NelsonHall: Digital Transformation Technologies & Services blog feed https://research.nelson-hall.com//sourcing-expertise/digital-transformation-technologies-services/?avpage-views=blog NelsonHall's Digital Transformation Technologies & Services program is designed for organizations considering, or actively engaged in, the application of robotic process automation (RPA) and cognitive services such as AI to their business processes. <![CDATA[NelsonHall’s Blogging Year: A Selection From 2016]]> NelsonHall analysts are regular bloggers, and while you might be familiar with a number of them, you might not be aware of the full range of topics that NelsonHall analysts blog about. We thought it was an opportune time to look back and pick out just a few of the many blog articles produced last year from different corners of NelsonHall research to give readers a flavour of the scope of our coverage.

 

 

We continue to keep abreast of unfolding developments in RPA and cognitive intelligence. In October and November, John Willmott wrote a sequence of three handy blogs on RPA Operating Model Guidelines:

Turning to Andy Efstathiou and some of his musings on FinTech and RPA developments in the Banking sector:

Regarding developments in Customer Management Services:

Fiona Cox and Panos Filippides have been keeping an eye on BPS in the Insurance sector. Two of their blogs looked at imminent vendor M&A activity:

Blogs in the HR Outsourcing domain have included innovation in RPO, and in employee engagement, learning at the beginning of the employee life cycle, talent advisory and analytics services, employer branding, improving the candidate experience, benefits administration and global benefits coverage, cloud-based HR BPS, and more! Here’s a couple on payroll services, so often an overlooked topic, that you might have missed:

Dominique Raviart continues to keep a close eye on developments in Software Testing Services. For example:

Dominique also keeps abreast of unfolding developments in the IT Services vendor landscape. For example, in November he wrote about Dell Services: the Glue for "One NTT DATA" In North America.

Staying with IT Services, David McIntire:

Meanwhile, Mike Smart has been blogging about IoT. Here are two of his earlier ones:

And Rachael Stormonth continues to consider the significance of unfolding developments in the larger and more interesting IT Services and BPS vendors:

That’s just a small sample of the wide-ranging themes and hot topics covered by NelsonHall blog articles in our trademark fact-based, highly insightful style.

Keep up with the latest blogs from these and other NelsonHall analysts throughout 2017 here, and sign up to receive blog and other alerts by topic area, or update your preferences, here. 

]]> <![CDATA[Swiss Post Solutions – Applying Intelligent Automation to Move from Physical Document Management to Digital Workflow Management]]>

 

“We connect the physical and the digital worlds”

This current slogan for the Swiss Post Group is very relevant for its Swiss Post Solutions (SPS) subsidiary as it looks to fundamentally change the nature of its business from paper-based document management to digital workflow management.

SPS is one of the larger companies globally offering both inbound document management and outbound document production and also some multi-channel management services. To give a sense of scale, on the inbound side, it scans over 1bn documents and prints around 1.2bn transactional documents (e.g. invoices, bank statements) per annum.

In the last two years, since Joerg Vollmer started as CEO, there has been a major shift in positioning at SPS, with less of an emphasis on the company’s legacy capabilities in inbound and outbound document management services, and a very strong focus on ‘Intelligent Automation’, combining existing SPS capabilities such as scanning, OCR, data capture & extraction with RPA and AI, to support clients in benefiting from the digital revolution in document management. Far from being threatened by digitization, SPS is approaching it as an opportunity to be grasped to help it evolve both its market positioning, and its portfolio. In particular, SPS is extending its capability along the value chain from standalone document management into digital workflow management and processing.

So much for the positioning – where is SPS on this journey?

The first evidence of a transformation at SPS is in its financials. Document processing and document output services are both based on activities that traditionally have had wafer thin margins. SPS’ own margin had been improving, but slowly. Since Vollmer’s arrival in January 2015, there has been a major improvement. Operating profit (the company’s primary financial target set by Swiss Post Group) has grown, with a 50% y/y increase in Q1-Q3 2016, and operating margin has increased from 1.8% in 2014 to 3.6% in Q1-Q3 2016.

And while Intelligent Automation is yet to make a major impact on company financials, SPS already has ~20 clients where it has applied RPA and AI technology, principally using UiPath . In addition, SPS has been an early adopter in using Celaton inSTREAM software on unstructured documents, for example for email categorization and key data extraction, and is the first BPS provider to take Celaton out of the U.K., and install inSTREAM in its Document Processing Center and Shared Service Center Banking.

Continuing this journey, SPS is evaluating technologies such as IBM Watson to refine its ability to extract key information from large documents. It is also potentially interested in using platforms such as IPSoft's Amelia to enable users to request and find key information within a large range of documents.

Importance of Vietnam – offshore, plus continuous improvement and intelligent automation

NelsonHall recently attended an SPS event in Vietnam, where we had the opportunity to visit a flagship center in Ho Chi Minh City. While the major theme of the visit was how SPS has started to introduce RPA (primarily UIPath) to automate tasks like scanning, data capture, and data extraction, and also simple AI (Celaton) to extract data from unstructured documents, SPS’ Vietnam centers have initially made an impact in terms of labor arbitrage and continuous improvement.

Vietnam offers, inter alia, relatively low labor costs, a sizeable (nearly 55m), literate, labor force, good physical infrastructure in the major cities, government tax exemptions, and a stable macro-economic environment. SPS has just over 1,000 employees based in the country, which appears to have played an important part in the margin improvement. SPS shared some stats which revealed that since 2014 the average number of documents processed per employee has increased by 124%, with slightly fewer people processing twice as many documents, fewer people deployed on basic data entry and document processing, and more on more complex BPS tasks. So far, this has been largely achieved through continuous improvement rather than RPA/AI. Vietnam will clearly continue to be important to the future of SPS; plans for 2017 will nearly double the number of employees in this delivery hub. 

As well as being a major offshore delivery capability for SPS, the Ho Chi Minh City location has a Network Operations Center which also operates as a customer experience center for showing clients and prospects a future vision of what they could achieve with digitized, closed-loop document management. The importance of this positioning should not be underestimated – it is central to SPS’ future as a BPS provider.

Extending beyond document management into wider workflow management

As well as looking to use RPA and AI to further enhance its management of unstructured and semi-structured data within inbound document management, SPS is also looking to use RPA and AI technologies to extend downstream into workflow management, focusing on back-office and industry-specific processes. For example:

  • Within F&A, in accounts payable activities, extending beyond invoice scanning and data capture/indexing into end-to-end invoice processing
  • In the insurance sector, using RPA to upload structured data on complex claims generated by SPS' OCR and document management software onto client systems. If all the necessary data and documents are present, bots start processing claims. In this case, the combined benefits from OCR and RPA plus an element of process redesign have already included a 60% reduction in manual processing and a 50% reduction in average processing time
  • In the Banking sector, supporting credit card collections by using a bot to check the current accounts of credit card debtors and block them to enable the credit card debt to be cleared.

Unsurprisingly, the verticals on which SPS is focusing are B2C sectors that have to manage very large volumes of documents, including insurance, retail banking, utilities and healthcare. Moving further into workflows requires closer industry and process knowledge than a traditional document management BPS provider might arguably need, and SPS has been working on this.

Building intelligent e-delivery platform for outbound document management

While a main focus of the event was on applying Intelligent Automation in inbound document processing, in SPS’ target sectors, outbound communications are also a key component in organizations’ digital transformation strategies.

Accordingly, SPS is developing capability to apply RPA and AI technologies to outbound document management, and is building an e-delivery platform to handle both print and digital output channels that formats data for each channel and sends printed and/or electronic communications as appropriate; current offerings include e-billing.

The Future – digitized closed-loop document management

In short, SPS has an ambitious roadmap to build a new digitized closed-loop document management capability incorporating third-party RPA and AI technologies, enabling it to move beyond traditional data capture and document output services, and become a more important player downstream in workflow management and processing. This means it can potentially capture components of work (that previously would otherwise have been heavily manual) in some middle- and back-office process areas that can now be automated. Moving into areas such as invoice and claims processing to address work that historically was not often accessible to document management BPS vendors is clearly a major opportunity for SPS.

So with these capabilities, will SPS move into full-scope industry-specific or back-office BPS? This is highly unlikely in the near term. While it can offer some level of multi-channel, SPS has no contact center capabilities, and voice remains a key component of industry-specific or back-office BPS. What is important for SPS in the next few years is that its clients regard its services as important to their digital initiatives, and that it can use automation to retain and extend the scope of existing document management engagements.

In summary, SPS is moving beyond traditional document management into wider digital workflow management and processing, and ultimately will provide digitized closed-loop document management services. This will  support clients in their digital transformation agendas by applying a powerful combination of global delivery, plus continuous improvement, plus industry-specific process knowledge, plus intelligent automation.

Further details on SPS initiatives in RPA and AI

]]> <![CDATA[HCL Technologies – Automotive, Autonomics & Partnerships Key Elements of its Future Growth]]> HCL Technologies’ (HCL) twitter hashtag for its recent adviser and analyst event in Sweden was #HCLBigLeap, which led us to expect to hear some big news items. The jam-packed sessions did provide an overview of many recent and current developments – but the big news item was finally disclosed in an individual blog the following day (more of which later).

We heard from many clients at the event, all of whom expressed strong satisfaction with HCL: its “relationship beyond the contract” messaging is resonating well with clients.

Mode 1, 2, 3

New COO, C Vijay Kumar, started by discussing HCL’s ‘Mode 1, 2, 3’ growth strategy for its portfolio:

  • Mode 1 - ‘Agile & Lean and service-oriented’: this describes HCL’s existing core services portfolio (applications services, R&D services, BPO) which are increasingly being layered with DRYiCE tools. HCL expects Mode 1 activities will shift from 85% (we believe closer to 90%) of its current revenues to around 60% over the next few years
  • Mode 2 - ‘experience-centric and outcome-oriented’: units including BEYONDigital, IoTWorks, cloud and cyber. These are high (20-30%) growth opportunity businesses, and will be high priorities for organic and inorganic growth investments. Mode 2 also covers newer delivery models such as Agile and DevOps
  • Mode 3 - ‘ecosystem driven’: products & platforms, where growth is most likely to come from IP partnerships. Mode 3 also includes partnership constructs such as JVs and commercializing client captives.

This is an apparently simple way of describing a journey that all IT services providers are having to undertake as they evolve to remain competitive to the new world of IT. HCL's approach includes building independent teams for Mode 2 propositions which are taken to market through the Mode 1 businesses.

As well as highlighting progress it is making in some of its Mode 2 areas, HCL has also made some major investments recently that span two ‘Mode 1’ businesses where it has particular strengths - infrastructure services and engineering services - and where it is now applying Mode 3 partnership constructs such as the deal with Volvo.

Volvo deal brings in mainframe capabilities, is also part of a broader push in the automotive sector

I got to drive the Volvo V90!

Gothenburg was an obvious choice of location for the event given the award to HCL earlier this year of a major IT infrastructure management services contract by Volvo Group involving an IT captive acquisition that serves 40 clients in the Nordics and France, and the transfer of ~2,500 personnel in 11 countries. The captive acquisition adds mainframe capabilities, local delivery presence and a pre-existing external client base, all of whom have migrated (Volvo estimates the transferred captive generates annual external revenues of ~$190m). We heard from Volvo CIO Olle Hogblom; the transition (a walk-in takeover in April) appears to have gone smoothly. Driving a major transformation in Volvo’s IT infrastructure was a key priority and Hogblom highlighted that 52 transformation projects are already up and running.

Since HCL started targeting the Nordics in earnest in 2011, the company has been very successful in the region in winning IT infrastructure services rebids, with the likes of Statoil and DNB in Norway and UPM in Finland. The Volvo deal was a big investment (media reports are of $130m) by HCL, who is now pushing for sector, portfolio and market expansion in Continental Europe.

In terms of target sectors and services, HCL is setting up an automotive CoE in Gothenburg on the back of the Volvo win. Other initiatives will enhance its capabilities in engineering services in the automotive sector. HCL is acquiring Geometrics (not including Geometrics’ 3DPLM JV with Dassault Systemes) in a share-swap deal worth around $190m. Excluding 3DPLM, the automotive sector accounts for ~47% of Geometrics revenue. Geometric generates nearly 60% of its revenues from the U.S. and ~25% from Europe (where it acquired German automotive specialist 3cap technologies GmbH in 2013). Geometrics will be HCL’s largest acquisition to date in engineering services and as such its importance should not be overlooked. HCL has also formed partnerships with the likes of sector specialists Movimento (over-the-air software updates) and Rightware (UI design software). We expect to hear much more from HCL over the next few years about its work around connected vehicles.

Will HCL Technologies be an engineering services consolidator, with additional acquisitions, perhaps specialists in other sectors?

Other obvious areas of potential interest for inorganic growth include

  • Cyber, to enhance its IT infrastructure services offerings.
  • In terms of markets, perhaps  Germany again, or possibly France.

DRYiCE autonomics portfolio continues to expand, newer AI components

DRYiCE, HCL’s brand for its orchestration, operations analytics, automation and AI suite of modular components, has been expanding and now comprises 40 micro apps (both third party and proprietary) that between them support all of its service lines. DRYiCE includes well-established IT operations tools and newer RPA, AI, NLP, machine learning and analytics technologies. It has six layers:

  1. Sense and act, e.g. monitoring tools
  2. Prevent & heal, e.g. automated patch management
  3. Ideate & create, e.g. to support automated testing, smart releases etc.
  4. Engage and collaborate, e.g. Satori, an open source KI collaboration platform
  5. Visualize and insight e.g. MyxAlytics predictive analytics
  6. Orchestrate and choreograph.

HCL highlights its approach with developing and implementing DRYiCE modules as being one of “pragmatic automation”, namely real world, use-case driven (and thereby clearly outcome-focused).

The latest addition to DRYiCE is ‘Lucy’, a Watson-powered Level 0 service desk cognitive agent launched last quarter (also uses ServiceNow), and currently in pilots with four clients. Early uses are in chat; voice will surely follow as other use cases are found.

HCL claims that some elements of DRYiCE (we never found out if it is an acronym) are in use in over 50% of its accounts, not surprising given that some of the modules are well established. Its current push is to increase the level of automation in software and product testing services, very much in line with market trends (see NelsonHall's research on software testing).

HCL articulates the attributes of DRYiCE clearly, and is also ahead of many vendors in indicating what lies under the hood. Doubtless the suite will continue to expand, including in analytics and cognitive applications.

IoT, Small but Growing Practice, Leveraging Engineering Services

At the beginning of the year HCL launched a standalone IoT practice with ~100 people. The unit is now being augmented with the smart product development capabilities from its large engineering services practice. HCL’s current client credentials in IoT are mainly longstanding engineering services clients such as ABB and Xerox. Obvious sectors for expansion for HCL are automotive and aerospace.

Partnerships Key to Mode 3

HCL is looking to develop a products and platforms business through what it calls innovative IP partnerships.

The first of these was with CSC. It is over two years since HCL and CSC struck up an innovative partnership with the Celeriti Fintech JV, whose primary remit is to modernize CSC’s financial services software (see our blog here). We were not given an update on progress at the event, even though HCL has increased its investment in the JV. Given the CSC/HPES merger, the relationship will not now expand beyond the actual JV, and a go-to-market push is likely to be less than initially envisaged.

HCL’s newest significant partnership was alluded to in its last quarterly earnings call when it referred to making a $350m investment over two years in a 15-year partnership with a “global technology vendor”. HCL could not publicly comment on this partnership at the event, but it has since become evident that the partner is IBM (with whom HCL is also collaborating on IoT, setting up an IoT incubation center in Noida). In short HCL appears to be buying IBM Tivoli systems management tools and the Rational software modelling and development middleware in a deal that also involves personnel transfer – so in many respects it looks like a straight outsource (IBM is doing something similar with Persistent Systems). While HCL and IBM will work together on future product roadmaps for Tivoli and Rational, HCL will be responsible for ongoing product development and support. Clearly, the deal plays to HCL’s strengths in software engineering. Beyond this, further details, for example of the go-to-market arrangements, are not yet clear. In the short term, HCL will earn annual revenues of $30-40m from the deal. Longer term, there could also be broader opportunities for HCL in going to market directly with Tivoli and Rational products.

Notable by their absence: BPO and SaaS

  • HCL’s BPO business (now under 5% of revenues and declining) is looking increasingly non-core. The only way that HCL is going to build a new BPO business is through acquisition: outside a captive buy, this does not seem likely in the short term
  • Another area where HCL does not appear to have strong credentials is services around the major SaaS products. As it seeks to mitigate the cannibalization of cloud on traditional ADM activities and the reduction in large ERP projects, HCL does not seem to be looking building up large enterprise apps SaaS practices.

Playing to its Strengths

In short, as it works on evolving its portfolio to align to new and emerging market opportunities, HCL is being bold but also playing to its core strengths in engineering services and IT infrastructure services. This is a story of renovation, rather than one of radical reinvention.

Note: in the NelsonHall Vendor Intelligence Program:

  • HCL Technologies is one of ~20 vendors individially profiled each quarter in the Quarterly Vendor Update Program
  • In future, HCL Technologies will also be included in the Key Vendor Assessment Program.
  • ​For details, contact [email protected]
]]> <![CDATA[WNS: Applying RPA in P&C Insurance with Focus on FNOL, Claims & Underwriting]]> This is the second in a series of blogs looking at how business process outsourcing vendors are applying RPA and AI in the insurance sector.

 

WNS’ RPA journey is moving quickly, with six pilots underway and five more ready to go. WNS has decided to wait on AI for the time being, in favour of developing its process automation capabilities, which has included the launch of eAdjudicator (a bolt-on RPA tool for claims adjudication) and InsurACE (a policy administration workflow tool) earlier this year.

RPA delivering 25% savings; 40% achievable with employee retraining

Echoing its peers, WNS started by applying RPA to defined, rules-based, and transaction-based insurance activities, specifically in payments and first notice of loss (FNOL), followed by subrogation, since these sub-processes are relatively standardized and do not require human judgement. Based on its pilot experience to date, cost savings in these areas have been around 25%, but in order to realise further cost savings, there is a ‘Phase 2’ that requires re-training of the labor force and process reengineering to take advantage of the automation, which could see a further 10-15% savings. Three of the pilots are in this second phase.

To take its journey forward, WNS required a technology partner who had an insurance focus, a cloud-based offering, and a particular strength in robotics for analytics – specifically with a capability to handle the vast number of compliance requirements imposed by the different U.S. states.  It found these in Blue Prism (although it continues to be open to additional partnerships with other technology vendors), who also happened to be looking for more traction in the insurance space – something that WNS brought to the table.

P&C FNOL, Claims & Underwriting the Focus for 2016

In 2016, WNS has three focus areas in which it will be applying RPA, based on client appetite: FNOL, claims processing, and underwriting (UW), with an overall aim of removing the unnecessary steps in each sub-process.

As yet, there does not seem to be huge traction on the life insurance side and, as such, WNS will be focusing on property & casualty (P&C) processes. An example of a recently on-boarded UW client is a U.S. P&C insurer who was seeking to reduce the number of UW assistants it would need to hire. The client expected to hire ~75 UW assistants, but since partnering with WNS, the expectation is now that it will be in a position to hire ~30% less than this, and a further ~20% additional capacity will be created. The client moved from pilot mode for this first line of business (personal auto) to full production in April 2016, and is set to add further lines of business to the scope, each one going through separate pilots.  

An example of cost saving achieved through applying the Blue Prism framework to a set of UW processes was with a client whose workforce operated in a predominantly virtual environment. The ‘before’ state saw work passing through ~40 handoffs, which WNS was able to bring down to 7, using workflow mapping. This alone has yielded ~35% savings for the client and has proved ‘transformational’ for the business.

In most cases, the conversations appear to be led by WNS. One of the key concerns raised by clients, however, is around what happens to staff allocation once RPA is deployed. Typically, staff are still very much required, but need re-training to make the most of the new systems and to ensure they operate effectively.

For now, WNS believes that sufficient savings and efficiencies can be gained through applying RPA to an insurance sub-process such as claims logging, which will provide the claims adjuster with a better summation of the situation and enable the handler to carry out the insurance process more effectively and accurately. For example, reducing the number of claims pages down from 50 to 10, and eventually to as little as 7 bullet points of actionable items.

Other similar areas in which WNS has successfully applied this type of RPA include medical review and transcription. However, WNS is of the view that there are some sub-processes that cannot be carried out by anything other than human effort, e.g. bodily injury; as it stands, WNS has not found a way to simulate the experience of the claims handler with RPA for this type of process.

Areas that are now progressed beyond pilot mode and are proving successful for WNS are:

  • Vendor payment
  • Subrogation (clients are almost all on transaction-based pricing)
  • Claims logging
  • FNOL (~60% of clients are on transaction-based pricing).
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