The primary challenge startups face today is to plan, execute, establish, and themselves within a shoestring budget. Although business process outsourcing serves as the most economical solution to acquire project-specific skills, basic knowledge of the price calculation process is necessary.

A true-cost analysis for up-to-date outsourcing services helps you make an informed decision without bearing additional expenses of consultants. Generally, outsourcing rates depend on what services you choose as well as their quality, scope, and breadth. Knowing the cost evaluation process can bring exclusive benefits to your business.

In this context, this guide presents informative data on how to calculate outsourcing rates in 2020.

Why Outsourcing?

Before knowing the price calculation process, you must know how outsourcing can benefit your business in the short or long-term. Apart from financial advantages, BPO allows you to focus on core business, improve quality, transform your business, acquire your desired expertise, solve capacity issues, and expand your organizational operations.Research shows outsourcing reduces more than 46% of expenses as compared to in-house operations. Visit our outsourcing services to know more about the financial advantages of BPO. Similarly, the spending on non-IT operations declined by $121.4 million with an increase in IT outsourcing expenses.

Outsourcing Costs

Given below are the various types of costs associated with business process outsourcing. These are general categories and their values depend on sector, desired skills and expertise, outsourcing country, and respective field.

  • Recruitment costs
  • Employees’ salaries
  • Certification costs
  • Consultancy costs
  • Transitioning costs
  • Cost of server management
  • Cost of legal obligations

Costs Calculations

There are three different approaches to perform a cost-benefit analysis of BPO.

Differential Costs Analysis

  • Identify services to be outsourced
  • Calculate in-house cost
  • Estimate outsourcing cost
  • Subtract outsourcing cost from in-house cost

In-house Cost Outsourcing Cost = Amount Saved from Outsourcing

For Example

$178,770 $41000 = $137,770

Another formula to calculate the outsourcing cost is:

ROI% = (Return Investment Cost)/Investment Cost x 100

Opportunity Cost

Opportunity cost refers to the financial benefits you are forging by preferring in-house operations over business process outsourcing. These might result in:

·         Inability to focus on core competencies

·         Non-compliance to the market requirements

·         Low-tech skills

·         Overburdened and stressed in-house teams

·         Reduced performance

Incremental Cost

An incremental cost refers to additional expenses a company bears while transforming its operations and function. In terms of business process outsourcing, incremental costs are related to the costs incurred while shifting corporate framework from in-house to outsourcing.

Nevertheless, the incremental cost in outsourcing is much lower than in-house due to the cost-effective and business-friendly nature of the former approach.

Cost Comparison

VariableIn-HouseOutsourcing
Hiring costsYesYes
SalariesYesYes
Operational expensesYesNo
MaintenanceYesNo
Tech trainingYesNo
Paid benefitsYesNo
Medical insuranceYesNo

You have to bear hiring costs and salaries for both in-house and outsourcing teams. However, you can cut these costs by outsourcing your operations to emerging countries like the Philippines, Pakistan, India, and China.

However, you do not have to pay for operational expenses, maintenance, tech training, paid benefits, and medical liabilities while outsourcing your operations because the subcontractor is responsible for bearing all these costs. On the other hand, all these overheads become your obligation if you have an in-house full-time team.

Cost Reduction

It is clear from the above comparison that cost reduction is the primary reason why companies are outsourcing their operations to emerging countries. According to an estimate, over 87% of IT firms consider BPO as the most efficient cost-cutting approach.

This means you can reduce your operational expenses and increase your profitability by acquiring outsourcing services from reliable agencies like Khired Networks. Moreover, BPO enables you to focus on core operations and boost global expansion without exceeding your budgets.

Hence, you can outperform your competitors and achieve your desired objectives by outsourcing your operations.

Conclusion

Cost evaluation is key to gain a financial edge over your competitors in today’s dynamic business environment. You can estimate your outsourcing costs by differential costs analysis, calculating opportunity costs, or evaluating incremental costs.

Contact Khired Networks if you want to acquire cost-effective, inclusive, and viable outsourcing solutions for your business. The company offers inclusive and economic BPO services to diversified sectors.

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