No two robots are the same. An interview with Michael Sterba
Under the term robot most people imagine a machine that performs physical work. Probably fewer people imagine robots behind the computer monitor, so-called software robots, whose activity you might not even notice at the first glance, however these robots just like machine robots can save operating costs several times over, increase speed of work with minimum error rate and compared to human deployment can be deployed in a 24×7 mode. Employees can then focus on activities with higher added value, where the human factor is irreplaceable. Service Edge, with Michael Sterba as its managing director, is a company handling implementation of such robots.
You have worked for several multinational companies. How has this experience influenced you in your current business? Is it possible to say that they gave the direction to your further career?
Clearly yes. Thanks to my previous experience of project work in various sectors and countries, I had a unique opportunity to get to know both the headquarters and local representation of many international companies. Over time, I was intrigued by a common line. On one hand, and quite logically, the enormous pressure on overall performance and efficiency in the core business, but on the other hand the amount of paper, manual labor, bureaucratic procedures and, ultimately, disproportionately high costs in supportive, however for the operation of the company essential, functions (the so-called non-core business), such as finance, purchasing and often IT. I became convinced that it is in the non-core business where there is almost infinite potential for improvement at adequate costs, in other words, ‘more music for less money’. This led me to start my own business in this direction.
So far, the Service Edge company has specialized itself mainly in surrounding markets such as Germany and Austria. Therefore, it is not so well known in the Czech Republic. Can you briefly introduce its focus?
The history of our company dates back to 2015. Since then, we have focused mainly on project management and consultancy in the design and the implementation of so-called Shared Services Centers for international companies, usually with significant presence or interests in Central and Eastern Europe. (Shared Service Centers or SSC are specialized service units within a group of companies that support administrative services, such as accounting, human resources, IT or selected purchasing activities, to optimize costs, improve service quality and provide basis for gradual process automation).
At the beginning of last year there was a significant change in your company?
At the beginning of last year, we significantly expanded our portfolio with another pillar that is closely related to the shared services concept and ideally complements it automation of manual and routine administrative operations using Robotic Process Automation (RPA) technologies, often also called virtual workforce, or software robots.
In Central and Eastern Europe and German speaking markets, we offer and implement the service in exclusive cooperation with Automation CoE, a global player with developer capabilities also in the Czech Republic and Slovakia, specializing in customizing and technical implementation of RPA solutions. Our connection brings two absolutely unique propositions for our clients. Unlike pure software companies or traditional management consulting, we offer both the technical and business part of the project under one roof, which significantly simplifies the coordination of suppliers and minimizes project costs for our clients. Secondly, we are able to deliver our projects ‘end-to-end’, i.e. from initial support in identifying suitable processes for automation in a given company, through design and implementation of solutions to so-called managed service, i.e. continuous maintenance, support and robot development by our qualified staff in a cloud environment.
When one says a robot, most people probably imagine some kind of machine or a device at first. But how does a software robot work and who are these robots suitable for?
Two simplified comparisons are useful for a brief description of software robots. On one hand, we can see them like Excel macros. However, robots usually perform more important tasks and are able to work in almost any number of business systems, applications, electronic forms, etc. Their other key feature is that they act de facto as real employees performing routine activities with clearly defined rules. Therefore, names, passwords, and accesses to their systems need to be created, while meeting internal security requirements. Sometimes they also get names from their colleagues, real employees.
Possibilities of utilization are not particularly tied to specific sectors, but rather to the extent, cost, systems used and quality of performance of administrative activities e.g. in finance, purchasing, customer service, etc. and these can be found to a lesser or greater extent in every medium or large company. Our experience suggests that examples of the use of robots in logistics are often comparable to manufacturing companies and other industries. Typically, this includes order processing, invoicing, creation and distribution of various reports, master data management, etc. Some applications are more specific, e.g. in one of our supply chain management projects we have managed to automate the exchange of inventory status information between several actors in the integrated supply chain.
Virtual workforce brings up several times lower operating costs, high speed of work, minimal error rate and possibility of deployment in a 24×7 mode compared to real employees. Recently, we have observed the tendency that more and more of our existing or potential clients expect robots to help save existing employees time, which can then be invested back into higher added value tasks where the human factor is irreplaceable, such as communication with customers, working on projects and dealing with exceptions or non-standard situations.
How does everything work from first contact with the client to the actual implementation?
We usually plan and implement our projects in three main phases. Aim of the so-called pilot phase is to demonstrate the functionality and benefits of RPA solutions on a limited number of relatively simple, stable and less critical processes and ‘get in touch’ with them. Some clients with sufficient internal resources proactively analyze and design their own candidates, in other cases support with identification of appropriate processes or parts of them will be provided by us; with zero or minimal costs. The pilot phase usually takes 4-8 weeks. In the subsequent implementation phase, more complex processes are automated, expanded to other administrative areas, or to other subsidiaries and countries. At this stage, it is important to define an organizational framework that includes internal roles and responsibilities for designing, approving, implementing and operating automated solutions across the company, making related organizational changes, implementing appropriate training and employee development, etc. Then comes the operational phase. Many clients use our managed service, others, such as banks and larger companies with sufficient capacity, choose internal teams and their own IT infrastructure.
If a company decides for the implementation, what should it expect? How difficult is the implementation, what costs should the company budget for and what is the payback time?
Implementation and operation costs vary from case to case and depend on the amount, scope, and complexity of the processes to be automated. However, based on empirical data from our projects, it can be stated that the break-even point already occurs when automating activities corresponding to an average of one-third of one employee’s workload, or approximately 0.3 FTE.
With the approach of robotization, there are concerns about job losses. What´s your point of view?
Yes, there are a plethora of similar general statements and scenarios today, and only this topic would be enough for a few interviews. The fact is that a large number of jobs and positions as we know them today will fundamentally change or disappear with the approach of automation and, in particular, the improvement of artificial intelligence. We are convinced that in the private sector, robots will take over the vast majority of low added value administrative and routine tasks over the next 10 years. On the other hand, there will be opportunities in areas where the so-called human cognitive abilities (verbal and non-verbal communication skills, empathy, etc.) will not be replaced for a very long time. However, companies and their employees will have to manage coexistence with robots and artificial intelligence and move towards a system of permanent change and related lifelong learning. We also want to focus on the development and education of human resources working in addition to the virtual ones in the future.
You focus on multiple markets. How do you perceive market in the Czech Republic? Are Czech companies at this point ready to use software robots?
Preparedness or unpreparedness for robotization is not very dependent on overall performance of the economy or region. E.g. banks, insurance companies or shared service centers of large corporations, where the office routine plays an important role, have been experimenting with robots for several years. On the other hand, larger and medium-sized manufacturing companies, logistics and other sectors are just beginning to discover them.
Especially in the Czech and Slovak economy we see another interesting impulse: The tense situation on the labor market and the lack of a suitable workforce hinder growth and is overly discussed. We are convinced that every company should ask themselves whether this additional human resource is really needed before announcing a new job in any administrative department. For example, is it not possible to automate the repetitive and, for only a few interesting, administrative agenda and use the vacant capacity of existing employees rather than recruiting new employees for additional and far more relevant tasks? We are currently launching a pilot phase in controlling of an international manufacturing company, where the impossibility of increasing the number of employees was the main motive for the approval of the automation project.
How do you see the future of RPA? Where do you think it will develop next?
It is currently the fastest growing software segment in the world. According to the renowned Garnter company, the RPA market grew by more than 60% in 2018 alone. A similar trend will continue in the coming years, with most estimates predicting an increase in total market value from today’s approximately $1.5 billion to more than $4 billion in 2025. However, much more interesting development is already in progress in terms of functionality. Increasingly, robots are deployed in combination with artificial intelligence (AI) elements such as machine learning so that they are able to process not only structured data according to predefined rules, but also less structured data and make simple decisions. Thus, it is to be expected that future robots will be as good as the artificial intelligence they work with or are directly embedded in.
Ing. Michael Sterba MBA
Michael Sterba graduated from the Faculty of International Relations at the University of Economics in Prague and from the MBA at Webster University in St. Louis and in Vienna. He has worked in Deloitte Consulting, international companies such as Erste Group and OMV AG in expert and managerial roles in program and project management, Project Management Offices and Shared Service Centers, and for several years as an independent consultant in the Czech Republic, Slovakia, Austria, Germany, Romania and other countries. He is the founder of Service Edge, where he currently holds the position of CEO and Senior Consultant.