Over the past several years there’s been a dramatic upswing in awareness of robotic process automation (RPA) in the business world. There’s also been a significant level of this technology integrated into service offerings by BPO providers. But this buzz shouldn’t disguise the fact most people are just beginning to hear about robotic software and trying to make sense of it.
Ironically, a real challenge in getting knowledgeable about this technology is benefits are so conclusive while preconditions are so reasonable. When a manager reads process costs can be cut from 30% to 60% – if activities are rules-based – the temptation is to stop learning and start doing. Perhaps a quick Google search and a demo download. The better route is to hold off on the demo, stay focused on becoming knowledgeable on the technology, and parlay first moves into smart moves.
A good place to start is by asking the question: why, since business process automation has been available for decades, is robotic process automation causing such a stir? It’s a good question because the answer reveals compelling benefits beyond the “30% to 60%” and “rules-based” sound bites. Once someone understands the full rationale for BPO providers to redesign their services offerings to incorporate robotic software, they’ll be able to make sound judgements for their own company. The answer to the question begins by setting a context for business process automation.
Origins of Business Process Automation
Business process automation has its roots in enterprise resource planning (ERP) systems and business process management systems (BPMS).
First introduced in the early 1990s, ERP systems have a central database which serves a suite of applications for core business processes such as finance & accounting, procurement, HR, etc. The objective was to rationalize and standardize those processes, and then integrate a common data set. For example, sales data would be used to forecast demand and order materials; it would also trigger commission calculations which integrated with the payroll application. Drawbacks include: expense; complexity; implementation time and customizations creep.
BPMS emerged as smaller and more limited automation option for companies who couldn’t afford an ERP investment. It also became an option for ERP customers who found the standardized application suite too confining. For example, many health insurance companies could afford an ERP system but required a specialized claims processing automation system as well. Drawbacks include: expense (though less than ERP); process design complexity; application and data integration complexity; and implementation time.
The difference between the two systems is one of focus: BPMS is focused on optimizing, improving and automating specific business processes. ERP is focused on leveraging centralized data across an integrated suite of core business functions. Despite drawbacks, these two systems remain the foundation for business process automation.
Where RPA fits in Business Process Automation
The fact is that neither ERP nor BPMS – alone or combined – can automate all of an organization’s business processes. The principle issue is ROI. Both ERP and BPMS are expensive and time-consuming to implement. Unless a process employs a critical mass of resources, it cannot justify the automation investment required by either of those systems. The practical reality is every company has hundreds of processes too small to warrant system automation. The economic reality is the aggregated inefficiencies of those hundreds of smaller processes are too large to ignore. What to do?
The answer for many companies was business process outsourcing (BPO). In a sense, it was a mirror image of the early “your mess for less” approach used for application outsourcing. BPO providers shadowed and documented the processes, then created a labour arbitrage by shifting the work offshore. The concept worked well over the past ten years. Companies saved double digits in business process costs and BPO providers enjoyed double digit revenue growth.
Labour arbitrage is not scalable – as volume grows so does headcount. For providers this means flat margins after the first years of productivity gains. For customers – on the other side of the same coin – it means flat savings. Providers lowered onsite headcount more aggressively and optimized to the extent possible, but the situation was essentially static.
During this same ten year period desktop automation – starting out as macro scripts – matured into rules driven desktop robotic process automation, capable of integrating with applications on the user interface layers. Soon many RPA products became able to integrate on other layers, using API and other technologies.
There were three subsequent RPA innovations that led directly to the current surge in interest and adoption by companies and BPO providers.
- Enterprise level, server-based robot deployments:
- Centralized dashboard robot management:
- Robot Orchestration:
These three innovations were game-changers because they redefined RPA from a desktop tool into a server-based, scalable, automation solution. Companies and providers are now able to orchestrate large (dozens or hundreds) groups of robots into workflows capable of addressing large volumes of work.
Over the past two years the RPA role has shifted to that of an automation solution capable of addressing – both technically and economically – the hundreds of remaining un-automated work processes left behind by ERP and BPMS.
The new value of RPA for the customer lies in the fact savings are freed from the non-scaling nature of business process outsourcing labour arbitrage. In fact, this automation solution frees processes from labour itself. When the benefits of scalability, accuracy and speed are added to savings, it becomes easier to understand why so many people are talking about the technology and why BPO providers are revising their service offerings to include it.
The future role and value of RPA lies in the fact its innovative journey is not over. Industry leaders UiPath and Blue Prism are developing cognitive capabilities for their robotic software. Robots will work with unstructured data (e.g. voice recognition, email, documents) and change rules based on their process experience or additional knowledge. The key for companies and providers will be to proactively implement an automation roadmap, based on a well-balanced technology and operational strategy.