Most businesses, from large corporations to small startups, usually outsource some of their processes since innovative and new services are increasingly available in the current highly competitive business environment.
However, should they be doing that? Let’s find out below everything you need to know about business process outsourcing and some of its benefits.
What is Business Process Outsourcing (BPO)?
Also known as externalization or subcontracting, business process outsourcing (BPO) is a type of outsourcing where a third-party service provider is tasked with carrying out several company functions.
The third party becomes responsible for every operation related to the business task. BPO was initially used in the manufacturing industry, but it is now mainstream for several business processes.
Types of Business Process Outsourcing
BPOs are of three primary types, but they can also be divided into various types depending on the location. These types include:
1. Offshore outsourcing
Offshore outsourcing is when a company employs the services of a service provider in another country.
2. Nearshore outsourcing
Nearshore outsourcing is when a company employs the services of a service provider in an adjacent country.
3. Onshore outsourcing
Also called domestic outsourcing, this occurs when a company employs the services of a service provider located in the same country.
What Do Businesses Use Business Process Outsourcing For?
Companies employ the services of BPO for two major areas, they are:
- Front office operations: This includes grievances redressal, customer relations, sales, marketing, etc.
- Back office operations: This includes quality assurance, information technology services, payment processing, etc. In most cases, companies usually outsource either one or several tasks.
For instance, the organization might outsource only the payroll processes instead of all HR functions. However, the BPO industry has increased over the years, and they now offer extensive functions and services to companies.
Benefits Of Business Process Outsourcing
You might be wondering why companies engage in business process outsourcing and how it benefits them. Well, let’s see some advantages it offers.
- Worldwide expansion: When a company enters the international market, they usually employ the services of a BPO company for activities that require fluency in the foreign market, national law expertise, and knowledge of local markets. This helps to expand quickly and boosts efficiency.
- Concentrate on important business operations: Sometimes a company can have problems with ancillary business activities. So when they transfer these non-core processes to a BPO company, the company would have the time to spend on primary business operations.
- Increased efficiency: Business process outsourcing has expertise in several fields and is capable of performing at a high level. They use the latest technology and best practices to ensure results with greater productivity and increased efficiency.
Demerits Of Business Process Outsourcing
Usually, when a company outsources its work to a BPO organization for a long time, it might become familiar with its work mode, thus resulting in an overdependence. This can lead to the company paying higher than expected when demanded.
In today’s world, for a business to be successful, it has to be efficient, and this difference boils down to innovative and smart processes with skillful management. With business process outsourcing, companies can now put their time into primary functions, increase their business operations efficiency, and reduce costs.