Case Study 101 O2 and RPA

O2 started in 1985 as Cellnet and has now grown to become the telecom provider with the broadest coverage in the United Kingdom. It was bought in 2005 by Spain's Telefonica. Its backoffice transformation began in 2004 when it engaged an Indian Business Process Outsourcing (BPO) provider to realize backoffice cost savings. As the volume of offshore transactions rose, so did the number of FTEs in Indiafrom 200 in 2005 to 375 five years later. At the same time, the provider's headcount in the United Kingdom dropped from 98 to 50 as the provider sought to cut back on its most expensive labor costs. In another costcutting purge, O2 eliminated nonvalue adding processing and optimized its 60 core backoffice processes. O2 started looking for a better way to get a handle on its backoffice processes. Robotic Process Automation (RPA) offered some promise here.

In 2010, the head of O2's backoffice services, Wayne Butterfield, started a twoyear proofofconcept initiative with two pilot tests of RPA using Blue Prism software. The first pilot swapped a customer's existing SIM with a new one while keeping the same phone number. The second process applied a precalculated credit to a customer's account. Both pilots were configured by Blue Prism consultants on site and were complete in two weeks. They both worked seamlessly with O2's systems. In fact, one worked so well that Butterfield was called in to answer to O2's Security and Fraud division to explain why so many transactions were being completed in such a short period of time.

Butterfield purposely had not told the Security and Fraud division about the two pilots. He also had not communicated with the IT department because he was concerned that they would object to acquiring additional software (Blue Prism). In fact, the IT department had already developed negative feelings about RPA. Feathers were smoothed when the IT department was asked to build identical systems using BPM as proofofconcept. The IT developers and scrum teams built the pilots in three weeks each, but at substantially greater cost because of IT labor. Using the results of the two pilot tests, Butterfield built threeyear business cases for RPA: Using BPM and the IT department, there would be an estimated zero net financial benefit while with RPA there would be a million ($1.4 million) benefit. O2 selected RPA for automating routine backoffice processes.

O2 issued a Request for Proposal to initiate a formal RPA vendor search and the IT department verified that Blue Prism offered the best proposal. O2 asked its Indianbased BPO to take on the RPA work. Recognizing that the BPO made its money on headcountand that its headcount would be drastically reducedO2 tried to sweeten the offer. However, after a sixmonth review by the BPO, the BPO declined the offer without any official reason. (The BPO continues to deliver O2's nonautomated backoffice processes, email and web chat services with a total of approximately 900 FTEs in 2015.) O2 sent its backoffice staff to Blue Prism. Using only four people, O2 has now deployed over 160 software bots, which process between 400,000 and 500,000 transactions each month. This translates into a threeyear return on investment of over 650% with a payback period of 12 months.

Discussion Question

Use one paragraph to define whatoffshoringmeans in an IT context. In that same paragraph, discuss why O2 turned to offshoring in India.