Member Article

Will The Outsourcing Model Be Obsolete By 2018?

Businesses across the world have taken to outsourcing as a way to keep cost of operations low. Companies outsource to keep operational costs as well as labor costs within control as well as continue focusing on their core business processes. This enables them to delegate mundane time consuming processes to external agencies.

This business strategy also enables companies to leverage global knowledge base so that they can have access to world class capabilities so that internal resources can be put to effective use. This strategy has also been put to efficient use when companies have run aground with internal resource crunches.

Yet another reason why companies have usually outsourced is because they are able to access newer markets that helps them gain economically. Hence, outsourcing has become some a core component of the routine activities carried out by businesses on a global basis.

The growth of artificial intelligence and automation

Outsourcing has emerged as a cost saving tool and also a ingenious business strategy to expand business beyond a company’s traditional outreach. However, the recent years has seen the growth of artificial intelligence and automation, and it is expected that these technological advancements will become a more cost effective solution than outsourcing itself.

Artificial intelligence includes smart machines such as robots, self-driving cars, and cognitive computing systems. As these machines are capable of artificial intelligence, they will be capable of making decisions as well as solving problems independently. According to Gartner, 45% of companies will leverage smart machine technologies, thereby rendering the offshore model obsolete by 2018.

Smart Machines – No longer a fantasy

For small as well as large businesses, cost is a crucial factor. It is generally considered wise to keep costs down so that profits can be maximized. When this target is achieved, the money that the company saves in this manner can be spent on other things that can give it a competitive edge.

According to Gartner, today’s smart machines are no longer science fiction or fantasy. These machines are commercially available and the new flow of ‘virtual talent’ seems to threaten the outsourcing model as it stands currently.

Today’s scenario is that artificial intelligence is taking over many of the functions that required human involvement. Today tasks such as discovering lawyers and attorneys, financial forecasting, fraud detection, etc. can be automated.

A complete replacement for offshore centers not warranted

Although, a complete replacement for offshore centers is not warranted and is not on the cards either, it is quite sure that their roles could be completely vitiated in the future. Nevertheless, there could be a role for offshore centers, but it would be a changed as well as refocused role.

Here, automation would take over some job functions for particular roles, but that would just mean that fewer people would be required for certain jobs. According to Gartner, the need for outsourcing won’t disappear completely, but the way businesses interact with them will change.

According to Frances Karamouzis, who is the head of research at Gartner, smart machines are now commercially available and more than US $ 10 billion have been already purchased through more than 2,500 technology firms. Although she also says that this does not mean that the offshore services as well as all these long-standing contracts will vanish, but it does mean that offshore services will no longer remain the primary means of cost control or speed to maintain competitive advantage.

Conclusion

Thus, with the advent of virtual talent, the long standing outsourcing model stands to be shaken, but there will not be a complete replacement of cheap labor. The new normal will be “hyperautomation arbitrage” which will usher in a completely different cost structure through the arrival of virtual labor.

This was posted in Bdaily's Members' News section by 360 Degree Technosft .