Automation will destroy, then save outsourcing: The industry has spoken – Enterprise Irregulars (blog)

For those of you who made our New York DigitalOneOfficeSummit a couple of weeks ago, we had a rumbustious mix of seasoned outsourcing buyers, service provider leaders, advisorsand robovendors under one roof to cogitate, discuss and argue where the hell the industry known as outsourcing and operations is truly heading. Lets just lay down what the hell is really happening in the only unvarnished way we know how

There is a fast realization that the outsourcing industry has reached a phase of almost insufferable tension. Why?

Several of the RPAsolutions vendors are painting an over-glamorous picture of dramatic cost savingsand ROI.RPAsoftware firms are claiming and demonstrating some client cases where ~40% of cost(or more, in some cases) is being taken off the bottom line. While some of these cases are genuine, there are many RPA pilots and early-phase implementations in the industry that have been left stranded because clients just couldnt figure out the ROI and how to implement this stuff. This isnt simply a case of buying software and looping broken processes together to remove manualefforts this requires real buy-in from IT and operations leaders to invest in the technical, organizational change management, and process transformation skills.

Buyers are backed into a corner with broken delusions of automation grandeur as their CoEsfail. Buyer leadershipsare being fed all this rosy information and are under incredible pressure to devise and execute an RPAstrategy, with some sort of set of metrics, that they can demonstrate to their operations leadership. Many are quickly discovering they simply do not have the skills inhouseto set up automation centers of excellence and are frantically turning to third parties to help get them on the right track.

Outsourcing consultants are selling RPAbefore theycan really deliver it. Sourcing advisors are claiming they are now RPAexperts who can make this happen, while struggling to scale up talent bases that can understand the technology and deal with the considerable change management tensions within their clients. RPAis murky and complex, and not something you can train 28-year-old MBAsto master overnight. Meanwhile, we are seeing some advisorssimply do some brokering of RPAsoftware deals for small fees, only to make a hasty exit from the client as they do not have the expertise to roll-outeffective implementation and change managementprograms.

RPAspecialist consultants few and far between. Pure-play RPAadvisorsare explaining this is not quite so easy and requires a lot more of a centralized, concisestrategy. There are simply not enough of these firms in the market, especially with Genfour having been snapped up recently by Accenture. With only a small handful of boutique specialists to go around, these firms can pick and choose their clients and command high rates.

Service providers will set the pace, but many will destroy each other in the process. Service providers are claiming they can implement whatever RPAclients need, but are not willing to do it at the expense of reducing their current revenues. Meanwhile, smart service providers are aggressively implementingRPAinto their own operations to drive down their delivery costs and reduce their own headcount. So we can expect to see providers aggressively attacking competitive clients with automation-led solutions that should create unbearable pricing pressures for service providers looking to retain the talent they need to implement this stuff. Hence, services providers will be hell bent on destroyingeach other and thewinners will be those who eventually succeed in winning more work than they loseamidst all the destruction. This is a war of many battles being fought and the winners will be those who are in this for the long haul, who can absorb some short-term losses to pick up the larger spoils further down the road when they have a fully equipped intelligent automation delivery capability that can deliverhighly-competitive and profitable As-a-Service offerings.

The good news is that half of todays buyers want to turn to service providers to make this work

When we privately polled 60 senior outsourcing buyers, at the recent HfSNew York Summit, on what would improve the quality and outcomes of their current services relationships, the answer was pretty conclusive half want to work with their providers to rollouttheir automation and cognitive roadmaps, while only a third think they should pull back work in-house to figure this stuff out for themselves:

The Bottom-line: The automation gauntlet is now in full effect and the casualties will mount up as the outsourcing industry plays out its most perilousbattle for survivalyet. But all is not lost if we eye a longer-term prize

So weve reached crunch time.Whichever way we look at it, RPAhascreated a lethal environment, which was only just coming to terms with providers and buyers working together to get the basics of delivery right. Most outsourcing buyers have to look to automation to save their jobs and please their ambitious leaders, no longer content with the ~30% they saved on offshore-centric outsourcing justa few short years ago (see our recent State of Outsourcing and Operations data on 454 major buyers).

So, in the meantime, for all the reasons outlined above, this industry will literally go into a destructive war over automation. The skills to make automation a massively profitable reality are few and far between, while greedy corporate leaders demand cost savings that simply are not achievable if their organizations fail to make the necessary investments and partnerships to make this achievable. Did companies become amazing at HR overnight because they bought an expensive Workday subscription? Or amazing at sales and marketing because they slammed in a Salesforcesuite? So why should they become amazing at cost-driven automation simply because they went and bought some licensesfrom an RPAvendor promising bot farms and virtual labor forces?

RPAand Intelligent Automation has sparked a major war in the worlds of outsourcing and operations, where many battles are being fought and the winners will be those who are in this for the long haul, who can absorb some short-term pain in order to benefit from the larger spoils further down the road. While automation is killing outsourcing today costing many people their jobs, their reputationsand destroying the profitability of legacy engagements, those who can hunker down, focus on self-contained projects where they can fix one broken process at a time, can get stakeholders onside by demonstrating meaningful, impactful outcomes without major resource investments, will be the winners. Start with one process at a time, prove how to fix in, then onto the next, then the next that is the only true way to be successful in this destructive automation-infested world.

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(Cross-posted @ Horses for Sources)

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Automation will destroy, then save outsourcing: The industry has spoken - Enterprise Irregulars (blog)