Outsourcing: Key to the Next Generation of Business Success.
It is not common for $260 billion industries to go largely unnoticed.
This is not the case regarding business process outsourcing (BPO). This is partly due to their “below the line” operations. This $260 billion industry may be the key to business resilience, continuity, and future success.
This is what cloud kitchens did to the hospitality industry: they eliminated inefficiencies, increased margins, and reduced operational complexity. BPOs can also do this for information-based businesses.
Definition of a BPO
Electronic Data Systems’ Morton H. Meyerson, a man destined to become a CEO and a man with such a name, proposed outsourcing in 1967. The practice was only formalized in 1989. BPOs are a new type of outsourcing that has emerged from the Information Age.
In the past, outsourcing meant that non-core business processes were outsourced as needed. Business process outsourcing means that entire business functions are outsourced continuously. Today’s BPO infrastructure allows almost every business function to be outsourced. This includes customer service, data analysis, marketing, software development, and IT management.
The market for BPO has grown to its current size due to the availability of skilled workers and increasing demand. It is expected to double to nearly $492 million by 2028.
Decentralization Done Right
The buzzword “Decentralization” has lost a lot of its luster due to the rise in popularity of cryptocurrency maximalists. However, BPOs have a lot of legitimacy.
BPOs allow for more practical, real-world decentralization rather than relying upon the often overhyped and poorly delivered decentralization promised in the blockchain. BPOs enable companies to decentralize core operations across geographical boundaries, reaping operational and economic benefits and skill-based advantages.
BPOs and the Future of Business
Silicon Valley has long advocated the lean startup model. Eric Ries invented the skinny startup model. It is a method of building new businesses that focuses on the idea that entrepreneurs should experiment, test, iterate, and re-examine their products.
Companies need to be creative to survive economically difficult times. Layoffs are more likely, and hiring slows down or even stops altogether. All companies must adopt a lean approach, not just startups.
BPOs are the answer.
In the past, outsourcing was driven by cost-cutting. With the advent of BPOs, there’s been a shift. It’s now more due to the desire to create a smaller, more resilient, and more efficient company. With just a few centralized, high-ranking staff members, making a strong company is possible.
BPOs: The benefits
Specialized Skills in High Demand
Let’s say you want to create an internal dev team. You could choose to hire a chief technology officer (CTO) and then recruit one at a time to attract top talent from your competitors. Option B is to engage a software development BPO to provide a ready-made team of developers with the necessary coding skills. This skill-on-demand luxury can be extended to all areas of your business.
Minimized Overhead And Staffing Needs
Office space and staffing costs can add up quickly in uncertain economic times and inflation. BPOs allow companies to fulfill operational requirements without having to hire staff or have physical offices. This will enable them to reduce fixed costs and provide greater control over their expenses.
Business Continuity and Resilience
Organizational bloat can lead to financial problems in difficult economic times. This is an example: In 2022 and 2023 alone, the tech industry has laid off more than 246,000 people. BPOs support core operations and help companies remain resilient in tough economic times.
Relying on BPOs: The Challenges
Put All Your Eggs in One BPO Basket
BPOs are a great way to support your business operations, but it is important that your company’s success and your existence do not depend on one provider. You should ensure that you have backup plans and that your BPOs can provide operational support and diversify your BPOs.
Management and Measuring BPO Performance
BPOs have an inbuilt management structure. However, you can still ignore oversight. BPO managers and employees can benefit from workforce analytics and employee monitoring tools. This productivity monitoring software can help BPO teams track time, evaluate BPO agent productivity, and measure efficiency.
Job Opportunities Offshore
Many BPOs have offices in other countries and send jobs overseas. BPOs do not necessarily need to be located overseas. Many U.S. companies rely on the support of U.S.-based BPOs. The U.S. BPO market is flourishing and worth over $68 billion. This is approximately 27% of the global BPO industry. When this article was written, the U.S. BPO market was a job-creating sector, employing over 657,000 people.
Why I am bullish on BPOs
I see a future where companies are built around a core executive team and the core functions are outsourced. This decentralized business model has the potential to be more stable, resilient, and financially viable.
There are trade-offs; this is only the right model for some businesses. This BPO-built business structure is the best way to launch and grow your business.