The traditional global offshoring model
Organisations have traditionally reacted to productivity drives, cost reduction and efficiencies by gravitating to global locations to benefit from lower hourly rates and salaries. This includes managed services, business process outsourcing and back office transfer.
Today offshore wages are soaring
Offshoring made perfect sense when an IT contractor in the UK might be making £500 per day and the equivalent in Mumbai India might be on $100 per day.
However, times they are a changing and India has not been immune to significant wage increases $300 per day + and climbing. In 2019 wages are set to rise (India Wages Will Rise 10% in 2019) against a wage rise of 9% in 2018. Nearly 30% up in 2 years.
However, whilst outsourcing organisations are now exploring Vietnam as the next low wage, high skilled overseas location a headwind is rising. This may blow their plans back onshore or at least prevent them from ever leaving port. Even from a lower base, current Vietnamese wage growth will be over 5% in 2019 (Vietnamese Wage Growth 2019).
So as costs increase the financial viability of offshoring large swathes of operational and back-office functions start to be called in to question by Chief Financial Officers across the UK. Not only is offshoring an ongoing concern as costs increase, but also as a future profitable business model can offshoring survive?
The future – what happens next?
Organisations, executives and managers must plan for significant salary increases and service charges when operating offshore business functions and process outsourcing. They will have to decide whether to keep the same operating model and risk ever increasing costs or constant disruption to a delivery service that will need to meet increasing demands with less budget and ongoing staff resignations and movement.
As many offshore locations will have increased wage strain, the ability to move operations to locations that deliver quality education, teach English and have a time zone that matches the U.K are diminishing fast and are short-lived. We all can appreciate that the opportunity to leverage benefits and gain a meaningful competitive advantage from offshoring becomes less and less with this model.
So where will the next advancement come from and will it be geographically and people constrained, or something else? My prediction is that it will be something else.
Re-shoring or Stay-shoring
With the advancement of process automation, organisations will have the ability to return those processes that have been outsourced and offshored back in-house (re-shoring). Also, those processes that have been identified as targets for offshoring can be automated first and kept in the U.K (Stay-shoring).
As an example, a utility company that ONQU is working with are constantly identifying incumbent processes that can be ‘offshored’ to leverage cheaper hourly rates. However, this is bound by diminishing returns. Why offshore to leverage a reduction in people costs when you can do so much more by automating the process first and reduce overall operational cost and improve efficiencies without the people?
Is Robotic Process Automation the answer?
Robotic Process Automation significantly improves the workstream and process outputs with the added advantage and ability to work 24*7 without breaks, downtime or wage increases. The workload and process flow can be controlled locally, redefined and managed using technology rather than relying on human capital half a world away on another continent.
Delivery and communication lags will be replaced with an always-on, ready to go continuous delivery function that can flex on demand to a fixed and controlled investment schedule.
The traditional operating models that rely on human capital to undertake capture, move and change data will be replaced by efficient automated processes that add value, are constant and flexible.
Robotic Process Automation will enable organisations to better control their data process functions, ensuring that future growth and expansion is not reliant on an ever-expanding wage bill and service cost, but on a more defined, known and fixed investment profile.
This significant transformational capacity will create an enhanced competitive advantage for those early adopters who will have the option to lead today or follow tomorrow.
Robotic Process Automation, will in many process areas, allow organisations to Re-Shore or Stay-Shored improving productivity, efficiency and compliance.
How to start?
Visit the ONQU Website and answer the questions asked in our Process Cost Calculator any process costing an organisation over £20,000 per year is typically a great target candidate to start with. However, other factors such as efficiency, compliance, process speed and better customer service need to be considered as well.
Alternatively visit our website.