What will be the main ramifications for today’s outsourcing space of the ongoing robotic automation revolution?
I’ve already re-shored around 300K work items a month from our existing outsource work stack and automated processes using RPA, and at a fraction of the cost of manual resource. Although we’ll always have a need for a manual back office, my view on robotics is: use it or lose work. With offshore costs rising, robotics is a valid alternative for high-volume repetitive tasks that have been the bread and butter of BPOs for years. The BPOs that include robotics and the cost savings it will generate in their pricing will begin to prosper greatly over the coming 12–18 months.
Some of the BPO organisations will adapt but I believe relatively few – and there will obviously be real advantages for the technology leaders to build their businesses here.
But of course this will just be one item, in a perfect storm of change for the old-style offshore BPO providers. Other impacts that they are already facing include businesses at last recognising customer direct contacts are best handled by local staff (we are currently seeing thousands of these jobs being repatriated to the UK); and exchange rate and other financial risks – over the past few years, we have seem the rupee almost halve in value, making these services artificially cheap and hiding the rapidly increasing salary inflation. If the rupee were to return to previous values (and the Indian government is trying desperately to strengthen it now) many existing BPO contracts could become non-viable.
Outsource Reality Limited
This is a critical moment for the IT services industry as established players embrace automonics technology to transform their delivery organisations in order to remain competitive. By embracing autonomics, which can provide efficiency improvements of more than 30%, service providers are able to redefine the cost/quality equation that they offer clients. Virtual engineers can be scaled at no extra cost to meet any required business volume and deliver a consistently high-performance and predictable service every day.
Through the use of widespread automation, IT operations will become as reliable and predictable as the supply of water and electricity. More importantly, expensive human resources can be fully dedicated to high-value tasks. For many IT departments, too much time spent on “run the business” activities hampers their ability to drive “change the business” initiatives, many of which are aimed as using IT as a business differentiator and are thus infinitely more valuable to a business than the engine room of keeping systems and services running.
Finally, autonomics provides unparalleled clarity of operations so that root cause analysis of any problems can be accurately pinpointed and rectified in a fraction of the time previously taken. Furthermore, automation provides a clear link between operations and business activities. As a result, enterprises will be able to source capabilities on the basis of business outcomes they want to achieve.
It’s no longer about the location of people and offshoring; rather it’s about strong technology transformation credentials and track record – and catalogues of robotic services to quickly deploy for client benefit.
F&A Capability Lead – EMEA
Hewlett Packard Company
The main ramification is this; service value and speed. While costs will always be a part of the sourcing equation the shift from pure labour arbitrage is giving way to the other part of the equation which is value generation. In terms of the impact on outsourcing it will separate the players into those who make the offering in advancement to those who will remain tried and true to history. Even if they have capitalisation capabilities there is a certain degree of stinginess that exists and this attitude is quite common. “Make today what you might not make tomorrow, pillage that wealth, and either dispose or close” attitudes are pervasive. Thus many buyers are quite leery about this and are vigilantly watching what is going on. No one is immune from this buyer oversight, not even at Tier 1, because as we have seen of late the gameplay is changing and thus an air of uncertainty exists.
Jerry E. Durant
The International Institute for Outsource Management
After publishing its first report last year that explored the potential impact of robotic automation on the outsourcing industry, HfS Research released a follow-up study in which they noted “the market for robotic automation and other forms of process automation is coming on strong and that the transformative impacts of these technologies could be greater than we even anticipated a year ago.”
Our work underscores HfS’ findings. Our BPO partners and clients have witnessed dramatic process improvements, elevated customer service and quality, redeployment of resources to more strategic, revenue generating functions and significant cost savings. Most importantly, robotic process automation represents a modern industrial revolution for BPOs and their global clients. A virtual workforce of software robots is now a third option for managing business processes: 1) onshoring, 2) offshoring, and now 3) robotic automation.
Charles Sutherland, HfS analyst and author of Toward a Constitution for Robotistan, predicts that the potential for robotic automation could extend to “the way that we further empower business advisors, knowledge workers, judgment-based role staff by removing the mundane and allowing them to truly spend their time on the remaining parts of the business process which can’t be broken down entirely into business rules. It may also be the accelerator for moving clients and service providers towards processes designed for a truly digital world.”
RPA has the power to transform our industry, but experience tells me that the pace of change will be slower than we expect. We have worked with one client who has adopted RPA internally and they use two simple measures to qualify their opportunities to deploy robotics across their business. The first is, does the process require voice? If yes it doesn’t rule out the whole process, but it does mean that the whole process will not be automated. The second is more telling: can the process be performed in India?. To that client the criteria to offshore and automate are the same. To dig into this a bit deeper here they are looking for processes which are low-risk or where the risk can be controlled and where the work is procedural and business-rules-driven. Whilst this might be an outdated view of offshore capabilities, it does represent a significant impact on the outsourcing industry. If RPA delivers its vision the ramifications could be huge for the industry and will undermine the metrics we use today to identify leading BPO providers: it will no longer be about how many people companies employ in India, it will be about how many transactions are performed. For our clients the ramifications are far simpler. RPA will provide the next wave of savings; in the same way as offshoring provided the last round of labour arbitrage, RPA will provide the next. This will lead to substantial savings and a reevaluations of what to look for in an outsourced service provider. This will give customers better value and more control.
Global Head of Process Robotics & AVP – Innovation Labs Product Lead
Sutherland Global Services
First, we believe we will see new outsourcing leaders emerge that don’t have the legacy of FTE/headcount-priced contracts hanging around their necks. Too many large BPOs simply believe they can’t afford to proactively reduce the price of their services by automating work now done with huge teams of offshore workers. Those that don’t understand they have no choice but to get in front of this trend will lose contracts to nimbler, more strategic competitors.
Second, we predict the whole reason for outsourcing at all will be questioned by more and more companies. For many, outsourcing simply meant offshoring (not real innovation) and when end customers realise they can create their own digital labour cost advantage with RPA, they will begin doing so. Once they also understand the secondary benefits of automation (error rates go to zero, analytics are empowered, cycle times are slashed) they will really put their foot on the gas of automation and outsourcers that don’t re-invent themselves will disappear.
To read other sections of our article ‘Age of the Robots’, from Outsource #35 (Spring 2014), click here.