Message from the Chair – Robotics Revolution: Digitizing While Downsizing

WandaBy: Wanda Lopuch, Chairwoman of the Board, The Global Sourcing Council

The digital revolution has arrived. It is in all corners of the world and all industries, especially the outsourcing industry.

It dazzles us with the allure of entering the future here and now. It seduces us with images of doing everything we do better, faster, and more productively. And yes, it frightens us with brutal economic consequences: jobless growth, wealth without workers, increasing the divide between the few who successfully ride the digital wave and the overwhelming majority of those who do not and will not have an opportunity to do so.

Gone are the days of enterprises generating both wealth and employment. Kodak of yesterday with 130,000 employees is being replaced by Instagram of today with 13 employees. Google and Facebook, digital giants of the 21st century, have a combined global workforce of 50,000 employees. In terms of employment, they are not a match to brick-and-mortar employers of the last century, which had labor forces of millions. Even Foxconn, the Chinese icon of modern manufacturing, has been trimming down its 1.5 million strong workforce as more robots can perform more tasks, better, faster and more reliably.

These trends are game changers for the outsourcing industry which, for two decades, impressed business analysts with its value proposition of lower labor costs. Countries such as India or the Philippines built entire sectors of economies based on the appeal of lower cost destinations. Today, the appeal of cost reduction through outsourcing is gone! The outsourcing craze is being quickly replaced with the robotics craze. Effectiveness, efficiency and better service are winning.

The outsourcing sector faces the challenge of adjusting its labor arbitrage model to the new realities of robotics, the cloud, and the Internet of Things. This means one thing: downsizing while digitizing. Such a shift promises to be painful. It has already started. The latest 2014 “Horses for Sources” survey demonstrates that 60% of surveyed companies are planning to reduce labor in 2015.

This dichotomy of the digital shift is well captured by two headlines: “How Digital Labor Reduces Business and IT Costs” and “Digital Revolution Will Kill Jobs, Inflame Social Unrest”.

As we are about to enter 2015, we will be navigating this conflicting landscape of the digital revolution with the promises of innovation, efficiency and speed, and the ethical questions about the role of business in society. The answers are anything but simple.

To kick off this discussion, we have asked five thought leaders and business practitioners to share their views on the excitements, challenges and concerns of entering the digital revolution.

  • Bobby Varanasi, Chairman, Martyzel, South-East Asia
  • Frank Casale, CEO, Institute for RBP, USA
  • Luis Robbio, CEO, Belatrix, Latin America
  • Chip Wagner, CEO, Alsbridge, North America
  • Daniela Zuin, Marketing Director, IPsoft, USA

I hope you enjoy the following conversations.

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Varanasi_Headshot100x100

Bobby Varanasi, CEO, Martryzel Consuting Inc.
Board Member, Global Sourcing Council
Board Member, IAOP

 


Wanda Lopuch: 
Bobby, There is a great level of excitement around Robotics Process Automation (RPA).  Who benefits most from bringing robots to BPO?  What are the major benefits of RPA?

BV: Yes Wanda, the excitement is quite high. Primarily owing to it being the latest trend to hit the stands (as they say). Application of robotics has been a highly proven endeavor across many sectors (Healthcare, Nano-technologies, Hi-tech manufacturing). Learning from such applications has today created the ability to pre-program robots to undertake “scripted” tasks.

This is where RPA comes in: the ability to complete (without errors) scripted activities cannot be denied. Extending this competence to encompass aspects (where decision-making and responsiveness to markets is crucial) is yet to be proven, notwithstanding the euphoria around it, if I may say so. The benefits of RPA are perhaps a bit over-emphasized given its modernity. Commercially speaking, it perhaps makes sense to deploy robots for scripted low-end tasks, thereby freeing up individuals to pursue higher value goals. Does that translate into reality? It is a more complex question.

RPA’s benefits may range from zero defects (reminds me of factory assembly models) to complete control on costs (a CFO’s dream). Beyond that, however, I am skeptical of the benefits. Perhaps one could argue there are other benefits to be had. But that almost always leads to deriving such benefits in controlled environments. I would therefore be quite sanguine to view RPA as more than what it can guarantee – control over the “not so important yet necessary” things to be done to keep organizations humming. Taking an outside-in view, I would argue that when organizational models themselves change (from the traditional command-and-control to partner-and-enable ones) RPA loses steam (on lines similar to how Six Sigma has in the past few years).

WL: Bobby, you are active in Asian markets.  Do you foresee a significant impact of the digital revolution, and specifically RPA on the outsourcing sector of Asia?  Do you see a potential for outsourcing jobs being lost to automation processes?

BV: Well, digital revolution and RPA are not complimentary to each other. The former aims to leverage technologies to bridge significant gaps between those that participate and those that do not, in productive economic endeavors. The latter premises itself on modernizing hitherto traditional operating approaches (be they processes, or rule-based tasks) that could collectively be termed “information sentinels”). I am inclined to think that RPA is not the solution to woes plaguing developing economies (most tellingly amongst fast-growing consumer economies of Asia). Rather it will perhaps find a place among some of the foremost companies to a limited extent.

From an outsourcing standpoint, the opportunity to leverage RPA is substantially low (and I could even argue that its contribution doesn’t even warrant any deliberations at this point in time). There are three principal reasons for this:

First, almost all conglomerates structured as complex intertwined corporations across Asia offer significant opportunities for traditional outsourcing to provide solutions around transparency, standardization, removal of duplicity and greater (overarching visibility) to the conglomerate’s performance. Unfortunately this opportunity is yet to be leveraged.

Second, outsourcing in its traditional form is dead for most economies (and companies within). A blended model that incorporates modern technologies, channels, platforms, services and insights into tangible solutions is what corporations are looking for. The outsourcing supply marketplace unfortunately is not helping here (with their fragmented approaches toward provisioning).

Third, from a national standpoint, most economies are tied to economic growth and job creation (there is no room to pick and choose between the two) hence jobless growth is out of the question, and whose consequences are too many to even comprehend (least of all social anarchy and structural collapse of fragile balances that govern most social contracts in Asia).

These three reasons are substantially impactful enough for outsourcing models in the region to stay away from any solutions that adversely influence these components. Outsourcing will therefore have to navigate from within, and create solutions relevant for the countries and companies in a manner that doesn’t divest itself from local realities.

WL:  Robots bring efficiency, reliability. When doing so, they are replacing workers. Should we be concerned about it? Who should be concerned about it?

BV: There are two ways to look at this question. From a technology standpoint, robotics undeniably (in its greater form, not just RPA) does replace jobs, while bringing in efficiencies and reliability. The geeks would of course argue that it opens up new virile opportunities too, for hackers and digital intruders that were hitherto unimaginable. Assuming control elements (through comprehensive laws and policies governing critical national information infrastructure initiatives) could be brought to bear, the attendant threats could perhaps be contained.

Switching gears, from a human standpoint, global population is slated to hit 9 Billion by 2050. Today’s unemployed population stands at approximately 500 million (not including those that make a living in various countries in what are collectively known as the unorganized sector, or in non-economic jargon, cash economies within economies). If we are not viewing this group of people as an immediate problem or relegating their insignificance to a multi-generational malaise, we may be in for a set of nasty consequences socially and politically.

The trend of technology replacing workers is not new. A look at the impacts of six Kondratieff waves (starting in 1780 through to now) gives us sufficient examples of jobs having been created, and jobs having been lost. During the first four waves, while each wave translated to more “new” jobs created than “old” ones lost, the fifth wave (1970-2010) reflected more job losses than new ones created. The sixth one has only added to the woes through jobless growth (an unprecedented trend not seen in the past 250 years).

Is this worrying? Absolutely yes, and I think everyone should be concerned about it – most of all leaders of fast-growing private sector industries, policy-makers and the youth. A collective emphasis on making job creation a component parcel of growth is not just socially responsible, but an imperative if we are to avoid an apocalypse of massive proportions that could stem from joblessness. Corporations can no longer divest themselves of job creation all in the name of technology modernity. The importance they place on strength of their balance-sheets needs to be replicated with their social accountability as well.

The outsourcing industry has created approximately 5 million jobs in its first two decades, while only a tenth of the same in its third decade. The trend has already begun. Hence if I have to choose between technologies that replace humans to deploying humans into productive endeavors, I would pick the latter.

Frank Casale100x100-2
Frank Casale, Founder and CEO of The Outsourcing Institute (OI) and
the Institute for Robotic Process Automation (IRPA)

 

 

WL: Frank, you have introduced the term SHiBLA to the industry. Please explain to the GSC community what SHiBLA is.

FC: SHiBLA means “Shift Beyond Labor Arbitration” and it refers to the shift that is taking place as we speak. If you think about it, a good majority of IT, ITO and BPO services have been based on low cost offshore / nearshore labor for the past 20 years. Digital labor a/k/a robotic process automation (RPA) is beginning to make this model irrelevant. CXOs now have an alternative. One that is much more attractive. It involves more software and less people. It’s better, faster and cheaper. You will see more and more decisions go the way of RPA over the next 24 months. Hence, the shift. Hence, SHiBLA.

WL: There is a great level of excitement around RPA. Who benefits most from bringing robots to BPO?

FC: For the BPO customers its 100% goodness. For the BPO service providers, it will be a mixed blessing. The dramatically lower price points (25-40%+) will enable them to attract and win new business.

However, this will also diminish the value and loyalty of their base accounts. If you thought you had a $1 billion dollar account base with let’s say an 80% re-up rate, you now may have a $600 million account base with a 50% re-up rate. Expect a big shakeout. We are predicting that as much as 40% of the ITO/BPO service providers will be acquired, merged or just plain out of business by 2020.

WL: Robots bring efficiency, reliability. When doing so, they are replacing workers. Should we be concerned about it?

FC: We should all be somewhat concerned. Like all disruptive technologies and or business models workers will be displaced. The internet did this, outsourcing did it as well. The debate among people on the inside of this new RPA wave is around the question: is this disruption different than previous disruptions? Will this disruption drive more aggressive cuts quicker? Will many more workers end up jobless? Is it possible that there won’t be many new roles for these displaced workers to cross-train into?

The jury is still out. Suffice to say we are in for a real ride here.

Robbio, Luis100x100
Luis Robbio, Founder and CEO of Belatrix

 

 


WL:
Luis, Belatrix operates in Latin America, including countries such as Argentina and Peru that have been facing serious economic, social and political challenges. What is your opinion about the robotics revolution, or a “third wave”?

LR: My opinion about this trend, could easily be qualified as schizophrenic thoughts. Here are three different “schizophrenic” perspectives:

As an engineer, I have been trained to look for the productivity and efficiency as a goal by itself, without considering side effects. A good doctor will save a life without asking if the person is a great person or not; his or her mission is to save lives. One of our missions in business is to reduce cost, to do more with less, using fewer resources including labor.

As a passionate reader and observer of economic trends and its effects on society, I have to recognize that there is a problematic tendency on concentrating wealth in the hands of fewer and fewer people. There is continuous growth in the wealth inequality, increasing the gap between the richest and the lower income members of our society. Such a trend is not conducive to further balanced development of any society.

The third angle of my schizophrenic view comes from a political perspective. One of politicians’ missions should be to “level” society, by reducing the power of the rich and providing opportunities to the poor. What a challenge considering that most efficiency will be obtained by investing capital concentrated in the upper level of society, and the return will go back to the upper class. This will increase power and income of those who already have capital, and decrease labor requirements; this in turn, will hurt the middle and lower class. At the beginning of this process of automation, the less educated people of our society will be hurting most.

The engineer in me says: It looks like a dangerous loop. I do not have answers to my schizophrenic dilemma. It is important though to recognize this dilemma.

At the minimum, we must pay close attention to these trends. We must look for solutions. Individuals, private sector and governments must be actively engaged in addressing concerns associated with this “third wave” combination of factors.


Chip Wagner, CEO of Alsbridge

 

 


WL:
Beyond the promise of better, faster, cheaper, there are other consequences of the digital revolution. For starters – downsizing is happening as we speak. Productivity increases. Profit margins grow. What a wonderful time to run a business. Or is it? Should we be concerned about other trends in the robotics revolution?

CW: Robotic process automation/autonomics/cognitive computing are all points on a continuum of artificial intelligence. “Labor as a Service” is the latest entrant in the Everything as a Service economy that we find ourselves in. Does this trend create the potential for job displacement and business disruption? Absolutely. However, this dynamic has happened before and we’ve witnessed significant labor displacement that, while painful, was not cataclysmic.  Within manufacturing, the automotive sector is perhaps the best example we can use to visualize how automation and robotics have changed production processes and displaced human labor.

What we are seeing now is the migration of that same logic and the application of technology to the white collar world. It is happening and, quite frankly, it is inevitable. New jobs will emerge, new businesses will be created, but the days of job growth based on people doing repetitive clerical tasks may be dwindling.

I do see this as cause for concern – some people will lose their jobs and will have to acquire new skills, some companies will go out of business and other companies will have to re-invent themselves. Significant and sometimes painful change will take place. But again, the underlying dynamic driving this change is essentially the same one that has characterized economic and social development throughout history. In that context, while we should certainly be concerned, we have no choice but to adapt.

Zuin, Danielle100x100
Daniela Zuin, Marketing Director, IPsoft

 

 


WL:
Beyond the obvious dazzle of better, faster, cheaper, there are other consequences of the digital revolution. For starters – downsizing is happening as we speak. Productivity increases. Profit margins grow. What a wonderful time to run a business. Or is it? Should we be concerned about other trends in the robotics revolution? Who should be concerned?

DZ: Cognitive technology will trigger far more than incremental efficiencies in business processes. Just as the industrial revolution of the past transformed economies so will the digital revolution fundamentally change the way in which we live and work. Cognitive technologies introduce the concept of “virtual labor” into our daily life. These virtual employees will form a core part of the workforce in future and are forcing us to rethink the relationship between man and machine.

We will need to re-define the roles involved in business operations in order to capitalize on the power of the technology we have at our fingertips. This means new roles for the human workforce; handing off processing repetitive tasks to our virtual colleagues so we can move up to focus on analytical tasks that utilize the wealth of data we have pouring into our businesses.  It will allow us to shift the focus of our human capital onto high-value, customer-focused strategies and away from non-differentiating “keep the lights on” operations.

The challenge of how we manage the transition from our current organizational models to those we will adopt in the digital economy is a priority for the stability of our society. There is no denying the disruption will be deep as it impacts millions of people around the world.

The new roles we define will require new skills. Re-thinking the content and process of education across the lifetime of working adults as well as that of our children, will require collaboration from multiple stakeholders. Public bodies, large businesses, investment markets and the technology providers must join forces in order to create a proactive plan to support the re-deployment of workers into new roles.  We have an opportunity to prepare ourselves for one of the most exciting periods of change seen in centuries and it requires us to lift our sights from narrow individual considerations to broader perspectives.

The GSC welcomes you to submit your comments on this special panel discussion. Please contact us at: contactgsc@gscouncil.org We will share your views with the community.

Outsourcing and its Leap to Robotics Process Automation

An Interview with Chip Wagner, CEO of Alsbridge

 

 


Editor’s Introduction

We are very pleased to present a recent interview with Chip Wagner that was conducted by Frank Casale, Founder and CEO of The Institute for Robotic Process Automation and originally published on its website.
[divider]
FC: As we dive right in here, what do you see as maybe two or three things that are new and exciting in the outsourcing arena?

CW: I think the changes, Frank, that are emerging in outsourcing are pivot points we’ve seen in the past. First, there was the ubiquitous amount of telecommunications bandwidth put out there that enabled players never who had trodden in this space to become behemoths. Then came the labor arbitrage model, enabled by technology. Today, we see new inflection points like robotic process automation, autonomics, which will eliminate labor or create digital labor, as we like to say.

Those inflection points are going to change outsourcing. This may be the biggest one yet and it will probably come in the most compressed period. If you look at the length of time it took for the other two to ripple through the world; this one probably ripples through the world in a more geometric pace.

FC: I agree. We’ll come back to your point in a moment. I wanted to ask you this question. I was in a room full of about a dozen buyers a couple of weeks ago where we had a roundtable. It was clear to me that outsourcing doesn’t seem to get any easier for these guys, although we’re tracking 21 years and you can argue that it’s obviously been done before that.

You would think it would evolve and mature, but it’s still a challenge and still seems to be fairly painful. Why do you think that is? Or do you agree with that statement?

CW: I think, happily for the third party advisory space, it is still challenging. If you go way back in time into the 60’s when it was all brand new it was hard for everybody. Nobody knew what they were doing, but if you get into 20, 30, 40 years later, you would think by now everybody has kind of figured it out.

Along came all new players who changed the game, such as the whole India offshore model. Now there are some other disruptive factors. People take these monolithic, huge (remember the 10 year mega deals we used to refer to, five billion, two billion revenue), wonderful transactions for the provider community, present this beautiful backlog, give us lots of business to work on, but some number of years into that, the customers weren’t happy. They didn’t see innovation. They became nervous that they had too many eggs in one basket, so the pendulum swung to the notion of multi-source and ecosystem of providers, and best of breed.

When you get into that, you’re building a house and suddenly you have 23 contractors crawling all over the house trying to do it all at the same time, and create a beautiful house, that’s harder to do than the monolithic single contractor who has most of those resources in his vertically integrated housing company. I think that’s why.

People are now recruiting their deals. They’re generation 2.0/3.0/4.0. They’re much smarter. They’re more selective about what they want. They have a lot of new partners they want to bring into the ecosystem.

Now they’re confronted by the ultimate challenge, which is how on earth do I govern and vendor manage that ecosystem. The more things change the more difficult they become and it’s obviously why there’s a business that we’re in.

FC: Makes total sense. In light of this, is the role of the adviser changing in this new world order as compared to what it used to be maybe five, ten years ago?

CW: I think it is. The standard let’s go to do a transaction, let’s go help somebody figure out how to outsource something and presume that maybe it’s their first time, there are still first timers out there which is remarkable. Every year, we encounter them. I sit there and scratch my head, and wonder if over the course of the last ten years, what have they been doing?

The new world order is ecosystems of providers, multisource, short term contracts, stronger ties between the technology provision and the SLA achievement and a business outcome, always talked about, always promised, rarely contracted for.

FC: As far as it changing, there are the first timers that need the traditional advisory help.

CW: The transaction side of this is still there but it’s becoming increasingly small. If you’re a third party adviser and you’re used to doing this, what are you trying to help people do? You’re trying to help them adapt to the new world order. The new world order is ecosystems of providers, multi-source, short term contracts, stronger ties between the technology provision and the SLA achievement and a business outcome, always talked about, always promised, rarely contracted for.

Some of those more subtleties, those nuances, and from our perspective in our business, we’ve opted to go away from a pure transaction model and even go away from a business where we’re predominantly outsourcing advisers. It might surprise you to know that the outsourcing advisory business at Alsbridge is one third of our revenue.

We, at Alsbridge, have gone into other areas that are going to make the CXO community happy and services that we believe our clients are interested in buying so we can expand on our relationship and our history of success with them by bringing them other offerings that will enhance their business.

FC: I think you are spot on. We touched on this earlier, but the word, innovation seems to be the holy grail for many enterprises the past couple of years, certainly within our network. All we have to do is drop that word in one of our conferences and there’s going to be a bunch of people showing up. I wonder how much of it is real versus fantasy.

We still see a lot of deals being done based on plain old-fashioned low price wins. Are you seeing innovation out there?

CW: Innovation is the thing that frustrates the enterprise customer who buys outsourcing the most. It is the promise that is made the strongest, particularly by those that make some of the innovation toys if you will, that make the software, that make the hardware that in theory is going to be the technology around which innovation should be levered and business results should come from. Unfortunately, it has not been as well received by the enterprise customers, and hence they go back out to market, they’re looking for new providers.

You might wonder what a company like HP or an IBM, (and I just use them as examples), who make the technology toys, could do if they leveraged those toys into their managed service arrangements and made some sort of guarantee by saying, listen, this technology will, let’s say it has an affect on inventory for manufacturing, we will triple your turns of your inventory by the application of this technology, and we’ll guarantee it? And the way we’ll guarantee it is we’ll make some economic adjustment if we don’t get there, or we’ll take a share of the turns that we’ve improved by the application of this technology. We’ll invest in the technology on our nickel. You pay us on the return in form of the better balance sheet mechanics that come from tripling returns.

Now put your money where your mouth is. Take your toys and say, I will show you how they’re better, and you now have a services relationship that is one of co-dependence, as opposed to one of I provide services and you buy them.

FC: Very interesting. What is your prediction? Do you see that playing out? Is it more based on good buying or good selling, or a little of both?

CW: Sure, there’s no question that good buying, good selling would contribute to that but it’s going to take somebody who is in the toy manufacturing business and services business, so the two examples I used earlier were HP and IBM, and they’re not alone but they’re the easy ones to think about. It’s going to take someone at the top of those two companies saying, I want to figure out how to do this. I’m going to disrupt my own book of standard old plotting along manage services business by using my technology to explode the contract and go in and change the dynamic by which it’s measured, and show someone I’m prepared to partner with them by putting my money where my mouth is.

FC: That’s a great point. What’s your take on robotic process automation (RPA) and its impact on outsourcing? You and I spoke about this before. I’m amazed at how about two percent of our network, our membership is all over it, and the other 98% has no clue what we’re talking about, so still really new to many. What’s your sense of the reality versus fantasy with regard to RPA?

CW: Fear of the unknown is why you see people slowly put their toe in the water.

They want to be careful. Let’s let the other guy go first. Let’s let two or three of my competitors try it out. If they’re successful and people don’t get fired for trying it, and there aren’t meltdowns as a result of it, then I’ll try it but that’s always true of every step function change that comes along, every pivot point in technology, even the cloud.

The cloud is now getting more ubiquitously absorbed but imagine, think 10 years ago, the cloud was out there for us and there were only a few people willing to try it. I think we’re going to see the same thing here but this pace of adaptation, of disruptive technology in time will only increase because the world is more competitive. It’s more difficult.

Who wouldn’t? I’m always reminded of the cartoon where the guy is sitting at a rock and he’s shooting a single bullet weapon at this oncoming hoard of people. The guy behind him is tapping him on the back and he has this machine gun that shoots 1,000 bullets a second. The guy says, listen, I don’t have time for that. People do have time for disruptive technology.

FC: Robotic process automation is the new Gatling gun maybe.

CW: That may be right.

FC: I get the sense in speaking with you and others on your team that Alsbridge sees itself much different than a traditional outsourcing adviser. Is that the case and how so?

CW: It is because we’re trying to assemble a portfolio of service lines that bring value well beyond simply, let me outsource something. Some of them are more tactical and cost compression in nature or cost takeout in nature. Those are going to forever be valuable to CFOs/ CIOs because they always want to run their business as efficiently as they possibly can. They want to pay a fair price but really not more than that fair price.

People that can help them get there, they’re always going to warm to that. Across the strategic spectrum of, let me think about business models and what should be different, and how can I transform myself? How can I run vendor management for this ecosystem that is now so complex that I don’t know what to do?

Someday there will be a degree in vendor management and governance services. At that point, maybe the world changes a little bit. Meanwhile, people need that kind of help.

I go to any university I want and I say to the director of placement, a guy who is desperate to have us come and hire his people, hey, show me the people who have a vendor management and governance services degree. He says, what’s that?

If we can help people figure that out, someday that void will be filled, whether it’s by the universities in India, the universities here. Someday there will be a degree in vendor management and governance services. At that point, maybe the world changes a little bit. Meanwhile, people need that kind of help.

Our traditional outsourcing advisory business is a third of our business so we’ve changed dramatically. We don’t make a big deal about it. We don’t go out and try to be too big about publicizing it. We’re just trying to be able to produce value for our clients across the whole spectrum of their business, not just how to do outsourcing advisory.

FC: Great. Chip, it’s hard to speak with you and not get a sense of real passion, real energy. I get the sense that you know secret, wonderful things about the future for all of us. What has you so enthused in your current role leading the organization?

CW: I wish I had a crystal ball or I wish I had some unique insight to what’s going to happen that no one else knew. That would be wonderful. I probably don’t have that.

We have had this marvelous opportunity within Alsbridge in the last year and a half to take this company in a different direction. We have the backing of an absolutely spectacular private equity fund called LLR Partners, out of Philadelphia that has just been so supportive and so helpful that it’s just enabled us to do things that we’ve dreamt about before, and we’ve been able to put a couple of them together in a way that has us very excited.

We think we’re differentiated. The market seems to be supporting us. This will be our best year in the firm’s history by orders of magnitude on every measure, so we’re just feeling very good about ourselves. We’re having a lot of fun, and it’s just that enthusiasm has been infectious.

FC: It has been indeed. Last question, maybe you can provide some free advice for our members. Any parting advice for those currently struggling with their outsourcing relationship? Any tips?

CW: I’ll tell you what we went through – this is going to be a roundabout way of answering your question – we went through a reevaluation of our firm a little bit, and we came up with a little tag line. The tag line is challenge the future. I would encourage your clientele, your members, challenge the future. Don’t take today’s status quo and say, it is what it is.

Challenge it. Ask questions. Try to figure out ways to proactively disrupt the status quo to get to a level of performance that you can’t even imagine getting to because it is out there. There are providers who are willing to take extraordinary risk with you, not improving risk but good risk. Challenge the future. Don’t expect that you know how to do all of this stuff.

Your job in an enterprise is not to be the best at everything; it’s to figure out how to get the best results from whatever level of resources you can draw upon.

The reason the third party advisory space exists, the reason we help people with telecom network contracts, which is a pretty basic thing, we do 150 of them a year. A great procurement person, the greatest in the history of mankind does four in a career. We do 150 in a year. If you are a generalist, you cannot hope to be as good as the specialists are.

We’re specialists. Go get some help from some people. Don’t try to figure it all out by yourself. The reason people like Alsbridge exists is because we do actually have some insight garnered from concentration and garnered from volume. We do know some things by virtue of what we do, not by virtue of us being any smarter than anybody else; but if you do something 150 times a year and the other guy does it three times in a career, the guy who does it 150 times a year is going to be better at it than the guy who does it three times in a career.

Go ask for help. Get the best of breed people to help you figure out your business. Your job in an enterprise is not to be the best at everything; it’s to figure out how to get the best results from whatever level of resources you can draw upon.

About Chip Wagner: Chip has nearly 30 years of experience, including 25 years in professional services, IT outsourcing, and business process outsourcing. He has worked with hundreds of companies and has been directly involved in over $15B in sourcing transactions.

Chip joined Alsbridge in 2008 and was appointed CEO in June 2013. His prior career experience includes management and executive roles within GE’s Lighting Business, EDS (where amongst other responsibilities he was a Member of the Board and President of the Manufacturing Division for EDS Germany GmbH), Origin, MSI, Marconi (as President of U.S. operations and CEO of Marconi Wireless), Adea Systems and USAA. He has also served on the Board of CTIA.

Shaping Our Destiny – Exponentially

Karen MorrisBy: Karen A. Morris, Board Member, The Global Sourcing Council and Chair, GSC Women’s Empowerment Committee

 

 


Editor’s Introduction

There are many ways we assess the impact of robotics, in particular the way it is changing the sourcing workforce landscape for providers and suppliers. Our founding Board Member, the innovation strategist Karen Morris, provides unique insights into the paradox we face as a global community.
[divider]
The fact is that June, my great grandmother, was a computer. The fear is that my son is not. Ours is not a cyborg-mutation story, although that fate may await my great grandchildren.

In 1924, “computer” was a job description. Computers, mostly women, tallied and tabulated numbers in neatly inked rows – a repetitive, robotic task 9 hours a day. An exhausting multiplication.

In 2014, June’s great-great-grandson enjoys great, great computing power. In a single device, he wields more computational capacity than the rocket that put a man on the moon. An extraordinary multiplication. And on the day you read this, our planet will multiply its computational prowess a thousand-fold. An exponential multiplication. For our children this is almost a shruggoffable statistic. These natives of a datafied, sensor-strewn world have no angst about the algorithms that know them taste to toe. My son rejoices that I-Robot’s Rumba cleans his (and several million other) floors.

The fear is that robots will one day wipe the floor with him, in the job market at least.

Computing Power

Immense computational power, inestimable troves of data, dissilient progress in robotics, advanced and inexorably advancing artificial intelligence, digital proliferation and combinatorial innovations in bio’ and nano’ technology together with 3D manufacturing, and more and more and more…what immortal hand or eye dare frame thy fearful synergy? Or should our mortal eye see the technologies we have framed as amazing, incredible tools in our human hands?

The fact is these science-fictional phenomena will drive my son’s car, or one he pools, translate his speech, locate his answers, do his tax returns, answer his insurance queries, perform the due diligence when his company is sold, replace a lost limb or organ, and diagnose his health. Eventually they will do all that we imagine and much that we can’t yet. Technologies, in short, will coalesce into a perpetual platform for wondrous innovation and will delete forever certain jobs.

The fear is here.

We have been there before. From stone hand axe and stick as plough to plume and printing, boat and bullet, how we shape our tools shapes us. But of course the really disruptive technology, the innovation that changed the course of history to a degree never seen before or since… until now…was James Watt’s combinatorial reinvention of the steam engine around 1775-6.

“Technology is not destiny. We shape our destiny.”
– Eric Brynjolfsson and Andrew McAfee

Watt catalyzed the Industrial Revolution; although the steam revolution took twenty years or so to unfold, in the words of anthropologist Ian Morris “it was, nonetheless, the biggest and fastest transformation in the history of the world.” What steam started, uncoupling energy generation from the mere muscles of man and beast, led to factories and mass production, to railways and mass transportation, to an unprecedented capacity for human societies “to master their physical environment to get things done.” As Morris phrased it, the transformational significance of our ability to generate massive amounts of mechanical power “made a mockery of all the drama of the world’s earlier history”.

Technological Propellants

The Industrial Revolution has been described as mankind’s First Machine Age, the first time that human progress was propelled primarily by technological innovation. And propelled it was, leading to a further explosion in technological advances in the late and early Twentieth Century dubbed by some economic historians the Second Industrial Revolution. Progress brought prosperity but not for everyone. Not at first.

Ned Ludd, a militant textile worker, led English mill workers displaced by automated looms to attack mills and machineries; similar uprisings occurred on the Continent of Europe. Clog- wearing (sabos) workers also destroyed the machines menacing their livelihoods. The former entered our lexicon with the word Luddite, the latter gave us sabotage. Not only workers but economists too expressed their fears through the 19th Century and beyond that automation would ultimately prejudice workers’ jobs and pay.

In oversimplified terms, these fears went unrealised in the long run albeit after a brutally exploitative start. Technology advances and increases in labor productivity in the last two centuries did benefit workers enabling higher wages and buoying the real value of those wages through falling prices. Labor productivity and private employment grew in tandem and labor compensation rose alongside the profits, dividends and capital gains accruing to capital providers. Living standards improved. Until the last dozen years. The same decade or so that has seen such exponential digital technology developments.

The decade we describe as initiating mankind’s Second Machine Age, one as ineluctably transformational as the first (even if wage gains have been lower than productivity gains since the 1980’s). Since 2000, a strange disparity has emerged. In the USA, corporate profits have risen 100 percent but median household income, adjusted for inflation has not. The fact is, it has fallen from $55,986 to $51,017. Over this same period, corporate profits as a share of gross domestic product more than doubled, rising from six to eleven percent. Employee compensation as a proportion of gross domestic product declined by four percent.

Robotic handshakeThis is not a U.S. monopoly. Wages have flat-lined across the developed world with real-pay average rises at 0.2% last year. In certain rich economies other than the USA, workers are also now earning less than in 2007, for example Italy, the U.K. and Japan. Asia and Eastern Europe have seen 6% pay growth whereas Africa and Latin America averaged barely 1%. Workers share of economic growth has also shrunk in China, Mexico and Turkey.

The fear is that automation is to blame. It’s not just that automation is doing more; it’s doing what we thought it never would. Only ten years ago, Frank Levy and Richard Murnane’s “The New Division of Labor” proffered insights into the divisions between human and digital work. We had reason to be confident back then that certain things could be done well by computers, such as rule-based applications, however complex. We saw IBM’s Big Blue trounce Gary Kasparov at chess in 1997. And yet, low-level sensorimotor skills like kicking a ball and high-level complex communication eluded the machine. Autonomous cars crashed, robots stumbled on steps, translations were awful. As the roboticist Hans Moravec explained: “It is comparatively easy to make computers exhibit adult-level performance on intelligence tests or playing checkers, and difficult or impossible to give them the skills of a one year-old when it comes to perception and mobility.”

This dichotomy, known as Moravec’s paradox, suggested that high-level reasoning was in the purview of computers; however, ordinary skills based on our human capacity for pattern recognition, that require sensing the physical world and navigating the body through it, would rest securely in the human domain. What a difference a decade makes. Autonomous cars, like Google’s and sensing automatons like Rethink Robotic’s Baxter are piercing the paradox. Computers and robots are on an aggressive trajectory to qualify ever more often and ever more competently as substitutes for human labor. Must you be a Luddite to be worried that this may sabotage rather than sustainable human progress?

Measuring People’s Well-Being

The European Union in concert with The Conference Board and Cornell University convened a symposium last autumn of economists and financiers to interrogate the relationship between evolutions in technology and employment depletion or creation. The experts were unanimous in their conclusions. No, just kidding, but I had you for a moment. We do not have, some argued, sufficient understanding of the nexus between job losses and automation. It is hard to decipher causation from correlation.

There are other contributory factors such as globalisation and work relocation and the seemingly inexorable decline in organised labor. The critical question is whether we should cleave to the convention that increased productivity remains an apposite proxy for people’s economic health. In a 2009 report, economists Amartya Sen of Harvard University, Jean-Paul Fitoussi of the Paris Institute of Political Studies and Joseph Stiglitz of Columbia University argued “the time is ripe for our measurement system to shift emphasis from measuring economic production to measuring people’s well-being”.

The fact is that my sons’ and your daughters’ career choices will be changed dramatically by technology, even more than ours have. And our experience has not been trivial. Ask a secretary, a tool-cutter, a switchboard operator, a manual bookkeeper. There has been a persistent decline in so-called routine jobs since computers entered the fray in the 1980s and the trend is accelerating. From 2001 to 2011, 11% of routine jobs in the USA vanished. Recent research from the University of Oxford (Frey and Osborne) suggests that over 700 professional categories are vulnerable to complete substitution by automation. They include loan officers, stock analysts, check-out assistants, tax preparers, paralegals, taxi-drivers, locomotive engineers, even animal breeders.

Robotics Figure_Yalescientific.org
The 700 will multiply. A disconcerting multiplication. Indeed, the oracular prediction of Carl Frey’s and Michael Osborne’s study puts 47 per cent of American jobs at high risk of automation in the coming years. If this is even a remotely correct approximation for the United States, what does it portend for the destination countries to which “low skill” US jobs were off-shored over the last quarter century and for their economies and employment levels? The fact is that these routine and structured functions are especially susceptible to automation and the corresponding fear is the devastating impact this would have on those countries’ workforce.

Nothing “must be” unless we allow it.

Erik Brynjolfsson and Andrew McAfee at the Massachusetts Institute of Technology anatomize with acuity the facts and fears swirling around the impacts of digital technologies in their important and provocative book “The Second Machine Age”. The authors do not retreat from dark diagnoses that, without action and change, many will continue to lose out to technology and that all of us are exposed to the risks inherent in our ever more complex and interlinked technological infrastructure. Nor do they fear a technological dystopia. Serendipitously for this December issue of The Source, the authors borrow from Dickens’ “A Christmas Carol” citing as metaphor Scrooge’s question to the Ghost of Christmas Future: “Is this what must be or what might be?” With ebullience, they urge us to take responsibility for what happens now. Nothing “must be” unless we allow it. In the authors’ aphorism “Technology is not destiny. We shape our destiny.”

People cause economic growth by rearranging resources, machines included, to increase their value. Whether it’s my great, great grandmother’s generation or my son’s or ours, every generation fears the impact on growth of limited resources and the unintended, adverse consequences of technology. Yet, to paraphrase loosely the economist Paul Romer, every generation underestimates our potential for finding new ideas and we consistently fail to grasp how many ideas remain to be discovered; if we grasped it, we would compute that possibilities do not merely add up, they multiply. Leaving us to realise an optimistic multiplication for human computers.

About the Author: Karen Morris is a strategic advisor to national and multinational companies. She is also a frequent speaker and writer on innovation and leadership at global forums and conferences around the world.