As your business grows, the capacity of your in-house teams can be overstretched, and nurturing your existing customers or accepting new opportunities might be your last call. Your products and services may be in high demand, yet if customer experience levels cannot meet rising expectations, you may find customers hard to onboard, and hard to keep.
Understanding customer demand is crucial to optimising capacity and predicting change in the short term and long term. The expertise and support of an outsourcing provider can be invaluable when there’s a need to scale up quickly. Agile outsourcing helps businesses respond fast to market changes, reduce lead times, fulfil larger orders, and scale sustainably.
Likewise, your entire organisation can benefit from leveraging the capabilities of an outsourcing provider. People expertise is vital for meeting business goals, whether experts come from inside or outside your organisation. When you connect these two elements, you can identify people with domain expertise, and as a result, this can offer a deeper understanding of current responsibilities, risks, and opportunities.
What is outsourcing and what is BPO?
Outsourcing and BPO are related concepts, with both terms commonly used interchangeably to describe delegating business tasks to an external provider. Upon contracting out, the external provider then manages the requirement to meet the client’s Service Level Agreements (SLAs).
When we consider their specific definition, outsourcing refers to any type of external contracting, while BPO (Business Process Outsourcing) relates to contracting out specific tasks and processes.
Outsourcing is a broader term that describes the practice of hiring a contractor or third-party to perform tasks or services, for example, customer service, human resources, and manufacturing.
A subset of outsourcing, BPO specifies the type of outsourcing delegated to a third-party to manage an organisation’s business processes. BPO can involve one or several core or non-core business processes that were traditionally handled in-house, for example, cash administration, payments reconciliation, and document processing.
Fundamentally, BPO signifies contracting out specific business processes to achieve a defined business or strategic objective.
Outsourcing can be divided into front and back-office functions
Front office outsourcing services
Customer support, telesales, IT Helpdesk and any other client-facing function or service that requires direct contact with customers are included in the front office. They play a significant part in revenue generation and brand reputation.
Back-office outsourcing services
Finance, HR, compliance, and any other non-client facing business function is termed back-office outsourcing. A well-functioning back office is crucial for business efficiency.
How does outsourcing / BPO work?
Outsourcing / BPO works by extending a part of the business or organisation to a third-party supplier. An outsourcing solution offers access to skilled resources that the organisation may not have available in-house. When the outsourcing contract has been signed, under the outsourcing delivery model both parties are contractually bound by service level agreements (SLA's) and performance metrics which underpin the client partnership.
The contract and the outsourced delivery model define the level of control that the Outsourcing Provider and the Client have over the management of the function, service, or process. Depending on these specifications, the outsourcing provider potentially absorbs the entire risk associated with the business process, function, or service.
Why do companies outsource?
A company or organisation will often decide that outsourcing is the best solution to increase capability, expand capacity and scale. Business expansion can put a strain on company resources especially when there is a requirement to support growth quickly. Outsourcing can free up internal resources to focus on core business activities.
Companies may decide to outsource to improve a function or service and achieve higher levels of quality by leveraging the outsourcing provider's expertise. While evaluating outsourcing you can choose a company that will specialise in the exact service you need, and offer the flexibility to meet your seasonal demands by scaling headcount up or down. A proven and reliable outsourcing provider will aim to increase cost efficiencies and improve performance over the contract term.
Control costs: By outsourcing, companies can control costs associated with in-house resourcing, particularly recruitment, onboarding, training, and office space. An outsourcing company with delivery centres located in a country where the vendor doesn't have a base enables cost efficiency benefits in comparison to the cost of setting up operations. Furthermore, outsourcing provides flexibility and choice in terms of delivery models, SLAs, and location, including deploying the outsourcing service at the client's location.
Focus on core functions: Outsourcing allows organisations to focus on their core business functions while outsourcing providers handle other areas. For example, an organisation may direct more resources and activity to product development when outsourcing customer support, rather than managing a contact centre. It can instead focus on highlighting its business differentiators and market potential. Overall, this can enhance its value chain interactions and reinforce its competitive advantage.
Improve business outcomes: There are certain capabilities and skill sets that outsourcing companies can provide that may not be available in-house. An outsourcing company that invests in process optimisation and Customer Experience can deliver cutting-edge breakthroughs to its clients. As an example, an insurance company may want to improve both its back-office processes and its customer service, and an outsourcing company that provides these services can drive the desired results.
Expand global presence: When an outsourcing provider offers services in multiple languages 24/7/365, it can support a client’s business to grow more rapidly. The outsourcing company can leverage its presence in several countries and deliver standardised services as well as advice on local laws and regulations based on their knowledge and experience.
Accelerate performance: The outsourcing of functions and processes allows companies to save time, improve accuracy, and increase capacity by letting specialists handle those tasks. Contracting a BPO that specialises in document processing, for example, can improve performance, efficiency, and compliance within the function.
Examples of outsourcing
Outsourcing companies provide a wide range of services to cater to business needs. These services could range anywhere from IT outsourcing, if the company needed help to maintain its technological infrastructure, to CX outsourcing, if the company wanted to build a higher quality experience for their customers.
What is nearshore outsourcing?
Nearshore outsourcing is when a company hires a third party vendor outside their home country to provide them with one or more processes or services. In nearshore outsourcing, the countries are usually on the same continent and within a similar time zone to each other. A nearshore outsourcing provider offers benefits in terms of language, proximity, cultural similarity, and minimal time differences when outsourcing abroad.
Nearshore outsourcing options for Western Europe-based companies include Central and Eastern European (CEE) countries such as Hungary, Poland, and Bulgaria. Due to their EU membership, these countries offer not only the usual nearshoring benefits, but their contracts and payments are also protected by the same European legislation as those in the buyer countries. Leading companies are increasingly looking to the CEE as an important investment region, and it has become a favoured location for shared services centres (SSCs) and business process outsourcing (BPO).
What is offshore outsourcing?
Offshore outsourcing is similar to nearshore outsourcing, the difference being when outsourcing offshore you would hire a third party in a distant country, usually not in the same continent or time zone as the organisation’s home country. For example, a U.S. company outsourcing to China.
When it comes to BPO activities like contact centre services, having a time difference can be beneficial since it allows for 24/7 availability.
While offshore outsourcing differs from nearshore outsourcing, they both share similar benefits, such as costs, languages, specific skills etc., but while nearshore allows for similar working hours, offshore can provide a business with a 24/7 service due to a much broader time distance.
Contact Centre Outsourcing
Contact centre outsourcing is the practice of hiring a third party to complete various CX processes for your business, often utilising several different seamless communication methods (omnichannel) such as phone calls, SMS, website live chat or direct messaging through social media, to name just a few.
Outsourcing a contact centre provides companies with much-needed extra time to focus on improving and maintaining strategic focus and core business, along with efficiency gains and access to facilities otherwise not available to the business, such as 24/7 services.
Additionally, contact centre outsourcing can provide insight into the future trends of customer service for your company while implementing new communication channels to help adapt your business to the changing CX environment.
As contact centres offer direct communication between consumers and organisations they are beneficial for a variety of industries, for example, the vaccine rollouts during the Covid-19 pandemic. Healthcare organisations with collaboration from governments used contact centres to efficiently organise and manage the population's vaccine administration and enquiries.
Likewise, contact centre outsourcing can help financial companies adapt to rising customer expectations and drive seamless omnichannel customer experiences. Furthermore, financial services companies can leverage the expertise of the BPO provider to effectively navigate changing regulatory and market conditions.
Leveraging Capability, Capacity and Scale
Scalability issues arise when market demand fluctuates faster than the business can respond, and of course, this poses risk to an organisation. Outsourcing parts of a company's activities can help to overcome supply risk and ensure products or services are delivered to the market on time.
As well as the expertise and support to handle peaks and troughs in demand, working with an outsourcing vendor can help deliver and sustain value in the long run. Outsourcing allows a company to take advantage of expertise it lacks in-house by leveraging the skills of a professional vendor.
Regardless of business size and scope of services, understanding limitations is crucial to remaining competitive. The emphasis is on increasing both the capability and capacity of your organisation, with a flexible approach to changing business needs.
Increasingly, organisations worldwide realise the benefits of outsourcing, together with how it supports business and strategic objectives like scaling faster, gaining access to local market opportunities, and international expansion.
