As AI technology begins to demonstrate the value it brings to businesses, it begs the question, ‘can some of the work that had previously been off-shored, be brought back in- house?’
Since the early 2000’s, the Business Process Outsourcing (BPO) industry, including Legal Process Outsourcing (LPO) has enjoyed Year-on-Year growth with companies around the world outsourcing their business processes to third party service providers. The global BPO sector is a $300 billion industry, employing more than 3 million people. The likes of India and the Philippines have experienced the largest growth in the sector, driven by the volume of cheap labour available, with India’s deals totalling $206.8 billion in 2010.
The legal sector is no stranger to outsourcing some of the brunt work, as it has also reacted to the market demanding more for the price of their legal services. However, with global labour costs rising the search has now turned from finding the next Philippines or India, to looking into what part technology could play in continuing the drive for efficiency.
These labour cost increases mean BPO is becoming unsustainable and less profitable, reaching a point where the benefits are beginning to be outweighed by the hardships. At the same time, recent technological advancements in Robotic Process Automation (RPA) and Smart Process Automation (SPA) are converging in such a way that systems can now carry out this work more consistently, at a faster pace and lower cost.
The question is, to what extent does this affect the legal sector and do these technological advancements coupled with rising labour costs spell the end of offshoring as we know it?
We may not have to wait too long for an answer, as what we do know, is that the appetite for offshore outsourcing is reducing. Within the last few years, companies are doing smaller deals and fewer of them. Research that KPMG’s Cliff Justice did recently for a report on the future of BPO along with market trend data published in The Wall Street Journal, suggest this is the case for India, where the value of deals worldwide have shrank from $206.8 billion in 2010, to $120.4 billion in 2014.
In the same report, Justice pulled out 5 factors that spell the end for BPO:
As well as the rise in labour costs there is another factor acting as a catalyst in the legal sector’s move towards new RPA/SPA technologies. Compliance.
Since 2008, after the financial crisis, compliance has grown in importance. An increased level of regulatory scrutiny coupled with the financial damage that non compliance can cause, has led to compliance moving up the boardroom agenda and back towards home shores.
In order to meet these new regulations, many companies are turning to RPA in order to support and maintain more robust and effective compliance programs due to the ease of use and rigorous control of the parameters applied.
These technologies allow companies to establish unparalleled levels of process accuracy, especially compared to the work that can be done by human employees. Furthermore, in carrying out these processes, these systems can provide activity logs and evidence of how decisions were made, ensuring they meet auditing requirements.
Businesses that have innovated have seen the massive gains that can be made by changing their thinking and their models around outsourcing and technology, and more and more are starting to follow suit.
Does this all spell the end of offshoring? Whilst RPA and SPA solutions continue to deliver improved efficiencies and increased revenues, at the same time as offshore labour costs continue to rise, the future for the BPO industry looks uncertain.