It’s not enough to just look at the benefits. Consider these outsourcing challenges that could affect your decision-making.
Time and time again, you hear of the benefits that come with outsourcing. The cost-effectiveness and external expertise offered by providers brings greater agility and efficiency for your brand. These benefits may be significant, but so are the outsourcing challenges that can impact your business’ success.
Before looking for an outsourcing partner, it’s important to take note of several considerations. These challenges could pose threats to your business and defeat the purpose of having a partner in the first place. We’ll talk about them in detail, but first, a quick question:
Why Would Businesses Turn to Outsourcing in the First Place?
Despite the risks of the move, outsourcing has been associated with appealing advantages. You, in particular, may find it hard to resist having an outsourcing partner, especially when hearing about these benefits all the time:
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Cost Reduction
One of the most cited reasons for adopting outsourcing strategies is the potential for significant cost savings. More specifically, your business won’t have to worry about operational costs like labor, infrastructure, and technology expenses.
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Access to Specialized Skills
Outsourcing strategies allow your business to tap into skills and expertise that may not be readily available in-house. Whether it’s customer service or tech support, third-party experts can deliver high-quality solutions on behalf of your brand.
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Scalability
Does your business experience a surge in demand during certain times? Are you struggling to keep up with this influx? Then outsourcing should be part of your business strategy. With an outsourced team, you can easily respond to market shifts.
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Focus on Core Competencies
Running a business is already tedious enough, but outsourcing can get some load off your shoulders. Once you delegate certain tasks to your outsourced team, you can divert your attention to other aspects of your business like innovation or sales.
Despite these rewarding benefits, you should still consider the risks associated with outsourcing. Here are the challenges as well as some workarounds for each of them:
1. Quality Control and Consistency
Maintaining a consistent quality is important in any business. However, when some tasks are outsourced, this might become a challenge. Oftentimes, quality control issues arise from differing levels of expertise and understanding of expectations. But differences in training, processes, and standards also lead to variability in the output.
The best counter to this outsourcing challenge is stringent quality assurance measures. In particular, it involves comprehensive auditing and regular performance reviews. It’s important to always know that your outsourcing provider adheres to the standards set by your business strategy.
Speaking of quality assurance, benchmarking also helps maintain consistency. Keep business process outsourcing risks at bay by implementing feedback loops with your provider. Ensure regular communication to address any discrepancies promptly.
2. Data Security and Privacy Concerns
Data security and privacy remains one of the key business process outsourcing risks that you have to think about. As cybercriminals get more cunning, the challenge of safeguarding sensitive information becomes more important. Can you make sure that your provider places a premium on data security?
One of the first questions you should ask your outsourcing partner is related to their compliance to data protection regulations. More importantly, you should ask them for any certifications from well-known bodies confirming their commitment to security and privacy.
Another measure that should be part of your business strategy at this point is to conduct thorough security audits. Always discuss with your outsourcing provider the different best practices in data handling and storage protocols.
3. Communication Barriers
We mentioned regular communication earlier, but what’s unfortunate is that the act presents its own challenges, too. For example, geographical distance, time zone differences, and language barriers could lead to misunderstandings and delays. Such barriers can cause timelines to slip, something that outsourcing strategies can’t afford to happen.
Advanced tools allow your business to address communication barriers proactively. In addition to that, schedule regular meetings to make sure you and your provider are on the same page. These regular meetings should address time zone gaps for better, real-time collaboration.
Finally, set clear guidelines for communication as part of your business strategy, including expectations on response times. There is also nothing wrong with using multiple channels if it reduces the likelihood of important messages being overlooked.
4. Cultural Differences
Just because you schedule regular meetings with your outsourcing provider doesn’t mean you completely understand one another. If your partner is used to a totally different culture, it might throw a wrench in your outsourcing strategies. After all, varying cultural norms and business practices can lead to misunderstandings and conflicts.
Avoiding friction between your business and your provider involves cultural sensitivity training. Additionally, strong interpersonal relationships can enlighten you about different business practices, work ethics, and communication styles.
Once again, collaboration plays an important role in bridging cultural differences. Cross-cultural training sessions and promoting an inclusive work environment do a lot in creating a harmonious and productive outsourcing partnership.
5. Hidden Costs
We have established that outsourcing is a cost-effective measure to grow your business. But what you don’t know is that hidden costs can undermine your success. Examples of these hidden costs relate to transitioning work, training, quality control, and management. Identifying and accounting for these costs can prove challenging because they are oftentimes unexpected.
A detailed cost-benefit analysis can help you anticipate any business process outsourcing risks of the financial kind. It’s already a common practice to set aside a part of the budget for unforeseen expenses while in an outsourcing partnership.
Besides transparent budgeting, regular financial reviews can help manage hidden costs. Choose a partner who is open to negotiating clear terms regarding these expenses to maintain financial stability.
6. Loss of Control
Outsourcing is basically relying on a third party to do some of your business operations on your behalf. Unfortunately, outsourced tasks are often done under the complete discretion of the provider, not your business. If certain functions are closely tied to your brand or customer experience, then loss of control is a real concern.
To maintain a reasonable level of oversight, you can propose a governance framework. But a more common mechanism to retain some control over your outsourced tasks is through a service level agreement (SLA). You can also review and adjust your oversight to retain operational integrity.
One of the safeguards of having an SLA is the requirement for your provider to keep up with metrics. The agreement can state a regularly scheduled review and put forward consequences for non-compliance.
7. Compliance and Regulatory Issues
Compliance and regulatory issues are among the most impactful outsourcing challenges you can think of. But if your outsourcing partner isn’t in the same place as your business, there could be discrepancies in compliance efforts. Labor laws, tax regulations, and intellectual property rights may be complicated topics, but they keep the outsourcing partnership running.
Legal and regulatory research is needed to avoid business process outsourcing risks related to compliance. Make sure your outsourcing agreement reflects any regulatory changes to avoid penalties.
Compliance training and checklist also help avoid legal and reputational damage. Ongoing adherence to regulatory requirements should always be a part of your business strategy to create a trustworthy partnership.
8. Innovation Stagnation
With the right partner, outsourcing allows your business to maintain consistency in your output. However, it shouldn’t stop you from reaching greater heights as time goes by. The bad news is sometimes, outsourcing stifles innovation. This is especially true if your provider isn’t as invested in your business’ long-term goals.
There’s nothing wrong with an outsourcing provider sticking to your SLA and producing results according to set metrics. What makes this a bit concerning is if the quality level no longer improves after a long time. Perhaps your provider is only focused on fulfilling a contractual obligation rather than work on improvements.
To keep this from happening, start by communicating your innovation expectations clearly. Better yet, demonstrate your motivation to constantly improve through collaborative projects. In doing so, you share the drive of wanting to do better over time.
Conclusion
For your business, outsourcing can drive efficiency and growth. However, outsourcing challenges are inevitable and need careful planning. Addressing them right away can help you refine your outsourcing strategies.
Decision-making for your business strategy may take some time getting used to. Don’t let outsourcing give you more to think about.
Open Access BPO as Your Partner Despite Outsourcing Challenges
Your path to business success is already filled with challenges. Don’t let your outsourcing partner add to your worries. If you partner with Open Access BPO, you can put any outsourcing concerns to rest.
We stand out in the customer service industry for our multilingual and multichannel services. Our diverse pool of well-trained agents make it possible to prioritize the customer experience as much as anything else.
But our back office solutions are also worth mentioning. We maintain practices that are within globally-accepted standards, and we have earned certifications for it. Our data-secure practices have been recognized by organizations including the PCI DSS and ISO.
Contact us today to learn more or get a partnership with Open Access BPO started.
The search for cost-efficient business solutions will continue to drive the growth of business process outsourcing (BPO) in the next six years.
Real estate firm Cushman & Wakefield’s Where in the World 2016 report stated that the global BPO sector is expected to grow by 6% annually. This is proof that entrepreneurs still consider third-party service providers as key components of their business strategies. Offshoring and nearshoring bring organizations opportunities to acquire high-value talents while letting them diversify their operations and extend their market reach. Plus, businesses get to save on operation costs without compromising the quality of their outputs.
To date, some of the biggest names in the sectorโnamely India and the Philippinesโremain powerful. New pioneering locations in other parts of the world are also emerging as a result of growing demands for offshore services.
Although we’re optimistic about the growth of outsourcing, the industry is currently facing several challenges, which are redefining brands’ business models.
1. Process automation
It’s predicted that 47% of today’s jobs may be automated by 2034 and that non-human tools may be capable of handling about 85% of customer service interactions by 2020.
Like other tech trends, this can disrupt business processes in major ways. If the forecasts above are accurate, we might see sinking demands for BPO companies soon, as brands may turn to cloud-hosted robotics that can automate tasks currently being done by humans. In addition, automation software is cheaper, costing only about one-ninth of the amount companies spend for a full-time worker. This is another factor that may motivate businesses to start absorbing robotic solutions.
The challenge for outsourcing firms, therefore, is to provide higher-value services. The Philippines, for example, is currently exploring its capacity to deploy tech services in addition to customer service.
2. Increasing demands for reshoring
Reshoring, also called onshoring or backshoring, is the process of re-absorbing previously outsourced services into one’s in-house operations.
Plenty of factors are driving this trend, and one is the rising costs of outsourcing in many locations. But it’s most prevalent in the manufacturing segment, where 54% of US executives in 2015 (compared with 7% in 2012) stated that they’re seriously considering moving their production back to their premises.
Additionally, the wage gap between countries is also expected to shrink over the next 10 years or so, partly due to projected exchange rate adjustments. This may indeed convince entrepreneurs to reshape their business strategies by reshoring their operations, although it’s unlikely to happen in the near term.
3. Scarcity of talents due to migration
Talent availability has long been a concern for many BPO companies everywhere in the world, and swelling migration rates aren’t helping them. As professionals seek career-conducive environments and lucrative opportunities elsewhere in the world, they’ve begun to flock to more industrialized countries.
To combat this threat, governments must work with the business sector as they strive to create promising employment opportunities for local graduates. It’s a challenging task, but reducing talent outflow can help them build a more sustainable economy.
4. Rise of new BPO destinations
Established outsourcing giants will be challenged by emerging hubs in countries that have yet to fully utilize their capacity to handle offshored services. Plus, brands are also looking for firms that can provide multilingual customer service. While this is an automatic advantage for inherently non-English-speaking populations, multicultural areas like the Philippines will continue delivering multilingual solutions.
For popular offshoring spots, the test is to upskill their workforce, acquire more intelligent and efficient tools, and enhance their services by targeting their own weaknesses. Doing so will ensure that they can survive tough business competitions in the industry.