Ways to Reduce Costs Through Business Process Outsourcing

Do you feel like your business is running on fumes? Maybe it's time to look at outsourcing some of your processes. You'll be amazed at what you can save by outsourcing certain tasks to a professional service company. It may take some upfront investment, but in the end, it will pay off with reduced costs and increased profits. Here are some examples of areas that can benefit from outsourced services: Accounting, Human Resources, IT Support, Customer Support, Marketing & Advertising, and General Office Services. All these things are important for any business owner or manager to have an understanding about so they know when out-sourcing might be the right decision for their organization.

Outsourcing is not for every business, but it can be very beneficial to many organizations. Consider outsourcing when you need expertise that is not available internally or when you require additional resources that are beyond your current capacity. You will want to hire an outside vendor who has resources and skill sets that match the requirements of the job at hand. This way, you can avoid unnecessary costs and delays.

Importance of Cost Analysis

Before signing the dotted line on an outsourcing contract, it is important to do a cost analysis. If you're outsourcing your payroll, for example, the costs involved in hiring an outside pay service would be analyzed against the current salary and benefits package you offer your employees. What are the total costs of keeping this function in-house? Calculate the costs of having someone working overtime to meet critical deadlines, hiring temporary replacement employees during peak periods, or the price difference between the software packages your department uses for payroll calculations.

When an outsourcing company offers to pick up the cost of hiring and training temporary employees to meet short-term demands, it is important to look at what this would cost in lost productivity. If your staff is already overloaded with existing workloads, you need to consider that the time required for training new hires will just add more work for other staff members. The last thing you want to do is create more workload for your existing employees so that you can save money on the temporary labor costs.

Your best bet is to focus on ways to reduce needs for overtime, temporary hires, and support services other than those provided by the outsourcing company. Listed below are some tips that will help:

- Review and analyze current business processes for possible cost reduction. Identify and document areas where improvements can be made to reduce the need for outsourcing services;

- Evaluate overall business processes to determine if there are ways to change, alter or improve these jobs to make them more efficient. For jobs that cannot be altered or improved, look at the time it takes to complete each task and if there are areas that can be automated;

- Look for ways to reduce or consolidate support and administrative functions and services (e.g., payroll services, benefits administration);

- Identify jobs that require a lot of overtime and determine if they could be scaled back or reduced. If so, then build this into the outsourcing contract;

- Identify jobs that can be outsourced overseas rather than domestically. Many companies are now doing work in countries where labor rates are much lower than those offered in the United States. For example, call center service providers frequently have employees working for them who are located offshore where labor rates are very low. These employees could be handling inbound customer service calls for your company, thus allowing you to provide better service to your customers without incurring the high labor costs associated with having these employees working in the United States;

- Look at all opportunities for process standardization and make sure that they are included within the scope of the BPO contract. Standardization of processes is a way to reduce costs as the provider will not have as many variations from client to client which need to be addressed and can thus focus on those areas which are truly unique or require specific skills and knowledge;

- Implement best practice tools for your company including those from third-party providers, but ensure that you have a process for determining which third-party products and services will be included in the scope of the BPO contract. Anything implemented as part of a production support function, such as technology or business tools, must be within the scope of the contract to avoid any issues related to intellectual property rights;

- Seek out those suppliers who provide BPO services for niche products and industries. This will ensure that the firm's training objectives are met while maximizing economies of scale by using "standard" processes for all clients;

- If possible, consolidate contracts with suppliers of common activities to gain overall volume discounts;

- Negotiate payment schedules that spread payments across the entire contract term or provide for "early termination" discounts;

- Ensure clearly defined service level agreements that are regularly monitored and reported upon to all concerned parties. Rating schemes must be put into place that provides for consequences if these standards are not met, just as they would be with internal employees;

- Provide the supplier with a clear understanding of the service strategy and performance standards. The supplier will need to follow a similar process for developing its businesses processes, to ensure consistency;

- Develop an exit strategy in advance, so that you can terminate your contract without penalty if required;

- Ensure that outsourcing agreements give both parties the right to terminate the agreement with reasonable notice.

- Be prepared to make a long-term commitment to the supplier even though they may not have a history of providing seamless service; 16. Consider longer-term agreements that provide more stability but allow for renegotiation after a certain period has elapsed;

- Ensure that confidentiality agreements are in place and clearly outlined with specific provisions.

- Ensure that your service provider does not limit the number of clients they deal with or use their position as a supplier to win other contracts – this may constitute a conflict of interest;

- Agree to benchmarking and regular monitoring between you and the supplier – if neither party is actively engaged in these processes it will be difficult to identify cost savings;

- Acknowledge that even with careful planning you may not achieve all your cost reduction goals, but ensure the measures outlined in this document are fully implemented so you can get as close to these goals as possible.

Conclusion

With the right business process outsourcing service, you can reduce costs without sacrificing quality. Our team at Outsourcing-Team has been helping companies make this transition for years and we know all of the pitfalls to avoid. In addition to reducing your overhead, you'll also be able to free up time for other essential tasks like marketing or product development by letting our experts take care of some of those behind-the-scenes processes that are costing you a fortune in labor hours. To learn more about how we can help lower your company's expenses through BPO services, contact us today!