Overcoming BPO Market Saturation: What Is It, How It Affects You, and What to Do About It

Mar 21, 2024 Dan Dietz, VP Of Sales
Happy, smiling and laughing call center agent talking to colleague

What is BPO (Business Process Outsourcing) Market Saturation?

In the context of outsourcing, market saturation refers to the excessive and unsustainable number of contact centers (either captive centers or BPOs) operating in a geographic location, leading to intense competition over talent and resources. For context, outsourcing destinations tend to see between 1-3 percent of the labor force employed in call centers. Depending on the study, some research suggests when a labor market reaches anywhere between 3-5 percent saturation rate, the market is considered saturated, leading to specific performance-related problems. The simple solution is for businesses to identify and select untapped geographies that possess the necessary characteristics to effectively support their customer care operations. However, to do so one must first understand the challenges of market saturation.

Several factors contribute to outsourcing market saturation. These include the unsustainable expansion of the outsourcing sector, where demand exceeds the location’s capacity to supply qualified labor. It may also stem from the growing situation where talent is available but does not have adequate skills. Additionally, competition from other ancillary sectors diverts labor away or diminishes the incentive to work in the outsourcing sector. For example, in India, rapid growth in IT, knowledge services, and higher-end BPOs have redirected labor from call center jobs. Moreover, the absence of suitable training institutes or government-sponsored training programs for the BPO sector exacerbates the issue.

How Saturation Affects Companies:

As certain geographies approach the point of saturation; it becomes detrimental to companies outsourcing in those locations. Here are some ways in which it may be detrimental:

  1. Reduced Quality of Service: With a saturated market, contact center executives face challenges attracting and retaining top talent. If relatively small populations limit the sustainability of accessing top talent, it could decrease the overall quality of services provided, affecting the customers’ experience, and potentially harming the company’s reputation.
  2. Wage Pressure: Competition for skilled employees in a saturated market can drive up labor costs (supply and demand), thereby eroding the cost-effectiveness that initially attracted clients to outsourcing in that location.
  3. Limited Flexibility and Customization: In a saturated market, BPO providers may be forced to focus on scale, process standardization, and profitability over customization in order to maintain acceptable profitability levels. This can limit the flexibility and customization options available to meet specific client needs.
  4. Higher Turnover Rates: Intense competition for talent in a saturated market can contribute to higher employee turnover rates. This turnover can negatively impact service continuity, as new staff members may take time to ramp up and fully understand client processes.

What to Do About It

The most common solutions involve exploring new destinations like South Africa or considering Tier 2 or 3 cities outside oversaturated metro areas, which still offer the same level of agent quality as Tier 1 hubs. At ACT, a leading Business Process Outsourcer (BPO) ranked by Forbes among America’s Best Large Employers in 2024, our strategy is to find the very best, non-saturated destinations for our contact centers, both domestic and offshore. We invest extensive analysis, research, and resources in identifying the destinations offering the best talent pool, transportation infrastructure, telephony infrastructure, educational background and training, cultural affinity, data security and compliance, scalability, cost arbitrage, regulatory environment, political stability, government support, and more. We also develop and maintain strategic relationships with regional governments and public sector stakeholders to support talent development and infrastructure to sustain outstanding BPO operations. We offer our clients the best and most desirable destinations within the United States, Nearshore and Offshore locations including South Africa, Jamaica, Guatemala, and more.

About ACT:

ACT was founded 27 years ago on a winning formula – that the best solutions integrate Employee Experience (EX) + Customer Experience (CX) + User Experience (UX) + Digital Experience (DX) + Multi-experience (MX) for an outstanding Total Experience (TX) overall. We call it the Total Experience Formula™.

Today, many of the world’s leading brands and Fortune 50 trust ACT to be an extension of their business to unlock their ability to respond quickly to rapidly changing competitive, business and compliance environments, to anticipate and scale for future needs, to outmaneuver their competition, to lower operating costs, to improve efficiencies, to drive revenue and increase customer engagement. 

When clients first come to us, we consistently find it to be an opportunity to transform their design and outcomes. ACT has invested significantly in mapping the end-to-end employee experience to ensure our employees are engaged, empowered to be successful, and highly motivated to deliver the best outcomes for our clients.

ACT offers the operational expertise, technologies, and best practices that you expect from a world-class BPO, combined with the innovative solutions, flexibility, and individual attention that you can only get from a 100% employee-owned company.

Learn more at our website: https://www.acttoday.com/about-act/

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