Points of View

BPO Service Providers: you’re facing Hobson’s Choice. Embrace Automation, or Prepare for Oblivion



A Hobson's choice (see definition) is where only one thing is offered: the two options are taking it or taking nothing.

After more than two decades of development, the cost and scalability elements of the value equation delivered by traditional business process outsourcing have reached exhaustion point, and the industry stakeholders have no choice but to work together to create innovative means of delivering value to enterprise clients.  While BPO quality can be delivered in so many ways, such as high quality, responsive customer service and analytics, if you can’t leverage automation to do this at scale with significant cost reduction, you will be out of the game. 

The HFS Robotic Business Outsourcing Roundtable, supported by Automation Anywhere, brought together 24 key stakeholders from across the BPO industry to discuss how BPO service providers can deploy automation at scale to redefine this cost/scale equation. Together, we explored how this technology is changing the BPO landscape, how providers, if they want to survive this evolution have no choice but to embrace these new opportunities. 


Proven software capability to reduce reliance on labor has changed the game

New findings (Exhibit 1) from the 2019 State of Operations and Outsourcing Study, covering the views of 355 operations leaders across Global 2000 enterprises, conducted with the support of KPMG, clearly shows their intent;  close to half want to change their BPO service provider across BPO domains, and also introduce automation in the equation.  For enterprises who’ve been deploying these BPO models based on “FTEs” for many years, they recognize the proven capability of software, such as Robotic Process Automation (RPA) to reduce the reliance on so many workers over time to receive operational services.  Hence, the whole revenue model of BPO has to include smart blending of people and bots to drive down labor costs over time, and also create a more data-rich environment that is easier to scale, and add value elements, namely better data and AI capability.



Exhibit 1: Outsourcing, insourcing and the impact of automation





Source: HFS Research supported by KPMG, “State of Operations and Outsourcing”, 2019

Sample: Global 2000 enterprise leaders, n=355


Move away from fixed-sum games—play an infinite game instead

Big disruptive changes are happening, there’s no pushing back the tide. As automation moves to scale—whether inhouse or outsourced, on premise or aaS—and BPO contracts are fulfilled using more and more automation, the mix of vendors spanning software, services, and BPO is sure to change. Resistance is futile.

The decision is how to act at this point. Is this a knife-edge, a difficult situation? Does this look like a threat? Are you still playing to win more of today’s pie? If yes, you are playing a fixed sum game where you fight with competitors over a shrinking pie—a race to the bottom seems inevitable.

Exhibit 2 below shows that when we asked the same 355 Global 2000 Enterprise leaders about their renewal plans for existing outsourced contracts only 23% (across industries) said they were likely to continue forward with their current deal. The rest are looking for some form of change, some will automate and/or insource – this 17% who abandon existing outsourcing contracts in favor of alternative arrangements will cause the pie to shrink. The 32% that are likely to change provider will likely place pressure on margins as will the 27% who want a different deal with their current outsourcer. The graph below shows an industry vertical breakdown of this data.


Exhibit 2: Less than a quarter of current outsourcing contracts are safe in current form




Source: HFS Research supported by KPMG, “State of Operations and Outsourcing”, 2019

Sample: Global 2000 enterprise leaders, n=355



There is alternative way to look at automation; beyond the immediate threat that automation presents there are many bigger opportunities. For now, continue to work with automation vendors to embed automation in offerings, whether that’s BPO, or Automation as a Service or any variant in between. Then, think ahead to the next level of the game where data governance, AI and IoT come of age. That’s a growing pie, the broad blend of what’s needed is unlikely to reside in any one business; ecosystems and partnering will be central to new business models. There is lots of opportunity for those who can collaborate in tomorrow’s game - right now it’s not very clearly defined and there are worrying skills shortages.


So, the short-term game might be one of defense and offence, to keep existing customers and woo those ready to change supplier. But the long game is one of investing in and training staff with enough new skills, especially in consulting and emerging technologies to make a credible play in tomorrow’s game.


Terminology is chief among the barriers to progression to automation at scale


Automation conversations are full of confusing and conflicting terminology. One person’s robotic process automation (RPA) is another person’s robotic desktop automation RDA. One person’s bot is another’s bot controller, and the terminology confusion is going to get worse before it gets better as more AI enters the picture. Establishing a baseline of agreed automation terminology would be a good starting point. There have been efforts to do this, most notably the Institute of Electrical and Electronics Engineers’ (IEEE) attempts to standardize terminology, but confusion is still widespread and preventing progress.


Extracts from the latest terminology definitions from the IEEE Corporate Advisory Group (CAG) are listed below in Exhibit 3. They are published “for the purpose of promoting clarity and consistency in the use of Software Based Intelligent Process Automation (SBIPA) terminology. The definitions represent the consensus of a diverse panel of industry participants.”





digital workforce

The collective suite of automation technologies delivering existing or new work output as applied in a business; the manifestation of digital labor

intelligent process automation

A preconfigured software instance that combines business rules, experience-based context determination logic, and decision criteria to initiate and execute multiple interrelated human and automated processes in a dynamic context. The goal is to complete the execution of a combination of processes, activities, and tasks in one or more unrelated software systems that deliver a result or service with minimal or no human intervention.

robotic desktop automation (RDA)

The computer application that makes available to a human operator a suite of predefined activity choreography to complete the execution of processes, activities, transactions, and tasks in one or more unrelated software systems to deliver a result or service in the course of human-initiated or -managed workflow. Syn: agent-assist automation, assistive automation, in-line automation.

robotic process automation (RPA)

A preconfigured software instance that uses business rules and predefined activity choreography to complete the autonomous execution of a combination of processes, activities, transactions, and tasks in one or more unrelated software systems to deliver a result or service with human exception management. See also: activity, choreography, business rule, process, service, task, transaction.



Source: IEEE Std 2755TM-2017, IEEE Guide for Terms and Concepts in Intelligent Process Automation



Scaling RPA and IA presents many challenges


We’re still not seeing the level of scale that buoys comfort levels. Many need to see others progress beyond the current levels of frustration before acting themselves. Doubt is taking hold. Buyers are putting the robot chicken before the outcome egg, buying RPA licenses before deciding what to do with them. At its worst, it looks like RPA has not achieved what it promised, causing suspicion that it might have been over-sold from the beginning. There simply is no bypassing the IT department—not for very long anyway—so while a business unit can buy RPA and play around with it a bit, it is unlikely to reach scale without IT’s wholehearted involvement. On the bright side, this is probably BPO providers’ biggest opportunity: cracking the scale challenge so that others don’t have to. Anyone who asks for automation at a single departmental level should be told “no”—automation needs to happen in a bigger way, across companies and silos.

We rarely see contracts based on business outcomes with risk and reward at the heart of the deal

Despite many, many conversations with providers of both BPO and IT services about contracts based on business outcomes, few are actually selling on this basis, and they are certainly not talking (publicly) about the terms of deals that are made on this basis. Vendors say it’s the client who backs out when it comes to putting it to paper. HFS is keen to understand this better and will explore further, but for now, it’s clear that the time-honored FTE-hours-per-year pricing model is still very much alive and well. It’s is a shame we’re not seeing more outcomes-based contracts because in the absence of clear and rewarding incentives for true efficiency, we are unlikely to see very much of it.

There are hard, unavoidable realities in breaking down silos

While RPA can operate across silos on the surface, actual change to what lies beneath requires transformation. Large scale transformation projects that are genuinely innovation-led are big beasts, long, and expensive and touch many applications, processes, and departments. The resource drag is incredibly daunting for the buy-side, and many alternative solutions can appear easier, cheaper, and faster. What’s more, where the ownership of the underlying systems and the responsibility for carrying out business processes are separate (e.g., in many BPO arrangements), workforce and operational strategy can become misaligned, resulting in a team on the ground dealing with process or system inefficiencies that does not necessarily have authority, budget, or permission to make changes to either the processes or the systems landscape.

The capacity for adaptation is patchy, and not everyone can do it—many organizations will fail

You can’t ignore the human factors; people’s resistance to adapting to working over or alongside digital workers will not be consistent across the board. Smart movers will anticipate and expect resistance and have strategies in place to counter, cajole, and incentivize the right behaviors and actions. Change management is core to progress here; it’s not simply a nice-to-have.

Exhibit 3: Investment intentions in 2019 show that humans-plus-bots is now the norm



Source: HFS Research supported by KPMG, “State of Operations and Outsourcing”, 2018

Sample: Global 2000 enterprise leaders, n=381



The Bottom Line: HFS’ data shows clear intention to automate, just as the first wave of BPO was offering people to perform processes cheaper than inhouse, the smart game now is offering automation that is cheaper and faster than can be achieved in-house, at scale.


BPO and RPA are on course for collision as RPA (or intelligent automation) takes on the mantle of process cost reduction champion. Logically, it’s reasonable to predict that for the foreseeable future, people and bots will be performing processes together, onshore, offshore, inhouse. One thing that’s not clear is whether or not the BPO industry is ready and able to seize the automation opportunity. Collaboration matters at this point, not just to grow the pie, but also to secure the strategic alliances that will strengthen the overall offering.


The window for the BPO industry to act with RPA is closing. HFS data shows that planned investments in AI are ramping up, overtaking investments in RPA as of 2020. Initially, some of that AI investment will be additive to RPA (such as machine vision and natural language processing), but in time, AI-assisted processing will progress, as will the software applications on which business processes run. Eventually, the Hyperconnected Enterprise state will prevail with truly interactive, automated, predictive, and prescriptive processing. RPA might be a part of this, but it won’t be the whole thing.




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