During PTD last Friday, Phil Fersht, CEO Horses for Sources (HfS) wondered whether outsourcing organizations are heading towards a zombie state. His argument is that the dull, repetitive tasks that often get offshored are leading to a condition where people are becoming demoralized and losing any interest they might have had in the tasks they routinely perform.
The outsourcing business is in danger of killing itself with boredom, with repetition, with believing its own bad marketing. Most of the corporate world has little clue what “outsourcing” is beyond subbing onshore with offshore labor. It is a business with unclear career paths, with over promised outcomes, and too many struggling and distrusting relationships.
The implications are obvious:
- Fragile productivity
- Higher risk of rework
- Higher offshore staff churn leading to...
- Higher costs in the long haul even though BPO is often seen as a race to the bottom
As an antidote to this situation, Charles Sutherland, SVP BPO Strategies, HfS Research has penned an intriguing paper about the introduction of cheap, easy to deploy software robots into otherwise dull but necessary business processes. This is a follow up to a paper HfS published a year ago when:
We concluded that robotic automation, or Robotistan (as we described it in a subsequent webinar), had the potential to be highly disruptive and to be a transformative technology for buyers and BPO service providers that would lead to a new landscape.
A year later, we are even more convinced that robotic automation has the potential to change the BPO marketplace.
What is robotic automation?
Robotic automation is the application of specific technology and methodologies to use a computer or “virtualized FTE or robot” rather than a person to manipulate existing application software (e.g., ERPs, claims applications, databases, learning management systems) in the same way that a person today processes a transaction or completes a process.
Robotic automation doesn’t replace existing client or service provider applications; instead, the robotic automation software works with those systems and the user interfaces to perform the specific task that the “virtual FTE or robot” has been asked to complete. This robotic automation software is designed to rapidly model and deploy the automation so it can be performed by individual delivery teams or process excellence resources without extensive and lengthy IT resources. With robotic automation, clients and service providers can also rationalize the vast portfolios of Excel macros and individually customized tools that have arisen over time to help the delivery teams be more efficient and effective but don’t fully automate the process either.
That's one heck of a mouthful but the ideas behind it are clear. Apart from wiping out the problems identified above, Sutherland believes this opens the door for delivering genuine business value outcomes such as reduced DSO and thus improved working capital utilization. That's something business would absolutely buy into. Sutherland believes this can be delivered without having to re-engineer existing or legacy systems. Another bonus.
Where are we up to?
According to Sutherland, the market is following the classic route of so many past technologies.
Last year, the action - such as it was - resided either with savvy buyers doing their own thing to robotize processes or, new entrants like Blue Prism were carving out a position as an early leader. Today, the large service providers are evaluating the potential but only a very few have committed resource to building out robotic capabilities. It is easy to understand why. In framing a 'Constitution for Robotistan,' Sutherland says:
Work with your organizational HR business partners to understand how different adoption scenarios of could impact the structure of your current and future headcounts. Make sure that you have the flexibility to manage the increased availability of certain skill sets or job levels within your model; otherwise, the potential benefits in reducing costs and improved attrition might result in unintended numbers of staff “on the bench.”
Basically - your headcount is going to get crushed so how are you going to cope and what impact will that have on the business model?
In the current report, HfS identifies a slew of processes and sub-processes that are good candidates for robotic automation. Taking finance as an example, Sutherland says that:
Procure to Pay (Accounts Payable)
Order to Cash (Order Management, Invoicing, Collections)
Record to Report (Fixed Asset Accounting)
...could be automated today with more to follow.
Over the last few years I have listened to Fersht as he talked about a shuffling of the deck chairs in the BPO business as the 'race to the bottom' accelerates. The introduction of robotic automation has parallels with the disruptive introduction of cloud accounting in the SME space that has had a significant impact on the accounting profession.
In the last couple of years, I have witnessed the emergence of a new class of solution provider that is flipping the professional model where 70% of the time billed was tied up in working with transactions. Now they can spend 70% of their time on value-added advisory. Most of this has happened outside the mainstream with the emergence of entirely new firms. Robotic automation sounds like it could have a similar impact in the BPO space.
I have no doubt that as in the past, disruption will be met with some level of disbelief sprinkled with resistance to change. HfS believes the trend towards building Robotistan will accelerate over the next 24 months. If correct then that will be far faster than I have witnessed in the SME space. My sense is that when enough big names like Telefonica, O2, the UKs NHS (which are already on the road) and others stand up and are counted as successful leaders in adoption then the movement can only snowball.
This is one to watch.