The outsourcing industry has always functioned in a state of flux. It’s had to face a host of political scenarios and changing customer expectations. However, with the proliferation of Robotic Process Automation solutions, now it has to face the falling advantage of foreign labour. Does this spell the end of offshore outsourcing as we know it?
With the rise of RPA products, some could argue that this is a mere opportunity for the outsourcing industry to transform; this may well bare some truth. Some could even make the point that the two sectors have the potential to combine.
However, this may be somewhat optimistic. In the cold light of day, the outsourcing sector is slowing down.
The BPO market declined 25%in the fourth quarter of 2016, in line with the previous year.
Looking at some of the innovations in RPA, it isn’t hard to see why this may be the case.
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Just as many business leaders (mainly CFOs) thought they had squeezed out all the unnecessary cost in their IT department, RPA has shone the light on more new ways to save money.
Of course, it is debatable whether or not we see the end of outsourcing or just a change in the sector’s rate of growth.
For know one of the most telling things we can do is look at how industries are reacting. I’m fascinated with the 2018 State of Operations and Outsourcing study, conducted by Hfs research in conjunction with KPMG. It’s an excellent study which shows how different sectors are looking to spend on RPA and more traditional outsourcing.
Banking and insurance
According to the report, insurers look like they are reigning in on their spending towards BPO, with organisations here looking to make significant investments in outsourcing adding up to a mere 10%.
For insurance, this may seem surprising given how they were pioneers in BPO and offshoring about two decades ago.
>See also: Robotic process automation: an operations silver bullet?
RPA seems to be the new golden child, with 58% of insurers making significant investments in it.
Banks are also near to the front of the queue for RPA (50%).
It is reasonable to assume that this is because in functions like finance where processes are highly repeatable, regular and routine RPA makes straightforward sense. However, software robots (‘bots’) are also being used in banking and insurance to support management decisions, facilitate transactions and even managing aspects of office security.
Telecoms and utilities
The telecommunications sector has traditionally outsourced in a different way than other industries. This is down mainly to their complicated back offices.
Many well-established telecom providers face severe challenges in delivering innovative services to their customers. But given how they’re burdened with large volumes of data, they seem like ideal candidates for the adoption of process automation technologies like RPA.
This analysis reflects in the research, with 63% committed to investing in RPA. Significant investments in outsourcing sit at 40%.
Utilities, on the other hand, are lagging behind, with a 39% commitment to investing in RPA, 10% higher than their outsourcing investments.
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A study by GlobalData may shed light on why this may be the case. According to their report, utilities tend to be asset-heavy organisations dealing with significant complexity concerning maintaining their ageing infrastructure, sustaining high levels of reliability, and keeping customers happy.
They are under tremendous pressures to do more with existing infrastructure, since upgrades are more expensive, and require complex approval procedures.
Despite this, various commentators are confident that RPA will grow in the utility sector.
For retailers, 58% look to make significant investments in RPA.
Digital transformation has long been difficult for retailers; this is due mainly to the years of decentralisation and M&A activity this sector has seen.
But with pressure from retail giants like Amazon, there is a real need to get on board with digital customer channels.
Here RPA has a lot of promise and could help to fix legacy processes that were just not cost-effective to outsource in the past. This perhaps explains why investment intentions in outsourcing sit at 20%.
The manufacturing industry is one of the early adopters of automation processes, whether it is the use of machines and even robotics to assemble, test, and package their products. Likewise, that were pioneers of outsourcing, being early adopters of BPO.
>See also: In-house vs. outsourced IT: what makes the most business sense?
They have, however, in recent times, struggled to improve their outsourcing engagements through the years. Many manufacturers are frustrated with outdated supply chain and accounting systems.
This explains why intentions to invest in RPA sits at 52% and 20% for outsourcing.
Loss of jobs and automation have historical associations with each other. People can draw from this a sense of glum and plenty, I’m sure, are. But this could signal a real opportunity to put human talent to better use, on more value-added and strategic work as opposed to mechanical or transactional work.
As I mentioned, it is still early days to talk concretely about whether or not outsourcing has had its day. However, RPA is offering new cost-saving opportunities for organisations. Time will tell if the growth in RPA investments will yield the promised ROI (various RPA vendors have made big promises in this regard)
>See also: RPA and the role of the CIO
For some organisations who have invested in RPA adoption has not been smooth, some have hit serious setbacks, such as not having the in-house skills to use this sort of technology, putting them in a position to hire third-parties.
Forrester has previously forecasted a big year for RPA spending, and we are seeing how some of the organisations taken baby steps in RPA are coming back with more essential aims and more processes for automation.