Why it’s time to try Business Process Outsourcing (BPO)
What is BPO?
It’s when you subcontract some of your business-related operations to a third-party vendor, it’s an innovative new way of gaining leverage over competitors in today’s competitive market.
Why do companies use a BPO model?
If you’re in North American, you may be interested to know how other entrepreneurs are able to maintain a successful, highly profitable business model by running some of their operations offshore. First off, and likely the most obvious reason, instead of spending local prices, offshore resources generally charge less – unless you are seeking expertise not readily available locally. In terms of more economical pricing, it is usually a win/win in which the resources offshore are making a solid salary that is below the local minimum wage
Some of the benefits that BPO brings to the table are: –
- (Operational) cost savings
- Flexibility
- Better performance/ expertise
- Cultural diversity
BPO in IT
IT nowadays is possibly the biggest contributing element within any business operation, if not the core. So, carefully deciding how one should allocate IT resources could really turn things around!
Examples of IT operations that could be outsourced:
Software/Application Development
Application Support/Management
Web Development and Hosting
Disaster Recovery and network management
There are many highly successful companies successfully outsourcing. Some include:
- Slack
- GitHub
- Skype
- Alibaba
- Basecamp
Different BPO models
Before outsourcing any of business operations, you should consider which model you’re going to stick to. When organizations start trying different models in the spirit of trial and error, the savings they were potentially going to experience decreases dramatically. Ensuring you make the right choice given your needs is key in reaping all the benefits you can from a BPO model. These models include:
Global Sourcing
The best option for large firms with a wide range of services, where some of the tasks are outsourced to specialized organizations in various countries.
Joint Venture Contract
With this model, the 2 businesses involved agree to enter a joint agreement, sharing all of their assets, profits, and even losses!
Both companies share workforce, capital, and all of their other resources until the project is completed.
Project-Based Outsourcing
Best model to adopt when it comes to projects of low/medium complexity, the reason behind adopting this model is that regular operations may be at risk if their focus is shifted towards the project.
Staff Leasing
Under this model, firms outsource a few employees to work as a part of their team or more of an extension to their operations.
Offshoring
This model is all about branching off in many different countries, with the mother company monitoring all of their activities. This model could come in quite handy as it gives the parent company the flexibility to outsource lots of their operations while keeping everything under their radar!
Risks of BPO
When considering BPO models it is crucial to do as much research as possible to ensure that the model you pursue is best suited for your industry needs. Below is a list of potential risks:
Choosing the wrong vendor/ supplier – Do your research! Ensure the organization you choose has an established practice and that your payment plan protects you and your deliverables! Ask what guarantees on the work are offered – especially when it comes to development!
Inaccuracy assigning tasks and responsibilities – Does your local manager have experience working with offshore outsourced resources/organizations? If not, think about hiring a consultant who does for the first time around!
Inexperienced outsourced teams – Ask for references! Don’t be the guinea pig for an organization unless you are willing to risk savings.
Hidden costs – Ensure you have a solid understanding of all potential contingent expenses.
Different time zones could delay project delivery – Be aware and agree on working hours and availability of offshore or outsourced resources.
Wondering how much you can save by outsourcing some of your operations and/or development? Reach out to further discuss how your company can benefit from BPO models with one of our specialists at info@hrbrain.com
