CX- Automation, how recent is this phenomenon?

Contrary to popular perception, CX automation is not a recent phenomenon. In fact, consumer mass deployment of the discipline dates back at least two decades. Record scrutiny and archival research should clear the air on which industry: Telecom or Banking was the first, in the Indian market to go the automation route. Pieces of empirical evidence seem to suggest that it was telecommunication that pioneered the automation of consumer-facing processes. "Self-help" was the term that telecom donned to speak about all its cx automation initiatives. It was groundbreaking, massive in scale and so simple to use that it caught on like a kite takes to the wind. Mind you, these were being done in the pre-consumer internet era. Text Messages and USSD strings were the carriers of these pathbreaking innovations. From simple queries like balance enquiry to rather complex workflows like SIM replacements were fully automated by the corporations and very well accepted by the customers. Banking hasn't been far behind too: Who can argue against the impact that ATMs have had on mankind's relationship with money.

I must call out though, that how these wonderful CX automation initiatives of the days gone by were different from what we understand of the term today. It is the intent, infrastructure support and proliferation of the internet that has separated the expression of CX automation of the present day from what it used to be in the past. It has acquired a new identity, a new name. Early CX automation undertakings were purely motivated by 'cost saving'. Yes, it was marketed as 'customer empowerment' but everyone working in both telecom and banking in the early days knew that it wasn't the case.

The term "Self-help", in the present day, doesn't invoke the same kind of emotions. "CX automation" is in vogue now and rightfully so. There is a world of difference in the technology landscape, computing capabilities, and general acceptance of the 'digital way of life" among end-users.

CX automation is a multi-billion industry today, we have to thank SaaS for it. The spectacular success that Freshworks, Zendesk and Zoho got has renewed the interest of capital in products that promise to automate customer-facing processes across a variety of industries. Advancements in cognitive technology, conversational Artificial Intelligence, and desktop automation have completely changed the scene. The ecosystem is fully ready to cut over to the new: 750 million connected smartphones beaming in India alone, the internet load for a day is cheaper than a decent cup of coffee (of course at telecom's peril) and there is growing interest in the industry to go fully automated. Capital, like it, always does is honouring the mood of the market. As we know from our economics lessons: capital and growth follow each other in a circle.

This change will cause massive displacement of low/semi-skilled professionals. The problem is that less than 5% of customer experience professionals today, truly understand the ways in which the new beast is to be tamed. That I am afraid is going to push the customer services industry (BPOs) to relive what banking when through in early 1980-90 ties, when banking embraced computers and they had to send nearly 70% of their workforce home (early retirement) because they just couldn't keep up with the machine.

There is still time to learn and adapt - the question is, will the BPO industry act in time? Your guess is as good as mine.

5 step change framework for BPOs and product Ideas!

In the last article, I argued how the winds within the wings of traditional phone-based BPOs are being stolen by cheap, easy, and widely available automation alternatives. I also propounded that weakening prospects of the BPO industry do not necessarily mean a reduction in the overall scope of outsourcing as a business decision. There is a bit of a dichotomy between the two parts of this statement, which at one glance could appear disorienting and that is ok. If you read the 2nd part of the last article carefully (I will link it down below) the confusion will disappear. The more prominent question which the previous article did not answer fully is that if BPOs have to become a platform company to survive what sort of platform company should they really become? It is a legitimate question and that is the inspiration behind this one. It is in order to mention here that overwhelming 80%+ feedback emails that I received from my smart readers were seeking clarity on this very question. So here we go.

Before we get into the specifics of it, I think we should spend a minute thinking about why is ‘change’ important for business, and then when the business does elect to change how is it that the organization should attempt it? Answering the first part of this question is rather straightforward, the needs of an evolving society change over time and to cater to that organization in the business of meeting those needs must change too. Now, on to the tricky part of the question, what is it that the organizations that decide to change try to do when they pivot? Organizations sacrifice products for saving business. Remember the goal of a for-profit organization is to make money and to not make money exclusively from doing 'a thing'.

Now with that out of the way, let’s focus on the element that often startles those who attempt to embark on a change. The strangeness of the new, the absence of familiarity, lack of knowledge in the new arena that they consider pivoting into. Right out of the gate let me concede that the fear is legitimate, 100% so. Imagine that if you woke up in the middle of the night in a deserted desert with icy cold sand under your feet instead of your bedroom and on the warm bed on which you slipped into peaceful slumber earlier that night? The first few minutes would fit the exact definition of hell, will it not? You would then normalize your new situation and think about how did you get there and what are the options in front of you to get back to where you actually slept? You would at that moment be scared, unhappy, uncertain, nervous, and irritated. Would you not be at the sea completely?

Can anyone count that turbulence against you?

Imagine an entrepreneur who has been making XYZ amount of money from a set business, tried and tested product line is being asked by someone to change it to something else because they think that is the future. It is a tough bargain, but then one that must be made because what is today will most certainly not remain so tomorrow. A case for change will have to be continually made and pushed at the right forums, because, as big a force is need for change, the urge to remain the same is also not a weak trap. Torn between the demand of tomorrow and habits of yesterday, the decision-makers feel exhausted, clueless, and sometimes a bit disenchanted too.

I can't claim to have discovered the formula that works in turning key people around, every time. I have failed a fair amount of times myself too, but it is in the times that I did win, I find both my motivation and purpose. So my dear readers, if you are the one pushing for the change, I wish you luck and urge you to try out your own strategy.

I better stick to the part of the puzzle that I am most comfortable with, that is knowing how to carve out the change. It is important to note here that the change that we are referring to here is the change of device and not so much the substance of what is being executed. That is in essence it will still be reaching to a customer to either sell or serve or remind them of the both or either. It would be easier for the brand to sell what it has already sold, it is this core belief that often prohibits the founders from changing. So, as a change managers, we should start from there.

I present to you the framework!

5 step framework for BPOs.

Let's understand how is the current stack of clients/customers stack up. Data probing will be necessary. Here are the questions that you will need to ask and answer.

1. Figure out your area of strength.

• Which industry?
• What line of work?
• Which medium?
• What nature?
• Is there a specific demographic?
• Not just for existing clients but past customers too.
  • Why did the customers who left you did so?

Plot these details on the table.

A quick analysis of these details should reveal to you that which is that technology feature that can fully automate the work that you are now doing in a manual manner. Pick that product and then assess.

1. Would you like to create the product bottoms up?
2. Or you have the wherewith-all to acquire an organization that might already have the solution ready.
   1. If acquisition looks difficult, try merger possibilities.

2. Get critical stakeholders on board with the idea of ‘transformation’.

• Board
• Investors
• Key employees.

It is important to keep critical people in the organization informed of the direction in which the organization is wanting to pivot into. As it is this set of people who are going to make it work. This conversation is best not kept unidirectional, consensus building is needed. Bring the team on board and then get on with the plan.

3. Finding the resources (money and other things).

• Budget.
• See how you’re placed.
• Plan for the shortfall if any.

Change is easier said than done. Resource mining beforehand is critical to success.

4. Getting the team ready.

• Restructuring the organization.
• Hiring the skill sets that would be needed to build/run/manage the solution.

This is perhaps the most important part of the puzzle. Old world conventional leaders do not want things to change because they know it is too late for them to change and they also know that if things change they will become irrelevant. In preparing the team, the leader needs to understand both sides of the story: why is change vital and what is the cost of not changing.

5. Make a new business goal.

• Make a new goal statement of the company and then socialize it.
• Plan
• Act

Both your mission and vision statements might need to reflect the change in plan. Make it happen, socialize it - take it to the last employee. You need the whole of the organization to rally behind the change.

These five steps pulled right should carry you through, without much trouble.

For those of you who are not wanting to get on with the first step right away and wish to think through a few ideas for building platforms, here are a few.

Platform/Product Ideas for BPOs.

1. CRM Solution for managing customer service end to end.

• Dialler.
• Workforce management system.
• Knowledge management.
• Training management system.
• Performance management Module.
• Quality management system. 
• Data and Reporting modules.

2. Creating a solution for the industry where most of your contacts come from.

• Video KYC in BFSI.
• Digital onboarding.
• Social Media command center

3. Systems designed to reducing churn.

• Survey tool.
• Linking usage with trigger points.
• Devising strategies for increased longevity of the customer.

4. Conversation engine.

• BOT.
• RPA.
• Desktop Automation.

5. Vendor management system.

• Client onboarding
• Client sign up
• Life cycle management
  • Complaint and compliment modules.
  • Billing and Invoicing.
  • Change management.
  • Forecasting and supply details.

No matter what you do, you must not remain the same, because those who do not change perish.

On that note I shall end this, take care and good luck.

Link to the last article 

Outsourcing and BPO; the past and the future!

Outsourcing and BPO; the past and the future!

Outsourcing exists because economic inequality has been a persistent reality of our world, and as far as we can tell it is not going anywhere. Both futurists and economists believe that whilst growth infused inequality improves the lives of those on the weaker side of the economy too, in balance, but at the same time, they also admit that it does little to reduce the gap between the two extremes - crazy wealthy and desperately poor. Growth, the world must have, as, without it, anywhere between 1 and 2 billion people across the globe will die of starvation. You might wonder why I say inequality makes the case in favour of outsourcing? “Shift and Lift” & “Same mess for less” were common terms that the western world used when they had to make an unofficial argument to export jobs east.

Yes, it is the snobbery of the developed world, but of a kind that gives hundreds of millions of people in the underdeveloped world a chance at life. Imagine if India did not export the fruits of its cheap human labour to the west, what % of India would have been penniless looking into an abyss of hopelessness? The thought alone will intimidate you, to put things in perspective, it will be close to 150 million people, without any source of income.

All outsourcing however is not created equal.

The society operates hierarchically, and business calls its regime-  ‘band’.

Human history gives enough evidence for us to know that as society progresses and becomes technologically advanced it renders the least complex and the most repetitive of its tasks to machines, leaving smart humans with time and energy to concentrate on solving intricate mysteries of the facets of the ever-evolving world. “Cognitive capital invested on relatively simpler tasks does not give satisfactory returns”, as a principle has been known for ages. Let’s use this frame to understand outsourcing.

Outsourcing exists in every industry that operates on planet earth. Let me give you a few examples. 

• Apple manufactures in Asia. 

• An overwhelming majority of software developers in cities like Bangalore, Hyderabad, Chennai, Gurgaon, Pune etc are developing and maintaining software owned by the west. 

• Third world countries (the third world is not an economic classification but a political one, countries that remained unaligned in the cold war era were given this label. Singapore is also a third world country), do financial accounting, transcription, translation and even train machine learning models with real-world data.

• Phone sales, customer service, credit card operations, travel logistics and loan processing - need I say more?

The way to classify the ‘band’, that I spoke about earlier is to judge a task by this simple standard.

• Have the people involved in outsourcing been academically trained in the same field? 

• Specialist outsourcing: If the answer to this question is a yes. Then you know that you are talking about high-value outsourcing. Like software (development and support), hi-end manufacturing etc.

• Generalist Outsourcing: If the answer to this question is negative, you know that what is being spoken about is low-value outsourcing: call centres (anything to do with phones), transcription, etc. 

At this point, you may be wondering why am I only insinuating about stronger currency hiring weaker denominations in the context of outsourcing? And you’re absolutely right, same currency outsourcing is a reality too. In fact, in the absolute share of manpower, it is roughly 60% that of all people working in outsourcing, but in revenue terms, it is just about 30%. You might wonder why 60% of people generate just 30% of the value? It is owing to the facts, listed below. 

• A vast majority of this outsourcing is generalist in nature. So unit pricing is abysmally low.

• The capital that enables politicians to try their electoral fortune comes from corporations, which want the minimum wages to remain as low as possible so that industries can remain competitive in the world market. As a result of which cheap labour is found in abundance, here.

• 98.99% of the tasks that these generalists perform can be automated, therefore, to remain relevant they are forced to operate at a cost that does not give the outsourcer compelling reasons to go all out to automate the workflow entirely.

Thus far we have covered the economic basis of outsourcing. Let us now look at the brief history of outsourcing in India. I shall focus on the BPO side of things, if you know me you’d know why and if you do not, read other articles on this subject that I have written and you’ll know.

Business historians classify outsourcing in these three different eras. 

The beginning of traditional BPOs from the 1900s to Mid 2000s.

• This was a straightforward period when consumerism was beginning to take gargantuan shape. The west needed a cheap solution to sell and service their customers, they started looking for countries that spoke their language reasonably well and offloaded the work to them. As they engaged with the east in this context they understood that they have tapped into an infinite pool of motivated, hard-working, sincere, hungry for growth cheap labour with plenty of skills to pull off generalist jobs well.

• Tasks after tasks kept pouring and India benefited by having an avenue of employment large enough to engulf its vast semi-skilled workforce.

• Wealth creation led to an increse in demand and indigenous manufacturing and distribution and real estate gained from it. 

• A high density of phone connectivity in the west enabled it.

The Medieval BPO Era: Omni Channel BPO 2000s to Late 2010s.

• West felt the need to cap their costs after nearly a decade long free for all outsourcing party. From this directional change, Indian players started offering goodies like process re-engineering, downstream innovation, process transformation and commitment to productivity enhancements, to keep the contracts alive.

• The phone was no longer the king of the reigns, the internet had made its entry into the homes (broadband) and in the hands (smartphone) of people. Asynchronous support channels gained ground, chat and email became popular too. 

• Other forms of work like simple MIS, basic data analytics and accounting processes also boomed in this era.

• In this period, the proliferation of phones picked up in India too and with it, large corporations began outsourcing their tele support, chat and email work to BPO service providers. Domestic BPO became a viable business. 

Contemporary Era (A): Insight-Driven BPO late 2010 and pre-pandemic.

• Corporations that had just come out of the slowdown in the west needed to tighten their belts. With great force, ‘lean and six sigma’ and similar standards became a part of the everyday routine for the Indian BPO industry. Providers burnt the midnight oil to achieve more with less. ‘Cutting waste’ became the mission of over a million people. As a result, a slew of process and product innovation made its way into the still flourishing industry.

• ‘Analytics with process transformation’ occupied the focal point of the industry.

        + Data-led process transformation.

                + Informed Insights-enabled digitisation.

    + Automation

+ Simple fetch and tell BOT.

+ Desktop automation.

+ RPAs.

 

Contemporary Era (B): Automation driven support late 2010 to Pandemic.

• There is a significant overlap between these two phases of outsourcing that is on account of the evolution of the outsourcers. Not every company woke up to the magic of automation at the same time. In Era A we have spoken about how the laggards of the industry reacted. In this section Era B, we are going to talk about the leaders and technology-first organizations. 

• The business landscape for the evolved part of the economy changed to proportions imagined by no one. The start-up revolution completely changed the way the world looked at business operations. Companies decided to trust algorithms for all rule-based tasks. Organisations like Ola and Uber were born, which was completely devoid of transactional support, the ‘application-only-operation’ became a thing. I know some of you are thinking about the brief period when both Ola and Uber used to take bookings on the phone. I must remind you that it was a period in which the organizations were educating the customers about this new technology, app-based operation. As it gained critical mass on the application, phones were switched off.

• Cheap data and economical smartphones came within the reach of the common man and what the west had experienced half a decade ago became the story of the economies of the eastern countries, too. 

• The organisation started working to reduce repeat with maniacal focus. Self-help was made cool.

• These technological advancements made their grand entrance into the scene, as well.

• Conversational AI.

• Advanced context-aware chatbots.

• OCR.

• Speech to Text and back to Speech - the whole cognitive stack. 

• Data modelling and advanced analytics. 

• ML gave machines an edge over humans involved in generalist tasks. 

• The little that was left of the traditional market was overwhelmed by the pandemic, which forced people to not only get acquainted but also comfortable with using support platforms and the internet for fulfilling their needs.

These advancements took away the winds under the wings of traditional BPOs.

• The technological solutions in the medium to long term became economical than a human doing a generalist task. 

• The efficiency gains of machine-made humans look unattractive. 

• Transparency, accuracy and ability to generate rich structured data from automated operations made generalists appear like chimpanzees in comparison to machines.

In the last two years of the pandemic alone the size of BPO has contracted to the extent of 24%, the 2/3rd that is still left is being slated to go down to half, in the matter of the next 12 to 18 months.

Why could the BPO industry as a whole not evolve with the changing market? Is a fascinating question, whilst answering that is an entire article in and of itself, I would say that ‘hyper inward focus’ is to be blamed for the ruins of the industry. The fact that this sector has not been attracting fresh capital for over 5 years now is somehow not catching their fancy. The aged leadership teams (50 Yrs +) has personal stake in keeping the charade on, as this late in the career changing stream would be impossible for them, so they shrewdly keep knitting stories of potential and show the 20% floating clients (who keep moving from one BPO to another) as territory for expansion to the promoters to keep their jobs going.

Much like Kodak, BlackBerry and Nokia were too busy with the make-believe world that they had created for themselves BPOs too are living the illusion of sustenance. The real world however has moved on, taking lesson from colossal failures of these one time giants.

Future of the BPO industry

• BPOs that metamorphose into tech products and platform organisations will survive and come out stronger on the other side of the churning. 

• Organisations like Concentrix, Wipro, WNS, Teleperformance, Infosys and Tech Mahindra are on the right track.

• The BPOs will have to find a way to put the great understanding of customer behaviour, their needs and wants that they have acquired over the last 2 decades, into developing tech products that solve the most pressing support questions of the day.

• They will have to move away from transaction handling and become consultative organisations that handle end to end customer journeys and not just what happens on the phone/chat/emails.

• Designing service philosophy and related processes.

• Budgeting service operations.

• Developing and deploying the platforms for support.

• Owning to the business outcome and billing for output rather than time spent on the job.

BPO that successfully catapults into an organisation that has skin in the entire vertical stack of service will not only survive but thrive.

Remember, what I opened this article with, outsourcing is here to stay - old devices of outsourcing (voice) will have to be given up in favour of new tools (cognitive tech).

With that, I would like to end this.

See you on the other side!

Till then stay safe and take very good care of yourselves. 

Remember vaccinations save lives.

BPO : Yesterday, today and tomorrow!

 ‘Business process outsourcing’, expansion of a three-letter word, BPO: brings food on the table of millions of Indians. This industry employees people in scores and mostly from the segment of the society in need of dire uplifting, immediate infusion of funds to make survival possible. BPO in the last 20 years has successfully created a new breed of the middle class, a layer just above the poverty line; a zone of youth, energy, aspirations, and dreams. The socio-economic classes above this layer snort at this group of hardworking professionals mostly because they consider call centre workers less educated (70%+ are indeed not even graduates) and not particularly well off (60%+ make just about minimum wage). Social stigma and prejudice are associated with this group all too easily and all too often. I have spent a portion of my professional career in this segment, working alongside women and men who bear the cross of biases proudly.

You should know this though that the thing about stereotypes is that ‘not all of them are based in reality’.

In my experience, I have found this group to be enterprising, smart, hardworking, sincere and forward-looking. These assemblages are also uniquely liberal, vocal and willing to participate in the change: both societal and those that shape the contours of business and economy of the country. This constituency is often not given the credit it deserves for taking 'working nights' into the mainstream. Outsourcing service providers are also not given the accolades it merits for bringing in young women to the workforce - paving way for social equality and financial liberation of the gender neglected for far too long. This industry is also the reason why computing and smartphones could become popular in an otherwise technologically backward country, like ours. A first close look at a working computer happened in the training rooms of their employers, for these millions of Indians. So in a way, the groundwork of creating a country that is conversant with computing and digital way of working has been prepared by this industry too, to the extent of its numbers.

1st decade of boom, followed by fast-paced 5 years and then the last 5 years of transformation was punctuated by the pandemic in early 2020. Things began looking shaky. It, however, did not take too long, for things to change completely. Let’s take one metric - work from home.

• Before pandemic.
  • Less than 1/10th of the workforce was working from home.
    • Only about 4 out of 10 in these 1 out of 10 used to be from the front line.
• A year in the pandemic.
  • 56% of all operations (at the peak of the pandemic) shifted base from office to home.
    • The rest did not or in some cases could not, for:
      • Logistical roadblock - transportation of computing infra and broadband connectivity.
      • The willingness of the clients to operate in the slump.

A study conducted says this :

The industry saw a double-digit decline in managed services in the second quarter of this year, with total global spending down 16%. A Deloitte poll conducted in April 2020 showed that 32% of businesses believe the end of the pandemic will bring with it a reduction in outsourcing.

One would assume that with things stacked the way they are, this industry would have lapped the change and must be working hard to re-invent itself, while it is true for a small and progressive section of the industry, the majority are still prisoners of the past - and in this reluctance to change lies the biggest folie of this otherwise upbeat industry.

A survey was conducted to find out how the workers would like to continue work in the future?

• 46% of the staff said that they are willing to continue working from home, as it helps them do better and also gives them time and resources needed to take care of their stuff at home. A win-win situation they say.
• The balance, 54% wish to return to the office.

One might think that aggregation of how individual employees think may not be enough for us to conclude how the industry as a whole thinks; especially the leadership. And there comes another segment of the study which, for the lack of a better term is - Perplexing.

• Only half of the BPO leaders think that the delivery, infra, environments, objectives of operation will change after we would have seen the pandemic off. The rest which is another half of the industry leaders believe that as soon as it is over, it is going to be a return to yesterday’s years. People going back to brick and mortar, office-based production.

A half is a significant volume which is still not for the permanent change, therefore - it is safe to assume that, what we are going to witness will bear the semblance to a hybrid model.

The question, however, is that is this the right approach? Will the world be better served with it?

Well, I for one, believe that this industry has reached a breaking point. What do I mean by "breaking point", you might wonder?

Here, 

• Believers in BPO will continue to pump capital and also see a surge in volume in the medium term. The assignments that the large players leave, don’t drop dead right away it first goes to the smaller operator for some time and then moves to the automation assembly, if not to the bin. This in-between period can be confused as the period of growth.
• Powered by popularity and simplicity of 'digital and distributed operations', the cost of entry, a barrier, has evaporated suddenly, which is bound to result in a spurt in a number of small players, (less than 500 seats). They too will get business in the medium term, the same waterfall logic of the economy will support them.
• Shifting demands - will create the illusion of growth.

So then the question is that, will such a strong economic force, a force for the good suddenly disappear? Will BPO become extinct in the next couple of years? The answer to that question is no. It won't, it will exist for some more time but just as landlines survive today but they do not mean much in the grand scheme of things. Like Smartphone has taken the place of PSTN, cognitive conversational AI-based tech solution will oust the current phone-based BPO industry. I pray, that it should not be seen as a bad outcome, 3 decades of glorious run built on an army of semi-skilled workforce generating billions upon billions in revenue is not a mean feat but as with most things, we are at the cusp of massive change, witness the change as it is happening.

I believe that what will become of the BPO industry can be understood by these phenomena.

Business Offering

• Voice to Technology: Primary offering of the BPO service providers will have to shift from phone-based conversational service to Technology platform based servicing such as no-code augmentation of ChatBOTs to the maintenance of Voice BOTs. BPOs will have a role to play in the training of the voice BOTs and other RPA operations. From 100% delivery to 90+% Audit and training that is the domain in which outsourcing is to shift.
• Voice to data: Data cleaning, alignment and error correction in upload and running of data operations, will be a new line of business for the BPO.
• Frontend operations to backend: Backend controls to do with designing and maintaining workflow operation will be another source of revenue for the BPO of tomorrow.

Operating Model

• Outcome-based billing: Transaction-based billing is soon going to be a thing of the past, servicing will be measured by outcome. So instead of how many calls/email answered (AHT based billing) to conversion/satisfaction based billing will kick in. Organisations are going to come out of volume game in the near future and focus on the delivery of the business KPIs exclusively.
• Distributed work: Work from home is a reality that can no longer be suppressed. This change is destined to alter the very concept of business continuity planning and execution.
• Lag in operation: Service operation is going to shift from current 'real-time' arrangement to 'scheduled framework' which will reduce the application of strengths of labour arbitrage. The volumes will become more and more predictable rendering WFM less and less applicable.
• Consultative Solution: BPOs, are poised to play a key role in the design of processes and will be involved in operations related to processing re-engineering, identifying errors in automation and in training the Artificial Intelligence models. Service philosophy design is also going to become the forte of the high-end BPOs.

People and culture

• Low-end data work: Bulk hiring of people who can conduct basic data Ops, to do with learning from and training of data models will begin.
• Upskilling: About 30% of the current staff will be upgraded to work alongside the machines on either data cleaning or audit/training of the models.
• Openwork,: Gig economy, specialised roles in BPOs are no longer going to be full-time employment roles, subletting of work and employing talent on a project basis will become the compulsion of the cost model that BPOs will have to operate under.

Sooner the industry accepts the facts as they stand today, the better will the next version of the industry be. I am excited to be a part of this inspiring change.

Do share your views with me on lk@lavkush.co.in

Have a good Sunday!

Future Outlook: Indian BPO Industry

The article “Outsourcing 2.0, the future”, that I wrote on 24th of Feb 2019, has been generating a lot of interest in the BPO industry as a result of which my inbox is full of requests for a write up addressing the specifics of the Indian BPO/BPM industry, so here I am! I’ll link the article towards the end of this one for those of you who would want to read it. Before we talk about the future of the BPO/BPM industry, I think it is vital to dwell upon its history a bit to understand, broadly, how it came into being and why it is important to a large section of the society, beyond the economic circuit. Outsourcing started as a cost-saving major, developed economies started shipping non-core, low-value jobs to destinations which had labor skilled for the job available in large numbers. India became a popular destination, thanks to its colonial past which indelibly impacted the creation of curriculum for primary education in the country, even post-independence. English is taught as one of the three languages that all Indian students study. We’re also a country with a good supply of human capital (one of the few benefits of out of control population bust). For a little over 3 decades, the business of outsourcing has been blossoming here.  A democratic, aspirational, developing economy that had just got liberalised, made a perfect breeding ground for the service industry to thrive. This business model brought with itself prosperity, it created billionaires, millions of jobs as direct benefits, indirectly too, this new phenomenon in the post industrialised world, gave an unforeseen boom to the real estate industry, among others. Cities like Gurgaon, Hyderabad & Bangalore owe all of its development to this single industry. The story has not been one with all positives though, it has seriously dented spread of higher education in India, a significant portion (68.32%) of those who started earning in this industry before completing their bachelors did not complete their higher education. As a result of which their long term growth prospects got stunted, but then it also boils down to personal choices that people make and it will be unfair to blame the industry for this entirely. Business standard says and I quote “The IT-BPO industry grew by 8 percent in 2017, leading to an aggregate revenue of $154 Billion. Further, in 2017, the BPO sector contributed 7.7 percent to India’s GDP”. I pull this stat up to familiarize you with the enormity of its economic spread.

The rationale behind sustaining large workforces emerged from the difference between wages in the US and in India; for a certain set and category of jobs, the delta was so huge that even if an inflation of 8% were to be applied on annual Indian wages it would’ve taken more than 3 decades for it to become comparable, in the days of early germination of the Industry. Right at the base of this rationale was the confidence that the wages will grow stronger in the US also, at least at the rate of 2 to 5% year on year. Reality did follow this plan but for a duration a lot shorter than what was expected at the beginning. Let’s just say progress happened rather swiftly. I know you are tired of hearing of ‘technology, the devil’, but I’m here to tell you that it is not the only contributor, it certainly holds most of the chips but there are other factors too which can’t be ignored if the goal is to understand it clearly and should I say comprehensively. Without getting into too much detail, let me quickly outline a few factors, which are noteworthy.

Global Recession: It taught corporate America cost-cutting, non-core tasks got axed first. Optimization becomes very core of running a business, post the meltdown.

Smartphone : Post Blackberry, both Apple and Android smartphones opened up the floodgates of application that ran comfortably on handheld small-screen, always-connected devices, people learned to do basic stuff themselves. Popularisation of self help as a cultural imperative in the west akin to modernisation propelled industry-wide restructuring of customer education/support organisation and cost.

Internet: Proliferation of internet reduced lag, empowered people to access information in massive quantity and mostly free of charge. It enabled the culture of comparison, making decisions informed, calculated and in many cases swifter than before and most importantly independent, in an unassisted manner. 

Automation: Robotic process automation, text to speech, AI-powered BOT, advance analytics, computer vision, OCR, virtual reality, mixed reality, augmented reality, internet of things: these changed the game completely. A structured task which does not require cognitive decision making or understanding of context can be automated at an astonishing speed and at a surprisingly thin investment.

Job crisis in the west: Economy in the developed world slumped, jobs that were being sent outside to developing countries to save cost suddenly started getting perceived and then projected as the reason for natives losing livelihood. Political movements around the world gained momentum which forced legislators to regulate offshoring.

Geopolitical shift: Politicians around the world submitted to ostensibly right-wing stance to solve job crisis that they were facing in their countries. Public opinion on imposing penalties for sending jobs outside gained ground. Crashing domestic consumer demands exerted additional pressure on the governments. 

Territorialism: Rise of protectionism, opened the world to Trump's America and Brexit in the UK.

All of these factors started stressing the growth of the outsourcing industry hugely. Voice-based businesses, the cash cow of Indian BPO majors started growing pale. Majority of high-value voice business in a matter of 4 years got converted into backend jobs; there too, whatever the tech at the moment couldn’t accomplish accurately comes to countries like ours. It won’t be wrong to say that the BPO industry of today is surviving on the breadcrumbs, quite literally. Large players because of their size they are able to aggregate more, and given the fact that the size of the western economy is still huge when compared to ours, the leftover is satisfactorily satiating the hunger of the big guns. But writings on the wall is unmistakably legible now which has forced progressive organizations to look for greener pastures elsewhere. We’re at the beginning of the end!

Organizations are not ideal, we do witness them facing up the challenges in ways that they think is best. Let’s try and briefly touch upon how the industry is preparing to answer the question that is questioning its very existence.

Large corporations: They have the luxury of wealth, geographical presence and size, intellect and prominence, they are smartly diversifying into newer arenas; Data, digitalization, process re-engineering & consulting being a few of them. They are making a significant investment of time, effort and money in upskilling their manpower in technologies of the future. Some of them have even shown the courage to shed low margin business and focus only on high-value contracts. It is all about operating cash and PAT now.

Mid Sized Organisations: This is a rather volatile segment in which some still see light at the end of the tunnel. The game of valuation at the moment seems lucrative in pockets. Consolidation is in progress in this segment, all the work that the large ones are not interested in doing for they either being low value or thin on margin is effortlessly flowing to organizations of this segment. Much like water flows from higher to lower planes, they are happily grabbing new businesses at the cost of margin, sometimes ignorant of the fact that what is flowing to them is not work that requires the real application of mind, most of it is basically two to five-step process. It with a small investment can be automated. Let me give you an example here, many companies have invested in the large establishment for the digitization of physical forms: jobs. The ubiquitous smartphone is digitizing the data at the very source, eliminating the need for forms to travel to the digitalization centers. This has wiped an entire industry away, in a blink. Love of fading times is not lost on them as yet. 

Small Player: The least said about them the better, they are running modern-day cruel body shops, disgusted with their business they are in it because they do not know any better and are willing to give an arm to anyone who can promise them a way out of the rut. Things have become so strange that even the champions of efficiency have lost their way quite literally. They are urging to be bailed out. 

So is it all grim and sad? Not exactly It is yet another cusp playing itself out. Outsourcing as a concept is not going to end, there will always be, ‘core and non-core’ jobs and there will always be a need for people to do things. But it is certainly the end of the road for those who are unwilling to move up the value chain, romantics of the past will soon become history, the forgettable part of it. The future belongs to those who are willing to experiment and wish to disrupt. 

Domestic players are in graver danger because they do not even have the cushion of exchange rates, extinction is staring at them in the eye. Single-digit PAT, which gets even weaker and uninteresting when depreciation is applied on it. It just does not make financial sense, to keep all your eggs in the basket of voice. It is bound to end, in less than a couple of years.

Please understand, you can’t make an omelet without breaking the egg!

The future in the outsourcing/service industry belongs to those who know to deliver intelligent end to end solutions and for those who have the wherewithal to make existing systems aware of context, efficient, accurate, reliable, secure and sustainable. Let me say again, the ‘old’ is progressing towards a demise at a dangerous pace. So what does the future look like? Simply put one of the two things.

1. Product ( tech or otherwise)
2. Data 

Tech products will get the job done and not humans in the days to come, the kind of work that does not require imagination and complex context-based cognitive decision making, as the first input. So, what should you do? Take a good hard look at what is it that you understand really well? Or simply which part of the entire business that you have existed thus far it should be automated, not as a work unit or set of tasks but a complete role. Let’s take the example of what Google, Apple, Amazon, and Samsung are doing with their voice assistants. They are trying to replace that person, whose sole job role was to hear the needs of the master and then go search for information and then come back with relevant details. What do these digital assistants do? You give them the same instructions that you would give to your human assistant but the output is so much better in areas that it has its command over; you get the results without discernible lag, so you prefer it. Not only does it make things simpler, quicker but also accurate - you get the point. 

Apply your mind, invite intellect to study what should you build to solve and then go for it. Due diligence that you would apply before making any important decision must be conducted here as well. Try to be objective about the whole thing, always remember that you have to accept change and that even when you do not accept it, it still happens, so no point, not accepting it. Remember, if you do not build it someone else will and you will be left to survive in the shrunken ground. First-mover advantages those who know how to pull off a great show, though. 

A for Analytics; yes this is the world that we are headed towards. Data is the new gold, new oil and everything else that makes sense. Data makes decision richer and those who know to model data in ways that make decision making better will see acceptability and will rule the next upturn. The science around statistics-based prediction is invaluable. Data is being used along with understanding from behavioral psychology and neural sciences to predict customer buying and consumption behavior. The ecosystem is currently not completely ready but is coming together at a great pace. The future belongs to those who can work with data & understand human behavior. 

In the same breath, we must also acknowledge that this change is not going to be a cakewalk or easily comprehensible to all but then we know from history that old makes way for the new. Unless some lose, others can’t win, so in that spirit it is ok! The bigger picture will still be just as heterogeneous, vibrant and happy as always; with or without people and business models and practices from the past. 

Towards the end, we must also spend a little bit of time in understanding what causes delusion, indecision & inaction? Why are these dying sectors not reacting with the sense of urgency that is warranted? Let me take you to that old frog experiment in which the psychologist turned the temperature higher at a rate slower than frogs ability to adapt as a result the frog died of heat but did not feel the need to jump out. Businesses also become comfortable with the status quo, they block their own sensors sometimes with over-confidence, comfort, or plain incompetence that surrounds them dressed as top executives ( brainless leadership team). Conduct a small experiment: for the last 30 years, pull top 100 organisations in any segment and then compare the list you will see only 8% survive beyond 1^st decade in the leadership position, the story at the end of the 2^nd decade is less than 5% and after the 3^rd decade the number comes down to 2%! 

Why? 

Because they did not change and thus perished!

I hope you, do!

Till we meet again, goodbye!

Link to: Outsourcing 2.0, the future!

http://www.lavkush.co.in/2019/02/outsourcing-2-0-the-future/

Outsourcing 2.0, the future!

It is impossible to attempt predicting the future without taking history into account; the posterior view of linear time. The history of outsourcing is intensely integrated into the history of the growth of the modern business enterprise, many believe that it rose in the second half of the 19th Century. Historians and economists in the past fifty years have helped us to understand this sudden and prominent phenomenon of growth, one such legend is Mr. Alfred D. Chandler, do read his work. Much has been said regarding outsourcing in the past couple of years. This business practice has suddenly grabbed center stage attention and is now the focus of politicians, the press, companies, and workers alike. Organizations in the outsourcing space are also constantly applying thought to understand how should they reinvent themselves to remain relevant, as they face their toughest challenge in the present era. A business that found its existing space between the value difference of a rupee and a dollar (speaking strictly in the Indian context) initially and in not too much time became a darling even on a transaction that was between the same currency, faces an existential challenge now. The rationale for the rupee to rupee transaction came from the differentiation of core and non-core tasks for an organization. Offshoring, mainly from stronger currencies to the weaker ones flourished for the first decade, almost fanatically. India gained immensely from this fad that was catching up. IT and ITES provided employment to over 3 hundred thousand people, major businesses,  houses came into being: Wipro, Infosys, Concentrix, HCL, Tech Mahindra, and many others. Companies in the western world saw value in saving money and at the same time dealing with a race that was hardworking, ambitious, hungry for growth, and also particularly skilled for doing the job just right.

The growth and meaning of outsourcing are increasingly getting flatlined; cost pressures are driving the value down, from the perspective of the service providers. The political scene around the world is not helping either, mass protests in favor of keeping the jobs onshore have become common. Major political events in the recent past have revolved around it, the rise of President Trump, the ill effects of Brexit; the mounting of obscurantists and protectionists ideologies around the world have hurt the prospects of the thriving outsourcing industry in our country. Both IT and ITES have suffered immensely, we do not see too many new players making a move. But thankfully, all is not lost. India is growing, one could argue that it could have grown faster had a few things not happened, but then those are hypothetical arguments; we remain among the fastest-growing economies in the world. A new breed of entrepreneurs have come into the fray and are solving real issues interestingly applying technologies that are now available at a much cheaper cost, than it would have been let's say a decade ago. The eco-system is ready. Would Ola or Flipkart have become such spectacular successes in 1980ties in India? The answer to that question is a clear no. Now is the time for it and it is a great thing to happen to us as a country, society, and also the economy.

If the political climate was unfavorable and stunting the growth of outsourcing agencies vigorously, the advent of technology: penetration of internet, the rise of automation, AI and ML are together making it almost impossible for small players to exist. Jobs that required humans back then are being done in a few taps a lot more satisfyingly and swiftly. ITES providers are dying a slow death, many are bleeding profusely with no real sight of a breakeven, let alone profit and prosperity. Many renowned businesses have done away with their domestic business or are in the process of walking out, Sutherland &  Mphasis are classic examples. More than 40% of small and medium domestic BPOs had to shut shop, in the last 6 yrs. The scene is not all that good for those who aren’t comfortable with being on their toes all the time, either. There are organizations like Aegis, Karvy DigiKonnect, connectQ, 1point1, Megus, etc who are trying to walk in the opposite direction of the wind and have created for themselves results that are not bad, if not all that encouraging, in all the quarters of the year. But there is hope. And that is exactly what we are trying to discuss here.

A workforce that began with handling transactions on prescribed SOPs have in these years become rich in experience and now have valuable insight into how various businesses are conducted, not only have they mastered their game of efficiency but have also educated and trained themselves on the craft to a degree that they now carry invaluable perspicacity into the world of the consumers and deep understanding of the technology that makes the customer experience come about. Cross-pollination of talent has graduated the industry into a formidable group, one that is capable of rewriting the rules of the game. This development is part evolutionary and part forced and therefore, not easy for everyone to get to.



The time has come for the outsourcing industry to shed its dead weight of unskilled manpower, onboard forward thinkers, and retain only high performers; the average and the below-average must go. This industry has to prepare itself to walk out of the shadow of the transaction and shine in the light of experience. It is apt for the service providers to fight for increasing their share of influence, the only way for them to exist is if they muster the courage to secure a seat at the thought leadership table. A transition from a low value, labor-based output to a high-value intellect based outcome will have to be made. Service providers will have to become providers of knowledge and acumen and not just efficiency.



Doing the job, quicker, better, and at low cost is no longer lucrative, there is a need to invent ways to do them differently, trying different business solutions. The construct of the ‘different’ is in making the delivery consultative, one in which the providers do not only bring manpower but also industry acumen, knowledge of framing service philosophies, the capability of defining experience, designing its machinery, and then delivering results which are second to none. Technology is here to stay, providers will have to befriend the trend, work towards creating the capabilities of automation in-house, start offering a data first, and voice second service offering. The conventional mode of isolated support on voice, data, and chat channels will have to be united into an omnichannel environment, flexible enough to extend the customers the choice to choose: voice or text, self-help or assisted guidance, with solid CRM integration, one that is capable of building context and providing for predictive customer behavior. Service providers will have to become solution architects. The change will have to be welcomed into the organization and the way of its inner working. If I may borrow from Robin Sharma;



All change is tough at the beginning, messy in the middle, and gorgeous at the end.



Here are a few things that service providers should do to transform.



De-age your leadership team - All of those 25 to 30 yrs + experience folks are good, they bring a lot of value but if they are made in charge of driving transformation, it wouldn't come about just as swiftly or effectively. You need to bring in a fresh perspective, bright and young people with the required skillset to populate your leadership team. Studies have shown that after a certain age and getting certain success in life the fire in the belly goes off for 98% of the people and that alone is a reason for you to look at your leadership team to see if you have such satisfied people around? If so, it's time for you to get people who relate to the change and have a better handle on contemporary settings and above all are willing to walk that extra mile and have the desire and the determination to make their mark.

Alter your service offering - Your service offering has to be a happy marriage between technology, business acumen, skilled manpower, and growth infrastructure. You’ll need to modify your solutions for them to make sense to the market and the customers that you wish to service. You need to be able to partner with the organization with which you are doing business with offerings, creating service strategy, forming the budget, laying the logical and physical service infrastructure, sourcing, training, execution - all of it. You need to take a leap from business process outsourcing into the realm of experience outsourcing.

Responsible billing model: Try to slowly move away from transaction billing to outcome-based invoicing. It is not going to be easy. Today you bill for transactions (calls/email/chat) you handle tomorrow you’ll charge on outcomes, let’s say a threshold of customer satisfaction, first, call resolution, churn %, repeat purchase, etc,  keeping the service cost below a certain limit for the exchange of x% of profit. I’m just saying. Commercial viability will have to be worked out but if service providers have to grow in the value chain they will need to value outcomes more than a transaction. And in the process will come into effect a high-performance culture because then the substandard outcome will mean substandard billing. Focus on performance will be much higher. And because it is a high-value job .. service providers will get to command much better prices.

Driving innovation as a core product: Organizations will have to increasingly invest in a thinking workforce, currently, the focus is only on doing (executing) which is why you have a mob of the unintelligent and the uninspiring, who are satisfied doing what they have always done, without thinking of finding different and better ways of solving the issue. Service providers will need to get creative, run of the mill thought processes will have to be now killed, deliberately. For the culture of ideation to thrive within the organization, leaders will have to reward thinkers, demonstrate a willingness to accept the nonnormal and above all, they will need to give the message that they value thinking as much as they value doing, if not more. Take up a few high-value high impact ambitious projects and run them so that the workforce has something to relate to.

Decentralize work (WFH): Cluttering the real state in today’s world is not only ineffective but also inefficient - the outsourcing industry will have to learn to ‘work from home’. A model that is a mixture of on-premise + Work from home has the capability of bringing the billing cost down with leaving larger room for service providers to expand profits, alongside creating a more independent, flexible, and happier workforce. I’m not even counting the environmental benefits of reduced vehicular traffic or saving of travel time, here. For far too long leaders have seen the outsourcing industry set up to be like manufacturing, that must change NOW!

Diversify into Tech Products: Voice can and should not be your only stream of revenue. You’ll need to create a 1st party tech platform/solution to survive.

Gartner says that by 2020 85% of the transaction will move to the unassisted category, the machine will take over man, we already see that reality manifesting itself in our day to day interaction with the world. If service providers do not invest in this critical adaptation now, they will soon be extinct.



On that note, I end this .. until we meet again.