Tag: Acquisition

IBM to Acquire myInvenio: Completing the Intelligent Automation Puzzle with Process Mining | Blog

The intelligent automation space has been witnessing a slew of acquisitions over the past couple of years. Several big tech providers have entered the market through numerous acquisitions, especially in the robotic process automation (RPA) space.

While the trend continues in RPA, with ServiceNow’s acquisition of India-based RPA vendor, Intellibot as the latest addition, 2021 seems to be a year of increasing M&A activity in the process mining space. After the acquisition of Signavio by SAP earlier this year, IBM’s acquisition of myInvenio is the second M&A deal happening in the process mining market within a short span of three months.

In one of our previously published blogs, Is It Open Season for RPA Acquisitions?, we highlighted larger technology players entering the intelligent automation market and discussed why more acquisitions might follow as these players seek to build more holistic business transformation solutions.

IBM entered the intelligent automation space with its platform, IBM Cloud Pak for Automation, in 2018 to help enterprises scale up their digital transformation initiatives. Two years later, IBM acquired WDG Automation, a Brazilian RPA vendor, to augment its platform capabilities.

Now, IBM is looking to further expand its automation portfolio with its latest acquisition of myInvenio, an Italy-based process mining technology vendor. The acquisition for an undisclosed price is expected to be completed in the third quarter of 2021.

Why the acquisition is not a big surprise

IBM provides IT and business process automation services to enterprises through its automation suite, which includes RPA, Intelligent Document Processing (IDP), Intelligent Virtual Agents (IVA), and process orchestration capabilities. Looking at IBM’s offerings within the intelligent automation technology ecosystem, process mining emerges as the key missing element in its automation suite.

The COVID-19 crisis highlighted the importance of digital transformation and the need to accelerate automation journeys for enterprises. The lack of a healthy automation pipeline and the inability to identify the right level of optimization opportunities emerged as key barriers for enterprises to scale automation initiatives. This has led to an increased focus on better understanding business processes and optimizing them to improve value realization from automation initiatives.

Process mining emerged as a critical technology providing the ability to discover as-is processes and identify/prioritize automation opportunities. Lately, the intelligent automation space also witnessed increased consolidation and entry of other bigger players in the market such as Microsoft, SAP, ServiceNow, etc., resulting in increased competitiveness for IBM.

To cater to the market demand and better compete in the automation space, IBM partnered with myInvenio in November 2020 to help its customers gain visibility into business processes and identify automation opportunities. Through this partnership, IBM sought to deliver a single solution to its clients for streamlining and automating business processes.

IBM has a very strong focus on enabling a unified experience to its clients through a one-stop-shop automation suite. In line with this vision, this acquisition would help IBM provide process mining capabilities that are tightly integrated into its automation platform. Also, this union would provide a holistic solution to IBM’s clients where they could access various technologies that constitute the intelligent automation ecosystem. It also boosts their AI and hybrid cloud strategy to provide enterprises with the necessary AI-enabled automation capabilities.

Why myInvenio?

Founded in 2013 and headquartered in Reggio Emilia, Italy, myInvenio has a vision to support enterprises in their digital transformation journey by helping them create a digital twin of their organization. Over the last eight years, it has acquired clients globally spanning the European, North American, APAC, and UK regions and serves enterprises across key verticals such as banking, financial services and insurance (BFSI), manufacturing, and healthcare and pharmaceutical.

Through its process mining solution, myInvenio focuses on enabling data-driven process discovery, analysis, and continuous monitoring to identify process improvement and transformation opportunities.

myInvenio was identified as a major contender in Everest Group’s 2020 Process Mining PEAK Matrix® and brings a host of capability modules to enhance the value proposition of IBM’s automation suite. These include:

  • myInvenio Process Analyst
    • Process discovery – to automatically generate process maps, perform multi-level process mining, and create BPMN 2.0 compliant process models
    • Conformance checking – to compare discovered as-is process model with a target reference model, perform root-cause analysis, and check compliance rules such as segregation of duties
  • myInvenio Process Insights
    • Process monitoring and reporting – to derive process insights through continuous monitoring, create customizable dashboards, and define custom KPIs/metrics
    • Process enhancement – to identify processes/tasks for automation, predict and highlight any expected KPI breach, and perform simulations/what-if analysis
  • myInvenio Desktop Process Mining (DPM)/Task mining capability – to capture users’ interactions across multiple desktops and map the recorded tasks to respective processes using Artificial Intelligence/Machine Learning algorithms for discovering end-to-end processes
  • myInvenio Process Store – to provide out-of-the-box pre-built templates for processes spanning across industries such as banking, manufacturing, and energy and utilities

What are the implications going forward?

Impact on process mining vendor landscape and partnerships

IBM has strategic go-to-market partnerships and technology alliances with other process mining vendors. Earlier this month, Celonis, IBM, and Red Hat announced a strategic partnership to help enterprises accelerate their digital transformation by combining Celonis Execution Management System (EMS) with Red Hat OpenShift’s hybrid cloud approach and IBM Global Business Services’ expertise.

Partnerships like these are expected to continue, giving clients the flexibility to choose as co-opetition is becoming quite common in the enterprise software space. For example, IBM maintained its partnerships with RPA vendors such as Automation Anywhere and UiPath after the WDG automation acquisition.

The IBM acquisition of myInvenio could put pressure on other process mining vendors since many do not have a global reach and would need to expand their service provider partnership ecosystem. This latest deal could also encourage the acquisition of process mining capabilities by other tech giants, Business Process Management (BPM), and Enterprise Resource Planning (ERP) companies in the coming months to offer a more holistic solution to their clients.

Increased adoption of process mining

Process mining technology would reach a much broader audience after its integration into the platforms offered by these service providers, resulting in improved awareness and adoption. IBM offers its automation products to enterprises across different sectors such BFSI, healthcare, and manufacturing.

IBM started delivering process mining services to its customers in November 2020 by leveraging its OEM partnership with myInvenio. Augmenting its prior implementation experience with in-house technology capabilities, IBM can now provide process mining capabilities that are tightly integrated with its automation suite. It is expected that IBM would offer process mining on a standalone basis as well as part of its Cloud Pak for Automation platform.

Impact on service providers

This acquisition will nudge other service providers to demonstrate their ability to think ahead and make more investments to strengthen their automation suite. Last week, Celonis announced its execution management without limits program that gives service providers access to its process mining solution with unlimited users and processes but charges them based on the volume of data being analyzed. While Celonis offering its EMS to consultants could be a win-win situation for both Celonis and service providers, some large service suppliers still might look to acquire process mining capabilities to strengthen their in-house technology portfolio. Also, having this capability in-house would give service providers more negotiating power and reduce the reliance on third-party vendors for capabilities that can be critical for their business going forward. The acquisition route can provide them the ability to deliver innovation faster in their focus industries and functions.

The takeaway: the acquisition could fuel more activity 

Since IBM has been faster in integrating acquired capabilities into its suite because of its cloud-based platform approach and containerized product architecture, it is expected to take less time to embed myInvenio’s process mining offering at a technical level within IBM’s automation suite.

With process mining emerging as a critical component of the automation ecosystem, the process mining market is entering a disruptive phase, garnering attention from all parts of the world. This acquisition could also trigger other big enterprise tech vendors like Microsoft, Oracle, ServiceNow, and Salesforce to make similar moves to enter the process mining market.

Wipro Acquires Capco Creating End-to-End Digital Consulting Services

Since Wipro’s March 4, 2021, announcement to acquire Capco, the London-based global management and technology consultancy that provides digital, consulting, and technology services to financial institutions, for US$1.45 billion, reaction has been mixed as to whether it will deliver the synergies and earnings growth Wipro expects. However, Wipro’s consulting-led offerings matched with Capco’s digital capabilities appear to be poised to deliver a powerful, end-to-end service for clients.

Here’s our take.

What’s in it for Wipro?

Wipro, a leading, India-based global IT, consulting, and business process services company, has acquired numerous companies in the last few years, such as Appirio for cloud services, Opus CMC for the mortgage industry, Designit, Syfte, and Cooper for design thinking and strategy, and International TechneGroup (ITI) for its industrial and engineering services. The Capco deal, which is expected to close at the end of June, stands apart from the other acquisitions not only because it’s Wipro’s largest to date but because it will greatly improve Wipro’s digital offerings in the BFS space, Wipro’s largest business unit. This will narrow the gap between Cognizant, Infosys, and TCS, Wipro’s three biggest competitors in the BFS arena.

Also, in 2020, digital contributed to nearly 40 percent of Wipro’s total revenue, making Capco’s digital capabilities integral in positioning Wipro as one of the market leaders.

The Wipro/Capco acquisition will deliver improved benefits to clients, including:

  • Superior capabilities in consulting and advisory: With this deal, Wipro will join a small group of service providers that bring integrated end-to-end solutions at scale to their customers. Wipro and Capco’s collective capabilities include high-value, upstream activities like consulting and advisory, and design and build, as well as downstream activities such as implement and manage
  • Better access to newer geographies and clients: With more than 40 percent of Capco’s US$700 million revenue coming from Europe, this acquisition will help Wipro strengthen its foothold in that market. In addition to the larger strategic benefits that the deal aims to provide, it will also add 30 new BFS logos to Wipro’s portfolio and could bring in more business from the company’s existing clients
  • Balanced shoring mix: Capco’s high leverage of onshore and nearshore delivery centers nicely complements Wipro’s offshore-heavy delivery footprint, which will give Wipro the opportunity to handle judgment-intensive work for onshore-heavy clients
  • Technology synergies: A blend of Capco’s multiple point solutions and Wipro’s digital investments will help Wipro strengthen its asset management, custody, and prime brokerage offerings, and develop niche, targeted next-gen solutions for its client base
  • Domain depth: Capco will deepen Wipro’s capabilities in digital banking and payments, as well as the asset management, custody, and prime brokerage spaces. This is critical at a time when financial services firms are looking to engage with providers with more domain depth
  • Augmented risk and compliance offerings: Wipro will be able to augment its current risk and regulatory compliance offerings on its Wipro Holmes platform by leveraging Capco’s extensive Finance, Risk, and Compliance (FRC) offerings and solutions portfolio

Large-scale acquisitions are not new to Wipro or the BFS industry; however, success from such high-value acquisitions are not always guaranteed. It is, therefore, no surprise that this announcement was received with mixed reactions and speculation from the market as to whether it will deliver the synergies and earnings growth that Wipro has promised.

Overall, we remain optimistic about the deal and believe this acquisition will equip Wipro to better solve BFS clients’ challenges through Capco’s future-ready digital capabilities. Most importantly, the acquisition is complementary in nature and will help Wipro gain scale, speed, and stature.

How will unities like consulting and digital end-to end services affect the broader BFS market?

Wipro’s consulting-led services, together with Capco’s digital capabilities, will provide more meaningful end-to-end long-term support to clients. It would not be surprising to see similar deals coming up across various segments of BFS with the aim of providing bundled offerings, as products lose their charm when offered on a standalone basis. Complementing service offerings with consulting-led delivery capabilities is being seen across various BFS industries, including mortgage and FCC. These capabilities are being acquired not just through acquisitions but also through partnerships, such as the recent one between Genpact and Deloitte in the financial risk and compliance domain.

Though this trend witnessed a slow start, especially for the Indian IT firms, it looks promising and rewarding in the long run and is only expected to gain momentum. Through end-to-end consulting and digital service offerings, enterprises get access to a compelling combination of digital talent at scale with a consulting-led delivery approach, which helps achieve greater business value and gains.

Success hinges on successfully executing consulting-led digital transformation

Generally, the value addition to enterprises entirely depends on the speed at which service providers can utilize the enhanced breadth and depth of their offerings post-acquisition. Having said this, the key to achieving significant value addition for both Wipro and Capco’s clients would eventually lie on smooth integration and flawless execution.

For the returns to outweigh the risks, a superior execution policy needs to be in place. The key to inspiring its BFS clients will be to align consulting, design, build and operate capabilities around solving some of the industry’s biggest challenges. For BFS clients, this is namely modernizing legacy systems, providing innovative product and service offerings, ensuring a delightful customer experience, and effectively managing the ever-evolving regulatory landscape. For Wipro’s enhanced capabilities to be successful, it should help reinvent the client’s journey through a rare combination of consulting-led digital transformation.

We would love to hear your thoughts on this acquisition and or others that are following the same trend, reach out to [email protected].

Salesforce Acquires Slack: Salesforce Stands to Gain Much More Than Slack in the Long Run | Blog

There was much excitement on December 1, 2020, when Salesforce announced that it has entered into a definitive agreement to acquire Slack, and Salesforce CEO Marc Benioff called the US$27.7 billion deal a “match made in heaven.” In the days since, however, the market has significantly dampened that excitement, with Salesforce losing more in market valuation than the price it paid for the acquisition.

But we at Everest Group are bullish on the deal; we believe Salesforce has much to gain in the long term.

Microsoft’s erstwhile involvement

Microsoft considered buying Slack for US$8 billion in 2016, but ultimately decided to take this market on organically, releasing Teams within a year. Microsoft used the US$8 billion to invest in Teams growth through:

  • An ecosystem play – Microsoft leveraged its Office 365 ecosystem to increase the Teams user base. It effectively provided Teams for free as part of multiple Office 365 packages, providing a more holistic value proposition.
  • Aggressive sales – Microsoft started a price war with Slack by offering Teams as a free product or at a highly discounted price. With its deep pockets and bundled offerings, Microsoft effectively contained Slack, turning the market against it, causing its valuation to decline.

Slack’s story

They say necessity is the mother of invention, and Slack is the poster child for that. What began as an internal tool, developed out of necessity turned into a wildly popular chat and productivity offering. Then Microsoft set its sights on the space, effectively crushing Slacks’ growth. In terms of market adoption, before Slack stopped reporting daily active user numbers in 2019, it was able to grow to about 12 million users in seven years; Teams matched that number in only three years. Moreover, Teams continues to expand its presence with a daily active user base touching 115 million in October 2020.

In terms of market valuation, despite achieving robust revenue and user base growth, Slack has not been profitable, reporting a loss of US$138 million in 2019. Additionally, its market valuation has eroded significantly since its IPO listing: From its IPO price of US$38.50, Slack was trading at $25.89 on October 31, 2020, a valuation loss of ~33%.

In many ways, its rivalry with Teams and its ensuing market valuation loss made Slack desperate for an acquisition. Slack needed a partner to sustain itself and compete with Microsoft. Salesforce to the rescue!

How can Salesforce help Slack compete with Teams and Zoom?

One’s immediate reaction may be that Slack should be able to arrest its slide given its ability to reach into Salesforce’s deep pockets. However, our take is that Salesforce is good at selling to business units and sales and marketing folks, not to enterprise IT and tech, who would be the primary Slack buyers. That is Microsoft’s power alley – the area it rules. In addition to money, Salesforce will have to make big changes to its sales model to make a dent in Microsoft’s tight control of that space.

How does Salesforce benefit from this acquisition?

The acquisition comes at a time when Salesforce recognizes its need to build integrated suites for enterprises. Most of its competitors – Microsoft, of course, and SAP and Oracle – have been talking about integrating the front and back ends, especially as enterprises have started to realize the importance of end-to-end integrated suites cutting across ERP, CRM, and HCM.

This acquisition gives Salesforce the opportunity to move beyond the sales and marketing area and gain access to other parts of the organization. If integrated well with the Salesforce platform, Slack could potentially act as a unifying thread across ERP, CRM, and HCM, while also solving for the missing piece in their customer-360 value proposition.

Salesforce has made a couple of failed forays in the collaboration space with Chatter and Quip; the third time may be the charm with Slack, given its more robust offering and positive customer sentiment.

What does the acquisition mean for the market?

The acquisition highlights the fact that the industry is going through consolidation, and standalone products are finding it difficult to compete with larger players that offer bundled products. Moreover, the collaboration space is gaining significant traction among enterprises as remote working becomes the new norm. We wouldn’t be surprised to see Amazon or SAP getting into this space, and we’re wondering if we might see Atlassian, Splunk, or some other similar organizations in the acquisition news sometime soon.

If you’d like to share your thoughts on the acquisition or on Salesforce’s strategy, reach out to us at [email protected] or [email protected].

 

Salesforce Acquires Acumen: The Likely Ripple Effects in Professional Services | Blog

The news of Salesforce’s acquisition of Acumen Solutions on December 1, 2020, was completely buried under Salesforce’s whopping $US27 billion acquisition of Slack the same day. But don’t discount the Acumen acquisition – I believe it will be the cornerstone of Salesforce’s professional services strategy over the next several years.

Why this acquisition is unusual

For starters, tech vendors in general do not leverage M&As to enhance their professional services capabilities; most tech vendors’ M&A activity is driven by their technology arms. The Acumen deal is the only pure-play professional services partner acquisition that has happened in the past three years among big tech vendors, based on an analysis of 51 acquisitions by AWS, Microsoft, SAP, and Salesforce over that time period.

The acquisition comes at a time when most tech vendors are in a state of flux over their professional services strategies. For example, AWS grew its professional services arm by an eye-popping 40% over the past 12 months, while peers and other vendors were still figuring out the implications of the pandemic and whether they should be aggressive with their professional services offerings.

The acquisition is also important given the fact that Acumen was one of the few remaining pure-play Salesforce System Integrators (SIs) that was competing head-on with the larger SIs as a major contender in the market. Thus, the acquisition adds significantly to Salesforce’s professional services strength, as Acumen adds approximately 1,000 FTEs to the existing base of 1,000-1,200 FTEs currently working in Salesforce’s professional services arm, effectively doubling the overall headcount.

What’s in it for Salesforce?

Salesforce gains significant advantages from the acquisition, chief among them:

  • Bridging the talent demand-supply gap – Everest Group’s recent talent study suggests that the demand-supply gap for Salesforce services talent has widened over the past two years and now stands at more than 20% for areas such as Lightning, Mulesoft, and Einstein Analytics. Also, Salesforce is getting pushed out by other vendors such as Oracle, SAP, and Pega and needed to have talent to help clients increase adoption, an area where service providers have been struggling. The acquisition strengthens the footprint of Salesforce’s professional services arm in North America especially in areas such as Einstein, Lightning, and Service cloud.
  • Catering to demand for industry-specific expertise – More than 70% of Acumen’s current portfolio is concentrated in three industries: federal; Banking, Financial Services, and Insurance (BFSI); and, manufacturing. The acquisition boosts Salesforce’s industry-specific agenda, which it has been driving on the technology side with Vlocity and the launch of industry cloud offerings. The acquisition also will have significant positive impact on Salesforce’s ability to serve the federal services space, where Salesforce has been able to capitalize on multiple opportunities post-pandemic.
  • Getting a nimble service partner – The acquisition also highlights Salesforce’s recognition that it needs to get more involved from a services standpoint. Pure play and niche SIs, in general, are faster to react to vendors’ technology innovation, and they are more flexible in meeting clients’ demands. The need for nimble service partners is more pertinent for Salesforce today given the volume of innovation that they have been bringing to the market.

What are the key implications going forward?

The Acumen acquisition has implications for enterprises, service providers, and, of course, Salesforce itself:

  • For enterprises: According to our Salesforce Services research (see our report, Salesforce Services – Solving for the Missing Link) more than 80% of clients said their vendor’s professional services arm is their go-to partner in defining the adoption roadmap when it comes to emerging products such as Mulesoft and Lightning. There is a clear time lag in the service provider’s ability to deliver on to the tech vendor’s innovation. This acquisition is a step in the right direction as strengthened professional services gives Salesforce an ability to deliver innovation faster in specific industries.
  • For service providers: Once the dust settles, this acquisition will force service providers to demonstrate their ability to think ahead of Salesforce’s innovation curve and be at the top of their game as truly agile partners. Service providers should think beyond the core platform and invest proactively in the marketing and commerce cloud and cross-skill talent in Mulesoft and Tableau. They should further develop a structured program to build industry and functional expertise in the existing Salesforce talent.
  • For Salesforce: As a result of this acquisition, some large SIs may perceive Salesforce Professional Services as a competitor – which might not be totally untrue – but could work against Salesforce. Even today, large SI partners believe core platforms (sales and service cloud) are not growing as fast as they want, and so they have curtailed proactive spending. Thus, the onus falls back on Salesforce to allay these fears and continue expanding its partner network.

It’s early days yet; only time will tell how this acquisition will actually shake out. But I have no doubt it will provide food for thought for other big tech vendors as they work through their professional services strategies over the next year. If you want to share your thoughts on the acquisition or on Salesforce’s strategy, reach out to me at [email protected].

HealthEdge Acquires Complementary Product Vendor The Burgess Group | Blog

On July 21, 2020, HealthEdge announced its acquisition of The Burgess Group, which we recently recognized as a Major Contender on our Healthcare Payer Payment Integrity Solutions PEAK Matrix™ Assessment 2020.

Healthcare Payer Payment Integrity Solutions PEAK Matrix™
HealthEdge provides an integrated financial, administrative, and clinical software platform (the HealthRules suite), while The Burgess Group is a specialist in the payment integrity software space.

Here’s our take on this deal.

The strategic intent behind the deal

The healthcare payer industry is plagued with notoriously old infrastructure. While healthcare payers are working to increase data transparency, offer member-centric solutions, and adopt a value-based care model, they’re obstructed by high reliance on dated, disconnected, and non-interoperable systems. Cost management is another endemic issue impacting the payer industry. One of the key reasons for this financial distress is the high share of expenditure on administrative costs in the US healthcare system, driven by redundant processing and limited automation. To address these roadblocks, payers are increasingly leveraging a core-admin platform approach.

The interesting fact here is that medical costs account for 80-85 percent of the total payer cost, while only 15-20 percent are admin and IT costs. Payers leave a lot of value on the table when they manage these costs separately. Payment integrity is one of the principal tools to manage medical costs and, hence, is a key functionality that payers value in core-admin platforms. By adding The Burgess Group’s offerings to its own expertise, HealthEdge’s goal is to create an integrated claims processing, payment integrity, and adjudication platform that addresses both administrative and medical expenses.

Another point worth noting is that Blackstone completed the acquisition of a majority stake in HealthEdge in April 2020, giving HealthEdge the financial muscle it required to make the right investments to expand its product offerings and compete with the other big players such as Cognizant (TriZetto), HM Health Solutions, Mphasis, and NASCO.

Unpacking the companies’ synergies

The acquisition offers several synergies.

HealthEdge Acquires Complementary Product Vendor The Burgess Group synergies

Things to watch out for

Ram Jagannath, global head of healthcare at Blackstone Growth and chairman of HealthEdge, has stated that the acquisition of Burgess is a great strategic fit for HealthEdge to enter the large, high-growth payment integrity market, helping address the estimated $1 trillion in wasteful spending in the US healthcare system.

We are positive about this deal, particularly for what it means to the market and current market demand. However, it remains to be seen how HealthEdge leverages this investment, while also mitigating the major concerns that enterprises cite around using platforms, including integration, interoperability, scalability, and user experience.

Platforms that can address medical costs while encouraging data-driven process efficiency are generating growing interest in the market. If HealthEdge can partner with payers to create tightly knit contracts with strong risk mitigation and guaranteed savings clauses, this comprehensive platform can unlock tremendous value for payers. We’ll be tracking this one closely.

Reach out to me at [email protected] with your thoughts on this acquisition or the market in general.

Microsoft Acquires Softomotive to Accelerate Its Dominance in RPA | Blog

Near the end of 2019, Microsoft added various RPA features to Flow, its automated workflow service, and rebranded it as Power Automate. It wasn’t surprising to see Microsoft getting into this space to embed RPA into its products such as Excel, PPT, Outlook, Teams, and SharePoint, and enable business users to automate tasks directly from these products. Now, with its acquisition of RPA software vendor Softomotive, it’s staking its claim in the US$1 billion RPA software market, accelerating its positioning in the RPA space, and offering greater depth and breadth of RPA capabilities to its customers.

This acquisition has come at a time when the demand for automation is being amplified due to the COVID-19 pandemic, and automation at scale is gaining pace. And it positions Microsoft as a serious contender for automation software needs as organizations are rethinking their automation strategies.

Here’s our take on the deal.

What Softomotive brings to Microsoft

Founded in 2005, Softomotive is a leading RPA software vendor with roots in desktop automation. Its popular desktop automation product, WinAutomation, helps automate tasks running on Windows-based applications and technologies. We positioned Softomotive as a Major Contender and a Star Performer in our 2019 RPA Products PEAK Matrix assessment for multiple reasons including:

  • Attended and unattended RPA for organizations of all sizes, through
    • WinAutomation, Softomotive’s desktop automation product, used primarily for attended RPA use cases. Robots are typically installed and executed on a user’s desktop in attended mode. It doesn’t have centralized control, monitoring, or governance capabilities, and is primarily suitable for small and medium-sized businesses
    • ProcessRobot, Softomotive’s enterprise RPA offering, delivers both attended (SideBot) and unattended (SoloBot) RPA capabilities along with centralized control, monitoring, and governance functionalities
    • Robin, Softomotive’s open-source RPA language for programmers. Microsoft’s immense presence and installed base could help make it popular enough in the developer community to force several other vendors to adopt it. And it could become a new standard for RPA programming and help Microsoft establish its thought leadership in the market
  • A comprehensive set of RPA features built over the past 15 years will help Microsoft expand the scope of its automation use cases
    • Drag-and-drop design studio with 300+ pre-built actions for developing automations
    • Web-based centralized interface for controlling and monitoring robots and features such as scheduling, queuing, and dynamic load balancing based on SLAs and priorities
    • Ability to multi-task/execute multiple automations in parallel on the same machine for higher resource utilization
    • Role-based access, version comparison tool, visual exception recording for enhanced debugging, and automation lifecycle management capabilities for higher collaboration across development, testing, and production stages
  • Pre-built connectors and integrations for greater ease of use
    • Softomotive has pre-built connectors with enterprise applications such as Java, Oracle, Salesforce, SAP, Siebel, and mainframes, and support for major browsers such as Chrome, Firefox, and IE, making it easier to automate tasks that involve these applications
    • Pre-built integrations with complementary capabilities such as cognitive/AI services from ABBYY, Google, IBM Watson, and Microsoft
  • An installed base of over 9,000 clients and recognition as a mainstream RPA player

What the acquisition means for the market

This acquisition validates the RPA space and reinforces the point that RPA will stick around for much longer than some have been predicting. It’s a big moment for the RPA market as a whole and could accelerate technology maturity, awareness, adoption, and development of RPA skills. It could drive or accelerate key market trends:

  • Consolidation/M&A activities – RPA is becoming a critical component of the enterprise software ecosystem for driving digital adoption and automation. In the last couple of years, we’ve seen multiple acquisitions such as Appian/Jidoka, Blue Prism/Thoughtonomy, Nintex/Foxtrot, and SAP/Contextor. These deals demonstrate that entry into this space isn’t very expensive, as there are many small RPA vendors with good offerings. This latest deal could encourage acquisition of RPA capabilities by other tech giants, BPM, and ERP companies in the coming months to offer a more holistic solution to their clients. On the flip side, just as UiPath did with its acquisitions of Step Shot and ProcessGold, there could be more instances of big RPA companies acquiring complementary capabilities to expand the scope of their solutions and increase their value propositions
  • Democratization of RPA – Microsoft products are used by most knowledge workers around the world. By making RPA another tool in its list of its Power products, Microsoft could accelerate the democratization of RPA and the concept of citizen developers. Because Microsoft Power Automate is available at much lower than the median pricing, other vendors will feel pressure to reduce their prices. To accelerate its adoption, it could also offer its RPA bundled with other Microsoft products without additional cost, making RPA more affordable and its business case more lucrative for organizations of all sizes. This move could accelerate RPA adoption among small and medium-sized businesses, where adoption has been growing at a relatively slower pace. Access to RPA as a plug-in directly from Microsoft’s products such as Excel, Outlook, Teams, Dynamics, and SharePoint would make it easy for business users to automate repetitive tasks. Instances of RPA being sold as a commodity are gaining momentum, and this could further accelerate that trend

What the acquisition means for other RPA vendors

With Microsoft going all-in on RPA with this acquisition, other RPA vendors will need to up their game to remain competitive. Microsoft will be able to deliver RPA that’s tightly and seamlessly integrated with its vast suite of business applications. To combat this move, other vendors will have to position themselves as specialists and best-of-breed providers of enterprise automation capabilities. Also, going forward, growth may elude pure-play RPA vendors; in order to thrive, they will have to either invest in other complementary areas such as AI and process mining, or be acquired. Note that today, most RPA players, including the big three, are offering complementary products in addition to RPA.

Additionally, Microsoft has deep integration, joint functionality development, and go-to-market partnerships with big RPA vendors including Automation Anywhere, Blue Prism, and UiPath. These partners also contribute to Microsoft’s revenue through collaborations, such as Azure, and it’s likely that those partnerships will continue, and clients will be given flexibility to choose, as co-opetition it is becoming quite common in the enterprise software space. For example, UiPath acquired a process mining vendor, ProcessGold, but has maintained its partnership with Minit. Similarly, Blue Prism announced an Intelligent Document Processing (IDP) solution called Decipher, but has maintained its partnership with ABBYY.

Other things to watch out for

It will be interesting to see how well Microsoft is able to leverage this investment. It could take the company up to a year to come up with its integrated RPA offering and embed Softomotive at a technical level across its suite of software products. In the meanwhile, Microsoft has made WinAutomation available for free to all of its Power Automate customers. However, it remains to be seen how Microsoft plans to leverage Softomotive’s ProcessRobot and Robin. Some say Microsoft gets it right the third time. Flow was Microsoft’s first attempt at RPA, Power Automate was its second, and Softomotive is its third. So, will the third time be the charm for Microsoft?

Going forward, Microsoft could follow on with more acquisitions in other automation areas such as Intelligent Document Processing (IDP), Intelligent Virtual Agents (IVA), process mining, and analytics to further establish itself in the intelligent automation space. An indication of this possibility is Microsoft’s late 2019 launch of Power Virtual Agents, a chatbot/IVA offering that’s based on its Bot Framework. Might IVA be the next area where Microsoft could make an acquisition, perhaps of one of the 16 IVA software vendors we assessed as part of IVA Products PEAK Matrix?

Will COVID-19 Amplify Acqui-hiring and Help Companies Win the War on Talent? | Blog

COVID-19 is truly turning out to be the black swan event of our lifetimes – it will have profound near- and long-term consequences on talent markets around the world. The International Monetary Fund (IMF) recently noted that COVID-19 could contract the global GDP by 3 percent in 2020, causing the GDPs of 170 countries to shrink and making it the steepest downturn since the Great Depression of the 1930s. As discussed in our recent blog, Will COVID-19 Ease the Relentless War for Talent?, talent shortages will become even more acute and the supply-demand gap for emerging skills will further widen as companies undertake rapid digital transformation and adapt to the “next normal.”

Against this backdrop, some firms are seeing this time as an opportune time to acqui-hire – or acquire startups primarily for their talent.

We have been here before. Acqui-hiring tends to spike during and after economic crises. The early 2010s saw a flurry of acquisitions by Silicon Valley giants including Facebook, Google, and Microsoft, aimed at acquiring hot skills. We believe there will be a similar acqui-hiring surge in 2020, with multiples firms announcing plans to acquire emerging skills and accelerate their efforts to build niche capabilities.

Why do companies acqui-hire?

Mark Zuckerberg once said, “Facebook has not once bought a company for the company itself. We buy companies to get excellent people.” This sentiment highlights the premium companies place on good talent. Companies acqui-hire to leverage multiple advantages such as access to highly-skilled talent, reduced time-to-hire and training efforts, developing niche capabilities, and launching a business model.

Facebook has plans to hire 10,000 additional FTEs in its product and engineering teams to tackle high utilization after the pandemic abates and to combat misinformation in advance of the U.S. presidential election in November. Amazon and Google are aggressively hiring product, design, and engineering talent. Apple CEO Tim Cook recently stated that the company plans to hire aggressively, just as it did after the 2008 financial crisis.

With multiple startups facing reduced valuations due to the economic downturn, it is highly likely that a significant chunk of this demand for talent will be addressed through focused acqui-hiring. Additionally, we expect leading Indian service provider players supporting global services delivery, like Infosys, TCS, and Wipro, to accelerate their acquisition efforts to gain strategic capabilities and grow business inorganically. And Walmart Labs has announced plans to hire over 3,000 FTEs for its India centers, aiming to strengthen its India COE by hiring new talent and acquiring relevant startups.

We are already seeing many acqui-hiring deals in 2020, a few of which we describe below. While not all were triggered by the COVID-19 aftermath, we expect the business and economic repercussions of the pandemic to accelerate this trend.

  • Google recently acqui-hired Superpod, an app that allows users to post questions and quickly receive answers from experts, to boost Google Assistant’s capabilities.
  • Tata Group-owned Titan Company, a traditional watchmaking firm, recently acqui-hired HUG Innovations to strengthen its smartwatches and wearables division, and plans to set up a development center in Hyderabad to cater to hardware, firmware, software, and cloud technology.
  • KPMG India acqui-hired Shivansh Solutions, an SAP consulting and implementation services provider, to augment its technology implementation practice, retaining Shivansh’s directors and the core team of SAP consultants.
  • Leading tech-enabled logistics marketplace, LetsTransport, recently acqui-hired and onboarded the team of a web and mobile app development startup, Pixlcoders, to strengthen its supply chain, technology, and applications divisions.
  • Alphonic Network Solutions, a leading mobile application development company, recently completed the strategic acqui-hire of Roaring Studios, a digital startup to augment its web and mobile app development.

As these deals indicate, acqui-hiring presents a great value proposition for companies to access highly motivated ready talent, augment existing offerings, and develop new capabilities. It also proves lucrative for startups, especially those that might be struggling with funding during an economic downturn. We are already seeing early signs of funding scarcity, with industry analysts reporting that total startup funding in New York City is down 48 percent from year-ago levels since the lockdown started in mid-March.

Acqui-hiring can be a win-win for everyone. However, to ensure acqui-hiring success, companies must address critical factors beyond the usual legal and contractual due diligence.

What makes acqui-hiring work?

To make acqui-hiring work, companies must:

  • Explore cost-benefit trade-offs – While multiple acqui-hire opportunities may exist in the market, assess their strategic near- and long-term priorities, and shortlist startups that align with their firms’ objectives and address crucial talent-supply demand gaps.
  • Assess culture fit –Ensure that the acqui-hired talent, who usually possess an entrepreneurial mindset with a constant need to create, has the capacity to adapt to a systemized, rules-based corporate environment.
  • Evaluate employee attitude –Make sure that the relevant skills are accompanied by the right attitude to avoid potential attitude issues.
  • Ensure smooth integration – Properly manage the integration process to eliminate in-house talent’s apprehensions about, and potential resentment toward, acqui-hired team members.

The way forward

The economic aftereffects of COVID-19 will surely create some paradoxes. While on one hand startups may be challenged and job markets ravaged, on the other hand this time could present an opportunity to re-strategize priorities, revitalize operating models, build capabilities, and acquire the right talent. We believe companies that proactively realign their workforce strategies and tactically utilize acqui-hiring will emerge stronger and more resilient.

Companies looking to acqui-hire as way to address emerging talent challenges must undertake the following steps to ensure effective outcomes:

  • Review the global workforce strategy and identify relevant talent supply-demand gaps
  • Identify and evaluate potential acqui-hire options
  • Undertake comprehensive legal and contractual due diligence
  • Develop a comprehensive roadmap for integration with the existing operating model.

We’d love to hear your thoughts on acqui-hiring as an effective talent acquisition strategy. Please share with us at: [email protected] or [email protected].

Appian’s Jidoka Acquisition Sets the Scene for the RPA Market in 2020 | Blog

Appian announced its intent to acquire the Spanish vendor Novayre Solutions SL and its Jidoka RPA platform on January 7. With this acquisition, Appian, best known for its low-code process management and orchestration software, will be able to offer extensive automation capabilities natively, while it did so previously with partners’ software such as Blue Prism and UIPath.

So, what does the acquisition mean for the market?

Why the acquisition?

Our estimates show that the RPA third-party software market is expected to grow by 80 percent to reach $2.5 billion this year. With this phenomenal growth rate, it’s not surprising that non-RPA companies want a slice of the pie.

Appian has been active in this market for a while and has benefitted from many new clients thanks to its partnerships with RPA vendors. It is also a reseller for Blue Prism and has experienced growing demand for RPA first-hand through that channel.

In addition, technology giants are increasing their activities in this market. SAP acquired Contextor back in 2018. And most recently, Microsoft announced UI flows to add RPA capabilities to Microsoft Power Automate (previously Microsoft Flow). It combines digital process automation (DPA) via APIs with UI-based automation. Pega is another competitor that has also invested in this market; it took over OpenSpan back in 2016.

Why Jidoka, and what about the partners?

We have assessed Jidoka as part of our RPA Technologies PEAK Matrix for a number of years and most recently positioned it as a major contender in our 2019 assessment. Jidoka is a Java-based platform where robots are designed and managed by a web-based console. There is a design studio for workflow and orchestration of robot operations. A console centralizes monitoring, audit, and exception handling features along with secure user permission and authorization capabilities. It has proprietary image recognition technology, Hawk Eye, to support Citrix automation. The platform offers capabilities such as auto-scaling of robots, a secure credentials vault, roles-based access controls, execution logs, audit trail, robot performance analytics, and ROI calculator. It also offers a chatbot capability that is available from the console. Real-time human-robot collaboration is provided via chat interface from the console (and Google Home,) the Jidoka mobile app (voice and chat,) and via IoT devices.

Appian intends to rebrand the product as Appian RPA. It will turn it into a low-code environment and integrate it with its own solutions to be offered on the cloud on a competitively priced subscription basis. While growing in Spain and Latin America, Jidoka has limited presence in other geographies. This is something that Appian can address with its presence in major tech markets.

As for its partnerships, Appian is keen to keep them going and offer clients choices. It remains to be seen how partners such as Blue Prism and UiPath will react to this news. It is not unusual for partners to go for co-opetition. For example, last year Blue Prism announced an Intelligent Document Processing (IDP) solution called Decipher, but has maintained its partnerships in the IDP segment, e.g., with Abbyy.

What does it mean for the market?

We have been expecting M&A activity in this sector to increase with market maturity and as RPA becomes a key tool for process efficiency and productivity. RPA is also commoditizing, and the fact that Appian is acquiring a very small vendor shows that entry into the market is not expensive. The news of this acquisition could encourage other tech companies, particularly those in the process management and orchestration space, to act too. There are many small RPA vendors with good offerings. The big RPA players with their current large valuations could suffer if a wave of acquisitions materialized and bypassed them; but at the same time, they have an awful lot of customers and a huge global footprint among them. Furthermore, private equity investors continue to invest in the market, as evidenced by Automation Anywhere’s last round of funding. This market remains buoyant and dynamic.

With Microsoft getting into the RPA business, all vendors have to up their game to remain competitive.  As for the RPA scale challenge that many enterprises are facing, vendors are working on this with new, improved offerings in the areas of robot management and controls, ease of use, and increased robot resiliency. With its existing and new capabilities, Appian will be well placed to address the scale challenge to make RPA adoption and operations smoother and, in so doing, edge ahead of the competition.

HCL’s Sankalp Acquisition: Reflections of a Dynamic Industry

In September, HCL Technologies announced its acquisition of the semiconductor engineering services firm Sankalp Semiconductor in an all-cash deal worth US$25 million, with Sankalp operating as a 100 percent subsidiary of HCL. While this is not a particularly large acquisition, it impacts a key market player, and it highlights a couple of key trends in the semiconductor engineering services market.

What the acquisition means for HCL

The acquisition impacts HCL in a few important ways:

Enhanced semiconductor engineering capabilities

The recent acquisition by HCL is a strategic move to cement its position in semiconductor chip engineering services by strengthening its existing digital design services and expanding into the analog and mixed-signal space.

Both HCL and Sankalp Semiconductor provide chip engineering services in the pre-silicon and post-silicon segments of the value chain (See Figure 1). But while HCL’s chip engineering expertise lies in digital design, Sankalp has strong capabilities in analog and mixed-signal circuit design as well.

And HCL will be gaining experience. Sankalp has more than 5,000 person-years of experience in semiconductor engineering services and covers the digital, analog, and mixed-signal domains through its 1,000+ engineers based in India and Canada. In analog and mixed-signal design alone, the company has more than 1,500 person-years of experience and has delivered more than 500 projects.

Increased revenue

Though HCL is a major player in engineering services, its acquisition of Sankalp Semiconductor, which reported revenues of ~US$20 million in FY2019, will be a nice boost to its semiconductor engineering services top line.

Increased market access

Sankalp will strengthen HCL’s play in specific market segments including automotive, consumer, IoT, medical electronics, networking, and wireless.

Key outsourcing segments of the semiconductor industry value chain

How the acquisition reflects industry trends

HCL’s acquisition of Sankalp is the latest in a series of acquisitions that have taken place in the semiconductor engineering services industry over the past few years. As shown in the graphic below, in 2015, Aricent acquired the Bengaluru-based semiconductor services firm SmartPlay Technologies Pvt Ltd before itself being acquired by Altran in 2017, which was – in turn – acquired by Capgemini in 2019. Cyient Europe Ltd acquired custom analog and mixed-signal circuits design company Ansem N.V, and L&TTS acquired Bengaluru-based Graphene Semiconductor.

timeline

All of these acquisitions reflect an important industry trend that has some specific consequences. There is an increasing focus on semiconductor engineering due to the rise of IoT and smart device applications, as well as a growing demand for greater computing power and device miniaturization.

This trend is driving several outcomes. First, it is forcing semiconductor companies to think about how to reduce time-to-market, as well as how to gain access to engineers with the right kinds of expertise. Many are turning to outsourcing to address these challenges. As a result, we expect outsourcing in this sector to grow at a rate of 10% over the next three years.

Second, it is forcing semiconductor engineering service providers to expand their portfolios to successfully address market needs. That challenge, coupled with the generally fragmented nature of the industry, is likely to result in ongoing merger and acquisition activity.

Ultimately, whether they choose to grow organically or inorganically, semiconductor engineering services firms will want to invest in their capabilities so they can grab a higher share of outsourcing from the ~US$ 470 billion semiconductor industry pie.

 

Capgemini-Altran Acquisition: Upping the Ante in Engineering Services | Blog

Back in December 2017, Altran’s acquisition of Aricent for US$2 billion was one of the biggest inorganic growth initiatives in the engineering services space. The acquisition helped Altran draw synergies across key verticals and strengthen its leadership position in the global engineering services space.

Fast forward just a short year and a half later to a much larger deal: Capgemini on June 24, 2019, announced its plan to acquire Altran for a cash consideration of ~US$4.1 billion and also assume Altran’s financial debt of ~US$1.6 billion, which is primarily attributable to its Aricent acquisition. The transaction is expected to close by the end of 2019.

Based on our calendar year 2018 estimates, the combined entity will hold over 10 percent of the global engineering services outsourcing market and will have nearly US$1.4 billion higher revenue than its nearest competitor.

Engineering Services revenue for leading service providers1 CY 2018; US$ billion

1 Includes Everest Group estimates

The acquisition reinforces the fact that the global services industry views engineering services as an avenue to offset the low headroom for growth in the IT and business process services. While players such as HCL Technologies and Tata Consultancy Services have primarily followed the organic route to drive growth in this space (both the companies have a spot in the list of global top 10 engineering services companies,) Capgemini has become the largest engineering services company with this mammoth acquisition.

The acquisition also highlights how service providers are increasingly reckoning with the need to develop capabilities to cater to the Information Technology – Operational Technology (IT-OT) integration needs of today’s connected world. An IT-OT play helps service providers demonstrate capabilities across multiple value elements and capture a larger share of enterprise spend.

What this acquisition means for Capgemini

Altran reported year-on-year growth of 27.1 percent for calendar year 2018, and its organic growth stood at 8 percent. Capgemini will certainly benefit from Altran’s robust portfolio growth. But it stands to gain more benefits:

  • Top spot in the engineering services industry: The combined entity will be the undisputed leader in engineering services, with over US$4 billion in engineering services revenue, and ~54,000 professionals
  • Enhanced capabilities across key verticals: With Altran’s stronghold in the automotive, aerospace, electronics & semiconductors, medical devices, and software products spaces, and Capgemini’s strength in sectors including manufacturing and energy and utilities, the combined entity will have a leadership position across the majority of engineering verticals
  • Asset and infrastructure dividend: Altran has developed numerous labs, solutions, innovation centers, etc., that will add rich depth and breadth to Capgemini’s capabilities
  • Enhanced value proposition: Capgemini will not only be able to cross-sell its enhanced IT-OT value proposition to Altran’s existing, top R&D-spend clients – including six of the top 10 Independent Software Vendors (ISVs) and all of the top five automotive Original Equipment Manufacturers (OEMs) –– but also to its own engineering-heavy verticals
  • Enhanced nearshore delivery capabilities: Altran has a sizeable delivery presence in Eastern Europe, which is a hub for high-quality engineering talent, and a significant delivery presence is viewed as a differentiator in the engineering services space
  • Access to Altran’s hand-picked portfolio of companies: Capgemini will be able to enhance its capabilities in niche areas including design and cyber security through Altran’s previous acquisitions of companies like Frog Design and Information Risk Management (IRM.)

What it means for Altran

In its mid-2018 “The High Road, Altran 2022” plan, Altran presented the key objectives it aimed to achieve by 2022:

  • Compound Annual Growth Rate (CAGR) of 6.5-7 percent (organic) during 2017-2022
  • 25,000 engineers in near/offshore locations, including India, up from 16,000 in 2018
  • Momentum in high-growth segments such as ISVs, electronics, automotive, and medical devices
  • Leadership in North America, while pursuing selective growth in the APAC region
  • Complete integration of Aricent by 2020

With Capgemini coming into the picture, the growth plan for Altran will likely be redefined. Nonetheless, assessing how Capgemini impacts the objectives Altran’s leadership laid down is still worthwhile.

While Altran has been managing steady growth on its own (8 percent year-over-year organic growth in calendar year 2018,) integration with Capgemini will help generate greater exposure to clients and accelerated market growth in North America. It will also accelerate Altran’s delivery expansion in offshore locations.

As a downside, Altran will be integrating with Capgemini – which could come into play as soon as early 2020 – while it continues to attain full synergy with Aricent. This multi-faceted integration will require meticulous planning and execution to ensure success. It may result in increased attrition among the talent Altran acquired from Aricent.

Cues for the broader engineering services outsourcing industry

This acquisition further enhances the dominance of Europe-headquartered firms on the leaderboard of the global engineering services industry. Further, once the acquisition is complete, Capgemini – as the largest engineering services provider – will have developed a sizeable offshore delivery presence and will be capable of going to market with an optimum combination of four key factors: capabilities, scale, client proximity, and cost-effectiveness. Offshore-heritage service providers will need to step up their game to continuously invest in building and enhancing capabilities for new and emerging areas.

We expect the inorganic growth wave to continue in this space. While it is unlikely that we will soon see another acquisition of this scale, we expect both large and mid-sized players to explore smaller acquisitions that address their unique objectives. While large service providers will flex their financial muscle to gain market share and niche capabilities, mid-sized service providers will look to build adjacent capabilities. And when this happens, both the providers and their clients will win.

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