Intelligent Automation Plus Outsourcing: A Profitable Combination

by VA team
Aug 16, 2017

The notion that outsourcing and automation are mutually exclusive is a myth. Often, when businesses or individuals are looking to make their business more profitable, they feel that they must choose between outsourcing work to save money or investing in technology that will enhance their automated processes. In the modern landscape, there is no reason that a business cannot combine automation and outsourcing to maximize profitability.

Models have shown that a combination of intelligent automation and traditional, human-centric outsourcing is best for maximizing the benefits of both approaches. This means that intelligent automation, of which there are many examples, will not necessarily substitute offshore human workers, instead augmenting them in many cases.

The fact remains that offshore labor remains a profitable measure for those looking to save on labor costs, while the establishment of intelligent automation processes remain fairly expensive. Therefore, attaining the lowered costs that come with outsourcing while also working toward intelligent automation that has long-term cost saving advantages serves as a wise business model.

The Continued Benefits of Outsourcing

The primary intent of outsourcing is for businesses to take advantage of the labor advantage that overseas labor forces provide. Outsourcing overseas has been prevalent in the IT industry for decades, with countries such as India providing a cheap, capable workforce at a fraction of the cost. However, employee outsourcing for the purposes of customer service, data management, and administrative tasks represent more forward-looking approaches.

For these tasks, businesses in America as well as Western Europe and Scandinavia would save cost without sacrificing quality by looking to Europe as the target for their outsourcing needs. Many European companies have worked to maintain a capable workforce at a fraction of the cost that native workers command, and the advantage of assigning services to a nearshore partner- versus India, for example – means that the risks of quality are significantly decreased.

This is the primary benefit of outsourcing: to lower the cost of labor, with as little quality sacrificed as possible. The reality that other nations provide cheaper workers will remain true, and companies located in business hubs such as Denmark, Norway, Sweden, the United States, and Western Europe will continue to utilize the cost-saving measure of labor outsourcing.

Outsourcing comes with a series of downsides, however. Outsourcing labor to another country often means that the client, based in America, sacrifices some level of quality control and direct oversight of a given project. However, accepting outsourcing as a critical component of cost-saving means that these risks can be mitigated. By partnering with European companies which provide an outsourced labor force, the benefits of outsourcing can be more completely realized.

The inter-European partnership which is provided for by the European Union (EU) means that shared work principles will often help to increase efficiency in the process of outsourcing tasks. In addition, EU regulations and oversight help to provide an enhanced level of security, including but not limited to IP protections and other forms of information protection, that cannot be guaranteed should work be outsourced to non-European workforces.

This is merely the cost of outsourcing in any industry, whether IT or otherwise. However, the reduced costs most often help a company’s profit margin while returning a level of quality that outpaces the relatively low cost. Indications are that there is still very much room for outsourcing in the American business landscape.

However, it is clear that intelligent automation, which is also referred to as cognitive automation or robotic process automation (RPA), is the wave of the future. These processes have become increasingly advanced, and are being applied in a wider range of business fields than ever before.

Intelligent Automation: The Future of Business

Intelligent automation has been likened to “a ‘virtual workforce’ of advanced software that performs tasks in an efficient, repeatable way.” This software has the advantage of being highly accurate, efficient, repeatable, and often come at a one-time cost, though the initial price of creating or attaining the software may be significant.

Regardless of the cost, these forms of intelligent automation are being increasingly used, as businesses see their long-term cost-savings and other benefits from the software as worth the investment.

One example of this high return on investment (ROI) is the incorporation of robotic process automation (RPA) by telecommunications giant Telefonica O2. A report on the benefit the company saw from implementing this software included a ROI between 650 and 800 percent. Further, it has been discovered time and again that employees who previously did tasks that are now automated were most often re-purposed for other roles instead of being fired.

Even more exciting to proponents of intelligent automation is the likelihood that more complex, less robotic tasks will be subject to automation in the relatively near future. Major companies, including IBM and Microsoft, are leading the way in terms of adopting intelligent automation as the future of their business model.

IBM in particular represents the balance that can be achieved between maintaining outsourcing while simultaneously investing in intelligent automation. One of the largest non-native employers in India, IBM has already undertaken the process of moving much of its labor overseas. With this commitment to outsourcing established, IBM is reportedly focusing more attention on expanding the capabilities of its cognitive engine Watson.

It has also been reported that Microsoft will center much of its business strategy around Cortana, its own intelligently automated personal assistant technology. While the movement toward increased automation of tasks that previously could only be done by humans will result in some job loss, it will also allow for those workers to be retrained for tasks that are not yet suited to intelligent automation.

Michael Vizard writes in CIO Insight that some companies may decide that in-house automation may replace outsourcing operations for some businesses:

“On the one hand, cloud computing has made it easier to not only outsource IT, but also entire business processes. On the other hand, the rise of IT automation may make the need to outsource IT completely unnecessary,” Vizard writes.

However, it is also noteworthy that third-party outsourcing firms may very well master the automation process, in many cases using the same overseas labor force to establish such automation. Should these firms establish automation processes that rival an America company’s in-house system, they could offer these services at a fraction of the cost that would come with a company developing the technology in-house. This would represent the ideal marriage between the cost-saving process of outsourcing labor and the further development of intelligent automation systems.

Outsourcing and Intelligent Automation: The Ultimate Cost-Saving Combination

It is true that, in many instances, a company will determine that automation serves as a substitute for their previous outsourcing model. However, for most companies, some combination of outsourcing labor and the development of intelligent automation will yield the most profitable results.

As companies work to develop systems of automation that can accomplish increasingly complex tasks, however, it is likely that many overseas labor forces will keep pace with this trend. Should this be the case, the overseas labor force would still offer the benefits of lower cost to the client, while developing skillsets that keep pace with the increasing automation trend.

When making the decision whether to increase profits through either automation or outsourcing, it is imperative that companies realize they are not always mutually exclusive. Together, automation and outsourcing may often provide a more profitable solution than choosing one or the other.