BPO versus Staff Leasing: Understanding the Different Outsourcing Models
While outsourcing has become a critical consideration for businesses of all sizes and across all industries, different models exist. For instance, business process outsourcing, or BPO, is the most popular model in India. In the Philippines, the most popular model is staff leasing.
While they’re both technically “outsourcing” they are very different and do not deliver the same benefits. In this, the third instalment in our four-part series, we’ll explore what each of these outsourcing models offers and help you understand why business process outsourcing in India is the better choice for your firm.
A Brief Overview
First, let’s explore the topic in a bit more depth. What we’re talking about is outsourcing, which is taking a process in your business and hiring a third party to handle it on your behalf. The process dates back to the 1700s, but it came into its own in the 1990s when the airline industry began outsourcing back-office processes to India.
Today, outsourcing has grown to be a global industry that generates an astounding amount of revenue. Below, you’ll find some compelling statistics:*
- In 2019, the global outsourcing industry generated profits of 92.5 billion in USD.
- The business process outsourcing market size is expected to reach 405.6 billion in USD by 2027.
- The most common reason to outsource is to free up time to focus on core business objectives.
- All industries outsource professional services to some degree, but the financial, pharmaceutical, retail, and transportation industries account for the lion’s share.
- Accounting and IT are the two most frequently outsourced services for small businesses.
Those are some eye-opening numbers. They’re also a testament to the tremendous value that businesses find in working with a reputable outsourcing partner. However, there is still considerable confusion when it comes to different outsourcing models in use today.
As mentioned previously, those are business process outsourcing (BPO) and staff leasing. Below, we’ll explore both.
The India Model
In India, the most popular outsourcing model is business process outsourcing. BPO providers offer their clients the ability to handle everything in-house. On engagement, the outsourcer begins handling recruitment and training, taking those burdens off the hirer. The BPO also takes care of all HR, operations, and IT setup, and delivers any necessary ongoing training and support. Essentially, all the details are handled by the outsourcer, who is also responsible for deliverables.
Look at it this way:
You run a small business and need to focus on serving your customers to the best of your ability. Handling the accounting requirements is eating into your ability to do that, so you decide to hire a BPO provider to take care of it for you. The BPO provider will then:
- Take the time needed to get to know your company, its mission, and its audience.
- Meet with you and build an understanding of your company’s needs, requirements, and objectives.
- Develop, refine, and implement a strategy to achieve your objectives.
- Recruit, onboard, and train any personnel needed to handle the accounting tasks you’re outsourcing.
- Provide all HR-related functions for those employees, including benefits like insurance, vacation time, PTO, and all the rest.
- Ensure that the deliverables (accounting-related services) are on point, accurate, and timely.
Think of it as hiring a provider who specializes in the service that you need. We used accounting in the example above, but it could just as easily be digital marketing, IT, or another mission-critical process. The provider handles the day-to-day, delivering just the service and freeing you up to do what you do best.
At Valenta BPO, we provide the expert talent you deserve and the services you demand. Our Team Managers oversee both work quality and outcomes, ensuring that we’re always on point and you never need to worry about quality, timeliness, or anything else. We also have a local presence in your city, enabling us to understand not just the broad strokes of your business, but your position within the local geography and economy.
The Philippines Model
In contrast to the BPO model highlighted above, there is the Philippines model. Here, the most popular option is called staff leasing. It’s worlds apart from business process outsourcing, despite having a similar purpose. How does it work?
Staff leasing is a lot like working with a recruitment agency. It’s more about finding talent for you than handling the processes you need to outsource. It also puts the onus of finding the right talent on you, meaning that they’ll provide you with access to a talent pool, but you have to handle the interviews, the onboarding, training, and everything else.
That’s an incredible amount of time (and money!) that you shouldn’t have to spend. It’s also a burden. While the outsourcing company might do the legwork when it comes to recruitment, that is all they do. Read that again – staff leasing means you have to do almost all the work, which just eliminates the benefits you’re seeking in the first place.
There are some other critical considerations to understand with this outsourcing model, including the following:
- No additional training is provided other than what you offer.
- No policies or standardized procedures are put in place, other than those you mandate.
- No additional training or support is provided by the outsourcing company.
The staff leasing model will also see that the staff have a premise to work from; a local office in the Philippines that is set up with all hardware and ‘office space’ required. So essentially your leasing fee entitles you to recruitment assistance and office space. The office space component has become less important though, especially as we face COVID-19 and most resources are now working from home, at least for the foreseeable future.
It’s a good fit for companies looking for a shortcut in the traditional hiring process. However, understand that you don’t actually outsource anything other than the recruitment process, and securing offshore office space. Staff leasing leaves you on the hook for everything else, from training to supervision.
Making the Choice
The difference between India and the Philippines are stark. Business process outsourcing offers a path forward for businesses seeking to save time and money while working with a trusted partner so they can do what they do best.
In our final instalment, we’ll touch on a few additional reasons that India remains the preferred location for outsourcing, as well as a guide to choosing the right BPO provider.