Business process outsourcing (BPO) is the service by which a company uses a provider to perform its repetitive, rules-driven operational processes, usually with low cost labor in a foreign delivery center. Those types of processes also lend themselves to automated workflow software, leading some highly regarded advisory firms to predict the emergence of new transformational business process outsourcing offerings. However, there are challenges to such offerings, and these challenges may prevent them from becoming as transformational or pervasive as industry pundits would have us believe.
BPO automation: 4 challenges but great opportunities
Beyond a common ground of applying technology to achieve cost, scalability and performance benefits beyond what’s possible in human workforces, BPO providers face very different challenges and risks than ones for companies who “insource” process automation by deploying the technology themselves.
Contracts and timeframes
Two of the largest differences between process automation outsourcing and insourcing can be found in the nature and scale of the two activities. Outsourcing almost always begins with a company RFP and a resulting engagement typically embodies RFP characteristics: it is large enough to justify the investment in RFP time and money; it is long enough to absorb the downsides of organization disruption and reap significant benefits; it is won by competitive bidding with a solution based on limited RFP information.
A company’s insource initiative is not burdened with these RFP characteristics. It can be small (and usually is) – a pilot focused on only a few processes; it can be comprised of short, iterative cycles – each applying lessons learned from the prior cycle; it acts upon on deep knowledge of company business processes and only faces only the competitive pressure of fighting for available budget monies.
The difference in operational and financial risks is huge. The outsourcing provider must lay a long term bet on price and performance guarantees based on imperfect information and limited solution design time. Since all RFP awards are highly competitive, measures to place conditional language or exclusions in those commitments increase the risk of failure.
Again, while both outsourcing and insourcing of automated workflows involve the use of robotic software technology, the risks and challenges are very different. Given the large scale of RFP-based engagements, software used by the outsourcing provider requires not only robust functionality on the robotic level, but also enterpriselevel capabilities across a global delivery model. Additionally, delivery centers focus on standardized technologies to promote quality and resource utilization, so providers would likely be limited to vendor options that could easily scale to large deployments. With emerging technologies, restrictions on qualified vendors can often lead to lackluster selections.
A company’s insourced initiatives, smaller and more flexible than RFP engagements, have the luxury of choosing to place a higher priority on innovative desktop robotic features and less on enterprise functionality – at least in the beginning. The modest scale also permits a company to avoid long term commitments to a small range of vendors. In fact, small initiatives encourage experimentation and comparison.
Work roles and locations
Business process outsourcers face a very disruptive transition from existing work roles and locations to the new world of automated workflows. Currently, the majority of their work takes place in low cost, well organized, highly scalable offshore delivery centers. Introducing business process automation offerings will radically change existing work roles and locations in several ways.
One way is the virtual disappearance of low-value roles. Once the robotic software is configured for process automation, this ‘virtual’ workforce will begin to lower operating costs by up to 65% while running 24/7 without cost of living increases. But high-value roles will not only remain, they will be indispensable. Without people with business skill and knowledge to resolve exceptions to activity rules embedded in workflow design, the software cannot perform. Outsourcers will have to recruit and retain more qualified workers than in the past.
Another change will be work locations. Because business knowledge and exception handling will be key job responsibilities for remaining workers, nearshore work locations – in or adjacent to customer time zones – could become a more effective delivery model than offshore centers. Over the past five years the outsourcing industry has emphasized cutting delivery costs by reducing their onsite and nearshore presence. If robotic software creates a delivery model with significant nearshore and onsite roles, reversing active trends in the opposite directions will be a challenge.
There will be a radical difference between governance requirements for customary business process outsourcing services and those for automated workflows.
Currently, delivery of provider services is based on well-defined hand-offs of outputs from customer processes to offsite delivery centers. Once the hand-off is made, the offsite delivery center has full control over the activities required to create customer deliverables. In fact, that full control over offsite deliver center processes and activities is essential for the efficiencies providers need in order to comply with service level agreement (SLA) requirements and internal profitability targets.
However, in a scenario with automated workflows, a great deal of offsite delivery center activities will be unnecessary - in terms of human workers. In this scenario, customer outsourcing benefits will be outcome based rather than FTE-based; human processes and activities will be minimized.
Critically, the robotic software and workflow design driving this outcome-based delivery model will be very tightly integrated with both upstream and downstream customer business processes. Any unanticipated change in those upstream and downstream business processes will have the very real potential of bringing the automated workflow delivery model to a halt.
For that reason, the workflow governance structure must be designed and structured to promote full transparency of business process changes on the customer side.
Further, the governance structure must incorporate resources with the expertise to accurately discern the consequences of planned process changes and adjust robotic software configurations.
Finally, escalation procedures must be in place for rapid responses and mitigation tactics when unforeseen process changes inflict operational disruptions.
David Eddy has fifteen years of global application services experience.