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The Business Case for Robotic Process Automation (RPA)

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This paper by Kinetic Consulting Services (www.kineticcs.com) outlines the business case for Robotic Process Automation (RPA). It examines the commercial and strategic aspects of RPA.

Transcript

1.
The Case for Robotic Process
Automation (RPA)
2
Copyright © Kinetic Consulting Services: www.kineticcs.com
Table of Contents
1. What is Robotic Process Automation (RPA)?…………………………….. 3
2. Understanding the Spectrum of RPA Technology……………………….. 4
3. Which Processes for RPA? ………………………………………………….. 9
4. Commercial Business Case……………………………………………….. 12
5. What are the benefits from RPA?………………………………………… 15
6. Strategic Considerations ………………………………………………….. 17
7. RPA as an Innovation Initiative ………………………………………….. 19
8. Who is Using RPA?…………………………………………………………. 20
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1. What is Robotic Process Automation (RPA)?
Robotic Process Automation (RPA) is the automation of back and front
office processes that are largely rules based, structured, and repetitive.
The automation takes place when software “robots” (not physical robots)
carry out processes or tasks normally completed by humans.
Process automation software has been around since the turn of the
century but it has recently had a positive injection with a new label added
to its name: “robotic”. This name change has modernised and linked the
business case for RPA to head-count savings. The software vendors of
RPA have positioned their software as a headcount saving and have
priced their software on the higher end of software, but on the lowest
end of hiring a human employee.
The name change has also positioned RPA within the wider context
belonging to the next wave of digital disruption. As outlined in previous
research1
the technologies of robotics and AI will play an integral role in
what has now been termed by economic authors as the Fourth Industrial
Revolution.2
The adoption rate of RPA has been gaining momentum over the past two
to three years largely due to the increasing attention it has received from
tier one consulting firms, and from the increase in IT vendors providing
RPA solutions and delivering more sophisticated software.
Our research into RPA identifies how an organisation could benefit from
this software and more importantly what strategic and tactical actions
need to be taken to successfully implement an RPA solution. Our goal
was to identify the business case that would resonate well with C-level
decision makers in a business. The primary aim of this paper is to provide
C-level executives with key information about RPA to make an informed
1
The paper titled: Technological Tsunami to Change CX” – Kinetic Consulting Services 2015
2
The term was first used in 2011 at the Hannover Fair.[ In October 2012 the Working Group on Industry 4.0 chaired by
Siegfried Dais (Robert Bosch GmbH) and Kagermann (acatech) presented a set of Industry 4.0 implementation
recommendations to the German federal government.
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decision on how to proceed based on their readiness to introduce a digital
workforce into their organisation.
2. Understanding the Spectrum of RPA Technology
The technology reviewed can best be broken down into four key
categories. Each category measures the software on four key functional
dimensions. The key dimensions defining the software vendors is as
follows:
1. Data: The level of sophistication in dealing with business data
(structured or unstructured);
2. Type of Tasks predominately performed: tasks are either rules
based or require knowledge from multiple sources to complete the
process.
3. Interoperability: working across multiple applications (single
application or multiple applications and platforms), and;
4. AI: The level of artificial intelligence provided by the application
(none, machine learning based on pattern recognition and statistics,
or emerging true AI).
The four dimensions enable us to
place the software vendors into
common groups. The range of
vendors is based on the types of
tasks performed, the applications
they can access and the level of
cognitive computing offered.
Each vendor claimed the ease of
implementation as a
differentiator, but this dimension
was excluded in the current
evaluation as we were unable to
validate enough implementations
to confirm their positioning.
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The diagram below provides the key characteristics of each level:
The vendors researched were classified into the four levels using the
dimensions outlined. Although we identified four categories we don’t
believe any vendor was able to demonstrate true artificial intelligence i.e.
a program that had intelligence capable of reasoning, knowledge,
planning, learning, natural language processing, perception, and the
ability to move and manipulate objects.3
There are a number of key
organisations such as Google and IP Soft making major inroads into
3
This list of intelligent traits is based on the topics covered by the major AI textbooks, including:
 Russell & Norvig 2003
 Luger & Stubblefield 2004
 Poole, Mackworth & Goebel 1998
 Nilsson 1998
 Single application
macro application
 Predefined
connectors into
other applications
such as ODBC
 Sophisticated
macro application
 Works across any
Windows or web
based application
without connectors
 Workflow
 Rules-based
 Structured data
 No decision-
making
 Pattern
recognition learning
 Works with
unstructured data
 Self-learning with
human aid
Limited decision-
making based on
information provided
 Multiple sources of
data used to gain
intelligence on a
subject
 Statistical based
learning
 Natural language
recognition &
understanding of
meaning
 No “personality”
Level 1 –
Basic
Automation
Level 2 –
Structured
Rules
Level 3 –
Pattern based
decisions
ssmaking
Level 4 –
Multiple
decision making
Macro App
RPA
Cognitive
Computing
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creating a true AI but at this stage there is no commercial application in
the marketplace
Ultimately, true AI will become a reality and once this occurs we would
classify this into a fifth category. For this research we have identified AI
as mostly machine learning using fuzzy logic algorithms and statistical
probability as the basis to make ‘intelligent’ decisions when completing a
business process requiring human-like decision-making. The latest
release of “Amelia” by IP Soft is the closest we have seen to a
commercial application of AI able to replace front office workers in a
Contact Centre.
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Outlined below is the grouping of the key vendors into the four levels of
based on the dimensions identified:
Most of the technology vendors for RPA are sitting around the level two
category. This category is well aligned with the current adoption rate of a
digital workforce by organisations. The momentum has increased around
level two automation in countries such as the US, UK and Australia. We
will provide some examples of companies and their adoption of this
software later in this paper.
We anticipate that as acceptance of a digital workforce increases, so will
the adoption of automation in the organisation increase. It’s inevitable
that we begin to see level four implementations of RPA making the
evolutionary step from a “dumb” software robot to cognitive based
computing. This automations will offer levels of artificial intelligence and
value-add to the processes by increasing the level of analytics and
predicting business outcomes in a more insightful and commercially
useful manner.
Cognitive Computing
Data
Level 1
Level 2
Level 3
Level 4
None AI
Interoperability
Activity
Single source –
Structured
Multi source-
unstructured
Single App Platform agnostic
Pattern Recognition
Single
Task
Multiple
Rules Based
Knowledge
based
NICE
Jacada
Cicero
UiPath
Automation
Anywhere
Blueprism
AutoPilot –
Arago
IP soft- Amelia
IBM Watson
WIPRO Holmes
Google – Brains
IP Soft
InStream
Openspan
Kryon
Multi source-
Structured
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Our focus in this paper will be to outline how the level two vendors of
RPA software are able to deliver value to an organisation. Our aim is not
to exclude the value propositions of vendors offering cognitive solutions
(level 3 and 4). Our attention around level two solutions is largely based
on where we believe the majority of the Western marketplace currently
to be in terms of adoption of RPA in the enterprise.
Based on our research4
we concluded that RPA is emerging out of “the
chasm”5
, and in terms of adoption stages, 2016 will be the year of ‘Early
Majority’ adoption of the technology. We expect the Early Majority will be
focused on automating low-value repetitive tasks currently outsourced or
conducted in-house.
Knowledge based work will also be replaced by cognitive computing but
this will be by Innovators and Early Adopters at this stage. The majority
will start applying RPA in their organisations to low value tasks before
they take on board replacing humans with higher value knowledge based
work. We believe the opportunity to introduce “Amelia” type AI into the
front office has significant benefits for the organisation and should not be
overlooked when putting the case for RPA.
4
Research included direct contact and review of key level 2 vendors, research reports from Deloitte, KPMG, Capgemini,
HfS Research, case studies from The Outsourcing Unit, London School of Economics and Political Science, &
Mindfields consulting.
5
Geoffrey A. Moore conceived the notion of “Crossing the Chasm”. According to Moore, the marketer should focus on
one group of customers at a time, using each group as a base for marketing to the next group. The most difficult step
is making the transition between visionaries (early adopters) and pragmatists (early majority). This is the chasm that he
refers to.
Laggards
Late
Majority
Early
Majority
Early AdoptersInnovators
“The Chasm”
Technology Adoption Process
RPA
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3. Which Processes for RPA?
Some processes will be better suited to RPA than others. The general
characteristics of a process which is ready for robotic process automation
would be:
 repetitive and rules based
 accesses structured data sets
 utilises applications on a Windows or Web based platform
 the process is documented and has been standardised in practice
 three or more staff are hired to complete the process
 data input is prone to human error
Level two technology providers are focusing more on back-office
processes that have been typically outsourced to offshore locations
partially because of the benefits of labour arbitrage and partially because
they are considered of low-value. Although of low strategic value they are
processes that are necessary in daily operations of the business. Typical
processes currently being managed by an RPA solution6
include:
Finance & Banking
 New account verification
 Data validation
 Customer account management
 Financial claims processing
 Report creation
 Form filling
 Change of address
 Loan application processing
Insurance
 Claims processing
 New account creation
6
Examples provided by Automation Anywhere (RPA vendor)
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Telecommunications
 Collection & consolidate customer data from client phone systems
 Backing up information from client systems
 Uploading data
 Transferring customer data between applications
 Extracting data about competitor pricing
Healthcare
 Patient data
migration and
processing
 Reporting for
doctors
 Medical bill
processing
 Patient record
storage
Retail
 Automatically
updating
online
inventory & product information
 Importing website orders and email sales into back-end systems
Government
 Verification process
 Populating forms and assigning sub-contractors to jobs
 Integrating legacy systems with newer systems
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Internal departments of organisations are also able to benefit from RPA.
Some of the key processes well suited for RPA include the following:
Finance/Accounting
 Invoice processing
 Accounts payable and accounts receivables
 Reporting
 Bank reconciliation
 Fixed assets analysis
 Master data management
 Vendor and customer account creation
 ERP logging from another system
HR
 Employee on-boarding
 Leave of absence management
 Populating employee data into multiple systems
 Performance appraisal management
IT
 Creating new accounts
 Software installations and updates
 Batch processing
 Printer set-ups
The list of processes that can be automated does not always require high
volume of work to justify the business case. Software based robots can
be multi-skilled and can be shared in a department to undertake multiple
low-value, but essential processes. The utilisation of a shared robotic
resource can enable a department or a Global Shared Services centre to
focus their time on higher value tasks that are more strategic in nature
and able to commercially benefit the organisation. For example, a
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Finance department could have a large team of accountants spending a
large portion of their time undertaking manual data entry into multiple
systems. The introduction of RPA would free up these resources to
perform more knowledge based functions, such as analysis of financial
records, and would benefit the organisation more than the data entry
work they performed.
4. Commercial Business Case
Organisations practicing ongoing improvement are constantly looking for
ways to improve aspects, or all, of their business. Business processes
have undergone multiple revisions ranging from mapping, standardizing,
reengineering through to outsourcing and transformation. The last main
wave related to business processes has focused around the reduction of
costs and improvement in outcomes by outsourcing, centralizing and/or
creating Global Shared Services centres. The outcome of these initiatives
has generated mixed results. Some organisations have been successful in
extracting the value from such projects whilst others have had the value
eroded due to a range of reasons. Offshoring back office processes to low
cost countries such as India and the Philippines, to benefit from labour
arbitrage, has been on the agenda for any company seeking to optimise
its operations and yield a greater result for their shareholders. Over time
this strategy has uncovered some risks which have led organisations to
reconsider their offshoring model. Some of the key risks include:
 Higher agent errors than onshore agents
 Data theft risks
 Loss of control of the process limiting improvements
 Higher costs in supervision
 Rising labour costs eroding the cost benefits
 Business disruption due to climatic and political issues
 Fluctuating currencies impacting financial gain
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RPA offers organisations the opportunity to take these processes back in-
house at a lower cost than currently offered by their outsourced vendors.
The cost comparison7
of RPA versus a full-time equivalent staff is
depicted below:
The cost of a back-office worker, in three similar markets (US/UK/Aus.),
reveals that an onshore agent would cost approximately 90% more than
an RPA licence. At the same time the RPA solution is approximately 50%
cheaper than a Philippines based agent and 34% cheaper than an Indian
offshore worker.
Our cost comparison was based on a captive operation in both the
onshore and offshore locations. The costs would normally be higher by
approximately 35% if a vendor was providing the services to an end
client.
7
Cost comparison based on Payscale salary comparisons across companies in the BPO sector.
$49,000.00
$37,700.00
$44,950.00
$10,150.00
$7,250.00
$5,400.00
$-
$10,000.00
$20,000.00
$30,000.00
$40,000.00
$50,000.00
$60,000.00
US UK Aus Phillipines India RPA
Cost Comparison of Back-Office worker to RPA in
USD$
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The cost comparison has included the following components:
 Labour on-costs of 35%
 Software on-costs of 20%
Our cost comparison is not a detailed one and is only intended for a high
level comparison to give the reader a better understanding of the
commercial benefits associated with RPA. A more detailed comparison
should include the
following costs:
 Support staff
 Attrition
 Hiring
 Training
 Vacant real estate &
utilities
 Agent errors
These components need
to be taken into consideration when presenting the case for RPA because
unlike a human agent, the digital robot does not:
 Make the same amount of errors as a human
 Call in sick
 Work only one shift
 Need to take breaks
 Resign from work because they are “seeking career advancement”
 Have holidays
 Need refresher training
 Cause HR issues
 Need physical working space
 Need redundancy payment if no longer viable.
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All these components need to be taken into consideration when
presenting the commercial case for RPA. Also, it’s worth highlighting that
any commercial case for RPA will need to include the following
components:
 Initial cost of consulting and establishing the RPA solution
 Ongoing supervision of the digital robots and retraining when
processes change
The commercial business case should be enough to ensure RPA is
placed squarely on the agenda of most organisations looking to
further optimise costs in their operations and enhance the
customer experience.
There are numerous other considerations when properly considering RPA
in your organisation. Once the commercial benefits are understood and
agreed the business case will need to include several other components
to properly assess how and if RPA should be implemented into the
organisation. RPA has the potential to transform the operations of an
organisation. The impact on the organisation highlights the necessity to
include specialist resources. This requirement is validated by the fact that
external consultants were always used for the RPA implementations we
reviewed.
5. What are the benefits from RPA?
If implemented correctly, RPA can offer wide-reaching benefits to the
organisation beyond the obvious cost-saving in human headcount. On the
surface it may appear that RPA is about further cost optimisation in the
operations of the business. However, this is a narrow and two-
dimensional view of the benefits associated with RPA. In our view, RPA
has significant potential to enhance the customer experience and help an
organisation increase its overall market share by delivering a superior
level of service to its customers.
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The relationship between RPA and customer experience are closely
intertwined. Some of the key facts we know about customer experience
for ‘on-demand’ customers is that they:
 Don’t like effort when interacting with an organisation
 Don’t like waiting a long time for their services or goods
 don’t want false or misleading information
 Want resolutions to their problems without much effort
 Prefer self-service
 Want consistency across all channels
 Like personalisation and contextual communication
Many of the back office functions outlined as examples for RPA have an
indirect and direct
impact on the
customer experience.
For example, when
highly repetitive tasks
are required, humans
are prone to errors.
These errors could, for
example, lead to a
delay in a medical
claim or an incorrect
account name being
established. Customers
calling a contact centre
to enquire about their
account are often
subjected to the same security questions multiple times as the agent is
required to open multiple applications to process an enquiry. This creates
frustration for the customer and takes the focus away from the agent
delivering a superior customer interaction.
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RPA can help elevate the customer experience by making the business
process:
 More efficient
 Largely error free
 Faster than the competition can deliver
 Low effort for the customer
This enables the front-line customer-facing human to be able to focus
their efforts more on emotional aspects of an interaction by ensuring the
customer;
 Receives proper attention
 Is dealt with in a courteous manner
 Receives personalised responses
 Has their needs more fully identified and matched to products and
services
 Is able to resolve more complaints on the first interaction (First
Resolution rate).
6. Strategic Considerations
The business case for RPA needs to include a number of strategic
components to ensure it presents the pre and post implementation
aspects of the solution. There are a number of transformational aspects
to RPA that also need to be considered.
The underlying basis for most substandard customer experiences is
rooted in the poor execution of business processes. RPA needs to be
identified in the organisation as a measure towards achieving process
excellence. The continual improvement attributes of RPA in the business
is an integral aspect in devising the business case to stakeholders.
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RPA is often introduced into the organisation as a proof of concept (PoC).
The primary aim of the PoC is to demonstrate that the solution works and
the value it can provide to the organisation. Once the PoC is completed
the larger business case will need to consider such questions as:
 Will RPA augment humans during some processes or replace them
entirely?
 Should RPA be led by the IT department or a business focused
department?
 What areas of the business could benefit from a digital workforce?
 Which processes are currently standardized and ready for RPA?
 Which processes need reengineering prior to applying RPA?
 How will communication be managed internally about RPA?
 Will you utilise a change management process to implement RPA
into the organisation?
 What is the governance model for managing the RPA vendor?
 Will RPA be implemented in conjunction with an existing business
process vendor?
 If existing processes are outsourced will RPA enable these processes
to be brought back in-house?
 Who and how will the digital workforce be supervised?
 What role will humans play in executing a process largely managed
by software robots?
 Will you upskill humans being replaced or make them redundant?
 Are there any union considerations if you intend to make people
redundant?
 Will you reduce headcount though natural attrition instead of
redundancy?
 How will you communicate to the public and shareholders your
initiative?
These questions should be answered or at least considered when
completing the business case. Once the business case has been
completed and approved the underlying requirements for the
procurement of the RPA vendor should be largely complete. This should
make selection of the RPA vendor less complicated.
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7. RPA as an Innovation Initiative
The virtues of innovation as a means to achieving competitive advantage
in the marketplace have become one of the well accepted pillars of
corporate success. Innovation has remained on the boardroom agenda of
most progressive organisations. CEOs are constantly told to innovate and
to do more with less.
RPA fits nicely into the boundaries of an innovation initiative that meets
the desired business outcomes most favoured by a board of directors and
shareholders. RPA has been identified as an enabling technology
contributing to the ‘Fourth Industrial Revolution’.
The Fourth Industrial Revolution is characterised by the degree of digital
disruption occurring across multiple industries due to the fusion of
multiple technologies. This concept was detailed in our paper titled
“Technological Tsunami to Change CX” (2015) and was reinforced by a
recent article published by the World Economic Forum in January 2016
titled “The Fourth Industrial Revolution: what it means, how to respond”.
The author, Klaus Schwab, points to what economists Erik Brynjolfsson
and Andrew McAfee have highlighted in regards to the impact on labour
markets:
“As automation substitutes for labor across the entire economy, the net
displacement of workers by machines might exacerbate the gap between
returns to capital and returns to labor. On the other hand, it is also
possible that the displacement of workers by technology will, in
aggregate, result in a net increase in safe and rewarding jobs.”8
The imperative to examine RPA becomes more powerful when it is
understood in terms of the wider context. RPA is a significant component
in the Fourth Industrial Revolution and should be carefully examined and
8
http://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond
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understood, otherwise the organisation will begin to lose its competitive
advantage because of its inability to capitalise on disruptive innovation
quickly.
8. Who is Using RPA?
A number of organizations are already in varying degrees of
implementation, ranging from PoC right through to multiple business
processes being outsourced and headcount reductions already taking
place. The most recent public announcement regarding the use of RPA
was the ANZ bank in Australia. For our international readers, ANZ is one
of the top four banks in Australia. The case study was published by
Mindfields Consulting with permission from the ANZ. The summary of the
highlights of the case study is as follows:
 235 processes automated using RPA
 Types of processes automated include:
o Transactions investigations
o Tracing funds
o Audit certificate
o Funds disbursements
o Address change
 Cost saving of greater than 40%
 20% less FTEs used
Other organisations using RPA include:
 Xchanging (BPO provider)
 Dell
 Google
 Uber
 GM
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 Tesco
 Whirlpool
 NASA
 Telefonica UK
 Sopra Steria UK
 Shop Direct
 Armed Forces
Bank
This is a partial list of adopters of RPA. The list of enterprises using RPA is
expected to grow exponentially over the next five years. Our conclusion
of the near future adoption rate is based on the number of tier one
consulting organisations currently promoting the value propositions of
RPA to their clients.
Our conclusion is that RPA will play a significant role in
organisational cost optimisation, and thought leaders will also
capitalise on its potential to elevate the customer experience and
strategically improve competitive positioning.
What Next?
If you are considering RPA in your organisation and would like to learn about what
steps to take or want to know more about the vendors we researched then we would
be happy to assist.
Kinetic Consulting Services is an award winning management consulting company
that has provided numerous organisations, and government around the globe with
consulting and operational management in a broad range of areas covering corporate
growth, operational optimisation, and organisational transformation.
Email the author: joe.tawfik@kineticcs.com
Australia: 1300 780 556
U.S.A: +877-318-6826
Middle East: +971 4455 8410
Web: www.kineticcs.com