What Is Business Process Outsourcing?

Business process outsourcing (BPO) is a method of subcontracting various business-related operations to third-party vendors. Although BPO originally applied solely to manufacturing entities, such as soft drink manufacturers that outsourced large segments of their supply chains, BPO now applies to the outsourcing of services, as well.

Understanding Business Process Outsourcing (BPO)

Many businesses, from small startups to large companies, opt to outsource processes, as new and innovative services are increasingly available in today’s ever-changing, highly competitive business climate.

Broadly speaking, companies adopt BPO practices in the two main areas of back office and front office operations. Back office BPO refers to a company contracting its core business support operations such as accounting, payment processing, IT services, human resources, regulatory compliance, and quality assurance to outside professionals who ensure the business runs smoothly.

By contrast, front office BPO tasks commonly include customer-related services such as tech support, sales, and marketing.

BPO is often referred to as information technology-enabled services (ITES) because it relies on technology/infrastructure that enables external companies to efficiently perform their roles.

Special Considerations

The Attraction of Business Process Outsourcing (BPO)

Companies are often drawn to BPO because it affords them greater operational flexibility. By outsourcing non-core and administrative functions, companies can reallocate time and resources to core competencies like customer relations and product leadership, which ultimately results in advantages over competing businesses in its industry.

BPO offers businesses access to innovative technological resources that they might not otherwise have exposure to. BPO partners and companies constantly strive to improve their processes by adopting the most recent technologies and practices.

BPO also offers companies the benefits of quick and accurate reporting, improved productivity, and the ability to swiftly reassign its resources, when necessary.

The Disadvantages of BPO

While there are many advantages of BPO, there are also disadvantages. A business that outsources its business processes may be prone to data breaches or have communication issues that delay project completion, and such businesses may underestimate the running costs of BPO providers.

 

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