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Is BPO Ready for Disruption


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Keynote Presentation by John Willmott, CEO NelsonHall at the BPO Innovations Conference held recently in New York and hosted by the Outsourcing Institute

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Is BPO Ready for Disruption

  1. 1. State of the Industry: Is BPO Ready for Disruption? John Willmott, NelsonHall Outsourcing Institute BPO Innovations Conference, New York October 30, 2014 © 2014 by NelsonHall.
  2. 2. NelsonHall – The Leading Source of BPO Information at Half the Cost Independent & objective information • All analysis by onshore analysts (U.S. & Europe) • All research interviews carried out by analysts – no online surveys, no vendor form-filling • Process domain experts with global remit • 16-years experience in BPO market and vendor analysis • Independence & objectivity – not amplifying the hype At half the pain and cost • Proprietary stage-by-stage screening of vendors “speed-to-source” • Half the manpower of Internet searches • Enterprise level licences to facilitate collaboration With analyst access to ask the difficult questions © 2014 by NelsonHall.
  3. 3. Topics © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 3 1. How have BPO Client Needs Evolved? 2. Disruptive Forces Impacting BPO 3. High Velocity BPO
  4. 4. BPO Buyers Get More Demanding as They Mature Important in 1st Generation BPO Important in 2nd/3rd Generation BPO Attaining, or improving position within, top-quartile operations cost © 2014 by NelsonHall. Integration into Global Business Services organization Ongoing ability to deliver innovation within operations Increasing automation of operations Supporting full geo coverage of organization, incl. supporting entry into new countries and markets Improving controls, compliance, and standardization of operations Ability to support the client in their business vision Client expectations of BPO vendors generally much higher generally than they used to be, e.g., of their: • Process knowledge and process analytics (increasingly seen as a hygiene factor) • Knowledge of the client’s business, combined with the ability to support them on a journey • Ability to deliver transformation and contribute to C-level vision NelsonHall-Proprietary – Not for distribution without permission 4
  5. 5. It’s No Longer About Cost Reduction. Is it? Most Important Objectives in Next BPO (Top Four: Prompted) © 2014 by NelsonHall. High Importance in Supplier Selection (%) High Importance in Differentiating Between Suppliers (%) Commitment to deliver ongoing year-on-year cost reduction in operations 93 97 Commitment to delivering business outcomes 86 97 Ability to amortize initial transition costs as ongoing service charges 79 76 Willingness to flex cost down as well as up in agreed timescale 45 83 NelsonHall-Proprietary – Not for distribution without permission 5 Cost-Related BPO Vendor Differentiators Challenges for buyers & vendors • Operating end-to-end across operational silos • Who drives change? • How do I still make a profit?
  6. 6. Disruptive Forces Impacting BPO Some Examples © 2014 by NelsonHall.
  7. 7. The Robots are Coming: Is this the End of BPO? © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 7 Where is RPA Currently Being Deployed Implications for vendors: • Getting to client first • Rapidity of change - short cycle-time for implementation • Maintaining revenues and margin • Maintaining deep understanding of standard operating procedures • Make or buy? BPO Activity Proportion of RPA Activity (%) Data extraction & enrichment 50 Performance analysis & reporting 25 Self-help query resolution 15 Multiscreen integration for users <10 Compliance <10
  8. 8. Analytics Becomes All-Pervasive © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 8 …and increasingly predictive Analytics used to be an add-on to identify process issues as part of a LEAN Six Sigma project but now increasingly embedded in process and predictive Implications for vendors: • Real-time drill down dashboards need to be built into all services • Performance against benchmark & goals • Increasingly focused on business actions and not just process improvement BPO Activity Areas where analytics being applied Contact center Speech and text analytics Next best action/propensity engines Social media monitoring & lead generation Marketing operations Price & promotion analytics Campaign and media mix analysis Store performance Financial services Model validation KYC/compliance Procurement Spend analytics
  9. 9. Labor Arbitrage is dead – long live labor arbitrage © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 9 Reports of my death were greatly exaggerated Implications for vendors: • Serving emerging domestic markets requires greater fragmentation of delivery centers as does moving up the value chain • Agent diversity continues to increase • The contact center refuses to die In spite of automation, mature “International BPO” services now being transferred to tier-n cities • Labor arbitrage is good • Reduced attrition is even better • Rural centers in mature markets Growth in domestic markets: • Small now but opportunities in emerging economies are growing especially in areas like customer management services • Bangalore and Cape Town are great for “International BPO” • Jamshedpur and Port Elizabeth more appropriate for domestic markets
  10. 10. Digital Renews Opportunities in Customer Management Services © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 10 The need to combine people skills and digital skills gets ever more pronounced Implications for vendors: • Need single-view of the customer & linked multi-channel delivery • Need to be able to analyze and optimize customer journeys • Need to recommend next best action both to agents & through digital channels • Differing channels need differing skills • Agent recruiting & training & motivation more important than ever • The web site is becoming a critical part of customer service Channel Proportion 2014 (%) Equivalent 2017 (%) Voice 56 41 Non-voice 44 67 Customer requirements • Combined CSAT improvement and reduced cost to serve » Reduced customer churn » Increased first call resolution rates • Reduced levels of shopping cart abandonment • To enable voice agents to focus on complex or high value interactions • To be taken seriously as an online business
  11. 11. Will Software Destroy the BPO Industry? or Will BPO Abandon the Software Industry? © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 11 Pros and Cons of COTS Software vs. BPO “Components” Questions for vendors: • How do I maximize my IP? • Will “make” be more cost-effective than “buy”? • Can I get a much more coherent combination of processes, dashboards, and analytics this way? • Where do key tools not exist? • Can I maintain the focus on services and not be tempted by software sales? COTS Software BPO “Components” High brand acceptance No brand value Tool-up quickly A relatively slow build Licenses are expensive as is SaaS BPO companies always built key tools like workflow to reduce cost IP is shared/handed to software company IP retained in-house Difficult to integrate with process models and dashboards Process models and dashboards can be built-in – less “Heath Robinson” Hard to sell BPO as an add-on to software Easier to sell BPO service with embedded enablers Facilitates move to BPaaS
  12. 12. The Internet of Things: Is this a New Beginning for Industry-Specific BPO? © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 12 Where is the Internet of Things Currently Being Deployed Implications for vendors: • Often not the traditional BPO buyer • A high element of 24/7 services • Strong analytics capability likely to be a pre-requisite • Potentially takes the meaning of risk/reward to a whole new level Sector Examples Telemedicine Monitoring heart operation patients post-op Insurance Monitoring driver behavior for policy charging Energy & utilities Identifying pipeline leakages Telecoms Home monitoring/management - the next “big thing” for the telecoms sector Plant & equipment Predictive maintenance Manufacturing Everything-as-a-service
  13. 13. High Velocity BPO What the client has always wanted © 2014 by NelsonHall.
  14. 14. Accelerated Timescales of Transformation in F&A Standardizing processes on transition Yesterday © 2014 by NelsonHall. Labor Arbitrage Process Improvement & standardizat’n Tools & Automation & Robotics Business & Process Analytics 14 Months Years Greater automation; Analytics embedded in specific processes Previously Today Business insight
  15. 15. The Future: High Velocity BPO © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 15 Why take years when months will do it? Attribute Traditional BPO High-Velocity BPO Objective Help the purchaser fix their processes Help the purchaser contribute to wider business goals Measure of success Process excellence Business success, faster Importance of cost reduction High Greater, faster Geographic coverage Key countries Global, now Process enablers & technologies High dependence on third-parties Own software components supercharged with RPA Process roadmaps On paper Built into the components Compliance Reactive compliance Predictive GRC management Analytics Reactive process improvement Predictive & driving the business Digital A front-office “nice-to-have” Multi-channel and sensors fundamental Governance Process-dependent GBS, end-to-end KPIs
  16. 16. Impact of Disruptive Forces on BPO © 2014 by NelsonHall. NelsonHall-Proprietary – Not for distribution without permission 16 More opportunity than threat Disruption Short-term impact Long-term impact Robotics Gives buyers 35% cost reduction fast Faster introduction of transaction pricing No significant impact on business models or technology Analytics Already drives process enhancement Becomesmuch more instrumental in driving business decisions Potentially makes BPO vendors more strategic Labor arbitrage on labor arbitrage Ongoing reductions in service costs and employee attrition Improved business recovery “Domestic BPO markets” within emerging economies become major growth opportunity Digital Improved service at reduced cost Big opportunity to combine voice, process, technology, & analytics in a high-value end-to-end service BPO “software components” Improved process coherence BPaaS service delivery without the third-party SaaS The Internet of Things Slow build into areas like maintenance Huge potential to expand the BPO market in areas such as healthcare GBS Help organizations deploy GBS Improved end-to-end management and increased opportunity
  17. 17. Q&A John Willmott, NelsonHall Outsourcing Institute BPO Innovations Conference, New York October 30, 2014 © 2014 by NelsonHall. Sign up for blogs & alerts NelsonHall Vendor Evaluation & Assessment Tool @John_NH NelsonHall-Proprietary – Not for distribution without permission 17