BPO and KPO: White-Collar and Professional Tasks Such as Law and Accounting Are Offshored

Offshoring was once thought of as the process of sending only less-skilled, low-paying jobs overseas. This is no longer the case, and the reality of white-collar jobs moving offshore is causing alarm within many professional associations and dislocating workers in America and elsewhere. Today’s offshoring includes much more than the replacement of call center operators or textile mill workers with lower-paid workers in Asia. In fact, Indian outsourcing companies such as Tata Consultancy Services Ltd. have scaled back their call-center services in favor of better paying, higher profit margin white-collar services.

BPO, or business process outsourcing, has been one of the fastest-growing segments in the offshoring sector. It has evolved far beyond its initial focus on call centers. Today, BPO services include human resources management, clerical tasks such as billing and purchasing, as well as many types of customer service or marketing activities, depending on the industry involved.

KPO, or knowledge process outsourcing, refers to the use of outsourced and/or offshore workers to perform business tasks that require judgment and analysis. Examples include such professional tasks as patent research, legal research, architecture, design, engineering, web site design, market research, scientific research, accounting and tax return preparation.

Today, offshoring includes the use of foreign workers to handle routine white-collar and professional tasks. For example, accountants in India are now preparing hundreds of thousands of American income tax returns yearly—a potential loss to professional accountants based in mature economies. The eternal question regarding offshoring looms large here—does offshoring of professional tasks increase productivity and net economic activity in nations such as the U.S., or does it lower American wages and create a net loss of professional jobs?

As of 2023, small and mid-size U.S. accounting firms were offshoring audit and tax return preparation in growing numbers due to rapid staff turnover and rising costs. Accounting workers in India, the Philippines and South Africa are picking up the slack. These employees are often trained by the U.S. firms, with some required to work overnight shifts to coincide with U.S. working hours. For example, Staffing firm Makosi reported hiring in excess of 1,000 accountants in South Africa and elsewhere in 2022 on behalf of accounting companies in the U.S., UK and Australia.

Offshoring is clearly affecting a wide variety of white-collar and professional sectors in the U.S., Canada, Western Europe, Australia and Japan. In particular, offshoring is being used to a growing degree for the more mundane tasks in legal services, architecture, design, engineering, health diagnostics, accounting and marketing. This is in addition to the already immense offshore business in software and hardware design and engineering.

High-security, internet-based data environments have been implemented to make it possible for very sensitive personal data to be worked on in offshore facilities. Nonetheless, firms that are responsible for sensitive, personal data are increasingly anxious about the potential of having that data hacked and are therefore forced to invest very heavily in security systems and software.

For example, accountants in India who are preparing income tax returns for Americans may log into specialized sites containing clients’ data, such as previous years’ tax returns and scanned copies of W2s as well as income or expense documents. However, they may not be able to see the clients’ personal information, such as complete name, address and social security number. In addition, financial account numbers may have been concealed. The offshore accountant can do the basic tax return work within the secure system. Later, the final return is compiled and printed out by the client’s personal accountant back home.

Additional white-collar and professional tasks moving offshore include jobs in financial services such as banking and insurance. Vast numbers of U.S. back-office financial services jobs have moved overseas. Hundreds of thousands of workers in the Philippines, India and elsewhere are employed in call centers, answering the questions of U.S. bank and investment customers regarding their accounts. The Philippines has emerged as what some consider to be a more effective destination for U.S. outsourced call center jobs, because of its cultural affinity with America and the large population that grew up speaking excellent English, with a clear, American-style accent. This is due to the fact that the Philippines was an American territory for many decades. Recently, the Philippines has been facing growing competition from outsourcing companies in low-cost nations like Vietnam and Indonesia.

Meanwhile, insurance application processing, claims processing and employee benefits administration are all ripe for offshoring. More and more accounting and bookkeeping tasks have moved offshore, in addition to the tax return preparation noted above. Also, the jobs of certain types of financial analysts are moving offshore to MBAs trained in Indian universities. U.S. banks have been outsourcing a growing portion of mortgage processing to India.

Another industry rapidly adopting offshoring is publishing. Offshore centers are offering highly trained workers who perform page layout, advertising design, prepress services, text conversion to digital format, index creation, content creation, high-level editing and many other tasks.

Lawyers are facing the offshore trend as well. For example, some U.S. law firms are using services in India for basic patent and trademark research. Inexpensive, outsourced legal services are on the rise, especially in India. While associates at U.S. legal firms typically bill more than $200 an hour, experienced attorneys in India bill at much lower rates.

Yet another business sector that is seeing outsourcing activity is architecture. For example, Cadforce, Inc. is a California-based architectural firm that employs designers, architects and computer technicians in ten global cities, including locations in the U.S. and India. The company utilizes proprietary online collaboration computer-aided design (CAD) systems to allow both clients and offshored workers to view and markup the same drawings during the design process. Cadforce is a subsidiary of engineering services company Neilsoft.

Outsourcing industry executives are keeping a close watch on how automation is changing the call center, BPO and related sectors, and plotting their future business strategies accordingly. For example, sophisticated telephone answering software can ask specific questions of the caller, and then route the call to exactly the right person, or perhaps to an automated response. Overall, this can save from seconds to minutes per call. Likewise, many other functions are becoming automated, utilizing, for example, software that can listen to a caller’s questions and provide computer-generated answers about account balances, or provide detailed instructions about how to complete a business form or set up a basic computer device such as a router. At the same time, automation and sophisticated monitoring devices means it requires fewer people in an offshore facility to monitor a client’s computer network or web site.

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