It could be a specialist subject for Mastermind as many business leaders consider the two approaches. In a few minutes, this article will provide some answers.
The challenge for business
Every business wants to be able to do more with less effort. It is essential for a business to remain competitive in an evolving world. Where a process exists in a business it is contributing to the overall success of the organisation but generic processes can be found in many other businesses, for example, “accounts payable”. This is essential for any business, but it does not differentiate the business.
The challenge in every business is for the generic processes to be performed well and at a low cost.
Mid-market businesses have sufficient volume of activity to achieve benefits from different approaches to the operation of their business processes whereas small and micro businesses lack the volume of transactions. Similarly, mid-market businesses will have sufficient structure in the existing processes that smaller organisations typically lack.
“Perform the core activity and outsource everything else” has been a strategy adopted by some successful businesses and is advice provided by management consultants to some established businesses.
This outsource approach has been shown to work but there are consequences to adopting such a strategy in terms of business risks and control. The COVID situation has highlighted how a lack of control can leave a business exposed and not able to react to a change in circumstances such as the need to rapidly scale up or scale down.
Since the millennium there has been a shift in workforce expectations. Questions about purpose, risks to mental wellbeing and risks to physical wellbeing are raised. Business can no longer expect people to work like “robots”.
The benefits from BPO and RPA
Business Process Outsourcing (BPO) provides execution of a generic process by a specialist organisation which through economies of scale can deliver cost savings compared with the operation of the process in-house.
Robotic Process Automation (RPA) is technology which enables a process to be completed through the use of software robots simulating the interactions a person would have made on computer applications. By automating the work which people do, the cost of processing can be reduced and the people can use their time more effectively than performing repetitive work.
Both BPO and RPA offer financial benefits to existing business process operations.
BPO takes over the “day-to-day” management of the process, reducing the operational load on the existing business management.
RPA has the potential to remove human errors from a process, as computers are 100% accurate and process consistently.
RPA is data blind, so that no bias is introduced during processing and no leakage of sensitive information occurs through human gossip.
How has the situation changed?
During the 1990’s and early 2000’s there was a boom in BPO activity. Although India led the boom in activity, it has also spread to other countries such as Pakistan, Sri Lanka, Philippines, Thailand, Mexico and South Africa.
Initially BPO arrangements were fairly prescriptive, efforts were made to ensure precise details were covered in the contract price. More recently, the emphasis has changed so that BPO service providers are encouraged to leverage their expertise and scale to deliver annual incremental improvements to the BPO service for the benefit of the BPO customers. This has driven BPO providers to look for automation and innovation their service to achieve the gains necessary.
The emergence of RPA technology to automate repetitive processes has been recognised by BPO providers as one way to deliver their challenges of service improvement.
Cyber security and data ownership have become more important topics for business in recent years. These have added complexity to any BPO arrangement, particularly if the provider is offshore.
As RPA technology has been successfully deployed in FTSE 100 enterprises, the software has matured, so that it is no longer “bleeding edge”. RPA has become proven, robust and affordable.
Microsoft, IBM and Salesforce have all made acquisitions to compete in the RPA market against the market leader UiPath. The UiPath aim of “A robot for every desktop” starts to seem realistic given the big players entering the area.
Different approaches with BPO and RPA
BPO is often divided into different types based on the service provider’s location:
- Offshore outsourcing, or just offshoring, occurs when services are delivered from a foreign country.
- Onshore outsourcing, or domestic outsourcing, happens when services are provided in the same country
- Nearshore outsourcing is when services come from neighbouring countries.
BPO is sometimes categorized by the types of services being provided; three categories commonly cited are the following:
- Knowledge process outsourcing, or KPO, is when the outsource service provider is hired to provide expertise as well as processing capacity.
- Legal process outsourcing, or LPO, is specific to legal services; these range from drafting legal documents and performing legal research to offering advice.
- Research process outsourcing, or RPO is when research and analysis functions are required rather than specific deliverables
BPO is also sometimes referred to as IT-enabled services, or ITES — a name that recognizes that IT infrastructure enables outsourcing to happen in some situations. In fact, IT Departments are often the subject of BPO arrangements, with IT operations, development partners, helpdesk services and IT Desktop support services being delivered through a BPO Service provider.
Similarly, there are a range of categorisations of RPA, the two most common are:
- Un-attended software robots, that work on data based on a schedule or as it becomes available
- Attended software robots that work alongside a person, as an assistant, reacting to and interacting with the person
The co-ordination and orchestration of the robots is a key factor in delivering a successful service, particularly when there is a mix of processing types involved to deliver hybrid solutions which are sometimes called “Human in the loop” implementations.
Key criteria for successful adoption are:
- Clearly defined scope of activities
- Explicitly defined integrations between the BPO service and the rest of the business
- Ability to deliver the service in the required timescale
- Mechanisms to ensure quality of the service
- There must be a digital input and output
- Clearly defined scope of activities, with rules based logic
- Any need for judgement during the process will require humans to continue to interact with those elements of the process, although the use of Artificial Intelligence (AI) can dramatically reduce this activity
It is clear, that any business process where RPA could be used, could also be achieved through BPO. However, not every process which could be implemented with BPO could be achieved through the use of RPA.
For mid-market business that decide to use BPO, they may effectively be getting RPA without knowing it.
RPA is no longer a choice for BPO service providers but rather a necessity that they need to quickly adopt in order to stay current within the market.
COVID has shown that people are a real value to a business, so their time needs to be used effectively hence the focus on optimising “day to day” operations which makes BPO and RPA relevant.