Offshoring – what it is, what to look for, how to manage it

By /

What is business process outsourcing (BPO)?

BPO is contracting out your customer calls/tasks/IT/HR/etc. to a 3rd party who then manages and administers it based on statement of work (SOW) with clearly defined KPIs.  In essence you are hiring another organization to do those tasks and processes on your behalf.  It can be front office (customer support, telehealth services, marketing and sales) or back-office support (IT services, HR, payroll processing, data mining/analytics, data processing, e-commerce engagement, SEO, QA, Accounting, Payment processing and other processes).  The BPO industry is continuing to expand to include more functions and services.

What is offshore outsourcing

Outsourcing can be divided based on the location of where the outsourced work is done.

Offshore outsourcing is when you transfer your services to be done in a foreign country.  This is different than onshore outsourcing where it is outsourced for the work to be done in your own country.  Nearshore also comes into play where work is done in a neighboring country.

Why outsource

Reason could be due to the time zone limitations especially if you must provide 24/7 support.  It could get awfully expensive locally.  For example, call center agents could be working the day shift in your home location and handling your overnight calls in a foreign country where there could be up to a 12-hour difference depending on offshore location.  This way you could handle daytime calls locally and shift the night calls to Asia-Pacific for example.

2nd reason to outsource is that your organization does not have the resources or volume to warrant creating an internal group to do those tasks since it is not part of your core business.

3rd reason is financial, as outsourcing is a lot cheaper and cost effective to have a specialized company do your non-core work better.

You must identify the functions that can be outsourced and then strategically decide if it makes sense for your organization to outsource that function.  Then you will have to decide on an outsource provider to move the work to.  It is important to be clear on the key objectives for outsourcing as it will usually be a minimum 3-year relationship.

Pros

  1. The primary reason for outsourcing offshore is usually for financial cost reduction reasons that increases cashflow.  It is usually cheaper to perform business processes in countries that offer highly skilled, lower wage workers which also reduces your local operational costs through decreased overhead.  These savings could account to up to 50% depending on the country.  Some ranges in different areas are: India – $6-$10/hour, The Philippines – $9 – $20/hour, Latin America – $10-$20/hour, Eastern Europe – $12-$16/hour, US and Canada – $30-$40/hour, Western Europe – $40-$45.
  2. Allows organizations to free up internal resources to focus on their core business to stay competitive instead of trying to manage non-core functions.  Now is even more important to focus on your core business because social media has allowed customers to amplify their voices if they are not happy with your product or service.
  3. BPO companies are designed to handle fluctuations in volumes therefore adding flexibility to your organization. This could also result in a con if you are not having dedicated agents and their attention is divided in handling calls for other clients.
  4. BPO’s are specialized in what they do therefore providing a better and more efficient service.  In addition, they will also keep up with innovation in their field allowing them to provide a better quality of work. BPOs are also able to spread spikes and capital investments over multiple clients.  Overall, this could help improve your customer focus.
  5. BPOs have expanded coverage allowing you to provide 24/7 service if necessary and therefore expanding service to your customers.  In addition, business continuity will be managed as they will be geographically dispersed.

Cons

  1. You must address security and regulatory concerns based on the data that is being channeled offshore by looking at the IT, legal and financial implications.
  2. Scope of work is critical to define exactly what must be done by the offshore team and what success looks like.  I have seen way too many scopes of work with objectives that only benefit the offshore team.   In addition, there could be unanticipated costs that creep for work that is not clearly defined on the SOW document.  The offshore company will need guidance and direction to ensure targets are achieved in terms of SLAs and KPIs.
  3. Security breaches are a possibility if connections are not secured properly.  Especially if you are sharing sensitive information.  Through audits will be critical to ensure control of your data.
  4. You must have strong communication with the BPO and be culturally aware so that it builds into a strong partnership.  There will be differences and a strong vendor manager will help make this seamless and ensure they get the proper support since at times your internal staff may see the offshore group as rivals and be less willing to share information.  You also must make the offshore team has all the material to make them feel as if they were part of your company.
  5. Levels of communication could decrease if you are not hiring accent neutral or training these offshore agents on language and cultural affinity of the country they are representing.  This is the number #1 reason customers do not like dealing with offshore agents.  You must train the offshore agents to the ways and nuances of the country they are representing.  Language barriers could also cause your AHT to increase and cause agents to sound scripted.
  6. Yu will lose control by transferring your customer touching frontline to a 3rd party that might not have the same commitment as internal staff that share the same values. If the outsourcing relationship does not work out, it will be expensive to bring the work back inhouse.  Therefore, it is important to do the due diligence to choose the right BPO vendor and  focus on your key objectives to make sure they are always met. 
  7. There could be political pressure and implications from sending work overseas due to its perceived economic impact.  In addition, you must consider severance packages that you will have to pay for local redundant employees since layoffs will cause morale problems with the remaining employees.

How to manage outsourced work

If executed effectively with strong vendor manager leadership to manage the entire operation, outsourcing can improve efficiency and be cost effective that will free up resources to focus on strategic and critical core tasks.  Building a strong partnership will ensure that the BPO vendor will work with you to go above and beyond to provide recommendations on improving and transforming your business and  instead of just focusing on the contractual agreement.

You must set clear expectations and deliverables with your vendor to ensure that your end-user is not suffering because of this 3rd party relationship.  Usually the issue is that the vendor manager does not know all the moving parts to be able to control performance and data.  You must stay on top of managing your offshore team and monitoring the quality of their work. This includes making sure that they are hiring high quality agents that you approve of.  Yes , every single one of them should go through an internal interview process.  Takes more time, but it will be worth it.

There will be dynamics in managing offshore groups, but experience will come handy in getting through the bumps when the vendor manager(VM) helps to properly align the BPO to your business strategy.  It will depend on the close relationship that your VM builds with the BPO through a strong line of communication to ensure they meet your needs with tailored and flexible solutions.  Integration with your core business strategy will help you achieve your business potential.

The vendor manager must be savvy enough to understand and respect cultural differences and not try to manage and motivate by universally applying western standards.  A local approach will be necessary and that is where a strong local management team will make the difference.  An effectively managed offshore team can achieve better results than your local internal teams. If left to its own, you will find that the BPO will do only what they are paid to do and be reactive in nature.

Finally, in managing a BPO, the VM must ensure efficiencies are realized, infrastructure is maintained to properly support the work, a positive work culture is built to keep attrition under control and a strong management team is in place to drive the results.

In the future, AI will handle some of the repetitive business processes that currently have to be outsourced.  In the meantime, outsourcing will provide economies of scale, specialized skills, flexibility, cost effectiveness, and value add if done correctly.

Customer experience is becoming a brand differentiator.  Do not leave it to chance.  Have a solid strategy whether this is handled inhouse or outsourced.

671 thoughts on “Offshoring – what it is, what to look for, how to manage it”

  610. jl33

    Smart bankroll management is key, especially with so many options now! Seeing platforms like JL33 prioritize easy deposits (GCash & PayMaya!) is great. Check out jl33 slot download for a streamlined experience – quick KYC is a plus too! ?

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top