In the current economic gloom, anything which claims to cut the cost of running internal business functions by up to 20 per cent will grab a company’s attention.

The financial pressure to save money without sacrificing service levels is prompting more firms to consider Business Process Outsourcing (BPO).

Back and front office functions such as finance and accounting, IT, human resources, payroll, legal services, customer data analytics and contact centres are being contracted out to third party experts.

These providers have invested in the latest technology and training to become a specialist, leaving their clients to concentrate on their core business.

Make it work for you

Companies can fear losing control if they outsource. They worry about cultural differences, potential security risks, damage to the brand and difficulties transferring knowledge. Yet with a robust outsourcing strategy these risks are minimised.

Duncan Aitchison, partner at information services group TPI EMEA and former head of global outsourcing at consultants Capgemini, says companies can achieve net savings of between 15-20 per cent by outsourcing.

Reap the benefits

“Cost cutting must not be the only driver. This is as much about increasing flexibility within your organisation and having access to specialist talent,” he says. “The reasons for outsourcing must be well thought through. What is your motivation and objectives for using an external partner?”

Dr Bharat Vagadia, CEO of outsourcing consultancy firm Op2i and a board director of the National Outsourcing Association, says an economic downturn always makes outsourcing an attractive option. A business will benefit from a provider’s economies of scale.

Go global or stay local?

“Off-shoring remains popular but there is more interest in local and European options as companies new to this way of working learn the ropes of dealing with an outsource provider,” says Vagadia. “Companies do need the skills internally to manage off-shore providers effectively.”

According to the London School of Economics, about 120 countries want to become outsource hubs. Of these, Egypt, the Philippines and Mexico are seen as having the labour and infrastructure skills to compete with countries such as India. China is struggling to address concerns around language, cultural barriers and intellectual property security.

In a bid to appease companies worried about cultural and language difficulties, particularly within call centres, when they off-shore, providers are opening local centres. This summer Aegis, the global outsource provider based in Mumbai, India, entered the European market for the first time when it created 600 jobs at a contact centre in Manchester.