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Where is business process outsourcing headed?

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The Rise of Philippine Outsourcing

Businesses all over the world are facing unprecedented challenges, from constantly intensifying competition to economic uncertainty, changing consumer preferences, market complexity and, of course, regulatory pressures. If the business owner or leadership team is to focus on growth and success, given this backdrop, they might be left with just two choices – either investing a huge amount to take care of all aspects of the business in-house or to focus on business growth in-house, while outsourcing peripheral (and at times, not so peripheral) processes.

Why Are Businesses Outsourcing Processes?

In fact, according to Deloitte’s 2016 Global Outsourcing Survey, “Cost, enabling core business functions, and solving capacity issues are the primary drivers to outsource.” The top reasons why businesses outsource, according to this survey are:

  • Cost Cutting
  • Enabling a focus on the core business
  • Solving capacity issues
  • Enhancing service quality
  • Fulfilling certain business needs
  • Enhancing access to intellectual capital
  • Improving management of business environments
  • Driving broader transformational change

Whatever the reasons might be to outsource business processes, Deloitte’s survey also discovered that the services being offered by outsourcing vendors have improved over time, with a distinct change observable even between 2014 and 2016. In fact, the organizations surveyed reported fewer concerns regarding their outsourcing services provider’s responsiveness, innovation, proactivity, service quality, and resource quality.

In addition, going forward, businesses across a variety of domains expect to increase their use of outsourcing services, with a visible increase already being observed in the Information Technology, Legal, Real Estate, Finance, Human Resources and Procurement sectors.

Of course, we might be preaching to the choir given that the benefits of outsourcing have been well established over the years. So, the next question would be where you should outsource to. Over the years, Asia has emerged as the preferred outsourcing destination for businesses across the western world. Here’s a look at why.

Outsourcing to Asia

According to the AT Kearney Global Services Location Index™, Asian nations dominate the index’s top 50 outsourcing destinations, accounting for six of the top 10 locations. While India and China have topped the index for the 10 straight years, the Philippines has emerged as an “industry powerhouse,” second only to India.

The AT Kearney report for 2014 said, “Philippine industry is one of the most sophisticated in the world and its qualified labour force is one of the deepest. With traditional strengths in call centres, the industry is expanding into higher value-added voice services, as well as into IT and BPO offerings.”

 

Here’s a look at the key advantages that outsourcing to Asia, and specifically South-East Asia, offers:

  1. Cost Efficiency

The overall cost of outsourcing to Asia is much lower, as compared to most other parts of the world, including Mexico, a nation that is part of the top 10 locations, according to the AT Kearney index. There are very few countries where you will find a workforce that is fluent in English and well educated, offering you the advantage of better communication as well as domain knowledge; all these cost lower than you would need to pay for in-house, onshore or even nearshore.

 

  1. Access to High Quality Resources

The easiest and most convenient way to build a large team with expertise is to outsource. When it comes to Asia, with a strong educational system, you are assured of the quality of the workforce as well.

With most of the workforce having a minimum of a graduate degree, and with many also having specific vocational and/or skills training, the quality of the resources at your disposal is much ahead of what you will be paying for them. In addition, it is the responsibility of the service provider to ensure that the team has the specific domain knowledge and training to be able to deliver consistent and high quality results.

 

  • Government Support in Infrastructure Development

The governments of Asian nations have been investing in developing sound infrastructure, including high quality telecommunications systems. Having been in the outsourcing market for a long time now, the governments have also realized the importance of this industry to their economy. This is why they are keen to support the industry not only through sound infrastructure, including technological support, but also through regulations, to make it easier for western countries to outsource to Asia. What this means for your business

ultimately is a lower risk of failure and better assurance of quality services.

 

  • Technological Advantage

Development of infrastructure and resources also means that Asia is where you are likely to find expertise in almost every aspect of technology. With a desire to get ahead, not only is the government supporting such expertise but the people are also arming themselves with specialized skill sets to be able to offer greater value. Nowhere else in the world will you find such a vast technologically proficient workforce as you would in Asia

 

  • Wide Experience

Given that this region has been providing outsourcing services for more than a couple of decades now, the outsourcing industry in Asia has been able to develop formal processes and methodologies for every business process being outsourced. This means that you get standardized services, adhering to international benchmarks of service delivery from a workforce that has already faced a wide variety of challenges and has formulated ways to overcome those obstacles. So, what you essentially get is a mature service that knows what it is doing, giving you less things to worry about.

 

  • Time Zone Benefits

When you have an entire team working for your business while you sleep, you can achieve so much more. In business, time is money, and when there is a time zone difference between you and your outsourcing partner, business operations can run almost round-the-clock, giving you a huge time advantage. Even when your offices are closed for the day, your service provider is working to complete activities for you. The bottom line is that what you get is faster and better services, given that lead times are decreased not only with the time differential but also with the domain knowledge that the outsourcing partner brings to the table. When your deliverables are available more rapidly and with higher quality, you offer higher value for your clientele.

 

  • Focus on Core Business Areas

When your resources and energy are freed up, you will be able to focus more on growing your business. The priorities of your in-house team can be set more effectively on research and development, building the brand and providing value added services to the consumer.

By reducing the time that management needs to spend on peripheral activities, you actually give your business a better chance at success. In addition, it saves you the trouble of investing and establishing infrastructure for specific processes, since the outsourcing partner will take care of the entire process, from infrastructure and technology required to the human resources and day-to-day operations.

 

  • Lower Risk

Risk is an inherent part of running any business, whether it is in terms of finances, regulations, markets, technologies that change rapidly or competition. However, the risk that you need to bear can be reduced and managed more efficiently with the domain expertise offered by outsourcing services providers, who are already well versed in minimising risk in their area of expertise. They bring you years of experience and insight into what risks might lie in store, giving you an edge in resolving issues in a way that you need not face the risk at all.

Philippines Rising

Within Asia, the Philippines has been rapidly growing into a preferred outsourcing location, with the Oxford Business Group stating that job creation in the nation’s BPO industry has grown from 101,000 employees in 2004 to 900,000 in 2013. Projects via the IT and BPO Association of the Philippines (IBPAP) led to 372,000 new jobs in the BPO sector between 2014 and 2016, providing jobs for a whopping 1.3 million Filipinos by 2016. In fact, the IBPAP estimates that the Philippines would have 3.3 million employees in the BPO sector by 2030.

Another research on the global outsourcing market, published in 2016, placed Manila in the second position among the largest outsourcing cities of the world. In addition, Deloitte predicted that the Philippine’s share of the global BPO market would rise to 20% going forward, accounting for revenues of $48 billion.

What Does the Future Hold in Store?

Before you go ahead and look for options for outsourcing to the Philippines or anywhere, it might be useful to look at what experts predict would be the most prominent trends in this sector.

  • Data Security

Businesses all over the world are increasingly moving to the digital sphere, not only with regard to their offerings but also for their internal operations. This is expected to lead to an increasing demand for better data security options from outsourcing services providers. This includes maintaining confidentiality as well as protecting information assets. BPO providers are already working on developing such security solutions, with a visible rise in content management solutions that include encryption algorithms to protect client data. The IT teams of these providers are also working on solutions that ensures data security to their own processes and operations.

  • Data Management

Although data management solutions have been outsourced by businesses for some time now, data processing and analytics is no longer sufficient. Now businesses are looking for solutions to integrate, consolidate, analyse and enrich data, and that too in real time as much as possible. Businesses often find that it is difficult to make sense of the large amounts of data they are presented with in-house. Then there is the confusion related to how to access relevant data and how to best make use of it to enrich the business offerings. BPO providers therefore are increasingly focusing on how to help companies leverage data to formulate strategy that gives them an edge.

 

  • Transitioning to the Cloud

With organisations realising the advantages of moving to the cloud, outsourcing services providers need to focus on how best to offer cloud services that are reliable, with minimal downtime and maximum security. And with businesses becoming more cloud savvy, BPO providers will be driven to leverage the cloud as a key platform for business transformation.

 

  • Intelligent Automation

Automation is the next step after Big Data. This is going to be crucial to driving down costs while increasing efficiency and productivity. Automation is not just in terms of robotics but in terms of data gathering, processing and analysis, as well as creating meaningful result reports from the data. This is what will give both the BPO service provider and its clients a leading edge over the competition.

 

  • Socially Responsible Services

Socially responsible outsourcing services models are expected to emerge. The focus here would not only be on providing high quality services at reasonable costs but also employing socioeconomically disadvantaged staff members, while also focusing on increasing diversity within the workforce. On the other hand, service contracts are expected to be customer and results driven, benefiting the clients.

What the future holds in store for the outsourcing industry is only likely to help organisations access better and more relevant services that are in sync with the changing customer preferences and business demands. By leveraging the knowledge, experience and skill offered by BPO providers, companies can look to gain an edge over the competition, focus more on their core business and drive growth and expansion. In addition, outsourcing can help decrease speed to market and to take a business global with their experience with diverse demographics, having worked with a wide variety of organisations from different parts of the world.

Can your business afford to miss out on the opportunities offered by outsourcing?

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By Ori Chen, Senior Adviser and Partner at Nusku Inc – Advertise on iFX Expo magazine, February 2017

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