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5 Min. Read

What Is Business Process Outsourcing (BPO)?

What Is Business Process Outsourcing (BPO)?

When running a business, you come across processes that you may not want to handle. On some occasions, there are processes that you may be unable to handle, due to a lack of time, staffing, or resources. In many of these cases, it’s likely that business leaders look to business process outsourcing. Business process outsourcing,  or BPO for short, can help make sure that all your tasks get done. But what is BPO? And how can it benefit your business?

Here’s What We’ll Cover:

The Basics of BPO

Services Provided by BPO Vendors

Advantages of BPO

Disadvantages of BPO

Key Takeaways

The Basics of BPO

Business process outsourcing is the act of using third-party service providers to carry out the processes of a business. These providers, referred to as vendors, are contracted for office operations. They ensure that office operations are accomplished and taken care of. This outsourcing can be done via offshore outsourcing using international vendors. It can also be done via onshore outsourcing with domestic vendors.

In the past, the manufacturing industry used BPO. In modern times its reach has been extended into the digital marketplace. By digital means, many business services and tasks can be contracted out to vendors. This means that your business doesn’t have to take care of them internally.

Services Provided by BPO Vendors

There are two common sets of services that can be provided by BPO vendors. They are divided into services done by the front office and those done by the back office.

Front Office Services

When seeking BPO for front office functions, you’ll be looking to fill your business’s needs in the following ways:

Back Office Services

BPO for back office services and functions typically include the following:

  • Payment processing
  • IT services
  • Quality Assurance

The Most Commonly Outsourced Functions

When the topic of BPO comes up, there are some office functions that are outsourced more often than others. Nearly all of them lead to cost savings when used properly.

Customer service is commonly outsourced due to the high demand needs of a customer service department. This allows for companies to focus on in-house needs without having to establish a customer service department. By using an established external service provider, you can give your customers a better experience.

Accounting and payroll are two core business functions that are very likely to be mentioned when talking about BPO. This is due to the high-salary positions associated with the functions. Many small business owners can enjoy outsourcing these functions.

Human resources is another department that is frequently outsourced. Job functions like recruiting, hiring, and onboarding can be done through vendors. These vendors will have the resources to carry the functions out, rather than you having to do the functions in-house.

Advantages of BPO

When you’re considering business process outsourcing, there are a few key benefits. These are some of the pros that you can look forward to once you’ve found a vendor for your outsourced functions.

Lower Costs

The main benefit of BPO is the cost reduction associated with it. For technological or digital functions, the use of BPO can help reduce the purchasing of expensive equipment or software. Additionally, when utilizing BPO properly, you can avoid paying full salaries for employees. Many vendors handle small tasks that may not need a full time employee, meaning that you don't have to hire one if you outsource. These cost efficiencies can add up.

Efficiency and Focus

When using BPO, the vendors that are fulfilling your needs are experts in their areas. Hiring experts allows for more efficient completion of the processes, as well as the ability to get more done. This means you can focus on your endeavors on the core processes that contribute to the success of your business. All good business models thrive on efficiency and focus.

Globalization

In the past, entering different markets on a national or international skill required massive amounts of time.  It also required lengthy research invested so that the process would happen smoothly. With BPO, entering different markets throughout the globe is easier. This is thanks to vendors that specialize in international markets. This allows for smooth transitions and introductions.

Disadvantages of BPO

With anything in the business world, there are advantages as well as disadvantages. These are the main drawbacks to be considered when seeking BPO.

Security

When bringing a vendor into the picture, a risk is always taken involving security. Simply put, the more that data and information is moved around, the more likely it is that it is intercepted. Using BPO can increase vulnerability, but there are many countermeasures available to keep data safe.

Miscommunication

Outsourcing can involve language barriers in certain cases. This can make it tough for functions or processes to be completed efficiently. While these can be worked around in most cases, there can be a period of growing pains involved that can be very costly.

Key Takeaways

When considering business process outsourcing, it’s important to understand your business's needs. Knowing which functions and processes you have that can be outsourced is helpful. Often, if you’re a small business owner, BPO can be a way to save money. It can also increase efficiency and reach, all without stretching yourself or your employees too thin!

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