Digital Transformation Needs Algorithms and Data | 1

Digital Transformation Needs

Algorithms and Data
January 2018 | Author: Tom Reuner, SVP Intelligent Automation and IT Services, HfS Research

Our industry is standing at a crossroads. The journey toward digitization and automation provides a
plethora of opportunities, but by the same token also a myriad of challenges. Technology innovations are
getting us ever closer to notions of real-time interactions and straight-through processing that
organizations were chasing for many years. However, the pace of change is nothing short of being
astounding. On this journey, buyers are struggling to make sense of the agents that are enabling this
change. Crucially, they are not aiming to buy Robotic Process Automation (RPA), Artificial Intelligence (AI),
or Blockchain off the shelf, rather they are seeking to procure an outcome. In the ever-noisy marketing
communications, AI is increasingly moving center stage. AI is many things: hyped, undefined, becoming
pervasive, and fostering emotional and—at times—heated discussions. Many of those discussions focus
on the use cases outside the realm of enterprise IT, with self-driving cars and Amazon’s delivery drones
being top of stakeholders’ minds. From a narrower perspective of enterprise IT, we have to move beyond
discussing unicorns or highly specialized use cases. For most organizations, the fundamental challenge is
to overcome and adapt legacy systems and applications for the Digital Age. This is the context where HfS’
concept of the OneOffice is coming to the fore. It is about guiding
IT juggernauts stakeholders around connecting back-, middle-, and front-office to truly
remain coy about enable a digital experience. While the IT juggernauts and service
educating the market providers remain unusually coy in educating the broader market about
the implications of advancing with automation, HfS had the opportunity
on the advance of to discuss many of those issues with AI technology pioneer Arago and
automation and AI. Continental, one of Arago’s lighthouse customers.

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Artificial Intelligence is a C-suite priority, but organizations continue to

struggle to make an impact
We recently surveyed 400+ enterprises on the role of automation and AI. Ninety-eight percent of
respondents told us that investments in AI and machine learning are mission critical, increasingly
important, or an emerging C-suite directive for operations strategy.

Despite this clear mandate to evaluate and progress with AI, buyers are struggling with the notion of AI
on many fronts:

» Lack of clarity and understanding around the technology building blocks: Enterprises struggle with
the narratives around AI and the plethora of technology vendors that can be seen on infographics.
Consequently, there is confusion about technology selection issues and on investment priorities.
Especially around business process-centric scenarios, many discussions veer back to RPA as the
concept appears easier to grasp.

» Expectation of significant investments: In sharp contrast to RPA, there is a perception that significant
investments are required to deploy AI projects. Poster children such as IBM Watson are reinforcing
those views. An acute lack of case studies curtails opportunities to shed more light on real investment
requirements.

» Misguided focus on chatbots: Similar to RPA, discussions around chatbots are masking and distorting
the progress in AI. Chatbots are largely about lower-level conversational services, while AI over time
will have the capability to redefine enterprise architectures and enterprise applications.

» Alignment of data and automation strategies: To support outcomes, automation technology

building blocks have to process and integrate semi-structured and unstructured data that go beyond
a narrow customer request. Critically, this needs to be done on an industrial scale and integrated into
delivery backbones, unlike in Big Data projects, if organizations want to progress toward autonomous
processes. The perspective is moving from the rear-view mirror (historical analysis) to the windshield
(predictive actions).

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Deconstructing AI with Arago

Arago brings in a fresh approach to deconstructing AI by providing a general AI platform that can handle
tasks from different areas and origins. With this positioning, Arago aims to differentiate from providers
that are offering “narrow AI”, such as Loop AI, SignalSense, or Algorithmia, which focus on optimizing
specific tasks or solving particular challenges. At the same time, Arago sees itself rather as a competitor
to IBM, Google, and Facebook. The HIRO platform applies experience from one area to another and can
thus learn faster. Knowledge transfer is the critical lever in this regard as it provides the semantic
connection between different areas. In simple terms, the stronger this connection, the faster knowledge
transition is achieved. Exhibit 1 provides details of the core components of Arago’s HIRO platform:

Exhibit 1: The Core Components of Arago’s HIRO Platform

Source: HfS Research, Arago 2018

Building on our point that the future of service delivery is about integrating increasingly unstructured data
on an industrial scale into delivery backbones, at the heart of HIRO is the Knowledge Core, which provides
an automatically scalable distributed data operating system with a semantic graph at its core. This allows
Arago’s AI to understand its environment. To get to an industrial scale, this knowledge is being fed to the
HIRO Engine. This component offers a unique problem-solving engine built around a machine reasoning
kernel that allows the platform to deal with incorrectness, ambiguity, and randomness. Added machine
learning capabilities are used for optimization purposes. Knowledge is not only relevant in the form of
data but from a holistic perspective. The HIRO Community is where subject matter experts can teach the
machine and get rewarded for doing so. This community is also the source for pre-built knowledge and
knowledge sharing.

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The architectural and technical details of the HIRO platform are highlighted in Exhibit 2. In this context,
we only want to emphasize three aspects. First, by building on the Open Graph Protocol, Arago follows a
similar approach to Facebook. This underpins their strategy on building semantic connections between
events and knowledge items. Second, by having a data store underpin the platform, Arago has a strong
differentiation from most of its peers across the Intelligent Automation Continuum. Thus, it not only can
act as data processor, but it also enhances the effectiveness of its algorithms through expansive data
assets. And lastly, paying homage to its German origins, HIRO is compliant with all European Data
Protection directives including GDPR. This will accelerate the build-out of a partner ecosystem.

Exhibit 2: Architecture and Technical Components of Arago’s HIRO Platform

Open Graph Protocol Stream Processing

APIs

Advanced IAM
Data and Excryption and individual
Access Security access control

On Graph Computing Time series processing,

CEP, Stream Processing

Graph Algorithms Data Centralized Machine

Processing Learning

Graph Query Centralized Analytics

Evolving Ontology Special modules for time

series, BLOBS
Data Store
Semantic Graph Semantic Search

Source: HfS Research, Arago 2018

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Seeing Arago through the eyes of a client: The automation journey of

Continental
The automation journey of Continental provides more color as to how buyers experience the collaboration
with Arago. Continental is a German automotive manufacturing company specializing in tires, brake
systems, and other parts for the automotive and transportation industries. Unlike in many other
organizations, the journey started bottom-up rather than through a top-down approach by the C-suite. A
small group of executives started to evaluate automation tools and devise a strategy. HfS spoke with Oliver
Lindner, AI & Service Management Specialist at Continental, about the experiences and lessons learned.
For the team at Continental, AI was the crucial element to accelerate their digital journey. This journey is
strongly aligned to HfS’ OneOffice concept. Crucial for Continental was to address both a change in the
business model and the way the organization was thinking about data. Lindner compared the first—or
more precisely the lack—of business model change to an operator of a horse-drawn carriage using just a
smartphone as “digital experience”. Similarly, regarding the latter, Lindner was equally clear: “No data, no
ROI”.

When starting out with the project, Continental benchmarked Arago against IPsoft, Ayehu, Cortex, and HP
Operations Orchestration Software (HP OO). In their view, there was a lot of noise around “robotics”, but
the tools they evaluated were largely run-books, had expansive macros, a drag-and-drop UI, and lower-
level machine learning. Continental saw the main differentiators in the following areas:

» Arago had a fundamentally different approach to all the other tool sets by progressing toward general
AI;
» Knowledge, also about other systems, remains with Continental, not the provider;
» Business model change was integral to Arago’s approach;
» Arago was an orchestrator of an ecosystem, including other runbooks.
As they were working bottom up, they initially confined their proof of concept (PoC) to one use case in IT
service management. The goal was to build a predictive maintenance system for a software platform that
is distributed on more than 200 systems and accessed by over 14,000 developers. Java had led to memory
fragmentation that in turn led to a low service performance. As part of the PoC, Continental addressed
the following steps:

» Evaluating processes, systems, data, configuration, knowledge, and metrics;

» Building a data lake and analytics system with an anomaly identifier;
» Training the “robot” (i.e., HIRO) with knowledge items and connect to the ITSM system;
» Simulating users and proving proactive and automatic adjustment of individual systems.
The results of the PoC were compelling. The original manually driven, reactive incident solution took on
average between six and 12 hours to solve performance issues that were affecting systems and users.

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With the PoC, Continental advanced to fully automated predictive maintenance solutions that took two
to three minutes to solve similar problems.

At the heart of Arago’s approach is knowledge, as Lindner explained. A knowledge item reflects knowledge
from a human being, documented as an object to be reused by the “robot”:

» A knowledge item (KI) is comparable to an “atomized” part of a script. Just one command or decision
should be stored in a single KI;
» KIs are related to dedicated configuration items and service elements, e.g. server, application, or
hardware operating system;
» An automation engine selects from the knowledge pool the relevant KIs required to carry out a
specific task;
» These items perform activities such as acquire information, make a decision how to proceed, or
perform actions to carry out a task.
What Lindner has outlined is pretty much a tangible example of how machine reasoning works. It is all
about generating conclusions and insights from knowledge and available information. A system like HIRO
is doing this to go beyond the results of a pre-defined solution. This is the key differentiation from systems
like runbooks or even low-level RPA, which is rules-based. Rather, HIRO allows the immediate retention
and application of expert knowledge and can be applied to any process with a massive track record in the
hugely diverse area of IT operations. It uses machine reasoning to create and follow a strategic plan and
execute a solution and machine learning to handle ambiguity, overlap, contradiction, or incorrect data in
context and knowledge itself. For customers, an additional crucial aspect is that they retain and control
their IP.

Even though Continental doesn’t yet have a longer-term roadmap, it has progressed from the initial PoC
to deploying HIRO in 12 processes, including HR and purchasing. For Lindner, the achievements of
transforming infrastructure services are a template for the broader IT function of Continental. As they
have demonstrated they could scale, he views HIRO as the “brain” that manages “dumb” systems. In other
words, it is all about the ecosystem.

Further examples of HIRO use cases

Even though Arago addresses also scenarios in business process-centric and vertical contexts, the
following more IT-centric use cases might help to bring the capabilities of HIRO to life.

Infrastructure:

» Smart network operations – triage and resolution: HIRO responds proactively without human
intervention across the entire network landscape and automates analysis and diagnostics to reduce

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incident resolution time. Machine reasoning enables ambiguous and complex root cause analysis,
thus identifying and isolating faults at their sources and applying the correct remediation. This
translates into near 100% automation rate of tickets triage and resolution and an average resolution
time of six minutes.

» Intelligent decommissioning: A semantic data map enables cross-architecture and cross-domain

optimization, providing IT professionals with better insight into processes that need to be removed
or must work within the IT system. HIRO makes decommissioning more efficient and easier for IT by
automating the process and providing a map that shows the relationships between active software,
resources, and business activities. HIRO decommissions the legacy services focusing on Linux, Unix,
and Windows without additional administrator requirements. HIRO reduces average
decommissioning time to 15 days.

Applications:

» Intelligent incident triage, escalation, and routing: HIRO performs comprehensive diagnostics and
troubleshooting to prevent incidents proactively or, when necessary, automatically escalates them
to the appropriate group. With its machine reasoning and machine learning algorithms, on average,
HIRO responds in six minutes, or 53 times faster than the average manual process. Incidents are
escalated and assigned to the appropriate L2/3 responder group when an automated resolution is
not available. On average, 80% of incidents are classified and prioritized automatically.

» Intelligent baseline security activities: Machine reasoning and learning enable HIRO to triage the
best approaches to complex solutions formerly handled by humans, detecting, escalating, and
automating security review activities. HIRO automates baseline activities and pushes forth pre-
approved resolutions at the network, server, and service layers. HIRO streamlines the process by
cutting down 65% of the time to resolution in the global ticket pool, providing more in-depth
recommendations to humans for a quicker mean time to resolution (MTTR) on breaches to policies.

Service Desk:

» Intelligent user role-based access management: Permitting access to multiple systems at machine
speed via HIRO’s integration points. Enterprise access policies are fully enforced at every step and a
complete comprehensive audit trail is generated.

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Bottom Line: Linking data management strategies with advanced AI tools is

on the cusp of Intelligent Automation
The lack of an appropriate moniker for Arago’s approach is a reflection that it is on the cusp of innovation
of Intelligent Automation. By emphasizing that it progressing toward notions of general AI, Arago is aiming
to put daylight between other approaches to AI, not least lower level machine learning. By accelerating
machine reasoning capabilities, the company differentiates clearly from more narrow approaches such as
RPA or autonomics. The integration of semantic mapping of events with expansive data sets puts Arago
at the heart of organization’s journey toward the OneOffice. This needs to be seen as a strategic rather
than tactical investment into building Intelligent Automation capabilities. To realize the benefits from this
approach, organizations have to shift toward a data-centric mindset. Consequently, this requires
significant investments by Arago in marketing to educate stakeholders of the expansive capabilities.
Similarly, we need to see the proof points for driving the general AI capabilities into business process-
centric scenarios. In our view—through the mindset of being an ecosystem player, the strong emphasis
on knowledge capture and sharing, and the ability to drive self-remediation across diverse use cases in
both business and IT functions, Arago adds a new quality to the discussions in Intelligent Automation.

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About the Author

Tom Reuner
Tom Reuner is Senior Vice President, Intelligent Automation and IT Services
at HfS. Tom is responsible for driving the HfS research agenda for Intelligent
Automation and IT Services. Automation cuts across the whole gamut
ranging from RPA to Autonomics to Cognitive Computing and Artificial
Intelligence. This includes increasingly the intersections of unstructured
data, analytics, and Cognitive Automation while mobilizing the HfS analysts
to research Intelligent Automation dynamics across specific industries and
business functions. Furthermore, he is supporting HfS’ push to disrupt IT
Services research by focusing on application services and testing. A central theme for all his research is
the increasing linkages between technological evolution and evolution in the delivery of business
processes.

Tom’s deep understanding of the dynamics of this market comes from having held senior positions with
Gartner, Ovum and KPMG Consulting in the UK and with IDC in Germany where his responsibilities ranged
from research and consulting to business development. He has always been involved in advising clients
on the formulation of strategies, guiding them through methodologies and analytical data and working
with clients to develop impactful and actionable insights. Tom is frequently quoted in the leading business
and national press, appeared on TV and is a regular presenter at conferences.

Tom has a PhD in History from the University of Göttingen in Germany.

He lives in London with his wife and in his spare time, he is trying to improve his culinary skills in order to
distract him from the straining experience of being a Spurs supporter.

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About HfS
HfS’ mission is to provide visionary insight into the major innovations impacting business operations:
automation, artificial intelligence, blockchain, digital business models and smart analytics.

We focus on the future of operations across key industries. We influence the strategies of enterprise
customers to develop operational backbones to stay competitive and partner with capable services
providers, technology suppliers, and third party advisors.

HfS is the changing face of the analyst industry combining knowledge with impact:

» ThinkTank model to collaborate with enterprise customers and other industry stakeholders

» 3000 enterprise customer interviews annually across the Global 2000

» A highly experienced analyst team

» Unrivalled industry summits

» Comprehensive data products on the future of operations and IT services across industries

» A growing readership of over one million annually

The "As-a-Service Economy" and "OneOffice™" are revolutionizing the industry.

Read more about HfS and our initiatives on our website.

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