Outsourcing is an agreement in which one company hires another

company to be responsible for a planned or existing activity that is or

could be done internally, and sometimes involves transferring employees
and assets from one firm to another.

BPO Business Models

Submitted by gc on Mon, 02/18/2013 - 10:26

BPO Business Models

Over the years, different models have been used for conducting business in BPO. The regular
outsourcing models of on-shoring, near-shoring and offshoring are seen in BPO as well. TPI, a
sourcing advisory, has observed that in addition to on-shoring, near-shoring and offshoring,
BPO operations are also conducted through the following three business models :

• Transactional BPO: Transactional BPO handles one aspect of a process only. The
customer has to carry out a significant part of the process in-house and hence the customer
owns the risk of the process. Also, outsourcing many aspects of the process in a transactional
mode leads to complex fragmentation which can pose as a threat to productive delivery.

• Niche BPO: A niche BPO carries out 3-4 aspects of a process. A niche BPO, which also
makes certain investments in the customer's process, aims at improving the efficiency of the
process. The vendor in a niche BPO works in close coordination with the buyer, sometimes
seeking the services of the customer's employees. Both the vendor and the buyer share the
risk of the process.

• Comprehensive BPO: A comprehensive BPO handles both transactional and

administrative tasks in a process and takes 70 percent responsibility of the output. The vendor
purchases the buyer's assets and also hires most of its employees. Comprehensive BPO has
bulk deals lasting for 7-10 years.

What Is Onshore Outsourcing

Onshoring is when an organization contracts with another company in the
same country or nation. This is a later type of outsourcing. The work and
service will still be done in the home country.

An example of onshoring outsourcing might be when a New York-based firm

contracts workers at a production facility in West Virginia to create parts for its
machines.
Advantages of Onshoring
Standards of Quality— it is understood that high-quality workmanship is
expected.

Language—There is an ease in communication due to a shared primary

language.

Business culture— This also facilitates communication and cuts down on

errors due to misunderstandings.

Time Zone— work is done in a very similar time zone which means no waiting
for responses to emails or late night meetings.

Talent— Generally, when the work is done within the same country, the level
of education and experience is understood when engaging in onshoring; there
shouldn’t be any surprises here.

Infrastructure— technology won’t be an issue.

Potential Disadvantages of Onshoring

Cost— onshoring tends to cost a business more than offshoring or
nearshoring. It may, however, free up time and human resources.

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but also have Pixelians based in Peru, Nicaragua, and Colombia. Contact us
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What Is Offshore Outsourcing

Offshoring is generally what we think of when we talk about outsourcing.
Offshoring is contracting third party organizations in countries that are often
geographically far and culturally different to complete vital business functions
at a reduced cost.

An example of offshore outsourcing might be an American business that

sends its production to a factory in China. Another example might be a
Canadian company that uses call centers in India to handle its customer
service inquiries.
Advantages of Offshoring
Cost— offshoring tends to reduce the cost of work, saving businesses money
and freeing up capital to spend on other projects. However, taking all factors
into account, offshoring is no longer the bargain it once was.

Potential Disadvantages of Offshoring

Standards of Quality— Quality standards may not be the same in the
offshoring country. This means more engagement from the home company to
oversee production and ensure that quality standards are being met every
step of the way.

Language—Often when offshoring, English is a second or third language with

varying levels of fluency. This can result in misunderstandings and mistakes
that cost time and money.

Business culture— Different business cultures and work ethics may occur in
offshoring. While different cultures are not inherently a bad thing, the
variances can prompt frustration for the home company. A more laid back
approach from the offshoring company can result in missed deadlines, slow
production, and misunderstandings.

Time zone— Usually offshoring countries are in very different time zones.
This means that work is completed while the home office sleeps. While it may
sound advantageous to wake up to emails and updates, it can also be a
source of frustration as emails and urgent updates must wait. It can also mean
meetings at odd hours, working late, early, etc.,

Talent— With offshoring, the educational level of employees may vary highly
from country to country and from firm to firm. The level of English proficiency
is another unknown variable. This type of uncertainty can be anxiety inducing
and require further involvement from the organization that is seeking to
outsource work.

Infrastructure— Depending on the offshoring country, technology may not be

as dependable as it is in the home country. This could also lead to delays, and
in a world where time is money, it’s an unfortunate situation to be in.
What Is Nearshore Outsourcing
Nearshoring is a closer-to-home type of outsourcing. Nearshoring is
outsourcing in a similar time zone and with geographic and cultural proximity
between nations doing business.
For example, when a US-based company partners with a software
development company in Costa Rica this is considered nearshoring due to the
relatively short distance and the similar cultures.

Advantages of Nearshoring
Standards of Quality— Quality standards between nearshoring countries
tend to be the same. Nearshoring nations recognize that the success of their
partnership hinges on the quality and timing of their production.

Language— While English may be a second language, nearshoring nations

have high levels of fluency, pass exams to confirm this and oftentimes
employees have spent time in the home nation, resulting in near-perfect
English.

Business culture— The business culture between geographic neighbors

tends to be very similar. There’s no babysitting required or multiple check-ins
to make sure everyone is on the same page and understands the importance
of the project.

Time zone— Nearshore countries are in very similar time zones to the home
country. Work is completed in the same workday, which means answers to
emails and questions come quickly, and there are no odd hours for meetings.

Talent— Nearshoring provides access to a highly educated, bilingual

workforce, often with lower labor costs, which means that your external team
will consist of talented individuals from various backgrounds.

Infrastructure— The nearshore nations of Latin America have invested in

infrastructure and understand that technology is the gateway to a more
prosperous future.

Potential Disadvantages of Nearshoring

Cost— Nearshoring is not as inexpensive as offshoring. While it may cost
slightly more than offshoring, it usually will save the business money over
onshoring.

Onshore vs Offshore vs Nearshore

With the above information, it becomes easier to make decisions about which
method of outsourcing is best for your business. If cost is the only factor to
consider (and we hope it isn’t) then your obvious choice would be to offshore.
If you’re interested in high-quality workmanship at a reduced
price, nearshoring just might be your best option.
Types of BPO Participants

What is a third party BPO?

Business process outsourcing (BPO) is a type of outsourcing wherein a third-
party service provider is employed to carry out one or more business
functions in a company. The third party is responsible for carrying out all
operations related to the business function.

What is a shared service provider?

Shared services is the provision of a service by one part of an organization or
group, where that service had previously been found, in more than one part of
the organization or group. Thus the funding and resourcing of the service is shared
and the providing department effectively becomes an internal service provider.

BPO Software
The right process management software can make outsourcing easier to manage
and create a seamless user experience for internal and external customers. Look for
process management software that scales effortlessly, automates repetitive tasks,
and integrates with a wide range of software and apps for end-to-end visibility.
Other features that will make outsourcing easier include: