Overview of the business process outsourcing industry

Overview of the business process outsourcing industry

If we hark back to prehistoric times, when man was a ‘hunter gatherer’ as we are told by historians, it seems tasks were divided between people who made up a group or tribe. People who would go hunting, usually men, would bring back the spoils and hand them over to the folks remaining back in the settlement, usually women and children, and the elderly. They would then carry out the task of cleaning and preparing and cooking the meat for consumption, and add to it through their own gathering efforts.

Why did they do it this way? Why did the men not clean and prepare and cook the meat themselves? Why did the women and children not go and hunt on their own?

Perhaps they identified their own unique skill sets and divided up the work so that the group as a whole would benefit. In a way, women and children outsourced the hunting to men and men outsourced the cleaning and cooking to the children and women.

The point being made is that outsourcing is not a modern invention, as some detractors seem to argue. It is as old as mankind. Man has always explored opportunities for creating efficiency. One solution that has been implemented since time immemorial is that of sharing the workload based on who can do it best or what creates the greatest value for the group as a whole.

It could be done to create efficiency and value in our day-to-day lives. It could also be done to create efficiency in what we define as our ‘work’ or ‘business’ activities. Since the joint stock corporation, with a separate identity of its own, had not been invented, there was little distinction between ‘personal’ and ‘business’ lives. Hence, it follows that the outsourced activities, or processes, applied as much to their ‘business’ as to their ‘personal’ lives.

This division of work and creation of efficiency and value is the principle the business process outsourcing industry is based on. It is also referred to as the BPO industry.

It refers to a B2B engagement, between two businesses, based on which business process activities of one are taken on by the other, with an overarching set of contractual conditions under which they would be performed. In other words, activities and tasks that could have been done in-house by the principal, or client, are outsourced to the vendor, or partner, as they are better placed to perform them in an efficient, value-accretive manner.

New age providers like oWorkers have added a new dimension to the industry. Already counted as one of the top three providers in the world, in its chosen line of work, that of data related BPO services, oWorkers has delighted clients from around the world in its eight years of existence.

 

Business process outsourcing industry – evolution

Though we have looked at the historical, even pre-historic perspective of process outsourcing, since our context is business let us discuss the evolution of the industry in those specific terms.

As we know, business always seeks value as it seeks to expand its scope and return more profits to its owners, in the free market that a business generally operates in and one that prevails in most geographies today.

Cost reduction being one of the two major starting points, revenue enhancement being the other, of the journey that leads to enhanced profits, is always a focus area. Outsourcing business processes contributes to the cost-reduction of the industry, which is one of the major efficiencies realized by the outsourcing company. While this is a simplistic view, and there are many more variables in the real world, including both additional advantages as well as some challenges that we will touch upon later, this should serve the purpose of illustration.

With growth of consumer franchises and as companies started feeling the heat of competition, the quest for efficiencies in processing began in real earnest. While the timeline is not definite, the period after the second world war when business and industry flourished, is broadly the time when this quest led to the adoption of an outsourcing strategy.

The early version, as always, was fairly simple. It essentially entailed the identification of non-customer facing functions of the company and moving them out of expensive high-street or downtown real estate into less expensive properties. This saved cost in some cases, and created revenue enhancement opportunities in others, and even both in a few situations. With relocation to less expensive sites also came the additional benefit of access to employees from a pool that would be less expensive.

With that humble start, the business process outsourcing industry has never looked back. The hunger of business for value has propelled it to keep pushing boundaries, both in the metaphorical as well as the physical sense. From the ‘nearby’ inexpensive sites companies first pushed the city boundary, locating business processes to smaller towns and cities that were not far away. State boundaries were pushed next, with the development and growth of air travel, which made transporting people as well as goods and documents much quicker. 

Around this time, with the scale that the industry had acquired, the BPO company came into being. So far, most process outsourcing was handled by units within the company, just located and staffed differently from the rest of the company. The BPO company could be a specialist in a particular area of outsourcing, such as Contact Center work, or it could offer a basket of services. The emergence of BPO providers perhaps was a major step in the emergence of the industry as one. Many companies found value in engaging a third-party provider over hiving it off as a unit within the company.

We know that the growth of telecommunications and the internet took the industry to the far corners of the world, as long as there was value to be found. With increase in volumes and concerns over security, some companies have gone back to the old model of in-house processing. The only difference this time is that most of them are choosing to outsource to a separate company, but controlled within their business group, unlike earlier when the processing might have been done within the same company.

oWorkers is led by a team of professionals with over 20 years of hands-on experience. With business being increasingly global, oWorkers is able to provide support in 22 languages. This is a result of a conscious multi-ethnic and multi-cultural human resources policy followed since its inception.

 

From evolution to evaluation – of benefits

In a competitive world, it is unlikely that an industry will grow and prosper if it does not create value for its clients. Clients, or customers, who pay for products and services, are the final word on the relevance of a business.

The business process outsourcing industry has grown tremendously in the last few decades and continues to go from strength to strength. Hence, that id does not deliver value can be nobody’s case. It has to be conceded, though, that there are some limitations in the manner of its operation that need to be recognized by outsourcers.

Given below is an evaluation of the main pros and cons of the industry:

It delivers cost savings to its clients, with its ability to operate from low-cost real estate as well as less expensive resources.

Its ability to aggregate volumes across multiple clients gives it the heft to not only invest in technology, but also process improvement. The improvements benefit both the client and vendor.

oWorkers has consistently delivered over 99% levels of accuracy, measured across different clients, different processes, different scales and different measuring systems.

With the help of its strong relationship with major technology providers, oWorkers can leverage the latest in technology for delivery on client projects, something they themselves will not be in a position to do.

BPO operators set themselves up with the flexibility to operate on a 24×7 basis. This gives them an extended window of work enabling faster processing. Turnarounds are often also expedited by locating delivery in a time zone which is the opposite of the client, so that processing is done while he sleeps, and the output is ready when he wakes up.

BPOs are able to access resource pools that clients would perhaps never discover. These talent pools are usually less qualified and experienced, making them less expensive. BPOs leverage a strong training capability to get them ready for client work.

With its positioning as a preferred employer, oWorkers is sought out by job seekers for employment. This not only creates a steady supply of talent, it also enables oWorkers to hire for short-term volume peaks that clients occasionally encounter, without the need to retain an idle bench which costs money to clients. At present they have the capacity to hire almost a hundred additional resources within 48 hours.

BPO operators are instrumental in distributing and sharing economic benefits with less privileged communities, where they usually gravitate to, for their delivery centers. This way, jobs flow from the richer to the poorer communities around the world, reducing disparity and inequality.

A corollary of the above is that they are job creators, which is why political leaders and administrators try to get them to set up facilities in their geographies.

oWorkers operates in three distinct geographies around the world. They pay social and local taxes for their staff and are contributing members of local communities. All centers are equipped to operate 24×7 for clients that need the service.

Specialization leads to greater efficiency. Companies can focus on their core competencies while outsourcing supporting activities to BPO providers that specialize in that activity, raising efficiency all around.

 

Limitations that need to be borne in mind

Blessings are never unmixed, as they say. So is the case with the business process outsourcing industry as well.

While it creates jobs in many places, they often come at the cost of jobs in some other place where the work is being done. This creates, perhaps, the strongest opposition to the industry.

Client work enables oWorkers to employ a few more people from the less fortunate communities we work with, and give them an entry ticket to the digital economy of the world. Hopefully, this is a step in the right direction in making the world more equal and inclusive.

Business information is sacred and valuable. Engaging a partner requires sharing confidential information of the business. While providers commit to the security of data, processes and systems are never foolproof.

With its strong technological moorings, including ISO (27001:2013 & 9001:2015) certification as well as GDPR compliance, oWorkers provides as safe an environment as any for security of data. Physical segregation through access control is also possible.

The brand of the client could be compromised, especially when the vendor handles processes that have an element of customer interaction, such as call centers.

The net benefit accruing to the outsourcer needs to be taken into account. While many clients often report savings of almost 80% when they engage oWorkers as a process outsourcing partner, the choice between input-based and output-based pricing offered by oWorkers is found interesting and unique by clients.

 

Business process outsourcing industry – business types

There are many classification methods; by location, by industry (vertical) and by function (horizontal) being the most common. With the focus on specialization, functional classification is gradually emerging as the preferred method.

The industry can be understood as a composite of many sub-industries.

Knowledge Process Outsourcing (KPO)

Outsourcing processing activities that are knowledge intensive is referred to as KPO or knowledge process outsourcing. KPO activities could range from market research to management of data to analytics and insights based on data to generation of MIS and reports. It could apply to a wide range of industries such as healthcare, financial services and aerospace.

Legal Process Outsourcing (LPO)

The act of a company taking ongoing legal support from a legal firm, instead of hiring in-house counsel, is referred to as legal process outsourcing. Document review, writing, drawing up contracts, drafting of briefs and pleadings and patent services are some of the more commonly used services through LPO. There could be limitations in certain cases that require physical presence, if the provider is located offshore.

Human Resource Outsourcing (HRO)

Being a job for a specialist, with knowledge of rules and regulations governing employees and working conditions, HRO takes away this responsibility from a business and keeps it safe from non-compliance, apart from, of course, taking over the administrative burden of the job,

Supply Chain Management (SCM)

SCM covers the flow of goods and services across the entire chain, from source to final consumption. Supply chains have also gone global with businesses doing so, requiring a navigation of the laws of many lands and working through entry and exit formalities.

Sourcing and Procurement

Being a support function, procurement often suffers from a lack of management attention. Probably related is its reputation as a cesspool of murky dealings. By outsourcing, it gets managed by a company for whom it is a source of revenue and main business, resulting in processes and technologies that promote efficiency.

Finance & Accounting (F&A)

In addition to being the common thread that ties all activities of a company together, F&A BPOs go over and beyond and contribute in many different ways such as providing intelligent financial information and tracking money trails enhancing realization efficiency.

Data entry

Despite its image as the most basic and simple service, data entry continues to be in demand. Not only are legacy records still being converted, many new services are also delivered over non-digital channels requiring a bridge between the two in the form of data entry.

AI enablement services

AI is seen as the next technological frontier that will push the human story a step further. However, to get there a significant amount of manual effort is required. Who better than the BPO industry to do that manual work?

Content moderation

A direct result of our current obsession with social media, moderation is required so that people and communities around the world can be kept safe from unwelcome, unwholesome and plainly unacceptable content. It is now a staple service of the business process outsourcing industry.

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