Greetings from Robotistan, outsourcing’s cheapest new destination

Outsourcing has always been about people, process and technology.  Scratch that.  It’s about process and technology, with people an optional extra.  So without any further explanation of this amazing trend where people will no longer be needed, let’s hand you over to our resident expert in robotics (among many other things), Jim Slaby….

“Listen and understand. Robots are out there. They can’t be bargained with. They can’t be reasoned with. They don’t feel pity, or remorse, or fear. And they absolutely will not stop, ever, until you have knocked another 50% off your outsourced labor costs.” (With apologies to James Cameron.)

Stop me if you’re heard this one before:

“Chief, I need to add ten FTEs to handle the additional order-entry and logistics workload we anticipate once our new product launches in six months.”

“Oy. You know we don’t have the budget for that. What about automating the process?”

“IT quoted it at 18 months and $1M to do under their standard SOA and BPM development approach. Even if we had the money, that wouldn’t come close to meeting our launch deadline.”

“So what are our sourcing options?”

“We can hire 10 FTEs for $800K in the States, or $300K India.”

“Right, India it is.”

“Actually, I have one other option. We can do it for $120K in Robotistan”

“Robotistan? Where the hell is that?”

“It’s right here. I’m going to have my own business process analysts create software robots to do the work. We can get the robots up and running in five months. The robots will do the work for less than half the cost of Indian FTEs. And nobody’s job gets shipped offshore.”

Oh, you hadn’t heard that one? Neither had HfS until recently, when we started researching a UK startup by the name of Blue Prism. It makes a software development toolkit and methodology that lets non-engineers quickly create software robots to automate rules-driven business processes.

Think about this for a moment. If you were a buyer, how fast would you jump at the option to hire FTEs at rates that undercut the Indian body shops by 50% — without sending jobs offshore? (“Hire” isn’t the right word, of course: it’s “create”.)  If you were a BPO services provider, how would you like to build a software robot to automate a business process for one client, and then resell copies of that robot to a dozen other clients in the same vertical? If you were an Indian outsourcer, how great would it be to hand off your dullest, most rote outsourcing work to robots so your human workers could take on more engaging tasks, thereby reducing your horrific churn rate – and by the way, undercutting your competitors on price?

Naturally, there are caveats. Not every business process is going to be well-suited to robotic automation: the more rules-driven it is, the better. Think of any rote, repetitive back-office process that does not require human judgment or much exception handling: swivel-chair data entry into multiple systems, account review and maintenance, creation of online access credentials (user IDs and passwords), general ledger account maintenance.

James R Slaby is HfS Research Director for newfangled things like Robotic Automation (click to download his report)

Furthermore, you’re going to need some buy-in from IT, and they may find the project a little fishy: what are business process analysts doing developing software? You may have to build a modest pilot first to convince them it works, as you’ll need their help with necessities like putting together a virtual machine cluster to run the robots on. (Getting your executives on board should be considerably easier once you show them the eye-popping business case in which not only does nobody’s job get shipped to India, but you may save enough to protect some onshore jobs or reshore some higher-value work.)

There is a learning curve on the environment, typically two to four months to master the tools to model, automate, test and optimize your new robots. But after the initial ramp-up, development time drops dramatically for each new business process, in part because new robots may be able to reuse components created for earlier ones.

Naturally, HfS didn’t take Blue Prism’s word for it: we studied two of its early adopters, a large wireless carrier and a major BPO services provider. Having successfully built very cheap robots to automate a variety of business processes, these people are true believers, avidly looking for new processes to automate. We outline their experiences in the report “Robotic Automation Emerges as a Threat to Traditional Low-Cost Outsourcing”.

In it, we take a long look at the business cases that led these well-known companies to explore the technology, the obstacles they faced selling it to internal stakeholders, how they identified suitable processes for robots to do, what learning the Blue Prism tools and methodology was like for their business-unit staffers, and how the resulting robots now fit into their existing IT and security infrastructure and governance.

We also make some predictions about how this technology has the potential to dramatically shake up the outsourcing industry, especially those players whose value proposition largely rests on labor arbitrage. The workers of Robotistan have arrived, and they have the potential to thump their human counterparts at their own game. HfS urges BPO buyers, services providers and advisors alike to look at the jaw-dropping economics of robotic automation, and put together a strategy to accommodate and exploit it today.

Click here to download your free copy of “Robotic Automation Emerges as a Threat to Traditional Low-Cost Outsourcing”

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8 Comments

  1. Posted November 4, 2012 at 3:48 am | Permalink

    Hi Jim

    Great article and exactly what IPsoft has been doing for IT and Business processes for several years now. Its great that influential analyst firms like HfS are picking up on this trend and discussing it as another option versus the offshore providers.

    Regards
    Rob

  2. Amanda Hare
    Posted November 4, 2012 at 7:28 am | Permalink

    Hi Jim,

    That was a funny blog! So I guess once we get processes standardized to a certain point, we eliminate ourselves?

    Amanda Hare

  3. George
    Posted November 4, 2012 at 7:59 am | Permalink

    Jim – great post.

    Isn’t it incredible how upset people get about jobs “moving offshore”, however, when they can be eliminated with software technology, everyone simply accepts it as “innovation”?

    George

  4. Posted November 4, 2012 at 7:29 pm | Permalink

    Interesting post and as one comment made… its been around for a while. The big if is that its suitable for commodity competitive processes (assuming that they are properly defined and have been normalized for efficiency). On the other hand one has to consider the impact that it has on the human-robot interface where humans aren’t particularly endeared to automation interaction.

  5. Posted November 5, 2012 at 2:02 am | Permalink

    The challenge here is the uplift and optimisation of processes to allow use of this capability, before one starts to discuss whether labaour arbitrage or automation can bring benefit (and it really isn’t an either/or). This effort really needs to be driven by the business strategy, not tacked on as a way for a solution to find an application.

    I believe the uptake of automation depends heavily on guiding the customers in the required change to leverage the capability. I also believe the supply of innovation will grow and innovate heavily, and that the specific technology will become less and less relevant as a USP. Since the first waves of outsourcing the candidates for lift and shift are thin on the ground. The challenge lies in the application, not the creation of the tooling itself.

    In my opinion, automation players may be stuck between CFOs who are cold to the technology-laden presentations and the operational teams who recognise that automation takes one level of rationalisation further than previously touted outsourcing deals, and the challenge that represents. Focus on the whizziness of the solution is likely to be a non-starter as more and more players enter the market with their own solution.

    Often the real meat of the benefit comes from the transformative event that is a pre-requisite to succesful outsourcing. Indeed, I have encountered clients who value the transformative exercise required to outsource more than the outsourcing itself. Without a business-relevant consultancy capability attached that can enact the changes required for the client to leverage these technologies (and may even recommend against the application of the technology in some cases), I believe automation risks running the same, oft-lamented course as traditional outsourcing.

    Please note, I give an opinion on the overall sector based on my understanding, not on the company referenced or any others in the sector individually.

  6. Carina Smith
    Posted November 5, 2012 at 4:45 am | Permalink

    Love the idea of charging for robotic FTE’s as well as actual highly trained people! At least then customers wont expect all that clever innovation and investment to be “free”…..
    Carina

  7. Posted November 5, 2012 at 9:26 am | Permalink

    Great to see the reactions here! We acknowledge that the Blue Prism is only one of what we expect to be a growing array of vendors delivering robotic automation solutions. And HfS has long noted the irony of bashing outsourcing while overlooking how automation eliminates far many more jobs.

    One theme on which my report focuses is the challenge of selling such solutions internally. Our case studies show how the economics and timeliness of the solutions were what won the day, not their technological glamour. I agree the longer-term play will be express their value less tactically, more as part of a continuum of solutions that includes a range of sourcing alternatives and traditional IT-driven automation. There’s clearly room for providers to lead the way on this.

    I think there’s perhaps a stronger argument to be made for robotic automation in agile software development terms: it is fundamentally iterative and close to the target business process. I imagine we are just at the beginning of an era where such tools and methodologies develop to the point where we all become software engineers to some extent.

  8. Posted March 25, 2013 at 2:35 pm | Permalink

    Great article. For further proof of the drive of robotics and automation its worth checking out what is happening in the large data warehouse, BI and Big Data marketplace. Automated data integration, code migration, test driven development all wrapped up in an agile delivery is now available on the most robust warehouse platform.
    Check out Agile Solutions ETL automation suite.

7 Trackbacks

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  5. [...] What’s more, efforts such as the Institute for Robotic Automation hatched last month by The Outsourcing Institute’s Frank Casale could give software robotics an even higher profile. �Some industry watchers, such as Horses for Sources, have dubbed a likely move by organizations to software robots as “Robotistan.” [...]

  6. [...] What’s more, efforts such as the Institute for Robotic Automation hatched last month by The Outsourcing Institute’s Frank Casale could give software robotics an even higher profile.  Some industry watchers, such as Horses for Sources, have dubbed a likely move by organizations to software robots as “Robotistan.” [...]

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