Last updated on December 28th, 2023
Competition between companies in the market has a direct correlation to business expansion. In today’s marketplace, the product or service must be of excellent quality and be competitively priced. The cost competitiveness of the company is an important element that can either take the company into progress or lead to its failure, therefore it is essential that it determines the most effective way to manage its costs and expenses. Here you will learn about the difference between Captive Center vs Outsourcing.
One of the most common ways to run a business is to set up a captive center or to outsource to BPO, i.e., to a call center or business process to Software Development outsourcing company. However, which one is better is a tough decision to take.
Due to the rapid growth of the market, there is a high level of cost competition. Consequently, companies are choosing third-party outsourcing to reduce costs and suit their business needs. Instead, many companies create their captive model and keep control over security and authorization. Each company chooses what is most important to their business.
As we examine both Captive Center vs Outsourcing models separately, let’s analyze their workings in more detail.
Captive Model
Captive companies are those who set up their own operations and handle the entire process themselves. As the functions aren’t outsourced to another company, they can be managed remotely. The company conducts its subsidiary in low-cost areas. In this model, a company can take control under their own authority rather than delegate the work to another provider. In the case of services, they inspect the whole customer life-cycle, from product creation to delivery, etc.
A disadvantage of Captive Shared Services is that they are more expensive as compared to third-party outsourcing. For example, land required for constructing a building, maintenance fees, and so on, significant investment is necessary to cover the costs of equipment and infrastructure.
Third-Party Outsourcing
Third-party outsourcing, however, involves assigning all responsibility for operations to the third-party provider. The whole organization benefits from it as it reduces costs and improves efficiency. In an outsourced environment, a company’s processes vary with the industry, location, level of complexity, and other factors. Companies can save up to 40% of their current costs by outsourcing.
You appoint IT Company or Software development agency on a contractual basis when delegating your operations. The company is responsible for handling all your customers’ needs. With third-party outsourcing, you don’t have to worry much about responsibilities because the vendor takes care of them. To ensure reasonable controls, a robust review system is required.
Some factors on which you can decide: Captive Center vs Outsourcing
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It’s important to know how quickly you need to reach your savings goals
In the first year, the cost of establishing a captive center is much higher than outsourcing. When you start a new center, the first question is, “Where?”. The decision of where to locate a shared services center is a crucial one, and should involve consideration of both financial and regulatory factors (labor and tax laws, etc.) in local markets. Usually, this process requires considerable analysis and takes time, which typically involves the use of a third-party resource.
Following the selection of the location, the building of the facility must be accomplished. To complete lease negotiations, more time will be needed, and improvements to the leasehold and infrastructure will require a significant outlay of funds. Additionally, you will have to create an organization from scratch, which involves HR, training, recruiting and other costs. If you outsource, you can avoid all of these costs, since the provider should already have established facilities and infrastructure you can enter in a short period of time and become operational without investing any capital.
As a result, captive models tend to have a longer payback period, and the speed to benefit is much slower. One of our clients recently helped us build the business case for both outsourcing and captive scenarios, and the captive scenario’s payback period was more than double (>4 years) compared to the outsourcing scenario’s (~ 2 years).
It is unlikely that captive will meet your needs within 2 years of starting the project.
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Achieving Success in Hiring
Service and sales associates are being expected to do more today than ever before. Having high emotional intelligence is essential for today’s workforce. It is must to have advanced problem-solving skills, excel at people management, and coordinate well with others. Nowadays, artificial intelligence is handling so many simple tasks, leaving human beings to handle complex problems – which is why finding the right people is important.
Brands have a tough time finding contact center representatives who possess the correct skillset. In contrast, an outsourced provider with experience and expertise in this area is able to relieve the brand of this burden so that it can focus on its core business functions.
When companies have the right employees, both their customers and their bottom line benefit: employees feel empowered to make decisions that benefit both the company and their customers, and customers experience positive customer service.
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Improving Efficiency
Currently, businesses are conducted worldwide 24/7, and customers expect brands to be accessible whenever they want them. It means companies must offer support anywhere, anytime, in any language. When associates do not meet these expectations, it leads to frustration and disconnect.
Captive centers face this challenge, but outsourcing has the advantage of having resources all over the world – including physical space, technology, and staff. Bringing in partner experts ensures that the next objective can be achieved quickly. This allows for more effective and faster completion of tasks.
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Improved Training Speed and Effectiveness
It is imperative to close sales quickly and efficiently. Getting more agents trained faster and more effectively with an outsourcer can help you reach your goals. Outsourcers are well versed in the best practices for their industries, which makes them ideally suited for using the latest technology to increase productivity and profits, such as TTEC’s RealPlay Bot, which lets associates practice with and receive real-time feedback from a virtual assistant.
With customer service outsourcing, employers can ensure their staff are motivated and equipped with the right skills to deliver exceptional customer service. Brands can create a workforce that is capable, collaborative, and connected because they provide the right tools and training.
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Expertise is at our fingertips
Brands are usually so focused on their products and services that customer service is relegated to a secondary role. The bad news is that customer experience is quickly becoming a differentiator for brands, even ahead of the products and price in some cases.
Outsource partners who live and breathe customer experience, on the other hand, are the right choice. A CX company specializes in end-to-end customer service, utilizes digital and next-generation strategies, provides operations rigor, and hires and retains world-class employees who act as brand ambassadors.
A brand may lack expertise in-house, but the right partner can fill that gap.
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Digital optimization
Digital plays a crucial role in the success of contact centers. Furthermore, outsourcing partners can give a digital edge to brands compared to captive centers.
Brands must provide multiple channels of support to customers because they want more digital and technology options. Furthermore, they need to know how to choose the best channels for each type of interaction.
A deep understanding of artificial intelligence is becoming increasingly important.
Organizations with low levels of customer support and simple requests may benefit from a captive center. It is crucial to work with experienced partners to deliver a great customer experience.
Partnering with the right company will help brand owners focus on their core business mission while balancing the right combination of people and technology.
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The preparation of facilities can take some time
Your implementation timeline will probably be longer if you decide to go captive. Why is that? Normally, preparing the facilities takes four to eight months. Your shared services organization has the best chance of success if it can leverage existing office space and extra space, but this isn’t always possible.
Captive Center vs Outsourcing: How to Choose the Right One
There’s no overstating the importance of having high-quality contact centers. These centers are often where customers interact with a brand more directly, and their experiences can bring swift consequences: positive experiences can lead to sales and repeat business, while negative ones can turn customers off a brand for good.
Research has shown that 70% of all shopping experiences are determined by the way a customer feels about how they are treated. In this sense, contact centers are at the frontline. But when it comes down to captive centers in comparison to. outsourcing centers, what is the most effective way to elevate selling and customer services to the highest stage?
In the beginning, it is crucial to comprehend the difference between captive centers as opposed to outsourcing. The captive centers are operated and owned by clients and supply services directly to their clients. The employees employed in captive facilities employ the business they are not employed by an external vendor. Outsourcing On the other hand is a method that allows an organization to hire an outside organization to perform jobs, handle operations, or even provide services.
1. The Right People to Hire
Nowadays there is more expectation of sales and service personnel than at any time in history. The workforce of today must have advanced problem-solving abilities and excel at managing people and coordinating with colleagues and possess excellent emotional intelligence. In a time when many of the tasks we do every day are taken care of by AI, however, the difficult ones are left to human beings, and identifying the best one is essential.
The process of finding contact iTechnolabs who have the appropriate skills can be a challenge for companies to find efficiently. However, it is essential to ensure that all employees remain in line with the brand’s style of operation. Outsourcing partners, who are experienced and knowledgeable in this field, can help relieve the pressure on the brand so that it can concentrate on its primary competencies as well as goals.
When you have the right team members Everyone benefits: employees feel confident in making decisions that benefit customers and the business, customers are satisfied and the profits will improve from this.
2. Becoming More Effective
Businesses operate in the global market 24/7 and consumers expect to be able to connect to brands at any time that is suitable for them. Therefore, companies need to be able to assist at any time and on any device and regardless of language. Anyone who doesn’t live up to the requirements can face a disappointing and insecure experience.
While this isn’t easy for a captive center but the advantage of outsourcing processes is that an outsourcer has resources all over the world, with technology, physical space, and personnel ready to support you in the short or long-term needs. Delivery centers and experts from the partner can quickly respond and get toward the next goal. Work is completed quicker and with greater efficiency and can increase KPIs as well as reduce costs.
3. Faster and more effective training
When it comes to closing sales speed and efficiency are the name to be played. Outsourcers can help you reach your goals by educating more of your contact center employees quicker and more efficiently, as well as process management and customer service. Expertly trained in the best practices in the industry Outsourcers can utilize the latest technology to increase productivity and improve profits.
Outsourcing can ensure that employees are engaged and can provide excellent customer service throughout each interaction. With the right equipment and education, they assist businesses to develop a workforce that is skilled, cooperative, and connected.
4. Tapping into Expertise
In many cases, customer service is a second-rate function since companies are too focused on the products they sell and their services. This isn’t good for the brands they represent since increasingly, customers are focusing on customer service as a competitive advantage in addition to the price of products in some instances.
The ideal outsourced partner however lives and breathes customer experience. They are experts in complete CX capabilities and can make use of new strategies and technologies as well as provide operational rigor and recruit and keep top associates that act in the role of brand ambassadors.
The experience a brand might not have in-house is available with the right partner.
5. Optimizing Digital
Digital, not surprisingly, is a major factor in the success of contact centers. One of the major differences between captive centers and outsourcing is the fact that outsourced companies can provide brands with the advantage of digital.
Customers are looking for more technology and digital options which is why brands need to offer various channels for assistance. Not only that, but they must also know the best channels for different types of interactions.
An understanding of AI specifically in the field of customer service is becoming increasingly crucial; Gartner predicts that this year, 15% of customer interactions with service will be entirely managed by AI which is a 400% increase from just 2017.
A captive center could be beneficial for businesses that have a low volume of customer support and for simple customer inquiries. For companies that want to distinguish themselves by offering an exceptional customer experience having a trusted partner is essential.
Do You Want to Build a Captive Center For Your Organization?
Black and white isn’t the whole story of Captive Center vs. Outsourcing. Hybrid models are most commonly used. Your organization’s business and operational needs must ultimately dictate the choice of model. You can achieve your goals by combining many different models when you use shared services. You might decide to outsource less risky, transactional activities such as invoice processing, cash application, and reconciliations and realize significant savings in a short amount of time while setting up a captive center for other processes that can be centralized, but operated internally.
