How to Measure the ROI of Business Process Outsourcing
Updated: Sep 5, 2021
Business Process Outsourcing (BPO) is a growing practice that allows companies to outsource select operations, freeing up time and resources. There are many reasons to outsource, but chief among them is usually cost savings. This begs the question: is your BPO actually saving you money? How do you measure your return on investment (ROI)?
To measure the ROI of business process outsourcing, you should audit your outsourced services at least once a year, to determine whether you are actually saving money as planned. You should also determine your unique goals for choosing BPO, such as customer retention or opportunity costs, and evaluate your performance in these areas as well.
Quantifiable ROI of Business Process Outsourcing
The most obvious ROI of your business process outsourcing is also the easiest to quantify. Many companies will choose to outsource labour, in areas such as accounting, customer service, or marketing. So at least once a year, you should determine whether you’re actually paying less to outsource than you would to staff those same positions, in the same amount of time.
To understand your ROI here, first, you need to determine what your in-house staffing costs would really be. This won’t just be salary. Be sure to factor in training and replacement costs, as well as any applicable benefits and taxes. Even rent and IT infrastructure can be extra costs associated with more staffing.
And be sure to factor in all the costs associated with your BPO, especially if you don’t have an all-in price. Did the company do everything they promised, at the rate they promised? This should also be included in your yearly audit.
Similarly, if you have outsourced IT and related infrastructure, you can also do a yearly cost-benefit analysis here to see if you’ve made the right choice from a financial perspective.
Of course there’s more than just financial concerns when it comes to BPO, and that’s why you should be clear on your goals for choosing it in the first place. This will help you determine whether you’re getting the true bang for your buck.
Maybe your objective was to outsource your customer service, by outsourcing your communications and call centre. Given the number of platforms with which customers can reach companies today, along with the level of customer service now expected, this is becoming an increasingly popular choice (to see if an outsourced contact centre is right for your business, see here).
In this case, it may be more difficult to put a dollar figure on your BPO. You can still do your comparison of staffing costs to BPO costs, of course. But just as importantly, you will want to look at metrics like customer satisfaction or customer retention.
Remember that you can’t put a price tag on an avalanche of glowing reviews on Google, all raving about your great customer service. Similarly, it’s hard to get past too many one-star ratings, which is why you need to vet your BPO carefully. Look at all your results, and not just the money spent and saved.
And of course, BPO is so popular with startups and growing companies, because it lets them stay flexible and focused. Flexibility and focus leads to opportunity, which is another way of assessing your ROI.
So, how much more new business were you able to take on in the last quarter, because you weren’t mired in accounting? How many new clients did your team secure because they weren’t also trying to run your social media? BPO lets everyone focus on what they do best, which can lead to more business and even more work satisfaction for both you and your employees.
Ultimately, when measuring the return of investment for your business process operating, always be sure to look at the whole picture. This will help ensure that your BPO is always helping you to meet your goals and run your business smoothly.