Introduction
Business process outsourcing (BPO) is a contract with a third-party service provider employed to perform essential business functions. It is also known as externalization. Initially, only manufacturing industries were contracting BPO, but now it is used in most business processes. All companies seek to get ahead of the competition, and the demand for BPO has increased dramatically. BPO is an excellent way of utilizing talent worldwide while allowing them to remain in their home countries.
What is Business Process Outsourcing?
Business process outsourcing (BPO) is a work contract with an external service provider. It consists of two primary services: the back office and the front office.
Front-office services include marketing and technical support to the contracting company’s customers. Back-office services include services such as billing or purchasing.
How does BPO work?
A company delegates specific tasks to a service provider in business process outsourcing. The provider can be a local or offshore company. After finalizing an agreement, a service provider may then manage tasks such as claims or invoice processing, including workforce management responsibilities that span hiring, training, and retaining talent to maintain a team for the client. Providers also typically assume responsibility for tracking the staff’s performance and progress and monitoring service level agreements for the performed work.
Different BPO Categories
There are different categories of BPOs depending on the location of the company, such as:
Onshore: Onshore BPOs involve business process outsourcing within your country. For example, you may outsource the customer service department to a company in a different city. The required skills can be available in a less expensive region.
Nearshore: This is outsourcing your business processes to a company close to your geographical location and likely has the same time zone, culture, and language.
Offshore: You will find low labor costs and tax savings when contracting an overseas company. A company decides to offshore its customer support call center to an overseas company due to available qualified talent and the lack of language barriers which benefits their clients.
Benefits of BPO
Cost reduction: Instead of purchasing necessary equipment and hiring more employees to perform various tasks, companies outsource the functions to a service provider, eliminating overhead costs. There’s a substantial cost-saving factor that comes into play when businesses choose to outsource services instead of hiring full-time in-house labor.
Eliminates language barriers: If your business expands, you might require customer support services in multiple languages. Business process outsourcing vendors hire qualified workforce in many countries with locals who can assist in their native language. This approach is beneficial as you don’t need paid recruiters who must assess the language skills correctly. Instead, the BPO company will handle the hiring, language tests, and skills assessments on your behalf.
Higher efficiency: BPO companies operate in different sectors and have high-performance levels. They are well-equipped and use the latest technology, which naturally results in higher efficiency and greater productivity.
Focus on crucial functions: The organization focuses on its primary business growth and activities by transferring non-core processes or ancillary business activities to a BPO service provider, which gives a competitive advantage, increases profits, and enhances customer satisfaction ratings.
Types of Services Businesses Can Outsource
Customer support services: The BPO company can provide appointment schedules, email services, marketing and telemarketing programs, payment processing, order processing, quality assurance, customer support, and customer feedback.
Back-office transactions: This includes financial transactions through cheques, credit and debit cards, receivables, direct and indirect procurement, transport administration, warehouse management, and logistics and dispatch.
IT services: These technical support functions include application development and testing, implementation services, and helpdesk. For example, automated data capture has replaced manual data entry increasing data intake.
Human resources: BPOs can help to cope with many challenging tasks and can cover payroll, healthcare services, hiring and recruitment, training staff, processing insurance claims, and retirement benefits.
Data and knowledge management services: BPO focuses on research analysis and data processing services. It is a part of core business functions and helps to develop an information governance program.
Financial services: These include billing services, accounts payable and receivables, accounting, auditing, and regulatory compliance.
How to choose a BPO provider: The companies should evaluate that the BPO provider meets the following criteria:
- It should meet their business objectives and help them to be more flexible, innovative, and competitive.
- It should be able to meet current requirements as well as capable of meeting future needs.
- It should be able to maintain data security and privacy and should meet compliance and regulatory requirements.
- It should demonstrate and report the metrics according to contractual standards.
- It should be located appropriately to meet business needs and regulatory requirements.
Conclusion
BPO services have grown substantially over the last few years due to changes in consumer behavior and higher demand for multichannel communications. If you are expanding your business, it’s critical to research BPO companies to see how they can deliver your desired business outcomes. Balancing concerns, such as security issues, hidden charges, and over-dependence, will determine the success or failure of an outsourcing partner.
