Table of Contents
Gaining profits from investments should top your list of priorities as an entrepreneur. Efforts to improve products and services, enhance operational efficiency, or upskill your workforce must yield results to ensure growth.
Business process outsourcing (BPO) is a cost-effective investment that addresses inefficiencies and drives success. The practice brings significant savings while allowing access to skilled professionals and modern technologies.
If you are considering integrating BPO into your operations, conducting a thorough cost-benefit analysis is highly recommended to ensure a positive return on investment (ROI). Continue reading this article to understand and perform this process.
Why conduct a cost-benefit analysis before outsourcing
A cost-benefit analysis helps you decide whether strategic outsourcing suits your current needs, targets, and budgets. This proactive approach measures the potential advantages of working with a service provider.
For instance, your e-commerce customer service team requires more employees to accommodate the potential surge in inquiries during the holiday rush. Performing a cost-benefit analysis beforehand helps you determine whether hiring BPO agents is more affordable and efficient than recruiting new full-time workers.
Outsourcing also introduces various risks; a cost-benefit analysis provides insights into disadvantages and practical ways to minimize their adverse impacts. According to a 2023 survey by Drexel University’s LeBow College of Business, risk mitigation is one of the main motivations of data-related programs.
Additionally, this financial study lets you establish baseline metrics and projected outcomes. You can use this data to compare the BPO team’s contributions to your business against initial projections. The action also informs the continuous refinement of outsourcing strategies.
How to perform a BPO cost-benefit analysis
Ensuring ROI throughout the BPO partnership is challenging due to fluctuating market demands and unforeseen circumstances. Conducting a cost-benefit analysis gauges the possible pros and cons of outsourcing. The findings guide you in drafting and implementing strategies to optimize third-party resources and achieve desired outcomes while ensuring cost savings.
The study is especially crucial when planning to work with a provider in the long term. The list below explores what a BPO cost-benefit analysis should comprise.
Establish a comprehensive framework
Develop a framework detailing the goals and scope of your cost-benefit analysis for outsourcing. A successful study begins with concise and specific questions about your BPO objectives. For example, “Will hiring 50 BPO live chat agents for the holiday season help us save 50% in labor expenses than recruiting full-time employees?”
As you enumerate these questions, prepare an overview of your current business status and outsourcing plan. This starting point helps your stakeholders understand why and how acquiring BPO services will improve your operations, products, and services while reducing costs.
The table below shows the factors and examples to include in your overview.
| Key factors | Definition | Examples |
|---|---|---|
| Background | Details of your current operations, expenditures, or challenges | Your in-house e-commerce customer support team consists of 50 agents who often render overtime to meet increasing consumer demands as the holiday season nears. |
| Current business performance | Quantitative data to show your in-house team’s usual productivity, output, and resource usage | Your 50 agents use contact software to deal with more than 1,000 shoppers in your online store. |
| Opportunities | Areas of potential improvements based on your current business performance | Your 50 agents are experienced in answering calls, but 80% of customers seek support through live chat. |
| Expected performance with the current business plan | Quantitative data regarding the possible effects of sticking to your traditional business approach | Although your 50 agents can accommodate live chat inquiries, their attention will be divided once the remaining portion of customers seek help via call. |
| Risks of the status quo | Potential negative impacts of not revamping your current enterprise strategy | Assigning all customer support tasks to your current in-house unit results in response delays. Poor customer experience causes 86% of consumers to leave or switch brands. |
| Ways to address the status quo | Strategies to mitigate the risks of the status quo | You hire 50 BPO live agents to accommodate the surge in customer inquiries during the holiday rush. |
Categorize and calculate costs and benefits
Sort and compute the costs and benefits of outsourcing repetitive tasks, such as data entry and customer service. Specify the resources your in-house team needs and the potential results of adopting BPO services. Then, after estimating the values, perform a cost-benefit analysis.
The table below shows the critical terms you must know while implementing this step.
| Types of cost |
|
| Types of benefits |
|
| Key cost-benefit analysis components |
|
Draft and implement a cost-effective BPO investment plan
Develop and exercise a BPO plan based on the results of your cost-benefit analysis. This strategy must cover your specific goals, functions to outsource, and budget allocations. Make sure to define the roles and responsibilities of your potential service provider.
Remember to update your BPO plan if your in-house and third-party teams encounter significant changes for the duration of outsourced services. This ensures your outsourcing investment remains aligned with your current needs and requirements.
The bottom line
Performing a cost-benefit analysis empowers you to make data-backed BPO investments. It removes the need for uncertain guesswork and helps build confidence in obtaining ROI with a third-party support vendor.
Analyzing the benefits and costs of outsourcing seems tedious. However, following the proper steps helps you simplify the process. Once you gain an overview of potential BPO advantages, let’s connect and allow us to deliver your desired outcomes.
