How AI Will End Offshoring

We are living in the Rise of the Machines. No, Skynet and its hordes of Terminators haven’t materialized just yet, but there are many that fear that advances in automation and Artificial Intelligence are a serious threat to humanity in at least one aspect: jobs. In America, more jobs are already lost to robots and automation than to China, Mexico or any other country. But the global impact of the these systems will be felt even more strongly. I believe that the proliferation of ‘virtual talent’ will have a profound effect on intellectual offshoring and business process outsourcing, one that will be especially pronounced for emerging countries.

Traditionally, outsourcing and offshoring has primarily been conducted as a cost reduction measure. After all, why spend more on an expensive local worker sitting at a computer when the same tasks can be performed at a dramatically lower cost by an overseas worker sitting at the same computer, all while maintaining the same level of quality? In the pre-AI world, that thinking made perfect sense. But what if you could make the computer do that same job, without a human operator? The cost savings would be massive, and the business decision obvious.

Advances in AI technology are rapidly making this hypothetical a reality. Recent research from Gartner found that by 2018, 40% of outsourced services will leverage smart machines, “rendering the offshore model obsolete for competitive advantage.” And this market is only going to grow. The same report states that over $10 billion worth of these systems have already been purchased from the more than 2,500 companies providing this technology, while more than 35 major service providers are investing in the development of "virtual labor" options that leverage AI-driven service offerings.

All of this means that the intellectual offshoring we've seen since the 90s will no longer be needed or even viable, as there won’t be any business requirement for these services or economic incentive to move these tasks overseas. AI and advanced analytics allow for the automation of many tasks that are currently outsourced. That’s an extremely attractive option; automating tasks that are currently performed by hundreds of overseas employees will enable businesses to hire more expensive local talent who can focus on the difficult tasks and strategic decisions that make bigger business impacts.

AI not only softens the incentive of cheap foreign labor, it also negates the advantages of lower offshore operational costs. If you can locate the machines that are performing these tasks anywhere on earth for basically the same cost, why not keep them close to your home base of operations and save a bundle on travel, audit and compliance costs?

These shifts might take a few years as technology develops, but they are coming, and they will fundamentally change the way the world does business. Intelligent machines are here, and companies that continue to rely solely on outdated offshoring models out of fear of the risks and challenges of being early adopters of these systems do so at their peril. Virtual labor technology can offer potential cost savings of between %10-%70, so business leaders must begin planning now for how to adopt this technology and adapt their organizations to maximize its potential in order to survive and remain competitive.