Article Summary

• What are the common challenges faced by BPO industry employees? BPO employees often face challenges like high turnover, low wages, and repetitive, unengaging tasks. Automation can help by freeing them from this low-value work, allowing them to focus on more complex and fulfilling tasks.
• What is the main goal of automation in operations? All Star’s approach is to empower customers with automation to eliminate as many manual tasks as possible, allowing them to use their BPO partner for only the remaining, more complex tasks.
• What is the cost of manual processes? The costs of manual processes extend beyond just labor. They include time costs from slow response times, the financial impact of human error, and a lack of data for strategic insights. In addition, manual processes are not easily scalable, which can hinder business growth.

The Hidden Costs of Legacy BPO: Why Cheaper Labor Isn’t Always Smarter

For years, BPO, or Business Process Outsourcing, has been framed as the simple solution for businesses looking to cut costs. The BPO promise was simple: find cheap labor, reduce overhead, and increase profits. However, many new businesses are now discovering the reality of this model. 

A legacy business process outsourcing model built on labor is a major risk. These models are often plagued by hidden costs and inefficiencies that erode productivity and hinder innovation. 

The core problem lies in the traditional BPO model itself. These companies don’t just rely on human labor, they actually prefer it. Human involvement is the main metric for generating revenue. This creates a powerful disincentive to adopt technology that truly automates tasks, as doing so would eliminate the very source of their income. While many BPOs claim to have technology that will eliminate manual tasks, a closer look at their billing often reveals that the hours spent on these tasks never decrease.

This reliance on outdated methods is more than inefficient; it actively holds businesses back from growth and true scalability. The industry’s own data confirms this shift. 

Why legacy BPO systems are failing modern businesses

The idea of using BPO systems built on cheap labor as a sustainable strategy is becoming outdated. As Deloitte’s 2024 Global Outsourcing Survey reveals, the industry is shifting. Four years ago, 70% of organizations cited cost savings as the main reason for outsourcing. Today, that number has dropped to 34% and 30% for companies using outcome-based delivery models. This shift is a result of the long-term problems that are associated with legacy models: 

• Unskilled Workers & High Turnover: A reliance on low-cost labor often leads to a high turnover rate and a less skilled workforce, leading to constant retraining and inconsistent performance.
• Decreased Productivity & Low Engagement: Repetitive, manual work leads to low employee engagement, which directly impacts productivity and quality.
• Company Reputation Damage: Frequent errors, slow response times, and poor service can damage your reputation with customers and vendors.
• Loss of Control & Innovation: When you outsource a process, you can lose direct control and hinder your ability to innovate. This is especially true for complex workflows, like Contract Lifecycle Management, where the inefficiencies of review processes managed by offshore teams can lead to costly delays and errors.

Consider the experience of one of our customers at All Star Software Systems. For ten years, they paid a BPO to perform manual data entry. The BPO claimed to have self-developed technology to assist with the process. However, this technology wasn’t integrated with the customer’s systems, so instead of streamlining the work, it actually doubled the data entry being done. 

This customer will still use the BPO for certain tasks, but they will use their new technology to eliminate 75% or more of the data entry required by the BPO. This example provides a critical lesson. It pays to use the technology you choose and have your BPO adapt to your system.

What are businesses expecting from BPO today

The demands of modern businesses have shifted from outsourcing for simple cost reduction to expecting partners to benefit business goals. Today, businesses are looking for a partner that can provide more than labor. 

Smarter Automation for Scalability and Accuracy

The ultimate goal of automation vs outsourcing is not to just save on labor, but to use technology to automate manual human tasks, reduce human error, and support businesses that want to scale without the need to increase headcount. To learn more about how we help businesses transform their operations, read our blog on the Benefits of Intelligent Automation Software or explore our full suite of Solutions.

Data-Driven Decision Making

Modern partners are expected to do more than execute tasks and meet deadlines. Partnerships should enhance your business’s operational strategies by providing insightful data and analytics. This information helps companies improve customer interactions and reach business goals.

AI-Enhanced Customer Service

As AI replacing outsourced labor becomes more common, the standard for customer service is being raised. Today, businesses are expected to deliver faster, more accurate, and more personalized support. AI-powered bots and LLM agents are at the forefront of this shift, handling a wide range of inquiries. These systems can provide customers with immediate, 24/7 service, meeting the demand for instant gratification and ensuring consistency by reducing human error.

Human + AI Collaboration

The most valuable BPO partners understand that the future isn’t just about replacing humans; it’s about supporting them. A collaborative model where AI handles routine, high-volume tasks, such as document separation, data entry, and data classification, allows humans to focus on complex, relationship-driven customer needs. By adopting this technology to automate the bulk of the work, you enable your BPO partner to provide a more streamlined and valuable service. 

Predictive Analytics for Market & Consumer Insights

Forward-thinking partners are expected to use AI and machine learning (ML) to analyze large datasets, from customer interactions to market reports. This allows them to identify patterns and forecast outcomes, anticipating future market trends and consumer behaviors. For a company, this translates to invaluable insights that can inform product development, marketing campaigns, and risk management. Instead of just reacting to what has already happened, a partner using predictive analytics helps you stay one step ahead of the competition.

Warning signs your legacy BPO system needs an upgrade

How can you tell if your current outsourcing model is holding you back? Be on the lookout for these red flags, which are direct indications of the high costs of manual processing:

• Frequent Errors and Manual Workarounds: Your teams are constantly fixing mistakes made by your outsourcing partner. This can be particularly evident in financial processes, where a lack of accuracy can lead to significant issues. As an example, a truly intelligent solution like Invoice Automation (AP Velocity) can eliminate these manual errors by replacing outsourced AP processing.
• Inability to Integrate with Modern Tools: Your partner can’t or won’t connect their systems to yours.
• Decrease in manual tasks not being seen in their billing: Despite promises of automation, your billable hours remain high.
• Slow Response Times and Downtime: Your partner’s manual processes are causing delays in critical workflows.
• Limited Analytics and Reporting: You’re not getting the data you need to make informed decisions.
• High Maintenance Costs: You are spending more time and resources managing your outsourcing partner than you’re saving.
• Poor Customer Experience: The quality of service from your BPO is negatively impacting your customers.

Partnering with All Star Software Systems to automate your business operations

At All Star Software Systems, we believe a true partner helps you redesign your processes for a more intelligent future. We believe that intelligent automation and client partnership are the keys to a modern, efficient business. 

Our goal is to empower customers to adopt our AI and automation technology to handle tasks like document separation, document classification, data entry, and workflow exceptions. This allows companies to still use BPO for the leftover tasks, making the entire operation more efficient and cost-effective.

All Star Software Systems provides advanced solutions like Invoice Automation (AP Velocity), which replaces inefficient, outsourced AP processing, and Contract Lifecycle Management, which streamlines and automates the entire contract review process, eliminating the inefficiencies of offshore teams.

To learn more about how we help businesses transform their operations, read our blog on the Benefits of Intelligent Automation Software or explore our full suite of Solutions.

Ready to stop paying for manual labor and start investing in smarter automation? Contact All Star Software Systems today for a free online demo.