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Outsourcing Offshore vs Onshore vs Automation - Which to Choose?

Tue, January 17, 2023

Offshore vs Onshore vs Automation – Which to Choose?

Many brands realise the potential for outsourcing for their business interests, from cost-saving to a bigger global reach and increased revenue. According to Deloitte, the most popular reason to outsource is to aid cost reduction (70%) followed by improving flexibility (40%). However, with different types of BPO services available, determining which is best to choose may not be simple.

Companies looking to take advantage of outsourcing many processes should do so with consideration, otherwise, it may not benefit them in the long term. Here are some of the key differences between outsourcing offshore and onshore and how automation could benefit your business too.

Differences between Outsourcing Offshore and Onshore

Firstly, what determines if something is offshore or onshore? Both are distinct types of outsourcing businesses can choose from but have a key difference – location.

Outsourcing Offshore – this is where a business partners with a company or vendor that is located in a different country from where they are based. For example, a UK company partnering with a vendor located in the US. Nearshoring is a variation of this where a company partners with another in a country within close proximity versus the other side of the world, working in similar time zones.

Outsourcing Onshore – this is simply where a business partners with a company or vendor that is located in the same country they are based. For example, a UK company partnering with a UK based outsourcing service, such as an FCA approved contact centre.

Hybrid outsourcing – a hybrid model is a combination of both offshore and onshore outsourcing. For example, a company may partner with vendors in their own country as well as further afield depending on their business goals and needs.

Outsourcing offshore is different to having an offshore company, as it involves working with a third-party company or agency based in a different country. An offshore company is one that expands into other countries itself without using third-party resources. The biggest difference here is the costs involved, as outsourcing has the potential to have the staff, equipment, and know-how to start helping your business from day one.


Advantages of Outsourcing Onshore and Offshore

Onshore outsourcing and offshoring have differences, mainly in location, but the advantages for businesses are the same. They enable companies to expand their resources at scale with much less investment required. If you compare the costs of offshoring without outsourcing, it’s akin to starting your business from scratch except in a different country.

Outsourcing provides a ready to go solution that doesn’t require more hiring, training, equipment costs etc. and can start working very quickly for your business. This is especially helpful during seasonal peaks as it enables them to scale resources quickly and temporarily, proving more cost-effective when demand isn’t as high. Companies can expect:

  • Savings on labour costs – not having to have permanent staff all year round.
  • Reduced time recruiting – quickly get the employees you need to help
  • Ready to go experts – outsourcing to companies with the know-how and skillset you need.
  • Access to better processes and technology – no need to invest in your own equipment or the latest advancements as outsourcing will help you find companies who already have this.
  • Fast expansion – employ more staff in more countries quickly, as and when needed.
  • 24/7 service – be able to help your customers in different time zones more effectively, improving CX.
  • Improved ROI – outsourcing can provide a better ROI overall due to cost-savings and quicker resolutions.

Before choosing to outsource onshore or offshore, businesses have to consider that when working with a third party this can bring some disadvantages. The most notable is having a separate company take on responsibility whether it be back office admin or customer communication in a contact centre environment. You need to consider how you will monitor output from the outsourcing company and ensure quality doesn’t slip.

You’ll also need to consider whether there will be any barrier to communication if the language is different or the time zone, not just for your existing employees but also your customers. Again, you do not want to create unnecessary barriers to success and customer satisfaction. Above all, you need to partner with a trustworthy outsourcing company that you have researched and fully understand before proceeding.

If you focus only on the cost-saving aspect, you may compromise on the quality of output, and this can impact CX and your brand reputation, so onboarding any BPO service whether offshore or onshore has to be carefully approached. The Call Centre Management Association (CCMA) has a good practice guide for companies considering contact centre outsourcing that can help with this decision process.


Outsourcing and Automation

As another option, Robotic Process Automation (RPA) is a growing trend that many businesses are considering. After the pandemic, 48% of businesses globally were looking to increase their adoption of RPA according to Forrester. This is due to the many benefits using automation brings when working with increasingly hybrid or remote workforces. Companies adopting RPA can be more agile, more productive, and ease the pressure of costs relating to operational tasks.

The idea of RPA is to streamline processes that are currently time-consuming and detrimental to the way your company works currently. Rather than outsource to a separate team, you can instead take advantage of software that can be implemented into current processes and enable your workforce to be more productive and efficient. You may find that certain processes just need the help of more advanced software integration that can make a difference for both your employees and customers.

Automation in the BPO industry is becoming more widespread, with outsourcing companies diversifying their service offerings to include software and CX development. Finding those that are working with RPA rather than against it may prove to be more beneficial for your business.


Outsourcing Pricing Models

There are a few different outsourcing pricing models to be aware of when deciding on which to work with:

  • Fixed Price (FP) – this is where a standard rate is given by a service provider charged either monthly or annually that covers all costs.
  • Cost reimbursable – where limits are set based on consumable expenses, which may include an additional payment at the end of the term (balloon payment) depending on the work provided.
  • Time and materials (T+M) – this is where a company bids on the costs involved with the work or project agreed to, and may include an upper limit to avoid going over budget.
  • Consumption based – this is a pricing model based on usage within a set timeframe, ensuring only charges based on usage rather than a fixed cost.
  • Profit sharing – this involves sharing a percentage of profit based on an agreed objective at the outset.
  • Incentive based – similar to profit sharing, this is a pricing model that provides a bonus or incentive on top of other agreed pricing.
  • Shared risk-reward – Similar to incentive-based models, shared risk-reward is where a flat rate is agreed but a shared risk on development or products is agreed upon, and rewards if successful.

  • Deciding to outsource involves a lot of decisions to be made based on the type of BPO service you want to use, the pricing model, and whether RPA could help too. It’s never simple making this decision for your business, so speaking to experts and researching your options will clear any confusion or doubt about your decision.

At Ventrica, we have many years of experience in helping global brands make BPO work for them. As customer experience specialists, we may be able to provide what you are looking for. To find out more, contact us today and we’ll be able to provide further information to help with your outsourcing decision.

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