BPOs embrace 'onshore' outsourcing to boost business

Having successfully serviced American and European clients from India for almost a decade, BPOs are now strengthening their 'onshore' presence in these countries to tap new opportunities.

Offshore outsourcing is the practice of hiring an external firm to perform some business functions in another country at lower costs. When the work is done in the same country, it is referred to as 'onshore' outsourcing.

BPOs have traditionally delivered solutions out of locations like India, the Philippines and Vietnam to offer clients low-cost, but high-quality services.

But now, business process outsourcing (BPO) firms are also strengthening their onshore presence to tap new opportunities in the healthcare and financial services space.

"The BPO industry earlier was almost everything offshore unlike the IT sector, which always maintained a strong onshore presence. For BPOs, offshore will continue to play a critical part because of the cost and quality advantage," Patni Senior Vice-President and Global Head BPO Sanjiv Kapur told PTI.
    
"But from a BPO perspective, it is changing from a 95-97 per cent offshore model to a 70-75 per cent offshore model, with 25 per cent of the work being done onshore," he added.
    
A strong footprint in the home country will also help the BPOs, as certain types of jobs have to be carried out onshore, like underwriting or acturian valuation.
    
"As you get into more mature relationships, certain parts of the work have to be done onshore. Certain sectors like healthcare and insurance might also require a certain part of the work to be carried out in the same country," Genpact Chief Operating Officer N V Tyagarajan said.
    
Patni's recent contract win from Universal American saw the BPO major acquiring CHCS Services (a subsidiary of Universal American), giving it access to a 200-person facility in Pensacola, Florida. Recently, it had also acquired another such facility in El Paso, Texas.
    
Genpact's contract with Walgreens, earlier this year, saw Walgreens shifting its accounting processes and jobs to Genpact, while the BPO major acquired the Danville facility of the drugstore chain.
    
Customers are not just looking for cost savings, but also how the service provider can grow and change to suit the customer's future needs and demands, industry experts say.
    
While margins might be lower compared to an offshore setup, the strategy pays off in the long-term in terms of more contracts.
    
"The success of this onshore strategy is evident in some of the customer wins that we are getting. Rather, during the slowdown, this has helped us get business and kept us in deals that otherwise would not have been possible to win," a spokesperson of Firstsource said.