In our last post, we discussed how service providers were using robotic process automation (RPA) to dramatically change the way outsourcing is designed and delivered. This technology, which allows companies to automate support processes, data manipulation or any other transactional activity, is revolutionizing the outsourcing industry and provides an attractive alternative to combat the growing costs of offshoring. This can dramatically improve the way outsourcing service is provided and offer many benefits to clients.
We have already discussed how RPA can improve scalability, offer better support and improve efficiency. Today, we will continue describing the benefits of adopting RPA, why outsourcers need an alternative to outsourcing and how service providers will continue to use RPA in the future to lower costs and deliver better service to their customers.
A new model for global service providers
Although the cost of labor in Asia is still significantly lower than in the U.S. and Europe, it is rapidly catching up. Wages in China have consistently risen by 12% each year since 2001.  This, coupled with mounting political pressure to bring jobs home is making many outsourcers reconsider their past strategies.
In order to be successful in the coming years, it is important for companies to rethink the way they design and deliver their services. According to industry consultants at the Everest Group, there are three principles for reimagining global services and automation comes first. “Automation and intelligence lie at the heart of our ability to reimagine technology services, because automation helps us deliver breakthrough outcomes without blowing the cost model out of the water.”  Taking an automation first approach that focuses on delivering innovation while maintaining costs allows companies to stay competitive in dramatically changing global markets. This is driving an unprecedented adoption of RPA, with the market seeing an expected annual growth rate of 60.5% between 2014 and 2020. 
Benefits of adopting RPA
By giving service providers the ability to use automation to mimic human actions and complete tasks in the same way that a person would, automation can reduce operating costs while allowing the organization to stay agile and responsive. Our last post discussed several of the high-level benefits of adopting RPA. Today, we will discuss some of the more specific benefits the technology can provide to outsourcers.
- Deeper insights & analytics – RPA can be leveraged to provide automated in-depth logging and reporting, allowing users to gather data more efficiently. This can allow the company to gain insights into processes, improve efficiency, reduce errors and lower costs.
- Rapid ROI – The efficiency of automation allows companies to roll out new features faster. This can dramatically increase the speed with which they attain a positive ROI for new solutions.
- Reduced redundancy – Human workers often perform redundant tasks and do unnecessary work. Automated processes can automatically identify these redundancies and eliminate them, improving efficiency and reducing costs.
- Better management ability – RPA naturally lends itself to better governance and compliance. Managers can look at statistics in a dashboard, easily turn off or adjust processes with the click of a button and generate reports and visualizations quickly. This allows them to gain finer control over day-to-day operations without investing more time or energy in the process.
- Leverage human employees – Although many workers are afraid that automation will take their jobs, it can actually allow companies to assign their workers more rewarding and stimulating jobs. Creative roles and management roles still need to be performed by human workers and will continue to be for the foreseeable future.
Outsourcing providers will only continue to find more applications for RPA, using it to make their services more efficient, more reliable and better able to meet the requirements of their clients. As the need to find alternatives to increasingly costly and politically difficult offshoring increases, a greater number of companies must turn to automation in order to stay competitive.
Robotic Process Automation (RPA) is rapidly changing the way outsourcing service providers design and deliver their solutions. As this technology evolves and becomes more powerful while an emerging global middle class, demanding middle class wages (i), drives up offshoring costs, service providers are being forced to consider alternative solutions to keep their costs competitive and deliver better, more efficient services to clients. One of the primary areas they are looking to is automation. Automation is quickly becoming a dominant force in the global economy. It currently accounts for 10% of GDP growth and 16% of labor productivity growth annually, and will continue to become more important in the coming years (ii). Service providers are looking to harness this power, allowing them to take advantage of the growing capabilities of automation solutions to augment their services and deliver competitive pricing to clients.
What is Robotic Process Automation (RPA)?
RPA is any technology that allows companies to automate support processes, data manipulation and other transactional activities. It allows service providers to significantly improve their response times and deliver better, more cost-effective services to clients. It can encompass several areas, including business processes, IT support, accounting, administration and workflow. Some areas can be almost entirely automated. For example, studies show that 69% of the work currently done in data processing by human workers could be automated. This work accounts for 16% of the total time spent working in the United States (iii). The ability of automation to adapt to such a wide range of roles and take the place of so many human workers gives service providers the flexibility they need to reduce their reliance on offshoring and reimplement jobs in onshore locations while maintaining costs and improving service to clients.
What advantages does RPA give service providers?
RPA offers many advantages over traditional outsourcing. It allows providers to leverage the power of automation to augment their human workforce, improve cycle time and increase accuracy. Other benefits include rapid scalability, better support, and greater efficiency.
- Scale to meet demand – One of the greatest advantages of using RPA is that services can quickly scale to meet current demand. Without the need to hire additional workers, source physical locations and perform all associated HR tasks, there is much less overhead and infrastructure associated with scaling. Service providers using RPA can simply allocate more virtual resources to a process with the click of a button, allowing companies to maintain optimal resource allocation while always meeting the demands of end users.
- Deliver better support – Automation solutions allow service providers to bring up information, answer questions and solve problems faster than ever before. It is now possible for routine issues to be automatically resolved, dramatically reducing human workload while increasing end-user satisfaction.
- Increased reliability – Humans are naturally prone to errors. The very abilities that allow human workers to be incredibly adaptable to new situations also means that they are never perfectly suited to any one particular task. RPA, on the other hand, can be tailored to the task at hand, performing it at multiple times the speed of a human worker with little to no risk of error.
- Improve efficiency – The costs of labor in many traditionally affordable markets have risen dramatically in recent years. In order to deliver better cost efficiency, service providers are turning to RPA to allow them to improve productivity with a smaller workforce. This dramatically reduces costs while making it possible to repatriate jobs.
The automation revolution is already here. It is estimated that currently available technologies could replace approximately 50% of the of the world’s work activity (iv). Companies that ignore this coming trend will inevitably be left behind.
RPA offers many benefits to organizations looking to improve speed and reduce costs without sacrificing accuracy or reliability. However, in order to be implemented successfully, it is important that it be a high level strategic decision with buy-in from business and IT leaders. Stakeholders across the organization must be able to provide the necessary support and resources to make the initiative a success. It is also important that client organizations choose their service provider organizations wisely. Partners should be able to work with the client to meet their unique needs and deliver a comprehensive proof-of-concept before deployment. This allows clients to reduce their risks while investing in a forward-thinking strategy. Ultimately, with the right service provider partner, companies can realize the full potential of automation by repatriating jobs, increasing reliability and reducing costs.
What if you suddenly lost a third to two-thirds of your IT staff? Or, what if they were suddenly 50% to 100% more expensive? Can’t/won’t happen? Think of what could happen to the H-1B program. Ironically, the cloud may save you.
You: CIO. You: VP of infrastructure. You: VP of application maintenance.
You know what you did.
You know that the biggest single expense in running an IT shop is labor. Your legacy IT departments — which constitute the majority of companies — are particularly vulnerable because your older infrastructure and applications require extensive, labor-intensive customized care and feeding. You were under pressure to reduce costs. You are always under pressure to reduce costs. So you succumbed to the siren song of the outsourcers to lower those costs.
They did it through labor arbitrage. They replaced Americans working in the homeland with much less expensive Indian IT workers — some in the U.S. and some in India. To get the Indian staff to the U.S., they relied upon a U.S. government program designed for a very different purpose: the H-1B visa.
Originally, according to federal rules, the visas were intended to bring in foreign workers with college degrees and “highly specialized knowledge,” mainly in science and technology. For years, outsourcers (primarily Indian in origin) have been using the H-1B visa program to import cheap labor — often without “highly specialized knowledge” — to undercut U.S. jobs in IT and other sectors. Almost half of these visas go to the big Indian outsourcers or U.S. outsourcers with big Indian operations. These accounted for almost 130,000 jobs between 2005 and 2014 (latest data available).
Sadly, U.S. corporations — many household names — have been willing accomplices in this travesty, all in the name of reducing their costs. Examples include Disney, Toys R Us, New York Life, Eversource Energy in Connecticut, Cengage Learning in Ohio, and many more. Those are only a few whose stories happened to get covered by the media.
These companies know what they are doing, and they know the implications if the word were to get out. Why else would they insist upon severance agreements with terms that state that the displaced U.S. employees cannot disclose training their Indian replacements or the true reason for their termination if they want to maintain their severance benefits and not be sued in court?
Year after year, attempts were made to rectify this injustice. But, by making common cause with Silicon Valley and beating the drum that U.S. technological excellence and prosperity required this system, the loss of U.S. jobs continued. Well the dirty little secret is out. While Silicon Valley pays upwards of $150,000 for workers on a H-1B visas, average yearly pay at the Indian outsourcing companies is only $69,500. In 2014, the top Indian outsourcing firms — Tata, Infosys and Wipro — brought in 12,000 people through the visa program. Microsoft, Google and Apple brought in 2,000 in all. Now, the times are changing. The new administration is wise to the scam and is studying new rules to finally right the wrong.
What are you going to do? H-1B visas only last for three years, with a renewal for another three — assuming that rule continues. Take a look at those outsourcing staffers. How many have been with you and for how long? If (when) they go away… well, those systems just won’t stay up by themselves, will they?
Time to bite the bullet, take a page from the leading edge of IT — cloud computing. When you use a hosted service — whether for infrastructure (IaaS) or applications (SaaS) — a key characteristic is that the amount of labor required is phenomenally less than the in-house equivalent in a legacy shop. Your challenge is migrating your portfolio to these new platforms.
The good news is that there are ways to get there. The bad news is that you need to tell senior management that it is going to cost money and that there will be disruption. Despite the work you have been doing trying to rationalize your portfolio and move to better platforms, you still have some real ugly ones, don’t you? They seem to have been there since the day the earth cooled and are going to be bears to deal with.
Lastly and ironically, your current provider of outsourced IT services won’t want to lose the revenue stream you have been feeding it. A good bet is it will want to keep some or all of it. Perhaps you could get the vendor to move you to the cloud. After all, it will be in a bind if (when) it is mandated to ramp down its use of H-1B visa holders. And you have the company under contract to deliver price and performance.
Think about your leverage — your outsourcer is. The leader of Infosys has already recognized that his business model must change, and he is advocating getting rid of H-1B holders and hiring Americans.
What a world!
Over the past three years, the IT environment has seen an increase in popularity for Cloud and enterprise systems, such as Software as a Service (SaaS) and Platform as a Service (PaaS). These systems have paved the way for new outsourcing strategies together with new challenges in outsourcing provider selection and integration.
The new service-based norms of outsourcing became mainstream: pay-as-you-go models took over in a bid to attract even small service providers and new skills needed to be developed to deliver to expectations.
Global political developments: The course of IT outsourcing will be determined by recent development in the political sphere, both in Europe and worldwide. Legal implications may impact delivery centres, and partners need to agree on a common policy for adherence and feasibility.
Data security: Protection of information during outsourcing has become one of the major issues of concern for companies. IT outsourcing providers should enforce internal information security practices and pay major attention to their non-disclosure policies. If there is any breach in the security process, this will have a negative impact on the relationship between client and outsourcing provider. Information security will therefore remain a major focus for outsourcing companies in 2017.
Automated systems and processes: Automation is unavoidable and software developers have to keep up the pace in 2017. Automatic processes take less time and are more efficient. Automation will help standardise processes, reducing direct costs and extending benefits to suppliers, buyers and customers.
Call centres (BPO): The traditional mega big call centres, as we know it, will disappear gradually or, at least, their operations will be greatly reduced. With technological advances made in Artificial Intelligence (AI), self-service tools become more widespread. This is putting at risk the traditional call centres. Bigger volumes at call centres will be taken care of by virtual agents and chat bots and will replace the need for human resources. A major company in Malta has already started to look for new call centre platforms to better serve their customers in the coming years.
Talent pool accessibility: Companies have adopted talent search, as this proves to be cost-effective in the long run in having skilled and professional people. Most IT companies in the developed countries perceive the urgent need for qualified specialists and are ready to accept remote skills, if that is the key to effective and on schedule work performance. The past trends will also be applicable in 2017 and more pressure is applied on recruitment specialists to provide skilled professionals in a timely manner.
Our local IT outsourcing branch, Castille Labs, will be using Castille’s recruitment experience to continue recruiting the best candidates for our clients as well as adjusting our internal processes to embrace 2017 with confidence.
The Global Business Services Evolution: Centralization and automation up, outsourcing and offshoring down
As organizations struggle to keep up with the disruptive shifts of digital transformation, service delivery models are evolving fast toward centralization and greater use of automation, according to the HfS/KPMG 2017 State of Outsourcing and Operations.
While there is growth across the board in all types of service delivery models, the study found that there is a drive toward full Global Business Services (GBS) and a spectrum-wide move away from decentralized models. For example, 11% of organizations are already operating under a GBS structure, while 20% are moving in that direction with a global shared services/outsourcing model. Only 16% of organizations are functioning under a fully decentralized structure.
“Companies are clearly re-examining the ways they go to market with their delivery models, because they must,” says KPMG’s Stan Lepeak, Head, Market Research at KPMG Global Management Consulting —disruptive technology is having such a significant impact on the front, middle and back offices. Organizations realize they need to start functioning with a “One Office” operating model, which hones in on the needs and experiences of the customer central to the entire business operation, while old barriers between corporate operations and functions are eroded and the constraints of legacy IT are limited. With “One Office” operating models such as GBS, organizations can begin to integrate not just the processes but also technology and data sets.
This transformation is seen by nearly all — a whopping 98% — of CEOs, who are beginning to use automation as a complete set of non-sequential levers that all integrate with one another. “That’s the new norm,” says Lepeak. “As things change so quickly, companies can’t afford the time to have fragmented operating models — it’s encouraging to hear that GBS-established organizations are taking a look at expanding their portfolio of services toward digital solutions that are very focused on the customer.”
Employment transformation is a big part of making the shift to GBS or other centralized operating models happen, as the nature of work — not necessarily the number of jobs — changes. “There are training requirements just to replace the shortages that are happening today, let alone new jobs that are being created,” Lepeak adds. “Our GBS-mature clients are focusing on making sure the entire back office is transformed in terms of interacting with external partners such as third-party service providers, and internally with groups across the major function of finance, IT, sourcing and procurement, and human resources..”
Robotics process automation (RPA) will shift the look of GBS operations
GBS is on the cusp of a major leap toward integrated service delivery models, with lower-value services outsourced and an increasing focus on analytical, judgment and expert services. “In over 300 GBS maturity assessments we’ve done for clients, it’s clear that getting really good at GBS is hard — especially if you have complicated, global, diverse underlying IT systems,” says Lepeak. “We see many organizations make some early progress towards greater GBS maturity but then often hit a wall.
Robotics process automation (RPA), he explains, is a great opportunity for firms to move toward GBS maturity — so they don’t have to have as many locations, for example. “This is going to be key and ultimately change what GBS operations look like,” he says.
This automation disruption and evolution toward integrated GBS has also accelerated, adds Lepeak, so that the journey to a centralized operating model is quicker than it has ever been — which requires a 360-degree view of the entire operating model environment. “Organizations cannot afford to view this in isolation and simply look to apply technological disruptors to the current environment,” he says. “They do need to look holistically at the entire picture because the pace will continue to change, and once they have implemented something, they will have to change again.”
The changing use of outsourcing and offshoring
Two years ago, the State of Outsourcing and Operations study found that clients were increasing investments in offshore use for outsourcing — Finance & Accounting was poised to rise 22%, for example, while HR was predicted to rise by 13% and IT/network infrastructure support by 23%. Today, however, there is a much flatter outlook in all of those areas. Finance & Accounting, in fact is predicted to decrease by 4% and HR by 3%. There were similar results in offshore use for shared services.
The reason for the decline? According to KPMG’s Dave Brown, Global Lead, Shared Service & Outsourcing Advisory, it is because the hype of RPA and cognitive is dying down — as the reality of it increases. “People who invested over the past two years in a proof of concept are now deploying RPA solutions, mostly on the business process side such as finance, accounting, HR and procurement,” he says. “Proof of concepts have now started to roll out into production environments and essentially take work out of offshore locations, whether third party or in their captive centers.”
As a result, companies are starting to look at their offshore strategies and decide whether they need to go forward with those efforts. “The confidence level in RPA has increased; it’s not just about hype anymore,” says Brown.
In addition, companies are no longer considering simply a one-off RPA solution. Cognitive solutions are becoming more mature, with more integrations of RPA with machine learning and AI. “There is starting to be more of a full suite of service offerings around that play,” he says. “We’ve joked over the years about hype vs. reality — I think the reality is really starting to dawn on senior executives that another lever is driving those costs out of organizations.”
The bottom line? According to the State of Outsourcing and Operations 2017, there’s no doubt that the shared services and outsourcing industry is on the cusp of massive change as the entire outlook of operations — from the front-office to the back — evolves into a centralized, “One Office” model. But this is not about jobs going away. Instead, it is about a reevaluation of the nature of work. Organizations must begin to embrace the digital and intelligent automation tools available and write off legacy options. The future of the industry demands it.
Source: cio.com-The State of Outsourcing and Operations 2017, Part 2
Image credit: istock
Call Centers Undergoing Dramatic Change
Leading companies are re-imagining their call centers and customer experience to integrate digital models into their voice models. Work volumes are shifting from voice call centers into new channels such as chat apps, email, tweets and other social channels. Companies are adopting these new ways of communicating with customers and integrating them into their customer service models. The digital model is disrupting the call center.
A recent Everest Group study showed that across a number of call center situations, companies eliminated 40 percent of the FTEs in their call centers – while improving customer service. They achieved this by applying Robotic Process Automation (RPA) technology.
Effectively, companies can use RPA to do automated look-ups for information, thus shortening call time. When an agent is equipped with the right information and robots pull information and present it to an agent in an easy-to-understand way, the conversation with the customer takes less time.
In addition, by using analytics and RPA, companies can do call suppression by understanding customers’ needs before they call and act to resolve them. This eliminates the need for the customer to call.
An emerging set of technologies and chatbots allows a robot or cognitive agent to carry on automated conversations across channels including voice. This potentially can eliminate another 20% of live agents, reducing the number of FTEs in the call center by a total of 60%.
Image credit: Shutterstock
Business process outsourcing (BPO) companies need to take advantage of digital technology to boost efficiency. Business rules automation can make a dramatic difference.
Perhaps more than others, organisations in the outsourcing space need to take advantage of digital technologies as they look to boost operational efficiencies, increase business agility and improve customer engagement.
Automating decision-making in complex mid to back-office processes and functions is a good place for business process outsourcing (BPO) companies to start. Decisions regarding eligibility for a particular service, product or loan; up-sell or cross-sell opportunities; risk assessments and the like are all candidates for such automation—and lead to cost savings and consistency that can be passed down to the client. The principle savings come from automating decisions around processes and functions that change frequently.
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Applying human logic to a frequently changing set of circumstances, or relying on IT to use traditional coding approaches to implementing new rules, can be slow, inconsistent and expensive—and certainly not agile or efficient. That’s where a business rules management system (BRMS) can prove extremely valuable to BPOs, enabling changing rules to be managed and implemented on the fly by business folks, without intervention from IT.
Here are three important considerations for BPOs adopting automated rules management:
- The more complex the process, the greater the need for automation: The truth is you probably won’t need a BRMS to automate simple processes for which where the underpinning rules rarely change. But you’ll see significant benefits if you have complex rules governing complex processes, both of which change frequently under tight control. Processes such as risk and rating, loan eligibility and origination or underwriting and claims processing are good examples. Yet other industries benefit, as well. Take healthcare, for instance—the Affordable Care Act simply couldn’t be delivered effectively without this type of technology helping to determine the eligibility of an individual for specific levels of social welfare and healthcare.
- BRMS is a differentiator: Nobody outsources a function that’s operating optimally without any scope for improvement—in fact it’s probably the polar opposite. The client’s expectation is that the BPO will improve a sub-optimal business process, do it for less than it costs right now and, probably, improve customer engagement at the same time. In a worldwide survey of business leaders, 57 percent cited improving efficiencies as a key driver in outsourcing processes.Other top factors included reducing cost and gaining better access to expertise. Achieving these goals requires deploying technology across a range of clients’ processes and functions such that, through economies of scale, cost is reduced while processes improves. That’s what automation solutions help to deliver—setting you apart from other BPOs.
- Optimizing internal backend systems is equally important: When people think about digital business, they naturally start thinking about their own customers and how they can better engage with them and more effectively manage the customer journey. But be careful not to limit your digital focus to the front end of your business or just your client’s processes. Internal mid- and back-office functions can benefit from BRMS, too. Automating processes isn’t just about not about veneering some digital stuff onto existing, legacy systems; it’s about modernising all systems and processes, and in some cases, reinventing existing ones from end to end.
No matter what industries a BPO serves—financial, healthcare, government or the public sector—process efficiency is always a priority. Finding a BRMS that maximizes operational efficiencies, cuts costs and increases agility will lead you down the path to the ultimate goal: service improvement.
I have written previously about Robotic Process Automation (RPA) and its potential impact on the financial services industry and more specifically on the finance and risk functions within the institutions. Most financial services firms have started exploring how to benefit from RPA – using software to mimic the actions a human would perform on a PC, then scaling up these actions as needed – and many have already automated a number of the repetitive, rules-based processes that are the typical starting points for RPA. Some firms that have implemented these tools have already seen dramatic reductions in average handling and/or cycle times.
Across the industry, companies have been looking for ways to help address high variable costs and stagnant productivity growth against market challenges. The proliferation of new regulations – as well as firms’ own initiatives to improve compliance and reduce risk – have driven up the demand for and market cost of finance and risk talent. And in parallel, the need to demonstrate strong controls to the regulator requires that solutions need to be proven and robust.
And companies have not been standing still. In their efforts to transform finance and risk operations, companies have also explored other paths to greater productivity. These include centralization (creating Centers of Excellence to concentrate and improve common processes); relocation (moving operations to lower-cost regions); standardization (identifying common process elements and making them uniform throughout global operations); optimization (simplifying processes and removing wasted effort); and digitization (computerizing document management, adding self-service options and establishing data warehouses).
But while all of these approaches have their merits, RPA offers significant potential for both short- and long-term efficiency gains.
The Value Proposition
Companies implementing RPA-based solutions often see returns on their investments in as little as one quarter. And importantly, the solutions are typically extendable – not requiring all processes and systems to be converted at the same time.
While freeing up workers for more complex tasks – particularly those requiring human analysis and judgment – is a major benefit, so is the elimination of rework and errors as the bots execute the transactions. Unlike their human counterparts, bots work 24 hours a day, seven days a week, and leave a clear record of the completed transaction, making compliance-related activities easier to track and monitor.
Growing Interest In RPA
RPA is generating considerable excitement in the world of finance and risk, and many firms are moving at pace with their RPA implementations. They typically begin exploring high-volume, low-complexity processes such as travel and expense management, review and payment of incoming vendor invoices, and monitoring of customer credit. RPA bots, for example, can scan invoices and automatically prepare payments, using logic and rules to validate invoices and routing exceptions to appropriate teams for review and approval. Leading firms are pushing into new areas with potential for further automation.
One of the most promising areas for RPA deployment is in compliance functions charged with fulfilling requirements for regulatory initiatives such as KYC (Know Your Customer), anti-money laundering (AML), and counterparty risk reporting. RPA bots can handle many of the activities associated with account openings, evaluating credit limits, and identification and explanation of changes in risk exposure. The use cases continue to expand.
Although RPA is a well-established approach to cost reduction, quality improvement and productivity enhancement, we are still in the early days in terms of recognizing its full potential. We foresee even more opportunity and transformation as analytics, machine learning and artificial intelligence follow behind this RPA wave.
Image credit: Shutterstock
Amidst the relentless robo-hype in our current era of robotic rhetoric, it’s fast-emerging that many buyers and service providers are really struggling to work together to create workable Robotic Process Automation initiatives – in many cases, neither are willing to make the necessary investments, trade-offs or sacrifices to make his work.
So let’s start with those selfish service providers unwilling to share the robotic rewards…
Some service providers want to implement RPA on themselves and avoid passing on the savings to their buyers. Having come off a great many buyer discussions about their developing Robotic Process Automation (RPA) capabilities to augment their BPO engagement productivity, I have been shocked to hear a common thread from several buyers: their service providers only want to implement RPA on themselves and insist on charging their buyers the same legacy FTE rates. Some service providers simply cannot stomach sharing gains with their buyers – some have, but the general experience, from the buyers, has been they are not really interested. And one of those service providers even boasts its own “cannibalization fund”, while refusing to do anything different with several of its biggest engagements. It’s quite mind blowing how contrary some of these service providers can be, when it comes to what they claim they are doing versus the reality of what they really up to.
Yes, amidst this talk of the leading service providers breaking away from the old model and openly exploring ways to invest in initiatives to delink headcount from revenue, it would appear that some are simply playing lip service to the industry while, in reality, they are just looking at RPA as a vehicle to drive down their own costs and improve their margins, while maintaining their legacy FTE-pricing. One buyer even mentioned to me that their service provider had the nerve to ask them if they could reduce their own staff delivery headcount using RPA, but keep charging them the same FTE rates…. no joke.
However, this isn’t just the fault of the service providers, many buyers are equally to blame for robotic restraint…
Buyers need to entrust their providers with more intimate data access. Most enterprise buyers, for security and control reasons, keep the providers at bay and force them to connect to their systems only using Citrix. This limits the effectiveness of RPA overall and encourages an “us versus them” mindset between buyer and provider, so it’s no surprise service providers do what they can on the other side of the “Citrix” firewall. Both parties cannot enjoy the full benefits of RPA and Intelligent Automation, without genuine collaborative engagements and a holistic security model that aligns the capabilities more effectively.
Greedy buyers need to stop treating RPA like legacy offshore BPO, demanding all the savings up front. I would also argue that many costs of RPA –greater testing, maintaining a fall-back agent pool and the incremental manner that robots are typically actually rolled out (versus a one time overall reduction in costs, as often asked by buyers) diminish the “greedy” aspect of this from many service providers. In addition, many buyers want royalties for advancing the automation initiatives of the sell side – there is a whole new business model evolving around access to data as well as contribution to IP, when it comes to developing effective RPA platforms.
Sadly, many buyers are often too greedy and want to get all the theoretical cost savings from a new deal up front, even before the RPA benefits have been formalized – and without realizing that RPA often drives up service provider costs in the short term for increased testing and QA. In this way, buyers are keeping the mindset used in legacy outsourcing deals, where savings driven through labor arbitrage were much more predictable and tangible. I would argue that many costs of RPA – a great deal of testing, maintaining a fall-back agent pool to mitigate transition risks, and the incremental way that robots are actually rolled out (versus a one time overall reduction in costs as often asked by buyers) put the service provider in a much riskier position to guarantee productivity benefits and cost efficiencies, than they ever were with their legacy outsourcing deals. Robots are not as easy to plug into legacy processes as offshore labor…
So clearly we are rapidly arriving at a juncture where a couple of scenarios will play out as to how buyers and service providers make RPA work…
Legacy BPO deals will continue to stagnate for some time. In most cases, deals struck several years’ ago have met their initial productivity targets through offshoring and some basic process standardization. The service provider has no incentive to do anything but maintain the same rates and same margin, and most are willing to risk their buyer trying to bring in a competitive bidding process. They know that in many cases, their business is not that attractive to other providers, and the cost of switching outweighs the benefits of “winning” the business.
Where we will see the advent of Robotic-led BPO solutions
Definition of Robotic BPO: “Applying robotics to transform legacy business process outsourcing engagements that were developed with a legacy FTE pricing and mindset. Deals are wholly or partially financed by the anticipated future headcount reduction and productivity improvements driven by the RPA, where the buyer and provider share the risks”.
It’s very rare today that RPA results in the elimination of entire job roles for staff in the BPO world (less so than with IT automation). Hence, we view an emerging focus on human-augmentation robotic solutions that combine people-driven processes with genuine RPA capability where it is cost effective and secure to implement.
We are already witnessing a serious potential for service providers to offer RPA-led offerings to streamline bloated stagnant BPO engagements, especially where there is a lot of very automatable offshore work that is efficiently run with well documented process flows. Enter R-BPO, where we will surely see the first automation-led human augmentation solutions, where the deals are partially funded by the expected headcount reduction and productivity improvements over the course of a multi-year engagement. We believe this will be especially relevant in F&A contracts which form the baseline of the BPO market today
Once we get passed the constraints of Citrix and the non-collaborative application and data security strategy of many enterprises there is real opportunity to reshape the market of F&A BPO contracts. In Finance and Accounting, many deals are mature and rooted in legacy models, the work is highly transactional, and buyers have been stuck with the same FTE loads for years (or decades). But the real reason why F&A is starting to deliver real potential for R-BPO is the simple lack of widely accepted enterprise F&A SaaS which can fix the dysfunction of a process, with a broad-brush implementation and hefty license fee. We are seeing it in pockets with SaaS solutions such as Workday FM, Netsuite and even FinancialForce, but it’s the ultimate failure of F&A to over-rely on legacy technology, maintain strict controls that defy collaboration, and keep bloated numbers of people to deliver legacy processes that is creating a huge potential new market for robotic-led processing and human augmentation.
The Bottom-line: Legacy BPO may be stagnating on its own, but it’s ready for R-BPO
What’s abundantly clear is that the outsourcing industry is caught in one bloody great rut: too many engagements are simply stuck in this Catch-22 where they are no longer attractive to competitive bids and the incumbent providers simply do not see the value (or have the onus) to invest in the buyer. You can’t trim the fat until you fix – and automate – the process underbelly, and today’s emerging RPA tools, such as Automation Anywhere, Blue Prism and UiPath, are increasingly providing the platform to do that. So the next phase is for R-BPO solutions to be come to market that are priced against future productivity gains through automation, not immediate cost-savings through labor arbitrage and elimination.