Ian Barkin, Global Head of Innovation, Sutherland Innovation Labs. Sutherland’s Innovation Labs amplify creativity across the firm and facilitate the design and execution of impactful new service offerings. As the Head of the Innovation Labs, Ian brings to bear his extensive background in BPO, service innovation, and trend spotting.
Topic: The evolving trend of robotic process automation, its impact on outsourcing and perspective on who will benefit most from this trend.
How do you see this trend evolving over the next 3-5 years?
Having spent many years in BPO and with ‘next big thing’ technology waves, we are excited about the prospect of the burgeoning robotics process automation trend. Our projection for the next 3 to 5 years is that we will see a quick ramp up in adoption for very simple and low risk processes. These will be focused around the pain points in enterprise systems such as data entry, Sales Order Processing, Accounts Payable, Accounts Receivable, Master Data Management, and HR. We also expect to see greater growth in sectors where work cannot be off-shored and in verticals where regulations and compliance are particularly strong (ie. Healthcare, Financial Services).
However, that’s only the beginning. Everything from enhanced surface-layer character recognition to voice recognition to true artificial intelligence will impact the landscape of services and knowledge work as we know it. McKinsey estimates that the economic impact of these ”knowledge automation tools” could be between $5.2 trillion and $6.7 trillion per year by 2025 due to greater output per knowledge worker. That’s huge!
With the existing capabilities in the market today, the near-term value of robotics is most applicable to organizations where rule-driven work is still performed manually. In our experience, the key success criteria for the adopters of process automation today will be their ability to move the discussion from one of enabling technologies to one of the business impacts.
Robotics is built on many automation techniques – some that have been around for nearly 20 years. But, until now, the technology has been dismissed by IT departments opting for more advanced and comprehensive systems. Now we have reached a maturity in robotics products that means the deployments no longer need to be IT-led but instead can be driven by the business. This is enabled by the fact that robotics is more nimble and adaptable than large ERP integrations. We are currently engaged with one client who still uses mainframe applications. Past projects attempting to replace these systems failed in deciphering and replicating the business rules amassed over decades. Now using robotics, we can preserve the business rules and logic in these old systems without a need to replace the systems, meanwhile minimizing risk and achieving high system speed. While some may argue robotics is a short term fix, for most companies the short term has a very long tail. For outsourcers and their clients, robotics platforms will become a strategic tool to address these tactical problems.
Finally, a change we expect to be particularly interesting in the next 3-5 year is the inevitable change in the BPO landscape. Like all evolutions, some players will adapt and survive, others will not. We are already starting to see new entrants that could be the harbingers of this change. Therefore, we anticipate the toppling of tier 1s, the acquisition of new entrants, and a fundamental reboot in the way solutions are approached, designed, deployed and supported. The next 5 years will be a turbulent time for outsourcing services firms. We’re excited to have a front row seat to the action.
What impact will this have on outsourcing?
It is our belief that robotics is destined to have a huge impact on the outsourcing industry. Impact so significant it will change the landscape and redefine the outsourcing services leaders quadrant. However, robotics is not being embraced by all. Many see the capability it brings as a threat and for them they may be right. Robotics undermines the investment in low cost delivery center infrastructures and the ability to sell large IT implementation projects. It therefore strikes at both ends of the market. This provides the opportunity for more innovative BPO service providers to step up to the challenge. At the same time this enables the leading robotics vendors to get into BPO. BPO vendors will need to differentiate on the value add they bring, either through experience, capability or capacity. As with BPO today some vendors will be able to take more risk and contract on outcome or deliver vested outsourcing arrangements. We are also seeing significant growth of robotics being sold directly to end clients, this will in turn impact outsourcing providers. As time progresses BPO vendors will need to support clients’ robotics tools as well as their own to be most effective.
Another dynamic is the growth in robotics software providers entering into the BPaaS space. Here BPOs will face direct competition for discreet services. There is room for both in the market but those BPO providers relying on labor arbitrage and simple processing are poised to be impacted the most by these developments.
Lastly, and perhaps further out than 5 years, we expect to see a gradual shift back to onshore delivery through the repatriation of work enabled by robotics. Whereas today BPO vendors offer a blended onshore, offshore and near shore delivery model, going forward we believe the offshore work will become automated. This will require offshore service delivery centers to upskill in order to take more of the work currently retained onshore – or else, face becoming obsolete.
Who will benefit most from this trend?
Based on the degree, scope and scale of impact, this is an exciting time for several stakeholders impacted by process automation and robotics. First, of course, are the clients – firms that are currently harboring large transaction-based workforces. The opportunity for cost savings, quality, process insight and financing of more strategic initiatives is significant. This impact may be just as large for service firms – those firms that have assumed control of previously captive transaction-based workforces.
However, we think the benefits will be most interesting and beneficial for the end customers – those individuals and firms ultimately impacted by process transaction speed and accuracy. By automating transactional processes in the front and back-office, customers will be rewarded with quicker and more accurate interactions with their service partners. This, in turn, will enable the better customer experience that most firms aspire to provide, but struggle to deliver. To date, we have seen examples of this where some clients consider automation as an opportunity to re-examine the impact of lower resource costs on the cost-to-benefit ratio of performing work not done today. This can either be through differentiating in their market through improving services to their end customers or through more tactical initiatives such as increasing collections rates. Examples here include increasing tailored personal and contextual communications, improving sell-on through using additional data sources to find the right product to promote at the right time and proactively resolving issues through increased monitoring before the client is aware of them.
However you slice it, process automation has the capacity to impact and benefit numerous stakeholders. The key is to identify areas of opportunity and to design and deploy meaningful solutions in a manner that protects (and transforms) core business processes.