Popular Offshore Outsourcing Models

The term “offshore outsourcing” refers to the processing of work flow from large organizations by outsourcing companies halfway across the globe. In past decade rapid growth in the BPO trend is evidenced by more and more companies offshoring to destinations like China, the Philippines and India. Cost reductions, improved quality standards and greater productivity are the key factors empowering offshore outsourcing strategies.

However, the facts of business process outsourcing reveal a somewhat different reality. Before finalizing any BPO contract, management must make complex decisions when selecting the right offshore models that fulfil their business requirements. The selection process involves considering several factors such as:

·     International business strategy.

·     Selecting the best outsourcing location.

·     Scanning the landscape

·     Deciding upon a BPO strategy.

The three popular and successful models currently in use among large business enterprises are joint ventures, subsidiaries and outsourcing to service providers. Given below are details on how these models work and what their benefits are.

·                     Joint Venture Offshoring

In a joint venture (JV), one company ties itself with another organization or local firm by either forming an independent company or taking an equity stake. The aims of a joint venture are to  benefit from the individual strengths of each party involved, scale up value chains and overcome market risks. Joint venture contracts mostly include build-operate-transfer (BOT) clauses to encourage both parties to work together on defined strategies to achieve business milestones. The JV model offers several benefits, especially if the company wants to learn intricacies of managing business customs directly from the domestic partner.

·                     Subsidiary/Captive Development Center Offshoring

Common terms used to describe the subsidiary model are offshore development center (ODC), captive development center or local office. Subsidiaries are independent business units or branch executing projects and programs for onsite teams. The main challenge faced by subsidiaries is managing expert staff, technical experts, line workers and line supervisors from multicultural backgrounds. This model is quite popular among high tech companies that have adapted to new technological developments and consider offshoring as an innovative way to achieve increased diversification of their strategies.

Large software companies such as Microsoft, Oracle and IBM have already developed a reputable position in the global marketplace. Outsourcing some of their projects to other destinations is an effective way to extend their geographic foot print.

·                     Service Provider Offshoring

Joint ventures and subsidiary models require strong commitment on the part of the client organization. To remove risks tied with these models and to maximize benefits of offshore outsourcing companies tend to outsource their projects to offshore service providers. Interestingly enough, service provider offshoring is the most commonly used model as it encompasses a wide range of jobs from small projects to multi-year contracts.

In summary, offshoring can be a complex decision which directly impacts a company’s market reputation. Business leaders need to consider both the pros and cons of each of these models before implementing a specific course of action within their organization. These days many companies are using customized hybrids which incorporate various principles from all of these models in order to stand out in a competitive market.

How offshore Outsourcing Contribute towards Growth of Companies

Today’s competitive market allows only those businesses to survive which can cope with customers needs and satisfaction level. In this regard offshore outsourcing has emerged as a growing concept which has led many companies to a strong and successful business future. Let’s check out some benefits of offshore outsourcing:

Reduce Operating Cost

Offshore outsourcing results reduce operational and administrative cost by delivering skilled labor at lower wage rates. Outsourcing non core activities at reduced rates can minimize over all expenses of business.

Get Access to Experts Globally

Generally people in countries like Philippines, India and China accept latest technologies more readily as compared to other countries. So if any specific expertise or skill is not available locally then you can find skilled people globally.  These days companies are remotely hiring experts in areas like human resource, help desk, telemarketing, IT support, telemarketing etc. This not only reduces cost of operational setup but also adds value to your service standards.

Improved Customer Care

Outsourcing customer care to specialized agents can ensure quality support services for your customers. Offshore outsourcing allows business to cater multilingual support services by hiring agents around the globe. Moreover help desk services can be provided to customers anywhere in the world and at anytime.

In addition to above given advantages there are many other factors which have added to the popularity of offshore outsourcing in past few years. As per new forecasts 2015 is considered the year of success for BPO industry.

Deciding Factors to Join BPO

Outsourcing your business to third party brings huge risks with it. On one hand business process outsourcing brings tremendous growth to your business in terms of increased productivity and reduces cost. While on the other hand you face sever risks in terms of reliability and promised target fulfillment by BPO Company. So before handing over your business activities to a third party you need to take some precautionary measures in order to avoid any problem afterwards.

Here are some times which help you to decide what, when and how you have to outsource your business processes.

•   Selection of Right Business Activities for Outsourcing

Selecting which activities need to be outsourced is one of the most important steps.  You must retain control over activities and aspects which make you unique or define your brand. Don’t outsource those activities which directly impact your customers directly. Mostly companies outsource their noncore activities so that they can actively focus on the major business operations.  As selection of business activities is the major step which is going to define future success of your business, therefore you need to be very careful.

• Finding the Right BPO Company

Once the selection of activities to be outsourced is done, the next important step is to select a reliable BPO Company. BPO firm unable to manage your business functions can ruin your whole business.  Take your time, compare and contrast offers from various companies. After a proper analysis of shortlisted BPO companies, go for the one which suits you best.

• Consider All Outsourcing Costs

Companies outsource to reduce their cost, however most of times projected cost does not match with actual cost. While choosing the BPO company fees charges from networking sites or any other legal charges while drawing up the contract may add up in your predefined cost plan. Therefore it is important to note down all extra charges that might occur, in order to avoid financial problems afterwards.

No doubt following above mentioned steps might help a lot to find ways to work more effectively and efficiently.   

Why Logistic Companies should outsource their Back office Functions

Business process outsourcing with its remarkable benefits in terms of increased productivity and reduced cost is now becoming an important part of almost every industry. Like others logistics industry is also embracing BPO concept in order to enhance and secure their business.  

The safety regulations in logistics market are making it difficult for companies to manage cost and maintain their market position.  According to latest research conducted by Avondale Partner analyst firm, in first quarter of 2014, 390 motor companies were bankrupts. The present stats depict that latest business ideas and technology should be utilized in order to stand in today’s challenging market.

Top trucking and transportation companies are now outsourcing  back office functions.  Back office outsourcing enables these companies meet their deadlines for delivering freight. Here are some main reasons which explain the importance of outsourcing in logistics industry:

•  Work force Cost Reduction

Trucking companies mostly have high demand for hiring workforce in order to make their process efficient. However despite of increasing the staff there is needs to think smart. Think of improved means of doing business which can reduce your workforce cost while increasing business productivity.  Back office outsourcing is one of the best ways to reduce workforce required to maintain back office data and documents processing. Moreover 24 hours services of a BPO company will help you in fast processing of payments, bills and salaries. In short you can manage variety of back office functions by hiring one BPO firm rather than inducing separate person for each function. No doubt back office processing is best way to reduce cost and increase production.

• Good Customer Service

Outsourcing customer support to a well experienced logistic document processing firm can make your business customer support efficient and effective.  Mostly BPO companies have trained error correction and quality assurance staff which ensures that every customer problem is solved quickly. Improved customer service naturally reduces pressure for the delivery team.

• Better Load Planning

Immediate processing of documents and critical information allows management to do better load planning. Outsourcing enables logistic companies to focus more on planning of their core activities.  A properly engineered plan reduces delays in shipments, allows proper utilization of trucks and decreases overall cost.

No doubt business process outsourcing is the major contributor in success graph of logistic companies.

Business Process Outsourcing Has Become a Core Enabler of Everyday Business

In past decade businessprocess outsourcing has become a norm for processing everyday business processes. The BPO concept has been adopted by numerous businesses owing to its operational benefits and profitability allure.  Outsourcing is all about hiring outside assistance to process your work.  Outsourcing non-core activities of your company or organization can help you focus on the profit generating aspects of your business. Moreover, improvements in outsourcing approach through technology, and highly qualified and experienced personnel have made business managers comfortable in outsourcing even their core business activities.  This shift in thinking has rendered BPO concept a backbone of successful business enterprises and is being practiced by some of the well-known names on Wall Street.

Benefits of Hiring services of Outsourcing Firm

Outsourcing is basically a strategic management tool which helps organizations work effectively and efficiently while reducing the cost. Some well-established benefits of outsourcing process include:

•     Companies utilizing BPO strategies have achieved great gains in cost savings and efficiency. Specially process like accounts receivable, accounts payable, payroll, collections and commission management are really good processes to be outsourced.
•        The cost effectiveness of business process outsourcing can estimated by considering that it not only reduces overheads like building rent, allowances, cash advances but also reduces high salary demands of trained staff.
•        Outsourcing also helps to reduce capital expenditures in non-core areas like the need for new systems or system’s upgrade.  This helps management to focus and spend money only on core areas of business.
•     Outsourcing firms are known to provide world class re-engineering skills, technology, innovation and success transfer thereby ensuring maximum productivity of your business.

Without any doubt, because of the benefits of derived from the BPO concept, it is being recognized in the business circles as tool for creating a competitive advantage and strong position and growth of their businesses.