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 Why consider having a back office and do more companies need one?
Due to the latest market shifts and the more complicated business situation many companies are looking for solutions that help them cut cost. Furthermore, most of the companies are not making the revenues they were generating a few years ago which alternately leads to a situation where expenses must be reduced.
The expensive rents combined with the high employment related cost which businesses incur make it impossible for them to keep up with the economic downturn. Some of the larger companies have started to build offices in more competitive locations and outsource entire departments of their businesses to cheaper destinations.
The discrepancies between the labor costs in Canada, the US and parts of the European Union vs. Latin America, Asia, the Philippines and Eastern Europe is what drives the businesses to outsource jobs. In those outsource friendly countries labor associated expenses are not the only advantage. Rent and legal fees and other relevant operating costs are also lower.
The departments that are usually outsourced are HR, marketing/ customer support, finance and accounting. However, the latest trend shows that not only support operations but also core business functions can be entirely outsourced. IT companies are building their software applications in remote, more cost effective destinations. Entire call centers are changing locations.
The contemporary back office
While the benefits of having a back office are well known and mid and large sized firms are capable of establishing their own back offices that is certainly not the case of small businesses. Small businesses and start ups cannot cope with the competition as most of them do not have the monetary sources and to invest in a back office facilities and the talent to supervise it and staff it. There has been a new wave of back office companies that emerged to fill that niche. Professionals in Latin America, Asia and Eastern Europe are being hired to fill in 24/7 back office positions in those contemporary back offices.
The contemporary back office is more than the traditional back office as it offers dedicated employees that work for your company only and at the same time are direct hires of the company provider of the back office services. What that service allows small business is the opportunities to compete with companies that have the capability to set up back office outsource centers without having to put the initial investment. By outsourcing headcounts to back office locations in more cost effective places, businesses gain capabilities they did not have before. They can expand their teams without having to hire people directly, without having to manage them and with the ability to take on more jobs since there are more headcounts available for a fraction of the cost!
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