Business process outsourcing is booming
No matter what business you’re in, chances are good that you either already do some business process outsourcing (BPO), or you are considering it. KPMG reports, “60% of clients are either considering or planning to assess their outsourcing strategies in the next 12 months.”
Market statistics tell a similar story. According to researchers at law firm Morgan Lewis, the BPO sector is likely to see significant continued growth over the next ten years. They forecast that the market will show an expected growth from the 2022 market of $245.9 billion to $544.8 billion in 2032, an 8.5% compound annual growth rate (CAGR).
So why is BPO growing so quickly now? After all, BPO is nothing new. Companies have long looked to save money by hiring contractors to handle some tasks. But today’s BPO is significantly different than in the past.
Today’s BPO might not involve many workers. Increasingly, companies are outsourcing tasks to cloud services that can automate routine workflows, eliminating the need to hire people for work viewed as drudgery. In fact, Morgan Lewis says cloud has become the number one operating model, and it will account for 69% of the BPO market by 2032.
In addition, today’s BPO is often part of a larger strategic effort, like a digital transformation initiative. Chris Damon, a managing director at KPMG, explains that modern BPO is “big-time transformation driven by functional and industry-specific solutions and not just cheap labor.”
Why is the current approach to BPO so different than in decades past? The answer has a lot to do with the reasons companies outsource.
Why outsource?
Outsourcing has always been driven by a desire to cut costs, and that motivation remains strong. Many industry analysts say financial considerations remain the number one reason for BPO engagements.
However, the drive for cost-savings tends to be more nuanced today than in the past. Rather than simply seeking out less expensive workers, companies are often looking for ways to make the entire organization more efficient. In many cases, they are looking for highly skilled, experienced workers who can augment the capabilities of their current staff. Outsourcing in these situations can be faster than training workers, or hiring new full-time employees.
And speed is essential for organizations responding to market conditions. KPMG says, “More and more businesses have turned to outsourcing as a crucial value lever in responding to increasing levels of market disruption, from remote working to talent retention, hyperinflation and business continuity. Companies are leveraging outsourcing relationships as fuel to accelerate the business response to change, as well as boost efficiency and control costs.”
The business environment has been changing rapidly the past few years. The pandemic helped organizations realize that remote work can be a very effective business model. In fact, organizations that want to stay ahead of the competition are embracing remote work as an integral part of their strategy. And in a sense, outsourcing is just another form of remote work.
The events of the past few years have also highlighted the fact that disasters are both inevitable and unpredictable. The companies that have best weathered the shocks of recent years are those that were the most flexible. Outsourcing can be a way to increase both flexibility and resilience.
In some parts of the world, governments have also lowered previous barriers to outsourcing. Some organizations are taking advantage of this more favorable regulatory environment, using BPO as a way to lower their tax burden.
BPO also enables companies to focus more intently on their core competencies. They can hire experts to handle necessary secondary business functions, while they focus on innovation and execution of their strategy.
How to find the right BPO partner
While BPO has many benefits, realizing those benefits is not a given.
Deloitte says, “Business Process Outsourcing (BPO) is like getting married – two parties decide to start a shared future together.” And much like in marriage, your choice of partner has a big effect on how successful that partnership ultimately is.
Another similarity to marriage is that there is no one best partner for everyone. The best choice for you will depend on your unique circumstances. If your organization is considering BPO, the following steps can help you identify the best partner for you and get the relationship off to a strong start:
1. Clarify your goals
Before you begin the process of selecting a BPO partner, think about why you are considering outsourcing. Are you only looking to reduce cost, or is this effort part of a larger strategic effort like digital transformation? Are you looking for highly skilled workers who can handle complex tasks, or do you need to offload some menial work so that your employees can use their time more profitably? How important is speed and flexibility? Is the geographic location of the BPO provider important for your disaster recovery or business continuity efforts?
Business.com advises, “It’s important for you to understand that outsourcing isn’t a plug-and-play proposition, but a way to accomplish a specific goal.”
It might seem like the goals of your effort are obvious, however, everyone on the team will see it differently. You will save time in the long run if you make sure that your entire team is aligned on the reasons for outsourcing before you start crafting the scope of work (SOW) or request for proposal (RFP).
Download this whitepaper to continue learning about the benefits of outsourcing your business processes.
