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.
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.
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/.
Taken together, various contract-specific adjustments can double the price per unit per month
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Is there a right time to benchmark? While benchmarking clauses can be built into a contract, it is best to align benchmarking with concrete objectives throughout the sourcing journey
Is there a right time to benchmark? While benchmarking clauses may be built into a contract, it is best to align benchmarking with concrete objectives throughout the sourcing journey.