Business Process Outsourcing – shifting the paradigm toward efficiency and cost-effectiveness

By Tennille Bell, General Manager: Sales at Programmed Process Outsourcing (PPO)

Business Process Outsourcing (BPO) has been around for longer than most people would imagine. Established after World War II, BPO gained traction in the late 1980s. While many still associate BPO with outsourcing call centres to foreign markets, BPO has expanded worldwide since then as more companies realised the benefit of reducing costs, increasing efficiency, and boosting customer service, all of which fast-tracked business growth while working with fixed, scalable resources. BPO, now a $26 billion global industry, has infiltrated almost every sector in every industry with the proliferation of the internet and digitisation. Yet South African businesses have been behind the curve on the uptake, reluctant to adopt this business model despite irrefutable benefits. As such, we must ask ourselves: is it a case of misperception that hinders the uptake of BPO in South Africa? Why wouldn’t businesses want to become more efficient and profitable? How can we correct these perceptions and help business owners to unlock the benefits of BPO for themselves?

What is Business Process Outsourcing?

BPO is a business model whereby an organisation contracts a third-party service provider to perform an essential business function. While such processes are essential to the running of the business, they do not form part of the company’s core value proposition.

BPO: brief historical context

In the early 2000s, organisations were concerned with world domination and, in their endeavours to expand their global footprints and increase competitiveness, businesses were quick to take advantage of the value delivered by BPO service providers. Initially outsourcing back-office operations to save costs, the advent of the internet enabled BPOs to completely diversify their service offerings. They began managing other important aspects of the business – from accounting to data processing to human resources. Today, technology developments have empowered BPO providers to offer high-end capabilities, often incorporating multiple competencies to deliver increased value to their customers, by assimilating disparate products and services. This transformation aligned with the global proliferation of cloud-based services and technology, marking the dawn of the Everything-as-a-Service era.

Changing South Africa’s change resistance

South Africa is behind the curve of technology and business trends.  However, BPO is a trend that has the potential to fast track our post-Covid recovery and set us firmly on the path to economic growth. While there might be some resistance from a labour perspective, it needs to be clarified that BPO does not seek to replace jobs or workers. It seeks to make businesses more profitable and efficient and enables opportunity for job creation through growth and innovation instead. Through BPO, companies contract out business functions that are not core to their revenue generating activities. While there is some concern for business owners that contracting out business functions means a loss of control over those portions of the business, they may be relieved to learn that these functions become subject to Service Level Agreements (SLAs) which are run entirely by the BPO with the sole purpose of meeting KPIs to improve efficiencies. This means that the BPO provider assumes accountability for performance in managing the relevant business processes in their entirety.

Unpacking the benefits of BPO

What happens when a company outsources a non-core business function? The BPO provider steps in to completely re-engineer that business function with the intention of streamlining operations and maximising output. Once a more efficient way of working has been established, processes are monitored on a continuous basis to identify even further opportunities for efficiency. This leads naturally to increased productivity, better utilisation of resources and decreased operational costs. More importantly, it results in increased profits and enhanced risk mitigation.

By outsourcing to a specialist BPO, businesses gain access to immense industry expertise, from human and industrial relations to legal expertise, through to operational and financial expertise. From a labour and operational perspective, BPO providers assume all the compliance obligations in terms of the National Labour Relations Act, as well as responsibility for union engagement and employment equity. From a health and safety perspective, outsourcing means enhanced health and safety compliance. Now that these compliance burdens have been removed from management, the company is now free to focus on those portions of the business that generate revenue. There is more time to focus on finding new avenues to market, because business owners are not caught up in the daily grind of operations and do not spend their time putting out fires.

Shifting the paradigm to efficiency and productivity

As economic conditions continue to get tougher, South African businesses will find themselves struggling to remain competitive. Cost-cutting exercises will no longer be sufficient to ensure survival as it will no longer be enough for businesses to just spend less. Instead, they must find ways to do more with less. Here, businesses should look to partnering with an established, trustworthy BPO provider. Companies that outsource their non-core business functions to a BPO partner can show they are transparent, legally compliant, and financially stable. In this way, companies will be able to ensure they remain competitive, while laying the foundation for business growth through efficiency, productivity and ultimately by creating the right conditions for innovation through the Everything-as-a-Service business model.

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