How Business Process Outsourcing is Evolving
Business Process Outsourcing (BPO) has evolved considerably as the market has matured.
Some years ago, BPO may have been considered to simply be a way of getting work done cheaply, but now the depth of BPO offerings is far smarter than just offshoring to a low-cost labor force.
The decline in Offshoring for BPO
Firstly, let’s address the eternal rumor of the decline in BPO. Yes, in a number of sectors, and in specific regions, offshoring as an approach to BPO has decreased in popularity. This is understandable – BPO is now more sophisticated with the automation revolution of RPA (Robotic Process Automation) and greater emphasis on quality, rather than quantity, through the paradigm of KPO (Knowledge Process Outsourcing).
Specific insight into the impact of RPA on the jobs market in India can be seen in recent reports from HfS Research, a US-based business advisory firm. HfS Research estimates that automation is likely to lead to a 14 per cent decline in India’s IT workforce with 4,80,000 IT jobs at risk by 2021. As RPA becomes more sophisticated, it is likely to consume an increasing percentage of work outsourced to individuals.
“It is estimated that there will be a 14% decline in India’s IT workforce, with 4,80,000 IT jobs at risk by 2021.”
One region that has experienced a recent decline in work from BPO is the Philippines – with a widely reported 34% fall in investment pledges, from the IT_BPM industry, in the second quarter of 2017.
Offshoring is understandably viewed more cautiously these days, with the increasing awareness of risks from environmental factors – from storms, floods, and the like to political and religious unrest. But what is lost from offshoring is more than readily taken up by the growth in onshore BPO options.
The benefits of RPA as a BPO option
We address the topic of Robotic Process Automation (RPA) in more detail in a separate post, but it’s worth mentioning here how RPA is gathering momentum quickly as it becomes easier to emulate, and improve on, rules-based behaviors via robots running either as part of an in-house system, or via connection to an as-a-Service offering from an expert partner.
With the advent of more sophisticated solutions, via RPA or KPO for example, businesses increasingly consider BPO as a method of improving service, rather than simply reducing costs.
If an outsourced service can reduce errors, provide better analytical insights and complete tasks more quickly, this presents a competitive advantage.
BPO to provide insight and advantage
In an increasingly digital world, business decisions are fueled by analytical insights best gained from electronic systems. When processes are held in-house on legacy systems, it’s often hard to drill down into performance specifics, or extract broad analytical insights. BPO service providers are aware of this and strive to deliver valuable, actionable, insights back to the business via a range of analytical tools.
Traditional BPO vs. as-a-Service model outsourcing
According to the Information Service Group’s (ISG) latest annual report, the annual contract value (ACV) for traditional IT and business process outsourcing, globally, declined by about 25% – whilst the as-a-Service increased by 38% in the same quarter (Q4 2016). Within the as-a-Service model, Infrastructure-as-a-Service (IaaS) is seen to outpace Software-as-a-Service (SaaS) by 3 to 1 for ACV.
“The market migration from traditional sourcing to as-as-service sourcing is gaining momentum, as enterprises increasingly embrace the digital opportunity to transform their operations, enhance their engagement with customers and better leverage their connections with suppliers,” said John Keppel, partner and president of ISG.
Whilst globally the trend is towards as-a-Service, this is driven primarily by the dominance of this outsourcing type in the Americas and Asia Pacific regions. EMEA is seeing an acceleration in growth of as-a-Service outsourcing, but traditional sourcing still constitutes the majority of the ACV for this region. Rate of change, acceleration of growth, in as-a-Service outsourcing is the key metric to watch though as this market evolves to become more digital.
“The annual contract value for traditional IT and BPO declined by 25%.”
The Global ISG Index indicators for 2017-2018 imply an expected growth of as-a-Service by 20%, leaving traditional sourcing behind with an expected growth of just 2.5%. The future appears to be increasingly digital.
Capitalizing on the benefits of as-a-Service outsourcing with a human edge
Expert partners, such as Corcentric, present businesses with the opportunity to capitalize on the benefits of as-a-Service outsourcing, and Robotic Process Automation, through a solution that is refined and implemented by people who deeply understand the business challenges this will answer.
With any new paradigm, there will be those too eager to jump straight to the end goal, perhaps trying to develop or deploy as-a-Service or RPA solutions directly themselves and causing more harm than good. Bringing in an expert partner to assess the business needs, refine and deploy the ideal solution, and even maintain this over time, will prove more efficient and remove the risk of incorrect deployment.