IPS Blog

Is the End in Sight for Traditional Outsourcing?

Oct 24, 2018 9:14:00 AM

By Greg Bartels

Business Process Outsourcing (BPO).  Digital mailroom.  Document and Data Capture.  Document Archiving.  Outsourcing back-office functions has made sense for businesses that wanted to save money, source labor, or speed turnaround.

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But when it comes to digitally transforming business processes such as procure-to-pay, contract management or business process automation, outsourcing to a traditional service bureau may not be the best strategy.  In fact, it may put a business’ digital transformation efforts at risk of failure.

When IPS began transforming our business over 20 years ago from what many would think a “service bureau” to a technology company, we never could have imagined all the advances in technology. We knew Moore’s Law was well under way, but advances in software and social media were only just beginning.

Our journey in automating our client’s legacy business processes has taught us the importance of choosing the proper strategy and technologies to transform and automate your business process. Businesses looking to transform their processes and shift the focus of their staff to more strategic work should consider leveraging transformational technologies that are delivered via a SaaS platform.

Here are four technologies that digitally transform business processes better than traditional BPO's and service bureaus:

  • Robotic process automation (RPA): For years, more work required more people to get the job done, even if the work was outsourced to a service bureau. That’s no longer the case with RPA.  The technology automates menial, repetitive tasks that can be easily replicated by instructing a software robot (bot) to copy keystrokes or to follow a defined set of rules.  Bots interact with IT systems and applications, just like humans.  And the technology is largely plug-and-play and does not require changes to existing IT systems, legacy applications or machines.  This makes RPA ideal for business processes such as accounts payable, where seamless integration with an ERP application is critical to achieving process efficiency.
  • Artificial intelligence (AI): AI attempts to enable machines to “think” in a way humans do, or to create systems that are good at doing the kinds of things humans are good at, although much faster and far more efficient. By analyzing data sets and patterns, AI automates time-consuming tasks such as data capture – one of the primary functions that businesses look to service bureaus to perform.  The technology understands the tasks that must be performed for a business process.  AI also can mine huge data sets to provide contextual insights for decision-making and planning.
  • Machine learning: A component of AI, machine learning uses sophisticated algorithms to eliminate the complex, rigid and time-consuming process of programming all the steps required to automate a business process, as well as providing a business with invaluable predictive analytics. The technology can “train” itself to recognize documents (e.g. invoices and orders) and to capture the necessary data based on their characteristics (such as extracting amounts).  As a result, the technology enables businesses to achieve better results over time – something that cannot be said of a service bureau that relies heavily on human operators.
  • Business analytics: Thirty-eight percent of finance executives surveyed by KPMG say that their finance organization is challenged by increasing demands for more data and analysis.   Business analytics addresses this need by connecting processes and systems to provide users with 360-degree visibility into information.  Configurable, roles-based dashboards deliver the visibility required for dynamic operations management and working capital management.  And users can instantly model future performance and build scenarios based on potential events.  Cash forecasting is real-time, dynamic, and fully integrated with any system.  This means that finance executives and stakeholders can generate, and track, scenarios based on economic or market trends, supplier behavior, competitor activity, or other critical factors.  Few service bureaus can come close to the visibility provided by business analytics.  

These technologies, delivered as a service, enable corporations to achieve their strategic digital transformation initiatives, while squeezing unnecessary cost out of business processes – even those that are currently performed by a service bureau.  Research and advisory firm Gartner reports that RPA and other digital technologies can be up to 65 percent less expensive than offshore-based staff. 

Compared to traditional BPO’s and service bureaus, transformational technologies such as RPA also enable businesses to:

  • Free staff from repetitive tasks to focus on value-added functions
  • Accelerate cycle times through the automation of routine and complex decisions
  • Achieve unfailing accuracy
  • Maintain control and tracking over business processes
  • Increase corporate agility as market conditions and business needs change
  • Quickly scale to meet changes in business activity
  • Ensure compliance with prescribed operating procedures

The benefits of digital transformation are a big reason that only 10 percent of banks and insurers are making significant investments in outsourcing, and 50 percent of banks and insurers are aggressively pursuing RPA.  That’s according to the 2018 State of Operations and Outsourcing study, conducted by KPMG across 381 Global 2000 organizations.  Insurers were one of the first industries to explore BPO and offshoring twenty years ago, so it’s telling that these organizations are rethinking their approach to business processes with RPA.  But it’s not just banks and insurers that are forsaking outsourcing for digital technologies; the KPMG study found similar results across verticals.

In fact, global management consulting firm A.T. Kearney predicts that digital technologies such as AI and machine learning delivered as a service will place further pressure on the outsourcing market. 

None of this is to suggest that BPO’s and service bureaus will disappear anytime soon.  The worldwide BPO market growth has been stable over the past few years, growing at a five-year compound annual growth rate (CAGR) of approximately 4 percent to 5 percent, according to research from IDC. 

But more businesses recognize that they cannot achieve their digital transformation objectives simply outsourcing key processes to BPO’s and service bureaus with staff in far-flung geographic locations.  Digitally transforming business processes requires new thinking and new technologies such as RPA and AI.

And that’s where traditional BPO’s and service bureaus fall short.

Contact IPS at 201.710.2417 to speak with a Solutions Consultant to begin digitally transforming your business today!

Topics: AP Processing, AP Workflow, accounts payable processing, Invoice Processing, digital transformation