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Why It’s Time For BPOs To Change, Again

Even before the pandemic, there’s a variety of market drivers affecting business processing organisations or BPOs. Historically the main reason is cost reduction. And its typically transactional tasks; those lower-value manual, repetitive activities that cost an enterprise too much overhead to perform in house when BPOs can leverage economies of scale and offer businesses a much lower cost per transaction, without risk and set up cost of opening in new markets.  Traditionally, enterprises didn’t look toward BPOs as a strategic business partner, they saw them as an opportunity to slice out overhead and infrastructure costs by leveraging low-cost BPO operations in markets they didn’t themselves have a footprint in. 

The problem BPOs now face is that with the advent of automation, the labour arbitrage bubble has now well and truly burst. Couple this with the recent challenges of COVID-19 and the global push for a more remote and digital workforce, and the BPO industry is gearing up for the fight of its life.

Shaking Up the BPO Industry: Automation

 “While BPO has benefitted from being able to provide labour at a reduced cost by moving their operations to lower cost-of-living countries, software can provide labour that has almost no cost once it’s trained” Forbes reports.

In a recent article by McKinsey, it’s predicted about half of the activities carried out by workers could be automated. Structured, repeatable physical activities are ideal candidates for automation and are ones that are typically outsourced to BPOs or Managed Services Provider, MSPs. Enterprises can now decide if they want to build an automation programme in house and directly reap the potential cost savings of task automation.

With the rise and global acceptance of RPA, it afforded BPOs to provide customers with cost reduction. But many BPOs weren’t able to implement this automation in house – and so the question arises of whether to build, borrow (partner) or buy the necessary technology they ultimately now need to stay relevant to their clients,   Those who are adapting fastest and are those willing to cannibalise their original business model to incorporate digitisation and automation for a brave new world of third party service delivery.  

Further Instability for BPOs: Covid-19 Pandemic

In COVID-19: A wake up call for the BPO industry, Deloitte states, “how Outsourcing Partners respond beyond the immediate crisis will determine the winners and losers in the future, and whether the industry as a whole thrives or not.” 

Flexibility, responsiveness and digital adoption are keys to BPO survival, according to Deloitte.

At the start of the pandemic, customers quickly discovered how their BPOs were able to address their needs. Or not. It’s where the moment of truth happened. According to Deloitte’s, No Quick Bounce Back, half of the CFOs don’t expect their revenues to recover for a least a year and are searching for a way to adapt their business to a new way of working and this includes accelerating adoption of new technologies.

Rigid contract details between customer and BPO will need to change. The current model needs to evolve and change to become more agile, flexible and secure; with less reliance on human work.

At a macro level, leadership is located onshore and process activities are offshore, the lack of staff being able to address requests starts adding up. How will your outsourcing provider be able to help you rethink control within operations to gain the organisational resiliency demanded by todays climate? 

In terms of technology, the previous operating model which includes fragmented, remote desktops; now requires fast deployment to remotely access technology. How will your BPO provide balance for remote working, security and pricing? They also need to demonstrate capability to help customers achieve operational agility to scale a digital workforce up and down to meet demand, at a fraction of the expense of a human workforce – that’s where they could start adding real value. 

Lockdown Restrictions Ease: Process Transparency is Needed

Experts agree business continuity planning (BCP) is required now more than ever for short-term and long-term business operations. And traditionally BPOs are essentially BCP and Disaster Recovery (DR) experts. It’s fundamentally in their DNA to ensure that operations and service are maintained in the face of any unplanned disruption to day-to-day business. This post-pandemic world should be their time to shine and thrive based on that inherent expertise at a time when bruised businesses are seeking organisational resiliency and risk mitigation. For those businesses creating standardised processes across business units and geographies to developing clear roles and responsibilities for both the client and their outsource partner will be a priority. And for the BPOs, providing specific detailed plans for extended shutdowns and diversifying vendor strategies to permit additional business agility will be required to become a client partner.

BPO Innovation via Automation

Bottomline: Automation affords BPO organisations a chance to reinvent themselves. But more importantly these BPOs can now provide strategic insights from automation. Forbes article explains, “In fact, smart BPO providers will likely be able to use these Machine Learning and AI tools themselves in order to increase efficiency for their own workloads. This will allow them to cut their own costs and make more profit on tasks that can’t be so easily automated.”

In their recently published “A Manifesto to Revitalize the BPO Industry,” HFS Research shares 5 must-have capabilities for Business Process Outsourcing organisations:

  • Invest in people diversity.

Requires BPO to take a different leadership perspective, as to how they approach recruitment and talent management for their organisation. 

  • Eliminate process debt.

It’s time to discard the short-term band-aid approach to fixing legacy systems and processes instead of discovering and solving the root cause. The use of tools such as process mining or process discovery is ideal for process standardisation.

  • Build AI-powered, cloud-enabled, autonomous, technology solutions. 

Moving past task or fragmented automation towards straight-through processing across departments, business units and even geographies is key. Enlisting data ingestion and digitisation solutions provides BPOs with the means to migrate from document-laden processes and shift towards a digital-first business model.

  • Treat data as a first-class citizen. 

By making data a priority, BPOs can discover data sets that bridge the gap between organisational siloes. Data and the analysis associated with it can become a key differentiator for BPOs to sell their services. And this can provide the value-add service customers are seeking.

  • Build-in digital change management. 

BPO industry needs to stay true to client’s needs and sell change, maintaining focus on their key challenges, similar to the BCP referenced earlier in this post.

As the industry landscape changes, enterprises who decide to boost their digital transformation—leveraging various technologies such as data capture, AI and analytics will in a better position to lead the charge with agility. 

Learn More in Business Process Outsourcing: Stagnate or Automate

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