Why You Should Invest In Tech, Not BPO

BPO is all the rage for many US-based and European companies looking to keep internal costs down. The global BPO market value is estimated to increase by a CAGR of 8.5% from 2021 to 2028 . The buzzwords, or rather phrases, surrounding BPO as an industry include “reducing operational costs”, “improving core business functions” and “increased flexibility”.?

No doubt BPO offers benefits for many industries, but is it all it's cracked up to be, once you peel back the layers of hype? Specifically, does it offer benefits for CPAs and the accounting industry in general??

I’m going to take a solid stance on this and say no. Allow me to explain why I don’t think BPO is the ideal solution for businesses looking to simplify their structure and management processes and you’ll see why.

Why All The Fuss About BPO?

BPO is not a new phenomenon. It’s been operating in some form since the mid-20th century, but it only really became the industry we recognize in the 2000s. The benefits it offers are fairly straightforward: businesses have access to a lower cost of labor and a larger, scalable supply of talent. At face value, it’s easy to see why so many businesses opt for outsourcing.?

However, once you lift the lid and take a look at the reality of the state of the industry, as well as the services you’re receiving, it becomes more obvious that BPO’s benefits are not as clear-cut and the industry suffers from multiple challenges.?

Investing in offshore offices was a solid strategy about a decade ago when technology and tech-based tools were not at the place they are today.?

I’m not suggesting that investing in BPO is a bad idea, but rather that it’s not the best idea. In my view, investing in BPO services instead of investing in tech is akin to investing in a Ford Model T (which is undoubtedly better than a horse and buggy) when you could be investing in a Tesla.?

The Drawbacks of BPO

High attrition rates

Globally, attrition rates in the BPO industry are incredibly high. Particularly in India, one of the biggest BPO destinations, the average attrition rate is estimated to be between 30% and 50% according to HFS. It’s not hard to see why once you look inside the bottle.?

Long working hours, increasing demands, and the monotonous nature of the work leave many employees drained and unmotivated, making them more likely to quit after a few short months.?

Human error

At the end of the day, when you’re working with humans, human error is bound to happen at a certain point. This is par for the course and expected.?

However, when you throw in the additional mix of working with people in another country (wherever that country might be located), there’s the added possibility of outsourced employees not fully grasping all the nuances, terminology, lingo, and expectations of US-based accounting businesses, making the margin for possible error even higher.?

Language barriers and miscommunications can also become a problem hindering productivity and success.?

Time zone drawbacks

Outsourcing to a BPO destination means you’ll likely be contending with time zone differences, some of which can be up to 10 hours or more from EST.?

Communication automatically becomes more challenging and deliverables take longer to complete because of gaps and downtime between your team and the team you’re collaborating with somewhere else in the world.?

Collaborating on an item or project can turn into an endless back and forth that takes days which could otherwise take a few hours at most.?

Management challenges

Managing and engaging with any sort of team is challenging enough (particularly in the era of remote work). It becomes even more complicated when you’re working with a team operating from an entirely different cultural framework, time difference, and expectations as well as any potential geopolitical challenges that may occur.?

Cost savings: expectation vs. reality

The expectation around BPO is always that you’ll save a lot more compared to working with an internal team or processes.?

While this is true to a degree, much of the cost savings end up being balanced out by the time you spend on additional management issues, working with clients on communication issues resulting from language barrier challenges, correcting mistakes due to misunderstandings, and dealing with a revolving door of staff due to high turnover rates.

Why You Should Invest in Tech, Not Outsourcing

Again, I’m not saying BPO is a bad option, but rather it does pose challenges and might not be the best option for your business. The major drawback of investing in AI is that it can take time to train initially, similar to a human. But once you’ve trained the AI, it will continue to learn on its own with no issues of restarting due to attrition.?

There are many reasons why investing in tech, instead of outsourcing, for improving your cost savings and operations is a better decision overall.?

Greater accuracy, smaller error margin

Tech with machine learning capabilities will continue to learn forever, and become more accurate over time, posing a much lower risk of error compared to human employees. Tech, managed by human supervision, is the ideal partnership and near perfect when it comes to accuracy.

Decreasing costs

Unlike human labor costs which increase with scale due to management relayering and stratification (of which some managers aren’t even directly contributing to outputs), technology costs remain flat and tend to decrease due to economies of scale.?

Faster, uninterrupted processing

Tech solutions are capable of faster processing speeds and of instantaneous processing, as well as uninterrupted throughput - something humans aren’t able to do. Working with tech means you receive consistent, uninterrupted processing and management of tasks.?

Training potential

Tech can be trained on millions of data points almost instantly, and benefits from a faultless memory. This makes it quicker and easier to teach tech business and industry nuances compared to teaching humans, provided you continue to use the tech solution in your business.?

Instantaneous improvement

Any performance issues can generally be resolved fairly quickly in tech tools with a few clicks and amendments as opposed to performance improvement strategies that can take months to plan, implement and roll out in external offices. There are also no HR concerns when it comes to performance issues with tech.

Better agility

Tech is more agile compared to humans and is minimally impacted by external, uncontrollable events like pandemics, natural disasters, political instability, and so forth due to its cloud-based infrastructure and capabilities.?

Greater cost savings?

The long-term cost savings of implementing tech in your work processes are real and will continue to improve with time and as more benefits become apparent.?

In Conclusion

Only you know what’s best for your business. However, before hopping on the BPO bandwagon, it’s best to have a comprehensive idea of the realities of working with a completely outsourced team in charge of handling your clients and their work. A tech-based solution is a viable way to mitigate the risks of outsourcing and avoid venturing into a quality/cost trade-off scenario.