Business Process Outsourcing (BPO) – What It Is and How It Works

The size of the global market for outsourced services is growing. The value of worldwide services was 92.5 billion dollars in 2019, and this number is gradually rising. Business Process Outsourcing, or BPO, is a type of outsourcing where one organization contracts with another to handle one or more business functions.

In other words, BPO is the practice of hiring a third party to take care of specific work processes for your business. This can include things like your website content, payroll, accounting, customer support, social media marketing, and many more.

BPO is most commonly used to take care of supplemental business functions, rather than core business functions. Services can either be technical or non-technical.

Your business can be successfully streamlined with BPO. Employing BPO services may be the best tool for you if you are a business owner. It enables you to concentrate on managing your business rather than handling other aspects of operations like payroll processing and human resources outsourcing.

Why is outsourcing corporate processes on the rise? Because it is a flexible, affordable way to fill in talent gaps that allows for worldwide expansion. Businesses are utilizing the knowledge and financial benefits afforded by outsourcing both front-office and back-office procedures as an alternative to hiring contingent workers internally.

Businesses can decide which services to outsource and how to save costs by filling specific jobs and acquiring specialized talents by understanding what Business Process Outsourcing (BPO) is and its various variations.

There are generally two sorts of BPO services, depending on your needs:

  1. Back Office Outsourcing

In-house business tasks like data entry, internet research, data collection, data analysis, order processing, payment processing, quality assurance, information technology services, billing, etc. are generally the focus of the back office type of outsourcing.

  1. Front Office Outsourcing

Front office BPO refers to the outsourcing of tasks that directly involve the public, including marketing, sales, technical support, customer service, and complaint resolution.

Over the years, the idea of BPO has been changing. These days, BPO services also cover fields like social media analytics, software development, search engine optimization, and more that call for specific knowledge.

These are additionally referred to as KPO regions (KPO). Organizations of all sizes outsource processes, and demand is increasing as new innovative services are offered in the BPO services that provide competitive advantage.

What is BPO commonly used for?

Some businesses hire just one vendor to handle an entire function, like the HR division. Some businesses only outsource particular tasks within a functional area, such as payroll processing, and handle all other HR tasks in-house.

Processes that are frequently outsourced include the following:

  • Administration
  • Payroll and accounting
  • Customer support
  • Manufacturing
  • IT management and services
  • Shipping and logistics
  • Marketing
  • Research
  • Sales

Additionally, some businesses outsource important operations like data mining and data analytics, which are now crucial components of preserving a competitive advantage in the digital economy.

The most often outsourced tasks are IT, finance, and payroll, according to Deloitte’s “2021 Global Shared Services and Outsourcing Survey Report.”

What are different types of BPO?

BPO’s origins are in the manufacturing sector. After deciding that outside vendors could provide more expertise, speed, and cost efficiencies to certain processes than an internal staff could, manufacturers recruited them to manage several aspects of their supply chains.

Organizations in other sectors eventually started using it. Today, a variety of jobs are being outsourced to service providers in the United States, other countries in North America, and even government organizations due to the growth in the use of BPO.

Based on the vendor’s location, the BPO sector is divided into three categories:

  1. Offshore Outsourcing
    These vendors are located outside a company’s home nation. For instance, American businesses may employ developers in India.
  2. Nearshore Outsourcing
    These sellers are situated in a nearby nation. Companies situated in the United States, for instance, could hire a company in Canada or Mexico.
  3. Onshore Outsourcing
    Vendors who are from the same nation as the contractual business are referred to in this. They might be found in several states or cities, though.

BPO may also be categorized according to the different BPO services offered. These categories are:

  1. Knowledge Process Outsourcing or KPO
    The competence of the outsourced service provider to manage a specific company function or process isn’t the only factor in hiring them. They are also employed to offer their knowledge about it.
  2. Legal Process Outsourcing or LPO
    This kind of KPO is unique to the legal industry. This can range from creating legal paperwork to providing legal counsel.
  3. Research Process Outsourcing or RPO
    This is yet another KPO with a focus on study and analysis. RPO is frequently used for market research by marketing agencies, biotechnology corporations, and investment firms.

What are top benefits of BPO?

Businesses big and small around the world are interested in BPO. All kinds of firms in a wide range of industries outsource various activities, from small startups to significant Fortune 500 companies, and the market is only expanding.

Companies will seek out any advantage they can obtain when new, cutting-edge services are offered to help them outpace the competition. A guaranteed strategy to improve your firm’s functionality and grow your organization is to use a BPO business model.

Here are the top four reasons to choose business process outsourcing, although there are many more advantages.

  1. Minimization of Costs
    BPO might be the best option for any size firm when it comes to properly allocating personnel and business process resources. There is no need to worry about overhead costs, office space, materials, or other difficulties because the outsourcing partner will take care of it as the third-party vendor is located offsite.
  2. Improved Time Management
    By outsourcing a sizable portion of repetitive work, you may free up staff time and concentrate on honing your core operational skills. An increase in employee happiness will lead to a more productive workplace. Employees are more content and effective when their abilities are used in a variety of settings within their professions.
  3. Workforce Based Projects
    For short-term projects, your firms may regularly need additional staff. When employing a new staff, the processes of recruitment, selection, and training might take time. Additionally, this employees might not be needed by your company in the future. BPO services enable you to establish a specific timeline and workflow for such contract-based people.
  4. Concentration on Core Functions
    A huge customer support department probably isn’t something that a startup technology business can afford to develop from the ground up. While doing things correctly is important, it’s likely that you won’t be able to do it inside. The result is improved processes for the same cost when outsourcing support to a BPO business that specializes in it. As a result, your personnel may focus on what is most important to the business.

What are the common challenges of BPO Industry?

The BPO sector appears to be expanding, but that isn’t necessarily the case. When working in the BPO sector, top management must overcome numerous obstacles and think of solutions on a daily basis.

Here is a list of some of the typical difficulties that the BPO sector encounters.

  • Rising Client Expectations
    For all BPO organizations, ensuring 100% client satisfaction has always been a challenge. Customer expectations have skyrocketed as a result of numerous social media platforms and increased market competition, which presents a significant challenge for the BPO sector.
  • A Changing Political Environment
    Political conditions in certain parts of America and Europe can have a significant impact on the BPO sector. War, economic collapse, and other factors may compel governments to enact legislation that forbids outsourcing to foreign nations. This might have a significant impact on BPO firms.
  • Health Issues
    Since the majority of outsourcing businesses are located in places with multiple time zones, their resources could be available at all hours of the day. The personnel may experience serious health issues as a result, which would significantly lower their productivity.
  • Budgetary constraints
    The budget is one of the biggest problems the BPO sector is currently facing. Most of the time, customers want outsourcing companies to deliver the greatest results at the lowest possible cost. They are compelled to make the most of their scarce resources.
  • Customer Churn
    The client might simply decide to cancel the agreement at some time during the project and give the work to your rival for various reasons. The cost of such an abrupt business termination can be extremely high and can significantly impact most BPO companies.
  • Employee Turnover
    It is noteworthy that the BPO sector has a high rate of employee attrition. Companies experience significant losses every time they need to train a new employee because they are unable to persuadably keep their workers for an extended period of time.

The Bottom Line 

COVID-19 has forced businesses to adopt technology in order to maintain continuity and enhance the experiences of customers and employees who have moved to their homes. The time has come to change your digital transformation strategy and adopt an adaptable mindset in order to deal with the new reality. BPO could be the way to go.

It’s not difficult to choose the ideal BPO service provider. Any business operation can now be outsourced to a reputable outsourcing BPO provider. The page provides a comprehensive overview of BPO services, including definition, examples, advantages, types, and methods for choosing a BPO provider.

Reputable companies have been able to cut expenses, increase agility, and invest more resources in their core business processes thanks to business process outsourcing. Have you already outsourced any tasks to increase efficiency and flexibility? If not, now could be the time to invest in a reputable BPO firm.

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