WASHINGTON & LONDON (March 8, 2004) — Looking at the offshore outsourcing phenomenon from a different perspective, BPO market research firm NelsonHall today announced that offshore BPO today accounts for only two percent of total business process service delivery contract value worldwide, and is only expected to rise to six percent of the total by 2008. This is one of many key findings in a new market analysis on the BPO Offshore Market available to buy-side and sell-side subscribers to NelsonHall’s BPO and Outsourcing Service.
Said John Willmott, founder of NelsonHall, “Workers displaced by offshoring, technological advances or downsizing have very legitimate reasons for concern. But the public, business and government communities need to know that a full 98 percent of today’s total contract value for outsourced business process service delivery remains on domestic soil.” Further, he pointed out that throughout history, when less-skilled, lower paying jobs in mature industries have migrated to other countries, higher paying, higher-skilled jobs have emerged in advanced domestic economies. He doesn’t foresee any reason why history won’t repeat itself.
What Business Processes are Being Offshored?
According to NelsonHall, nearly 60 percent of work done offshore is in customer management services such as technical support for software and hardware products, telemarketing, and basic customer care such as order taking. Some 64 percent of offshore work overall is voice-based, with 85 percent of customer management services being voice-based. Most offshore processes today involve basic data entry or are rules-based. The firm predicts that the offshoring of “judgmental” processes – more complex processes requiring agents to make informed decisions to fulfill requests – and “analytical and expert services” – highly complex processes requiring specialist knowledge and expert judgment – will only increase to 10 percent of offshore BPO activity by 2006.
Debunking Job Satisfaction of Offshore Workers
NelsonHall’s market analysis found that the popular belief that call center jobs are highly valued by offshore workers is actually a misconception. In fact, the firm found that staff attrition rates within BPO centers in India average 22% per annum, with attrition rates in voice-based services hitting 30 percent. Although average attrition rates in the U.S. and Europe are higher, these figures indicate that offshore delivery centers suffer from the same human factors as anywhere else. To combat these high attrition rates and ensure consistent service delivery quality to their clients, BPO companies are actively striving to raise the understanding and value of their company brand within the community, and introducing incentive-based pay structures and “quality of life” initiatives for workers.
Cost Reductions Still Enticing to Offshore BPO Buyers
Regardless of the many challenges associated with offshoring the delivery of business processes, the potential of 40 percent to 60 percent cost reductions is highly compelling to prospective buyers, especially in the commercial sector. The financial services industry accounts for 45 percent of total offshore BPO delivery contract value as these organizations seek to reduce costs in an increasingly competitive environment. Other significant opportunities exist within manufacturing and telecoms.
A Word to Service Providers
While tremendous opportunities exist for offshore service providers, they are unlikely to reap the rewards if they take an arms-length approach to their in-country operations. Governance of offshore BPO delivery is critical, with companies requiring strong escalation procedures and the ability to closely monitor their in-country operations. To address this, the major multi-national service providers are typically incorporating offshore delivery capability as one element of a geographically distributed delivery capability. And many “pure play” offshore service providers recognize the importance of local on-site account managers or governance teams in all in-scope countries.
Which Offshore BPO Regions Reign?
India is still the pre-eminent location for offshore BPO delivery, but is facing increased competition from the Philippines. The Philippines government recently announced its intention to develop and promote the country as a hub in the delivery of customer contact center, medical transcription, animation, BPO and shared financial services, while Mexico is an important delivery center for North American service provision, and South Africa for service delivery aimed at the European market. China is also challenging India, offering lower staff costs but only limited language capabilities.
The Offshore BPO market analysis is available to subscribers to NelsonHall’s BPO and Outsourcing Service. For more information, please contact email@example.com (U.S.) or firstname.lastname@example.org (U.K.)
Based in the U.K. with offices in the U.S. and Germany, NelsonHall provides buy-side and sell-side organizations with deeper research and analyses in front office, mid-office and back office BPO than any other research firm in the world. The company’s subscription-based model provides subscribers with robust market analyses, case studies, vendor assessments, contract analyses, market reports and access to a content-rich BPO contracts database. The firm covers a wide range of industries including financial services, government and utilities sectors, and tracks worldwide and regional BPO activity. NelsonHall’s home page is www.nelson-hall.com.
FOR MORE INFORMATION CONTACT:
Jolie Newman John Willmott
Jolie Newman & Associates NelsonHall
+1 407 677 8404 +44 1753 701015
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