Automation vs. Outsourcing - What's the right solution?

This article of mine was recently quoted in Mortgage Technology Magazine. Read it here.

Any automation project must always be evaluated against all other options and a true comparative ROI should be established. The three possible choices facing an organization are:

Full Automation – Preferable when the process being automated has achieved process maturity and the workflow is well established. Full automation is preferable only when it is a solution for a long term need. Buy vs. build is a major decision in full automation. As a rule of thumb, if an off-the-shelf software solution can meet at least 75% of the requirements, there is no compelling justification to build the software from scratch. Proprietary plug-ins can always be built over packaged software. While this might not be the most elegant solution, considering the rate of software obsolescence this path must be given great consideration before investing in a long term automation project.

Partial Automation – Sometimes the productivity gains from partial automation might be able to provide the maximum benefit for the minimum cost. Examples of this are imaging systems, workflow software, telephony and fax automation solutions, etc. Frequently enabling the workforce with productivity improvement tools is the solution.

Outsourcing/ Offshoring – If an external vendor(s) has already made the investment in automation and/or has the economies of scale to perform a process better/faster/cheaper than a heavily automated organization can achieve, outsourcing should be the preferred path. With the outsourcing approach there is no upfront investment in software development or programmers and a variable cost model can be established. Further, there is no cost of technology obsolescence or ongoing maintenance. An organization needs to evaluate whether its investment in an automation tool achieves it a greater ROI over outsourcing the same work within a reasonable time span. Offshore outsourcing options need to be evaluated to further reduce the cost of outsourcing and to achieve a greater ROI.