Articles Posted in Industry Trends

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Industry 4.0

The Fourth Industrial Revolution is the term coined by Klaus Schwab, the founder and executive chairman of the World Economic Forum, to describe the fourth major industrial era since the first industrial revolution which took place in Europe and America in the 18th and 19th centuries. Industry 4.0 comprises a collection of transformative technologies, what Schwab refers to as “emerging technology breakthroughs,” such as automation, artificial intelligence, the Internet of Things, digitalisation, use of composite materials, autonomous vehicles, quantum computing and nanotechnology with industrial/commercial applications.

Although not a new technology, many commentators would include additive manufacturing (AM) in the list of transformative technologies making up Industry 4.0. Until relatively recently, however, AM’s adoption was largely confined to development of prototypes with industrial uses rather than full scale manufacturing. This started to change with the expiration of certain key patents around a decade or so ago, to the point that today – although still in its infancy – AM has reached an inflection point as lower costs and technical advances have put it in reach of a greater number of businesses and consumers.

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Global In-House Centers (GICs) were first seen in India in the 1990s as an alternative to IT outsourcing arrangements with third-party vendors. The principal driver was labor-cost arbitrage between the United States or Europe and India. The banking, financial services and insurance industries were early adopters. In their original iteration, GICs were known as “offshore captive centers.” A number of these captives were later sold to outsourcing vendors, particularly in the years following the Great Recession.

In recent years, there has been a resurgence of interest in GICs in India across a wider range of industries, including transportation, telecom, media, manufacturing, medical devices, oil & gas, aerospace, retail and hospitality. In “Global In-House Centers in India, v2.0,” Pillsbury partners Jeff Hutchings  and Craig de Ridder explore how GICs in India are evolving from cost-saving platforms into Innovation Centers for emerging digital technologies that can provide a competitive advantage.

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Financial Institutions may need to revise consumer contracts to remove class action waivers in preparation for a March 2018 federal rule.

On July 19, the U.S. Consumer Financial Protection Bureau, the federal regulator for a sweeping range of depository and non-depository consumer financial services companies (including the largest of U.S. banks), published a final rule that makes it illegal for many of the CFPB’s regulated entities to include consumer class action waivers in pre-dispute arbitration agreements. The Rule’s effective date is September 18, 2017, and applies to contracts entered into after March 19, 2018. (The Rule does not apply to pre-existing contracts.)

As a result, covered consumer contracts entered into after March 19, 2018, will need to: (a) remove language in pre-dispute arbitration provisions that bars consumers from participating in class actions; and (b) add language informing consumers of their rights to participate in class actions. The Rule will also require such companies to provide information on individual arbitration awards to the CFPB for publication in a public database (redacting consumers’ private financial information). Although the Rule does not outright prohibit pre-dispute arbitration agreements themselves (as many expected the CFPB might), companies will need to reconsider the economics behind offering consumers a full arbitration program in light of a future reality of increased class actions.

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Recently, governments and rule-making bodies across Europe, the UK and globally, appear to be paying increasing attention to the need for the development of legislative and regulatory frameworks in the expanding field of artificial intelligence (AI) and robotics. With the growing use of these technologies across a wide range of industry sectors, we expect to see new laws and regulations being introduced in this area in the coming years, across a broad spectrum of legal disciplines including intellectual property rights and product liability.  Discussed below are some recent developments in this area in the European Union, the United Kingdom, the United States and Japan.

European Union

The European Commission’s Legal Affairs Committee recently published a report calling for EU-wide rules governing AI and robotics[1]. Rapporteur Mady Delvaux (S&D, LU) said: “A growing number of areas of our daily lives are increasingly affected by robotics. In order to address this reality and to ensure that robots are and will remain in the service of humans, we urgently need to create a robust European legal framework”.

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Should what goes out come back in? In a recent guest blog for MRO-Network.com, colleagues Mike Pierides and Caron Gosling discuss insourcing, the bringing back in-house of functions that have previously been outsourced. From regaining control of business-critical functions to increased flexibility and simplified purchasing, Mike and Caron examine the benefits and challenges of returning functions to the fold.

 

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These days it seems every supplier’s infrastructure pitch book is full of the virtues and potential benefits of their drive toward automation, the objective being to get the same work done for less. What’s not clear is whether the supplier will actually be able to achieve what they promise or how to allocate the benefits between buyer and seller.

The same for less is a well-travelled road; the same goal drove moving work to less expensive delivery locations over the last couple of decades. Along the way some algorithmic alchemy created an acceptable balance among costs, margins, prices and benefit to the buyer. While the arithmetic to ensure the benefits were reasonably distributed amongst buyers and sellers could be complex, the factors of production to drive economic verification models were pretty well known, or at least could be with a bit of research. Underlying it all was a basic assumption, that an FTE was an FTE, and many buyers used the number of proposed FTEs to validate a suppliers’ ability to actually perform the work.

Automation changes all that. Is an FTE still an FTE, or is an automation assisted FTE a 125% of an historical FTE or maybe it is 150%, or maybe even more? What if there is no FTE at all just some robotics doing what an FTE used to do? Since an automaton is likely to make fewer mistakes than a human FTE, and will do those error-reduced tasks faster than the human FTE, the promise of better and faster and cheaper seems attainable.

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On 24 June, the UK’s National Outsourcing Association hosted its annual symposium in London.  This is one of the best attended and most prestigious sourcing industry events in the UK, and is well attended by suppliers, customers and advisors.

Pillsbury sponsored this year’s event, and hosted a breakout session on transition and change in outsourcing, chaired by Aaron Oser, Mike Pierides and Tim Wright.  Guest speaker was Andrew Cubitt, Senior Commercial Lead at Transport for London.  The session focused on how customers’ and suppliers’ priorities during a transition programme can often conflict in respect of the key matters of scope, pricing and performance, and the challenges that arise from such conflict.  Working in break-outs with the attendees, the Pillsbury team identified several key recurring themes such as relationship breakdowns exacerbated by poor governance and challenges in balancing incentivisation with punishment.

More information about the event, including the slides prepared by the Pillsbury team for the transition session and the materials prepared by the other symposium speakers on topics such as robotics and digitalisation, can be found via this link: http://www.noa.co.uk/event/noa-symposium-2015/.

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As the range of technology employed by the UK’s leading banks widens, the balance between cost-effectiveness and manageability of solutions becomes increasingly difficult to strike. Mike Pierides (Partner) from law firm Pillsbury examines some of the challenges banks face in sourcing the technology they need to stay competitive.

Background

The banking sector in the UK has grown significantly through acquisition and amalgamation. The result is a market dominated by banking groups, which have not yet had the time, finances or inclination to set about harmonising the underlying IT infrastructure of their respective component parts. The table below highlights some of the key retail bank elements of the UK’s major clearing banks, alongside which it is necessary to consider the various additional investment bank, private client, credit card and other major business unit components that sit within the same group.

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The Internet of Things (IoT), whereby miniature computers are embedded into objects and devices and connected via the internet using wireless technology, offers many advantages, such as smart thermostats which have the ability to remotely monitor and adjust your heating at home, and medical devices / apps which are used by patients to enable remote monitoring (e.g. a dangerous change in a patient’s insulin levels).

Speaking recently at CES 2015, Las Vegas’ annual hi-tech trade show, the chair of the US Federal Trade Commission, Edith Ramirez, warned of a future where smart interconnected devices enable technology firms to build a “deeply personal” and increasingly detailed and granular picture of consumers that will subject consumers to highly targeted advertising of products and services, as well as leaving them vulnerable to data attack.  Ms. Ramirez said that smart devices could potentially collect data such as an individual’s health, religious and other lifestyle preferences, and asked “will this information be used to paint a picture of you that you won’t see but that others will?”  Data should only be gathered for a specific purpose, said Ms. Ramirez…“I question the notion that we must put sensitive consumer data at risk on the off-chance a company might someday discover a valuable use for the information”.

Regulators around the world are increasingly concerned to ensure that security and privacy issues are taken seriously by device manufacturers.  For example, the Article 29 Working Party (the independent European advisory body on data protection and privacy) issued an Opinion in September last year which reviewed the IoT and the specific data protection and privacy challenges raised by it, assessed the state of the applicable law (in Europe) and made a number of recommendations applicable to relevant IoT stakeholders. These include a call for IoT device, O/S and application manufacturers, and developers to apply the principles of Privacy by Design and Privacy by Default and to undertake Privacy Impact Assessments (PIAs) before any new application is launched in the IoT.

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Innovation is prized in the growing space of the Internet of Things.  But an innovative product design is not enough, and potential pitfalls abound.  As demonstrated in a report published by the Federal Trade Commission, privacy and security need to be at the forefront of developers’ minds.  Here are five lessons on what not to do when developing a connected product.

The Internet of Things (“IoT”) is an expanding ecosystem of everyday objects that are embedded with technology, allowing them to connect, communicate, and transfer information about users and their surroundings to each other.  IoT products boast beneficial effects such as increasing economic productivity and efficiency, encouraging robust innovation, and tailoring user experiences.  However, by virtue of being connected to the Internet, IoT products also carry privacy and security risks.  On January 27, 2015, the Federal Trade Commission (“FTC”) published a report focusing on privacy and security concerns for IoT devices sold to consumers.

Given the growing interest in how embedded computing advancements affect security and privacy issues, this Alert identifies what developers, investors, and entrepreneurs should avoid when entering the IoT market.