Money Matters

Will Robotic Process Automation (RPA) replace business process outsourcing?

A man operating a computer in a factory space

In today’s guest post, Brian Terrell looks at the growth of Robotic Process Automation and it’s impact on the world of Business Process Outsourcing. For decades, virtually every large financial, insurance and telecom enterprise has employed nearshore and offshore outsourcing of routine business processes. And for decades, it penciled out in those enterprises’ favor. But that could be changing. Wages in China and India continue to rise by double digits annually. While wages in other countries remain low, there are significant startup costs and multiple challenges involved in outsourcing. Could Robotic Process Automation (RPA) replace Business Process Outsourcing (BPO)?

“The last decade was about replacing labor with cheaper labor. The coming decade will be about replacing cheaper labor with autonomics.”

Chetan Dube, Founder,  IPsoft Inc.

RPA’s Threat to BPO

RPA has the potential to make many outsourcing relationships obsolete. Estimates from experts at Deloitte Consulting, Everest Group and KPMG place the cost savings of RPA over outsourcing at upwards of 70 percent. But that’s not all – RPA’s threat to outsourcing goes beyond the cost savings. By replacing outsourcing with RPA, companies stand to reap benefits like these:

  1. Complete control: Your organization drives and delivers your automation, leaving no chance for an outside party to lose sight of your company’s goals and vision.
  2. Lower costs: The costs associated with designing and implementing RPA are typically a fraction of an average outsourcing contract.
  3. Wide versatility: You can apply RPA to a wide variety of business processes. If the tasks are rules-based and definable, they are a good candidate for RPA.
  4. Scale to suit demand: You can quickly and easily scale RPA – up or down, to meet variations in your business activities.
  5. Simplified communication: You only need to train your RPA robot once. After that, the bot can repeat the task sequence reliably, accurately and uncomplainingly.
  6. Accuracy: RPA robots are exceedingly accurate.
  7. Compliance: You can program RPA to follow a prescribes set of operating procedures each and every time, and record an audit trail of its actions, ensuring compliance with business mandates.

In short, since RPA can be done completely in house, companies eliminate many of the downsides of outsourcing while reaping the majority of its benefits.

RPA’s Weaknesses Compared to Outsourcing

Don’t blink – this section is short, as RPA’s weaknesses in direct comparison to outsourcing are relatively few.

  1. RPA is not as good as a human at processing scanned images and unstructured data, such as free-form emails and attachments. Companies must first accurately digitize this type of data using OCR or similar technology in order to be useful to the bots.
  2. Due to the very nature of RPA, an error in one entry or transaction can be repeated across multiple entries in multiple applications.
  3. RPA is best suited to rules-driven processes, so if a business has frequent changes to its standard processes, RPA’s productivity and its competitive advantage over a human counterpart are diminished.
  4. RPA robots can never replace the experience of a human interaction, so some outsourcing tasks are simply not suited to this technology.

Rumors of Outsourcing’s Demise Have Been Greatly Exaggerated

You might imagine that BPO companies have a lot to fear from RPA as it threatens their fundamental business model of quickly and inexpensively completing routine business tasks. So, is outsourcing out?

The short answer is no, outsourcing will no doubt continue to be a viable, cost-effective option for the voice-based jobs that require that human touch. In fact, in an interesting turn, outsourcing companies are becoming some of the biggest users of RPA technologies. The most innovative Business Process Outsourcing companies are recognizing that they can leverage RPA in their operations to enhance their offerings and lower their transactional costs. And companies are demanding this type of innovation from their BPO partners. A 2016 report by Deloitte found that among companies that outsource, technical innovation was a driving factor in selecting a BPO company. So, in an odd-bedfellow type of way, RPA may become BPO’s best friend.

Our Takeaway on RPA

RPA is itself a type of outsourcing – outsourcing to a software robot, rather than another country. And this type of outsourcing isn’t going away anytime soon, as businesses recognize that freeing their staff from rote, repetitive tasks to focus on high-value work contributes directly to the bottom line.

The key differentiators of successful businesses are flexibility, agility and the ability to cost-effectively scale up or down in response to customer requirements. RPA delivers on those differentiators, allowing companies to boost efficiency and productivity, lower costs and reallocate their human capital to strategic, business-building activities.

Bringing It Home to the Midmarket Enterprise

As a midmarket enterprise, you may be thinking that talk of offshore or nearshore outsourcing isn’t particularly relevant to you. And you may be right. But efficiency, productivity, and cost savings are relevant to you – and that’s what RPA is all about. It’s here in the midmarket that RPA shines. RPA brings significant benefits to midmarket companies. With more limited resources than larger companies, it’s even more important to leverage the assets you have. Implementing Robotic Process Automation in your midmarket enterprise can allow you to grow and scale with agility and precision, and frees you to invest in human capital that engages in strategic tasks that reward them – and your bottom line.