“Offshoring is often only a way station on the road to automation”
It’s hard to believe that it was over 15 months ago that Brynjolfsson & McAfee coined this phrase in relation to Automation. The statement hit me then for its clarity in articulating what I had been seeing for years, while working in BPO firms. In the last 15 months, a lot has changed for me. I left a career in BPO and focused my life around automation, founding Symphony Ventures. In short that “way station” quote summarises my career. Let me tell you why.
Anaesthetist, not the surgeon
Back in my BPO days I worked as a Solution Architect and Director. I loved those roles because they gave me the opportunity to understand a clients’ business, see where the problems lay and solve them as best I could. Whilst the more interesting parts of my role were due to automation and more innovative technologies, the solutions tended to hinge upon offshoring the work to a lower cost location. For the most part, I wasn’t solving a problem I was just reducing the pain so that the problem (the inefficiency) was manageable. I was the anaesthetist, not the surgeon.
So why was that the case? The problems my clients faced were generally a result of inefficiencies in technology, not process and not people. Yes, the processes were broken, but more often than not, this was not a result of basic process inefficiencies, nor a lack of expertise, nor understanding of best practice. Instead, the problem stemmed from the client’s legacy systems, which dictated the sub-optimal processes that were being followed. Fixing the systems was also not an option for many clients. If it were, they would not be looking at outsourcing or offshoring. Instead these clients were looking for an interim solution - a way station. One where they could get some of the benefits but without the cost or risk of replacing systems.
Next stop - Robotic Process Automation
So if offshoring or outsourcing can bring benefits, then why consider automation? Well, for many organisations, automation can bring you far greater benefits. It does this in the same way as arbitrage. But, rather than moving work offshore to a country where salaries are lower, you can move the work to robots (software emulating a user’s actions) where salaries don’t exist. Consider a Robotistan if you will, as Charles Sutherland at HfS described in his paper back in 2013. There is an entire delivery location waiting to inherit work, and able to do so rapidly and at massive scale. And, cost savings are not the only benefit of this new location, nor are they the most compelling. Automation means that work is performed quicker, without misunderstanding or quality issues, and it can provide far greater insight and auditability than could be achieved using people to perform the same work. However, automation is not always the answer and it seldom is the full solution. Automation can remove non value-adding work but judgment-based tasks will always exist. Whilst artificial intelligence brings promise of automating some judgment-based work, it is at best several years out. So in the meantime we will need experts to perform complex, higher value work - the type of work that people are best at, and better yet, enjoy doing.
The road to automation
Where does this leave outsourcing and offshoring? Whilst automation is a great weapon in the fight against inefficiency, it is not the destroyer of work. People are still required. Who employs these people and where, is a nuanced decision with no ‘one size fits all’ answer. The more innovative and specialised service firms will thrive as they add true value to their clients, but firms making a living from ‘your mess for less’ models will struggle. Be aware though, every BPO firm positions itself in the first category, the vast majority make their living in the second.
In conclusion, automation in business is inevitable. Newer firms will arrive on the scene with fully autonomous operating models (or at least they should). But, older firms, plagued with inefficiency and legacy system spaghetti, need not fear. There are now tools that can automate their current state, alleviating the need for costly (and risky) system upgrade and replacement. For these legacy firms, they will now also be able to repatriate the work they’ve offshored for decades, capturing greater value in the process. Offshoring played its part, and still has a good future but, for those firms committed to continuous improvement, offshoring will, in fact, only be a way station.