June 23rd, 2020
When considering how best to allocate business resources, it is important to understand the trade-offs between keeping processes in-house and outsourcing them to a qualified partner. Finding out-of-house solutions for business processes may allow companies to reduce their costs, while increasing productivity and operational efficiency.
The Nearshore Advantage
There are specific advantages of working with a nearshore partner. Among them are the proximity to the U.S., favorable time zones, and a highly-skilled and highly-educated workforce with excellent English language skills and multilingual capabilities. Additionally, due to lower wages and decreased operating costs, outsourcing nearshore also represents significant cost savings.
Domestic Disadvantages:
There are some specific disadvantages with hiring in-house or outsourcing domestically the in U.S. as well. Higher wages aside, there are also hidden or often unconsidered operational costs such as office rent, telephony, and employee benefits. By reducing the average costs to one fixed hourly rate, a simple cost-benefit comparison between a fully burdened U.S.-based agent and that of a Nearshore (Caribbean or Latin American) based agent shows potential savings of over 50% per agent, per hour.
Limited Candidate Pool:
At the start of 2020 unemployment in the U.S. was at its lowest levels in 20 years; not only making it difficult to hire experienced candidates, but the shift in demographics and lack of ‘culture fit’ candidates led to increased recruitment costs for less experienced or even first-time agents. This, in turn, led to higher investments in training and retention. And coupled with high turnover rates, attrition costs skyrocketed. While the impact of recent global events makes it difficult to model at present, recent trends should also be factored into the analysis.
Cost Benefit Analysis:
The true value of an operational outsourcing partner can be summarized in a cost benefit analysis of both options:
| Captive/Domestic US* | $USD | Average Nearshore** | $USD |
|---|---|---|---|
| Labor, Benefits & Taxes | $13.50 | Labor, Benefits & Taxes | |
| Vacations/Holidays | $2.35 | Vacations/Holidays | |
| Site Management, HR | $2.62 | Site Management, HR | |
| QA, Trainer | $1.75 | QA, Trainer | |
| Attrition | $1.43 | Attrition | |
| IT Support | $1.66 | IT Support | |
| Facilities/Utilities/Workstation | $1.69 | Facilities/Utilities/Workstation | |
| Overhead, Supervisor, Other | $4.90 | Overhead, Supervisor, Other | |
| Total Hourly Rate/Agent | $29.90 | Nearshore Savings | $15.10 |
| *Approximate | **Based on Caribbean/LatAm Call Center |
These results show an annual savings of nearly $1 million for every 20 agents outsourced Nearshore. These funds can instead be reinvested into the core business and other growth opportunities.
As it relates to performance, Nearshore partners hold their agents to the same level of accountability as a domestic equivalent, and in most cases, the partner outperforms across all key metrics. This is due to the specialization that the outsourcing partner has within that industry.
A successful Nearshore collections agent, for example, can generate up to 15% more revenue per hour than a domestic collections agent. This can also equate to an additional potential revenue increase of over $150k per agent, per year.
The Champion/Challenger Model
Another advantage of an outsourcing partnership is the ability to initiate a ‘Champion/Challenger Model’. This is a strategy that helps compare the advantages of an outsourcing provider against a domestic team. In this strategy, the client starts with a small outsourced team (the challenger). The small outsourced team then competes against the domestic team (the champion) to identify the best performing solutions across all performance metrics. The company then compares costs and performance to allocate resources accordingly. This strategy also allows clients to easily test the benefits of an outsourcing partner without requiring a full commitment from the outset.
In conclusion, a Nearshore outsourcing partner provides not only cost-effective solutions but also significantly better performance and quality while benefitting from a flexible and scalable workforce to help grow, and grow with, your business.
About KM² Solutions
KM² Solutions ( KM2 Solutions ) operates contact centers throughout the Caribbean and Latin America, providing outsourced inbound and outbound customer service contact services for voice, chat, email, and mobile. KM² Solutions provides these services to clients in financial services, multi-unit healthcare, insurance services, travel & hospitality, eCommerce, technology & telecommunications, home services, and other sectors. The company provides clients with a host of solutions, including customer support and care, telesales & retention, claims management & processing, appointment setting & schedule management, loan origination & verifications, back-office processing, and technical support. KM² Solutions maintains PCI DSS compliance, completes a SOC 2 audit annually, and has a Compliance Management System that meets the FDIC standards.
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