South Africa is being billed as a better value alternative to India or the Philippines, but can you really save money by outsourcing to South Africa?
South Africa is the bright young thing of the BPO sector. While low-cost outsourcing in locations such as India or the Philippines has alienated customers, South Africa promises the best of all worlds – a place where businesses can drive down labour costs, without sacrificing quality. With the government piling in with support and incentives, the number of BPO companies in South Africa has surged. But can it really offer the cost savings it promises?
The cost of BPO services
First, let’s look at the costs. The average monthly wage in South Africa is roughly R28,231 (£1,243), while in the UK it’s around £3,800. In India, it’s around ₹27,300, or around £233, a tiny fraction of the UK levels. Taking the headline rate, therefore, South Africa may offer a sizeable discount on the UK, but it’s still much more expensive than in India.
However, the average only tells part of the story. The minimum wage in South Africa is 28.79 per hour, or just £1.27, which means basic low low-paid work is much cheaper. More highly skilled professionals will be much more expensive, especially in high-demand areas such as IT or software development.
Overall all then, South Africa is more expensive purely in terms of the cost per employee, but the gap closes for lower-skilled professions. Against that, though, you should also consider the quality of services on offer.
The quality of services
The South African BPO sector leans heavily on its reputation for quality. Indian outsourcing has often been associated with low levels of quality, high customer complaint rates and significant risks of cyber fraud. Major corporations which decided to offshore customer service operations, such as BT and India, have to reverse those decisions and somewhat sheepishly brought services back home.
Customers struggled with long delays and communication difficulties as they struggled to understand the thick accents of Indian call centre operatives. Most of all, though, outsourcing services to places such as India sent a clear message to customers about how highly valued they were. Businesses would rather cut down on costs than increase spending to ensure a high service quality.
The result is lower customer satisfaction, which in turn leads to reduced levels of customer retention. Customers begin to take their business elsewhere, and even those who stick around generate less revenue.
These were the hidden costs of the BPO industry, which had businesses seeking alternatives. What you gain in lower labour costs, you lose elsewhere. South Africa was quick to respond.
With a shared language and culture, South Africa has plenty of natural advantages which make it much more appealing. Customers experience none of the communication difficulties that plague conventional outsourcing services. Customer service agents find it easier to build lasting relationships, which in turn leads to higher levels of revenue per customer.
The government was quick to back the sector up with high-tech infrastructure and a robust regulatory and governance framework designed to foster trust and ensure reliability. South Africa’s data protection laws are designed to match leading global regulations such as GDPR. Businesses can move data in and out of South Africa with ease.
The country’s technological infrastructure is world-class in the major cities, with superfast broadband being the norm. With South Africa operating on a similar time zone to client companies in the West, communication is quick, easy and instant.
The result is a BPO industry that positions itself on an offering of quality. It prides itself on providing. Customer satisfaction levels are significantly higher with South African BPO providers than when using those from India or the Philippines. Instances of cybercrime are lower with stronger data protection laws and greater levels of transparency. South Africa’s BPO sector tends to have much lower staff turnover than in India, which leads to more continuity in service provision.
Ultimately, South Africa’s value proposition is simple. As a hiring company, you’ll pay a little more in upfront costs than some other outsourcing destinations, but you’ll get that back through better customer retention and higher revenues. Favourable regulatory environments, including the use of tax incentives for overseas service providers, can further build on the overall offering.
The type of job roles
Outsourcing to South Africa is also changing the game by expanding the range of jobs and services that can be outsourced. Businesses are moving beyond the traditional favourites, such as customer service or admin, and turning to more professional and senior roles.
South Africa’s workforce is young, dynamic and hungry for opportunities. With unemployment remaining high, especially among young people, professionals of all kinds are freely available. Small and medium-sized businesses in the UK which struggle to compete for talent at home can find it by looking overseas. South Africa, with its matching time zone and languages, makes a perfect choice.
Businesses, therefore, are seeking out talent opportunities across the board, especially in sectors such as technology, finance and legal support. The major cities benefit from best-in-class digital infrastructure, which enables a free flow of collaboration and communication between outsourced and domestic employees.
As a result, the make-up of outsourced teams is also changing from single functions to complex multidisciplinary teams. These professionals may work on a full-time or contract
basis and will require a much deeper understanding of your business and its service offering. This, in turn, requires a different type of BPO provider. Rather than providing existing employees to perform simple functions, they will have to help you build sophisticated teams of professionals that can be embedded much deeper into your organisation. Structures such as Employers of Record (EOR), which act as a local employment intermediary, allow you to build more tailored and nuanced teams better suited to the specific needs of your business.
The BPO sector, therefore, is changing. When calculating costs, businesses look at more than just the bottom-line calculation of wages. They look at the impact of customer relationships, any government support and potential security or regulatory risks. By moving to more senior job roles, they are also achieving significant savings right the way up the corporate hierarchy. As technology continues to change the game, the BPO sector is likely to become increasingly central to the corporate strategy of hiring companies.
