Business Process Outsourcing: Key Trends and Developments in 2021

 

Business Process Outsourcing

Business process outsourcing (BPO) has seen significant growth over the past decade as companies look to optimize costs and focus internal resources on core competencies. BPO allows organizations to delegate non-core but essential business functions like human resources, finance and accounting, customer support, and supply chain management to third-party service providers. This allows businesses to scale operations more easily while controlling expenses. The BPO industry has transformed various back-office processes and helped companies improve efficiency.

A major driver of the BPO industry's success has been the ability of service providers to offer high-quality support at a significantly lower cost compared to in-house teams. By leveraging economies of scale across multiple clients, BPO firms are able to keep prices competitive while continually upgrading technologies and processes. This value proposition has convinced many organizations, especially those in competitive industries, to rely more on outsourced partners for non-revenue generating activities. According to various industry estimates, the global BPO market was worth over $230 billion in 2020 and is projected to grow at a 6-7% CAGR in the coming years.

Remote Work Becomes the Norm

The COVID-19 pandemic has disrupted work cultures around the world and accelerated the shift to remote working models. For the BPO industry, this transition was more seamless since processes were already setup to be delivered offsite. BPO providers had existing infrastructure to efficiently manage projects and teams operating from home. This allowed them to continue serving clients without disruptions during lockdowns when in-house teams faced multiple challenges. Going forward, more companies are expected to outsource non-core operations as remote and flexible work becomes standard. BPO firms are well-positioned to take advantage of this long-term trend by leveraging their expertise in managing distributed workforces.

Operations Become More Digitized

Technology has always played a pivotal role in driving efficiencies for BPO firms. However, the past year increased the need to digitally transform processes to enable remote collaboration. Leading service providers heavily invested in clouds, cybersecurity, robotic process automation (RPA), and AI-powered virtual assistants. This allowed employee and customer-facing operations to be reimagined utilising digital platforms. For instance, automation has been leveraged to roll out no-contact enrollment programs and virtual onboarding of new hires. Many back-office tasks like invoice processing, data entry, and form filing have been made touchless. Business Process Outsourcing

companies are now offering ‘Digital at the Core’ propositions that position technology at the heart of service delivery. As a result, processes have become more agile, insight-rich and scalable to changing demands.

Growing Adoption of Specialized BPO Models

Within the overall market, vertical-specific BPO segments like legal process outsourcing (LPO), engineering services outsourcing (ESO), and knowledge process outsourcing (KPO) are gaining prominence. LPO providers are augmenting law firms and corporate legal departments with litigation support, contract management and patent research services. Engineering capabilities available from ESO partners allow product companies to leverage virtual design, testing and validation teams overseas. KPO firms deliver high-value analytical research and publishing support to management consulting, market research and publishing verticals. As domains become more specialized, third-party experts delivering niche, industry-relevant BPO functions are giving clients a major competitive edge. Furthermore, focus on delivering expertise versus just labor arbitrage is a huge differentiator for specialized BPO companies.

Increased Focus on Risk Mitigation and Compliance

As outsourcing arrangements become more nuanced, proper due diligence and ongoing governance are critical for both clients as well as BPO partners. Areas like data security, regulatory adherence, subcontractor oversight, and business continuity have emerged as key concerns. Service providers are required to have stringent processes and certifications in place to address these challenges. Data localization and localized business operations have also become important for meeting country-specific compliances. BPO firms need to transparently demonstrate their ability and commitment to proactively identify and mitigate risks. This gives clients the assurance required to onboard new service delivery models developed in collaboration with their outsourcing partners.

Consolidation of Capabilities

Large horizontal BPO firms are enhancing their value propositions through targeted acquisitions that fill portfolio gaps. This allows them to offer complete integrated outsourcing or ‘one-stop BPO’ versus standalone functions. Significant M&A deals in 2020 included WNS acquiring Denali Sourcing Services to add strategic procurement BPO capabilities and EXL acquiring 4 industries-focused BPO platforms to bolster industry-specific solutions. Customers are presented with opportunities to outsource a wider array of activities to fewer, larger partners. Such full-service business process outsourcing providers are able to better optimize resources across clients while ensuring higher levels of coordination and governance. Consolidation also enables BPO majors to flexibly delivery services using multiple engagement models ranging from traditional outsourcing to as-a-service propositions.

 The BPO industry has significantly evolved in recent years to stay aligned with changing business priorities and technologies. Looking ahead, outsourcing will continue transforming at a rapid pace as service providers join forces to develop innovative, specialized solutions leveraging the latest digital and analytical tools. While risks do exist, industries that leverage optimized business process outsourcing strategies will gain major competitive advantages through improved outcomes and total operating costs. Companies embracing digitally enabled outsourcing relationships will remain best prepared to address future challenges.

 

Get more insights on This Topic- Business Process Outsourcing