BPO: shaping the future of outsourcing?
A recent report by the London School of Economics predicts that BPO will eventually take over ITO as more companies look to outsource back office processes. This increase in BPO has allowed fledgling outsourcing suppliers to get a foot hold in the market.
The Beyond BRIC study, authored by Professor Leslie Willcocks and his team at the LSE’s Outsourcing Unit, looks at how the growing demand for BPO and other outsourcing services is fuelling a new generation of outsourcing hotspots. Locations such as Egypt, the Philippines and Kenya are all amongst the locations that have the potential to chip away at India’s BPO grip.
The NOA has been regularly commenting on the speculation that India’s BPO market share will drop, allowing new players to enter the market. This latest study takes a rational view of the situation, stating that high attrition rates combined with increased wages and higher costs means that India’s offering is less appealing than it once was. India’s unstable market, twinned with companies looking at suppliers that are either nearshore or have similar cultural touch points, means that emerging destinations are capitalising on an evolving outsourcing market.
Patriotic sentiments have also added to the increased interest in new destinations. Obama’s administration always stressed the importance of keeping jobs on American soil; a great-election winning line but an unappealing prospect to US businesses keen on keeping costs low. Instead, companies are looking to suppliers that give the appearance that work is kept on home turf (or at least near home turf). US businesses will be looking to countries such as Costa Rica, Philippines and Brazil to provide them with nearshore outsourcing services, something which the ‘Beyond BRIC’ report and the NOA identified as a key trend in 2009.
The UK is also exploring destinations a little closer to home. In Northern Ireland, suppliers are thriving in this current market. gem, a contact centre service provider based in Belfast, announced a huge expansion in order to service its growing client base. Eastern Europe and South Africa are benefiting from greater UK interest, especially when looking at contact centre opportunities.
Egypt was the main focus of the ‘Beyond BRIC’ report, especially as the research was commissioned by ITIDA, the Egyptian IT development agency. Obviously Egypt has been flourishing in the outsourcing world, winning the Outsourcing Destination of the Year award at the last NOA industry awards, however, it does face stiff competition when it comes to BPO. There are other locations, previously mentioned, that offer a more Westernised BPO service. The introduction of fibre optic broadband into Kenya and other African areas will increase the value of the services they offer and pose a real challenge to Egypt’s BPO offering. This, combined with accent free English and a workforce educated to the equivalent of the British based-system, will mean that previously unconsidered locations will start to offer very competitive services.
In essence we are seeing the true globalisation of an industry. Outsourcing is no longer limited to a select few countries and the big players should be prepared to face some stiff competition in a vibrant, global, market.
There is still one area that the big two destinations can lead on, that is the capacity to do the actual work. At one NOA meeting, where a representative from an emerging destination (interestingly not covered in the report) spoke about what they could offer. Another delegate enquired as to how many people they had to offer. When emerging destination representative answered the delegate said, “Well that’s enough for the London Borough of Brent but what are the rest of us going to do?”
The growth in BPO has opened up opportunities for non-BRIC countries. However, they may be better off if they specialise in a particular area. This will allow them to focus all their skills and capacity on one service, rather than spread their resources across the whole BPO offering, which may reveal a skills shortage, especially if they are compared to the bigger players.
Tags: BRIC, ITIDA, LSE, offshoring, outsourcing
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