Outsourcing in the Age of Intelligent Automation

After all the conversations and inevitable evolution, AI and intelligent automation for business is here and now. As real for enterprises as it is for technology service providers. And it’s only natural that there is enthusiastic debate around what artificial intelligence and robotic process automation will do to the hitherto cost-labor arbitrage-hinged outsourcing model. With so many outsourcing experts placing the cost savings of RPA over outsourcing at upwards of 70 percent, it’s clear why buyers would want to rethink the scope and mix of their outsourcing deals. In fact, a recent survey we conducted on the topic - Outsourcing in the Age of Intelligent Automation - points to 85% of buyers reviewing or planning to review their existing contracts for use of intelligent automation. Because, in the age of robotics, the metrics that measure the value an outsourcing partner delivers includes both productivity as a function of the human capital capabilities of the provider and the leaps of incremental productivity derived from the embrace of AI and automation, across the landscapes of process, technology and infrastructure, that they bring.

That intelligent automation will replace a substantial number of tasks and jobs delivered through outsourcing is given, but emerging only as a sub-plot in a much larger story of change unfolding all around us. By penetrating deep into the fabric of business what digital technology has done is turn enterprises into technology companies that almost incidentally serve a particular type of opportunity – like financial services, manufacturing, retailing and the like. So now, with technology moving from an outer orbit to the core, organizations are understandably treating it as a capability to develop and retain in-house, thus choosing to also nurture digital labor to amplify the human workforce on their rolls. And consequently rethinking the mix of what they have traditionally been outsourcing and what might better be insourced.

Several industry watchers look at this as the end of outsourcing. But, my sense is, there’s an opportunity to change the game.

Digital labor is primarily a threat to the offshoring of repeatable processes to low cost facilities. However, it also brings a new attractive opportunity in the form of demand for digital labor management services – building and managing bots, charting a path for cognitive automation and so forth – services, that enterprises will be open to outsource to a near-shore or on-premise ‘in-servicing’ partner. There is also an opportunity for the in-servicing provider to perform the skilled parts of a job that cannot be automated, provided it is equal to or better than the buyer’s in-house team in terms of knowledge, execution, accessibility, and above all, value.

One way of proving worth is by reengineering processes within a business service – one at a time - so that together they yield far higher efficiencies when automated. This means the outsourcing/ in-servicing provider needs to reinvent themselves into a business process expert. More than half of all leaders we surveyed rated business process domain expertise as critically important to determine their choice of outsourcing partner. Another way of engaging more deeply to deliver value for clients is by leveraging in-market investments in technology and innovation hubs – to collaborate, co-innovate and co-create with clients to solve tough business problems and build new solutions, thereby shifting the focus from cost saving and mere capability augmentation to gain sharing (from co-created IP, for instance).These additional near-shore facilities will also serve (far better than the erstwhile onsite-offshore model) the need for speed and agility that characterizes all development in the digital age. As an extension, providers could even ‘lend out’ their own innovation value chain to clients, not just the innovations themselves but even the building and nurturing of the innovation ecosystem of alliances, acquisitions and start up investments as part of the in-servicing deal. After all, nearly 85% of the leaders we surveyed said that the innovation quotient of their partners played a huge role in influencing selection.

But perhaps the biggest demonstration of worth will come for outsourcing providers from sharing their talent value chain with clients to recruit, train and even refactor their own human resources for the age of robotics. Our survey clearly indicates that the biggest change buyers are seeing in their outsourcing priorities is outsourcing necessary digital skills. Not exactly surprising, given IT companies are native technology organizations, whereas their clients are, to borrow a famous analogy, technology immigrants. With the advent of robotics and the transition of technology deployment from leveraging only people to a people + software model, progressive outsourcing service providers have understood the need for depth in capabilities rather than mere breadth, and they nurture full stack developers who’ve embraced agile development methodologies. So the IT outsourcing partner has plenty of expertise to offer in how to build the right talent for the digital age, right from the regulation army of engineers to innovators, problem finder-solvers, design thinkers and even experience designers. A recent example, is how we partnered with Udacity to train our employees in self-driving car engineering, through a program that combines in-person and online training. This will now give our people the skills needed to focus on autonomous technology, and partner with our clients across a range of industries, including automotive, manufacturing and mining.

When an outsourcing provider becomes such an integral part of the enterprise operations and process landscape, indeed, almost as much as an in-house team itself, playing a key role in the enterprise’s journey to digitization, it makes much more sense to revisit the strategy of the past that dealt with outsourcing from a perspective of distributed technology, infrastructure and process landscapes and forge a deeper, more purposeful relationship with that one provider instead of flirting with a plethora of vendors. This also gives the partner ambit and room, to do justice to their expanded role of technology, process and infrastructure provider and amplifier. Ever so often, the client organization might even decide to divest captive units – a global shared services team, for example – to the partner to lighten the burden of people, process and productivity management.

Digital labor management, process reengineering, talent and innovation value chain sharing – these are the outsourcing opportunity areas of the future. While providers need to build their skills in all these domains, and prove equal to in-house teams in business and market knowledge, and job execution, they should also go after the un-automatable jobs in client organizations, jobs such as designing new experiences, finding new problems, creating new innovations etc., which can only be performed by human beings. And just like in the old outsourcing model, they will find that once again, it is their people, doing the things that only people can that will bring value home.