AI 101: an introduction to automation and artificial intelligence in outsourcing

The traditional view of outsourcing has tended to see cost reduction as one of the primary drivers for any customer. The idea that the'total cost of ownership' of a particular business function over the term of the outsourcing contract should be lower is very often part of the business case. Similarly, seeing outsourcing as a means of transforming a collection of assets on the balance sheet into a recurring service charge, and reducing (or at least apparently reducing) capital costs is another common refrain at the outset of deals. Whilst technology transformation / business change deals do happen where the aim is for a service upgrade at an increased overall cost, they are by no means as common as cost-led deals. To date, a large portion of the cost savings delivered through outsourcing deals – especially those that involve any sort of offshoring, nearshoring or even (in the London-centric UK at least) 'northshoring' – come from labour arbitrage: the central idea being that the activity undertaken by the outsourcing customer's relatively more expensive current local employees can be performed at a lower cost, but to the materially the same or even a better overall standard, by the outsourcing vendor's resources.