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Are traditional UK BPO's currently walking along a precarious tight rope? Are some UK outsourcers struggling to regain their balance due to events over the past couple of years?

David Taylor, Partner Success Manager

Competition abroad, unforeseen challenges and diversification, it’s a difficult tight rope to walk for UK BPO’s at the moment. In this article, our Partner Success Manager, David Taylor, reviews the the current state of the UK BPO landscape and how external factors are pushing UK Outsourcers to diversify and adapt to changing market conditions.

The business process outsourcing (BPO) industry in the UK has faced significant challenges in recent years, with the COVID-19 pandemic and Brexit creating much chaos, uncertainty and disruption. Over the past few months, we have unfortunately seen two sizeable UK BPO’s placed into administration – which ultimately has led to job losses and undue stress in a time where the UK is experiencing it’s highest rate of inflation since March 1993.

As part of this article, I wanted to explore the challenges facing the UK BPO market, what to expect over the next two years, and what UK BPOs can do to diversify and adapt to changing market conditions.

Challenges facing the UK BPO market:

  1. The COVID-19 pandemic has had a significant impact on the BPO industry here in the UK. Many businesses have had to re-evaluate their outsourcing strategies as a result of the pandemic, with supply chains disrupted and remote work becoming the norm. This has led to a decrease in demand for some BPO services, particularly those related to office-based functions such as customer service and administrative support.
  2. Brexit has also created challenges for the UK BPO market, particularly around access to talent. Many BPOs in the UK rely on skilled workers from the EU, and the uncertainty surrounding Brexit has made it more difficult to recruit and retain these workers. This has led to a shortage of skilled workers in the industry, which is expected to continue over the next few years.
  3. The high rate of inflation here in the UK has caused a significant squeeze in the cost of living. Many employers have reacted to this by increasing employee wages to help with the cost of living, and right so. However, this has huge implications on a market that is run on very fine margins, hence many UK BPO’s making the difficult decision of raising customer/client facing costs.
  4. In addition, the rise of automation and artificial intelligence (AI) has had an impact on the BPO industry in the UK. Many businesses are looking to automate certain tasks and processes, which has reduced the need for certain BPO services. While this has created new opportunities for BPOs that specialize in automation and AI, it has also led to increased competition in these areas.

What to expect over the next two years:

Whilst I don’t own a crystal ball, I believe there are still opportunities for growth and innovation in the UK BPO market. Here are some trends to watch for over the next two years:

  1. Increased demand for automation and AI services. As businesses continue to embrace digital transformation and automation, there will be increased demand for BPO services that specialise in these areas. BPOs that can offer expertise in areas such as robotic process automation, machine learning, and AI will be well-positioned to succeed in the market.
  2. Greater emphasis on flexible and remote work. Whilst this could be an article all in itself, demand for remote and flexible working will continue over the next few years, which will create new opportunities for BPOs that can offer remote support and services.
  3. Focus on innovation and digital transformation. Innovation and digital transformation will be key drivers of growth in the BPO market over the next few years. Time and time again our clients are looking for partners that can take them on a journey of continuous improvement and technological innovation.

Diversifying and adapting to changing market conditions:

In order to succeed in the UK BPO market, BPOs need to be able to diversify and adapt to changing market conditions. Here are some strategies that UK BPOs can use to do this:

  1. Expand into new markets. One way to diversify is to expand into new markets. BPOs can look to offer their services in new geographies, or target new industries and sectors. This can help to reduce dependence on a single market or sector, and create new opportunities for growth (as well as offering clients the same service at reduced rates).
  2. Embrace automation and AI. As mentioned earlier, automation and AI are key trends in the BPO market – just look at the recent explosion of ChatGPT. BPOs that can offer expertise in these areas will be well-positioned to succeed. By embracing these technologies, BPOs can reduce costs, improve efficiency, and offer more innovative solutions to their clients.
  3. Focus on customer experience. Sounds simple, right? Customer experience, something which has been forgotten about a little over recent years, is becoming increasingly important in the BPO market. BPOs that can offer exceptional customer service and support will be in high demand. This means investing in training and development for customer service teams, and using technology

So I go back to my question at the top of this article, are traditional outsourcers in the UK struggling to regain their balance? Well, I think the answer is yes (from a traditional sense), however we’ve definitely not seen the last of the UK BPO market as a whole. Many BPO’s in the UK have already woken up to what’s going on around them and have successfully diversified their business to adapt to this new environment – just look at the success of homeworking since the pandemic. However, I predict further change will be needed for some of those remaining BPO’s who have yet to fully embrace the changing UK BPO landscape.

Looking for further guidance after reading this article? Get in touch, we are here to help!