Archive for March 30th, 2012

Will virtual FTEs deliver the next wave of back office cost savings?

Friday, March 30th, 2012

Virtualisation. It’s a term that is rattling around the IT industry like a pinball. Yet, unlike many IT terms (SOA anyone?) it seems to me, fairly easy to define.

Virtualisation has so far focussed on hardware, and software. Shared central resources providing computing power as needed, are sure to be more economical than local machines which carry wasteful overheads. This utility model can also apply to software. MSP, SaaS, Cloud – take your pick. All are aimed at making software available at the point of need, in immediately scalable quantity. All are managed automatically, with resources being selected to suit the requested task at any given point in time.

Let’s think about your back office for a moment, though. How many people work there – hundreds? Thousands? What do they all do? I would place at least a $1 bet that more than half are doing simple rules based processes. Couldn’t we apply the same principles of virtualisation to people? It’s like the opposite of the Mechanical Turk principle.

So far, efforts to reduce back office costs fall into three categories:

  • Large scale IT automation programs
  • Process Improvement – Lean/Six Sigma etc
  • Reducing input costs – work people harder, or offshore to cheaper labour rates.

But despite all these efforts, back offices are still hideously inefficient. Just ask any process expert who has worked in manufacturing and moved into the clerical world.

What if we could create a centralised pool of virtual FTEs*, using robotic automation techniques. Then delegate business processes to that pool to be executed at the most appropriate time to suit the business. These virtual FTEs can perform rules based processes interacting with other applications to achieve the process outcome.

It’s not just about cost savings, accuracy and the other benefits that go with any type of automation. It also provides process visibility and perhaps most importantly, scalability. Under-estimated your business volumes for that new product by a factor of 10? No problem in the virtualised world. In the “real people” world, how would you multiply the size of your workforce overnight?

Blue Prism’s experience is that the economics are very interesting indeed. The cost of setting up and managing a virtual back office is about 1/3rd of an offshore centre. So you can imagine the savings if you haven’t offshored yet.

* FTE – Full Time Equivalent Staff