As we all heard over the last couple of months, service providers have continuously invested a great deal of effort to enable automation/artificial intelligence as part of their service offerings.
Specifically related to business process outsourcing (BPO), the evidence of automated activities is more prevalent than any other type of outsourcing deal. This can be attributed to the level of standardization of processes/activities BPO services are executed – making it a perfect candidate for automation.
With numerous BPO deals expiring over the last 12-24 months, below are some ideas organizations may wish to consider before determining their next course of action:
- BPA, business process automation, is not a myth but rather a reality: The adoption of automation through BPO activities is an avenue most service providers are pursuing as this leads to increased margins on outsourcing deals. As such, organizations should have an understanding of the “automation element” and its implications to the financials of the deal. Since this can represent a win-win scenario for all parties involved, it is on the organization’s best interest to determine whether or not automation is a reality they are willing to embrace.
- The “As-a-Service model” is here to stay: BPO is a precursor of the “As-a-Service” model. Although not as complex as an ITO deal, the foundational principles to effective manage a BPO deal are quite similar: (1) standard set of terms & conditions, (2) appropriate governance model, training, protocols and procedures, and (3) appropriate service levels and remedies. The BPA can, however, be quite complex and challenging at times, especially if the organization does not have the right fundamentals in place – as the “As-a-Service” model emphasizes the importance on how organizations manage service providers. What does it means? Organizations should be ready to embrace the change otherwise it can create service delivery challenges, which could potentially impact the organization’s reputation on the marketplace.
- The service provider’s labor dilemma is not solved: As I wrote on my latest article (millennial outsourcing), no one is certain of when the offshore labor advantage is going to erode. That explains the increased focus on automation by service providers, as it will help to mitigate the service provider’s labor risk. Automation is an enabler service providers’ are leveraging to mitigate this risk.
- The client’s optimum point for BPA: Organizations need to decide how much of their BPO services should be automated, not service providers. Organizations may wish to consult with their service provider or to hire an independent party to help determine the best course of action for their needs. Prior to adopt automation, organizations should understand the implications and potential risks associated with this option for in-scope BPA services. There are nuances related to BPA that organizations should consider to understand sooner than later. This helps to determine the automation appetite levels.
- The cultural impacts of BPA: Any changes to the working environment that are not effectively managed can lead to a productivity loss. As clients goes through those, emphasis on appropriate change management practices can help the organization to manage any cultural impacts/challenges derived from BPA. As automation is an enabler but at the same time a disruptor, organizations may wish to control the level/speed of change the organization can absorb so productivity is at a minimum neutral or improved.
- The importance of due diligence prior and after the BPA deal: Many organizations conduct different levels of due diligence on vendors prior to signing an agreement for services. Very few, however, execute ongoing monitoring of vendor activities, latest news. This is particularly important, for example, in case vendors have a breach of their data – as those may have direct consequence to the organization’s services and its clients.
- The third party risks become real: As organizations look to further refine/enhance services while reducing costs, the risk elements and factors shall be considered in advance of any decisions. For some industries like financial services, regulators are increasing their focus on third party/vendor management practices.Given the stage in which we live today, organizations cannot afford to damage their reputation as this can have significant impact to the organization’s bottom line. For example, organizations should understand the implications of subcontractors and concentration risks. In addition to it, organizations may wish to consider developing a third party sourcing risk management program to manage risks at the (1) contract, (2) vendor, and (3) program levels across its entire enterprise.
- The ability to scale has a price: With the new advancements applied to BPA deals, organizations will be able to scale their operations using multiple service providers in a manner they have not experienced yet. The fundamental question here is whether or not the organizations has the right means to monitor multiple service providers’ interdependencies and services. If an organization wishes to scale services on a needed basis, a suggestion is to conduct a proof of concept exercise to ensure that their resources, skills and abilities are not placed at risk.
- The ability to measure success: Organizations will be more focused on the quality of services being provided, not costs alone. At the backbone of this, organizations will need to determine their measurement of success and then apply across different service providers offering the same type of services. This will help organizations to determine their strategies for different needs. As presented above, an alternative organizations may wish to consider is to develop a third party sourcing risk management program.
For those of you interested in obtaining more knowledge about the latest trends in the BPO industry, The Outsourcing Institute is hosting its Business Process Innovation Conference on October 22nd at the Bohemian National Hall in New York City. This is a one day conference where you have the opportunity to hear from industry champions such as Frank Casale, Phil Fersht just to name a few. Looking forward to seeing you there!