The key questions BPO investors have about RPA

Written by Jordan McMahon in Automation Anywhere News on March 31, 2015
key question about RPARecently, Automation Anywhere CEO Mihir Shukla had a conversation with BPO investors about how RPA is impacting the outsourcing world, and what BPOs and their investors should watch out for. Here, in interview form, are some key takeaways.

Why is it relevant to discuss this topic now more than ever before?

MS:

We are at a pivotal point in our evolution as a society. Computing power has grown so exponentially that now many things that were formerly done by humans can now be done by a computer. If you need a good example of this, look to the highways. I live in the Bay Area where the Google self-driving car in the lane next to me is a common sight on the morning commute. The fact that a car is capable of driving itself is remarkable when you consider the number of ways humans need to react to variables on the road: swerving, braking rapidly, avoiding an animal, deciding right or left when you come to a fork in the road, you get the picture.

If cars drive themselves now, despite all of the variability on the roads, you better believe that tasks like processing an invoice—a process that has comparably little variance—can be automated much more easily. And the reality is that those processes are being automated. Everywhere. This new technological age will replace the workers who perform actions that could be considered robotic, and are therefore better performed by a robot.

What does this mean specifically for BPOs?

MS:

BPOs and the shared service industry at large employ a workforce that is relatively low skilled. So it seems inevitable that the RPA trend is coming to that industry.

 

Everest Group Research has analyzed the impact that automation will have on the services industry. 40% of all outsourcing contracts are ready to be impacted by automation, and have the potential to be affected quickly—within the next 18 months, in fact. RPA is 4 times as likely to be included in new F&A deals, a growth rate of 1,000% from two years ago to now. BPO clients’ IT budgets are not increasing, making it imperative to find and fund solutions for the digital world. Automation is now moving from “nice to have” to “need to have.” And it’s not a matter of “if,” but “when.”

Once you accept that certain work can be done by an automated computer, in a financial model you are competing against cost of computing—which continues to decrease—and cost of human labor, which continues to increase. I don’t know anyone in my professional life who will bet against the cost of computing power.

And actually automating the processes is only the beginning. Cognition (also known as Artificial Intelligence) and RPA are being combined by providers like Automation Anywhere. I’m sure others will follow - the value of such a combination is simply too compelling. The combination of RPA and Cognitive will create highly specialized process cognition technology that excels at mimicking human behavior, while thinking in a different way than humans.  The back-office is already being automated, and the front-office is next with these cognitive developments.

How have the service providers been defining automation all these years, and how that is being changed by companies like Automation Anywhere?

MS:

There are a few ways the scope has changed. First, service providers have exhausted other options, like moving to lower cost models. The choice to go with automation is easy when, really, there is no other choice.

Second, automation can handle vastly increased scope and scale now, compared to its early days when it would have to tackle multi-million dollar projects that last 5 years and require customers to change their systems or excel macros. RPA provides a very different price/performance option that is game-changing. It is an enterprise-class solution at dramatically reduced cost and dramatically reduced timeframe for delivery.

Finally, there is also a timing element. If this technology was available 10 years ago, it wouldn’t have the same impact. Automation requires digitization, development in OCR technologies, and maturity in processes and six sigma. Of course, we have all of that now, and so it’s the right time and place to be employing this technology.

Let’s talk past-present-future: Where are we today vs. 3-5 years ago, and how do you see the progress 5 years from now?

MS:

The first striking difference is in demand. Customers are actively asking for RPA. There’s been a 1000% increase in RPA requirements from 2 years ago to today. On the flip side, supply needs to meet this. BPO is an area that will be significantly impacted by RPA in the near future. Of the total ~USD150b industry with more than 2 million people employed in India alone, on average, 20-40% of jobs will be automated in 5 years, depending on whether the job is higher or lower value, or how “robotic” in nature it is. Today the number is less than 1%.

 

Over the next several years, providers that lag behind on the RPA adoption curve risk having their customers ‘in-source’ using RPA—cutting out the ‘middle-man,’ so to speak.

What are the gaps between provider offerings and client demands? What are the provider imperatives?

MS:

I was recently at SSON Week in Orlando, and there was a clear trend—including an entire keynote—talking about how automation will impact the future of shared services and outsourcing, and usher in a new “machine age.” Shared Services Organizations are increasingly focused on continuous process optimization, otherwise known as ‘the need to support client growth with reduced budgets’ in parallel with outsourcing. Clients are not only asking, they’re demanding that providers support them in continuous optimization. Given this pressure, providers are turning towards analytics and RPA.

BPOs have multiple challenges like Cloud and Mobile interfaces, technologies which allow a process to run end-to-end with minimal need for middlemen. And amid such a scenario, service providers are required to provide anywhere between 3-5% efficiency every year. Labor arbitrage can only take them so far, and is not an option that can be optimized further forever to meet end clients’ need. To further complicate the picture, there’s increasing pressure from process-as-a-service providers, organizations that are completely cloud-based and fully capable of taking on end-to-end processes with a 100% turnkey solution. Think what ADP has been doing for payroll and apply that to broader swaths of HR and Accounting.

What is the order of savings to be had for the client in choosing the RPA route (over and above the offshore model)?

According to ISG, automation could result in 60-80% cost savings for outsourcing customers, versus 15-30% savings from the traditional Indian IT. Our experience tells us that provider clients that come directly to RPA providers see the same 60-80% savings that RPA-backed providers will ultimately deliver. The key for providers will be the value add above and beyond automation, including continuous process optimization.

Does this pose a serious alternative to the offshoring model (and thereby gain popularity sooner)?

Technology is disruptive when you are not ready for it. If service providers are open and willing to change with the shifts in client needs, RPA offers a tremendous opportunity to remain competitive. As long as vendors can provide automation, the end customer will take it from the incumbent vendor. Clients appreciate vendor know-how, and that drives ‘stickiness.’

To learn more about how RPA is making waves in the outsourcing world, read our Complete Starter Guide to RPA for the Outsourcing Community.