Basics of BPO Outsourcing For SMEs

Outsourcing to the Philippines has become popular for businesses looking to optimize costs and access a skilled workforce. As a major hub in the global outsourcing landscape, the Philippines offers diverse setup models to suit companies’ varying needs, from third-party outsourcing to captive centers. These options allow businesses of all sizes to handle everything from short-term projects to full-scale operations with greater flexibility and efficiency.

This guide provides an overview of typical outsourcing models available in the Philippines, helping you choose the best approach for your business. Each model has unique benefits that can streamline processes, reduce costs, and enhance productivity.

Typical Setups for Outsourcing in the Philippines

Foreign investors want to work only in Manila when they outsource to the Philippines. This has resulted in the rapid development of BPO centers in the country.

Your business might not have the capacity to hire local employees. As a result, you may want to consider outsourcing.

Listed below are some of our outsourcing models that you may find helpful.

Third-Party Outsourcing

This is the most common delivery model associated with BPO in the Philippines. It involves transferring tasks to an entity outside the organization. According to a study by the Everest Research Institute, outsourcing to an offshore IT vendor is more affordable than establishing a captive unit owned by the company.

Project-Based Outsourcing

Suitable for companies looking for short-term cost savings on one-time or test projects of low to medium complexity. This model is ideal for projects with well-defined requirements. You may choose this if demand is irregular or you cannot hire full-time employees.

Dedicated Offshore Center

Clients who want a cost-effective alternative to in-house production often use this option. Dedicated offshore centers establish a team of local professionals. This team would be working full-time for the client.

Captive Centers

They are also called offshore shared services. Captive centers are an in-house delivery model. The company owns some business process facilities in locations outside its principal office. As a subsidiary, it allows the company to support lower-cost offshore resources. Meanwhile, it maintains complete control over processes.

Hybrid Model

Today, captive centers have matured into a hybrid model. These models could represent 15 to 20 percent of all work sent to offshore providers. At least 80% of the captive units in Manila alone provide voice, back-office, and IT-related services. About half of the captive units providing voice services are completely or owned by a U.S. company.

Insourcing vs. Outsourcing

When a company hires an outside organization not affiliated with the company to complete specific tasks, this is called outsourcing.

On the other hand, insourcing is a business practice within an organization’s existing operational infrastructure and processes.

The primary difference between outsourcing and insourcing regarding work, projects, and tasks is how they are divided between different companies and departments for strategic reasons.

Outsourcing

To perform tasks, outsourced organizations rely on the developed workforce of an outside organization. Outsourced organizations also depend on the resources of an outside organization to provide services and manufacture products. Outsourcing work to another company is typically motivated by the desire to save money on labor costs and other expenses. Outsourcing is frequently used by telecommunications, travel, transportation, media, and retail industries to complete important projects or tasks on time and budget.

Companies can benefit from outsourcing by concentrating more on their core competencies. In other words, outsourcing non-core activities can help you become more efficient and productive. Outsourcing jobs can potentially affect jobs ranging from customer service to manufacturing and even positions in technology and the back office.

When a company uses outsourcing or insourcing, the organization’s ability to control operations and make decisions will differ. Organizations that outsource a specific service or manufacturing process have limited managerial control over the methods used by the outside organization contracted to complete the project. In the case of an organization known for providing friendly customer service, the ability to enforce or manage the way an outside support center interacts with customers is not available to the organization.

Insourcing

An insourced project is completed by a person or department within the company rather than an outside person or company. It uses the resources that have been developed within the organization to perform tasks or achieve a goal. For example, an organization may choose to outsource technical support for a new product because the company already has specialized support for another product.

In addition, insourcing typically involves bringing new operations and processes on-site within the organization’s walls. Because it frequently necessitates implementing new strategies to establish a new division within an organization, insourcing can be more expensive for a business than outsourcing.

Cons of Inhousing

Bringing activities in-house has several disadvantages that could be considered. One example is the cost of goods and services. Even though not all businesses see the advantages of manufacturing in low-wage countries, labor in foreign countries is frequently less expensive for many companies.

The costs of bringing activities in-house may increase significantly if the appropriate capacities are unavailable. This will be accomplished at the expense of limited resources such as time and money. The fact that more tasks must be completed due to insourcing is another disadvantage, as it may cause employees to become distracted from their core responsibilities.

A design agency should avoid devoting too much time to administrative tasks such as accounting and human resources. These activities do not contribute to the success of the company’s core business.

Furthermore, here are more reasons:

1. Higher cost

Outsourcing your workforce will result in higher hiring and labor costs for your company.

You’ll need to spend money on the following items:

• Each new employee is subjected to a background check and hired.
• Monthly salary
• Benefits such as paid time off, sick leave, new work equipment, and so on are expected.

2. Time consuming

In most cases, sourcing a workforce takes a significant amount of time.

Even after you’ve found the ideal candidate for a specific job, you’ll need to train the new hire to ensure they fully comprehend the scope of your company’s operations and functions.

A new process for operations or establishing divisions for new projects can also be overwhelming for your existing team.

As a result, your team’s attention may be divided between various departments, ultimately hindering their productivity.

3. No flexibility

Workload flexibility allows your employees to adjust their workloads in response to project deadlines, unanticipated delays in deliverables, and other factors.

Your organization will typically require this level of flexibility because your team must take on additional responsibilities when taking on a new project.

Since an outsourcing partner can provide the capacity you require, workload management is simple in the outsourcing world. Establishing this level of adaptability and flexibility in your internal workforce isn’t easy.

Your existing team will be preoccupied with long-term projects and will most likely be unable to accept additional work on a short-term basis. As a result, your internal team may feel burdened and demotivated.

4. The Costs of Headhunting

Employing someone is an expensive and time-consuming endeavor. Hiring specialists at the highest levels is even more complex and can result in headhunting complications in some cases.

Not to mention that the cost to the company of hiring a specialist may be significantly higher than your budget.

The more specialized your job profile becomes, the more money it will cost you to hire your ideal candidate.

Advantages of Offshoring Companies in the Philippines

Magellan Solutions is one of the leading contenders in the BPO industry. With 17 years of experience, we believe we have mastered offshoring services to SMEs and helped them expand their business.

Our past and current clients have experienced positivity with our partnerships, such as:

Full control

With staff offshoring, you are still the boss. Outsourced staff would concentrate on operations and business projects, all according to your instructions. It is also important to remember that communication is vital. Indirect access to the team can cause language barriers, miscommunication, and cultural gaps. This may lead to poor results and even failure to meet your expectations.

Cutting operations cost

Cutting costs is one of the most common attractions. This is one of the many reasons industries decide to offshore their operations. Outsourced staff causes:

• Decrease of need for direct employee salary
• Less utility
• The reduction of facilities and supplies needed.

The pricing for staffing offshore is also cheaper. This is in comparison to business process outsourcing.

Dynamic team

An offshore team in the Philippines usually consists of young individuals. These individuals have fresh ideas and creative input and are solution-oriented when dealing with problems. This makes the country excel in many fields and makes us one of the top choices for outsourcing jobs.

Efficiency

You don’t need to waste any of your time. We set up your operations and a suitable office for your staff. We also take advantage of the time difference, offering a 24/7 working team. Even if you are resting, your business continues its operations with us.

Government support

The government has been integral to the country’s BPO success. It has backed the industry for over 25 years.

Support provided includes:

• Training programs
• Marketing
• Improved infrastructure
• Workforce pipeline building
• Tax holiday
• Tax exemptions

Multilingual speaking agents

According to GlobalEnglish Corporation, the Philippines has the top spot for business English skills. At least 90% of the country’s population are English speakers, which has become a significant advantage in the Philippine outsourcing industry. Many Filipinos also speak other languages.

Why the Philippines is the #1 outsourcing destination

For years, companies have chosen the Philippines as their top destination for outsourcing partners.

Filipinos have neutral accents and can adapt to different accents depending on their assigned region or country. The top countries that outsource include the United States, Australia, and the United Kingdom. In addition to their natural-sounding accent and diction, Filipinos are mostly known for their customer-centric approach. Furthermore, the workforce comprises well-educated individuals who graduated from thousands of HEIs and universities in the country. This provides a stable hiring pool of quality individuals, which BPO companies can utilize to deliver quality client results.

Magellan Solutions has served minor to medium enterprises and significant players globally.

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