When Using Smart Machines Becomes More Viable Than Outsourcing

Companies turn to outsourcing as a way to keep cost of operations down. But with the rise of artificial intelligence and automation, using smart machines may end up being a more cost effective solution than outsourcing, according to analyst firm, Gartner.

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Smart machines are intelligent devices including robots, self-driving cars and cognitive computing systems. These machines are capable of making decisions and solving problems autonomously. Gartner already predicts that by 2018, 45 per cent of the world's fastest growing companies will have fewer employees than instances of smart machines. Now the analyst firm believes that by 2018, 40 per cent of outsourced services will leverage smart machine technologies, rendering the offshore model obsolete for competitive advantage.

For businesses of all sizes, cost is a crucial factor for decision making. It is generally wise to keep costs down to maximise profits. That leaves more money to spend on things that will give organisations a competitive edge. Sometimes, outsourcing is required when a company doesn't have a particular set of skills so they seek help from external providers. So when smart machines become more financially viable than outsourcing your work to an external firm, why wouldn't you do it?

"Smart machines are not future fantasy; they are commercially available. According to Gartner’s analysis of external sources, more than $10 billion have already been purchased through more than 2,500 technology companies," Gartner vice-president and analyst Frances Karamouzis said. "For the business and IT services industry, this translates to a new source of fuel for the industry - namely 'virtual talent.' It's faster, cheaper and more predictable."

Indeed, automation and artificial intelligence is taking over many functions that used to require human involvement. For example, the task of discovery for lawyers used to require a team to sieve through thousands of pages of documents can now be done by computer with e-discovery software. Even financial forecasting and fraud detection can be automated.

The pace of progress for smart machines isn't slowing down and it's safe to assume computers will be able to fulfill even more tasks that usually require a human touch. But it would be silly to buy into the blanket statement that "smart machines will kill all jobs in the future".

"Smart machines are not always complete replacements for subject matter experts (SMEs) or other labour," Gartner said. "There could still be a role for offshore centres, albeit changed and refocused. Human labour is still part of the mix, and cheaper human labour always will be appealing to business leaders."

Automation may take over some job functions for particular roles, but that would just mean fewer people would be required for a certain jobs, but it won't kill the need for humans completely.

Tying this all back to companies that are stuck on traditional outsourcing models, Karamouzis has some words of advice for them. Gartner doesn't believe that outsourcing itself will become completely irrelevant, but the way businesses interact with those services need to change, he said:

"Organisations must embrace the market change and be able to evolve in light of the new fuel of virtual labour. This means stopping the use of offshore business models as a crutch for cost savings and starting to build the capability to analyse, rethink, reimagine and recalibrate your sourcing portfolio, and appropriately balancing risk with business value and cost."


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