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A New Paradigm in Automation Threatens Status Quo for Outsourcers

By Lee Coulter, CEO, Ascension Ministry Service Center

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Lee Coulter, CEO, Ascension Ministry Service Center

As companies began operating complex systems in the 80s and 90s, the solution to finding less expensive ways of performing mental or cognitive tasks relied largely on global labor arbitrage, creating the global $250B outsourcing market.  Automation is not a new concept. We have been automating physical human labor for hundreds of years. The advent of the computer opened the door for automation of men- t a l rather than physical tasks. Recently, a new breed of software platforms is automating complex mental reasoning tasks that we might characterize as cognitive labor. “Recently, a new breed of softwareplatforms isautomating complexmental reasoningtasks that we mightcharacterize ascognitive labor”

There has been plenty of hype about this most recent wave of automation. When you peel back the covers on today’s technology, it’s real. This isn’t a “someday, this would be pretty cool” sort of thing. This is here, and it has its sights set squarely on the outsourcing industry; an industry built on using lower cost labor to perform what is now largely automatable work.

 What is Robotic Process Automation?

Terminology in this new wave of automation is still getting settled. The big catch-all label is Robotic Process Automation (RPA). However, the term RPA includes a wide spectrum of capabilities:

 • Task automation (doing things), • Interpretive automation (understanding inputs such as images or natural language) • Precognitive automation (if, then, else rule-based decision making) • Cognitive automation (decision making) • Machine learning (learning how to make new decisions) • Intelligence automation (human l ike intuition, making decisions, and establishing future structures for gaining additional knowledge and capability)

 If you can build a process map, chances are good it can be automated. What’s more, bots don’t fat finger an input, get sick, complain, or get tired, and the new platforms track every action performed. A typical bot can do the work of two to five people depending on the application. Costs to perform the work drop by 50-90 percent.

 Today, with these new tools and a couple of weeks of training, a reasonably skilled subject matter expert can create a “bot” eliminating repetitive tasks that just a few years ago could only be done by a human being. The new tools are platform independent. If the task involved requires accessing multiple systems, transforming data or inputs, and assessing complex scenarios, you can build a bot to do it. Why Now? What Changed?

 Our rapidly evolving digital world provides an important foundation for automation tools. We all live by calendars, communicate in text, and have a transactional history or fingerprint that is discoverable and usable. This digital world means that a bot can interact in much the same way we ourselves are interacting until recently, software was focused on automating a human task. The new tools are using trainable a layer of software to operate other multiple software platforms the same way a person would.

 The Impact on Industry and Specifically Outsourcing

For businesses everywhere, automation offers a new alternative to how things get done. We live in an increasingly cloud based, digital world. The new automation puts a big shiny new tool in the tool belts of corporate leadership. After adopting ERP and process standards, the logical next step in cost reduction was to outsource the work. Now there is a new option.

 Outsourcing providers are wrestling with this new reality. The vast majority of outsourced work was chosen for its repetitive or rule-based nature. This work is now first on the list for potential automation. Consider the options if you are a provider:

1) Proactively approach your clients. Develop a plan to apply automation. Offer them a 60 percent reduction in cost and hope you can keep your client while cannibalizing your own revenue stream. 2) Quietly automate the work you are doing for your client and hope that by the time they figure out what is going on, you are in a position to offer to drop their price by 75 percent.

 3) Ignore all of this and wonder what happens when they either:         a. Automate the outsourced work.        b. Don’t renew because they are working with outsourcer B who is offering automation and a much lower price.

   4) Get into the automation business, helping your current and potential clients, but at nowhere near the revenues and margins you previously enjoyed.

   5) All of the above.

      Service providers are agonizing over these options.

 Putting It in Perspective

The future of work is changing quickly. Automating wide swaths of administrative burdens will free us up to focus on higher value work. We will be able to spend more of our time on interesting and higher value work. At the same time, it will disrupt many jobs common today.

While the impact of the new world of automation is real, so are the principles Gartner’s Hype Cycle and Adoption Curve. What is compelling for the outsourcing industry is that a high percentage of the work is technology enabled. This means that this work, before other work, is going to be influenced first and most significantly by automation.

 Service providers are looking at contracts and renewal dates, assessing the sophistication of their clients, and trying to figure out what to do. How it is all going to sort itself out is uncertain. What is certain is that automation is to the outsourcing industry what digital media streaming was to Blockbuster or digital imaging was to Kodak. Lee Coulter