Contact center outsourcing vendors must take strategic view for BPO success

Outsourcing and BPO

by CBR Staff Writer| 28 November 2008

Contact center outsourcing providers are suffering from thinning margins and lower contract volumes as the economic downturn bites, leading to an increasing appetite for diversification into adjacent business processes. These vendors should look to move into higher value business process outsourcing areas and develop a more long-term strategic approach, without which they are unlikely to succeed.

According to Datamonitor forecasts, business process outsourcing (BPO) globally is to grow at a compound annual growth rate of 7.8% over the next six years to $411 billion in 2013. In the short and medium terms, BPO will be one of the most robust markets in the global economy - the demand for outsourced services is likely to increase as the ongoing challenging business conditions bring companies to focus on cost cutting, especially in relation to non-core operations.

A number of contact center companies have admitted to suffering lower volumes on some of their key contracts, and this is likely to continue as the current economic downturn worsens. At the same time, margins at contact center companies are shrinking.

However, diversification into related areas of outsourcing offers an excellent opportunity to counter the threats to both top and bottom lines. The customers of contact center outsourcers (CCOS) are actively looking to outsource business processes. They are also looking to consolidate the number of vendors that they use, as a result of which vendors need to develop bundled contact center and broader BPO services.

Although many vendors provide some level of broader BPO services, they have tended to approach the market on a reactive basis, responding to client requests for services rather than developing and offering a line of business.

Thus far, the major strategic moves made by contact center companies, mainly in the human resource outsourcing market (HRO), have not been judged successful by their peers. This reaction has had a dampening effect on vendors' ambitions - although they are very keen to identify BPO opportunities, they are not convinced that investments will pay off.

CCOS vendors have only scratched the surface of the possibilities offered by partnering with major BPO vendors which take on multi-process deals but lack solid customer service capabilities. There are particularly strong opportunities for partnering on facilities and administrative costs for collections, and HRO for employee care services.

Contact center outsourcing is a mature industry which is currently threatened by narrowing margins, lower contract volumes and the cannibalization of revenues by technological innovations. Vendors are naturally keen to develop new revenue streams, and offering BPO services is a logical step. However, there is a yawning credibility gap, which many vendors have failed to bridge by using short-term strategies which have concentrated on providing services on a very bespoke basis, operating processes in the way they were in-house and therefore duplicating inefficiencies.

Ultimately, vendors need to place more emphasis on partnering with other outsourcing providers and investing time and money in developing scalable best practices which can be offered on a multi-client basis.

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