Challenges Faced By The BPO Industry: The Complete Guide to Staying Competitive in a Customer-Centric Age

TechSee explores the challenges faced by the BPO industry and how to stay competitive.

The challenges faced by the BPO industry are considerable, as are the rewards. Today’s client focused marketplace is putting even greater pressure on business process outsourcing (BPO) leaders to find innovative and unique outsourcing solutions. 

This will help BPOs improve in areas such as:

  • delivering a better customer experience 
  • meeting demands for lower costs 
  • enhancing wallet share, and 
  • increasing margins.

In this article we will explore the challenges faced by the BPO industry and discuss:

The Current Challenges of Outsourcing

Large BPOs have traditionally focused on highly scalable, repeatable customer care transactions. In many cases, the agents being deployed against these types of engagements tend to be generalists in nature and do not have the skills, training or tools to handle more complex technical support calls.

The result of the historic focus on broader, scalable engagements is that many larger BPOs are faced with the difficulty of differentiating themselves from their competition. As a result, they are facing more stringent customer KPIs, margin compression, and ultimately a commoditization of their traditional service delivery models.

What are the Barriers to Outsourcing using the Traditional Delivery Structure?

The traditional delivery structure for many customer engagements is often priced out per minute, per agent hour, or per transaction. With high-volume, low-complexity transactions, the BPO profit margins are affected, forcing them to compete more on price than any other single element. However, even with the price being prioritized by the customer, performance KPIs are often made more stringent.

This inverse relationship forces BPOs to apply different operational practices, call handling guidelines, or look for less expensive labor sources, often in areas where there is no operational footprint today. The end result is a never-ending cycle of cost structure optimization in an effort to remain competitive.

The Price/ Support Paradigm

While cost optimization efforts are a worthwhile cause, the fractional temporary gains that these changes make, do not stay service delivery differentiators for long. This is because the competition has to react to maintain their competitive position. The end result is a price/ support paradigm that continuously erodes margin, increasing the challenges faced by the BPO industry.

This leads us to the following question.

How to Break Away from the Cycle of Decreasing BPO Profit Margins

The challenges faced by the BPO industry,  are causing them to continuously evaluate their options, including:

  • opening new, higher-value service lines
  • changing the current price/ support paradigm while maintaining operational excellence.

Is Breaking into the Higher Value Market the Solution?

When it comes to entering new, higher value market segments, BPOs have had limited success.

The change in focus from high-volume/ lower complexity segments to lower-volume/ higher complexity segments is challenging due to current structural limitations such as: 

  • site location 
  • skill set availability 
  • BPO technology limitations/ requirements, and 
  • contact center operational practices that do not necessarily align with supporting non-traditional market segments.

Shifting the Price/ Support Paradigm – Can it Help?

Changing the price/ support paradigm has proven to be just as challenging since reporting/ billing environments may not support creative methodologies. This concept initially drove BPOs offshore; however, once this became the status quo, a new differentiator was needed. BPOs have experimented with variations of success-based billing. However, the risk of accurately assessing your success and KPI changes versus the cost associated with achieving that success and those changes has been high.

Tech Support as the Solution

Because of its specialized nature, tech support operations often require different personnel skills and tools, and unique operational processes. As a result, larger BPOs have traditionally deferred this market segment to “boutique service providers” who are less concerned with scalability.

If large BPOs could easily support higher value markets and leverage their existing operating efficiencies with the same agent base they use today, would that solution be worth considering?

Agent Empowerment BPO Technology as an Enabler

BPOs can use innovative customer support technologies to enhance their current service offering and provide a wider range of unique outsourcing solutions. 

For example, visual support enables more affordable customer service generalists to handle higher-value technical support calls with minimal training. When agents can see technical issues and guide end users to solutions, a BPO can extend its service capabilities beyond their current service delivery limits. This opens up new service capabilities with their existing customers, along with new markets and revenue streams that were, until now, unfeasible and inaccessible.

Using BPO technology to reduce agent churn

Savvy BPOs that use technology to empower their agents to provide more complex services and increase success rates also stand to reduce agent churn through increased job satisfaction. This has a follow-on effect of earning greater customer wallet share and positions these BPOs as industry thought leaders.

The importance of customer service in BPO

The integration of intelligent visual support also wins customer mindshare. This solution demonstrates a strong ability to think outside the box. Since it clearly improves customer experience, it allows BPOs and their customers to engage in conversations they may not be able to have otherwise. This helps to address the challenges faced by the BPO industry.

Rethinking the Pricing of Customer Satisfaction in BPO

While customer experience is generally stated as one of the most important factors in the enterprise decision-making process, ultimately service delivery cost becomes the dominant factor when organizations are choosing a BPO.

Despite that, when considering two vendors at equal cost, the ability to deliver an improved customer experience in given situations, will have a significant impact on an enterprise’s decision. BPOs have a clear advantage when they can provide for example: 

Those BPOs that can find creative ways to structure their fees so they can offer enterprises a win-win scenario, stand to gain a considerable competitive advantage, and greater wallet share.

Offer New Success-Driven Pricing Models

Using truck rolls as our metric, let’s look at how visual support technology can change the traditional price/ support challenges faced by the BPO industry and drive savings.

Performance-based pricing is difficult to implement and monitor. However, a BPO that can demonstrate consistent, significant savings by preventing truck rolls is in a much more knowledgeable position to implement an innovative billing approach.

Removing the barriers to outsourcing: reducing truck rolls example

For example, if a BPO can reduce truck rolls by 20%, where one truck dispatch can be 15 x the cost of a support call, it can propose to reduce agent fees. This will be in exchange for taking a percentage of the savings on truck rolls. 

Revenue generated in this way could boost a BPO’s margin and lower operating costs, while at the same time delivering significantly improved customer satisfaction: a win-win situation.

New Market Segments

The contact center outsourcing business is shifting and leading BPOs have to stay ahead of the curve by addressing the challenges of outsourcing. This will allow them to maintain and grow their market position. 

New markets are emerging such as the Internet of Things which industry analysts say will grow to 27.1 billion connected devices by 2025, demanding more and different types of support. Large BPO’s are ideally positioned to support this emerging market with their scale and breadth of services. 

However, this segment will require a different approach to maximize customer value and a new discussion on how employers can overcome the challenges of outsourcing. To effectively compete in this burgeoning market, BPO’s will have to deploy a combination of their operational expertise coupled with the correct technology to maximize their value.

Visual Engagement = A Unique Outsourcing Solution

Innovative technologies such as a visual engagement platform can help meet the challenges faced by the BPO industry. It can allow BPOs to extend their services beyond general customer service calls and compete in higher-value call segments. As active service providers in these segments, BPOs can propose win-win price/ support structures that increase their margins, save their customers money, and deliver an exceptional customer experience.

For a more detailed explanation of how BPOs can harness the powers of technology to approach the barriers to outsourcing, take a look at this BPO technology article.

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      How to calculate the true cost of a truck roll