DBS2016: Digital Labor Disruption

© 2016 Information Services Group, Inc. All Rights Reserved.

Stanton JonesResearch Director & Principal Analyst

Digital Labor Disruption


The impact of price performance

Technology price performance is increasing exponentially.

In the manufacturing sector, have seen this effect for some time in the form of industrial robots.

In the services sector, just now starting to see this effect in the form of software that mimics the way a human works and makes decisions.

Price

Performance

Performance

Price

Old Equilibrium

Digital Labor.

Software that works like a human, or mimics the way humans make decisions, focused on the automation of knowledge work.


How is this different?

Intelligent Systems

MachineLearning

Expert Systems

Process Automation

Scripts & Runbooks

Code, or code bundles that automate a process.

Workflow based. May perform work as if

it were a human.

References a knowledgebase.

Mimics decision-making.

Experts provide feedback on quality of decisions.

Learns from data. Assesses probability and

classifies results. Does not need experts to

provide feedback.

Enterprises have traditionally focused

hereWhile digital labor will focus here.

Uses biology as foundation to understand patterns, make predictions & develop behaviors.


Digital Labor plans.

Robotics

Robotic Process Automation (RPA)

Machine learning / AI / Cognitive

Voice Recognition / Natural Language Processing

Data Science / Big Data

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

23%

22%

13%

13%

6%

18%

22%

21%

18%

18%

24%

24%

29%

32%

23%

23%

20%

23%

21%

29%

11%

12%

14%

16%

24%

Source: ISG 2016 global IT leader survey; n = 352

Not deployed, no plans to useResearching, no current trialsTesting, no plans to deployTesting, plans to deployIn production

Survey Question: Rank the following emerging technologies on a scale from “Not Deployed” to “In Production” as they are in use today


Enterprises are getting there differently.

Model Benefit DrawbackDo it yourself Retain IP.

Avoid black box syndrome. Employee morale.

Assume risk. Software lock-in. Small COE driving big change.

Embed in outsourcing

Transfers risk. Leverage industry processes. Focus on outcomes.

Incentives often not aligned. Software and process are linked. New business model for

providers.


And business drivers vary.

Primary Motivation Outsourcing Digital Labor Cloud

Cost reductionCost avoidanceScalabilitySpeedConsistency


Digital labor in outsourcing is driving significant productivity gains.

Volumetric Productivity Improvement (%)

Number of Applications Managed +30%Number of Virtual Instances Managed

+29%

Storage GBs Managed +34%Number of End Users Supported +20%Number of End User Devices Managed

+85%

Number of Network Devices Managed

+100%Source: ISG Automation Index

Traditional productivity improvements were 3 to 5 percent in first two years.

Over past 12 months, seeing dramatic improvements being committed to in ITO contracts.

Network consistently first tower enterprises are attacking.


And this is leading to significantcost savings.

Cost savings for the IT services contracts we assessed ranged from 26 to 66 percent;

50 percent decrease in the number of resources required to support certain IT services.

Based on signed contracts that are in transition/transformation now, so actual results are still to be determined.

Application Support

Data Center Operations

Service Desk & EUC

Network & Voice

0%

20%

40%

60%

80%

100%

51% 60%74%

34%

Baseline Costs Future Mode Costs

Impact:Cost ReductionGreater than 65%

Source: ISG Automation Index


Combining all three delivery modelswill create new opportunities.

Business BenefitOutsourcing + Digital Labor +

CloudCost reductionCost avoidanceScalabilitySpeedConsistency

Cost mandate of outsourcing, combined with scalability of cloud and speed / consistency of digital labor.

What will it look like when the cost of adding a virtual engineer or agent is 1/100th the cost of an onshore employee?

What will it look like when supply (Q) is virtually unlimited and price (P) is transparent & commoditized?


Guidance

Start now. Exponential increases in price/performance means digital labor will expand faster than expected.

This is an operating model change (people, process, governance) more than a technology change.

DIY buyers: Focus digital labor on scalability and consistency challenges; cost savings is a derivative.

Sourcing buyers: Cost will remain primary focus, however, ensure supplier can deliver on productivity promises.

Create an digital labor COE; use agile approaches.


Providers: Warning!

Securing better commercials is number one reason clients renegotiate.

In competitive renegotiations, the incumbent looses the entire scope nearly 50 percent of time.

Risk is not a deterrent for most clients to move work to a new provider.

Without a digital labor strategy and delivery model, there is very little way to compete in today’s hyper-competitive market.

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