Outsourcing in the digital era: How technology has transformed traditional outsourcing models

We live in a digital world. And no one recognizes this better than businesses. Aiming to remain relevant in a highly competitive space, many enterprises are embracing technology together with business process outsourcing (BPO) to streamline operations and ensure greater agility and ability to navigate increasingly complex economic and financial landscapes.

But what has been the impact of digitalization on outsourcing? How has it changed in recent years? Which sectors are affected the most? And what are some of the trends that we are likely to see in digitalization and BPO? In this article, we cover the answers to these questions. Keep reading to find out more.

Transformations in outsourcing

Just a few years ago, BPO was used by businesses as a cost-saving measure. However, today, BPO is becoming the norm across many industries and verticals as a strategic way for doing business more effectively.

With the combination of technology and outsourcing, businesses are finding it much easier to adapt to constantly changing business environments while remaining competitive. In this section, we explore some of the technologies and affected areas of business at this crucial intersection.

Technologies

Tech-driven outsourcing in recent years was characterized by the introduction of chat bots to help businesses address their customer service needs. A chatbot would be used to answer queries—from simple to more complex ones.

However, with great technological advancements, numerous types of technologies are emerging whose impact on outsourcing is having a real impact. Here are just a few of these:

  • Cloud computing
  • Video conferencing
  • Collaborative tools
  • Automation through robotics and artificial intelligence (AI)
  • Blockchain technology
  • Customer care chatbots
  • Machine learning (ML) algorithms
  • Virtual reality (VR)
  • Augmented reality (AR)
  • Business process management (BPM) applications
  • Low-code development platforms
  • Robotic process automation (RPA)

Through these technologies, collaboration between businesses and their vendors operating at different locations around the globe can be streamlined. In addition, communication can be improved through various technological tools.

Furthermore, routine and repetitive tasks can be automated for greater efficiency. And to add to this, digitalization in outsourcing also enables businesses to strengthen their customer service, improve decision-making through data-driven insights, and more.

Affected areas of business

Although outsourcing may have the reputation of using a third-party vendor to carry out routine business tasks as a cost-saving measure, such as call centers for customer service enquiries and problem resolution, this is not the only area of business where technology is impacting outsourcing.

Apart from customer service that’s carried out through AI and chatbots, other business areas that are affected in a positive way include payroll, recruitment, purchasing, finance, coding, web design, and many others.

Advantages and disadvantages of digital outsourcing

There are both advantages and disadvantages to outsourcing in the tech age. Let’s take a closer look at these below.

Advantages

  • Through data management, businesses can use technological tools to store, manage, and analyze large volumes of data to enable them to improve their decision-making processes.
  • When outsourcing critical functions such as IT, automation and technology can help provide greater levels of cybersecurity to ensure business know-how and proprietary knowledge remains safe and secure online.
  • Project management tools enable companies to improve their tracking of outsourced work, while also enabling them to make incremental changes and adjustments, as needed.
  • Businesses can also enjoy greater levels of accountability from their outsourcing partners through monitoring and reporting of any potential issues that could become business bottlenecks.

Disadvantages

  • Because there is an inherent risk with outsourcing in that customer and corporate data is shared with a third-party, it’s possible for certain information to be exposed to data security violations. Other examples include financial data, login details, and passwords. Of course, such data breaches can have negative financial and reputational consequences.
  • Another challenge with digital transformation in BPO is that certain communication gaps or barriers can arise. Often, third-party vendors are in offshore territories and sometimes, an intended message can become distorted due to language barriers or even challenges in communication tools and technology.
  • Lastly, there is the potential loss of management control as the primary business allows its partner to manage certain processes. As such, internal controls may be ignored or overlooked, making for more challenging management control.

Digital era outsourcing trends

With the rise of modern outsourcing models through the increased adoption of technological tools and solutions, new digital era outsourcing trends are emerging. Here are a few that businesses should look out for:

Emergence of new technologies

New technologies will continue to be developed, giving businesses greater choice and freedom to decide which one will meet their needs best. This trend is unlikely to subside in the near future as process automation becomes increasingly emphasized as a strategy for business development and cost-saving measures. This is likely to be achieved with robotic process automation, which uses bots and AI to carry out work at a faster and more affordable rate.

Emergence of social media management tools

The rise in social media means a rise in social media management tools. These technologies mean that customers are increasingly using social media, even as a way of directly communicating with businesses to have certain issues resolved. Businesses that outsource their customer experience to third-party vendors should be aware of such tools to help streamline the process of managing the customer journey in real-time, while using customer-generated data for product insights and to address future potential challenges. Dedicated and outsourced social media teams are also becoming the norm.

Increased investments in cloud computing

Through virtual storage systems, smaller businesses can compete more effectively by ensuring lower costs and expenses associated with the resources involved in data centers, hardware, software, personnel, etc. This can have tremendous positive implications for SMEs such as improved business collaboration as a result of a standardized system between the business and their outsourced partner. Cloud storage can improve business continuity and reduce risks associated with storing data in a single location.

Stay ahead with digital outsourcing

The outsourcing model’s evolution is rapidly changing due to technological advancements and technology is reshaping the world of outsourcing. It’s important for all types of businesses to stay ahead and not get left behind.

Through our deep dive into the ways in which technology has transformed traditional outsourcing models, you can now unlock the potential of tech-driven outsourcing for your business. Explore our digital solutions today!

 

Published: November 21, 2023

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StorsenDigital is a leading company that specializes in sourcing the best outsourcing talents in Europe. With the rise of remote work and digital transformation, skilled professionals are in high demand, and StorsenDigital is at the forefront of managing the supply and demand of these talents.
StorsenDigital is a leading company that specializes in sourcing the best outsourcing talents in Europe. With the rise of remote work and digital transformation, skilled professionals are in high demand, and StorsenDigital is at the forefront of managing the supply and demand of these talents.