BPO, offshore, and nearshore outsourcing are prominent business strategies. Learn in detail about each model and the core differences between nearshoring and offshoring.
In recent times, the corporate world has been dictated by ever-growing market trends and challenges that can be tedious to keep up with. With these fluctuating conditions, businesses must reinvent themselves and strategize to keep pace with increasing customer demands. One such effective strategy for expanding your services without investing in a larger workforce is outsourcing.
This article delves into detail about various outsourcing models, including BPO, offshoring, and nearshoring, how they compare with each other, and how they can help your business thrive in the future.
What Is Outsourcing?
Outsourcing has recently become a core practice in the business world. In today’s time, the US accounts for the highest percentage, with 30,000 jobs being outsourced every year.
Outsourcing refers to hiring a third party to perform certain in-house services that were previously handled by the company’s employees. Outsourcing helps provide a myriad of services to the company, such as customer support, manufacturing, and logistics. This approach allows the company to focus on its expertise and improve the brand’s overall productivity and performance. In addition, outsourcing eliminates the expenses of utilities, equipment, and infrastructure to provide a more cost-effective and convenient alternative.
Utilizing global talent and optimizing the company’s resources is a recognized strategy in business economics. That said, various outsourcing models exist, depending on the company’s needs and expectations from the contracted third-party organization.
What Are the Different Types of Outsourcing Models?
Outsourcing is an umbrella term that can be further categorized into various models. Here are some of the most common outsourcing models, along with their specialized advantages:
1. Business Process Outsourcing (BPO)
Business Process Outsourcing (BPO) is a subset of outsourcing in which the outsourced company takes responsibility for specific business functions. BPO generally involves a remote third party taking over routine business tasks such as accounts payable while the company pays for the deliverables.
BPO may include outsourcing either front-office or back-office processes. Front office functions are linked with customer-related services such as sales and help-desk support. On the other hand, back-office operations include technical tasks such as accounting, finance, and inventory management.
Partaking in BPO aids in streamlining operations, lowering production costs, and paying more attention to the company’s core competencies for speedy growth.
2. Offshore Staffing
Offshore staffing occurs when, instead of hiring an entire organization, the company hires staff living in distant locations. The main difference is that the third-party firm is in a different geographic region with different time zones, languages, and customs.
For example, a company located in the US hires designers from India through an offshore staffing firm. In such cases, the workforce reports directly to the company while the firm handles payroll and office supplies.
This strategy helps companies access an expert, diverse talent pool at cheaper labor costs. However, companies must be aware of the various communication and coordination challenges when utilizing offshore staffing from overseas countries, including disparate time zones. This often requires the remote staff to work through the night, causing quality-of-life issues with the risk of remote staff churn.
Additionally, visiting overseas staff is expensive and time-consuming, impacting a manager’s ability to build a strong and healthy relationship with their remote team.
3. Nearshoring – Remote Team Solutions
In nearshoring, businesses recruit employees located ‘near’ each other to provide services or work on projects. The service provider either shares a border with the host company or is situated in similar regions, such as a US-based company hiring a team from Mexico.
Since nearshoring is done between neighboring countries, it ensures the hired team operates at working hours and conditions similar to those of the company. This allows for easy and smooth compliance with the company’s values and seamless communication at all times.
Nearshoring vs Offshoring
Both nearshoring and offshoring are remarkable business strategies for companies to accomplish their goals in a faster time and with better performance. You can decide which method works best for your company based on the following factors:
1. Cost Savings
Although nearshoring and offshoring are cheaper alternatives than hiring an in-house team, both offer significant cost savings. Offshoring cuts down the company’s operational costs by about 70 to 80% by focusing on regions with cheaper employee salaries and technology. Meanwhile, nearshoring accounts for 50 to 60% of cost savings. Remote Team Solutions specializes in finding and staffing your remote team for your business.
2. Real-Time Communication
While hiring international workers gives the company the advantage of staying operational 24/7, it can also create communication rifts. Since the firm shares a similar time zone in nearshoring, it is easier for companies to conduct team meetings and collaborate seamlessly with the outsourced end.
Meanwhile, offshoring can be problematic if real-time communication is essential for the company and the third party is unwilling to compromise on their schedules or find a way out of the critical time complexities.
3. Cultural Compatibility
Closer proximity accounts for closer cultural values and language proficiency. This means that when nearshoring, it is easier for the company to convey its demands, priorities, and principles to the third party without going into detail about each aspect.
In contrast, offshore staff require considerable briefing to fully understand the company’s ideas, cultural background, and operational procedures. This, combined with the time zone differences and possible language barriers, can make it quite time-consuming and challenging for the host company.
4. Team Building and Direct Management
Team building is an essential component behind getting optimal product results. With nearshoring, the manager has the ability to travel and collaborate onsite with their remote team situated in Mexico.
Similarly, the nearshore staff can also visit the company’s headquarters in the US or support the US trade shows to encourage team-building activities. On the other hand, it is relatively more complex to directly manage the outsourcing staff and build better relationships within the team when offshoring.
Conclusion
From retail banking institutions to financial management firms, companies across various sectors can significantly enhance their operational efficiencies and reduce costs by adopting BPO, offshore staffing, nearshoring, or other similar outsourcing models.
Remote Team Solutions goes beyond the role of a traditional staffing or recruiting agency. We partner with your business to build your team of professionals in Mexico, tailored to meet your specific operational needs. Our approach involves a thorough understanding of each client’s unique requirements, enabling us to equip your remote team with specialized skills essential for your services. Moreover, we proactively manage and mitigate any potential challenges associated with staff outsourcing, ensuring a smooth integration of our staffing solutions into your business processes.
Choose Remote Team Solutions to transform and optimize your operations with expertly managed staffing solutions that drive growth and operational excellence.
