Outsourcing and the associated Business Process Outsourcing (BPO) service providers are effectively all about cost saving, by offering cheaper labour to companies located in places where labour costs are higher – basically a labour arbitrage. On the surface it is good for the company, as it reduces costs; good for the BPO company as it gets foreign investment, often in a 3rd world country, and good for the BPO workers as the job prospects improve.
Outsourcing is a partnership
Prior to the 2008 global recession, some companies looked at cost cutting and outsourcing to making their ‘bottom-line’ figures more attractive to shareholders and new investors; gain a competitive advantage by having more resources (people) available or spread the risk by not processing in one country. Since job opportunities were plenty, any job losses due to outsourcing were pretty much ignored or lost in the noise of ‘musical chairs’ job moves.
Move forward a few decades since the 2008 financial crisis, a 2020 covid pandemic ensued, coupled with the 2025 Trump Trade Wars, companies are forced to rethink their cost saving strategies and unsurprisingly the allure of the BPO cost savings is even more attractive. However, governments and public authorities, who during the times of plenty turned a blind eye at job losses due to outsourcing, are now duty bound to protect against job cuts, especially in a government created cost of living crisis. Nevertheless, governments are forced to strike a fine balance between the free-market economics and imposing a social moral obligation on privately held companies, who have their own viability to think about.
One solution available to cost conscious companies, in uncertain times, is to outsource only those tasks and jobs that, for the survivability of the company, must be feasibly outsourced – the needs of the many outweighing the needs of the few. Making people redundant is negative, irrespective of location, so identifying mutually agreed schemes such as fewer paid working days, unpaid holidays, rate cuts, etc., all go to retaining human wealth in the company, which is positive.
Another solution available to companies, in higher cost locations during a recession, is to re-evaluate their BPO service provider/partner and re-negotiate better rates. Additionally, companies should consider alternative BPO service providers, who are offering lower costs and maintaining/enhancing service and quality levels.
Traditionally, India is seen as a low cost BPO location, yet with emerging BPO markets in neighboring countries and locations around the world, companies should not limit themselves exclusively to India and its BPO providers. Since the ‘new kids on the block’ will try harder and offer more for less, companies could, through the cost savings of switching BPO providers, be able to retain their on-shore staff and still make the bottom-line figures look attractive even in a recession – winners all round, which can only be a good thing.
The Rise of AI
That’s not to talk about the Artificial Intelligence (AI) industry/revolution, which is set to disrupt the traditional outsourcing model, with automated AI Agents (machines) taking over human processing roles and task – globally.