Offshore business process outsourcing (BPO) is a popular strategy for companies that want to reduce costs, improve efficiency, and access global talent. But what exactly is offshore BPO, and how can you benefit from it? In this article, we will explain the basics of offshore BPO, the different types and models, and the advantages and challenges of outsourcing your business processes to another country.
Offshore BPO is a form of outsourcing where a company contracts out one or more of its business processes to a third-party provider located in another country. The business processes can be related to any function or department, such as customer service, accounting, human resources, marketing, or IT. Offshore BPO allows companies to leverage the lower labor costs, tax benefits, and specialized skills of the provider's country, while focusing on their core competencies and strategic goals.
I was a banker during 1st half (15 years back) of my career and had evaluated the third party service providers for outsourcing, during that time: - companies specially banks use to outsource to get cost arbitrage mainly - This cost benefit use to go up-to 30 to 40% - It also yielded more productivity Now being the other side with ITES/BPO I can see things much more beyond the above benefits: - Organizations look for more process harmonization, standardization and stabilization first than cost benefits - Best practice sharing is another lever which most of the service providers use as they work with different global clients spread across globally - The Center of excellence has evolved well between clients and third party
Reduced cost , easier ramp ups as you can funnel part of your savings to aggressive recruitment plans , in some cases better attrition rates as in nearshore and offshore countries bilingual jobs are paid a premium which makes them more attractive.
Offshore BPO can be categorized into two main types: front-office and back-office. Front-office BPO involves outsourcing processes that interact directly with customers or clients, such as call centers, telemarketing, technical support, or online chat. Back-office BPO involves outsourcing processes that support the internal operations of the company, such as data entry, payroll, billing, inventory management, or quality assurance. Both types of offshore BPO can help companies save money, increase productivity, and enhance customer satisfaction.
Offshore BPO can be classified into three models based on the level of involvement and control of the company and the provider. These models include project-based, dedicated, and hybrid. In project-based models, the company assigns a specific project or task to the provider, who delivers the output within a defined timeframe and budget. The company has minimal oversight and communication with the provider, and pays for the results rather than the resources. In dedicated models, the company hires the provider as an extension of its own team, who works exclusively for the company and follows its policies and procedures. The company has direct supervision and communication with the provider, and pays for the resources rather than the results. Lastly, in hybrid models, elements of both project-based and dedicated models are combined depending on the nature and complexity of the processes. The company has flexible oversight and communication with the provider, and pays for a mix of results and resources.
Offshore BPO can offer many benefits to companies that want to optimize their business processes and gain a competitive edge. Cost savings can be achieved by outsourcing to countries with lower wages, cheaper utilities, favorable regulations, and tax incentives. Efficiency improvement is possible by outsourcing to providers with specialized skills, advanced technologies, best practices, and round-the-clock service. Additionally, offshore BPO can expand the talent pool, diversity, and expertise of the company by tapping into providers with qualified, trained, and experienced staff who can handle different languages, cultures, and markets.
Offshore BPO can provide companies with a number of advantages, however, there are also some challenges and risks that need to be considered before outsourcing. Communication barriers, such as language differences, accent variations, time zone differences, and cultural misunderstandings, can affect the quality and timeliness of service delivery. Additionally, offshore BPO can expose sensitive data to potential breaches, theft, or misuse by the provider or third parties if the provider's country has weak cybersecurity laws or regulations. Finally, managing and coordinating business processes between the company and provider can be difficult due to different work styles, values, or goals.