ISG Provider Lens™ Intelligent Automation - Solutions and Services - U.S. 2020 - Conversational AI
Covid-19 Pandemic Fast-Tracks Enterprise Roadmap to Intelligent Automation
With the COVID-19 pandemic, enterprises across industries worldwide are embracing digital transformation to future proof their businesses. Intelligent automation, at the heart of this transformation, combines robotic process automation (RPA) with artificial intelligence (AI), cognitive optical character recognition (OCR), machine learning (ML), natural language processing (NLP), advanced analytics and other digital technologies for improved productivity, data accuracy and customer experience, alongside reduced costs.
The need to remain competitive, agile and effective in delivering value to customers, partners and stakeholders is the trigger for adopting intelligent automation. However, inadequate knowledge/skills often derail this digital transformation journey, driving enterprises to seek transformational sourcing options to revamp business and IT operations.
The economic impact of COVID-19 will be long-lasting for enterprises and the ones that implement intelligent automation now will be able to optimize on cost, productivity and capacity, and reduce risks in the short term to stay prepared for the future.
ISG has observed the following trends in the global intelligent business automation space:
Large enterprises are rapidly embracing intelligent automation: Intelligent automation finds more acceptance among large enterprises as they have the resources to implement such solutions. Mid-sized companies too are gradually making a headway in this direction.
Extending automation to front and middle office: Although automation is common in IT infrastructure operations and traditional back-office tasks such as finance and accounting, enterprises now are automating beyond these support functions to sales and marketing, supply chain and customer service.
Benefits beyond headcount reduction: The goal of automation is increasingly shifting from cost savings to improved productivity, indicating an understanding that technology automates routine work, and not jobs. Enterprises with advanced automation capabilities expect automation to provide improved employee productivity, data accuracy and customer experience.
Focus on change management: Organizational change management (OCM) plays a vital role in helping employees adapt to the introduction of advanced technologies into business processes and allay fears about job loss. Companies are increasingly motivating employees to embrace automation and fostering a culture of collaboration between them and digital workers for transactional tasks.
Outcome- and transaction-based pricing attaining traction: Subscription-based pricing has overtaken perpetual licensing as the preferred commercial model, with enterprises increasingly opting for transaction- and outcome-based pricing models. Concurrently, providers are confident about promising higher productivity/outcomes while negotiating on sourcing engagements. Outcome-based pricing is particularly gaining favor among enterprises in the mature stage of automation.
Reskilling and upskilling workforce for jobs of future: With increasing back-office function automation, talent management is a challenge, carrying the risk of existing employee skills soon becoming obsolete. Therefore, training and upskilling is critical. Several organizations are collaborating with providers to upskill their workforce on digital skills such as AI, ML and advanced analytics to empower them to focus instead on high-value tasks.
Vertical-specific business process expertise: The changing business environment is pushing enterprises to try to find a competitive edge in their respective industry. Hence, companies are on the lookout for providers with vertical-specific automation expertise such as claims bill payment in Insurance and inventory monitoring in Retail. Providers that bring in extensive domain/industry knowledge alongside intelligent automation technologies are head and shoulders above the others.
Process mining is key to proving automation opportunities and benefits: A key reason preventing companies from realizing return on investment (ROI) on automation is the poor identification of use cases and inclination to automate processes as-is. To gain the benefits of automation, business processes must be assessed through multiple lenses with the help of process and task mining technologies. Process mining solutions will see a high demand in the near future, particularly among large organizations looking to optimize legacy business processes.
Growing importance of ethical AI: As companies scale their automation programs, providers of AI solutions will have access to critical enterprise data. In this context, providers that have invested significantly in R&D for the ethical, transparent and accountable use of AI technologies will find favor among enterprises.
AI and ML led automation has been gaining traction in the past few years: With the global IT environment undergoing digital transformation, independent software vendors (ISVs) and system integrators worldwide need to create the right setting for data and systems to be managed from a centralized location. IT assets and workloads would need to be orchestrated across edge, cloud and on-premises resources, making use of analytics ― for actionable deep insights ― critical. AIOps blends AI, ML and big data to analyze the large volume of data generated in the wake of digital transformation. Most verticals are adopting AIOps to improve business processes in terms of increasing revenue and reducing IT operational costs.
The ISG Provider Lens report for Intelligent Automation this year compares service providers on their proprietary solutions and services and positions them based on their portfolios and future outlook. This comparison has been done across three quadrants ― Intelligent Business Automation, AIOps and Conversational AI ― that represent the services and products that typical enterprise clients are acquiring in the intelligent automation space.
U.S. Market Overview
Intelligent Business Automation
The U.S. market is the largest adopter of intelligent business automation solutions and has reached maturity with the increase in engagements over the years. Enterprises in the U.S. are more transformation focused and are increasingly leveraging new-age technologies to accelerate their digital transformation journey, at scale. According to ISG Research, on average, about 80 percent of the U.S. enterprises are either experimenting with or have deployed technologies such as ML based OCR, NLP, and conversational AI in business processes. This trend is expected to accelerate in the near term.
ISG sees that second- and third-generation outsourcers in the U.S. are beginning to engage with providers more holistically. They work collaboratively with providers and adopt a partnership model to walk the intelligent business automation led transformation journey. During the complete transformation of their business processes, it is difficult, at times, to convince employees and external parties such as vendors and suppliers to stay on board with the transition. Therefore, it is imperative to find a suitable provider that can assist with end-to-end business process transformation, not only by offering strong domain and vertical expertise and best-of-breed digital technologies, but also providing effective advisory, change management and maintenance support services to ensure overall success.
AIOps
The development of data agnostic AIOps platforms has been a priority in this space. In 2020, many global system integrators are expected to launch AIOps platforms. These platforms and frameworks will be a big win for the industry as the more varied the data ingested into an AIOps platform is, the greater the value the algorithms can accomplish. The goal of global system integrators is to build deeper visibility of the context to relate data such as events, metrics, logs and traces to one another. This means users can accurately determine issues, predict impacts and understand how change can affect business-critical activities. With the AIOps platform, enterprise clients in U.S. and the rest of the world will witness agility, diversity and resilience in their supply chain operations.
Conversational AI
North America, and the U.S., in particular, are leading in terms of adoption of enterprise intelligent virtual agents and conversational AI technology, in general. Multiple independent studies have shown that people in the U.S. are comfortable with interacting with a bot instead of a human, which explains the growing interest in interacting with a virtual agent for quick resolution of issues. In addition, with the developments in conversational AI solutions, there is specific focus on how and when calls can be transferred to a human agent. The number of generic queries that can be answered by an intelligent conversation solution has increased, and includes resolving a problem, getting detailed answers, finding a human assistant, making a reservation or paying an invoice. As conversational AI solutions learn to better discern user intent, clients are experimenting to implement them in additional use cases. Banking and financial institutes and enterprises are leading in terms of implementing conversational AI solutions, and users prefer to leverage such solutions for common issues. As the level of confidence in dealing with conversational AI solutions increases and vendors improve on their solutions, the market is expected to see a boom in the near future.
Some global trends in conversational AI are also applicable for the U.S. market:
- Low-code/no-code development: As focus shifts toward enabling citizen developers, and a young, smart and tech-savvy workforce finds employment, users would seek solutions to help rapidly implement business context to an existing framework and build customized conversational AI bots or virtual assistants.
- Integration with business applications: Solutions that can integrate with more leading enterprise technology stack solutions and offer application programming interface (API) integration would lead the market. A conversational AI solution should be able to integrate with all and many such technologies to decide on response and fetch the required data.
- Reusable pre-packaged business process and industry focused virtual agents: Clients would seek solutions that offer pre-packaged modules or virtual agents for common business processes such as HR, operations and IT. Similarly, clients are interested in, or expected to show interest in solutions with prebuilt modules for industry specific operations. Clients would prefer solutions with more of these prepackaged modules as they would need minimal customizations.
- Bots talking to bots: Many vendors are investing in solutions with capabilities to enable virtual agents to converse with each other, thereby automating many processes and making a huge change in the way business processes work.
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