Few topics garner more attention on the hype cycle these days than automation and the related topics of cognitive computing, software robots and digital transformation in general. Hardly a week goes by without another conference, another webinar or another research report discussing the benefits of Robotic Process Automation (RPA), as well as the amazing cost savings just around the corner for those who embrace it. Those voices will get louder as more and more companies develop their own success stories, and the technology is refined for easier adoption and implementation.
These trends can’t help but affect the market for global sourcing. For the last 15-20 years, global sourcing has been the go-to approach for organizations looking to reduce cost, increase flexibility and build strategic partnerships with their vendors, many of whom are some of the most innovative companies in the world. But as automation gains more and more traction in the market, what does that mean for the traditional sourcing model? What are the circumstances that would lead a company to place its bets on automation instead of outsourcing? Are both models here to stay or is automation going to cause the global sourcing model to wither away.
One approach companies are taking to address this question for the short term is to put the onus on their sourcing vendor partners to help them navigate the automation challenge. Indeed, the more aggressive vendors are proactively bringing automation ideas and solutions to their clients who are in the process of being seduced by the automation story, before needing to defend to a client the value. But to a large extent, that approach is less than ideal. While vendors do use automation to bring real value to clients, even the best of them do not have interests that are 100% aligned with their clients in this area. To take an obvious example, the BPO vendor with 500 FTEs working in Chennai on insurance claim processing is potentially not going to move as aggressively as possible on their own accord to adopt the technology that could mean the elimination of 25-50% of those roles, along with the associated revenue. This is not to say that they do not have their client’s interests at heart – just that those interests are different from their own.
Despite this potential divergence of interests, global sourcing is not going away completely any time soon. Nevertheless, the challenges that automation and digital transformation pose mean that companies will need to think clearly to incorporate everything in overall plan and roadmap. What are the key factors that should determine when to do what? How should everything fit together? What new skills need to be built up? These are some of the questions that this paper will explore.