In September 30, 2013, Knowledgefaber, a research and consultancy firm, released the results of its study, which showed that Manila has claimed from the National Capital Region (NCR) of India, Bangalore, and Mumbai the coveted number one spot as the premiere destination for global outsourcing.
The basis of the study is the growth rate achieved by these countries heading toward the end of 2013. Philippines was far ahead of the NCR of India, that is, 15.6% versus 8.9%.
However, the study is interesting not because Philippines usurped the crown from India’s long-dominant position in outsourcing but because during this period, the Indian Rupee enjoyed a comparative advantage against the Philippine Peso in foreign exchange vis-à-vis the United States Dollar. India’s offer is more affordable than that of the Philippines, but foreign companies chose to invest in the Philippines!
The Philippines has always been an attractive destination for outsourcing not only because of comparative cost advantages but also because economies of scale exist.
According to the 2010 data from the Census on Population and Housing, the Philippines’ literacy rate is 97.5%, which is one of the highest in the world. American English is regarded as the primary medium of instruction in institutions and of communication in business.
In a 2012 study conducted by the Global English Corporation, the Philippines is listed as the world’s best country for English, surpassing even the United States!
Companies benefit from outsourcing by capitalizing on comparative cost advantages and economies of scale prevalent in other regions or locations. For countries such as the Philippines and India, the greatest comparative cost advantage is in labor, that is, local workers earn approximately only one-third of the salary of their foreign counterparts.
Outsourcing found its way to the forefront of the corporate “war room” strategy that builds sessions in the new millennium. The market size expanse of global outsourcing has grown from US$45.6 billion in 2000 to US$104.6 billion in 2014. The global outsourcing industry has not been in a period of downturn. At present, the total value of the global outsourcing industry is approximately US$ 507 billion!
The growth of global outsourcing is reflected in the growth of the Philippine business process outsourcing (BPO) industry. From a US$1.3 billion industry in 2004, Philippine BPO industry has grown into a US$15 billion industry in 2014. This industry is also expected to earn gross receipts of US$18 billion in 2015.
I have been involved in BPO since 2009. In the nearly six years of having been in this industry, I have learned that despite the ideal conditions for growth, the present structure and orientation of the industry do not translate to immediate success for anyone planning to start an outsourcing business.
The first BPO company, which I cofounded in 2009, met great success until one highly questionable, spurious, and hotly debated campaign spelled our demise in 2013.
Two months after its closure, I put up Benchmark Global Management Solutions, which has been steadily growing for the past two years. Most of all, this company is running according to my belief on how BPO should be managed.
Although we have not attained the heights of the big players in the industry, the level of success we have achieved in such a short time is enough for me to confidently share with you six tips on how to succeed in running your own BPO company.
1. Represent YOU
Being a prosperous industry, BPO has a lot of “experts.” They will tell you several truisms. Some of which are listed below:
- If you’re a small company, you will only get to manage commission-based accounts.
- You need the assistance of brokers and intermediaries to get accounts.
- You will never get a pay-per-hour account unless you prove yourself with a commission-based account.
I can assure you, NONE of these is true! If you believe and follow any of these, you will either underperform or lose money. Benchmark is a small company, but all of our accounts are either pay-per-hour or pay-per-project. We do not accept commission-based payouts even for outbound projects. Commission-based payouts are one sided, massively flawed in structure, and predominantly responsible for the demise of several BPO companies.
People who render service should be paid. Period. If employees don’t meet quota, then management has to figure out why. For this reason, tools and analytics exist to measure performance. Even the most experienced agents will fail to meet quota the first time especially if they are transitioning to different products or services. Commission-based payouts do not respect the learning curve! When you are hiring agents for a campaign, you are not just filling in slots; you are BUILDING A TEAM. Developing a team that can work together takes time!
We built our portfolio on a strategy of establishing right-fit alliances with foreign-based and local companies and individuals plus a grinding networking schedule. We’ve never contacted brokers; most of them are probably notorious scammers.
Our experience was not easy, and many moments were both frustrating and humbling. But if you believe that your proposition presents the highest value, stay the course! Work confidently. Be unperturbed throughout the difficulties and deliver your proposition with intact purpose and vision. A client who receives and acknowledges your convictions, ideals, and beliefs will be a right-fit partner and will give you the opportunity to manage their business.
2. Embrace Your PEOPLE
Philippines has built its BPO industry through its people despite having a comparative disadvantage in foreign exchange.
So why are many companies afraid of their own people?
In my interviews with thousands of applicants, I’ve come across thousands who share the surreptitious recruitment practices of several BPO companies, some of which are among the movers and shakers in the industry. The goal of these practices is to avoid regularization. Companies are hesitant to regularize because of the increased cost in terms of benefits and the risk of being unionized or infiltrated. Although both reasons have merit, nonregularization presents a conundrum: Should we regularize to standardize processes and quality or work even though costs and unionization risk will increase?
The right to organize is covered by law as a mechanism to protect the livelihood of workers from grave abuse of authority. Treat your people with respect, accord them their basic human rights, commit to a career and succession plan, pay them on time, grant them their benefits as required by law, and most of all, give them credit when it is due.
People are the only asset in your company that can be a positive catalyst for change. The incremental costs in regularizing them will be greatly offset by their contributions to the success of your company. Embrace your people, do not fear them!
3. Be True to Everyone
During meetings with associates in the industry, one view that elicits strong reactions and lively debate is my blatant disregard for three standard features of outbound BPO: the use of scripts, accent training, and using aliases.
In customer service, human connectivity is important, but how can you establish this connectivity when you are automating the human element with all of these prepared scripts? The script has reduced to agent to reading paper. Agents should be allowed to react, absorb, and give feedback to customers based on who they are and how they understand the situation. Customers become irate when all they receive are default responses instead of a concerted effort to resolve the issue.
Resorting to fake accents and aliases are the other protocols that I strongly don’t agree with. Successful relationships are built on trust, and deceiving prospective customers with fake accents or fake names is not how you build trust. People will know if you are faking your accent, so what’s the point?
We had an agent whose first name is “Bayani.” He wanted to change it to “Barry.” I told him to introduce himself as “Bayani” to everyone he called. The experience was great because the prospects were asking what his name meant. Some clients referred to Bayani as “Hero” and always welcomed his calls. By being himself, Bayani was able to build relationships with his clients.
If you can’t be true to yourself, you can’t be true to your clients!
4. Limit Your Exposure
Field of Dreams is a good movie, but unfortunately, in BPO, building a center doesn’t mean a client will come. Although Philippines is a preferred destination for outsourcing services, the industry itself has been evolving largely because companies no longer see BPO only as a cost-saving strategy.
According to a year-end 2014 survey, 87% of the companies that participated in the survey still consider cost savings to be the primary factor to outsource. But close behind, 82% cited great scalability of operations and 78% pointed process standardization as their main reasons to outsource. In fact, 53% of outsourcing companies covers professional and technical services.
Therefore, long-term contracts are no longer a guarantee because of the highly specialized nature of business. Clients want to limit their risk exposure in case the arrangement will not yield the desired results. Investing to build a center is not viable for you unless you have a client who is willing to guarantee a long-term contract. Otherwise, you will be stuck with recurring expenses and depreciating assets.
If you land a client, depending on scale, the best options include leasing a facility or running off-site operations, otherwise known as home-based operations. With a leased facility, you can limit your capital exposure to just rent in quarterly increments plus salaries. A shared facility has the advantages of economies of scale. Home-based operations are viable nowadays with the availability of cloud-based technology, online virtual platforms, and the advances in mobile technology.
In BPO, the procedure is never a chicken-and-egg predicament. You need to land a client first!
5. Create Synergy
If you are presenting BPO just as a cost-saving process, then you are undermining its potential for your client. Outsourcing can significantly contribute to your client’s revenue generation activities by customizing work flow or operational framework.
A framework that addresses both cost management and revenue generation objectives needs synergy between functions.
In customer service for example, we would propose a “push and pull” framework that would integrate both outbound and inbound components of BPO. “Push” refers to activities that market and promote the client’s products and services. These include after-sale surveys, appointment setting, lead generation, and e-mail marketing. “Pull” refers to activities that address customer concerns, such as chat support, e-mail support, inbound call-ins, and social media engagement, and these are linked with the back office group: accounting, technical support, and administration.
“Push” focuses on market generation, whereas “pull” focuses on market retention. Through synergy, we build a holistic framework that is proactive with customers.
6. Protect Your Margins
Pricing is an important component during negotiations. I have lost prospective clients during this stage. The rate that you charge your clients is based on the overall cost of operation. In itemizing costs, you should consider fixed and variable costs as well as contingencies, such as foreign exchange fluctuations. The purpose of cost summary is to ensure that operations are not compromised by short falls. Once you’re confident that your summary covers all of the relevant pricing points, calculate your profit margin.
Meeting prospective clients who encourage a “bidding war” among service providers by setting a very low entry price is not uncommon. If the price puts me in an uncomfortable position to manage the account and the client is unwilling to negotiate, I drop my pursuit of the project.
I also don’t “abuse” the comparative advantages of outsourcing by charging a rate that is above industry but still generates cost savings for the client. It’s a personal choice. Some BPO providers do, but I don’t because I feel we need to prove our capability to the client first.
The bottom line is protect your margin. Do not compromise your margin just to land the account. You will commoditize your service and put both parties at risk in the future.
At the same time, moderate your greed.
BPO industry is still in its growth stages and opportunities to succeed abound. Therefore, you should not jump in without taking the time to develop a solid, strategic business development plan.
Experience in BPO is a plus but not a necessity as long as you do the research, conduct studies, and surround yourself with right-fit people. It is perfectly fine to seek the counsel of others but in the end, the only voice you should listen to is your own.