A Brief History of Business Process Outsourcing

a.k.a. “BPO” a.k.a. “When Dey Tuurk Our Jerrbs”

 

Business process outsourcing has been around for a long time in one form or another. Companies have always contracted vendors to handle specific tasks – often for services that were essential but difficult to manage in-house, like production or fulfillment. In the mid 20th century, however, many companies were driven to grow and own all elements of their operations. This led to bulky enterprises that needed to dedicate a lot of resources to managing all aspects of the business.

 

Towards the end of the 20th century, many companies began searching for ways to focus their resources on their areas of expertise and work with vendors to handle other important business processes. Businesses realized they could work with other companies to leverage their expertise while cutting down on costs. The game plan, particularly for top-heavy organizations, shifted towards focusing on what your team did best and finding partners do the heavy lifting for other operations.

 

Outsourcing was formally identified as a powerful business strategy in the early 90’s. Initially, certain operations were outsourced, like call center support or manufacturing. Today, it’s become a necessity in a range of different sectors. Whether a company is a lean start-up or a long-established enterprise, outsourcing has proven to be a way to reduce overhead costs, source talent, and quickly scale operations.

 

As technology – particularly telecommunications – became more powerful, more segments of a business could be outsourced to dedicated teams. Human resources, accounting, customer support, and a bevy of other front and back office operations can be done by a local vendor or by a company on the other side of the world.

 

Domestic Outsourcing, also called Onshore Outsourcing, is when a company hires local experts to help out with certain processes. Domestic Outsourcing is often done when companies need to save on costs to deploy teams with experience but when proximity is a must. Offshore Outsourcing is where a company contracts a vendor in a different country than their own to help out with some of their operations. This is often done to save on cost since other countries have talented labor pools and a lower cost of living. It can be significantly more cost effective to scale a team up or down with vendors overseas. One of the top locations for offshore outsourcing is the Philippines.

(Smooth segue, right? Read on!)

It’s More Fun In the Philippines

It’s also less costly and more productive

The Philippines is one of the top business process outsourcing destinations in the world. For a long time, businesses have either opened up their own operations or contracted Filipino BPOs to handle a range of different tasks – from back office to front office operations. Talent, cost, and experience in outsourcing are the leading reasons why companies work with Filipino partners.

 

Over the years, The Philippines has developed a foundation of solid economic growth, high quality service, and cost-effective partnerships to establish itself as one of the top BPO destinations in the world.

The People

Filipinos, both in the Philippines and as expats abroad, are highly sought after across a range of different sectors. This is because The Philippines has a massive pool (ocean?) of talented young men and women. The average age in the Philippines is only 24 years old, and there is a high population of college-educated people to work with. Not only is there a high number of young Filipinos, but 62% of the population that are of working age are participating in the workforce.

 

Higher education has long-been an important element of Filipino culture. In fact, the oldest university in Asia is the University of Santo Tomas in the Philippines, which was founded 1611. Today, more and more Filipinos are going to Universities to study a range of different disciplines. This long history of higher education is ingrained in Filipino society – which is why a lot of companies have some sort of relationship in the Philippines.  

BPO Framework

BPOs have been operating in the Philippines for decades now. The industry has become a mature sector of work for a lot of people in the country. This young, educated workforce has grown up around and benefited from the opportunities that outsourcing has provided to them. There are now independent training programs and university training that many people take advantage of before joining the workforce. Men and women here are some of the most well-equipped to work in conjunction with foreign companies to handle some of their operations. Not only are they well equipped for the type of work that is outsourced to the Philippines, the people are well suited to work in dynamic environments and adapt to changing workflows and practices.  

Language

While outsourcing manual tasks like manufacturing is essentially a given nowadays, some companies are still hesitant to outsource essential services – especially customer-facing services. Anyone who has made a phone call to customer support has encountered an offshore agent working on the other side of the line, but text-based communication like email, chat, or even social media communications are also handled by offshore agents. Smart companies that outsource talent abroad make sure that their agents aren’t simply capable of speaking or writing English, but have a high proficiency and cultural awareness.

Bilingualism is not the exception in the Philippines, it’s the rule. One of the massive advantages of working with Filipinos is that the entire country is immersed in English. In fact, English is the second official language of the Philippines and the primary language used in the education system. A majority of Filipinos grow up speaking English and many take classes to learn how to speak with a minimal accent that is clearly understandable to native English speakers from around the world.

 

It’s important to note that good outsourcing organizations that take care to work with their teams to ensure their language capabilities are up to standard. Not all organizations place emphasis on this, but the ones that do shine in the eyes of their partners.

 

(Big picture below…there’s more underneath!)

Culture

Language is only one piece of the puzzle that helps companies determine the best location to find partners for outsourcing. Globalization has connected the world like it never has before, and teams that work in a global environment need to try to be aware of each culture’s different norms and lingo.

 

The Philippines has a long history of different cultures influencing the country – immigration, integration, or colonization – so the wide range of influences from different countries shape the way Filipinos understand the world. Furthermore, a large percentage (most recent estimate at nearly 11 percent) of the Philippine population lives abroad indefinitely or temporarily for work. These overseas Filipinos bring back their experiences and knowledge from their time abroad to provide a broader cultural understanding of the world.

Cost

Most companies that work with teams overseas try to cut down on cost. This is always an important element in determining if it’s worth collaborating with outsourcing vendors overseas. Skill is important but if the cost doesn’t provide measurable advantages then it’s often better to work with an in-house team or an onshore alternative.

 

The fact of the matter is that the cost of living in the Philippines is significantly lower than that of other countries. The cost of living in the Philippines is a fraction other industrialized countries like the United States or countries in Europe, and this translates to a lower cost of labor all around. Furthermore, Filipinos that work in BPOs make earnings in the middle-income bracket of the country, which means they earn well while providing services to their partners at a low cost.

 

The benefits of working with BPOs translate further when additional costs are taken into consideration. Working with an outsourcing partner cuts down on onboarding – recruitment, hiring, and training. In addition to that, other costs like HR, IT, and accounting are built into the general pricing. Overhead costs like office space and other facilities are not only built into the pricing, but save time for partners to BPOs.  

 

It’s important to note that lower cost does not always mean lower quality. While not all BPOs are created equal – finding a good outsourcing partner can save a company time and money.

Outlook and Future

The World bank states that “The Philippines is one of the most dynamic economies in the East Asia and the Pacific region” with a large and young population, increasing urbanization, and economic dynamism that is supported by a vibrant labor market. Companies are flocking to the Philippines to create long-lasting partnerships that benefit both the vendor and the client.

 

There are a number of benefits that come with outsourcing in the Philippines. When you find a good partner to help you do the heavy lifting for essential and non-essential tasks, you both benefit.