Many businesses today, from the small startups to the big corporations, choose to outsource work processes to the third-party providers often situated in a location different from the company’s whereabouts. It all began with transferring good’s production to the developing countries but, at present, service outsourcing has been growing in popularity ever since we entered the Internet Era. While the main reason for outsourcing is to save money, it doesn’t mean that you have to sacrifice the quality of the services. The typical example of outsourcing, the help desk, no more looks like undereducated staff speaking bad English and working in bad conditions. As the standards have been rising significantly for the last decade, you won’t find that kind of service on the market, unless you try really hard.
- Types of Business Process Outsourcing Services
- Pros and Cons of BPO
- Business Process Outsourcing Models
- Top 5 companies that outsourced
- IT outsourcing
Types of Business Process Outsourcing Services
Service outsourcing can be divided into two main categories according to the kinds of services that are being delivered by the third-party.
- Back office outsourcing includes application outsourcing, data management, quality assurance, billing services, payment processes, surveys, database management, e-commerce, etc.
- Front office outsourcing. The most typical example is a call center, it also includes but is not limited to email support, chat conversations, and any other services that are connected with client support.
Depending on how close the third-party contractors are situated, i.e. its geographical position on the map, outsourcing can be onshore, nearshore, and offshore.
- Onshore or domestic outsourcing refers to hiring other companies or freelancers located in the same country or even on the next street.
- Nearshore is an alternative to offshore outsourcing, but the service providers are positioned in nearby countries, which have much in common with the hiring company.
- Offshore outsourcing implies hiring a third-party provider company situated often on the other side of the world.
According to the type of services provided by a third party, BPO can be categorized into knowledge, legal, human resources, and research outsourcing.
- Knowledge process outsourcing or KPO is the process of providing any kind of information-related activities by a third-party contractor outside the company or by its subsidiary.
- Legal process outsourcing or LPO is the process of contracting a third-party provider for the reason of any legal services like consultations, documents preparations, and researches.
- Research process outsourcing or RPO is related to the research or analysis services provided in most of the cases for marketing agencies or biotech companies.
- HR outsourcing or HPO includes not only recruitment activities but also staff training, planning of benefits and consulting.
Advantages and Disadvantages of BPO
The top benefits of BPO are saved money and enhanced time to focus on the key business Goals.
- Cost-efficiency. Instead of investing in the high-priced services that your company doesn’t specialize in by hiring professionals to work in-house, a business can invest in other spheres to grow. Besides, by hiring an outsourcing company to do the job, you save your HR’s department time that can be focused on the inner company’s goals.
- Focusing on primary expertise. The outsourcing company will provide services that it’s most efficient at, while your business will tackle its most relevant goals. This not only saves the resources required for the new employee but also executives’ time
- Increased productivity. By delegating tasks to an outsourcing company, the staff tends to become more productive. In order to stay satisfied with the jobs, employees’ responsibilities should correspond to their job titles and be consistent with their abilities. Besides, not everyone is good at multitasking.
- High competitiveness. Keeping the balance between efficiency and cost makes the company more compatible on the market by both focusing on the main business competence and by reducing the expenses on the services beyond the company’s expertise.
- Global access to labor forces. Looking for the professional team not just in your country but all over the world increases the possibility to find the best professional services that will match your business goals by an affordable price.
- When hiring an overseas company you have less control over how they do their job than if they were located in the same office. That’s why you have to be really sure about the third-party company’s expertise and decide in advance what extension of interference in the workflow you are expecting.
- Security risks and information disclosure are possible, so a business should protect itself by signing a non-disclosure agreement (NDA) and hiring only trusting third-party service providers.
- Different time zones can become a problem too. It’s an important point to discuss with offshore outsourcing companies before the agreement is set. The good point about it is you can provide your services 24/7 by hiring professionals in different time zones.
- Hidden cost may make outsourcing not as cheap as expected. While getting too excited about possible savings, one should not forget about possible pitfalls, so don’t forget to double check the contract before signing it. Another downside of the low price is the correspondingly low quality, so there always has to be a golden mean.
- When delegating work to the third-party provider, there is always a risk that the contractor can go bankrupt and stop delivering services. To mitigate this risk, research on the offshore company should be undertaken before the decision is made.
Business Process Outsourcing Models
Depending on the way the outsourcing is implemented, there are three most common outsourcing models.
- Staff augmentation. Very often companies need a professional with certain skills that are absent in the region or the volume of work doesn’t require for him to work full-time at the office. Thus, a business can not only save on workplace expenses but also on paying for unnecessary working hours. This model can also be implemented by hiring more than one professional.
- Dedicated team. The main idea of this outsourcing model is that you hire the whole team of professionals to work on a certain project. For example here, at GBKSOFT, we can offer you a highly skilled dedicated team that will work on your project full-time as a company’s remote IT department. You have full management control over the team’s activities, the scope of work and priorities.
- Offshoring. According to this model, the company transfers his team to another country for the reason of saving on taxes, property rental, natural resources or tackling new market opportunities.
Top 5 big companies that outsourced
To be able to work on so many projects, it’s no wonder that Google decides to outsource IT, specialists all over the world. The most famous case of outsourcing probably was a great number of help desks including email and phone customer support centers for Adwords located around the globe.
Skype stormed into our lives in the early 2000s and it really made a difference in the communication market. But if it hadn’t been for the outsourcing developers from Europe who later became partners, who know it this the idea of connecting people through simple conversations using Internet connection would come to life.
Alibaba started as a small internet company and before it became a “Chinese eBay” it had to create a powerful web e-commerce site. To grow into the biggest market place in the world it had to overcome two obstacles, a poor talent pool and internet restrictions.
Expensify is a useful tool meant to collect and manage information about all kinds of expenses with the option of receipt scanning. It turned out to be a world’s leading application and reached 5 million users worldwide in 2018 probably thanks to the wise decision of outsourcing the development of the application’s back-end while focusing on its front-end.
At first, Ford Motor Company started outsourcing billing and accounting services. Nowadays Ford not only is moving its production offshore but also relies on overseas software developers and provides 24/7 customer support by call centers situated both inside and outside the USA.
Most commonly when we talk about IT outsourcing we mean developing a website or a mobile app. As you probably already know, you can significantly save on software development and on IT related services by hiring a company from eastern Europe and receive the product of clean code and top-notch design. Such countries as Ukraine with its rich talent pool provide companies all over the world with services and products of the best price and quality ratio.
In 2019 Ukraine was proud to take 1st place in the category of Science and Technology among 153 other countries in The Good Country Index.
But it’s not only software developing that can be outsourced in the IT sector, but also business automation services and IT consultancy. Drawing on our experience, we believe that up to 30% percent of the expenses can be reduced by means of business automation including but not limited to big data processing, generation of reports, and data unification. By automation of every time-consuming process in your company with the help of such technologies as ERP, CRM, CMS, and IoT you can save time for the primary company’s business activities.
Regardless of whether you want to find a rare professional your company desperately needs or to hire the dedicated team for a long-term project, business process outsourcing may be the best choice. You just have to be sure that you are aware of all the possible downsides when it comes to outsourcing. You can find out more about choosing an outsourcing company in our article Choosing an Outsourcing Partner: a Guide For Digital Agencies.
Whenever the services lie outside your company’s competencе or exceed your staff resources, you can’t go wrong with outsourcing if you stick to simple precautions mentioned above. The BPO industry is developing rapidly and it will keep growing because outsourcing makes it possible to increase your company’s return on investment and by doing this increase its productivity and compatibility significantly.
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