Business Process Outsourcing (BPO) is a form of outsourcing in which an outside service provider is hired to perform one or more business functions in a company. A third party is responsible for performing all operations related to the business function.
BPO is also known as subcontracting or outsourcing. It was originally used in the manufacturing industry but is now used for many business processes.
What is BPO used for?
Companies contract with BPO service providers in two main areas:
- Back-office operations: this includes payment processing, IT services, quality assurance, etc.
- Front office operations: this includes marketing, sales, customer relations, and complaint resolution.
In many cases, organizations outsource one or more functions. For example, instead of outsourcing all human resources functions, a company will outsource only payroll processes.
The BPO industry has grown significantly, offering organizations a wide range of services and capabilities.
Types of BPO
BPO companies can be divided into several types depending on their location:
- Onshore outsourcing is when an organization hires a service provider in the same country. This is also known as domestic outsourcing.
- Nearshore outsourcing: when an organization hires a service provider in a neighboring country.
- Offshore outsourcing: when an organization hires a service provider in another country. This is also known as offshoring.
Make the BPO decision
Transferring in-house work to a BPO company requires change management as it impacts employees, workflow practices, and overall business operations. The outsourcing decision process includes the following elements:
- Company executives arrive at the decision to outsource a business process or part of it.
- They weigh the pros and cons of the decision and decide if it makes strategic sense for the organization.
- They identify the best BPO for the job and transfer the work from the internal to the external service provider.
Advantages of BPO
1. Reduction in costs.
One of the main reasons why organizations outsource is to reduce costs. Instead of buying hardware and hiring more employees to do various tasks, they can outsource the charges to a service provider and reduce or even eliminate overhead costs.
2. Higher efficiency
BPO companies are experienced in various fields and operate at the highest level. They also adopt best practices and use the latest technologies. This naturally leads to higher efficiency and productivity.
3. Focus on the core functions of the business.
Many companies, usually startups, struggle with non-core business activities. Transferring non-core processes to a BPO company gives the organization more time to focus on its core business activities.
4. Global expansion
When an organization decides to enter a foreign market, certain activities that require knowledge of the local market, expertise in national law, or proficiency in a foreign language can be outsourced to a BPO company. This helps to increase efficiency and accelerate expansion.
