Rise of the BPO bots

1. new approaches and what’s unusual is the speed with which the RPA market is developing. Normally an industry is built up over time, with many false starts. We are seeing the exact opposite in the automation world; in only the past two or three years it has leapt almost fully formed into the industry that we once called outsourcing. BPO providers are finally waking up to the fact that their entire business model could soon be obsolete and they are anxious. Those companies that are rolling out automation are not talking about it because it is decoupling routine service delivery from labour arbitrage, something that has sat at the heart of the BPO market in the past 20 years. Plus, bearing in mind that almost all outsourcing service providers’ business models are (still) predicated on doing work cheaper in far-off lands, this is extremely worrying for them. But what about organisations that don’t outsource? What is the impact of RPA on a captive business? For Dariusz C onference panel discussions are generally pretty lame affairs - competitors become frenemies and nothing much of value comes out of them. Well, not this time. Chairing a debate on the impact of automation on the BPO market at the recent Analyst Relations Forum conference, I hosted an animated chat between the chief executive of a robotic process automation (RPA) software house, a captive leader who’d done his own thing, one of the foremost analysts and a founder of a consulting firm. One thing became obvious really quickly; the impact that automation is starting to have on the BPO market is but a foretaste of what is to come. Tom Reuner of HfS Research knows his stuff and can articulate it to an audience of service providers in a way that is both impressive and scary. He gave an overview of the automation/autonomics market, saying that automation is not one thing. In fact, there is a whole raft of Bazeli, general manager of Geoban (the captive shared service operation of Santander Group), the answer is clear. By using automation software, initially from NICE and then by using C# tools from Microsoft, he has more than 100 applications running in his back-office operation with nearly 30% now being automated. For a financial institution this is extremely rare as, traditionally, most of the investment is spent on the front office not in the back office. Bazeli sees his role as using automation to build a bridge between the two. Pascal Baker spent 17 years in outsourcing and has also seen the difference in the last year with automation. He’s found that clients are using automation in a different way. Yes, one can still drive transactional work through automation to drive out cost, but he finds that cus- tomers of Symphony Ventures (a leading RPA consultancy) are increasingly using automation to do things that they can’t achieve with outsourcing: for instance, Rise of the BPO bots Guy Kirkwood asks if BPO could morph into BPA because of the impact of robotics 04 Professional Outsourcing Special Report DEBATE t

2. using automation to focus on improv- ing customer experience, increasing cycle-time because the robots can work 24/7. One of his clients in the care home market is deploying automation to allow more staff trained in patient care, but who were doing administrative tasks, to focus on patient care – something that just couldn’t be done through outsourcing. The cost savings of using RPA over BPO are still the same or better, but it’s much more valuable than just saving money. Daniel Dines, CEO of RPA software firm UiPath, winds back slightly as he’s still finding organisations that know nothing about RPA. At the simplest level, he compares RPA to having an army of chimpanzees you can train to do transactional tasks without needing any breaks to visit the bathroom. Now there’s an image we weren’t expecting... The bottleneck, as he sees it, in terms of widespread adoption is not in the technology, it’s in the mentality of the delivery centres and the process issues that have been in existence far earlier than the tools necessary to fix them. Dines believes that robotics alone won’t replace the hundreds of thousands of people doing this work – that will come when artificial intelligence (AI) becomes more mature – but it is currently enhancing the work of the humans, helping them to become more efficient and work faster. It is an and, not an or situation. For those readers who didn’t catch the last edition of Professional Outsourcing Magazine, which focused on robotics, Dines has a cracking analogy: self-driving cars. There are currently two approaches. Most existing car manufacturers are installing systems that will assist drivers in specific circumstances while on main roads or highways; they will steer, speed up or slow down and change lanes without input from the human driver. The other alternative, as advocated and developed by Google, is the complete package where the car is in control in all circumstances. The current RPA solu- tions are like the first situation, helping now and available now. The second requires AI that just does not exist and is probably five to 10 years out – a similar time scale for the mass consumption of Google’s (or to be precise Alphabet’s) car. For Reuner, the speed of development in the RPA market so far has been precipitous compared with the creation and rollout of cloud, where the seven years to a turnkey solution has been achieved in two or three years. He and his team note that all of the large outsourcing service providers are looking at RPA, but most are looking only at a sub-processes level. A tangible example is a mediating system in the IT helpdesk environment. The robot talks to the virtual agent, conducting simple tasks such as password resets. This is possible as the processes in IT have been well standardised over many years. This allows the robot to follow IT service management (ITSM) standard operating procedures, so the clients no longer need human helpdesk agents to carry out these tasks. Compared to IT, BPO is much more complex with sub-processes being more specialised. One would need to have the skills and experience of a business analyst to understand the intricacies of each element of, say, finance or HR. It’s only by combining the features of several systems that companies can move their business processes towards an autonomic “as a service” future. What’s interesting is the dichotomy between the rise of BPO 20 years ago, when it was the advisers and consultants who were leading the charge, and today, where it could be argued that most consultants are behind the curve. Baker believes that this is certainly the case; the market just isn’t mature enough to add value to the consultants’ clients. For BPO, once the market was mature, there were armies of consultants and advisers and the tangible results led to first, second and third-generation BPO deals and the associated commoditisa- tion of services. RPA is a new phenom- enon and it’s taking the analysts and advisers time to catch up. At present the small number of organisations in the RPA ecosystem are doing the lion’s share of the education. This is accelerat- The speed of development in the RPA market so far has been precipitous compared with the creation and rollout of cloud; the seven years to a turnkey solution has been achieved in two or three years. “ ” t Professional Outsourcing Special Report 05

3. greater for captives but it requires much more education. He also thinks that for the outsourcing community that use robotics, there will be an increase in profitability but a marked decrease in revenues. It can be argued that the fastest BPO companies to embrace RPA and AI will be in the position where they become immune to the vagaries of labour arbitrage and either position themselves as being ripe for acquisition, or even in a better position to acquire capability themselves as they pick up more work from the more traditional and slower competition. In other words, RPA might well be the catalyst that leads to increased consolidation among the outsourcing providers. Reunerr thinks differently; he has observed that the companies with most to lose from automation – the Indian service providers with their vast access to cheap labour – are counterintuitively at the forefront of adoption. Many com- mentators read these companies’ re- ports, which state they’re reducing their headcount by a third (which in some cases translates to more than 100,000 jobs) and see only one end-game, but it is more complex than that. Reuner sees these companies fundamentally reshaping themselves. The generalist back-office jobs are shifting much more towards analytical and technical roles, but this does not mean that we’ll see an increase in consolidation as a result. For Baker, the questions that the advisers should be asking on their clients’ behalf are about the full end-to-end transformation capability and how RPA can facilitate a true “people, process, technology” play. BPO has delivered phenomenal labour arbitrage but has ing as large corporate organisations hear about the potential value of RPA. So, education for Symphony is being seen in two ways; clients are pushing the advisers and consultants for more information (the reverse of the situation 20 years ago), and the RPA technology companies, system integrators and specialist consultancies are continuing to push information out to the market. From a captive client perspective, the question is whether RPA is more appli- cable as an alternative to BPO specifically and outsourcing in general. Bazeli sees large outsourcing companies reviewing the technology to help deliver on the promises they have made to their inter- nal clients. For captives, just by moving work to an offshore-based shared service centre and reaping the cost savings, most organisations remain happy. For many captive leaders, the idea of RPA remains either that it is robotics and therefore very complex or simply mac- ros that have been used for years. Very few captives see the middle ground, where RPA can replicate the work of people in a much more controlled and stable environment. Bazeli also believes that RPA is an enabler for captives to review how streamlined a captive’s processes actually are. Much has been made of lean and Six Sigma operations, but when RPA is being considered and one starts scratching below the surface, many captives still have much to do. Bazeli finds that BPO firms are more mature and sophisticated in their adoption of RPA than captives. The top five BPO companies already have RPA practices, but he thinks that the balance of power between supplier and captive will reverse over time. For UiPath, he sees the potential of RPA being much seldom delivered more than lower FTE costs, which advisers and clients alike have wanted to use as their apples with apples comparisons in competitive cycles. RPA will undoubtedly offer significant cost reduction (even versus perceived low-cost locations), in some cases achieving more than 1,000% ROI, but that is not the point; it is how the client’s best people can avoid doing the mundane transactional tasks and move to more analytical, higher-value judgemental work that will fundamentally drive successful uptake. The RPA market is still maturing. To discuss how and where it will have the greatest impact requires an overview that the AR Forum debate was able to provide. By having representation from what are arguably the leading organisations in the ecosystem articulating their different perspectives, not only did we avoid the “lame panel”, but the outsourcing providers and end-user clients in the room could use the information to shape their offerings and their companies’ future direction. So my thanks to Daniel, Dariusz, Tom and Pascal. The value of this interaction to the audience is a clearer view of where automation is going and, in conclusion, RPA then is all about human and robot collaboration. In terms of where we are now, there are really no robots today that can take over an entire process from end to end as business processes are still likely to require decision-mak- ing and judgement that the machines without AI currently can’t manage. So, to answer the question posed at the start of this piece, BPO will not become BPA but it might well ultimately become BPAI. 06 Professional Outsourcing Special Report DEBATE t