What is Business Process Outsourcing (BPO)?

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Business Process Outsourcing (BPO)
Image Credit: Anawat_S / Getty Images

A successful business in today’s connected world needs to be efficient. This can be down to innovative processes and skilled management.Modern process management techniques are a great way to transform your business.If done professionally, carefully, and conscientiously with a qualified vendor, business process outsourcing (BPO) can be a great option to make a difference.

This article will cover everything you need to know regarding business process outsourcing (BPO). It covers what is BPO, how they support certain processes, types of business process outsourcing, and how BPO can help your business.

What is BPO?

Business Process Outsourcing (BPO) is the practice where specific work processes are outsourced to an external service provider.These services include payroll, accounting, telemarketing, data recording, data collection, social media marketing, customer service, and many more.

BPO typically fills the role of an auxiliary business function rather than the core business function. The services can be technical or non-technical.

Business Processing Outsourcing (BPO) is outsourcing IT-intensive business processes.The external service provider then owns, manages, and controls the selected functions according to defined and measurable performance indicators.There are two main categories of BPO services:

  • Horizontal offerings are those that can be used across multiple industries.
  • Vertical-specific offerings (those which require specific knowledge of a particular industry process)

All businesses outsource their processes. The demand for BPO services continues to rise as more innovative services are offered. Businesses seek to gain competitive advantages.BPO can be an alternative for labor migration. It allows the labor force to stay in their country and contribute skills abroad.

Companies often refer to business process outsourcing by separating the types of work they are outsourcing into different categories.These are front-office and back-office outsourcing.

  • BPO is a form of back-office outsourcing that focuses primarily on the internal business needs of a company.These tasks include billing and payroll.
  • Outsourcing front-office business processes refer to tasks that include customer services, such as tech support or marketing.

One or both of these types of outsourcing could benefit your company. The kind of outsourcing most beneficial to you depends on your specific needs.You may also choose to keep more control over your business operations.Business process automation can streamline business processes you don’t want outsourced.

Different types of outsourcing

Most people think of outsourcing when they hear the term.This is not the only type of Business Process Outsourcing (BPO).There are four types of BPO:

  • Offshore outsourcing: Offshore outsourcing is when your company employs an overseas company to fulfill certain work requirements.This is an example of a US-based company outsourcing work to an Indian company.
  • Nearshore Outsourcing: This refers to when you outsource work to a neighboring country.For example, if your company has headquarters in the USA and you want to outsource to Mexico.
  • Offshore Outsourcing: Outsourcing refers to outsourcing work within your country to another company.A USA-based company might hire an outsourcing firm.
  • Process Automation using SaaS: Process automation from Software as a Service (SaaS) companies is another type of outsourcing.These companies allow you to outsource the software that runs your business processes rather than outsourcing them.

Although offshore outsourcing is the most popular, it’s not necessarily the only option.Some third-party outsourcing companies can also be located near your home.These third-party outsourcing companies offer outsourcing for expense report audits, accounts payable, document imaging, and account receivables.

Why do Businesses Outsource Processes?

Outsourcing to countries with lower income taxes is a benefit for U.S. companies, since in many cases businesses pay the same rate as their host country.Enterprises also cite other reasons to outsource.

  • To reduce costs: Outsourcing lowers labor costs, especially training and staffing, and provides the space to house local workers.Outsourcing companies physically located in developing countries can access lower-cost labor markets.

Outsourcing allows businesses to adopt variable cost models such as fee-for-service plans instead of the fixed-cost models required for local staff retention.

  • Focus on the key functions. Outsourcing allows businesses to focus on their primary offerings, not on functions that aren’t directly related to their core processes.The company doesn’t need to keep an eye on the performance of the payroll accountant when it outsources.

Instead, the company can concentrate on highlighting its business differences and maximizing its overall growth.The company will enjoy higher customer satisfaction and greater profits.

  • Focus on the key functions. Outsourcing allows businesses to focus on their primary offerings, not on functions that aren’t directly related to their core processes.The company doesn’t need to keep an eye on the performance of the payroll accountant when it outsources.

Instead, the company can concentrate on highlighting its business differences and maximizing its overall growth.The company will enjoy higher customer satisfaction and greater profits.

  • Outsourcing can improve efficiency and speed. Outsourcing allows companies to outsource certain tasks, saving time and increasing accuracy and capabilities.

For example, a BPO provider specializing in records management can index documents automatically, making them easily retrievable and keeping companies in compliance with legal requirements.This replaces manual data entry.

How can BPO reduce business admin?

Outsourcing can be used to outsource any business function. This is a great way to cut down on business administration.It is important to take the time to ensure you can communicate in writing what tasks you wish to outsource.

BPO can also be used to outsource administrative tasks such as property listing or back-office tasks like accounting and research.BPO can help reduce costs for assent summary, loan size, lease abstraction, and other administrative tasks.

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