This document discusses the rise of digital labor and its impact on outsourcing. It notes that technology price performance is increasing exponentially, allowing software to mimic human work. Enterprises are starting to use these technologies like robotic process automation. The document provides guidance on digital labor strategies for both enterprises and outsourcing providers. It suggests starting digital labor efforts now to gain productivity benefits like 30% more applications managed and up to 100% more network devices managed. It also warns outsourcing providers that without digital labor, they will struggle to compete and retain clients seeking lower costs.

1. © 2016 Information Services Group, Inc. All Rights Reserved.
Stanton Jones
Research Director & Principal Analyst
Digital Labor Disruption

2. © 2016 Information Services Group, Inc. All Rights Reserved.
The impact of price performance
 Technology price performance is
increasing exponentially.
 In the manufacturing sector, have seen
this effect for some time in the form of
industrial robots.
 In the services sector, just now starting to
see this effect in the form of software that
mimics the way a human works and
makes decisions.
Price
Performance
Performance 
Price 
Old
Equilibrium

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

4. © 2016 Information Services Group, Inc. All Rights Reserved.
How is this different?
Intelligent
Systems
Machine
Learning
Expert
Systems
Process
Automation
Scripts &
Runbooks
 Code, or code
bundles that
automate a process.
 Workflow based.
 May perform work as if it
were a human.
 References a
knowledgebase.
 Mimics decision-
making.
 Experts provide
feedback on quality
of decisions.
 Learns from data.
 Assesses probability and
classifies results.
 Does not need experts to
provide feedback.
Enterprises have
traditionally focused here
While digital labor will focus here.
 Uses biology as
foundation to
understand patterns,
make predictions &
develop behaviors.

5. © 2016 Information Services Group, Inc. All Rights Reserved.
Digital Labor plans.
23%
22%
13%
13%
6%
18%
22%
21%
18%
18%
24%
24%
29%
32%
23%
23%
20%
23%
21%
29%
11%
12%
14%
16%
24%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Robotics
Robotic Process Automation (RPA)
Machine learning / AI / Cognitive
Voice Recognition / Natural Language Processing
Data Science / Big Data
Source: ISG 2016 global IT leader survey; n = 352
Not deployed, no plans to use
Researching, no current trials
Testing, no plans to deploy
Testing, plans to deploy
In production
Survey Question: Rank the following emerging technologies on a
scale from “Not Deployed” to “In Production” as they are in use today

6. © 2016 Information Services Group, Inc. All Rights Reserved.
Enterprises are getting there differently.
Model Benefit Drawback
Do it yourself  Retain IP.
 Avoid black box syndrome.
 Employee morale.
 Assume risk.
 Software lock-in.
 Small COE driving big change.
Embed in outsourcing  Transfers risk.
 Leverage industry processes.
 Focus on outcomes.
 Incentives often not aligned.
 Software and process are linked.
 New business model for providers.

7. © 2016 Information Services Group, Inc. All Rights Reserved.
And business drivers vary.
Primary Motivation Outsourcing Digital Labor Cloud
Cost reduction
Cost avoidance
Scalability
Speed
Consistency

8. © 2016 Information Services Group, Inc. All Rights Reserved.
Digital labor in outsourcing is
driving significant productivity gains.
Volumetric
Productivity
Improvement (%)
Number of Applications Managed +30%
Number of Virtual Instances Managed +29%
Storage GBs Managed +34%
Number of End Users Supported +20%
Number of End User Devices Managed +85%
Number of Network Devices Managed +100%
Source: ISG Automation Index
 Traditional productivity
improvements were 3 to 5
percent in first two years.
 Over past 12 months, seeing
dramatic improvements being
committed to in ITO contracts.
 Network consistently first tower
enterprises are attacking.

9. © 2016 Information Services Group, Inc. All Rights Reserved.
And this is leading to significant
cost savings.
 Cost savings for the IT services contracts we
assessed ranged from 26 to 66 percent;
 50 percent decrease in the number of
resources required to support certain IT
services.
 Based on signed contracts that are in
transition/transformation now, so actual
results are still to be determined.
51% 60%
74%
34%
0%
20%
40%
60%
80%
100%
Application
Support
Data Center
Operations
Service Desk
& EUC
Network &
Voice
Baseline Costs Future Mode Costs
Impact:
Cost Reduction
Greater than
65%
Source: ISG Automation Index

10. © 2016 Information Services Group, Inc. All Rights Reserved.
Combining all three delivery models
will create new opportunities.
Business Benefit
Outsourcing +
Digital Labor +
Cloud
Cost reduction
Cost avoidance
Scalability
Speed
Consistency
 Cost mandate of outsourcing, combined
with scalability of cloud and speed /
consistency of digital labor.
 What will it look like when the cost of
adding a virtual engineer or agent is
1/100th the cost of an onshore
employee?
 What will it look like when supply (Q) is
virtually unlimited and price (P) is
transparent & commoditized?

11. © 2016 Information Services Group, Inc. All Rights Reserved.
Guidance
 Start now. Exponential increases in price/performance means
digital labor will expand faster than expected.
 This is an operating model change (people, process,
governance) more than a technology change.
 DIY buyers: Focus digital labor on scalability and consistency
challenges; cost savings is a derivative.
 Sourcing buyers: Cost will remain primary focus, however,
ensure supplier can deliver on productivity promises.
 Create an digital labor COE; use agile approaches.

12. © 2016 Information Services Group, Inc. All Rights Reserved.
Providers:
Warning!
 Securing better commercials is number one reason clients
renegotiate.
 In competitive renegotiations, the incumbent looses the entire
scope nearly 50 percent of time.
 Risk is not a deterrent for most clients to move work to a new
provider.
 Without a digital labor strategy and delivery model, there is very
little way to compete in today’s hyper-competitive market.

13. www.isg-one.com
imagine your future™
let’s connect…