New generation of BPO

In the past, business services were moved offshore to service centres or outsourced to offshore providers. This resulted in cost savings and some efficiency. However, due to wage inflation in many of these offshore markets, dissatisfaction with the quality of the output and, more importantly, the criticality of these services to businesses that are trying to differentiate themselves in a market, customers are now taking a different approach to achieve better quality services with fewer people.

Automation and analytics

 One of the main ways this is being achieved is through the automation and re-engineering of business processes. The result is that services are being brought onshore with fewer people working in smarter ways. The focus is on output and quality. In the last decade cheaper and more adaptive technology has made this possible. New systems do not need to be created from the ground up; off-the-shelf programmable packages are radically altering BPO delivery.

BPO providers are using partnerships and acquisitions to make critical moves into the technology market. The technology allows more sophisticated interaction with end-users using less people. With fewer people there can more flexibility around location. This has led to “backsourcing” and aligning location with business priorities.

More and more businesses understand the value of data that sits within their business processes. Many of the old BPO systems and processes did not support sophisticated data analytics. In many cases they actually acted as an inhibitor of this analysis or worse made the process risky from a security perspective. Again this has required BPO providers to adopt new technology to assist their customers with their data strategies.

Data security

As a result of the technology changes a key challenge of this for the BPO market is how “new technology meets data”. Because efficiency is king, many of the BPO technology solutions emerging are standardised cloud-based offerings that support multiple clients, rather than bespoke variants.

While undoubtedly pushing the boundaries of efficiency, vendors need to be equally mindful of the increasing scrutiny being applied by their customers and potential customers to security, in particular the security of personal data. The anti-trust style fines for data breach under new laws proposed by Europe are grabbing the headlines and, more importantly, the attention of the boardroom in a way never seen before.

Challenges for the BPO vendor are to assure customers their “one-to-many” solutions enable compliant outsourcing on a global scale, and also to assess what level of risk and liability they are able and willing to take should data breaches occur.

Business outcomes

In parallel with the technology revolution, there is also a growing desire from the customer community to source solutions focused on business outcome. While this means different things to different people, those vendors who can show this level of business orientation will be best placed.

However, this inevitably means taking on a greater level of risk, usually pricing risk – the vendor might be paid on the happening of the outcome rather than on a more traditional service metrics model. This is challenging providers to have a better and deeper understanding of their customer’s business so they are able to take an informed risk rather than simply “flying blind”.

But the upside is a closer relationship, alignment of interests and better BPO services.

Matthew Bennett and Dominic Dryden are partners at Olswang LLP, and experts in the field of sourcing and technology.