Outsourcing your back-office tasks

Not so long ago, outsourcing was confined mostly to contact centers, data entry, and low-level tech support. These days, companies are outsourcing more critical tasks as well. Although every business should be cautious about outsourcing functions that are too closely tied to their primary line of business and their public image, the decision to outsource "back office" functions may be an easier one to make. "Back office" refers to those behind-the-scenes tasks that the public rarely sees - those that are not directly related to the core of the business but are necessary in order for it to operate. These functions make up the firm's support structure and, depending upon which expert you ask, may include billing, accounting, legal systems, a variety of information technology functions, payroll, and even human resources.

More and more companies both large and small are choosing to outsource their back office functions. Though many people automatically associate outsourcing with offshore positions, domestic outsourcing is often more practical than going offshore, particularly for financial and legal functions. Whether you outsource locally or globally, it is a major decision that should involve careful thought and planning. Here are a few points to bear in mind.

1. Consider hiring an outsourcing consultant before you make any major decisions. When making decisions about outsourcing your back office functions, you first need to determine the basics: e.g., whether outsourcing is indeed necessary, how it will benefit your company, and the possible risks involved. If you have no experience with outsourcing, making these determinations by yourself can be overwhelming. That's where outsourcing consultants come in. A good outsourcing consultant or consultancy firm will carefully analyze your current business practices in order to help you determine exactly which back office services should be outsourced. They should also be able to provide you with referrals to appropriate outsourcing services. Of course, due diligence applies here: check the consulting firm's qualifications and references; make sure they have experience in your industry; and satisfy yourself that they don't have any undisclosed interest in the recommendations or referrals they make. (For more criteria to consider, this article, though it specifically addresses HR outsourcing consultants, may be helpful: http://www.businessmanagementdaily.com/articles/20202/1/8-criteria-for-choosing-an-outsourcing-consultant/Page1.html ) Getting good advice about outsourcing at the outset could help you avoid costly mistakes.

2. Decide which back office services you want to outsource, and when and how you want to do it. You should make these decisions before requesting bids from potential outsourcing partners. Business process outsource (BPO) providers offer a wide variety of services; some specialize in accounting, some in payroll, some in human resources... and the list goes on. Your outsourcing consultant should be able to help you decide which services you want to outsource, and whether you want to outsource them all at once or in phases. In the end, of course, it is up to you to make these decisions.

3. Choose your provider(s) wisely. Whether you go offshore, use a domestic provider, or utilize some combination of the two will depend upon the services you're outsourcing. Some experts deem data entry and minor IT-related tasks to be back office functions, and these are commonly outsourced offshore. As noted above, though, it might be better to handle accounting, finance, and legal tasks closer to home. However, quality and integrity matter no matter where the job is performed. Even though BPO providers are handling behind-the-scenes tasks, each and every function has an effect on your business, and in a very real sense is a reflection of you and your company. A substandard BPO provider can negatively impact your business, employee morale, and public image. Perhaps this is particularly true with customer service and call center functions. Those humorous credit card commercials featuring "Peggy" in a rival card's customer-care center offer only a slight exaggeration of the frustration that many customers have experienced with offshore call centers. Quality concerns aren't the only issues. Depending upon your industry and your BPO(s), there also may be other risks, such as theft of intellectual property or other proprietary information; loss of managerial control; and bad publicity and ill will. These caveats are why numbers 4 and 5 below are also important.

4. Have a structure in place to monitor your back office services, particularly those that have been outsourced internationally. If you're partnering with more than one BPO company, this is especially critical. In any case, provisions for quality assurance, including a regular review process, should be incorporated into all of your contracts with your BPO providers.

5. Have a qualified attorney carefully review any BPO contracts before you sign them. Lawyer jokes aside, there are times when a good attorney is worth his or her weight in gold. At the risk of stating the obvious, outsourcing is the BPO provider's business, and they are the ones who write the contract. That simple fact puts you at a disadvantage when negotiations begin. An attorney who knows the territory is a worthwhile investment at this stage.

The main point to remember is that any type of outsourcing arrangement will only work if it does not adversely affect the way your customers relate to your business, and if it actually does enhance productivity and profits, as well as your public image. That's why it's so important to choose your outsourcing partner(s) with care. Properly done, outsourcing will allow you to focus more of your resources on your core business, knowing that the support structure of that business is being suitably maintained. And you'll be able to rest easy, knowing that you are providing good jobs for as many people as possible. That's a win-win.

For more information...

• The top 7 outsourcing advantages: http://operationstech.about.com/od/officestaffingandmanagem/a/OutSrcAdvantg.htm

• In defense of outsourcing: http://www.cato.org/pubs/journal/cj25n2/cj25n2-12.pdf

THIS IS NOT INVESTMENT, TAX OR LEGAL ADVICE. Consult with a financial advisor, accountant or attorney before making important decisions in these areas.

THIS IS NOT INVESTMENT, TAX OR LEGAL ADVICE. Consult with a financial advisor, accountant or attorney before making important decisions in these areas.