What is Business Process Outsourcing?

For most countries with a large number of BPO firms, the BPO industry is the backbone of the economy. It is one of the most important service industries in our global economy.

Business process outsourcing is a type of outsourcing in which the operations and responsibilities of a particular business function (or processes) are contracted to a third-party service provider. Originally, this was associated with manufacturing companies such as Coca-Cola, which outsourced large portions of their supply chain. In today’s context, it primarily refers to the outsourcing of services.

There are two most common types of BPO: back-office outsourcing, which includes internal business functions such as human resources or finance and accounting; and front-office outsourcing, which includes customer-related services such as contact center services.

What is BPO For?

Consumers, professionals, and businesses all use business process outsourcing to simplify their lives and business processes. Many businesses, both domestic and international, require additional assistance in facilitating critical systems and services. By providing quality service to their own customers, BPO companies enable their clients to achieve that level of satisfaction.

Businesses hire BPO firms to handle front- and back-office functions. When we talk about front-office functions, we’re talking about the operations that deal with serving prospective and loyal customers. Customer service, marketing, and sales are all examples of this function.

Back-office functions, on the other hand, include support operations such as accounting, human resources, information technology services, quality assurance, and so on.

What is the difference between BPO and a Call Center?

Call center is a service under a business process outsourcing firm. Technically, a call center is a type of BPO. For example, a tech gadget company may outsource its customer service to a call center. They handle phone calls, the majority of which are customer inquiries. 

BPO, on the other hand, is in charge of performing some aspects of another business organization’s process. It is not only limited to customer service; BPO can also provide administrative, accounting, and other services.

Why Do Businesses Outsource Processes?

Managing a business is not an easy feat. Especially at a time where a pandemic or any natural cause has the capacity to delay the entire world’s trade and economy, businesspeople will always be in pursuit of finding the right system to ensure their company’s success. Business process outsourcing is a definite way to achieve certain business goals.

We listed below the major reasons a company should partner with a BPO firm:

1. It can reduce labor and operational costs

Outsourcing can cut down on in-house labor costs. Hiring a third party to run new or existing business operations is more cost-effective. The majority of BPO services are low-cost. Outsourcing processes helps businesses reduce corporate costs such as staffing and training.

2. It can aid in focusing on key functions

Aside from lowering labor costs, businesses don’t have to worry about missing or chasing down time to focus on priority tasks because BPO firms can handle non-core tasks. It can assist businesses in saving time.

3. It can improve speed and efficiency

Since BPO firms have a pool of various specialists, speed, accuracy, and efficiency are guaranteed in the production and output of the tasks you hired them to handle.

4. It can lessen risks and ensure operational continuity

BPOs have a higher likelihood of adapting to market changes. It ensures that core functions continue to be performed and delivered while posing fewer risks due to guaranteed security. 

How Does Business Process Outsourcing Work?

When a company is in need of external aid for its internal processes, BPO firms come into the picture. They assist in handling internal processes such as customer support, accounting, sales, and more.

It’s not the same as hiring an agency to complete specific tasks. BPO focuses on the ongoing production of labor-consuming tasks rather than higher-level techniques and management. Business process outsourcing has evolved into something resembling staff augmentation or staff leasing.

Different Types of Business Process Outsourcing

Because business process outsourcing is such a large market, prospective clients have varying expectations from BPO firms. There is a distinction between BPOs and what they can offer their clients based on their location. Here are the different types of BPO and their definitions:

Onshore Outsourcing

This takes place when a company farms out services provided by a BPO firm that operates in the same country as the hiring organization.

Nearshore Outsourcing

It is when a firm hires an outsourcing company that is based in neighboring countries. For example, in the US, a BPO in Canada is considered a nearshore vendor.

Offshore Outsourcing

This happens when an organization contracts for services provided by a company based in a foreign country. An example is when a UK company hires a BPO company in the Philippines.

Benefits of BPO

Business process outsourcing offers an array of advantages. If you’re still on the fence about partnering with a third-party company, here are some advantages to think about:

1. Cost Saving

Hiring BPO firms, as mentioned earlier in the “Why Do Businesses Outsource Processes” section, can help businesses save money on labor and resources by allowing them to outsource tasks to a service provider instead of purchasing equipment and training employees to complete various tasks, lowering or even eradicating costs.

2. Focus on Essential Business Functions

Most businesses usually struggle with managing priority tasks and getting it done. Using a BPO company to handle non-core processes frees up time for the company to focus on its core business.

3. Increased Efficiency

BPO firms have a wide range of experience and excel in various fields. These firms also use cutting-edge technology and adhere to best industry practices. Inevitably, it leads to increased efficiency and productivity for the client’s organization.

4. International Expansion

Collaboration with a BPO firm can aid in international expansion. When a company decides to expand into an overseas market, important and necessary activities in that market can be managed by delegating them to a BPO firm. This usually aids in more effective and faster growth.

How to Choose a Business Process Outsourcing Vendor

Choosing which company to partner with is an important aspect of business process outsourcing. This guarantees that your staff recognizes the importance of getting off to a good start with your planned collaboration with an outsourcing company in order to achieve your business objectives. 

Here are the steps on how to choose the BPO vendor that meets your standard:

1. Determine what your company requires.

You must first determine and plan your outsourcing goals, requirements, and concerns before anything else.

2. Do thorough research and pick the best type of BPO.

After determining your company’s needs, conduct research to learn about the reputation and capabilities of your prospective outsourcing firm. This guarantees that the company’s goals are met. Decide what kind of outsourcing you’ll need. Will you outsource locally, nearshore, or offshore?

3. Select the third-party vendor with whom you want to collaborate.

Make a list of outsourcing companies you think will meet your requirements and fulfill the responsibilities your company requires. Remember to write down the project specifications for your outsourcing requirements so you can explain them to your potential outsourcing partner.

4. Begin the recruitment process.

Hire your final business process outsourcing company of choice and negotiate the terms of your partnership agreement. Specify the terms, conditions, and responsibilities you’re entrusting them with. 

5. Delegate the work to your preferred vendor and establish key performance indicators (KPIs).

Following the selection and hiring process, keep in touch with them on a regular basis as they work together to achieve a harmonious collaboration between your team and their team.  Additionally, communicate your established KPIs to your hired third-party company.