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New Business Models Changing Outsourcing Market

According to the 2016 A.T. Kearney Global Services Location Index report, two new business models are expanding the options available to companies looking for alternatives to traditional outsourcing. The report—in addition to analyzing and ranking the top 55 countries for outsourcing worldwide—focuses on robotic process automation (RPA) and business process as a service (BPaaS) and concludes that these two new models are challenging the traditional offshoring outsourcing model.

RPA uses software robots to process rules-based, repetitive operations three times faster than the average human. These software robots are tailored to a company’s own user interfaces for the various operations that the robot is processing. The software robots can work “24/7/365” with no errors, absences, or diminishing returns, while lessening the need to hire and train personnel. Additionally, the report found that an RPA license, on average, costs one third as much as an offshore employee and one fifth as much as onshore staff, estimating that RPA can save a company up to 50% in select back-office processes.

BPaaS is exclusively based in the cloud and uses a standardized interface for multiple customers. Whereas RPA costs are fixed, BPaaS costs are variable based on output or usage. The report states that switching to BPaaS could save a company approximately 10% versus traditional business process outsourcing (BPO). In 2014, the report states, global BPaaS accounted for almost $18 billion of the approximately $160 billion global BPO market. Because of the minimal fixed costs involved, the key growth sector for BPaaS is smaller and midsized companies that do not have the volume or need to enter into large outsourcing contracts.

Given the continued growth of (and potential savings produced by) these models, it appears that all potential outsourcing customers will need to consider the viability of RPA and BPaaS when developing their outsourcing strategies.

View the full 2016 A.T. Kearney global Services Location Index.

Copyright © 2019 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

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About this Author

Vito Petretti, Morgan Lewis, Technology Lawyer
Partner

Vito Petretti’s practice focus is technology and outsourcing matters. Clients regularly turn to him to draft and negotiate domestic and international outsourcing service agreements for a variety of business processes, such as information technology, finance and accounting, human resources, and procurement. Within the realm of information technology, Vito drafts and negotiates agreements for software licensing, hardware purchases and leases, data licensing and subscriptions, website hosting and development, and other technology-related agreements, including system...

215-963-5001
Katherine B. O'Keefe, Morgan Lewis, Technology Lawyer
Associate

Katherine B. O’Keefe is part of a team that handles critical commercial transactions that enable our clients to run their business operations effectively. The team is focused on technology transactions, including licensing, services, and alliance deals that involve emerging technologies such as cloud computing, software as a service (SaaS), and data analytics. Our technology, outsourcing, and commercial transactions lawyers assist clients in managing their online presence, from website development, hosting, and maintenance; to privacy and use policies; to data breach and retention issues.

215-963-5564