reinventing to disrupt:

Reinventing to Disrupt:Shaping a New Identity for the Indian IT Industry

We are in the midst of a revolution—one where digital technologies are transforming everyday life, education and business.

Think about it: Refrigerators now text homeowners when their doors are left open. Washing machines monitor energy prices in real time and run a load of laundry when spot prices are at their lowest. Robot vacuum cleaners controlled by a smartwatch or smartphone clean floors. In restaurants, drones whisk dirty dishes away from diners’ tables and into the kitchen for cleaning.

In education, colleges and universities have established intelligent learning platforms to supplement the work that instructors do in the classroom. A large industrial equipment company, for instance, has automated some of its production lines so thoroughly that they can run unsupervised for several weeks. Hospitals can process patients’ personal data, information from medical journals and healthcare specialists’ expertise—nearly simultaneously—to provide personalized treatment recommendations for individual patients.

And this is just the beginning. Imagine what will happen by the end of 2020, when more than 5 billion people globally will have an active social media presence, and when more than

6 billion smartphones will be in use, transmitting nearly 370 trillion megabytes (MB) of data. All that data will be ripe for capture by almost 21 billion connected devices. And it will be ready for processing by “exascale” supercomputers boasting a computing power of 1 quintillion floating point operations per second (FLOPS)— 50 times more computing capability than what exists today.

Global businesses across a wide range of industries have recognized this game-changing opportunity and have set out to deploy digital technologies to reshape their future. They are now looking to us—their trusted IT partners for more than three decades—to help them maximize their gains during this journey.

To do our best for them, we must reinvent ourselves. We have done so before. In fact, reinvention is in our DNA and has been our source of profitable growth for 30 years.

However, this reinvention will differ markedly from those that came before. Technological shifts will form the foundation of how we redefine our business and will lead us to create decidedly new operating models. In addition, we will need to execute this reinvention far more swiftly than we carried out earlier transformations, given that the technological

FOREWORD

i “What Will Social Media Look Like in 2020?” Wall Street Journal Digital Network, March 2013.ii Ericsson Mobility Report, June 2015.iii Ericsson Mobility Report, June 2015 and Accenture analysis.iv “Gartner Says 6.4 Billion Connected ’Things’ Will Be in Use in 2016, Up 30 Percent From 2015,” Gartner, November 2015.v “Next up: exascale computers, expected to arrive by 2020,” PCWorld, November 2012.

R. ChandrasekharPresident, NASSCOM

Rekha M MenonChairman and Managing Director, Accenture in India

Foreword

shifts underpinning the reinvention will continue to happen at unprecedented speed.

With these imperatives in mind, we offer this report in the hope that it deepens our collective understanding of the nature and implications of the shifting technological landscape. With the support of Accenture, IBM, Infosys, Google and Microsoft, we at NASSCOM are happy to share research on the latest developments in five major global technology shifts: cloud computing; automation and robotics; artificial intelligence and cognitive computing; the Internet of Things; and virtual and augmented reality. Each section in the report explains how the corresponding technology is affecting various industries and offers recommendations for how Indian IT and business process

management (BPM) companies can capture the opportunities presented by the technology as well as surmount the challenges.

Drawing insights from these companies’ experiences, we also introduce an action plan for India-based IT and BPM companies to embrace disruptive change.

We take this opportunity to thank the leadership and members of the participating organizations – Accenture, Google, IBM, Infosys and Microsoft for their contribution in formulation of this exhaustive document.

Hoping to see you reinvent yourselves with speed.

1. Introduction 06

2. Social Mobile & Analytics 12

3. Cloud Computing 16

4. Automation & Robotics 22

5. Cognitive Computing and Artificial Intelligence 28

6. Internet of Things 34

TABLE OF CONTENTS

6 | Indian IT Industry

Reinventing to Disrupt:Shaping a New Identity for the Indian IT Industry

If there is one thing that the IT-BPM industry in India excels at, it is reinventing itself. During the last three decades, the industry has updated its business and operating models–thrice. In the 1990s, it focused on transforming from a basic IT to a functional IT services giant. The second transition, which began in early 2000, positioned the Indian IT-BPM industry as a global offshoring leader, capable of delivering a range of scalable enterprise software services. The third, which hit suddenly in the aftermath of the global economic crisis of 2008, demanded that Indian IT-BPM players become growth enablers for their global clients. Leaders of the Indian IT-BPM industry have been extremely successful at stewarding these transitions. The numbers say it all. From a fledgling US $100 million industry in the late 1990s employing a few hundred thousand people, the Indian IT-BPM industry by the end of 2014 had clocked revenues totaling US $118 billion and emerged as the largest private sector employer with an 11 percent share of total urban jobs.1 However, only a few years after the last transition, the Indian IT-BPM industry is now being challenged to reinvent itself yet again. Fortunately, this reinvention holds an unprecedented promise–that of carving a new identity.

The reinvention imperative

During the last three years, global clients of Indian IT-BPM companies have been experiencing “big bang disruption”–a phenomenon where their businesses risk being devastated, virtually overnight, by new competitors capable of simultaneously beating them at price and quality. Leveraging digital technologies, reliable broadband networks and increasingly powerful and ubiquitous mobile devices,

these competitors (also called “big bang disrupters”) are destabilizing mature industries in record time, leaving incumbents and their supply chain partners dazed.2

Keen to disrupt rather than be disrupted, large global businesses across multiple industries are now turning to their trusted partners–the IT-BPM companies in India–for solutions. The request? Help us transform quickly into outcome-driven digital organizations. This demand (and the myriad opportunities it brings) is immediate, which means the Indian IT-BPM industry must move faster than ever before. In the words of a senior executive at a large multinational corporation supported by an Indian IT entity, “Indian IT firms do not have the luxury to gradually evolve this time. They need to hit the ground running and build their technology capabilities and organizations in parallel.”

As a result, Indian IT-BPM players that excel at business process management or outsourcing services need to transition rapidly into providers of digital services like cloud migration and management, or application delivery and support. And they need to extend even further into new areas such as offshore management of robotics operations and virtual reality solutions. Indian IT executives are already running into clients whose understanding of technology


Indian IT Industry | 7

is matching–or in some cases even outpacing–that of their own. Fortunately, the long-term opportunity from this transition is even greater for Indian IT-BPM companies. Global clients are anticipating the pace of technology change will increase rapidly over the next three years3 and, as such, are hungry for ongoing partnerships with Indian technology service.

Much to gain and too much to lose

If the Indian IT-BPM industry is able to manage this transition, it will be reinventing to disrupt the digital innovation and solutions market at scale. Positioning to compete in the digital technologies market could be a lucrative and long-lasting opportunity. In 2015 alone, one analysis marked the digital economy as responsible for 22.5 percent of the global economy, or US $19,159 billion. To size a fraction of this market, the sale of professional service robots alone is expected to be US $19.6 billion between 2015 and 2018.4 Clearly, the IT-BPM industry players in India stand to gain immensely if they move quickly to capitalize on this growing demand. Above all, they will emerge as strategic growth partners for their clients, capable of helping them derive distinctive and disruptive value in an increasingly competitive business terrain.

The alternative is the deep cost of inaction. Should the Indian IT-BPM industry not transform as rapidly as needed, it could end up losing significant business. Providers without digital capabilities would become irrelevant to the growth agenda of clients in the era of digital disruption. Loss of clients would result in loss of brand identity that has been carefully cultivated through the years. The core strength of Indian IT-BPM companies–top talent–would also start departing. Eventually, the industry would get too far behind to catch up.

Overcoming challenges to reinvention imperative

Conversations with senior executives and managers across the Indian IT-BPM industry reveal challenges across three major fronts that will need to be addressed in order to proceed with reinvention:



• Proactively decipher the exact nature of value to deliver – Many Indian IT-BPM industry players are used to delivering value that is generally pre-defined by their clients. But in an era of digital disruption, many of these clients may simply fail to decipher and define what their end-customers want. A number of the established hotel and travel chains, for example, failed to recognize the importance customer place on a transparent information flow in the process of booking hotel rooms–an oversight that was filled by the creation and success of Airbnb. To avoid more situations such as these, Indian IT-BPM players will need to decide beforehand which value will be most beneficial for their clients–and shape offerings to match. Unfortunately, many organizations are not wired, either from a strategy or an operational perspective, to achieve this goal.

• Strategies to design and deliver the desired value to clients profitably – For many clients of the Indian IT-BPM industry, introduction of a product into the market at an appropriate cost point and time determines profitability. Take oil companies, for example. They make major investments and every penny they save makes an impact on their bottom line, especially when oil prices are at record lows. In the digital era, oil companies are turning to big data as a means to make better decisions against slim margins. To achieve this goal, they need analytics support that is capable of processing petabytes of unstructured and distributed data from various operations. Traditionally, the industry has met this demand by adding more hardware to accommodate high-data throughput and real-time data processing. But how many IT-BPM companies in India have the technological and talent wherewithal to provide the big data analytics solutions their clients desire at a given point of time?

In addition, Indian IT-BPM companies have a tendency to avoid projects where clients ask them to have “skin-in-the-game,” especially if both parties are unsure about the value the solution will ultimately deliver. One senior manager from an India-based IT-BPM company explained it like this: “More and more of our clients want us to be not output driven. They want us to assume the same level of risk they face in the era of digital disruption. We deal with such situations when they arise, but we do not have a clear strategy to deal with them.”

• Building accessible sources of present and future value desired by clients – Indian IT-BPM companies remain underinvested in their efforts to build strong ties with start-ups in the innovation ecosystem; those that take this leap, however, are better positioned to develop future solutions that cannot be built internally. In the words of an executive from a leading Indian software developer, “We know there are start-ups that can help us deliver what the client wants, but we just don’t have access to them. We haven’t invested in building bridges with the ecosystem.”

Reinventing to disrupt: An action agenda

With these challenges in mind, how can companies in the Indian IT-BPM industry reinvent themselves to survive and thrive with their clients in the era of digital technology disruption? While the journey to reinvent will be unique for each Indian IT-BPM company, there are common actions that forward-thinking leaders can take to facilitate a smoother and quicker transition into disrupters.


Define value to be delivered

Identify technologies and ways to deliver value

Clearly articulate value your firm will want to provide towards helping its clients grow in the era of digital disruption

Spot technologies and ways of delivering desired value ensuring market differentiation

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A right mix between talent and technology will be vital to successfully put strategy into action towards delivering accelerated value

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Build a time-bound transition planBuilding an organization capable of leveraging technology is a growth impreative. So, develop a transition plan to move your organization towards delivering desired value with the power of digital technologies

Develop a talent value structureYour people will continue to be your biggest asset. So, design and execute programs to reskill existing talent and in parallel build talent pools capable of delivering value at speed a period

Continuously upgrade technology stackTechnologies will be vital to achieving growth productively. So, find ways of dynamically upgrading your technology stack and getting your talent pool up to speed on them a period

Invest in an outcome-based digital business modelClients will value you if you help them achieve their business goals. So, invest in creating a business model with a clear focus on digital customer value proposition, resources and profit formula a period

Foster a culture of openness and digital experimentationYour firm is not wired to generate all types of business value your client needs. So, open up to collaborating and experimenting with startups and other technology entities in the ecosystem.

Seed talent for future disruptionTalent will be key to driving disruption in the future. So, establish digital platforms and mechanisms to discover new sources of digital value with talent within and outside your firm.

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Figure 1: Reinventing to disrupt–An action framework (Source: Accenture)


Strategically embrace the journey of reinvention

Indian IT-BPM firms must focus on strategizing their journey of reinvention. To begin, they should identify and articulate the value gap to be bridged to support the accelerated growth journey of their clients. They should also leverage digital technologies as a means to achieve market differentiation and deliver value that will help their clients succeed against the forces of market disruption.

To accomplish this step, IT-BPM companies in India must acquire a deep understanding of the business opportunities and pain points of their clients. This includes proactively engaging with their clients and meeting their clients’ customers. Another important aspect is to build a body of actionable knowledge about the ongoing disruptions taking place in direct and adjacent markets where their clients operate. Finally, IT-BPM providers must explore possible integration of their new digital service lines with legacy, domain-specific application development and maintenance services; this step will help them present a comprehensive value proposition for enterprise customers.

Design mechanisms to excel at delivering the desired value

Reinvention is not going to happen overnight. Yet, it cannot continue for perpetuity either. Indian IT-BPM organizations must develop a time-bound transition plan to move towards delivering the desired value to clients through digital technologies. This transition plan must be owned and executed by top leadership in active consultation with the senior management team responsible for talent, technology and finance. While developing such a plan, a winner will work extremely hard to ensure that it is both executable and respects the core values and vision of the firm. More importantly, the plan must be tightly aligned to the value the Indian IT-BPM company is keen to deliver.

Looking ahead, the factors behind IT employee productivity will change dramatically as this transition plan is rolled out. Digital service lines will need a smaller staff to earn the same revenue because of the premiums they will command. Therefore, a robust talent value structure will be vital to achieving operational excellence post reinvention. Indian IT-BPM companies must systematically look at developing this capability as they reinvent themselves.

Digital technologies, such as robotics and artificial intelligence, will open up scalable opportunities for Indian IT-BPM companies to disengage their workforce from doing mundane tasks and reskill them to complete high-tech jobs. For example, IT-BPM companies in India could start investing in skill-building to help employees collaborate with robots and machines. This effort could make it possible to deliver more cost-effective value to clients. In the near future, these providers may also wish to train employees to operate drones and robots to efficiently deliver packages and conduct surveys in other countries, respectively. Regardless of where they focus their services, Indian IT-BPM companies will need to build scalable talent pools of specialists with expertise in digital technologies, including big data analytics, mobile application development, new user interfaces and cybersecurity.

The enterprise solutions that Indian IT-BPM companies will offer in the future will largely focus on deploying new connected systems, migrating legacy systems and creating integrated platforms to present real-time analytical insights from the connected world. Raising revenue per employee in these scenarios will only be possible if Indian IT-BPM entities continually update their workforce’s skillsets to develop and deploy the key technology stacks. Dynamically upgrading skills and knowledge will be essential. As addressed by some winning firms, IT-BPM companies in India could achieve this goal by establishing technology collaborations with leading universities or niche technology firms.

With growing client demand to have a “skin-in-the-game,” Indian IT-BPM companies will need to focus on reinventing their business models. One option is to invest in outcome-based digital business models with a clear focus on customer value proposition and to develop varying commercial models to extract share of value from clients. For example, as clients start moving up the cloud stack, the role of IT-BPM companies in India, typically involved in delivering infrastructure-as-a-service and systems-as-a-service, will be minimized. However, by focusing on business-process-as-a-service and solutions-as-a-service, these companies can add value through their domain capabilities–by creating capabilities for clients through service integration, as well as by working with the cloud ecosystem to create new capabilities on the cloud that multiple clients can leverage.


Discover and seed sources of future value

Success with digital technologies, such as internet of things or virtual reality, is closely linked to the size of the business ecosystems they create or operate. Expecting to thrive with these technologies as an individual company is a mistake. Unlike past technology adoptions, where there was a clear demarcation of end users and suppliers/vendors, digital technology adoption is creating a unique situation wherein competitors find it imperative to collaborate and clients and vendors feel the necessity to partner. Fostering a culture of openness and collaborative digital experimentation, therefore, becomes a vital dimension of the Indian IT-BPM journey. Strategic alliances can give large IT companies the flexibility to drive innovative solutions without disturbing core operations. Larger companies can gain a competitive advantage through access to differentiated start-up technologies and greater risk-taking ability. In return, niche companies and start-ups get access to capital, as well as global exposure and clients. For example, a top Indian IT company has set up a US $500 million fund to invest in smaller companies working in domains such as automation and artificial intelligence. It has also recently made a US $200 million acquisition of an automation start-up.

Given the transient nature of value in the digital era, Indian IT-BPM companies need to continually shape talent pools that can innovate new types of market-relevant value and unique ways to deliver this value. This is an area where Indian IT-BPM companies could actively explore collaboration with governments. Working with the Ministry of Human Resources to introduce new subjects such as data sciences in school and college curricula as part of a national plan to create at least a million data professionals by 2025 an important step in this direction.

The imperative for leaders to once again push an agenda focused on reinventing the Indian IT-BPM industry is clear. The technologies they invest in, their growth mechanisms, how they view and manage relationships with their customers, the talents they look for from employees–these areas and more are all aspects that IT-BPM leaders will have to reimagine in order to become disruptors. As a guide, this report explores six major global technology shifts–digital technology (social, mobile, analytics); cloud computing; automation and robotics; artificial intelligence and cognitive computing; the internet of things; and virtual reality and augmented reality. Each section includes use cases for how the technology is impacting various industries, as well as the opportunities and challenges being presented to Indian IT-BPM companies as they embark on their journey to forge new identities in the digital economy.


Global Technology ShiftsSocial, Mobile and AnalyticsFoundation for the digital economy

The digital age was launched through the confluence of key technologies: social, mobile and analytics. (Note: Cloud is covered separately in the next section of this report.) As consumers embraced these innovations into their lives, businesses took note and began incorporating what would later be dubbed “digital technologies.” Even today, as companies across multiple industries pursue comprehensive digital transformation, the power of these technologies cannot be understated. Each has had a fundamental impact on how businesses approach their products and services; however, social, mobile and analytics when combined have laid the foundation for even more advanced and cutting-edge innovations. To set the stage, here is a closer look at how these technologies are being used by companies today:

• Social–Whether connecting people and their friends, customers and businesses, or co-workers operating across the globe, social technology is all about bringing people together. Early platforms like MySpace and Facebook showed that people were willing to communicate and build relationships online much like they did in their day-to-day lives. Forward-thinking brands recognized these platforms as a new channel of access to consumers. This idea kick-started major investments in advertising across social platforms. In fact, a recent study showed that 83 percent of 21,000 surveyed social media users reported first learning about businesses’ new products and services on platforms like Twitter, Facebook and YouTube.6

But social media is about more than building awareness and improving sales. Companies with winning digital brands also leverage social platforms to build closer relationships with their customers–no matter the scale of

their business. Royal Dutch Airlines, for example, is committed to responding to every single tweet it receives from customers. The company keeps a running timer on its website for how long customers should expect to wait for a reply, and uses the interaction as a way to communicate information like flight delays, cancellations and other pertinent travel information, while reassuring customers that their voice has been heard.

• Mobile–A huge impetus behind the adoption of social platforms was the meteoric rise of smart phones. A 2015 survey reported 43 percent of adults globally owned a smart phone. While this number is buoyed by certain countries (United States at 73 percent, Australia at 77 percent), it is undoubtedly a global trend. The same survey reported that smart phone penetration in developing nations was equivalent to 37 percent–a sharp increase from the 21 percent reported in 2013.7 Reliable internet connections from 3G and 4G services enable people to shop, interact and go online anytime, anywhere.

Once again, businesses paid attention and are now using mobile technology to provide a differentiated



experience and new value to customers. In fact, the list of companies that are offering mobile services and apps is quite long, including connected payment services like Venmo and Apple Pay, connected health wearables like Fitbit and Jawbone, as well as digital content distribution and customized shopping promotions. For example, Macy’s, the clothing retailer, installed iBeacon technology in stores and partnered with Shopkick, mobile shopping app, to send personalized discounts to shoppers when they pass near items on their wish list.

• Analytics–The rapid rise of social and mobile technologies has also generated massive amounts of data. For perspective, more data has been created in the last two years than in all of human history, and by 2020 the total size of the digital universe is expected to be 44 zettabytes of data.8 Businesses have turned to advanced analytics to make sense of all this information. Moving toward a data-driven culture has even become a competitive differentiator for some enterprises based on how well they are able to gain insights from the analytics and take actions as a result. The results have been incredibly lucrative for those that succeed. For perspective, GE reports having a six-times return on its investment in big data over the course of a year.9 Seeing the immense value data can deliver, companies across industries have seen data science become one of the most valued skills to be acquired by the enterprise.

The combined power of digital technology

The important takeaway, both for the Indian IT-BPM industry as well as for global companies in all industries, is that none of these technologies should stand alone. It is vital to create a combined strategy for incorporating digital technology into the business. Focusing on one technology may yield significant benefits, like those addressed above, but a broad and integrated approach allows the value of these technologies to grow exponentially. Case in point–Uber. Uber leverages mobility as the focal point of its service–for customers to hail rides, and drivers to indicate if they are off or on duty as well as receive driving instructions to their customer’s destination. The quality of Uber’s product is improved by a social element, allowing drivers and riders to rank one another promoting better service and better interactions as a whole. And finally, analytics is the key to making Uber money. By having robust real-time analytics, Uber is able to modify rates based on demand–surging the price when demand goes up to incentivize more drivers to log on and thus meet that demand.



As these examples–and many more–show, companies are weaving together social, mobile and analytics to build a range of seamless and exciting experiences for customers. What is equally important to note here, however, is the reliance of technologies discussed later in this report on these foundational digital technologies. Take the internet of things for example. The explosion of smart devices–powering connected cars, homes, and cities–is being built as an extension of mobility. Think of Nest thermostats or Phillips’ Hue lightbulbs: these smart devices take input and control from a homeowner’s mobile device. And the exciting space of artificial intelligence? It is being driven by advanced analytics and fed by the sheer amount of data collected from social and mobile services.

Much like this described inter-relationship between social, mobile, and analytics, “new wave” digital technologies are growing off one another as well. Look no further than automation and robotics for proof. Despite the discipline being around for decades, huge strides have been taken in this area, thanks largely to IoT making it easier for machines to ‘talk’ to one another and AI making them ‘smarter’. But the really exciting space is seeing the power of these technologies taking hold within industries–essentially creating entirely new paradigms for business. Take healthcare–cloud, internet of things and artificial intelligence are all coalescing to allow healthcare providers new ways of providing services to patients. Doctors and other healthcare experts can now deliver personalized treatment regiments and receive real-time feedback on the conditions of their patients all through the power of digital technology.

Opportunity for the Indian IT-BPM industry

Given this viewpoint, how should the Indian IT-BPM industry respond to the opportunities of social, mobility and analytics? First and foremost, they must enhance their capability to be a partner for digital transformation. While many companies have been experimenting with these core technologies for a few years, there is still a global appetite for a go-to partner that can help guide the digital business transformation. Functionally, this means investigating a number of new services.

Global enterprises seeking to become fully digital will need experts who can help them build mobile architectures, create and test apps, and leverage the power of APIs–all projects the Indian IT-BPM industry is well-equipped to manage. But there is new territory to conquer as well. IT-BPM players in India can build a new advantage by introducing analytics services, helping clients manage and capitalize on the large amounts of data being generated on a daily basis. In these pursuits, Indian IT-BPM companies can move beyond the role of vendors that help clients reduce costs on necessary IT operations, and rise to the role of partners that can help clients achieve new growth.

Finally, the imperative to act is not only due to client demand. Considering the foundational nature of social, mobile and analytics, the IT-BPM industry must grow adept at leveraging these technologies if they wish to become experts in emerging and cutting-edge technologies like robotics, artificial intelligence and virtual reality. The exercise of growing into a digital transformation partner will guide the IT-BPM industry in acquiring and developing the skills and tools to make this leap. As Indian IT-BPM companies build digital competencies and grow into the role of digital transformation partners, they will reinforce the industry’s reputation as the global source for IT talent while ushering in a new era of growth.


Cloud ComputingHarnessing a platform for innovation and digital growth

Technology and market overview: The changing face of cloud

Cloud computing is a pay-per-use IT consumption and delivery model that enables real-time delivery of configurable computing resources, such as networks, servers, storage, applications and services. Typically, these are highly scalable resources delivered over the internet to multiple companies, which pay only for what they use.

Few digital technologies have had as extensive an impact on companies today as cloud computing. Initially, many businesses pursued cloud as a way to shift IT costs from capital expenditures to operational expenditures. As the technology matured, however, it became clear that cloud computing could deliver more profound benefits. One, the ability to provision and remove IT capacity on-demand across layers of hardware, system software, platforms, software solutions and security; two, the opportunity to foster innovation and business partnerships across the global community by developing rich collaborative ecosystems in the cloud.Industry by industry, cloud has fundamentally changed how businesses operate and become the catalyst for a new paradigm of technology delivery models. These cloud-enabled models can help organizations scale investments as they grow their business. They also open the door to new approaches through standardized applications, infrastructure, testing environments and business processes that help improve service delivery and efficiency. The latest development in the progression of cloud is the “everything-as-a-service model,” which includes infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), software-as-a-service (SaaS), solution-

as-a-service (SlaaS) and business-process-as-a-service (BpaaS). Now, instead of having to invest in long-term solutions that cost a lot of time or money, the various “as-a-service” offerings allow businesses to simply pay as they go. Putting it all together, the everything as a service trend–combined with the vast amount of storage and computational power available through the cloud–is allowing companies to achieve benefits such as reduced time to market, increased scale and improved insights from huge volumes of growing data.

There are different strategies for capitalizing on the cloud as well. Today, companies use three forms of cloud architecture–public, private and hybrid cloud models–to transform key aspects of their businesses. Public clouds, the services provided by vendors like Amazon and Rackspace, provide speed, ease and affordability since all of the hardware is managed by the vendor. Private clouds, on the other hand, are more secure and customizable–but require a bigger investment. And, as the name infers, hybrid clouds are the connection of one or more clouds to on-premises systems and/or the connection of one or more clouds (private/public) to other clouds.



Figure 2: Projected cloud market growth

$692BTotal Cloud

2018 Oppty

23%

33%CAGR ’15-’18

$402BHybridCloud2018 Oppty

CAGR ’15-’18

In terms of opportunity, the total cloud market is expected to grow at CAGR of 21 percent between 2015 and 2018. Within overall cloud, the hybrid cloud market segment is expected to grow faster at a CAGR of 33 percent between 2015-2018 and reach US $402 billion.11 This growth is being fueled, in large part, by enterprises’ growing recognition awareness that cloud, and especially hybrid cloud, offers more than just low-cost computing and storage capacity; it offers a platform for innovation and new business models to enable digital transformation. According to industry analyst IDC, 75 percent of large enterprises will have digital transformation at the center of their corporate strategy in the next two years. And more than 80 percent of enterprises will commit to hybrid cloud architectures by 2017.12

Even as the value proposition for cloud adoption focuses on the innumerable opportunities for innovation, a handful of challenges are restricting companies from obtaining the full potential of cloud-based innovation. Chief among these are a lack of proven cloud transition strategies and a lack of standardized methodologies to enable services integration across business partners and ecosystems. While many companies are leveraging cloud for their own benefit, there are also few offerings, if any, that support the cloud ecosystem for industry as a whole, such as industry-specific offerings/cloud platforms that impact company and industry value chains, as well as customer value propositions.

(Source: IBM)10



Industry use cases: Leveraging cloud to drive optimization and innovation

Cloud can drive significant business value creation and competitive advantage for global enterprises through optimization of resources and infrastructure. In fact, whether large incumbent companies opt for public, private or hybrid cloud solutions, a cloud strategy can accelerate new opportunities for agility, scalability, productivity and customization. Consider some of the following industry use cases:

• Banking–Using cloud-based infrastructure, enterprises are designing, developing and prototyping applications faster than ever. As just one example, Westpac, the largest bank in New Zealand, is undergoing a significant transformation, from a traditional bank to one using cloud computing to address key market trends such as social and mobile adoption. The company now uses a private cloud architecture to develop and test tools within a dedicated environment. This helps Westpac build online and mobile banking services faster and across multiple devices and platforms in response to changing consumer preferences for banking.

• Media–Organizations can benefit from mobile and cloud-centric information technology to scale their businesses. Take the case of weather forecaster AccuWeather. In the business of commercial weather forecasting since 1962,

the company adopted a cloud strategy that helped reduce IT costs while scaling up in response to the number of devices connecting to the service for updates. Today, AccuWeather uses a cloud-based infrastructure to handle billions of data requests each day.

• Transportation–Using a combination of cloud-delivered services, companies can accelerate time to market and differentiate the customer experience. Uber, for example, uses a dynamic pricing model driven by algorithms to set prices in real-time during peak- or low-demand periods. The company’s app lets customers reserve rides and gives drivers exact pick-up locations. While waiting, customers can track the location of their driver, see a picture of the vehicle coming to pick them up and make payments through the app. These elements contribute to a wholly differentiated experience, all made possible by delivery through Uber’s cloud-based network.

• Hospitality–Through cloud-based infrastructure, Airbnb created a new segment in the travel and leisure industry. The service enables travelers to book private rooms, apartments or homes from guest hosts, helping to create a supply of accommodations that previously did not exist. The company also offers cloud-based forums to allow suppliers and renters to share feedback, photos and reviews, adding transparency to an industry where the quality of the guest experience is the litmus test.


These examples are the “tip of the iceberg” for cloud business models. As more companies are launched through cloud, or decide to migrate to the cloud for competitive advantage, more industries will likely feel the impact.

Although optimization is a business-critical benefit, cloud has also essentially democratized innovation, providing any company in any industry with the potential to disrupt through on-demand IT capabilities, paid per use. This has been the impetus of thousands of start-ups that are not only born as cloud companies, but also operate as virtual companies. Larger enterprises can learn from these success stories. Since many of these start-ups have never had a fixed IT or infrastructure presence, they have much lower capital expenditures, which translates into higher risk appetites and more room for experimentation. Start-ups thrive on the principles of fail-fast, fail-safe and thus improve the odds of continuous innovation, which can generate phenomenal enterprise value.

Implications for the Indian IT-BPM industry

To understand the impact of cloud, Indian IT-BPM companies must start with the trends and shifts in IT spending. IT operational budgets are on the rise, climbing at the fastest pace in years, with 69 percent of IT organizations getting larger operational budgets. Capital spending, on the other hand, is flat. Another distinct shift is that IT spending as a percentage of revenue and on a per-user basis is falling. The per-user figure was at US $6,847 in 2015, a drop of more than US $3,500 since 2012.13 What’s more, a net 56 percent of IT organizations are increasing spending on cloud applications, but just 10 percent are spending more on data center infrastructure.14 Cloud is playing a role here and it carries significant pointers for the IT services industry.

Beyond the dimension of spending, it is essential to look at how IT roles are being reconfigured. The role of CIOs is changing from being service operators to service integrators. IT organizations are creating APIs to expose their enterprise capabilities and using APIs from other companies to complement their own products and services. As this is beginning to take place in real time across the cloud, it is reducing the number of data centers and operational work.

Figure 3: The changing role of IT

(Source: IBM)15

Security

IT Management

StorageServer

Mainframe

Network

IT as a Service

Orchestration

Traditional IT Private Cloud Public Cloud

To: Services IntegrationFrom: Systems Integration

Brokerage

In-house Services 3rd Party Services


Given the transition of CIOs and their underlying IT organizations toward service integrators, the role of Indian IT-BPM companies that support these functions will also undergo a distinct change. There will be a significant shift in the nature and proportion of work. More automation of operational tasks in the cloud will mean IT resources will need to be reskilled to perform service integration tasks. The ability to innovate quickly and at scale through the cloud will mean the methods of work will also change. In the new world of democratized innovation, Indian IT-BPM companies will need to differentiate by using Agile methods to translate application requirements into business functionality. DevOps will be the norm to improve the process and automate it for software delivery and infrastructure changes. Based on these changes, Indian IT-BPM companies have opportunities to craft value propositions for clients using the following value levers:

• Buildaprivatecloud–Thoughthisisnotexpectedtobeastand-alonecapability for clients, there is still a need to offer this service. In terms of the nature of work, it is similar to the way Indian IT-BPM providers design and build traditional systems and applications. The only difference is that this will be consistent with the architecture and capabilities of a cloud.

• Providedigitalmodernization–Anchoredonthevaluepropositionofcloud,which makes it possible to leverage legacy capabilities in conjunction with modern capabilities to create new services, helping clients to modernize existing IT capabilities will be a prime opportunity. The majority of IT modernization efforts logically take the workloads to cloud. Migrating, salvaging aspects or rewriting parts of the existing applications will move clients in the right direction for larger cloud solutions.

• Leveragehybridcloudforenhancedinnovationpotential–Thisisagame-changer and the one that best supports the shift of IT’s role from systems integrator to services integrator. When clients establish a hybrid cloud architecture, they can unleash the power of the ecosystem by creating shared, innovative and optimized solutions for their end-customers. The nature of work will move from systems integration to driving innovation through integrating services from various elements in the hybrid ecosystem. In this case, clients will need to not only solve known problems, but also unlock unknown possibilities. This will entail capabilities beyond the confines of IT. Indian IT-BPM providers will need creative skills, industry domain knowledge and business acumen to co-create with clients.

• Offervaryingcommercialmodels–Movingupthecloudstackfrominfrastructure-as-a-service to systems-as-a-service could gradually minimize the role of Indian IT-BPM companies and cannibalize the current revenue streams driven by IT operations. However, providing services at the top of the cloud stack (solutions-as-a-service and business-process-as-a-service) will give Indian providers opportunities for tremendous value through their domain capabilities–both in terms of creating capabilities for clients through service integration, as well as working with cloud ecosystem players to create new capabilities on the cloud that can be leveraged across multiple clients. In its most evolved form, Indian IT-BPM companies can generate new revenue streams by becoming ecosystem players, creating or co-creating capabilities on the cloud and making them available to clients and other service integrators.

• Createstandardizedmethodologies,servicelevelagreementsandprocesses–Another opportunities lies in helping clients transition from legacy to cloud-based apps, which includes providing organizational design and governance services to navigate changes anticipated through cloud.

• Developindustry-specificplatforms–Digitalbusinessstrategieswilldrivecloud strategies.

• Developingindustry-specificcloudplatformstocatertotheneedsandeasethe integration of players in the industry value chain would enhance the Indian IT-BPM industry competitive landscape by fostering innovation that could lead to the next wave of disruptive innovation.

Closing thoughts

Mobility and big data will continue to drive cloud computing adoption throughout the digital era. Soon cloud deployments will become a standard requirement for every company. And this is just the beginning. The next wave of cloud will be application-driven solutions built over the cloud infrastructures being created today. To fully realize the value of cloud, Indian IT-BPM companies need to think of cloud as a foundation for their more transformational agenda.


Automation and RoboticsScripting a new relationship across minds, hands and machines

Technology and market overview: Collaborating with intelligent machines

When people think of automation, their thoughts often drift to the large industrial machinery designed and built to accomplish specific tasks along an assembly line. While the complexity of tasks achieved by machines has increased over the years, they are far from being called intelligent. But that is changing. Today, automation is being powered by smart software–enabling machines to do a wider range of activities and even learn new ones.

Take Rethink Robotics’ industrial robot Baxter, for example. Baxter is a dual-armed robot that can accomplish heavy lifting tasks like loading and unloading, but also has the capability to perform tasks requiring fine-tuned movements like packaging and kitting products. Not only can Baxter perform these tasks repeatedly and without tiring, but unlike past automation solutions, Baxter can learn–and is thus more intelligent. The robot can be taught new tasks by manipulating its arms through the correct motions. Now when a company pivots to a new product, it is not saddled with an expensive piece of equipment. Instead it can redeploy Baxter and continue to reap the benefits of its automation investment.16

So what is powering this new wave of intelligent robotics and automation? For starters, cloud technology is delivering almost limitless computing power to fuel the complex operations demanded by robotics. Furthermore, unprecedented volumes of data (supplemented by the decreasing cost of data storage, which is now roughly

US $0.03 per gigabyte of hard disk data storage17) are creating vast swaths of information for machines to access and learn from.

More broadly, robotics solutions are being empowered by the internet of things and artificial intelligence–two large trends that are covered elsewhere in this report. The internet of things is creating connected environments where machines can communicate with other machines. These maturing networks are allowing more reliable and safer interactions (in both the digital and physical world), while creating the foundation for robots to accomplish more demanding tasks. Artificial intelligence, on the other hand, is the brain behind the operation. As the software driving these machines becomes better equipped to learn and handle basic cognitive tasks, the robots subsequently can be entrusted with more complex tasks.

Start-ups are also contributing to this disruption as businesses increasingly look to partner with robotics and automation start-ups to help them stay ahead of the competition. In 2015 alone, robotics start-ups received an estimated US $1.32 billion in funding.18 Other companies take it a step further by purchasing some of these start-ups.



Acquisitions in 2015 for robotics companies totaled more than US $2.27 billion.19 For example, Amazon’s acquisition of Kiva Robotics played a big part in differentiating the retailer’s supply chain, as it now has warehouses entirely “manned” by robots and is pushing to create the first drone delivery service.

It is clear that robotics and automation are quickly proliferating across the economy. For scale, a recent survey from GE discloses that 91 percent of Indian business executives (and 83 percent globally) believe that robotics and automation will completely transform the job market.20 In light of these emerging developments, Indian IT-BPM companies must leverage these new tools to improve efficiency and drive new business growth.

Industry use cases: Using automation and robotics to do things differentlyManual and routine tasks are the most obvious applications of robotics. The occurrence of such cases and the increasing penetration of automation is astounding. In fact, recent numbers forecast the sale of robots from 2015-2018 to be 152,400 professional service robots and 35 million personal service robots (the value of those markets being US $19.6 billion and US $12.2 billion, respectively)21. Consider these examples from industries where automation is truly taking flight:

• Manufacturing–Siemens has developed the first fully automated factory. At a pilot location in Germany, Siemens connected 1,000 of its local manufacturing units enabling them to interact and, in essence, run the factory themselves. The smart assembly lines communicate with the factory’s team of machines, instructing them on what steps must be taken to manufacture the product. A feat in itself–a factory that can run without a human presence for weeks on end–this move to “extreme” automation is allowing the company to accomplish brand new things like customizing products at scale, right on the factory floor.

For one project, Siemens helped BASF produce a customized line of shampoo products. Leveraging the capabilities of the fully automated factory, Siemens was able to create individually differentiated products based on customer preferences for fragrance, labeling and bottle type–with each of these unique products entirely produced right on the factory floor with no human intervention.22



• Natural resources/mining–Caterpillar is embedding its fleets of mining vehicles with the latest automation technology. For any mine operation, efficiency is generally determined by the quality and abilities of the machine operators–essentially, a hauling vehicle is only profitable as long as someone is in the driver seat. Furthermore, some remote operations have to deal with hazardous conditions, which can make quality talent hard to attract and keep.

Command for Hauling by Caterpillar is an autonomous solution already being deployed in mining sites and helping to overcome these challenges. The autonomous vehicles are able to maximize efficiency by working around the clock and to avoid downtime by alerting operators to any potential maintenance issues. The automated trucks also improve site safety, as the trucks can both enter hazardous conditions and safely maneuver around people and equipment already deployed to the mining site. Ultimately, the results show on the bottom line where owners can now mine previously inaccessible sites and make full use of their investments.

• Hospitality–Aloft Hotel is deploying robotic butlers capable of handling a variety of tasks like bringing food or towels up to a guest’s room. While this may seem like a gimmick, it is an indicator of the future of the industry. Expectation is the robotic butler will start being rolled out to hundreds of hotel locations in the next few years. While the robots enable process efficiencies across hotel operations, they also free up the staff to focus on providing a more personalized and differentiated experience for guests.23 The emergence of hospitality robots is not restricted to hotels either. At the Timbre restaurant in Singapore, autonomous drones are being used to deliver food and clear dirty tables–once again allowing the wait staff to focus on customer interaction and ensuring an excellent overall experience.

• Media–The Associated Press, a global news outlet, is also turning to software “bots” to produce content. The company has begun using a bot to write its quarterly financial reports. In the past, using human writers and editors, the company was able to release a few hundred reports. By turning over to the bot all drafting and publishing, however, the company now produces 14 times more reports than before.24

• Education–Arizona State University is using an intelligent learning platform to supplement the work that instructors do in the classroom. The platform offers students personalized curriculums, identifies areas where students are struggling and where they are excelling, and provides all this information to the instructor. Now the professor spends less time managing the class and more time providing personalized attention to the students. In the classes where the bot was deployed, pass rates went up to 75 percent from 64 percent, while withdrawal rates dropped 56 percent.25

In addition to specific industries and physical tasks, automation is moving beyond the factory floor to appear in service roles like call centers and help desks. Consider Amelia, the personal assistant software from IPSoft. Companies are deploying this “virtual agent” across customer service centers as a way of helping manage the request volume. The software learns from interactions between human employees and customers in order to determine the correct solutions. Once Amelia understands both the solution and problem, the software is able to service requests entirely by itself. If it comes across more complicated problems and does not know the solution, it hands off the problem to a human employee.26


Future of jobs: Emphasizing people first in an automated, robotic world

As businesses consider heavier investments in automation, where does this leave existing workforces? Many companies are viewing automation as a cost-cutting exercise. While this may look good on the bottom line, such an approach is shortsighted because companies rely on employees to uncover new avenues for business. Many large firms also recognize the importance of people in their mission statements–variations of creating a better society through business growth. Deviating from this professed value could result in brand and market devaluation.

Companies excelling with automation are using it to free their people to work on more challenging and cerebral tasks. Not a single writer at the Associated Press has lost their job after the content writing bot deployment. Even better, instead of focusing on routine reports, writers are now devoting more time to providing insights into why numbers look the way they do on a particular financial report. This emphasis on people first is becoming a common theme across enterprises. Eighty-four percent of executives surveyed in a recent report from the Accenture Institute for High Performance believe that intelligent machines will make work more interesting.27

Undoubtedly, there are challenges ahead. The skills a company employs today may not be the skills it needs in the future. The fully automated factory at Siemens still employs 1,150 people. However, instead of working on the factory floor, the people now remotely monitor operations and program the machinery. Predicting exactly which jobs are going to emerge, remain or disappear is a difficult task.

What’s clear though is that routine, manual jobs with low cognitive requirements are being more readily absorbed by machines. Jobs emerging in their place are ones that require adaptability, creativity and the skills to monitor and manage these intelligent machines. For companies in any industry, a vital part of building an automation strategy will be determining how the company injects new skills into its workforce, builds the workforce for adaptability and change, and finds the right talent to collaborate alongside machines.


Today, automation and robotics are presenting the Indian IT-BPM industry with a tremendous opportunity–to lay a strong foundation for future competitiveness while creating exciting journeys for their workforce.

Indian IT-BPM companies are under increasing pressure to help global clients simultaneously solve both efficiency and new growth challenges. Historically adept at addressing efficiency challenges, Indian firms now need to mobilize and deliver on clients’ new growth priorities. Automation and robotics provide a powerful opportunity for Indian companies to systematically free their resources from mundane tasks and channel them into building new offerings. As a result, these companies will be positioned to offer more engaging prospects to engineers, analysts, coders and other employees, facilitating their migration from repetitive jobs into experimenting with cutting-edge technologies and next-generation software.

Many IT and business leaders are convinced about the talent-transformation opportunity at hand. The Accenture Technology Vision 2016 survey found that 52 percent of executives in India believe that within a five-year period, artificial intelligence-driven automation will be seamlessly embedded into every aspect of business, a number much higher than their global peers (38 percent). In order to build towards this future and create a long-term role in the global economy, however, Indian IT-BPM companies need to aggressively address a number of short-term challenges:

• Insufficient understanding of automation technology–The technology acumen of clients in every industry has grown as a result of the recent digital revolution. As a result, would-be clients for the IT industry are starting to build thought leadership and perspectives on “new IT” that can sometimes surpass the Indian IT-BPM sector’s own understanding of that technology.


“Inability to answer questions on many fronts about the automation and robotic technologies we are trying to sell, impacts our own conviction about the usefulness of such technologies,” said a manager of a leading Indian IT and software consulting firm.

• Misdirected investment–This lack of a strong position on the future of automation technology manifests not only in the ability to secure new deals, but also a second challenge that directly affects where Indian IT-BPM companies are making investments. Many companies that failed to sense their clients’ rapid transformations are now strapped with traditional assets and technologies. Not wanting to forego the investments, a large number of these Indian companies are now struggling to leverage these high-cost assets to their full potential. The confusion around what to keep and what to jettison must be resolved in order to reorient their portfolios in this day-and-age of automation and robotics.

To overcome these challenges, Indian IT-BPM companies must first focus internally. Their own talent pools are the best mechanism to influence, design, build and deploy innovative solutions. But to do so, companies must equip their people with the right technical knowledge, analytical skills and business acumen. In particular, Indian IT-BPM companies should take a holistic look at the disruptions and shifts happening in the overall digital economy. They must also study the investments their biggest clients are making, and begin to develop distinct perspectives about automation and robotics. On a more tactical level, IT executives should initiate a change in the workforce mindset. Executives and individuals across the organization must view automation and robotics not as a threat, but rather as an immense opportunity to improve their own jobs, as well as the business growth of their companies and clients.

However, no company should expect to confront this new future alone. To begin transforming, Indian IT-BPM companies should look to collaborations as an effective way to adopt new automation and robotics platforms. Strategic alliances can give major companies the flexibility to experiment and drive innovative solutions without disturbing core operations. Start-ups give larger companies a competitive advantage with access to differentiated technologies and greater risk-taking ability. In return, niche companies and start-ups obtain access to capital, as well as global exposure and clients. For example, a top IT company has launched a program to identify the right collaborations with start-ups. Under the program, the company invites a series of start-ups to pitch to business heads across functions. It also sends senior executives to start-up ecosystems for mentoring sessions.

Closing thoughts

More than the novelty of self-driving cars, or packages being delivered by drones, the disruptive impact of automation and robotics is embedded in how it is transforming the nature of work. And as automation continues to change what people do, and how they do it, it effectively changes the goals and activities of entire organizations. Today the global economy is rapidly evolving, built not just on the labor and output of humans but increasingly that of machines as well. Considering how pervasive this change is, Indian IT-BPM companies can seize this as one of the most immediate opportunities to pioneer new technologies and strategies of great importance and value to global clients, and in the process build a new identity for the Indian IT-BPM industry.


Cognitive ComputingOpportunities at the confluence of human intelligence and machine intelligence

Technology and market overview: Making sense of ubiquitous data

With the advent of the digital revolution, the world’s data has been doubling every 12 to 18 months. Approximately 80 percent of this data is what computer scientists call “unstructured,” which means it is information that is not readily machine readable or comprehendible, such as audio, video and images. Plus, there is lots of “noise” in the data, which compromises its veracity.28 With such high volumes of data, it is impossible to ingest and make sense of it all using the computing technologies of the past few decades. In this context, artificial intelligence and cognitive computing hold an unprecedented degree of promise. Cognitive computing can be defined as systems that learn at scale, reason with purpose and interact with humans naturally. Rather than being explicitly programmed, the systems learn and reason from their interactions with people and experiences with the environment. Advancements in a number of scientific fields over the past half-century have made these systems possible.

Yesterday’s systems were deterministic. Cognitive systems are probabilistic in that they generate not just answer to numerical problems, but hypothesize, reason arguments and give recommendations about more complex and meaningful bodies of data. In other words, these systems can make sense of unstructured data, which enables them to keep pace with the volume, complexity and unpredictability of information in the modern world.

This augmented intelligence is a necessary step in our ability to harness technology in the pursuit of knowledge and to further our expertise. That is why it represents not just a new technology, but also the dawn of a new era of technology and business: the cognitive era. One of the manifestations of this era’s potential occurred in February 2011 when Watson, IBM’s cognitive computing system, defeated champion players at Jeopardy!. It was the first widely seen demonstration of cognitive computing, and it marked the beginning of machines making sense of unstructured data, in this case the knowledge required to play the game show.

Such capabilities are now expanding around the world, driven by research, as well as by enabling cloud-based platforms and technology ecosystems. These capabilities are being directed towards patterns and insight in unstructured data, in order to help businesses and people make more informed decisions about consequential matters. The full potential will be realized by combining the large-scale data analytics, statistical reasoning, deep learning and fact checking of machines with uniquely human qualities, such as self-directed goals, compassion, intuition, common sense and value judgments.



To date, the unstructured data analysis of cognitive computing has not been offered in the IT Industry. These technologies include natural language processing and machine learning techniques. Mastering these capabilities can enable Indian IT-BPM providers to provide new value to clients through cognitive computing by deflecting the “price of not knowing.”

Industry use cases: Overcoming the price of not knowing

Businesses around the world make innumerable decisions every day, but they do so without fully knowing what they need to know. This “price of not knowing,” a phenomenon that is prevalent in industries swamped with huge volumes of information, can be addressed through cognitive computing:

• Oil and gas–Each offshore drilling platform has thousands of sensors and a single reservoir can produce more than a dozen petabytes of data in its lifetime. Although this data is stored, many oil companies operate conventional systems that lack the capability to analyze this data, as well as supplemental seismic data, geo-political data and economic data, in order to make better decisions about drilling and pumping at optimal rates. To overcome the price of not knowing, Repsol, a Spanish oil and gas company, leverages cognitive technology to reduce the uncertainty of future oil field acquisitions and to maximize the yield of existing oil fields. These applications have a significant impact on the efficiency and efficacy of the global operations of Repsol.

• Retail–People post up to 500 million tweets and 55 million Facebook posts every day.29 30 Analyzing the magnitude of this social data is difficult because it is in natural language. Now retailers can use cognitive technologies to mine these data sources, understand consumer trends and quickly adjust imbalances in inventory and supply chain, which can lead to huge savings. In another area, retailers can tap into cognitive to deliver personalized suggestions based on consumer preferences, which helps buyers to purchase the right products and retailers to achieve more consistent sales. Wine consumers, for example, can use Wine4Me, a cognitive computing-enabled app, while shopping in-store or on a mobile device and receive individualized recommendations about which wines they are most likely to enjoy.



• Sports–New products are designed to ensure the health and safety of athletes. Smart Impact Monitor (SIM) is one such wearable sensor that can be embedded in headbands or skullcaps to track the force and frequency of head impacts. This empowers parents, coaches and athletic trainers with the tools to improve player safety in real time. Using cognitive technology, the device can factor in more diverse data sources to analyze sentiment and infer cognitive and social characteristics–leading to fewer injuries, improvement in skills and reduced downtime.

• Banking–Singapore’s leading bank, DBS, intends to apply cognitive computing to its wealth management business to improve the advice and experience delivered to affluent customers. This will help DBS’ relationship managers analyze large volumes of complex unstructured and structured data, including research reports, product information and customer profiles; identify connections between customers’ needs and its growing corpus of investment knowledge; and help advisors weigh various financial options available to customers. From this knowledge, DBS professionals can arm themselves with data-driven insights to personalize client experiences.

• Healthcare–Every individual will generate approximately 1 million gigabytes of health-related data in their lifetime–equivalent to 300 million books. Cognitive solutions can address the challenge of expertise asymmetry among medical professionals by reading and evaluating medical literature, and by learning from clinical experience to offer evidence-based recommendations for treatment. A leading hospital based in Bangkok, Thailand, has implemented a cognitive computing solution that quickly processes a patient’s personal data, information from medical journals, the guidelines of world-class experts and the experience of specialists at the hospital. Based on this information, the system then provides personalized treatment recommendations for consideration and use by the hospital’s oncologists.31

• Information security–In 2014 alone, more than 1 billion personal data

records were compromised by cyber-attacks. This included information from multiple industries–intellectual property, health records and bank accounts.32 The price of not knowing who is mounting these attacks is escalating. Using cognitive technology, SparkCognition identified Shellshock, a computer vulnerability that allowed attackers to gain access to UNIX systems, on the first day of its public disclosure. The company took advantage of this knowledge and quickly developed a fix.33


• Professional services–Audit, tax, advisory and other professional services rely heavily on judgment-driven processes. Adding cognitive technology’s massive data analysis and innovative learning capabilities to these activities has the potential to advance traditional views on how talent, time, capital and other resources are deployed by professional services organizations. For instance, KPMG is using supervised cognitive capabilities to analyze much larger volumes of structured and unstructured data related to a company’s financial information, as auditors teach the technology how to fine-tune assessments over time. This enables audit teams to have faster access to increasingly precise measurements that help them analyze anomalies and assess whether additional steps are necessary.34

As these examples show, literally every industry has large volumes of unstructured data that contains valuable information, but today’s computer systems lack the systematic and scalable ability to know it. Thus understanding and acting upon the “price of not knowing” through cognitive computing holds the key to competitive differentiation for many companies.


The application of cognitive computing to enable better decision making is becoming a huge opportunity by itself, beyond the traditional confines of IT services. It is important for Indian IT-BPM providers to understand where this additional value is going to come from. The true value of intelligent systems is not in optimization and productivity, but rather in doing new things, such as unstructured data analysis using cognitive technologies. IT-BPM companies in India will need to craft their value proposition around enabling decision support, invest the right assets and build the right talent to capture value emerging in this space. Those that take these steps will have a tremendous opportunity to generate new value for clients, namely, automation for productivity with cognition for decision support. Building industry and client solutions leveraging the industry/domain expertise and relevant data, coupled with cognitive technologies, will go a long way toward resolving the price of not knowing.

To craft a value proposition to sell cognitive capabilities, Indian IT-BPM companies can use the following ideas to shape their thinking:

• Elevate and scale expertise–The first value lever is based on improving and expanding knowledge from a few individuals to millions of humans. Take, for example, the medical profession. On average, it takes 16 years to become a doctor. However, there is an enormous variation in the capability of individuals who serve patients. Now combine this variation with the explosion of data that is available. Cognitive computing can not only bring professionals up to speed, but also democratize knowledge by having the best doctors train a cognitive system, which can then be used to bring up the capability and competence of the average professional.

Similarly, in the IT arena, companies that depend on multiple systems and people to function properly are facing dearth and churn of expertise. Imagine building a cognitive system that could be customized according to the needs of organizations, enabling them to provide more accurate and faster decisions and to focus on the issues that need immediate attention.

• Enhance and expedite exploration and discovery–Another value lever relates to increasing the ability to discover new things, both faster and more methodically. Take the example of an oil company, which routinely has to make big bets in order to locate new sources of oil. Exploring a potential oil field requires analyzing petabytes of unstructured data. Having a cognitive capability to speed up this process would save oil companies millions of dollars and thousands of man hours. In another data-heavy industry, a pharmaceutical company interested in developing a new cancer drug must review millions of documents to identify which proteins are changing cells to a pre-cancerous state. Using researchers to read the documents would take years to do. Turning this processing over to a cognitive system would complete this effort in just weeks.

• Create deeper human engagement–The third value lever involves cultivating a personalized, more fully human interaction or relationship between cognitive systems and humans–based on the mode, form and quality each person prefers. Cognitive systems take advantage of available data (geo-location, web interactions, transaction history, loyalty program patterns, electronic medical records and wearables) to create a fine-grained picture of individuals and then add details that have been difficult or impossible to detect.


For instance, cognitive computing can not only understand natural language and multiple languages, but also detect tone and sentiment, thereby deepening engagement, emotional state, environmental conditions and the strength and nature of a person’s relationships. Banking institutions could use this approach, for example, to create personalized wealth management solutions based on their customer’s spending and saving patterns or life events. Creating deeper human engagements in both business-to-business and business-to-consumer arenas helps companies improve their clients’ experiences, thereby creating more value to sustain their relationships.

As Indian IT-BPM companies introduce cognitive capabilities to their clients, they must decide how to configure their value chain and business models to monetize their underlying data assets. This includes clarifying what capabilities will differentiate the company and provide a competitive advantage in driving client value through cognitive computing. Potentially viable options in cognitive decision support include:

• Build capabilities to align with elements of the value chain–The three elements of the value chain include sources of relevant data; a platform to synthesize and provide access to data; and solutions that are built on the underlying data applying cognitive technologies to provide decision support. Acquiring relevant data is emerging to be one of the most fundamental differentiators. Relevant data could span various organizational boundaries, including internal data, publicly sourced data (journals, public filings, patents, geological survey), data from ecosystem partners (other businesses, social media companies) and private client data.

Making this data available through platforms to clients and business partners is the next step. The monetization potential of data multiplies when it is made available to an ecosystem of users/applications that value the data and are willing to pay for it. It is not a necessity, however, for every IT-BPM company in India to build their own platform; they may prefer to participate on the next stage of the value chain, which is creating solutions by leveraging the data from various sources that is available over a platform.

• Levers to monetize capabilities and assets–Indian IT-BPM companies can choose to pursue any one of the three steps in the value chain or combine all three end to end. The following list includes possible ways to monetize cognitive computing investments, some of which players in the IT services industry are already doing:

– Create cognitive applications or solutions based on client’s choice of data and platforms. This will be similar to the traditional model of IT services.

– Provide data access with a “pay-per-insight” business model. – Offer a subscription to cognitive computing services and charge pay-

per-user for a service. – Develop a value sharing opportunity with co-creation partners. – Create a revenue share with ecosystem players.


• Talent constituents for effectively serving clients–Indian IT-BPM companies that provide services to the cognitive market will need to offer more than the traditional combination of architect, developer, tester and support roles. The nature of talent will move from homogenous technical talent to multi-disciplinary teams. It will be crucial for Indian firms to hire data scientists who will help in building the cognitive system, as well as assist in testing hypotheses and eventually training the solution. The data science domain provides the greatest value because the success of cognitive systems hinges on a deep understanding of the problem–from both a process and automation perspective, as well as a decision making one.

Perhaps the most profound change will be in how Indian IT-BPM companies identify and groom top data science talent. This will be gauged not based on what and how much an individual candidate knows, but rather on their ability to ask the right questions and form effective hypotheses. It will be important to address the following two aspects of talent:

– Reimagine talent nurturing strategies to handle multi-dimensional talent at a larger scale. This will be a distinct shift as the talent strategies and systems are today wired to handle homogenous talent of “software engineers.” Cognitive technologies require machine learning and natural language processing capabilities. Thus, talent needs to understand mathematical models, algorithms, design thinking and business.

– Take steps to ensure all employees in the company have opportunities to leverage cognitive systems not only to serve clients, but also to operate within the company. Current automation initiatives in companies are built upon structured data; it’s only a matter of time until companies move to unstructured data as well to help manage functions such as product and service development, finance, marketing and HR.

Closing thoughts

The nature of capabilities and assets required for cognitive computing are more than traditional IT services capabilities; therefore, Indian IT-BPM companies will need to invest in new areas and move quickly to secure a position in the market. Updating revenue models from the traditional labor-based models to outcome-based models will enable Indian firms to gain a foothold in cognitive application development and solution deployment. The ability to develop and deploy cognitive solutions will come from deep industry/domain capabilities. The industry experience gained by Indian IT-BPM companies over the past few decades will provide a head-start to capitalize on the new market opportunities around cognitive computing. The benefits of knowing will be worth the journey.


Internet of ThingsMerging the digital and physical worlds through connected devices

Technology and market overview: Reaching an inflexion point

Internet of things (IoT) is the network of physical objects–devices, vehicles, buildings and other items embedded with electronics, software, sensors and network connectivity–that enables these objects to sense or interact with their internal state or external environment. The goal of internet of things is to enable things to be connected anytime, anyplace, with anything and anyone ideally using any path/network and any service.

In the last 15 years, an increasing number of devices have been connected. In 2014, an estimated 15 billion devices (fitness bands, cognitive thermostats, smart meters, etc.) were connected to the internet. The count is expected to reach 50 billion connected devices by 2020.35 There will soon be connected homes, smart kitchen appliances, universal smart controllers, driverless cars, self-learning traffic systems, remote controlled production lines, remote/real-time healthcare diagnostics and more.

“We’re physical, and so is our environment. Our economy, society and survival aren’t based on ideas or information–they’re based on things. You can’t eat bits, burn them to stay warm or put them in your gas tank. Yet today’s

information technology is so dependent on data originated by people that our computers know more about ideas than things. If we had computers that knew everything there was to know about things–using data they gathered

without any help from us–we would be able to track and count everything, and greatly reduce waste, loss and cost. We would know when things needed replacing, repairing or recalling, and whether they were fresh or past their best. RFID and sensor technology enable computers to observe, identify and understand the world–without the

limitations of human-entered data.”

– Kevin Ashton, researcher who coined the term ‘internet of things’



This combination of the physical and digital worlds is a powerful one. McKinsey estimates that the economic impact of internet of things applications could be from $3.9 trillion to $11.1 trillion per year by 2025.36 Gartner expects more than half of businesses in asset-intensive “heavy” industries will implement internet of things by the end of 2016, and estimates more than a third (36 percent) of service-led businesses will do the same.37 Various factors are pushing internet of things adoption, causing it to reach an inflexion point that will usher in a fully connected world:

• Smaller, cheaper, faster and better–There has been a rapid proliferation of smaller and cheaper sensors, thanks to significant increases in processing power, storage and bandwidth at a much lower cost. During the 1980s, an average sensor was the size of a shoe box, weighed several kilograms and lasted for a few days when powered by batteries; today, a low-noise, three-axis accelerometer with a digital output of 8 bits-14 bits weighs just a few milligrams.38 With this miniaturization, sensors that were used only in specialized areas–such as military systems, network-centric warfare, oceanographic studies or seismic surveillance– have been integrated into smart phones and tablets used by everyday people. IHS predicts that the market for sensors or chips integrated into mobile devices–known as micro-electromechanical systems (MEMS)–will increase from approximately $10 billion in 2015 to nearly $14 billion in 2019.39 As seen with previous technology developments, the increased usage will boost more research and development, which in turn will bring down sensor price points and cause a further increase in adoption.

• Convergence of social, mobile, analytics and cloud (SMAC)–Enterprise adoption of SMAC technologies is getting stronger, as covered elsewhere in this report. In particular, an Ernst & Young survey shows 80 percent of organizations view analytics as a catalyst to support their business strategies, yet few companies understand how to make sense of the myriad data sources. This issue will be amplified as sensors are embedded into machines and other internet of things objects that generate even more data. By 2020, EMC2-IDC research estimates show a staggering 44 zettabytes of data will be available to be analyzed.40



Internet of everything

MoblieSocial activity

Social marketing

as-a-service Clou

d ap

ps

Cloud Computing

Customer engagement

M2MWearable

B Y O D

Vertical-specificIoE applications

as-a-service

Cloud analytics

Big data

Social

Social data tools

Soci

al d

ata

Figure 4: Interrelationship between internet of things and other digital technologies

Source: Livemint


As SMAC and internet of things meld and complement each other’s growth, companies will pay more attention to the economics of deploying them. Supporting complex internet of things analytics solutions in cloud computing platforms, for example, will provide flexible pricing models to cost-effectively deliver personalized and contextualized content to customers anytime and anywhere.

• Emerging standards and platforms–While a universal internet of things standard is still not in place, different consortiums or alliances have come together to establish some early standards. AllSeen Alliance, an open-source framework for interoperability of internet of things devices, was the first formal standards group; today it lists more than 170 members including Microsoft, Sony and Lowe’s. The latest alliance is the Thread Group, with over 80 members including Samsung and Philips; it serves as the prominent wireless-centric standard for certifying any connected device.41 The Industrial Internet Consortium (backed by GE, IBM, Cisco, AT&T and Intel) sets guidelines for industrial applications of internet of things. And a proprietary internet of things framework gaining attention is Apple’s HomeKit platform, which app developers and hardware manufacturers are beginning to adopt into their products. Despite these enablers, internet of things is still on top of Gartner’s hype cycle because enterprises are grappling with business cases and related issues.42

Internet of things–the India story

While India has been regarded as a force in the software and IT services industry, internet of things offers a huge opportunity for Indian companies to participate in the convergence of electronics, computing and communications. The Government of India aims at making a US $15 billion internet of things market in India by 2020. To foster this growth, Department of Electronics & IT, ERNET India and NASSCOM have combined forces to set up the Center of Excellence for Internet of Things. As part of the initiative, NASSCOM will be instrumental in creating and supporting a physical lab infrastructure to build an ecosystem for budding entrepreneurs to leverage emerging technologies and access to researchers, industry and other stakeholders.

In India, internet of things can be leveraged to address issues like transportation systems, parking, electricity, waste management, water management and women’s safety by helping create smart cities, smart health services, smart manufacturing and smart agriculture. These efforts dovetail with the “Digital India” initiative led by the government, which has pledged to develop 100 smart cities by 2030, and the “Make in India” initiative aimed at transforming India into a global manufacturing hub, with manufacturers looking to leverage internet of things to optimize their supply chains in order to produce high-quality goods at low cost.43

Industry use cases: Making headway in the internet of things spaceGartner’s survey of organizations that have already implemented internet of things shows that it has been largely internal operations (52 percent) reaping benefits–improved efficiencies, cost savings and enhanced asset utilization–versus the external internet of things benefits of enhancing customer experience or increasing revenue (40 percent).44 This is largely led by the ease of implementation of connected things in an internal controlled environment against an external application of internet of things across multiple network systems with higher cyber-security and integration risks.

The internal enterprise benefits encompass two areas–engineering efficiency that marks optimization of product design and analysis; and supply chain efficiency that pans across the ecosystem of raw materials, components, engineering and production, logistics and end market. In addition, companies with a production-based value chain can achieve optimization in the areas of:

• Operations–improveoperationalequipmenteffectiveness,acombinedmetricof performance, quality and availability.

• Maintenance–condition-basedmonitoringledbycriticalityofprocessesandassets.

• Information–backboneintegratingthediverseandcomplexoperationsandequipment on the shop floor.

• Energy–reducewasteandresourceconsumption,akeypartofthesustainability of both the organization and the ecosystem.

• Service–enhancetheend-userexperiencepost-production,involvingretail,operational and maintenance processes.


However, enterprises are increasingly asking vendors and partners to help them use internet of things to generate revenue, drive competitive differentiation and build new business models. Internet of things enables data-driven, informed decision making and can result in product-as-a-service models. For example, auto insurers could offer usage-based insurance based on the way individual customers drive rather than charging a monthly/yearly premium.

Given the economic situation and the rapid disruption taking place across industries, enterprises have to embrace internet of things or risk losing out on the major market opportunity. Four industries that understand internet of things, have critical business use cases and lend themselves to significant disruptions are:

• Manufacturing–The future of manufacturing–the fourth industrial revolution or Industry 4.0–will be enabled by a combination of cyber and physical systems that will build a complex, closed-loop system. By applying internet of things in factories, machines will operate in tandem with each other and humans in real-time. Manufacturing processes will become visible and controllable in a virtual space. Real-time decision making will enable products to communicate with machines as to how to process, based on contextual information. And supply chains will flexibly align based on changes in demand or production capacity.

This smart manufacturing setup will far exceed traditional efficiencies by incorporating machine learning, communications and networking (intelligent, automated, network controlled decision-making); optimized processes (rapid prototyping, enhanced supply chain visibility); proactive asset management (preventive diagnostics, maintenance); and enhanced infrastructure integration. Harley-Davidson, for example, operates a new manufacturing facility where every machine is a connected device, and every variable is continuously measured and analyzed. The equipment provides performance data that the manufacturing system uses to anticipate maintenance issues before machines break, which minimizes workflow interruptions. With the help of internet of things, Harley’s manufacturing plants can now complete a new motorcycle every 86 seconds.45

• Personal health–A new patient-centric model is emerging in healthcare enabled by connected wearables, advanced body sensors that provide real-time health monitoring and remote diagnostics to enhance medical attention. As one pioneering example, Google and the Swiss healthcare group Novartis jointly developed a specialized contact lens that can measure blood sugar levels through tear liquid and transfer it to a glucose monitor or a smart device. Novartis has already developed a prototype and hopes to achieve significant market penetration in the next five years.46


• Retail–The consumer products and retail industries are undergoing a profound transformation. Traditional competitive advantages are being challenged as customers use smart, connected devices to access information while shopping and demand more convenient and personalized shopping experiences. In the future, an internet of things-enabled retail environment will use smart customer relationship management systems to interpret customer feedback, automate transactions and offer personalized products/services. For instance, online retailing giant Amazon has introduced the Dash Button, a WiFi-enabled device for use in the home that is mapped to specific consumer packaged goods products such as laundry detergent. It allows for customers to order replacement products by the touch of a button.47

• Public/government–According to a Cisco analysis, the internet of things is poised to generate US $4.6 trillion in value for the public sector over the next decade due to increasing employee productivity, connected militarized defense, cost reduction, citizen experience and increased revenue. Internet of things-led innovations in public services can be realized when the near real-time data on citizen behaviors, movement of goods and services, infrastructure usage, weather conditions, etc. are all collectively analyzed to address population needs. With this information, governments can become hyper-aware, predictive and agile in their responses. Government-specific use cases for internet of things include smarter management of city infrastructure (with big data analytics), cloud-based collaboration across multiple public agencies, improved public safety and law enforcement, cognitive traffic systems, efficient emergency response, networked utilities with smart metering and grid management.

Other industries that have potential for internet of things use are:

Industry Key Change Potential Benefits

Automotive and Transportation Real-time driving behavior, traffic and vehicle diagnostics

Improved customer experience, reduced pollution, increased safety and additional revenue streams

Supply Chain Real-time tracking of parts and raw materials, which helps organizations preempt problems, address demand fluctuations and efficiently manage all stages of manufacturing

Reduced working capital requirements, improved efficiencies and avoidance of disruptions in manufacturing

Infrastructure Smart lighting, water, power, fire, cooling, alarms and structural health systems

Environmental benefits and significant cost savings with better utilization of resources and preventive maintenance of critical systems

Oil and Gas Smart components Reduced operating costs and fuel consumption

Insurance Innovative services such as pay-as-you-go insurance

Significant cost savings for both insurers and consumers

Utilities Smart grids and meters More responsive and reliable services; significant cost savings for both utilities and consumers resulting from demand-based and dynamic pricing features

Figure 5: Internet of things opportunities by industry

Source: McKinsey; Infosys insights


While the demand side of internet of things is heating up, the supply side has seen steady investments over the last decade for both enterprise and consumer markets. Cisco and IBM were early adopters of internet of things and have been working on their respective initiatives “Internet of Everything” and “Smarter Planet” since the late 2000s. The rise of consumer wearables and smart objects such as Pebble, Apple Watch, Samsung Gear, Fitbit, Nest (bought by Google), Amazon Echo and HTC Vive have rubbed off on the enterprise space. A range of companies have entered the market in the last five years to create a business internet of things stack as well–developing MEMS chips and internet of things devices, providing infrastructure, and building platforms and applications.

Despite this market activity, there are three main challenges that must be addressed as internet of things moves from hype to reality, namely, security, interoperability and real-time analytics.

• Security–According to Forrester’s 2016 Internet of Things Predictions survey, 34 percent of decision makers are concerned about security issues in internet of things. A recent study released by Hewlett Packard showed that 70 percent of internet of things devices contain serious vulnerabilities.48 Recent hacks on baby monitors, driverless cars and home thermostats are just the beginning.

The Open Web Application Security Project’s (OWASP) Internet of Things Project is an independent initiative that aims to help manufacturers, developers and consumers better understand the security issues associated with the internet of things, and to enable users in any context to make better security decisions when building, deploying or assessing internet of things technologies. The project discloses device security problems that need attention before establishing a full-scale internet of things ecosystem are shown in the following table.49

Figure 6: Internet of things stack

Source: Infosys Insights

Application Middleware Devices

• Insufficient authentication or authorization

• Insecure software or firmware

• Insufficient security configuration

• Insecure web interface

• Insecure cloud interface

• Lack of transport encryption

• Insecure mobile interface

• Insecure network services

• Privacy concerns

• Poor physical security

Figure 7: Internet of things security issues

Source: McKinsey; Infosys insights

Source: Open Web Application Security Project


• Interoperability–One of the main value propositions of internet of things is the network effect–the value of the network increases from the various nodes that attach to it, and the new insight derived from the entire network will be more valuable than the insight from siloed nodes. Today, however, the internet of things is still disparate and disorganized. The fragmentation is at various levels–MEMS makers, original equipment manufacturers, connectivity frameworks, communication protocol standards and platforms to support application developments. Moreover, there is a dire need to migrate billions of existing devices and legacy software applications and connect them to the network. McKinsey estimates that of the potential economic value of internet of things at stake, interoperability is required for 40 percent on average and for nearly 60 percent in some settings.50 Unless widespread migration is achieved, the full potential of internet of things will be lost.

One solution is to develop a shared gateway to connect, secure and manage remotely all the digital and legacy systems. Large players and industry bodies need to work together to build a common platform with standards to support a global internet of things ecosystem. Discussions are ongoing; the sooner that generic, open and widely available standards are adopted as technical building blocks for internet of things devices and services, the better it will be for innovation in internet of things applications and the corresponding economic opportunities.

• Real-time analytics–Gartner sees the bottleneck in processing the vast amount of data from connected devices and delivering real-time analysis of multiple data streams as key reasons for slow internet of things adoption. Existing analytics platforms tend to use parallel architectures to process very high-rate data streams to perform tasks such as real-time analytics and pattern identification. Traditionally, the industry has responded to the problem with more hardware to cope with high data throughput and real-time data processing. However, the key is to break free from the procedural programming.

Building software to scale out multiple CPU cores is one solution. Bet365, an online betting site, uses Erlang, a language originally developed by Ericsson, to handle the vast amounts of betting transactions concurrently. The platform allows multiple and lighter concurrent systems to be processed across multiple CPU cores simultaneously. This improves the utilization of hardware while enhancing the limits of the existing processing capabilities.


The Indian IT industry has been focusing on internet of things in the last three years. However, many Indian IT-BPM providers have been grappling to define their market entry and to articulate their value proposition to clients. Internet of things investments and developments have been diverse and disparate as a result. A handful of Indian players are working with large manufacturing, industrials and engineering clients to co-create internet of things use cases. Some of them are also participating in ecosystem plays such as Infosys-GE, TCS-GE, Wipro-Software AG and Cognizant-Verizon.

Indian IT-BPM companies with expertise in domain-specific processes, technology services, systems integration and project management are well-positioned to participate in the deployment of internet of things value chain for enterprise clients. In order to capitalize on the burgeoning market opportunity, they must define which part(s) of the internet of things technology stack to occupy and firm up their service value proposition in those areas. Making a concerted effort to present a cohesive services story that spans different practices–digital/SMAC, engineering, traditional services–will allow IT-BPM players in India to truly help clients leverage internet of things and achieve their business objectives.


Consulting Enablement Connectivity Integration Management

• Strategic planning and business case development

• Governance strategy

• Internet of things technology roadmap (reference architecture)

• Custom app development (dashboards, visualization, etc.)

• Product engineering

• Sensor networks development

• Software engineering

• Embedded technology

• Device security

• Network engineering

• Network implementation

• Network security

• Database design and build

• Analytics implementation

• Systems integration

• Application modernization

• Device management

• Cloud hosting

• Network management

• Data security

Figure 8: Internet of things service offerings

Source: Horses for Sources

According to McKinsey, approximately 69 percent of the estimated economic value of internet of things by 2025 is expected to come from the business-to-business (B2B) sector. This is where Indian IT companies can make an impact with their consulting, technology development, infrastructure, systems integration and project management capabilities. In order to achieve this, they will need to focus on:

• Investing in R&D and skills–With the technology space rapidly changing across the value chain to adopt internet of things, it is important for Indian players to keep up with the race by building necessary technological capabilities and designing proprietary solutions. Current efforts by Indian IT-BPM companies include TCS’s Internet of Things Center of Excellence in collaboration with Intel, research initiatives on internet of things under Infosys Labs and HCL’s Internet of Things Incubation Center with Microsoft. Among the diverse digital skills needed for internet of things, there are two key roles that draw the most focus: one, internet of things solution architect to bring in the system thinking and present the holistic design of the overall connected network in the solution; and two, big data analyst to design the real-time analytical standpoints based on the free-flowing data from the connected system.

• Strengthening the value proposition–Global players such as Cisco, IBM, Google, Microsoft, Apple and Amazon are leading with specialized internet of things platforms, while Indian IT-BPM players are still determining their sweet spot in the internet of things value chain. Major Indian service providers need to merge their expertise in implementing personalized technology solutions (IT) with their decades of experience in domain-specific technologies (OT) to build a distinctive value proposition in the enterprise (business-to-business) internet of things space.

It is essential for Indian IT services players to integrate their new digital service lines with legacy domain-specific application development and maintenance services in order to present a comprehensive value proposition for enterprise customers. This enterprise solution should encompass the ability to deploy new connected systems, migrate key legacy systems, and offer an integrated platform to present real-time analytical insights from the connected world.


• Managing the ecosystem play–Unlike past technology adoptions, where there was a clear demarcation of end users and suppliers/vendors, internet of things adoption may lead to an amorphous situation–where competitors need to collaborate, clients and vendors need to partner, and everyone needs to work as an ecosystem. Although the internet of things stack presents a well-defined segmentation, often there is strong incentive for players to cross the segmental barriers within the internet of things value chain.

For instance, hardware manufacturers such as Intel and GE are major contributors to internet of things platforms. Thus, Indian IT-BPM companies need to step up the game in building partnerships with global players and go beyond just servicing the internet of things platforms. Ideally, India’s digital solutions should enrich the partner’s internet of things platforms, as TCS is doing with its new off-the-shelf internet of things solutions, which are expected to strengthen GE’s Predix platform offerings.

Closing thoughts

The internet of things is introducing an extraordinary transformation that will link millions of devices, machines and equipment, enabling them to perform with stability and synchronize across the entire value chain. The Indian IT-BPM companies that make bold moves now to develop the right skillsets, secure their value proposition and establish critical ecosystem relationships can be an indispensable part of this future.


Virtual and Augmented RealityImmersive experiences will drive the next wave of services

Technology and market overview: Real-world advancements for a virtual world

Virtual reality (VR) is the art and science of creating environments where humans can either experience their current world in a simulation or entirely different worlds. Augmented reality (AR) is mentioned in situations where humans can experience some virtual reality capabilities while still being present in their normal surroundings. This section uses the term virtual reality to refer to all immersive experiences that are either simulated or mixed with real-world objects and events.

While the technology itself is still working its way into businesses, the market for virtual reality is growing rapidly. Approximately 2.5 million virtual reality devices were sold in 2015. According to many research reports, the forecasts for 2020 range from 40 to 80 million devices with the total software and hardware footprint being US $20 to $30 billion.51 The sharp spike in this market will grow as businesses and consumers alike find new use cases for this maturing technology. Today, the virtual reality solutions focus on single senses–think Google Glass or Microsoft’s HoloLens for vision, but future iterations will see several technology components woven together to work synchronously and deliver an immersive experience. These include:

3D video – 3D or stereoscopic vision provides a person’s eyes with slightly different or shifted images of a 2D view, which the brain interprets to infer depth of objects in the scene. Previously, polarized glasses were the primary way to render different images to each of the person’s eyes. Today, a new technology called auto-stereoscopy is bringing 3D to displays where the person does not need to wear anything special. An early example of the technology in mass consumer use

is the popular Nintendo 3DS handheld game console, which is equipped with an auto-stereoscopic screen for a more immersive experience.52

3D audio – Also known as surround sound, this effect is produced by mixing sound waves of different frequencies and intensities, one of the many techniques being wave field synthesis. In addition, low-frequency effects (LFE) are produced with sub-bass sounds. The audio effects of surround sound can be extremely influential in creating an immersive experience, since people experience sound from all angles in real life. For true surround sound, businesses would need 16 strategically placed sound sources mixed with two LFE sources (represented as 16.2).

Eye tracking – Tracking a person’s eyes is a useful tool to manufacture an experience that is reactive to the direction of the person’s gaze. This capability is achieved by having a projector (usually infrared) directing light at the eyes, a camera to record the nature of the ocular features of the eyes, and computer vision algorithms to determine distance and direction of gaze. But more than just helping hone the experience, this technology can also improve the backend of a virtual reality simulation. The amount of memory and bandwidth needed for high-resolution displays is very large, even larger when considering whole environments. Eye tracking helps with a technique called variable acuity



resolution (VAR), which makes sure the area that gets the maximum visual information is just the area the person is gazing at, while other areas are a little hazier–similar to how peripheral vision works.

Head tracking – For the head, there are six degrees of freedom; three linear movements on the X, Y and Z axis; and three rotational movements called pitch, yaw and roll. This seems simple enough as people seldom give much consideration to the angle of rotation of their head as they go about their daily lives. However, when a person wears a headset, knowing the six degrees of freedom of the head requires gyroscopes and accelerometers. This information is necessary to drive the entire experience, because only based on the understanding of the location and orientation of the head (knowing where a person is looking) can the immersive environment adjust the sensory inputs. These inputs lead to providing different imagery, sounds or angles of both, all from various sources.

Hand and finger tracking – Known as haptics, this technology provides the sense of touch by using movements, forces and vibrations of a person’s hands. Special gloves both obtain data about hand movements and give the brain the sensation of touching or pressing. Without gloves, tracking the salient points of the hands and fingers is done by modeling and computer vision algorithms. Based on these models, various gestures can trigger events in the environment.

Motion tracking – Simulating locomotion of the entire body requires signals from the feet. Basic virtual reality solutions attach sensors to the feet and allow the person to stand and move on the ground. A more advanced option uses omnidirectional treadmills to give full freedom of movement for the user.

Currently, companies are opting to specialize in different areas, rather than provide the end-to-end sensory experience. There is an entire technology stack built around virtual reality, each layer with its own set of partners and competitors. Much like mobility, the stack can be broken down into three layers:

• Devices,whichincludesthecompaniescreatinganddesigningthehardwarefrom the wearable to the chip and battery manufacturers making the devices run.

• Softwareandtechnologyrunningontopofdevices.• Contentandappdevelopersthatareprovidingtheexperiencesdeliveredto

people.



Convenience and mobility – To experience reality, people just need to open their senses to their environment. Currently, virtual reality requires people to wear a head-mounted display and other accessories that lends to an unreal feeling. This makes moving between and mixing real and virtually real environments almost impossible. In time, the number of devices needed for high-definition virtual reality will subside, making the experience more realistic.

Other barriers include bandwidth and power limitations that are putting a ceiling on how fast devices can work and how long they can run. The final barrier, of course, is cost. Today’s dedicated headsets are in the range of US $400-$1,500. Until these devices reach the less than US $50 price point, sales will be limited and slow mass consumer adoption.53

Industry use cases: new immersive capabilities redefine what is possible

Despite the obstacles to full-scale adoption, companies are still exploring the potential of virtual reality. A few global companies are pushing to be the first to find the truly advantageous and lucrative use cases. These pursuits have led to three ways in which virtual reality is being leveraged by innovative companies across industries, including:

Helping people do new things–In a business context, virtual reality unlocks the potential to give people capabilities beyond their natural capacity, by supplementing natural senses with a virtual reality environment–think seeing how atoms reconfigure under different conditions or hearing a whisper from halfway around the world. Virtual reality can also help businesses monitor experiences at a large scale. Currently, it’s not feasible to construct real-world physical models of buildings and watch how they react to stressful factors like strong winds or earthquakes before constructing the actual building. However, in virtual reality environments, architects could perform several activities of trial and error on a virtual building and simply press the restart button after each experiment.

Removing humans from hazardous or undesirable situations–People have long risked their lives to perform duties such as mining, firefighting, deep sea

Figure 9: Segmentation of augmented reality and virtual reality companies

Although the virtual reality industry has seen some brisk investments and technical breakthroughs, it is still in the infantile period. There are many significant challenges that need to be addressed before this technology can see widespread use.

Health – The human body has evolved its senses over a long time, and there is much to be learned about the effect of simulated environments on individuals. For companies looking to leverage virtual experiences, they will have to fully explore the health considerations. Immersive experiences can cause minor side effects like dizziness and nausea, or more serious issues like reduced limb and postural control, eye strain and even seizures in some people.

Cognitive dissonance – In an immersive environment, any small disturbance or anomaly will make the human experience one of cognitive dissonance, which will spoil the experience. Examples of signals that tell the brain, “this is not real” are: a lag of more than 15 milliseconds to stimuli response; a variable amount of latency to similar inputs (for example, the person moving their fingers by one millimeter and seeing two times the difference in movements on the screen); and others, including lack of synchronization between audio and video or stutters and lags in visual output. Reactions to this dissonance has shown to directly affect buy-in to the experience.


exploration, defusing bombs, fixing broken high voltage electricity lines and policing cities. Using virtual reality, these same individuals could reach dangerous places in virtual environments and control robots to do these tasks along with unpleasant activities like sanitation.

Bringing significant cost and time efficiencies–Many physical items are too rare or expensive for businesses to innovate with regularly. Mistakes can be expensive, for example, when working with hard-to-find elements for use in scientific discovery. Likewise, there are many physical products that are unaffordable for people, such as high-tech items or luxury yachts, as well as experiences like travel that are too time consuming to do with any regularity.

With virtual reality, almost anyone could have access to these products and experiences for experimentation, training or enjoyment. The technology could essentially open up new opportunities for businesses to take risks and innovate. Personal travel could even be rendered irrelevant by bringing the destination to a person in a virtual reality environment. Just as knowledge was democratized with software, hardware will be democratized with software models and virtual reality. Some of the industries where these use cases will play out are:

Medicine–Due to the high cost of medical training, the demand for qualified doctors and dentists far exceeds supply, and the availability and location of these experts is often away from the place of need. Working on real patients is expensive and decisions have ethical consequences. Some doctors may not want to live or travel to substandard locations to work with patients. These issues can be addressed with virtual reality, and it is already in use for patient simulations, nurse training and desensitization treatment of phobias like fear of flying, heights and spiders.

Sports–Media companies and sports franchises can offer fans a first-hand experience with their favorite teams, using virtual reality to provide opportunities to meet players, gather autographs and talk to them about the game. Virtual reality also promises an ability to experience the action from various vantage points, and go to sports events with friends while actually munching snacks at home.

Education–In most universities, transmission electron microscopes (TEM) cost between US $100,000 and US $1 million. Imagine the joy a 7th grade student in Nagpur could get by actually observing cell mitosis using a TEM in a virtual reality environment without having to rely on textbook pictures or videos of the process. Likewise, a well-educated teacher in Surat could use virtual reality to teach chemistry with simulated experiments to students in London for a fraction of the cost of a full-fledged chemistry lab and teaching staff in London.


Military–Soldiers work in dangerous and unpredictable situations. They use expensive equipment and need to be trained extensively to be prepared for combat. Training them in virtual reality environments could greatly reduce the cost and the time for perfection of skills. Simulation of difficult or surprising scenarios can also be done in safe environments. In addition, virtual reality makes remote combat possible to keep soldiers out of harm’s way.

Tourism–With virtual reality, destinations will arrive to people’s doorstep. To see the Taj Mahal in all its beauty, for example, they will not need to stand in queues, nor be constrained to looking at the walls and minarets. Instead, they can opt to take helicopter rides or walk around the building at any time of the day or year.

Implications for the Indian IT-BPM IndustryThe first phase of IT services growth in India was largely driven by the ability to outsource knowledge and information services. However, the information age did not cause widespread changes in the delivery of hardware services. The common saying was “plumbers and painters can never be outsourced.” The new age of virtual reality will significantly reduce that barrier.

The combination of purpose-built robots and virtual reality-enabled work environments will disrupt any service that is traditionally delivered locally. Complete automation is the holy grail, but people working with robots will become the norm for most services. In the next two decades, for example, a person in India may be able to operate a robot to paint a home in Brazil. All she will need is dexterity and a virtual reality device to virtually walk around a home in any country. Similarly, a group of delivery boys in Mumbai could control drones to distribute packages to any part of Europe. And instead of medical tourism where patients from the US visit an eye care hospital in Bangalore for an operation, a reputed oncologist working in an environment in Thiruvananthapuram could remotely perform surgery for a patient in an Ohio hospital.

Closing thoughtsAs the world of robotics, computerized control and internet of things expands rapidly, the opportunities from virtual reality will drive the next wave of services. In fact, there are numerous opportunities in virtual reality to open up new jobs and help people use various tools to get things done–tasks that were previously impossible or cost-prohibitive to do. Indian IT-BPM companies that develop the requisite digital skills will have much to offer to the virtual reality services industry.


Reinventing to Disrupt: ConclusionAs they say, time and tide waits for nobody. Today, technology is more intertwined with businesses than ever before. CIOs are increasingly becoming an integral part of big picture strategy conversations, while even the most junior employees of any company are being expected to have at least basic technology fluency.

Long-standing global clients of the IT-BPM industry are becoming experts in digital, as the technology pushes to the forefront of their organization. There is an unprecedented demand

for strategic technology partners, and in turn an emergence of competing IT-BPM service providers from around the world. If IT-BPM firms across India fail to leverage the power

of digital technology to carve a new identity for themselves now, they may not have a second chance. Everything currently is in favor of the Indian IT-BPM

industry to reinvent to disrupt. Clients are asking for game-changing growth solutions; the start-up ecosystem is maturing quickly; and the national

government and several state governments are rolling out initiatives to encourage domestic value creation. By adopting actions

discussed in this report, IT-BPM firms based in India can become digitalized powerhouses capable of profiting from the business opportunities the world has to offer.



Introduction

1 “Perspective 2025: Shaping the Digital Revolution” McKinsey & Company, NASSCOM, 2015

2 “Big Bang Disruption: Strategy in the Age of Devastating Disruption” Larry Downes and Paul Nunes, 2014

3 Accenture Technology Vision Survey, Accenture, 20164 “Digital Disruption: The Growth Multiplier” Accenture, 20165 “Reinventing to Disrupt Framework” Accenture, 2016

Social Mobile & Analytics

6 “Social Recommendations Index” Social Media Link, 20157 “Smartphone Ownership and Internet Usage Continues to Climb in Emerging

Economies” Pew Global, 20168 “The Digital Universe of Opportunities: Rich Data and the Increasing Value of

the Internet of Things” EMC DigitalUniverse with Research; Analysis by IDC9 “Cognitive computing: Why now and why it matters” KM World, 2014

Cloud Computing

10 “IBM Investor Briefing” IBM Corporation, 201611 “IBM Investor Briefing” IBM Corporation, 201612 “IDC FutureScape: Worldwide Cloud 2016 Predictions – Mastering the Raw

Material of Digital Transformation” IDC13 “Gartner Worldwide IT Spending Forecast” Gartner, Inc., 201514 Ibid.15 “IBM Investor Briefing” IBM Corporation, 2016

Automation; Robotics

16 “Rethink Robotics’ Sawyer Goes on Sale, Rodney Brooks Says ‘There May Be More Robots’” IEEE Spectrum

17 ”Disk Drive Prices (1955-2015)” John C. McCallum, 201518 “Funding and Acquisition Spree Continues” The Robot Report, 2016

19 Ibid.20 “Advances in Automation to Transform Job Market” Livemint, 201621 “Service Robot Statistics” International Federation of Robotics, 201522 “Germany develops ‘smart factories’ to keep an edge” Marketwatch, 201423 “Starwood Introduces Robotic Butlers At Aloft Hotel In Cupertino” Techcrunch,

201424 “AP Has A Robot Journalist That Writes A Thousand Articles Per Month” Tech

Times, 201525 “Arizona State U Teams with Private Partners on Adaptive Learning” Campus

Technology, 201526 “Amelia just may be the brainiest AI assistant yet, sorry Siri and Cortana”, Tech

Times, 201527 “Managers and Machines, Unite!” Accenture, 2016

Cognitive Computing and Artificial Intelligence

28 “Why Unstructured Data Holds the Key to Intelligent Healthcare Systems” HIT Consultant, 2015

29 “Facebook Statistics” Kissmetrics, 200930 “Twitter Statistics” Statistics Brain, 20131 “IBM Watson for Oncology” Bumrungrad International Hospital, 201632 “Breach Level Index” Gemalto, 201533 “With Watson on the Case, Cybersecurity Gets a Boost” People 4 Smarter

Cities, 201634 “KPMG Announces Agreement With IBM Watson to Help Deliver Cognitive-

Powered Insights” IBM Press Release, 2016

Internet of Things

35 “Internet of Things In Logistics” DHL Trend Research; Cisco, 201536 “The Internet of Things: Mapping the Value Beyond the Hype” McKinsey, 201537 “Predicts 2016: Unexpected Implications Arising from the Internet of Things,”

Gartner, 201538 “Sensor Networks: Evolution, Opportunities, and Challenges” IEEE, 200339 “MEMS Market Tracker” IHS, 201540 “The Digital Universe of Opportunities: Rich Data and the Increasing Value of the

Internet of Things” EMC 2, 2014


41 “The State of IoT Standards: Stand by for the big shakeout” Tech Beacon, 201542 “2015 Hype Cycle for Emerging Technologies” Gartner, 201543 “Collaborative Eco system To Jump start the IoT Innovation Engine” DeitY, ERNET,

NASSCOM, 201444 “Gartner Survey Shows That 43 Percent of Organizations Are Using or Plan to

Implement the Internet of Things in 2016” Gartner, 201645 “SAP Brings You the Internet of Things for Business” SAP, 201446 “The Internet-of- Medical-Things: Five innovative examples” Iq!, 201447 “How the Internet of Things is Reinventing Retail” ComQ1, 201548 “Internet of Things Research Study” HP, 201549 “Internet of Things Top Ten” OWASP, 201450 “The Internet of Things: Mapping the Value Beyond the Hype” McKinsey, 2015

Additional Sources:

“Predictions 2016: IoT’s Impact Inside Companies” Forrester, 2015“Bet365: A company betting on its own technology innovations” Computer Weekly, 2015“Reshaping the world with software” Infosys, 2015“SMAC 3.0: digital is here – Enterprise IT trends and investments 2015” Ernst & Young 2015

“Internet of Things (IoT) Services – Excerpt for Accenture” HFS, 2015“How Smart, Connected Products Are Transforming Competition” HBR, 2014“IOT Company Ranking – Q3/Q4 2015” IOT Analytics, 2015“Publications on Internet of Things” IEEE, 2015“Every. Thing. Connected.” Ericsson, 2015“Internet of Things Research Study,” HP, 2015“The Internet of Things Ecosystem: Unlocking the Business Value of Connected Devices” Deloitte, 2014“The Internet of Things: The next growth engine for the semiconductor industry” PwC, 2015“IoT adoption held back by lack of business case, software and skills” Computer Weekly, 2016

Virtual & Augmented Reality

51 “Virtual Reality Headset Sales are Set to Take Off” Business Insider, 201552 “The Nintendo 3DS: The Technology Behind a New Generation of 3D Gaming

Consoles” Big Think53 “The Best VR Headsets to Buy in 2016” Pocket-lint, 2016

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