This is the final article in a series which has charted the rise of the Business Process Outsourcing (BPO) market and technology outsourcing, from its early days and the aspirations of those who developed this new way of working across the decades, to the very different outsourcing landscape that we see in the future. This article will be projecting into the future, assessing the realistic ways in which we can expect the BPO market to change and answering the questions surrounding the long-term future for business process and technology outsourcing.
How we envisage the BPO market developing
As the US president, Benjamin Franklin said “…in this world, nothing is certain except death and taxes”. We all know that the future is uncertain. No greater evidence of this has been demonstrated by the advent of this most recent COVID-19 pandemic.
This uncertainty manifests itself in that there are so many factors which could influence whether what we say here today will come to pass. However, with over 20-years’ of experience and the supporting and structuring of over 500 behind us, these 8 trends come with a degree of confidence.
We have witnessed the ebbs and flows of this complex marketplace, its highs and its lows, and we have guided our clients through them all.
What we share with you today is where we see this BPO market going over the next few years; so you can judge for yourselves what preparations you feel may be necessary to undertake to protect and optimise your organisation’s future.
Many traditional BPO contracts are unlikely to be renewed
We have already seen ‘traditional’ back-office service outsourcing start to decline as new technologies have offered alternate solutions. It is therefore likely that we’ll see an increasing number of the legacy BPO contracts (for example, those with a high manual labour resourcing profile for transaction processing) allowed to expire without renewal.
This does not, however, necessarily mean a decline in overall BPO demand. Robotic Process Automation (RPA) is beginning to take over, supported by limited Artificial Intelligence (AI). Strategic suppliers are coming under increasing pressure to reduce the cost of BAU transactional services and are instead focusing their value on innovation and developing different ways of working for their client base. RPA solutions assist in this objective by dealing with low-level tasks that are repetitive and volume-driven, thus simplifying the workflow. It then allows a strategic supplier to focus on offering customers a more innovative, higher quality experience, and to dedicate more time to empathise and help solve complex problems by deploying more strategic advice.
Better insights and agility in the BPO market
As technologies such as RPA and AI improve opportunities will be created to reduce processing cycle times. As insights from ‘big data’ (the tracking of RPA and AI outcomes) become increasingly richer, this can lead to more agile outsourcing services (providing appropriate ‘re-shaping’ processes are built into the behavioural governance and contract terms).
Both of these will also help performance to become more transparent and efficient. Whether it’s cognitive analytics to redefine scenario analysis, crowdsourcing to improve reach and creativity, or mobile analytics to unlock real-time performance management, the potential for digital solutions to transform BPO is considerable.
Potential service disruption from strategic suppliers
The advent of COVID-19 has affected strategic suppliers in three main ways:
1) by directly impacting on production and demand,
2) by creating supply chain and market disruption, and
3) by its financial impact.
The vulnerability of supply chains has been exposed and many are now accelerating their resolution of these issues.
One of those vulnerabilities has been a reliance on people resourcing, splitting strategic suppliers into two camps – those who have invested in RPA solutions, and those who have not. For suppliers still reliant on large numbers of people to perform manual tasks, the virus has created many challenges. These have included people being off ill and unable to work and work-from-home mandates which have led these suppliers to review how mission-critical enterprise customers have the necessary tools and technologies to enable the speed, security, quality, and overall efficacy of services.
For those suppliers that have invested in RPA and AI technologies, the Covid crisis has thrown into the spotlight their increased efficiencies, but also their increased vulnerabilities as cyber security must keep pace, or a different kind of virus (technological) may adversely impact your services.
Increasing reliance and more successful adoption of RPA and AI technologies can start to reduce the supply-chain risk of BAU transactional outsourcing being interrupted. However, automated technologies in analysing multiple levels of supply-chain risk within strategic suppliers, will also help to highlight potential service disruption on future agreements, along with mechanisms to help mitigate these.
It is also worth noting that the global pandemic has had another unforeseen impact on the BPO market; that of client decision delays in deciding whether to outsource in the first instance. These have hit some strategic suppliers harder than others, especially those whose business models were reliant on a certain amount of new work entering the top of their sales funnels to survive.
Digital outsourcing will continue to increase
Strategic suppliers undertaking BPO transactions will inevitably increase their use of robotic processing automation (RPA). To date, successful implementation by the Government’s strategic suppliers has been ‘patchy’, to say the least, as our evidence is that they seem to be better at selling the concept of RPA than implementing it at the present time. We are though starting to see much better domain expertise being deployed, and from our research, along with both clients and suppliers we have been involved in recovery projects with, it seems many more specialist technology experts are developing their skills in both RPA development and implementation.
We believe that the next five to ten years will see a huge shift away from using low-cost labour to deal with the more transactional aspects of BPO to developments in RPA, supported by significant improvements in artificial intelligence (AI) to increase processing rates in transactional BPO agreements and relationships.
Health care and medical facilities
The global pandemic with Covid-19 and associated variants, along with other ‘super-viruses’ will continue to substantially increase the demand for remote and niche-specialised telehealth services. In this respect, sophisticated strategic suppliers that support advanced diagnostic systems will benefit from this upsurge.
The FinTech sector
Increasing corporate use (including within the public sector) of easy access banking services, through smartphones, desktops, tablets and smartwatches is evident. The FinTech sector is moving toward a more customer-focused approach, incorporating highly sophisticated cybersecurity measures to reinvent the way organisations manage finances.
In the foreseeable future, we see public and private sector organisations outsourcing to ensure that they have access to an inherently secure and minimum risk environment in which to operate. AI and blockchain are increasingly becoming the future key to optimising secure financial operations within private sector organisations, along with central and local government.
Over the next five years, many private sector client organisations (and their strategic suppliers) are planning to continue to use a number of Asia-Pacific and Eastern European destinations for dealing with the manual elements of their BPO transaction processing.
In particular, due to their low labour and operating costs, India and China are primary destinations as they are investing heavily in building talent pools in these areas. They are closely followed by Indonesia, Malaysia, Nepal and the Philippines. The Ukraine, Poland, Belarus, Czech Republic and others have been going in a different direction, increasingly investing in their technology infrastructures to improve their competitiveness against their larger rivals.
Their rapid growth in technology based processing and robust infrastructure development put them in a stronger position to ride out the Covid storm and increase their competitiveness in pricing. Central government organisations will need to be mindful that many strategic suppliers will want to see their options open to utilise these offshore destinations for greater innovation in BPO transactions services.
Strategic outsourcing partnering agreements
- Quality and innovation. Over the last 15-20 years, to help with cost-cutting, many public sector organisations looked to outsource their transactional BPO services. In recent discussions with these clients, they have indicated that although innovation was built into their agreements, few have taken advantage of it, as it was on the ‘too hard’ pile. Too hard to quantify the outcomes, too hard to measure the suppliers against them and, therefore, too hard to evidence value for money.Public sector clients now seem to be increasingly willing to take a more proactive approach to initiatives, as processes are now available to better quantify outcomes from innovations and techniques to objectively evidence return on investment and value for money can be implemented.Innovation to drive better value over and above BAU cost-cutting seems a trend that is likely to continue for the foreseeable future.
- Outcome-based agreements. In an attempt to better mobilise innovation in organisations, we are seeing an increasing trend in the development and use of value-outcome-based contracts between clients and their strategic suppliers.However, in our recovery and remediation work, we see that the lack of practical governance actually being implemented to drive collaborative behaviours, often due to the contract terms not being practically aligned to drive the right kind of behaviours between client and supplier, can lead to disappointing outcomes.If not realigned, this poorly delivered innovation governance will cost client companies not only in financial terms, but also in important business and customer relations. The most productive innovations we see in BPO are when the ‘re-shaping’ of these agreements follows independently facilitated workshops with clear outcomes and measurements in place.
- Data protection laws and cyber insurance. Cybercrime, data theft, and information misuse are all on the rise with the capabilities of cybercriminals significantly improving. This poses a constant threat to the sustainability of online business services.The UK government, along with other governments across the world, are focusing on building stringent laws and setting up stricter measures in their own capacities to curb cybercrime. The coming years are likely to see greater effectiveness and enforcement in the form of better compliance with the laws of client-residing countries. Strategic suppliers to government will have to significantly increase their investment in these areas to protect clients in their strategic BPO agreements.
To conclude – Outsourcing Future Trends
The future of BPO will see rapid changes which will require strategic suppliers in this area to evidence their agility and to evolve to not only keep up with technological advancements, but also the expectations of an ever more technologically savvy client-base.
However, at the core of the future of the BPO market is a concept that has not changed over the years, though one which has become increasingly important for both clients and their suppliers to master. That is the ability to define ‘what good looks like’. This foundational stage, of being able to visualise, quantify and articulate precisely what the future outcomes of their organisation is expecting to achieve, and to be able to determine when those outcomes they are aiming at have been achieved, has never been more important.
At BPG we have tried and tested systems in place to support our clients in defining what good looks like for their individual project to better future proof their outsourcing and technology efforts. To discuss your unique situation and aspirations for your organisation contact us on 0845 345 0130 or email firstname.lastname@example.org