The Rise of Generative AI and Its Impact on the BPO Industry

The business process outsourcing (BPO) industry has been a major part of the globalization story over the last few decades. Companies in developed countries like the United States have increasingly outsourced various business processes like AI in BPO industry service, technical support, and back-office functions to overseas locations to take advantage of lower labor costs. Major BPO destinations include India, the Philippines, Mexico, and Central/Eastern Europe, to name a few. 

The BPO industry directly employs over 3 million people (about the population of Arkansas) just within the United States and generates over $100 billion (about $310 per person in the US) in annual revenue. Major companies like Teleperformance, Concentrix, Synnex and Startek rely heavily on offshore delivery centers to service American clients across various sectors. The onset of advanced technologies like automation, AI, and machine learning has already impacted the industry. But a new technology called generative AI threatens even more disruption. 

What is Generative AI? 

Generative AI refers to machine learning models that can create new, original, and realistic content like text, code, images, videos, and audio on their own. The most popular examples are chatbots like ChatGPT, image generators like DALL-E 2, and copywriting tools like Jasper.   

This technology is still nascent but progressing rapidly. A June 2023 report from Bloomberg Intelligence estimates the generative AI market to reach $1.3 trillion by 2032, with growing demand for generative AI products potentially adding $280 billion of new software revenue. This reflects the potential frowth of AI in the BPO industry. 

Generative AI Vs. Traditional AI/ML 

Traditional AI and machine learning models are trained to identify patterns and features in data to complete narrow, well-defined tasks. But they cannot function beyond their training. 

In contrast, large language models like ChatGPT have been trained on gigantic volumes of text data from the internet to not just recognize patterns but develop a much deeper understanding of human language. This allows AI in the BPO industry like reading comprehension and emotional intelligence. 

Current Capabilities of Generative AI   

While earlier AI technologies focused mainly on visual recognition, generative AI can produce remarkably human-like text and visual content. Some major applications include: 

• Automated Copywriting: Writing marketing copies, blog posts, social media captions, essays, emails, etc. with just a prompt 
• Chatbots: Having conversations, answering ai for bpo queries   
• Code Generation: Developing code for websites and software applications 
• Data Analysis: Identifying patterns and insights from data 
• Drug Discovery: Proposing structures of new drug compounds 
• Cybersecurity: Generating payloads for penetration testing 
• Creative Design: Creating logos, digital art, 3D renders of objects, etc.   

Generative AI is also making steady progress in other human-like skills such as reasoning, summarization, translation and even understanding emotions.   

Given their current capabilities and rapid pace of advancement, generative AI models pose a serious threat of disruption for industries relying on low-cost human capabilities, such as BPO, retail, transportation and warehousing. 

How Generative AI Will Impact BPO?  

Many back-office services commonly outsourced to overseas BPO partners like 1Source BPO including AI in BPO, sales & lead generation, transcription/data entry, and even basic IT support/website changes. Most of these functions involve fairly structured processes and do not require specialized domain expertise. As such, they are primed for automation using AI. 

Generative AI takes this to the next level by demonstrating human parity in not just completing mechanical tasks but handling unstructured work. For instance, a generative AI agent can potentially replace 10-20 customer service agents just as effectively for a fraction of the cost and without any overhead.   

Some major ways generative AI threatens to impact BPO services include: 

• Automating Client Interactions 

Chatbots and voice bots powered by large language models can communicate naturally with customers via phone, email, and messaging apps. They can understand context, hold meaningful conversations, and solve problems empathetically. This directly substitutes the need for thousands of offshore call center agents. 

• Automated Data Entry & Processing 

Tools like Jasper, Clara and Rytr can rapidly analyze, extract information from and make sense of large volumes of data. This generative AI for BPO industry cuts down or even eliminates the need for offshore data entry operators, researchers and business analysts.   

• AI Content Creators 

Offshore content mills and marketing agencies employ hundreds of thousands of copywriters, graphic designers and video editors catering primarily to overseas clients. Automated copywriting tools and creative platforms like DALL-E 2 threaten these jobs by generating blogs, social posts, product descriptions, whitepapers and even visual assets like ads and logos at scale. 

• Code Generation & Deployment   

With GitHub Copilot, Anthropic Claude and other code-generating models, developers can build, test and deploy complex, production-ready software just using natural language prompts with minimal manual coding. This affects technology/IT services - a major offering within BPO. 

Evidence Already Emerging 

While wider adoption across industries will take some time, early evidence indicates generative AI’s promise in replicating higher-value skills, not just automating repetitive tasks:   

A 2021 study found that GitHub Copilot could generate correct solutions for over 84% of programming problems, cutting development time by nearly half. 

Chatbots like Claude and Alexa can already pass exams testing abilities like reading comprehension and emotional intelligence.   

Tools like Jasper and Rytr now create marketing copies, emails and blog posts that are coherent, creative and persuasive enough for business use.   

Consumer brands like Target and Mattel are testing DALL-E 2 for rapid prototyping and AI for BPO ideation. 

Forecast on Automation Rates   

According to AI in BPO estimates by researchers and industry associations, automation fueled by AI could eliminate around: 

• 23-25% of offshore call center agent jobs by 2024 (Forrester, McKinsey)   
• 15-30% of basic IT services and software engineering roles by 2025 (Gartner, Nasscom) 
• Over 50% of entry-level digital marketing jobs as SEO analysts and content writers by 2026 (Tracxn)   

A study by Stanford University computer scientists estimates that about 42% of all US occupations currently have over 50% of their key tasks fully automatable just with existing AI-based tools. Most administrative support and sales roles, heavily reliant on language processing, face over 70% automation potential. Expanding adoption of generative AI across sectors could boost these automation rates even further. 

Strategies for BPO industry   

While automation is an existential threat to individual jobs and skills, the BPO industry still holds immense value in its ability to offer round-the-clock operations with large workforces covering wide expertise. Companies can try to mitigate disruption through a two-pronged approach: 

• Reskilling Employees: Providing extensive training programs to upgrade human ai in bpo industry specialized skills in areas like data science, product design, cybersecurity, IoT, etc. which requires an application of expertise.   
• Responsible AI Adoption: BPOs can use generative AI themselves to augment human capabilities and enhance productivity rather than completely replace jobs by leveraging AI for BPO to automate tier-1 support while escalating complex issues to human agents with expert oversight for final edits and quality control. Such human-in-the-loop systems maximize benefits while minimizing risks. 

Bottom Line   

While AI-based technologies have streamlined operations for years, generative AI’s rapid advancements pose real concerns for the U.S.-based BPO and outsourcing industry, which relies on overseas labor.  

Estimates show automation could displace up to 42% of US administrative and sales roles commonly outsourced overseas. However, US BPO players that reskill workforces and adopt responsible AI have the opportunity to transition their offerings and thrive in the long run. But companies clinging onto old cost arbitrage practices face irrelevance in the age of AI BPO. 

Are you a U.S. company finding it harder to staff qualified talent as offshoring gets disoriented? The intelligent solution is partnering with an onshore BPO like 1Source BPO. With its global talent pool and AI-powered platform, 1Source BPO enables you to deploy qualified remote talent in America quickly/swiftly and compliantly. 

FAQs 

• How quickly will generative AI make an impact?  

While wider adoption across industries will take some time, significant automation of business processes and job roles relying on language and data tasks could happen within the next 3-5 years. 

• Will new technologies create new BPO jobs? 

Yes, there will be new roles related to developing AI tools, designing human-AI collaboration systems and preparing data to train machine learning models. But these require different skills and won't directly replace jobs made redundant. 

• Can generative AI fully replace human capabilities?  

Not yet. Algorithms still lack contextual reasoning ability, emotional intelligence and common sense that humans intrinsically demonstrate. But they keep steadily improving and expanding use cases. 

• What business processes face the highest risk? 

Generative AI currently has a major impact automating client interactions via chat/voice bots, data entry/processing, basic creative/content development and software testing/deployment. 

• How can BPO companies adapt? 

Through extensive reskilling programs, shifting from pure labor cost arbitrage to specialized services, and responsible adoption of AI to enhance rather than replace human work. Hybrid models balancing automation with expert skills also cikey.