Intelligent automation - a game-changer for outsourcing in Industry 4.0

IN the previous decades, the cost-labour arbitrage model has fueled the rise of offshore outsourcing. The traditional value proposition is based on FTE savings and it has long been the foundation for multi-million dollar, long-term contracts in the outsourcing sector. However, recent developments in Intelligent Automation (IA) have shifted the ground beneath the outsourcing industry. Some have contended that automation will render offshore outsourcing ‘obsolete’ (Troove, 2018). Early signs suggest that the cost-labour arbitrage model is no longer a sufficient value proposition to customers. This year, 22% of Shared Services professionals shared plans to reduce reliance on outsourcing by automating this work in-house, in an emerging phenomenon known as virtual shoring.

With the rise of smart robots, artificial intelligence (AI), big data analytics and cloud computing, the business landscape is now digitally-connected and insight-driven. Software bots have revolutionised service delivery and are outperforming human labour in measures of speed and accuracy. The inability of providers to offer an attractive value proposition beyond the cost-labour arbitrage has resulted in unhappy partnerships where customers are losing patience. Currently, customers have shared that their outsourcing relationships are increasingly characterised by a lack of innovation, customer-centricity and cultural engagement (Enlighten and SSON, 2018). To stay relevant in the age of digitalisation, providers need to revitalise their business model - pronto.

How can providers inject more value in their offerings? More than 50 BPO customers reveal that they expect providers to play the role of a strategic enabler to the business, by offering effective solutions for problem-solving (46%), leveraging RPA to improve performance (43%), analytical insights (37%) and end-to-end expertise (36%).

To meet such expectations, next-generation outsourcing must deliver a greater degree of personalisation, engagement with problem-solving and digital enablement. It is critical that providers leverage intelligent automation to enhance expertise in areas of domain specialisation, greater process complexity and are able to support business strategy with data-driven insights.

By showing customers that they can deliver unparalleled value to their processes, providers can offer an attractive value proposition where human and digital labour work in tandem to create a seamless, end-to-end experience.

Unfortunately, outsourcing’s ascent of the value chain has been far from smooth. Providers cited that a lack of talent was hampering efforts to optimise technology (Enlighten & SSON, 2019). Anti-outsourcing sentiment fueled by protectionism in the U.S., Europe and Australia has resulted in immigration reforms (CNN Money, 2018) and a proposed regulatory crackdown on offshore outsourcing (The Australian, 2019), thereby, exacerbating the talent challenge. Leading outsourcing locations, Philippines and India have also reported decade low growth rates (Bloomberg, 2019).

The confluence of macroeconomic conditions described above will exert more pressure on providers to reinvent their value proposition as customers have less of an incentive to move work overseas. Providers can no longer expect that the cost-labour arbitrage will enable them to stay competitive as major economies seek to clamp down on outsourcing. More than ever, the time has come for providers to make strategic investments in their talent through upskilling or reskilling, and bridge their current offerings with technology.

All of which spells good news for customers who will benefit from outsourcing’s new value proposition. As digitalisation continues its onward march, the winners and losers of Industry 4.0 are already being sorted. Providers who have yet to realise this are simply waiting for the shoe to drop when their contracts end.

Granular insights on the impact of Intelligent Automation are available in SSON Analytics’ recent VAW: Intelligent Automation in modern Shared Services - a catalyst for opportunities, driving strategy and service excellence. Or read our recent report on outsourcing here - BPO in the 2020s: How Leaders will be positioned.

Sources: 1. Forget off-shoring. The future is virtual shoring. (Troove, 2018), 2. APAC BPO Market Report (Enlighten & SSON, 2019), 3. Global immigration backlash could hurt India's top tech companies (CNN Money, 2018) 4. Labor strike on companies sending jobs offshore (The Australian, 2019), 5. Philippines Outsourcing Growth May Slow as Industry Faces Challenges (Bloomberg, 2019)