How much of an impact has the financial crisis had on the BPO industry? And what has it meant for BPO locations around the globe outside of India?
Market uncertainty since the financial crisis has led to a conservatism which has forced companies to delay their decision making, concentrate on reducing operating costs, and focus on short-term objectives. At the same time the demand for protectionist measures is also becoming more forceful.
In their latest 2010 Market Vista report, Everest argues that the global outsourcing market has rebounded well with the overall number of outsourcing transactions increasing from 1,730 in 2009 to 1,979 in 2010. The recovery is being led by North America with Banking, Financial Services and Insurance and Manufacturing, Distribution and Retail continuing to dominate. Together these two verticals represent 35% of the total market in 2010 compared to 30% in 2008. Recovery in Europe is being spearheaded by the UK with a global overall share of outsourcing transactions of 14% in 2010. Everest reports how offshore suppliers on average continue to outpace traditional global service providers with growth of nearly 30 % in 2010 whilst traditional global providers have lost ground.
Significantly, Everest predicts a consolidation in the Tier-II service provider landscape in the near future citing recent M&A activity such as Hewitt and AON, Atos Origin and Siemens, IBM and Netezza. This kind of activity underpins the change in market structure by showing that the consolidation of vendors will reduce risk as will less focus on arbitrage and more focus on quality. Everest concludes that Africa can benefit from this market shift and can become the new frontier in global services.
In February this year, representatives from South Africa participated at NASSCOM’s leading industry event, the “India Leadership Forum”. The forum backed up many of Everest’s observations. With over 1600 delegates from 32 countries participating in the conference, it was used as a platform to show South Africa’s role in the future of the industry. Keen interest was shown around the discussion of “global delivery strategy” with two prominent Indian BPO companies, Genpact and Aegis, explaining their decision to base operations in South Africa and how they will use the country as a gateway to the rest of the continent.
Genpact and Aegis highlighted the strengths of the South African value proposition with its English speaking capabilities and cultural affinity to the UK. The world class infrastructure, placed under the critical global spotlight of the World Cup, was applauded, as was the stable political environment. Preference for a similar legal and regulatory framework also plays an important role in the decision making process. On the cost side South African government officials from the Department of Trade and Industry were able to demonstrate South Africa’s competitiveness by explaining the new incentive scheme which reduces costs by an impressive 20%. In the last 24 months, five of the top 10 global voice companies have moved to South Africa making it the third largest low cost offshore location for the UK market and I believe we will be seeing further investment, from both UK and Indian companies this year.
As global financial uncertainty has lifted, we are witnessing a much higher level of interest in the BPO offering in South Africa. Most recently Amazon has opened its doors with 1,000+ seats planned and the level of activity for inbound missions has also increased substantially. Recently a large Indian BPO provider came to the Cape Town to view operations on the ground. Why? “Because our clients are insisting we deliver a more global offering”. Their excitement after engaging with local industry representatives confirmed that BPO has a strong future in South Africa.
Recently we showed a major UK telecom company the Australian iiNet site which is being run by Merchants. The iiNet environment is increasingly governed by new metrics such as Net Promoter Score which underlines the relevance of managing the customer experience in a holistic manner. The site received rave reviews from the UK visitor. Aegis, too, also stresses the importance of ensuring that “customer service process outsourcing is not about cost cutting but is seen as an investment to retain customers and enhance the customer experience”.
The combination of global players entering South Africa’s BPO market with the already flourishing local market highlight the country’s key role as a hub for BPO’s global services.
