BPO- Understanding the context
BPO is a part of service industry but process driven global export trading of services and have resulted in economic development of various countries and there is growing demand globally (usd140 billion and growing at 8-10 % p/a) and average revenue earning for some countries ie India US2.4 billion (Batt, Moynihan:2002 ). For purpose of the present paper, Business Process Outsourcing (BPO) is defined as the hiring of an external company to handle business activities that ordinarily could have been conducted in-house. These services can be provided locally, but they are increasingly being conducted “offshore,” as numerous functions are outsourced to low-cost locations like India, the Philippians, South Africa, Zimbabwe etc. In 2008, global BPO as an industry employed approximately 2.5 million people worldwide (Nasscom and McKinsey;2008). The largest players were India, employing 1.6 million (65% of global employment) and the Philippians, employing 400K (16%); the rest of the world employed approximately 500K (19%). Current estimates for India’s BPO employment stand at approximately 2.2 million, while data for the rest of the world is not known. In terms of market size, global BPO exports in 2007 were $24 billion. However, there is approximately $196 billion in addressable demand that is not yet met. This is comprised of five primary market segments: Rules-based Decision-Making, Basic Voice, Basic Data, Knowledge Services, and Specialized Voice. According to Rottman and Lacity (2006) Rules-based decision-making is defined as data activities that are based on business rules and guidelines. For example, the most commonly outsourced rules based decision-making includes processing accounts payable and insurance claims; in 2008, the addressable global BPO demand of this segment was $77 billion2. Basic voice involves scripted activities requiring minimal training, such as telesales, taking sales orders, etc. ($69 billion in addressable global demand in 2010). Knowledge services are defined as activities not governed by standard rules and that require deep domain knowledge, such as research requests or automotive engineering ($67 billion in 2008). Basic data is simply understood as straightforward activities such as data entry, data conversion from one format to another, reconciling databases, etc. ($37 billion in 2008). Lastly, specialized voice is defined as specialized interactions that cannot fully be scripted and require some domain knowledge (e.g., cross selling, help desks, credit card collections) ($13 billion in 2008).Thus, given the size of the market and addressable demand, there is an opportunity for Zimbabwe and other emerging economies to look on to provide BPO services to the developed world. Around 500,000 Filipinos are employed by BPOs in the country today, with 350,000 of them into call centres. Recently Zimbabwe is one of the African country that recognized and taken advantage of this opportunity.
BPO Outlook and Benefits to the host country-Brief Case studies: SA, Philippines, Kenya ,India and Mauritius
According to Friedman (2012) as of 2012, around 2.8 million people in India work in outsourcing sector. Chyan Yang and Jen-Bor Huang also added that India has revenues of US$10.9 billion from offshore BPO and US$30 billion from IT and total BPO (expected in FY 2008). India thus has some 5-6% share of the total BPO Industry, but a commanding 63% share of the offshore component. This 63% is a drop from the 70% offshore share that India enjoyed last year: despite the industry growing 38% in India last year, other locations like Philippines, and South Africa have emerged to take a share of the market .Around 2.5 million people graduate in India every year. Wages are rising by 10-15 percent as a result of skill shortage. Despite the rising costs Norbert (2012) believes that India remains a vital destination for outsourcing and expects its annual GDP to grow at 8-10% for the next decade. In addition BPO/KPO/Domestic & International Call Centres/NOC etc. are covered under the ‘Other Service Provider’ (OSP) Category by the Department of Telecommunications. The companies who are providing the ‘Applications Services’ means providing services like tele-banking, tele-medicine,tele-education, tele-trading, e-commerce, call centre, network operation centre and other IT Enabled Services, by using Telecom Resources provided by Authorised Telecom Service Providers. Policy priority is given to IT PBO and Call Centre sector which are in Special Economic Zones (SEZs) to spur growth. Government have been spearheading cyber security training & BPO and Call centre awareness policy India. According to NASSCOM (2012) there is also Strong legal system and compliance with international laws, e.g.labour laws, and adoption of international standards. On institutional framework India have National Association of Software and Services Companies (Nasscom), Business Process Industry Association of India (BPIAI), erstwhile the Call Center Association of India (CCAI), all these have an effective and close working relationship with Government and academia. India BPO services is mainly on Software development, Engineering services and Call Centre services.
Mauritius started focusing on BPO in the late 90s and become more engaged in early 2000. In 1996 over 50 enterprises were in operations with a growth of 19% per annum. 4500-5000 was directly employed. Foreign firms were mainly from India and France with over a R3.5 billion direct investment. According to OTAM, IT/BPO industry in Mauritius grow at a rate of 25% for the past two years contributing a major share to the country’s GDP growth. It is estimated that in 2012, IT/BPO industry contribution to economy was 6.8% and it is forecasted that there will be an increase in the contribution up to 8% by 2015.Mauritius has had some considerable success in attracting Business Process Outsourcing and Call Centre work but the high price of international bandwidth remains a key concern. Mauritius, have a small labour force however the labour force have strong people and IT skills and has a favourable business environment. They also have an advantage of the bilingual capability of its citizens who speak both French and English. Large companies like Accenture and Infosys also use Mauritius for their global delivery functions. Currently Mauritius have abolished all tax incentives, except 15% corporate tax (one of the lowest globally). More so Mauritius has developed a National ICT Strategic Plan to achieve the vision of the Government to make the ICT sector the fifth pillar of the economy and Mauritius a regional ICT and call centre hub. The country also have appropriate legal framework for BPO/ITES/Call Centre industry. There is also Effective advocacy by Outsourcing & Telecommunications Association of Mauritius (OTAM) which have close working relations with Government. Over 50% of the Operators/Call Centre Agents in Mauritius have at least High School Certificate and a minimum age for one to work in a call centre is 16 years.
Philippines Department of Trade and Industry published that business process outsourcing industry in the Philippines has grown 46% annually since 2006. In its 2013 top 100 ranking of global outsourcing destinations, Tholons, a US-based strategic advisory firm for global outsourcing and investments, has ranked the Philippine capital Manila number 3, lifting it 1 notch to knock off India’s New Delhi from number 3 spot in 2012 to number 4 in 2013. This boom is led by demand for lower labor costs, a highly skilled and educated work force, and high proficiency in spoken English. Industry estimates from the Board of Investments, Business Process Association of the Philippines put the number of people employed by the BPO and call centre sector by end of 2008 at 435,000. In 2012, BPO in the Philippines generated more than $13 billion in revenues, an increase of $2 billion from the $11 billion in 2011. The Business Processing Association of the Philippines (BPAP) now projects that revenue of the BPO industry will hit $16 billion in 2013 and have 926,000 full-time employees. To achieve and sustain this growth, the Philippine government offered fiscal and non-fiscal incentives to attract foreign direct investment in these industries as part of its 2007 Investment Priorities Plan (IPP). The IPP was prepared by the Board of Investments (BOI), as the lead agency in promoting investments, focused on the sectors identified in the Medium-Term Philippine Development Plan (MTPDP) 2004-2010 (PBOI 2006).
The majority of the BPO facilities are located in “first-tier” cities in Metro Manila and Metro Cebu. However according to Investvine.com (2012) Philippines is now 30 per cent more expensive than India due to a 30-per cent difference in peso and Indian rupee exchange rates with the US dollar.
In the Philippines, call centres began as providers of business email response and managing services. The call centre sector comprises over 80% of the total BPO industry in the country. With 80% of the call services provided for the US market (Business Processing Association Philippines 2012).Growth of the call centre industry in the Philippines can be written up to the lower operational and labor costs relative to the US, the high proficiency in spoken American-style English and idioms (the Philippines was a former US colony and English is the language of instruction in schools), a constant stream of college-educated applicants, and a highly-skilled and an overall motivated workforce. In 2008, call centers supported a $12-billion BPO industry. By 2011, the Philippines surpassed India to become the top call center BPO destination in the world. The Business Processing Association of the Philippines (BPAP) expects that BPO industry in Philippines will employ around 1.3 million Filipinos in BPO industry and have their revenue scaled up to $27 billion by 2016.
Since 2007, South Africa has been one of the world’s upcoming Business Process.
Outsourcing (BPO) offshore destinations. Major companies like Lufthansa, Amazon, ASDA and Shell have set up captive centres. The South African call center industry has grown by approximately 8% per year since 2003 and it directly employed about over 54 000 people, contributing 0.92% to South Africa’s gross domestic product(GDP) . South Africa is by far the strongest play in the BPO field in Africa. It had brought the country on a respectable rank 31 in the Kearny Index in 2007. The South African Business Process Outsourcing (BPO) and contact centre market was valued at $1.08 billion in 2010, and it is expected to reach $3.06 billion by 2016 (Frost & Sullivan ). This represents compound annual growth rate (CAGR) of 19.4% from 2010 to 2016. BPO and Call Centre sectors. According to Frost and Sullivan (2012) South Africa is maturing and becoming strategic in its ability to offer voice, complex back office BPO and a shared service platform for southern African markets. Moreover, its extant, strong capability in higher value work in knowledge process outsourcing, financial services BPO and legal processing outsourcing provides the platform for delivering on its considerable potential in these areas over the next 3-5 years. The report makes South Africa one of the leading BPO destinations in the world, with the country competing with the likes of India and the Philippines. The report sees South Africa’s key selling points to include an assortment of government incentives in the form of grants and subsidies, good infrastructure, and cultural affinity with key western markets such as US and UK. South Africa specifically has been a natural choice for contact centres due to its large and articulate English-speaking population and service-oriented business culture. Another strength is its expanding broadband connectivity, thus ensuring that the latest unified communications and collaboration tools will run efficiently. However, telecommunication costs and inadequate flexibility in the labour market were still obstacles for the country.
Supporting the government efforts SA have other institutional organisations like the active BPeSA & other regional BPO associations, with Govt funding support Incentive framework to attract investors. SA was also on an aggressive marketing to promote the country as a BPO destination. They now have data protection laws to provide confidence to investors and of key is a comprehensive BPO-specific Quality Assurance Framework benchmarked to global best practice. Call centres in SA can recruit Call Centre Agents with a minimum qualification of grade 12 and a minimum age: 15 years. On average agents are working 168 hours per month and team leaders 175 hours per month. The Nelson Hall (2011) study found South Africa offering a viable BPO alternative to onshore services for delivery of high levels of customer experience and handling of relatively complex processes.
Nelson Hall also notes improved financial attractiveness with a new incentive scheme putting BPO delivery at 50-55% lower than equivalent European, and within touching distance of Philippines offshoring. While 70% of 2011 BPO delivery by South Africa was contact centre services , there was already a significant level of global delivery network service delivery around the more complex financial industry-specific and back-office services, particularly for the energy, wealth and life insurance sectors e.g., CSC and Mutual Life and Discovery. Reporting in August 2012, the Everest Group provides the most recent research-based analysis of the South African BPO industry. It corroborates and extends the earlier reports. Everest finds South Africa servicing three segments as at mid-2012 – contact centres for UK, complex, non-voice BPO, and a platform to provide shared services or access broader markets in the sub-Saharan African region.
Zimbabwe’s BPO cluster essentially began to form in 2005 when the Nesbitt brothers founded KenCall, Kenya’s first call center that met international quality standards. The first few years were fairly difficult ones for KenCall as perception of poor quality and insufficient infrastructure stifled KenCall’s marketing efforts. However, in early 2007, BPO was named one of the six flagship clusters in Kenya’s Vision 2030. As a result, the BPO and Contact Center Society, the BPO cluster’s first Institution for Collaboration (IFC), was formed in March 2007 and membership quickly grew to 33 members. Later in 2007, a second IFC was formed, the Kenya Information and Communication Technology (ICT) Board. While a part of the Ministry of Information & Communications of the Government of Kenya, the ICT Board operated like an IFC in the cluster. At approximately the same time, the World Bank began subsidizing Kenyan BPO firms’ bandwidth costs, so that Kenya could compete with other global BPO players. As a result of these subsidies, multiple BPO providers entered the market primarily providing basic data and basic voice services. In March of 2008, KenCall won the Best Non-European Call Center at the CCF European Call Center award, a significant milestone not only for KenCall, but also for the cluster. Another milestone came in May 2009 when the first undersea fiber-optic cable – SEACOM – connected South and East Africa. In June 2009, construction of the East African Marine System (TEAMS) fiber optic cable was completed, and in July 2010, the Eastern Africa Submarine Cable System (EASSy) fiber optic cable was completed. Fiber-optic connection caused Kenya’s BPO bandwidth costs to drop significantly, and as a result the World Bank subsidies expired. Key governmental milestones came in August 2009, when the ICT Board officially launched its “Kenyan BPO Value Proposition” and thus began aggressive worldwide marketing efforts, in June 2010, when the government pledged $12 million in annual funding for BPO-related training and industry development, and in March 2011, when the government held its first Center of Excellence, a program that “trains BPO trainers.” Despite cluster progress, one of greatest milestones will come when construction of the 7,500-seat BPO Park is completed (expected 2013/2014). Kenya’s cluster primarily participates in three main segments: Basic data, basic voice, and rules-based decision making. Specialized voice and knowledge-based services are in the nascent stage of development. While the cluster is comprised of many small players, the largest and most established players are KenCall, Horizon Contact Centers, Direct Channel, and Ken-Tech Data Systems. As mentioned, KenCall was founded in 2005 and has 300 seats. It offers mainly basic voice and data services, but has begun to move into specialized voice; for example, KenCall has recently engaged in technology training for Cisco and Microsoft products. The government has taken key steps to ensure targets are met; budgetary allocation, setting up of complementary institutions like the Information Communication and Technology Board (ICT Board) that will ensure facilitation and implementation of desired targets.
The National ICT Strategy issued by the government of Kenya in January 2006, underline the key role of call centres and business process outsourcing services (BPO) to achieve the strategy’s goal of “making Kenya the ICT capital of Africa”. According to the plan, outsourcing can contribute to create over 30,000 jobs. The National ICT Strategy has been adopte d by ICTPark, a consortium of local, regional, and global organizations working together for the development of ICT sector in Kenya. The consortium focuses on facilitating the development of BPO and call centres in Kenya by working in close relation with facility owners, business operators and outsourcing clients.
Key determinants to grow the BPO and Call Centre Industry
Table 2: Key determinants to grow the BPO and Call Centre Industry
|Factors describing Location||Demand, Entrepreneurial determinants||Supply:
|Catalyst: Business attraction and activation||Reputation||Products Type|
|Infrastructure||Business Facilities||Quality and reliable, secured business environment,|
|People||Manpower Availability||Skills development and knowledge base|
|Finance||Low cost of operations||Infrastructure|
BPO and Call Centre Niche which Zambia can utilise
- Customer Service
- Back Office e.g. transcription, data processing
- outbound marketing campaigns
- BPO Training for the region
- Other related ie Software Development
Some of the BPO and Call Centre Associations
USA – International Association of Outsourcing Professionals (IAOP)
India – National Association of Software and Services Companies (NASSCOM)
UK – National Outsourcing Association (NOA)
Kenya – Business Process Outsourcing and Call Centres Society (KBPOCCS)
South Africa – Business Processing enabling SA (BPeSA)
Philippines – Business Process Association of the Philippines (BPA/P)
Philippines – Contact Centre Association of Philippines
Global – Global Association of Contact Centres
Zimbabwe – Contact Centre Association of Zimbabwe
Australia – Australian BPO Association
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