Welcome to the era of Shock and Awe automation deals… it’s the only way

Isn’t it amazing how history has this habit of repeating itself?  Especially when it comes to services engagements, where the buyer hopes to shed loads of cost and the providers hope to make a handsome profit, while building a utility model to resell similar engagements to many other buyers.

And that is what we’re seeing, as the services industry evolves from engagements deriving value from lower wage costs to one which combines lower wages with the RPA arbitrage of repetitive tasks being computerized in software recording devices.  As one analyst firm once famously declared exactly five years ago: “Welcome to Robotistan, Outsourcing’s Cheapest New Destination“.  Or is it?

The difference these days, is that many of the emerging services engagements are being based based more on hope than certainty, where many buyers (often naively) think this is going to be just as easy as lumping the work offshore, and many providers simply have little choice but to sell them the dream, and live through the hell with them, if they want to stay relevant in this market. How else can you build an effective automation-led services model, if you don’t have the guinea pig clients to join you on that nice packaged holiday to Robotistan… And, let’s face it, how else are both buyers and providers supposed to behave, when there are so few historical benchmarks to set baseline metrics that both parties know are achievable?  Yes people, welcome to the era of Shock and Awe automation deals… it’s the only way.

So let’s skim over the first phase of RPA:  The discover phase: “What is RPA?”, “Do I use AA, BP or UiPath?”, and  “This stuff is easy, let’s just PoC it by ourselves”. And don’t forget the “Our attempts at CofEs always fail, but this time will be different because we’ve learned from our outsourcing and shared services experiences”.  Let’s begin the new automation-led journey at the phase where they’ve selected their products, appointed the CofE lead, and signed a deal with a service provider daring to escort them to the pearly gates of Robotistan:

The issues that are starting to unravel in this robotic age, is the simple fact that most clients avoided the painful transformation to their data processes and people, during their earlier efforts to source work to lower cost global locations.  They were pretty much able to delight their CFOs with 30%+ savings, without having to do much to change their underlying process architectures (the old “lift, shift then transform” approach usually stopped after the “shift”).  The reality of moving into an automation arbitrage environment is that you can’t just replicate that work into an even cheaper robotic environment without really figuring out how to do this effectively.

Bot licenses are not cheap, and simply do not make financial sense for a lot of processes, the way they are currently being operated.  You can simply end up paying $8K a year for a bot that only is utilized for 20 minutes a day, when you could streamline that process into a broader workflow and use that same bot to process a lot more work for the same cost.  Looking at several engagements already in place, clients are committing to significant staff reduction within 12-24 month of contract signing, and many are quickly realizing they are facing some serious complications, if they are going to meet the metrics their CFOs are expecting.  Either they end up running operations on desperately thin staff numbers, or they own up that they need to rethink that they need a significant transformation on their data infrastructures, processes and people culture, if they are going to enjoy the delightful fruits of Robotistan.  As several early RPA adopters will already tell you: You need to do MDM before you RPA.

When you talk to some of the leading consultancies in this space, they will tell you that they are making more of their revenues on pre-implementation transformation work, just getting clients into a place where they can do this.  They will also tell you the issues are not about the technology, but much more about the change management necessary to deploy the technology effectively.

The Bottom-line: The early RPA adopters are doing everyone else a huge favor by writing the new rule book

The biggest issue facing the services industry today is that we have run out of silver bullets, BandAids and scapegoats.  In order to get to Robotistan, you need to finally look deeply into your underbelly of messy processes, spaghetti code, manual workarounds and other funky ways of handling exceptions.  Moreover, you need to look at your people and figure out how to foster a culture of inclusion and innovation. Most enterprises have been stagnating for years, but as the guinea pigs find their way through their shock and awe of having to conduct real surgery – and psychotherapy – on themselves, a new rule book that guides us through the steps we have to take to learn, think, calculate and act, will emerge that many of the laggards will gleefully follow.

(Cross-posted @ Horses for Sources)


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Founder and Chief Executive Officer of HfS Research, the leading global research analyst organization covering global sourcing strategies. Acclaimed Industry Analyst and Consultant who scribes the leading blog for the services industry "Horses for Sources".  Previously worked  at AMR Research (Gartner Inc),  Deloitte Consulting’s BPO Advisory Services, the  Everest Group and  IDC .  In 2010, Phil was named “IIAR Analyst of the Year” by the Institute of Industry Analyst Relations (IIAR). This is the most coveted global award for industry analysts in technology and services.

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