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  • Phil Fersht

RPA - Beyond Labor Arbitrage: The New F&A BPO Frontier.

"Beyond Labor Arbitrage: The New F&A BPO Frontier

However, what has changed is the rampant excitement about the new arbitrage: RPA, where many clients hope they can still avoid that true process transformation by mimicking those same obsolete processes in a piece of robotic process recording software. At some point, they will need to stop dodging the transformation bullets and actually make real investments in their underlying process and data workflows, but until that time, let's see how the market continues to shake out in our 2017 F&A As-a-Service Blueprint, so let's hear from the blueprint lead author, Barbra McGann...

F&A As-a-Service (FaaS) reflects a time of transition as service buyers and service providers move to “finance of the future” – more strategic use of talent, technology, partnerships, and operating models to achieve high-quality, more agile, and insight-driven finance operations. Any company not thinking of how to bring together these elements to impact business outcomes is behind the curve at this point, although it’s not too late to get going. And service providers in this mature services market can play a valuable role in helping broker within and across organizations to develop and/or deliver against a roadmap for “virtual finance.”

The question is not whether or not to use RPA or cognitive computing but how, when, and where.

Many service buyers, from our research, are mostly interested in low-cost standard delivery. What will get that next level of efficiency and cost savings – and how does robotic process automation (RPA) play a role in it? What is the balance of RPA versus lower cost delivery centers – movement from 1st to 2nd to 3rd tier cities, to use industry terminology? In too many cases, labor arbitrage conversations are being replaced by robotic labor arbitrage – a combination of lower cost delivery locations and RPA. The industry is at an inflection point -- do service buyers and service providers have a choice to make – (a) move up the value chain with strategic collaboration – defining and addressing business problems, outcomes, and designing appropriate solutions that use digital technology or (b) promise 40-50% further improvement through digitization or automation, a tactical approach. Or is there a combination in play? The industry sits on this knife’s edge today.

Last year many of the finance and operations leads we spoke to for this study when asked about RPA, were, with few exceptions, in one of two camps: had heard of RPA or hadn’t. This year, every client is familiar with RPA and has some kind of status to share, ranging from “discussion” of how and where to use it, working on a business case, or already using it either in-house or with service provider partners. It’s driving change in how the industry thinks about operating models, contracts, governance, partnerships, talent development, and change management. Earlier adopters in the business are realizing that automation for the sake of using the technology or in trial/pilot is not as impactful as when there is a business case for change in partnership with IT to achieve a targeted outcome for a process, e.g., touchless invoicing. There is a disparity in the market as to whether clients want/will develop and keep intelligent automation capability in-house or partner with service providers. We heard examples of both decisions.

Collaborative engagement is an increasing factor in whether or not service providers have “stickiness” with clients. There is a current trend in “considering options” as contracts come up for renewal. A number of service buyers shared their stories of re-bidding parts or all of their finance BPO contracts to (a) create balance in a service portfolio to have strategic partners where there is stronger alignment on strategy and culture as well as thought leadership for finance and tactical partners to address the transaction and increased use of RPA; (b) shake up service providers that clients believe are complacent, e.g., not consistently raising the bar or challenging the status quo.

Clients are (a) kicking it up a notch in partnering for the long –term with strategic roadmaps, (b) getting impatient with service providers that seem to be “resting on their laurels,” complacent, or just not aligned or insightful about the client culture or work/objectives, and (c) more willing to look beyond the traditional market leaders to “up and comers” who can prove trustworthiness, credibility and cultural alignment. This was reflected in scores for “value of engagement over time.” With the increasing mix of technology – platforms for procure-to-pay, record-to-report, and order-to-cash, as well as robotic and cognitive computing – in the business process services market, clients need to be looking at where and how service providers are investing in their own and third-party software, technical and business/consulting talent, and change management.

F&A As-a-Service Winners are service providers with clear vision and momentum towards transformational finance… but face the challenge of making an appropriate match with clients culturally and having the talent to deliver on these promises consistently

Our study included over 60 client interviews as well as surveys, service provider briefings, and additional research and analysis covering the vision and operationalization of F&A As-a-Service. All of the participating service providers are making investments and progress in some way towards a more insight-driven, digital-enabled finance function. The ones that have the clearest and compelling vision and scale as well as roadmap and evidence of investment and progress toward landed in the Winner’s Circle. However, there are also some unique value propositions by players on the whole map.

Top Tier Providers

F&A As-a-Service Winner Review

Accenture: One of the few service providers that consistently through the years touts talent development as a differentiator and is working to create a more flexible workforce management approach (Accenture Agile Workforce). It’s also invested in building out and rationalizing a set of proprietary and third-party tools to address all areas of finance and integrated systems support, e.g., Accenture Intelligent Automation Platform and Accenture Cognitive Engine, with apps like Intelligent Collections, Payables Optmizer, and Period-End Analyzer. Accenture is looking to partner with clients to define and deliver real-time enterprises and is doing a better job at defining joint roadmaps with clients to achieve this kind of vision. It also has industry-specific IP, such as in hospitality and utilities. Accenture faces the challenge of meeting high client expectations for understanding their business and delivering highly relevant and meaningful innovation consistently – for each client across its portfolio.

Capgemini: Through acquisitions and partnerships, Capgemni has built up and then defined a portfolio of offerings that are platform-based and designed to match the culture and approach of its clients to help them achieve “virtual F&A.” The portfolio of “as-a-stack” now includes support for centralizing and supporting FP&A and controllership. In the last year, Capgemini has made progress in defining a more clear and collaborative approach to incorporating robotic and cognitive automation into finance with its clients. It’s also had success in co-defining new models and approaches through design thinking with F&A clients. Capgemini needs to make all of this capability more transparent and relevant to more of the clients in its portfolio, as well as with new clients.

EXL: While operating on a smaller scale then the other players in the Winner’s Circle, EXL serves as an example of being small enough to feel approachable and collaborative but large enough with resources and focused investments. The EXLerator 2.0TM Palette includes custom-developed IP, best practices, and co-development partnerships. EXL has also adopted a more stakeholder and experience-centric approach to transformation and is rotating operations employees through consulting services, EXLerator, and RPA workstreams to develop more talent with future-oriented business, tool, and technology capability. EXL’s industry-specific IP is in insurance, healthcare, banking, and capital markets. EXL’s biggest challenge is the perceived lack of middle management talent pool to lead transformational change at an account level at scale.

Genpact: A steadily increasing percentage of Genpact’s F&A business is led by transformation, and it has built incentives for its teams to measure business impact beyond contracted productivity that must be acknowledged by the client. The latest acquisitions, Rage Frameworks and TandemSeven address two forward-thinking areas – platform-based microservices with conversational artificial intelligence and customer experience focused service design, respectively. Genpact is also building up its FP&A capability. It has particular coverage of consumer goods, manufacturing, pharma/healthcare, and financial services from an industry perspective for F&A. While Genpact’s thought leadership receives recognition consistently, on the ground, there is the inconsistency that gives clients the feeling that there is a gap between the capability of leading and delivering. Genpact needs to invest in raising the whole; and its recent investments are a smart approach.

IBM: Steadily consistent in its messaging, investment, and delivery through IBM Cognitive Process Services to help finance organizations incorporate digital technologies to drive better outcomes in finance. While the momentum is a bit slower across its clients than its peers in this category, IBM clients appreciate that the company has strong technology, design, finance, and industry capability. IBM is focused on how to best use data, and its core to the work it does to help “future-proof” finance. IBM has the highest percentage of its contracts incorporating FP&A and receivables analytics per our analysis. And it has a handful of useful applications for reconciliation, close, and translation that can be incorporated into finance today. The service provider, however, still has a tendency to be too “trigger happy” when it comes to embracing the next shiny toy – and it’s not just IBM Watson anymore, now it’s blockchain. It needs to define a clearer roadmap with clients on how to address the problems of today with the funding and contracts of today to bridge to the future.

TCS: “Touchless and intelligence” sums up the TCS vision for finance of the future. It is a technology first organization, with the “Digital Five Forces” of Analytics, Cloud Computing, Mobility, Robotics, and Cognitive Intelligence and Social Engineering. TCS is getting smarter about how it approaches the positioning of technology within business need and outcomes using its ValueBPS™ approach; it’s also in the top four of service providers reporting contracted analytics work embedded into BPS. Its F&A business by revenue is growing twice as fast as headcount by using this combination of talent and technology and not having a past portfolio of headcount-based deals. The challenge that TCS faces is that its story tends to be complex and in the weeds of technical detail, rather than looking at problem to solve, targeted outcome, and relevant solution.

WNS: In the year since launching its “Outperform CFO Framework,” WNS has invested to build out the capabilities such as thought leadership, domain expertise, maturity models, and context for the appropriate use of digital technology. It provides an outline and guide for building out future finance operations. From a technology perspective, WNS’ new CFO TRAC is the package it puts around cloud-based, mobile-enabled partnerships, such as for invoice-to-pay. It’s also one of the few service providers we cover in this report that has an ad-hoc research and analysis capability that supports FP&A beyond reporting. It’s depth is in industry-specific F&A, such as for travel, logistics, healthcare, and airlines.

High Performers – Cognizant, Conduent, DXC, HCL, Infosys, Sutherland, Wipro – are strong challengers to the F&A As-a-Service Winners, each with some unique capability to bring to the table. Arvato in retail, commerce, and fraud analytics, and NTT Data in industry-specific F&A such as healthcare, execute effectively in these chosen focus areas although lack a clear and compelling vision for future finance. OneSource Virtual is newer to the F&A business process services world with its launch just last year of accounts payable services wrapped around Workday. Hexaware and Intelenet have platform-based business process services in F&A that need consistency in delivery and clarity in vision – although both are advancing in these areas.

Bottom line: It's time to share the risk to get to the next level in F&A

A focus on customer engagement and relationship is increasingly having an impact on the longevity of service buyer and service provider engagements in F&A. Where RPA and collaboration are both part of the equation, the value of the engagement is rated higher over time. It’s the watermelon effect that we often refer to – even when SLAs show that performance is on target with green, if there is not a feeling of partnership and a visible effort to continually raise the bar (e.g., with journey maps, relevant use of RPA), then the engagement red – not of value to the service buyer and/ or the service provider.

What is making a difference now, per the collective feedback from references in this study, the service providers via briefings, as well as discussions with technology partners of the service providers and other leaders in the industry, is capability, context, communication and transparency, calculated impact, and collaboration. We hear from clients an increased willingness to “look around” and be open-minded if their engagements don’t match their own business, e.g., not customer-centric, or lacking a roadmap, or culturally misaligned. You – as service buyers and providers – need to be engaged, open-minded, and willing to take and share risk in order to drive increased value from services engagements.

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