What is BPO (business process outsourcing)?

In today’s hyperconnected world, many businesses – from agile start-ups to major corporations – choose to outsource non-core business processes. There are many vendors, or business process outsourcing companies, who provide these types of services.

Find out everything you need to know about BPO (business process outsourcing), including the advantages and disadvantages of BPO implementation. First off, see our BPO definition.

BPO definition

Business process outsourcing is a practice wherein companies subcontract business-related process tasks to third-party vendors. In many cases, BPO providers are located offshore, although in some cases they may be nearshore (i.e. Mexico is a “nearshore” vendor for the USA) or onshore.

BPO providers can cover a broad range of tasks, including payroll, accounting, customer support, social media marketing, and more. Put simply, BPO offers a chance to outsource either technical or non-technical supplementary business functions, rather than core business functions.

BPO is usually divided into two main types of service: front office and back office. Front office refers to services related to customers, such as tech support, sales, and marketing. Back office refers to internal business processes like billing, quality assurance, and IT.

The benefits of BPO (business process outsourcing)  

There are a broad range of benefits associated with using BPO providers. Here are some of the most commonly cited advantages of outsourcing your supplementary business functions:

• Lower costs – Perhaps most importantly, BPO can help your business decrease costs. Many BPO providers are located in developing countries, allowing you to take advantage of lower-cost labor markets and cut down on your in-house labor costs.

• Concentrate on key business functions – By outsourcing company functions that aren’t directly tied to your core processes, you can focus your energies on the functions that differentiate your business from the competition, helping to boost customer satisfaction and maximise growth.

• Boost speed and efficiency – Another key benefit of using business process outsourcing companies is the fact that it can help you save time and improve your overall service capacity, making your company more efficient when it comes to your non-core business functions.

• Expand your global presence – You may not have the resources to provide 24/7 customer service in multiple languages, but BPO can help you provide this level of service for a reduced cost, thereby helping you to expand your presence on the international stage.

BPO implementation disadvantages and risks

However, using business process outsourcing companies is not an all-purpose salve, and there are several risks or disadvantages that you need to consider.

• Security breaches – Security is one of the most significant concerns associated with BPO implementation. If you’re outsourcing IT, it’s much more difficult to maintain your security standards and keep your systems protected against data breaches and vulnerability disclosures. You may also experience issues with compliance if you’re outsourcing to an offshore vendor.

• Over-dependence on BPO – Another risk of BPO implementation can be an over-reliance on certain BPO providers. If the vendor encounters issues or lapses in their work, your productivity could suffer, which is why it makes sense to outsource your work to a number of trusted vendors.

• Language barriers – When dealing with offshore business process outsourcing companies, you may experience communication issues with service providers. This can result in delays or quality issues, particularly when it comes to customer-facing services.

• Quality – On another, more practical note, when it comes to business process outsourcing, you tend to get what you pay for. While the lower cost of labor provided by offshore BPO vendors can help to boost your cost efficiency, there’s always going to be a possibility that the work won’t be up to standard. As such, it’s important to find a reliable BPO provider if you do plan on using BPO for your non-core business functions.

How to choose a BPO provider

If you’ve decided to use business process outsourcing companies, it’s important to choose a vendor who can meet your company’s expectations and goals. Define your key requirements, produce a request for proposal (RFP), and evaluate the proposals that you receive. Think about the risks and benefits of working with each BPO provider that you’ve sourced before negotiating the contract and transitioning the work to your new service provider.

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