BPOs: The Future of Document Processing is Automation

This article was written by Greg Council and first published on November 28, 2017, in Shared Services and Outsourcing Network magazine and an excerpt is provided below:

Survey of Top 50 BPOs

Parascript, a data extraction business powered by machine learning, recently collaborated on a survey of the top 50 Business Processing Outsource executives on how their companies manage document processing.

The study showed:

  • Top priorities for BPOs in 2018 for document processing include 40% focused on increasing revenue through new customer acquisition and 32% increasing revenue from new service offerings.
  • 79% of BPOs are under pressure to lower the price of existing services from their current customers
  • 64% of BPOs surveyed are considering artificial intelligence to enhance their data capture
  • 17% of BPO’s surveyed said they are looking to improve margins for existing clients

The future is automation for Business Process Outsourcers (BPOs) in document processing, according to a recent benchmarking study of 50 BPO leaders underwritten by Parascript. The study also reveals there is still a long way to go before BPOs achieve the level of automation now possible through technology investment—even though outsourced document processing has been a mainstay of BPO offerings. The effects are increased vulnerability through inability to meet customer expectations or adapt to changing market requirements for existing or new services.

The top BPO priorities for document processing technologies are to increase revenue through new customer acquisition followed by introduction of new service offerings. More revenue is always the #1 priority: by getting new customers and increasing share-of-wallet with existing ones. What is interesting is that improving margins isn’t necessarily a major objective, which can play into the ability to compete effectively. Another interesting finding is that there is a strong desire to automate through technology so BPOs see automation as a key to increase revenue opportunities.

Emerging Pricing Models

Against the backdrop of increasing revenue from new customer acquisition and new service offerings is the ever-present client pressure to lower prices: according to the survey, 79% of respondents are under pressure to lower service prices; and 63% state that customers expect prices to continue to drop.

Gainsharing, defined as a shared risk model where cost reductions enabled through the BPO service are shared between the BPO and the client, is gaining momentum—44% responded that pricing based upon cost reduction is preferred over fixed pricing. This is an effective strategy that can reduce the pressure to lower prices by placing focus on actual client cost reductions.

One thing is clear: fixed pricing is risky for BPOs. While gainsharing is more-complex, it is preferable. From other research, the most-prominent model is transactional-based pricing. Clearly, effectively offering gain-sharing as an option helps – they need to understand their own costs and ability to benefit from economies of scale, two areas where automation can help.

Customer Expectations for Process Analytics

Process analytics is a difficult thing to understand, much-less implement. Forty-eight percent of respondents reported process analytics as the most difficult customer expectation to achieve. Accuracy standards were a distant second, at 19%. To provide these capabilities requires software that can track data, aggregate, and summarize it. But with many client projects involving manual processes that are “shift-and-lift” – i.e., where only the location and the owner of the process is changed, not the actual process itself –  the ability for a service provider to analyze a client’s current processes to determine bottlenecks is a complex affair.

Actionable Data

One hallmark service for document-oriented BPOs is document transformation into actionable data, where data accuracy is a significant requirement. The most common means of offering this service is through “brute force” manual data entry, where human error is not only constant, but can be significantly affected by various factors. While only 19% of respondents ranked ‘meeting customer data accuracy standards’ as the most challenging customer expectation, BPOs are under constant price pressure from potential and existing clients, and the only way to meet high-accuracy requirements is to implement highly manual processes, where data is reviewed several times. The fact that only 61% of respondents felt the need to perform spot checks supports the notion that many BPOs still heavily rely on multiple manual data review processes. Close to 20% – a fifth – of respondents never check data accuracy. This reveals many potential issues:

  • Reliance upon heavy manual processes increases costs and reduces cost competitiveness.
  • Lack of automation impacts a BPO’s ability to identify process improvement opportunities to further drive down costs.
  • Lack of measurement points to potential SLA compliance issues.

Automation Technology Adoption

When it comes to automation investments and strategies, we start to see arguments in favor of various levels of adoption and automation capability. Automation is viewed first and foremost as a cost reduction enabler, with 44% of respondents stating that is the primary objective. Still, more than half view automation as an enabler of scale in terms of either acquiring clients or offering more services. These perspectives limit the value of automation investment, creating a backward-looking strategy that can’t be realized due to constant technological change and shifting customer expectations.

As for adoption, the results were surprising, with only 19% indicating the use of data extraction in client projects and 22% declaring no automation at all. BPOs typically search for a best-of-breed provider of individual capabilities based upon a client’s specific project requirements, versus acquiring systems with the breadth of capability to solve a number of different problems. Investment tends to be client-specific, but acquiring and implementing automation can lead to problems.

Even the ability to lower costs is in jeopardy, with the study revealing that 64% of respondents do not have a unified means to use automation with multiple client-specific systems. This affects both the costs of using automation (since there is neither leverage for price nor staff expertise) and the ability to maximize efficiencies. Using an analog from the airline industry, Southwest Airlines was able to significantly lower costs by standardizing on a single plane model, while other airlines had several different models. As a result, Southwest offered low cost fares and still enjoyed a high profit margin relative to the industry.

Our “Multi-channel” Input World

An additional side-effect of fragmented systems is the inability to address the “multi-channel” input world where documents can arrive via FTP, email, mobile device, etc. Fifty-two percent of respondents stated that different systems are used for different input channels. If systems are fragmented, aligning processes so that there is a reduction in overall complexity is next to impossible.

Ultimately, the desire to use automation to reduce costs is diametrically opposed to the realities of how automation is implemented through BPOs.

Trust in Data

Within the group that does automate document processing, there is little trust in the system to accurately classify or extract data: more than half of the respondents stated that they verify all data manually. So, fully 85% of respondents have a trust issue with their systems. This means that while capital has been used to acquire and implement automation systems, true automation is not achieved in the large majority of BPOs.

The most probable reason for this is that the systems are only “functionally configured”, meaning actual measurement of the data accuracy from the system has not been actively managed. The use of client-specific systems increases the costs of going beyond functional configuration to achieve measured, tuned, system output. Multiple systems also make accuracy measurement costlier since different systems have different reporting and data monitoring functions.

Inside the BPO Service Portfolio

Ultimately, two perspectives need to change when it comes to applying document automation technology within the BPO service portfolio: Investments need to be broader, more strategic efforts; and they need to focus on more than just cost reduction.

Investment in document automation technology should be treated as a strategic initiative, and not as a cost of delivery for a client project because the fragmentation of various solutions and the associated costs can contribute to problems, the most serious of which is the inability to adapt to ever-changing market and customer demands.

Automation Zen

Document automation should also be considered in a more holistic manner when it comes to business objectives. While cost reduction through the elimination of manual process is typically an easy win, setting objectives for top-line revenue increase through the expansion of service offerings across a customer portfolio can make the difference in maintaining sticky client relationships that increase in value over the risk of commoditization through competitive offerings that can provide deeper technology and business process integration.

If you found this article interesting, you may find this information for BPOs of interest.