SA's business process outsourcing (BPO) sector has heeded the industry's call, and is shifting its focus to higher value offerings in a bid to create jobs and grow the sector.
SA's largest BPO sector - Gauteng - and its cousin in the Western Cape have both shifted strategies towards offering value-enhancing services. These include back-office processing, in areas like finance and accounting, instead of just being viewed as a pure call centre destination.
However, an analyst says that for the strategy to succeed, the country needs to present a cohesive marketing plan to the world, or risk losing business in a bidding war.
The industry previously came under fire from analysts for not shifting focus from the highly-competitive call centre arena to higher margin businesses, such as processing financial transactions.
Gauteng will add back-office processing services to its current customer service skills within call centres to create 4 000 new jobs and exceed revenue of R7.4 billion this year, growing from R6.1 billion last year, says Keryn House, CEO of Business Process enabling SA (BPeSA).The provincial sector currently employs about 35 700 people, she adds.
BPeSA is the national coordinating industry association representing the interests of the BPO sector.
Opportunities abound
SA has a $960 million annual BPO industry, which is forecast to grow to $1.9 billion by 2015, according to recent figures from Frost & Sullivan. Revenue was estimated at $885.2 million in 2007.
Gauteng, which accounts for 71% of SA's BPO sector, has developed a four-year strategy in conjunction with Frost & Sullivan, which provided input on potential growth areas. The province has set itself the target of growing by between 9% and 14% each year to 2014, says House.
She explains that the strategy involves moving into value-added services such as offering accounting, IT and financial services to international companies that want to outsource these functions. “Especially in high-end services, our research tells us that we have a growing skills base and have a credible offering on a global basis,” says House.
“Many of our members struggled during the economic crisis, but our data shows that employment in Gauteng's BPO sector grew modestly during the recession. Now the strong players are well positioned to be globally competitive,” she notes.
Constraints
However, there are challenges in growing the BPO sector in the country, such as a lack of infrastructure and rising inflation, which places a burden on the cost of labour.
IDC senior economist Gerhard Kuhn told the delegates at the BPeSA Gauteng Outsourcers Forum, held in Sandton this week, that inflation is the key to controlling labour costs in BPO in SA. Higher inflation could push up the cost of doing business in SA, making the country less competitive, he pointed out.
“Even if SA's inflation rate stays at around the 6% level, it is still far higher than the 2.1% and 0.9% inflation rates reported for February 2010 in the US and the Euro area, respectively,” he said.
“Moreover, both the US and the EU strive towards a 2% targeted inflation rate. That means that, year-on-year, SA would become 4% less cost competitive vis-`a-vis the developed world. This may not seem like a lot, but 4% is a big deal for corporations.”
House adds that SA and India face similar tests. “The challenges we face in Gauteng are strikingly similar to India's big cities. Their main challenges include infrastructure development, rural development, supporting SMEs, and creating employable skills and a literate talent pool. India has made great progress over the years in addressing these socioeconomic issues, mostly through developing the outsourcing industry,” House comments. “So can we.”
More than voice
SA is known to be a good destination for call centres that do not just rely on scripted conversation because of the acceptable accent and high levels of understanding in the English language.
However, this needs to be coupled with back-office offerings in niche areas such as financial and legal services, adds House.
House says the province's BPO sector will now start marketing itself as a destination that offers value-added services, instead of just playing in the highly-competitive call centre field.
The Western Cape also aims to grow the sector. Fagri Semaar, interim CEO of BPeSA Western Cape, says the sector was part of a delegation that joined president Jacob Zuma on his recent visit to the UK.
“The trade mission was a very valuable networking event, and provided insight into opportunities for strengthening trade between SA and the UK. It also helped solidify SA's relationship with the UK, while promoting investment opportunities.”
Semaar says, during the visit, several meetings were held with a number of potential clients. “As a result, we now have a number of companies that will be conducting inward missions to the Western Cape over the next few months.”
The Western Cape has highlighted several areas for growth, including financial services, desktop publishing, software development and legal process outsourcing, which have been earmarked as core focus areas for 2010 and beyond.
Frost & Sullivan ICT analyst Spiwe Chireka says the two largest BPO provinces in the country have realised the need to shift focus to higher margin areas. However, she warns, SA needs a co-ordinated marketing strategy that pitches its offerings as a whole.
Chireka says it would be pointless punting Gauteng at the expense of other provinces, such as the Western Cape, and the country's offerings need to be bundled together, or the move to value-added services may flounder. “Now that they [the sector] have got what we are saying, it is time to synchronise the message.”
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