Outsourcing trends to watch in 2017

This year, we saw outsourcing integration challenges multiply, production workloads and enterprise systems hit the cloud, and security hit the top of the agenda.

So what’s ahead for 2017? Uncertainty for one thing. Industry watchers expect a number of shifts in the IT and business process services space — not least of which will be the initiation of more flexible outsourcing terms as the world watches and waits to see what happens once president elect Donald Trump takes office and Brexit takes hold.

We also expect to witness maturation in cloud computing, robotic process automation (RPA), and cognitive capabilities while entities like the call center and business models based solely on labor arbitrage fade into history. For more on what our outsourcing experts expect in 2017, read on.

1. Industry insecurity reigns

The coming year will be a time of uncertainty for the outsourcing industry, both within the U.S. and abroad. “It will be one of a handful of times that outsourcing will be affected by the political climate, says Rebecca Eisner, partner in Mayer Brown’s Technology Transactions practice. The new administration coming to power in the U.S. could have an impact on trade agreements, regulations, tax policies, visas and immigration–ultimately impacting the outsourcing industry, which continues to rely on the benefits of global labor arbitrage. Brexit only adds to industry anxiety in the U.K. and Europe.

Companies have already begun assessing and auditing their contracts to determine the impact, says Christopher A Seidl, partner and chair of the global business and technology sourcing group at Robins Kaplan. “In 2017, this will lead to deeper discussions between parties, and more renegotiations, over terms relating to currency, changes in the law, and the overall costs of the deal,” Seidl predicts. “They will also seek to add flexibility into their outsourcing arrangements through, for example, new termination rights, rights to move locations, rights to insource, and other similar protections,” Eisner says.

In the business process services space, the political environment and the higher-end work being outsourced will lead to more work being be delivered from onshore locations, predicts Rajesh Ranjan, partner with outsourcing consultancy Everest Group.

2. Security stays top of mind

Information and data security will continue to be a major concern over the next 12 months. “Traction for advanced security automation, threat intelligence, and security analytics solutions will continue to be robust as enterprises look to build a holistic approach to enterprise security and fend off business risks,” says Jimit Arora, partner in the Everest Group’s IT services division. “As-a-service models to scale security capabilities and dynamically support cloud-based workloads will also gather steam.”

Vendors will take more of a lead role in protecting the enterprise through security offerings, adds Seidl. “Vendors won’t simply be thought of as an entry point for hackers, but rather as an ally for regulators, politicians, and businesses who continue to be challenged in looking for solutions.”

3. Intelligent automation drives down costs

“Intelligent automation and robotic process automation will take a step function forward for certain providers, disrupting existing commercial outsourcing structures and driving down costs and, to a lesser degree, prices in the market,” predicts David Rutchik, executive managing director with outsourcing consultancy Pace Harmon. “This will result in supplier margin expansion, greater savings opportunities for enterprise buyers, the need for enterprises to renegotiate existing outsourcing deals, and the bifurcation of the ‘haves’ and ‘have nots’ in the marketplace.”

4. Customers demand more from cloud

The novelty of cloud computing adoption has worn off, and the grace period for providers is over. “Clients will force cloud providers to mature,” says Adam Strichman, founder of boutique outsourcing consultancy Sanda Partners. “Clients will become more savvy about what a cloud service really means, and these ‘me too’ cloud services are going to have to grow up or be kicked to the curb.” Customers will be looking to leverage cloud as the core platform for new internal and external initiatives, adds Arora. “Enterprises will demand significantly more value from cloud service providers to drive transformation in their business.”

5. Offshore providers pivot

“The days of unprecedented growth for the tier one offshore firms appear to be over,” says Chip Wagner, president and partner with Information Services Group (ISG) Business and Emerging Service. In addition to the potential impact of Brexit and a new U.S. administration as well as increasing automation, offshore providers are also dealing with currency exchange issues. All of that has lead to increased margin pressures and staff downsizing, says Wagner. “Clients will seek differentiation of solutions driven by automation and new technologies, as well as better governance to manage increasingly multiple smaller deals.”

Indian providers will significantly increase their functional capabilities in key process areas and build better organizational change management capabilities, says Rutchik. “This will enable them to compete more effectively with the IBMs and Accentures for more transformative and strategic work.” Look for acquisitions and hiring from U.S. and European consultancies.

 

Source: Cio.com – Outsourcing trends to watch in 2017

Global Sourcing Activity Declines in Q3 2016, But GIC Setup Activity Marks All-Time High

Location activity in the global sourcing industry declined significantly in Q3 2016 from the previous quarter, with 404 deals in Q3 compared to 429 in Q2, according to Everest Group, a consulting and research firm focused on strategic IT, business services and sourcing.

Although outsourcing activity across North America increased during the quarter (with share of transactions jumping from 31 to 37 percent), there was a 24 percent decline in the number of deals across Europe (except in the United Kingdom, which reported no change in activity), and the rest of the world experienced a decline as well.

Conversely, Global In-house Center (GIC) setup activity reached 37 setups in Q3 2016, an all-time high, led by new adopters setting up their first delivery centers. GIC activity on a year-to-year basis also witnessed increased traction, reflecting the growing importance of in-house centers to enterprises.

*Key Trend to Watch*

Everest Group’s Q3 2016 research suggests that a key trend to watch is increasing service provider investments in cybersecurity. Between 2015 and 2016, service providers have ramped up their cybersecurity portfolios via strategic acquisitions, organic growth and collaborative alliances with technology firms.

“As enterprises increasingly adopt digital services, robust cybersecurity programs are becoming ‘must have,’” said H. Karthik, partner at Everest Group. “This, in turn, is forcing service providers to continuously evolve their offerings and move toward end-to-end cybersecurity services.

“Baseline cybersecurity capabilities of service providers include having personnel that can follow a client’s security initiatives and use basic security tools and products to manage the security of applications and infrastructure. But service providers are moving quickly beyond that to develop more sophisticated services, ranging from designing security architecture to providing insights through security analytics. Leading service providers are pushing the envelope even further, looking to provide even more advanced support, such as pre-emptive threat intelligence, localized managed security services and incident response.”

 

Source: outsourcingdigest.com –  Global Sourcing Activity Declines in Q3 2016, But GIC Setup Activity Marks All-Time High

Outsourcing is Now About Innovation, Not Just Lower Costs

Lower operational costs are no longer the key motivation behind outsourcing, as enterprises across the world are increasingly expecting service providers to inject agility and innovation into their business operation.

These days, before signing the deal, companies try to figure out how service providers can add capacity to their business and advance their functional capabilities.

“Value, rather than cost, is the new watchword, and will likely be measured by how service providers help empower business growth through innovation,” says Deloitte’s global outsourcing survey 2016.

In the survey, most respondents have viewed service providers as key business enablers and ‘purveyors’ of innovation. In other words, enterprises expect them to help transform their business rather than just provide a source of price arbitrage.

Many said that they are actively tracking the incorporation of innovation into their outsourcing agreements. However, survey results indicate that the majority of respondents still struggle to define, track, and motivate innovation from their service providers, or that they are unsure how to do this formally within a contract.

The real innovation taking place is outsourcing’s enabling of organizations to buy a module of service that can be effectively procured, integrated, used for a period of time, then safely removed from the environment when its useful life has expired.

Thanks to advancing technologies such as robotic and cognitive process automation, outsourcers have somewhat been able to ease the bulky business operation for the service buyers, assisting them with mergers and acquisitions in addition to mitigating business risks.

Findings also indicate outsourcing’s accelerated growth into additional functions, like real estate, facilities management, and procurement. “Responses to this year’s survey reflect the growth of outsourcing across mature functions, including IT, human resources, and finance, during the two years since our last survey,” said Deloitte in a press release.

Unlike its 2014 survey, people involved in outsourcing no longer appear to worry about prospective legislation and regulation on outsourcing decisions. Also on the decline is the fear over cyber security.

Another notable change is that 75% of outsourcing buyers are discussing the use of robotic and cognitive process automation to improve outsourcing results.

Source: nearshoreamericas.comOutsourcing is Now About Innovation, Not Just Lower Costs

Robotic Process Automation in Shared Services

What is RPA?

Robotic process automation (RPA) is the application of technology that enables computer software or a “bot” to perform processes in areas such as Finance, Procurement and HR, emulating human behaviour.

The “bot” is able to capture and interpret existing applications for processing a transaction, manipulating data, triggering responses and communicating with other digital systems. Down to its simplest form, this would mean that when a “bot” has finished working on a file, it could email it to a human with a note saying what tasks it has performed and what follow up tasks are required. Bots therefore become part of the team.

RPA sits alongside existing IT infrastructure. It does not require a heavy IT investment or additional infrastructure, in fact, it can even be desktop based.

Fast Facts

  • RPA employs a variety of tools for grabbing digital data, which can include screen scraping, digital image recognition, or the ability to access a server or be linked to a website.
  • It makes use of rule engines similar to those found in business process management tools.
  • It is considered a virtual workforce controlled by the business operation teams.
  • RPA does not disturb underlying computer systems.

A “bot”accesses the existing systems and programs in the same way a person would.

  • It provides an on-demand solution and removes backlogs, provides a no added cost scalable solution and requires less investment and ongoing management than outsourcing.

Robotic process automation is:

  • Configurations that automate manual, repeatable tasks
  • Algorithms that solve specific problems
  • Software ‘robots’ that plug into, and access, existing business software
  • Workflow enabled end to end interaction that includes follow ups?

Robotic process automation is not:

  • A humanoid robot
  • Something that can entirely replace humans
  • Something that replicates human cognitive functions… yet
  • Purely just another cost play

How do I apply RPA to business services functions such as Finance, Procurement and HR?

RPA Solutions can be applied to a multitude of cross functional processes across any industry. Within the Finance function, RPA has successfully been implemented to manage Procure to Pay and Order to Cash processes (e.g. AP, T&E, Cash Allocations, Management and External Reporting, Accounting/Close). As the maturity of RPA evolves it can start to be applied to solve queries and undertake analytics.

What can it do?

What enablers does it need?

  • Automate activities in Finance, Procurement, and HR
  • Read contracts and apply contract terms
  • Continuously check if transactions are still ‘in compliance’
  • Send and receive messages
  • Compare records or tables across multiple applications
  • ‘Learn’ how to respond to events or occurrences
  • Apply cash and net intercompany transactions and payments
  • Training
  • Electronic documents
  • Structured Data
  • Rules-based processes
  • Reprogramming when circumstances change
  • User access rights across applications
  • Programming on how to deal with events or occurrences
  • Re-design of processes to efficiently apply the ‘bot’

What benefits can it bring?

Cost comparison

Realised benefits of 300-800%

RPA can quickly deliver benefits such as ROIs of between 300-800%

Typical CFO/Finance Controller Questions

I am already with a BPO, what does this mean for our relationship with them?

BPOs are familiar with RPA and it is worth while discussing how those benefits can be realised. Many BPO contract include gain share provisions which will enable the sharing of RPA benefits. When renegotiating contracts make sure RPA is included.

How much time and effort will it take to implement RPA?

Typically a proof of concept RPA project will take 4-6 weeks to build and implement.

How much IT involvement will RPA implementation require?

It is important that IT is fully across the implementation of RPA, however the level of IT involvement does not need to be high. RPA should be business led, with IT support.

Will I require retained headcount to manage the bots and other activities?

RPA will not fully replace all human roles. The aim of RPA is to free up time for staff to focus on higher value tasks. Resources in the form of a virtual control room would also be required to make adjustments to the bot as required.

Have many other companies are already implemented RPA?

While RPA is relatively immature across higher value processes, many companies across industries have already implemented RPA across core Finance processes (e.g. Accounts payable, Cash application). Apply cash, Net intercompany transactions and payments.

Where has it been done before?

So the question is not

IF, but WHEN the new era of automation will  have full impact on your organisation

Source: outsourcingportal.eu-Robotic Process Automation in Shared Services

Outsource repetitive tasks to robots

Humans can focus on more intelligent tasks and decision making by outsourcing the repetitive tasks to robots, said Khurram Siddiqui, Mena Leader for Advance Process Assurance and Data Analytics (APADA), Financial Accounting Advisory Services (FAAS), EY

Robots, are software tools that have emerged to simplify business process delivery. The technology behind this development is called Robotic Process Automation (RPA). These software robots offer improved business efficiency, data security and effectiveness by mimicking human actions and automating repetitive tasks across multiple business applications without altering existing infrastructure and systems. Enhanced productivity, reduced cycle time, and improved accuracy and compliance are some of the benefits of this technology.

 

“We believe RPA is the next step, with the potential to significantly reduce the requirement for employees to perform rule-based high-volume activities. Embedding RPA in leveraging automation across various processes does not replace the value brought by human beings. In fact, the combination of bots and humans makes the most efficient and effective business environment,” said Siddiqui.

EY was promoting its new Finance Data Analytics product at 10th CFO Strategies Forum Mena organised by Naseba.

The tool offers a 360 view of not only finance, but also the operational trends and developments that constitute a crucial input to strategic decision making. It produces comparative analysis and detailed evaluation using information from peer companies, budgets and prior years using EY Market Intelligence Database.

Finance functions are under significant pressure across all industries but more specifically in the financial services sector. Some of the major challenges are: to shrink costs and support decreasing margins; to improve speed, volumes and quality of information provided; and to focus on the delivery of value adding insights to the business.

RPA is evolving into a new hot topic in the finance world. Its significant potential to become a differentiator in finance functions has become evident. Most of the large players in the financial services sector are either assessing possibilities to benefit from this new solution or even proceeding with the first implementations. The RPA implementation burdens (costs and timelines) are relatively insignificant, compared to major IT platform updates. Therefore, it is likely that RPA will quickly convert from being a differentiator delivering a competitive advantage to a standard practice that needed for survival and eventually, better customer satisfaction.

In the age of digital transformation, CFOs have a mandate and, equally, an opportunity to play a pivotal role in the digital transformation of their organisations. Data analytics remains at the core of the digital transformation agenda.

Organisations prepared to embark on the digital transformation journey, recognise the tremendous potential value of the data they hold, and are working hard to exploit that value. Initiatives in better data management and analytics are beginning to take shape. However, realising and creating value from data – turning information into insight and practical action – is challenging and most companies have much more work ahead.

“It is an EY offering based on our intellectual property (IP), that has been developed over time, based on a number of both regional and global case studies. The pricing of the product is based on multiple factors, which may vary based on the client environment, frequency of service and specific client requirements. All sectors can use our tool. The product is designed for a strategic function that is crucial to all organisations and sectors,” said Siddiqui.

The game changer is CFOs embarking on the digital transformation journey in a quick manner and laying the foundation of a sustainable digital journey, on an on-going basis. The tools help CFOs focus more on the strategic goals of the organisation while tactical areas could be taken care by the FDA tool. The tool provides dashboards to CFOs, enabling them making timely decisions on key issues.

EY’s session on Finance Data Analytics (FDA) showcased the new and innovative tools, which leverage the power of data and analytical techniques to identify insights and trends, and to identify control weaknesses across the finance function and operations on 100 per cent population of finance data, which is a transformational change from sample selection techniques. This will enable unparalleled business success for clients – which typically was not possible with limited enterprise resource planning (ERP) software. – sandhya@khaleejtimes.com

Source: khaleejtimes.com-Outsource repetitive tasks to robots

Let’s make Outsourcing Great Again!

An “industry” still searching endlessly for an identity, a purpose and a value proposition, founded on more than dredging up cost savings through lower wages, tortuous conferences for bored sourcing advisors and pompous analysts who ask idiotic “questions” which end up confusing themselves… but finally we finding some salvation for our industry! Finally outsourcing doesn’t have to end up in the scrap heap of legacy commoditized business models, akin to what happened to the telecom industry…

The State of Denial is over in the States. In White Plains for the HfS Cognition Buyers’ Summit, the mood was the most upbeat I have experienced in a long time – clients were peeping above the bed covers and saying “I want real examples, I want to touch and feel this automation stuff… tell me what I need to know and how this is done”. There as a stark admission that “our kids will be alright, they live and breathe what is needed in organizations today, its us mid-career folks who need to be worried – we’re the ones who need to reinvest ourselves if we are to stay relevant”.

Many of the Indian providers want to extend their stay in Denial a while longer. Then we took the HfS team over to Bangalore, India for NASSCOM’s 19th BPM (BPO) Strategy Summit, where most of the local service provider dignitaries were firmly hiding under their bed covers asking the same old question: “How can we sell higher value deals to the same clunky big enterprises without doing anything differently than we have been, since we started doing this stuff 19 years ago?”. Clearly most of these guys won’t change course while they’re still experience 5% revenue growth and healthy margins…

The Problem dogging the outsourcing industry: Too many buyers just aren’t looking to their providers with the expectation they can deliver more than the basics

Perhaps most telling is this data point from our brand new industry study of 343 industry stakeholders, conducted with NASSCOM for the summit, where it’s clear over half of today’s buyers do not view their providers as purveyors of the new high value capabilities that will help them break out of their legacy tail-spin. This is in stark contrast to the views of the service providers themselves and sourcing advisors, where the vast majority clearly view the role of the service provider as pivotal to help clients advance their capabilities in areas such as Design Thinking methodology, automation, cognitive computing, analytics and process redesign:

The Solution to making outsourcing great again: Supporting disruptive business models

The big issue today, in my view, is that the outsourcing industry is too focused on the wrong things, such as staving off the “threat” of automation and protecting traditional headcount-based delivery. So let’s break down the issues to come up with some ideas for preparing for the future:

Automation is not the threat to outsourcing, it’s Digital Disruption. The real threat comes in the form of disruptive competitors using digital platforms and cognitive computing, that can wipe out your enterprise overnight. Imagine a new bank appearing, with a great mobile app, immediate customer service via chat / phone etc. Or a rival insurance firm that delivered everything you needed at half the premiums, but twice the usability? You’d switch in a heartbeat wouldn’t you? And these capabilities are here today, they’re not coming tomorrow. Today’s clients are under incredible pressure to be more nimble, more intelligent, more scalable and more digital than ever. And this is right across industries, where the threat and opportunity posed by digital disruption is rife. Remember, it’s recessions that destroy jobs, not robots:

Outsourcing is the perfect solution to help scale and operate disruptive business models

BPO and IT services provide the modern business with the ability, not only to survive and thrive in today’s disruptive market, but it’s here for today – not just tomorrow. BPO is not some legacy service that’s going the way of the robot, it’s a very real solution that is more imperative than ever for the survival of our most advanced digitally-savvy businesses.

I recall one of our analysts recently coming back from a visit to AirBnb’s new BPO contact center and she was actually shocked – “Phil, it’s just your classic BPO center providing traditional customer support services.” Digital businesses actually need BPO to function – why do they want to going out and hire armies of support staff and processing people when they need to attack their markets at warp speed?

Digital disruption is driving an unprecedented level of urgency and paranoia among enterprise leaders – and outsourcing can really help

In many industries today, digital business models can completely take established legacy enterprises out overnight. If you are an insurance firm with 10,000+ people processing claims onshore using green screen computers, or a bank which still has hundreds of branches employing tellers from the 1970s, or a retail outlet with no mobile app strategy, you are at dire risk of competition coming at you with a completely mobile app-driven, user friendly, intuitive and cognitive business model, supported by intelligent, affordable BPO and IT operations. So you need partners who can help you pivot fast, and combat these potential fatal threats to your business model… and where better to look than BPO and IT services firms which can provide the scale, talent and analytics you need to operate with the flexibility you need, without the burdensome capital investments?

Outsourcing can make itself great if it can pivot between helping today’s traditional enterprises and tomorrow’s emerging digital businesses

When we look out into the future of the world leading companies, the Global 2000 in five years time will look very different to what it does today. As we’ve discussed many times before, enterprises are looking to focus on their core and stop adding size and scale to grow. With businesses which interact with their customers, partners, suppliers and employers using apps and collaborative tools, the focus is quickly shifting to growing profitability through smart scalability of customer base, as opposed to linear revenue growth. This means a $100m digital business in the future could command $10-20m in outsourcing spend a year to drive its business forward. But the crux of the problem today us today’s outsourcing providers are still obsessing around pursuing $5bn+companies because they only see their success in going through the initial labor arbitrage, as opposed to pursuing clients which to not have the legacy back office burden and just need agile services they can plug into quickly and effectively.

The emerging outsourcing customer needs a very different approach to account management, sales and service delivery

Outsourcing providers need to completely revamp their account management models to cater for the evolving digital business – but this something well within their capabilities… just go hire forward-thinking sales leaders and build teams of people who can work with the emerging companies of the future, not just the ones of the past. In addition, providers need to ensure they have the ability to cobble together smaller delivery teams which can quickly grasp the needs of these evolving clients. Hence, they need large investments in training and Design Thinking to help with outcome and goal setting with clients. The old “master/slave” delivery model will be a thing of the past with the emerging digital business, which will demand much faster ramp-up times and staff who can quickly respond to their unique business needs.

So it’s time to be smart, time to be prepared to help our clients combat, and ultimately win this war with digital disruption. BPO and IT services provide a critical foundation, so let’s prepare to reinforce to the world what we stand for and the sustained value we deliver every day to thousands of clients around the world.

Source: horsesforsources.com-Let’s make Outsourcing Great Again!

3 Ways Outsourcing Industry Has Changed in 2016

Contrary to the general belief, the outsourcing market is changing, and at a rapid pace. It’s widely believed that outsourcing is more about cost-cutting and mainly stands true. However, a recent survey indicates that market is shifting its focus from mere cost-cutting to value addition. Value and innovation are the new watchwords, rather than the cost (alone). How service providers facilitate the business in fueling innovation and growth will determine the ultimate fate of their relationship.

According to Deloitte’s 2016 global outsourcing survey, the usage of outsourcing is accelerating though it faces challenges from changing technologies that enable result-oriented business services. There was a time when companies’ sole concern was cost-cutting, and it is still the primary motivation; however, the survey indicates that outsourcing is becoming a vibrant path for driving innovation into the business enterprises.

The study suggests that market for outsourced services will most likely to continue rapid adoption as companies aspire to meet the customers’ expectations of quality and cost. However, there are certain visible transformation trends – backed by market, consumer, and external environment changes that are leading the industry to modify the relationship nature between the service provider and enterprise.

Source: Deloitte’s 2016 global outsourcing survey

Following 3 points should guide you about the way the outsourcing market is heading, and how the relationship between service provider and enterprises are shifting.

1. Outsourcing is More Than Cost-Cutting:

As noted above, businesses are taking service providers as key business enablers; the service providers are turning into the main partners in innovation and enterprise’s growth. Vendors are being perceived as a source of innovation that facilitates transformation, rather than offering a set of things.

A good percentage of respondents (35%) view innovation as a key component of the value derived from the ultimate relationship between service provider and business. In response to the increasing demand of ‘value,’ service providers are converting their businesses into innovation incubation centers with the vision of creating more growth and business opportunities for clients.

2. Changing Relationship Nature with Service Provider:

There is a visible shift in the nature, prospects, and scope of the relationship between vendor and client.

Though some respondents confirmed their active incorporation of innovation in their outsourcing contracts, a vast majority still struggles to define and track innovation from the service provider. Given the growing concerns over cyber security, data breach, and legislative threats, the relationship between service provider and enterprise requires more integration and listing of specifics into their agreements.

More than one-third (35%) of businesses measure the value delivered by outsourcers through innovation, but roughly 21% make innovation an essential part of service contracts. 70 percent of the enterprises are currently implementing or discussing the automation processes to improve outsourcing results.

Therefore, service providers need to (in fact, are required to) ensure they have a plan for such changing dynamics of the market and have a dedicated plan to alleviate risks looming ahead.

3: Maximization of Value:

46% business enterprises believe that their biggest challenge is that service providers are mostly reactive and not proactive, while 33% believe that service providers do not offer the perceived/promised value.

Therefore, organizations are changing the way they calculate results being delivered from the service vendors. Incorporation of enhanced Service Level Agreements (SLAs) has become a standard practice, which specifically addresses enterprises’ concerns about value and innovation. Besides, 75% of enterprises stress upon the usage of robotics/automation solutions for better results.

Finally, as we discussed above, the nature of the relationship between enterprise and service provider is changing. Businesses with strong reasons to outsource their processes want their service providers to share responsibilities of growth led by innovation. In this regards, they expect service providers to facilitate in market research, production ideas, innovation and market intelligence.

Therefore, services vendors need to make sure they understand the growing expectations and shifting requirements of the market. This is the only way to compete in the year 2017 when more businesses will be looking forward to innovation, value, process automation, and a shared responsibility of growth.

Source: business2community.com -3 Ways Outsourcing Industry Has Changed in 2016