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Home » Glossary » Onshore Outsourcing

Onshore Outsourcing

Definition

Onshore outsourcing definition

Onshore outsourcing, also known as domestic outsourcing, is the practice of outsourcing business functions to a company in the same country where the business operates. It is becoming increasingly popular with businesses that are pulling their operations back to their home countries.

Benefits of onshore outsourcing include smaller travel expenses, similar time zones, similar cultural expectations, and, on occasion, easier legal compliance.

The cost of staffing is not as competitive as with offshore outsourcing. However, some experts argue that when considering all things, onshore outsourcing is just as competitive an option for business owners.

Issues that can arise due to a mismatch in expectations can be more easily resolved because of lower travel costs and similar time zones, for example.

Why are companies onshoring?

Giving work to an organization in your own country is referred to as onshoring. When a firm outsources onshore, it might be because they lack the expertise or don’t have the right talent accessible right away since they can’t afford to keep employees.

Onshore or offshore outsourcing is adopted by various businesses to keep their operations functioning while saving costs.

Onshore vs offshore outsourcing

Onshore and offshore outsourcing offer different benefits in terms of accessibility, language barrier, and cultural compatibility.

Onshore outsourcing, for one, makes it easier for businesses to visit their teams on site since they are only located within their home country. Thus, actual face-to-face meetings, team building, and collaborations are much easier and more fruitful.

However, there is a possibility that their team will be affected by local calamities and disruptions like their in-house teams.

Offshore outsourcing, meanwhile, is more technology-driven. Teams collaborate with online tools most of the time. However, outsourcing partners still encourage their clients to visit their teams from the other side of the world and meet them personally.

One advantage of it is offshore teams can’t easily be affected by the local calamities that can bring disruption to their business. This ensures continuity in providing services to their customers.

Onshore outsourcing advantages

Most outsourcing companies establish a local office in the country they are servicing. Whilst most of the operations are done offshore, the accounts executive team is usually based onshore to keep a good working relationship with the client. A lot of businesses have built their outsourced team with a mix of onshore and offshore talents.

Outsource Accelerator specializes in helping small and medium-sized enterprises (SMEs), with two to 500 employees, typically based in the high-cost English-speaking world. We are the experts in transforming these businesses with outsourcing.

Onshore outsourcing advantage
Onshore outsourcing advantage

Some of the reasons why onshore outsourcing is a smart choice for your company are as follows:

Communication

While language difficulties are one of the most noticeable obstacles to effective communication when working with offshore contractors, you need also consider time zone variations.

Working with the onshore team has no time zone difference. If there’s an issue that has to be resolved right away the onshore provider can respond on time because there’s no time zone to mind and language barrier.

Increased control, response, and dependability

Issues such as quality control are easier to manage when you outsource onshore. You may also send a request that allows for personal encounters, practical demonstrations, and a better knowledge of what’s necessary if you need to train or onboard your service provider to operate in a particular manner.

Onshore outsourcing is a great strategy to increase control in the business process since distance creates additional issues that can create a significant delay unless the company is willing to take additional services for the processing.

Less cultural distinction

When you outsource offshore, cultural differences might become more of a challenge. When working with offshore contractors, there are also variations in the way they approach work and business. Some cultures may value recommendations and ideas, but others may criticize your company indirectly.

Language and cultural barriers won’t be much of a problem with onshore outsourcing. Advice and guidance can help you obtain better outcomes immediately, with fewer unsuccessful attempts and adjustments to specifications. This makes the task more efficient onshore than it would have been if the work had been outsourced offshore.

Skill sets that are locally appropriate

When you outsource tasks within your onshore, you know that the individuals who will be assisting you have a certain set of talents that are determined by local conditions.

You can be certain that you understand the level of local qualifications; however, some companies find it difficult to acquire an identical qualification in another country. The standard of the knowledge bases required in another country may differ.

Knowledge about your industry 

When businesses outsource customer service or marketing responsibilities, they need to deal with companies who are familiar with your client’s demands.

Without this information, even the most well-intentioned measures may fail. Any subsequent conflict impacts your business since your outsourced market-facing communications will represent the brand image.

Intellectual property protection

Companies will prioritize protecting their intellectual property and ensuring that the firm has a reputation for dealing with others’ intellectual property. Generally, they don’t want their original ideas to be widely distributed.

Further, companies do not want to be charged for copyright or patent infringement. Most local businesses you outsource to will avoid doing so, however, organizations or foreign nationals may not be as cautious in their work.

Onshore outsourcing services

While any role, especially core business functions, can be outsourced, some companies choose onshore outsourcing for specific roles such as the following.

Software development

Outsourcing software development to an onshore company helps businesses take control of their operations and culture better. At the same time, this saves them the hassles of facing intellectual property issues since it is under the jurisdiction of their home company.

Project management

Firms can also outsource project management duties to onshore providers that can handle localized projects and functions for them. Delegating this function also frees up their time so they can focus on maintaining their operational excellence further.

Support services

In some cases, businesses choose to delegate customer and technical support within the same country, especially for their local market. This helps them minimize cultural and language barriers since agents speak the same language as their customers.

Outsourcing FAQ

What is Fully Managed Outsourcing?

What is fully managed outsourcing?

Fully Managed Outsourcing is one of the many services offered online by various outsourcing companies. It is a kind of laser-focused management that takes over the business process and tracking of the organization’s KPI metrics, training and development of employees, and quality assurance for the client.

When routine tasks and jobs are outsourced, the company will have more time to focus on the more essential aspects of the business.

Fully managed service

Working with a fully managed outsourcing can be beneficial to any specific organization. Despite working offshore, Business Process Outsourcing (BPO) companies can still provide a fully managed service to their clients.

They ensure the best operational structure, competitive pricing structure, proven processes, and guaranteed results with their operational overseers.

They can build a team and hierarchy; they do well-prepared implementation and alignment; and are also aligned to their high-quality mission, objectives, and culture.

This kind of partnership promises a deliverable-based solution that can hit KPIs, targets, and metrics. Lastly, they can ensure continuous improvement as you go along with your business.

Outsource Accelerator provides you access to the best outsourcing companies in the Philippines, where you can save up to 70% on staffing cost. We have over 3,000 articles, 200+ podcast episodes, and a comprehensive directory with 700+ BPOs… all designed to make it easier for clients to learn about, and engage with fully managed outsourcing.

Offshore outsourcing definition

What is offshore outsourcing?

Offshore outsourcing refers to the practice of transferring some functions of your business to a company in a different geographic location, particularly offshore destinations like the Philippines, India, and Malaysia.

Organizations usually use this strategy to access a wider talent pool at a low overhead cost without sacrificing the quality of work done.

Offshore outsourcing helps strengthen a business's performance and compete with other organizations in the industry.

To do this, companies partner with established and trusted outsourcing service providers to ensure high work quality and accountability.

Partnering with a trusted BPO provider assures organizations the following:

Employees who underwent a thorough interview process to ensure suitability for the needed role Workers going through proper onboarding, training, and upskilling sessions Satisfied employees, since they will be provided with high-quality equipment and a Class A physical office Accountable and manageable upper management Clear targets and KPIs for the offshore team Efficient processes and standard operating procedures Legalities and other documentation to be well taken care of, among others

Further, offshore employees can help manage essential business operation tasks, which means you and your in-house employees have more time to focus on your own responsibilities.

This boosts focus, productivity, and employee fulfillment — all while the company saves up to 70% on labor costs!

This article aims to provide a comprehensive understanding of what offshore outsourcing means and provide examples of its many benefits.

We will also discuss the history of offshore outsourcing, learn why businesses resort to offshore staffing, discover its pros and cons, as well as learn the types of offshore staffing.

Offshore outsourcing definition

Offshore outsourcing, also referred to as business process outsourcing (BPO),  is the process of having work done for your business using qualified staffing solutions from countries with lower labor costs.

Commonly, IT, sales, and administrative roles are carried out for businesses across the world from countries such as the Philippines and India.

Companies can benefit from accessing other countries that have more resources for people with specialized skills. At the same time, they get quality work at a fraction of the costs.

Like nearshore outsourcing, companies prefer having minor tasks outsourced to a service provider so that the in-house team can focus on the core business functions.

One perk of offshore outsourcing for businesses is that they do not need to think about the overhead expenses when they hire domestically.

Overall, the company could benefit from lower human resources costs, equal or higher-quality outputs, and higher profits.

About offshore outsourcing Offshoring history Benefits of offshore staffing Why do businesses resort to offshore outsourcing? Offshore outsourcing examples What services you can outsource Pros and cons of offshoring Pros of offshore outsourcing Cons of offshore outsourcing Offshore outsourcing in the Philippines Types of offshore outsourcing  Offshoring history

Deploying manufacturing jobs out of the country has been a common business method since the 1960s.

This well-known business strategy started with outsourcing. Outsourcing is when an organization farms out parts of its business processes to an external company.

While it may seem like a current phenomenon to many, the truth is it has been going on since the 1950s.

However, it wasn't until the 1980s that corporations perceived it as an effective business strategy. It was also in that year when companies mainly outsourced to allow them to have a greater focus on their core competencies.

Then in the 1990s up to the early 2000s, organizations started to concentrate more on the cost-saving measures of outsourcing.

Now, this is the time when strategic outsourcing has emerged, and the goal is to gain a competitive advantage in the industry.

Fast forward through time, given today's technological advancements, it is easier for companies to delegate both their core and non-core functions to the external workforce in different countries.

Offshoring revolutionizes organizations and how they perform their daily operations. It transforms business landscapes into agile structures that boost its overall profitability.

Benefits of offshore outsourcing

The world is becoming increasingly globalized. Technology, software, and communications improvements now enable easy access to a globalized workforce.

This has many advantages, but the primary benefits of offshore staffing are:

Cost savings

One of the leading reasons for offshore outsourcing is the potential to reduce labor costs. Companies can take advantage of lower wage rates in other countries, which can significantly impact the overall cost of production or service delivery.

Also, some countries may have lower infrastructure and operational costs, contributing to overall cost savings (typically 60%-80%).

Access to global talent

Offshore outsourcing allows businesses to tap into a global talent pool.

Companies can access specialized skills and expertise that may not be readily available in their home country, leading to improved product or service quality.

Focus on core competencies

Outsourcing non-core functions enables companies to concentrate on their core competencies. This strategic focus can enhance efficiency and productivity, as resources are directed toward areas that contribute most to the organization's success.

Time zone advantage

Offshore outsourcing can provide a time-zone advantage. Companies can create a 24/7 working environment by leveraging the time differences between their home country and the offshore location.

This can result in faster project turnaround times and increased productivity.

Flexibility and scalability

Outsourcing allows businesses to be more flexible and scalable. They can easily scale up or down their operations based on business demands without the challenges of hiring or laying off in-house staff.

Risk mitigation

Offshore outsourcing can help spread business risks. Diversifying operations across different geographical locations can reduce the impact of local economic or political fluctuations on the overall business.

Innovation and technology

Access to global talent often brings in diverse perspectives and innovative ideas.

Outsourcing to locations with advanced technological capabilities can also result in the adoption of the latest technologies and methodologies.

Faster time-to-market

Offshore outsourcing can accelerate time-to-market for products and services. With a global team working on different aspects of a project simultaneously, companies can bring their offerings to market more quickly.

The benefits of offshore staffing impact small, medium, and large enterprises across the globe. Businesses can access more affordable resources to help streamline and grow their business.  This is a win-win for all parties involved.

Despite these benefits, it's crucial for businesses to carefully evaluate the risks and challenges associated with offshore outsourcing, such as cultural differences, communication barriers, and potential quality issues.

A well-planned outsourcing strategy that aligns with the business goals and values is essential for success.

Why do businesses resort to offshore outsourcing?

Companies do not just switch to offshore outsourcing due to its cost-effectiveness.

Rather, more and more companies these days are acknowledging the other relevant advantages of offshore outsourcing to the market:

To save up to 70% on labor costs

Businesses always have to look for ways they can obtain a stable stream of revenue while sustaining their daily operations.

However, because of the economic fluctuations and its unpredictability, other companies couldn't afford the costs of local operations. This is where offshore outsourcing can come in handy.

To stand out in a sea of tight competitors

Another reason for offshoring is to stay competitive, especially with the global economy.

Like for example, with customer service, businesses are able to boost their efficiency and daily operational procedures with this strategic practice.

To keep up with the latest business trends

Entrepreneurs in this day and age know well enough that innovation is one key factor in their overall success. Thus, it is more achievable with offshoring.

To leverage professional and highly competent offshore staff

Other companies also resort to offshoring as a result of the lack of qualified local workers to do specific tasks. Countries like Australia experience skill shortages in the automotive industry.

It was the same as with the United States when Apple had to transfer its manufacturing to China due to the lack of a local labor force.

Offshore outsourcing examples

Businesses of all sizes rely on offshore outsourcing to delegate tasks to lower-cost countries but of equal expertise.

Just like nearshore outsourcing, companies prefer offshoring several roles so that the in-house team can focus on the vital functions of the business.

Here are some of the most popular offshore outsourcing examples:

Customer service departments through offshored call centers

One popular example of offshore outsourcing is customer service through call center companies. Every company needs a customer service department to cater to customers' needs, but these operations can get very pricey.

As a business grows, more people are needed to handle queries and maintain customer satisfaction. Having an in-house customer service team may not be the best decision.

From coming up with standard operation procedures to staff and management training, running a customer service department alone can take so much time and effort, not to mention resources.

This is why offshore outsourcing of customer service roles and departments has become the norm

Virtual assistants

Almost anything can be done online:

Need to book personal appointments or work meetings? It can be done online. Need to delegate social media posting and graphic design activities? Do it virtually. Need to develop codes for your website and/or mobile app? Outsource it online.

Almost everything can be done online, so business owners and companies offshore outsource tasks to general Virtual Assistants (VAs).

Offshore outsourcing tasks to general VAs has been a major game-changer, especially for small businesses. This is because outsourced staff ensure quality work while saving a lot of resources.

What services can you offshore?

Aside from manufacturing, organizations these days are able to farm out both their core and non-core functions to offshore providers.

One example of this is foreign companies that have been offshoring their call center in the Philippines. We all know that the country is known as the Business Process Outsourcing (BPO) capital of the globe and is well known for call center services.

However, aside from customer service and support, Information technology (IT), related job functions are also some of the leading offshored services.

In fact, according to statistics, the global IT outsourcing market is expected to be worth $98 billion from 2020 to 2024.

A lot of foreign companies have also tapped into offshoring their human resources tasks such as sourcing, hiring process, and more. More so, finance and accounting-related tasks like bookkeeping, tax filing, procurement processes, etc.

In terms of sales and marketing, offshore outsourcing companies like Six Eleven BPO offer global strategic solutions for different types of industry sectors.

Some of their services may include lead generation campaigns, industry and market research, and search engine optimization, among others.

Basically, companies can offshore nearly every part of their daily business functions to offshoring providers from around the world. This has been made even possible with the help of our modern-day technology and the availability of the internet.

Pros and cons of offshoring

Naturally, offshoring will always have its mix of advantages and disadvantages. Having said that, let's see whether the benefits of offshoring outweigh its downsides:

Offshoring pros Reduced labor costs

One good example of this is US companies that offshore to developing countries like the Philippines.

This allows them to reduce their overhead costs as Filipino workers have low compensation as compared to those hiring local in-house employees.

Availability of a skilled workforce

As we have mentioned earlier, one of the reasons why organizations offshore is the lack of skilled labor. Offshoring to countries like the Philippines and India grants international companies access to a skilled talent pool.

Both these countries have seasoned global talents who are English proficient and college degree holders.

24/7 operations

Foreign companies that offshore to another country with major time differences allow them to have their daily operations overextended hours.

Like in most cases customer services, these foreign companies are able to extend their contact center services even up to twenty-four hours.

Increased focus on the business core

As businesses free up more on their job loads, this gives more time for leaders and in-house staff to focus on improving their core functions.

You can rely on a trusted outsourcing partner like HireSmart Staff to build a highly-skilled team to perform other tasks needed in your company.

It is also important to note that organizations that offshore are not just on the receiving end of this practice's perks. In the Philippines, the BPO industry plays a huge role in terms of its economic growth.

The country's BPO industry employs a lot of the working population in the Philippines.

Offshoring cons Language barriers

This is perhaps one of the major drawbacks of offshoring. Usually, in countries like India and China, the English language isn't the locals' first language.

Another factor is when the offshoring provider comes from a region with a strong local accent.

Cultural differences

When offshoring to different countries, cultural and social differences are unavoidable.

For example, US business leaders may talk in a straightforward and candid manner, while a Filipino remote staff may be more reserved.

Quality control

Another concern for foreign companies is that offshoring also means that they will be giving up control over their offshored tasks.

Even if these clients provide quality guidelines, there will still be differences in terms of the working culture and environment.

Despite these cons, businesses still consider offshoring as a good business model for organizations of all shapes and sizes. Going back to offshoring to the Philippines, the country has ranked second among Asian countries with the highest English-speaking population.

More so, the country is also heavily influenced by Western culture as it has been colonized by the US and Spain for years.

Offshore outsourcing in the Philippines

The Philippines is the leading offshore outsourcing destination in the world.

With 1.3 million BPO workers and counting, large corporations and even small to medium-sized enterprises all over the world trust that their Filipino workers and remote teams can provide excellent outputs, customer service, or IT assistance at a cost-effective price.

Outsource Accelerator provides you with the best customer service outsourcing companies in the Philippines, where you can save up to 70% on staffing costs.

We have over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 2500+ BPOs, all designed to make it easier for clients to learn about and engage with outsourcing.

Types of offshore outsourcing

Here are some types of offshore outsourcing, as listed by Rezaid:

There are many popular approaches and solutions that are used by businesses today – each with its own benefits and drawbacks. The right offshore outsourcing type will depend on your specific requirements as well as the nature of your project.

Here are four different types of offshore outsourcing:

Production offshoring

The actual movement of the physical manufacturing process overseas, generally at a significantly cheaper cost in terms of personnel and materials, is known as production offshoring.

Front-office and back-office processes and functions are the two primary types of offshored processes and functions. Customer service, inbound and outbound telemarketing, virtual assistants, and technical assistance are all examples of offshore.

HR and recruiting, accounting and bookkeeping, mobile and web development, and design and graphics are other examples of production offshoring.

System services offshoring

Information technology (IT) will be a key subject to get right given the multiplicity of procedures and minute-by-minute activities of any corporate operation.

In the 1990s, a huge amount of communication infrastructure allowed nations like India, which has a big pool of English speakers and a technically skilled workforce, to lead the sector by luring companies like HP, IBM, Microsoft, Oracle Corporation, Intel, and Cisco.

Innovation and software offshoring

Asian countries lead the world in computer science and software development services. High-tech product companies, including those in Silicon Valley, have begun to offshore innovation work to Colombia, Belarus, South Africa, Mexico, and Ukraine.

Using these countries' highly trained labor pools results in considerable cost savings and faster production cycles.

Reshoring

Reshoring, also known as back shoring or inshoring, is the opposite of offshoring. Companies like Google, Facebook, and Amazon have been criticized in Europe for allegedly concealing income and avoiding taxes.

They reportedly did this by booking non-US earnings from major advertisers through its Dublin branch in low-tax havens like the Republic of Ireland.

As a result, in January 2018, it started to book those earnings and pay taxes on those profits in the countries where they were generated.

Want to learn more about outsourcing? Check out the Inside Outsourcing book as well as the Inside Outsourcing book review today!

Nearshore outsourcing definition

Nearshore outsourcing definition

Nearshore outsourcing is a smart way of hiring people from a third-party source of skilled workers for a short or long-term project. The contracted workers are from nations near the hiring company.

This is in contrast to offshore outsourcing, where the employees are typically from nations further away. Typically, outsourcing hubs like India, China, and the Philippines are utilized.

Companies could save a lot from connecting with an outsourcing partner than hiring an in-house team, especially for their business processes. Most employers would typically hire workers from overseas, where rates could be lower.

However, time is a huge concern. The need to hire a workforce with similar cultures and languages has birthed nearshore outsourcing.

Some firms get a nearshore outsourcing company as a partner because skilled workers are abundant for that job in the neighboring country. Benefits of nearshore outsourcing include cost savings while compensating for the shortage of in-house staff.

In turn, this process helps improve the efficiency of a company. The spoken language will be similar even if workers come from a different country.

It is also ideal for a company to outsource back-office tasks for lower wages while in-house staff focuses on the more critical roles and functions in the company.

 

Nearshore call center

Companies that require close collaboration with their employees in the same country and do not outsource a significant volume of tasks usually struggle to justify utilizing the offshore market.

That is why the nearshore outsourcing industry is gaining momentum.

Fueled by a growing need for geo-redundancy, countries in Central and South America are quickly becoming the go-to destination for seeking a quality BPO partner.

A nearshore outsourcing company and call center can offer many important benefits, such as:

Proximity Similar time zones Quality control Larger talent pool Exceptional English, Spanish, and Portuguese workforce Superior cultural alignment with the US and Canada

Additionally, through massive private and government investment in training, facilities, and infrastructure, many major companies are choosing to open their facilities to nearshore outsourcing companies.

Why do companies go for nearshore outsourcing? 

There are many reasons why so many companies are turning to nearshoring as an alternative to traditional business process outsourcing.

Here are some of the nearshore outsourcing advantages:

Cost savings

The main reason why many companies choose to outsource work to a nearshore company is that they want to save money by paying lower wages.

Nearshore outsourcing allows you to maintain high levels of quality while cutting costs significantly.

Increased flexibility

With offshore outsourcing, you have less control over your project because it is no longer within your borders.

With nearshore outsourcing, however, you still have full control over the process and can make changes whenever necessary.

Availability of skilled resources

A huge pool of skilled resources is available in nearby countries who can easily be hired for nearshore outsourcing services.

These resources have experience in different domains and are well-versed with the latest technologies (such as for outsourcing software development).

Language barrier

Businesses engaged in international trade often face language barriers and cultural differences when working with clients or partners overseas.

However, this is not the case with nearshore outsourcing because most companies use English as their corporate language, making it easy for both parties to communicate effectively.

Faster time to market

Nearshore providers are also closer to your target market so that they can deliver products faster than those located further away from your customers.

This means that you get them into the hands of potential buyers sooner than if they were produced at a distant location.

Nearshore vs. offshore outsourcing vs. onshore outsourcing

Nearshore and offshore outsourcing both refer to sending work overseas.

Nearshore refers to outsourcing work to another country within your region — typically one close by and offering lower labor costs than the United States or Europe.

The nearshore outsourcing model takes place within a few miles of the client’s office. It is often used by companies that have smaller budgets or need more specialized services.

Offshore outsourcing refers to sending work outside of your region — typically to India or China because of their lower labor rates.

Offshore outsourcing is often used by larger companies with budgets large enough to justify the higher expense of overseas labor. These firms want access to highly skilled professionals who aren’t available locally.

Onshore outsourcing, however, is a closer term but still distinct. As the name implies, onshore outsourcing refers to working with suppliers in your own country (the US, for example).

Nearshore outsourcing and onshore outsourcing are frequently (and mistakenly) used interchangeably.

Nearshore outsourcing services 

There are many services that companies can get through nearshore outsourcing. Here are a few common examples:

Here are a few common examples:

Sales and marketing functions

Sales and marketing teams need to interact with customers on a daily basis, which means they’ll need to be located near those customers through nearshore outsourcing.

This isn’t always possible when dealing with distant clients and prospects.

First-party support

First-party support refers to the assistance provided by a company during its own sales process.

It’s unlikely that these companies would hire an offshore firm to provide this type of service. They could lose credibility with their customers if they did so.

Therefore, nearshore outsourcing is better.

Software development

Companies that choose nearshore software development outsourcing for their software development to locations in other countries get the expertise and talent of developers at a much lower price. This is in comparison to what they would pay if they hired software developers in their own country.

Human resources

The main reason why companies choose nearshore outsourcing is because of their proximity to the client’s office. They can easily communicate with each other and respond to any requests quickly.

This gives them an edge over offshore outsourcing, which takes longer due to many factors, such as time zone differences and cultural differences.

Accounting and payroll

In the case of accounting and payroll services, nearshore outsourcing has been extremely popular. It helps businesses reduce costs while still maintaining control over their data.

Nearshore outsourcing companies

Outsource Accelerator has listed the leading BPO providers in leading and rising nearshore destinations. See the complete list here:

Top Nearshore BPO Companies Top 40 BPO Companies in the Philippines  Top 30 BPO Companies in India Top 40 South African BPO companies Top 30 BPO Companies in Canada Top 30 BPO companies in the USA Top 20 BPO Companies in Puerto Rico Top 40 BPO Companies in London Top 25 BPO Companies in El Salvador Top 30 BPO Companies in Jamaica Top 30 BPO Companies in Brazil Top 30 BPO Companies in Poland Top 40 BPO Companies in Europe Top 30 BPO companies in Costa Rica  Top 25 BPO companies in Malaysia Top 20 BPO companies in Uruguay Top 25 BPO Companies in Spain Top 30 BPO companies in France Top 15 BPO Companies in Albania Top 20 BPO Companies in Ghana Top 20 BPO Companies in Indonesia Top 40 nearshore BPO companies Top 20 BPO companies in Chicago Top 20 BPO companies in Mexico Top 20 BPO Companies in East Asia Top 20 BPO companies worldwide Top 20 BPO Companies in the UK Top 25 BPO Companies in Romania Top 20 BPO Companies in Colombia Top 30 BPO Companies in Honduras Top 20 BPO companies in Fiji Top 30 BPO companies in Germany Top 20 BPO companies in Washington Top 20 BPO Companies in Australia Top 20 BPO companies in Los Angeles Top 20 BPO Companies in New York Top 20 BPO companies in Guatemala Top 25 BPO companies in Pakistan Top 20 BPO companies in Vietnam Top 20 BPO companies in Sri Lanka Top 20 BPO companies in North Macedonia

What is What is business process outsourcing??

Business Process Outsourcing (BPO) is the delegation of business processes to an external service provider to a nearby or farther location. BPO uses various technology-enabled services to optimize the delivery of services.

Some of the usual outsourced business functions are the following:

Payroll Accounting Human resources Customer service Sales Marketing

In the case of content providers, these could mean hiring writers, remote editors, or virtual assistants.

BPO speeds up processes and enhances efficiency. Companies that outsource some of their business processes use their time on core services and competencies.

With this shift in focus, companies improve their current processes, which may result in improved customer satisfaction. BPO helps companies divert their resources to more critical business strategies.

Often, companies find it impractical to hire a full-time position in-house because of the cost associated with doing so. Outsourcing services can also help them save costs and resources in hiring suitable employees.

The definition of business process outsourcing (BPO)

In business process outsourcing, a company delegates its services to a service provider. It can be a local firm, nearshore, or offshore company.

Upon reaching an agreement, the service provider will then set up a team for their client. They will shoulder the costs and resources needed, including:

Office space Workplaces Connection Cloud storage IT infrastructure

The providers are responsible for tracking the staff's performance and progress. Meanwhile, the clients are responsible for providing the tasks, processes, and KPIs needed for their operation.

In some instances, they are also allowed to incorporate their culture and values into their team and absorb them as a part of their company.

What are the benefits of business process outsourcing (BPO)?

There are many benefits to outsourcing, as well as some downsides and risks.

Outsourcing powerhouses like the Philippines and India produce high-quality talent at a lower rate due to their low operational costs and full government support.

Since outsourcing companies hire and produce experts in the field, clients can ensure better results in their operations – whether in customer service, accounting, or marketing. Their staff are trained to ensure that their clients achieve the outcome they expect.

Companies are able to scale their staff depending on the demand and availability of their tasks. This also helps them improve their operations by letting their service providers contribute to streamlining their processes.

Outsourcing poses more growth opportunities for businesses of all shapes and sizes. While there are still drawbacks to this practice, it is safe to say that its advantages outweigh its risks.

To explain it further, below we have outlined the top benefits of outsourcing business processes:

Cost savings

Companies can enjoy savings of up to 70% by leveraging the salaries and costs in offshore countries.

In the Philippines, for instance, companies can hire offshore staff with a US$500/month salary for starting positions. A team of 10 employees would only cost them as much as a single worker in the US with an equal position.

Global market

Small and medium-sized businesses find it most difficult to hire local employees that suit their roles.

The widened skill gap in developed countries, paired with economic crises, affects their capacity to expand their teams as needed.

Businesses get to access a bigger pool of talent that can fit their requirements. They can have better options in hiring employees since they are not limited to what is available in their home countries.

Global presence

At the same time, outsourcing opens clients to global trade opportunities. They can establish their global presence and expand more easily to other locations since they already have operations in the area.

Flexible workforce

Outsourcing is a great way to establish a remote workforce, especially for companies looking to implement this setup for the first time.

BPO reduces internal local compliance obligations, including providing additional office spaces to employees. Instead, organizations can hold their business operations on a remote setup, most usually having their teams in an office provided by the BPO firm.

Leverage skill

Companies cannot always do everything on their own. Burnout within entrepreneurs and teams is more common than everyone thinks, especially with everyone filling up the tasks beyond their skill sets.

A BPO company enables them to leverage the skills of other specialist companies on more complex tasks such as accounting and IT.

Focus

Lastly, BPO enables organizations to focus on their core business functions. This is because most of their non-core business operations are done with the help of a reliable service provider.

Business process outsourcing examples

The BPO industry is vast, generating over $200bn annually and employing millions of people worldwide.

As stated in the Market Analysis Report, the global business process outsourcing market reached over USD 245.9 billion in 2021. Thus, it is foreseen that we will acquire a compound annual growth rate (CAGR) of 9.1% this year from 2022 to 2030.

The proliferation of the global BPO sector is utterly driven by several key factors that organizations take full advantage of:

Improved efficiency and agility Focus on core competencies Decreased operational costs Adapt to the ever-changing business dynamics

In general, when we speak of outsourcing, it always entails contracting out parts of business processes to an external provider, either domestically or offshore.

BPO can be seen in different forms and contexts, from hiring single staff to getting an offshore team.

Here we have listed some of the examples of business process outsourcing:

Big enterprise

Corporate outsourcing has been around since the industry started. The new breed of large companies are still taking advantage of its benefits and using it to expand their offerings further.

Some of the known enterprises that outsource their services today include the following:

Google. Google has been ramping up its outsourcing efforts since 2016 by delegating development and customer support. Facebook. Meta, particularly Facebook, outsources content moderation to the Philippines as a way to filter toxic content and keep the platform safe for its users. Wells Fargo. Wells Fargo has been outsourcing their operations to the Philippines since 2011. It has recently pulled out its functions in the country, though the company retained its BPO center in Manila. Medium-size businesses

A medium business with 50-500 staff might outsource the labor-intensive accounting and finance functions to a team in the Philippines.

Small business and entrepreneur

The recent Clutch survey stated that around 90% of small businesses plan to outsource their services in 2022 due to the efficiency and flexibility that companies get.

It is common for small business owners to have a Virtual Assistant (VA) working for them full-time and remotely from the Philippines.

Aside from this, organizations can delegate other services such as development, IT, and digital marketing.

What are the different types of BPO?

Outsourcing can be executed in different forms, depending on the outsourcer's needs. The truth is that not everyone is fully aware and has an in-depth grasp of the BPO sector.

For most people, BPO can simply mean farming out business processes to third parties located in another country, but this is just one type of BPO.

As for businesses, it is always vital to be familiar with the various classifications and functions of BPOs. This way, they are able to opt for a business process outsourcing provider that is best suited for their type of requirements and industry.

More importantly, outsourcing is not a one size fits all strategic approach, this is why it is not enough just know what outsourcing is and how it works.

There are several types of BPOs that businesses can choose from. The type of business process outsourcing can be characterized by its specialization, location, and size.

Generalist or specialist BPOs

Business process outsourcing is in the human resources and professional services sector.

However, their services extend across all industries. The majority of BPOs are generalists in that they offer a full range of professional services.

Meanwhile, some specialize in certain verticals, such as the following:

Legal process outsourcing

Legal process outsourcing deals more with delegating legal processes and compliances to legal firms in another area.

Knowledge process outsourcing

Meanwhile, knowledge process outsourcing enables companies to outsource knowledge-related work, including research and development, innovation, and creativity.

Location

Business process outsourcing typically operates from developing nations such as the Philippines, India, and Colombia. They typically have cheaper cost of living and bigger populations. Different locations offer different advantages.

Size of BPO

The bigger BPOs employ more than 250,000 people. They are huge, global operations. Medium-sized BPOs range from 500-5,000 staff and offer a full range of services. The smaller BPOs might have 1-500 people.

Offshore

Offshore outsourcing refers to the process of delegating a part of operations or a department to an offshore country.

To maximize profitability and efficiency, companies choose to outsource to a different region or timezone. India, the Philippines, and South Africa are some of the popular countries known for offshore outsourcing services.

Onshore

Onshore outsourcing or onshoring, meanwhile, is preferred by firms looking to delegate their services within their country.

Onshoring does not offer as much savings as offshoring or nearshoring. However, clients prefer this as a way to maintain their branding and satisfy their local markets.

Nearshore

Lastly, nearshore outsourcing is preferred by companies that do not want the hassles of time zones and cultural differences in offshoring but still want to get the best out of their delegated services.

Through nearshoring, businesses can collaborate with their teams located in nearby countries. This gives them the opportunity to maintain their local compliance and save on costs since most nearshore locations are cheaper than their onshore counterparts.

Functions of business process outsourcing

Collectively, business process outsourcing provides any kind of staffing solution. Common functions of BPO include:

Finance and accounting

Outsourced finance and accounting services help businesses manage their books, monitor cash flow, and keep up with corporate income tax compliances without fuss.

Healthcare

Healthcare outsourcing, meanwhile, organizes various back- and front-end functions for the healthcare and insurance industries.

Creative and content

Creative services outsourcing covers everything from post-production of Hollywood movies to newspaper and website content.

Tech, IT and development

IT outsourcing involves delegating network management, web and app development, and cybersecurity protection to IT firms in different countries.

Sales & customer support

Some BPO providers specialize in sales and customer support for pre- and post-sales transactions. This helps companies meet the expectations and demands of their customers, keeping them satisfied even after their purchase.

Marketing

BPOs and marketing firms can help in ongoing marketing, communication and branding activities for their clients. This helps them attract more suitable leads in a cost-efficient way.

Talent and HR

Businesses can delegate HR, recruitment, and compliance to professional employer organizations to maximize recruitment and workforce management.

Administration

Generalist BPOs help organizations accomplish general business administration and operational activities. This includes data entry, appointment setting, and other related functions.

Supply chain management

Lastly, e-commerce stores benefit from outsourcing supply chain management to manage warehouse and delivery processes.

The future of BPO outsourcing

We have gathered five expert opinions from renowned global business leaders. They shared how they perceive the future of outsourcing will be, including the trends that will prevail in the coming years.

Meg Marrs, Safer Senior Care

Meg Marrs of Safer Senior Care strongly believes that entrepreneurs and business leaders should outsource their essential tasks.

“Outsourcing certain roles has freed up my time to focus more on big picture strategy, rather than being completely meshed in the day-to-day tasks.” 

One thing is certain, outsourcing to support businesses growth is something that will never go out of trend.

Sean Nguyen, Internet Advisor

As for Sean Nguyen, Director of the Internet Advisor, outsourcing to streamline processes is another essential trend that businesses will continue to apply.

He quotes, “Outsourcing can be really helpful, even at the most incipient levels, because it allows you to streamline operations. If it's not essential to have it taken care of in-house, there is no reason to do so.”

Elandas Miller, Kicking It Sports

Elandas Miller of Kicking It Sports, has been outsourcing back office and creatives since 2017. “I like to think of outsourcing as a tool to help me get to my goals faster and more efficient without burning myself out.” 

Outsourcing to support both organizations' short and long-term goals is another trend that companies will practice in the foreseeable future.

Tom Baker, Tom's Projects

The founder of Tom's Projects, Tom Baker, offshores his entire product and development. “Outsourcing means that we can scale the team up and down when need be.” Scaling the workforce through outsourcing is, yet again, among the trends that will remain prevalent.

Bobby Reid, Capitol Tech Solutions

For Bobby Reid, founder of Capitol Tech Solutions “Outsourcing has helped our business by being able to provide expertise for a service quickly. While these contracts are outsourced, they are incorporated into our company culture when possible, since they are working full time with our firm.” 

Lastly, outsourcing to fill in talent gaps and expertise is one of the key trends that more and more organizations will utilize in the coming years.

The future of work is digital, says Outsource Accelerator Founder and CEO Derek Gallimore.

The world has moved on from manufacturing and creating products to providing services. And as we enter the post-pandemic world, he says we are “moving towards a single global economy.”

The concept of work dramatically changed with COVID-19, and things have changed for good. These changes made us realize that technology is available for remote and digital work interfaces.

Once showed an unsteady growth, the global outsourcing market spiked to US$245.9 billion in 2021. The sudden surge of demand brought by the pandemic, along with the worsened talent shortage, has led companies to increase their outsourcing efforts.

In a podcast episode, Derek explained, “There are eight billion people on the planet, and they are now all increasingly connected digitally.

There are [also] four billion people who are highly qualified professionals sitting around the world, and they're not just virtual assistants and basic roles. You can find [people with] PhDs, architects, accountants, or whatever you need for your business.”

To conclude, Derek believes that the global economy and a globally-sourced workforce are the future, and it is not going away.

Leaders all over the world also know that outsourcing is here to stay. Former US President Barack Obama says that jobs that have been outsourced cannot be brought back to the country.

As a result, it is better to retrain and re-skill the workers who have lost their jobs on account of outsourcing.

Obama further suggests that community colleges could provide the necessary skills for a person to be gainfully re-employed in the workforce. He adds that this is a necessity that Americans look forward to in the future.

Looking back doesn't always make people feel good, so it is essential that they retrain for the ‘jobs of the future.'

How to choose a BPO provider

Over the years, outsourcing has been the go-to strategic practice for businesses looking to scale their operations effectively.

But just like any other venture, companies should be wary of the possible drawbacks of outsourcing before selecting bpo providers.

Risks of BPO outsourcing 

Despite its advantages, business process outsourcing done incorrectly leads to outsourcing risks that affect a company in one way or another.

Hidden charges

Some BPO vendors do not totally disclose the total fees they charge and their terms. Clients could experience “bill shock” upon seeing the hidden charges they get.

Compliance issues

Compliance is crucial, especially in handling financial information and dealing with intellectual property. BPOs that violate compliances could risk their clients' reputations and branding.

Problems with security

Lastly, BPO vendors with loose security compliance could risk getting their client's data exposed and used for malicious purposes.

Choosing the right business process outsourcing vendor

The key to successful outsourcing lies in choosing a suitable bpo company and working with them along the way. Here are some of the considerations to look for in a BPO vendor:

Expertise

A BPO vendor's expertise can be shown primarily through their approach to their clients. Even without getting too technical, they can comfortably discuss the initial solutions to provide according to their client's requirements.

Compliances

Especially when delegating functions involving sensitive information, a bpo company should be up-to-date and compliant with regulations relevant to their services.

Check for ISO, HIPAA, and PCI certifications as much as possible.

Employee satisfaction

A good BPO company also places employee satisfaction as its priority. Check on employee reviews online to see how the staff feels about their company.

Technology

The tools and equipment a BPO vendor uses largely affect their performance in general. Check to see if they use updated technology at work and how they train their employees to use them.

Top BPO companies in the world's top outsourcing hubs

A wide range of business process outsourcing companies in different parts of the world provide the utmost services to their Western and local clients.

Many of them even earned recognition by award-giving bodies due to their performance in both their roles and their level of care for the employees.

Check out the top BPO companies in several outsourcing destinations below.

Top BPO companies in the Philippines Top Indian BPO companies Top South African BPO companies Business Process Outsourcing (BPO) services

With the rise of new offshore outsourcing locations, companies can have better options in terms of location and services they can delegate.

However, finding a suitable BPO company can be a daunting task to be done on their own.

It's a good thing advisory services such as Outsource Accelerator are there to help them.

Outsource Accelerator is the most trusted source for independent information & advisory for Business Process Outsourcing (BPO). We have over 5,000 articles, 400+ podcast episodes, and a comprehensive directory with 3,000+ BPOs from different locations.

Outsource Accelerator's offerings make it easier for clients to learn about and engage with business process outsourcing companies worldwide.

Want to learn more about outsourcing? Check out the Inside Outsourcing book as well as the Inside Outsourcing book review today!

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About OA

Outsource Accelerator is the trusted source of independent information, advisory and expert implementation of Business Process Outsourcing (BPO).

The #1 outsourcing authority

Outsource Accelerator offers the world’s leading aggregator marketplace for outsourcing. It specifically provides the conduit between world-leading outsourcing suppliers and the businesses – clients – across the globe.

The Outsource Accelerator website has over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 2,300+ BPO companies… all designed to make it easier for clients to learn about – and engage with – outsourcing.

About Derek Gallimore

Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014. Derek is the founder and CEO of Outsource Accelerator, and is regarded as a leading expert on all things outsourcing.

“Excellent service for outsourcing advice and expertise for my business.”

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