Nenad Lazarević is CMO/Head of Growth of Insightful.
It’s not often that $260 billion industries go largely unnoticed.
But when it comes to business process outsourcing (BPO), this is very much the case. This is partly due to the “below the line” nature of their operations. But as I will argue, this $260 billion sleeper industry may just hold the key to future business success, resilience and continuity.
I believe that similar to what cloud kitchens have done for the hospitality industry—eliminated inefficiencies, increased margins, and reduced operational complexity—BPOs can do for information-based businesses.
Morton H. Meyerson of Electronic Data Systems (the man destined to be a CEO with that name) proposed outsourcing as a business model in 1967. However, the practice did not become a formal business strategy until 1989. The rise of the information age ushered in a new evolution of outsourcing: BPO.
While outsourcing in the past meant handing over secondary processes on an ad hoc basis, business process outsourcing involves the permanent outsourcing of entire business functions. With today’s vast BPO infrastructure, almost every business function can be outsourced: customer service, data analysis, marketing, software development, IT management, and more.
This wide availability of employable skills and ever-increasing demand has fueled the BPO market to its current size, which is expected to nearly double to $492 billion by 2028.
Decentralization done right
Decentralization is a buzzword that, thanks largely to cryptocurrency maximalists, has lost much of its luster. But when it comes to BPOs, the term has legitimacy.
Instead of relying on the sometimes overhyped and underdelivered decentralization that blockchain promises, BPOs enable more utilitarian real-world decentralization. They enable companies to decentralize their core operations across geographies, realizing operational, economic and skills-based advantages.
BPO and the future of business
In Silicon Valley, the lean startup model has been advocated for a long time. Conceived by Eric Ries, the lean startup model is defined as “an approach to building new businesses based on the belief that entrepreneurs must explore, experiment, test and iterate as they develop products.”
As we move through economically uncertain times where layoffs are more likely and hiring slows or, in many cases, stops altogether, companies must find innovative ways to continue growing. It is up to all companies to adopt a lean approach – not just startups.
And that’s where BPOs come into play.
Historically, cost reduction has been the driving force behind outsourcing. But with the rise of BPO, there has been a shift; this is now increasingly due to the desire to build a leaner, more resilient and efficient company. It is now possible to build a robust company with only a handful of centralized executive-level staff, supported by BPOs of all kinds.
Advantages of using BPO
Specialist skills on demand
Let’s say you need to build an internal development team. Option A is to pick a Chief Technology Officer (CTO) and hire one at a time, hoping to separate the top talent from the competition. Then there’s option B: hire a software development BPO to deliver a ready-made developer team with the coding skills and scale you need. This luxury of on-demand skills extends to all corners of your business.
Minimized overhead costs and staffing requirements
Office space and staff costs add up—especially during uncertain economic conditions and inflation. BPOs enable companies to meet operational needs without headcount and physical office space, in the process reducing fixed costs and providing greater cost control.
Business continuity and resilience
When economic conditions are tough, the organizational bloat of good times can become a hindrance. Example: the technology industry alone laid off more than 246,000 people in 2022 and early 2023. BPOs help ensure business continuity and resilience in tough economic times by providing support for core operations, without the risk of layoffs and downsizing.
Challenges of relying on BPO
Put all your eggs in one BPO basket
While BPOs can provide critical operational support, it is vital that the success and very existence of your business does not depend on a single service provider. Be sure to diversify the BPOs you work with and have backup plans in case the BPOs underperform or go out of business.
Managing and measuring BPO performance
BPOs come with an inherent management structure, but that doesn’t mean you can wash your hands of oversight. A workforce analytics and employee tracking tool can play an important role in managing and measuring BPO teams. This type of productivity tracking software can help BPO teams track time on tasks, assess BPO agent productivity, measure efficiency, and more.
Jobs are going abroad
Many BPOs are based in other countries and outsource work. However, business entities do not necessarily have to be based abroad. Many US companies look to US-based BPOs for additional support. As a result, the BPO market in the US is thriving and is valued at more than $68 billion, approximately 27% of the global BPO market. It’s also a job-creating industry, with more than 657,000 people employed in the BPO industry in the US at the time of writing.
Why I favor BPOs
In the future, I envision a world where companies are built around a skeleton executive team with key functions outsourced. This decentralized approach to business has the potential to be more robust, recession-proof, efficient and economically sustainable.
Yes, there are some trade-offs and it’s not a model for every business. But for many aspiring founders, entrepreneurs and leaders, this business structure built on BPO holds the key to a fast and efficient startup and growth.
What do you think? Can you imagine building your company almost entirely on BPO?
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