BPO Predictions for 2012

It’s that time of the year again. Time to review what happened in 2011 and lay down some predictions for 2012. If anything we can all agree that 2011 was a very eventful year. We saw major global events unfolding that will surely be recorded in time as significantly historical. I thought it would be worthwhile to lay down these key events that occurred in 2011 before we get started on some of the predictions:

1. Arab Spring: major civil unrest across the Middle East and North Africa
2. Overturning of governments: Egypt, Libya, Tunisia, Greece
3. Civil unrest in the UK, Greece, Spain and Russia
4. Death of key strongmen: Gadhafi, Kim Jong IL
5. US debt crisis
6. European debt crisis
7. Japanese earthquake and Tsunami
8. Christchurch earthquakes
9. Queensland flood
10. Thailand flood
11. Philippine flood

These events, in one way or another, would have touched each and every one of our lives in 2011. Such significant events have not only sent global markets on a wild rollercoaster ride but have managed to influence every business plan in the corporate world. The GFC had managed to affect 86% of all BPO providers to one degree or another. The impact of 2011 will be closer to 100%.

My last set of predictions for 2011 outlined the need for BPO providers to reorganise their businesses to be able to compete more effectively by addressing growing economic and political pressures. These challenges were further compounded in 2011 by the turbulence experienced in the markets in response to the global economic, political, and environmental events occurring in 2011. It was a difficult year for BPO providers to determine whether to alter their direction or maintain a steady course and weather the storm.  The key factors to address in 2012 will be:

1. How to address lower BPO revenues from traditional sources such as call centre outsourcing
2. How to address risk effectively in BPO locations affected by political instability and legal deficiencies such as data protection laws
3. How to address commodity based pricing of BPO services
4. How to address growing staff attrition and increasing labour costs
5. How to address new competition from new low cost labour markets
6. How to address legal complications brought about by the proposed US Outsourcing Bill
7. How to address the impact of currency fluctuations to ensure your Gross Profit is maintained

A report produced by Ovum concluded, from their research, that a number of firms surveyed are reluctant to outsource their business as they consider it risky to offshore their business. This survey was undertaken in companies based in Australia, Europe and North America. Only 2% of the companies surveyed indicated they would be outsourcing offshore in a year’s time. I can only conclude that fear from executives to send their call centres offshore is brought on by the heightened sense of the risks associated. These risks are not only highlighted in the list of key issues to address in 2012 but also by the negative impact on customers from poor quality services.

One of the key strategies BPO providers can take in 2012 is to address the slowing down of traditional voice revenues by leveraging their relationships with existing customers and begin offering them new value-based services. These services should be specialised value-added services with a compelling ROI. This will enable a BPO provider to move into the trusted partner level with their clients and move away from the commodity single service provider. By opening up the types of services offered the BPO provider can increase their addressable market opportunities and position themselves to become a sustainable BPO provider in the future. A report undertaken by NASSCOM and Everest India has identified that the Indian BPO industry can increase its revenues five-fold from its present revenue to reach US$50B by 2012 by extending its capability and footprint. Countries like India can address their current challenges in voice by reviewing their assets and points of differentiation.  For example, their highly skilled legal and medical workers can be used to provide new specialised services such as legal support.

We are seeing an increasing number of corporates using outsourcing to address a number of the economic challenges they are faced with. A recent study conducted by TPI covered the latest strategies adopted by global 2000 companies in the outsourcing industry. They identified that there was a drastic change in the outsourcing sector. Companies are willing to spend more compared to previous years but have tighter expenditure policies now. The report says many companies are looking at depending fully on outsourcing and are seeking a full solution at an economical budget. The opportunities in 2012 will be to:

1. Increase capability and footprint to offer corporates specialised services
2. Leverage from unique assets that your BPO country/city offer
3. Reduce the risk for corporates by providing economical and safe solutions
4. Become part of the growing move towards shared services
5. Devise creative pricing models that contain an element of risk and reward
6. Increase development and engagement of staff to address the growing attrition rate
7. Increase innovation in your company

In my 2011 report I highlighted that we would see an increasing number of mergers and acquisitions due to greater access to cash. What we saw in 2011 was a slow start to mergers and acquisitions but a strong finish in Q4. Key transactions were made by companies such as Exls, Capita, Genpact, Xerox, Infosys and Aegis. I would expect this activity to continue to be mostly strong in the middle market space in 2012.

With an addressable global marketplace estimated at $450 billion the BPO industry is continuing to be a major economic powerhouse to most countries. Gartner states that the global BPO industry is anticipating a global growth of 6.3%. However there are some noticeable exceptions worthy to keep track of in 2012.

The report highlights that the Asia Pacific market (India, China, Philippines and Australia) is likely to see a 17.9% growth in business. This region is by far the shining star in the industry. China is seen as the key growth contributor in the region with expected annual growth of 20% to 25%. The reason for this is not only because of the amount of work outsourced from the US and Europe but also because the region faired a lot better than the US during the financial and currency crisis.  The growth expected in the US is much lower at only 3.8% and Western Europe may have growth up to 8.9%. The rising star globally is Latin America which is expected to grow at 14.7%.

Have a great 2012 and keep smiling!