BPO and KPO Companies Must Evolve into One-Stop, Multi-Services Providers to Survive
The Philippines has the potential to be the leading outsourcing destination but only if business process (BPO) and knowledge process outsourcing (KPO) companies evolve into one-stop shops capable of providing different services.
“Companies want to deal with larger companies,” Scott Murray, chair and chief executive of Stream Global Services Inc told the Philippine Daily Inquirer. “Companies are looking for one-stop shops that provide consistent work and that have long-term employees.”
BPO and KPO companies that offer comprehensive services to customers will enjoy a number of advantages, according to most businesses strategists. One-stop shopping allows companies to generate higher revenues from the same clients than their competitors. For example, a knowledge process outsourcing firm that provides only research and development to a client will not be able to offer writing and content development, no matter how much the client likes the company.
On the other hand, a firm that offers comprehensive knowledge process outsourcing services can also make money from the same client with additional business assistance such as e-marketing, data analysis, training and consulting, or legal research. The supplemental revenue from just one client allows a KPO company, for instance, to reduce the amount of effort in prospecting for new business. In today’s competitive business and knowledge process outsourcing market this new revenue can be a significant plus.
It is easier for BPO and KPO service providers with a higher level of service to extend existing business relationships. Since a client already shares important business information with its partner service provider it shouldn’t be difficult to up-sell and acquire other components of the client’s operations as well.
From the client’s point of view, the big benefit of partnering with a one-stop business or knowledge process outsourcing company is that it eliminates dealing with several firms to monitor its different outsourced business operations. Assuming that all the business and knowledge process outsourcing services are provided competently and diligently it is hard to argue with this kind of reasoning.
While it can be rewarding being a one-stop BPO or KPO firm, it comes at a price as it can be demanding for firms of any size. Providing comprehensive business or knowledge process services efficiently requires tremendous effort and coordination.
Building and maintaining a BPO or KPO business that competently offers several services involve different disciplines. Companies that pursue this strategy must hire qualified personnel for each service area offered. A key factor in successfully transforming into a one-stop BPO or KPO company is that the head of the firm must be knowledgeable enough about all of the services provided in order to effectively coordinate and supervise the different units.
Many kinds of business and knowledge process outsource services require tight procedures that incorporate a deep understanding of the laws regarding intellectual rights or privacy. A BPO or KPO service provider can be held liable if their procedure is flawed and assumes that its client will allow any information provided for one service to be used for other purposes.
Another potential pitfall for a firm that wants to offer a wider array of business or knowledge process outsourcing services is the possibility of overextending itself by offering too much support. The consequences of spreading it too thin can be damaging to a BPO or KPO company in more ways than one. The cost in terms of legal liability can be astronomical. But price of losing the client’s trust can be even steeper. Rebuilding shattered business relationship between a provider and its client is often extremely difficult, if not impossible.
A small BPO or KPO firm must carefully consider whether it is able to handle the increased administrative and supervisory level that will come with each service that it wants to offer. Failure in one branch of service can have a serious negative impact on the company’s entire operations. Any substantial liability incurred from a mistake committed in one of the firm’s unit can eat up the resources necessary to sustain other areas of its outsourcing operations.
However, offering one-stop shopping can be feasible for both big and small business and knowledge process outsourcing companies. Larger BPO and KPO firms can typically provide more corporate support and structure for their services. But smaller firms are generally more efficient at coordinating their business and knowledge process outsourcing services according to the needs and circumstances of their clients.
One advantage of smaller BPO or KPO service providers is that, generally speaking, they have less bureaucracy and more flexible company policies. In other words, a smaller BPO or KPO is better at personalized services than its bigger counterpart. On the other hand larger BPO and KPO firms have better brand-name recognition.
Another possible strategy for BPO and KPO companies in the Philippines to achieve one-stop shop status is through the consolidation of different corporations into a single business entity. Bigger companies would gobble up smaller players, Murray predicted. In fact, mergers and acquisitions are already an emerging trend in the local business and knowledge process outsourcing industries.
“The market we operate in will consolidate,” he said in his interview with the Philippine Inquirer. “Vendors will consolidate, leaving small ones in the cold. Clients would be looking for BPO companies that could be one-stop shops.”
To take advantage of the consolidation trend, Stream Global Services Inc is on the lookout for other companies – in and outside the Philippines – to acquire, Murray revealed. The BPO company plans to move up to knowledge process outsourcing services with companies in the financial, government and healthcare sectors.
Murray is optimistic that the Philippines will be the next-generation India and could even surpass it not only as business process but as a knowledge process outsourcing destination. He cited the strong government support, high level of English-language proficiency among Filipinos, and the efficiency of workers as factors that will help make this happen.
But different business and knowledge process outsourcing companies in the Philippines should start looking at consolidation. BPO and KPO Firms that successfully integrate comprehensive services into their service offerings stand to benefit by increasing revenues while offering lower costs through the economies of scale. Consolidation will also give them a substantial edge over their competitors, in particular the outsourcing industry in India. Consolidating into one-stop shops will enable them to meet the needs of clients who want to deal with just one business or knowledge process outsourcing company for their growing business needs.
