What is Business Process Outsourcing BPO?
Companies big and small took a huge hit during the Covid-19 pandemic, but a service called Business Process Outsourcing (BPO) emerged as something of an unsung hero, given the way it helped firms survive and thrive.
BPO involves contracting out processes such as finance, tax, accounting operations and technology support to third-party service providers.
It fast became an economic lifeline for firms that were forced to accelerate their digitisation efforts amid Covid-19 restrictions.
But the easing of those restrictions has not slowed the BPO momentum, with experts tipping continuous growth.
Why Business Process Outsourcing is growing fast?
Mr Gayal Karunasena, business process solutions leader at Deloitte Singapore, said the company has recorded growth of more than 50 per cent for its BPO services in the Asia-Pacific region since 2020, and he expects the expansion to continue in the next few years.
“The Covid-19 pandemic really accelerated the need to recalibrate business models regionally with remote working, cloud services and outsourcing of back office processes,” said Mr Karunasena.
“We have not yet seen a significant demand from SMEs (small- and medium-sized enterprises) in Singapore in the past few years… (but) we expect the demand to increase from this segment as well once the market conditions improve in the near future.”
The shortage of skilled employees has also aided the rise in BPO services.
Which Industries will benefit the most from Outsourcing?
Mr Chiu Wu Hong, partner and head of enterprise, tax at KPMG in Singapore, said: “From our observations, BPO has always been among the key solutions businesses can leverage to help reduce costs and improve the efficiency of their core processes. BPO has proved popular regardless of company size.
“For the SMEs, we have seen interest from companies in the trade, food and beverage and retail industries, to name a few.
“Some of the common processes that they look to outsource include finance and accounting, corporate secretarial functions, payroll, invoice management and payment or claims processing.
“Many of these firms tend to be open to tapping BPO providers who offshore their operations to other countries in Asia where the cost base is lower.”
Outsourcing will remain a viable option over hiring in-house employees as companies continue to grapple with the effects of the Covid-19 crisis, especially when SMEs do not have the financial resources to compete for talent amid the labour crunch, said market watchers.
BPO service providers are also offering artificial intelligence, machine learning and predictive analytics capabilities, given rapid advances in technology.
Mr Chiu said: “With digitisation, BPO providers are now expected to provide data-driven insights that can help clients make critical business decisions.
“BPO has traditionally enabled companies to improve their efficiency, but they are now also seen as a gateway to accessing value-added, professional expertise that may not be readily available internally.
Research firm Statista noted that the global revenue of BPO and information technology outsourcing amounted to US$92.5 billion (S$130 billion) in 2019. Revenue in the BPO segment in Asia is projected to reach US$72.9 billion this year.
Business Process Outsourcing Service Provider – Win-Pro
Mr Soh’s staff in Malaysia also had to work from home during the lockdowns.
Those serving e-commerce businesses based in Singapore were plugged into cloud platforms and were taking orders and answering inquiries from customers here.
Mr Ronald Soh, managing director and founder of BPO service provider Win-Pro Consultancy, said at least 25 SMEs had contracted his firm’s services since the pandemic, including e-commerce companies, marketing agencies, food distributor companies and manufacturers.
The home-grown IT services and consultancy firm founded in 1993 has offices in Singapore, Johor Bahru and Kuala Lumpur. Mr Soh said he will be setting up a fourth office in Batam, Indonesia, this year, to cater to the rising demand.
Mr Soh said that by engaging a third-party BPO service provider, business owners can reduce their overhead and labour costs by as much as 50 per cent, instead of hiring in-house employees.
In a recent survey conducted by Dr Rashimah Rajah as part of her work with the World Economic Forum on the future-readiness of SMEs, around 300 decision-makers globally were asked what were their top three challenges in business.
At 52 per cent, talent acquisition and retention was the top challenge among SMEs, said Dr Rashimah, a lecturer at the department of management and organisation at NUS Business School.
How can BPO help SME?
Dr Rashimah noted: “In Singapore, high labour costs put local SMEs at a disadvantage when it comes to talent acquisition, as accepted job candidates often turn down offers in favour of a higher pay package or a more reputable, bigger, company.
“In a company we interviewed for the study, the acceptance rate of job offers was as low as 30 per cent.
“While it is important to have team members physically in the same place to foster better teamwork and collaboration, decision-makers in local SMEs tend to find themselves outsourcing jobs where the skills available match the demand.”
Mr Andy Lim, director of GF+A Global, which imports premium tiles and sanitary ware from Europe, said: “It hasn’t been easy for SMEs to hire skilled workers.
“Even when I raise the salary, younger workers are not keen to work for a small business. BPO provides a good alternative, although it may pose another challenge of how my sales team in Singapore will be able to work seamlessly with the offshore marketing team.”