Business process outsourcing (or BPO) will, without doubt, be one of the major themes talked about in business during 2004. BPO is driven by fundamental changes in the international business environment in the last decade; most European companies, albeit in many cases reluctantly, now realise that they must embrace it if they are to move forward.
Take IT companies. According to research analysts Ovum Holway, the general IT market--including consultancy, supply, implementation and development--declined 6.6 per cent in 2003 with further decline predicted for 2004 before a market pick-up in 2005. By contrast, double-digit IT BPO/outsourcing growth is forecast through to 2007. If you're in the IT sector, it's sensible to have at least one foot in BPO.
BPO works because outsourcing 'basic' and 'repetitive' business functions to companies that either have specialist expertise or that enjoy economies of scale, if not both, makes perfect economic sense--especially at a time when international companies are chasing the bottom line like never before.
With the basic premise of BPO both accepted and established, the question companies must now ask is, "What functions can I successfully outsource?"
Service outsourcing
There is no sector where this question is more relevant today than the customer service sector. The outsourcing of English-speaking customer service and telesales tasks to comparatively low wage countries such as India, the Philippines and South Africa, is in full swing. In August 2003, the Financial Times reported that as many as 3.3 million jobs in the US and a further two million in western Europe will be lost to off-shore locations--with the call centre sector being one of those most heavily affected. Mitial Research forecasts the loss of 90,000 jobs from British call centres by 2005, while British trade union Amicus warns that up to 200,000 British jobs in the financial sector could be lost offshore over the coming years.
These figures go some way toward pointing to the true BPO opportunity. Because it's not just customer-facing jobs that are being outsourced--it's a wide range of back office and middle office jobs as well.
Commentators in India have foreseen this future. In December 2003, a reporter for the India Times wrote that "Indians answering customer calls for companies outsourcing their customer-support account for barely 13 per cent of our BPO business ... even in 2008, when pundits say we'll be the world's BPO capital beyond a doubt, only Rs 3,300 crore [[euro]620.7 m] out of the total takings of Rs 20,000 crore [[euro]3.8 bn] from outsourcing will come in via call centres, according to Frost & Sullivan".
The reporter's point is that call centres, per se, will not be the centrepiece of India's positioning as the world's back-office: "An entire range of activities that require reasonably well-educated, preferably English-speaking young women and men will keep moving to India, including medical transcription, technical writing, text rewriting and editing, processing of tax returns, payroll management, insurance claims processing, accounting and bookkeeping and so on."
Companies such as Google, Yahoo!, AOL, IBM, Microsoft, AT & T Wireless, Accenture and Adobe have already gone this route according to the piece, using Indian resources for software development and other higher value information technology work.
It's a point that analysts Ovum Holway concur with. The analyst group defines four categories of mid and back office BPO: customer management including call centres and other front office work; payroll with associated benefits, training, recruitment and HR functions; accounting, encompassing credit control, ledger, procurement and all finance work; and finally mid-office, industry-specific work, such as loan application processing.
What is a hosted customer service solution?
'Hosted' contact centres are at the forefront of this technology revolution. Hosted network-based technology services bring together all the voice and data functions needed to operate a customer contact centre in an integrated, scaleable solution--and delivered by a single vendor. In essence, it is a completely managed contact centre technology service that means there's no need for clients to invest in equipment, software licenses or IT resources.
A hosted solution typically enables clients to interact with customers via e-mail, web collaboration, web callback, intelligent chat, fax, interactive voice response, voice mail and telephone, while managing these media in a completely integrated fashion--and a growing number of companies are starting to offer hosted contact centre solutions. They include: Annexio, Applicast, Ascent Technologies, ICT GROUP, inServ e-customer solutions, MCI and Streamdoor. A typical range of hosted contact centre services includes: Automatic Call Distribution, eWorkforce Management, Interactive Voice Response, Computer Telephony Integration, Outbound Dialling, Reporting and Call Recordings. A number of these hosted offerings are based on Aspect's contact centre technology solutions with the Aspect Contact Server at their core. Whether the client of the hosted service provider decides to recruit and run their own contact centre or to use the manpower services of an outsourced partner is incidental. With the technology required for smooth operations hosted in the network, all a manager needs to do is access an internet browser to define, in real time, the business rules that determine how contacts are handled and resources scheduled, how performance is monitored and so on. Once these rules are set, contacts can be directed anywhere.