The business process outsourcing industry is quickly growing to become a humongous market, thanks to the flexibility that it can provide to businesses. However, not many are familiar with how BPOs work, their different types, or what benefits they have.
In the business world, knowledge is power. And power usually means money, so being aware of the different tools and services available is crucial to achieving your maximum potential.
For the sake of sharing that knowledge, you’ll find in this article an explanation of what BPOs are, how a BPO can help your business, and how to choose the right provider for you.
Business Process Outsourcing (BPO) Explained
Business Process Outsourcing, or BPO, is the act of delegating your business process to an external provider. In other words, subcontracting your business operations to a third party.
This could be business support operations such as accounting, payment processing, or IT services, or customer-facing operations such as sales, marketing, tech support, or customer services.
There are multiple reasons why a company would choose to outsource its operations.
For example, smaller businesses or startups could choose to outsource a portion of their business operations if they find they don’t have the resources to do them on their own.
More established businesses, on the other hand, could simply choose to outsource a job because it would be cheaper than doing it themselves. In some cases, a BPOs skillset might be more specialized than a company’s own in-house employees, in which case they could handle certain tasks better.
Different Types of BPOs
BPOs can be categorized in different ways, depending on where they outsource their services from, or the type of services they provide.
Based on location
There are 3 types of BPO based on where they are centered in relation to the business hiring their services, these are:
- Domestic, or onshore, BPO: This type of outsourcing occurs when a company hires the services of a BPO located within the same country.
- Nearshore BPO: This type of BPO happens when organizations contract services from neighboring countries.
- Offshore BPO: This outsourcing is the one that people tend to be more familiar with, where a company contracts the services of a foreign country.
Based on the types of services provided
When the focus is on what the BPO can do, and not where it is, we get the following categories:
- Knowledge process outsourcing: Also known as KPO, this happens when a company is hired for their expertise in the area, and not just for a specific process.
- Research process outsourcing: RPO is the outsourcing of research and analysis functions, and it is typically done by biotech companies, marketing agencies, or investment firms.
- Legal process outsourcing: LPO is a KPO that focuses on legal services, from drafting documents to giving advice or performing research.
While all three of these are variations of the first entry, they still tend to be regarded separately.
The research firm Gartner also categorizes BPOs in two ways, horizontal or vertical-specific offerings. They label horizontal offering BPOs as those that can be used across multiple industries. Vertical-specific offerings, meanwhile, are those that are limited to a specific industry.
What are the Benefits of BPOs?
There are many benefits to outsourcing certain business processes. Some organizations outsource to make their operations more efficient or to save on costs. Here is a breakdown of the potential benefits that BPOs can provide for your business:
A competitive edge
By allowing you to focus on your operations, BPOs give you an edge over your competitors who have to stretch their resources thin.
Beyond that, BPOS are more likely to be familiar with the latest technological developments in the areas of their expertise, which could give you access to innovations that you might not normally invest in.
Working with a BPO, your company can adapt or modify the way that your processes are run more easily, which adds flexibility that is critical for markets that can fluctuate quickly.
BPOs allow you to increase the quality of your work both for the processes they handle, and the ones you do. On your end, you’ll have a renewed focus and more time and resources to work with.
On their end, their expertise in the area makes them more efficient and accurate with the process you are outsourcing to them.
BPOs can give your business the ability to expand your business much faster and more easily. For example, you can set up call center operations that work at all times, creating a “follow the sun” business model.
As we mentioned, revenue is always a factor for business. BPOs can allow you to save money by running your processes at a lower cost, or through tax savings.
What Are the Risks of BPOs?
Any kind of outsourced process will have its share of risks. For BPOs, these include:
- Potential security breaches due to additional points of entry for fraud.
- Compliance requirements that extend to the BPO, and which could present issues if not followed
- Communication issues or cultural differences that make the partnership unattainable
- Instability within the BPO that could lead to disruptions
- Higher costs than anticipated if the amount of work needed is underestimated
Choosing a BPO Provider
There are a lot of factors that a business should consider when choosing a BPO provider. Price is always a factor but shouldn’t be the deciding one. Consider the following points when looking for a BPO:
- How well they understand your business’ industry
- Their ability to meet your requirements, as well as scale if necessary
- That they can deliver reports that prove they are meeting their goals and contractual obligations
- That they meet all regulatory and compliance requirements that your industry demands
- That their location doesn’t present pain points down the line
BPOs present many opportunities for businesses that are not limited to just savings. They can make your processes more efficient and improve your scalability. They are not without risks, but you can mitigate those by being thorough in your research when looking to select a BPO provider. BPOs might not be the right choice for all businesses, but when they are they can be a massive boost to your operations.