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Automation versus labour arbitrage

By: Jeff Mazzini| Tags:

By Martin Conboy

How much will automation impact the level of off-shored outsourcing and BPO? According to the Everest Group North American companies believe automation gives them the ability to bring their work back on shore. A similar trend seems to be prevalent in the UK and Europe. Automation reduces the advantages brought about by labour arbitrage, where software robots are even cheaper than wages in developing countries.
The desire to bring work back onshore is being driven by companies that operate in highly regulated industries with substantial compliance requirements. The recent spectacular breaches of data security that have occurred at off shored contact centres, such as AT&T being fined $US25 million for breaches at a Mexican call centre, are encouraging companies to seriously look at automation rather than off-shoring.
It’s easier to audit and demonstrate to the relevant authorities, compliance in an automated onshore environment rather than in an arbitrage labour environment.
A recent study by Ilan Oshri , Professor of Globalisation and Technology at Loughborough University, highlighted how quite a number of US and UK companies had re-shored work in the past three years. These companies were leaving high volume transactional activity with offshore service providers but bringing higher-value elements back home.
The desire to bring work back onshore is being driven by companies that operate in highly regulated industries with substantial compliance requirements.

Organisations are also viewing automation as a more cost effective and efficient means of coping with workload spikes. Thus for services with varying or seasonal demand, robotic automation can be an efficient means of scaling an operation, at a fixed and consistently uniform level of service and quality

The higher value tasks were those things that were more likely to drive positive benefits to the corporation, while the simpler tasks are primarily lower-value, transactional rules-based activities.
Robotic Process Automation (RPA) allows tasks and business processes normally done by humans to be automated. It’s particularly effective for tasks and processes that are repetitive, rules based and high volume. Tasks that are, also, generally great candidates for outsourcing.

A software robot can cost around a tenth of a full time worker in the US, UK or Australian, or roughly a third of a full time worker in India. The marginal cost of additional software robots is minimal if not zero.
Global outsourcing and BPO organisations, like Infosys, Wipro, TCS, Capgemini, Capita, etc., who have built business models around employing more and more people, need to assess the opportunities and potential threats that RPA heralds.

The technology that exists today is still relatively immature; it can replicate the basic transactional tasks. But as the technology develops at an accelerating rate, this percentage will most certainly increase.
The result of this trend and the continuous advance of RPA technology is that the cost advantages of labour arbitrage will continue to diminish. But labour cost is not the only factor. Organisations are aiming to reduce errors and the cost of managing their back-office functions, as well as improving compliance through the use of new automation technologies.

Organisations are also viewing automation as a more cost effective and efficient means of coping with workload spikes. Thus for services with varying or seasonal demand, robotic automation can be an efficient means of scaling an operation, at a fixed and consistently uniform level of service and quality.
Under a labour arbitrage model they would have to pay their provider for more human resources, which would need time to be recruited and trained. If spikes can be managed by robots, their capacity to scale is greatly enhanced and for only a fraction of the cost.

Robotic Process Automation (RPA) aims to reduce costs, improve efficiency and productivity by removing repetitive and manually intensive tasks. As a result organisations are able to respond quickly to new markets and regulatory demands. RPA is expected to have a significant impact on the outsourcing and BPO industries in the next few years as BPO providers and their customers look at further ways to reduce costs and improve profitability.
This means organisations can build virtual back offices staffed with robotic FTEs, that can handle millions of back office tasks faster, cheaper and more efficiently than humans can. They don’t have to be perfect; they just have to be better than humans.

That said in my view machine intelligence would never be able to fully replace the intelligence, judgement and communication skills of a human. The likely role of humans in these service market workforces of the future will be in high-level roles that require complex and subjective decision-making. For example tech support and personalised administration support. Value added activities that require complex analysis by skilled and highly trained personnel.
For a thought provoking view check out this you-tube video. It lays out the case for why almost half of those currently in the work force could struggle to find work once automation takes over in the near future.

Humans Need Not Apply www.youtube.com/watch?v=7Pq-S557XQU

In related developments Google DeepMind now employs around 140 researchers from around the world at its lab in a new building at Kings Cross, London. Machine learning is being used across Google, in areas such as image search, robotics, biotech and Google X, the company’s highly experimental lab. For instance, Google last month unveiled a new feature in its photos product, allowing users to search their photos by text for labels like beds, children, holiday, even though the users never labelled those photos as such originally.

It is these types of advances, and the potential to solve some of humanity’s really big problems—food insecurity, global warming, and income inequality—that are being overshadowed by “hype” around Artificial Intelligence’s existential threat, Mustafa Suleyman, the head of applied AI at Google DeepMind said.
“The narrative has shifted from ‘Isn’t it terrible that AI has been such a failure?’ to ‘Isn’t it terrible that AI has been such a success?’ ” He said. Suleyman was speaking at a machine-learning event in London last week.

https://clarity.sutherlandglobal.com/blog/accounting-minute/the-road-to-reshoring-and-its-impact-on-indias-bpos/

http://robohub.org/how-robotics-is-changing-the-face-of-business-process-outsourcing/


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