Whether it\u2019s referred to as Intelligent Automation (IA), robotic process automation (RPA), or digital labor, the potential for increased efficiency and improved performance of business systems through automated processes is massive.\u00a0 Companies are learning about the tools and techniques available now to capture workflow that is currently performed by personnel and contractors, and translate and migrate those activities to software.\u00a0 Early adopters are on their way to fundamental transformation of back office and direct business process solutions, and many other companies are in the pilot stage of fledgling IA efforts.\nAs history shows, all business revolutions are accompanied by uncertainty and complexity.\u00a0 This was true for the industrial revolution, the computer revolution, and it\u2019s true with the IA revolution as well.\u00a0 So as companies develop and execute their IA strategies, substantial return on investment (ROI) may take a while.\u00a0 According to Thomas Hall of KPMG\u2019s Management Consulting practice, it would serve these companies well to look just a bit beyond their internal IA efforts for more immediate returns on advances in automation technology, and focus on their current providers of outsourced IT (ITO) and outsourced business process (BPO) services.\u00a0\u00a0\nGlobal outsourced service providers are rapidly deploying automation into their operating models to drive efficiencies, and numerous providers are capable of doing big things within the scope of services they currently deliver to their customers.\u00a0 But making sure organizations, as the customer, understand the potential value that can come from leveraging their service providers can be tricky.\u00a0\nBusiness process outsourcing took off on a large scale back in the early 2000s, with most savings generated from geographic labor arbitrage and basic process realignment across shared service centers.\u00a0 Technology played a supporting role, with document scanning and global telecommunications enabling the distribution of work to lower wage locales.\u00a0 Now, some 15 years later, the technology environment has dramatically improved to enable much greater opportunity through IA \u2014 employing automation tools to translate human activity into software. \u201cNew tools are available to rapidly implement process automation,\u201d says Hall, which means immediate potential for dramatic decreases in run costs and related increases in quality.\u00a0 \u201cWhen software is implemented correctly, it doesn\u2019t make mistakes,\u201d he adds.\u00a0 \u201cThe run cost becomes software maintenance, a fraction of the cost of labor-based service delivery models.\u00a0 For task-oriented IA solutions, the decision to move forward is a no-brainer.\u201d\nSo why aren\u2019t buyers of outsourced services seeing massive savings from service provider IA programs?\u00a0 What are the hurdles and what\u2019s the trick?\u00a0\n\u201cThe contracting terms and pricing structures for outsourced services have pretty much settled during the past 5 to 7 years in a way that doesn\u2019t anticipate rapid adoption of process automation,\u201d Hall explains, pointing out that the commercials in market standard outsourcing agreements can\u2019t handle broad-based automation and implementation of digital labor across a variety of in-scope activities by a BPO service provider.\u00a0 Also, there are complexities in the enablement of IA that these contracts don\u2019t address, such as threats to the customer\u2019s financial controls and issues with IT security.\nEnablers of IA:\u00a0 Core Systems and Standardization\nSetting the service provider contracting issues aside for a moment, let\u2019s think about what\u2019s necessary to enable IA, from basic task automation to more complex, rules-based cognitive solutions.\u00a0 To really drive savings through IA and ensure meaningful ROI, a company must target a wide range of activities that address a large volume of work.\u00a0 That is, identify and capture work that\u2019s currently managed by a lot of labor.\u00a0 If this is sounding familiar, it may be because these are the same characteristics that supported general labor arbitrage a decade ago.\u00a0 Process standardization is a key enabler of IA, and the level of complexity a company maintains in its underlying core systems is an important variable.\u00a0 To flesh this out, let\u2019s look at a couple different scenarios.\nAn industrial conglomerate operates more than 300 different ERP systems, that when consolidated at a group level, compose about 50 some systems. The ability to standardize this diversified company as a whole, for things like financial reporting and accounting, is severely limited due to the variety of needs and the disparity of processes across systems.\u00a0 In this environment, Hall explains, \u201cIt\u2019s possible to evaluate opportunities for IA within distinct parts of the organization, but it\u2019s harder to drive ROI off the investment necessary to harvest all of these smaller opportunities.\u00a0 Therefore, it becomes difficult for an outsourcing service provider to look at the whole and recommend an automation program for standardization.\u201d\nOn the other hand, consider a global company that\u2019s already made great strides in consolidating systems and streamlining processes internally, with just one instance of their ERP system \u2014 and a consolidated system of record.\u00a0 This, says Hall, creates a huge opportunity for cost savings. \u201cIn this case, the outsourcing service provider has the opportunity to look much more broadly across an entire set of services \u2013 end to end \u2013 and offer IA solutions that are really compelling for the customer,\u201d he explains. The question then moves beyond customer incentives and towards, \u201cWhat\u2019s in it for the service provider?\u201d\u00a0\n\u201cWhat makes sense is to engage the service provider in dialogue about expanding the scope of the outsourced services,\u201d says Hall, who recommends relying on the service provider to drive the efficiency and quality program end-to-end. \u201cOf course the conversation would be taken by the customer in light of its IA strategy over time: \u2018What do we want to do, and when do we want to do it?\u2019\u201d\u00a0 The opportunity to implement automation on a large scale is much more difficult and will be harder to maintain, which means more expense and less ROI.\u00a0 But, Hall explains, \u201cThe customer and the service provider can agree to do some creative re-scoping of the services to be outsourced, and move forward with a mutually beneficial restructured relationship. Engaging in dialogue early on can pay off well and quickly.\u201d\nThe Influence of IT Security and Controls\nFor finance and accounting functions, companies implement specialized financial and IT security controls, and they manage audit processes to ensure compliance with these controls.\u00a0 In a labor-based service delivery model (whether functions are outsourced or retained by the company), controlling for separation of duties is pretty straight forward.\nWith IA solutions, however, the software is making the decisions based on a set of rules.\u00a0 That software is then combined with other bits of information that automate end-to-end processes \u2014 so there is no separation of duties paradigm that equates to how people do work.\u00a0 This makes IT security and controls more challenging, Hall explains. \u201cPeople who write and maintain software, who don\u2019t necessarily have financial backgrounds, are now in control of these functions,\u201d he says.\u00a0 \u201cHow do you audit separation of duties when the delivery mechanism for those business processes is really a shared suite of application programmers?\u00a0 How do you ensure financial controls when software is writing to your ERP system?\u00a0 Software is approving. Software is paying.\u00a0 The transformation to IA solutions requires a revised framework for controls, whether the IA solution resides in the company or is run by a service provider.\u201d\nAs operating model for financial controls and IT security fundamentally change in an automated environment, \u201corganizations must shift gears and implement and audit controls in a different way,\u201d Hall says. \u201cTo enable potential cost savings of IA in an outsourced services relationship, there\u2019s a lot of ground work to do.\u201d\nHow to Get Started with Intelligent Automation\nNo matter how far along your company is on its journey to Intelligent Automation, it\u2019s important to rethink how you\u2019re managing your major ITO and BPO services relationships.\u00a0 \u201cWhether or not you\u2019re building an IA center of excellence, you can still drive substantial cost savings and quality improvement into your organization by adopting a new IA paradigm through which you manage your outsourced services relationships,\u201d says Hall.