There has been a lot of buzz about “cognitive procurement,” the application of artificial intelligence (AI) to support buying goods and services to free up humans to handle valuable procurement functions that AI cannot manage.
The same advanced technologies that are making procurement smarter, more efficient and more data-driven, can be used to make outsourcing relationships leaner, more profitable and more advantageous.
This technology-enabled advancement in outsourcing can’t happen soon enough. As the percentage of contingent workers rises around the globe, strategic supplier relationships become increasingly important for companies to achieve their business objectives. As well, they are becoming a more significant budget line item. To that end, governance strategies must be in place to drive value and optimize these operations.This is both an opportunity and a challenge, as researchshows companies experience value leakage from 17% to 40% of the annual contract value over the lifecycle of outsourcing contracts.
The adoption of new technologies to support improved efficiency and drive greater value in outsourcing operations has been upon us for some time. But today a successful outsourcing strategy must find the balance between efficiency and experience, man and machine – ensuring the best possible outcomes in terms of cost, cycle time and quality of work.
By interweaving AI and analytics into outsourcing operations, companies can gain the insights necessary to orchestrate the most innovative strategies to make outsourcing the crown jewel in the organization, driving sustainable growth and shareholder value.
Here are the major tenets of a cognitive outsourcing approach:
1. Ensures a Full Understanding of How Work is Happening within Outsourced Operations
The first premise of a cognitive outsourcing approach is that it entails active performance management. While in the past, performance has been gauged through tools such as time and motion studies, today in the knowledge economy, work is predominantly digital in nature.
Advanced people analytics can be helpful performance measurement tools in that they measure and analyze digital output generated by individual and work group activity. Software automates the collection of the digital signals that an employee emits when using technology systems and combines them with analytics that equip executives with reporting and analysis to make better decisions around work, systems and the workforce.
People analytics take into account work patterns on a day-by-day, or even minute-by-minute basis. The results can reveal many areas of productivity leakage (e.g., revenue) and the insights gleaned can also support process improvement initiatives, shed light on work “waste,” and provide employee engagement trends and opportunities. It can also help predict future work/talent trends so businesses can proactively plan for what’s ahead in addition to learning from past performance.
2. Provides Insights on Where to Inject Automation
Outsourcing strategy and technology roadmaps must be aligned, both for the contracting organization and for the outsourcer, in order to: guide technology and automation investments; achieve business objectives; and drive value.
As advances in AI, software robotics, machine learning and innovative technology platforms enable businesses to redefine processes, organizations have significant opportunity for performance and efficiency improvements. Yet today few companies have succeeded in meeting workplace automation goals.
Successful workplace automation initiatives – or transformations – require equal focus on man and machine and, specifically, the space between them. Data-driven insights from people analytics can play a vital role in “minding” that intersection.
3. Guides Strategic Supplier Management
As strategic supplier relationships become increasingly important to achieve future company objectives, there is a need to define the relationship model. This can best be accomplished through a data foundation that supports quantitative analysis of performance with clear metrics. Co-management creates a relationship where both parties have a vested interest in the direction and success of the program with transparency at both strategic and operational levels.
To support co-management, enlist a sophisticated, proven technical tool that automates the outsourcing governance function. For best results, choose a solution that meets the following six requirements:
· Ensures accurate and automated data is captured to gain visibility into outsourced team operations
· Captures data that is highly accurate and can be used to create benchmarks, SLAs and metrics to run governance
· Creates a data-driven engagement and governance model
· Ensures real-time visibility into activities to predict the outcome/deliverables
· Links data captured back to current metrics and SLA in contracts
· Frees up governance team resources to focus on increasing value from its outsourcing engagements
4. Safeguards Business Operations from Risk
Cognitive outsourcing also involves putting in place the foundation for risk identification and mitigation to safeguard business activities from potential harm.
Experts advise an approach that aligns business objectives and internal and external resources, implements sound governance and controls and addresses all relevant regulatory and compliance matters.
Risk identification and mitigation must begin early in the outsourcing program lifecycle. A data-driven foundation can help organizations and their outsourcing partners work together to identify, evaluate and prioritize risks, and then implement mitigation strategies accordingly. Dashboarding can keep all parties apprised of issues so no one is caught off-guard.
Cognitive Outsourcing – Making Every Supplier Relationship a Strategic Supplier Relationship
Technology-enabled advancements in outsourcing are providing tools to bring business operations around the world into lock-step alignment, making outsourcing relationships leaner, more profitable, more advantageous and more strategic.