Go BackDoes talk of 'convergence' mask business process outsourcing growth where customer is still king?
By Alan Stewart, head of marketing, Telecom Service Centres (TSC)
The trend to entertain business process outsourcing (BPO) at strategic level lies counter to the history of most outsourcing being quickly cast to tactical and operational levels. BPO is strategic where it involves business re-engineering, but tactical where it involves operational process and traditionally, customer care. Or so it has been.
Globally, companies are currently more alert than ever before - and most importantly open to the opportunities offered by BPO. Their reasons are many, conflicting, contrasting yet conclusively similar.
The rapid surge in interest and growth in BPO markets throughout 2007 belies a recent history cast in doubt. The last quarter of 2006 saw a decline in outsource value for the first time. Contracts were diluted and contract value decreased as fewer multi-process contracts were awarded. Eyebrows were raised at the downturn in what had hitherto been a market with singularly positive signs.
With a global market value currently estimated at between $600 - $700 billion, growth is forecast to continue until at least 2010. Within Europe, the UK continues to lead the market where financial and public sectors are key buying sectors. The explanations for outsource growth are clear yet complex.
Traditional drivers include:
1. Cost saving - where almost irrespective of the effect on other processes within the business work was outsourced to cut costs. The effects of this were both positive where strong new supplier relationships were formed on a global basis - and negative where the business process failed to meet the operational and customer demands. Purely financially driven decisions have been the main cause of outsource problems.
2. Specialist knowledge - the undeniable capabilities offered in the Indian sub-continent offered an educated workforce with at significantly lower cost in key consultancy disciplines. The scale and quality of resource availability has proven attractive and continues to do so.
3. Concentration on core business - where a business has the vision and confidence to identify its key strengths and core business, outsourcing the right parts of the business are key.
4. Improved customer service - outsourcing the problem has been part of the problem. Outsourcing to improve customer service has not always meant business process outsourcing and has often been designate at operational task rather than strategic business driver.
Where once finance-dominated decisions drove the strategy for outsourcing, the reasons are now more business-wide and customer led.
The BPO market is not one but many markets. Traditionally rooted in IT and software, specialist outsourcers now offer human resource, administration, finance and accounting, purchasing, logistics, training, production, R&D, and customer care. BPO extends to transaction-intensive processes such as payroll, mail room, document storage and card processing.
And the picture is changing so quickly that buyers are confused. Talk of convergence fuelling growth is all the rage - but exactly what is converging, where and why?
Vendor sectors are converging: Whilst academically engaging to BPO consultants, the average executive is faced with a myriad of suppliers covering increasingly confused segments with seemingly endless propositions and product offerings. Where once BPO meant simply IT and techies, it now means 'we do just about everything, or know a man who can'.
The major consultancies are realigning: Some major consultancies are changing their positioning from a service delivery model to a procurement management model. Their engagement of portfolio suppliers increases the competition amongst specialists and fuels the need for larger companies with greater economies of scale to deliver to consultancies on a global scale.
Globalisation : through internet trading links and opening borders, there is an unstoppable move to wards global trading at all levels of business. This requires specialist assistance offered only by multi-disciplinary BPO suppliers.
Blurring of technological boundaries : Telephony product companies are diversifying into software applications. Software companies are diversifying into speech recognition. Traditional IT application developers are expanding into communication software. Web applications have developed sophisticated self management opportunities. The scene in technology is analogous to the change in mobile phones. Are they now phones, email units, digital cameras or multi-media communication devices? Telephony, software and digital communications now significantly overlap.
This focus on 'convergence' as the cause of BPO growth is where most commentators are misinterpreting the drivers of growth. Whilst the opportunity for diversification is great and the gap between sectors has never been smaller, BPO is primarily driven by the need to service customers.
Customers are driving the need for rapid product development and speed to market. It is the customer who is demanding a faster, higher quality, more flexible service from business. It is customers who demands support and communication beyond just contact or calls.
And it is the call centre industry that faces the front line challenge of satiating this demand. It is the maturation of call centre companies who are leading the drive for technology integration, flexibility and innovation. Companies are now faced with the realisation that investment cost precludes in-house solutions, or at very least brings the scale of investment to the boardroom table. Outsourcing communications now no longer means just calls, but all forms of paper, voice, image, video, email and messaging.
The last decade has seen a call centre transformation from fledgling businesses to a professional industry with major investment in specialist technology, recruitment, resource management, planning and forecasting expertise. The need to service the 24/7 culture whilst minimising cost for clients has fuelled innovation in computer/ telephony integration, IP technology, web applications, Multi-media communications, speech recognition and self service applications.
People forget that the call centre industry is little more than 10- 12 years old. The change in capability delivered through specialist knowledge and professionals together with the increasingly technical solutions deployed now put call centres deeply into strategic BPO decision making.
The call centre industry is being embraced under the BPO banner more conclusively than ever. Originally shunned as being outside the high-brow business process consideration and seen as the necessary and costly means to answer necessary questions from customers; call centres are now at the forefront of the battle for consumer loyalty.
The UK call centre market is shifting into the BPO arena and consolidating at pace. Now and for the next two years the call centre market will continue to consolidate. International, and especially Indian, BPO groups are investing in and acquiring European and UK call centres. The UK, as the largest call centre market in Europe is a prime target.
This will bring investment on a huge scale, creating larger, more diverse call centre companies with complete portfolio of BPO services from strategic process analysis capability through to direct delivery of customer communications. The speed of consolidation and change is accelerating. Smaller UK suppliers are merging or being acquired to enable investment on the scale required for international business.
The speed of change in the call centre sector has never slowed. The next phase of development is arguably the most exciting, significant and far-reaching to date.
We will see the development of a new breed of global communication centres with international competition at the upper end of the market (and that's where we aim to be).
Call centres or contact centres are unfortunate misnomers. They are already sophisticated communication centres: staffed by well-trained people; capable of responding to customer demands by voice; equipped with multi-media channels to communicate in the customer's preferred medium, at the time of customer choosing and need.
At TSC, we have always taken a more strategic view of communications by seeking to manage the customer lifecycle rather than simply one-off contact. Engaging with clients to help manage every phase in their customers' experience with their company provides a more cohesive communication approach.
For many corporate companies, the investment required in telephony, technology, resource and efficiency management is already unachievable in-house. The front-line communication specialism is too significant. For many servicing customer communication is increasingly beyond consideration for internal investment.
Growth in BPO is not caused by convergence. Convergence itself is a symptom of technological, market and organisational change in a maturing and increasingly global market. The root cause of BPO growth is the demands made on organisations by increasingly insatiable customers. The customer is calling the shots more than ever and the communication centres are now recognised as an essential part of strategic considerations in delivering customer service, loyalty and ultimately value.
