Think back for a moment (for those of you old enough) to the late 1970’s when the Japanese were crushing the Detroit automakers. Japanese automakers were building cars with better reliability and at a lower cost than Detroit. How was this possible? It happened in large part because the Japanese turned to Robotic Process Automation as a way to increase productivity, improve quality, and lower costs at the same time.
The Japanese companies invested in process manufacturing robots that did a single process perfectly every time, never called in sick, and worked 24 hours a day. Detroit realized they had to change and began making plans to “outsource” some of the manual work activities. Since then many other industries have followed that lead and invested in tools and technologies that have helped them maintain their competitive edge.
Robotic Automation Meets the Back Office
Why does automation make sense, beyond just the dollars and efficiency ratios? Let’s face it; no one likes to do boring, repetitive work. When we are forced to do it for long periods of time we tend to defocus from the task at hand a start to make mistakes. These mistakes are costly in terms of customer satisfaction levels, re-work and in some instances lost customers. There have even been whole industries that have almost disappeared because their competitors found ways to automate.
One business area that has not leveraged the benefits of automation is back of office processing, why? The answer is that most IT shops are over burdened and understaffed and cannot address the constantly changing needs of the business user. As a result, business users create manual workarounds using spreadsheets and unstructured databases and, as workloads increase costs increase at the same rate.
This problem is partly what spawned what we know to today as BPO outsourcing. Firms realized that they only way they could reduce cost was to reduce the labor rate associated with the work being performed. Many jobs were shipped offshore to countries with workforces whose labor rates were vastly lower than the western world and almost overnight offshore companies became household names.
Introducing Robotic Process Automation
A new technology, called robotic process automation is about to change the landscape of the BPO world in a way no one imagined. It is now possible for business users to create software robots that mimic the actions of a human user at a computer. This means that the actual business user can quickly and cheaply develop custom robots to automate business processes.
These robots are highly effective doing any repetitive process that does not require human judgment and the commercials are eye opening. While an onshore FTE costing $80K can be replaced by an offshore FTE for $30K, with robotic automation the same function can be performed for $15K. And, one robot can replace as many as 3.5 FTE, doesn’t call in sick, and never complains about the shift he/she is on. Not to mention the fact that facilities cost drop to nearly zero, a pretty compelling value proposition!
This technology is going to have significant impact on the BPO outsourcing industry. Giving business users the ability to quickly automate rules based process with a robot at less than 50% of the cost of an offshore FTE is a serious threat to any outsourcer that relies on low labor cost as their main differentiator.
Process Automation – Outsourcing Innovation At Its Best
Many outsourcing firms will view this trend as a threat and will continue to move work to geographies with the lowest labor costs but will likely soon find that win rates and renewal rates will suffer. Savvy outsourcing firms will view this technology not as a threat, but as a way to bring true value and innovation to their clients. These early adopters will have a distinct competitive advantage as the waves of BPO deals begin their renewal/re-bid process, an enviable position to be in!
There is no stopping the wave of back office robotic automation, get past the mentality of people in seats and focus on the real value this technology can bring to your firm or your clients. Here at Virtual Operations U.S. we live and breathe robotic automation and we would be happy to share our thoughts and ideas, please drop us a note if you would like to talk.