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Acquisition signals increasing role of AI in outsourcing | CIO

With its announcement last week that it will purchase enterprise artificial intelligence (AI) and automation vendor Rage Frameworks, Genpact became the first IT and business process service provider to acquire an AI platform.

[ Related: Questions to ask before choosing an automation partner ]

The addition of Rage Frameworks, which has been applying machine learning and language processing to build intelligent automation platforms for financial services, capital markets and supply chains, “will take Genpact deeper into integrating semi and unstructured data and AI, where we see the true marriage of business processes with clever technology and self-developing algorithms,” says Phil Fersht, CEO of outsourcing analyst and consulting firm HfS Research.

On the surface, another acquisition of a niche automation vendor by an IT service provider might seem unremarkable. But industry watchers say this may be the tipping point where focus will shift from back-office automation to integrating and intelligently automating front- and middle-office functions.

“It represents an evolution of the back-office oriented automation acquisitions that many outsourcing providers have made over the past several years,” says David Borowski, director with outsourcing consultancy Pace Harmon.The differentiation is Rage’s focus on artificial intelligence, and the significance is that it should allow Genpact to develop and deploy applications and solutions that can directly integrate Rage’s cognitive, predictive and real-time analytics capabilities.”

[ Related: 11 ways to address RPA and AI in IT outsourcing contracts ]

Genpact first began partnering with Rage Frameworks to harness its AI capabilities. Rage Frameworks’ technologies “are immediately applicable to Genpact’s existing client base,” says Peter Bendor-Samuel, CEO of outsourcing research firm Everest Group. “Leveraging Rage’s AI platform, Genpact hopes to provide real-time insights, simplify automation, and gain competitive advantages. Their theory is that their combined capabilities will help clients drive digital transformation at scale and accelerate clients’ digital journey.”

Labor-arbitrage based IT service providers ceased growing last year, according to Everest Group, with 21 percent of industry growth in IT and business process services with a digital focus. A recent survey of of 132 “best reference” clients of top service providers by Everest Group found that 48 percent were unhappy and 25 percent were very unhappy.” A top reason for their dissatisfaction is providers’ capability of helping them with a digital restructure,” says Bendor-Samuel, adding that this move by Genpact is acknowledgement that the future of IT services will be focused on digital transformation.

[ Related: Outsourcing trends to watch in 2017 ]

“We’ve danced for years trying to prophesize when BPO will truly integrate with IT,” says Fersht. “But we’ve now had reality unveiled: RPA [robot process automation] platforms streamline the back office, while AI brings the middle and front together to create that true digital experience. Moreover with Rage’s development effort over the last two years to build enterprise applications for financial industry processes (wealth management, commercial loan processing and financial statement spreading) is shifting the focus from automation tools and capabilities to providing an end-to-end process leveraging a model driven business transformation platform.”

[ Related: Building a business case for offshore robotic process automation ]

It also enables Genpact to change the old offshore outsourcing narrative from that of shipping jobs overseas to improving processes and delivering new business value, according to Borowski. “For existing customers, it provides the opportunity to reimagine how its existing outsourcing solutions are delivered in areas where pure cost reduction was the previous focus or there was a perceived risk associated with outsourcing,” Borowski says. “It shifts the discussion from ‘can you outsource an activity’ to ‘can you improve a process and result’ using a toolset that happens to be provided by your outsourcing provider.”

Genpact’s purchase is not the beginning of a trend, but rather the next phase of an ongoing attempt by outsourcing providers to embed enabling technology into their offering. “For the past several years, outsourcing providers have been actively pursuing ways to incorporate increasingly transformational levels of automation and intelligence into their solutions,” says Borowski.

To date, the tendency has been to partner with rather than purchase AI and automaton vendors. Automation software providers Blue Prism, AutomationAnywhere and UIPath have aggressively forged partnerships with most of the leading outsourcers, such as Accenture, IBM, EXL and Capgemini,” Fersht says.

“AI vendors IPSoft and Celaton have also been active, while several outsourcers are now working with Watson, including KPMG.” However, Bendor-Samuel argues, “the incumbent service provider industry has no choice but to accelerate their rotation into digital, and the most effect way to accomplish this is through acquisitions.

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US addiction to outsourcing might cost it the Robot revolution

The US’s addiction to off-shoring might cost it a seat in the next revolution of manufacturing.

As robots are rushing to take over human jobs, the US is finding that its own manufacturing base is not taking advantage – mostly because it off-shored its manufacturing ages ago.

Roboticist Matt Rendall said that robotic job displacement will reshape global manufacturing and since America, which has outsourced much of its manufacturing and lacks serious investment in industrial robotics, it will be relegated to a third world country.

In the future, it will be the robot makers which will have the key role in determining how automation expands across the globe.

As the CEO of manufacturing robotics company Otto Motors, Rendall is building fleets of warehouse bots that could eventually replace the many fulfilment workers who are hired by companies like Amazon.  He said that the robots were coming.

“After the Great Recession, there was a fundamental change in people’s interest in automation. People started feeling the pain of high-cost labour and there’s an appetite for automation that we haven’t seen before.”

Rendall believes automation will, in the long-term, improve society and help humans live better lives, but there are changes afoot in the global manufacturing scene that could leave American industries in the dust.

“China is tracking to be the No. 1 user in robots used in industrial manufacturing and the country is driving “an overwhelming amount” of growth.

But China is responding to automation by embracing it instead of shying away from it. This is in stark contrast to industrial advances of the previous century, like Ford’s assembly line, that helped transform American industries into the most powerful on the planet.

The risk is of course is that if the US does not do something fast then that crown will leave it being a nuclear powered also ran on the world stage, dreaming of days when it used to be great.


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