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BPO Cost Models

Your Contract, Right or Wrong?


How do you know if you are paying the right price for your service?


This article will help you review your outsource contracts.


Primary Considerations

The first consideration is scope, what exactly are you outsourcing, and why? Whilst virtually any business process can be outsourced, one of the most common choices is the call centre function, whether that be sales, technical support, customer service or any other telephone based activity. Next we need to examine the business thinking behind deciding to outsource. The primary reasons are generally cost, time and quality.



Cost is a key factor, often the only one. The arguments around why outsourcing is more cost effective are well rehearsed but there are other factors that carry weight.



By when do you need your business process up and running?  Putting a time window on this decision should focus your strategy.


In any process you need to consider the time impact of a number of key areas including:

  1. Recruitment and staff training
  2. Delivery of the work
  3. Team management and reporting
  4. Quality control
  5. Process review

An outsourcer could, for example, implement an outbound sales campaign months faster than you would, starting from scratch.


If you do the work in-house you have to deal with all aspects, if you outsource you might reasonable only have to consider the last two.


Quality is a big one. You have a great product or service, but are you the best you could be at customer support? Ongoing management and refinement is time consuming and your quality will start low if you don’t have prior experience. Also, staff churn might well dilute your in-house which will affect the quality of team performance.


BPO Cost Models

Every model

In every outsourcing model there is an administrative overhead and for sales processes there are often commission charges which may vary greatly as will the minimum wage in the country that operates the outsourcing operation.


Cost per Seat

This is the closest model to hiring your own staff and consequently every person hired is charged to you. You are paying for someone else to just handle primary staffing issues such as ensuring enough people are available every day.


Cost per Call / Contact

This is where you only pay for the time that staff are on the phone or dealing with your clients or prospects, often this is more cost-effective than the Cost per Seat model.


 Cost per Case

This model encourages the outsourcer to deliver First Contact Resolution. If the case extends over multiple contacts there is still only one charge. The downside can be a high charge per case.


Cost per Time (Cost per Working Minute and Cost per Working Hour)

Here, you only pay when staff are working. This falls between Cost per Seat and Cost per Call.


Bureau services

This approach works effectively for well-run contact centres. They deploy the same agents across different campaigns and generally charge on cost per call basis. In the right circumstances, this model can work extremely well for the outsourcer and the client.



Which cost model works best?

Working out the best cost model for you requires a clear view of your contact patterns, call volumes and call durations. The next, and trickier, aspect is working out the resource cost of doing the work yourself, factoring in elements such as recruitment, training, sickness and holidays. The more existing metrics you have, the easier this calculation will be.


With accurate numbers you can make an informed decision before you even approach an outsourcer. If the information simply isn’t available in a trustworthy form, a good outsourcer can gather this for you. Keep the situation under review though as, over time, the best model for you may change.



The system on which your process is run will depend on the outsourcer chosen and, perhaps, on the cost model as well. In any case, to keep abreast of what’s happening with your process you need to be able to see your analytics data. You should not have to ask the provider to provide reports but should be able to deep dive into the system yourself, at any time and cloud based systems such as bxp are ideally place to match this requirement.


The system is critical to delivery and some businesses now provide the system to the outsourcer.



Your outsourcer should also provide the facility to record random calls for review and should have an integrated customer scoring system.


What do you have to lose?

The first thing you’ll lose when you outsource is hands-on experience but cost and resource availability may not be on your side.


Organisations learn from business challenges and refine their offering to match changing environments but an outsourcer can add a layer of insulation which may unwittingly conceal some of these insights. This is why choosing a business that wants to be a partner not just a supplier is key.