Remote Work & Culture

Business Process Outsourcing: The Good, The Bad, and The Alternatives

Outsourcing Teams Through BPOs: Pros and Cons for Any Team Leader

The rapid evolution of AI, business growth and the COVID-19 pandemic have led to an outsourcing boom. Though outsourcing is far from a new concept, the services and capacities of outsourcing providers and the industries they serve are evolving rapidly. Today, over 68% of large U.S. companies utilize outsourcing to scale their teams and maintain their bottom line. But there are BPO pros and cons to consider before making that choice.

Business Process Outsourcing (BPO) is the most common outsourcing model used by growing and enterprise-level companies that need to quickly scale up operations in one area without the need for a long-term or direct-hire team — but that doesn’t mean it’s an ideal fit for every business. If your business is considering outsourcing services to a BPO, here’s everything you need to make an informed decision.

How Do BPOs Function?

BPOs are third-party companies that take on outsourced functions — like customer support or operations — so companies, managers and teams can focus on other core functions. BPOs can be a useful model for both startups and enterprise-level companies: Small teams must prioritize internal resources and might not have the necessary workforce to perform all operations; enterprise companies may have bigger fish to fry and benefit from more efficiently outsourcing front or back-office work. Most companies choose to outsource when the benefits of the third-party provider outweigh an internal approach.

BPO Pros and Cons

As you consider outsourcing essential functions to a BPO, it’s helpful to research the pros and cons of this approach

BPO Pro #1: Increased Efficiency/Productivity

Outsourcing through BPOs can free up internal resources, allowing valuable employees to redirect time spent on certain business functions — such as call centers or sales support teams — to more variable tasks or projects. Outsourcing also provides access to a broader talent pool of experienced professionals, helping you innovate and stay competitive without accruing the additional costs of hiring internal employees.

BPO Pro #2: Empowered Key Reductions

Large BPOs with multiple clients in many locations can reduce the costs of administrative work, 24/7 operations support, IT and certain HR functions. Since offshore operating costs are generally much cheaper, as is specialized labor, cost savings is a primary reason many enterprise companies choose BPO outsourcing.

BPO Pro #3: More Flexibility 

Sourcing and vetting candidates can be incredibly time-consuming, especially for teams that only require additional support in a seasonal or otherwise temporary capacity. By eliminating the need to recruit and hire directly for certain teams, companies can scale quickly and effectively.

BPO Con #1: Remote Culture Challenges

Culture has been one of the biggest buzzwords in the remote work boom forced by COVID – “how do we maintain our company culture when our team members aren’t in the building?” Companies cite communication, tracking remote work productivity and lack of team cohesion as key challenges in managing a remote workforce. These challenges can be exacerbated when entire teams are outsourced and employed by your BPO.

BPO Con #2: Unexpected Costs

Large BPOs can have complex contracts with extensive fine print. If you choose to partner with an offshore BPO and fail to conduct thorough due diligence, poor management, high turnover and service charges or hikes could kill your cost savings. On top of tangible costs, loss of quality control and customer dissatisfaction with your chosen BPO can lead to additional losses.

BPO Con #3: Potential Security Concerns

Trusting a third party with proprietary information poses an obvious risk: your chances of experiencing breaches or data theft are much higher if your chosen BPO does not have strict security protocols or extensive experience with protected data. And when outsourcing to a BPO that employs offshore workers, security can be a nonstarter — especially for companies in the cyber, fintech, insurtech or medtech spaces.

BPO Con #4: Lack of Dedicated Support 

With many BPOs, employees might be working on several accounts, increasing the chance that they might lack cohesion or be less than committed to your organization’s success. This can also result in challenges communicating with the BPO – an issue that can be even worse for small and mid-sized enterprises, as their BPO might naturally spend more time with higher-paying enterprise accounts. This type of account sharing can also exacerbate the remote culture issue mentioned above.

BPO Alternatives

If outsourcing would be helpful to your company, it’s important to partner with the right provider. Any outsourcing takes significant front-end work, including training and communication as the work shifts from in-house to the BPO. If you aren’t confident that a traditional BPO is an ideal fit for your company, staffing agencies, RPOs (recruitment process outsourcing), or even a managed service model can offer specialized, third-party help with slightly different approaches.

A New Way to Outsource

Managed service models can offer a better way to outsource that combats all the downsides of a BPO while delivering all of the benefits. While they operate similarly to BPOs, there are typically key differences:

  • Culture and engagement are embedded into the outsourced team
  • Costs are lower and more transparent and predictable
  • Remote team members are all either located in the U.S. or authorized to work in the U.S. (some companies even use a talent pool of military spouses, veterans, caregivers, and survivors to reduce the risk of offshoring). The global location of military connected workers can provide coverage while mitigating security concerns.
  • Team members are only on one account at a time for fully dedicated support.

Before choosing an outsourcing provider, make sure to weigh the pros and cons of going with a BPO – and consider your alternatives. It could make all the difference between business results and a management nightmare.