The Information Technology Enabled Services (ITES) and Business Process Outsourcing (BPO) industries are subject to several common errors, especially in the early stages of business development.
Information Technology is one of the widest streams of interest today, with academic and business interests both at high levels in developed and developing countries. In several countries, the interest has also given way to real action on both sides. In fact, a lot of societal prosperity and global standing of nations is being driven by their capabilities in the wide IT space.
One relatively easy to enter IT space for countries is the ITES and BPO space. Though, it has its own learning and maturity cycles, the cost arbitrage and revenue opportunities offered by them are viable entry points for may economies which are yet to reap its benefits. It is also relatively easy to enter provided there is a skilled workforce and clarity of policy to attract investments. The skills can in many cases be as minimum as English or other language capabilities. Though complex subjects like Finance, Engineering and Medicine are also catered to by mature ITES and BPO practices. It is the simplicity of the minimum skill requirement that makes it easy for economies to venture into this space. There is a bunch of resources that are listed at the end of this article for leaders to get more information about this space.
The focus of this article is more to introduce a set of cautions for the leader of organizations, newly venturing into this space. The Information Technology Enabled Services (ITES) and Business Process Outsourcing (BPO) industries are subject to several common errors, especially in the early stages of business development. While there are many possible mistakes that could be made, here are some critical errors to watch for. Understanding how each error manifests within an organization and its potential consequences can provide invaluable insights.
1. Scaling too quickly
- Young and inexperienced companies often start hiring too quickly or taking on too many clients to support the initial overhead costs. This can result in poor service delivery. It has been commonly seen that, service companies hire staff and acquiring resources based on projections of account acquisition just to ensure they can create a faster turn-around to please potential clients. Many times, this causes a rate of cost increase, that outpaces growth of the client base or revenue.
- Consequences: Staff may be underutilized, leading to higher costs. Also, quality of service may decline if the company can’t manage its larger scale effectively.
- Solution: Gradual scaling based on a thorough assessment of resources and capabilities. What takes time, takes time. Business cannot be run by just hustling, especially over longer periods of time. Organizations have to work on sound fundamentals to ensure, sustainable business growth.
2. Under-pricing services
- l In the early days, many companies offer services at a price significantly lower than competitors without a sustainable financial model. A common justification for this is that it is the best way to gain market share quickly. As a result, companies often price their services too low, affecting profitability.
- Consequences: Initially, this might attract more customers, but in the long run, the company risks running into financial difficulties. The low prices may also set customer expectations for low cost rather than high quality.
- Solution: A well-researched pricing strategy that balances competitiveness and profitability.
3. Neglecting employee training and development
- In the rush to deploy services, in some organizations, employee training may be neglected, leading to quality issues. This further manifests into high turnover rates, unhappy employees, and a lack of ongoing training initiatives.
- Consequences: Employees are more likely to make mistakes or provide poor service, leading to unsatisfied customers and potentially loss of business.
- Solution: Investment in continuous training programs and skill development.
4. Customer attrition due to poor service /quality
- l In early stage companies, the inexperience of building responsive processes and hence their ineffectiveness can lead to, insufficient focus on customer satisfaction and relationship management. This manifests in, high numbers of customer complaints, low customer satisfaction scores, and no system to address customer feedback.
- Consequences: Gradual loss of customer base, difficulty in acquiring new customers due to poor reputation, and potential negative online reviews.
- Solution: Implement Customer Relationship Management (CRM) systems and KPIs focused on customer satisfaction. Besides this, Process design and Improvement and training for efficiency is also critical to uphold customer interests. Good organizations have elaborate and robust Quality Assurance and Quality Control systems.
5. Inadequate focus on compliance and security
- Ignorance or oversight regarding industry regulations and data security, is another grave challenge faced by early stage ITES companies. As a result, clients and auditors frequently discover lack of secure systems, missing compliance certifications, and inadequate employee training on compliance and security matters.
- Consequences: Data breaches, legal penalties, and loss of reputation could cause irreversible damage.
- Solution: Strong internal controls and compliance teams are just the basic building blocks of the solution. Every employee in an ITES type organization has to recognize that this is an integral part of their everyday activities.
6. Failure to innovate
- When organizations are new to a space, and they really don’t have expertise, they often play the lift and shift or a copy things game. They may even take on cheaper technology to experiment with. In the process, they create a reliance on outdated technology and methods, lack of new service offerings, and ignoring industry trends. In some organizations, there is a heavy focus on day-to-day operations at the expense of research & development.
- Consequences: Competitors can easily outpace the company in terms of technology and service offerings, leading to loss of market share.
- Solution: Allocate resources for innovation and strategic partnerships. Thereafter, setup a department or team with the highest level of executive sponsorship to build capability and solutions in the organization with a right GTM (go-to-market) strategy.
7. Lack of clear branding and positioning
- In many early stage services companies, offerings are not distinguishable from competitors, and there is no clear messaging on why clients should choose their services. Hence, there is a lack of a clear value proposition and differentiation in the market.
- Consequences: Difficulty in attracting and retaining customers, and potential loss of business to competitors who have a strong and clear brand identity.
- Solution: Develop a strong brand strategy and unique selling proposition (USP).
8. Inefficient cost management
- In organizations, focused on establishing and scaling, often costs are not regularly reviewed or optimized. Investments may be made without clear justification or ROI analysis. Sometime, even investors keep pumping in capital, in the hope of rapid scaling and accelerating ROI.
- Consequences: Lower profitability, potential financial instability, and decreased ability to invest in growth or innovation.
- Solution: Effective cost monitoring and control mechanisms. This is not just about the finance department being diligent, but every business leader being focused on setting-up correct internal business processes.
9. Poor leadership and decision-making
- In some early stage setups, decisions are made based on gut feeling rather than data, frequent changes in strategy, and lack of clear communication from leadership. This happens due to lack of experience or foresight in guiding the company.
- Consequences: Employee dissatisfaction and confusion, ineffective execution of plans, and potential business failure due to poor strategic choices.
- Solution: Hiring experienced leaders and advisors and focusing on data-driven decision-making. In the absence of experienced leaders, Consultants and training organizations can be brought in to groom leaders.
Identifying these errors as they manifest in real time is key to taking corrective action before they lead to significant problems.
Some IT, ITES and BPO brands to learn valuable lessons from:
1. Accenture has a strong approach to learning and development program to ensure quality service.
2. Infosys often focuses on value-based pricing instead of cost-based pricing, which allows them to maintain profitability.
3. TCS (Tata Consultancy Services) employs Six Sigma techniques to maintain high quality.
4. Cognizant places a strong focus on compliance and has often been lauded for its robust security measures.
5. IBM has always put focus on innovation, investing in research and patents even when it ventured into BPO and IT services.
6. Genpact has specialized customer service training and feedback systems to ensure high levels of customer satisfaction.
7 Deloitte has always positioned itself as a provider of premium services, focusing on high-value offerings rather than cost-based competition.
8 Capgemini has been able to deliver cost-efficient services through effective cost management systems.
9. Google, though not a traditional BPO or ITES, is known for its strong leadership and decision-making processes which are driven by data analytics.
Some resources for leaders of young ITES companies: (this is just an indicative list, and representation here is neither due to preference or comprehensiveness. Please start here and find what works for you)
BOOKS
1. “The Lean Startup” by Eric Ries
–Focus: Scaling and Innovation
–Why: Provides a new approach to business that’s being adopted worldwide.
2. “Blue Ocean Strategy” by W. Chan Kim & Renée Mauborgne
–Focus: Market Positioning
–Why: Talks about how to create uncontested market space and make competition irrelevant.
3. “Good to Great” by Jim Collins
–Focus: Leadership and Management
–Why: Provides a deep dive into what differentiates great companies from good ones.
4. “Measure What Matters” by John Doerr
–Focus: KPIs and Objectives
–Why: Focuses on setting the right metrics for company growth.
5. “The Outsourcing Handbook” by Mark J. Power, Kevin C. Desouza, and Carlo Bonifazi
–Focus: Outsourcing Best Practices
–Why: Comprehensive guide on outsourcing operations effectively.
6. “Zero Trust Networks” by Evan Gilman and Doug Barth
–Focus: Cybersecurity
–Why: Understanding the zero-trust model is essential for modern ITES and BPO companies.
7. “The Art of Strategy” by Avinash K. Dixit and Barry J. Nalebuff
–Focus: Strategic Decision Making
–Why: Offers a rigorous framework for strategic business decision-making.
Articles and Reports
1. Harvard Business Review on Outsourcing
–Focus: Various aspects of outsourcing including risk management and relations.
2. Gartner Reports on ITES Industry
–Focus: Market trends, statistics, and future predictions.
3. Forrester’s Customer Experience Index Reports
–Focus: Customer experience and service.
4. Deloitte’s Global Outsourcing Surveys
–Focus: Industry trends and best practices in outsourcing.
Global Agencies and Associations
1. IAOP (International Association of Outsourcing Professionals)
–Focus: Global outsourcing industry
–Why: Provides certification, training, and sets best practices for outsourcing professionals worldwide.
2. Outsourcing Institute
–Focus: Business process outsourcing and IT outsourcing
–Why: Offers resources like webinars, articles, and case studies on outsourcing.
3. CCSA (Cloud Customer Service Association)
–Focus: Cloud-based customer service solutions
–Why: Provides best practices, research, and networking opportunities related to cloud customer service.
4. TM Forum
–Focus: Digital business and IT services
–Why: Provides a collaboration platform, best practices, and standards for IT service management.
5. ISG (Information Services Group)
–Focus: Technology research and advisory
–Why: Offers in-depth market intelligence, advisory services, and best practices for technology-driven companies.
6. SOCAP International (Society of Consumer Affairs Professionals)
–Focus: Customer care and customer engagement
–Why: SOCAP provides a platform for customer care professionals to share best practices, insights, and trends.
7. ICMI (International Customer Management Institute)
–Focus: Call center management and customer service
–Why: Provides research, training, and best practices for call center and customer service operations.
By actively engaging with these and other similar agencies, associations, and industry bodies or referencing to their collective published wisdom, early-stage ITES and BPO companies can stay updated with the latest standards, practices, and trends, thereby ensuring they are on the path to becoming world-class organizations.
Sai is the founder of OrbitShift. He is a coaching & consulting practitioner and an entrepreneur at heart. He can be reached at saikumarchandran@orbitshift.com
