What You Need to Know Before Offshoring
This article was kindly provided by one of our valued partners, Sharon Melamed – Managing Director of Matchboard, a free online matching service for sales, service and back office. Sharon is a BPO industry veteran, having spent 20+ years in the US, Japan and Australia, helping hundreds of clients set up contact centre and back office operations in global markets.
Thinking of going offshore? Here are some tips.
As Shakespeare famously said, “All the world’s a stage”. And in today’s business world, if you’re not playing on it, you may be missing a golden opportunity to lower your costs and grow your business.
From start-ups to established firms, the march of Australian companies offshore is gathering momentum. Enabling this trend are countries such as the Philippines, where there are now a range of outsource vendors with models and tools to make life easy for offshore first timers. These vendors often have an account manager or sales representative on the ground in Australia; some are even owned and operated by Australian entrepreneurs, removing the cultural barrier which can thwart success.
What sort of functions are suitable to offshoring?
Typically it’s the “grunt work”, rather than strategic functions, that are best offshored. Here are a range of real-life examples that work well offshore:
- Recruitment/executive search firms – these firms have embraced offshore for back-end tasks such as research of potential job candidates, database cleansing, and book-keeping functions.
- Management consultants – the majority of consulting businesses are either small boutique firms or solo practitioners who don’t have super-size budgets. They may turn to offshore vendors to build a website or manage their SEO initiatives.
- Online retailers – customer service is key for retailers, whether that’s delivered through a call centre, web chat or email. Offshore outsourcers can manage all these channels, and even around-the-clock to provide a point of competitive differentiation.
- Accounting firms – while accounting firms are best suited to managing their client relationships and complex matters directly, the “easy stuff” can be offshored with significant cost savings. This might include things like BAS preparation and lodgement, management of client accounts receivable and payable, and bank reconciliation.
- Law firms – transcription services are a popular choice for lawyers (who speak into a Dictaphone and send the audio files to the offshore vendor to type up). Another service which professional services firms across the board are using is outsourced web chat. That’s where an offshore provider monitors your website and captures leads through web chat boxes that pop up and assist visitors with information about your offering.
What are the key advantages of offshoring?
- Large cost savings – Depending on which country you outsource to, you can enjoy cost savings of between 30% and 70%.
- Broader talent pool – If you are struggling to find the right skillset locally, you can tap into the world’s vast English-speaking labour pool, stretching from New Zealand and Fiji to the Philippines and South Africa and beyond.
- Remove admin burden – Spend more time getting close to customers and developing your business strategy while daily tasks are taken off your shoulders.
- Increase your flexibility – Offshore workforces can be ramped up and down in accordance with your changing business needs, with no investment in computers, phones or other assets… You can be up and running in as little as a couple of weeks.
What operating models are available offshore?
Hopefully you are now asking yourself the question, not “should we?” but “how should we”? If you’re a small business, there are two models you should consider to go offshore:
- Traditional outsourcing
The most common, “traditional” operating model offshore is business process outsourcing (BPO) to a third party. There is no shortage of BPO vendors clamouring for business, ensuring a highly competitive process. Pricing is often per hour per FTE (full-time equivalent) or per transaction. This approach is uncomplicated, since the outsourcer is contracted to manage the hiring, training, technology and operational performance. Since there is no requirement to establish an entity on the ground, the complexity from an HR, operational and legal perspective is relatively low. The risk is also low, assuming a reputable vendor with proven expertise delivering similar contracts is selected.
- Staff leasing, or Co-sourcing
This is where you work with a third party to establish an optimal mix of their services and people and yours. For example, you would likely control and directly manage the workforce, but the third party would provide the infrastructure and shared support services, such as HR and IT. The staff leasing model is more suitable if you like having full control – you can fly over (or Skype) and interview and select the people you want working on your business; you can implement your policies, your KPIs and provide your own training. The other key advantage of this model is that it’s cheaper than traditional outsourcing, as it is not a turn-key solution where the outsourcer has accountability for the staff’s performance.
So where do I start?