Robotic Process Automation: LATAM Needs to Step it Up

By Bianca Wright

With robotic process automation set to reach US$ 4.98 billion by 2020, <a href=”http://globenewswire.com/news-release/2015/03/19/716638/10125555/en/IT-Robotic-Automation-Market-to-Reach-US-4-98-Bn-by-2020-Globally-and-is-forecast-to-grow-at-60-5-CAGR-from-2014-to-2020-Transparency-Market-Research.html”>according to a report by Transparency Market Research</a>, Latin American firms would do well to investigate potential opportunities in this field. The report noted that the key drivers of the global IT robotic automation market “include cost benefits and improved efficiency of RPA over manual process handling, ability to leverage other application software without integration, increasing adoption in finance and accounting (F&A) sector and potential alternative to offshore outsourcing among others.”

Robotic process automation is the use of software to automate processes, usually repetitive in nature. In a Finance and Accounting Outsourcing scenario such processes could include account receivable and accounts payable, for example.

According to <a href=”https://www.uk.capgemini.com/resources/bpos-next-wave-of-robotic-process-automation”>a report by CapGemini’s Lee Beardmore and Christopher Stancombe</a>, “Mature BPO providers have, of course, been automating back office processes for some time. However the ever-increasing sophistication, and consequent application, of RPA in the BPO domain is now swelling a virtual workforce as never before.” The report went on to say that “the new wave of RPA can so dramatically increase the capacity to do work, in such a cost effective manner and with such a heightened level of accuracy, that labor intensive back office functions are being ‘picked up’ by rapidly advancing RPA technologies.

Growing Awareness

Derek Toone, Managing Director of Alsbridge <a href=”http://www.alsbridge.com/news/news-events/press-releases/534/Alsbridge-Launches-Robotics-Advisory-Practice.html”>RPA Service Line</a>, said that all of the leading global ITO and BPO service providers – which would include their Latin American operations – are using some form of Robotic Process Automation, but the level of maturity varies dramatically between firms. “Some are very advanced in their use of RPA in their ITO services, but lagging in BPO while others are in the reverse situation,” he said.

There is growing awareness of robotic process automation in Latin America, although concrete examples of the use of the technology are harder to find. References to the potential impact of RPA, though, have permeated discussions with a number of those familiar with BPO in the region over the past few months.

Jaime Miller, CEO of <a href=”http://web.zonamerica.com/home/”>Zonamerica</a>, which has an existing free trade zone in Uruguay and is expanding to Cali, Colombia, said: “We are seeing the issue about robotics in the BPO processes. We are not sure where that will lead but it will favor those countries where the labor pool is skilled enough not to be substituted by robotics. It is one of the tendencies we are starting to see. My gut feeling is that it will take volume out of the transactional part of BPO and it will drive growth to the high-end value services. It is too early to tell.”

He added that, in his opinion, once robotics is proven and consolidated as a form of document processing in the CSC, it will substitute the transactional work that is currently done in processes such as Procure-to-Pay. “This will impact on headcount of centers that handle transactional work in low cost locations. I believe high end work in the CSC will always require judgement and expertise of high skilled human workers,” Miller said.

Anupam Govil, Partner at <a href=”http://avasant.com” target=”_blank”>Avasant</a>, noted that he had only seen the Tier 1 vendors embrace it and did not have sufficient data points on Latin America’s experimentation with RPA. “Partially that’s because one has to have a very mature and scalable service delivery model for RPA to have a significant impact. Most LatAm providers are still comparatively small and less mature in their service portfolio – not a single LatAm-centric firm is a Billion dollar plus,” he said.

Govil added: “Even amongst the global tier one providers, RPA is still in early experimentation phase. RPA requires use of sophisticated technology, process topology and service delivery methodologies that have to be tested across large size projects for the efficiencies and performance to be mapped out. There is a significant upfront investment and that is another reason why the larger providers with their depth in client experience and R&D capabilities are ahead of the curve.”

Toone said that providers vary in how proactive they are in rolling out these services to their existing client base as opposed to using it solely as a means to unseat competitors to acquire new clients. “A third key difference is whether the provider intends to develop their own proprietary RPA or license one or more of the off-the-shelf products from firms like Automation Anywhere, Blue Prism, Arago or IPsoft,” he said.

Wait and See

Latin American providers may not need to pursue automation as aggressively as their Indian competitors. Steve Hall, a Partner at <a title=”ISG” href=”http://www.isg-one.com” target=”_blank”>ISG</a>, noted that the Indian heritage firms have been pressed by the market to identify non-linear growth strategies for the last several years. “The continued need to add labor to continue to grow has been a major concern for some time. Indian heritage firms also moved into infrastructure support, application maintenance, and lower-end BPO markets, which are some of the first to be heavily automated,” he said.

Hall went on to explain that the combination of the need for non-linear revenue streams coupled with support for commoditized services are two of the biggest drivers for the Indian firms’ adoption of automation. “The LatAm providers do not currently face these same threats, though as the automation market matures, these suppliers will also be under pressure,” Hall said.

The nature of Latin American projects means that automation is not yet a requirement. “Many of the LATAM players specialize in support for Enterprise Resource Planning (ERP), complex development projects, agile deployments, or other projects that rely on time-zone proximity as their main competitive advantage. These projects still require deep subject matter expertise and client alignment,” Hall said.

He added: “At ISG we don’t see an immediate need for LatAm providers to adopt automation at the same rate, given their current advantages with the types of projects they are supporting.”

Tackling Challenges

Regardless of when Latin American companies tackle the issue of automation and in what form, there are challenges to overcome. According to Toone, the challenges for the ITO and BPO providers include deciding upon strategic direction, building or buying/integrating the operational solution and capability, managing the organizational change to their personnel and office space requirements, and optimizing the commercial impacts to their revenue and profit as the RPA-enabled solutions are rolled out to customers.

“Despite these challenges, no one doubts that RPA is the way of the future for ITO and BPO service provision. Firms that do not embrace RPA will begin to lose market share as they will soon be unable to compete on either the pricing or service quality fronts with those who do,” he warned.

He went on to explain that, for example, generally speaking an ITO provider using autonomics can reduce their price by as much as 30% without difficulty. “Further, RPA can be used to complete tasks more rapidly and with a higher degree of accuracy, which beyond the obvious benefits also frees up human workers to focus on higher value-add tasks for the business,” Toone said.

Mario Tucci, Founding Partner at <a href=”http://www.mvdconsulting.com/en/”>MVD Consulting</a>, explained that robotics would shift the focus to higher end functions and higher levels of skills in BPO and also motivate companies to offer employees better working conditions and quality of life as incentives.

It is clear that Latin American firms are following the global trends towards RPA, but greater emphasis on providing innovative solutions that leverage the benefits of automation within an outsourced context is needed.

The Need to Compete

Toone cautioned: “On the buy-side, we’re seeing global enterprises embrace RPA, so if LatAm providers want to compete long term they will need to step up their capabilities in this space. Those providers that lead the charge in RPA will solidify their existing client base, take market share from less innovative competitors and advance their capabilities in this emerging space helping them to retain their lead. Those that lag now in the early stages of the game will be unable to compete in the years to come.”

Toone noted that, of particular interest to LatAm providers that have previously had to contend with competitors using lower cost labor, RPA dramatically erodes the advantage previously presented by labor arbitrage. “Whereas before it was an advantage to use lower cost labor, when using a ‘virtual workforce’ the cost of the remaining labor component is no longer a key decision criteria,” he said. “Rather, buyers will tend to look more to factors like language, cultural fit, time zone, security and quality of solution.”

For some Latin American nearshore destinations, this could strengthen the value proposition because of the time zone advantage, cultural affinity with the United States and growing English language skills combined with a skilled labor pool.

Govil said: “Latin American companies should look towards RPA as it will likely become an industry standard in the next two to three years, much as having an offshore delivery center has been for the last two decades. LatAm providers should start experimenting with RPA and as the technology and market matures, they would be well positioned to compete with the global players.”

robotic process automation in Latin America