Navigating the Path Ahead: Customer Service and BPO Trends to Watch in 2024

If the past few years have shown us anything, it’s that change is the only constant in the business process outsourcing (BPO) world. As we bid farewell to 2023 — a year marked by economic fluctuations, workforce scarcity, and increased automation — we can’t help but look forward to what 2024 holds.

In 2023, businesses continued to wrestle with the ripple effects of the pandemic, which spurred a seismic shift in consumer behavior and expectations. Amid these changes, the BPO industry remained resolute by meeting the demands of the new normal.

The increased emphasis on data privacy and the growing reliance on technology also has shaped the BPO landscape, compelling brands to rethink their customer experience (CX) strategies. The future of CX is set to be more innovative and customer-centric than ever before.

As we step into 2024, let’s explore the key trends poised to redefine customer service and BPOs.

Rising Demand and Growth in Diversified BPO Services

We expect to see an expansion in the demand for outsourcing services across multiple disciplines, beyond call center operations. For instance, the global Knowledge Process Outsourcing (KPO) market is set for significant acceleration, projected to reach $90.5 billion between 2023 and 2027, growing at a compound annual growth rate (CAGR) of 15.5% during the forecast period. Other high-demand services include IT & digital (ITO), human resources (HRO), financial & accounting (F&A), and legal (LPO).

One of the main drivers for this shift is the relentless push toward digital transformation. Companies need to stay competitive in a rapidly evolving market, and outsourcing these peripheral tasks gives them the agility and flexibility to focus on their core competencies.

Broader Adoption of Outsourcing by Smaller Enterprises

Outsourcing, once viewed primarily as a cost-saving tool for large corporations, has evolved into a strategic growth driver for companies of all sizes. A recent survey of small business leaders revealed that the majority (83%) planned to maintain or increase their spending on outsourced services in 2023.

We expect this trend to carry over into 2024 and beyond. Emerging brands are viewing outsourced services as a strategic tool that can enhance the business due to:

• Technological advancements: The rise of digital technology has made it easier than ever for businesses to connect with service providers across the globe.
• Cost-efficiency: Instead of investing heavily in in-house resources, companies can leverage the expertise of external providers at a fraction of the cost.
• Access to global talent: Businesses are no longer restricted by geographical boundaries when it comes to hiring and can source the best expertise from anywhere.
• Operational flexibility: Outsourcing offers younger and emerging brands the flexibility to scale operations up or down based on demand.

Booming Demand in Nearshore and Offshore Markets

Even before the pandemic, there was a growing demand for nearshoring and offshoring. The pandemic further accelerated this trend due to staffing shortages in the domestic (U.S.) market.

As we navigate the aftermath of the pandemic, the impacts on global workforce distribution continue to evolve, and companies are exploring nearshoring and offshoring options to mitigate risks and maximize cost savings.

Over the past year, we’ve observed significant expansion in both nearshore and offshore markets. Offshore markets, particularly in Asia, have seen a marked increase in demand for IT and customer service outsourcing in 2023. [AP3] [NJ4] Nearshore markets, especially in Latin America, also saw a significant upswing in demand during the same period. The growth in nearshore underscores the increasing preference for geographical proximity to the U.S., cultural affinity, and similar time zones as the U.S.

Emerging locations offer access to untapped and unsaturated labor markets, showing promising growth potential. In particular, Africa is standing out, with countries such as South Africa, Kenya, and Nigeria becoming attractive outsourcing destinations. These regions, with their large, young, English-speaking populations and improving infrastructure are drawing attention from brands looking to tap into new labor markets.

Certainly, we expect the nearshore and offshore outsourcing markets to continue expanding into 2024 and beyond.

Exploring New Horizons: Brands Will Continue to Embrace Geographic Diversification

The post-pandemic era has underscored the significance of diversification, compelling organizations to pursue de-risking strategies for operational growth and stability. We believe that geographic diversification in the outsourcing industry is not only expected to grow in 2024 but is also crucial for the industry’s evolution. Here’s why:

• De-risking and diversification: As we navigate a period of global economic uncertainty, diversification becomes critical for brands to maintain a competitive advantage and spread out their operational risk.
• Talent accessibility: Brands find that having a diverse mix of locations helps them efficiently align customer demand with skilled BPO resources.
• Cost-effectiveness: With price surges in the U.S. and high turnover rates in traditional outsourcing regions, brands are drawn to emerging markets for cost-effective and high value solutions.
• Overcoming over-concentration: Brands have had concerns about over-concentration in established markets like the Philippines and India, for years. There’s an increasing need to diversify from over-reliance on these traditional outsourcing hubs.
• Emerging markets: Companies can no longer depend solely on mature outsourcing markets to manage the anticipated growth. With the BPO industry projected to reach $525 billion by 2030, brands are actively exploring emerging markets as a means to absorb this expansion.

Ultimately, geographic diversification is critical to future-proofing businesses, ensuring continuity and addressing industry skill gaps.

Empowering Communities through Impact Sourcing

Impact sourcing is an inclusive business practice within the outsourcing industry that aims to create employment opportunities for individuals with limited prospects. It goes beyond just hiring workers; it’s about empowering them and fostering community transformation.

This socially responsible approach to business is gaining momentum, and we believe its prominence will significantly increase in 2024. There are several reasons for this forecast, and I’ll touch on a few key points:

• Social responsibility: Impact sourcing is an effective way to demonstrate a commitment to social causes. It directly impacts disadvantaged communities, providing meaningful employment opportunities that increase income and reduce unemployment rates. This practice aligns with the growing trend of consumers preferring to engage with socially responsible brands.
• Competitive performance: As I discussed in my previous article on the topic, impact sourcing isn’t just about doing good; it also demands competitive performance. Service providers in this sector have proven their ability to deliver high-quality services at competitive rates, often leading to an economically self-sufficient and loyal workforce that delivers positive outcomes for brands.
• Diversity and equality: Impact sourcing plays a significant role in promoting diversity and closing the gender pay gap. Offering equal pay helps eliminate disadvantages and fosters an inclusive work environment.
• Emerging markets: The rise of emerging markets provides a ripe landscape for impact sourcing. These markets often have untapped talent pools that can be developed and utilized through impact sourcing strategies, leading to economic growth in these regions.
• Workforce development: Companies invested in impact sourcing actively contribute to workforce development by providing training and employment opportunities to individuals in high-unemployment areas.
• Strategic partnerships: Impact sourcing allows brands to partner with BPOs that share similar values and missions, fostering a sense of purpose and creating stronger business relationships.

The outlook for impact sourcing in 2024 looks promising. The combination of social responsibility, competitive performance, and market growth make it a viable and attractive business strategy. As more companies recognize the benefits of impact sourcing, I foresee a significant uptick in its adoption, leading to a more inclusive and equitable global economy.

BPO Consolidation and De-risking: A Bright Future for Smaller Players in 2024

The BPO industry is in the midst of a transformation. In 2023, we witnessed some significant M&A activities, with two mega-deals standing out: Concentrix’s merger with Webhelp to form a $10 billion behemoth employing over 430,000 individuals and Teleperformance’s acquisition of Majorel, creating a $12 billion organization.

Will we see more M&A deals throughout 2024? It’s quite possible.

However, our contrarian view is that consolidation paves the way for mid-sized and smaller BPOs to gain market share. Why? The largest BPOs tend to chase mega clients with enormous scale. And as we’ve seen in recent years, larger buyers of outsourcing services are increasingly looking to mitigate risk by sourcing from a balanced group of suppliers rather than relying heavily on larger BPOs.

This shift presents a significant opportunity for mid-sized and smaller BPOs. These companies can often provide more personalized service and are sometimes better equipped to cater to niche markets or deliver specialized services. I talk about why bigger isn't always better in a previous article.

We also expect to see an increase in “defensive” acquisitions as BPOs strive to diversify away from traditional call center services. With the rise of automation and AI, BPOs are investing in capabilities such as digital transformation, analytics, and technology consulting to stay ahead of the game. This diversification not only mitigates their business risk but also allows them to offer more value-added services to clients.

In addition, there is a growing trend toward vertical-specific BPOs serving niche industries such as healthcare, finance, and retail. These specialized BPOs are well-positioned to provide industry-specific solutions and expertise to clients, making them less vulnerable to the commoditization of traditional BPO services.

Rising Impact of Automation in Call Centers

The impacts of automation on outsourcing will be significant in the coming year, especially with the rise of artificial intelligence (AI), robotic process automation (RPA), and other advanced tools.

Here are some of the ways automation is transforming call centers:

• Augmentation over replacement drives higher customer satisfaction: As I explained in a previous article, AI and automation are not here to replace humans but to augment their capabilities. This could potentially lead to an increase in customer satisfaction rates as customers receive quicker responses for simple queries while more complicated issues are handled with human compassion and expertise.
• Increased efficiency and productivity: Automation tools like RPA can significantly improve efficiency by reducing the time spent on repetitive tasks. According to a study by Accenture, RPA can reduce the time taken for these tasks by up to 90%. This increased efficiency can be passed on to clients, improving the value proposition of outsourced services.
• Personalized service delivery: AI-driven analytics can provide valuable insights into customer behavior and preferences, enabling more personalized service delivery. Consumers are more likely to shop with brands who recognize, remember, and provide them with relevant offers and recommendations.
• Potential for upskilling: Automation creates a chance for upskilling in outsourcing organizations. As repetitive tasks are automated, call center agents can focus on developing higher-level skills, potentially leading to greater job satisfaction and lower attrition rates.

Managing CX Leadership Challenges in an Unusual Job Market

In 2023, the U.S. job market presented a contradictory picture: widespread layoffs across various sectors coexisted with a record-low unemployment rate. Nevertheless, job growth, although slowing down, remains strong, indicating a resilient economy that continues to generate new opportunities.

In this unique landscape, many talented customer experience (CX) leaders have been struggling to secure the right position with the right company. Since 2022, we have observed high-level leaders enduring an extended period of unemployment despite their diligent efforts to find a suitable role.

Perhaps it’s a sign of the times, an unclear economic picture, and other headwinds impacting hiring decisions. As we navigate through 2024, these trends will continue to impact brands, particularly in the area of CX. When organizations are forced to make cutbacks, CX is impacted. Leaders are spread thin, which can lead to increased stress levels, and less time spent with family. Furthermore, the pressure to deliver exceptional customer experiences remains high, while resources and support may be limited. 

This is where BPOs can play a crucial role in supporting CX leaders. By partnering with experienced BPO providers, organizations can tap into an extensive pool of trained customer service professionals and specialized technology to help manage customer and workflow demand and alleviate some of the pressure on internal teams. This not only allows for more efficient operations but also frees up time for CX leaders to focus on strategic initiatives and drive overall business success.

Transformation and Growth: A Promising Outlook for 2024

Looking back at 2023, it’s evident that the BPO industry is undergoing a significant transformation. The widespread adoption of outsourcing became a game-changer for companies of all sizes.

 We saw significant growth in nearshoring and offshoring, fueled by companies’ desire to cut costs in the U.S. market. As businesses continue to streamline costs, these markets will undoubtedly experience increased demand. This trend also led to geographical diversification, as emerging locations provide access to untapped labor pools.

In 2023, M&A activity in the BPO industry was robust, paving the way for mid-sized and smaller BPOs to gain market share by catering to niche markets or providing specialized services.

One of the most encouraging trends we observed was the rise of impact sourcing. Companies began to embrace socially oriented outsourcing strategies, aiming to create positive economic impacts on disadvantaged sectors and eradicate inequities faced by women and minorities.

So, what’s next for 2024?

Automation, AI, and RPA will continue to revolutionize the industry. We anticipate more small enterprises embracing outsourcing, nearshoring and offshoring markets flourishing, and new labor markets emerging. The future is bright and filled with opportunities for innovation, growth, and purposeful impact.

Here’s to a prosperous 2024, where we continue to transform the BPO industry, create a positive impact, and drive business success.