What Is Business Process Outsourcing? How Does It Work?

Business Process Outsourcing Stock Image What is business process outsourcing? Companies hire third-party providers to complete specific business processes or services that are not strictly tied to their core product. This is known as business process outsourcing (BPO). Many people connect this term to the outsourcing of IT-intensive jobs.

But the truth is that it can cover anything else too from Human Resources to customer onboarding to social media marketing to Public Relations and more. Sometimes, companies may get dragged down by certain jobs that are required to keep them running, but can be done by anyone trained to do them. A BPO company provides organizations with a simple, cost-effective, and efficient way to complete these critical tasks. The idea is to let a BPO services provider take over tasks that can be executed swiftly and efficiently by qualified employees, allowing the client company to refocus their attention on more important targets.

What are the many types of business process outsourcing (BPO)?

Back office and front office services are the two basic categories of BPO services. Internal company procedures such as billing and purchasing are included in back-office services. Marketing and technical support are examples of front-office services that pertain to the contracting company’s customers. These services can be combined by BPOs so that they work together rather than alone.

BPO Services

Based on the vendor’s location, the BPO industry is classified into three categories. By integrating the three areas, a company can achieve complete process optimization:

  • Offshore vendors are based in a country other than the company’s own region. A corporation in the US, for example, might hire an offshore BPO provider in the Philippines.
  • Nearshore vendors are based in countries that are close to the contracting company. A BPO in Mexico, for example, is considered a nearshore vendor in the US.
  • Onshore vendors work in the same country as the contractor, but in a different city or state. An onshore outsourcing provider in Seattle, Washington, or Huntsville, Alabama, for example, could be used by a corporation in Seattle, Washington.

What Are the Benefits of Business Process Outsourcing?

  • Reduces costs
  • Allows better focus on core business output
  • Improves performance in non-core functions
  • Can help increase market reach
  • Overall efficiency and speed increases

What are the risks associated with BPO?

When businesses outsource business processes, they also take on possible risks.

  • Security breaches and/or opposition to high-security protocols
  • Unexpected or higher-than-expected costs
  • Difficulties during handover
  • Over-reliance on a third-party provider
  • Higher chance of misunderstandings

Creating an outsourcing procedure for your organization has both advantages and disadvantages, of course. The advantages are that it saves your time and effort, as well as money. Because there are only so many hours in a day, you’ll want to spend your time on the tasks that will give you the best return on investment (ROI) at your peak performance.

How to Pick a Vendor for Business Process Outsourcing

Outsourcing Benefits The implementation of an outsourcing system is challenging and will always involve some amount of internal restructuring efforts. It demands a thorough preliminary analysis when selecting a contractor and a rigorous assessment of expenses. The latter must be weighed against the predicted economic impact. The transfer of business processes, as the most advanced form of outsourcing, can provide your company with significant benefits, but you must carefully select a contractor based on your needs.

For businesses considering hiring a BPO vendor, here are the basic steps to follow:

  • Define your criteria and conduct a thorough evaluation of potential vendors.
  • Make a request for proposal (RFP) from potential vendors.
  • Do a basic background search of the vendor you’re interested in hiring.
  • Negotiate the terms of the contract thoroughly.
  • Begin the work/processes transfer only when you’re certain you’ve made the best possible choice with the information you have.
  • Maintain control over your connection.

Organizations should select a BPO provider with attention and caution. The relationship should be properly defined, managed, and evaluated on a regular basis. A quarterly or yearly analysis of the overall impact of contracting with a BPO vendor is always ideal.