With its announcement last week that it will purchase enterprise artificial intelligence (AI) and automation vendor Rage Frameworks, Genpact became the first IT and business process service provider to acquire an AI platform.\n[ Related: Questions to ask before choosing an automation partner ]\nThe addition of Rage Frameworks, which has been applying machine learning and language processing to build intelligent automation platforms for financial services, capital markets and supply chains, \u201cwill take Genpact deeper into integrating semi and unstructured data and\u00a0AI, where we see the true marriage of business processes with clever technology and self-developing algorithms,\u201d says Phil Fersht, CEO of outsourcing analyst and consulting firm HfS Research.\nOn the surface, another acquisition of a niche automation vendor by an IT service provider might seem unremarkable. But industry watchers say this may be the tipping point where focus will shift from back-office automation to integrating and intelligently automating front- and middle-office functions.\n\u201cIt represents an evolution of the back-office oriented automation acquisitions that many outsourcing providers have made over the past several years,\u201d says David Borowski, director with outsourcing consultancy Pace Harmon. \u201cThe differentiation is Rage\u2019s focus on artificial intelligence, and the significance is that it should allow Genpact to develop and deploy applications and solutions that can directly integrate Rage\u2019s cognitive, predictive and real-time analytics capabilities.\u201d\n[ Related: 11 ways to address RPA and AI in IT outsourcing contracts ]\nGenpact first began partnering with Rage Frameworks to harness its AI capabilities. Rage Frameworks\u2019 technologies \u201care immediately applicable to Genpact\u2019s existing client base,\u201d says Peter Bendor-Samuel, CEO of outsourcing research firm Everest Group. \u201cLeveraging Rage\u2019s AI platform, Genpact hopes to provide real-time insights, simplify automation, and gain competitive advantages. Their theory is that their combined capabilities will help clients drive digital transformation at scale and accelerate clients\u2019 digital journey.\u201d\nLabor-arbitrage based IT service providers ceased growing last year, according to Everest Group, with 21 percent of industry growth in IT and business process services with a digital focus. A recent survey of of 132 \u201cbest reference\u201d clients of top service providers by Everest Group found that 48 percent were unhappy and 25 percent were very unhappy.\u201d A top reason for their dissatisfaction is providers\u2019 capability of helping them with a digital restructure,\u201d says Bendor-Samuel, adding that this move by Genpact is acknowledgement that the future of IT services will be focused on digital transformation.\n[ Related: Outsourcing trends to watch in 2017 ]\n\u201cWe\u2019ve danced for years trying to prophesize when BPO will truly integrate with IT,\u201d says Fersht. \u201cBut we\u2019ve now had reality unveiled: RPA [robot process automation] platforms streamline the back office, while AI brings the middle and front together to create that true digital experience. Moreover with Rage's development effort over the last two years to build enterprise applications for financial industry processes (wealth management, commercial loan processing and financial statement spreading) is shifting the focus from automation tools and capabilities to providing an end-to-end process leveraging a model driven business transformation platform.\u201d\n[ Related: Building a business case for offshore robotic process automation ]\nIt also enables Genpact to change the old offshore outsourcing narrative from that of shipping jobs overseas to improving processes and delivering new business value, according to Borowski. \u201cFor existing customers, it provides the opportunity to reimagine how its existing outsourcing solutions are delivered in areas where pure cost reduction was the previous focus or there was a perceived risk associated with outsourcing,\u201d Borowski says. \u201cIt shifts the discussion from \u2018can you outsource an activity\u2019 to \u2018can you improve a process and result\u2019 using a toolset that happens to be provided by your outsourcing provider.\u201d\nGenpact\u2019s purchase is not the beginning of a trend, but rather the next phase of an ongoing attempt by outsourcing providers to embed enabling technology into their offering. \u201cFor the past several years, outsourcing providers have been actively pursuing ways to incorporate increasingly transformational levels of automation and intelligence into their solutions,\u201d says Borowski.\nTo date, the tendency has been to partner with rather than purchase AI and automaton vendors. Automation software providers Blue Prism, AutomationAnywhere and UIPath have aggressively forged partnerships with most of the leading outsourcers, such as Accenture, IBM, EXL and Capgemini,\u201d Fersht says.\n\u201cAI vendors IPSoft and Celaton have also been active, while several outsourcers are now working with Watson, including KPMG.\u201d However, Bendor-Samuel argues, \u201cthe incumbent service provider industry has no choice but to accelerate their rotation into digital, and the most effect way to accomplish this is through acquisitions.