How will the geographic distribution of sourcing delivery evolve over the next decade?
BPO has evolved from primarily a cost-saving initiative by outsourcing back-office functions into one involving the outsourcing of a large number of customer-facing processes. The BPO provider of the future (what we term BPO+) will be evaluated not just by proffered cost savings, but by the ability to deliver strategic business impact. This will lead to an evolution of sourcing locations, as organisations are required to amalgamate the business considerations of the process being outsourced with the explicit capabilities and limitations of specific locations.
Enterprises have traditionally assessed sourcing locations with a variety of factors in mind ranging from hedging geopolitical risk (and ensuring business continuity), the availability of skills, a desire for a “follow-the-sun” approach, and the availability of support when looking to enter new markets. However, in light of a rapidly changing business environment, the impact of globalisation, and the fruition of industry-changing dynamics which are causing organisations to reevaluate their priorities (and in particular what they are willing to outsource), new factors are influencing location decisions. This is resulting in a reappraisal of resources which are onsite, onshore, nearshore or offshore.
On the one hand, as enterprises become global and look to new, and in many cases emerging, markets the need for BPO+ providers to possess greater local and regional knowledge and capabilities will be critical. In particular, customer-facing processes will require regional and local knowledge and understanding. Meanwhile, in other cases local regulatory requirements will force the location decision (for example strict data regulatory requirements in Europe).
On the other hand, the world is changing exponentially into one where 24/7/365 connectivity is ubiquitous. Back-end or non-customer-facing processes no longer need to be confined to geographical boundaries, and this has already resulted in the emergence of new locations across the globe as potential BPO destinations. The increasing maturity of local providers, the broadening depth and breadth of multinational providers’ global delivery models, combined with governmental investments and subsidies, has led to an increasing array of possibilities in new geographies, whether in Africa, Latin America or Asia.
In situations where location is not a constraint, the decision to source will also be impacted by the BPO+ provider’s ability to offer attractive pricing models including outcome- (risk or reward) based pricing, mainly to enable better governance and higher levels of commitment from providers. The sourcing decision will also be driven by the provider’s ability to offer platform-based BPO+ services as they enable standardisation of processes, drive efficiencies, increase productivity, and enable a uniform experience for the end-customer. Platform-based BPO+ suppliers need to make greater investments to standardise the hosting, implementation and maintenance of their services and hence at least in the short-to-mid-term will mostly be sourced from more mature BPO destinations like India rather than upcoming ones.
In light of these varying and in some cases dichotomising location dynamics, customers should continue to bear in mind that while cost will always be important the overall business environment (including the IT environment), geopolitical stability, legislative and regulatory environment, and the quality of workforce, will ultimately determine success or failure.
About the Authors
Charles Green is an Analyst with Forrester Research
Hansa Lyengar is Sourcing & Vendor Management Analyst, Forrester Research