Domestic, Offshore, or Nearshore: Which BPO Model Is Best for Your Business?

Outsourcing your business processes can be a good way to reduce your operating costs. One example of this was when Procter and Gamble outsourced its Java Programming to the Philippines and Poland. This allowed the company to save up to $28 million in costs, according to this report by the International Journal of Business and Social Science.

By contracting third-party specialists, you save up on having to maintain an in-house staff. This can come in handy especially if you only need the service for a limited time – like when you are building websites and databases, or when you need inbound call center services to support a seasonal sales effort. You also get to focus more on developing your company’s core competencies, whether it’s manufacturing, production, or creative services.

There are different ways you can outsource work to a BPO company. Let’s go over three types of BPO models so you can decide on which one is the best for your company.

1. Domestic-Based Outsourcing

This first type of outsourcing involves contracting your company’s functions out to third party service providers located within the same country. These service providers can either be other businesses or individuals, as long as they can provide the needed services for your firm.

Benefits:

The primary benefit of domestic-based outsourcing is the absence of a language barrier and cultural differences. Outsourcing work locally makes it easier to communicate precise instructions to your third party provider. Since the BPO agents you may hire can understand clients better, your customers will have an easier time communicating concerns or inquiries to your company.

Disadvantages:

Higher labor costs is one main disadvantage of domestic-based outsourcing. In developed countries, high standards of living and taxes could contribute to higher hiring fees. Companies outsourcing work to BPOs in the same country, for example, might have to shoulder these fees, especially if the local labor laws require them to pay higher amounts. If your budget won’t allow for this, then it might be better to consider other options for outsourcing.

2. Offshoring

This BPO model involves contracting your company’s business processes out to an overseas third party service provider. Doing so allows the business to cut operating costs while maintaining product or service quality. Since other countries may have cheaper wages, companies can save more as opposed to maintaining business processes in-house. Some of the areas they can save on include human resources services, customer care functions, and telemarketing.

Benefits:

Offshore outsourcing gives you access to lower labor costs and a global talent pool. This has the potential to expand your company’s network since you’re hiring service providers from different countries. This also works for businesses that either have an international presence or a huge local client pool. Another alternative is to open an offshore company in order to take advantage of the low taxes and easy incorporation process.

If your business, for example, has a lot of clients and your customer service becomes overburdened, you can try outsourcing to BPOs abroad. Among the most popular services outsourced abroad are inbound call center services, for which call centers based in countries like India and the Philippines are the most well-known providers.

Disadvantages:

Incurring additional costs is a possible disadvantage when hiring BPOs abroad. These can include training and translation fees, especially if the country speaks a different language. In such cases, it’s best for you to negotiate and clarify the exact expenses that both parties need to cover.

Another potential challenge is cultural differences and language barriers. Since the BPO you might want to do business with is located in a different country, you will have to give clear instructions on how you want call center agents to relate to your customers. You can have your company send representatives who can train the agents in the first few months.

3. Nearshoring

Similar to offshoring, this BPO model outsources services in another country that is closer to your company’s location. One example of nearshoring is how the companies in Europe outsource their work to BPOs within the continent’s boundaries. These third party providers are located in regions where the labor fees are considerably lower.

Benefits:

As opposed to offshoring, this BPO model offers the benefit of less time zone differences and cheaper travel. Since the service provider is within a region where the cost of doing business is much lower, your company may have an easier time covering fees for both training and traveling.

Disadvantages:

One disadvantage of nearshoring is the relatively higher cost as compared to offshoring. While rates and fees may be more cost effective, the difference may only be minimal. Companies may have to take careful consideration of costs if they are operating on a lower budget than larger businesses.

These are three of the ways that you can outsource your business processes. Depending on the size of your company and your budget, you will need to carefully consider which one is the best suited for your purposes, whether it’s a call center for placing orders, a telemarketing sales force or customer care services.