Your Guide to Business Growth & Global Expansion
In a world where businesses operate on a global scale, with websites that reach across continents, the ability to ship products internationally, and the flexibility to set up remote work environments, gaining a competitive edge has become increasingly challenging. Despite these advancements, one strategic business practice continues to stand out for its effectiveness in reducing staffing costs and accelerating growth: outsourcing.
By tapping into a global talent pool and leveraging specialized expertise, companies can not only optimize their operations but also enhance their competitive advantage in ways only sometimes possible with in-house resources.
Understanding the Concept of Outsourcing
In its simplest form, outsourcing is the practice of hiring employees outside your business to perform critical business functions. Your outsourced staff may provide new skills and knowledge, expanding your offering and growing your business.
The History of Outsourcing
The practice of outsourcing has evolved significantly over the decades, transforming from a simple cost-saving strategy into a complex and strategic business tool.
- 1950s: Outsourcing started within the manufacturing sector of developed countries as a strategy to reduce costs and improve operational flexibility by contracting out portions of the manufacturing process.
- 1970s: Globalization led businesses to move operations offshore, particularly to Asia, to capitalize on lower labor costs and the productivity benefits of different time zones.
- 1990s: The internet boom transformed outsourcing, extending its reach to include IT services and customer support, with countries like India leading in IT outsourcing due to their skilled, English-speaking workforce.
- 2000s: Outsourcing evolved into a strategic partnership, offering not just cost savings but also adding value through innovation and specialized expertise in areas like BPO, KPO, and digital marketing.
- 2020s: Today, outsourcing integrates advanced technologies such as AI and robotic process automation, enhancing service delivery and allowing companies to outsource more complex functions.
Types of Outsourcing
There are several types of outsourcing, each one catering to specific needs and helps businesses remain competitive and efficient in their operations.
Information Technology Outsourcing (ITO)
Information Technology Outsourcing involves delegating IT functions, such as software development, infrastructure solutions, software support, and maintenance, to external providers.
Example of ITO
Hiring an app developer with specialized skills can be costly for a small business. As a result, a small business might look to build an outsourced development team to capitalize on cost efficiencies and access to technical expertise.
Business Process Outsourcing (BPO)
Business Process Outsourcing involves contracting non-primary business activities and functions to a third-party provider. These activities typically include customer service, accounting, data entry, and human resources.
Example of BPO
A retail company might use BPO to handle customer service operations, employing a firm in the Philippines to manage calls and online customer interactions. This would free up internal resources to focus on core business strategies.
Knowledge Process Outsourcing (KPO)
Knowledge Process Outsourcing refers to outsourcing in areas that require advanced analytical and technical skills and decision-making expertise. This often includes services like investment research, patent filing, market research, and medical transcription.
Example of KPO
A pharmaceutical company may outsource drug research and development to a KPO firm in Eastern Europe, taking advantage of the region’s strong educational focus in chemistry and pharmaceutical sciences.
Legal Process Outsourcing (LPO)
Legal Process Outsourcing involves outsourcing legal services to external firms or legal support service providers. Tasks typically outsourced include document review, legal research, document drafting, and patent services.
Example of LPO
A U.S.-based corporation might outsource the review of legal documents to an LPO provider, which has professionals skilled in U.S. law but at a fraction of the domestic cost.
A Breakdown of Common Outsourcing Models
How companies choose to outsource can vary greatly depending on their specific needs, goals, and the nature of the work. Below are some of the most common outsourcing models, each tailored to different strategic objectives:
- Project-Based Outsourcing: This model involves outsourcing specific projects with defined beginnings and ends rather than ongoing services.
- Dedicated Team Model: In this model, the outsourcing provider supplies a team that works exclusively for the client, acting as an extension of the client’s own workforce.
- Staff Augmentation: This is a flexible outsourcing strategy that allows companies to hire tech talent globally and manage augmented teams directly.
- Managed Services: This model involves outsourcing entire business processes or functions to an external provider who manages the operations and delivers results against agreed-upon performance metrics.
- Hybrid Outsourcing: Hybrid outsourcing combines elements of different outsourcing models to suit specific project requirements or to balance control and flexibility.
By choosing the right model, companies can achieve greater scalability, flexibility, and efficiency in their operations. While several outsourcing models exist, one stands out among the pack.
The Emapta Model: Tailored Outsourcing
Emapta’s unique outsourcing model sets it apart from other outsourcing services. While the Emapta model is similar to that of dedicated offshore teams, it offers more scalability, personalization, control, and, most importantly, transparency.
- Scalability: With Emapta, you can easily add to your dedicated team in order to meet your organizational demands (with no hidden fees).
- Personalization: Your offshore employees work in modern offices branded with your company logo and have access to the same equipment and hardware used by your in-house team.
- Control: Unlike other outsourcing models and providers, Emapta allows you to offer raises and promotions to your offshore employees anytime.
- Transparency: What we quote you is what you’ll get — no hidden fees and no salary markups.
The Benefits: Why Companies Choose to Outsource
Businesses outsource because it can offer a significant competitive advantage when done with the right outsourcing partner. Here are some of the advantages of outsourcing:
Access to Global Expertise
By building teams around the globe, employers can find talent they wouldn’t usually find locally. When you partner with Emapta, you have access to the top 1% of global talent, all with specialized skills and certifications.
Cost Savings
Outsourcing is a cost-effective practice. Recruiting, hiring, onboarding, and retaining local in-house employees can be expensive. Between the lower cost of living in regions like the Philippines and Latin America and the cost savings of your outsourcing provider handling the recruitment and onboarding processes, businesses can save thousands of dollars year over year by choosing to outsource specific teams and roles.
Allows Businesses to Focus on Core Competencies
By outsourcing non-core functions, companies can concentrate their onshore resources and energy on what they do best. This strategic focus on core competencies can drive innovations, improve product and service quality, and accelerate business growth.
Increased Operational Efficiency
Outsourcing can streamline business operations and improve service delivery by leveraging optimized processes, state-of-the-art technology, and experience in handling complex situations. The result is a more efficient, faster, and reliable process flow, reducing downtime and increasing productivity.
24/7 Productivity
Outsourcing to providers in different time zones enables businesses to operate around the clock. This continuous operation ensures that work is being done even when the home office is closed, thus speeding up output and improving response times to customer inquiries and market demands.
The Potential Risks and Challenges to Know
While outsourcing offers numerous benefits, it also comes with its own set of risks and challenges that could impact business operations. It’s important to understand and prepare for these potential issues:
- Hidden Costs: Many traditional outsourcing providers charge fees for contract management, transition, and ongoing coordination. Review any outsourcing agreements for hidden fees. Emapta has zero hidden fees or salary markups.
- Data Security Risks: Any time you work with an external service provider, there are potential security concerns. When you partner with a provider like Emapta, your data is backed up by bank-level security measures. For example, we’re compliant with Republic Act No. 10173, also known as the Data Privacy Act of 2012 (DPA). We safeguard personal data across all sectors, adhering to principles of transparency, legitimate purpose, and proportionality in all data processing.
- Communication Barriers: Cultural differences, language barriers, and time zones can lead to misunderstandings and inefficiencies. That’s why we establish clear communication protocols, invest in cultural training, and source talent from English-proficient regions.
Outsourcing vs. Offshoring vs. Nearshoring
Businesses looking to optimize their operations through external collaboration have several strategies to consider: outsourcing, offshoring, and nearshoring. Each offers unique advantages and can be tailored to meet specific business objectives.
Outsourcing
Outsourcing involves engaging a third-party organization to manage certain business functions or processes. This can occur within the same country or internationally and is typically driven by the desire to improve efficiency, reduce costs, or access specialized skills not available in-house.
Offshoring
Offshoring moves business processes to a different country, usually to benefit from lower labor costs, favorable economic conditions or to enter new markets. This involves setting up a subsidiary or contracting an external company in a foreign country.
Nearshoring
Nearshoring is similar to offshoring but involves transferring work to companies in neighboring or nearby countries. This approach is chosen to reduce costs while maintaining closer cultural, linguistic, and geographical ties, which leads to easier communication and collaboration.
How to Choose the Right Outsourcing Company for Your Business
Selecting an outsourcing provider is a critical decision that can significantly impact the efficiency, quality and overall success of your business. Here are key considerations and steps to help you find the right outsourcing partner that aligns with your organizational goals and operational needs.
- Define Your Outsourcing Objectives: Clearly define what you expect to achieve through outsourcing. Are you looking to reduce costs, access specialized skills, or scale operations?
- Assess Provider Expertise and Reputation: Evaluate potential providers based on their expertise in your industry and their reputation. Check their track record and client testimonials.
- Consider Cultural and Communication Fit: Ensure that the provider’s corporate culture and communication style align with your own. This is crucial for smooth collaboration.
- Analyze Communication Protocols: Good communication is essential. Evaluate their communication protocols and their ability to respond to emergencies or urgent needs.
- Discuss Scalability and Flexibility: The provider should be able to scale services based on your business needs. Flexibility can be crucial as your business grows or faces fluctuating demands.
By thoroughly assessing these areas, you can select an outsourcing provider that not only meets your current needs but also has the potential to be a long-term strategic partner in your business growth.
Join a New Era of Global Talent Outsourcing with Emapta
Emapta’s global reach means we can build expert, dedicated teams across a wide range of industries, including:
- Tech
- Mortgage & Financial Services
- Finance & Accounting
- Retail & E-Commerce
- Customer Experience
We offer access to global talent solutions and a tailored outsourcing model that focuses on transparent pricing and maximum control. Emapta reimagined the way businesses operate, and if you’re ready to discover the benefits of outsourcing, we’re here to build the dedicated team you need.
