July 26, 2018
Ultimate Guide to Outsourcing
It takes courage and conviction to take your business down the outsourcing road. Outsourcing may include risks; which is why this guide was written to teach you on how to do it as safe as possible and also to maximize returns sooner.
These days could be some of the most exciting times in your life. Why? Because having a business and thinking about outsourcing are not that simple! Indeed, deciding on whether you ought to outsource your business or not should not be taken lightly.
You may be eager to learn about the secrets on how to become a successful outsourcer or perhaps, you are someone who have already tried it, but have failed the first time. Whatever the case may be, this guide will be one of your most important references moving forward.
This guide will explain the basics of outsourcing, its benefits, as well as the steps and proper timing of how and when to begin. Also discussed here are the common myths and misconceptions about outsourcing.
Some real-life success stories are featured. You will find out how some of the most popular entrepreneurs like Jack Ma, Noah Kagan, and Vivek Wadhwa developed their businesses to the success they are today through of outsourcing.
Companies such as Procter and Gamble, Unilever, and Skype have successfully leveraged outsourcing to continue to innovate, save money, and maximize the knowledge of the experts in their industries. Their decision proved to be right in the long run as they have continued to be relevant in today’s modern times.
A couple of outsourcing employees are also featured, showing how working in the BPO industry changed their lives and their families’ lives.
Lastly, this guide will also discuss how the Philippines has emerged as the top outsourcing destination in the world. Some of the top and most well-known Philippine BPO companies are also recommended in the final section of this guide.
Truly, this guide lives up to its title as the ultimate guide to outsourcing!
Business Process Outsourcing: knowing the basics and its benefits
No one could become successful in business process outsourcing unless they learn about its basics first. In this section, you will know the definition of outsourcing, the reason why you may have to get into it, and the benefits inherent to the practice.
There are different advantages of outsourcing, depending on the size of your business. Thus, the benefits are differentiated according to sole proprietors, small-to-medium size companies, and large corporations.
Ten reasons why you need to outsource your business are also elaborated, as well as the business areas that are commonly outsourced today. Various types and models of outsourcing are also further examined as a primer to the more meaty insights of the succeeding sections.
Prepare yourself to absorb loads of information as we walk you through the basics of outsourcing. Without further ado, let us begin.
Outsourcing: what is it?
When it comes to businesses these days, one has to be efficient to be successful, and that is often where outsourcing comes in. One of the deciding factors that responsible in making a business grow to “great” from “merely good” is how one utilizes modern process management techniques. Business Process Outsourcing (BPO) is the modern way of running a successful business where you utilize all factors and ideas to benefit your business the most.
This article will tell you all about outsourcing: what it means, how it works to help your business, business areas you can outsource, types of outsourcing, and a few more tips before you take a plunge into the industry.
What is outsourcing and how does it help your business?
You might ask, “What do you mean by outsourcing?”
BPO has been making its way in the business industry, changing how processes work. We can describe outsourcing as a modern practice of contracting a particular business process or work processes to a service provider outside the company. It can include various services depending on what your business needs.
However, outsource services are more about filling supplementary business processes such as accounting, payroll, data recording, telemarketing, customer support, and other tasks that are not considered as part of the core business functions.
From small start-up companies to massive corporations, outsourcing’s explanation is that it can provide plenty of benefits and advantages, especially when it comes to getting ahead of the competitions in the industry.
We can also define job outsourcing as a business strategy to help cut process costs and spending while simultaneously growing the business and increasing its profits. Because of that, there is a rapid growth in the BPO industry.
But, how does it really help businesses not just to strive but also gain success in their respective fields and niche?
To explain outsourcing, you need to understand the two basic types of outsourced services – the front office and back office works.
The business’ front office services are all about contracting customers and services that involves it such as tech support and marketing. Back office services, on the other hand, pertains to the internal processes such as billing and purchasing. While these services work differently, outsourcing functions as a process that can combine unlike services, making them work together instead of working independently.
Each of these services, when not kept in tight reins, can cause a huge drain in both the company’s resources and budget. Any cost-cutting method or strategy is always helpful, and outsourcing is well on its way in that case. BPO allows businesses to fulfil their processes and obligations to both their employees and customers while keeping a tight control of their overhead costs at the same time.
BPO also has a significant potential of freeing up employees’ valuable time within the company from doing time-consuming everyday tasks, giving more of that time to creating better strategies for business growth.
The basic point of outsourcing is to bring in external specialists and knowledge to take over the business functions that would otherwise crowd the employees’ task lists or those that are not performed well because of the lack of employee expertise.
With this understanding on how outsourcing can be integrated in a business structure, there are a number of significant advantages of using this approach on various kinds of businesses.
Planning up ahead: why do you need to outsource?
One of the most obvious benefits of an outsourcing process is to reduce business costs and expenditures. It gives a company the means to keep their overheads on a tight rein while also growing the business at the same time.
BPO doesn’t only provide advantages in terms of core products and services either. It also helps optimize the business’ complimentary areas, as well as the knowledge of the new and emerging markets and trends to get ahead of industry competitors.
Business Process Outsourcing and its advantages
From small start-up businesses to much larger corporations, outsourcing work can provide countless benefits. Companies of various sizes can outsource their processes as the business demands continue to grow. BPO serves as an innovative service that helps businesses get ahead of their respective industries.
1. For solopreneur
In truth, outsourcing works not only for those multinational companies as what most people believe. Even solopreneurs can take advantage of what is outsource and how it works.
Running your own company or brand can be taxing at the best of times. Whether you like what you do or you are passionate about it, there will be times that daily tasks add up, making you think that there’s no enough time every day to do everything. Making a business successful is not an easy feat even with a lot of employees to do specific works, even much more when you only have yourself to run the whole process.
The main benefit of offshore sourcing for solopreneurs is increasing the efficiency and speed of business processes. You can’t handle all specific business operations by yourself all the time and still expect that your company will be efficient and successful. With reliable external service provider handling the menial tasks within your company, you will be able to significantly free up your time to focus more on core business functions and duties. You will be able to maximize your time, as well as your resources, to produce high-quality services or products.
2. For SME companies
There is a growing trend of small and medium business enterprises which significantly boost the economic growth. They also carry a potential to grow even more with the advantages of offshoring activities.
While most people believe that outsourcing can be expensive for small scale businesses, which is not true at all. BPO is considered as a cost-efficient business solution that can work not only for large companies, but also for SMEs. Even a small business can cut its overhead cost and payroll costs by outsourcing certain business functions.
For small businesses, there are certain problems and issue regarding the expertise of employees toward specific business tasks. It can often hinder the company’s growth. Through BPO, SMEs won’t have to worry about acquiring specialized tasks for their employees, such as accounting and IT services. Outsourcing guarantees that your company would have a high-quality output from professionals.
Also, when asking what an outsourcing advantage for SMEs is, it will include gaining high flexibility as well as financial freedom. Aside from being cost-effective, it also makes business processes efficient, saving time and resources significantly. Furthermore, it gives freedom to choose what business tasks you want to retain within the company and what to outsource from service providers. You won’t have to worry about the burn of having too much to work on a daily basis anymore.
3. For large corporations
What is an outsourcing company, especially a big one, benefit from this business strategy?
Large corporations are often hard to work around as there is always an influx of business tasks to accomplish. There are far more deciding factors to consider to achieve the company’s success. As such, it is mostly hard and taxing to have a seamless business operation.
“What is an outsourcing advantage for large corporations?” The main reason why they should consider choosing to outsource some of their business processes is to lower their costs. It significantly reduces expenses for certain functions such as manpower costs and equipment costs.
Large companies tend to have a big number of employees and with that, there is also a huge amount allocated for traditional manpower costs including work and compensation benefits. However, with outsourcing, fixed costs like this can be reduced. Financial resources can be directed to revenue-producing processes to achieve business growth.
Work efficiency is also a touch and go when it comes to large corporations as it is hard to have a tight rein on all employees and business functions. With outsourcing, you get advantage in terms of time-driven operations. It also eliminates the need for in-house employees to multitask, now giving more time to focus on developing strategies and competencies to achieve operational demands.
No matter how large a business is, there is still no guarantee that all business expertise is covered by in-house employees. BPO provides this access to industry experts and trained personnel specializing in a particular niche to improve the business’ performance.
10 reasons why you need to outsource your business
Outsourcing has served small to large companies the greater good for their businesses. It has become a common strategy for the 21st century companies, giving them countless benefits.
a. It reduces and controls the operating costs but increases revenues
As mentioned, the most common advantage of outsourcing is reducing the business’ operating costs while simultaneously increasing sales and revenues. It is possible because outsourcing offshore eliminates the need to hire permanent or full-time employees for business operations who are all listed on the payroll even during times when their services are not required within the company.
Outsourcing provides businesses a flexible workforce who will only work and will only be paid when needed, thus reducing operating costs significantly.
b. It helps You maximize the use of external resources
Aside from reducing labor costs, BPO also gives businesses means to maximize the use of their external resources, cutting other expenses, such as shipping and materials costs. By moving certain business processes elsewhere wherein such materials are easily obtained, costs can be a lot cheaper. It also reduces or eliminates infrastructure costs as it will become the responsibility of your outsourcing firm.
c. It enables the company to gain access to world-class capabilities
Outsourcing a part of your business elsewhere or overseas can give you access to put your business within the increasing global market. International sales can improve your company’s total revenue. Depending on where you send a part of your business functions, you can also take advantage of the time zone differences, building offices that would be operating in other world business schedules. It can make your company almost 24 hours per day open.
d. It can free up internal resources for other purposes
Outsourcing your business to external service providers can give your company resources that otherwise aren’t available in-house. It can also free up your business resources that would otherwise be used in fulfilling back-end functions. With having experts in their particular niche working on certain parts of your business, those functions can be well taken care of, leaving you with no worries on using your resources for salaries, recruitment, and training of employees in those areas.
e. It Requires Little to No Initial Capital Investment
When outsourcing a part of your business, you wouldn’t have to drain a lot of cash to start that particular business function you wish to contract from external service providers. It eliminates the need to put in a huge capital investment for things like infrastructure, employee recruitment, and training, as well as the daily production expenses.
f. It Provides You Access to Trained or Expert Specialists
With outsourcing, you will have access to experts and professionals in their respective fields. It can be beneficial in a lot of ways. These expert specialists are the best in the industry, giving you a guarantee that you get a high-quality output that would otherwise be sub-par when produced in-house due to lack of training and expertise by employees.
g. It Allows You to Focus on the Core Competencies of Your Business
Keeping all your company’s business processes in-house can often be complicated and make things busy. These back-end operations can also get overwhelmed by external issues and would often require significant attention and funds to be able to run seamlessly. Contracting parts of your business functions to external service providers doesn’t only cut your business’ overhead costs. It also gives you extra time, something you can use to focus on the core competencies of the company.
This way, you will have the means to give emphasis on business processes that is otherwise crucial in terms of sales and revenue. Outsourcing also makes the entire business process more efficient. There is no scrambling to finish all the tasks at a short period, making you focus on creating high-quality business products and services.
h. It Reduces the Training and Labor Costs of the Employees
There are certain competencies that are crucial to business success and efficiency, but aren’t always covered in-house. It would often require hiring more employees that would cover such business processes or would provide competency training to existing employees.