Large companies may have thousands of employees, but that doesn’t mean they do everything in-house. Even niche industries like online slots Canada websites use third-party companies for most of their operational activities. This has many advantages, and if the right choices are made, it can make companies much more efficient. This is why BPO has become a huge industry, as companies can significantly increase their profit margins when they offer some of their services through third-party companies. In this article, we’re going to talk about what BPO is and how big it is.
What is BPO?
BPO is the abbreviation of “business process outsourcing” and is generally considered a subtype of outsourcing. Outsourcing, as it is known, means that some departments of companies (for example, human resources, facility management, etc.) are managed by a third party. BPO is a subtype of this business model: it means that only the operational activities of companies (for example, customer services) are managed by third parties. This is a contract-based business: the responsibilities and tasks of the third party and duration of the contract are clearly defined in advance.
The biggest reason why companies prefer the BPO model is cost-saving: some operational activities that would cost a lot if they were carried out within the company can become much cheaper when managed outside the company and by an independent third party. To give a simple example, if a Canadian-based company set up its call centre in Canada, it could cost millions of CAD. However, the same company can save tremendously if it hires an agency in countries where the minimum wage is lower and there aren’t many unions. (This is why the majority of call centres are based in the Philippines and India.)
The Size of the BPO Industry
This is a pretty big industry. It’s over $60 billion in size in the United States alone: statistics show the U.S. BPO industry was worth $56.80 billion in 2018 and $60.20 billion in 2019. Analysts think the industry will maintain a growth rate of 8.5% between 2021 and 2028.
The global size of the BPO industry, on the other hand, was 232.32 billion dollars in 2020. The COVID-19 pandemic plays an important role in this value as more companies have chosen to take advantage of BPO services during the pandemic. As a result, the global size of the BPO industry reached 245.91 billion dollars in 2021. In other words, there is a steady increase. Analysts expect the global size of the industry to reach $435.89 billion in 2028.
The Future of BPO
It is clear that the BPO industry will continue to grow, and the 8.5% growth rate forecast looks pretty consistent. Technologies such as RPA (robotic process automation), machine learning, and AI will also contribute to this growth, as it is estimated that most companies will prefer to use BPO services for such technologies. In the near future, we may see companies where only the management staff is located in developed countries: all other departments will be in different third world countries. In this regard, the IT and communications departments come first: 34% of all BPO operations are made up of these departments. (Customer service comes second with 31%.) As a matter of fact, telecom companies continue to be the largest enterprises in the BPO industry.
Statistics show that North America will continue to benefit most from BPO services, and that this industry will grow the fastest in Asian countries. Even now, 36% of all BPO operations are requested by US-based companies, and almost all of them are conducted by third parties in Asian countries. However, we can say that BPO has also been growing rapidly in Eastern European countries recently.
The BPO industry also has some problems. For example, keeping customers’ personal information confidential is a legal requirement for US and EU-based companies. However, some of the Asian-based BPO companies that they work with are located in countries that do not even accept the existence of such a thing as “personal information”. Likewise, some BPO companies do not take adequate precautions, both online and in terms of physical security: hackers can target these companies and take over the databases of big and global brands. In short, security and privacy are the two most important issues of the BPO business model. This problem may also cause the future of the industry to be shaped in Eastern Europe instead of Asia, but it is still early to make a definitive analysis. In any case, it is clear that the BPO industry will continue to grow, and the way companies operate is about to change globally.