Virtual Back Office: To Be or Not To Be
The requirements for setting up a virtual back office differ with each company. The decision to set one up requires
in-depth knowledge of the company and its future. The level and the number of processes to be given to the
virtual back office are to be considered too. Still, there are some common factors that anyone has to take
into consideration before taking a decision of whether to have a virtual back office or not. They are as follows:
Saving Overheads:
The first pointer that helps a person decide whether or not to set up a virtual back office is the need to cut
down the company’s expenses. Virtual back office will help with the reduction in man power and hence, it directly
affects the cost lost in social security benefits, employee’s health care plans and worker’s compensation.
The efficiency of the work done is also increased due to the specialty of the back office team as they will be more
experienced due to the high volume of work. It also helps the company take the extra work load from the existing
employees and re-assign them in core business projects.
Moreover, when a current in-house process is sent to the back office, any assets related to the process can be
sold to bolster the company’s financial status. This flexibility is greatly reduced if you sign-up for long term agreements.
But, there are some companies that do not require such contracts.
Concentration on Core Business Processes:
Another main advantage is that you can focus on your core business processes while the rest of the work can be sent
to the back office. This is quite a rewarding benefit for small and medium sized companies who are trying to make their
stand. It helps the entrepreneur to free up his time from mundane, repetitive work and focus on core areas of the business
like marketing, operations, etc.
Retention of Knowledge:
In most cases, having inexperienced personnel in non-core business areas will lead to reduction in morale due to
need for re-do work or due to compensatory work in the name of quality.
Most importantly, many small sized IT businesses might not have the resources to employ experienced computer
personnel or create and maintain top level technology. When these projects are “back office-ed” to a company
with such expertise, the small sized company gains knowledge retention from such a transaction and so becomes
able to compete with large scale companies.
Responsibility:
When it comes to back office service, the client and the vendor are well aware that the client should receive the best
service for the payment received by the vendor, and that it is the vendor’s responsibility to make this happen. Moreover,
the client has a person (usually the account manager) to communicate any type of grievance and the vendor is required
to address it to the complete satisfaction of the client. This type of understanding is mostly missing within a company.
Thus, if your company has the advantage of great financial stability that doesn’t require you to save any more overheads,
if you have enough time to look into both the core and non-core functions of your company, if you have expert and
responsible hands to compete with the top competitors in your industry, you might not need to enroll a virtual back
office provider. If not, you might have to seriously consider the option.
All the best!
Virtual Back Office: Is It Worth It? – Part 1
Many companies do not understand the pit falls of having all the processes in-house until they foresee or have
a disaster that disrupts all the operations for the company. Let us discuss the various disadvantages of having
all the non –core and core business processes in-house.
1) Cost Incurred:
Every company tries to achieve the lowest costs possible by reducing overheads. They cannot be blamed for it in the
current economic scenario. A company that has all the business processes in-house has the disadvantage of incurring
large overheads like rent, setup costs, equipment, employee salary, welfare benefits, security benefits, etc. Each
and every process requires its own set of employees, assets, and costs which can be saved if the processes are
taken off the company’ hands.
2) Focus on Core Areas of Business:
When housing both core and non-core business processes, any entrepreneur is faced with the daily dilemma of focusing
on both the parts. Focusing on one will lead to lax in another and at one point both the processes end up a failure.
This is one of the main headaches for small business owners which can be solved by outsourcing the non-core processes.
3) Responsibility and Morale:
When process expertise is missing, it is evident in the work done. It is not possible for a small business to hire
a expert for all the business areas. In such a case, the business suffers by either taking longer time than necessary
to finish a project or re-working on it to make up for quality. In order to compete with top companies in the industry,
a small business either has to have the expertise in-house or have ties with a vendor who does. Outsourcing companies
have people who have hands-on experience and who become experts due to the sheer amount of work done. Also, when you
have a vendor, you have a single point of contact to question in case of any grievances.
Even if outsourcing might sound the best alternative in the above scenarios, it has its own disadvantages.
They are:
1) Control Over Process and People:
One of the basic disadvantages of outsourcing is that you don’t have much control over the outsourced processes.
In case you want to change the priorities of a given process, you have to go through the necessary channels, which
costs you time. The resources that are allocated for your purpose do not directly answer to you. This makes the
channel of communication longer and in some cases ends with the misinterpretation of a given message.
2) Retention of Knowledge:
In most cases of outsourcing the agreement with the vendor company means that the work outsourced will be completed
to the expectation of the client. If in case the client company is a small business without much expertise in the
processes outsourced, such knowledge remains out of reach for the company as the vendor only aims to fulfill the
transaction rather than impart knowledge to its client. This cannot be asked of the vendor who has kept up his end
of the bargain.
3) Long Term Contracts:
Generally, most outsourcing companies go only for long term contracts. This might affect the financial capacity of
your company by turning your cash-at-hand into an investment thus freezing you from using it elsewhere.
You might now be confused with the question, “If both in-house operations and outsourcing doesn’t work, what other
options do I have?” The other most important option you can try out is a virtual back office. We’ll discuss what
advantages you have when you use virtual back office, in "Virtual Back Office: Is It Worth It? - Part 2".
To your success!
Virtual Back Office: Is It Worth It? – Part 2
In the article “Virtual Back Office: Is It Worth It? - Part 1”, we discussed the various disadvantages of having
all the operations and support processes in-house. The points mentioned are for both product-based companies as
well as service-based companies. As a continuation, in this article, I will be detailing what a virtual back
office is and the various advantages it has over outsourcing.
What is Virtual Back Office?
A virtual back office is a set of individuals who are assigned to work on your processes while their physical
location can be anywhere in the world.
A virtual team can be considered as the best source for raw talent. Since they use resources that are part-time
or less utilized, the costs are drastically cut. A specialized virtual team can work on any area of your business
like marketing, finance, sales, legal, technology and management. It has the advantages of outsourcing
(like no overheads from rent, office space, payroll, insurance, etc.) and none of its disadvantages.
1) Control Over Development:
With a virtual back office team, you have complete control over the resources assigned to you and because of that;
you can change your priorities anytime. The channel of communication is also shorter as you can directly interact
with your team’s lead. By changing the priorities, you can reassign the team to any process you deem to be of high
importance. This doesn’t cost you extra time or money if the team is already knowledgeable in the work to be done.
In this way, your virtual team will also get multifaceted experience which will help you in the long run.
2) Retention of Knowledge:
With virtual back office, since you have complete control over the virtual back office team, you have 100% retention
of knowledge through reports, logs, and such. Also, you can choose companies that provide daily, weekly and monthly
reports so that you have complete information on the performance of your virtual team. Since, your virtual team has
the experts of the field; you can directly deal with the cream competition in the industry. Also, since it is your
vendor who is employing the subject expert, you don’t have the financial strain of employing such a resource.
3) No Long Term Contracts:
Even though many virtual service companies ask for long term agreements, there are some that do not require contracts
at all. Thus, you just have to pay on a monthly basis for the work done. If you don’t want the service, you can quit
anytime without having to pay an extra dime. Since there are no long term contracts, you can use a virtual back office
provider as a testing ground for the outsourcing of the service. If in case you choose to outsource it or have the
process in-house, you can do so immediately as there are no contracts involved with these companies.
Thus, if you decide to outsource, the best method to follow would be to get a virtual back office through a vendor.
What’s more? You don’t have the hassle of any employee welfare costs, set up costs or equipment costs. You just have
to give your requirements and see the results unfold!
To your success!
