Written by Rene Mallari
When outsourcing a service to a BPO company in Phoenix, a business owner or manager in Arizona’s primary considerations are the cost and the returns, which are an integral part of their decision-making.
This article discusses outsourcing and gives a sample return on investment (ROI) analysis for Phoenix businesses.
Outsourcing covers various processes (e.g., customer service, human resources, data entry, and virtual assistance) and locations (e.g., nearshore, onshore, and offshore). Below, we focus on technical support outsourcing to the Philippines to help illustrate whether the strategy is feasible for your organization.
Let us dive in.
Technical Support Outsourcing ROI Analysis for Phoenix Companies
What is the business process outsourcing (BPO) cost of technical support? BPO providers in the Philippines and other outsourcing destinations typically offer four pricing models: per-device fixed rate, per-user flat cost, ad hoc fees, and monitoring only. Your preferred pricing structure for outsourced technical support determines your cost.
Knowing more about these pricing schemes helps you conduct an outsourcing return on investment analysis for your Phoenix operations. Check out the following details:
1. Per-Device Fixed Rate
Your BPO partner charges a fixed amount for technical support services based on the number of devices you want covered. It can adjust the pricing according to the number of PCs, laptops, tablets, and mobile servers you operate during a given time frame. The fees are higher when more computers and devices require attention.
This pricing mechanism is straightforward and allows you to easily track expenditures. You can quickly set up a budget for future expansions. For instance, you might require every remote team member to have a laptop for better collaboration. You simply multiply the fixed rate by the number of additional devices needed.
While this pricing model can help you with investment research, it might become more expensive if users request coverage for multiple devices, particularly for sales staff who are always on the go. If you plan to expand your team, your technical support costs will also rise.
2. Per-User Flat Cost
This model is comparable to the per-device price structure since it includes a fixed outsourcing fee. Your costs are similarly scalable and proportional to the number of users. The costs for outsourced technical support increase and decrease based on the number of covered users.
This pricing model is recommended for a startup or small business on a tight budget. Technical help is only offered to critical users in the organization. You can make the most of your financial resources in this way.
Furthermore, the per-user flat charge assists you with business expansion goals. Maybe you recruit 30 extra people next year to prepare for a multimillion-dollar operation. Given the expansion, you can easily estimate the cost of technical support outsourcing.
3. Ad Hoc Fees
Another model to include in your outsourcing return on investment analysis for your Phoenix business is ad hoc fees. This cost structure provides technical support upon request. You employ a service provider only if you require technical assistance and pay them for their services. It works best if you rarely need such help, preventing periodic payments to BPO firms.
However, you pay more if a major technical problem unexpectedly emerges in your information technology (IT) system. A third-party vendor asks for a higher fee for after-hours assistance to save your company from losing money and productivity amid workplace disturbances. The rationale for the high fee is peace of mind for you, your workers, and your customers.
The ad hoc payment system is most suitable if your firm does not rely significantly on its IT network to execute mission-critical functions. You should consider this outsourcing return on investment analysis for your Phoenix business.
You can also use this approach when your in-house technical support staff does regular system checks or maintenance. The outsourcing provider then acts as backup support, resolving serious problems your in-house team cannot solve.
4. Monitoring Only
This pricing model is an option to include when conducting a cost assessment. The BPO provider offers basic network surveillance and reporting activities for a set monthly charge. These activities include general server capacity, backup logs and monitoring, antivirus and anti-spam updates, and patch management.
This price plan best suits small enterprises that are easy prey for hackers and cyber attackers. Many companies need financial and human assets, knowledge, and skills to fight these online assaults.
Malware incidents such as trojans and viruses are among the most severe risks to small businesses. Hackers write programs to get a hold of your networks. They can harm computer systems or grab vital information.
This disruptive foreign software infiltrates your IT system when you read spam emails or transfer data from compromised networks. You can also obtain it when you download data from questionable websites using your devices.
The ILOVEYOU virus is the most notorious email-borne malware attack. In 2009, it affected around 45 million computer users and caused $10 billion in damage. Approximately 10% of all desktops globally were compromised.
Other Types of Outsourced Technical Support Costs to Consider
You should also learn about the other types of outsourced technical support costs to assist you in performing an outsourcing return on investment analysis for your Phoenix business. Examine the following information:
1. Recurring IT System Costs
Recurring costs are continuing technical support charges, such as your payment for data security updates and maintenance. They are more difficult to calculate than one-time expenditures (read below), as each company has distinct needs that the third-party IT team must satisfy.
BPO providers often charge for outsourced technical support services in the following ways:
- The total number of devices (laptops, smartphones, notebooks, tablets, and desktops), servers, and data volume are used to calculate service charges.
- They calculate the support hours required for each device and server. The more devices and servers you operate, the more assistance hours are incurred. The industry benchmark for support hours per device or server annually is around 25 hours, with a service charge of $100 per hour.
- Based on #1 and #2, you can calculate the price of outsourced technical support using the basic equation below:
|Number of devices + number of servers = total number of devices and servers x 25 support hours annually = total product x $100 every hour.|
So if you have 30 devices and servers, multiply that by the total time of 25 hours. You multiply 750 by $100 to get the result. The annual cost is $7,500, or around $625 monthly.
Regarding data volume, the average industry charge for storing and copying as much as 10,000 GB of data is roughly $2,500 a year. That amounts to approximately $200 monthly.
When including this cost in the outsourcing return on investment analysis for your Phoenix business’s technical support, the ideal budget range should be between $1,000 and $9,000 annually. The actual cost fluctuates depending on how much IT and telecommunications equipment or devices you have.
2. One-Off IT System Expenses
One-off IT systems are another expense to insert in your [Link here] outsourcing cost savings evaluation for the business. You only have to pay once for technical support and other IT outsourcing solutions. The one-time expenses you must make for this activity are listed below.
- Network implementation. Building connectivity and email accounts and deploying an organization-wide IT system involve high monetary costs. Acquiring the third-party provider’s services and skills means carrying another large budget.
- Office applications procurement. The initial procurement is costly since you purchase in bulk. Hiring third-party IT specialists to install and set up the software is another one-time cost associated with this process. Doing so helps prevent costly mistakes and ensures you no longer have to pay ongoing fees for technical upkeep.
3. Maintenance and Upgrades Costs
Maintenance and upgrades are also part of IT system expenditures, which you should add to your outsourcing return on investment analysis for your Phoenix firm. They contribute to your total technical support budget.
- Maintenance. Suppose your system involves frequent administration, such as updating documentation and user assistance, testing data, eliminating applications, fixing hardware and connections, and correcting design faults. In that case, your IT support costs are likely to be high. You pay more when using a legacy platform prone to glitches.
- Upgrades. Outsourced technical support expenses can spike if your IT infrastructure requires the newest or most advanced software version, hardware, or apps. Upgrades enhance the platform’s performance.
IT Support Outsourcing: Onshoring or Offshoring?
The BPO provider’s location is a major factor in outsourcing’s [Link here] ROI calculation for your organization. You can acquire outsourced services for technical support in two ways: onshore or offshore. Let us discover the details.
Onshoring, or domestic or local outsourcing, transfers technical support functions to a third-party provider in the same country as your main headquarters. As you are in Phoenix, the onshoring provider can be in California or Arizona. Here are some advantages of onshore outsourcing:
- Removes time zone differences
- Helps prioritize core competencies
- Reduces operating costs
- Maintains high-quality supervision
- Addresses important business needs
- Improves customer experiences
Customer communication is fluid with onshoring, as cultural and language gaps are minimal. Consider this factor when determining outsourcing’s ROI. You enhance the customer support experience since this strategy aligns the third-party agents with the consumer’s language and demographics. However, note the drawbacks of onshoring:
- The costs include the technical support agents’ wages and other perks from the BPO provider.
- Both companies operate under the same local labor regulations, so salaries are comparable to your in-house staff’s.
You must contend with high labor costs when choosing onshore IT support outsourcing. For example, average hourly rates in the U.S. vary between $80 and $250. However, tech support outsourcing services from Asia (e.g., the Philippines and India) and Eastern Europe (e.g., Ukraine and the Czech Republic) can be half to a third of the onshoring cost.
Besides these disadvantages, cost savings via local outsourcing are still possible. The onshoring provider’s competitive edge is its top-of-the-line technologies, latest infrastructure, advanced skills, and extensive business connections. These are important elements to include when performing an outsourcing return on investment analysis for a Phoenix business.
With these benefits, the BPO provider can deliver technical support at lower prices than you would incur for the in-house IT group.
With offshore outsourcing, you delegate processes to a BPO provider in a country with more affordable wages due to lower national taxes and living standards. The service provider has a trained and experienced workforce for outsourced technical support services.
Offshore pricing is more attractive than onshore pricing, mainly due to the lower salaries of offshore tech support staff. In particular, Asian outsourcing hubs offer a workforce as competitive as those in the U.S. Accordingly, you should include this factor in your outsourcing return on investment analysis for your Phoenix business.
For a basic illustration, let us pick the Philippines as an offshore destination and compare it to Arizona as an onshore hub. Indeed reveals the salaries of the different technical support positions in the U.S. versus the Philippines.
Technical Support Positions (Salary per Month in U.S. Dollars)
*Philippine pesos converted to U.S. dollars at $1:PHP55.71
You should consider the following information to guide your outsourcing decisions:
- Advantages of the U.S. technical support workforce over the Philippines. Similar time zones, minor language gaps, and minimal cultural differences with local customers.
- Advantages of Philippine tech support over the U.S. Reduced outsourced technical support costs, technically skilled third-party staff fluent in English, and a flexible workforce willing to work anytime.
How Cost-Effective Is Offshoring Technical Support Services?
Based on the salary figures for tech support roles above, offshore is a better choice to reduce operating costs. Its [Link here] outsourcing effectiveness regarding monetary savings is undoubtedly greater. Offshoring emerges as an attractive option when conducting an outsourcing return on investment analysis for your Phoenix businesses.
Let us examine offshore and onshore outsourcing. The tables and figures above can be used to calculate the total outsourced technical support costs. Below are some illustrations.
Your business operation is in Phoenix, and you seek the following outsourced tech support positions:
- Seven tech support representatives (tier 1)
- Three specialists (tiers 2 and 3)
- One supervisor
If you outsource to the Philippines, the costs will be:
- Seven tech support representatives x monthly salary = 7 x $3,577 = $2,835
- Three specialists x monthly salary = 3 x $499 = $1,497
- One supervisor x monthly salary = 1 x $584 = $584
To compute the total costs, add the three sums: $2,835 + $1,497 + $584 = $4,916 monthly. This amount is your estimated expenses per month when outsourcing to a BPO provider in the Philippines.
When onshoring the same number of tech support workers in Arizona, the costs will be:
- Seven tech support representatives x monthly salary = 7 x $4,041 = $28,287
- Three specialists x monthly salary = 3 x $4,212 = $12,636
- One supervisor x monthly salary = 1 x $5,569 = $5,569
To get the overall expenses, add all the sums: $28,287 + $12,636 + $5,569 = $46,492 per month. This amount is your projected monthly cost when outsourcing to a service provider in Arizona.
This basic comparison can help you carry out outsourcing profitability calculations. Let us check how much you can save:
- Total offshore outsourcing costs (Philippines): $4,916 per month
- Total onshore outsourcing costs (Arizona): $46,492 per month
Subtract $4,916 from $46,492 to find the cost difference between the two outsourcing alternatives. The result is $41,576.
When performing outsourcing cost analyses, you notice that outsourcing tech support functions to the Philippines is about eight times less expensive than assigning them to a service provider in Arizona.
Note that this computation is an approximation instead of a precise approach to getting the actual outsourcing costs. You should contact a Philippine BPO provider and a financial analyst to assist you in [Link here] measuring ROI.
Other Considerations: Tech Support Outsourcing’s Three-Tiered System
Tech support outsourcing typically has three tiers to provide the best possible service. Learning about the three-level structure will help you conduct an outsourcing return on investment analysis for your Phoenix business. It contributes to the total cost of outsourced technical support.
Let us explore the details.
Tier 1 (T1) Support
Gathering consumer information, analyzing problem specifics, and delivering remedies are all part of this level. T1 support can resolve 75% of all user technical issues using essential knowledge and management solutions.
Uninstalling or reinstalling fundamental software applications, navigating application menus, fixing login and password difficulties, and establishing correct hardware and software configurations are some straightforward solutions.
Tier 2 (T2) support
This tier handles the remaining 25% of user challenges outside the scope of T1. T2 assistance is more comprehensive and costly than T1. The T2 expert is more skilled and knowledgeable about your product or service.
T2, also known as administrative-level support, employs advanced diagnostic and analytical processes. If this team cannot find a solution, the issue is escalated to level 3.
Tier 3 (T3) support
T3 support is the final level of defense. Specialists in this grade are the most knowledgeable and expensive professionals. They manage the most challenging technological issues. Their principal duty is to assist T1 and T2 technicians. They are also responsible for finding answers and solutions to new or unforeseen issues.
A product replacement is required if this team cannot resolve concerns due to inbuilt flaws (in materials and design).
Tech Support: Outsourcing or In-House Team?
Knowing the difference between outsourced and in-house IT support will help you perform an outsourcing return on investment analysis for your Phoenix business.
Undoubtedly, outsourcing technical help is more cost-effective. Running an in-house technical support department incurs costs that outsourcing does not. These expenses include:
- Office space and equipment costs. You must spend money on a larger workspace for the tech support group, relevant equipment, and extra office materials. Most are high one-time costs, while others are recurrent, such as system maintenance and updates.
- Salary and compensation costs. Regularly pay your full-time technical support personnel’s salaries and benefits. You are also responsible for non-monetary benefits, including sick leaves, health coverage, and pension arrangements.
- Training costs. You must cover your IT support crew’s training and upskilling expenses. Your employees must maintain and develop their knowledge and abilities to tackle unexpected technical challenges, which can be expensive, especially in cybersecurity.
How to Acquire Your Ideal Third-Party Provider
Learning how to pick the right offshoring BPO company will assist you in conducting an outsourcing return on investment analysis for your Phoenix business. The ideal service provider can improve your organization’s productivity, performance, and revenue.
Follow the advice below to find the most suitable third-party tech support team:
- Outstanding track record. Pick a BPO partner with a good track record and widely recognized clientele. Examine its qualifications and feedback on its services. You will feel more secure when working with a reputed service provider.
- Multiple tech support services. Employ a BPO provider offering several IT support outsourcing services. Basic (troubleshooting and installation) to advanced (digital transformation and cybersecurity) assistance must be provided. Secure all technical assistance from a single vendor.
- Appropriate size. Select a service provider the same size as your company. If you are a new business, consider partnering with a small or medium-sized BPO provider to prioritize outsourced processes. This factor helps you conduct an outsourcing return on investment analysis for your Phoenix organization.
- Technical qualifications. You must include BPO providers with IT or specialized accreditations or licenses on your list. Some capabilities include being a Certified Information System Security Professional and a Microsoft Certified IT Professional.
- Industry-specific skills. Work with a service partner well-versed in your sector. A BPO firm with extensive knowledge of your industry can provide superior solutions and services.
The Bottom Line
Cost analysis is one proven way to help perform outsourcing ROI studies for businesses in Phoenix and other parts of the U.S.
This approach assesses the financial sustainability and viability (and we use technical support outsourcing in this case). It is the method of obtaining and analyzing data to distribute resources. The goal is to recognize the connections between different cost variables and discover cost-cutting options.
Let’s connect if you need to explore more about outsourcing return on investment analysis for your Phoenix business!