2011 Predictions for the BPO Industry
My 2010 predictions for the BPO industry were largely consistent with the final outcomes we saw in 2010 for many of the regions I covered. There were, however, a couple of interesting variables in 2010 that were not identified in the predictions. These factors had a significant influence on the industry and helped shape the flow of work to various regions. The factors that had a material effect on the BPO industry in 2010 were as follows:
1. President Obama’s push to retain jobs in the USA and to provide incentives for companies to hire Americans
2. The devaluation of the US dollar and the effects on other currencies, especially low cost base regions undertaking BPO work
3. Wage pressures in some BPO locations further reducing the attractiveness of labour arbitrage
4. Uncertainty in political stability of some BPO locations leading to slower than expected investments in some regions.
These factors affecting the industry in 2010 will continue to shape the industry in 2011. Economic instability in Europe, especially in the UK, will force many companies to rethink their customer management strategies. I would expect to see further outsourcing to lower cost base centres such as South Africa for predominately English speaking services and it will be anyone’s guess as to who picks up the multilingual services now that Egypt has become unstable. Bulgaria, Romania or Turkey could be worthy recipients of European language based services.
2011 could be a year where we see a shift in traditional outsourcing regions as the heavyweights in the industry begin to shift some of their business to emerging regions in the hope they can offset the challenges they face in some of the more overpopulated BPO regions. The choice of location will be interesting as well. As technology now easily permits the seamless management of multiple smaller centres the option of moving away from the mega centres to smaller centres could see a change in the way the large outsourcers undertake their business. There are advantages and disadvantages to operating smaller interconnected centres as opposed to mega centres. Some of the considerations in 2011 that will drive the decision making of the larger operators will be:
1. Size of exposure to one particular economy
2. Labour pressures in one particular region
3. Currency exposure
4. Inflationary pressures
5. Political stability
6. Redundancy and follow-the-sun solutions
The cost of data links has come right down and the maturity of VOIP and virtualisation has increased making the equation right for new and innovative approaches to operational delivery of services.
2011 is likely to also see further consolidation as larger players try and acquire smaller operators and also buy their way into new markets. Companies like Aegis will continue to penetrate the marketplace by their sheer mass and the forward momentum of their aggressive M&A strategy. In general we would expect renewed M&A activity in the industry as cash becomes more easily accessible to companies.
Growth in the industry is likely to come from immature markets such as Africa and the Middle East. I would expect to see some large outsourcing deals coming from this region. The current unstable political and economic climate in Egypt is likely to create opportunities for surrounding countries in the region. Cultural differences and access to experienced management will remain the largest obstacles for foreign companies to enter and succeed in these marketplaces. We are seeing some real growth opportunities in countries such as Saudi Arabia but the challenges to enter and conduct effective operations will be very high and likely to prove too difficult for most of the larger players.
The two largest BPO countries, India and the Philippines, will continue to compete with each other in 2011 for the title of leading BPO destination. We learnt in 2010 that the Indian BPO and contact centre industry was responsible for adding five million jobs and $15 billion in revenue.
2010 was also the year that the Philippines overtook India as the contact centre outsourcing capital of the world, according to industry data and the Philippine government. A report from IBM released in October 2010 said the Philippines had this year passed India as the global leader in business process outsourcing in terms of the number of people each country employed in the sector. “For business support functions… the Philippines has taken over the lead in the global ranking from India, after having challenged the top position for several years,” the report said.
The Philippine’s’ outsourcing sector could more than double its revenues and workforce by 2016, according to an industry roadmap released by the Business Processing Association of the Philippines (BPAP) in 2010.
The roadmap, dubbed “IT-BPO Road Map 2011-2016: Driving Global Leadership”, projects the business process outsourcing (BPO) sector growing its revenues to $25 billion and workforce to 1.3 million by 2016, from $9 billion and 500,000, respectively, today.
However, to achieve these, the BPO industry in the Philippines must accelerate talent development initiatives and obtain stronger government support.
A key driver in 2011 will be the importance of enhancing the customer experience. I would expect that given all things being equal the desire to improve the customer experience will remain the most important component in the decision making process in 2011.
The International Quality and Productivity Centre study in India found that 72.2% of respondents said that enhancing their customer experience is one of their top priorities. This is a significant figure highlighting a market trend that is no longer driven by costs alone. This figure is also very encouraging as it demonstrates matured thinking in outsourcing and the various components that need to be considered. Customer experience is at the forefront of people’s thinking meaning we are likely to see more thoughtful decisions that will ultimately produce greater results for companies in 2011.
7 Mega Trends in the Contact Centre Industry
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2010 Predictions for APAC BPO Industry
I often get asked for my predictions for the year ahead for the BPO sector and usually it has been a relatively straight forward exercise. The crystal ball is a little murky when for the BPO future for 2010. Most of us will agree 2009 was a survival year. Companies outsourcing in 2009 responded to the GFC in various ways. Some downsized, others took services in-house and a few did nothing. As we emerge out of the muck of 2009 many executives can again recommence executing plans for growth and profitability. The general word on the street is that many have taken the last quarter in 2009 to plan for ‘business as usual’ activities in 2010. There are many profit and loss statements with weak numbers that are in desperate need of some beefing-up.
My predictions for 2010 are based on current market based sentiment around the confidence in the global economy and BPO industry trends in the region. Firstly, if we look at the current state of the economy we could reasonably argue that we are due for a strong re-bound in 2010. This prediction is based on historical similarities with other downturns at the time when market confidence swings from negative to positive (1999, 2003). The question is whether the upturn will be a U, V or J curve. BPO providers in the region have been/will be affected by the consolidation in the industry. In 2009 we saw UCMS acquired by Aegis, Xerox acquired ACS, Sykes acquired ICT, Dell acquired Perot Systems, and high debt and poor timing bankrupted Blueprint Management Group. Huddling together during a crisis is a normal market response. The consolidation amongst the big players will force smaller BPOs to re-position their offerings or face slow but certain extinction. Whenever the playing field changes so do the rules that bind the game. 2010 will present great opportunities for smaller players that can take the courageous path of re-inventing themselves to take advantage of the opportunities presented in 2010.
In previous years the APAC region has reaped the rewards of its ability to service primarily the US, UK and Australian marketplaces because of its low cost advantage and access to large English speaking resources. The companies that made the decisions to outsource to the region have more than a 10 year history to determine what worked and what could be done better. The region has matured significantly but it is not without its problems: rising costs, operational inefficiencies and competing markets. Markets such as Egypt are emerging as real threats to the region. The region has a lead but is in danger of losing its sustainable competitive advantage if it does not address some of the issues it faces and reinvent itself to ensure it is as attractive as when it identified its first strong sustainable value proposition. I am still surprised by the number of solicitations I receive from providers claiming that they can help reduce my costs and therefore I should send them work to India or the Philippines. The lower cost value proposition has simply been done to death. The region needs to become more entrepreneurial and creative in its offerings. It also has to import leadership from the markets its services to overcome the knowledge and experience gap.
So where will the opportunities in 2010 be for the region? The opportunities lie in becoming more specialised in what is offered to the marketplace. In 2010 providers should, as a minimum, have the following:
- A clearly defined area of specialisation
- SIP based telephony
- Self-service technologies
- Back-office platforms
- Creative operational models incorporating home agents
- A robust sales engine capable of attracting clients
- A well-structured service delivery model
Reports from CallCentres.net, Everest Group, XMG Global and Research and Markets all indicate that 2010 will offer varying levels of growth for the various sectors in the BPO industry. My summary predictions for the region are as follows:
- India: further consolidation and reduction in the number of BPO providers. Strong demand for non-voice outsourcing and steady to declining demand for voice. Largest market US.
- Philippines: strong demand for voice (non-sales) and also back-office outsourcing. Largest market US but Australia and the UK increasing in 2010. Watch out for exchange rate head winds.
- China: growing interest in the BPO sector. Companies seeking partners to enter China.
- Japan: reduced demand for voice BPO and greater demand for self-service technologies.
- South Korea: increasing demand for voice and non-voice BPO from local providers.
- Pacific Islands: minimal growth in voice and non-voice BPO
- Australia: strong demand for specialist voice providers and self-service, especially with sales expertise. Strong demand for offshore back-office and low value voice BPO.
Whatever sector of BPO you may be in there is a strong prediction that if you work hard, remain persistent and surround yourself with good people you will succeed in 2010. Many people in the industry deserve a much better year in 2010 than they had in 2009. Wishing all practitioners a prosperous 2010.