The Future of Business is Outsourcing: Why Companies Are Turning to BPOs

by | Published on Jul 28, 2023 | Business Process Outsourcing

For any business, striving to be the best in its niche within the industry is crucial. Companies must seek innovative ways to sustain growth. This has become all the more difficult in times of economic uncertainty, where layoffs are increasing and hiring is slowing down or even freezing. This is where BPO or business process outsourcing services come into play.

Reports indicate that both big and small companies are turning to outsourcing to navigate challenging times and that this trend is set to grow.

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The Rise and Growth of Business Process Outsourcing

BPO involves delegating a wide range of non-core business functions, responsibilities and operations to external partners.In the current BPO landscape, nearly every business function is open to outsourcing possibilities, covering areas such as customer service, data analysis, marketing, software development, IT management, and beyond. The extensive BPO infrastructure enables businesses to leverage external expertise in a wide array of operations. Outsourcing allows companies to focus their time, resources, and manpower on the core aspects of their business that drive growth, while benefiting from the expertise provided by external partners.

In the past, outsourcing primarily revolved around cost-cutting. Nevertheless, the emergence of BPOs has led to a change in mindset. Nowadays, companies are progressively embracing outsourcing to construct a “leaner, more resilient, and efficient” organization (Forbes).

“In today’s world where talent, cost, technology, and cybersecurity are differentiated capabilities, the effective use of third-party ecosystems and enhanced sourcing delivery models are required to unlock immediate and long-term business value,” notes the Deloitte Global Outsourcing Survey, 2022.

The report highlighted the significant changes that have occurred since the last Global Outsourcing Survey was published. In 2022, the Deloitte’s research revealed that technology has advanced, work methods have undergone transformation, global boundaries have expanded, and most importantly, the priorities and requirements that organizations consider while opting for outsourcing have shifted compared to two years ago.

Reasons for the Increasing Significance of BPO

Amidst an increasingly complex business environment, there is a renewed focus on outsourcing due to various reasons:

Automation and AI: As automation and artificial intelligence technologies continue to advance, certain routine tasks in various industries may become automated, leading to changes in the outsourcing landscape. While this could potentially reduce the demand for outsourcing certain repetitive jobs, it may also create new opportunities for specialized outsourcing services in AI and automation fields.

Lower costs: Outsourcing offers cost-cutting benefits through economies of scale and lower labor rates. BPO companies can efficiently handle large volumes of work in low-cost regions, centralizing processes to achieve significant cost savings. They specialize in specific areas, optimizing processes, reducing errors, and delivering high-quality results efficiently. They often invest in advanced technologies and infrastructure to support their operations. For instance, BPO companies that offer customer support services to various clients from different industries often invest in AI-powered chatbots, customer relationship management (CRM) platforms, robust cybersecurity measures, and other advanced systems. By serving multiple clients, they can spread the cost of these investments across various projects, making it more affordable for individual clients to access cutting-edge technologies and systems.

Increased efficiency: Outsourcing boosts efficiency by letting the client focus on their strengths while BPO providers handle non-core tasks. For instance, bulk document scanning services offer an efficient solution for businesses transitioning from manual to digital workflows. These services use high-speed scanners and OCR technology to quickly and accurately digitize large volumes of documents, eliminating manual data entry and saving time.

Rise of Knowledge Process Outsourcing (KPO): Traditional outsourcing has often focused on business processes like customer support and data entry. In the future, there might be a shift towards KPO, which involves outsourcing higher-value tasks that require knowledge, expertise, and problem-solving skills. KPO could encompass areas like research and development, data analytics, legal services, and more.

Scalability or variable capacity advantage: The variable capacity advantage of outsourcing refers to the flexibility that outsourcing provides to adjust resources and services based on the changing needs of a business. It allows a company to scale its operations up or down quickly without incurring significant fixed costs. For example, when a retail company experiences fluctuations in demand or seasonal peaks, outsourcing offers the ability to quickly ramp up resources to meet increased requirements. The company could outsource its customer support during busy holiday seasons when customer inquiries are higher, and then scale back the outsourcing during slower periods. This increased flexibility to meet changing business conditions ensures that the company has the necessary support without having to maintain a large internal workforce at all times.

Increased focus on strategy/core competencies: Outsourcing non-core processes allows companies to focus more on their core competencies and strategic initiatives. For instance, a company that outsources document scanning can free up its employees from the time-consuming task of scanning and indexing documents. This allows them to focus on core business activities, increasing overall productivity and efficiency.

Access to specialized skills: BPO providers focus on specific industries or functions such as data mining and cleansing, legal processes, human resources, payroll, customer service, etc. They have deep domain knowledge and stay updated with the latest trends, best practices, and technologies relevant to that particular field. Outsourcing provides a strategic approach for businesses to tap into these specialized skills and resources.

Lower ongoing investment in internal infrastructure: Many business processes require sophisticated IT infrastructure and systems. By outsourcing, companies can leverage the outsourcing provider’s existing IT infrastructure, including servers, data centers, software licenses, and cybersecurity measures. This avoids the upfront and ongoing costs of purchasing, maintaining, and upgrading internal IT infrastructure. Fewer assets and infrastructure to maintain internally also reduces depreciation costs associated with capital-intensive investments.

Shorter time to market: A shorter time to market enables a company to introduce its product or application faster, allowing them to potentially secure more revenue and market share ahead of competitors with similar offerings. For example, when demand for a product increases, outsourcing partners can help the business by quickly scaling up its resources to accommodate higher production volumes. This scalability allows businesses to respond rapidly to market opportunities without delays.

Focus on quality and value: While cost savings have been a significant driver for outsourcing, companies are increasingly placing emphasis on quality, innovation, and value-added services. Future outsourcing partnerships may be built on delivering superior outcomes rather than just cost reduction.

Evolving regulatory landscape: Changes in international regulations, data protection laws, and trade policies could impact the outsourcing industry. Service providers will need to stay compliant and adapt to new legal requirements.

Choose the Right BPO Partner

BPO will continue to offer companies a strategic way to optimize costs, enhance efficiency, and improve the overall quality of their business processes, contributing to long-term growth and success. However, it’s essential for companies to carefully assess their specific needs, choose the right business process outsourcing company and establish effective communication and collaboration channels for successful outsourcing arrangements. In fact, the Deloitte survey noted that organizations are not only interested in acquiring talent and staying abreast of advancing technology but also seek service providers focused on trustworthiness, transparency, performance, service integration, culture, and a deep understanding of their business.

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