BPO Philippines – Why cheap doesn’t cut it

MANILA, Philippines — Low-cost outsourcing is a mistake in today’s customer experience-obsessed world.

Trying to cut costs on outsourcing by using a low-cost BPO provider in the Philippines means sacrificing quality. Ultimately, it will cost a company more in terms of agent and service quality, as well as increased likelihood of lost business. Over time, using low-cost BPO providers will cost a company more when it considers the entire outsourcing model.

“Migrating business processes offshore to any country will inherently come with risks. To mitigate these risks, it's critical that companies understand that the hourly vendor rate is often directly related to the level of service they can expect to receive. Low-cost BPO providers in the Philippines compete on cost only, which often translates to less skilled and English proficient agents, management, and ultimately service,” says Ralf Ellspermann, CEO of PITON-Global, a leading mid-sized BPO in the Philippines. 

Low-cost vendors simply cannot afford to hire and retain highly skilled agents that are needed to make programs work and that premium providers employ. They also don't have the capital or resources to invest in world-class technologies, ongoing training, and necessary infrastructure to adequately deliver outstanding Customer Experiences (CX).

To illustrate this, consider that the Philippines' top 50 BPO providers make up 70% of all BPO-related employment in the country. These premium BPOs offer the highest compensation, job security, state-of-the-art facilities and the best opportunities for career advancement.

The BPO industry in the Philippines is one of the most highly sought-after employment sectors in the country, with competition between the most skilled agents for the best companies beginning even while future candidates are still in university. Premium BPOs charge, on average, US$12-16 per hour, with much of that capital being reinvested into continued training and education as well as technology and infrastructure.

Low-cost vendors that compete on price typically charge US$6-8 per hour or half the cost of industry-leading BPO providers. There simply is not sufficient revenue for these companies to make capital investments into advanced technologies or infrastructure, and they certainly cannot pay the salaries that highly skilled agents demand.

According to Ellspermann, “Today you’d be even hard-pressed to find a highly skilled agent that is willing to work for anything less than US$3-4 per hour. And that’s just the hourly agent rate, not taking into consideration all the other costs. Highly skilled and English proficient agents know their worth and can choose their employers.”

Another consideration is how the focus of outsourcing has evolved. Twenty years ago, the overriding benefit was the significant cost savings and the ability for organizations to scale. Today, inspired by the success of companies like Amazon, the focus is much more customer-centric. This means premium outsourcing vendors have shifted much of their focus onto providing world-class CX.

“The byproduct of this is that industry-leading BPOs are quickly becoming tech-driven companies. Both to improve service, but also to meet the expectations of some of the most successful companies in the world. The type of cutting-edge tech required for this is costly and requires significant investment; expenditures that premium providers are committed to, and low-cost BPOs simply cannot afford. Advanced technologies not only help improve operating efficiencies but also enhance CX,” says Ellspermann.

Even with the additional cost of hiring the best-trained agents and investing in state-of-the-art infrastructure and facilities, by partnering with a premium BPO provider, companies can still realize 30-50% cost savings over standard US vendor rates.

“Trying to squeeze another 20% savings by using low-cost BPOs only results in poor agent performance and an overall negative CX. Ultimately companies using low-cost outsourcing providers have no choice but to stop doing business with them altogether due to the diminished ROI and alarming inadequacies in customer service,” he adds.

Companies trying to remain competitive in a competitive global marketplace can no longer afford to risk customer dissatisfaction. The ones who do will ultimately be faced with higher costs in the form of downtime, inefficiencies in labor and technology, and most importantly, the loss of customers and business.

Paying a few dollars more per hour by partnering with a premium BPO provider in the Philippines can literally mean the difference between success and failure.