Voice AI has enabled significant innovation, allowing for AI agents that are highly conversational and sound human-like. This article explores the disruption of outsourced work by AI, focusing on Business Process Outsourcing (BPO).
What is BPO?
BPO stands for Business Process Outsourcing. It's a significant component of work outsourced by large enterprises to companies like Accenture, Tata, and Wipro. When companies get to a certain scale, it may become unsustainable to manage a large amount of work in-house. Therefore, it's often outsourced to a BPO that can more efficiently handle things like customer support, HR, Finance and Accounting, Knowledge Management, and research functions.
Size and History of the BPO Industry
The BPO industry is currently valued at $300 billion and is expected to grow to over $500 billion by 2030. This growth is driven by the increasing amount of work that large enterprises require to function. The industry has been around for a long time, with some of the oldest players starting in the 1940s to assist manufacturing companies with operations. Today, BPO touches all major industries, including retail, travel, telecom, logistics, manufacturing, healthcare, insurance, and banking.
Shortcomings of Traditional BPO
When considering the traditional model of BPO, it's important to remember that this model still relies on human labor. BPO processes are subject to delays and misunderstandings. While companies outsource non-core competencies for better efficiency, the outsourced work isn't always done in the best possible way. Often, software solutions could not handle the bespoke nature or unstructured data involved in many of these processes.
How AI is Solving These Challenges
Historically, software struggled with processes that had a lot of variations, required different data inputs, and required contextual understanding. AI, however, is well-suited for handling disparate, unstructured information from various systems. AI can synthesize, structure, and make sense of this information, leading to actionable outputs. This capability enables new use cases for software that were previously impossible.
Key AI Capabilities Unlocking the BPO Industry
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Voice AI: Voice AI allows for natural conversations with AI agents, providing a better customer service experience. The low latency and integration with business systems enable quick and relevant responses.
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Browser UI Automation (Computer Vision/Operator AI): This emerging technology allows AI agents to work across heterogeneous systems, including traditional software, the web, and in-house applications. This can automate tasks previously performed by data analysts or invoice processors.
Industries Ripe for Disruption
The most disruption is happening in industries with high call volumes, such as:
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Logistics: Managing communication and collaboration across the complex supply chain.
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Healthcare: Addressing consumer inquiries and facilitating communication between hospitals, insurance providers, and other stakeholders.
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Back-office Automation: Automating tasks that require AI agents to move through different systems, understand context, and execute actions.
Advice for New Founders in the AI-Driven BPO Space
Founders should not assume that established BPO companies will not leverage AI themselves. BPOs operate on a business model fundamentally about labor, and a full shift to AI requires a substantial organizational change. Additionally, working with AI systems requires significant technical expertise, especially in areas like preventing hallucinations and evaluating AI responses.
Focus on areas with clear KPIs:
- Customer support with metrics like ticket resolution time and customer satisfaction scores.
The Future of AI and BPO
There will always be a long tail of problems that require human intervention. Founders should think about how that long-tail support will be provided. AI solutions can offer services to a new segment of the population that BPOs haven't served before. AI can also expand the surface area of existing work, offering comprehensive coverage across the entire product surface area.
Opportunities for New Businesses
AI enables smaller companies to leverage resources that were previously only available to large enterprises. For example, companies can now outsource invoice processing or offer more comprehensive support.
- Focus on Linear Scaling Costs: Identify operational tasks that scale linearly with company growth, and then create ways to plateau or reduce these costs using AI.
Gaps and Unclear Areas
The distribution of BPO activities can be unclear from the outside. A significant portion of BPO work involves outsourced IT or application development. Coding agents are improving, empowering non-technical individuals to build applications. This could be an orthogonal attack vector against some BPO work, by empowering individuals to build their own applications.