The following article reflects an interview by Mary Driscoll of the American Productivity and Quality Center (APQC) and Susie West of sharedservicelink. The article first appeared in APQC’s Knowledge Base. APQC strives to learn about the latest best practices in the marketplace and how successful leaders transform their organizations.
Susie West is the founder and CEO of sharedserviceslink—a company with the central mission of maturing the shared services market by providing useful content and facilitating connections. In this interview, West described the current state of robotic process automation (RPA) within shared service organizations (SSOs).
There seems to be a discernable buzz within shared services organizations (SSOs) about robotic process automation, what are you hearing?
Without question there is a discernable buzz about robotics within SSOs. People in the mainstream are talking about robotics and understand the difference between RPA and the current process-enabling technology. Additionally, people see where RPA fits into their current process design and whether it’s a complimentary or competitive solution to what they already have. If I talk to a random group of 10 people in shared services, one or two are either rolling out a robotics pilot or robotics is properly implemented and a handful are evaluating RPA as a viable solution. Clearly, robotics is a solution gaining popularity.
A number of organizations that outsourced services to India or other countries benefitted from process streamlining. They are now looking to enhance them further by bringing services back inhouse and implementing robotics. Have you seen organizations plotting this strategy?
This kind of pattern is beginning to happen and there’s a strong logic behind it. A lot of organizations that either outsourced or offshored services have been feeling the effects of three trends:
- the cost-savings case for your ‘classic’ outsourcing which was more dependent on labor arbitrage has lost its appeal;
- knowledge management issues arise because of worker churn; and
- devotion to process improvement has been lacking
About 10 to 15 years ago, labor-cost arbitrage was very attractive—outsource repetitive, manual, low-function work to India where labor costs were low. Now, however, labor-cost arbitrage is getting weaker as salaries continue to increase and become an unattractive alternative to large scale and long term automation. In addition to that, a lot of SSOs have felt the negative effect of workforce churn, which creates a knowledge management vacuum. Lastly, because of the strong labor arbitrage over the past 10 to 15 years, there hasn’t necessarily been a devotion to improving process.
And the outlook for providers of out-sourced services?
Outsourcing was a quick fix that slashed the cost base for organizations and the strategy worked for about 10 years, but there’s still this main problem of costs. People are realizing the fix that came with the classic outsourcing model is not long-term or sustainable. Fortunately, over the past three to five years, there’s been a shift among outsourcers. They anticipated the case for labor-cost arbitrage diminishing and channeled focus into innovation, process efficiency, and value creation. Outsourcers have recognized the future of the BPO industry is in these areas, all of which are supported by RPA. This new perspective sits on top of the cost-reduction proposition, which still exists, but is dwindling and has an expiry date. As a result BPOs are now in partnership with RPA providers and they’re hard-wiring RPA into their offering.
What does weakening labor-cost arbitrage mean for SSOs?
SSOs are growing—either because the company is growing and expanding into new geographies, or because the SSO approach has been so successful, it’s sensible to include more processes. In order to grow, however, SSOs need certain foundations in place so that it’s a reliable, sturdy, and sustainable operating model, one able to help run a cost-effective business and scale incredibly quickly.
A lot of organizations are examining their options and wondering what the most optimal model looks like to deliver process excellence in a cost effective manner and whether that model can scale quickly when needed. RPA makes for a very attractive component of this model, be the RPA owned and managed in house or via an outsourcer.
The beauty with robots is that organizations can program robots and know exactly how many are needed depending on the scale of work. Your resource-planning accuracy spikes when you work with robots: they provide a very reliable workforce because they work through the night, don’t take cigarette breaks, don’t get sick, don’t go on holiday, etc. Because of this, organizations know exactly what productivity levels and costs will look like.
Lastly, this model is sustainable because organizations aren’t going to lose robots to other companies or the competition. These robots are very capable of taking on lots of activities that SSOs and outsourcers have been doing for years.
Some observers now claim that robotics in the workforce will eventually cause a level of job elimination that could hurt the traditionally rich economies. What’s your take?
I think the jury’s out on this one. A couple of scenarios are possible. For those SSOs that are offshore or outsourced, a lot of those jobs have already been relocated to India. Robots are an enabler to bring those jobs, functions, and activities back within the organization and potentially bring back auxiliary work. Therefore, organizations can recreate SSOs onshore to manage the robots and the other higher value work that may transpire as a result of using robots. In this scenario, the group that loses out is the outsourcers.
So we are seeing outsourcers in a big hurry to get their RPA portfolio absolutely sorted and ready to go in order to be competitive against this re-shoring option (i.e., the companies doing RPA themselves). Outsourcers plan to compete on margin along with the fact that they have already been building a trained workforce of robots. There is a training aspect to RPA that organizations would have to take on—training robots can take weeks or months. If robots are already trained on how to process a particular transaction or how to perform a certain process that is arguably uniform from company to company, the option of outsourcing remains compelling.
Regarding the threat of job loss as a result of RPA, we did a study on this very same question: “To what degree do you think robots are a threat to jobs?” The general response was that robots will take on a lot of the menial, repetitive, low-level work. And ideally, the SSO will eventually upskill employees with new capabilities, enabling them to take data, turn it into analytics, and present it back to the business in a much more intelligent way to help drive decision making, scenario building, and predictive modeling, etc.
What are the robotic SSO pioneers learning?
They are learning that the world of robots itself is developing quickly. Generally, robots in the SSO world have been trained to simply mimic the activities that people do within the SSO. But we are now on a journey toward cognitive computing and artificial intelligence, and right now RPA is at the stage where it’s not just mimicking activities, but it’s improving on the processes. So the pioneers are excited about the developments and process improvement potential that robotics bring.
Is RPA a harder sell to CFOs or to the current worker populations?
Any CFO that’s been reading any business magazine has been thinking about RPA—and why his or her organization hasn’t implemented it yet. But the perception that robotics equals job loss, even though I don’t think this is the case, could suggest that RPA is a harder sell further down the chain.
ABOUT SUSIE WEST
Susie West is the CEO and Founder at sharedserviceslink, and proudly labels herself as a shared services geek. She has been in the shared services industry since 1998. In 2007 she set up sharedserviceslink, a leading global business community for professionals looking to improve performance in shared services. Her central aim is to help individuals, companies and the market mature through the sharing and consumption of (mostly peer generated) best practice information. The sharedserviceslink team is based in New York and London.
Susie has chaired over 60 conferences, presented at over 80 events, and presented on over 200 webinars, mainly on shared services, outsourcing, business process, P2P, and many associated subjects.
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