It is impossible to attempt predicting the future without taking history into account; the posterior view of linear time. The history of outsourcing is intensely integrated into the history of the growth of the modern business enterprise, many believe that it rose in the second half of the 19th Century. Historians and economists in the past fifty years have helped us to understand this sudden and prominent phenomenon of growth, one such legend is Mr. Alfred D. Chandler, do read his work. Much has been said regarding outsourcing in the past couple of years. This business practice has suddenly grabbed center stage attention and is now the focus of politicians, the press, companies, and workers alike. Organizations in the outsourcing space are also constantly applying thought to understand how should they reinvent themselves to remain relevant, as they face their toughest challenge in the present era. A business that found its existing space between the value difference of a rupee and a dollar (speaking strictly in the Indian context) initially and in not too much time became a darling even on a transaction that was between the same currency, faces an existential challenge now. The rationale for the rupee to rupee transaction came from the differentiation of core and non-core tasks for an organization. Offshoring, mainly from stronger currencies to the weaker ones flourished for the first decade, almost fanatically. India gained immensely from this fad that was catching up. IT and ITES provided employment to over 3 hundred thousand people, major businesses, houses came into being: Wipro, Infosys, Concentrix, HCL, Tech Mahindra, and many others. Companies in the western world saw value in saving money and at the same time dealing with a race that was hardworking, ambitious, hungry for growth, and also particularly skilled for doing the job just right.
The growth and meaning of outsourcing are increasingly getting flatlined; cost pressures are driving the value down, from the perspective of the service providers. The political scene around the world is not helping either, mass protests in favor of keeping the jobs onshore have become common. Major political events in the recent past have revolved around it, the rise of President Trump, the ill effects of Brexit; the mounting of obscurantists and protectionists ideologies around the world have hurt the prospects of the thriving outsourcing industry in our country. Both IT and ITES have suffered immensely, we do not see too many new players making a move. But thankfully, all is not lost. India is growing, one could argue that it could have grown faster had a few things not happened, but then those are hypothetical arguments; we remain among the fastest-growing economies in the world. A new breed of entrepreneurs have come into the fray and are solving real issues interestingly applying technologies that are now available at a much cheaper cost, than it would have been let’s say a decade ago. The eco-system is ready. Would Ola or Flipkart have become such spectacular successes in 1980ties in India? The answer to that question is a clear no. Now is the time for it and it is a great thing to happen to us as a country, society, and also the economy.
If the political climate was unfavorable and stunting the growth of outsourcing agencies vigorously, the advent of technology: penetration of internet, the rise of automation, AI and ML are together making it almost impossible for small players to exist. Jobs that required humans back then are being done in a few taps a lot more satisfyingly and swiftly. ITES providers are dying a slow death, many are bleeding profusely with no real sight of a breakeven, let alone profit and prosperity. Many renowned businesses have done away with their domestic business or are in the process of walking out, Sutherland & Mphasis are classic examples. More than 40% of small and medium domestic BPOs had to shut shop, in the last 6 yrs. The scene is not all that good for those who aren’t comfortable with being on their toes all the time, either. There are organizations like Aegis, Karvy DigiKonnect, connectQ, 1point1, Megus, etc who are trying to walk in the opposite direction of the wind and have created for themselves results that are not bad, if not all that encouraging, in all the quarters of the year. But there is hope. And that is exactly what we are trying to discuss here.
A workforce that began with handling transactions on prescribed SOPs have in these years become rich in experience and now have valuable insight into how various businesses are conducted, not only have they mastered their game of efficiency but have also educated and trained themselves on the craft to a degree that they now carry invaluable perspicacity into the world of the consumers and deep understanding of the technology that makes the customer experience come about. Cross-pollination of talent has graduated the industry into a formidable group, one that is capable of rewriting the rules of the game. This development is part evolutionary and part forced and therefore, not easy for everyone to get to.
The time has come for the outsourcing industry to shed its dead weight of unskilled manpower, onboard forward thinkers, and retain only high performers; the average and the below-average must go. This industry has to prepare itself to walk out of the shadow of the transaction and shine in the light of experience. It is apt for the service providers to fight for increasing their share of influence, the only way for them to exist is if they muster the courage to secure a seat at the thought leadership table. A transition from a low value, labor-based output to a high-value intellect based outcome will have to be made. Service providers will have to become providers of knowledge and acumen and not just efficiency.
Doing the job, quicker, better, and at low cost is no longer lucrative, there is a need to invent ways to do them differently, trying different business solutions. The construct of the ‘different’ is in making the delivery consultative, one in which the providers do not only bring manpower but also industry acumen, knowledge of framing service philosophies, the capability of defining experience, designing its machinery, and then delivering results which are second to none. Technology is here to stay, providers will have to befriend the trend, work towards creating the capabilities of automation in-house, start offering a data first, and voice second service offering. The conventional mode of isolated support on voice, data, and chat channels will have to be united into an omnichannel environment, flexible enough to extend the customers the choice to choose: voice or text, self-help or assisted guidance, with solid CRM integration, one that is capable of building context and providing for predictive customer behavior. Service providers will have to become solution architects. The change will have to be welcomed into the organization and the way of its inner working. If I may borrow from Robin Sharma;
All change is tough at the beginning, messy in the middle, and gorgeous at the end.
Here are a few things that service providers should do to transform.
De-age your leadership team – All of those 25 to 30 yrs + experience folks are good, they bring a lot of value but if they are made in charge of driving transformation, it wouldn’t come about just as swiftly or effectively. You need to bring in a fresh perspective, bright and young people with the required skillset to populate your leadership team. Studies have shown that after a certain age and getting certain success in life the fire in the belly goes off for 98% of the people and that alone is a reason for you to look at your leadership team to see if you have such satisfied people around? If so, it’s time for you to get people who relate to the change and have a better handle on contemporary settings and above all are willing to walk that extra mile and have the desire and the determination to make their mark.
Alter your service offering – Your service offering has to be a happy marriage between technology, business acumen, skilled manpower, and growth infrastructure. You’ll need to modify your solutions for them to make sense to the market and the customers that you wish to service. You need to be able to partner with the organization with which you are doing business with offerings, creating service strategy, forming the budget, laying the logical and physical service infrastructure, sourcing, training, execution – all of it. You need to take a leap from business process outsourcing into the realm of experience outsourcing.
Responsible billing model: Try to slowly move away from transaction billing to outcome-based invoicing. It is not going to be easy. Today you bill for transactions (calls/email/chat) you handle tomorrow you’ll charge on outcomes, let’s say a threshold of customer satisfaction, first, call resolution, churn %, repeat purchase, etc, keeping the service cost below a certain limit for the exchange of x% of profit. I’m just saying. Commercial viability will have to be worked out but if service providers have to grow in the value chain they will need to value outcomes more than a transaction. And in the process will come into effect a high-performance culture because then the substandard outcome will mean substandard billing. Focus on performance will be much higher. And because it is a high-value job .. service providers will get to command much better prices.
Driving innovation as a core product: Organizations will have to increasingly invest in a thinking workforce, currently, the focus is only on doing (executing) which is why you have a mob of the unintelligent and the uninspiring, who are satisfied doing what they have always done, without thinking of finding different and better ways of solving the issue. Service providers will need to get creative, run of the mill thought processes will have to be now killed, deliberately. For the culture of ideation to thrive within the organization, leaders will have to reward thinkers, demonstrate a willingness to accept the nonnormal and above all, they will need to give the message that they value thinking as much as they value doing, if not more. Take up a few high-value high impact ambitious projects and run them so that the workforce has something to relate to.
Decentralize work (WFH): Cluttering the real state in today’s world is not only ineffective but also inefficient – the outsourcing industry will have to learn to ‘work from home’. A model that is a mixture of on-premise + Work from home has the capability of bringing the billing cost down with leaving larger room for service providers to expand profits, alongside creating a more independent, flexible, and happier workforce. I’m not even counting the environmental benefits of reduced vehicular traffic or saving of travel time, here. For far too long leaders have seen the outsourcing industry set up to be like manufacturing, that must change NOW!
Diversify into Tech Products: Voice can and should not be your only stream of revenue. You’ll need to create a 1st party tech platform/solution to survive.
Gartner says that by 2020 85% of the transaction will move to the unassisted category, the machine will take over man, we already see that reality manifesting itself in our day to day interaction with the world. If service providers do not invest in this critical adaptation now, they will soon be extinct.