Are AI Automation Agencies the Future of Outsourcing?
The outsourcing industry has seen tremendous growth over the past few decades. Companies are increasingly looking to outsource various business processes in order to reduce costs, increase efficiency and focus on their core competencies.
However, the industry is undergoing a major shift with the emergence of artificial intelligence (AI) and automation.
AI-powered solutions are poised to disrupt the outsourcing space and give rise to a new kind of service provider – the AI automation agency.
In this article, we will look at:
The Current Outsourcing Landscape
The global outsourcing industry is estimated to be worth over $92.5 billion. Some of the commonly outsourced business processes include customer support, software development, human resources, sales & marketing amongst others. India and China have emerged as leading outsourcing destinations owing to their large talent pool and cost arbitrage.
However, in recent years, the industry has faced certain challenges such as rising labor costs, high attrition rates, constrained talent pools, and issues around quality control. Moreover, with technologies like cloud computing and AI maturing, organizations are increasingly looking to automate repetitive tasks rather than outsourcing them. AI-based solutions can replicate human-like conversations and perform tasks 24/7 without any interruptions. This has led to the emergence of a new outsourcing approach – AI automation.
The Rise of AI and Intelligent Automation
AI refers to the simulation of human intelligence and self-learning capabilities by machines. Some of the popular AI techniques used today include machine learning, natural language processing, computer vision, and predictive analytics. Recent advances in AI have made it possible to automate a range of cognitive tasks at high precision levels.
According to a McKinsey survey, 58% of organizations have at least partly automated knowledge work processes with AI and other technologies. By automating workflow and decision-making, AI enables cost savings of 20-25%. No wonder AI software revenue is predicted to grow from $10.1 billion in 2018 to $126 billion by 2025.
This has led many outsourcing firms to invest heavily in AI capabilities. The offshore service providers that adapt quickly will be able to achieve huge efficiency gains and cost savings. The ones that fail to adopt AI will struggle to remain competitive.
How AI Automation Agencies Work
AI automation agencies refer to outsourcing firms that focus on providing intelligent automation solutions to clients across industries. They develop AI software bots that can automate business processes end-to-end. Some of the key capabilities offered by AI automation agencies include:
Robotic Process Automation: RPA tools are programmed to automate repetitive, high-volume tasks such as data entry, extraction, and reconciliation. They interpret and integrate with existing IT systems. RPA eliminates human effort for mundane work.
Conversational AI: Chatbots and virtual assistants created using NLP and machine learning can handle customer queries, provide tech support, process orders and automate other front-office tasks seamlessly.
Cognitive Document Processing: AI algorithms can extract information from structured and unstructured documents and classify them. This automates back-office data entry and processing work efficiently.
Intelligent Process Automation: Combining RPA with AI techniques such as computer vision, speech recognition, and NLP results in intelligent automation that can replicate human judgment for decision-making. IPA can automate complex tasks.
In essence, the role of AI automation agencies is to assess a client’s processes, identify automation opportunities, develop and deploy suitable AI software bots, and manage automated workflows on an ongoing basis.
Benefits of Using AI Automation Agencies
Here are some of the major benefits offered by AI automation agencies over traditional BPO/KPO firms:
- Significant cost reduction: AI automation requires less human effort. Bots can work tirelessly 24/7 without holidays or sick leaves. This results in lowered labor costs by as much as 80% for automated tasks.
- Enhanced efficiency and productivity: Intelligent bots process data and make decisions faster than humans leading to higher throughput and productivity. Bots perform tasks consistently without fatigue.
- Higher accuracy: AI models are trained on enough data to minimize errors. Automated document processing and data entry results in fewer human errors and higher accuracy.
- Better customer experience: Chatbots and virtual agents resolve customer queries instantly without wait times resulting in higher CSAT scores. They can be scaled easily to manage higher volumes.
- Improved analytics: AI tools generate useful insights from data that can be used to improve processes and decision-making over time. Analytics capabilities exceed human capacity.
- Higher agility and scalability: Software robots can be deployed quickly as per changing needs and scaled up or down easily. Hiring and training costs are negligible.
- Reduced risk: Automation leads to better compliance, information security, and minimized risk of data breaches.
The adoption of AI automation solutions can generate an ROI of 30-200% as per various estimates. The benefits are compelling for any business.
Key AI Capabilities Driving Cost and Efficiency Gains
Let’s look at some of the most important AI techniques that enable automation agencies to minimize costs and maximize productivity for clients:
- Machine Learning: Algorithms that learn from data to make predictions, classifications or recommendations enable automated decision-making. ML techniques like regression, clustering, and deep learning are commonly used.
- Natural Language Processing: NLP techniques allow software bots to understand human language, extract meanings and sentiment. This facilitates conversational interfaces.
- Computer Vision: Automating visual perception is possible using CV techniques. Bots can identify, categorize, recognize text, and detect anomalies in documents and images.
- Predictive Analytics: Historical data and trends are used to train predictive models. This allows forecasts and data-driven decisions on future outcomes.
- Speech Recognition: SR software enables systems to identify and understand spoken language. This allows human-like interactions with bots.
- Robotic Process Automation: RPA tools automate structured, rules-based processes through screen scraping, APIs, and AI capabilities.
- Intelligent Character Recognition: ICR techniques enable conversion of different types of documents into machine-readable formats for processing.
These AI capabilities replicate and in some cases exceed human skills. When combined, they automate entire workflows rather than just specific tasks.
Challenges Faced By Traditional Outsourcing Firms
Traditional outsourcing firms will face considerable challenges and disruption from AI automation agencies for the following reasons:
- Inability to remain cost competitive: Traditional BPOs/KPOs cannot match the low costs achieved via automation. Human agents will only be deployed for select complex tasks.
- Lack of capabilities: Legacy outsourcers are focused on offshoring human talent. They lack expertise in emerging technologies like AI, ML, NLP, etc that are key to future automation.
- Process reengineering: Existing workflows optimized for human agents cannot be automated as-is. Processes will need redesigning from the ground up for automation. Not all traditional firms have these capabilities.
- Talent shortages: Ambitious AI initiatives require data scientists, ML engineers, data analytics experts, and other high-demand profiles. The talent war for these roles is intense.
- Cultural challenges: Transitioning to an automation-first model requires changes in outlook, strategy, and operations. This poses cultural hurdles for incumbent players.
- High investment: Developing or acquiring AI capabilities requires significant upfront investment. Not all traditional firms have the appetite to make such investments.
These challenges make it imperative for traditional outsourcing firms to reorient themselves or risk losing out to new-age AI automation agencies.
The Future Outlook for AI Automation Agencies
The COVID-19 pandemic has become an inflection point, accelerating the trend toward automation. AI adoption in business processes has seen a marked increase over the past year. According to IDC, worldwide spending on artificial intelligence is forecast to reach $110 billion in 2024. AI software growth is estimated at 20% annually through 2027.
As per a McKinsey study, the net employment outlook will remain neutral overall despite automation leading to the loss of some jobs. New jobs will be created from AI adoption and the economic growth it generates. AI automation agencies will see strong demand across industries like banking, insurance, healthcare, pharma, telecom, and technology.
Forrester predicts that in 2021, 40% of outsourcing contracts will have some AI component, up from 5% in 2016. AI-related services now account for nearly 30% of major Indian IT firms’ annual revenue. The AI automation market is forecast to reach $232 billion by 2025.
Automation and AI adoption will only grow in the post-pandemic world. Companies will prefer outsourcing to AI automation agencies over human-dependent service providers. India is a global IT hub and is well placed to develop capabilities in this emerging segment.
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Conclusion:
The rise of AI and automation represent the fourth industrial revolution. Like previous industrial revolutions, this will also transform businesses, labor markets, and the way work gets done. AI automation agencies are bringing about this change in the outsourcing industry by offering lower costs, higher productivity, and a stronger competitive advantage.
Companies that embrace partnerships with AI automation agencies will be better positioned to save costs, boost efficiency, refocus human talent, and eventually emerge as leaders. AI-enabled services clearly represent the future of the outsourcing industry.
