Which outsourcing model is right for your business?

by | Jul 18, 2022 | Offshoring, Outsourcing

The decision to outsource offshore can be daunting so it’s important to understand the different offshore outsourcing models so you can decide which is a good fit for your business. 

They all have pros and cons so it is important to understand the differences between each model. Let’s take a deeper look at the differences between the different offshoring and outsourcing models.

Project Based Outsourcing

Project-based outsourcing is typically for projects that have a limited scope so it doesn’t make sense to bring on a permanent position.

Startups or companies with limited budgets will often do project-based outsourcing because they aren’t ready to add a full-time resource, but they aren’t able to do the work with their current in-house team. 

One challenge with project-based outsourcing is the service provider is often working on multiple projects with multiple clients so timing can become an issue when conflicts arrive. 

This can create challenges and cause unexpected delays.

Offshore Outsourcing

Offshore outsourcing is when a company contracts with a third-party service provider in another country to completely take over certain business-related tasks and processes.

Business process outsourcing (BPO) is what many people think of as offshore outsourcing.

The global BPO market has an estimated market value of USD $245 billion in 2021.

The outsourced tasks are typically non-core business functions like customer services, call center activities, accounting, and other support services.

If you are looking for a hands-off approach this is the model for you.

It also comes with few upfront costs and can often get up and running in a few weeks’ time.

One challenge for clients is the loss of control over the process and little transparency into what is happening and who is working on their products or services.

Also, although it is hands-off, it can be difficult to ensure that the process and quality of the service provided are in alignment with the company’s expectations.

There needs to be clearly documented processes and deliverables mapped out by the client with ongoing monitoring of the end product received.

Smaller companies with limited resources often struggle to make sure the service meets their expectations.

Service Level Agreements can help mitigate these challenges but by the time you realize you have an issue you are deep into the relationship making it hard to pivot.

BPOs are also more expensive since the service provider has to build in the expense for handling the entire process and risk associated with that level of service.

Offshore Corporate Division

Offshoring is when you set up a division of your company overseas and manage the entire operation yourself- HR, Payroll, IT, Facilities, and employment laws on top of the day-to-day operations.

Unlike other outsourcing models, you have complete control in this model which is important to many companies.

This is quite an undertaking and can take a long time to get set up, not to mention a large upfront investment. 

It can become cost-effective but only when you are doing it on a large scale.

This model requires deep local knowledge so you’ll need to do a lot of recruiting and vetting of your senior management team to ensure they align with your company value and goals. 

Unlike outsourcing, companies that offshore are more likely to relocate crucial operations to their overseas offices.

In addition to having direct control over the product or service, companies that offshore take advantage of lower labor costs and access to the global talent pool.

Managed Operations: Best of both worlds (Forma’s model)

Managed operations are when you partner with an offshore outsourcing partner and they handle all the payroll, HR, IT, recruiting, and facilities.

You have direct control over your team and your partner co-manages your team’s productivity and quality alongside your management team to ensure performance standards are met.

Managed operations typically have a dedicated team and the hiring process is similar to in-house because you can interview the best candidates.

In this outsourcing model, you have full control over your team. They work seamlessly side by side with your in-house team. 

Thanks to technology, your team can join calls and video calls whenever needed and is always available via phone or messaging app. 

Your partner manages all the time tracking freeing you up to focus on your performance.

These customized teams are more cost-effective than a BPO as well

Your time commitment is less than setting up an entire company offshore, but more than the hands-off approach of a BPO. 

Lean small and medium-sized companies often end up spending a lot more time than expected with the BPO model so many find Managed Operations more suited to them due to the co-management aspect of a Managed Operations approach.

Discover how Forma Managed Operations model can benefit your business- contact us today!