More than decades ago, companies started outsourcing their business processes and functions to offshore locations, primarily to cut down on costs and focus on core business activities at home. Since then, the global outsourcing industry has come a long way.
Advancement in technologies has made it much easier to perform work from a remote location, and consequently, the offshore outsourcing industry has grown tremendously. Research studies have been conducted to provide insights and statistics on popular outsourcing destinations and the outsourcing providers that offer their services to customers from all over the world.
We've compiled the ultimate list of outsourcing statistics to help stay up-to-date with the trends. Check out this infographic and read on to learn more about the global outsourcing industry.
The Global Outsourcing Industry
According to Deloitte's 2016 Global Outsourcing Survey, 78% of respondents claim that they feel positive about their outsourcing relationship.
When asked about the reasons for outsourcing, 59% of businesses cited cost-cutting as the primary reason, while 57% claims that it enables them to focus on core business functions. Another 47% of businesses claim that outsourcing solves business capacity issues.
Other reasons for outsourcing include the enhancement of service quality, critical to business needs, access to intellectual capital, business environmental management, and wider transformational change.
This is why more industries are outsourcing their business processes, especially IT and customer service. Outsourcing sectors include IT-BPO, healthcare and pharmaceuticals, energy, travel and transport, telecommunications, and media.
In KPMG's recent Global IT-BPO Outsourcing Deals Analysis, telecommunications sector consistently remains one of the top contributors to the outsourcing industry. It's because this sector is increasingly leveraging information and communication technology as well as social, mobile, analytics, and cloud technology.
Adoption and Revenue
Another study revealed that since the Great Recession in the United States, the country had outsourced more than 2.4 million jobs. In fact, 57% of companies in the United States increased their use of outsourcing, while 34% significantly restructured outsourcing agreements and only 9% terminated their outsourcing agreements.
When KPMG analyzed the deals closed in the first quarter of 2017, they found that albeit decreasing, the Americas is continuing to be a major outsourcing region that contributes 42% of the total deal value (from 68% the previous quarter). Of these, 41.5% came from the United States alone.
Meanwhile, the EMA (Europe, Middle East, and Africa) and ASPAC (Asia and Oceania) regions are not far behind and have increased their adoption of outsourcing. In the previous quarter, EMA contributed 27% of the total deal value, but during the first quarter of 2017, their contribution increased to 35%. Of this percentage, 22.07% of deals came from the United Kingdom.
ASPAC, on the other hand, contributed 23% this quarter as compared to only 16% in the last quarter. Australia and India were also identified as a key outsourcing market in the same report.
Since the advent of outsourcing, revenue has almost doubled. In 2000, the global market size for outsourcing was at 45.6 billion U.S. dollars and that number has continued to grow until it reached 88.9 billion U.S. dollars in 2015. However, the same source reported that last year, the global market revenue went down to 76.9 billion U.S. dollars.
Automation and Outsourcing
The global outsourcing industry has evolved, as automation technology is taking over much of business processes. Traditional IT-BPO offshoring models are evolving. In the past, operations of an entire business function are contracted. Today, specific services can be contracted and delivered across distributed environments in the world.
But, because automation is a relatively new technology, it still needs to be closely monitored. As a result, new jobs are created as human decision-making and critical thinking are still required in creative and more complex processes. These new positions require more advanced skills for the building, training, management, troubleshooting, and improvement of the technology. In effect, the demand for low-skilled jobs in offshore BPO companies is declining, and the demand for higher skilled workers that can manage and improve automation technology is rapidly increasing.
As such, new offshore positions are being created in rhythm with the trend of outsourcing higher-skill jobs, and creative tasks that cannot be automated is rising. According to MicroSourcing, the most common business processes that companies nowadays outsource are for small or one-time projects, photography services, administrative tasks and repetitive processes, accounting and bookkeeping, and graphic design projects.
The Philippines as a Top Outsourcing Destination
Because SMAC and automation technology is rising, A.T. Kearney took digital competence in consideration to identify the top outsourcing destinations in its Global Services Location Index (GSLI). Along with this, they used 38 metrics surrounding financial attractiveness, people skills and availability, and business environment. In this GSLI, the Philippines ranks as the 7th best offshoring landscape.
Meanwhile, the Tholons Services Globalization Index added digital innovation this year as one of the metrics in coming up with the top outsourcing destinations in the world. It places the Philippines 3rd on its list of top digital nations. Manila is also ranked 4th on their list of top super cities.
These rankings confirm that the country is holding steady as an industry leader in outsourcing. As one of the world's largest English-speaking nations with a 95% literacy rate, the Philippines is an undisputed leader in customer service and BPM (Business Process Management). In fact, 16 of the top 20 offshore call center projects in 2016 were located in the country.
More importantly, the Philippines is gaining ground in high-value fields including legal-BPO and engineering. The country is constantly updating the skills and knowledge of their talent pool to keep up with the evolution of outsourcing trends and automation technology.
Digital forces such as robotics, AI, cloud storage, social media, mobile technology, and big data are shaking up the traditional model of outsourcing services. As such, the global outsourcing industry is becoming increasingly competitive, with Canada, Chile, Israel, and Brazil disrupting its landscape. Outsourcing companies and third-party providers need to innovate and re-invent their services to keep up with evolving demands.
At MicroSourcing, we enable organizations and enterprises to get the most value for their money and grow their business exponentially in response to today's digital demands. Whether you're a startup company or an established enterprise, we make sure to offer a strong outsourcing option to help your business thrive.
Many businesses, especially startups and SMEs, only have a few people running the operations—sometimes even run by only one entrepreneur. And more often than not, these people are not human resource experts and are more skilled on the business side of things.
At first you may be doing okay handling and taking care of your people; but in the long run, handling the complex HR process from recruitment, onboarding, and training up to payroll, benefits, and other employee programs can get overwhelming and may affect other parts of your operations.
Here are the signs you need to look out for to know when it's time to outsource your HR.
Difficulty in Keeping Up with Employment Regulations
Employment regulations and requirements always change or get updated, and non-compliance can result in fines or and legal issues. Despite having in-house HR staff, it can still be overwhelming to stay on top of these, especially if you are planning to expand to other places or countries. Outsourcing to an HR outsourcing provider ensures that you have a dedicated outsourced HR team that has extensive expertise in employment laws and other HR matters. Outsourcing companies that offer HR outsourcing also have the right, up-to-date resources and technology.
Outsourcing non-revenue generating operations, such as back-office functions like HR, is cost effective and brings efficiency to your business. The costs you will get to save will not only come from overhead and infrastructure expenses, but also from the technology and streamlined system that the outsourced HR provider offers. Having an all-in-one, centralized HR information system simplifies processes, thus improving productivity.
Part of the growing pains of a business is the struggle to keep it together while keeping up with the increasing demands. Instead of dedicating your time and energy to coming up with strategies to keep the momentum and improve it even more, you're stuck with HR functions such hiring more people, processing payroll, and more. Growing businesses can benefit from outsourcing their back office functions, including HR. Not only you get more time to focus on your business' bottom line, but you also save on costs so you can allocate more money to core operations.
Inability to Attract and Retain Employees
Talents will be more encouraged to apply to your company and stay longer if you provide a comprehensive benefits package as well as satisfying employee management and engagement programs. Your HR outsourcing partner has all the skills and resources to take care of these for you. It's also important to nurture your employee's development. HR outsourcing services include Learning & Development (L&D), which could help you tailor and deliver training programs for your employees.
MicroSourcing offers end-to-end recruitment and HR outsourcing services, from talent acquisition to talent management and retention.
by: Finella Kristle Panlilio
Tuesday, March 12, 2019 | Comments (0)
Category: Outsourcing Research / Trends
When your business is growing rapidly, it's not only the products or services development and the marketing you should prioritize. Customer service is also a priority as your customers are the ones bringing you business.
Start-ups typically have the tendency to overlook customer service to focus on other priorities and this can become an issue over time. Especially when your business is growing fast, it can create customer service pain points that could make it difficult for you to scale your operations and grow your business further.
While challenges are common and inevitable, it is best to anticipate them and prevent them from happening. When it comes to customer service challenges, here are the most common ones you should look out for and how outsourcing can help you overcome them.
Start-ups and small businesses only have a few employees in their team, so elaborate information security system and policies may not be necessary. But as your business grows and you gain a lot of customers, your team, especially your customer service staff, also grows. And with a lot of customer service employees having access to sensitive data, your company can become vulnerable to data breaches.
In this digital age, cybercrimes are getting more sophisticated and customers are getting more careful about giving away their personal data. In protecting your company and your customers from data security risks, you should be able to define who are authorized to access the data, what the data is being used for, and how it's protected.
Why Outsource Customer Service: Customer service outsourcing firms are already experienced in this field and have dedicated secure facilities in place for offshore customer service teams. They have robust and strict physical and information security policies and protocols, in which everything is audited and monitored, and potential breaches are assessed so they could be prevented.
Seasonal or Unpredictable Surge of Customers
Seasonal sales or promos and new campaigns or products can create dramatic fluctuations in customer service demands. It's hard to predict customers' reaction toward a new product or campaign, but it's possible that a successful campaign or launch will result in an overnight explosion. Is your business ready for surges?
As for seasonal promos like Christmas sales, you can predict that customer service demands will peak during this time of the year. So, you would hire more people to accommodate increases in volume during this season. But what happens during off-peak seasons? You could hire temporary staff for peak periods, but you’ll still have a permanent extra office space and equipment that will remain unused for most of the year.
Why Outsource Customer Service: Among many other purposes and benefits, outsourcing is designed to help businesses scale up (or down) their operations whenever they need to, and make it easy to do so. You can hire an offshore team of customer service staff for an arranged period of time or for long-term. That way, you have expanded resources without spending more on overhead costs. Outsourcing also reduces turnaround time for the recruitment, onboarding, and training processes. You can focus on growing your business while your customer service outsourcing partner takes care of your offshore team.
A growing business can mean that you are starting to cater to customers from other countries. Despite having stellar customer service locally, overseas customers might have varying definitions of what is good customer service for them. Tapping into new markets can come with challenges, but customer service may be one of the most complicated to get right. Different countries have different languages—and even if English is the universal language, there's also the cultural differences to consider, as well as different regulations you need to comply with.
Why Outsource Customer Service: Outsourcing providers have the expertise to give you advice on the right customer service approach or strategy for a specific market. There are markets that prefer email or chat over calls, while other markets prefer voice-based customer service. Furthermore, they have the skills, tools, and resources to recruit customer service talents for you that have the right skill set that you need to cater to a certain market. They may support different languages as required and may have language competencies for specific regions or dialects. Outsourcing companies, as they cater to offshore clients, are also well-versed in and are certified for international standards and regulations.
To overcome these challenges, you should be prepared for all the potential scenarios that could happen. Assess every aspect of your customer service and come up with sustainable strategies that will not compromise other areas of your operations. An experienced customer service outsourcing partner will help transform your business to become more flexible, scalable, and productive. Outsourcing your customer service will also give you access to extensive expertise, best practices, and a wide range of resources.
Aside from helping businesses cut costs and improve efficiency, outsourcing also brings innovation and a wide range of resources that businesses typically can't acquire easily for their in-house operations. However, many businesses are still hesitant to outsource their business processes for various reasons. One is because of their inaccurate assumptions about outsourcing.
Below, we've debunked five of the common misconceptions businesses make about outsourcing.
Outsourced Work Has Poor Quality
Some businesses assume that because outsourcing provides services at lower costs, it means that the quality of work is lower, too. There's also the assumption that outsourced staff is less skilled that in-house employees in the US or Europe.
On the contrary, many businesses turn to outsourcing to get professional help from experts from different parts of the world. Outsourcing gives businesses access to a diversified set of skills and resources that can bring new strategies and innovations, as well as handle projects with a neutral or more objective perspective. In Deloitte's 2016 Global Outsourcing Survey, it said that some of the reasons companies outsource are to enhance service quality and to have access to intellectual capital, among other reasons.
Outsourced work is comparably more cost-effective than in-house teams not because of lower quality work, but because the cost of labor and overhead are much lower in some overseas outsourcing destinations and economies of scale enable large specialized providers to do more work at lower costs.
Outsourcing is Only for Big Companies
Startups and SMEs think that outsourcing is only for larger enterprises with the resources and capabilities to take part of their operations offshore. But there are many outsourcing opportunities available for any type of business. Companies of all sizes from different industries can outsource any part of their operations. Outsourcing providers offer customized services that cater to various objectives, including delegating small tasks and occasional projects, as well as expanding a part of your operations offshore.
In Deloitte's survey, the respondents said that the innovation that outsourcing brings is being used to increase the level of quality, lower costs of delivery, improve customer experience, decrease transaction time, and deliver new capabilities. With startups and SMEs having limited time and resources, these benefits, along with being cost-effective, prove that outsourcing can serve as an essential part of their growth strategy.
It's a Challenge to Communicate with Outsourced Teams
In outsourcing, clear and effective communication is important. Some companies worry that when they outsource to another country, it will be a challenge to communicate with the outsourced team because of the language barrier. Others also don't feel confident about not being able to communicate with the outsourced team in person.
Reputable BPO firms like MicroSourcing have standards in place when it comes to the level of education and language proficiency being required from outsourced applicants. According to international education and language training company EF's 2018 English Proficiency Index, the Philippines ranked 14 out of 88 countries, with a high proficiency score of 61.84.
In terms of remote collaboration, innovations in technology today make it possible and easier for outsourced teams to effectively communicate with the in-house team. In addition to email, there are now different channels of online communication. Project management tools and data management software that are accessed via the cloud also make it convenient to keep track of and monitor offshore teams and projects.
Outsourcing is Only for Tech Companies
Since tech business functions are not heavily impacted by distance, many businesses think that outsourcing only works for tech businesses. However, while IT is the most outsourced business function, it's not only for tech companies. In fact, according to Deloitte's survey, the majority of the companies that benefit from outsourcing belong to the consumer and industrial products industry. Many companies also come from the financial services sector, the healthcare industry, and just about 9% are tech and media companies.
Next to IT outsourcing, commonly outsourced services include legal processes, real estate, taxation, human resources, finance, and procurement. Your business doesn't have to be in the tech industry to take advantage of these services.
Clients Don't Have Control over the Processes
Outsourcing is meant to help lighten your load so you can have more time and money to spend on core business goals. And while BPO companies take care of the outsourced operations for you, their services are customizable to match your existing processes. If you prefer to maintain control over your entire outsourced operations, there are also other outsourcing options available, including the managed operations model.
Offered by MicroSourcing, the managed operations model is like having your own company in the Philippines combined with the benefits that outsourcing offers. You can send someone from your in-house team to serve as the operations manager of your offshore team, or hire and train a Filipino manager who understands both your company's and the local cultures. The managed operations approach serves as the middle ground between incorporating and outsourcing, where your company gets to enjoy the best of both worlds.
by: Finella Kristle Panlilio
Tuesday, February 19, 2019 | Comments (0)
Category: Outsourcing Research / Trends
For any business, whether a large company or a small business, time and resources are valuable and must be used sensibly on aspects that matter most. Back-office processes that don't directly contribute to growing or improving your core business should be outsourced to professional BPO providers. One of these processes is managing the accounts receivables. It's a time-consuming activity that can be delegated so you could focus on revenue-generating activities.
Here are the ways outsourcing your accounts receivables can help your company save more money.
Ensures smooth cash flow
Having a proficient accounts receivable team ensures that payments are collected on time and tasks are completed efficiently. This helps provide regular cash flow, which in turn enables your business to run smoothly. Outsourcing your accounts receivables to a professional will not only offer you a team of specialists, but also innovative solutions and technologies that make the process quicker and more efficient.
Your own team without the extra overhead
One of the main benefits of outsourcing is you get to hire extra people without having to worry about additional costs for workspace, equipment, and the likes. Reducing staffing costs will improve your cash flow.
Lessens indirect costs
Reducing indirect costs through outsourcing your accounts receivables helps you achieve maximum profitability. The money you saved by delegating your admin activities to an outsourced team can now be spent on more useful, growth-oriented business activities.
Value for money
Not only do you have access to accounting and finance experts that can do the job effectively and efficiently, but you also get to obtain these services at low labor costs. According to studies, it costs around $9.38 for companies to send an invoice and 90% of that is because of labor costs. Outsourcing to developing countries with an educated labor force, such as the Philippines, gives you value for your money.
Better client screening
Outsourcing companies that have the expertise to manage accounts receivables can help you establish credit policies and procedures that will screen your clients thoroughly—if they are credit-worthy and are able to pay sooner. This kind of efficiency will save you money in the long term.
Pay for only what you need
Instead of having to pay a full-time in-house accountant or accounting team, increase your ROI by paying for only the service that you need, only when you need it. Outsourcing has flexible engagement models, including arrangements that allow you to acquire outsourced accounts receivables services for a certain period of time or only as needed.
Managing accounts receivables, while it's one of the lower priority business processes, can create a negative impact on revenues when not done efficiently. It's perhaps for this reason that accounts receivables was one of the first tasks to be outsourced, as well as one of the most commonly outsourced business processes today.
Make sure that your receivables are immediately converted into revenue by ensuring effective cash flow. Improving your accounts receivables collection process through outsourcing will help your company save money in more ways than one.