For a long time, India was synonymous with the BPO industry, but now there is a new kid gunning for the crown.
Barclays, Santander, and BT – three well-known names with one thing in common. Each, in recent years, has promised to relocate Indian based call centres back to the UK. Complaints and a desire to improve customer service mean the powerhouse of the global outsourcing industry is seeing its value called into question. Competitors are stepping up to offer an alternative, chief among which has been South Africa. The country’s emphasis on quality and value for money has turned many heads and with the BPO sector surging within South Africa, many businesses see it as the go-to choice for the future. Any business considering outsourcing will have to ask itself a clear question: Do they stick with India or go all in on South Africa?
Outsourcing in India
India has long been the leading name in BPO. By the end of 2024, around 1.5 million people were employed in the sector, providing a host of services from call centres to IT support. The market is mature with a well-established infrastructure that has served many of the biggest corporations in the world.
Even so, its main offering is somewhat one-dimensional: money. Wages across India are a fraction of the UK and other developed western economies, which makes it an ideal option for any company looking to optimise its workforce costs. However, that comes at a price.
Levels of spoken English vary considerably across the country. The Indian accent can also be particularly strong, which makes it difficult for customers to communicate with agents. Frustration has soured the sector’s image, with many customers vowing to ditch companies that decide to offshore their operations.
Cultural differences can also sometimes be a problem, particularly when it comes to building a long-term working relationship with customers. Indian call centre professionals may struggle to recognise many common UK or European references, which can make it difficult to foster a rapport with customers.
This leads to lower levels of customer satisfaction and inevitably, lower retention rates. Pretty soon, the savings gained from lower wages can be wiped out by lost revenue.
India’s reputation has also suffered something of a setback after a string of negative headlines regarding corruption and cybersecurity. Varying levels of cyber resilience infrastructure can increase the risks of costly data leaks.
The massive flow of sensitive customer data between Indian outsourcing operations and their host companies creates a world of opportunities for cyber criminals. Fraudulent operations have been set up to impersonate major businesses, attempting to trick people into handing over their hard-earned money. The number of scams targeting Western companies and
customers has surged in recent years, further eroding the country’s reputation as a safe and legitimate outsourcing partner.
For all that, businesses continue to move operations to India, driven by the promise of lower labour costs. Even so, its position at the head of the world’s BPO sector has seldom looked more fragile.
Outsourcing in South Africa
Leading the list of outsourcing alternatives is South Africa, with a very different blended offering that overcomes many of India’s key weaknesses.
Superior levels of spoken and written English make it much easier for customers and call centre agents to understand one another. Most people speak it fluently, with a clear accent that is easy to understand. As such, there is less of an instinctive resistance to outsourcing services to South Africa than in India.
Cultural references have a much closer match, especially between countries such as the UK, making it easier to build long-lasting and profitable customer relationships.
First world-level technical infrastructure has reduced the cyber risks, providing reassurances to any businesses moving sensitive data from one territory to another. South Africa has worked hard to improve levels of governance, building stronger cyber resilience and data pipelines.
Regulatory alignment with global data protection laws enhances trust when transferring data between South Africa and host companies back in the West.
Government support has further strengthened the hand of South African outsourcing providers. Tax breaks and grants reduce the overall costs of outsourcing and make it much more price-competitive with the lowest-cost outsourcing options, such as India.
Faster communications make it easier for businesses in the UK or Europe to communicate with their South African-based employees.
The talent pool is rich and diverse, creating a host of opportunities that go beyond simple labour costs. South African professionals can provide services across all industries. While customer service remains the number one option, Western-based companies are looking for professionals across all disciplines, including finance, legal and marketing.
South Africa’s location also provides advantages. It is only a couple of hours away from GMT, making it ideal for European business hours. There will be none of no delays that can be unavoidable when working with foreign-based professionals.
For the time being, South Africa’s outsourcing sector is much smaller than India’s. The number of employees within South Africa’s BPO industry is in the tens of thousands rather than the millions. However, it’s growing fast. The BPO sector is the fastest-growing area of employment within South Africa. The government sees it as a key element in its overall
economic policy and a way of giving the growing number of upwardly mobile South African professionals better employment options in their home country. This, in its turn, is helping to combat a common problem faced by growing African economies – the drain of talent overseas.
South Africa, BPO market, therefore, is growing rapidly with a host of new opportunities. In doing so, it is changing the game and creating a very different version of BPO than the one championed by India. No longer is it a one-dimensional question of cost and front-line, relatively low-skilled work. Today, it can cover almost everything.
South Africa can offer this due to all the reasons mentioned above, coupled with the evolution of digital communications allowing faster collaboration between multi-disciplinary teams across many different borders.
It’s a new vision for outsourcing – one in which a company could work with many different types of professionals, performing many different job functions and working on many different contract types. From full-time employees to occasional freelancers, South Africa’s burgeoning talent pool is opening up to the world, and businesses across the West are taking advantage.
The country also has a growing support network of companies that can help Western businesses manage their outsourcing. Employers of Record, Agents of Record and Professional Employers Organisations provide support with employee management, onboarding and classifications. They help foreign businesses overcome legal and administrative challenges that can make it difficult to manage large-scale teams based in South Africa.
For many companies that remain focused solely on the bottom line, India will continue to have value, but for those companies that want to optimise their costs, open up new talent sources and new markets, South Africa offers a different and highly exciting take on the outsourcing concept.
