The continuous market fluctuations, global economic crisis, and uncertainty push companies to reduce operational costs and increase agility and performance while maintaining high service quality. And, while shared service centers (SSC) and business process outsourcing (BPO) have long been seen as the best way to remain competitive in the market, the hybrid outsourcing model seems to be the golden solution.
This strategic blend of shared services and BPO delivers efficiency, scalability, and cost-effectiveness – the three pillars of remaining competent and growing in the dynamic business environment.
In this blog post, we explore how adopting this model can enhance operations and boost your growth. We look into the model itself and how it works, briefly compare shared services and outsourcing, and more.
The Hybrid Outsourcing Model: What Is It?
The hybrid outsourcing model is a blended operating model in which some business processes are handled internally by a shared service center and others are delegated to an external outsourcing provider.
This allows businesses to customize their service delivery frameworks based on the nature of the task, cost, talent availability, and location.
The hybrid outsourcing model is a best-of-both-worlds solution that allows companies to reach global markets while retaining internal coherence.
Shared Services and Outsourcing: The Blend That Overcomes All Challenges
The hybrid outsourcing model combines the strengths of shared services and outsourcing, offering a comprehensive solution to managing various types of business processes. In that way, it ensures flexibility, cost-effectiveness, and streamlined operations.
This table compares SSC vs BPO across different functions, and how the hybrid model handles them all.
The Adoption of the Hybrid Model Among Companies
The global outsourcing market continues to grow rapidly, reflecting the increasing demand for efficient and cost-effective solutions. In 2024, the business process outsourcing global market’s value was estimated at $285.76 billion, and projected to reach $544.78 billion by 2032, which is a compound annual growth rate (CAGR) of approximately 8.5%.
As the market expands, companies adopt hybrid outsourcing solutions, which combine the control of shared services with the scalability and cost advantages of BPO.
Here’s why businesses adopt the hybrid model!
3 Main Reasons Businesses Adopt the Hybrid Outsourcing Model
#1. Cost Reduction
Shared services and outsourcing both help companies reduce their costs. Shared services reduce duplication and standardize processes internally, while outsourcing lowers labor costs, especially when working with offshore or nearshore vendors.
Combined, they can drastically cut overhead costs without compromising performance, allowing businesses to allocate resources more intelligently.
#2. Increased Agility and Scalability
A hybrid outsourcing strategy allows businesses to expand or contract operations more easily. For instance, during peak seasons, outsourcing providers can handle increased demand, while the shared services center ensures continuity in business operations.
The flexibility to smoothly scale up or down allows companies to boost production and increase profits without increasing overhead costs.
#3. Better Focus on Core Activities
Outsourcing non-core tasks like accounting, data entry, or IT support allows internal teams to focus on core activities. Shared service centers, at the same time, maintain control over key business processes such as operations, management, and internal audits.
The hybrid outsourcing model ensures that strategic and routine operations are aligned without being conflated, which leads to better focus and business outcomes.
Benefits of the Hybrid Outsourcing Model
Combining shared services and outsourcing brings several advantages that can significantly enhance organizational efficiency and adaptability.
- Flexibility – Companies can scale up or down their operations quickly while keeping critical functions in-house to retain control over them.
- Cost Efficiency – Delegating non-core, routine-based tasks to lower-cost BPO providers reduces businesses’ overhead costs, optimizing expenses.
- Risk Management – Companies can keep sensitive operations internally, to minimize data and privacy risks, and outsource non-sensitive tasks.
- Governance – Enterprises maintain full control over process standards in the SSC and oversee the outsourced tasks.
- Access to Talent and Technology – Companies can access industry professionals that may not be available locally, and the latest tech tools, ensuring the highest service quality at all times.
Common Challenges and How to Overcome Them
While the hybrid approach has many benefits, it also has some challenges. Here are the most common ones:
Cultural integration
Ensure smooth and continuous communication and collaboration between internal SSCs and BPO providers to easily bridge the cultural gap between in-house and external teams.
Data security
Choose an outsourcing partner that has the latest technology, and make sure your SSC team also has it. A strong digital infrastructure allows for seamless integration between internal and external teams and ensures compliance and secure data transfer between systems.
Consistent performance
First, determine which tasks should the shared service center handle and which the BPO provider. Then, determine who owns what to be clear on the governance structure and responsibilities. Lastly, align KPIs across both your teams.
Shared Services vs Outsourcing: Finding the Balance in a Hybrid Outsourcing Model
The shared services vs outsourcing debate has been going on for quite some time. But it’s not about which model is better. It’s about aligning them with your business goals.
Shared services provide centralization and standardization, while outsourcing offers cost reduction and scalability, among others.
In the hybrid model, these two coexist, perfectly balancing their strong suits to ensure maximum operational efficiency, performance, agility, and competence in a changing global marketplace.
Implemented effectively, the hybrid outsourcing model provides a foundation for digital transformation, process optimization, and sustainable growth.
FAQs
1. What is hybrid outsourcing?
Hybrid outsourcing combines in-house and remote teams that work together to ensure streamlined operation. Shared services and business process outsourcing are one of the most common hybrid outsourcing models. It allows companies to create an extended office model by keeping internal teams and adding external ones for better efficiency.
2. What are the main benefits of hybrid outsourcing?
Hybrid outsourcing brings the best of both worlds – shared services and BPO – thus ensuring complete control over all business processes while reducing costs and increasing performance and productivity. Most importantly, it allows businesses to scale at no additional cost.
3. What is the difference between shared services and business process outsourcing?
Shared services is an organizational model where various departments within a company consolidate their processes in one centralized service center.
Business process outsourcing (BPO) refers to outsourcing certain non-core tasks to an external (on-shore or off-shore) provider. That provider is fully responsible for the processes delegated to it by the client.
