According to the 2016 A.T. Kearney Global Services Location Index report, two new business models are expanding the options available to companies looking for alternatives to traditional outsourcing. The report—in addition to analyzing and ranking the top 55 countries for outsourcing worldwide—focuses on robotic process automation (RPA) and business process as a service (BPaaS) and concludes that these two new models are challenging the traditional offshoring outsourcing model.

RPA uses software robots to process rules-based, repetitive operations three times faster than the average human. These software robots are tailored to a company’s own user interfaces for the various operations that the robot is processing. The software robots can work “24/7/365” with no errors, absences, or diminishing returns, while lessening the need to hire and train personnel. Additionally, the report found that an RPA license, on average, costs one third as much as an offshore employee and one fifth as much as onshore staff, estimating that RPA can save a company up to 50% in select back-office processes.

BPaaS is exclusively based in the cloud and uses a standardized interface for multiple customers. Whereas RPA costs are fixed, BPaaS costs are variable based on output or usage. The report states that switching to BPaaS could save a company approximately 10% versus traditional business process outsourcing (BPO). In 2014, the report states, global BPaaS accounted for almost $18 billion of the approximately $160 billion global BPO market. Because of the minimal fixed costs involved, the key growth sector for BPaaS is smaller and midsized companies that do not have the volume or need to enter into large outsourcing contracts.

Given the continued growth of (and potential savings produced by) these models, it appears that all potential outsourcing customers will need to consider the viability of RPA and BPaaS when developing their outsourcing strategies.

View the full 2016 A.T. Kearney global Services Location Index.