What are the top risks of using a BPO provider?
Key takeaways:
- Companies that outsource some of their non-core services to other firms are utilizing Business Process Outsourcing (BPO).
- BPO has several benefits but also some risks.
- The loss of control is one of the main risks of BPO.
- Hidden costs can be another risk of BPO.
- Companies seeking to supplement their in-house teams will suffer if they choose the wrong vendor.
- Data risks and privacy concerns are concerns when using BPO.
Companies today are enjoying the effects of a more connected society. Businesses can now delegate their non-core processes to third-party companies. This is known as Business Process Outsourcing or BPO.
Many BPO vendors in the market offer quality services but just as many don’t. This presents risks to companies that don’t choose the right BPO provider. A company that outsources tasks to a reputable BPO, for example, can enjoy great cost savings but choosing the wrong one can lead to hidden fees and unexpected expenses.
A successful BPO relationship depends on hiring an experienced firm that will deliver on its promises. One of the quickest ways to see a reduction in revenue is outsourcing to a sham company. Failing to research a provider can lead to lost time, money, and productivity.
We talk about the risks of BPO that a trusted provider will not subject you to. Here are five risks and how to mitigate them.
Potential risks of BPO
As with many core business decisions, the move to outsource your business processes comes with some risks. These risks can easily disrupt your operations so it is prudent to identify them early.
1. Less control
One of the first things you may notice after outsourcing is lessened control of tasks. If you are used to being very hands-on, this will be challenging at first. It may feel easier to manage and supervise an in-house team (because you feel like you have more control).
You will, however, have to start relying more on the supervisory skills of the BPO provider and less on yours. All control on your part is not lost, though. There are many collaboration and supervisory tools that you will use to communicate with your international workers such as Skype, Slack, and good old email.
Outline an international worker’s responsibilities every day and/or week and track their performance. A good way to keep up with performance would be to track KPIs and metrics. You should also identify a reliable point of contact with the BPO.
2. Hidden costs
If you choose the wrong BPO provider, hidden costs may start to eat up your budget. This is especially true if the contract you signed didn’t include such costs. You may also start with little costs but incur some extra costs later on. Some of the hidden costs that may appear later in the development include:
- Upgrading your software or hardware
- Training costs
- Additional invoice costs
One way to mitigate this risk is by having a comprehensive budget, communicating it to your BPO, and reading the fine print in the contract. Your budget should not overlook anything. You should also use time management tools to ensure you pay your offshore workers accordingly.
3. Choosing the wrong vendor
You ought to choose the right vendor if you wish to have a successful BPO relationship. Failure to do this will have you running into considerable problems later on while working. It can be difficult to trust a person or team that is thousands of miles away. However, you need to conduct a risk analysis when you are vetting a BPO company. One of the main things to consider is whether the company provides the services you need as a core business. You do not want to work with a company that does not specialize in the services you are looking for. It is also prudent to find out if the outsourcing firm has done similar-sized projects.
4. Errors when handing over work
Transferring work is a critical process when looking to outsource business services. You need a fast yet comprehensive process. A hasty handover can be quite disruptive in a bad way. It may also increase costs.
You can mitigate this potential risk through careful planning. Outline possible risks that could arise during a handover, such as depriving your new partner of knowledge needed for implementation of the work, and find a way to reduce such risks. Ensure that you do not forget about the services outsourced immediately after you hand over the reins. Work closely with your new business partner to ensure this process is smooth.
5. Security and privacy risks
You will often have to share some essential details with a BPO provider once you start working together. Some of this information may include client data, login credentials, and credit card numbers.
Transferring this kind of data exposes you to a couple of security risks. Hackers can find the data and use it for their benefit. At the same time, the BPO provider, if unscrupulous, may use the information nefariously.
One way to work around this issue is proper screening. Always do your due diligence when selecting a BPO provider. Outline your expectations and speak to them about how they will fulfill them. You should also ensure that your security protocols align with that of your partners. Remember it is okay to stop working with a firm if you feel that your private data is at risk.
Let DOXA combat risk
It may be easy to overlook risks but don’t. Hidden costs can arise at any moment even if you planned everything to the last detail. A data breach can also cost you significant amounts of money if financial information gets into the wrong hands.
Working with professionals helps small to mid-size businesses build high-performing, scalable, global teams. We are not a one-size-fits-all solution because every business and its leaders are unique. Contact us today for a free consultation to see how we can help you.
