During severe economic disruptions, businesses often focus on their largest expense item—people. Even in nations with strong employee protection laws, cutting workers quickly is typically seen as a survival instinct. While layoffs and restructuring may result in immediate cost savings, essential tasks still need to be performed to maintain operations, engage with customers, manage finances.
However, there is an alternative to widespread layoffs that allows organizations to quickly reduce expenses while laying the groundwork for future growth. Business process outsourcing (BPO) can be a lifeline for CEOs striving to keep their companies afloat.
For most businesses, the decision to outsource, define the scope, and select and negotiate with suppliers has historically taken months or even years. Typically, companies implement BPO as part of a deliberate shift in their operating model during better times, allowing ample opportunity to consider every detail and its implications for the organization.
In challenging times, such as the current economic situation doesn’t support the luxury of forming task forces to explore every option and conduct thorough analyses before making a decision. When executed correctly, BPO can serve as a quick and effective method to help a company endure a downturn and ultimately thrive once economic conditions stabilize.
Why BPO?
In today’s extremely challenging economic environment, companies need to rapidly reduce costs to survive. However, the benefits of BPO extend well beyond mere financial savings, offering a range of advantages that cannot be achieved solely by downsizing the workforce. What other advantages does BPO offer?
1. Rapid Cost Structure Decrease
When businesses find the suitable scope and service levels, they can experience a substantial reduction in cost structure within just two to three quarters by collaborating with third-party outsourcing providers, especially those located offshore. No matter how challenging the situation gets, businesses will still need to carry out essential tasks like settling bills and handling accounts payable, in addition to meeting customer demands. The provider community excels at rapidly shifting processes to help clients capitalize on significant cost savings, all while preserving or enhancing quality. Depending on the current processes, the savings could reach around 30 to 60 percent of the current cost structure.
2. Strategic Resource Allocation
One benefit of employing BPO as a strategic tool is the capacity to swiftly adjust the cost framework and allocate resources towards sustained expansion when the economic climate shifts. Simply downsizing the workforce will only yield immediate advantages; however, when it’s necessary to focus on expansion, a shortage of skilled personnel will impede the company’s ability to quickly regain momentum.
3. Long-Term Competitive Advantage
When the economy recovers, businesses that have implemented lasting improvements, rather than just looking for quick solutions, will be in the best position to adjust and compete in a market where the basic principles could be quite different.
In conclusion, BPO offers not only immediate cost savings but also positions companies for sustained growth and long-term competitiveness.