The ultimate guide to outsourcing data processing services

For more than a century, Harvard Business Review has been a go-to resource for managers wanting insights into topics such as leadership, negotiation, strategy, marketing and finance. Its writers cover the big issues facing organizations and it was no surprise when an in-depth article appeared under the headline ‘Managing the Crises in Data Processing’¹.

On the back of demands for bigger budgets to tackle an ongoing spike in data, one executive spoke for many when she said: “The technology is getting ultra-complex. I can’t get the right people fast enough, let alone provide suitable space and connections to our sprawling computer network.”

Such concerns would sound familiar for many of today’s business leaders, which is ironic because the article appeared in the March 1979 edition of the magazine. That’s right – the more things change, the more they stay the same and data processing continues to create headaches for businesses.

Just as Harvard Business Review reported “rapid growth in DP services” in the 1970s, the past decade has seen a boom in data creation and, in turn, inspired a desperate need for data processing services. Research shows the total amount of data created, captured, copied, and consumed globally is tipped to reach more than 180 zettabytes in 2025, up from 64.2 zettabytes in 2020². In a world of social media, internet shopping and video streaming, people have never spent more time online, so much so it has been estimated that every person on Earth produces 1.7MB of data every second³.

All that data means little though without systems in place to process it and that requires resources. Quality people, leading technology and scalable solutions are crucial for accurate and efficient data processing, which is why many businesses are partnering with outsourcing providers that specialize in the field. This article will provide readers with a comprehensive insight into outsourced data processing and share tips for organizations keen to explore such a strategy.

What is outsourced data processing?

Outsourced data processing is the use of external parties to extract relevant information from data sources in a bid to gain insights for business planning, strategizing and forecasting. It is essentially the art of manipulating and processing data sets to transform, classify, interpret or retrieve information into easily comprehensible formats. Many data processing tasks can be completed digitally, which makes them ideal to be performed in an offshore outsourcing destination such as the Philippines.

^{Source: Big Data Processing: Transforming Data into Actionable Insights}

What are the types of data processing services?

Data processing covers a broad range of services including:

• Commercial data processing: many businesses access data from multiple sources, which is where commercial data processing can play a pivotal role. By integrating business and technology, it makes it practical for companies to input vast data, typically standardized, into a single processing system and produce massive output. Commercial data processing is also known to significantly reduce the likelihood of errors.
• Scientific data processing: this method combines multiple computational operations and lower volumes of inputs and outputs. Particular focus is put on ensuring the validation, categorization and standardization of data is performed cautiously as false links or inferences could result in incorrect decision-making.
• Batch data processing: handling several data cases simultaneously can pose challenges but this process lessens such concerns by gathering, analyzing and utilizing batches of data at the same time. The process can be further broken down into two systems – batch processing that involves the contemporaneous, simultaneous, or sequential execution of an activity and simultaneous batch processing when they are all carried out at the same time by the same resource for all cases.
• Online data processing: as opposed to batch processing, online processing is defined as ‘interactive’ and can be created out of several relatively simple operators. Using this method to tackle large databases makes up a significant percentage of analytical activities and it should be no surprise that modern online analytical systems offer interactive performance.
• Real-time data processing: it was previously a given that there would be a lag between a data event occurring and the process of documenting or updating it. An obvious limitation, software developers created systems that can capture, update and process data in real-time to provide insights faster. This involves pumping massive amounts of data into organizational systems that almost eliminate the gap between occurrence and processing.

What are the benefits of outsourced data processing?

Outsourcing one’s data processing needs to third-party experts can deliver a range of benefits including:

• Respond to demand: just as accountants navigate tax season and retailers bolster staff ahead of gift-giving holidays, many businesses find themselves reeling when data processing demand spikes. Quality outsourcing providers can help them respond to increased data levels by seamlessly and cost-effectively sourcing additional staff and preventing bottlenecks in the processing timeline.
• Reduced costs: employing data processing teams can be an expensive exercise between the likes of wages, office space and technology. Outsourcing to offshore destinations such as the Philippines can reduce such costs by up to 70% and allow businesses to dedicate those funds to core activities.
• Increased efficiencies: many businesses make the mistake of trying to manage their data processing needs with unqualified or under-resourced staff. Third-party providers that specialize in the field can enhance operational efficiencies and optimize workflows.
• Improved accuracy: data processing is too important to risk entrusting to in-house staff that have little expertise in or passion for the task. Many outsourcing providers source talent who have industry-specific knowledge and can better validate, categorize and process data to ensure simple mistakes do not become costly.
• Access to technology: data processing is increasingly reliant on cutting-edge platform and tools that allow users to work faster and better identify insights. Businesses can avoid falling behind in the tech arms race by partnering with outsourcing providers that already possess the best data processing software and systems.

What are the sectors that benefit from outsourced data processing?

Businesses across multiple sectors and industries are benefiting from the ability to outsource their data processing needs.

• Legal: lawyers and their support staff are very familiar with the sinking feeling of needing to review cases files containing hundreds, if not thousands, of pages of documents. Data processing staff can ease this workload by digitizing records, fact-checking legal papers, indexing and addressing document errors.
• Logistics: transporting products and goods across the city, country or even world requires immense planning and coordination. Quality data processing is essential for seamless operations, with outsourced processors able to handle inventory management, order processing encoding, report creation and document completion.
• Insurance: as the insurance sector continues to grow, so too does the amount of data it collects and processes. From claims processing and quoting to entering policy amendments and encoding premiums, outsourced data processing teams can help teams achieve faster and more accurate results.
• Banking: few sectors rely on data quite like banking, with a boom in digital services creating a need to manage private and sensitive information properly. Partnering with a quality outsourcing provider allows financial institutions to put responsibility for encoding and organizing such data into the care of hard-working experts who specialize in such areas.
• eCommerce: with almost $5 trillion in global revenue, eCommerce is one the world’s fastest-growing industries and all that online interaction is creating seemingly endless amounts of data. Outsourced data processing can allow eCommerce stores to stay ahead of the game by managing inventory databases, ensuring accurate records and identifying potential customers.

^{Source: 175 Zettabytes By 2025}

What data processing roles can be outsourced?

There is no shortage of data processing roles that businesses can outsource including:

• Data Processing Specialists
• Data Entry Specialists
• Data Processing Technicians
• Data Entry Clerks
• Data Processors
• Data Analysts

Data processing falls under the data management function of an organization and works closely with the likes of data architects, data analysts, data compliance officers and data security specialists.

What is a sample data processing team structure?

The structure of a data processing team is dependent on the volume and type of data that needs to be processed but a typical unit could like this:

• 1 Lead Analyst (Team Leader)
• 1-3 Data Analysts (intermediate to senior level)
• 5-10 Data Entry Specialists
• 1 or 2 subject matter experts if necessary
• 1 Quality Assurance Specialist.

An outsourced data processing team leader would usually report to a local Chief Information Officer or a specific department manager such as Retail Operations, Healthcare Information or Logistics and Supply Chain managers.

What are five tips for a successful outsourced data processing solution?

Choosing an outsourced data processing provider is a major decision but there are a few key steps businesses can take to increase their chances of a successful partnership.

1. Identify your needs: one size does not fit all in the data processing space, which is why it is essential to clearly outline the type of tasks you require assistance with. From volume and complexity to specific formats, make sure you know what you want before starting your search for a provider.
2. Determine a budget: do not make the mistake of entering discussions with potential partners without knowing your budget. Having a figure in mind will help determine whether it is best to establish a billing structure (eg: fixed, project-based) that meets your financial needs.
3. Research potential partners: it seems obvious but many businesses fail to conduct adequate research before knocking on outsourcing providers’ doors. Consider the likes of their track record, client testimonials and industry experience.
4. Prioritize tech and security: data is a prime target for hackers, which is why you need to ensure your outsourcing partner has robust security measures in place. Similarly, providers that offer access to leading tools and software solutions will help deliver better results in a world where technology plays an enormous role.
5. Implement communication channels: the best outsourcing partnerships are built on a foundation of quality communication between business and provider. Establish multiple channels and effective systems to ensure both parties can stay abreast of deliverables, address concerns and build rapport.

Conclusion

Outsourcing data processing is about so much more than cost efficiencies. Accessing specialized support, tapping into wider talent pools, utilizing cutting-edge technology and having the ability to seamlessly scale resources are just a few of the reasons why more businesses are looking further afield to serve their processing needs and, in turn, spend more time on core activities.

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