The Right Way to Outsourcing Back-Office Operations: Navigating Vulnerabilities


“Skill” and “cost” – a need for which sparked what is now understood to be the genesis of outsourcing as a business strategy. The 1980s-90s of the business world witnessed many competitive benefits soon thereafter. However, there was a common consensus that core competencies should be handled on the home ground. That changed when Eastman Kodak, a global technology company providing industry-leading products and services, decided to outsource their IT systems in 1989. The aftermath was the emergence of strategic partnerships and alliances that led to preference for outcome-based business models – in other words, doing what works.

Even so, non-core competencies, such as back-office functions, are still among the most outsourced functions. These include HR, payroll, accounting, data entry and IT support. Redirecting back-office processes to a third-party service provider helps businesses refocus efforts on tasks that require strategic or specialized efforts. This is especially true for Small to Medium Enterprises (SMEs). When pockets are tight and survival is tough, something has to give. 

Thus, despite the many seasons that the industry has endured, “reducing cost” remained a steady catalyst for its growth, with 70% of executives citing it as a key factor in outsourcing their functions. And the perks did not stop there. As a result of outsourcing, more leaders understood the value it could add to the business in terms of capabilities, resources and an increased focus on more critical KPIs. 


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Why ensuring security should takeprecedence in back office outsourcing

What began as a fascinating phenomenon in the 20th century is now a global movement. The advent and evolution of technology has made the market as fierce as ever. So it may seem, in order to survive, contracting out operations is more than beneficial, it is almost necessary! However, it is exactly for this reason that there is a right and a wrong way to outsource. 

A simple search on Google would reveal that the adoption and acceleration of digital transformation is the top trend for businesses in 2023. Backed by developments in transformative technologies such as artificial intelligence (AI), the internet of things (IoT), virtual and augmented reality (VR/AR), cloud computing, blockchain, and super-fast network protocols like 5G, businesses are preparing to transcend into what has been termed an “intelligent enterprise.” A star feature of an intelligent enterprise is leveraging technology to facilitate cross-departmental information and data mobility, breaking down departmental silos. The problem arises when the traveling data is sensitive, which is often the case. A data breach can do more than harm your reputation and expose you to unwarranted lawsuits. According to a study by IBM, businesses lose an average of $3.86 million as a result of data breaches. That is not a small number! 

Given that reducing operational costs is the primary reason to outsource, threats to data security and the consequential costs can put you in a deadlock. Moreover, when it comes to outsourcing back-office processes, a large volume of data makes the rounds. In the wrong hands, or without sufficient armour, it can be vulnerable to major pitfalls.


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Ergo, here are some things to keep in mind while outsourcing your back-office functions. 

To ensure the security of data, it is vital to have a clear understanding of the data that is being shared. In addition, it is important to encrypt your workflows in order to protect them from theft or unauthorized access. ISO 9001 and 27001 certifications establish that a provider adheres to specific security protocols. As a rule, opting for a certified provider is the best course of action. Recognized internationally, it guarantees the implementation of measures to safeguard against security risks.

Additionally, having the appropriate authorization procedures in place is essential. The absence of proper authorization can lead to significant losses. It is imperative to establish clear authorization policies and procedures, including background checks for employees and strict access controls.

Outsourcing your functions does not necessarily mean cutting corners. For example, overlooking protocols or choosing providers who are not compliant with relevant laws and regulations can result in costly legal fees and potential reputational damage. Investing in a compliance-focused service provider who is well versed in regulatory compliance can pay off in the long run by avoiding costly fines and penalties. Speaking of costs and pricing, there is a debate between flat rates and pay-per-use models. However, the latter provides a consumption-based pricing system which ensures that resources are not wasted and you pay only for what you use.


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In Conclusion

Outsourcing back-office functions can provide numerous benefits to businesses, including cost savings, disaster management, compliance, and uninterrupted service. However, in order to make outsourcing work for your business, it’s crucial to understand the risks and take steps to mitigate them. By understanding the pricing structure and hidden costs, ensuring compliance, data security, and conducting due diligence on potential vendors, businesses can outsource their back-office functions the right way and achieve success.

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EOSGlobe is leading business process management organization that strives to provide high quality services focusing on exceptional customer experience and digital technological innovation. EOSGlobe is committed to become a value-driven organization with the highest standard services to their customers. With an exceptional team having rich domain expertise and robust digital solutions, helps businesses to transform their futuristic goals into reality. It aims for strategic partnerships with its global clientele to build a culture of innovation and business transformation at cost effective rates and with more productivity.

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