Over the past five years the IT outsourcing industry has gotten used to hearing about how the Internet of Things, cloud computing platforms, robotics and other technological trends will lead to a wholesale reshaping of the industry. It’s been a largely conceptual discussion, with the consulting industry churning out forecast after forecast about “digital transformation” and the advent of the “as-a-Service” economy. The drumbeat in this case was the light click of the “enter” button as PowerPoint slides and graphics with a dizzying assortment of arrows detailed the business model of the future.
Yet there was precious little data to support the technological change we were summoned to behold. And, perhaps as hangover from the Great Recession, companies were slow to invest in the cloud and associated technologies. Legacy systems were not retired.
That has begun to change of late. In July Gartner released a budget sheet for Internet of Things initiatives. Nucleus Research recently published a research note concluding that cloud analytics deliver 2.3 times more return on investment for customers, as opposed to on-premise deployments. That’s 2.3 times — not percent.
As the transition ramps up, the synergy between mobile devices, Internet of Things, cloud computing platforms, robotics and predictive analytics promise to remake the world in profound way. Communication will not only be instantaneous between people, but between a person and their entire collection of computers and digitally enabled devices. This is the Fourth Industrial Revolution.
What are the main features of the Fourth Industrial Revolution, especially as it relates to BPO and ITO? And how long will it actually take to transform the business model?
Forging Partnerships, Retiring Legacy Systems
Companies have begun finalizing partnerships to move select processes into the cloud. For some outsourcers, such as BPO operators, the cloud’s transformative effects on BPO will continue to lag behind industries like software development. This is because security concerns with BPO abound and legacy systems must be reconciled with the cloud in a cost effective way.
Even here though, there are glimmers of the future. Christopher Stancombe, Capgemini’s CEO of business process outsourcing, noted that “over two-thirds of companies are due to refresh their ERP in the next three years” in a recent statement on how the cloud promises to reshape BPO into BPaaS. As companies transition, BPaaS will grow. Stancombe highlighted the benefits of Capgemini’s offering. “Business process as a service through our BPO as a stack, including our Virtual Company solution, gives customers innovative alternatives to deliver business change more quickly but at reduced cost,” he stated.
Specific industries will not only adopt the cloud at different speeds, but adoption rates will vary across regions as well. Capgemini is introducing its Virtual Company solution — bolstered through applications offered by Unit4 —in the education, not for profit, professional services, retail and finance sectors, and in select advanced markets, such as the Nordics, North America, Germany, Spain, Netherlands, UK, Ireland and Asia-Pacific. Hence, Latin America is likely to trail wealthier or faster-growing regions when it comes to widespread adoption of BPaaS. This should not come as a surprise given the economic slowdown taking hold across the region.
Plan for IT Transformation, Don’t Be Afraid
In the process of transitioning to BPaaS, and the Fourth Industrial Revolution more generally, there is of course concern that the transition could completely destroy technology outsourcing because it represents the automation of business processes heretofore outsourced simply because the process was cheaper abroad.
Of course, uncompetitive enterprises have need to worry, but the larger shift is likely to be one of incremental transition to a cloud model. Legacy systems will ensure the transition proceeds at pace. And as we become more reliant on the Internet to deliver our everyday needs, concern is growing about the security of the cloud. These security concerns about the cloud will continue for the foreseeable future, at least until there is demonstrable evidence that the cloud is more secure than current processes.
Moreover, just because a delivery model is in the cloud doesn’t make it supremely better. Cloud computing platforms, if designed or introduced poorly, could certainly alienate people. When Unit4 unveiled its “people platform” earlier this year, CEO Jose Duarte said, “Enterprise software is almost anti-people. It’s not easy to consume, it’s not easy to adopt.”
It seems likely that technology outsourcing, which has already become something of a chop-up arrangement between home countries and multiple offshore sites, could be diced further. Companies will creep into use of the cloud, probably starting with enterprises that are not as security sensitive, retaining a healthy portion of their existing delivery for more critical processes.
So, the Fourth Industrial Revolution is here — almost. It will certainly bring transformation, but it won’t be instantaneous. The inevitable rarely transpires immediately.