There Is Trouble Brewing In BPO Land....And The Cloud Is To Blame

Executives in charge of BPO operations know that their business is under siege. Growth rates have stalled and for some markets negative growth rates are firmly established.

There are of course a few reasons for it but perhaps the single biggest reason is the migration of services into the cloud. SaaS has become a job killer for some BPO services and there is little doubt that the trend will continue.

One of the challenges the BPO industry faces is to put a numeric value on the exodus of services into the cloud and come up with a good estimate.

Gardner has done the work for the industry now. They have compiled a report which attempts to give a forecast as to what what % of revenue will be either lost or transferred  to cloud services.

The report does a great job analyzing individual segments of the IT industry and providing estimates as to the $ amounts expected to be migrated.

The BPO industry is seen as the biggest loser. Out of the current 119 billion (market size in 2016) a whopping 43 % are expected to migrate into the cloud until 2020 -  (Cloud Shift Rate)...making the BPO industry by far the biggest loser.

Of course, all that cloud business still needs to have operators and the 43 % shift in revenues does not necessarily equate to a 43 % reduction  in workload for the BPO providers.

However...given that any business which transfers into the crowd does ultimately so because they want to increase efficiencies (=save money)...there will be a noticeable impact on BPO providers.

Once the emergence of AI powered chat bots and NLP powered voice solutions are thrown into the becomes clear that the BPO industry should face some significant headwinds from here on out.

How To Close The Productivity Gap When Outsourcing Web Design Work ...A Real Life Example

It is well known that outsourcing does have some disadvantages. One of the biggest ones every user of outsourcing services has to battle with  is the issue of productivity gap vis a vis the onshore worker.

Experienced users of outsourcing services know that the productivity gap is real...and they have some specific strategies to make sure that it is as small as as possible in the beginning.

Over time and with proper integration of the outsourced worker the productivity gap will shrink...and often times the offshore worker might become more  productive than the onshore worker.

Below is the real life experience of one of my customers. The customer is a web development and design firm. When the company needed to increase headcount they decided  to hire 2 web developers overseas and integrate them into their team of onshore web developers.

With our help the company devised a specific, 6 Step plan to integrate the developers.

Step 1:
The company assigned each one of the developers to a designer in their US office. The offshore designer were deemed junior to the onshore designers.  In the event of vacation and/or sickness the onshore developers/designers would cover for each other and supervise the offshore designers. Importantly though...the offshore designers were not supposed to cover for each other.

Step 2:
Daily Skype Meetings. A schedule was set whereby each design team would meet up via skype once a day. In the beginning the meetings primarily served as a "get to know each other" opportunity. It was deemed important that a team spirit was created among the onshore and offshore designer and in order to foster it the Skype meets were deemed mandatory.

Step 3
It was decided that collaborative tools were to be used instead of emails. Specifically it was agreed that skype was going to be used for screensharing. Active Collab ( was to be used for the submission , feedback and related  questions regarding any project assigned to the offshore designers.

Step 4
In order to enable the President to verify that the offshore designers were in fact working and not just playing video games both offshore workers were put on Hivedesk ( By using Hivedesk any perception that the offshore workers might not dedicate the hours needed towards the client were eliminated. It was agreed that the offshore workers were on a 9 hour workday with a one hour flex break.

Step 5
In order to properly integrate the offshore workers the company decided on a set course of action as to what the offshore designers were supposed to do. It was agreed that the offshore designers were going to build only webpages after the initial design had been approved by the client. The senior designer/developer (onshore) was responsible for the home page design and built.  As such the offshore worker had only limited ability to bring their own design ideas into any project. The site tree and structure was already there and thus the offshore workers were to finish out the site after the approval of design and site structure.  

Step 6
All communication between the client and the company was to be handled by the onshore developer/designer. The client would not communicate with the offshore worker.

The steps described above might seem simple in itself. The end result though was that a well functioning team developed between the onshore and offshore developer.

Within a few weeks the offshore designer became attune to the thinking of the onshore team leader and started to adopt and instinctively follow the design ideas of the team leader without having to engage in extensive back and forth.  

The relationship stated to click, enabling the team leader to increase the level of responsibilities assigned to the offshore designer.

The company realized significant financial benefits and increased the size of the offshore team to 6 designers within one year.  

The Distributed Workforce Model Is Creating Problems For BPO Providers....

Traditional BPO providers have had a challenging business environment globally. EMEA has been down a solid double digits  last year (-18 %) and APAC was down a more moderate single digit number. (-6.3%).

The BPO industry has always been rather fragmented. One problem has always been how  to capture the correct data to come up with estimated revenue numbers for the industry as a whole. Market intelligence firms are usually looking at Annual Contract values above 5 Million (some firms will include lower ACV's of 3 Million US-$).

As such the decline in Annual Revenue numbers is rather "top heavy" is geared towards bigger contract values.

What is not captured in annual revenue numbers is the shift away from traditional BPO providers  to a more distributed workforce model.

A new breed of providers has emerged which cater specifically to organizations who have demand spikes for services followed by a significant decline.

In the past conventional BPO providers were tasked to absorb those demand surges and had to staff accordingly. Not any longer.

There are now specialized providers who offer "On Demand" (aka Access Contractors) employees to handle those demand spikes. The model is highly attractive to any  sales heavy  organization (etailers) which has to absorb strong seasonal changes in sales volume. (either promotional or seasonal driven)

The distributed workforce model has always been plagued by a rather high error rate. But that has been changing. Tasks have been further reduced into missions. A mission specific employee is tasked with such a small subset or responsibilities that training and subsequent error rate are both minimal.

Making an employee mission specific instead of a more general trained employee in a BPO environment has allowed the distributed workforce model to gain rapid speed.

There are companies in India which have created significant workforce's of on demand workers which can be marshaled into action  within a few minutes. (the biggest providers are in the 1000's of workers or "Access Contractors").

Access Contractors claim that there error rate is about even to the error rate of conventional BPO providers.

The lure of using an Access Contractor is in the associated savings. Savings can be as high as 70 % (!) vis a vis a conventional BPO provider.

Given the realized savings it is easy to foresee continued revenue drain for the established BPO providers. It is one more thing to worry about, besides the emergence of cloud services and AI.


Strange News - Phone Fraud puts Indian BPO providers on the defensive

Most people have been getting unsolicited calls from (mostly)  Indian call centers. Sometimes the calls are simply a solicitation for a  product...sometimes the reason for the call is much more sinister.

The Federal Trade Commission has received about 400,00 calls last year regarding what it deems "imposter scams" where the caller claims to be from law enforcement or even the IRS...with the motive  to extort money.

In almost every case the caller has an Indian accent (or an accent which is deemed Indian). The problem which has been arising for the BPO industry is that distrust is brewing between consumers and operators of BPO companies because of it.

The consumer who calls his bank, or even worse, gets called by his bank and hears an Indian accent goes immediately on the defensive. Call center operations are not easy as it it is anyhow....and immediate distrust only makes it worse.

I can attest to the fact that the problem described above is very much front and center for executives planning to set up or relocate call center operations. The Indian Call Center industry is being tarnished...and it is becoming a factor for executives in charge of call center operations.

It is certainly not the main reason...but it a significant contributing factor why the Philippines are now the call center capital of the world.