Derek Toone, Managing Director –
A specter is haunting offshore outsourcing — the specter of Robotic Process Automation…
The cost and availability for a given skillset is a key driver in determining the location of a service delivery center. Due in large part to its thousands of highly skilled and competitively salaried labor resources, India is today the recognized global center of outsourcing operations. And in general, the value proposition of any sourcing location – be it China, Eastern Europe or Latin America – is based to a significant degree on skillsets and labor costs.
Other considerations contributing to service delivery location decisions include language capability and cultural affinity, as well as existing infrastructure, government stability, physical and IP security and time zone. Ultimately, though, if the same skillsets are available in two locations but cost less in one versus the other, the location decision will most often go in favor of the one with the lower cost of labor.
This is changing in a fundamental way, as the emergence and rapid adoption of RPA transforms how businesses approach service delivery location. By enabling more work to be performed with fewer people, RPA undermines the basic premise of labor arbitrage. Put simply, cheap workers – however skilled or capable – now present a significantly diminished competitive advantage compared to software that doesn’t require a weekly wage and never takes a holiday. Moreover, the processes most suitable for RPA – digital inputs and outputs, with rules-based decision making and no requirement for voice or in-person interaction – are the also the ones most likely to be offshored.
As the cost and availability of labor becomes a smaller component of overall service delivery, the weight of other factors such as language, culture, time zone and IP security will no longer be additional considerations; rather, they will be primary drivers of service delivery location decisions. This change in priorities will force global enterprises to re-think their service delivery models, which today combine a complex mix of onshore and offshore locations designed to maximize the advantages of each location while making the hand-offs and touch points between locations as seamless as possible.
We are seeing these shifts occurring already with some of the smaller, up-and-coming ITO and BPO providers who are using early adoption of RPA to compete against the larger established players. These upstarts are using an optimal mix of skillsets from onshore and offshore labor, with a focus on maximizing quality of service rather than minimizing cost of labor.
Many of the established global providers recognize what the future holds as well – consider recent reports of Wipro’s plans to reduce headcount by 47,000 in the next three years by leveraging automation, artificial intelligence and digital services.
Bottom line: RPA, artificial intelligence and cognitive computing will over time make geography increasingly irrelevant to more and more job functions. While this Brave New World may be closer than we think, the immediate reality is that RPA is already having a significant impact on sourcing location decisions, by redefining the criteria and priorities used to determine where work gets done.
The impact of RPA on onshoring was the topic of a panel discussion at the recent RevAmerica Conference in New Orleans.