The Comprehensive Guide To Outsourcing — What You Need To Know

Published by Magellan Solutions at May 29, 2019

What is Outsourcing?

Outsourcing is the practice of tapping outside firms to handle work usually done within a company. It is a familiar concept to many entrepreneurs, industrialists, and financiers. Small companies routinely outsource their processes such as payroll, accounting, distribution, and many others. They often do this because they don’t have a choice.

Many large companies turn to outsourcing firms for operational savings. In response, plenty of businesses have evolved to support other companies by catering to their outsourcing needs.

But not many of us have fully understood the benefits of outsourcing. It’s true that outsourcing can save money, but that’s not the only reason to do it. As several firms learned during the outsourcing “hype” of the early 1990s, subcontracting the tasks excessively can be an even bigger mistake than not outsourcing any work at all.

Benefits of Outsourcing

The flat world economy we’re in now has caused many companies into huge layoffs and subsequently outsourced their functions. However, if business owners and entrepreneurs are as wise as you, you know that outsourcing smartly can provide a lot of long-term benefits:

Control capital costs

Subcontracting work can convert fixed costs into variable costs, releases capital for investment elsewhere in your business, and allows you to circumvent costly expenses in the early stages of your business. Also, outsourcing may make your firm look more attractive to investors since you’re able to pump more capital directly into revenue-producing activities.
Increased efficiency

Companies that do everything themselves have much higher research & development, marketing, and distribution expenses — all of which is shouldered by the customers. A third-party provider’s cost structure and economy of scale can provide leverage to drive more success for your company.
Reduce labor costs

Hiring and training employees for short-term or peripheral projects can be really costly. And sometimes, temporary employees don’t always live up to your company’s expectations. So by partnering with an outsourcing company, it lets your company focus human resources on where it needs the most.
Start a new project quickly

Handling a new project in-house might involve taking weeks or months of hiring the right people, training them, and providing the support they need. And if a project demands major capital investments, such as building a series of distribution centers, the startup process can be even more difficult. The solution: outsource it. You see, a good outsourcing firm has the resources ready to implement a project. By partnering with the right firm, the rate of success in completing the project will be higher than doing it in-house.
Focus on your core business

Every business has limited resources. Likewise, every manager has limited time and attention. Outsourcing can help your business shift its focus from peripheral activities to work that serves the customer. This can help managers set their priorities more clearly.
Level the playing field

Most small firms simply can’t afford to match the in-house support services that larger companies have. An outsourcing company can help them act “big” by gaining access to the same economies of scale, efficiency, and expertise that large companies enjoy.
Reduce risk

Every business investment carries certain risks. Volatile markets, fierce competition, changing government regulations, erratic financial conditions, and advancement of technologies at break-neck speeds contribute to the success (or failure) of the company. And that’s where outsourcing providers come in. They assume and manage the risks for you, and they generally are much better at deciding how to avoid them in their areas of expertise.

Does outsourcing jobs solve problems?

Yes and no.

While outsourcing firms can help, they are not the all-in solution for all the problems your company is or might be facing. Let’s elaborate on this. Before engaging a partnership with a BPO provider, give a moment to answer the following questions, as discussed in this article from Entrepreneur.

Let’s touch on some of them.

What is the problem?

Clearly define the problem first. Sit down with your small council and “critically analyze what you need to achieve and the most important facet of your problem”. Questions will arise and these should be discussed extensively in order to have a clear picture of the problem.
Who do I know has the expertise in this problem?

Should we do it ourselves? Can we really do it? Or should we tap in third-party experts to help us? Identifying experts will help you determine whether your company needs a BPO partner or not.
When can I see results?

This should be the deal-maker (or deal-breaker). If partnering with a BPO company can help you reach your goals faster, then go! If not, then why bother?

How to choose the right BPO company?

Here’s our shopping list in choosing the right business partner for your company.

Don’t Sell Yourself (or Your Company) Short.

Before we begin shopping for partners, build your pilot project to deliver proof-of-concept first. Identify your benchmarks for success. Smart providers will compare their performance on metrics for common processes against your benchmarks for those same processes. Important issues will be raised at this point such as reporting, performance, and scalability. All of which are equally important in choosing the right BPO. In order for you to measure whether a BPO partner is a cost-effective investment, you should really consider all of these factors before moving forward. The best way to do that is by putting your company’s needs first (remember: “What is the problem?”)
Reporting is Key — Visibility and Constant Communication between Parties.

Visibility and reporting is an important process to set up. A clear reporting and management tool must be established between you and your outsourced team. Even though you won’t be there physically, you still want to be on top of things. It is still your business after all, not theirs. By having easy access to reports submitted to you religiously, it will provide you insights into how your BPO is performing as far as achieving your targets go. As a result, you will have the ability to set goals and metrics for your outsourced team, as well as change them as needed. The recommended reports include weekly internal status reports, monthly management reports, and customer satisfaction reports.

In addition, to ensure that the BPO provider meets and maintains standards on all deliverables, a designated point of contact must be identified and should be easy to get a hold of. By having a point person, you can have a solid touch-base you can reach out to at any time for the duration of a project. Long story short, communication is the driving source to success.
Ensure that the BPO Partner is Financially Stable.

In other words, the sustainability of a BPO partner will give you peaceful nights for the duration of the project. This is a particularly turbulent time for BPOs and sometimes overlooked by some. You see, politics and AI can pose a threat, which makes deciding even more difficult. As a decision-maker, do your due diligence. Take time to look into the financial health on your list of prospective BPO partners. You can even dive into the economic outlook of the country of origin. If the industry is predicted to fail in a certain location, it would probably be wise to look elsewhere. If everything looks good from a geo-industry perspective, then take a look at their financial history, their current holdings, and their growth potential. And if a BPO has a history of bankruptcy under the same management, you might want to think twice before signing the dotted line. Remember, you want success, so don’t partner with a company that will only drag your firm down. Study every portfolio and choose a BPO provider that — without a shadow of a doubt — can really take your company there.
Quality Assurance is Fundamental.

After you looked into the financial profile of a BPO firm which you think can drive more success for your company, and you feel that they won’t leave you hanging until the job’s done, what’s the next step? You cut the list down. At this time, you might have expectations in place for your dream customer service team, so it’s worth looking into the vendor’s track record and performance. Quality is important. This will determine whether the BPO firm can really deliver service based on the needs of your business. To qualify your possible BPO partner, you can verify if it is nationally certified or not. Another is to ask (or look) for client testimonials and reviews to know their field of expertise and the type of industries they serve. Feedback will play a key role in choosing your BPO partner. It is also wise to interact with managers and possibly other team members of the BPO firm before signing a long-term contract. By seeing and talking to the very people who will help your company succeed can gauge whether they are the right fit for your company’s needs.
Keep IT Capabilities Top of Mind This should be the last on your list.

A high tech company does not equate higher success rates. The questions “Who should I tap?” and “How soon can we reach success?” will come into play at this juncture.

In a Forbes article entitled “The Machine Learning Revolution: How Artificial Intelligence Could Transform Your Business”, it discussed how AI will impact several industries like health care, information technology, etc. And then, back in 2017, McKinsey Global Institute released a discussion paper entitled “Artificial Intelligence: The Next Digital Frontier” which raised the question: “Artificial Intelligence is getting ready for business, but are businesses ready for AI?”

Let us look at the numbers real quick:

Image source: McKinsey & Global Institute

In 2016 alone, 26 to 39 billion dollars were invested in artificial intelligence; however, only 20% of these AI-aware firms say they will adopt this technology. Meanwhile, 41 percent of the total respondents say they do not know how AI can help them succeed.

If BPOs will claim that they are embracing new technologies, it does not necessarily mean that they can help you succeed.

Again, do due diligence.

Assign a senior engineer (or somebody you can trust as far as existing technologies go) to do frequent visits from the offshore vendor to the client site during the design phase. The reports from these visits can help see a better picture of the project you will be undertaking.

On the flip side, the BPO partner can showcase their capabilities. Visiting your possible outsourcing service provider can give additional insights you might miss from afar.

Finally, how can we confirm if a BPO will be able to stick to technical timelines on deliverables? The answer is to have them sign a Staff Augmentation contract. This contract will provide both you and your would-be BPO partner the flexibility to act on meeting the changing demand without shouldering the cost and liabilities of adding full-time employees.

Where to outsource?

At this juncture, we’ll be talking about location – not ethnicity.

In the 2017 A.T. Kearney Global Services Location index study, 55 countries were ranked according to three criteria: financial attractiveness, people skills and availability, and business environment. Of the countries included in the study, the Philippines ranked number 7 at an index score of 5.87 points, just 0.5 points behind Vietnam.

Here’s what the report says about the health index of the BPO industry in the Philippines:

“The Philippines focuses far more heavily on customer service, especially voice services, as a result of its workers’ English language skills and neutral accents that more closely align to American customers.”

Here is the full list pulled from the Kearney report:

Source: A.T. Kearney

List of Call Center Services

There are several BPO call center services that you can choose from when you are planning to outsource. In general, it can be classified into two categories: the inbound call center services and the outbound call center services.

Inbound call center services

The services that fall under this category are concerned with the calls coming from consumers. It can be about an inquiry, a product issue, a refund, a need for support or assistance, and more.

List of inbound call center services:

App mobile customer support
Appointment and schedules management
Billing inquiry
Claims processing
Customer service
Direct response marketing
Dispatch services
E-commerce customer care
Email support
Inbound sales
Inquiry handling
Interactive voice response support
Live answering services
Live chat support
Order taking
Overflow after-hours support
Reservation
Technical support

Outbound call center services

Outbound call center services, on the other hand, refer to calls made by agents who work for you to offer a product or service, solicit opinions, or set appointments.

List of outbound call center services:

Appointment setting
B2B and B2C lead generation
Collection reminders
Data verification
Market research and survey
Medical reminders
Telemarketing and telesales

Multilingual call center services

Not all people speak the English language. In the United States alone, the population of non-native English speakers is already huge. If you operate in this area, chances are high that you haven’t tapped many customers yet because they speak a different language.

Also, multilingual call center services are also helpful if you are planning to expand your market in different countries. Multilingual call center service can be inbound, outbound, or both.

The Bottom Line

One cannot be successful in life without doing due diligence. With numerous BPO companies around the world (especially the Philippines, look it up), your company has a plethora of options.

In need of call center or BPO services? Contact us now!