Business process outsourcing (BPO) first gained traction in the late 1990s and has undergone a dramatic transformation since those early days.
In its infancy, BPO primarily revolved around cost savings. Companies were looking to reduce operational expenses by shifting certain business functions - such as call center operations - to external service providers that are often located in countries with lower labor costs.
Today, companies often turn to BPO providers for handling seasonal spikes, short-duration campaigns, and ensuring business continuity. BPOs provide great advantages like scale and flexibility, which can help manage seasonal volume spikes.
Additionally, BPO providers can quickly assemble teams with the required skills to execute short-duration campaigns with an extremely cost-effective solution.
BPOs can also put business continuity/disaster recovery (BC/DR) plans in place to ensure uninterrupted service, even during unexpected disruptions like natural disasters, IT failures, or other emergencies. Companies can rely on BPO partners to maintain critical functions in such situations.
The BPO 2.0 Evolution
However, as we fast-forward to the present day, BPO has evolved into a multifaceted and strategic business initiative.
One of the hallmarks of this evolution is the introduction of cutting-edge technology. The digital revolution has ushered in a new era of BPO – what we at ibex call “BPO 2.0” – with advanced software, automation, and artificial intelligence (AI) greatly improving the efficiency and quality of outsourced services.
The BPO industry has also expanded to encompass a broader spectrum of services. While traditional functions like customer support and back-office processes are still commonly outsourced, companies are increasingly turning to specialized providers for services such as software development and digital marketing.
This diversification allows organizations to tap into niche expertise and stay competitive, no matter what market they are in.
Crucially, the value proposition of BPO has also evolved. Beyond cost savings, businesses now recognize the strategic advantages it offers.
...BPO has evolved into a multifaceted and strategic business initiative. One of the hallmarks...is the introduction of cutting-edge technology.
Outsourcing enables companies to focus on their core competencies while delegating non-core functions to experts, thereby increasing their agility and ability to adapt to market changes. I’d go so far as to say that BPO providers have become partners in innovation, collaborating with their clients to develop new solutions and drive growth.
Unlocking Business Agility
The ability to scale a business both up and down is absolutely essential in today’s dynamic marketplace. One of the key advantages of an outsourced model is the inherent flexibility it provides, enabling companies to adapt quickly to changing customer demands.
BPO partners are often well-equipped to handle these fluctuations in workload. They have the resources and expertise to swiftly scale in response to the specific requirements of their clients.
This scalability is particularly valuable for businesses that experience seasonal or unpredictable fluctuations in their operations. It means that companies can meet peaks in customer demand without the burden of maintaining a consistently sized workforce or infrastructure throughout the year, ultimately saving on resources.
One of the most overlooked benefits of outsourcing is the expertise and best practices that providers bring to the table. BPO providers often have extensive experience in various verticals, having worked with a diverse range of clients across industries.
This exposure enables them to develop core competencies and gain insights into the unique challenges and opportunities within each sector. This cross-pollination of ideas and practices means that clients can benefit from best-in-class service and a fully developed outsourcing model.
Global Pricing Flexibility
A key distinction of BPO is its global model. When signing new accounts, global BPOs can price the business onshore, nearshore, and offshore, hence giving greater optionality to clients. In my mind, this is one of the most beneficial aspects of BPO.
The onshore option typically involves outsourcing services to a provider within the same country or region as the client. This can be advantageous when businesses require close collaboration, have regulatory compliance concerns, or need to maintain a consistent time zone for customer interactions.
Nearshore outsourcing entails working with BPO providers in neighboring or nearby countries. This option strikes a balance between cost-effectiveness and proximity. Nearshore teams can often offer cost savings compared to onshore options while still providing a level of geographic and cultural alignment that facilitates effective communication and collaboration.
Offshore outsourcing, on the other hand, involves partnering with providers who have a presence in distant countries, often with significantly lower labor costs. This option is ideal for businesses aiming to maximize cost savings and scalability. Offshore teams can handle a wide range of tasks efficiently, making it a popular choice for large-scale, repetitive, and labor-intensive operations.
Working-from-home has become increasingly popular over the years, and it gained even more prominence during the COVID-19 pandemic.
The terms “homeshoring” and “homeshore” specifically refer to a business practice where employees or contractors work from their homes, and it can apply to various types of work, including customer service, IT support, and other roles that can be performed remotely.
It’s a practice that can be applied in various contexts, including onshore, nearshore, and offshore locations. These all come with many advantages, such as cost savings related to infrastructure and utilities, flexibility, BC/DR, a better work life balance, ease of scalability, and access to talent.
A Matter of Culture
BPO providers are in a constant battle to fend off the competition to not only retain clients but also expand their business.
I truly believe the thing that sets one outsourcer apart from the other is culture. A strong and inclusive culture contributes significantly to employee satisfaction. When employees feel valued, engaged, and aligned with the organization’s values, they are more likely to be motivated and committed to their work.
In the context of outsourcing, satisfied employees are the linchpin to delivering high-quality customer interactions. They become the face of the organization to end-customers, and their satisfaction translates directly into better service delivery and greater client value.
Moreover, a healthy organizational culture is a powerful driver of employee retention and loyalty. After all, employees who feel a sense of belonging and purpose are less likely to seek opportunities elsewhere. High turnover can be devastating to the quality and consistency of services, which is particularly critical in the outsourcing industry.
A performance-driven leadership team is another core component of a positive culture. Effective leaders inspire and guide employees to achieve their best, fostering a culture of continuous improvement.
Leadership sets the tone for the entire organization and influences how employees approach their work. In an outsourcing context, having leaders who prioritize excellence and accountability translates into better outcomes for clients.
State-of-the-art facilities and access to the latest industry innovations are another tangible element of a positive culture. They enable employees to perform their tasks efficiently and with confidence. In the outsourcing industry, where operational excellence is paramount, having the right infrastructure and resources is a key differentiator.
The Cost Advantage
Of course, cost savings are still a key part of the equation. BPO firms typically manage large facilities and employ a skilled workforce, allowing them to spread costs more efficiently across multiple clients. This shared infrastructure reduces the financial burden on individual businesses, making it possible to access resources and expertise that might otherwise be financially out of reach.
BPO providers also offer leadership and management expertise. They have established processes and experienced leaders who can efficiently oversee operations and drive performance improvements. They also employ subject matter experts with deep knowledge in specific domains, enabling businesses to tap into industry-specific expertise without the expense of hiring and training these people in-house.
...BPO providers perform just as well as, if not better than, in-house teams.
Technology is another key cost driver in outsourcing. Providers frequently invest in solutions to enhance their service delivery. Clients benefit from access to these innovations without having to invest in them independently. This not only reduces costs but also ensures that businesses stay competitive in rapidly evolving industries.
As alluded to earlier, the global labor market is another crucial cost-saving aspect. BPO providers can tap into a vast pool of talent worldwide, often in regions with lower labor costs. They have the established infrastructure, networks and processes to recruit, train, and manage talent efficiently across the globe. This allows businesses to hire skilled professionals at a more competitive rate, thus reducing labor expenses.
The Seven Habits
When it comes to digital CX outsourcing, I’m often asked whether the BPO provider should handle the whole program themselves, or whether they can seamlessly split the work with the client’s in-house contact centers.
There are many ways to approach this. Some clients like to outsource 100% of their work to one or many outsourcers based on their business model, strategy, and budget. Others prefer to split the work between an in-house contact center and a BPO provider.
But no matter what the client chooses, there are seven critical factors that must be addressed by the BPO provider to ensure a seamless customer experience (CX).
- It’s essential to hire individuals whose profiles align precisely with the job requirements. This ensures that the right skills and expertise are in place to meet customer expectations consistently.
- Clear communication is a must, whether an employee is in-house or outsourced. It’s vital to convey consistent messages and information to all associates (agents), regardless of their location or employment status. This ensures everyone is on the same page and can provide customers with accurate and coherent responses.
- All associates should have access to the same knowledge base and resources to perform their tasks effectively. This uniformity in resources guarantees a consistent level of service quality. Having the very best technology in hand also helps create a positive work environment for the associates who handle crucial customer interactions.
- The use of standardized processes, workflows, coaching, and feedback mechanisms is crucial. This ensures everyone follows the same procedures and receives consistent guidance and support, contributing to a unified customer experience.
- Leadership supervision and escalation protocols should be consistent across the board. Whether an associate is in-house or part of an outsourcing team, they should have access to the same leadership support and know the proper channels for addressing issues or escalating matters when necessary.
- Adaptability is key in an ever-changing environment. Processes and workflows should be continuously reviewed and adjusted to stay aligned with evolving customer needs and industry trends.
- All associates must embody the mindset that they represent not just the outsourcing company but also the brand and product they support. They should understand that, in the eyes of end customers, they are the face of the brand and company. The quality of their service directly impacts how customers perceive the brand.
At the end of the day, BPOs are an extension of their clients and of them to their customers. The BPOs’ success determines theirs, and vice versa.
Often the proof is in the numbers. When looking at CSAT, NPS, and VoC scores, for instance, the data consistently shows that BPO providers perform just as well as, if not better than, in-house teams.
This compelling evidence is driving more and more companies not only to explore domestic outsourcing but also to consider nearshore and offshore options for their operations.