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Industry Research : BPOs Rush to Near and On-shore Works to be Closer to Clients
Business process outsourcing companies, specifically those in the contact centre space, are reversing the trend of moving most outsourced work to low-cost locations such as India and the Philippines, chasing higher-value business in exchange for working closer to their clients.
"On-shore" and "near-shore" presence is increasingly becoming an important area of differentiation that is helping those vendors who can demonstrate the capability garner a larger share of business.
In the 2008-2010 period, more than 71% of the contracts were delivered mainly offshore. In the 2011-2012 periods, that fell to 59%, according to the latest data available at advisory firm Everest Group. And the trend is further picking up.
FirstSource Solutions, Aegis, WNS and Serco are among firms that have been spending on big-build delivery in places such as South Africa, Eastern Europe, Scotland and the United States and more investments in this space are be expected. FirstSource is looking at Latin America as a possible geography to expand to and service US customers from, CEO Rajesh Subramaniam said.
"Having a flexible set of delivery locations is often in a provider's interest so that it can accommodate different client requirements. Where work is moving back on-shore or near-shore it is primarily to try and improve the quality of customer service - typically with the use of native speakers," Cathy Tornbohm, analyst with technology consultancy Gartner, said.
The pace of the global economic recovery is also an important factor is driving work back to the home markets, particularly from clients who want to cut costs but are unwilling to send the work out of the country.
"In this initial recovery, companies are attempting to investigate additional avenues to variabilise cost by additional outsourcing, although not necessarily off-shoring," Sandip Sen, CEO of Aegis, in a recent interview.
"BPO is the perfect answer to variabilise cost and improve efficiency, but with customer experience being the key focus it also is critical to deliver from any shore," Sen said.
Aegis has about 5,000 employees in the US and over 2,000 employees in Australia and New Zealand. The company will be tripling its headcount in the UK to 1,500 and is considering a near-shore acquisition to serve the US market, a source with direct knowledge of the matter told ET.
Sen had declined to comment on this.
On-shore expansion is increasingly rising as a priority for BPO firms as such operations are becoming a major selling point to win new deals, which are increasingly thin on the ground in the BPO sector.
"Typically onshore plays an important role and does tend to play kingmaker in moving work offshore," Susir Kumar, CEO of the Global Services division at Serco told ET.
It's not just the quest for a better accent on the other side of the phone line that is driving the shift. As companies target new markets and strategic, higher value work, new models are evolving to cope with the shifts in business.
An example that combines on-shore and offshore delivery is the Finance and Accounting (F&A) shared service model. Such a model leverages onshore delivery from a centre in Eastern Europe, for instance, to cater to the language requirements while the bulk of the heavy lifting in F&A is provided from an offshore delivery centre, say in India or Sri Lanka.
"Such models will only continue to evolve to meet the growing needs of globalisation," Keshav Murugesh, CEO of US-listed WNS, said.
The Economic Times
Posted by Veronica Silva Cusi, news correspondent
Today's Tip of the Day - Involve Staff
Published: Monday, December 2, 2013