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Outsourcing Pros and Cons: Reading between the lines

Posted by Shashvat

The rise and fall of a business depend on not one but many factors. It takes a collective effort of smart and bad decisions to make or break a company respectively. As a business owner, you need to vision a bigger picture, forecast the road ahead, and weigh your available options before you take any decision for your company.

Running a business is tiresome, risky, and sometimes quite an onerous task. However, there is no place for ambiguity in a business, unless external aspects that you don’t have control on hit your deck. So, as far as it is possible, you should ensure that you are well-versed with all the essential information and resources that are needed to streamline your business run and growth.

Outsourcing is one of the scorching topics that has been the center of debate for the business community around the world. Business owners love outsourcing because of the loaded benefits that come with it. On the other hand, there are allegations that outsourcing also has some demerits that not only can reduce business performance but also bring your company to its knees. Which one is true?

Through this blog, we are seeking the truth about outsourcing by assessing its advantages and disadvantages and by understanding what lies in it for the businesses. Let’s start:

What is Outsourcing?

Outsourcing is the term given to the delegation of a business function to a third-party service provider for the betterment of the company’s performance and profitability.

That’s the simplest way to put it up.

Outsourcing started in the later 1980s and early 1990s when major corporations in the United States started handing over their business tasks to external entities. Initially, the tasks that were outsourced most by the big corporations include manufacturing, accounting, back-office operations, etc. Out of this, manufacturing was the biggest outsourced business functions. Big automobile, technology, and manufacturing companies started to look out for nations where the cost to hire labors were low as compared to the countries like the USA, UK, Australia, etc.

The point was to trim the overhead expense, which directly impacts the increase of business profitability. Business experts at that time regarded outsourcing as the big players’ tool until the IT boom jolted the world. With the burst of information technology, the internet became popular. With computers and mobile phones eventually becoming accessible to more and more people, the entire world started to shrink (virtually).

Companies dealing in technology-related products had the buyers but that wasn’t enough. The people they were selling products to were smart enough only to use the products but not to comprehend the technicality of those offerings. So, these organizations had to seek a support division that would provide consistent and smooth assistance to their customers. Hence, the burst of the customer support department happened.

Now, technical experts’ profile was quite high in demand and business owners were looking to hire the most competent customer service agents at the lowest price.

In the meantime, a burst of the internet also paved the way for e-commerce companies to blossom. Businesses started hurling the web and soon enough, thousands of companies started to cater to the colossal audience that was present on the internet. Result? The requirement of customer assistance increased even more.

All these aspects lead the business owners to the nation like India where technically sound experts are available at affordable cost and the era of call centers begun. Slowly and steadily, call centers of big American and European organizations started to emerge in India and soon enough the outsourcing sector become big enough to employ millions of people.

Today, the business functions that are outsourced are:

  • Technical support
  • Customer service
  • Human Resource
  • Telemarketing
  • Lead Generation
  • Digital Marketing
  • Content Writing
  • R&D
  • Market Research

These are only some of the tasks. Companies in present times are not even shying away to delegate their sophisticated business operations like web development, Blockchain solutions, business application management, etc.

Outsourcing has come out of the shadow of being a big organizations’ toy to a business strategy that is beneficial for enterprises of every size.

What is BPO?

Business process outsourcing or BPO is the subset of outsourcing itself. You can say, outsourcing is quite generic whereas BPO is specifically meant to contract out particular business tasks to a specialized service provider.

Typically, BPO is segmented in two parts; back office outsourcing, which includes tasks like HR, accounting, bookkeeping, etc. The other is front office outsourcing that consists of operations like technical support, customer service, telemarketing, etc.

Since companies today are not content with just the call assistance, there are multiple functions they look out to delegate on the contract basis. The vendors providing these services are termed as contact centers or BPO companies. These service providers serve multiple businesses at a time by hiring a large workforce and by maintaining a state-of-art facility at their premise.

Is Outsourcing Beneficial?

Now, since you are clear about what is BPO, let’s dig deeper into this topic. In your opinion, would you recommend outsourcing?

Or in simpler words, do you think outsourcing is actually good?

Do not hurry in answering because there are always two sides for a coin, right?

Let’s step-by-step discuss the pros and cons of outsourcing and unfold this mystery once and for all.

We start by listing the advantages of outsourcing first:

Benefits of Outsourcing

The entire business community is divided on the topic of outsourcing, not in the equal proportion though. The benefits of outsourcing are too fascinating to overlook for the business owners. Maximum companies that avail outsourcing services are from the American and European continent. The government of USA has even put a restriction on outsourcing in the light of lost jobs for the American citizens. Still, there is hardly any dip on outsourcing. Why? Let’s find out why do companies outsource so much?

1. The cost-benefit

If you are an owner of a business in the United States and are:

  • Planning an expansion
  • Expecting a surge in customer calls
  • Starting a new unit
  • Experiencing a dipping customer-base

Outsourcing is the perfect option. There is a massive cost-benefit that sails along outsourcing. For an example; the cost of hiring a technical (beginner, mid or senior level) expert in the USA is around 3-8 times higher than to do the same in India. This creates a huge monetary void that cannot be filled with whatever you plan on doing. Countries like India, Philippines, Brazil, etc have qualified people who are ready to work on low wages.

In addition to this, setting up an ultra-modern facility would also cost you a big fortune. Over that, do not forget that there is a constant requirement to update the technology that is changing so quickly that if you ignore it, your customers are going to switch to the competition in no time. Hence, the requirement becomes unavoidable.

If you hire a competent call center or a BPO company in India, this expense is also taken care of quite easily. The call centers or the BPOs in India are already equipped with the latest technology and state-of-art equipment that is needed to provide a frictionless deliverance of service. So, the overhead cost that your company would bear if you plan to open up an in-house facility trims to many times.

Another factor that amplifies the effect of cost-effectiveness is the price of real estate. Setting up a call center in India, Philippines, etc is also easy because the price of properties in these nations is quite less as compared to the first-world countries like USA, UK, Australia, etc.

2. High productivity

When running a company, the focus should be converged on the tasks that directly impact the revenue generation process to ensure consistent growth and better profitability. However, other tasks that may not influence the profit margin directly cannot be ignored either.

Now, if you are going to manage tasks like customer support, HR, telemarketing, etc on your own, it is quite inevitable that your attention will be diverted to some extent. And since you are handling these tasks internally, your experts will be also working on multiple tasks at a time. This reduces the amount of focus on the core competencies of your business, which ultimately can be seen in the curtailed efficiency of your team.

BPO companies or contact centers possess years of experience in handling businesses tasks and their agents are quite competent in providing the first-string service in accordance with clients’ requirements. As a business owner, if you are tying up with a proficient BPO firm, your team would be free to utilize its entire focus and efforts on the core tasks of your company. Also, when your business’s extraneous yet necessary functions are handled with utmost professionalism and high competency, you can throw all your worries and put your entire concentration to streamline and enhance the profitability of your company.

In a nutshell, outsourcing does promote and boost high productivity by managing your other business functions quite smoothly.

3. Scalability

Big organizations generally favor outsourcing because BPOs offer them superior customer experience that ultimately decides the fate of these companies. But, the small-sized organizations, startups, and medium-sized companies have different reasons.

These organizations have limited budget and time. So, when one of these companies experiences a surge in customers’ demand or a spur in seasonal requirement, these firms either have to hire external resource or they would have to face heavy loss.

This happens a lot. A company in the United States generally experiences a peak demand season in the month of Christmas. Travel firms see a hike in customer inquiries in the holiday season. All these companies need a couple of extra hands to take care of their customers.

Now, as said, these companies already have restricted resources so they just cannot hire new staff just for the peak season and then fire them afterward. It will be expensive and ethically not correct. Even contracting a few extra hands would cost them a good chunk of their capital.

On the brighter side, BPO companies have a colossal team of professionals who have gained special expertise to work on multiple projects at a time. Also, you can hire agents on ‘shared basis’ that would offer you less price to pay and still get what you want. Call centers are becoming extremely flexible in providing customized solutions that would just fit your business requirements in the right manner.  

So, the entire scalability issue is eradicated from the root.

4. Around-the-clock assistance

Customers are becoming the primary source of revenue generation for most of the companies and there is no doubt that the organization that would want to remain ahead of its competitors would ensure to be available for the customers 24*7. Especially the e-commerce enterprises and multinational firms that are catering to an international audience would like to provide around-the-clock assistance to their customers.

Now, doing so in-house would require you to hire additional staff to work in two or three shifts. In the times of stiff competition, losing a single customer call or inquiry means gifting a revenue opportunity to your competitors. Small and medium businesses do not have such high expense plan to recruit extra employees. Even the big organizations avoid doing so because that would mean that their team would have to take care of multiple tasks simultaneously, which could again impact the business productivity.

This is why the call centers and BPO firms are so useful. Call centers in India are known to hire a massive workforce that working in rotational shifts just to make sure that the businesses in the United States and other European nations don’t miss a single customer inquiry or call. These specialized service providers offer an unparalleled, 24*7*365 assistance to your customers.

For business owners in Australia, the United States, and the UK, providing assistance in the holiday season means hiring and paying extra resource to agents, if they wish to do it internally.

BPO firms, on the other hand, provide complete 360-degree support for your customers whether its holiday, festival or any other occasion. What’s more intriguing is that these contact centers charge minimal prices for such assistance.

5. Direct access to diligent agents

For the organizations that don’t have monetary considerations, hiring and training a pool of customer support agents is an arduous task that requires constant supervision and proper handling. Having money is different but possessing the competency to create and manage a deft staff of support agents is entirely a different scenario.

Most of the big enterprises fail to keep up the high deliverance level of service experience, which brings them to hire BPOs.

Call centers, contact centers, and BPO companies have trained and qualified experts who possess immense experience in handling customers’ queries, grievances, and complaints. When outsourcing to these vendors, you get direct access to trained and experienced agents. This is one of the most captivating advantages of outsourcing that draw so many companies towards it.

Disadvantages of Outsourcing

While there are many pros of outsourcing, some of the cons exist too. Every business owner, hence, needs to measure these advantages and disadvantages of outsourcing in balance to choose what’s right for his/her company.

Let’s take a quick look at the cons of outsourcing:

1. Less control

This is one of the worst nightmares of business owners. It is completely understandable that you have outsourced your business task so as to make it streamlined and much effective. But there is a drawback. By handing over that specific task to a third-party, you are somehow also giving away to controlling power to manage that business function.

Some of the business owners have reported that since they have hired a company, so handling its agents in order to bring out the desired level of result becomes a challenge sometimes. This has feared most of the businesses that are placed in the overseas location.

The solution to this issue is to select an outsourcing company that offers the highest possible level of transparency.

2. Communication gap

You are in the United States and your outsourcing partner is in India. Everything is good, the service, the market status of the vendor, the price, etc. But, business owners often overlook one of the biggest potential bottleneck; communication.

Now, some of you may not agree but communication is one of the biggest issues that have made a lot of western companies to opt out of outsourcing. There are many issues with communication:

  • Matching up the cultural difference
  • Conforming with the accent void
  • Regular interaction issue
  • Time-zone difference often leads to the availability issue
  • Having smooth and uninterrupted technology back for hassle-free service deliverance

A lot of ultra-modern contact centers in India are offering accent training to their agents to lessen the cultural gap during the conversation. Along with this, Indian call centers are also working in night shifts so as to make sure that their managers, supervisors, and agents are available whenever needed.

3. Quality void

A lot of call centers exist in India and all of them promised an astounding level of service quality, which is not right. Quite many business owners have complained that the promised service experience is not offered.

Hence, be very careful with whom you are partnering up. Assess the company’s quality and then only contract with it.

Final Takeaway

Of course, there are some benefits and disadvantages that come along with outsourcing. But if you are wise and knowledgeable enough, outsourcing can become your biggest booster for growth. A proper assessment of these factors will make sure whether your business requires outsourcing or not. To get more updates like this, stay tuned. Thanks!

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