Known as ‘offshoring’ or ‘offshore managed services
,’ partnering with a third-party provider who has an overseas operation to take over your back office processes can be a great way to save money. But while these processes are not revenue-generating activities, they are still important aspects of your business. Entrusting them to an outside company is not something that should be undertaken lightly.
Before entering into an offshoring contract, it is critical that your organisation vets potential providers and understands the opportunities that exist to minimise the impact of possible problems.
The Benefits of Offshoring
Traditionally, ‘back office processes’ are considered to include administrative tasks such as order processing, payroll, accounts, HR, IT, data processing, and data management. Outsourcing these tasks represents an attractive opportunity for large organisations with high operational costs, though it is also beneficial for SMEs or companies in a growth phase that may not be able to host these or other similar functions in-house.
Other potential benefits of offshoring through a trusted provider - beyond the cost-savings that come from outsourcing to countries where labour costs are cheaper - include:
- The ability to tap into a deep pool of talent resources. In many countries where offshoring operations are common - such as the Philippines - BPO roles represent solid career opportunities for local workers + who are highly educated / tertiary qualified
- The productivity benefits associated with freeing your staff from repetitive daily tasks so that they can focus more on core business activities. Not only will this improve productivity, it also leads to higher job satisfaction and retention rates.
- The risk management benefits that come from working with an established provider. Not only can these offshore service providers take on the risk of your non-core functions, they also eliminate the risks associated with setting up your own operations in a foreign country.
- The flexibility that comes from having a workforce in another time zone that is able to work around-the-clock on your business functions.
- Scale up your operations, via building an extension of your team.
A less common benefit of offshoring that is often overlooked is the additional efficiency organisations can achieve through the creation of transition documentation and reviewing the process required for document management to ensure efficiency.
Before an organisation transitions to BPO of any kind, their provider should assist in documenting processes so that staff can be trained and so that minimal disruptions occur, once it comes time to go live. However, creating this documentation may uncover additional opportunities for optimisation. In this way, further efficiencies can be achieved through offshoring than were initially anticipated.
The Risks of Offshoring
While offshoring offers many benefits, there are also a number of potential risks to consider when outsourcing back office processes to an outside provider in a foreign country. These can include:
- Variable costs, if the costs you are initially quoted do not remain consistent due to exchange rates or operational changes. If this occurs, outsourcing can quickly become a less profitable exercise.
- Inconsistent quality, if the quality you were promised is not maintained. This can result from a number of challenges, including poor quality control, language barriers, mismatched cultural standards, poor training, or inadequate management.
- Data security risks, if your offshore provider does not take sufficient precautions to keep your data safe. This can cause your organisation to experience a loss or theft of company or customer data.
- Performance interruptions, if your provider is unavailable to carry out processes on your behalf for any length of time. For example, if a natural disaster, business failure, or other unplanned event occurs, and if proper contingency plans are not in place, you may lose access to processes that affect your ability to do business.
- Staff retention, some providers may have a high turnover rate of staff which can cause issues around staff training and competency
How to Minimise Your Offshoring Risks
All of the risks with offshoring can be minimised by appropriately vetting potential partners to ensure your organisation is protected.
Ask the following questions of every third-party offshoring partner you are considering:
- Do you understand my business? The best partners understand the importance of engaging in consultancy up-front to familiarise themselves with your organisation, your customers, your needs, and your business goals. If a partner does not understand your business, they simply can not serve it properly through offshoring.
- How will your team help my organisation transition to offshoring? A good partner understands not just how to set up offshoring services, but how to transition an organisation to them with minimal disruptions.
- What accreditations do you hold? Partners should be happy to share evidence of their existing accreditations - for example, to current ISO standards.
- How do you minimise the potential impact of language and cultural barriers? Look for a partner whose workforce speaks and understands English as well as their native language, and that fully understands any terminology associated with the back office tasks you plan to outsource. Offshore workers in the Philippines, for example, have strong English language skills, and many build their careers working in offshoring roles.
- What is the culture of the organisation? Look for a workforce that is highly engaged. Ask what activities are in place to give back to the community. A great community culture and staff engagement increase staff retention rates providing longer term success.
- What hours will the offshoring team work? If you do not require an after-hours workforce, look for a partner that offers the flexibility to work the hours you need, despite your different time zones.
- How will you keep my data safe? Look for a partner that has a good track record of data security and that follows the latest data protection policies. You can further minimise risk by only providing them with the data they need to perform the tasks assigned to them and by requiring that they sign agreements ensuring complete data confidentiality.
- How do you set and enforce quality control standards? Minimising potential quality issues comes down to selecting a provider with experience in your sector, who fully understands the standards you require.
- What values do you adhere to as an organisation? Choosing an offshoring partner whose corporate values align with yours can create a culture match that contributes to the long-term success of your engagement.
One underutilised tactic for vetting offshoring providers is to actually visit their overseas location. Visiting in person allows you to see their work environment, people, management, and facilities, and to determine for yourself whether or not they are not up to the standard you expect.
Once you have found an offshore service provider that meets your criteria, one final step you can take to minimise risk is to enter into binding agreements together. These might include a service level agreement (SLA) or governance plan that dictates regular audits, key performance indicators (KPIs) that can be tracked and monitored over time, or a binding contract with penalties attached that clearly spells out your expectations and requirements in terms of quality, compliance, and security.
Careful Research Leads to Offshore Success
Any concerns or risks associated with offshoring can all be successfully managed through the precautions and activities described here.
Working with an established provider that has a track record of success is not just critical to the future of your offshoring program. It may be the single most important factor that drives its overall success or failure.
With 25 years experience, and more than 1000 employees serving 150 clients through a Grade A+ facility in the Philippines, Canon Business Services (formerly Converga) has the experience and skills needed to help you successfully launch an offshoring program. Reach out for more information on how our team can support your back office processes through offshoring.