Rahul Barwe Everest Group
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Rahul Barwe

Rahul Barwe is a Senior Analyst at Everest Group located in our Gurgaon, India office.

Are the Automation Savings Numbers You Hear Real? | Blog

By | Automation/RPA/AI, Blog

While today’s enterprises turn to automation for a multitude of competitive advantages, cost savings is at the top of their list. Through their marketing initiatives, often backed by client case studies and references, third-party service providers often boast automation-driven FTE reductions that save their clients millions of dollars.

Indeed, we’ve seen claims of savings to the tune of 30-70 percent FTE reductions. But our own data, culled from BPO deals on which we advise, show FTE reductions that are one-third to two-thirds lower.

Why is there such a significant gap? It’s because the service providers are calculating the reduction at the project level, instead of at the process level. While the numbers show well using a project level calculation, they’re very misleading, and often lead to disappointment.

Let’s take a quick look at an invoice processing example to see the glaring differences.

invoice processing example

As you see, an automation-driven invoice data extraction project in North America results in a 60 percent FTE reduction. Yet, when you expand the calculation to include invoice coding and exception handling in all operating regions – i.e., the enterprise-wide end-to-end invoicing process – the number drops to 10 percent. A 60 percent FTE reduction is highly enticing, and technically it’s correct. But it doesn’t show you the whole picture.

In order to properly assess the value of automation and develop your business case, you need to look at the percentage savings for the entire process. This is the only way you’ll obtain objective, realizable benefits data.

How can you find the automation savings data you need?

Your first thought might be to try and collect it from similar enterprises that have already implemented automation. But the numbers won’t be particularly reliable, as most enterprises are in the early days of their automation journey.

The most practical and valuable approach is to look at the BPO deal-based data for the entire process to be automated. Doing so gives you a realistic view of the automation-driven FTE savings for a couple of reasons. First, the FTE base for automation benefit calculation in deals is clearly defined in the baselining/RFP phase as the total number of FTEs in the process. And second, the FTE benefit numbers within deals are slightly more aggressive than the current norm, but because providers are continually refining their capabilities, they are comfortable with contractually committing to the higher numbers.

And remember that your BPO and/or RPA implementation provider should present this data to you to set realistic expectations. If they don’t, you’ll be armed with the ammunition you need.

Automation has the potential to greatly reduce your expenses. But before you leap, you need to carefully evaluate how the savings are being calculated. Your satisfaction depends on it.

If you’d like detailed insights on the FTE reduction numbers across different BPO processes within live BPO deals, please connect with us at [email protected] or visit https://www.everestgrp.com/research/domain-expertise/benchmarking/.

Impact of Digital on Outsourcing Contract T&Cs | Sherpas in Blue Shirts

By | Blog, Outsourcing, Pricing

Many enterprises today are restructuring their existing outsourcing contracts with changes to scope, pricing mechanisms, and SLAs to help ensure they reap the benefits of the emerging digital technologies being used in their engagements.

For example, because the focus has shifted from quality of service delivery to service innovation and business outcomes, we are observing more incentive and benefit sharing mechanisms being added to digital services contracts. And because enterprises are mindful of the uncertainties that exist in the digital transformation journey, they are willing to include some contractual flexibility around scope changes, SLA revisions, etc.

However, one important area that has been somewhat neglected in this digital-driven contract realignment is terms and conditions (T&Cs.) In these contract T&Cs, enterprises must do all they can to safeguard themselves from potential risks, even those that are unforeseen. Consider the case of a global consumer goods company, whose outsourced RPA solution was working incorrectly due to issues with the automation technology platform. It took six months for the base product to be updated and fixed, but the enterprise could not recoup lost opportunity costs from its service provider because such a scenario was not adequately incorporated into the contract T&Cs.

Key outsourcing contract term considerations

Following are just some of the areas that enterprises should consider including in their digital automation outsourcing contract T&Cs.

  • Who owns the IP rights to the automation bots? Does this change when the solution has cognitive features that generate business insights?
  • Can the service provider reuse the automation solution with other enterprise clients? Can it do so with the buyer’s competitors?
  • What happens to the automation solution on contract termination? What part of the automation solution can be retained by the buyer? If the solution is non-transferable, what assistance is the automation provider contractually obligated to provide?
  • If the automation solution fails to work as originally designed, who is responsible for the damages that arise?
  • Does the outsourcing contract provide flexibility to incorporate additional scope or automation projects, or will separate negotiations and contracts be required?
  • What happens if the provider under- or over-performs on the productivity improvement or cost savings targets? Will the parties share the benefits or opportunity losses?
  • What happens if there is a change in the process or underlying IT system? Who will be responsible for the subsequent changes in automation solution?

Of course, there’s a double-edged sword here: in general, the more stringent the T&Cs, the higher the price charged by the service provider. So, you need to carefully weigh the risks versus the rewards.

Have you experienced an issue relating to non-inclusion of any clause in your digital services contract? Or did you successfully safeguard your company through a specific term or condition? Please feel free to directly share with me at [email protected].

RPA Implemented! But Where are The Benefits You Were Promised? | Sherpas in Blue Shirts

By | Automation/RPA/AI, Blog

Consider this situation: the head of operations for the finance function at a leading insurance company had heard from both his BPO provider and several technology companies claims of robotic process automation’s (RPA) ability to deliver significant operational efficiencies and cost savings. He decided to take the plunge, obtained leadership buy in, made elaborate RPA implementation plans, set the investment rolling, and finally directed his team to implement RPA across the function in all geographies. A year after deployment, he was still struggling to see significant evidence of the promised benefits. Have you heard stories like this before? Perhaps experienced it in your own organization? Unfortunately, it’s all too common. Various factors contribute to the glaring gap between expectations and reality. They can be broadly categorized as follows:

  • Process – This includes lack of process standardization and an improper process viability study for automation. For example, process-specific differences due to delivery location-specific nuances require greater RPA tool customization. This drives costs higher, and can significantly impact the automation ROI and expected benefits.
  • Delivery – This includes factors such as service placement across locations that can affect the automation levels in a process. For example, if FTEs are fragmented across different locations, they cannot be released because of minimum FTE requirements to service those locations.
  • Governance – Similar to any major transformation initiative, success with RPA depends upon various governance specific factors like buy in from IT, organization alignment, etc. For example, we have seen IT departments causing considerable delays in providing the prerequisite security clearances for RPA environment setup and deployment.

Automation assessment, or lack thereof, is the most critical factor

The paramount contributing factor to a successful – or unsuccessful – implementation of an automation project in your enterprise is automation discovery, i.e., the assessment of automation potential in your organization’s unique environment. In all too many cases, BPO or RPA tool providers look first just at process viability, e.g., if the process consists of rules-based, rather than judgment-based, activities, and then base their assessment on experiences with other clients or on a pure numeric automation benchmarking exercise provided by an analyst firm. However, mere replication of the same RPA tool across a similar process will not necessarily deliver similar automation benefits.

Our recommendations for enterprise buyers on how to help optimize their RPA investments and achieve the potential ROI include:

  • Make sure your RPA vendor or BPO service provider addresses topics specific to your particular environment, including an assessment of impact of a fragmented technology landscape, regional language-specific nuances to be considered, etc.
  • Obtain a robust automation benefits benchmark mapped to your organization’s context, and safeguard yourself, if possible, with contractual obligations
  • Set the right expectations with internal stakeholders on potential benefits

Our primary recommendation for service providers looking to satisfy their clients’ expectations is to leverage a comprehensive automation benefit benchmarking model that is based on benefits delivered and the underlying context of RPA delivery. This will help them not only better estimate but also realize the potential benefits on their clients’ behalf. Service providers that correctly estimate, communicate, and deliver these benefits consistently will ultimately have more RPA success stories to tell.

Do you work for an enterprise or service provider that has implemented RPA? If so, our readers would love to hear about your automation journey experience, and if/how you were able to achieve the intended benefits!