The business world is complex to navigate. That’s especially true when you are looking to optimize processes to achieve cost efficiencies and greater productivity. This is where the question of outsourcing vs shared services arises.
Which option is right for your business and what do you need to know about them? In this article, we explore the key differences between business process outsourcing (BPO) and shared services.
We also focus on some key benefits you should consider when making this critical decision. Let’s begin.
Key Differences Between Business Process Outsourcing and Shared Services
Much has been said about BPO already but a brief reminder could be useful. BPO is the practice of outsourcing key business functions to a third-party vendor that acts as an extended arm of the primary business.
The two businesses (the client and the vendor) are separate entities and the vendor works to ease the client’s needs by offering a vast portfolio of services to achieve this goal.
These services may include IT, finance, HR, accounting, marketing, talent acquisition, management consulting, market intelligence, boosting the customer experience, and many others.
Shared services, on the other hand, do not involve an external third-party in the model. Instead, businesses typically consolidate certain internal functions with a view to streamlining processes.
However, shared services come with associated challenges such as acquiring talent, training staff, automating processes, ensuring flawless communication, as well as the necessary coordination that is required for departments to thrive.
Examples of internal departments that may be suitable candidates for consolidation include communication and marketing, IT, finance, HR, procurement, facilities management, project management, data analytics, recruitment, payroll, etc.
Benefits of BPO vs Shared Services in Enterprise Operations
Both BPO and shared services come with their own distinct set of advantages for organizations. Depending on the model you choose, you may enjoy benefits that include:
Advantages of BPO
Business process outsourcing comes with a range of advantages for businesses of all sizes and these include:
- Greater cost efficiencies
- Enhanced productivity and efficiency
- Scalability and flexibility
- Knowledge sharing and expertise
- Reliance on the vendor for upgrading technology and implementing efficient processes
- Does not require training of staff from scratch; you can tap into a talent pool instantly
- Better economies of scale
Advantages of shared services
The advantages of shared services are also broad, such as:
- Focus on core competencies
- Cost savings
- Improved customer service quality
- Standardization and harmonization
- Better governance and control
- Enhanced insights for improved decision making
Despite these advantages in both models, when it comes to shared services and BPO, shared services can be rigid and inflexible to implement and there may be collaboration challenges between departments that were previously independent of each other.
Also, the complexity of uniting departments over geographically diverse locations can prove to be a further challenge and these points are worth bearing in mind.
Shared Services vs BPO: What’s the Right Choice for Your Company?
You may wonder why global companies choose shared services over BPO. The answer really depends on the nature of the business. For example, a multinational business such as a global hotel chain could benefit from standardized processes and procedures for an enhanced and more consistent approach to customer service.
However, BPO often emerges as the clear winner among the two because it is more cost effective and can produce faster and better results for organizations while enabling it to focus on its core priorities: business development and growth.
While the choice of BPO vs shared services will depend on your business’ unique needs, it’s worth bearing in mind that BPO is the more streamlined approach and can even be implemented in businesses that are looking to consolidate some of their functions.
Often, BPO is chosen by medium and large organizations that are looking for effective ways to scale. Shared services, on the other hand, may be implemented by large international organizations that are looking for greater service consistency both on the front and back-ends of their activities and processes.
To determine which option is right for your business, the following questions can serve as a helpful guide in driving your decision:
- What is the size of your business and what niche does it operate in?
- Do you have already established business processes that you’re struggling to introduce consistency of?
- What stage of business growth is your business in?
If you are looking for fast growth and scaling, BPO is the right answer for your needs. That’s because it takes a lot of the guesswork and hassle out of building processes from scratch and creating automations and routines around them. Plus, the cost efficiencies of working with the right partner can be highly beneficial for your business’ bottom line.
Conclusion
While shared services and BPO are often mixed up in terms of meaning and function, they are two separate models. BPO works with a business and their external partner while shared services all take place internally to the organization.
Although each one has its merits, the downside of shared services is that it can be slow, sluggish, and cumbersome to implement. BPO, on the other hand, offers faster and more cost-effective solutions that can significantly drive business growth.
To speak to an expert regarding your distinct business growth plans, we invite you to chat to one of our expert team members who will be able to offer you sound advice and point you in the right direction.
Simply contact us today and enjoy the certainty and security of having the right partner by your side with StorsenDigital.
