomo_rpa_massive_deal_112017\/","title":{"rendered":"Sumitomo Group announces the largest-ever RPA deal, but is this really all RPA?"},"content":{"rendered":"

<\/p>\n

Japan is currently the only major developed country that is experiencing a population decline and many of its ambitious enterprises are increasingly desperate to find new means to get work done without over-relying on human labor.<\/p>\n

Unlike other developed economies, it is not offsetting population decline with immigration, and most its firms have proven very reluctant to engage in offshore labor arbitrage over the years. In addition, Japan has the largest proportion of elderly citizens of any country in the world. In 2014, 33% of the population was over the age of 60 and this percentage is increasing. Hence, getting the most out of its shrinking workforce to keep their enterprise healthy is of utmost importance to a country which loves long-term planning. No joke, but I was once asked to review a 100-year business plan from a major Japanese conglomerate!<\/p>\n

Given its shrinking productive population, combined with its wealth, the cost of labor is high. Consequently, its companies are often the first to adopt new technologies, including artificial intelligence and robotics to increase productivity in a market with severe skills shortages. In addition, Japanese firms increasingly struggle to acquire necessary skills to optimize their technology investments which, in turn, raises the cost of these skills. This is leading to increases in spending with third party service providers that help to fill these skills gaps.<\/p>\n

A massive automation-led services engagement is announced, placing RPA in a whole new bracket for value and cost impact<\/strong><\/p>\n

Hence, it was no huge shock when major Japanese financial services conglomerate, Sumitomo Group, announced an unprecedented RPA initiative (see the news release<\/a>), with savings claimed to be in the hundreds of millions of dollars (also see link<\/a> on UIPath’s website). However, while this is a tremendous public endorsement for the potential benefits of RPA, this appears to be a massive corporate restructuring that is using RPA as a catalyst<\/em> for labor reduction.  We already have discussed (see link<\/a>) how Japanese firms love to deploy automation to increase productivity and competitiveness – it’s in their DNA as a firm with deep technology and manufacturing roots. In short, most Japanese firms do not suffer from the same negative connotations of automation that their Western counterparts – they are proud to be able to infuse quality and efficiency into their processes.<\/p>\n

However, we caution enterprises to take some of the grandiose claims with a bucket of salt, as we’ve not seen anything near these touted levels of productivity gains yet realized, as outlined by HfS analyst John O’Brien<\/a> in his latest POV<\/a>.<\/p>\n

It’s being touted by some participating suppliers as the largest-ever RPA implementations worldwide, although, ironically, we don’t yet know how many robots are going to be used.<\/strong><\/p>\n

We understand it’s a significant contract in terms of dollar value, and most of the implementation and transformation work is going to IBM. UIPath is doing the (attended) front office RDA automation and the (unattended) back office RPA automation. Blue Prism has also been involved doing some unattended automation in the back office, but SMBC declined to mention them in their press release (see link<\/a>) which clearly points to UIPath as the prime automation software partner in the engagement moving forward. <\/p>\n

According to SMFG\/SMBC, the attended digital workforce supports the group’s front-office centric activities, enabling the staff to develop the automation themselves and to work alongside the robot by exerting direct command over it. Complementary, the unattended digital workforce targets all the high volume processes that do not require the human touch, working 24 hours per day and 365 days per year to sustain high-throughput, high-intensity processing. SMFG\/SMBC has endorsed UiPath as ‘highly usable and scalable’ supporting the initiative during this week’s UIPath conference in New York.<\/p>\n

Bottom Line: Massive kudos for RPA being demonstrated at scale, but this appears more like a massive corporate restructuring using RPA as a catalyst for change<\/strong><\/span><\/p>\n

There’s no doubt that right now this endorsement from SMFG\/SMBC is great kudos for the RPA vendors aiming to scale enterprise-wide – the most jaw-dropping initiative yet that takes RPA to the 9-figure level in terms of perceived monetary value.<\/p>\n

However, RPA initiatives, in general, have not nearly met cost savings and productivity targets anything near these touted outcomes.  We’re just not there yet as an industry – sure, many of the more mature deals today are yielding value benefits in the $1m-10m range, once they are being managed effectively, but to jump from these levels to the hundreds of millions is massively far-fetched. <\/p>\n

At HfS, while we believe there are genuine intentions from Sumitomo to leverage RPA to free-up and eliminate human labor, there has to be a much broader corporate restructuring plan, way beyond the digital labor initiative, that will get Sumitomo to these lofty targets. It’s also important to point out that these ambitious enterprise-wide deals are already going on in other organizations – for instance, we understand Blue Prism is involved in a number of projects of at least this size across the globe. But these companies are much less willing to share the details of their programs with the wider community – clients, employees, and shareholders are all going to be impacted in some way by the expectations being set, and whether they are realized or not.<\/p>\n

Keeping quiet is often the easier way to avoid the kickbacks when things inevitably go wrong. Whether naïve or not, SMFG\/SMBC’s level of disclosure means it’s going to be an important test case to assess the success of scaling RPA across the enterprise.<\/p>\n

HfS subscribers can click here to view our complimentary analysis on the initiative, by John O’Brien and myself <\/strong><\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

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