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acquisitions

Blue Prism’s Acquisition of Thoughtonomy: Does 1+1 =3? | Blog

By | Automation/RPA/AI, Blog

As a reader of this blog, you likely know that we’ve been researching and analyzing the RPA market in-depth for more than five years and have conducted multiple RPA technology vendor PEAK MatrixTM evaluations in the same time frame.

Starting in 2015, Blue Prism earned a Leader’s spot in in our assessment because of its extensive features and strong market presence. Thoughtonomy made it into our Leader’s group starting in 2016 for its Software-as-a-Service (SaaS) offering, and for combining RPA and AI for unstructured data processing.

Because it is a public company, Blue Prism’s strong growth over the years is a matter of public record. Thoughtonomy has also grown strongly, gaining around 77 direct clients and another 200 indirect through its service provider partners.

Against that backdrop, we believe that Blue Prism’s announcement earlier this week that it is acquiring Thoughtonomy for a total consideration of £80 million is a positive move for three reasons.

First, Blue Prism gains several hundred mid-sized direct clients in an instant. Second, and more importantly, its ability to deliver intelligent automation through a SaaS delivery model gives it the opportunity to much more easily sell into the mid-market. Third, this is a strategic move by Blue Prism. Right now, adoption of RPA on the cloud is in the early stages. At the same time, many AI solutions are offered on the cloud to enable access to computing power on demand, and many work with RPA in combination when needed. Having both RPA and AI on the cloud could help companies realize the full potential of intelligent automation and achieve higher scalability. Blue Prism is becoming cloud-ready with this acquisition.

But there is more.Blue Prism Acquires Thoughtonomy

What Thoughtonomy Brings to Blue Prism

Thoughtonomy was set up in 2013 to provide a cloud-based intelligent automation platform. At its core, it is a cloud version of Blue Prism’s RPA, combined with other capabilities that Thoughtonomy has developed over the years, including:

  • Features for human-in-the-loop automation (Self-Serve), including next-best-action recommendation – These features will help Blue Prism with attended automation that is typically used in the front office. Currently, Blue Prism offers human-in-the-loop through its technology partner, TrustPortal, which provides the UI for this capability
  • Built-in AI / machine learning within the platform to optimize workload distribution and robot performance
  • Natural Language Processing (NLP), sentiment analysis, and chat interface to automate processes using chat as a channel
  • A web-based interface for controlling and monitoring robots – While Blue Prism offers a central console for controlling and monitoring robots, it is not web-based. This will help improve the accessibility of its console
  • Wireframer, an intelligent coding quality tool – Blue Prism currently has an automation methodology, but not a coding quality tool
  • Use cases in IT process automation – This will help improve Blue Prism’s value proposition for IT use cases, which are growing in demand

In addition, Thoughtonomy will help enhance Blue Prism’s presence in some verticals, such as healthcare and government & public sector, where it currently has limited market share.

With Blue Prism at the heart of Thoughtonomy’s SaaS platform, the job of integrating the two product sets should be relatively straightforward.

All in all, we believe in this case that 1+1 does add up to more than 2. Is it a 3? Maybe not, but it is a solid 2.5.

The challenges of SaaS, selling to the mid-market, and targeting the front-office market

Blue Prism’s model includes a minimum licensing requirement that can make it expensive for smaller companies to get started with its RPA offering. Thoughtonomy was absorbing these requirements. Blue Prism will no doubt clarify how it will handle licensing for its SaaS offering.

The addition of Thoughtonomy’s human-in-the-loop interface will help boost Blue Prism’s attended automation value proposition. But if it intends to target this segment – which primarily consists of front-office and contact center use cases where thousands of robots might be required – it will need to adjust its pricing to reflect large orders. Additionally, it will need to deliver more desktop-based features in order to outshine established attended automation vendors such as NICE and Pega. As this doesn’t appear to be a high priority segment for Blue Prism, we may not see those additional features in the near future.

The market outlook

With this move into SaaS, Blue Prism has captured a competitive edge. We expect other companies will quickly follow suit. Several RPA vendors are cash rich thanks to recent private equity investments, as well as good organic growth, and they may well have their eyes trained on potential acquisitions. Other RPA technology vendors and other companies that provide complementary technologies, like chatbots, could well be either acquirers or acquisition targets. AI-based automation vendors, e.g., those with NLP or intelligent virtual agents, could make acquisitions of their own to complement their products. And we wouldn’t be surprised to see large software vendors acquiring RPA vendors, just like SAP did last year with its acquisition of Contextor, an RPA vendor that we positioned as an Aspirant in our 2018 RPA Technology Vendor PEAK MatrixTM Assessment several months before SAP made its move.

This is just the beginning of the consolidation phase of this expanding market, and we have no doubt there is more to come.

Everest Group will be publishing its 2019 RPA Technology Vendor PEAK MatrixTM Assessment in the next few weeks. In the meantime, please check out our recent service optimization technology-focused publications, including Intelligent Document Processing (IDP) Annual Report 2019 – Let AI Do the Reading

What Makes Mindtree an Attractive Acquisition for L&T Infotech? | In the News

By | In The News

L&T Infotech has been a front runner in the race to acquire a 20.4 percent stake in Mindtree. Reports suggest LTI is willing to offer close to Rs 975 a share to acquire this 20 percent. This pegs the value of this stake, owned by VG Siddhartha, the Founder of Coffee Day Enterprises that operates the Café Coffee Day chain of cafes, at roughly Rs 3,400 crore.

According to Chirajeet Sengupta, Partner, Everest Group, “L&T Infotech (LTI) has been on a very strong growth path over the last few quarters. They have been growing significantly better than their peers.” To sustain this growth path, the company has been making investments to grow inorganically. “If you look at the last few quarters, they have made some very interesting acquisitions,” Sengupta pointed out.

Read more in moneycontrol

How Enterprises Benefit In Digital Transformation From DXC Technology Acquiring Luxoft | Blog

By | Blog, Mergers & Acquisitions

DXC Technology yesterday announced its acquisition of Luxoft, a global-scale digital innovator with world-class digital talent. I think this is an interesting acquisition, not only from a services industry perspective but also from the perspective of benefits to enterprise customers undertaking digital transformation.

Read more in my blog on Forbes

Office Depot Acquires CompuCom in an Amazon–Driven Pivot | Sherpas in Blue Shirts

By | Blog, Mergers & Acquisitions

The adage, “Disruption does not discriminate,” rang true again with Office Depot’s acquisition of CompuCom last week.

The beleaguered office supplies retailer bought the IT infrastructure firm for US$ 1 billion, illustrating yet again the disruptive impact of Amazon and the digital economy. With this deal, Office Depot expects to add US$1.1 billion in revenue, and achieve cost synergies to the tune of US$40 million in two years. As part of the transaction, Thomas H. Lee Partners LP, the PE firm that owns CompuCom, will assume an 8 percent ownership in Office Depot.

The why

The deal comes at a time when Office Depot’s business is in the doldrums due to diminishing demand for traditional office supplies as offices go digital and online retailers eat into brick and mortar sales. CompuCom had its own share of problems, with four CEOs in the past four years, declining revenue, and diminishing investor confidence.

As the proposed takeover by Staples fell at the antitrust altar last year, Office Depot had been looking for ways to strengthen sales that had continued to slacken for several quarters. Its hiring of a slew of tech executives indicated that a drastic change was in the cards.

With this acquisition, Office Depot aims to pivot towards a business services and technology play in order to achieve:

  • Superior value proposition: Provide a stronger story to customers around the “workplace ecosystem” for enterprises
  • Cross-sell opportunities
    • Leverage its “Last Mile” footprint to provide Tech-Zone help desks in Office Depot’s 1,400 retail locations, thus increasing CompuCom’s service-based opportunities
    • Use the Tech-Zone help desks to increase on-premise traffic, thus driving traditional sales
  • Topline growth from recurring revenue streams
  • Synergies around the SMB market: Both companies target this highly fragmented market, with Office Depot’s omni-channel strategy offering access to nearly 6 million SMBs.

So, all ends well…right?

While the CompuCom acquisition is in line with the “Software Eats Everything” theme, meaningful questions exist:

  • Uninspiring investor confidence: Office Depot’s share price dropped by 15 percent following the announcement. Although this can be considered a short-term consequence, both firms have struggled as secular market trends reshape their core industries. Will the combined entity realize its promised value?office depot acquisition of compucom blog
  • Digital innovation: There is little clarity on the combined entity’s innovation strategy around the digital workplace construct. The onus is on it, especially CompuCom, to deliver a value proposition centered on seamless customer experience
  • The Amazon conundrum: With Amazon disrupting traditional business models – via e-channels and innovation across physical channels through concepts such as Amazon Go – the combined entity must chalk out a strategy to counter Amazon’s onslaught from both the retail and technology perspectives
  • Change management: The combined entity needs to guard itself against organizational inertia, as the pivot from a brick and mortar model to a services play will require considerable structural changes and incentive restructuring
  • Customer education: The combined entity must educate customers about its new value proposition and what it means for their business and their business as usual to assuage any concerns that lead to customer flight.

The way forward

There have been previous instances of retailers acquiring Managed Service Providers (MSPs) to enhance their value proposition and margins. This includes Staples’ acquisition of Thrive Networks in 2007, and Best Buy’s acquisition of mindSHIFT in 2011. Although worthy pursuits, these acquisitions failed due to executional fallacies, lack of a clear-cut strategy, and their erroneous belief that SMBs would choose them to outsource their IT in a managed services model.

On the other hand, most of CompuCom’s revenue comes from conventional project-based and procurement engagements. The customer experience point is important here. If Office Depot can make this model a de facto choice for customers looking for a better customer experience, this might just work.

That said, the continuous disruption by players such as Amazon and the proliferation of digital users who demand a personalized user experience across all channels will play a key role in determining the success of this acquisition.

Creating a definitive digital value proposition aligned to customer expectations and chalking out a clear, dynamic execution strategy are the key tenets Office Depot must embrace for the CompuCom acquisition to succeed. Indeed, they are our words to the wise for any service-related organizations considering M&A activity in today’s digitally-disrupted environment.

What is your take on Office Depot’s pivot? We would love to hear from you at [email protected] and [email protected]