BPO Outsourcing Trends in 2023: What Should We Expect?

by Nick Jiwa, Founder and President, CustomerServ

If 2020 and 2021 were years of change, transformation, and tumult in the business process outsourcing (BPO) world, how do we describe 2022? Was it more of the same? And, what can we expect in 2023?

It’s hard to say how 2022 turned out for many because it “feels” like the year came and went incredibly fast, with mixed outcomes. Many businesses told us that 2022 was a down year and a time of uncertainty. In contrast, other companies and brands said that it was their best year on record.

All of us seem busier and more preoccupied than ever. We’re running a mile a minute still dealing with the aftereffects of the pandemic — our workload, family, and life in general. So, what’s in store for 2023 in our beloved BPO industry? Let’s break down a few general trends we expect to see based on our experience.

Here we go.

Onshore Cost Surge

Outsourcing costs have been steadily rising in the U.S., and we anticipate this will continue throughout 2023. Don’t expect most U.S. BPOs to offer lower pricing for work-at-home vs. in-center, because that delta closed rapidly during and post-pandemic. Higher wage rates are the biggest contributor to rising costs. According to Zip Recruiter, the average base wage for a U.S. call center worker today is $18.00 per hour; that’s a 40% increase since pre-pandemic levels.

Productive hour pricing bids from BPOs in the U.S. have increased into the $35-$45+ range in 2022, and we expect 2023 will be no different. By comparison, pre-pandemic hourly bids averaged $27-$29 in the U.S., but this was during a time when BPOs could pay $12-$13 hourly wages to call center employees — those days are long gone.

Staffing Challenges in the U.S.

During the COVID surge of 2020, the primary focus for BPOs was a rapid shift to work-at-home with a massive investment in remote architecture, training, systems, security, and agent collaboration tools. The focus shifted to HR in 2022, and we expect this to continue throughout 2023 and beyond.

Forward-thinking BPOs are investing heavily in digital and social recruiting. You can expect BPOs to invest more in employee engagement and amenities. For BPOs to be successful in 2023, they must strive for a “best-place-to-work” culture. Many BPOs are competing with other BPOs and industries that offer higher and more robust compensation. Therefore, they are increasing their wage rates to attract and retain talent.

Nearshore and Offshore Growth

With wage inflation and rising costs in the U.S., expect nearshore and offshore growth to continue. More brands are embracing nearshore and offshore call centers for cost reduction and access to talent.

The nearshore region consists of 26 countries throughout Latin America and the Caribbean that offer BPO services to U.S. and international clients. Some nearshore markets are already experiencing saturation, especially in places like Jamaica and Colombia. However, saturation is cyclical and almost always impacted by supply and demand. Most nearshore markets remain relatively unsaturated and capable of delivering high performance and scale. Offshore markets like the Philippines continue to deal with high saturation and high turnover. However, the Philippines is, and will likely remain, the de facto offshore destination for English language BPO services.

Geographic Diversification

Expect brands to seek new BPO outsourcing markets throughout 2023 and beyond. Brands are looking to de-risk, diversify, and expand into regions where highly skilled English language talent is readily available in unsaturated markets. Many brands find that a diverse mix of locations enables them to match customer demand with talented BPO resources seamlessly.

In addition, brands that service customers in multiple languages will continue searching for and selecting BPOs that offer appropriate multilingual solutions from newer and diverse geographic locations.

As we continue through a period of global economic uncertainty, diversity will be critical for brands to maintain a competitive advantage. Diversification for some brands means lifting and shifting from traditional locations to emerging markets. Other brands are testing new markets against traditional markets in a champion vs. challenger format.

Brands have expressed concerns about overconcentration in markets like the Philippines for years, fueling the need to diversify from overreliance on established outsourcing destinations. Cost surges in the U.S., saturation, and high turnover in traditional regions are also reasons why brands are seeking emerging locations.

Social Impact Outsourcing

We are happy to report that the BPO industry is embracing social and purpose-driven outsourcing more than ever. We expect 2023 to be one of the biggest years on record for organizations looking to improve lives through outsourcing. Impact sourcing is a socially conscious business practice where companies intentionally employ individuals from disadvantaged backgrounds, harnessing talent from communities with persistently high unemployment and limited career options.

By way of example, impact workers employed by BPOs in South Africa increased their incomes by over 200% through steady employment, enabling the individual to support three to five family members and contribute to their communities through increased discretionary spending and reductions in unemployment rates. Impact sourcing often leads to an economically self-sufficient and loyal workforce, delivering positive outcomes in terms of performance and service delivery for brands that look to make a positive social and financial impact in their outsourcing endeavors.

Impact sourcing can also help eliminate disadvantages through diversity and closing the gender gap with equal pay. According to Everest Group, the impact sourcing market currently has 350,000 workers worldwide, with Africa employing 17% and Asia-Pacific at 58%.

Recessionary Fears

Fears of recession and economic downturn loom, but we’ve been here before. Sadly, some companies are downsizing, layoffs are occurring, demand has slowed, and for many companies, volumes are down (a trend that impacts headcount needs). Other companies continue to experience a spike in demand and increased volumes, calling for more call center agents.

Ironically, recessions can create more demand for outsourcing as companies look to reduce costs — and we expect that outsourcing will play a significant role in helping organizations improve efficiencies and contain costs throughout 2023. Those who, like me, have been in BPO outsourcing for more than three decades, have seen the BPO industry endure recessions, wars, pandemics, and much more … and we’re still here.

The BPO industry is resilient, and even during economic uncertainty, BPO demand generally remains stable. Another factor to consider should the unemployment rate rise in the U.S., expect staffing issues to improve and call center job openings to fill back up.

Cost Containment

It has become cost prohibitive for many companies to outsource their call centers in the U.S. (We’ve all talked about this ad nauseum for the past two years.) However, throughout 2022, we noticed brands that already outsource nearshore and offshore, and are already benefiting from lower costs, are beginning to squeeze their BPOs.

Unfortunately, we expect cost pressures on nearshore and offshore BPOs to continue throughout 2023. We must add a caveat: Not all brands are pressuring their nearshore and offshore BPOs to reduce prices. Many have opted to pay their BPOs at or above market rates to secure the best talent available. If you are a brand that genuinely cares about your customer and the customer experience, there is a danger in expecting bargain basement pricing from your nearshore and offshore BPOs.

It is impossible for top-level BPOs to hire the quality of talent expected from brands that want to pay “dollar store” rates but expect white-glove customer experience and service. You’re better off contracting with one of the umpteen commodity, lower-grade BPOs — caveat emptor.

Outsourcing vs. Insourcing

The BPO industry experienced a huge uptick in outsourcing demand in recent years, and we expect demand from new and established outsourcing buyers to remain strong in 2023.

We attribute the demand spike to many factors, including an increase in outsourcing vs. insourcing due to staffing issues, costs, de-risking, and contingency planning. Also, many brands and organizations who “vowed” never to outsource have decided to migrate some or all of their internal call centers to BPOs.

BPOs have a larger recruiting engine and offer more flexibility in site locations, including nearshore/offshore, enabling them to recruit from lower-cost, diverse labor markets. In-house call centers also increased agent compensation, contributing to higher insourcing costs.

In 2023, expect more interest in outsourcing vs. insourcing, with some BPOs offering migration incentives, such as subsidized training and start-up costs, to help brands alleviate the financial impact of onboarding an outsourcer. (For many organizations, training costs are in the millions, and it helps if the BPO is willing to absorb some or all these expenses.)

Return to the Call Center

We started seeing a preference for in-center agents in Q2 of 2021 until the Delta Variant spread. Throughout 2022 and into 2023, more brands are asking their BPOs to move agents back in-center, or at least move to a 60/40 or 70/30 in-center vs. remote hybrid. And we’re seeing more interest in tethered staffing for work-at-home — agents working at home but in geographic proximity to a physical site.

While the remote agent is here to stay, in some nearshore and offshore sectors, we are starting to see a trendline toward in-center staffing. Many operations have reported that work-at-home has not improved agent retention across the industry. In some markets, it has made attrition worse, as it is easier for agents to “quit” a job virtually vs. in-person.

In Summary

We probably could have doubled the word count in this article by covering other trends related to technology, CX, and other key areas, but we felt it essential to focus on megatrends. We see the industry from a holistic point of view, working with a wide range of brands, from Fortune 500 companies to smaller enterprises that utilize BPOs, and with our hand-selected BPO partners with operations in over 50 countries. We’re leaning in, listening to leaders throughout the industry, knowledge sharing, and prognosticating based on our real-world experience.

I, for one, plan to enter 2023 with great optimism and high expectations for diversification, growth, job creation, delivering world-class customer experiences, and doing great things for global communities. I hope that you share my optimism!

Nick Jiwa Founder and President

About the Author: Nick is an outsourcing industry veteran of 36 years and the founder of CustomerServ. He advises and guides leaders at Fortune 500 brands and companies of all sizes to maximize “people performance” by outsourcing smarter with better-matched BPO partners and more successful outsourcing strategies. Nick is a founding member of the business process outsourcing (BPO) industry, a thought leader, matchmaker, CX champion, and impact sourcing advocate. CustomerServ is a BPO industry pioneer, thought leader and matchmaking ecosystem that helps brands outsource smarter. Learn more at customerserv.com

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