The future of BPO services: Embrace automation or perish

The outsourcing of business processes—save call centers and payroll processing—began in earnest in the mid-1990s. Business process outsourcing (BPO) walked pretty nicely in the footsteps of the IT services industry, garnering attention as a potential growth engine for both pure-play BPO providers and IT providers offering BPO services.

But despite early predictions, this service segment did not grow as fast as expected and in recent years has slowed. What happened to this shiny new toy?

+ Also on Network World: Top 5 factors driving domestic IT outsourcing growth +

By their very nature, business processes are sprawling, live production services that touch an enterprise’s customers, suppliers and business operations. While the outsourcing of these services obviously leverages the economies of scale and delivers the associated cost advantages offered by third-party BPO providers, on-the-ground implementation of offshored services has faced a higher degree of resistance and more change management issues than IT services.

At the same time—especially in the past two years—emerging technologies and robotic process automation (RPA) have begun to turn the industry on its ear. For the most part, the work that gets outsourced to remote locations is the bottom-of-the-pyramid work, and as RPA capabilities advance, those processes are increasingly ripe candidates for minimizing or removing human intervention altogether. For better or worse—better for cost savings, speed and efficiency and worse for all the jobs that will be lost to RPA—this capability is slowly making its way into all industries and all types of business processes.

Of course, scores of low-cost employees in developing countries are still keying in data based on pre-defined rules. They are still processing supplier invoices, loan applications, insurance claims and all manner of such routine tasks. While this work is still required, the need for people to do the work is becoming less so.

Looking forward, people will be needed only to handle the exceptions flagged by the system as “not in good order.” And even for these exceptions—and for the processes that require some level of data correlation, interpretation and judgement—machine learning technology will soon replace humans. While the current speed of RPA adoption and the level of disruption it is causing are arguable, it is clear this capability is real. Companies are already benefiting from it, and workers are feeling its impact. 

What does this mean for the BPO industry?

5 things BPO providers must do

Here are the top five ways BPO providers can stay in the game:

1. Focus on skills: Hire, train and re-skill your workforce so employees can move up the value chain to positions such as data scientist, mathematician and actuary—and so you can offer existing and potential customers higher-order capabilities.
2. Go deep: Work on acquiring deep knowledge of specific industry domains so your customers know you fully understand their business and can add value in their business transformation.
3. Demonstrate confidence: Demonstrate that you can deliver on business outcomes and that you are willing to assume the risk of such delivery.
4. Lead the way: Establish deep technology capability and show you can deliver technology-led innovation on an ongoing basis.
5. Accelerate: Invest in areas you know will differentiate your company in terms of speed, innovation and impact.

All told, the BPO industry is up for a dramatic shift. Are you ready to play the game by the new rules?