History of business process outsourcing
A brief history of business process outsourcing
Choose a BPO company
When someone says ‘business process outsourcing,’ what is the image that flashes across your mind?
For many people it is likely to be that of a modern office, with rows upon rows of workstations peopled by fairly young workers, either hunched up and peering into the screen of a computer or with a headset wrapped around the head and a microphone ‘boom’ extending out to catch what they speak.
And this is perhaps quite accurate, as business process outsourcing (BPO), riding on information and communications technologies, does work for anywhere from anywhere in the world. It is, perhaps, difficult to imagine a world of business where BPO does not have an important part to play.
That being said, the images our mind conjures up are perhaps driven by the role we have seen BPO playing in the ‘services’ sector, supporting activities like Hiring, Banking, Finance and Accounting, Legal Services, Knowledge Processes and many more. Is that where the history of business process outsourcing begins?
oWorkers occupies an important place in the recent history of the industry. Coming into existence just eight years back, it today gets counted as one of the top three providers in the world in its chosen area of operation, that of data based BPO services.
Role of manufacturing in the history of business process outsourcing
We know that manufacturing is a constant in our lives.
We know that we will always need ‘things’ in the current living arrangement of humans, which nobody sees changing in any hurry.
We will need cars, we will need mobiles, we will need airplanes, we will need books, we will need furniture, we will need toothpaste, we will need clothes, we will need utensils, and millions of other things that we cannot even readily recollect.
We also know that the contribution of the ‘services’ sector to global GDP has been steadily growing. According to a report published by Deloitte, “services’ share of GDP has grown while industry’s has declined.”
Many of the ‘best practices’ used in BPOs today, such as Lean, Six sigma and other quality management disciplines, owe their origins to the manufacturing sector.
As a participant in a competitive landscape, ‘manufacturing’ businesses have always been looking for creation of value.
Though a linear, researched history of the evolution of BPO may not be available, examples of choices exercised by some large corporations could be considered as early examples of using business process outsourcing to push the agenda of the company forward.
Getting others to participate in the ‘supply chain’ processes of the company, which were business processes, is how manufacturers leveraged BPO to create value.
Recruitment of the right resources, at the right price, in the right numbers, has been one of the cornerstones of the BPO model of delivery.
With its prominent place in local communities, oWorkers attracts a steady walk-in flow of candidates interested in working for it.
This enables them to choose the most suitable resources for client projects.
Coca Cola
Starting life in the late nineteenth century, Coca Cola is understood to have started engaging partners for bottling its famous drink.
What was it if not business process outsourcing?
In fact, in the first quarter of the twentieth century, Coca Cola had gone global with the approach and even set up a partner in the Philippines, halfway across the world, for the same activity.
This outsourcing activity is rarely recalled in a discussion on the rise of the Philippines as an outsourcing destination.
With its avowed policy of working with employed staff, and not contractual or freelancers, oWorkers is able to deploy resources as required.
That it routinely received satisfaction scores in excess of 4.5, on a scale of 5, from existing as well as past employees, is a matter of pride for them.
Electronic Data Systems Corporation
Electronic Data Systems Corporation (EDS), which eventually was bought by General Motors in 1984, provides another milestone in the history of business process outsourcing.
EDS used to act like the IT department for many companies at the time, which could be considered as early years for the IT industry.
Systems engineer Mort Meyerson, who later became the President, introduced the model of ‘outsourcing’ that led to explosive growth for the company and became a model adopted by millions of companies in one shape or form till this day.
Often clients are unable to predict volumes with any certainty.
Unplanned spikes, if not handled, can mean revenue foregone.
oWorkers is able to provide additional resources at short notice to handle unforeseen spikes.
As an indication, an additional 100 resources in 48 hours is not out of their capability set.
Eastman Kodak
Eastman Kodak struck a blow for outsourcing when, in the eighties, it outsourced its IT operations.
As a large corporation, Kodak was widely followed and copied, and this led to many others adopting outsourcing as a strategy.
Though this was a prophetic move that would be widely copied, unfortunately Kodak could not withstand the march of technology and the onslaught of digital imaging technologies and soon became a pale shadow of their former self.
History of business process outsourcing : The Services revolution
While manufacturing continued to play its defined role, the ‘services’ sector had begun to rise and begin to contribute an increasing share of the global GDP.
The contemporary BPO offering appears to be synonymous with the rise of the ‘service’ sector of the economy.
Drawing a history of business process outsourcing from the perspective of the ‘services’ sector might even yield more definite results.
Separation of identity of jobs
Even as the incidence of BPO in manufacturing was rising, with the end of the world wars and rising prosperity, consumer franchises had begun to assume mammoth proportions.
Of course, competition was always there in the free-market economies and continues to push organizations towards seeking better solutions.
As transaction volumes grew, companies started looking at methods of managing them better, as well as more economically.
This may have resulted in the adoption of the business process outsourcing as a strategy, while separating out activities that could be outsourced versus the ones that could not be.
In the book “Some Method Some Madness: Managing BPO in India,” the author relates to this beginning and says, “Every Corporation has a reason for existence, a business it pursues, and how it goes about its key objective of shareholder value maximization.
Outsourcing of non-core activities has been on the agenda of forward-looking organizations for many years.
This outsourcing agenda has, like everything else in business, evolved with the times.
The first step for organizations interested in outsourcing was separation of identities of what could be classified as non-core.
The separately identified business began to be managed through a strategy that was likely to be different from what was used to manage the Core business, in terms of nature of people employed, compensation levels, metrics used to determine performance, etc…
This outsourcing, in most cases, is likely to have developed and operated in geographical areas contiguous to the main business, which would be mostly located in and around major urban centers.”
Clients of oWorkers, especially the ones from the US and Western Europe, have consistently advised substantial savings, up to 80% at times, when working with oWorkers.
History of BPO : Non-contiguous delivery centers
The book goes on to say that “As scale and volumes grew, and also the comfort level in being able to manage a separate business, organizations started to look for the next “point of inflexion”.
This came through consolidating the non-core activities and establishing scaled-up Delivery Centers away from the major urban centers, providing organizations leverage in making use of low-cost physical space as well as lower-cost labor pool which could deliver the same services.”
Thus, early success led to the willingness to experiment with more radical solutions in search of greater benefits, leading to delivery centers being set up further afield to take advantage of both a reasonably priced workforce as well as physical space.
This expansion was aided by increasing ease of travel as well as a rapid expansion in air travel networks.
This led to easier access to towns once considered difficult to reach. In the history of business process outsourcing, it should be pointed out, this was perhaps the phase that led to the emergence of third-party providers.
As it had been proven that outsourced services need not be housed adjacent to the business center, if it could be taken to a distant location it could also be taken to an external provider.
These providers excelled in the processes that supported outsourcing and opened the doors for volumes to start increasing, since outsourcers were no longer limited by their own ability to manage the processes.
oWorkers operates delivery centers that are equipped to operate on a 24×7 basis.
This equips them to serve clients from anywhere in the world.
Telecommunications and internet revolution
Eventually, all shackles were broken by the developments that took place in the information and communications technologies, also known as ICT.
In one way, in a nice sort of way, ‘all hell broke loose.’
Occasionally, with the benefit of hindsight, it appears that unconnected variables are in cahoots in order that a certain outcome is achieved.
This was also the time when winds of economic change were beginning to blow through parts of the world that housed large pools of people; more importantly people who were English-proficient.
With economic liberalization as the backdrop, the skilled manpower of India and the Philippines could be put to work with the help of the advances in communications technologies and the internet, and the most important chapter till date in the history of business process outsourcing could be written.
General Electric and American Express are known as two of the earliest movers in this space, and set up ‘captive’ outsourced centers to support the business they were generating in the western, mostly English-speaking world.
Operating out of super secure facilities with ISO certification (27001:2013 & 9001:2015), oWorkers makes all efforts to ensure your data is safe. They are also GDPR compliant.
Going beyond simple processes
So far, the work that was outsourced broadly satisfied two conditions; it was considered as a non-core activity and the volume was high.
And that had been the practice over the various phases of its evolution.
Companies, however, are always hungry for more.
Business process outsourcing had, perhaps, also withstood its trial by fire and was considered as a good alternative.
The scope for what could be outsourced kept expanding, leading to a large number of internal processes being outsourced to partners.
Human Resources, Finance and Accounting, Legal Services are some of the business processes that started being outsourced.
During this period, the old order started changing, yielding place to the new.
Newer technologies, and requirements emanating from the use of these technologies, started driving the flow of business to BPO providers.
Business processes like social media moderation that is driven by the popularity of social media platforms, and data annotation, that is required for the development of Artificial Intelligence (AI) models have gradually become the new kids on the block that are competing with legacy processes for headcount.
As client needs grow and they expand, oWorkers is able to support them regardless of where they go.
This is because oWorkers has the capability to support clients in 22 languages.
Platform solutions and integrated offerings
Providers have been gaining experience in their defined areas of work.
With this experience, the desire to do more, and the volumes across multiple clients, BPOs are offering platform solutions as well as process improvement services.
It is a boon for many clients for whom, perhaps being non-core, investment in technology or process improvement is difficult to justify.
Hence, leveraging platform solutions and process improvement services create value that they would otherwise have missed out on.
Providers are also leveraging opportunities for consolidation of services.
In other words, they are increasingly providing integrated services to reduce management effort on part of the principal in managing multiple vendors.
By consolidating different products and services and creating omnichannel solutions, and leveraging the cloud that now looms over all businesses, vendors are creating greater value for clients.
Robotic process automation (RPA) once again promises to release significant resources from the current model, by taking over repetitive, voluminous tasks, leaving representatives with greater freedom to interact with customers.
With a wide set of alliances with technology companies, oWorkers is in a position to access the latest technologies and platforms, and use them for client work, something clients are not in a position to do themselves.
Clients get the best technology for their work from oWorkers.
The future is bright
Take your analyst pick, they will be betting on a continued growth path for BPO. The only difference will be the rate of growth projected.
Most analysts peg CAGR at anywhere between 3 and 8 percent over the next few years. If you are a provider, this augurs well for your future.
If you are an outsourcer, you are on a value-creation path taken by many others.
If you haven’t yet considered business process outsourcing, we hope you will, soon, like the many unicorn marketplaces and technology companies that work with us. Whether the history of business process outsourcing ticks any boxes for you or not, you should consider it as a source of value for your own business.
