Business process outsourcing (BPO) is when an organization employs another company to execute a task that the employer organization needs to finish its operational processes. BPO originated in the manufacturing industry, where the manufacturers would often employ other companies to carry out a specific task.
Organizations use business process outsourcing for two main functions: front-office functions and back-office functions. Back-office functions include IT, HR, QA, etc., and front-end functions include sales, marketing, and customer relations. An organization can choose to outsource complete or part of any office function.
Typical examples of BPO include outsourcing accounting services, processing payrolls, digital media marketing, etc. Organizations also tend to outsource crucial office functions such as IT, data analytics, etc.
Deciding for outsourcing can be a tedious one for any organization. Several factors play an important role in helping the company executives. For example, a company might outsource a task because they do not have enough resources to perform that specific task in-house. It might be more cost-effective and efficient to outsource the job rather than serve it themselves.
Whichever case it may be, the organization not just has to assess the pros and cons of outsourcing, but it has to find the best vendor for the job. The decision to outsource should be a strategic one that ensures that the outsourced task would be a calculated move.
While outsourcing might seem to be the right way to go for many organizations, it does come with its challenges and hurdles, out of which security is the main challenge. Any organization must make any necessary arrangements to ensure that the safety of not only their physical property. But also, their intellectual property is airtight. The organization also needs to ensure that no regulations are violated during the BPO, especially when outsourcing financial, IT, and data-related tasks.
In today’s business world, there are three main types of BPO can any organization can use:
When an organization employs a company for BPO based in a foreign country, it is known as offshore outsourcing or Offshoring.
2. Domestic outsourcing
When an organization hires a company for BPO based in the same country, it is known as onshore outsourcing or domestic outsourcing.
3. Nearshore outsourcing:
When an organization hires a company for BPO based in their neighboring countries, it is known as Nearshore outsourcing.
On the flip side of the coin, there are three main types of services that BPO companies offer to their clients:
1. KPO (Knowledge Process Outsourcing):
The employed company performs the task being outsourced to them, but it also provides the employer company with consultation regarding the outsourced job.
2. LPO (Legal Process Outsourcing):
As the name suggests, these services are particular to all legal matters, including documentation, legal document drafts, and legal research.
3. RPO (Research Process Outsourcing):
RPO is similar to KPOP, but it confines itself to the research part of the process and provides its expertise around it. This form of KPO is popular with investment, biotech, and marketing sectors.
In the global economy, BPO plays an important role. It helps organizations reap financial benefits in terms of cost savings. It provides them with flexibility, allowing them to react better to changing market trends and gain a competitive edge over their competition. BPO also enables companies to gain access to innovations much quicker. That expands their coverage over not only their industry but also opens up new avenues for them.