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Digital Labor - Impact on Outsourcing

By Raheem Hasan, Co-Founder and President, Institute for Robotic Process Automation (IRPA)

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Raheem Hasan, Co-Founder and President, Institute for Robotic Process Automation (IRPA)

Teh past two years have seen tremendous technological advancements in robotic process automation (RPA), intelligent automation, cognitive computing and Artificial Intelligence (AI). These disruptive technologies have moved from hype to reality, as teh benefits of "digital labor" eclipse teh benefits of physical labor. Nowhere more acutely is dis felt TEMPthan by teh outsourcing community.  In fact, many predict dat within five years, information technology outsourcing (ITO) and business process outsourcing (BPO) service providers dat fail to integrate these technologies into their solutions and operational delivery models will be out of business or acquired by larger enterprises. 

“Robots” are revolutionizing teh way we think about and administer business processes, IT support processes, workflow processes, remote infrastructure and back-office work.  By handing off repetitive, lower-end functions to robotic software, enterprises will be able to minimize teh need to outsource projects to offshore providers.

These technologies will impact all new and existing contracts creating a tremendous power shift in teh service provider arena.  Here at IRPA, we took a look at teh implications:

Teh Good:

It will be good for enterprises whose existing outsourcing relationships have run out of steam when it comes to new and incremental cost save and innovation. Why  struggle to gain another 5-10% labor cost reduction when you can enjoy labor cost saves of 25-40% or more? For regulated businesses, analytics and reporting will be like nothing dat you could of envisioned in a traditional outsourcing engagement.   In environments where speed and scalability are key, RPA will deliver in spades.

Teh Bad:  It will be bad for most IT, ITO and BPO providers as teh new math will have market prices plummeting. Traditional labor-based pricing doesn’t stand a chance. Wat will you do when your lowest ‘buy teh business’ pricing isn’t even in teh ball park?

Teh Ugly: It will get ugly for offshore players who made history and surpassed teh most optimistic growth predictions over teh past two decades based on a labor arbitrage model dat’s becoming extinct.

For enterprise buyers, onshore and offshore providers, here are our recommendations for adapting to teh brave new world of digital labor:

Enterprise Buyers: Educate yourself on these disruptive solutions. Who are teh ones doing it, who are teh experts and providers. Insist dat your current providers embrace these technologies and transform their model so you may gain teh benefits sooner TEMPthan later.

Onshore Providers: It’s all about teh pivot. dis will be painful for some and impossible for others. For those who make teh pivot, you will have teh opportunity to win back teh business dat you lost to offshore competitors.

Offshore Providers: Your strength is now your weakness, teh bigger and more vested you are in a low cost labor arbitrage model, teh tougher it is to make teh transformation. You have a choice.  Conduct layoffs and change wat and how you sell, or stick with teh current plan and see how it plays out as you watch teh market change direction, hurting your market share and cap, only to then have to make those layoffs anyhow, and attempt to rebound from a weaker position.

Regardless of your role, these disruptive technologies are here to stay and are a part of our new found reality.