It’s Time to Level Up With Outsourcing


It’s Time to Level Up With Outsourcing

It was September of 2020. I was about to launch a business. As a corporate spinout, we had some advantages: a battled-tested product, our first customer, a mature team, and we had raised venture capital.

But even with this head start, a sage advisor wearing a medium-length gray beard warned me that “Running a startup is like plowing a field with your face.”

Over two years later he seems wiser than ever.

If you’re running a small-midsized business (SMB), or managing one of its departments, you know what I mean. One new client can triple your revenue. One painful churn can cost you the company.

In an SMB, all the amps go up to 15. Few things can prepare you for the extremes of life in an SMB. Because of this, we’re always looking for ways to moderate those extremes, mature our companies, and become more resilient.

But many of the solutions available to larger enterprises require deep pockets. Amazon can install robots to make their warehouses more efficient. SpaceX can develop bleeding-edge artificial intelligence (AI) to land and reuse rockets.

Best Buy can hire McKinsey consultants to improve its processes. As mere mortals, we don’t have those resources.

The Rise of and Case for BPOs

But one strategy is now within reach: outsourcing. Pioneered in the 1960s and 1970s by manufacturing companies such as General Electric, with a second wave in the 1990s spurred on by IT giants such as IBM and Dell, the advent of outsourcing created companies now called business process outsourcers (BPOs).

The BPO industry soon began to encompass contact center-provided customer service, support, and sales, enabling companies to ramp up programs faster, with ready access to affordable quality labor and to the latest technology at scale.

The BPO industry is forecasted to grow from $251 billion in 2021 to over $500 billion in 2030, according to Grand View Research. This is big business.

Well known for bringing significant cost savings, the practice of outsourcing a business process – when done well – can also bring better technology, process excellence, management practices, and workforce agility.

For instance, rather than hosting an internal customer service team in an expensive metro-area headquarters with a high cost of living, a company can spin up a talented BPO team in a less costly geography. While simultaneously partnering with a company that specializes in those state-of-the-art systems, processes, and hiring practices known to maximize the customer experience (CX).

While BPOs don’t always get it right, these are the reasons why big companies do it i.e., outsourcing.

SMBs Limited in BPO Use

And yet, SMBs have been nearly shut out of the outsourcing revolution. One reason: they often lack the in-house sourcing and vendor management teams needed to develop and oversee BPO relationships with confidence.

Also, while there have long been small outsourcer contact centers, performing basic tasks like taking messages and orders, many of them often lack the tools and the agent training to enable SMBs to compete effectively on more sophisticated service and support with the larger companies.

There are many thousands of BPOs around the world. Their maturity, skills, language proficiencies, and industry expertise vary widely. Plus, a given BPO’s performance ebbs and flows over time.

It’s the Wild West out there for companies searching for a BPO partner, and there can be significant business penalties for making a poor selection. Combine selection risk with the risks associated with launching and managing ongoing operations and it’s no wonder why many SMBs shy away from outsourcing.

Another blocker for SMBs is that many BPOs, especially the big, well-known players, don’t take small deals. They purpose-built their operations to deliver better economies of scale to large enterprises.

Standing up a team of five customer service agents breaks the model. It is neither profitable for the BPO nor large enough to benefit from the BPO’s sophisticated management systems designed to optimize the output of large teams. The BPOs willing to take smaller deals are lesser-known and therefore inherently riskier selections for the SMB.

Yes, BPOs, particularly since the COVID-19 pandemic, provide work-from-home (WFH) agents, which helps with affordability, especially due to lowered facility costs.

But the management layer is still important (QA, supervision, scheduling, etc.). Plus, new technologies are required to support WFH. Consequently it may not translate to BPOs accepting smaller deal sizes, except for the ones that focus on low complexity services.

In a U.S. economy where 30 million small businesses contribute 62% of jobs and 43.5% of GDP (Forbes) these barriers to outsourcing create a meaningful gap.

New Opportunities

But there is good news: resources have emerged in recent years that are at last unlocking the BPO industry for SMBs.

Take customer service as an example. Cloud-native CX platforms, such as Zendesk, have become both affordable and feature-rich, making it possible for globally distributed teams to easily share a common knowledge base, reporting tool, and customer interaction system.

Gone are the days when systems complexity and massive IT projects were required to establish multinational teams and, therefore, to outsource.

These modern platforms are easy to configure, can start with as little as one software license, and then grow with the business. This creates a convenient technical backdrop that reduces the system's burden – time, cost, integration, implementation, and training – of engaging a BPO.

On top of this, the emergence of tech enabled BPO marketplaces solves the sourcing problem for SMBs. When an industry requires economies of scale but is also highly fragmented (with thousands of BPOs and millions of SMBs), an aggregation mechanism eventually emerges.

A marketplace can mediate numerous SMBs and numerous BPOs into optimal patterns to produce economies of scale, making deals both profitable for BPOs and affordable for SMBs.

Moreover, a healthy marketplace will provide services in any language, geography, skill set, industry vertical, or use case, while monitoring BPO performance, working conditions, diversity, equity, and inclusion (DEI) credentials, and more.

Plus, if the marketplace has deployed standard terms of trade, the sourcing challenge can be further streamlined. These marketplace features combine to make it easier, safer, and more affordable than ever for an SMB to source the right partner, at the right price, and on the right terms.

The BPO can also bring a knowledge of CX best practices to your program, along with a history of excellent performance in your industry.

A new partnership is poised to revolutionize the BPO sourcing experience for SMBs: BPO marketplaces integrated into CX platforms.

By integrating the BPO marketplace into the CX platform, SMBs can now – with only a few clicks – add outsourced customer service agents to their roster without ever leaving their core CX system.

This allows SMBs to outsource fearlessly, confident that they are getting high quality service from a handpicked BPO roster vetted by the marketplace and approved by the systems platform. On Zendesk, for example, this is accessible using the Get Labor app. Expect to see more of this kind of collaboration as industry players seek to better incorporate SMBs into the world of outsourcing.

Best Practices

The above examples illustrate how the industry is adapting to the underserved SMB market. Now, from my experience helping SMBs navigate the world of outsourcing, I’d also like to share several best practices that should make your outsourcing journey more successful.

1. Don’t base your BPO partner selection on cost alone. If you are currently in-sourcing, almost any BPO partner will deliver considerable savings.

Instead, focus on factors that will improve service to your customers. This may include a cultural fit of the BPO with your team and customers and the ability of the BPO to align with your branding, quality control, and performance management capabilities.

The BPO can also bring a knowledge of CX best practices to your program, along with a history of excellent performance in your industry.

Most SMBs may struggle to uncover these attributes, in which case they should consider tapping a CX consultant, broker, or a BPO marketplace.

2. De-risk the cost of a poor BPO selection. Despite your best efforts, it is possible that a BPO relationship may not deliver.

To avoid the twin problems of either living with an underperforming partner or undertaking a painful rip-and-replace project, you should have an escape plan. If you have enough demand for it, contract with more than one BPO.

That way, if performance goes south, cost goes north, or if your BPO experiences an outage – perhaps due to adverse weather or a systems impairment – you can shuffle the workload to the other partner(s) on the program.

If your program is too small for this, as will be the case with many SMBs, consider sourcing through a marketplace.

The marketplace, with its dozens or hundreds of BPO partners ready at hand, becomes a proxy for your multi-BPO program, making it easier to switch if circumstances require.

3. Lean on your BPO partner for launch planning. A quality BPO will be expert in recruiting, scheduling, and managing agents, and should have prowess in project managing the launch of a new campaign.

The SMB should ensure your BPO’s project plan includes the necessary elements, such as systems deployment, agent HR and recruiting, service channel setup, QA, training, training, training (yes, it’s important!), and more.

The SMB should also:

  • Require your BPO project manager to provide regular status reports throughout the launch.
  • Expect to train the agents, at least the initial crop. An important rule of thumb is that the success of the campaign is determined during the first 60 days.
  • Agree on success criteria with your BPO partner, then meet frequently to establish a healthy operating rhythm and set the right precedents.

4. Manage the BPO, not their agents. A common misstep made by companies outsourcing for the first time is to manage BPO agents exactly as if they were internal agents.

There are certainly some program elements where this is appropriate, such as training and providing recognition. But it is not wise to directly discipline, penalize, or reschedule agents. Keep in mind that you’ve hired a BPO, not a team of freelancers.

A healthy BPO relationship depends on a strong mutual understanding of what is meant by “good performance.”

The BPO employs supervisors, managers, QA staff, and more, whose jobs are to drive the success of your campaign. It is important not to bypass these leaders, as it undermines their role in the campaign, erodes trust, and sows the seeds for a fragmented relationship. Rather, experienced outsourcers learn to manage the BPO.

5. Make outsourcing success part of your team’s performance goals. With this in place, then formally recognize and reward your line leadership for BPO program success.

As part of this approach, establish service expectations. A healthy BPO relationship depends on a strong mutual understanding of what is meant by “good performance.”

Early in an outsourcing program, expectations may be more focused on ensuring good coverage, achieving agent competence, and meeting QA standards.

Over time, measures should include customer-facing metrics, such as customer satisfaction, and efficiencies, such as handle times. These should be developed in concert with your BPO, and perhaps with a trusted advisor or consultant, and documented into a formal Service Level Agreement (SLA).

It is crucial that SLAs not be “imposed” but agreed, as there is interplay between headcount, incoming demand, issue types, and other factors. Meeting SLA commitments should then be a core focus of your BPO and an agenda item in performance meetings.

6. Build a knowledge base, together. Most SMBs hesitate to outsource because they lack a formal knowledge base – a uniform repository of company and product information – believing it to be a prerequisite.

Certainly, it would be helpful. After all, a knowledge base allows your agents to answer more quickly, with more confidence, and more accuracy. A knowledge base is also foundational to launching a chat bot or conversational AI down the road.

But the fact remains that it is far more common for SMBs to launch without a knowledge base than vice versa. Rather, BPOs are experts at helping build your knowledge base and integrate it into processes for maximum benefit.

With powerful, affordable, cloud-native CX platforms, combined with global, tech-enabled BPO marketplaces, the outsourcing industry has warmed up to SMBs. While it is wise to proceed with caution, now is a better time than ever to jump in … and you can do well by following best practices such as those cited herein.

Alan Pendleton

Alan Pendleton is the CEO and Co-Founder of ArenaCX, is a fan of you-and-what-army sized challenges and is passionate about making a positive impact through business. He lives in central North Carolina with his wife, two daughters, and cat, Mindy.