The outsourcing industry has grown exponentially in the past few years, and the future only holds more promise for growth. Research states that the outsourcing market is expected to grow by US$40.16 billion by 2025. With the growing demand for remote working opportunities, upward mobility, and education in developing countries, the scope of outsourcing is likely to grow further.

However, there are also some challenges that outsourcing industries of today face and some key benefits that should make outsourcing the lucrative industry it’s predicted to be.

Challenges of Outsourcing

As viable as the future of outsourcing is, there are some challenges that organizations of today must consider if they are looking to outsource their operations.

1. Communication and Collaboration

One of the biggest challenges of outsourcing and remote work is the communication barrier that can hinder effective communication and collaboration with the outsourcing partner.

Being located in different countries and time zones means that working hours can differ.

Since these teams often speak various languages and come from diverse cultural backgrounds, maintaining clear communication can be challenging and lead to potential delays and misunderstandings.

Solution:

When outsourcing customer-facing roles like customer service, consider these best practices:

1. Use the latest cloud-based communications technologies to bridge distances and time zones, such as instant messaging, video chats, and even virtual meeting spaces.
2. Hire BPOs that will work during your time zones or employ BPOs in more than one geography in a “follow the sun” strategy, which companies use to provide 24/7 customer support across different times.
3. Utilize existing and emerging technologies that reduce language and accent barriers, such as grammar tools, agent-assist AIs, and even real-time accent reduction software.

For a firm just starting out, hiring a BPO with deep experience recruiting and assessing agents for their language skills, accents, cultural awareness/affinity, and ability to work during the client’s needed shifts can be a great idea. They can then explore the use of workforce management software that can ease the burden of planning shift coverage using globally distributed teams

2. Quality Control

Outsourcing provides access to a wide range of global expertise and specialized talents, which may be a valuable asset for businesses trying to innovate or optimize operations. However, outsourcing to developing countries may sometimes result in a drop in quality.

The client company cannot directly oversee day-to-day operations because they cannot audit the work floor in person. Sometimes, the lack of direct visibility can result in the services not matching the standards set by the organization.

According to a survey by Deloitte, 25% of businesses cite the loss of control as a significant challenge when outsourcing.

Solution:

To address quality changes associated with outsourcing, make sure that a senior member of your team is responsible for the success of the outsourcing program. This will include a skill set that is highly different from managing an internal staff.

It will also require a global mindset, cultural sensitivity, vendor management, negotiating, working through a matrix organization, and more. You should ensure this leader has aligned incentives for complete buy-in to the program’s success.

Aside from that, you can also appoint a team member to serve as quality manager and provide appropriate incentives to motivate both this individual and the teams who will receive feedback from them.

Establish a quality assurance program wherein experts review a sample of records against a standards rubric, which should include multiple categories of quality checks, such as:

• Timeliness of response
• Accuracy of response
• Completeness of response
• Appropriate use of brand style and tone
• Correct grammar and use of language.

Companies can also outsource to a location and to a partner with sufficient infrastructure and backup plans to avoid and recover quickly from computer and communications systems outages and ensure you have a training program in place that gives your outsourcing partner their best chance to live up to your expectations.

You can also install redundant resources so that, in case of poor performance, systems impairment, adverse weather, or other negative incidents, you can reroute the work to other resources, preventing a lapse in quality.

3. Data Security and Privacy Concerns

In today’s world, where data is extremely valuable, outsourcing can make it harder to keep this data safe and private. Even if the outsourcing partners use robust cybersecurity tools, there’s still a higher risk of your sensitive information getting exposed or leaked when you share it with them.

Solution:

It’s true that when you outsource, you may either grant access to your data or even transfer data into the possession of your outsourcing partner. It’s crucial to consider data security as part of your evaluation.

Ask your partner to verify their solutions using some of these best practices:

• Provide evidence of their security training, systems, and certifications
• Provide a list of any breaches in the past 12 months and how they responded to them
• Provide an overview of systems architecture, including encryption measures, redaction practices, and other controls in place to either protect or redact sensitive information.
• Introduce you to their security personnel, providing a hierarchy of contacts, including escalations.
• Evaluate contract language to ensure both parties have appropriate legal responsibility for their data environments.

If you are in a regulated industry, hold sensitive partner/customer data, or engage in public sector work, tap professionals from the data security industry to assist in your evaluation of new partners.

While this can be a daunting challenge, keep in mind that most outsourcing companies are large enough to employ hundreds, usually thousands, of employees and work with numerous enterprise clients.

Most experienced BPOs have already addressed these challenges to the satisfaction of their major clients. Since 95% of the Fortune 500 outsource today, their best practices have permeated much of the industry.

So, while the onus is on you to do your diligence, you should be optimistic about your prospects of finding a solution.

4. Dependency on One Outsourcing Partner

Outsourcing helps businesses work more efficiently and save money, allowing them to focus on what they do best. For instance, a technology company might outsource customer service so it can focus more on developing software.

But, relying too much on outsourcing partners carries a risk. If something unexpected happens, like a natural disaster or political instability in the area where your outsourcing partner is, it could affect your business.

Solution:

The first solution many companies consider is retaining internal roles and the competence to handle some tasks if the outsourcing partner falls behind.

This is a reasonable approach, but internal teams often become fully utilized and absorbed on other valuable projects, so tapping into an internal team when your outsourced team is backlogged or impaired can be disruptive.

Instead, a best practice is to outsource to more than one partner and ensure they are located in different geographies and time zones and recruit from different talent pools.

This way, you would have access to your internal team, your primary outsourcing partner, and a secondary partner.

It also maximizes your ability to scale to seize the upside, respond to a capacity crunch, and scale back when demand ebbs more easily. It is the most scalable and resilient model for your talent supply chain.

Additionally, you should consider expediting the creation of your self-service and AI-powered solutions, which takes the pressure off your teams and increases the probability that you will be able to handle the rise and fall of demand and capacity with greater ease.

Benefits of Outsourcing

When done correctly, outsourcing can offer companies of all sizes multiple strategic advantages. The increasing popularity and prevalence of remote work have made outsourcing a no-brainer for most organizations.

Here are some benefits that you can tap into when you choose to outsource:

1. Cost Savings

Any outsourcing is likely to generate considerable cost savings, even when done in the same country where your operations higher costs for real estate, local taxes, insurance, and wage rates, among other things. are currently located.

For example, if your customer service facility is located in a U.S. metropolitan area, you are likely facing

Outsourcing to a more rural U.S. location may yield significant savings without establishing a new team outside your local country.

That said, managing teams from different countries, especially developing nations, is a big benefit of offshore outsourcing. Organizations often adopt this strategy because labor costs are generally lower in developing countries.

In fact, this difference in labor costs is one of the main attractions of offshore outsourcing.

For example, a business based in the United States might outsource customer service or data entry tasks to a country with lower labor costs. These cost-savings can help the company offer its products or services at more competitive prices or reinvest the savings into other business areas, like research and development.

The Wall Street Journal reports that, in some cases, companies saved up to 40% of their payroll costs by moving positions offshore.

2. Access to Specialized Skills

Outsourcing opens up opportunities for businesses to tap into skills and expertise that might be hard to find in their own talent pool. This is especially useful for getting specialized knowledge or skills that are either scarce or too expensive locally.

For example, a company might find experts in a certain type of technology or a particular language skill more readily available in another location. Outsourcing to these experts allows the business to handle tasks more efficiently than it could with only local resources.

3. Easy to Scale the Business as Per Needs

Businesses with outsourced teams can adjust the size of their operations more efficiently to meet the market’s demands. If a company suddenly needs to increase its production due to a spike in demand, it can quickly add more people to its outsourced team.

Similarly, if the demand drops, the company can reduce the team size without the complications of downsizing its in-house staff. This flexibility is a huge advantage, especially in industries where demand can change rapidly.

In a survey by Clutch, 19% of small businesses with 251-500 employees said they use outsourcing mainly to scale their operations.

4. Focus on Core Competencies of the Business

When a company outsources tasks that are not central to its primary business, like customer service, IT support, or accounting, it frees up its internal team to concentrate on what they do best. This could be anything from product development and strategic planning to improving customer experience, depending on the nature of the business.

In a recent Deloitte survey, 65% of companies stated that outsourcing work helps them focus on the most important business functions.

Conclusion

Outsourcing in 2024 is a valuable business strategy with its own benefits and challenges. The main challenges include communication difficulties, maintaining quality, ensuring data security, and relying too much on single outsourcing partners.

To address these, consider implementing cloud-based communication tools, hiring BPOs with relevant expertise and diverse geographical coverage, utilizing language and accent reduction technologies, ensuring thorough security evaluations, and utilizing workforce management software and efficient shift planning.