A Comprehensive

Guide to
Outsourcing

Everything You Need to Know About

Starting Your Offshore Team
Contents

00
Foreword

01
Introduction to 01.0 What is Outsourcing and How Does it Work?

Outsourcing 01.1 Managed Outsourcing Services

01.2

01.3

01.4 In-House Employees and Outsourced Team

01.5 What are The Types of Outsourcing?

01.6 List of Common Services That are Outsourced

01.7 How Much Does Outsourcing Cost?

01.8 Key Benefits of Outsourcing

01.9 Is it the Right Time to Outsource?

02
Outsourcing and 02.1 Why do businesses fail in outsourcing?

its Risks 02.2 Common Outsourcing Mistakes and How to

Avoid Them

02.3 Key Issues/Risks with Outsourcing and How to

Mitigate Them
03
Finding and 03.1 The Sourcing Methodology
Choosing a 03.2
Service Provider for Service Providers

03.3 Tips on Choosing a Service Provider

03.4 Stop, Look, and Listen: Red Flags to Look

Out for

04
The Outsourcing 04.1 Due Diligence in Outsourcing

Journey Begins 04.2 The Transition Process: What is It and Why

04.3 You Shouldn’t Skip It

04.4 Getting to Know Your Outsourced Team

Best Practices to Managing Outsourcing
Relationships

05 Outsourcing to 05.1 What Makes the Philippines a Top

Outsourcing Destination
the Philippines
05.2 Is the Philippine BPO Market Ready for
Automation?

06 Conclusion
 0
00
Foreword

What’s your take on building an offshore team in the Philippines?

You’re probably interested to give it a try after hearing its benefits and perks,

specifically its ability to lower operational expenses. However, you’re still unsure

if it will work for you — that’s why you’re here.

This e-book aims to guide you through your entire outsourcing journey: from

learning the basics about outsourcing to maintaining positive relationships with

your chosen service provider. To prepare you further, we’ve also discussed the

common reasons why outsourcing deals fail, the common mistakes you should

avoid, and the risks you may encounter.

You can also find a simplified yet flexible sourcing methodology in the Chapter 3

of this e-book which you can follow or modify as you see fit.

In the last part of this e-book, we presented basic information about the

Philippine outsourcing market and why you should consider sending jobs to this

country.

As you read, pick up the information you find as valuable and use it as your guide

in building your offshore team.

Ready to start your outsourcing journey? Here’s a

reminder before you do it: Quality over quantity at all
times. Choose an outsourcing company that can help
you grow over time.

Good luck with your journey and may the odds be ever in your favor!
01
Introduction to
Outsourcing

What is Outsourcing and How

Does it Work?
Outsourcing is the practice of hiring an external service
provider to manage certain business functions for your
company. It’s about understanding the business
operations you need to let go of in order to devote more
resources to your key initiatives.

Initially, businesses utilize outsourcing because of the

dramatic cost savings they can get. Apart from its
economical cost, they can also access top-grade
technology without purchasing additional equipment.
But as outsourcing continues to prove its superiority in
The primary goal of outsourcing is to help
delivering quality services, many companies have been
businesses fill in roles and resolve other
using it as a strategic solution to fill in operational gaps
in-house limitations. But what exactly is
like specialist skills, technology, service delivery, and
outsourcing?
data security.
So what happens when you outsource?

Once you’ve passed down the service to your chosen outsourcing company, it’s a requisite to give up partial
or full control of the function. Rather than overseeing work details, you can simply monitor your team’s
progress through a contact person. In cases where you need to hire more people to assist business growth,
all you need to do is inform your vendor and everything will be taken care of — recruitment, payroll, HR, IT,
accounting, and admin.

However, you should also note that the amount of work an outsourcing company can do for you depends on
the working arrangement you prefer. The usual business delivery models you can encounter during your
search are Managed Services, Staff Leasing, and Staff Augmentation services.

01.1

Managed Outsourcing Services

This business delivery model is most commonly known
as the “fully managed” or the “traditional end-to-end”
staffing solution that enables you to transfer an entire
function to a service provider.

Here, the outsourcing service provider will build a

curated team of highly-skilled professionals for the
specific business function you need to outsource. You
will be the one to identify the KPIs and SLAs while
their management team will oversee your offshore
team’s day-to-day operations. They will ensure that
they are meeting your requirements to help achieve
your business goals.

For example, if your company has limited resources to

maintain a customer service team, you can hire a call
center to handle your customers’ inquiries.
01.2

Staff Leasing Services

Staff Leasing, also known as a “co-managed” staffing
solution, is the popular option of businesses nowadays.
It gives you full operational control over your team. You
will manage and give directives while your outsourcing
partner will oversee the operations and provide regular
reports. Additionally, the outsourcing service provider
will be your support arm that will take care of non-core
business activities such as recruitment, HR, IT, payroll,
and other processes for you.

To understand how it works, simply imagine having a

remote team or employees who are working from
home. This service delivery model is a suitable solution
for talent and specialist skills shortages within your
organization. To make outsourcing work, you should
see it as a strategy that requires a structured approach,
a considerable amount of planning and research, and
good judgment.

01.3

Staff
Augmentation
This outsourcing strategy is for businesses in
need of additional staff temporarily to
augment the capacity of their in-house team.
In most cases, the clients under this service
only need a presence in the country and a little
back-end support, such as in HR, payroll, and
administrative tasks.
01.4

In-House Employees and

Outsourced Team
Cost In-House Employees
The median weekly earnings of full-time
American workers for the first quarter
of 2021 were $989, according to the
updated report from the US Bureau
of Labor Statistics. The amount still
varies depending on several factors.
For instance, men have higher median
weekly earnings than women. Race
and ethnicity groups, age, occupational
groups, and educational attainment
are also taken into consideration —
with $1,426 being the median weekly
earnings of employees holding at least a
bachelor’s degree.
Outsourced Team
Based on the latest data, the median
monthly salary of full-time Filipinos is
$999.17*. If you’re going to divide this
number by four weeks, the weekly salary
will be $249.79.
*Based on the converted amount. The
original data shows that the average
monthly salary is Php48,200. As of 01
May 2021, $1 is equivalent to Php48.24

* Aside from looking at the actual figures, it is also recommended to perform a cost-benefit analysis.
This will help you assess if outsourcing is a viable solution for your business based on its estimated
costs, benefits, or opportunities.

Roles/Job In-House Employees Outsourced Team

Functions Certain roles must be kept in-house at
all costs, specifically the functions that
are crucial to your core competencies.
Examples are executive roles, employee
training and development, strategic
planning, and risk management.
Management In-House Employees Outsourced Team
Control
As the employer, you have full oversight You will need to let go of some, or most,
over the tasks, performance, and results control over your outsourced team. To
ensure good performance, you can set
KPIs which you will communicate to a
key person. As previously mentioned,

want to manage your outsourced team

directly.

Service In-House Employees Outsourced Team

Quality
Service or output quality depends on the
employee development programs, and
leadership skills. Finding an employee
who fits not only the job description but
also the company culture matters a lot.
Similar to in-house concerns, you must
also find a reliable outsourcing company
that can match you with the right talent.
As long as you can make the right choice
in selecting a service provider, you
can expect quality service from your
outsourced team.

Data In-House Employees Outsourced Team

Security and
Ensuring the security and confidentiality Data security and confidentiality
Confidentiality
of your data will depend on your IT are common concerns regarding
department. outsourcing. However, you should
also take note that many outsourcing
companies follow strict information
security protocols to prevent data
leakage.

Talent In-House Employees Outsourced Team

Availability
Do you have employees who can
perform the role? How easy or hard is it
to fill in roles?
Another advantage of outsourcing is
you can look for a service provider that
process of recruiting, hiring, and training
will all be under their care.
01.5

What are the types of Outsourcing?

It’s crucial to decide where you will send the job before you officially start your outsourcing journey. Cost is a
key differentiator, as offshore outsourcing companies offer cheaper services compared to their onshore
counterparts. However, there are other elements you need to consider such as the time zone difference,
cultural disparities, and talent availability.

Moreover, knowing whether you will engage with a single (single-sourced) or different (multi-sourced)
outsourcing partners is also important if you have plans to outsource several functions. Below, learn the
differences between onshore outsourcing vs. offshore outsourcing and single sourcing vs. multi-sourcing.

Onshore Outsourcing Offshore Outsourcing

Onshore outsourcing, also known as “local outsourcing”, Offshore outsourcing is the activity of sending jobs to

refers to the contracting out of jobs to companies located another territory. An example is a U.S.-based company

in the same geographical location. A New York-based hiring its data entry team in the Philippines.

company contracting its call center operations in Texas is

an example of onshore outsourcing.

Single Sourcing Multi-Sourcing

Single sourcing takes place when you outsource a set of Multi-sourcing happens when you outsource different

services to a single service provider throughout the services to multiple service contractors. The main

contract term. This setup makes it easier to build and advantage of this model is you can select specialized

maintain a close relationship with the provider. However, companies providing the actual service you need. This

it’s crucial to choose a subcontractor carefully to mitigate setup is best for small- and medium-sized businesses.

risks. To make it more specific, the provider should meet

expectations and objectives, deliver the services

outsourced competitively, and create cost savings and

innovation.
01.6

List of Common Services that are

Outsourced
For this e-book, we will focus on two types of outsourcing:
Information Technology Outsourcing (ITO), and Business Process Outsourcing (BPO).

Information Technology Outsourcing (ITO)

It involves IT-related functions such as:

Technical and Desktop Support / Help desk / Programming /

Application Development / Network configuration and management /

Software as a Service (SaaS) / Cloud computing / Telecommunications

Business Process Outsourcing (BPO)

Considered a simpler version of ITO, business process outsourcing focuses on transactional processes.
Here are the commonly outsourced BPO services:

Customer service / Data entry / Lead generation / Telesales /

Accounting / Payroll / Human resources management / Content

Moderation / Claims processing / Mortgage processing / Debt collection

01.7

How Much Does Outsourcing Cost?

The cost of outsourcing depends on several factors, with staff salary being only a part of a broader
spectrum. When “shopping around” different vendors, you must also consider the following:

Geographical Location Job title and skill level Hours of work

of the resource
The labor market rate per country The number of hours rendered for
The role (e.g., customer service
or region varies. This is especially your business is a huge factor
representative, IT technician,
important if cost-cutting is your influencing the cost. Thus, it’s
graphic artist) and the skill level
main reason for outsourcing. important to determine if you’re
(i.e., entry-level, experienced,
going to need full-time or part-time
expert) greatly impacts the base
employees.
salary.

Government-mandated
employee benefits Service fees
Employee benefits usually depend
Size of the team
This usually covers operating
on the law followed in your country The more employees you need, the expenses like utility bills, taxes, and
of choice. higher the cost will be. equipment.

You must also be inquisitive about any hidden charges or additional expenses so you can manage or
eliminate them. Understanding the cost structure enables you to make smarter decisions along your
outsourcing journey. This ensures you get the optimal benefits while mitigating risks.

In addition, always keep in mind that you get what you pay for. While it’s tempting to outsource to companies
offering cheaper prices, the service quality should always come first. Avoid falling for “too good to be true”
offers, as it may do more harm than good to your business in the long run. Always research the reasonable
market price in a certain country before making any engagements.
Outsourcing Pricing models
Fixed Price (FP) Model
Time and Material
(T&M) Model
Cost-Based Pricing
Production-Based Price
Incentive-Based Model
Shared Risk-Reward Model
Note: While the information presented herein aims to guide you in decision making, it is still better to discuss
outsourcing costs and pricing models directly with the business development officer/s of your shortlisted
outsourcing companies.
A mutual agreement on price and timeline will be undertaken. The standard
rate — inclusive of tools and workplace charges — will be billed on a monthly
or annual basis. It is ideal for public or not-for-profit organizations with small-
to medium-sized projects.
The T&M model is a popular choice among clients due to its agile nature. As the
term suggests, you will only pay for the time (hourly, daily, weekly, or monthly)
spent on labor, materials, and other expenses used to complete the work.
In this system, the price is set according to the total cost of service being
offered, plus the management fee. This pricing model is suitable for large-scale
outsourcing projects.
This is for projects that are easy to track and measure like article writing and
video production. You may want to consider this if you’re not looking for
long-term commitments since you will only need to compensate your chosen
service provider based on the outputs* they have produced for you.
*Staff salary, hours rendered, and service fees are included in the computation.
For transparency, ask your service provider for a price breakdown.
This model — often used with a traditional pricing method like T&M and FP —
offers bonuses, commissions, or incentives for meeting target objectives stated
in the service level agreement (SLA). The main goal of using this method is to
encourage higher performance and productivity among the outsourced team.
You can utilize this if you’re outsourcing services with daily quotas such as lead
generation and sales.
It follows the same approach used in the incentive-based model but instead of
bonuses, you will be sharing risks and developments with your service provider.
Service and Contract Length
Identifying both service and contract length is significant in determining the final cost of the outsourced
service. Here’s a quick overview:

Service Length Dedicated service Shared service

You will get 40 hours of dedicated service per You will get less than 40 hours of service per

employee per week. Dedicated means the employee per week, plus the employee will also

employee will only work on your project. This is be assigned to other projects. This is ideal if

recommended for high-volume projects or there’s not too much work to do with the project.

complex tasks. For instance, if your business receives a low

volume of calls per day, utilizing the shared

service approach allows you to save more and

make the most of your money.

Contract Length Short-term Seasonal

For projects with short-term goals and are limited For projects with fluctuating/seasonal demands

by budget and timescale (less than six months) (e.g., phone support during the holiday rush)

Long-term
For projects with long-term goals (around six to

twelve months)
01.8

Key Benefits of Outsourcing

The benefits of outsourcing depends on a case-to-case basis. This is why it’s essential to lay down your
needs, goals, and objectives during your initial planning. By doing so, you can prepare key performance
indicators (KPIs) which you can use in measuring the results you would like to achieve.
Basically, here are the common benefits offered by outsourcing:

Higher cost savings

Outsourcing, especially to an offshore location, allows you to cut substantial costs in recruitment, employee
salary, equipment, office space, and some tax obligations.

Competitive service delivery

Its well-established procedures, exclusive focus on specialized roles, and consistent service quality
monitoring empower outsourcing companies to deliver high-quality services to clients.

Easy access to specialist skills

Outsourcing resolves skills and employee shortages. The service provider takes care of the end-to-end
process of recruiting, hiring, training, and talent management so all you have to do is to set goals and
expectations for your team.

High availability of essential resources

The outsourcing company provides the required technology, equipment, office space, and admin support.
Key Benefits of Outsourcing

Flexible outsourcing deals

Outsourcing companies offer customized packages to meet your needs and budget. Whether you need a
small team or a large one, dedicated service or part-time help, standard technology or add-on software, you
can discuss it with your chosen service provider.

Scalable solutions
Outsourcing can support rapid business growth, allowing you to scale fast to prevent unnecessary delays. To
the same extent, a service provider can also assist you in scaling down to lower overhead expenses during
tough economic situations.

Guaranteed data security and confidentiality

BPO companies enforce strict data protocols to ensure your data is protected and safe from any threats.

Faster speed of development

For startups or small businesses, outsourcing is the faster and more economical solution to fill in vital roles
instead of building an in-house team from the ground up.

Business continuity
Outsourcing companies have business continuity plans (BCP) in place to ensure your team remains
operational even amidst disruptive events.

More focus on core business

Letting go of non-core functions gives you more time and energy to focus on your key company initiatives.
01.8

Is it the Right Time to Outsource?

There’s no “definite” time to start outsourcing. But some of the signs telling you it’s high time to try this
strategy are the following:

You need to cut costs or you have insufficient The fast growth of the company requires you
funds to maintain an in-house team. to scale up fast.

There are skills or labor shortages in your There’s a sudden spike in service or product
business. demand (This is typically for short-term
outsourcing.)
You or your employees are getting swamped
with repetitive tasks. Service or product quality becomes
unsatisfactory resulting in numerous
You need to shift your focus to customer complaints.
business-critical areas.

On the other hand, you should not outsource when:

There’s a threat to data security or The job is part of your core business (e.g.,
confidentiality. management roles).

The service is too expensive — defeating one You’re in the middle of a major restructuring
of the main purposes of outsourcing. activity.

To learn if you’re encountering any of these signs, it’s necessary for you to conduct a thorough
evaluation of your business.
02
Outsourcing and
Its Risks
02.1

Why do businesses fail in

outsourcing?
Everybody can outsource, but not everyone can turn it
into a story of success.
Even multinational companies that outsourced to
well-known service providers have experienced serious
setbacks. Regardless of these cases, outsourcing has
been a viable solution to addressing numerous business
needs. In fact, some of the successful companies we
know today such as Slack and Alibaba had utilized
outsourcing during their early days.

Taking risks is indispensable to growth If it works, then why do some businesses fail?

and success — as long as you do it

smartly. Here’s all you need to know
about the risks you may encounter when
outsourcing.
Outsourcing failures are often attributed to several factors, such as the ones discussed below:

Failure to assess actual business needs

Limited knowledge of the real needs of your business can prevent you from realizing the full potential of
outsourcing. Jumping on the outsourcing bandwagon might sound like an alluring venture but you must also
take your time assessing your business’ strengths and weaknesses. This way, you will have well-grounded
objectives to guide you in selecting an outsourcing partner.

Ineffective planning
Lack of planning often leads to project failure. When there are no clear directions, even with the best service
provider, you will be less likely to achieve the results you expect. This is the usual reason why multinational
companies fail with outsourcing. To avoid the same fortune, involve all key stakeholders in coming up with a
solid plan.

Wrong choice of a service provider

Entrusting a service to the wrong hands can result in monetary losses and might compromise data security.
Moreover, it can affect your customers’ experience and impression of your brand. Make sure to prioritize
cultural fit. At the same time, choose a service provider that has similar visions as you so you can work
together towards a common goal.

Miscommunication
Miscommunication is often the result of several other problems that hinder the effective exchange of
information between the service provider and the client. The language barrier is one of the issues, especially
when both parties speak different languages.

Another cause of miscommunication is insufficient documentation. There are three scenarios involved in this
case:
1. The service provider does not document properly the necessary data for the project
2. The client does not pay attention to the reports submitted by the service provider, or
3. Both parties are not concerned with proper documentation.

In some cases, some clients omit information because it seems obvious when in reality, the outsourcing
company is clueless about it. That’s why it is crucial to be as detailed as possible in writing a project brief.
Other factors affecting communication are lack of trust, openness, feedback, and questions. Take note that
good communication is a shared responsibility between the client and the service provider.
Conflicting interests
Failed outsourcing initiatives can also emerge from conflicting interests and cultures. To prevent this, it’s
important to lay down all pivotal information in the service level agreement (SLA) to have tangible proof each
time a process or service request is being questioned.

Mismatched expectations
This occurs when you and the service provider are looking at different objectives, thus creating misaligned
expectations. Preparing a detailed SLA can prevent this from happening. Discuss this with your provider
before contract signing and make sure you understand its terms and conditions.
Once the project officially begins, keep yourself involved at every stage so you can immediately learn its
developments and resolve any issues.

Too much focus on cost-cutting

Focusing heavily on cost-cutting without considering its impact on employees, customers, and service
quality yields negative long-term results. While it is true that reducing operational costs is an outsourcing
benefit, it doesn’t mean overdoing it. Going after the cheapest solution may not be cheap at all and may
even cost you more in the long run.

So what should you do?

If you’re going offshore, it’s crucial to research the standard labor market rate of your target
country. Too cheap services is usually a red flag because there’s no guarantee that the
outsourcing company has highly skilled talents. Otherwise, they are depriving their staff of
reasonable wages that may lead to demotivation and poor work performance.
02.2

Common Outsourcing Mistakes

and How to Avoid Them
Setting unclear objectives and instructions
The inability to set clear objectives creates misunderstanding. You may not
notice its effect in the beginning but as the project progresses, the
misunderstanding can ripple into the other areas of your outsourcing project.

Have a strong start by keeping your objectives and instructions as clear and
detailed as possible. State your expectations with the project, the problems
you need to resolve, its deadline, preferred communication methods, and
payments plans.

Not doing proper research

Lack of research limits your knowledge of the possible risks you may
encounter, the ideal sourcing methodology, and other vital information
necessary to succeed in outsourcing. With limited knowledge, you’ll be more
susceptible to mistakes.

Before going all in, conduct thorough research internally. Begin by assessing
your business. You can use the Strength, Weakness, Opportunity, and
Threat (SWOT) Analysis or other assessment tools that will let you figure out
if outsourcing works for you based on your current business condition.
Next, study your market. How can you meet their needs? By knowing this,
you can formulate precise objectives targeted at resolving your customers’
problems.

Once you’ve laid down the fundamental information, only then should you
start looking for a service provider. Research about their track records,
services, security guidelines, specializations, pricing models, client reviews,
and the like. This way, you can eliminate any personal biases and groundless
opinions and make decisions based on hard facts.
Leaving out the interview process
When selecting candidates, schedule a meeting (face-to-face, phone, or videoconferencing) with a business
development officer or business executive to ask questions not answered by the available online resources.
Take it as a chance to clarify vague information you’ve encountered during your research.

Speeding up the transition

You can miss out on critical details if you hurry up the project transfer to the service provider. It’s important
to take your time during the transition stage to pass on knowledge and processes effectively. This stage also
enables you to build trust, good relations, and positive momentum with the provider. Be there to guide your
outsourcing partner in the right direction.

Not setting metrics to measure performance

Without metrics, you’ll be clueless about the progress of the projects, plus you won’t have enough data to
measure its effectiveness. A good set of metrics shows the direction of the relationship and lets you maintain
control over its processes. Use your main objectives in setting up metrics to know if your outsourcing partner
has hit the targets or not.

Neglecting your offshore team

Your offshore team is still a part of your team. Even if someone is tasked to manage and oversee their
performance, it’s still crucial to invest some time in connecting with them. This way, they can feel a sense of
belongingness which can encourage them to work better. Make them feel they’re a part of your business,
share your visions, provide feedback, and stay in touch. Not only will you create a stronger bond with them
but they will also feel more connected with your business.

Neglecting your offshore team

Your offshore team is still a part of your team. Even if someone is tasked to manage and oversee their
performance, it’s still crucial to invest some time in connecting with them. This way, they can feel a sense of
belongingness which can encourage them to work better. Make them feel they’re a part of your business,
share your visions, provide feedback, and stay in touch. Not only will you create a stronger bond with them
but they will also feel more connected with your business.
 0
02.3

Key Issues/Risks with Outsourcing

and How to Mitigate Them
Outsourcing without risks is called wishful thinking. Like other business initiatives, it compels you to get out of your
comfort zone in search of better opportunities and processes to drive business growth. What makes outsourcing
successful is the way you deal and move around threats. Learning the risks you will encounter gives you the upper hand
to manage them before they cause harm to your business.

Loss of control Poor service quality

It is only natural to lose some management control
over your outsourced team since outsourcing is about
freeing up internal resources so you can focus more on
your key initiatives. What you need to watch out for is
when you can no longer get the results produced by
your team.
The root cause of poor service quality is choosing the
wrong service provider. Other factors are also involved
such as demotivated or unskilled staff, too cheap
services, communication silo between the service
provider and client, and lack of good leadership.

Delays in service delivery

It is important to have a key person who will report to
Time zone differences, language and cultural barriers,
you directly. At the start of the engagement, there
and ineffective communication could result in the
should also be a signed agreement that enumerates
service provider’s failure or delay in service delivery.
the provider’s obligation to report the status and
Specify in the SLA the schedule and preferred mode of
progress of the project.
communication you prefer so you can be in sync with
the service provider.
Information leakage
Sharing sensitive data is inevitable with outsourcing. Technology dependency
However, it runs the risk of information leakage,
Becoming heavily reliant on the technology and
especially when you outsource to a country with
processes of the outsourcing company makes it
lenient data security regulations. Before sharing
difficult, if not impossible, to switch to another service
confidential information, sign a legal document like a
provider or move back the job in-house. To mitigate
non-disclosure agreement (NDA) that will serve as
this, insist on documenting the development process
another layer of protection for your business.
from the start of the engagement until the end. This
way, you will know the strategies you will need to use,
the best way to migrate your data, and the types of
Reputational risks
software to purchase.
Reputational risks occur when the service provider
delivers substandard service to consumers. The best
way to mitigate this is to find an outsourcing partner
that can provide quality service for a reasonable
amount.
03
Finding and Choosing
a Service Provider
03.1

The Sourcing Methodology

This sourcing methodology aims to provide you with a
simplified process in selecting a service provider. Based
on outsourcing best practices, each method seeks to
steer you away from possible pitfalls. It is divided into
three different stages:

Business analysis and planning

Sourcing

Transition process
The success of your outsourcing journey is
highly dependent on your choice of a
service provider. To make the right
choice, following a structured approach
paired with research and common sense
will let you find the most suitable
outsourcing company for your business.
Stage 1:
Business
analysis and
planning
The first stage of the
sourcing methodology will
help you determine if
outsourcing is a smart
move or not, the business
functions you can
outsource, and your
capability to outsource.
Stage 2:
Sourcing
This stage follows the
elimination process
approach — you will start
with a long list of service
providers and trim it down
until only one remains.
1. Using SWOT analysis, assess your business to determine which
functions can be outsourced.
2. Once you have the results, list down your business needs,
budget, and service requirements.
3. Prepare an outsourcing plan. State your expectations with the
project, the problems you need to
resolve, its timeline, your preferred communication methods,
and payments plans.
4. Set goals and objectives based on the current needs of your
business. What do you expect to achieve by outsourcing?
5. List vendors that offer the service you’re looking for. Feel free
to list all decent outsourcing companies you can encounter
during your search.
6. Prepare vendor criteria enumerating the standards an
outsourcing company must meet to qualify in your list. See if
the criteria you created is aligned with your goals and
objectives.
7. Do more research on the companies on your list. Don’t forget
to read client reviews.
8. Trim down your list to those who can meet your requirements.
You can use your vendor criteria for this.
9. Message or call your prospective service providers. Many
outsourcing companies offer free consultations to discuss their
client’s needs, requirements, and budget. You can use this as
an opportunity to validate vendor capabilities and filter out
 10. unresponsive companies.
Compare the proposals of your potential candidates.
11.
If possible, do an ocular visit to learn more about the company,
their culture, and the work atmosphere.
12.
Select your best bet — this is the service provider with the most
favorable offer in terms of solution, service quality, and price.

Stage 3: 13. Set metrics and benchmarks to measure performance.

Transition 14. Prepare the SLA with your chosen vendor. Thoroughly review all its

process content to make sure you understand the terms. If there are
unclear statements, clarify them with the vendor before signing.
Your actual outsourcing
journey begins here. At
this point, you’ll
15. Maintain close collaboration with the key person from the
hand-over necessary company to ensure a smooth transition process. Take your time to
information to your
hand over essential information and processes because this will
outsourced team. It’s
important to note that have a lasting impact on many of your daily interactions with the
your direct involvement is vendor.
required at this stage to
make sure your team can
function well when your 16. Track the progress of your project.
project is launched.
03.2
Manual vs Efficient Approach of
Prospecting for Service Providers
Searching for a reliable service provider can be a walk in the park or a tiresome process — it all depends on
the strategy you will use. See the comparison below to learn the difference between doing a manual search
compared to using the efficient method.
Manual method
Manually searching for BPO companies
uses the traditional approach where you
need to sift through thousands of vendors
to find the right one. It’s a long, arduous,
and confusing journey that can leave you
paralyzed and unable to know where to
start. Some of the common resources for
this method include the internet,
directories, and business listings, among
others.
Efficient method
It involves asking your network with
previous or ongoing outsourcing
engagements for referrals. Their insights
can help you shortlist potential candidates,
thus resulting in a fast and efficient way of
looking for providers.
Another example of an efficient sourcing
method is by getting quotes from
outsourcing advisory companies. Using this,
you can find the best deals customized
according to your needs and budget.
Joining networking events to connect with
executives from outsourcing companies is
also a good idea though it requires more
effort on your end.
03.3

Tips on Choosing a Service Provider

To further prepare you in building your outsourcing team, consider these tips:

Outsource the right service to the right company

You must also be inquisitive about any hidden charges or additional expenses so you can manage or eliminate
them. Understanding the cost structure enables you to make smarter decisions along your outsourcing journey.
This ensures you get the optimal benefits while mitigating risks.

In addition, always keep in mind that you get what you pay for. While it’s tempting to outsource to companies
offering cheaper prices, the service quality should always come first. Avoid falling for “too good to be true”
offers, as it may do more harm than good to your business in the long run. Always research the reasonable
market price in a certain country before making any engagements.

Read client reviews, feedback, and testimonies

Client feedback will give you more insights about the company that is not stated on the website. If they’re
receiving more negative reviews than positive. It’s a red flag signaling you to stay away. On the other hand,
positive reviews can provide essential information about the company’s culture, work ethics, talent pool, and a
lot more.

Ask the right questions when interviewing potential partners

Asking the right questions increases the chances of a successful partnership. It gives you the ability to bring out
crucial information that you may not know through research.

Learn more about their employee development programs

The outsourced company will be in charge of the direct supervision of your offshore team. If they can keep your
staff happy and engaged, they can perform better at work. Remember, excellent work performance is equal to
high-quality service.

Filter out lowest bidders

Companies offering prices below the standard rate often deliver sub par services to clients. Never compromise
quality over cost because it may cause more harm than good — higher financial losses than gains — to your
business in the long run.
03.3

Stop, Look, and Listen:

Red Flags to Look Out for
To further prepare you in building your outsourcing team, consider these tips:

Substandard work samples High attrition rates

At the very least, the outsourcing company should Stay away from companies with high attrition rates

put some effort in organizing their work sample. If because they’re often the ones with poor employee

they send you a sloppy one, consider removing them programs, ineffective policies, low market

out of your list as it can be a reflection of the service compensation plans, and internal conflicts. When

they provide. If you cannot rely on them on simple employees don’t stay long, learning and development

tasks like this, how much more with the function you within the company are also affected — there’s no full

plan to outsource? mastery; you’ll get stuck with a team that needs

never-ending training.

Even with tempting offers, avoid engaging with them at

all costs. Don’t sacrifice the long-term goals of your

Upfront pricing company for short-term cost reduction opportunities.

A good company works hand-in-hand with clients to

determine their concerns. They ask enough questions

and commit to understand the details of your project.

Once they have a full grasp of your requirements,

Lack of transparency
only then can they give you an estimate. Be wary of
If a vendor is reluctant to disclose critical information
companies sending you with up front quotations
with no legitimate nor logical reason, look elsewhere.
without even trying to discuss your needs. It’s a
You don’t want to work with a secretive partner, do
warning sign of being uninterested and uninvested
you?
with your project.

Bad financial standing

A good company works hand-in-hand with clients to determine their concerns. They ask enough questions and commit to

understand the details of your project. Once they have a full grasp of your requirements, only then can they give you an

estimate. Be wary of companies sending you with up front quotations without even trying to discuss your needs. It’s a warning

sign of being uninterested and uninvested with your project.

04
The Outsourcing
Journey Begins

04.1

Due Diligence in Outsourcing

Upon choosing a service provider and signing a
non-disclosure agreement, you and your chosen vendor
should conduct due diligence.

Due diligence is the legal investigation executed by both

parties (buyer and vendor) before contract signing to
guarantee that the outsourcing plans will proceed as
planned. It’s a two-way process requiring your vendor to
evaluate your proposed project and you to assess the
vendor’s expertise and qualifications to provide the
After signing your outsourcing contract,
service and meet your objectives.
it’s your turn to know your team better
and play your role in managing the
outsourcing relationship.
When conducting due diligence, here are some of the best practices you must consider:

Gathering a team of experts who can evaluate the rationale for the proposed relationship.

Doing an ocular visit to see if the service provider's office is fit to serve your needs.

Asking the service provider for a formal and written disclosure of pertinent information such as
relevant costs and operating procedures.

Preparing waiver clauses that you're done making all necessary inquiries to the service provider

Preparing a merger clause indicating the agreement between both parties.

04.2

The Transition Process:

What is It and Why You Shouldn’t Skip It
Transition is the stage where you hand over responsibilities and essential information to your service
provider — a critical phase that requires your full attention and commitment. This is when you invest enough
time to transfer information, resolve emerging issues, and pave the direction of the outsourcing relationship
so you can have more time later while being confident that your outsourced team is aligned with your visions.

As discussed in chapter two, this stage allows you to build trust, good relations, and positive momentum
with your service provider. There are no set rules in the transition process. It varies according to the nature,
size, and complexity of the project. It is often divided into three phases:

Phase 1 Phase 2 Phase 3

Takes place after contract signing. The phase where the full scope and The most critical stage, it determines

At this phase, both parties still intricacy of the transition period how satisfied you will become with the

have mutually high expectations comes into light. Moreover, this is service you’ve been provided. A

with each other. also when emerging problems occur well-executed transition plan can lead

such as communication concerns to a smooth sailing outsourcing journey

and governance issues. while a poorly planned transition may

decrease your confidence with

outsourcing.
The transition process sets the reality between you and the service provider. This is why it’s crucial that both
of you are invested to make this partnership work. Meanwhile, the key elements of the transition phase you
should take note of are the following:

Transition plan

1 A document prepared by the service provider, a transition plan lays down the stage and timeline in
transferring the services including the efforts needed from you. Ideally, this should be ready before
contract signing.

Project and knowledge transfer

2 Project and knowledge transfer marks the actual start of the transition process. This phase can be
pretty complicated and, therefore, requires careful planning. It typically includes transfer of IT
assets (e.g., equipment, software, premises) and information (e.g., workshops, training sessions).

Testing

3 Project and knowledge transfer marks the actual start of the transition process. This phase can be
pretty complicated and, therefore, requires careful planning. It typically includes transfer of IT
assets (e.g., equipment, software, premises) and information (e.g., workshops, training sessions).

Project launch

4 Depending on the complexity of the project or the geographical location of the outsourcing
company, launching its operations can take place in a single day or by phases.

Transformation Stage

5 As the project progresses, it may call for transformation — the process of improving and
streamlining your outsourced service by introducing new solutions to achieve bigger cost savings or
greater efficiency. This phase is normally taken care of by the service provider.
04.3

Getting to Know Your Outsourced Team

These are the key people whom you can expect to work towards the success of your outsourcing project:

Team leader The person who will manage your team. Your usual point of contact.

Offshore staff A person or a group of people who will work on the tasks you’ve provided.

Operations manager Oversees the operational elements of the outsourcing company to ensure KPI
targets are met. He or she is also in charge of the planning and implementation of
strategies, process improvement designs, setting and assessing of quality
performance standards, and maintaining engagement with clients.

Quality Assurance Monitors and reviews the service or output quality of your team.
Specialist

Training specialist Responsible for training your employees before onboarding.

04.4
Best Practices to Managing Outsourcing
Relationships
Maintain open communication
Keep your communication lines open to
avoid delays and misunderstandings.
Find time to catch up with your team to
learn their achievements, struggles, and
satisfaction with their tasks. By staying
in touch, you can build trust and
rapport with your team and resolve
issues before they get serious.
Provide feedback
Let your team know how they are
performing, the quality of their output,
and the areas they need to improve.
Leaving them in the dark for too long
can leave them wondering if they are
doing a job not.
Set realistic goals and expectations
Understanding the abilities and
limitations of your service provider is
necessary for nurturing lasting
relationships. When you assign tasks
based on each individual’s strengths,
your team can perform better, plus this
will prevent them from experiencing
burnout.
Reward excellent performance
Motivate your team to do better by
rewarding excellent performance. Use
measurable data as your reference to
figuring out who performed well and who
needs more coaching sessions.
05
Outsourcing to
the Philippines

05.1

What Makes the Philippines a

Top Outsourcing Destination
In the recent Tholons Innovation Index 2021 report, the
Philippines’ capital city, Manila, has been named as the top
eight of the 100 super cities across the world. This means
that the country shows excellent results in terms of:

An abundance of talent, skill, and quality

Its role as a business catalyst

Cost and Infrastructure

Named as one of the top outsourcing

Risk and quality of life
destinations in the world, the Philippine
outsourcing market continues to evolve Openness to innovation/Digital technology
to meet new market demands.
From its humble beginning in 1992, the Philippine outsourcing market has grown into a billion-dollar
industry, thanks to the incessant government support and abundant number of professionals ready to take in
BPO jobs. Here’s a detailed information for your reference:

Dynamic government support

The BPO industry is considered one of the pillars of the Philippine economy. Contributing $26 Billion to the
Philippine economy in 2019 and with a total of 1.3 million Filipinos working in this industry, there’s no
wonder why the government offers full support for its further development.

In fact, several organizations have been established to oversee its growth such as the IT and Business
Process Association of the Philippines (IBPAP), Contact Center Association of the Philippines (CCAP), and
Philippine Economic Zone Authority (PEZA). PEZA-registered companies located within Ecozones can enjoy
tax incentives.

Meanwhile, the Technical Education and Skills Development Authority (TESDA) continues to work with
universities and the private sector for the reskilling and upskilling of Filipinos. This is to prepare the
workforce for the changes brought by automation.

Home of talented professionals

The Philippines has a functional literacy rate of 91.6% and thousands of university graduates yearly which
enables it to supply the manpower needed in the global outsourcing industry.

Filipinos have high regard for building positive interpersonal relationships. This drives them to use
hospitality, politeness of speech, and in direction of interpersonal behavior when talking with another
person. As a result, it prepares them for front-end jobs that require high customer interactions.
Their sensitivity to feelings, known as empathy, enables them to be flexible and adaptable in social
situations. This is the reason why it’s easy for them to connect and work with clients from different cultures
and temperaments.

With America's 48-year colonization in the country, a huge percentage of the population are proficient in
speaking and writing in English. Its rich historical background also exposed Filipinos to various cultures and
beliefs.

The other outsourcing benefits you can expect when you choose to send your jobs to the Philippines are higher cost savings,
competitive service delivery, faster speed of development, guaranteed data security, scalable solutions, and the other
benefits discussed in chapter one of this e-book.
05.2

Is the Philippine BPO Market Ready for

Automation?
A few years ago, automation threatened the existence of call center, data entry, and other routine
outsourcing jobs in the country. This has caused an uproar in the local outsourcing setting due to fear of
losing millions of jobs to technology.

Amidst this threat, the country’s Trade and Industry undersecretary Rafaelita Aldaba said in a 2019 article
that their department is already “working with the academe, the private sector, and other government
agencies” to prepare for the possible onslaught of automation. Their efforts include upgrading skills and
communicating with training schools to revise curricula “to include subjects on digital and other skills that
job automation would require.”

The trade undersecretary also said that the country “should not fear the advent of new technology because
it would allow the country to improve its competitiveness. Develop new industries, and even create new
jobs.”

Two years later, the key Philippine sectors, including the IT-BPO industry, are indeed ready for automation.
A recent study revealed that the IT-BPO industry is “showing good progress in implementing fourth industrial
revolution (4IR) preparedness,” adding that at least half of the employers surveyed have already adopted 4IR
technologies into their operations.

However, the threat of losing jobs to automation still remains. To address this issue, constant upskilling and
cross-skilling efforts should be adapted by individuals.
05.3

Outsourcing: A Worthwhile Investment

The benefits of outsourcing still far outweighs its risks as long as you do it right. Take your time in looking for
a service provider while considering the best practices and risks you might run into.

Hopefully, this ebook has helped you learn and understand better the processes involved with outsourcing.
For the latest updates and practical tips about the outsourcing industry, visit Booth and Partners’ blog. Click
here.

Right People, Right Solutions

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your business.

Booth and Partners offer outsourcing solutions that you can customize according to your needs

and budget. Consult with our experts today to learn more about our tailored staffing solutions.

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