Impact Sourcing as a future of Business Process Outsourcing

The case of Two BPO Companies

Imagine two organizations A and B in the BPO industry with the same credentials operating in India for the last 15 years. A and B are on par with each other for the first twelve years of their existence displaying almost similar characteristics across various performance parameters. The last three years data, however, reveal significant differences that include-

*Stagnation for A; steady growth for B
*35 percent attrition rate for A in the last 3 years; 15 percent for B
*Non-acceptance of new orders due to limitation in sourcing talent for A; accepting new orders easily with surplus
talent for B
*Loss of CSR perception for A; gain of goodwill from society for B

So, what is it that B did to move far ahead of A, when the market potential for both remained the same?

To answer this question a look at the status of BPO industry is necessary.

Status of BPO industry in the world and India

The evolution of BPO industry in the world and India reveals that worldwide annual BPO revenue stands at $180 billion growing 10-15 percent every year. India and Philippines are the leading providers of BPO services. India’s annual BPO revenue is $28 billion, out of which domestic BPO revenue accounts for $4 billion as per NASSCOM (http://www.nasscom.in/knowledge-center/publications/domestic-bpm-market-2016-cusp-transformation). India’s domestic BPO market grew at 21 percent CAGR clocking more than eight times growth in the last 11 years. BPO providers have built domain expertise to offer value added services. One of the major bottlenecks for growth in BPO industry is attrition.

How BPO industry tackled attrition

As attrition rates increased, BPOs had to either pay higher wages increasing their costs of operation or look for fresh talent elsewhere and so tapped tier-2, 3 and 4 cities. They found that they could counter the higher wages in larger cities with lower wages in tier-2, 3 and 4 cities plus an additional cost for training. This strategy helped them to create a large pool of talented people from these towns. More importantly, they found that overall costs of operations came down substantially simply because of the lower incidence of other costs in these towns. Further, they found that they had a more committed work force because migration was no longer an issue. The workers were happy to procure jobs amidst their environment of comfort zone.

Now, an answer to the question why B did better than A emerges.

The paradigm shift to Impact Sourcing

B resorted to sourcing talent from tier-2, 3 and 4 cities whereas A continued in its traditional BPO model sourcing from tier-1 cities. In fact, B did what many of its successful peers did – unintentionally create a new concept called as impact sourcing, which is sourcing from the traditionally underprivileged class of people. BPOs such as B did not approach tier-2, 3 and 4 cities with an objective of doing social good. They merely looked for trainable people at lower wages.

Moving to smaller towns invented the new paradigm of impact sourcing. Soon, impact sourcing gained currency and today is showing the way for stagnating BPOs to reinvent themselves and become competitive in the market place.

How is impact sourcing affecting the BPO industry?

Impact sourcing has taken roots in the two main BPO countries of India and Philippines accounting for over 12 percent of all BPO revenues. Impact sourcing has started creating a new talent pool from disadvantaged people (economically, socially and physically) from lower strata of society who are either loathe to migration or don’t have enough opportunities in their towns.

Impact sourcing is here to stay according to a report submitted as a part of a seminal Digital Jobs Africa Initiative study by the Everest Group supported by The Rockefeller Foundation (https://www.everestgrp.com/wp-content/uploads/2017/04/RF-The-Case-for-Impact-Sourcing-Final-approved_vf.pdf). The report, covering India and Philippines besides African countries, inter alia says that impact sourcing is

*A sensible business strategy offering immense benefits – tremendous 65-87 percent cost advantage, significant 35-
40 percent savings compared to traditional BPOs
*Comparable to traditional BPO performance
*Responsible for lowering attrition rates due to ‘no migration’ issues, simultaneous educational opportunities
*Highly suitable for domestic BPO market
*Socially responsible as it targets underprivileged sections improving their economic situation and showing the way
for other members of the communities to join the BPO industry thus growing the skilled talent pool
*Building communities with special skills
*The fastest growing segment of the BPO market

Impact sourcing suitable for call centers and back office operations

The study also pointed out that impact sourcing is suitable for certain categories of the BPO industry that include services which
*Transact with high volumes and repeatability – non-voice back office support, voice work in call centers in local
languages including English
*Are not amenable to automation
*Require humans to perform tasks

Impact sourcing suitable for multiple business processes

The BPO market comprises many processes for a variety of functions out of which the following can benefit from impact sourcing

*Marketing, sales and customer service including call centers and back office
*E-commerce
*HR
*Processing insurance claims
*Supply chain and procurement
*Finance and accounting including back office

Impact sourcing suitable for simple tasks

These processes undertake a variety of tasks such as

*Data entry and document digitization
*Telemarketing – local languages
*Answering customer queries through call centers
*Capturing and validating sales data, invoices, converting hard copy information into digital form through back
office operations
*Transcription, translation

The future of BPO is Impact Sourcing

Today, the BPO industry is embracing impact sourcing to grow the BPO business manifold. Impact sourcing is making inroads into the domestic market and BPOs that can spread their wings all over the hinterland will reap rich rewards. Those ignoring will miss the opportunity to leverage the tremendous latent potential a burgeoning middle class will unleash in the years to come.
In the ultimate analysis impact sourcing is the future of BPO and its social impact will only grow the BPO business besides providing a laudable image of social responsibility.
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