Two Decades of BPO Evolution: ‘We’ve Come a Long Way, Baby!’

I have seen many changes in the outsourcing industry during the past two decades since my first IT job as a MIS manager for a small satellite company in Ohio. …

I have seen many changes in the outsourcing industry during the past two decades since my first IT job as a MIS manager for a small satellite company in Ohio. BPO was almost unheard of back then, in the days when the few small businesses connected to the Internet used dial- up lines. BPO was a very exotic realm left to the largest multinational corporations who were experimenting with aligning internal functions and processes operationally as opposed to geographically, eliminating duplication of back office tasks.

The primary enabling technology allowing the business we now know as Business Process Outsourcing has clearly been the growth in the global digital communications infrastructure. Prices for data communications plummeted due to the combination of international deregulation of telecommunications carriers and new, destructive technologies that allow modest home users to enjoy Internet speeds that surpass the large corporate offices of a dozen years ago. Remember that in 1990 it was rare for anything other than a corporate office or high-tech laboratory to have a data connection larger than a T3 circuit (45mbps, or about three times the speed of the typical home DSL or cable connection)!

In the late 1990s, I was involved with exporting the new technology of H.323 gateways into Latin America. This was the very beginning of VoIP (Voice over IP). Back then it was certainly considered a disruptive technology and many countries with state–owned telephone monopolies actually enacted legislation to outlaw these devices or employed firewalls to attempt to block voice packets to protect their profitable income from long-distance tariffs. VoIP technology, still in its commercial infancy, was finally allowing us to have telephone conversations over data networks computer-to-computer, or office-to-office. Trust me, for those of you who don’t remember, this was a very novel concept at the time.

The Rise of Call Centers

On a larger scale, the same enabling digital communications technology was allowing the first large scale international call centers to open up in places like India and Ireland. One of the very first large-scale BPO applications was call center outsourcing, and of course, this remains a primary BPO example to this day. Many companies got their start domestically, such as 411 directory information outsourcing firm InfoNXX, which then grew to operate call centers from Pacific Islands to Europe. (InfoNXX is now merged with KGB.com)

Many companies rushed into BPO without properly laying the groundwork. Whereas now BPO is somewhat of a political hot potato with outsourcing being a topic in the current presidential campaign, a decade ago, the news was the public outcry against poor customer service, with the blame falling often on poorly trained customer service or sales representatives in a far-off country who could not speak with an intelligible accent or had no cultural training and could not relate well to the customer or client on the other end. I still get a chuckle at some of the hilarious parodies of these early, bad examples of outsourcing available on YouTube (The PhoneJacker ones are my favorites).

Cutting Costs
You see, the first generation of outsourcing was seen almost exclusively as a cost-cutting measure, with businesses looking at functions like data entry, software coding and testing, customer service and inbound telesales as commodities that could be bid out on a lowest-cost basis. This side of the business was saved as both providers and BPO buyers began to take a more sophisticated and enlightened view of these aspects of their business, and realized “you get what you pay for.” BPO firms started to compete based on their rigorous training, quality, and knowledge of their workers, rather than a strictly cost per call or cost per man-hour basis.

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As the reputation for BPO improved, companies began to trust more complex operations to outsourcing firms. By this point, global consultancies and larger technology firms entered the BPO business in a large way. Suppliers that had not operated with a BPO model in the past retooled in order to offer their services on a global stage.

BPO – Today and Tomorrow
BPO is no longer only for large corporations. It enables even the smallest companies to efficiently outsource non-core operations across the globe. On the supplier side, remember that the freelance graphic artist in Bogotá, or the individual PHP programmer in Kiev (these are actual people I know) who get paid from their small US customers via PayPal, legitimately are citizens, in their small way, of the world of BPO.

That has brought us to where we are today. BPO still means call centers and software development, but it also means market research firms, human resources (HRO), pharmaceutical development, and lest we not forget, the United States has now completely outsourced for the time being, manned spaceflight to the Russian Federation. (Unthinkable even when I was a college student!) Today, there is an industry wide discussion on whether the term “Business Process Outsourcing” is politically incorrect or even obsolete. I will save my opinions on that issue for a future column, but in any case, from the largest multinational to the smallest artisan proprietor, BPO has permanently changed the way business is done worldwide.

This story was originally published by Nearshore Americas’ sister publication BPO Outcomes.

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