The BPO industry emerged and grew over the 80s, 90’s and 2000s primarily as a means for organisations to reduce costs through labour arbitrage. Contact centres and customer service were seen as ideal targets to have someone else manage these functions, whether locally or overseas. Technology and the pandemic have greatly impacted the BPO industry and the value it can deliver in helping organisations manage their CX initiatives.
Technology and the ability to offer solutions built around automation as well as managing a workforce more cost effectively, has become critical for most BPOs. Sharon Melamed, Managing Director and founder of Matchboard and veteran of the contact centre and BPO industries, has observed, “10 years ago, outsourcing was very much about saving money and reducing the liability of having too many workers on the payroll. It was all go, go, go to the Philippines and India. And the CFOs were smiling!”
“But 5 years ago, companies cottoned on to the even greater cost benefits of automation, particularly for simple or low value transactions. Large BPOs began offering blended human and automation offerings, often with dedicated practices around this. While it’s the human component that drives large revenues, the automation component drives high profit margins for the BPOs”.
The value BPOs were initially designed to create was transactional. The BPO industry was designed to take pressure off an organisation’s operations, so the business could focus on its core capabilities and making the right strategic decisions. But if BPOs are going to continue to provide value they must ‘up their game’ according to Ryan Rayner, Co-Founder & Chief Customer Accelerator, iCXeed, “I think there’s a significant gap in what some BPOs deliver for their clients, versus what they could do! BPOs aren’t all to blame; unfortunately, some clients view their contact centre as a cost bucket, and the labour arbitrage is enough of a balance sheet sweetener never to consider any point of change, but I think legacy BPOs are attached to the revenue associated with bums on seats”.
BPOs who have a purely transactional approach will typically offer solutions that are inflexible and are built around reducing costs not improving customer experience. There is significant potential for BPOs to increase value for clients through customer experience innovation, automation and providing self-service solutions. It is about treating interactions with customers not as transactions but as opportunities to develop deeper connections and understanding.
Rayner comments, “We built iCXeed to change the core role of someone working in a contact centre to be more professional and focused on customer experience improvement
The solutions are about pinpointing why are customers interacting with the contact centre and using a mix of human talent and leading technology solutions to either optimise or eliminate the need for those interactions”.
Location, location, location
With any discussion around BPO people immediately think of the Philippines and India, but the impact of the pandemic has accelerated the growth of BPO in other locations as Melamed points out, “2 years ago, we were in the throes of the pandemic, and the BPO industry changed in many ways –severe service disruptions caused by lockdowns and shutdowns in the Philippines in India left the door open for emerging destinations like Fiji to fill the gap. Matchboard now gets more outsourcing requests for Fiji than the Philippines Fijians tend to enjoy working in the office, as it’s a very communal culture, while workers in other countries have on the whole moved to a hybrid office/home working environment”.
BPO is often equated with the notion of offshoring where the BPO organisation has facilities and staff in overseas locations. Over the last few years, a number of companies, with the express aim of improving customer experience, have brought their BPO projects back onshore to Australia or have reverted back to an inhouse model. Melamed comments, “Some big brands like Telstra, Optus, Westpac, Alinta and NIB have brought work back from the Philippines. While some BPOs picked up additional contracts onshore, the industry did lose out on balance, with these big brands evolving to an inhouse model in most cases. That being said, onshore BPOs were riding high 2 years ago with huge volumes of COVID-related work from clients in the Government, health and financial services sectors”.
According to research from IBISWorld the market size, measured by revenue, of the Business Process Outsourcing industry Australia is $42.3bn in 2023. The market size of the Business Process Outsourcing industry is expected to increase 3.5% in 2023. The report highlights plenty of opportunities for the savvy BPO provider to take advantage of the current trends in technology and automation to assist clients to improve their customer experience and achieve their business goals.
How to select a BPO
Technical expertise and access to the latest technology are a must when evaluating a BPO provider. But more importantly it is about the capability of the people and their commitment to improving the customer experience. Melamed says, “Never rely purely on a written proposal to make an outsourcing vendor selection. It is extremely important to get to know the leadership team and the people who will be responsible for your account, to ensure cultural alignment and a good “gut feel”. If you can, do a site visit. Speaking to references at the BPO’s other clients is also very insightful”.
Rayner advises, “Think about your brand’s customer experience model holistically, what are your business’s overall strategy and tactics to grow in the next 2-3 years? what you need to solve? and what boxes could each prospective BPO tick off?”
“The totality of your customer experience should not solely be evaluated on the outcomes of your contact centre’s service experience. Customer satisfaction (CSAT), average handle time (AHT), first contact resolution (FCR), net promoter score (NPS). We’ve all heard these, but it’s more than that. Any business’s true customer experience is the culmination of their social reputation experience, channel experience, product experience, security experience, and their service experience, and the best customer experience may be no service experience.”
Rayner recommends the following traits as being critical when evaluating any BPO provider:
- Shared goals: A strategic BPO partner owns, or shares goals aligned with their client’s growth objectives and customer outcome aspirations.
- Mindset: A strategic BPO partner focusing on value, outcomes and costs. A partner that isn’t against revenue cannibalisation in a quest to deliver the optimal service for its client’s customers.
- Continuous Improvement: A strategic BPO partner should have a continuous improvement target that can help the company improve the performance of the outsourced processes over time.
If your organisation is about to go down the down the outsourcing path maybe think of it in terms of increasing value rather than it being purely about cost reduction. The cheapest provider is unlikely to have the technology, the expertise and committed staff to improve the customer experience and may cause more damage than good. Melamed highlights, “BPOs present their pricing in different ways, and it’s crucial to be able to compare proposals apple to apple. If you don’t have the skills for this internally, engage a consultant – his or her fees will be recouped many times over!”
The Offshoring Institute has identified the following as the different charging methods used by BPOs
- Fixed price – pricing is agreed before start of operations, based on processes, activities, SLAs, or specific requirements contained in the agreement
- Time and material – price is accorded to the duration of the service provided and the amount of material to be spend during the serving of the activities/services supplied to the customer
- Transaction-based – the price is always given in proportion to the number of transaction taking place during the service provision. For this, each transaction should have a unique and particular price
- Incentive-based (KPI) – price is conditioned through the achievement of goals established before the start of the engagement. Penalties generally appear when goals are not obtained
- Business-benefit-based – the price changes in proportion to the benefit reached by the customer due to the leverage of its services to the provider
- FTE-based – the price is established as direct function of the number of employees dedicated exclusively to the engagement
- Revenue-based – a certain percentage of the customer’s revenues is fixed at the beginning of the engagement as a price for the services provided
- Production-capacity-based – the price is based on the installed production capacity of the operating units/ companies served and only changes if the capacity varies (extending or downsizing manufacturing capacity)
Conclusion
The BPO industry has undergone sweeping changes in the last few years. Some providers have stayed ahead of the curve in their ability to help clients improve their customer experience while others have remained stuck with a ‘bums on seats’ mentality and pricing structure.