Are organizations backing away from the traditional three-year RPO format?
If you follow the world of RPO, you may have noticed an interesting trend. According to the Everest Group’s annual report on the industry, the average deal length has been dropping, and for the first time since Recruitment Process Outsourcing emerged as a tool in the talent acquisition leader’s tool belt, it’s approaching just two years. Today buyers seem to be heading away from the traditional three year format.
High business value, low risk, sophisticated vendor offerings to propel 90% RPA market growth annually
Robotic Process Automation (RPA) continues to expand its reach and client base as more enterprises become aware of the benefits of the technology. Enterprises of all sizes and industries are testing the RPA waters, eager to keep pace with their peers in the technology adoption curve. Enterprise adoption of RPA, as indicated by the number of enterprise clients served by independent RPA vendors, achieved a 105 percent growth rate from 2016 to 2017, according to Everest Group.
“RPA offers many benefits and few risks,” said Sarah Burnett, vice president at Everest Group. “Using RPA, companies can reduce costs and achieve faster processing and improved quality. The risks are low, because the technology is non-invasive and easily remediable. The market is in its early stages of high growth and adoption, with most enterprises testing the water at this stage.”
Among current RPA deployments, desktop automation (attended RPA) is the most prevalent, followed by server (virtual machine) deployments (unattended RPA), which typically sees robots run according to pre-defined schedules or process related automatic triggers. Much less common is the use of cloud for running RPA deployments, but adoption of this model is increasing as the market grows.
RPA software typically comes with centralized robot management and robot performance analytics. More advanced features include auto-scaling, dynamic load balancing and context awareness. At the nascent stage of emergence is cognitive RPA, which is RPA integrated with artificial intelligence technologies, robot voice and vision interfaces, predictive and prescriptive analytics, automation of judgment tasks, and self-managing and self-healing robots.
“We expect an extrapolated high-growth curve for the next several years as vendor offerings get more sophisticated,” added Burnett. “For instance, we already see vendors building out capabilities in the areas of computer vision, pre-built automations, self-healing systems and auto-scaling systems, just to name a few.”
The RPA software market overall witnessed a growth of 92 to 97 percent in 2017 to reach US$480 million to $510 million. The market is expected to grow between 75 and 90 percent annually up to 2019.
These findings and more are discussed in a newly released Everest Group report, “Robotic Process Automation (RPA) Annual Report 2018 – Creating Business Value in a Digital-First World.” This research explores RPA market size and growth, buyer adoption trends and key learnings from early adopters, RPA solution characteristics, technology trends, the RPA technology vendor landscape, and the future outlook for 2018-2019.
Some of the findings are:
- Small- and medium-sized enterprises have accelerated the pace of RPA adoption and now together account for a major portion of the market.
- Industry-specific processes continue to see the highest adoption of RPA.
- North America continues to be the largest RPA market; however, Europe and the United Kingdom, together, accounted for the highest growth among major markets.
- Buyers generally have a high satisfaction level with RPA vendors, but they expect the vendors to improve their support, analytics, and cognitive capabilities.
- The majority of RPA buyers are still in an early adoption phase, as they continue to test the technology before scaling up.
- Attended RPA has a higher adoption maturity and installed base in terms of licensed volumes. However, unattended RPA is driving the highest growth due to cloud-based deployment.
- Automation Anywhere, Blue Prism, and UiPath are the top three vendors in terms of RPA license revenue and account for over one-third of the total market revenue.
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80% of enterprises’ application modernization efforts are limited to ‘lift-and-shift’ rather than meaningful changes to the underlying architecture; enterprises need to invest in intelligent sentient architecture if they are serious about digital transformation
More than 54 percent of enterprises aspiring to digitally transform blame their slow-moving efforts on the constraints of legacy systems. A key, but too often disregarded, component of those legacy systems is the architecture of enterprise software, according to Everest Group, which reports that 80 percent of enterprise efforts to modernize their applications is limited to a “lift-and-shift” approach as opposed to the adoption of modern software architecture practices which would considerably accelerate digital journeys.
“With a traditional software architecture approach, the enterprise focus is on ‘how’—basing their software architecture on the technologies they want to adopt,” said Yugal Joshi, vice president at Everest Group. “Instead, enterprises should focus on the ‘what’—user expectations and business outcomes—as they design and modernize their software architectures. Unfortunately, enterprises aren’t hiring the right talent to accomplish this.”
Joshi explains that a wide chasm exists between the next-generation architecture aspirations of enterprises and the skills of their enterprise architects. Unfortunately enterprises are not moving fast enough to fill this gap. For example even for hiring next-generation architects, 5 percent of enterprise architects are expected to have expertise in containers, 10 percent in microservices, 15 percent in DevOps, and only 1 percent in serverless technologies.
These next-generation technologies and development approaches are key foundational elements for creating sentient architectures, software architectures that are agile and responsive to business needs. Sentient architecture systems are driven by the 3Ds of design centricity, dynamic adaptability and discrete structures:
- Design centricity: Systems need to be intuitive and should be designed collaboratively rather than being the responsibility of the enterprise architect alone.
- Dynamic adaptability: The architecture should be adaptable so that it can be easily refactored or re-architected, without requiring a massive time-consuming investment to deliver value to customers.
- Discrete structures: Software should be composed of discrete components that are granular in nature and can be integrated with other components when required. This will require architects to break down application components into software-enabled services that are independent, distributed and loosely coupled.
These results and other findings are explored in a recently published Everest Group report: “Application Services—Annual Report 2018: The Future of Architecture is Intelligent.” This research provides fact-based analysis of buyer trends by geography, industry and revenue size. It analyzes major trends impacting the application services market and provides an outlook for the year ahead.
Key Findings About the Applications Services Market
- Stand-alone application deals continued their upward trend, constituting two out of every three deals signed (67 percent). Bundled deals that combined application services and infrastructure services also witnessed a slight uptick (11 percent from 9 percent), suggesting that enterprises are beginning to find more value in the convergence of these layers than in the silos.
- The declining deal size trend saw reversal, and the deal sizes for application services grew by over 25 percent this year, compared to the previous year. This is indicative of a vendor consolidation exercise where a lesser number of service providers are getting the larger share of client’s spend.
- Application services deal duration continued to be dominated by deals with durations of less than three years (40 percent); deals with a duration over five years constituted only 16 percent of the deal volume.
- New contracts took up a slight majority (52 percent) in contract type, suggesting that the trend of anti-incumbency and customer dissatisfaction prevails.
- Surprisingly, deals with consulting in scope dropped sharply to 43 percent of the deal volume. However, 55 percent of deals included system integration in scope, suggesting that the precipitous drop in consulting deal volume might be an anomaly.
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From product development through claims management, the insurer landscape will change dramatically over the next 10 years
Life Sciences companies, typically laggards in technology adoption, face increasing pressure to leverage analytics, IoT, automation and omnichannel marketing
The Life Sciences Business Process Outsourcing (BPO) market grew at a healthy pace of 10 to 12 percent since 2014 to reach US$4.6 billion in 2016, according to Everest Group. Increasing adoption by first-generation buyers, the rising cost of drug development and clinical trials, and a shifting focus towards a patient-centric model are some of the key contributors to growth in life sciences BPO market during this period.
Looking ahead, Everest Group expects the global life sciences BPO market to grow at a lower but steady pace of 9 to 11 percent over 2016-2018. Political uncertainty and other industry challenges in the key buying geographies of the United States and the United Kingdom (which together represent nearly 90 percent of the buying base) will contribute to a slight dampening of the growth rate. However, life sciences companies will continue to be highly motivated to optimize costs through BPO. Life sciences companies will look to their BPO service providers for help in expanding their businesses, reducing time-to-market, removing inefficiencies, reducing costs, achieving higher customer mindshare, and building multi-channel capabilities.
Adoption of life sciences BPO by first-generation buyers will continue to be a primary growth driver, but expansion of contract scope will contribute as well. Deals will increasingly include services around drug discovery and clinical trials, regulatory compliance support, analytics, and sales and marketing.
“Even though service providers in the life sciences BPO market are strongly positioned to help their clients capitalize on new technologies, life sciences companies are slow to adopt,” said Manu Aggarwal, practice director at Everest Group. “The reticence of life sciences companies to move beyond the occasional pilot program is stifling momentum in the market, which is hurting these enterprises and delaying the ROI they could be enjoying today.
“Nevertheless, analytics certainly has a greater role to play in the industry, and we’ll begin to see more advanced analytics solutions, as well as IoT and omnichannel marketing solutions, especially as the concepts of Real World Evidence and personalized medicine take hold,” continued Aggarwal. “We’ll also see more growth in Robotics Process Automation, driven by the more progressive service providers in the market as they seek to relieve the pressures on their profit margins.”
These findings and more are discussed in a recently published Everest Group report, “Life Sciences BPO—Annual Report 2017: Personalization Bug Biting the Market.” The report provides an overview of the Life Sciences BPO market and service provider landscape. It also explores key solutions (such as analytics, automation, omnichannel marketing, and IoT) that buyers and providers can leverage to mitigate challenges prevalent in the life sciences industry.
Other Key Findings:
- While North America continues to be the most significant market for life sciences BPO, Europe and Asia Pacific have witnessed significant growth.
- Slower growth in developed or mature markets of North America and Europe, along with increasing adoption of generics, continues to be one of the key challenges faced by biopharma companies.
- Increasing pressure from regulatory bodies, especially to reduce prices and move jobs back to onshore, and rising expectations of customers are also likely to play a significant role in the future strategy of life sciences companies.
- Increasing focus of biopharma companies on personalized medicines presents a whole new set of opportunities and challenges.
- Despite a decline in share, the input-based pricing model (fixed fees and FTE-based) still dominates the life sciences BPO market.
- Share of big pharma (revenue greater than US$20 billion) in the life sciences BPO market has declined over last few years.
- Adoption of analytics is at a more advanced stage when compared to adoption of RPA in the life sciences BPO market; however, currently the primary focus area for adopting analytics involves the use of basic analytics (reporting and descriptive); use of advanced analytics solutions, such as predictive and prescriptive, is less common.
- The market continues to remain consolidated at the top, with Accenture, Cognizant, Genpact, and TCS together accounting for more than 60 percent of the market by revenue.
- While pharmacovigilance emerged as the most outsourced segment, sales and marketing emerged as the most competitive segment within the life sciences BPO market.
- Emergence of startups and the entry of BPO+IT players has caused significant disruption in the life sciences outsourcing market, especially among some of the more traditional players.
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