In today’s hyper-connected, technology-fueled world, businesses are continually seeking ways to streamline operations, reduce expenses, and significantly enhance productivity. One strategy that has proven exceptionally effective is backoffice outsourcing — or even going a step further, with offshoring.
Unpacking Backoffice Outsourcing and Offshoring
Essentially, backoffice outsourcing involves delegating administrative and support tasks, such as accounting, customer service, or IT support, to third-party providers. Offshoring takes this concept global, engaging providers based in foreign countries, often to leverage more cost-effective labor markets.
Companies like American Express, for instance, have successfully adopted this approach. They’ve offshored substantial elements of their backoffice operations to countries like India and the Philippines, generating substantial cost savings and focusing their core teams on strategic, revenue-generating tasks.
Despite the numerous benefits this strategy offers, concerns regarding quality control, data security, and loss of managerial control often emerge. While these concerns are valid, many can be effectively addressed with careful planning, thorough provider vetting, and a robust framework for oversight and control.
The Realities & Rewards of Outsourcing
Several studies highlight backoffice outsourcing and offshoring’s advantages. According to Deloitte’s 2020 Global Outsourcing Survey, 59% of businesses view outsourcing as a cost-cutting tool while 57% see it as a means to focus on their core business. Additionally, 47% believe that outsourcing and offshoring solutions are crucial to solving capacity issues.
Moreover, businesses aren’t just outsourcing any tasks. Deloitte’s survey revealed that 80% of businesses outsource their IT functions, while nearly 50% outsource their finance tasks.
When executed correctly, backoffice outsourcing and offshoring can offer numerous benefits:
Cost Savings: With access to a global labor market, companies can tap into regions with more favorable labor costs. This strategy often results in substantial savings, especially for businesses based in high-wage countries.
Enhanced productivity: By offloading routine and non-strategic tasks, businesses can free up their core teams to focus on critical, growth-driving initiatives.
24/7 service availability: Through global outsourcing, businesses can create a “follow-the-sun” approach where operations continue round-the-clock, crucial in today’s always-on marketplace.
Navigating Potential Pitfalls
In terms of quality control, data security, and managerial control, companies can mitigate risks by implementing stringent controls and ensuring they select reputable, established outsourcing providers.
Quality control: Companies should establish clear service level agreements (SLAs) outlining expectations for performance quality, timelines, and more. Regular review meetings can help maintain alignment and address any issues promptly.
Data security: Businesses should only partner with outsourcing providers who demonstrate robust data security protocols. These safeguards should include secure server infrastructure, data encryption, and strict access control measures.
Managerial control: Maintaining clear lines of communication and implementing robust project management systems can ensure the business retains sufficient oversight despite physical distance.
In Conclusion
The business landscape is constantly shifting, and for companies to stay ahead, they need to evolve and adapt. Backoffice outsourcing and offshoring offer opportunities for businesses to optimize their operations, reduce costs, and free up their core teams, thereby driving more strategic value. Yes, there are potential pitfalls and concerns. However, with careful planning, stringent protocols, and diligent selection of outsourcing partners, companies can enjoy the full suite of benefits this strategy offers.
The path of progress isn’t always straightforward, but as former IBM CEO, Sam Palmisano, said, “You have to take your workforce global in order to serve a global customer base.” Backoffice outsourcing and offshoring, when done correctly, embody this approach, transforming businesses into global entities ready to serve a global marketplace.
