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Outsourcing

Definition

About outsourcing

Outsourcing is the process of leasing skilled resources from third-party providers. It usually involves availing of services or manufacturing of products. In effect, there’s no employer-employee relationship between the availing company and the staff leased.

The employees’ salary and benefits are paid by the outsourcing company and the client gets billed on a monthly basis. The amount charged is usually a computation of seat/management fee plus salary (passed-thru cost). Seat and management fee varies depending on the company and role being outsourced.

Outsourcing
Outsourcing

Outsourcing business

Outsourced roles are often back-office related jobs. These jobs don’t require specialized knowledge or specific skills, primarily outsourcing refers to service-oriented ones such as customer support or email support. However, some outsourced position may require specialized skills that the service providers have mastered and developed.

Outsourcing brings a lot of advantages to businesses, primarily being the cost involved. When a business needs a new set of skills, hiring a new employee inhouse maybe more expensive than hiring someone from a service provider.

Outsource Accelerator specializes in helping small & medium-sized enterprises (SMEs), with 2-500 employees, typically based in the high-cost English-speaking world. We are the experts in transforming these businesses with outsourcing.

Outsourcing FAQ

What is an Outsourcing Company?

What is an outsourcing company?

An outsourcing company handles various supporting processes of contracting companies. These supporting processes are activities that are not central to the company's business but cannot be done away with. Examples include payroll, customer service, accounting, IT, etc.

A great outsourcing company is someone that has proven expertise in the process to be outsourced, that has access to resources and technology not otherwise available to the contracting company. For a contracting company to fully leverage the advantage of outsourcing, it is preferable that the outsourcing company will have it's own key performance indicators to help drive innovation and growth for the contracting company.

Outsourcing companies in the Philippines

Outsourcing evolved a lot during the past decade, it is no longer all about customer service outsourcing. Nowadays, it is very common to outsource other functions such as finance & accounting, lead generation, software development or digital marketing. Outsourcing is also applicable to any industry and any business size, as long as the job can be done in front of a computer, then it can be outsourced.

Outsource Accelerator's directory lists over 700+ outsourcing companies in the Philippines. All of these are carefully selected for innovation, expertise, and technology that will benefit our clients. We also provide you with guidance on how to maximize the potential that such expertise gives you in growing your business.

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 do 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 services providers to ensure high work quality and accountability.

Partnering with a trusted BPO provider assures organizations the following:

Employees that 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 could 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 businesses resort to offshore outsourcing Offshore outsourcing examples Services you can outsource Offshore outsourcing pros and cons 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 their business processes to an external company. While it may seem as 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 where companies mainly outsource to allow them to have 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 where strategic outsourcing has emerged and the goal is to gain a competitive advantage in the market 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 external workforce in different countries. 

Offshoring revolutionizes organizations and how they perform their daily operations.

It transforms business landscapes into agile structures that boosts 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 that:

You can significantly cut costs (typically saving 60%-80%) Access large pools of highly qualified and highly capable staff Source staff from across the globe instead of being limited by the local population

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

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 into 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. Same as with the United States when Apple had to transfer its manufacturing to China due to the lack of 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 having several roles outsourced 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 outsourced 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, effort, and 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.

Part 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’s 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 them hiring local in-house employees. 

The 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 that 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 terms of the Philippines, the BPO industry in the country 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 in offshoring. Usually in countries like India and China, 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 to 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 the 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

In computer science and software development services, Asian countries lead the world. 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, it started in January 2018 that it would book those earnings and pay the 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!

What is Back Office?

What is back office?

Back office is a term used to classify business activities that are not directly attributable to frontline customer support, sales, and services.

Its functions relate to administrative functions which do not directly generate income or are accessed by customers, but such is necessary to streamline the other processes involved in a business.

Back-office functions include but are not limited to the following: data entry, account processing, website content management, data verification, mediation, graphic design, writing and editing services, accounting, and financial services, and quality assurance.

These functions are necessary to a business yet attribute additional cost. Some companies find back-office jobs costly since you need to allow a substantial amount of capital for recruitment, salaries, and employee benefits.

Back-office functions

The back office is the cornerstone of any company’s financial and operational success. As a result, it often generates less revenue than the front office.

The traditional back-office tasks are divided into two categories. These are the administrative operations that keep the firm functioning, and the customer support functions that directly fulfill customer services and demands.

These functions frequently carry out significant, multi-step processes in which more than one individual or functional group contributes to the business' process fulfillment.

What are back-office jobs?

A company’s back-office operations are formed of several functions, and below are some examples of back-office jobs and their key responsibilities:

Financial assistant

A financial assistant is in charge of assisting a company’s finance department. They are responsible for various tasks in the office such as data entry, balance sheet generation, accounting, and keeping financial records up to date.

Because they mostly work on the company's accounts, financial assistants must be detail-oriented, well-organized, and have excellent analytical abilities.

HR assistant

Human resource assistants are in charge of organizing appointments, keeping records, and onboarding new employees.

Among several other tasks, they handle payroll and keep attendance records, and usually help the human resources manager. Employees in this field must be trustworthy, organized, and have effective communication skills.

Data analyst

Data analysts are in charge of interpreting data, analyzing data, and putting data gathering systems in place. They also create reports and provide assistance for the data warehouse.

Data analysts must be competent mathematicians with good problem-solving abilities and the capacity to manage information efficiently.

Financial analyst

Financial analysts are in charge of various financial activities on behalf of external or internal clients. Their responsibilities include estimating operating expenses, producing reports, and maintaining a database.

In order to stay excellent in this job, applicants must be skilled mathematicians with great analytical abilities. It is also important to be kept updated on the latest developments in the field to determine how they could affect the firm's financial records.

Risk analyst

Risk analysts are back-office employees who are in charge of supervising investments and identifying potential risks in a company’s investment portfolio.

Based on their review of these investments, they support the company by providing suggestions to corporations to assist reduce future risks. Risk analysts must be skilled in analytical, strategic, and interpersonal abilities.

Back office support definition

Back-office support is responsible for organizing and improving the customer experience in the company. Accurate data, clear and interesting content, and well-designed websites all contribute to a better customer experience.

Back-office support jobs are frequently concealed behind the scenes. However, they should never be underestimated.

Back-office positions help expand company demands and minimize friction from the customer experience for roles dealing with data input, content moderation, office services, and financial services.

A good back-office support program can help you prevent unfavorable encounters at every point of interaction. Employees in back-office roles are equally as important to excellent CX as those in front office positions, from multichannel services to order fulfillment.

Back office outsourcing

With the advent of the internet age, companies can now take advantage of what we call business process outsourcing (BPO). This business approach can lessen the operational costs of running back offices while maximizing its full benefits.

This also translates to more time for you and your core office team to focus on income-generating functions.

Outsourcing back-office roles guarantees that you are working with skilled professionals minus the hassle and cost of recruitment, as well as other operational and employee benefit expenses.

Where to find a back office outsourcing partner?

Thanks to the growing BPO industry, finding a back office outsourcing partner is easier these days. There are thousands of companies that have entered the business process outsourcing industry to accommodate clients who need specific skill sets in their business.

The good thing is they can be found in any country across the world — whether nearshore or offshore.

The Philippines is among the fast emerging outsourcing destinations in the world ever since its emergence in the 1980s. Their expertise in back-office services, as well as numerous other roles, attracts global firms to their shores.

The country's wide pool of BPO firms makes sure that their representatives are competent enough to handle the client’s needs. Outsource Accelerator lists over 3,000 business process outsourcing companies in the Philippines that specializes in back-office administration.

What is a Customer Service?

What is customer service?

Customer service is a process of delivering a product or service to a customer in an efficient, accessible, cost-effective, and satisfying manner. It is creating a relationship that involves trust and builds loyalty, even after the delivery is made. Customer service is knowing how to deal with customers and understanding their needs and wants. It is finding what customers want during the entire process of delivering the product or service.

Excellent customer service is knowing when to ask the right questions to get the correct answers. It is listening wholeheartedly to your customers as if you’ve known them for a very long time. Excellent customer service is learning to adapt and provide solution to each individual client. It is discovering the right level of judgment then and there. Most importantly, in-depth knowledge of the products or services you offer is the ultimate foundation of a great customer service experience. Communication skills, creating the right environment, and being friendly aren’t enough if you don’t have in-depth knowledge of the product or service that your company offers.

Outsourcing of customer service

Outsource Accelerator provides you the best customer service 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, outsourcing.

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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 3,000+ 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.