The Most Utilized BPO Models: Why Do Companies Choose Them?

Working with a business process outsourcing (BPO) provider can boost your enterprise’s efficiency, output, value, and income. The service provider can offer other non-quantifiable benefits (e.g., better brand recognition and higher in-house staff morale) to help you thrive in the long run.

But with different outsourcing services available, which one should you choose? Knowing about the various outsourcing strategies can assist you in making a solid decision. 

This article discusses the most commonly utilized BPO models and why organizations of different sizes and industries choose them. Keep reading to learn more.

What Are the Most Utilized BPO Models?

Let us explore the location-based BPO models commonly adopted by companies.

Onshore Outsourcing

Onshoring, or domestic outsourcing, is when an organization delegates tasks to a nearby third-party service provider. The client and the BPO provider can be headquartered in the same nation but in separate states. So if you are in New York, your outsourcing partner can be in Arizona or other U.S. regions. 

What are the reasons why onshore outsourcing is one of the most utilized BPO models? Here are some: 

• The same time zone. This BPO business model assures that the outsourcing services are performed during local office hours to coincide with your in-house processes. This feature is particularly crucial if you have strict project management requirements or adhere to the continuous improvement process (CIP) approach.

• Proximity to your main office. Of all the most utilized BPO models, onshoring ensures maximum proximity to the provider. If a crisis occurs in your information technology (IT) infrastructure (e.g., servers), your BPO partner can send tech support experts to your office to resolve it.

Below are some disadvantages of onshoring:

• High operating expenses. Outsourcing to a service provider in the U.S. means the salaries of the third-party team are similar to your in-house staff. If you want greater control over delegated operations instead of a cost-effective team, this BPO model is for you. 

• Limited talent pool. The short supply of skilled workers is one of the main issues with onshoring. The U.S. has experienced labor shortages due to the Great Resignation. A limited talent supply tends to increase salaries.

Nearshore Outsourcing

Nearshore outsourcing is a BPO model wherein a service provider in a nearby country handles business processes. So if you are in the U.S., the third-party vendor can be in Mexico, Costa Rica, or other Latin American (LatAm) countries.

What are the reasons nearshore outsourcing is one of the most utilized BPO models? Check below:

• Bilingual customer support. Nearshore customer service agents in Latin America are fluent in English and Spanish. They can switch languages depending on consumer preference to provide exceptional customer satisfaction and experience, raising sales and revenue.

• Low attrition rates. The outsourcing industry in Mexico and other LatAm countries enjoys a low staff turnover rate compared to onshoring and other types of BPO. The region experiences less than 15% annual attrition, while the other outsourcing destinations encounter at least 30%.

• Favorable business relations with the U.S. LatAm regions have better trade ties with the U.S. This means the U.S. will likely choose this region to do more business, providing better incentives to nearshore service vendors over industry counterparts.

Here is one potential drawback of nearshoring:

• Increasing cyberattacks. The LatAm region has been the target of online attackers. Mexico News Daily reports that Mexico topped the list of nations with the most severe cyberattacks in 2022. It had the most prominent ransomware incidence, with over 18,000 detections. Colombia follows closely with 17,000 and then Costa Rica with 14,000.

Offshore Outsourcing

Offshore outsourcing is among the most utilized BPO models, wherein front-end and back-end functions are transferred to a service provider on another continent. So if you are in the U.S., the BPO partner can be in India, Ukraine, Vietnam, or the Philippines.

What are the reasons offshore outsourcing is one of the most utilized BPO models? Look at the benefits:

• Improved customer experience and satisfaction. The world’s call center capital is the Philippines, a leading offshoring destination. The country’s BPO industry has numerous call centers consistently delivering high consumer satisfaction, resulting in higher customer retention and increased sales.  

• Enhanced user experience. India, another major player in the offshoring space, remains the top global IT outsourcing hub, with millions of skilled, English-speaking tech support workers. Indian BPO companies provide excellent tech support services, allowing clients to focus on their core businesses. 

• Cost-effective operations. Offshore outsourcing companies offer voice-based and IT support services at more affordable rates than other business process outsourcing models. The reasonable fees are due to the relatively low wages of its employees.

Look at one possible issue with offshoring below: 

• Undisclosed costs. Some third-party providers request a percentage of your revenue, which becomes a greater loss the more sales you have. Other hidden expenses include start-up fees and charges for unexpected incidents and work interruptions. The BPO service provider might also impose considerable cancellation or pre-termination fees.

Multisource Outsourcing

Multisource outsourcing combines the services of offshore, nearshore, and onshore vendors. The company hires one or more service providers when its current BPO partner cannot meet increasing business demands.

What are the reasons multisource outsourcing is one of the most utilized BPO models? Discover the advantages:

• Adaptable hiring. Multisourcing can cover the company’s human resource needs without recruiting and teaching new hires, thus saving the business money. This approach is helpful if the company requires temporary workers for recurring or periodic operations.
• Improved technology and infrastructure. Multisourcing effectively combines outsourcing, artificial intelligence (AI), and other advanced technologies. This strategy aims to optimize the overall performance of the organization’s IT platform by acquiring the most competent BPO providers.
• Diminished risks. This strategy spreads out the risks while improving service quality. It can also promote healthy competition among outsourcing providers, reducing service fees in the long run.

Below are the disadvantages of multisourcing: 

• Increased operating expenses. As the company hires more service providers, it might realize that its internal staff requires assistance managing all the connections or services delivered. As such, the multisourcing process can result in higher overhead expenses.
• Difficult information sharing. Collaboration between the company and its service providers relies on efficient information exchange. The more suppliers it has, the more critical communication is to minimize compromises and oversights. Sustained and monitored cooperation is necessary to achieve the best results.

What Is the Most Utilized BPO Model? 

So what is BPO’s most frequently adopted model? The most utilized BPO model is offshoring because of the Philippines and India, two of the world’s outsourcing spots that continue to dominate the voice-based and IT support services markets, respectively. The nearshoring model comes second because of Mexico and Brazil, two popular BPO sites. 

Since 2010, the Philippines has been the world’s call center capital. Due to their favorable investment returns, companies worldwide outsource their call center operations to the Philippines instead of other outsourcing sites. Many of the best call center companies are in this country, as found by checking BPO trends.    

Similarly, India remains the most sought-after destination for IT outsourcing, outperforming market rivals from Eastern Europe, Asia-Pacific, and LatAm regions. Since 2004, the Global Services Location Index (GSLI) has ranked the nation’s IT outsourcing services as number one.

The cost advantage is one main reason offshoring is the most utilized BPO model. Despite the various benefits of business process outsourcing, many U.S. organizations primarily partner with service providers in Asia and Eastern Europe to help reduce operating costs, increasing revenue and available funds for core business support. 

How to Choose the Ideal BPO Model

What are the factors to consider when picking one of the most utilized BPO models? Explore the tips: 

• Identify specific objectives and needs. Develop a transparent outsourcing plan. Determine goals and criteria thoroughly. Some goal examples include decreasing operating expenses and enhancing revenue, obtaining the latest technologies and streamlining operations, or focusing on core competencies. 
• Consider available financial resources. Determining how much the organization can allocate is vital since outsourcing engagements often seek to reduce costs while retaining or increasing productivity. If an organization wants to save money, offshore or nearshoring are the best choices.
• Assess which drawbacks to accept. As discussed above, each BPO model has disadvantages. Onshore outsourcing has the highest operating costs. Nearshoring countries have a high cybercrime rate. Offshoring sometimes includes hidden outsourcing costs. Meanwhile, multisourcing involves collaboration issues.  
• Adjust and improve operations. Streamline internal processes to maximize the outsourcing arrangement. When onshoring, closely work with third-party teams on projects that require timeliness. When nearshoring, focus on bilingual capabilities to expand the market base. When offshoring, harness round-the-clock customer support outsourcing benefits. 
• Fortify communication channels and relationships. Establish solid and extensive communication, regardless of the BPO model. Ensure regular communication with your BPO partner to build and maintain the business relationship. Healthy communication is one of the keys to success in outsourcing.

The Bottom Line

The BPO models mentioned here are based on the location of the service providers and their teams. Other subcontracting approaches depend on the type of operation, such as front-office or back-office. 

Regardless of the outsourcing model, your decision should hinge on a carefully planned and examined strategy to enhance the company’s revenue while sustaining the best quality products or services.

Let’s connect if you want to learn more about the most commonly utilized BPO models and why companies choose them!