Between mass layoffs, declining consumer confidence, and an enduringly troublesome newscycle, it doesn’t take an official declaration of recession to know the economy is in a precarious position. Most every business — from the family-owned corner store a couple blocks from your office to the multinational conglomerate that owns half the brands you stock in your home — is looking for ways to cut costs and buckle up for the rocky road ahead.
Recessionary environments are times of great adversity, but they can also be times of great opportunity. And while it’s true that larger businesses have an inherent advantage when it comes to weathering economic turbulence, companies of all sizes can leverage the same strategy: business process outsourcing.
What is business process outsourcing (BPO)?
Business process outsourcing (BPO) is when a company delegates specific business functions to a third-party vendor.
Whether it’s the accounting firm your company outsources payroll to for its hundreds of employees or the small but mighty marketing agency that manages your company’s social media presence, BPO is an incredibly common practice. In the US alone — which outsources more than any other country in the world — nearly 68% of companies leverage BPO for one or more services.
By no means a new phenomenon, the process of outsourcing is as old as the industrial revolution itself — although, it wouldn’t be formally recognized as a business strategy until 1989. That doesn’t mean the practice of outsourcing was immediately championed by all.
For many years, the use of BPO has been criticized for resulting in poor customer support experiences with ill prepared agents who did not speak the native language well. This perception has shifted in recent years, however, with widespread globalization and sweeping improvements to technology making BPO more accessible and easy to adopt than ever.
And that was before the pandemic hit, which ultimately accelerated the trend.
In early 2020, when the global health crisis brought the world’s economic engine to its knees, businesses learned the hard way that they were poorly equipped to operate in the new paradigm that was rapidly materializing out of urgent necessity. Between remote work, online-first business models, and rising customer expectations, in-house teams found they could not survive without leaning on outside help.
BPO providers benefited greatly from this shift. Globally, the industry was valued around $92.5 billion in 2019. Now, the industry is projected to expand its value to $405.6 billion by 2027. Even if we’re returning to some semblance of normality in the wake of the pandemic’s many disruptions, BPO providers appear to have carved out a more permanent home for themselves in the larger business ecosystem moving forward.
Why do support teams use BPO?
The changes brought about by the pandemic weren’t easy for anyone, but support teams had a particularly rough go. Not only were contact volumes higher (call centers saw a volume increase of 14% in 2020), the effort required by support agents to address customer concerns at least doubled in difficulty.
Customers have come to expect support teams to be available everywhere — and to respond promptly. This means businesses now have more channels to forecast, staff, and monitor.
While it may be tempting to think about how to cut costs from customer support operations, the reality is that customer satisfaction is one of the most effective ways to win and retain consumer support when the economic going gets tough.
That’s because the level of service a customer receives from a business can make or break their perception of the company. In fact, research from Salesforce found 91% of consumers are likely to become repeat customers after having a good support experience. Compare that to 70% who said they are likely to look elsewhere if it takes hours to get help from someone in support.
Both literally and figuratively, businesses can’t afford to make their customers feel that way. But many underestimate just how detrimental poor customer service can be. One report from 2018 claims the cost of poor customer service is $75 billion per year — and that was up 20% from just two years prior.
This suggests that customer support teams are shouldering a greater share of responsibility for whether customers choose to engage with a brand. Which brings us back to BPO.
Many support operations use BPO providers to help with contact center functions. Some companies might choose to outsource all their contact center work while others might route easier customer inquiries to a BPO provider so their in-house teams can focus on handling escalated tickets as quickly as possible. Contact center work can even be divided between outsourced and in-house teams by channel.
But contact center functions aren’t the only way a support team can benefit from BPO. BPO providers can also augment support teams by handling additional functions such as training, documentation, and quality assurance.
There’s no one-size-fits-all approach to how companies use BPO to scale or gain leverage for their support operations. That said, a support team’s reasons for doing so generally fall into one of two categories: expansion and optimization.
Using BPO to expand support operations
BPO providers are adept at sourcing and placing talent quickly. As such, a support team might use BPO to gain access to talent pools with specialized skill sets that aren’t available in-house, or to implement a new support channel faster than in-house recruiting teams and internal processes can support.
In situations where the company is looking to expand its support operations into other countries or 24×7×365 availability, BPO providers grant them access to native speakers of that country’s language or the ability to staff up at all times of day using agents located in other time zones — often at a fraction of the cost.
Using BPO to optimize support operations
Many businesses that outsource customer service say it enables them to prioritize core operations.
If a company is not particularly efficient when it comes to handling certain aspects of the business — or if there aren’t enough resources to do so in-house — it makes sense to outsource those processes to a well-oiled machine instead of recruiting, hiring, and training new people.
According to 70% of executive’s polled in Deloitte’s Global Outsourcing Survey 2020, cost savings are the primary motivator for their outsourcing strategies.
How does BPO support cost efficiency?
When customer support teams are fully in-house, the cost of operating is high. It’s not just the labor for each employee, it’s the additional overhead that comes with every individual on the team — from the cost of the physical space itself down to every light bulb, notepad, and paperclip that’s housed within it.
By some estimates, in-house wages are roughly double the rate a BPO provider would charge.
That’s because everyone needs equipment, everyone needs training, and everyone must go through a hiring process. These things don’t just cost money, they require time and resource investment from other in-house employees. So it’s easy to see how in-house costs can quickly grow out of hand.
There are several pricing models that BPO providers use to deliver their services, but an all-inclusive structure based on productive hours worked tends to be the most common and straightforward. With this pricing model, BPO providers help customers save money and accurately predict their costs.
Because BPO providers are powerhouses of efficiency, they can bring down their overall operating costs in ways in-house teams can’t. This enables them to offer their services at cheaper rates.
The cost-saving benefits of outsourcing become even more apparent when the BPO provider is located in a country with cheaper infrastructural expenses such as rent and utilities. Support teams gain access to highly qualified talent pools in parts of the world where the cost of living and, as a result, the cost of labor are cheaper.
How big are support teams that use BPO?
The biggest, most recognizable brands in the world outsource some aspects of their customer support operations. And in some cases, they outsource a lot. Take Google, for example, which has more people working for it by way of BPO than in-house.
There’s no denying BPO is a great strategy for scaling your support operations. But that doesn’t mean you need to be a large or rapidly growing company to leverage this approach. It’s not unheard of for teams of less than five people to lean on third-party vendors for specific functions of support — including to build out a team of support agents from the ground up.
In 2019, 29% of companies of 50 or fewer employees outsourced one or more processes. Compare that with 66% of companies with 51–500 employees who also relied on outsourcing.
The reality is, deciding whether to outsource isn’t a linear if-this-then-that exercise. BPO providers can be used to free up existing in-house resources and also to build new processes for the first time by handing them off to a vendor. Put simply, outsourcing part of your customer support operations can factor into your business strategy at any point in your company’s growth.
Want to hear more about how support teams leverage BPO in practice? Watch this Assembled Office Hours webinar recording with special guest Adie Fonseca, former head of project management and supplier management at Stripe.