From Horses to Cylinders: How HCL’s CTO hears the Clickety-Clack?

|January 11, 2017 0
Sea gulls have the amazing ability to drink salt water as well as fresh water. Would the outsourcing service industry ever have such unique glands? Does it already?

Pratima H

INDIA: It’s a strange reassurance. For someone who is on land, spotting a sea gull is a clear hint that the sea is around. But for someone sailing in deep sea itself, the sight of a sea gull trickles hope of a land-stretch nearby.

Ah, such bizarre musings on life also assure that philosophy is still alive in the rushed world of social networks. But step closer and you may hear the cogs of business wisdom working sneakily inside a poet’s rant.

                                 

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Denial is no more a luxury for the outsourcing industry when it comes to flying between legacy oceans and digital rocks. Media is rife with speculation and confirmation on the many rusted cogs that are making a lot of unwanted noise. We have heard of marquee names undercutting each other in the rush to salvage their bread and jam through traditional services contracts. We have seen revenue forecasts being revised, and then, re-revised. We have looked out of the corner of our eyes at hyper-competitive pricing that still salivates at big-dollar contracts.

Industry watchers are witnessing confused plaits woven where traditional headcount-based delivery is trying to hold its slippery grip around the threat of automation. Analysts stand amazed at dyed-in-the-wool providers who refuse to hear the storms around their curtain-draped windows.

If we swing to some numbers from the IT outsourcing advisory Information Services Group, we can spot an estimated figure of 5,565 contracts which are valued at $201 billion to be up for rebids by 2018. And across geographies and verticals. At the same time, as strategy advisory firm Constellation Research prognosticated, 61 per cent of the global top 2,000 firms seem to be engaged in digital transformation, and 73 per cent of chief executives are anticipating budgets to increase in 2017.

It’s not the same table and the same game anymore though. Outsourcing advisory firm HfS’s latest industry BPM, BPO study of 343 industry stakeholders dispels some myths strongly. It turns out that about half of today’s buyers do not view their providers as purveyors of the new high value capabilities, more so, as they want to get out of the really-burdensome legacy mode.

In this Sept 2016 report, 89 per cent service providers and even 83 per cent advisors thought design thinking capabilities to be important in 2018 but only 48 per cent buyers nodded along. The same goes for process automation tools that echoed with only 47 per cent buyers. Nonetheless, 91 per cent service providers and 90 per cent advisors were affirming to this capability strongly. For cognitive computing again, the scene ranged from 72 per cent thumbs-up from advisors, 89 per cent service providers, and yet only 47 per cent for buyers.

These are interesting shore-lines for Indian players. These are times to ask (and then actually answer) some tough questions.
But can they get out of the comfortable skin of decades-old cost and labor arbitrage model? The formula of costs savings and offshore presence has worked so spectacularly so far. Do they have the vision and the wherewithal to jump to emerging segments where budgets and buyers are heading?

Can they look at legacy business with objective courage and face revenue compressions instead of chasing clumsy-clunky deals of the past? Can they look beyond the big-wallet enterprises, get over the obsession for $5 billion-plus companies, and acknowledge a new anti-incumbency of future-ready digital enterprises who could be formidable challengers for these giants soon? What about some consultants’ crystal ball where clients can be seen shaking their heads now, hinting that they need actual help in automation; would outsource locally and will look at offshoring as a final option?

Closer home, when we look at HCL Technologies, it is intriguing to note that between the quarter ending Sept 2015 to Sept 2016, application services has shifted from 40.4 per cent to 37.8 per cent, while infrastructure services has moved from 35.1 per cent to 40.3 per cent, as per the service mix revenue analysis of Second Quarter FY2017 Earnings Report.

The company has been a name to reckon with since early on and sometimes, for very different reasons than what other neighbours shone by. As you would gather in the conversation that unfolds next, it never echoed that the head-count model would stay unshake-able as its CTO shares; and that it not only had its ears glued to the ground for the sound of cylinders driving carts next, but was already investing in four-stroke engines when others were happy with the sound of hooves.

Really? HCL could see through commoditisation, cost arbitrage etc and get ready for new words like IP, platforms, AI (Artificial Intelligence), non-legacy business, cognitive computing etc even when it was a world far away? Is it not struggling with the ‘relevance syndrome’ that has clutched many big names by their collars?

Let’s sit across Kalyan Kumar, Chief Technology Officer, HCL Technologies; and find out if ‘digital’ is the fresh water that outsourcing birds have been looking for or whether spotting a sea gull still makes some sense for those lost in legacy oceans?
Let’s see how’s the T element playing out for a CTO who is steering new wings across new industry landscapes and water-scapes. Let’s try to deconstruct this new blur that the industry stares at.

Does automation bother you or make you smile?

Technology is the new core of enterprises indeed. Earlier, it was a question of what they want to do and how technology can help to solve their problems. Now, there are so many options and every next business looks like an API economy, every business is a software business in some sense and the question is about how to steer this transition. So technology is very important and HCL’s focus and foresight on R&D and engineering services early on has given us strong scale today.

Automation as a technology shift is impacting all industries globally – it is no longer an option for the 21st century enterprise. The impact of artificial intelligence and automation on businesses will grow significantly over the next five years to drive both revenues as well as profitability for enterprises. It is fair to say that autonomics is the key driver of innovation and agility for businesses today; autonomics sits at the very core of IT and Operations. Technology, more than ever, is taking precedence over human intervention in almost all areas of IT and Operations.

So yesteryears’ business models have become commoditised and cost arbitrage or body-shopping is a hollow model?

We are not into traditional models as we operate in outcome-based models. IP and R&D is our core ingredient. We were never into body-shopping. From our perspective, we see the shift as a completely strong opportunity, whether it is digital transformation, Internet of Things (IoT), Cloud, Security anything. At least, HCL will keep evolving and will stay relevant.

We focused on new areas like engineering or R&D very early on. Ours was a different model – an output-based model instead of a people-based one. We invested in products and platforms much earlier than others.

Those who were operating with body-count model must be concerned. Not we. We are into assets and outcomes. We bundle products and solutions and not just software. HCL has taken the lead in developing third-generation autonomics, orchestration and AI technologies, such as machine learning, computer vision, natural language processing, speech recognition & image analysis.

Kalyan Kumar, CTO, HCL

Kalyan Kumar, CTO, HCL

As to commoditisation, from an industry point-of-view there could be some inflection points; and some players will take advantage of it and some won’t.

Let’s pick application-development which happened to be a major chunk of work in this industry. What changes are DevOps and Containers bringing and how much of un-freezing is easy?

From a traditional code scenario, the infrastructure today has become more programmable. Our business model was always different and we saw AI early on, embraced automation in the last 12 years, and have products like DRYiCETM already.

Is the customer-side embracing products like DRYiCETM? Where does AI intersect with outsourcing?

Yes, DRYiCETM, HCL’s Autonomics & Orchestration Platform, has evolved to become one of the most comprehensive Enterprise–grade A.I. & Automation platforms in the industry. It has over 40 modules that bring the power of futuristic A.I. technologies such as Machine Learning, Deep Learning, Cognitive Computing, Predictive Analytics, Robotics and Neural Networks to simplify operations and bring about business agility. It is the only IT Automation platform on the market that pushes the impact of Automation further into the realm of Service and Process and it makes an Enterprise IT ‘Automation Ready’.

Currently, over 200 clients leverage the benefits of one or more modules of DRYiCETM and many more are adopting some form of AI such as natural language processing (NLP), machine learning or robotics. Existing customers are migrating to the latest DRYiCETM technology. It is also impacting most of the new transformational wins for HCL.

Do you see AI gaining prominence in this space ahead? How is it affecting your strategic slant?

AI is happening. We cannot deny it anymore. We are trying to be an AI middleware with many AI options as a service-centric organization. We are integrating AI layers and work with multiple companies and solutions (Amazon, Watson etc.) to make everything come together. We are not building our own AI. The big ones like Google, Facebook are betting billions of dollars and trying to commoditise competitors. The entire ecosystem is important here. There is noise and then there is ground reality. The question is – how do you want to do AI?

How crucial are IP and platforms (pre-integrated ones specially) to the Cloud and digital era?

We are focusing on IP and platforms for the last 20 years. We are trying to become an IP powerhouse and create a better risk-reward model. Not a product company, but an IP powerhouse. IP-enabled platforms are important in that respect.

What’s exciting for you as a CTO today?

There are areas with applications beyond what is visible now. Their evolution, in that sense, would be very interesting to watch. Application of technology is becoming exponential and it’s cutting across so many boundaries. Every company wants to build its own platform and technology is going to stay the core.
When I think of exponential technologies, I see these extremely-fast Innovations that are poised to create exponential impact on surroundings or the way things are currently done. There is also a view point that Organisations should consider the ethics and morality of applying exponential technologies due to their potential wide ranging impact on human race.

Any examples?

Augmented Reality and Virtual Reality are interesting. So are Blockchain Technologies; Machine Intelligence ones, and re-imaging core systems. There is Liquid workforce that is agile, dynamic and ready to adapt to changes and upgrade skills in quick time to enable new projects and activities within the organisation. This concept is picking up and organisations are seeing its benefits.There is the platform economy that is fundamentally changing the way people work, live, communicate, meet etc.

Some industry-leaning ones?

There is re–platforming or modernising of existing IT systems and solutions. There are autonomic platforms that enable real–time intelligent IT and Operations through use of DevOps, analytics etc. based paradigms.

Also, organisations are talking about Right Speed IT. That is, Speed of IT that balances various aspects ranging from business, technical feasibility, Risk, Compliance etc, while executing its core functions in most efficient and effective manner. It is about making multiple parts move together as fast as possible.

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