What is an offshore BPO & what are their pros/cons?

by Andy Nguyen
offshore BPO

In recent years, offshore BPO has expanded from offering manufacturing services to embracing almost all types of business operations. 

With several benefits ranging from lower costs to access to skilled labor, offshore BPOs can help companies grow quickly. 

But what exactly is an offshore BPO

In this article, we’ll explore offshore BPOs and processes that often get outsourced. We’ll also look into the pros and cons that an offshore BPO company can offer your business.

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Let’s begin.

What is an offshore BPO?

BPO (Business Process Outsourcing) companies are third-party vendors or agencies to whom you can outsource some business processes. These vendors specialize in the skills required to run specific operations. 

It’ll help your company’s operations with specialized skill sets and advanced technologies.

So, when does it become offshore?

An offshore BPO is the outsourcing of your company’s operations to an outsourcing service provider in a foreign country. Commonly outsourced processes are human resource management, information technology, customer service, and administrative service. 

5 popular offshore BPO sectors

From start-ups to billion-dollar enterprises, companies are outsourcing their business functions to partners outside their country.  

Some of the most popular of these processes or sectors of the BPO industry are listed below:

1. KPO

KPO (Knowledge Process Outsourcing) is a part of BPO that refers to outsourcing of information-based tasks. It focuses on data-driven core operations that need business insights. 

For example, if you’re running an export-import company, you can employ KPOs specializing in legal service to sift through the legal processes. They can help you make sense of legal guidelines, vendor contracts, tax laws, etc., of the countries you do business with.

Since it’s their specialty and they have trained experts for the same, they’ll cover grounds better than an in-house team — also saving you from the trouble of nurturing an in-house team.

2. Finance and accounting

A finance and accounting BPO provider offers services like bank reconciliation, payable and receivable accounts, bookkeeping, tax planning, returns, etc. Being specialists in their field, they always strive to deliver the best by adding value to your business.

For example, they can automate your business functions by adopting technological solutions like cloud-based finance. It can make your operations agile, automated, and efficient, redefining the very structure of your business. 

They also offer financial insights, forecasting, investment management, budgeting, etc. 

3. R&D

Research and development are essential for any company to innovate their industries and make good business calls.

Any business decision needs careful analysis. The first step is to collect information through research. You can outsource the process to BPO providers who specialize in R&D to utilize the pool of researchers at affordable wages.

Adding research and development to any wing of your operations will add value. 

It’ll allow you to devise efficient ways of operating your business, increase your scalability, and find market gaps you can profit from.

4. Data analysis

To convert data into something valuable, you need experts to make sense of the raw data. 

Additionally, to uncover useful insights, you’ll have to mine and analyze vast volumes of data, overburdening a limited in-house team. 

Offshore outsourcing services have access to expert analysts, who will help interpret the data on a large scale quite efficiently. You can then use it to understand your market, clients, and any other business functions.

For example, a contact center uses data analytics to sift through their massive data. They then derive actionable insights on customer satisfaction, products, markets, lead generation, etc. 

Companies can leverage these insights to tailor their business services or products to suit their customers accordingly.

5. Customer support

Business process outsourcing companies specializing in customer support handle emails, social media, live chat support, mobile support, and set up call centers

Call centers include not only inbound but outbound as well. Outbound call centers allow you to reach out to your potential clients, which can result in lead generation. But, you’ll have to be available at your clients’ time.

When you outsource these services across the globe, you’ll have an expert team available 24/7, catering to your customer’s needs. And of course, happy customers always equate to good business.

Besides, you can save on hiring, training employees, and investing in equipment.

6. Sales & marketing

The offshore BPO sector includes outsourcing work such as marketing (telemarketing, and advertising) and sales that would otherwise cost a ton in the homeland.

Offshoring sales and marketing to a BPO company is a strategic move that’ll also allow you to tap into international markets. In addition, offshore BPOs speak to your potential customers in their own language. 

This will help you connect better and easier than if you had approached them directly.

Wondering why companies outsource such varied processes to BPO? 

Check out its significant advantages and how they can help you.  

5 key benefits of an offshore BPO

The advantages of offshore BPO companies make them an irresistible option for many companies. 

Some of the benefits of an offshore BPO include:

1. Affordable operations

One of the primary reasons why companies outsource their operations is monetary benefits. 

You can offshore it to a BPO provider in an offshore location with a lower cost of living. 

It’ll save labor costs due to the lower salary expectations in the offshore country as well as the difference in currency rates from your home country. 

For example, let’s take the average monthly salary of popular offshore sites like India (428.49 USD ), the Philippines (875 USD), and Vietnam (748 USD). This compares extremely favorably to a US-based company where the average monthly salary is 7900 USD. 

In addition to the low labor cost, they also have much lower tax rates.

The above factors incentivize companies in countries like the US to offshore their operations to these countries. By taking advantage of the low costs, low tax cuts, etc., they’re able to cut costs, making significant profits.  

And when you offshore processes, most of the operational costs, such as staffing, investing in infrastructure, equipment, etc., will also be managed by the BPO provider. 

2. Refocus on core operations

Outsourcing services will take a few non-core operations, such as information technology, marketing, customer service, etc., off your shoulders. As a result, you will have ample time to concentrate on the core areas of your company.

You can now shift and reallocate your time, money, and resources to a business function like innovations, management, or even start a new wing to your company. It’ll help you expand your business sustainably.

3. Global expansion

If you’re looking to test international waters to expand your business, an offshore BPO can help you.

For example, an American company may offshore marketing, customer service, and R&D processes to a service provider in Latin America. Of course, it’ll allow them to cut costs, but it’s also an opportunity to explore another market.

By reallocating the cost savings to marketing, they can push their products in the new market. The call centers would know how to interact with the local audience along with global customers. In time, the company will be able to build a brand of its own in the regional market.

If successful, they can even begin manufacturing units in the offshore country. It’ll enable the company to cut import costs to sell in the new market. Additionally, it can also manufacture products cheaply, benefitting from skilled low-waged human resources.

4. Access to better technology

As offshore outsourcing companies specialize in different processes you need, they need to keep up with the technology. It includes the latest trends in software, methodology, or even machinery. 

Moreover, business process outsourcing companies cater to multiple businesses at a time. It incentivizes them to scale their operations quickly and optimize them for maximum efficiency. 

They can give you access to the latest technology in the fields of process automation robots, artificial intelligence, analytics, and design thinking. Plus, BPOs also hire the right people to operate such advanced technology.

That’s why a BPO is much better equipped to handle your growing needs in a short time frame.

5. Access to skilled labor

Outsourcing companies have a knack for hiring the right talent in their home country. They know the requirements for the job and the local job market more than foreign companies. 

This knowledge helps them build a team of experts with fewer resources than your company. And the continuous stream of new projects for multiple clients also means that the team remains at its core competency. 

You can save the trouble of building a team from scratch or training new employees. Moreover, you can hire such teams on a project basis, which means you need not keep all of them on your company’s payroll throughout the year. 

However, you should be aware of certain downsides of offshore BPO services.

5 limitations of an offshore BPO

An offshore BPO has a few shortcomings that you can address before deciding on an offshore BPO provider.

1. Lack of day-to-day control

As your business operations shift to an external vendor, you may not have the same control as your in-house team.

You may find it difficult to ensure that your teams get full information about crucial projects. Besides, distance and non-communication can make your employees slack off their tasks and commit less to your company’s goals.

The difference in time zones only adds to the problem. For example, a German company offshoring in Mexico will have a time gap of seven hours. So, either one of them may have to adjust their working hours to schedule meetings.

It can make urgent communications a little tricky, delaying time-sensitive operations.

2. Security concerns

If you’re outsourcing operations such as data analytics and finances, it’s only natural to be concerned about your company’s data security.

Never forget to research the offshore company and check its credibility before signing a contract. Ensure that your company’s and employees’ personal data are protected from data breaches. Have NDAs in place and a solid risk assessment plan to protect your IP rights.

Protect your physical assets with surveillance technology. If possible, you can also limit unwanted access to your assets.

To be extra careful, verify that they have iron-clad security walls, legally and technically, in their networks and communication servers. 

You may do your due diligence by hiring a third-party data security consultant to prepare your BPO vendor to handle your company’s sensitive data. 

3. Unfamiliar foreign regulations

Offshoring operations to a foreign country could put you on the blindside of their laws. To avoid this, be well-read on the relevant laws, especially intellectual rights, economic regulations, taxation, etc.

Iron out any possibilities of hidden costs, like maintenance charges, taxes, currency fluctuations, etc. This can prevent any unforeseeable additions to your cost.

For example, inflation is an integral part of offshore BPO contracts that many aren’t aware of. It’s highly likely that offshore partners may demand local inflation benchmarks. But you should resist and always opt for an inflation risk allocation that also favors you.

4. Language and cultural barriers

Speaking different languages doesn’t just affect your operations but may also cause miscommunication between you and your BPO providers.

For example, if you have offshored customer support service, employees may have regional accents even after accent neutralization. It might affect the quality of your customer service.

To maintain uniformity, it’s necessary for employees to undergo training that will familiarize them with the tone, culture, and brand of your company.

Moreover, your partnership will be stronger if you’re sensitive and accommodating of their culture. Updating yourself with culture, local holidays, festivals, etc., can make communications easier. The more your outsourced team feels understood, the better the results they deliver. 

5. Inability to monitor employee productivity

Offshoring your business functions can make it difficult to track progress and check the quality of work. No matter how much we deny it, physical distance along with time difference does make communication difficult. 

You can never be sure if your offshore outsourcing partners follow the same productivity standards as you. In fact, their idea of quality assurance may not match with yours at all.

If you don’t check in with your teams regularly, they may lose the motivation to deliver results. It’ll compromise the quality of work and derail your operations.

Thankfully, powerful productivity management tools like Time Doctor can help you out here.

With Time Doctor’s robust productivity features, you can: 

This way, you can successfully track and stay in the loop with the operations of your offshore BPO team.

If you want to read more about this, check out our article on offshore outsourcing pros and cons.

You can also check out our list of the top business process outsourcing companies.

Wrapping up

Offshore outsourcing services help you scale your business sustainably without drilling a hole in your pocket.

However, it’s also important not to take it for granted. 

Keep in mind the limitations of an offshore BPO and work around them. Weigh your options carefully before you choose an offshore outsourcing partner. 

If you do it the right way, an offshore BPO can undeniably help expand your business through cost-effective processes, skilled expertise, and improved performance. 

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