Transforming the outsourcing industry: 2018 and beyond

In today’s digitised world, where excellence is based on the ability of an organisation to achieve targets on a minute scale, there is growing evidence to suggest that outsourcing essential services is the way to go.

Although outsourcing has become an increasingly common practice over the last decade, today we are poised on the brink of a global revolution in the industry. Only those entities that embrace cutting-edge technologies as well as creative systems and processes can hope to enhance competitiveness and thrive.

Nearly six months into 2018, we are witnessing the emergence of new trends in the sector. For instance, there is the growing worldwide adoption of innovative technologies, such as augmented reality, virtual reality, blockchain, artificial intelligence (AI) and machine learning. In the UAE, the uptake of these technologies is driven by the implementation of progressive federal-level initiatives announced by our leadership. These include the UAE Blockchain Strategy 2021 and the UAE Strategy for Artificial Intelligence (AI), aligned with the objectives of the UAE Centennial 2071.

Valued at roughly $976.1m (Dhs3.58bn), the UAE’s outsourcing industry is among the fastest-growing sectors in the country with a compound annual growth rate (CAGR) of 11.2 per cent, as per the International Data Corporation’s UAE Outsourcing Market Outlook 2016-2020 report. To maintain this remarkable growth, leading names in the outsourcing space are welcoming more efficient ways of conducting business while moving away from traditional outsourcing, shared service models and business      systems management.

Amid rising disruption within the sector, here are some of the key trends that appear set to shape the outsourcing landscape in the second half of 2018.

Emerging technologies become mainstream

Across the board, businesses are adopting AI solutions to streamline processes, resulting in significant cost reductions. According to a report by global consultancy Accenture, AI-human integration can add $14 trillion (Dhs51.42 trillion) to industries reliant on business process outsourcing (BPO). The idea is to optimise processes with intelligent solutions, thereby driving lasting profitability and economic growth.

Research from Gartner reveals that in 2018, 40 per cent of outsourced services will incorporate smart machines. The same report states that more than $10bn (Dhs36.73bn) worth of these systems have already been purchased from the more than 2,500 companies supplying this technology, while more than 35 major service providers are investing in the development of ‘virtual labour’ options that leverage AI-driven service offerings.

Increasing process automation

Emerging technologies have a ripple effect on outsourcing services, as they enable the automation of increasingly complex processes. Companies should use automation to introduce changes and revise their business models, gearing up for a future where robotic process automation (RPA) and AI will forever transform the industry landscape and make the traditional outsourcing service delivery model almost obsolete.

Typically, in most businesses, more work requires more manpower, but RPA has changed this equation. Increased automation will result in better processing capabilities and faster turnaround times, redirecting human resources from routine and volume-driven work to value-driven and more complex tasks that add value to their organisations.

Start-ups turning to outsourcing

Another notable development is the rise of small and medium enterprises (SMEs) across the world. In emerging markets, most formal jobs are generated by SMEs, as highlighted by the World Bank. For the UAE itself, 2017 estimates by the Ministry of Economy indicate that SMEs account for a staggering 94 per cent of companies operating in the country, and provide jobs for more than 86 per cent of the private sector workforce.

As SME businesses work on tighter budgets than larger companies and conglomerates, we can expect a growing number of SMEs to turn towards outsourcing solutions designed to lower overheads and boost efficiency, allowing them to focus on strengthening core business operations.

In a nutshell, the Fourth Industrial Revolution and its accompanying focus on cutting-edge technology and innovation are set to herald shifts in the traditional models and processes of the outsourcing industry. The need of the hour is to encourage businesses to adjust and adapt to these dynamic shifts as early adopters in order to maximise their benefits.

Ammar Al Malik is executive director of Dubai Internet City and Dubai Outsource City