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IBM expands automation capabilities with WDG acquisition

Home ‣ Insights ‣ Articles ‣ IBM expands automation capabilities with WDG acquisition

August 10, 2020 by bhamilton1000

IBM follows Microsoft with RPA acquisition - or does it?

IBM expands its automation capabilities with the WDG acquisition on July 8, 2020. WDG Soluções Em Sistemas E Automação De Processos LTDA is a Brazilian software provider of robotic process automation (RPA). WDG provides RPA, Intelligent Automation (IA), Interactive Voice Response (IVR) and chatbots primarily to customers in Latin America. WDG's capabilities are comparable to Softomotive, which was acquired by Microsoft a little more than a month ago. That's where the similarities end. We’ll explore why IBM bought WDG, how this acquisition is different from Microsoft's, and what it means for the broader RPA market.

Why did IBM do this acquisition?

The WDG acquisition is IBM CEO Arvind Krishna's 2nd deal since he was elevated to the top role in April 2020. Krishna's vision and stragey are influenced by his prior role as head of IBM's cloud and cognitive services division. Therefore, IBM's strategy to advance its AI-infused automation capabilities should not be surprising. IBM wants to enable its clients to connect business processes to IT operations. And it wants to extend IBM Services' ability to transform clients' operations as RPA, analytics and AI bring more intelligence to enterprise workflows. Both expand IBM's capabilities for delivering automation pervasively across client organizations. We'll come back to these objectives when we compare IBM's deal to Microsoft's.

The acquisition aligns well with IBM's strategy and immediately checks three boxes. First, WDG capabilities will be integrated with IBM's CloudPak that offers AI-driven solutions for data capture, orchestrating workflow, monitoring and reporting, and decision management. IBM will deploy about 600 pre-built WDG automation activities in CloudPak. Second, WDG technology will be embedded with IBM Watson AIOps that automates processes to detect, identify and respond to IT issues. Finally, IBM brings RPA and AI-driven chatbot capabilities in house. IBM will continue its partnerships with the big 3 (UiPath, AutomationAnywhere, BluePrism), but this will give IBM more leverage to win customers.

How IBM's deal objectives differ from Microsoft's

The long game for IBM is to enable customers to meet their cloud, digital transformation and AI objectives. Who else is positioned as well as IBM to do that? IBM is the world’s largest IT Services company, a market leader in hybrid cloud solutions, complemented by strong AI capabilities. The combination differentiates IBM from pure RPA players as well as from SaaS software companies (Microsoft, SAP, Oracle, SalesForce). As a result, IBM can combine RPA with its own automation platform, professional services delivery and product pricing (and create automation-as-a-service). With this in mind, IBM is able to leverage RPA as loss-leader in return for larger automation plays.

There are additional benefits that may be less obvious, but important nevertheless. Combining RPA and AI delivers low-code cloud-based automation platforms with strong capability to integrate across core customer and employee-facing processes. To date, enterprises have adopted RPA to automate their back-office processes and tasks, and the addition of AI opens customer-facing, front-office automation opportunities. The WDG acquisition brings key customer experience (CX) capabilities that enable IBM to expand from its back-office corporate services (Finance, Procurement, IT, HR, Operations). Finally, we'll mention that IBM will not gain significant customers when it closes the WDG deal. In fact, IBM was not interested in acquiring a large installed customer base or RPA deals (some of which have failed or are commercially unattractive). As a result, IBM may go after failed RPA implementations and replace some incumbent players and win new customers.

What does it mean for RPA?

IBM expands its automation capabilities with the acquisition of WDG and validates the RPA category as well as RPA's role in Intelligent Automation. This is also the case for Microsoft's acquisition of Softomotive in May 2020. In addition, IBM and Microsoft raise the stakes and apply pressure on the incumbents. Both companies have to successfully integrate the acquisitions into their automation platforms and ensure that they preserve and enhance the value of the acquired IP and talent. That will take time. Gartner's just released RPA Magic Quadrant report shows the market shift, with Softomotive (acquired by Microsoft) disappearing from the Niche quadrant, and replaced by Microsoft in the Visionary quadrant (but not in the Leader quadrant because of unproven "Ability to Execute"). We expect IBM to make an appearance in future analyst reports for RPA.

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Reto Meier profile picture by Reto Meier Senior Director, RPA
Posted:
Aug 10, 2020
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