Why Outsourcing makes Sense and is so Successful

Why Outsourcing makes Sense and is so Successful

Outsourcing has become essential for any business that is looking to scale. Using a BPO can cut their costs while, frequently, enhancing the quality of their services. But what are the factors that make BPO so successful, and why can they succeed in a way that in-house provision cannot match?

The obvious difference is in price. The BPO industry owes its existence to the fact they are able to offer their services at a significantly lower cost than a business could otherwise provide them. Indeed, the initial growth of the sector was down to the savings that they offered. India emerged as a dominant location because the country’s lower labour costs, along with some incentives offered by the Indian government to encourage inward investment, meant BPOs were able to operate much more cheaply than their in-house equivalent.

The savings are not, however, just in staffing costs. The earliest major examples of BPOs were captive; in-house operations set up by multinational businesses. Although these provided ongoing savings, they came at a considerable establishment cost. Modern third-party BPOs rose to offer that opportunity to businesses that would not, otherwise, be able to resource offshored operations. While large organisations themselves, India’s biggest BPO employs over 100,000 staff, their ability to cover multiple contacts meant that even those with small BPO requirements were able to take advantage of their services.

Cost and savings alone is not enough to make a success, though. Indeed, there have been notable BPO failures where the high initial savings were quickly lost because quality had suffered. Instead, the best BPOs focus heavily on quality. Most will have their own sector specialisms, meaning they can meet their clients’ regulators’ often demanding requirements and a pool of well-versed staff in the conversations and processes that will shape their working day.

They can also make use of local specialisms. BPO to the Philippines is perhaps the clearest example of this. The nation has an exceptionally high level of English fluency; this has made it the leading destination for BPO services like call and contact centres, where good communication is essential to success.

And BPOs also invest heavily in their own business. While an in-house service might struggle to be high on the priority list, for BPOs, ensuring that their staff are trained in best practice and have both the equipment and culture they need to succeed is critical to the business’s performance. BPOs are often early adopters of technology, voice recognition and AI; for example, they are frequently used to create assistants for call agents, providing relevant suggestions and prompts while they are on a call.

This combination of factors can make outsourcing an easy business decision. In the same way, as a brand might source a component from a specialist to get the best price and quality, they can use a BPO for business functions. When it comes to customer complaints or claims processing, who actually does it matters much less than being done well. That’s why BPOs have flourished along with the businesses they have helped.

John Norwood
John Norwood is best known as a technology journalist, currently at Ziddu where he focuses on tech startups, companies, and products.