Why South Africa is the ideal offshore location when outsourcing customer services

The term ‘outsourcing’ entered the business lexicon in the second half of the 20th Century, as costs for transportation decreased and communication technologies became more affordable and commonplace in offices worldwide.

Consequently, many businesses from the 1950s onwards found it easier than ever to expand their operations. To meet the demands of business expansion, company leaders hired third-party companies as a cost-efficient way to access skilled professionals. For example, people with advanced technology skills or multilingual customer service representatives who could help a brand establish itself abroad.

Nowadays, companies of all sizes can benefit from outsourcing a wide range of core and specialised business services, whether they trade exclusively to a domestic audience or internationally. Furthermore, thanks to the introduction of the internet and remote working technologies, company bosses can select the ideal outsourcing partner from anywhere in the world, creating a viable service offshore.

This article will act as a guide for business leaders who are considering offshoring aspects of their customer service to a country like South Africa (which is emerging as a world-renowned centre for offshoring). We’ll explore what gives our company (Sigma Connected) a unique edge against both international and domestic outsourcing competitors.

We will also try to debunk some myths surrounding offshoring, such as cultural and communication differences, high costs, and how difficult it is to find an outsourcing team that adopts a strong customer-orientated approach in everything they do.

The state of offshoring in 2022

In the wake of the pandemic, remote working has become the ‘new normal’ for many organisations. In early 2020, lockdowns forced companies to pivot their operations and adapt to entirely digitised processes to remain viable. The increased focus on digital communications (such as video conferencing, cloud computing, and automation technologies) helped companies adapt in a way that became more aligned with offshoring’s main benefits, i.e., the ability to cut operational costs while maintaining core business competencies.

In fact, studies show that the offshoring industry grew from $92 billion in 2019 to $246 billion at the end of 2021–– a 165% increase in global revenue in three years. Experts predict that growth within the global BPO industry will continue. The customer service outsourcing sector alone is expected to be worth $178 billion by 2030.

These figures indicate that companies who identified outsourcing as a potential driver for growth and tested its effectiveness throughout the pandemic now feel confident in permanently outsourcing portions of their business activities offshore to third parties worldwide.

India is the most popular location for offshoring globally, with 70% of businesses outsourcing to Indian partners. India boasts a world-class IT infrastructure and a highly-skilled workforce. It is also located in a suitable time zone (GMT+5:30) for managing overnight operations on behalf of both Western European and Australian companies.

The Philippines is the second most popular offshoring destination. Known as the ‘Call Centre Capital,’ the Philippines is renowned for its top-performing, multilingual call centres. By the end of 2022, the Contact Centre Association of the Philippines predicts that the country’s call centre industry will reach $20.4 billion in revenue.

However, in recent years, South Africa has emerged as a highly competitive location for business process outsourcing (BPO). Since 2017, South Africa’s BPO industry has grown 22% yearly –– three times higher than India and the Philippines. For the last two years, South Africa has been rated the best country for offshore CX delivery, based on survey data from the Ryan Strategic Advisory (a world-leading BPO and CX research organisation)..

It’s also believed that the South African BPO industry will be worth $3.6 billion by 2027. So, for those considering which offshore destination might be the perfect fit, South Africa rates very highly as a world-class BPO hub.

The benefits of offshoring and outsourcing

Outsourcing and offshoring are two different things (with offshoring referring to exporting business functions overseas). However, as remote working becomes more popular, international teams are becoming the norm in modern workplaces, making the differences between offshoring and domestic outsourcing less noticeable. But regardless of whether you’re working with a third-party BPO vendor in your own country or overseas, outsourcing carries several advantages, including:

• Flexibility: You can invest in more services at short notice (for instance, to cover seasonal customer service demand). No need to recruit or train staff, as outsourcing allows you to hire an existing, trained workforce.
• Concentrated business expertise: Outsourcing teams offer specialised skills that may be difficult for business owners to recruit for themselves.
• Improved business focus: When everyday business functions (such as customer service or collections) are taken care of, businesses can free up creative resources and concentrate on profit-generating tasks.

The flexibility of outsourcing operations also allows businesses to innovate and steadily increase their business’ value by enlisting the help of talented professionals.

Ultimately, outsourcing offers businesses an easier way to control their staffing costs without worrying about their service level ‘dipping’ if they struggle to hire the right people in-house. Adding an offshore angle, opens up a wider resource pool and quite often a wage arbitrage reducing the overall cost to serve customers.

Dispelling offshoring myths

Over the years, several pervasive myths may have held enterprises back from exploring the advantages of offshoring. Here, we will list a few offshoring myths and look at how developments in the industry have dispelled these negative perceptions in the minds of business leaders and consumers.

Myth #1: Time zone differences can hinder business collaboration

Many organisations explore offshoring because they purposefully look for staff that can operate outside their country’s business hours. However, for companies that need a higher level of communication and collaboration with offshore teams, time zone differences can have enormous challenges and even costly delays to business operations.

To manage the time differences of offshore teams effectively, companies could look for outsourced teams operating in complementary time zones. For example, South Africa is two hours ahead of GMT, allowing for easy scheduling with UK-based headquarters.

Similarly, the USA is six hours behind, and Australia is eight hours ahead of South Africa’s time zone, making South Africa the ideal location for offshoring CX delivery overnight for Australian and US brands offering 24-hour services. Or with the introduction of shift patterns the time difference becomes irrelevant.

Myth #2: Language barriers present an issue

English is the primary language used in business, so offshoring teams looking to maximise their profitability need to have a high level of proficiency in the language.

Organisations may shy away from offshoring because they believe that BPO contractors offshore may not be fluent in English, and customers may complain about their communication skills as a result.

However, the truth is that offshoring companies recruit for job candidates with exceptional language skills. South Africa, for example, is ranked higher in the world in the EF English Proficiency Index than other popular offshoring locations like India and the Philippines. Furthermore, the South African accent is easy for native English speakers to understand, which again can alleviate some hesitancy business owners may have in offshoring.

Myth #3: There will be cultural differences that make communication difficult

Some business owners may also believe that cultural differences between nations cause challenges for those looking to offshore company operations.

Thankfully, many worries about cultural mismatches between countries are gradually dissipating thanks to the connectedness that the internet and other media foster.

Technology goes a long way in bridging the cultural gaps between nations by making it easier for people to empathise with others worldwide and experience other cultures via the internet.

Furthermore, places like South Africa are a hub of many African and Western cultures. There are Dutch, Portuguese, and British cultural influences due to colonisation; and multiple African ethnic groups exist in South Africa (e.g., Xhosa and Zulu peoples, which also act as two of the country’s primary languages). Living in such an environment means South African workers (and countries with similarly diverse populations) can communicate and empathise effectively with people from many different walks of life.

Myth #4: Other countries may not be customer-service oriented

Alongside hesitancy about cultural differences, there is a common myth that offshore teams may not present a customer-first attitude in their work. This myth is harmful to the offshoring industry and does not reflect the truth as it stands in 2022. South Africans and especially Cape Tonians have a natural affinity to deliver excellent customer service. They consistently aim to deliver exemplary customer support on every call.

In addition to the harmful myth that offshore teams struggle to present a customer-oriented approach to services, some business owners also believe they are handing over too much control to a third party. Business leaders want to be able to keep a close watch on the activities of outsourced teams to ensure that they meet their company’s high customer experience standards, in addition to ensuring they represent the brand values at all times.

To dispel the myth that businesses need to constantly worry about the quality of an offshore teams’ output, it’s helpful to consider that good outsourcing companies continually invest in the latest technologies and training for their advisory teams. These efforts help offshore professionals deliver a consistently high output standard, regardless of their work discipline.

For example, CRM systems enable teams to log information on previous communications with customers, allowing teams to access pertinent customer data in real-time. Technologies that integrate with existing business systems are a key component of modern BPO practices and help companies offer a more efficient and personalised service to their valued customers.

Myth #5: Offshoring has become more expensive

Some business owners note that the costs of offshoring are increasing, and as a result, they may not see the cost-saving benefits of an overseas outsourced workforce. However, it is essential to compare offshoring costs with recruiting new staff members to get an accurate picture of the money-saving benefits.

Moreover, developments in global technology infrastructure have vastly increased the value and speed of offshore service delivery. External teams can perform complicated customer support tasks remotely, such as diagnosing problems with in-home smart meters. In contrast, less than a decade ago, advanced remote diagnostics services like these were not widely available.

The unique benefits of offshoring to South Africa (and Cape Town)

So far, we have touched on some of the benefits of offshoring in South Africa and other nations. In this section, we will take a closer look at more of the benefits of partnering with a South Africa-based BPO, in particular, we will highlight how Cape Town’s unique characteristics make it the ideal location for hiring offshoring professionals.

A large talent pool of tech-savvy graduates

South Africa has a first-world infrastructure and a high number of university graduates (approximately 160,000 graduates per year).  In Cape Town alone, there are over 69,000 BPO employees with over 5,500 BPO roles created in the city in 2021. Therefore, businesses can be assured that there is no shortage of talented and enthusiastic call centre employees in this location.

High unemployment and low labour costs

South Africa’s national unemployment rate is 34.5% across all ages but as high as 63.9% for those aged 15 to 24 ( according to the Q1 2022 Quarterly Labour Force Survey of the South African Government). Furthermore, approximately 410,000 people with skills in BPO enter the South African labour market annually. These figures demonstrate that there is a vast potential workforce for employers interested in ethically offshoring their customer services abroad.

South Africa also generally has lower living and labour costs than countries like the UK due to economic factors like inflation, housing demand etc. Therefore, wage arbitrage enables overseas business owners to make significant savings on establishing highly educated customer service teams abroad.

Potential for impact sourcing

South Africa’s Department of Trade and Industry recognises the importance of BPO as a growth industry within the county. As such, various initiatives have been set-up to help train the next generation of BPO employees in South Africa. Some examples of initiatives include:

• Western Cape’s BPO Academy: South Africa’s government, in collaboration with BPO brands in Cape Town, set up a dedicated BPO Academy at the College of Cape Town’s Gardens Campus. The initiative hopes to create a reliable pipeline of BPO employees equipped with all the skills they need to thrive in the industry.
• Harambee: A non-profit social organisation that seeks to lower youth unemployment through private sector partnerships, data collection and innovation, and hands-on training.
• MyCalling: A digital recruitment tool that matches potential job candidates with suitable roles via a specialised algorithm that takes a more value-centered approach to hiring. Tools like MyCalling prove invaluable to job seekers in South Africa, as the website helps them create a high-quality CV in less than 15 minutes.
• Shadow Careers: A three-month training programme designed to give disadvantaged youths full training in BPO disciplines. Students are offered a job upon successful completion of the programme.

It is reassuring to know that brands in South Africa (like ourselves) actively work to improve the employment prospects of young people. Businesses have the opportunity to do a lot of good within South African communities through impact sourcing initiatives. From a business investment standpoint, partnering with firms that use impact sourcing can form part of your organisation’s CSR strategies, and help ensure the continual development of South Africa’s BPO industry.

Familiarity with cultural differences

As mentioned previously in this eBook, the South African workforce has considerable experience interacting with people of different nationalities and cultures. In a customer service environment, this is immensely helpful. But to go further than that, proficiency in English is required for many BPO positions worldwide. Subsequently, many countries like Poland and the Philippines invest in accent neutralization training for BPO employees. This is because, despite some non-native speakers’ proficiency in the language, many accents remain difficult for native English speakers to understand.

However, in South Africa, little to no accent neutralisation training is required, as the differences in dialect are easy enough for most people in the UK, US, and Australia, and other English speaking countries to understand. Plus, many people in Western Europe, America, and Australia are somewhat familiar with South African culture, so not much can get ‘lost in translation’.

Finding the right offshoring partner

Finding the right offshoring partner for your business requires researching the industry and setting clear goals for what you want to achieve with the help of external teams.

In this section, we will outline some things to consider when hiring an outsourcing partner, like the technologies, recruitment strategies, and processes teams use to ensure that business leaders get the best possible experience working with offshore companies.

Step 1: Look into the business benefits of offshoring

Research outsourcing companies in various countries to help you decide which regions best suit your business hours, service requirements, and budget constraints. For example, if you need teams that show a high level of engagement with customers, as well as the ability to build rapport and deal with complex queries, you may want to consider offshoring to South Africa.

South African workers are exceptionally skilled in connecting with people from a wide range of backgrounds. So, they are likely to offer highly-attentive staff to help businesses manage all different types of customer enquiries.

Step 2: Find an outsourcing partner

After searching the market and deciding on the services you need to make outsourcing profitable for your brand, start enquiring with outsourcing companies that pique your interest.

As part of your due diligence, spend time checking that potential offshore partners have plenty of experience and strategies to consistently ensure they offer high-quality services. At Sigma Connected, we have over a decade of experience in the BPO sector. We also have a well-established presence in its home city of Cape Town and an HQ building in the UK, ensuring that our service quality matches the needs of customers in multiple regions.

Step 3: Establish strong communications with your offshore partner

Once you have selected your ideal offshoring partner, set up regular meetings and ensure you are aligned on your processing requirements and key performance indicators. For example, make it clear how many customer queries you wish to have resolved in a day, week, etc.

A good outsourcing company will be more than happy to give you complete transparency in their operations, and will go out of their way to build trust and rapport with your team.

Step 4: Monitor the offshore onboarding process and make improvements

Continually monitoring and improving the relationship between you and your offshore teams is a two-way street. Outsourcing brands like Sigma Connected make the onboarding process as smooth as possible by investing in technologies that integrate with many different enterprise IT systems.

Likewise, ensure you provide all the information offshore teams need to live up to your brand’s mission and values. Send your outsourcing teams company literature like ‘Tone of Voice’ documents for brand communications and any customer service pointers you may have picked up from your inbound customer support teams. Companies like Sigma Connected also offer additional services like independent Quality Assurance teams, who can help you monitor the output of your offshore (and in-house) teams and provide suggestions in areas where staff can improve their services.

Discover the benefits of offshore teams with Sigma Connected in Cape Town

In summary, the offshoring and outsourcing industry is experiencing exponential growth. Countries like South Africa are heavily investing in BPO development, as its location and cultural makeup are the ideal fit for brands in UK, US, and Australia time zones.

Sigma Connected, with offices in Cape Town, offers a wide range of outsourcing services, including customer services, collections, complaint management and customer acquisition. The team also invests in call centre training, which helps ensure the next generation of workers in South Africa have the skills they need to keep the BPO sector thriving.

If you would like to learn more about the business benefits of offshoring through Sigma Connected, please contact us today.