Those of us who have been around long enough remember American television commentator Lou Dobbs and his infamous list from 2009 that named and shamed companies who were “exporting America.” Dobbs accused these companies of outsourcing jobs, primarily in technology or technology-enabled services, out of the US to benefit from wage differentials in other countries. While the Lou Dobbs list did precious little to stop the rapid growth of business process outsourcing (BPO), the industry itself has spent the last decade in the throes of radical change and continuous reinvention.
Here is how we see the evolution of the BPO business model:
- Phase 1: Classical BPO (1990s to mid-2000s). The growth of globally connected telecommunications networks gave rise to the classical BPO business model. This model leveraged wage differentials between geographies and the availability of skilled language talent in locations such as India, the Philippines, and South America to “rightshore” work. Out of this era came the strong focus on smooth offshore transitions and industrialized process excellence.
- Phase 2: Omnichannel BPO (late 2000s to late 2010s). Consumer preference in the decade after 2010 was marked by the proliferation of digital, mobile, and social channels (SoLoMoCo, anyone?) and the diminishing glamor of voice-based customer engagement. While the trend toward outsourcing only increased, client companies wanted more from BPO partners than vanilla voice engagement. BPO vendors began the long and arduous transition to “digital BPOs,” using technology to gather, store, analyze, and use context and to create engaging experiences as customers jump from channel to channel. Many BPO vendors are still grappling with this transformation. However, even this is not enough for what comes next.
- Phase 3: Insights-driven BPO (late 2010s and beyond). Advanced analytics, automation, data science, and AI have reset the goalposts for the business process outsourcing industry. BPO vendors continue to have unique and inherent strengths. However, BPOs of the future must rapidly recast themselves into transformation partners for enterprises on digital and process transformation journeys in the age of insights.
Going forward, insights-fueled outsourcing will be a critical ask from customers. Vendors will have to fundamentally retool — sometimes rendering their process outsourcing firm indistinguishable from a technology services firm. BPOs must invest extensively in technology platforms and IP, domain and process intelligence, and commercial model innovation to stay ahead. This transformation is not optional. Our analysis reveals three levels of insights capabilities among BPO vendors today:
- Insights-led vendors support process transformation. These providers support process or business model reinvention by delivering sophisticated, often real-time insights capabilities, usually within a managed services construct. They typically base their value on platform investments and vertical- or process-specific knowledge codified into tools and IP. These vendors use insights investments to strategically shift their mix of business toward sustained high-value digital and insights services.
- Insights-enabled vendors enable digital goals. These providers integrate insights and automation technologies into solutions that transform the performance and effectiveness of their clients’ processes. These include the ability to deploy analytics around speech/text and third-party technology such as chatbots or robotic process automation. The specific value of their offerings lies in “better, faster” contact center performance metrics. However, these vendors’ investments in technology and insights tools can be sporadic and client-specific rather than broad-based; they may not always have thought through the business model and commercial value proposition of their offerings.
- Insights-aware vendors optimize operational performance. These vendors remain rooted in their operational heritage. Their coverage of insights capability across their client base is spotty and unsystematic. They have yet to outline, implement, and industrialize insights capabilities to create breakaway business value for clients. Instead of making them process-centric or people-centric, they often design their tech offerings as a solution looking for a problem. Clients are often unaware of these capabilities. They rate their vendors’ legacy BPO and analytics capabilities as superior to their insights capabilities.
We have been covering this new trend with a series of reports that cover the evolution of insights-driven BPO. Forrester clients can start their journey into this stream of research with the report “Say Hello To Insights-Driven BPO.” Next, explore the vendor landscape with our “Now Tech: Insights-Driven Business Process Outsourcing, Q1 2020” report and our latest offering, the brand-new “The Forrester Wave™: Insights-Driven Business Process Outsourcing, Q4 2020.”
As always, we encourage you to reach out to us for an inquiry if you’d like to know more.
- Age of the Customer
- Application Development & Delivery
- Architecture & Technology Strategy
- Big Data
- CIO insights
- Customer Engagement
- customer experience
- data science
- experience design (XD)
- machine learning
- natural language processing (NLP)
- omnichannel customer experience
- robotic process automation (RPA)
- text analytics
- user experience (UX)
- vendor selection
- virtual agents
- voice of the customer (VOC)