Each week we find a new topic for our readers to learn about in our AI Education column.
Do-it-yourself is great for individuals—it’s not always so wonderful for businesses.
In fact, a young, small, entrepreneurial business is rarely equipped to handle all of its functions by itself. Over the years, consultants and service providers have emerged to support businesses of all stripes.
Welcome to another AI Education, where today, we’re going to turn our focus to an industry term, business-process outsourcing (BPO), that first evolved in the absence of AI.
Now, AI is transforming business-process outsourcing itself.
Business-process outsourcing, with or without AI, describes the outsourcing of one or more specific business processes to a third party, an external service provider. When this external service provider offers technology to conduct the operations and responsibilities of a business process, BPO is usually referred to as information technology-enabled services (ITES). We’ll just stick with BPO for the sake of clarity in this writing.
What Does BPO Look Like?
BPO, and ITES in particular, didn’t originate with knowledge industries like finance—the information infrastructure and computing technology didn’t really exist to digitally outsource many of the financial service industry’s processes. BPO’s roots aren’t even in computers and technology.
Instead, it started with manufacturers spinning off or outsourcing some of their process, specifically, supply-chain management. Companies like Coca-Cola decided to wind down some operations that weren’t related to their core value propositions to narrow their focus—in that mangled, repetitive business consultant speak, the term would be “to focus on doing what they do best.”
This trend did not start because companies wanted to narrow their range of responsibilities, rather, they wanted to improve overall performance while cutting costs.
Over time, however, BPO has become more about modernization and technological transformation. As technology evolved, companies outsourced other non-core processes in which they may not have had technical expertise, like customer support (call centers), marketing, technical support and back-office functions. Eventually, IT functions also came to be outsourced by many companies to what have come to be known as managed service providers (MSPs).
BPO can involve international resources, where processes are outsourced to companies in other countries—for example, U.S. companies might outsource some work to third-party providers in southern Asia where wages and other costs are significantly lower, enabling them to lower costs. In the AI age, however, more business-process outsourcing is occurring between two or more companies domiciled in the U.S., which is called local outsourcing, or between two or more companies in first-world countries, which is sometimes called nearshore outsourcing.
Enter AI
But technology hasn’t just transformed companies’ desire to outsource parts of their operations—it’s changed the service providers that allow such outsourcing to take place as well. Technology-enabled automation has made BPO more efficient, affordable, and (of course) desirable for companies. Before AI, service providers were using robotic process automation (RPA) to take the human element out of repetitive tasks and business processes by teaching technology to extract data and fill-in forms. RPA is not AI—the machines/software in RPA does not make informed decisions on its own. Instead, it’s given a script, a set of software rules guiding its actions, so that it can mimic manual work once completed by human workers.
Machine learning and AI has enabled service providers to add discretion into RPA software—rather than following the same script and the same process each and every time, a BPO solution enabled with AI is more versatile. It can decide which course of action is best in different circumstances. What we have now is not RPA, but AI-BPO, AI-enabled business process outsourcing, also known as intelligent process outsourcing, or IPO.
Predictive AI allows BPO solutions to alert the human leaders of businesses and their service providers to changing behavior and trends, and in some cases, enables technology to react and respond automatically to these changes without intervention.
How AI Changes The Impact of BPO
According to Andreeson Horowitz, BPO is a $300 billion industry today that is growing rapidly, but it is being significantly disrupted by AI.
The technology has changed what BPO really means. Pre-AI, BPO often resulted in headcount reduction. Two or more companies in similar industries would decide to outsource the same process, often to the same third-party provider. Instead of two companies doing what was essentially the same work with two completely different workforces, each company would outsource that work to one firm where the same workforce would provide BPO to both, meaning that significantly fewer workers would be needed.
Now, with AI, we’re not outsourcing to another workforce, we’re outsourcing to automation. Instead of consolidating the workforces of two companies into the single workforce of a BPO service provider, the process-specific workforce of the BPO provider is rendered unnecessary. AI-BPO is not halving the number of workers between two companies completing a process, it can eliminate or more significantly reduce the headcount necessary to complete the work.
Thanks to AI, more businesses can harness the benefits of BPO at a lower cost. Over time, BPO providers are evolving to become software providers, which should enhance the efficiencies realized by companies that are outsourcing.
Applications of AI-BPO
Customer Service—BPO call centers employ dozens of communications specialists answering phones and responding to consumer and client questions. AI-BPO uses chactbots and voice agents to conduct that work with little or no human intervention.
Moderation—You know the adage “never read the comments?” Comment sections are full of misinformation, abuse, spam and other problematic behavior, and most businesses do not have the workforce to manage and moderate content in user and client comments. AI-BPO can automate moderation, as AI can detect offensive comments and other misbehavior. AI’s ability to moderate in real time migrates this ability from asynchronous discussions like bulletin boards and blogs towards real-time chats across modalities like text, voice and video.
Finance—Accounts payable and receivable operations, like invoice processing and reconciliation, are being conducted by software rather than CFOs and their staff.
Human Resources—BPO’s customer service capabilities can be turned inward to serve employees, as well, but that’s just scratching the surface. AI-BPO can be used to review resumes, schedule interviews and help inform hiring decisions.
Data—By automating data entry, processing and management, AI-BPO can make sure that a company’s digital resources are accurate and ready to be used by other AI-enabled technologies. AI-BPO facilitates and accelerates adoption of artificial intelligence across the enterprise.
Marketing and Business Development—CRM data entry can be automated via AI, ensuring accurate and usable information about clients and prospects. AI-BPO can also be deployed in helping businesses to segment clients and prospects to better focus their efforts.
