The Evolution of Offshoring and Why it Still Matters

There is a very good reason we are seeing a marked increase in the continued growth of offshore captive operations, they simply make sense. In fact, many of the major 3rd party Business Process Outsourcing players we know today originally started as captive or in-house centers themselves.

Birth of new model

Companies like GE Capital, Dun & Bradstreet and British Airways all established in-house operations offshore in mid to late 90’s. Originally created to support internal operations, they evolved into 3rd party service providers Genpact, Cognizant and WNS respectively. It was apparent that the benefits of economies of scale, and capitalizing on the labor arbitrage principals of supplying high skilled workers at lower costs, was beneficial to not only themselves, but to potential external clients, as well. This allowed the originating firms to realize ROI on their investments at an increased pace. Ultimately, the captives became stand-alone BPO providers, with the originators as initial clients.

Y2K, Crisis in need of a savior

Just as the fledgling BPO model was getting started, the very computers and telecommunications infrastructure that made the industry possible were creating its biggest boom ever. In order to save valuable space in the expensive memory and storage capabilities of the 90’s, the format for date codes represented the year in 2 digits (1999 = 99). When the inevitable year 2000 hit, computers would recognize this as 00, a major problem that many experts predicted. Thus, the need for programmers, and supply and demand laws, dictated the cost of local qualified resources increased. As a result, due to availability and cost, the labor arbitrage model came to the rescue.

High demand for customer service and fundamental IT skills

Now that the proverbial cat was out of the bag, many service-oriented companies were enamored with the potential of qualified workers at lower costs, and the offshore Call Center/BPO industry took off. Call Centers housing thousands of agents in specially designed facilities, operating at off hours in their home countries to support the day-time hours of their client’s customer base, were practically popping up like mushrooms.

Industry begins to mature

The initial CC/BPO model has proven very effective and many customers have enjoyed the significant cost savings. A toddler toddles for a while, but eventually gains confidence, picks up its feet, and walks. The BPO client base began to raise its expectations and soon wanted more.

Combine learned improvements with increased competition, and you now have an industry utilizing many methodologies like Six Sigma and LEAN for ongoing process improvement. Adoption of standards such as ISO to validate proper controls were put in place, and development and incorporation of advanced Workforce Management (WFM) and Customer Relationship Management (CRM) platforms were expected.

KPO – just like BPO only with specialty skilled workers

The CC/BPO industry has created an entire infrastructure with solid processes and measurements that niche players can capitalize on to provide highly skilled talent in a variety of focused customized disciplines (Medical, Legal, Accounting, etc.). The effects of global aging populations and lower adoption of particular skills in the consumer based countries, allows the often younger offshore CC/BPO provider nations to offer not just the “most cost effective” labor, but more importantly the “needed” skilled labor.

Everything old is new again

As the 18-time Yankee baseball all star Yogi Berra once said, “It’s like déjà vu all over again”. While pioneering captives were the foundation of the BPO industry, technology and infrastructure costs back in the day required significant capital expenditure to setup and maintain operations. Today, 25+ years of industry and infrastructure maturation have enabled an As-A-Service economy, and this has re-opened the doors to the significant benefits of the captive, in-house model. Now, many options to build an Operational Expenditure (OpEx) model exist, allowing the smallest of pilot projects to be cost effectively established, tested and proven with complete IP and end-to-end process control.

Source: ssonetwork.com-The Evolution of Offshoring and Why it Still Matters

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Will Robotic Process Automation Bring Down The Curtain On Outsourcing?

If there is one area that Robotics Process Outsourcing affected widely is near and offshore jobs. Robotic process automation (RPA) is applied to a variety of business processes by automating rule-based monotonous tasks and bridging temporary gaps. Basically, the RPA engines are loaded with highly-specific process knowledge which enables rules-based automation. Today, robotics lifecycle is automating almost half the traditional back-office functions which are being augmented with automation and are offsetting the cost of locations, noted a Deloitte Financial Services paper. So far, the early stages of adoption have shown businesses great benefits. According to recent statistics, robotic automation market will reach $4.98 billion globally and is forecasted to grow at a rate of 60.5 percent.

Some of the key functions that robots follow are:

  • Gather, validate and analyse structured and unstructured data
  • Record and transport information and data
  • Communicate effectively with users, clients and customers
  • Learn, anticipate and forecast the behaviour outcomes effectively

So, how is RPA a threat to the BPO industry? A Sage Intaact blog indicates that RPA has the potential to make many outsourcing relationships obsolete. According to the top four accounting organisations, the costs savings of RPA over outsourcing are around 70 percent. Along with the cost-saving factor, RPA also gives organisations complete control over the automation process, can be scaled to suit demand, simplifies communication and delivers accuracy for rule-based tasks.

Do BPO companies and teams fear the onslaught of RPA? The fears are largely exaggerated and Tom Davenport of MIT Center for Digital Business and Deloitte Analytics says that automating types of tasks with a machine may not be earth-shattering, but the early adopters of RPA do seem to have generally achieved some impressive returns on investment. Citing an example, he emphasised in a blog post as to how one telecom company that automated 160 different processes, achieved an ROI that ranged between 650 percent and 800 percent.

  • According to Davenport, the processes that were structured and codifiable enough to move to services outsourcers are the same ones that will be automated.
  • Many outsourcers have realised this and now offer either their own proprietary RPA solutions or “white-labelled” versions from other vendors.
  • Currently, business processes that show a high degree of knowledge and expertise, from radiology to legal document review, are already being partially automated.

Will Cognitive Automation Spell The Doom For Outsourcing?

Which brings us back to the question — will automation kill the era of outsourcing and what kind of impact it will have on the labour market? Davenport revealed that all automation systems require human involvement in the form of configuration, oversight and maintenance. Also, the role of outsourcers will change in the future where they will have to go beyond mere labour arbitrage. Outsourcing companies will have to provide a range of automation technologies and reskill process and technology experts. Here’s how Davenport puts it — the mere fact that human involvement is required at every stage of the process for cognitive automation indicates RPAs will not make the vast majority of human functions obsolete.

RPAs Won’t Affect Outsourcing

Even though BPOs will become less profitable in the future, the technological advancement of cognitive automation will converge, mature and will be augmented by humans. The question that most outsourcing companies are grappling with today is to what extent will this affect the business of offshoring. On the upside, RPAs will enable companies to achieve unparalleled levels of process accuracy and efficiency and at the same lower the cost as compared to the work that can be done by human employees.

In addition to this, RPAs can effectively provide activity logs and evidence of how decisions were made, ensuring they meet auditing requirements. Besides, the trend will not just affect a few sectors but will be a global employment and economic trends. In terms of India, where outsourcing is one of the biggest sources of employment in India, this will affect the labour outcome.

A research report from KPMG’s Cliff Justice highlighted the shift to RPA is a double-edged sword. It will not only digitise labour with advanced machine intelligence, big data, analytics, mobile technologies and cloud computing, but also hugely impact the knowledge worker labour market. However, a section of economists suggests that RPAs will impact the labour market positively by expanding the job market and created new roles.

Source: analyticsindiamag.com-Will Robotic Process Automation Bring Down The Curtain On Outsourcing?

Don’t ignore data flowing through vendors management systems

In my last column I emphasized smart contracts as one of the ways to address issues in Vendor Management.

Vendor Management is becoming an area of increased importance as clients increasingly use vendor ecosystems (ranging from services, software, startups etc.). And yet, we see clients not paying enough attention to it.

Most clients who have outsourcing relationships with vendors are sitting on huge amounts of insights and data.

This data is simply under-utilized.

The vendor management model has, for decades, been all about cost savings and control. But as we enter the age of transformation, the real value lies in unlocking the data and insights between the two parties.

Vendor Management consists of several transactions across finance, performance, contract, compliance etc. As financial information is exchanged, it reveals significant insights on usage patterns of various IT elements, by the client. Similarly, performance data can reveal areas – at a granular level – that need improvement. With better tools, the data can be analyzed real time, and used to identify error patterns, usage patterns and trends. The result is prevention of outages and disruption, and better utilization of IT assets.

Having advised several companies in their vendor management journey, I, at times, have been mesmerized by the substantial amounts of rich data they are sitting on. It’s overwhelming, just how useful this information can be.

Instead of the traditional way of policing suppliers, Vendor Management Offices can create a forum for more meaningful dialogue with vendors with deeper insights into operational metrics that can allow clients to address issues.

In fact, I see the possibility of mining this information to be monetized and benefit the industry in general.

This requires Vendor management offices to be equipped with the right skillsand technologies. The market has seen an influx of tools like Service Now, Sirion Labs and many more. Deploying these platforms is a step towards enabling a digitally enabled Vendor Management. This, in turn, can be further supported by the use of RPA and Cognitive technologies.

RPA can automate activities like invoice validation, performance validation, contract compliance, etc. These are labor intensive activities that often take multiple iterations and several days.

The opportunity and the future of Vendor Management can be described as below.

The future lies with the enterprises that gives way to a digitally enabled and data driven ecosystem of vendors. Enterprises will have to deal with constant changing sets of vendors in order to derive value. This is possible through information driven insights. Enterprises that do not adopt the new paradigm will struggle to manage vendors, as they will lack the skills to respond to the market dynamics of the ever changing vendor ecosystem.

Which side you want to be is completely your choice!

Source: ssonetwork.com-Don’t ignore data flowing through vendors management systems

Why now is the time to bring Services back

The fourth industrial revolution will impact the way many enterprises conduct business. Advents in technology, infrastructure, communication and social interaction require every company that values its customer base and operating costs to re-evaluate the business models that brought it success in the past. Access to skilled labor at competitive cost is crucial to every operation, and is the primary reason for the creation and growth in the offshore, third party Business Process Outsourcing (BPO) model.

This model was initially predicated on carving out labor intensive, non-core competencies to benefit from the economies of scale, labor arbitrage and process standardization that third party BPO providers offer. However, the digital revolution is now blurring the lines between core and non-core aspects of operations.

As a result, in efforts to avoid intellectual property and/or proprietary process exposure, or maintain regulatory and compliance requirements, operational flows can incur a degradation of process efficiencies and an increase in customer dissatisfaction.

In this second article in our series, we will take a look at some of the factors you should evaluate to determine your company’s strategy for success in the digital age.

BPO Model Maturity

Along with the growth and maturity of the BPO business model has come industry level standardization and adoption of the many processes, policies and procedures required to perform and manage key business functions. These operations are often provisioned from talent rich, cost effective economies around the world. Many tools governing these processes, policies and procedures are now available in a cloud model, allowing niche-focused, Small to Medium Enterprises (SMEs) to capitalize on the same tools and functionality as large corporations.

This evolution has created a vast pool of tenured staff who are often siloed inside large delivery centers, many of whom are now exploring avenues of professional and personal development.

At the same time, BPO providers have enhanced their models by offering outcomes-based delivery, and recently, increasing consultancy services. Their belief is that hybrid BPO/SSC support models will strengthen relationships beyond client/vendor into true partnership models, with operational processes co-existing within the same geographical areas and perhaps even sharing facilities.

The Evolving Infrastructure and Technology Landscape

The “everything” as a service (XaaS) business model is transforming capability availability. Similar to VCRs, personal digital assistants and answering machines, there are many antiquated solutions that required significant Capital Expenditure (CapEx) to design, build and maintain the hardware infrastructure required to enable an environment where the costly business support infrastructure would reside.

Today’s Cloud Computing model changes the paradigm and is commonly recognized in three layers of functionality:

  • SaaS (CRM, WFM, etc.): Software for day-to-day operations
  • PaaS (AppDev): Platforms that provides robust, controlled environments for application development
  • IaaS (VM, VDC): Hosted Infrastructure providing the actual hardware

All are available virtually, on an as-needed basis. This includes immediate scalability with maintenance and support handled by the provider(s).

The same model has expanded beyond the virtual world, with many suppliers now offering facilities, staffing, process design and management support in the as-a-service model as well. This evolution has significantly reduced or eliminated the CapEx requirement, moving it to a much more favorable Operational Expenditure (OpEx) model where up-front costs are significantly reduced and applied only when required to facilitate growth and development.

Operational Control and Regulatory Compliance in the Digital Age

Due to regulatory requirement considerations, some processes simply cannot be outsourced to third party providers. The benefits of access to required, experienced, skilled labor in a cost-effective environment can still be realized, however.

This occurs when performed under an internal governance structure as executed by a satellite operation, wholly owned and operated under the corporate umbrella. The need for this overall governance and control becomes even more critical when working to realize the full potential of emerging technologies like Artificial Intelligence (AI) and Robotic Process Automation (RPA) to achieve true Intelligent Automation (IA). The power of these technologies requires more than just replacing portions of a process with automated BOTs. True incorporation requires review of the entire end-to-end process that most likely will create entirely new process flows, requiring access to data, internal systems or IP.

It also requires highly trained and experienced staff that utilize the output providing an ultimate solution. It may not be prudent to develop, implement and expose this with outside third party vendors.

True Omnichannel (Multichannel on steroids) support requires extensive customer experience monitoring and interaction. If internal operational management resources are required to oversee this, the question must be asked, “Should these resources oversee internal or external third party staff?” This can often be hampered by communication challenges and hand-offs between disparate systems and databases. The very nature of the distributed ledger aspects of blockchain, for example, can expose sensitive information, which is best administered via internal resources.

Now is the time

The time for serious re-examination is prior to implementation, as these variables can significantly influence current operating policies, processes and procedures.

As little as 10 years ago, a viral tweet involved a sick bird of some sort, while today it can devastate a brand overnight. The fourth industrial revolution is re-imaging everything into a digital landscape and the possibilities are only limited by action, or more aptly, inaction.

Does your organization have plans to capitalize on and incorporate emerging technologies to improve operating models and customer interaction? Are these plans reliant on third party service providers owning key processes or should an internal solution be considered? Were prior CapEx requirements and expenditures a limiting factor? Does access to staff experienced in required operational disciplines cause concern?

The enterprise needs to determine what actions are required to thrive in the digital world.

Just be aware that past operational models most likely will not get you where you need to be in this rapidly evolving digital landscape.

Source: ssonetwork.com-Why now is the time to bring Services back

HFS TOP 10 INFRASTRUCTURE AND ENTERPRISE CLOUD SERVICES 2018

The infrastructure and enterprise cloud market continues to evolve as as-a-service and hyperscale cloud put pressure on traditional delivery models. More and more enterprises are looking for partners to tackle challenges from writing off legacy to providing a platform for the expansion of digital services. As this market develops, providers are becoming more specialised—more providers are coming to the market armed with deep relationships with the major cloud providers, placing less emphasis on their own infrastructure assets. Indeed, some are coming to market with no assets at all—playing the role of a pure-play services broker.

 

While infrastructure and cloud may no longer be the buzzword on the lips of business and IT leaders, it’s the essential foundation for many of the digital technologies that take up more mindshare. To this end, Infrastructure spending is shifting away from specific IT components and instead is being reframed as an enabler for other engagements in contracts. Infrastructure and applications, for example, are becoming increasingly interchangeable for enterprises. The focus is on the outcome to be achieved not on the tools and levers used to achieve them.

 

In this second iteration of this research (but first in the developed HFS Top 10 methodology), we explore the emerging market in the provider ecosystem for infrastructure and enterprise cloud services.

 

WHAT YOU’LL KNOW AFTER READING

 

  • How the market is evolving to face the onslaught of hyperscale cloud and as-a-service delivery models
  • The movements of the biggest providers operating in the space, and how they are evolving offerings to meet the changing needs of enterprise clients
  • The strengths, challenges, and opportunities for the major providers servicing the infrastructure and enterprise cloud market.

Source: HSF.com-HFS TOP 10 INFRASTRUCTURE AND ENTERPRISE CLOUD SERVICES 2018

6 Positive Benefits of Winning a Corporate Award

In an increasingly crowded global marketplace, it can be hard to stand out. Back in the day, competition came from companies that looked just like yours. That is no longer the case. With an always-online hyper-connected economy, your competition could come from an industry so far removed from the one that you are in that it hardly makes sense…and yet if you aren’t watching, your business can find itself on the precipice of being made redundant by a company you never saw coming. (Think Uber to cabs or AirBnB to hotels…or even more recently Amazon to grocers.) It is not at all far-fetched…and with artificial intelligence and other forms of digitization, who knows what the future holds?

Frankly, it shouldn’t be surprising that some of the best ideas may come from outside your industry…that’s one of the concepts that SIG holds dear. During a plenary Summit session, we had everyone work with the people at their table to discuss a challenge that one person at the table was facing. Because the tables were random and the people at those tables represented different positions and industries, the results provided some breakthrough moments with complete out-of-the-box thinking.

Most of the time when companies are focusing on innovation, transformation or process improvement, they embark on projects with the sole purpose of improving things internally in some capacity. But it is those outside-the-norm projects that can really help an organization stand out in a cluttered marketplace. Not only can you have internal results that provide top-line growth or bottom-line savings, but you can also influence the external market as well, which amplifies the rewards. How? One easy way is to enter your projects into award competitions. The benefits can provide impact far beyond the original goal of your project:

  • Brand recognition and free PR – Being shortlisted as an award contender gives your organization free publicity from the awards organizer as well as the other nominees and possibly even the judges. And if you win, the publicity is even more far-reaching and impactful.
  • Instant credibility – Winning an award opens numerous doors and gives you instant credibility with potential customers. Let’s face it, we all look at reviews before we make purchases. Third-party endorsements are critical, and an award shows that an outside organization with no skin in the game thought something you have done warrants recognition. The rewards can be further amplified if you shout the results to the rafters and include any “badges” showing the win on your website, in signature files and on social media.
  • Increased morale – It almost goes without saying that winning an award provides intrinsic motivation and improved morale for those on the team. The nomination alone, which recognizes hard work and a job well done, is a celebration of the hours the team put into the project and can significantly—and positively—impact employee satisfaction and talent retention.
  • Talent attraction – When potential employees see your company recognized and your teams being celebrated, it can go a long way toward creating a new talent pipeline. According to a recent Deloitte study, millennials are looking for an opportunity to make a difference in their workplace and in the wider world. In fact, 74% of millennials believe that business has the potential to solve the challenges that concern them. That is a powerful statement. We routinely hear that talent management is one of the hardest things our member companies face. If young talent sees your organization addressing and tackling big issues, your problem with talent attraction and retention could be a thing of the past.
  • Easy benchmarking – Imagine being exposed to dozens of projects simultaneously tackling similar—and different—issues and challenges. Time and again, we’ve seen SIG members have aha moments by listening to someone in another industry present thought leadership and then transform their own businesses by implementing those takeaway ideas. By nature of the event, awards programs provide you with quick access to the best of the best, with greater potential for those insightful moments!
  • Differentiation and leadership – At the end of the day, aren’t all companies—whether on the buy-side or sell-side—seeking leadership in their industry? An industry award allows you to differentiate yourself from your competition and showcase your leadership. It can open up new doors and plant your organization at the top of the pedestal (quite literally).

Statistics support all these benefits and more. A joint study between Georgia Tech and the University of Western Ontario tracked 600 recipients of quality awards over a five-year period and found that they experienced 37% higher growth in sales, a 44% higher stock price return and a 48% growth in operating income over a control group of similar companies that did not receive rewards. The benefits of awards can be both tangible and far-reaching…so even though they take time and resources to enter, the results make it difficult to justify NOT participating!

Source: sig.org-6 Positive Benefits of Winning a Corporate Award

Gearing Up for the Fifth Industrial Revolution – a Glass Half Full

Two years ago, the World Economic Forum (WEF) published its Future of Jobs report – exploring employment, skills and workforces in the Fourth Industrial Revolution. This sparked debate – and growing concern – around a changing global employment landscape as the result of disruptive technologies, studded with widening skill gaps, new jobs and job displacement.

“The Fourth Industrial Revolution, combined with other socio-economic and demographic changes, will transform labour markets in the next five years, leading to a net loss of over 5 million jobs in 15 major developed and emerging economies.”

Recently, at a London-based robotics event, attendees were asked the same question that the WEF did: did your job exist when you were in primary school? The 67% ‘no’ response was hardly a surprise – the job landscape is evolving constantly, so it’s naïve to expect to be on a career path set during our early school years.

Headlines of this type are often strongly associated with ideas of robots replacing humans in every profession – although clearly there are always roles more suited to humans and their capacity for empathy. But rather than accepting this pessimism as truth, let’s embrace the new generation of jobs that automation will offer us.

We grumble at the fact that our current careers may not have been mapped out for us at infant school, instead of celebrating the fact that we somehow emerged prepared for the jobs we have today. To ease our fear, it might help to recognise that tomorrow’s workforce is more than capable of taking the same path if we guide them wisely: the fact that government is now backing education initiatives that will support children in their future professional lives is a leap in the right direction.

Last year, a group of liberated educators took steps to evolve the curriculum so that children are prepared for a future with automation – the creation of new qualifications and courses dedicated to human centric skills such as leadership and collaboration was evidence of this.

It’s refreshing to hear that 2018 is set to see government beginning to back educational initiatives with cyber skills training; hopefully the next step is more government funding surrounding training for the jobs students will need in the age of increasing automation.

In addition, we’ll need to address the current gap of skills needed for robotics and Artifical Intelligence (AI) by investing in software development, systems design, engineering, programming and data science amongst other areas, to ensure workforces of today – and tomorrow – are skilled to take charge in the robotics world. Taking into consideration the hole in numbers in Science, Technology, Engineering and Mathematics (STEM) subjects currently in university, we have a five-year lag in students moving into this area.

It’s time for government to get smarter when it comes to incentivising students in this direction – this doesn’t necessarily require radical thinking. How about reducing tuition fees for STEM subjects as a start, and creating conversion routes from other subjects?

Until then, we must focus on educating students in a way that will help them collaborate with AI in the years to come. The essence of roles that will be filled by children currently in primary school will be their humanity. Curriculum must continue evolving so that the members of the future’s workforce leave school with skills that focus on adaptability, collaboration and resilience. Instead of focusing only on the retention of facts, it’s time to teach how to question these facts.

If we can build on current momentum and continue to bridge the gaps to encourage new ‘age of automation’ careers, headlines in 2018 and beyond might look more optimistic, pointing towards a future where robots and humans work collaboratively to deliver improved services and bright new opportunities. It’s up to us to decide how full – or empty – the glass looks when it comes to the future of jobs.

Source: futureofsourcing.com Gearing Up for the Fifth Industrial Revolution – a Glass Half Full