Like many aspects of any business, the world of business process outsourcing (BPO) is constantly evolving. So whether you’re a seasoned outsourcing pro or just starting to explore its potential, our monthly report will equip you with the latest on everything outsourcing, starting with a reminder of why businesses worldwide still outsource:
A recent study by Information Services Group (ISG) reveals that companies save an average of 15% by outsourcing business processes compared to handling them in-house. The ISG Market Lens™ BPO study, which surveyed 368 business leaders globally, found that reducing operational costs was the primary reason for outsourcing, followed by process efficiency and capacity to handle volume needs. Companies also reported an average improvement in quality performance by 11% due to outsourcing.
The study also highlighted the future impact of AI and automation on BPOs, with about 50% of companies expecting to reduce external staffing through these technologies. Customer operations outsourcing is anticipated to see the most significant reduction in staffing. Despite the growing role of AI, industry knowledge and understanding remain topmost factors in selecting BPO providers.
AI in BPOs
Whether negative or positive, artificial intelligence is creating waves in the BPO industry. Here are some companies taking strides in ensuring they use AI as an asset:
Teleperformance
Teleperformance has partnered with Kore.AI to enhance customer engagement using advanced conversational AI. Through its digital services arm, TP Infinity, the firm will use Kore.AI’s Experience Optimization (XO) Platform to develop sophisticated virtual assistants.
These AI-powered tools will cater to various customer needs, including enterprise automation and personalized user solutions, aiming to improve customer satisfaction and provide a competitive edge.
Verizon
US cable company Verizon is utilizing generative AI to retain 100,000 customers by predicting the reasons behind their calls and directing them to the most suitable agents, significantly reducing store visit times.
CEO Hans Vestberg announced at a conference in Sweden that Verizon receives around 170 million calls annually, and with GenAI, the company can determine the reason for a call 80% of the time. This advanced matching capability aims to improve customer service and retention.
Verizon’s AI-driven initiatives have streamlined customer service, reducing store visit times by approximately seven minutes. The company handles about 70 million store visits annually and can now personalize offers instantly.
With Verizon having a churn rate of around 1% in 2023, the AI programs are expected to reduce churn and enhance customer experience, contributing to the company’s financial performance.
CVS
CVS plans to transform its customer service by leveraging AI, according to CVS Health CTO Tilak Mandadi. The company is developing an app that uses AI to provide text-based responses in natural language, eliminating the need for customers to navigate traditional menu-based phone options.
This shift aims to improve the customer experience, especially for Gen Z users who prefer not to speak to live agents. If the AI cannot resolve an issue, customers will be transferred to a live representative.
Vivo
Vivo has partnered with Microsoft to develop “I.Ajuda,” a generative AI assistant for their 11,000 call center agents. The tool, implemented with Telefónica Tech and powered by Microsoft Azure OpenAI Service, helps agents quickly access information from over 30 systems and 2,000 processes, streamlining customer service interactions.
As a result, average service times have decreased by 9% for individual customers and 4% for companies, with improved first-contact resolution rates and service evaluation scores.
Ricardo Hobbs, Vivo’s VP of Strategy, New Business, and AI, noted that the tool has enhanced customer satisfaction and operational efficiency. The AI tool allows Vivo to provide faster, more efficient, and higher-quality customer service.
Global Growth in Outsourcing
Even with the boom of AI, there’s no stopping the rise for the need for BPO around the world:
South Africa
South Africa’s BPO sector has created over 6,000 jobs in the last quarter of 2023, with significant growth in KwaZulu-Natal (KZN), which accounted for nearly 39% of these new positions. This sector is seen as a critical component in addressing South Africa’s high unemployment rate, aiming to create 500,000 jobs by 2030.
Despite the country’s sluggish economic growth and rising unemployment, particularly among youth and Black South Africans, the BPO sector offers a promising solution. It has generated ZAR2.7 billion ($143 million) in foreign revenue over the past year and continues to expand, creating new employment opportunities in an otherwise challenging job market.
Fiji
Fiji’s knowledge process outsourcing (KPO) and information technology outsourcing (ITO) sectors are seeing significant growth in employment opportunities, according to Deputy Prime Minister and Minister of Finance Biman Prasad.
During the expansion of RCL Services Pte Ltd., Prasad highlighted the government’s commitment to the outsourcing industry, which currently supports around 8,000 to 10,000 workers.
Prasad emphasized that the outsourcing sector is crucial for Fiji’s economic resilience and aims to establish the country as a leading outsourcing hub. The government has invested $2.5 million in ICT infrastructure and introduced new skills accreditation courses to support this growth. Outsource Fiji, or the BPO Council of Fiji, aims to capture 10% of the global BPO market, potentially creating 25,000 jobs in the next five to eight years.
South Korea
South Korean technology companies are increasingly turning to Southeast Asia, including Cambodia and Mongolia, to address a persistent shortage of IT talent. The demand for skilled developers has surged post-pandemic, leading to skyrocketing salaries in South Korea and driving firms to seek cost-effective alternatives abroad.
Companies like Naver Corp. and major non-IT firms have started outsourcing beyond traditional markets such as India and China to manage rising payroll costs, which have increased significantly due to the rapid adoption of AI and big data technologies.
A 2022 survey by Korea’s Ministry of Trade, Industry, and Energy highlighted a labor shortage in the software sector, prompting firms to explore new talent pools. Mobile C&C Cambodia, for instance, has found success in Cambodia, where starting salaries for developers are significantly lower than in South Korea.
Egypt
Foundever has inaugurated its third hub in Egypt at City Stars Towers in Nasr City. The new hub is set to create hundreds of job opportunities initially, with plans to employ 4,000 people over the next three years, driven by an anticipated revenue growth rate of 65% per year.
The new hub will complement Foundever’s existing operations in Cairo and Luxor, enhancing the company’s multilingual service capabilities. Benedita Miranda, general manager for the multilingual region of Foundever, highlighted Egypt’s highly proficient workforce, supported by significant government investment in language training.
Poland
Concentrix has expanded its Polish operations with a new permanent site in Katowice, officially opened on June 6, 2024. Edyta Szubert, Concentrix’s country leader for Poland, expressed excitement about the growth and employment opportunities this new site will bring to the area.
Operating in Poland since 2005, Concentrix already employs over 2,000 people across its offices in Lublin, Szczecin, and Warsaw. The new Katowice site has created over 500 jobs in the past year, with plans for further expansion. This development follows Concentrix’s merger with Webhelp in 2023, forming a global leader in customer experience services, now serving over 2,000 clients in more than 70 countries.
USA
Advanced Call Center Technologies (ACT) has expanded its facility in Norman, Oklahoma, adding 800 jobs and solidifying its position as the city’s largest private-sector employer. The expansion of the 51,000-square-foot facility, located at 2701 Technology Place, comes just two years after ACT established its presence in Norman. This growth will result in a $350 million impact on the community and create an additional 2,587 indirect jobs, according to the Norman Economic Development Coalition.
ACT’s CEO, Hunter Croft, attributed the company’s dramatic productivity and growth to its transition to an employee-owned structure. Governor J. Kevin Stitt and local leaders praised the investment for its significant contribution to job creation and economic growth in the state.
Singapore
Singapore-based BPO company Gear Inc. has partnered with Filinvest REIT Corp. (FILRT) to establish its first office in the Philippines, leasing 1,993 square meters in the Filinvest One Building at Muntinlupa’s Northgate Cyberzone. This Grade A, PEZA-accredited, and EDGE Advanced-certified building is designed to support tech companies’ growth and strategic initiatives, with Gear Inc. planning further expansion within the facility.
FILRT President and CEO Maricel Brion-Lirio welcomed Gear Inc., emphasizing FILRT’s commitment to providing world-class office spaces. Gear Inc., known for delivering high-quality services to global brands, employs over 6,000 professionals worldwide. COO Tan Seow Tien Desmond praised the Northgate Cyberzone’s infrastructure and sustainability, noting the exceptional quality of FILRT’s buildings.
This partnership underscores the Philippines’ increasing attractiveness as a hub for global BPO operations, thanks to its high-quality infrastructure and strategic location.
Philippines
Intouch CX is set to expand its operations in the Philippines, solidifying its presence in the outsourcing sector. Since its expansion into the Philippine market in 2016, Intouch CX has established locations in Manila, Cebu, and Clark.
The company, which rebranded from 24-7 Intouch in January 2023, has also expanded into Malaysia, alongside its existing campuses in several countries including the United States, Canada, and India.
Intouch CX continues its global growth strategy with the opening of a platinum LEED-certified campus in Hyderabad, India, and plans for further expansion in the APAC region. The company remains focused on global scale, employee engagement, and leadership, introducing new solutions such as well-being-led Trust and Safety solutions, Mosaic languages, and Intouch CX Disrupt, designed for hyper-growth companies.
Mergers and Acquisitions
The outsourcing industry is undergoing a period of significant consolidation, with several high-profile mergers and acquisitions (M&A) taking place this month, which we explore below:
Vensure
Vensure Employer Solutions, an HR and HCM technology provider, has acquired Execupay, a provider of payroll and HR services for small and mid-sized businesses. This acquisition, Vensure’s 75th in six years, adds nearly 800,000 worksite employees (WSEs) from Execupay, bringing Vensure’s total WSE count to approximately 4 million. The acquisition will enhance Vensure’s capabilities, particularly in the PrismHR technology portfolio, and expand its client base.
CEO Alex Campos emphasized that Execupay’s expertise aligns perfectly with Vensure’s mission, creating strategic opportunities for growth and strengthening HR solutions. Execupay’s CEO, Gerald Stowers, noted that the merger would enhance customer experience and expand their presence in the HR/HCM space.
VXI Global Solutions
VXI Global Solutions has expanded its customer service center in Charlotte, North Carolina, through the acquisition of Chime Solutions, a contact center provider. This strategic move will create over 100 new full-time jobs to meet increasing client demand.
David Zhou, CEO of VXI, emphasized that the acquisition reinforces their commitment to balanced service portfolios and innovative operating models, enhancing client value and community impact. Byron Johnson, director of operations for VXI Charlotte, highlighted the company’s supportive work environment and internal promotion culture.
Cognizant
Cognizant has announced the acquisition of digital engineering firm Belcan LLC for approximately $1.3 billion in cash and stock. This strategic move aims to enhance Cognizant’s presence in the $190 billion engineering research and development (ER&D) services sector and marks its entry into aerospace, defense, space, and marine industries. The acquisition is expected to generate over $800 million in annualized revenue for Cognizant in 2024 and positively impact earnings per share by 2026, with over $100 million in annual revenue synergies projected within three years.
Cognizant CEO Ravi Kumar S. highlighted that the acquisition would strengthen their position in the ER&D market and accelerate revenue growth, benefiting clients across various sectors. Belcan’s CEO, Lance Kwasniewski, will continue to lead the company as a division within Cognizant. This acquisition follows Cognizant’s recent takeover of Thirdera and aligns with their strategy to leverage Belcan’s engineering expertise to offer advanced AI, Cloud, and Data technologies.
