Models of Outsourcing

1. Upwork/Freelancer This model works on a low cost, project basis style of work. You can list a job or task that you want completed, then different companies or individuals from around the world will bid on the job, allowing you to choose who you want to complete the job. This model is a quick and easy way to get one task off like creating a database or graphic design work completed. Some of the pros and cons of this model are listed below:

Pros

• It’s cost effective in most cases as you have different people and companies bidding for your work.
• The time for the job delivery can be quick and seamless.
• You can get the right skill set for the task at hand.

Cons

• More and more freelancers are winning the jobs, then outsourcing to other local companies to complete the jobs for them (they are acting like an agency).
• The companies and individuals often fabricate or oversell their previous work and skills, making it hard to know if you will get what you paid for until it’s already done.
• It’s often difficult to brief them in detail on what is required, and the work isn’t always completed as requested due to the misunderstandings of what it is you really need.

2. Project style work

There are more and more specialised outsourcing centres being created to complete your jobs on a project basis. An example of this is an SMSF provider in India who completes SMSF compliance work for $350 per entity. Some of the pros and cons of this model are as follows:

Pros

• You can get your backlog of work done cost-effectively and in a timely manner, without the need to employ staff.
• No training is required.
• You have a fixed cost for the work.

Cons

• Often these processing centres are set-up by offshore companies with no local tax knowledge; it has all been learned remotely. With this lack of Australian or New Zealand knowledge, team members often produce work of a lower quality that needs significant and detailed reviews (Don’t be fooled by the marketing)
• The time zone and language differences are often barriers

 3. Business Process Outsourcing (BPO)

One of the fastest areas of outsourcing is in the BPO section. The easy way to think of a BPO is a labour hire and service office all in one. The BPO provides the office environment, set-up, management, and all facilities required for your offshore team to work. They also recruit your new offshore team, manage the HR, payroll, and all employee-related matters. All you need to manage is the workflow and training required for your new team member to fulfil their role. More and more BPO’s are becoming specialised and focused on certain markets. For example, The Outsourced Accountant is solely focused on Australian and New Zealand accounting firms.

This includes a dedicated training division for accounting tax, compliance and update training. Some of the pros and cons are as follows:

Pros

• Specialised BPO’s will understand your business and are set-up to cater specifically to your needs
• You don’t have to worry about staff management, HR and sick leave as this is all taken care of
• The cost is inexpensive
• It’s simple and easy to implement
• It’s easy to grow your team

Cons

• Once your team grows beyond 25, it can become expensive in relation to operating your own BPO/office
• If you partner with a BPO that doesn’t understand your industry or business it can be difficult to communicate your needs and wants.

 4. Build-Operate-Transfer Model

The build-to-operate-your-own-office or BPO model is for firms that want to grow their offshore team beyond 25 team members. It becomes viable once you have 15 team members onboard, and can be a great way to get scale and be able to control the whole offshore culture and team. Some of the pros and cons of this model are as follows:

Pros

• You can create your own environment and culture.
• You control the whole process.
• The costs are often cheaper than being in a BPO, once you have more than 15 team members.

Cons

• It often looks easier than it is.
• There is a big learning curve involving the culture and how it works. Without this knowledge, you will often pay “western prices” rather than local prices, and staff retention will be low if you don’t understand how to best manage your team.
• The time costs need to be taken into account. You need to have your Australian team there regularly (at least monthly) to manage the day-to-day owners’ tasks (e.g. signing documents as everything is manual).
• The set-up can be costly and expensive.

  Deciding which model will work best for you isn’t easy. The best approach to take is to build your offshore strategy, then find a partner who can assist you with your plans. This may include partnering with a specialised BPO who can work with you and assist with your transition to your own facility, if and when the timing is right.

The Outsourced Accountant helps accounting firms from all over the world grow their capacity, margins and profits through global outsourcing. Contact us to find out more about how we can help your firm.