In today’s world of rapid technological development and fastpaced transformation, the year-long RFP cycle is outdated. Companies need the flexibility to move in and out of sourcing agreements rapidly to keep up with changing demands and new capabilities

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The mortgage and loan servicing industry is beginning a period of rapid change in the way business process services are delivered. Over the past few years, mortgage portfolios have not grown rapidly. For example, in the U.S., the largest residential mortgage market in the world, loans have grown only 7.3% from year-end 2012 to year-end 2016, a CAAGR of 1.8%. Some lines of loans have grown quickly, such as auto and education loans in the U.S. However, those loan pools are smaller than the mortgage pools and loan servicing requirements are less complex, both of which drive much lower revenues for processing services.

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Robotic process automation and artificial intelligence (RPA & AI) in HR are at an early stage, though the clear signs are that vendors are beginning to make investments that are paying off for their clients. Here I take a look at recent RPA & AI initiatives in three areas of HR outsourcing: payroll services, recruitment process outsourcing (RPO), and learning services.

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Avasant’s CEO, Kevin Parikh shares a case study for the humanity at the Empowering Beyond Summit

The outsourcing journey began 23 years ago, when it was all about labor arbitrage and the focus was on cost and offshore labor– but if you think outsourcing is dead, you’re wrong – it’s just been reinvented; the outsourcing revenue decline over the past 7 years since the peak of 2014 shows no signs of turning around anytime soon, but at the
same time, we see a dramatic and rapid increase in the market for digitally-fueled deals–service offerings powered by new technology, new business models, new pricing, automation driven labor arbitrage, more cloud, and more service as software.

At a key inflection point, enterprises are seeing the convergence of emerging technologies with business operations & digital transformation for a new type of outsourcing, as they re-think their business processes, organizational structure and sourcing, pricing & revenue models to adopt to a new Digital world. Never before have there been such opportunities for those seeking better, faster, and lower-cost services. If you are like most business and tech executives, you are probably dissatisfied, if not fed-up with traditional outsourcing and its labor arbitrage-centric business model. Most of the savings have evaporated, performance is lagging, and the innovation isn’t coming fast enough.

The advent of RPA, Cloud, IoT and advanced analytics is changing the nature of how the work gets done. These technologies combined with new players and new business models  are driving the reincarnation of outsourcing! New digitally-fueled service offerings are ushering in a wave of heretofore unachievable benefits and it couldn’t have come at a better time. Many enterprises still prefer the bulk of the work, the investment and the risk to be borne by an outsourced service provider.  These customers simply want the results. With the implementation of digital transformation services, clients are beginning to realize that they can now have outcome driven engagements with providers that can drive real innovation without the cost, risk and time investment.

“Many analysts have enjoyed predicting the demise of outsourcing several times over the past decade. And they continue to be wrong.  Outsourcing is alive and well, but being revived through Digitally fueled services,” said Frank Casale Founder of The Outsourcing Institute & The Institute for Robotic Process Automation & Artificial Intelligence.  “That said, the nature of outsourcing is indeed changing; while the old outsourcing models are in fact dead, a new digital services industry is being born. When I launched the Outsourcing Institute in 1993, outsourcing was all about labor arbitrage and mostly your mess for less; it has pretty much remained the same for the past two decades. But this original iteration of outsourcing began to run out of steam over the past decade.   Customers wanted innovation, but weren’t getting it from their traditional outsourcing contracts.  Along come digitally fueled services powered by new technology, new business models, new pricing and less labor arbitrage. This is the New Outsourcing.”

“Digital enterprise transformation is the primary focus of The Outsourcing Institute’s 2017 programs because this is truly where the industry is headed, and needs to move to very quickly. While there are plenty of members who are still in the thralls of traditional offshoring and outsourcing deals, it is clear that those models are no-longer sustainable based on accelerating technology and business convergence, market dynamics and potentially political pressure,” says Daniel Goodstein, President of The Outsourcing Institute. It’s imperative that the marketplace and our members begin to shift to the ‘New Outsourcing’, leverage digitally-fueled services and re-think the way they are operating and getting work done. We plan to focus a significant portion of our content, events and advice around examining the impact of digital technologies on the marketplace in the coming years.”

To this end, The Outsourcing Institute’s Digital Convergence Conference will be held in New York City on September 27, 2017, sponsored by PwC, and co-chaired by Anupam Govil, Partner at Avasant and Gregory North, a former Chief Process Officer at Xerox and Principal of Outsourcing Institute’s newly formed Digital Transformation & Innovation Practice. The conference is designed to help clients, service providers and advisors make the transition to Digital Services, providing insight into the new ways work is getting done through the convergence of IT, Business process/operations outsourcing and Digital technologies. The conference will include discussions around new go-to-market strategies; digital revenue models; new methods of handling governance, risk and compliance; customer experience management and combining front, middle and back office/internal operations.

Come discover the “uberization of the enterprise” through IT as a service, Business process as a service, Crowdsourcing, Automation & Cognitive, IoT, Analytics, Cloud and platform-fueled technologies. If you haven’t already registered, go to http://oievents.com/digital-convergence-conference-2017/ to lock in your attendance! or more information on the full Outsourcing Institute event calendar, visit clear-barnacle.10web.cloud/events.

Outsourcing Institute President Daniel Goodstein,  Anupam Govil, Partner at Avasant and Gregory North, a former Chief Process Officer at Xerox and Principal of Outsourcing Institute’s newly formed Digital Transformation & Innovation Practice, contributed to this article.

Catherine Zhou is a partner and serves as the Digital Services Leader with PwC’s Financial Services practice. She is deeply connected to the financial centers in New York, Asia and Europe while resides in Silicon Valley, San Francisco the Bay area where her root has been, working with start ups and technology giants in developing digital first businesses. She represents the combination of the left brain of an engineer/ statistician by training (from Carnegie Mellon University) and right brain (marketer for fortune 500 companies and practitioner of the experience economy).

A consultant for nearly 20 years, Catherine has extensive experience leading organizations in areas of business strategy, organizational design, sales and marketing effectiveness, cost reduction, change management and ultimately ROE improvement. She leads a full service teams of strategists, designers, and technologists who help companies turn ideas into transformational digital businesses.

Why are vacations usually more fun than transformation programs?

We don’t start a family vacation by getting in a car and driving, we start by deciding where we want to go and determining if we should drive, fly, or maybe take a cruise.  We have a conversation about what kind of vacation we can afford and get input from the kids on where they would like to go.  We then pull all this together into a plan with a clear destination, a way to get there and a price we are willing to pay for the experience. Unfortunately that is a lot more than can be said of many transformation programs.  Too often they feel like a dream, or is it a nightmare, where we wake up on a plane headed we don’t know where with no idea how we got on board.  But it is clear we are flying first class, so this must have been a really expensive ticket.  How does that happen?  Why does survey after survey of CEO’s, CIO’s and COO’s report failure rates for transformation programs greater than 50%, often citing unclear goals and failure to take into account organizational and process complexity up front as reasons for failure?  Why do companies invest so much time, money and organization mindshare on leaps in technology or changes to organizational structure without a well-defined roadmap?  Perhaps the answer lies in three factors that in combination represent a perfect storm of pressures on leaders today:

• Need to constantly report and show improvement in results
• Very rapid rate of change in the operating environment
• Ever increasing number of choices in technology enablement

Simply put – leaders today have much less time to think about much more with someone always watching.

Back to our vacation scenario.  Imagine you and your family are on a globally televised game show where you have sixty seconds to cycle through all the possible options on where to go, how to get there and how much to spend while millions were watching.  What is the chance that would go well?  Welcome to the life of the CEO of a global business.  Is it any surprise that these pressures result in decisions that later result in failure?

Still, the buzz today is all about transformation, usually digital transformation.  Companies threatened by digital disruption from competitors and racing to keep up with rapidly changing consumer expectations know they need to transform if they are to survive and thrive.  But transform to what?  And why?  And how?  Too often these questions get lost in the rush to get something you can call transformation going.  They do come up later at the “lessons learned” session, when why the project went so wrong is the subject of the meeting.

Framing Your Transformation Roadmap

The first stepping in framing your roadmap is calling a transformation time-out – hold the calls, cancel daily updates on progress, go off site if needed.  The objective is to take a big, strategic step back, carving out time and mindshare to think systematically about this thing called transformation, gaining perspective on your current position, the competitive threats and new opportunities opened up by changes in technology and business model.

To get to a smart transformation roadmap there are things we need to recognize and questions we must answer.

• Transformation is a road to a future state that should be a strategically better position than the current state.  This requires strategic clarity, honesty about gaps in current capability and specificity about future state elements.
• Choices about the vehicle we use to transform (people, process and/or technology) depend on how far we are from the desired destination, what conditions are like between here and there, how much we have available to invest, and how much time we have.
• Transformation is not something we do alone.  Who needs to be on the journey with us  – within our organization, across our network, and from the universe of possible partners and suppliers  – depends on what plays we need the team to run.
• Timing is everything in transformation.  Take the leap too early and the market is not ready, too late and there is no market left.
• Every transformation efforts faces obstacles and understanding those up front helps one plan and prepare for them.
• The considerations above are not independent variables. Having different partners may open up new possibilities about where we can go and how we can overcome obstacles in our path.

This all sounds so simple – take a strategic pause, ask and answer some questions, then off you go.  But if it were that easy we would all already be doing it all the time.  Our own experience and the data suggests otherwise.  This should not be surprising as transformation is not about what technology can do, it’s about what humans can do with technology.  It takes tremendous self-control to resist the latest tech shiny object until you know what its for, courage and candor to admit that your strategy is not sufficiently clear or that your operating environment is overly complicated or that your capabilities are limited requiring a partner to provide insight or technology you lack.  It takes design thinking to center the transformation on real customer needs and lean design to keep the business model and business process as simple as possible.

Case in point – Prodigy and Amazon.

What if Sears had launched the online service Prodigy back  in 1984 as the front door to its legendary core competency in catalog shopping and mail order logistics, encouraging consumers to shop from home?  Instead Prodigy was positioned as a dial up service like AOL, an easy to use front end to the entire internet.  When that market did not pan out Sears sold its position in Prodigy after investing hundreds of millions of dollars, largely exiting the digital high ground from which Amazon would later dominate retail.   Conversely, Amazon.com was launched on an investment of less than one million dollars as just a web site where you bought books online.  That simple business model was the base from which the entire retail industry has been transformed.  Strategic wrong turns are always easier to spot through the rearview mirror, but there is no question an alternative history of digital retail could have been written by Sears, its pioneering hero.

Clearly the downside risk of mismanaging  transformation is extreme – opportunity missed, resources squandered, even existential threats.  So we had better take the time to get it right.

Transformation is a journey.  You are going to need a roadmap.

by Gregory North, Principal Digital Transformation – Outsourcing Institute

Much of what has been written, for good reason, on the subject of automation has been about the impact on jobs, with topics including:

• How many jobs will be lost?
• What type of jobs are most or least likely to go first?
• How can one defend one’s role against the specter of creeping automation?

There is no question we face a tipping point with profound implications for our society and economy as cars and trucks go driverless, automated agents start taking customer calls, and bots process all that work in the back office.  There is real fear that the rise of the robots signals that human may be on the decline, or at the very least, will have very little left to do and may require universal basic income just to get by.   But even though the percentage of work that can be automated may be uncomfortably high, the workforce of the near future will still be a mixed one, where humans aided by new technologies like AI and predictive analytics work “side by side” with robots.  Welcome to the digital workforce.

Around the world organizations sense this new reality and are coming to the realization it will be upon them sooner than they thought.  The time is now to begin considering what that digital workforce will be like and prepare their leaders and employees for this transformation.  Examples recently from my work with companies on their digital strategy include:

• Leaders thinking beyond the short-term benefits of an RPA implementation to the long-term impact on their culture, deciding to build in employee change management and re-training at the front end of their automation roadmap
• Questions arising about who “manages” the robots, monitoring throughput and quality of output, determining when improvement or replacement is required
• Process owners designing service value chains to ensure seamless “hand-offs” from Tier 1 chatbots to Tier 2 customer service representatives.

These signs point to a workforce where the line between human and digital work blurs, replaced by a spectrum ranging from fully automated to not automated with a good deal of work in the middle space where human and digital labor works together.  Three to five years from now it will not be unusual for teams working a project to have support from a Siri-like resource capable of accessing all of the organization’s data.  Ten years from now that resource may be leading the team.  Career advancement in that environment will likely go to employees who demonstrate the strongest human/robot collaboration skills.  Managers will need to get good at discerning what work is best done digitally, which requires the human touch and which benefits from them working together.

As we move up the robotics chain from transaction bots to AI enabled robots Human Resources will begin to develop policies and programs reflecting the new reality that many of the “resources” at work are not human.  Will robots get an employee ID?  Probably.  Will they be eligible for the annual employee satisfaction survey?  Not clear.

What are the strategy implications of the digital workforce?    It will be a source of massive disruption – and opportunity.  No industry will be untouched and every role will be touched in some way.  Companies that see it coming, recognize it as an opportunity and seize that opportunity will build sustainable competitive advantage.  Others caught off guard may see their best talent move to faster growing, more digital enabled firms.  Ironically, the best career choice of the future may be the company with the most, or better put, the best robots.

Regardless of how one feel about these changes, they are coming.  The era of the digital workforce is nearly upon us.  Time to prepare.

If you would like to schedule a briefing call to learn more about how digital transformation is creating the workforce of the future now, email us at inquiries@clear-barnacle.10web.cloud.

Frank Casale, Founder of Institute for Robotic Process Automation continues his discussion with Naresh Kothari, AVP & Head – Business Development, EdgeVerve (Americas), on Beyond RPA: How AI-Based Systems are Ushering in the Next Wave.  In this video interview, you’ll hear about the differences between cognitive and traditional RPA — and when to apply which technology.

Learn about:

• What’s similar and what’s different when it comes to evaluating these technologies?
• Is the assessment process the same?
• What implementation considerations need to be taken into account?

The Institute for Robotic Process Automation and Artificial Intelligence (IRPA AI) hosted a unique “Ask Me Anything” webcast in which you the viewer could ask questions directly to IRPA AI founder and CEO Frank Casale and Jennifer Valenti, the head of client strategy and transformation at Workfusion.

Jen discussed the process of planning, evaluating, and selecting intelligent automation, along with lessons learned in her career.

Watch the recording to hear:

• A candid ask-me-anything discussion between Jen Valenti, Frank Casale, and you
• The questions on the minds of your peers
• The experience of selecting, buying and implementing RPA in banking