CBI Tradewatch for

Business Process
Outsourcing (BPO)
‘Broadcasting your trade statistics’

There have not been major changes in the BPO market

compared to last year. Cost reduction and flexibility are still
important drivers for BPO. Standardisation is a driver that has
increased in importance. Opportunities for BPO providers from
developing countries (DCs) are highest in the UK, the
Netherlands, Belgium and Scandinavian countries as they are
most open to international outsourcing. Germany offers
opportunities due to its large market size, but ‘near-shoring’ is
preferred here. Also France and Spain offer potential as they
have large BPO markets, but language skills play a dominant
role. Finance and accounting outsourcing, contact centre
outsourcing, document management outsourcing and human
resource outsourcing are the segments that offer the best
opportunities for DC BPO providers. A new segment that is
rapidly gaining market share is social media outsourcing.

Promising markets

The EU+EFTA market consists of 31 countries Considerations for action

that all have different characteristics. Some  Focus on one or two priority countries. Be
countries are more promising for DC BPO aware that product, price, promotion and
providers than others. Three elements from distribution strategies might differ per
which your opportunities in the different EU+EFTA country, unless you target similar
EU+EFTA markets stem are: countries.
Openness towards international  Take openness towards international
outsourcing outsourcing, the size of the market and
Size of the market language into account when deciding on
Language. your priority target market(s).

Openness towards international

outsourcing
 Northern EU+EFTA countries such as the
UK, the Netherlands, Sweden, Denmark,
Finland and Norway are generally more
open to international outsourcing than
 Focus on the UK, the Netherlands, Belgium,
Sweden, Denmark, Finland or Norway as
these countries are most open to
international outsourcing.

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CBI Tradewatch for Business Process Outsourcing (BPO)

other EU+EFTA markets (refer to Figure 1).

However, as the BPO market is maturing,
other markets in Western, Central and
Southern Europe are expected to become
more open to international outsourcing as
well.

Figure 1: Level of openness towards international outsourcing of EU+EFTA countries, 2013

high

medium

low

Source: Industry experts

Market size Considerations for action

 In terms of market size, the UK and  If you want to target Germany, approach
Germany have the largest BPO markets in the market through a German speaking
the EU+EFTA region (Refer to Figure 2). employee or a German contact person so
Although Germany is quite open to that language and cultural differences will be
international outsourcing, many companies smaller.
prefer near-shoring due to language and
cultural similarities. Medium sized markets
are Scandinavian countries, the
Netherlands, Spain and France.

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CBI Tradewatch for Business Process Outsourcing (BPO)

Figure 2: Level of openness towards international outsourcing, BPO market size,

EU+EFTA regions, 2013

Source: TPI index (measures commercial outsourcing contracts with an annual contract
value of €3.78 million or more) and interviews with industry experts

Language Considerations for action

 Language also plays an important role in
BPO, especially in the contact centre, data
related services and human resource
segments. A language match can therefore
also offer opportunities for DC BPO
providers.
 Focus on markets with language similarities,
for example France for North African BPO
providers or Spain for Latin American
providers.

Market developments

Growing European BPO market Considerations for action

 According to the TPI Index which measures  Come up with a good added value
commercial outsourcing contracts with an proposition.
annual contract value of €3.78 million or  Adapt your BPO services to technology
more, the value of BPO contracts signed in trends such as cloud computing.
Europe in 2012 was 35% higher than in
2011. This is because companies are
increasingly looking to BPO value
propositions which can deliver a more
profound business change. Technologies
such as cloud computing, data analytics
software, social media platform and
process automation software are being
used within BPO to enable companies to
lower costs and be more effective.

Smaller outsourcing deals  Consider offering a trial project to potential

 Whereas the number of large outsourcing buyers in order to show your capabilities and
deals is declining, smaller deals have gain trust.

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CBI Tradewatch for Business Process Outsourcing (BPO)

increased significantly. Furthermore, more

companies are adopting a multi-vendor
model. Instead of having one large contract
with one provider, they have several
smaller contracts with different providers.
Smaller contracts and the multi-vendor
model are growing in popularity as they
provide more cost certainty and more
flexibility. Smaller outsourcing contracts
generally offer better opportunities for DC
BPO providers, as they often do not have
the capacity for large outsourcing deals.
Furthermore, when contracts are smaller,
EU+EFTA companies are generally more
prepared to work with DC providers as the
risks are smaller.

Nearshoring still preferred

 Northern and Western European companies  Partner with near-shore BPO providers, as
generally prefer near-shore BPO providers they might also be interested in off-shoring
from Eastern Europe above off-shore to DCs in order to save cost.
providers because of their language skills,
proximity and cultural similarities. This is
particularly the case for Germany.
However, as prices in near-shore countries
are rising, providers in these countries
become less competitive for off-shore
providers.

Skills shortage
 The Northern and Western EU markets are  Conduct market research to identify
coping with a skills shortage, although this countries and BPO areas in which there
is currently somewhat offset by the is/will be a skills shortage.
continuing economic crisis. The shortage
depends on the country and the sub sector.
However, in the long term, the skills
shortage is expected to increase as a result
of the ageing population.

Also refer to ‘CBI Trend mapping for Business Process Outsourcing (BPO)’, for more information
about market trends and developments in the EU+EFTA BPO market.

Market drivers

Drivers Considerations for action

 As a result of economic uncertainty, many  Emphasise cost reduction, flexibility and
companies are currently focusing on basic standardisation in your marketing message.
goals, i.e. cost reduction, flexibility and
standardisation (refer to Figure 3). As the
outsourcing market is maturing, these
basic goals gradually being achieved.

 Many companies see industry standard  Focus on standardised offerings for a specific
offerings as a priority in 2013 as current industry.
BPO processes are rarely standardised and
solutions are not easy to industrialise. As

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CBI Tradewatch for Business Process Outsourcing (BPO)

many companies failed to standardise their

business processes in-house, they are now
shifting them over to third parties

Figure 3: Critical and important drivers behind a company’s BPO and ITO decision
making, medium and large outsourcing buying companies, in %, 2013

Reduce operating costs

Greater flexibility to scale operations

Standardize processes

Meet compliance requirements

More effective operations at a global level

Critical
Transform / re-engineer processes
Important
Gain access to talent

Gain access to new technology

Improve analytical capabilities

Mature offerings

Force change into our business

0 10 20 30 40 50 60 70 80 90 100

Source: HfS Research

 The majority of BPO initiatives are highly
effective in meeting operational goals, but
are falling short in achieving strategic goals
(refer to Figure 4). This means there are
still many opportunities to be found in BPO
solutions that provide strategic goals.
 Besides operational goals such as cost
reduction, also try to focus on strategic
goals, for example innovation or analytical
skills.

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CBI Tradewatch for Business Process Outsourcing (BPO)

Figure 4: Effectiveness of BPO initiatives for achieving business benefits,

medium and large outsourcing buying companies, in %, 2013

Reduce operating costs

Standardize processes

More effective operations at a global level

Meet compliance requirements

Gain access to talent Very effective

Somewhat effective
Force change into our business
Not effective
Transform / re-engineer processes

Improve analytical capabilities

Gain access to new technology

Innovation

0 20 40 60 80 100 120

Source: HfS Research (2013)

Outsourcing destinations

Figure 5: Popularity of BPO and ITO regions, based on Tholons Top 100
outsourcing destinations ranking, 2013, in %

Oceania,
1%

North
America,
8%

Africa,
8%
Asia,
39%

Central and South

America,
20%

Europe,
24%

Source: Tholons Top 100 Outsourcing Destinations Ranking (2013)

Asia Considerations for action

 Asia is the most popular outsourcing
region for BPO and ITO (refer to Figure 5),
especially the South East Asian countries
India, China and the Philippines. South
East Asia’s maturing ‘Outsourcing brand’,
improving macro-economic environment
 Positive country branding is very important
to increase awareness of your country as a
BPO destination. However, you cannot do
this alone, you need the public and private
sector. You are therefore advised to join
forces with other BPO stakeholders in your

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CBI Tradewatch for Business Process Outsourcing (BPO)

and expanding domestic markets continue country.

to draw the attention of BPO and ITO
buyers.

Central and South America

 Central and South America has the biggest
gainers (Costa Rica, Uruguay and
Colombia) and the biggest losers (Brazil
and Argentina) in the ranking, which
indicates positive developments in some
countries and restraints in others.

Eastern Europe
 Eastern European countries like Russia,  If you are located offshore, try to limit the
Poland, Czech Republic and Ukraine are possible disadvantages of being offshore by
getting more attention as outsourcing providing excellent means of
destinations as respective cities continue to communication, availability in the required
develop their BPO and IT services time zone and good security and privacy
landscapes. Furthermore, for EU+EFTA measures.
buyers communication with Eastern
European companies is perceived as easier
than with offshore companies due to little
time difference and more cultural and
language similarities. This is very
important, as many offshore projects fail
due to simple communication problems.
Legal and financial issues are also much
simpler as many of those countries are EU
members.

Middle East and North Africa

 Outsourcing to the Middle East and North
Africa continues to be constraint due to
political and social risks.

Forecast
 More opportunities are expected to appear
in the BPO industry, although with stronger
competition. South East Asia, Central and
South America and Eastern Europe are
forecast to continue their growth as a
result of human capital development
programmes, aggressive marketing and
promotion activities, IT and related
infrastructure development as well as
strong commitment from industry
stakeholders. South East Asia however, is
expected to remain the most important
region for BPO.
 Differentiate yourself from your competitors
for example by specialising in a specific BPO
service for a specific vertical market.
 Join forces with different stakeholders in
your country and lobby for human capital
development programmes, joint country
branding campaigns and infrastructure
developments in order to better position
your country as a BPO destination.

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CBI Tradewatch for Business Process Outsourcing (BPO)

Promising segments

The largest segments in the BPO market are Considerations for action
(refer to Figure 6):  Specialise in a specific BPO segment. When
Finance & accounting selecting this segment, not only look at
Contact centres market size and (future) demand, but also
Human resource at your company’s own experience in this
Digitisation services (part of document segment.
management)

Industry experts also identified these segments

as the ones with the best opportunities for DC
BPO providers. For more information about
these segments, refer to CBI’s ‘Market channels
and segments’ for BPO. Also refer to CBI’s
Product Factsheets for insights into some
promising product-market combinations.

Figure 6: Outsourcing plans per BPO segment, medium and large outsourcing
buying companies, in %, 2013

Finance & accounting

Human resource

Document management

Procurement
Start outsourcing for the 1st time

Analytics Increase outsourcing

Stay the same

Industry specific
Decrease outsourcing
Knowlegde process No plans to outsource

Legal process

Customer relationship management

Marketing operations

0% 20% 40% 60% 80% 100%

Source: HfS Research

Finance and accounting Considerations for action

 Finance & accounting is the BPO segment  Anticipate potential clients’ needs for cost
in which companies plan to outsource most reduction and standardisation by offering
in the coming year. The finance & finance & accounting solutions that comply
accounting BPO market is forecast to show with these needs.
an annual growth of 8.0% until 2017.
Although innovation and analytical value
are appreciated, the main reasons for
adopting finance & accounting outsourcing
have reverted back to cost reduction and
standardisation of processes.

 Finance & accounting processes are still

predominately managed in-house, which
means that there are many opportunities

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CBI Tradewatch for Business Process Outsourcing (BPO)

for outsourcing providers. Payroll, accounts

payable and receivable and transactional
outsourcing are most frequently
outsourced within finance and accounting
(refer to Figure 7).

Figure 7: Management of finance & accounting processes, medium and large

outsourcing buying companies, in %, 2013

Payroll

Accounts payable

Transactional purchasing

Accounts receivable
Outsourced
General accounting
Shared services

Management reporting Offshore captive

Inhouse
Analytics

Strategic sourcing/Direct procurement

Logistics/Supply chain management

Financial planning & analysis

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Source: HfS Research

Contact centres Considerations for action

 The contact services segment continues to  If you are located in a different time zone,
grow, driven by the rising interest in use this to your advantage as time zone
outsourcing. This rising interest in differences could mean extended availability
outsourcing is particularly driven by the for EU companies.
current economic crisis as outsourcing is
seen as a way to reduce costs. Services
offered include round-the-clock support
services through e-mail, chat and voice.
Most outsourced services within the
contact service segment are IT help desk
and employee contact services.

Human Resource
 The emergence of cloud-based Human  Have a clear understanding of national
Resource platforms and Software as a labour laws and regulations in your target
Service have opened up Human Resource segment
outsourcing to small and medium-sized
enterprises (SMEs). Payroll, benefits,
recruitment and learning are most
frequently outsourced within Human
Resources. Human Resource outsourcing
is expected to continue to evolve and
grow.

Digitisation Considerations for action

 There are still many EU+EFTA companies  Make sure you have a clear understanding of
that have a great deal of information on copyright limitations and other important
paper that needs to be digitised. Also regulations on digitisation.

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CBI Tradewatch for Business Process Outsourcing (BPO)

institutions such as libraries, museums and

archives are under huge pressure to
digitise cultural heritage. The EU+EFTA
digitisation services market offers
opportunities for DC providers as
digitisation is labour intensive work that
generally can be done by DC providers at a
much lower price than EU providers.

Social media
 A relatively new segment which is gaining  Focus on social media outsourcing. As this is
market share is social media outsourcing. a relatively new market, there is still room
The volume of content on social media for new entrants.
such as Facebook, blogs and review sites is
growing rapidly. Organising this content is
a time consuming process. As a result, an
increasing number of companies are
outsourcing social media services to
specialised BPO providers. Asian countries
such as India and the Philippines for
example are a popular destination for
social media outsourcing by UK companies.
Verticals
 An increasing number of EU+EFTA  Focus on BPO services for a specific
companies are looking for specialised BPO industry, for example contact centre
providers with a deep understanding of services for the finance and banking industry
their industry. As BPO services are spread or finance and accounting services for the
over a wide range of industries, retail industry.
opportunities can be found in almost all
verticals. Banking, Financial services and
Insurance represents the largest vertical in
the BPO market (refer to Figure 8).
Consumer Packaged Goods, Retail and
Wholesale saw the largest growth in 2012.

Figure 8: BPO and ITO demand by industry, according to service providers, in %,

2011 and 2012

Source: KPMG Sourcing Advisory Global Pulse Survey 4Q12

This survey was compiled for CBI by Facts Figures Future

in collaboration with CBI sector expert Harry van Geijn.

Disclaimer CBI market information tools: http://www.cbi.eu/disclaimer

Source: CBI Market Information Database • URL: www.cbi.eu • Contact: marketintel@cbi.eu • www.cbi.eu/disclaimer • June 2013