Before you decide to outsource, consider cognitive technologies

It’s 3 October 2016, and the Dutch and Belgian employees of ING bank are in for a shock. Their anticipated fear becomes reality: ING announces restructuring plans which involve the loss of 7,000 jobs over the next five years.

The Dutch newspaper De Volkskrant revealed more details about the restructuring plans of ING. Surprisingly for a group that is seen as a front runner in technological innovation, about 25% of disappearing jobs are going to ING employees in low-wage countries in Eastern Europe and Asia.

Why do companies choose Business Process Outsourcing (BPO)?

Large companies have been outsourcing the execution and the daily management of IT and other processes to sister companies or external suppliers in low-wage countries. Both the internet reliably connecting the whole world 24/7 and the increased education levels in developing countries have taken away all barriers for BPO.

Companies’ biggest benefits of outsourcing include:

  • cost reduction: staff in low-wage countries typically cost 50% or less;
  • the opportunity to focus on core processes and get rid of support activities;
  • the possibility to quickly tap into advanced technologies without the necessity to develop them oneself;
  • increased flexibility when volumes of transactions vary in time;
  • access to multilingual staff to support a global customer base;
  • the observation that specialists deliver a more consistent quality of service.

But this trend is turning

The advent of increasingly powerful cognitive technologies pulls this tendency to a screeching halt, or rather turns it around. And this is just a matter of years.

Cognitive technologies, also known as artificial intelligence, use machine learning, natural language processing and computer vision both to automate tasks and to augment human expertise and performance. Cognitive technologies focus on computerizing the very easy and low-value tasks and on supporting more complex expert-rich work. In other words, cognitive technologies are quickly becoming ‘the new BPO’.

Similarly to BPO, cognitive technologies’ effectiveness depends upon the volume and characteristics of data concerning these tasks and processes; the absence of too much diversity and complexity, and if the results can be easily tracked and measured.

One could even say these technologies are ‘the better BPO’. To a large extent, cognitive technologies can generate or even surpass the BPO impact on efficiency, speed, and quality of services.

What the rise of cognitive technologies means for businesses in the West

Back to ING: businesses in the West should consider shifting their focus from outsourcing to making cognitive technologies a priority of their own. Their gain: self-reliance.

When compared to outsourcing, in-house technologies allow for better control, for more flexibility in implementing organisational changes and for gradually expanding the scope. The quality and productivity gains stay the same.Indeed, cognitive technologies could even be the key to bringing back jobs to the West. Over the last two decades, Western Europe and the US have lost millions of jobs to BPO providers in India, the Philippines, and other countries. It has been a ‘transfer of wealth’ from developed to developing countries.

If businesses in the West decide to use cognitive technologies to take routine tasks back into their own hands, they could very well bring back at least a part of those jobs. And certainly the value.

What the rise of cognitive technologies means for BPO providers

Where BPO providers are concerned, the tasks that have been put into their hands are usually large in volume, with limited complexity and with easy assessment of quality and performance.

BPO companies have to decide whether they embrace this technology or whether they hang on to the old business model of doing just the same at an ever lower cost and become obsolete. With growing wages in the countries they operate in, this might become a tricky choice.

If they embrace cognitive technologies, on the other hand, they’ll keep the value creation in their own hands. The smartest BPO providers will even seize the opportunity to broaden their offering.

How could cognitive technologies help you with business processes?

With cognitive technologies rapidly developing, it is time for companies and BPO providers to stop and think. The question is not if, but how to integrate them into existing business processes. It’s an opportunity for BPO providers to extend their business model — and for companies to possibly take these tasks and processes back into their own hands.

‘ING hires an army of cognitive technologists to combine efficiency gains with deep local expertise’: picture that as a headline in De Volkskrant in 2018.