Global Business Services & ICT
Global Business Services & ICT, Foreign media

What’s next for BPO providers?

May 21, 2021

The following article by Valdas Sirutis, a Senior Investment Advisor, Business services & ICT at Invest Lithuania first appeared in the Outsourcing&More magazine. You can find the original here.

Business process outsourcing in the new normal

“The pace of change has never been this fast, yet it will never be this slow again” – said Canada’s Prme Minister Justin Trudeau at the World Ecenomic Forum annual meeting in Davos in 2018. His message became a harbinger of the events that shook the world in 2020 and sped up the pace of change even further. As is the case with many other industries, the pandemic has pushed BPO players to change the ways they deliver value to their customers. Showing considerable resilience in the face of a global crisis, the business process outsourcing (BPO) market is expected to grow by 7-8% annually over the next four years. The focus for BPOs is now set on employing automation, artificial intelligence and other technologies to build robust service roadmaps and secure lasting client relationships.

The global pandemic is transforming traditional BPO models and the sector faces significant challenges. This article provides general trends by drawing on examples of how Lithuania-based BPO providers are adapting in the face of ubiquitous change.

Outsourcing solves lack of capacity and expertise

The whole premise of BPO rests on businesses having scarce resources. Large enterprises often lack the means or expertise to carry out certain functions, such as customer support, data entry, or accounting, themselves. Many of them also do not have the technology stack for transaction processing work, which is another challenge. BPOs expertly perform these tasks, saving their clients time and money. While business process automation has emerging as a threat to BPOs, intra-organisational technology initiatives are notoriously difficult to implement, so corporations trust their BPO providers with automation solutions as well.

With this in mind, it is no wonder that some BPO providers have not only withstood the challenges of the pandemic but even managed to grow. The Paris-headquartered Teleperformance, for instance, has recently decided to expand its Lithuanian team by more than 500 employees.

With a new global client entrusting the company with content moderation work, Teleperformance needs specialists with the right language skills, and Lithuania’s multilingual talent pool is more than ready to meet the challenge. The country has one of the highest foreign language knowledge rates in Europe, with the average number of languages spoken per person being 2.7, and 97.3% of the population speaking at least one foreign language. Operating in Lithuania since 2015, Teleperformance now employs specialists speaking English, Swedish, Portuguese, Spanish, Russian, Greek, and Hebrew.

Geographic diversification – the key to competitive advantage

The global pandemic has starkly highlighted the flaws of the single outsourcing hub model, affirming that diversification is key to getting the offshore delivery equation right. Other factors, such as tightening regulations in various jurisdictions and a steady increase in wages, are also pushing BPO providers towards a global delivery model. Today, diversifying their geographic presence is paramount for BPOs that want to leverage unsaturated talent pools and gain competitive advantage over their competition.

US management consultancy Guidehouse opening an office in Lithuania is a recent example of such geographic diversification. Expanding its managed services business, the company expects to hire up to 100 specialists who will serve Guidehouse clients in the areas of AML and brand risk management. Lithuania’s strong anti-money laundering ecosystem and highly-qualified local talent were the main drivers behind the company’s decision to invest in the country.

Competitive differentiation via high-tech solutions

Data is the new gold, but it must be processed to extract business value.  Most companies understand the importance of data, but have problems figuring out how to use it. For them, the pressing priority is mining organizational data to produce insights that can improve the operations, customer satisfaction, create growth opportunities. This is why BPO providers offering machine learning, advanced analytics, artificial intelligence and other high-tech solutions will undoubtedly gain the trust of their clients and be better equipped to grow their business in the future.

The functions carried out at Cognizant’s Vilnius hub perfectly illustrate how high-tech solutions create value for BPO clients and, in turn, enable  BPO growth. The hub currently provides end-to-end back-office processes for key clients in banking and insurance. The Center also provides information management and business solutions, supporting complex business challenges like Solvency II implementation.

New challenges in the new normal

The COVID-19 pandemic has brought on unprecedented levels of sophistication to virtual working, with BPOs rapidly deploying remote access end-points that protect the health of the workforce and ensure continuous delivery of services. Balancing remote working with information security is challenging, however, and with most data breaches appearing through 3rd party vendors, businesses may be reluctant to use BPO providers to mitigate the risk of data exposure.

This fear is not unwarranted – the remote working model is highly unusual for the outsourcing industry, and a recent IBM security study found that employees new to working from home pose security risks. This is also backed by a recent Malwarebytes study that found that remote workers have caused a security breach in 20% of surveyed organizations. To reassure clients and protect their information, BPOs need to train their staff, develop robust security protocols and secure their work-from-home infrastructure.

Another challenge is the mounting cost pressures. The increasingly competitive industry landscape may lead to shrinking margins and deteriorating service levels, which might jeopardize the long-term relationship between BPO providers and their clients. Companies most impacted by the pandemic are looking for savings and put BPOs under a pricing strain. Many BPO providers are asked to change their cost model from FTE to Hourly and vice versa as a way for clients to secure contracts at competitive rates. Payment models such as outcome-based support or business process as-a-service might also start to re-emerge in the market as flexibility is a desired quality in uncertain times.

The eventual recovery of the global economy will see a boost affecting different industries and geographies. Differentiating themselves by offering high-tech solutions, large BPO providers will likely continue to compete for contracts of global enterprises.  Pockets of educated, multilingual talent at attractive rates will remain one of the key elements giving a competitive edge for large BPO players. The Lithuanian BPO centres Teleperformance, Cognizant and Guidehouse exemplify the main developments of business process outsourcing post-crisis, showcasing the adaptability and responsiveness required to cope with the ever-accelerating pace of change.

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Aistė Žebrauskienė
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    Aistė Žebrauskienė Press Officer
    Thank you!

    Thanks for reaching out to us, this means a lot! We will get back to you shortly.

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