Outsourcing in ‘09: Onshore, Offshore, and At Home

As the global recession forces many companies to scrutinize bottom lines, the business process outsourcing (BPO) space continues to forge ahead. New York–based research firm Datamonitor highlights five key trends it believes will shape the BPO space during the rest of 2009.

According to Peter Ryan, lead analyst for contact centers and BPO at Datamonitor, the five trends to keep an eye on are:

• client pricing;
• new niche, horizontal opportunities;
• potential for resurgence of onshore contact center deployments for outsourcers;
• quality and security of offshore locales; and
• increased global penetration of home agents.

To Ryan, client pricing will be one of the most important trends to keep an eye on, particularly in today's economic environment. He explains that margins are tighter than ever and organizations looking to work with outsourcers are increasingly concerned about the price of doing business. Ryan says potential clients will want to know if the prices will be less than operating in-house and if that dollar figure will stay stable.

Early indications find that BPO companies must have a compelling cost-savings story in order to stay competitive. "Look at the standardization of outsourcing services ... it's tough to differentiate from one another," Ryan explains. "It is a very competitive sector, and a lot of players are trying to drive prices down to win business."

Another avenue for BPO players to potentially look into is a horizontal opportunity Ryan says falls in line with customer care, marketing, and technical support: collections. While it will still remain niche, consisting of less than 5 percent of global outsourced workstations, Ryan sees it growing by 25 percent over the next four years. "The credit crisis has caused more of a need than ever for third parties to help companies recoup accounts receivable," he says. "It's going to be important that outsourcers provide a service with sophisticated options like organizing a repayment period."

With the election of President Barack Obama, there is also a chance for the resurgence of onshore contact center deployments for outsourcers. Ryan explains that the president's push to create new jobs could create tax incentives for companies electing to keep their customer service operations onshore. "The jury is still out on that," Ryan says. "Even if President Obama is able to do this, how do you find people to work in them? Unemployment is a bit higher, but it is still challenging to find workers for these contact centers."

Another trend Ryan admits is a mainstay for the BPO space revolves around the concern over the quality and security of offshore locations. "This could drive companies in uncertain times to say, ‘I'm keeping my business at home to make sure none of the end users drop off and use other companies that keep their contact centers in the United States,'" he says. "It's a way of retaining business."

Another avenue for keeping contact centers in America while not having to expand traditional brick-and-mortar sites is via work-at-home agents (WAHAs), the last trend Ryan says is important to keep tabs on in the BPO market in 2009. More companies are either partaking in or at least seriously considering WAHAs to bolster customer service repertoires. "I don't think people have a choice ... this is a business model that is proving itself especially in the United States," he declares. "It's starting to prove itself in other locations as well. If it is done [correctly], the chances of it working in a niche perspective are substantial."

Look for BPO to be come back into the spotlight as Obama assumes his new role in the White House, Ryan says. The market could be radically shifted depending on the types of policies he sets forward. The emphasis is on could, though. "There will be a lot more visibility as Obama comes into play with his administration and sense of [policy] direction," he envisions.

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