News

The Changing Relationship Between BPO and Real Estate Post COVID-19

Gary A. Courtney Jr. & Michelle Lake

 

The “Old Model”

BPO solutions have always had real estate “implications”, but rarely did a reduction in on-premise headcount deliver significant cost savings or result in less square footage.  Why?  Pre-COVID, contact or call center outsourcing would generally impact pockets of space in locations when departments/functions moved out without generating any actual space givebacks and therefore no savings.  Conversely, if a call or contact center solution was large and concentrated enough for a full floor or an entire building to be taken dark, overall, Real Estate costs likely just remain neutral.  How does that happen? In order to see a save, your in-house Corporate Real Estate team will have to work to take this space dark and/or sublease it. Unfortunately, in our experience, we have found that this kind of work is incremental for the Corporate Real Estate team, many of which do not have the capacity and or experience to strategize with all parties necessary to meet the corporate requirements to achieve the savings and exit the lease.  And even if/when there is bandwidth, depending on the priority the team can place on this effort (with all the post-COVID distractions), it can take time (months or even years).

 

The “Forced Model”

Fast forward to 2020 when the COVID-19 pandemic hit the world…  This was an event that almost no businesses had a plan for, so most, if not all call and contact centers needed to figure out how to send employees out of the office and into a 100% Work from Home (WFH) environment.  And just as was seen by many other companies and functions, they made it work.  Now, as we are coming out of the pandemic, many of these companies plan to continue this model into the future.  We have witnessed firsthand that even companies who would never have considered a WFH model solution from their BPO partners previously, are at a minimum REQUIRING the capability as a business continuity option, both nearshore and offshore.

 

The “Go Forward” Model Question

If BPO solutioning didn’t save big money on real estate pre-COVID, and now potentially no real estate is needed at all, how do you realize the additional business case impact on your BPO solution and just as importantly, regardless of whether you are the BPO provider or the client looking to outsource, what do you do with the real estate that you already have?

 

The Company Perspective

Let’s begin to tackle that question of “do we need real estate at all” by understanding what many companies are thinking as it relates to how much real estate any organization needs going forward.  While most companies allowed for some level of WFH pre-pandemic (maybe one or two days a week), the requirement to move employees to 100% WFH has produced unanticipated success and productivity improvements from many groups – even those who didn’t previously have WFH privileges (examples being call and contact center, administrative and other non-exempt staff). 

 

Why is this important?  First, solutions that were never previously thought about as being 100% WFH eligible (call and contact centers) can be and second, now that almost all employees have gotten a taste of WFH and the benefits it can bring to work/life balance, employees WILL have a say in how and where they work going forward. 

 

What does the future of work look like?  The major real estate outsourcing vendors seem to agree that employees want flexibility when they go back to the in-office environment and they will likely be offered one of three models:

  1. “Hybrid” (some work is done in existing offices and some done from home)  

  2. Work from Anywhere [WFX] (includes locations that the company doesn’t maintain or lease)

  3. “Hub and Spoke” (there will be offices, flex spaces, and WFH.) 

 

While each concept is interesting and deserves more attention (potentially in a future article), regardless of which is adopted, organizations will find ways to optimize their square footage because there will be an even larger WFH component to employee work lives in the future than there was previously.

 

The BPO Partner Perspective

As it pertains to BPO partners and their future use of real estate, it is getting more complicated for them to achieve a balance as well.  We have seen two divergent requirements from clients: a reduction in density for in-office work and an increase in WFH capabilities. 

 

Requirement one is about housing fewer cubicles per square foot in the office environment.  This is a costly ask for BPO partners because part of their savings equation has historically been the ability to utilize several high-density methods such as desk sharing, small cube sizes, and fewer, tightly packed training rooms.  Pre-COVID, most clients were indifferent to these strategies so long as they did not impact delivery quality (background noise, increased attrition, etc.).  Now, clients (and some Government entities in other countries) see these close-proximity work arrangements as inherently risky and want to see their BPO partners incorporate more space between agents and to hold more, smaller sized training classes.  The result is that BPO’s are beginning to source additional space to ensure they can continue to provide the number of required seats subject to these new “rules.” 

 

The second requirement some clients require of BPO partners is to move some or all their program to WFH either full-time or as part of a business continuity requirement. [SKWeston & Company offers several process and technology solutions which can assist both the clients and BPO partners to do this seamlessly and safely which we will cover in our next article, “WFH Emerging Technologies”].  This requirement, along with the density requirement is putting the BPO’s in a unique situation whereby they are trying to source real estate in support of some clients in some locations and simultaneously eliminating unnecessary real estate from their cost structure in other locations.

 

The Real Estate Analysis

Ultimately, whether some real estate is needed for the BPO solution or all your organization’s space can be vacated, there are core questions that need to be contemplated to determine your real estate strategy:

  • What does your lease say (lease terms, the ability to terminate, and the ability to exit and sublease your space)?

  • If you do have the ability to terminate, what is your requirement to reinstate the space if any (and if so, have financial provisions been made)?

  • If you can’t terminate but can sublease, can you get a full sublease or only a partial sublease?  If partial, do you have to do any work to the space to demise it?

  • What are the financial impacts to all the strategies that you are contemplating if you terminate, take a space dark or sublease it?  (There are impacts to many aspects of your P&L and Balance Sheet so have your Accounting/Finance support help you with your business case.)

  • And most importantly – what do your EMPLOYEES say?  Real Estate supports the business.  Regardless of what could be saved by shrinking the overall corporate footprint, to get this right for your employees, your Real Estate solutions have to support the flexibility they desire and you have to make it easy for them to choose where they want to work and to come into that “office” on any given day!

 

 

SKWeston’s Offerings

BPO Solutioning and Real Estate Portfolio Optimization are more complex than ever post-pandemic.  It is no easy task to take these inter-related initiatives and put structure and data around them to create solutions and business cases. 

 

At SKWeston & Company we have worked with clients on exactly these types of projects.  We have developed BPO WFH strategies which have included establishing proper governance and oversight of employees to ensure productivity remains constant.  We have utilized our technology partners to enable oversight of employee downtime and solutions for securing payment processing and securing PII information.  And now, we are prepared to support BPO vendor’s and clients in the review of their real estate footprint to devise a complementary strategy that will optimize space in both a post-BPO and post-COVID environment as well.

 

Give us a call today and let us get started on defining your path, creating your business case, and helping you achieve some significant savings!