Does More Automation Mean More Profit for Service Providers? | Sherpas in Blue Shirts

One of the prevailing myths in the services industry is that more automation means higher profits for the service providers. The theory: as they introduce automation they reduce the number of FTEs per revenue dollar; therefore, they would get higher profits. The reality: it’s not true in the market overall.

Higher profits from automation may be the case in specific situations where the contract was left assuming that labor would be used and the work was performed on an outcome basis. But this is seldom the case.

At this point in the market, we’ve had three years in which automation has been systematically introduced into providers’ service offerings. But there seems to be no correlation, no industry-wide increase in profitability in these service areas. That’s disturbing for the providers.

Here’s what it means: Taken as a whole, the market is adjusting and the customers are capturing the full benefit of automation, not the providers. Customers are dispelling the myth that more automation equals higher provider profits.

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