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/