At least some areas of the BPO industry are growing....Global Procure To Pay expected to grow at 15.77 % CAGR into 2020

It is well understood that the BPO industry in general is fighting declining revenue trends. I have written extensively about the continued challenges the industry is facing from a couple of sides.

Matters will only get worse for the industry once the combination of AI and NLP will reach its full potential. Admittedly this is perhaps up to 2 years away...but at this point is simply a matter of when...not if.

Robotic Process Automation (RPA) will decimate certain BPO providers..there is little doubt about it. It is therefor somewhat refreshing that at least some areas of the industry can look forward to a few good years.

The guys at at "Research and Markets" , one of the better market intelligence firms out there,  have just released a new report which reviews the market outlook for the outsourced "Procure To Pay" industry.

The report foresees compound annual growth rates of 15.77 % into 2020.  By any standard the foretasted  growth rate is rather such at least this part of the BPO industry should not face the headwinds other segments will encounter over the next few years.

The lesson learned here is that specialization and deep integration into an organization's internal structure is what insulates the BPO provider from the general industry malaise. By managing the entire procure and pay life cycle the BPO provider is deeply embedded into internal processes...which makes the service more valuable to a corporate customer.

It is that added value which insulates providers of that service from the general industry challenges. Deeper integration and more complex Business Processes are what will separate  BPO providers from here on out.

The lesson for BPO providers is clear, specialize and go up the value chain or face the consequences.

Client Churn Within The BPO Industry...Is It A Problem ?

Any business is keenly watching new revenues as the number one gauge to judge if the fundamentals are solid. After long as revenues keep on growing at a healthy clip the business, presumably, will continue to generate free cash flow which will enable it to expand further.

One component to the revenue stream is customer churn. Every industry faces some degree of customer churn as part of the overall business environment. Sometimes customers merge or cease operations, sometimes they discontinue a part of their operation which makes the use of services obsolete. Sometimes though the churn is because of a general willing of the customer to consider alternative solutions...which in most cases leads to the transfer of business to a competitor.

The BPO industry is not immune to the general competitive environment faced  by corporations. In theory the long lead time in negotiating a suitable BPO solution combined with strong operational challenges implementing said solution should lead to a low churn rate.

The hurdle rate, so it seems, is rather high to transfer business away.

A recent recent study though seems to suggest otherwise. The study evaluated respondents willingness to consider moving their business away form their existing BPO provider and their motivation for doing so.

The results differ dependent upon the industry surveyed. A whopping 26 % of respondents within the "IT Networking and Infrastructure Support" group  indicated a willingness to move their business.

On the other end of the scale only 9 % of "Finance and Accounting Users"  seem to be prepared to entertain different solutions.

The most interesting take away of the study is the degree to which SaaS or BaaS is making inroads into traditional BPO relations. Between 4 to 5  out of 10 respondents indicate that their reasoning to abandon their existing relationship is rooted in their willingness to entertain a Saas or BaaS solution.

Of course...the notion that the BPO business is under attack by the emergence of SaaS and BaaS is nothing new. As such the study does not really suggest anything out of the ordinary.

It is never the less an interesting fact that almost 50 % of customer churn in the BPO industry can be attributed to new solutions as apposed to competitive pressures.