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The South African business process outsourcing (BPO) sector is set to grow significantly over the next five years, as companies turn to outsourcing as a means to drive efficiency and remain competitive.

For companies navigating through a tumultuous business environment, it has become particularly imperative to rationalise costs and focus on their core business.

New analysis from Frost & Sullivan, Demand Analysis of the BPO and Contact Centre Market within the South African Financial and Retail Sectors, finds that the market earned revenues of $1,3-billion in 2011 and estimates this to reach $3,06-billion in 2016. The research covers outsourcing of five key business processes; namely contact centre, information technology, financial and accounting, and knowledge process.

“The increasing need for businesses to focus on their core business is driving the trend towards outsourcing of non-core, yet critical processes such as contact centre, IT, and financial and accounting,” says Frost & Sullivan’s information and communication technologies industry analyst Ishe Zingoni. “Enterprises confronted with an uncertain economic outlook have sought to improve business efficiency and manage costs in order to remain competitive.”

In seeking to attain these twin objectives, companies have opted to focus their energies on their core business, while outsourcing the non-core aspects to third parties. This strategy not only gives the businesses access to the most up-to-date technologies and practices, but also ensures rationalisation and predictability of cost structures.

“Another driver of the outsourcing trend seen in South Africa pertains to the shortage and, subsequently, high cost of skilled personnel,” adds Zingoni. “This driver has been crucial, particularly in the outsourcing of IT and financial and accounting processes.”

Companies are increasingly facing enormous costs to retain in-house expert staff, which explains the trend towards outsourcing of these business functions. Previously, growth in the BPO sector was predominantly driven by call centre services. Today, a more evident increase in demand from financial and retail sectors for back-office services will see offerings, such as IT and financial and accounting services, gain more traction.

As a trend in the BPO sector, South African companies are increasingly showing preference for service providers offering one-stop shops. This is motivated by companies’ desire to streamline their procurement processes and control costs associated with servicing multiple outsourcing contracts. In order to capture these opportunities, it is imperative for BPO service providers to increase the breadth of their offerings, culminating in true end-to-end solutions.

“In order to become one-stop shops, service providers need to develop and expand their competencies and offer integrated solutions,” advises Zingoni. “One way of achieving this would be through the acquisition of relatively small niche service providers. As a result, Frost & Sullivan predicts a notable degree of consolidation in the BPO sector over the next five years.”