Business Process Outsourcing Meaning
I work for a BPO firm. Wait. Did you understand it? I work for a call center. Undoubtedly, the terms BPO and call center are most often used interchangeably. However, there is a difference between the two. The key difference is that a BPO Company accomplishes various back-office jobs of any corporate business like customer support, bookkeeping, and accounting operations. However, a Call Centre Company handles just telephone calls to take orders or to provide customer service. Nowadays, BPO is gaining demand. Roll up your sleeves to get into the bottom of business process outsourcing, famously known as BPO.
What is Business Process Outsourcing?
Business process outsourcing is contracting a portion of any company’s non-core functions and activities to a third party under commerce jargon. While non-primary business is outsourced to a vendor, it does not lose focus on its core operations. In simple terms, it is executing corporate endeavours outside the organization. This approach is widely observed across the industry sector. Payroll, human resources (HR), accounting, customer relations are few lateral functions that constitute BPO services. The key features of BPO are flexibility, cost-effectiveness, speed, and availability of the BPO workforce.
Accenture, IBM, Infosys, Mphasis are among the top BPO companies providing their services to innumerable global organizations. With this information, let us further study the advantages and disadvantages of BPO.
Advantages of BPO
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Benefits of BPO
Cost Reduction
BPO has a talent pool of workforce employed at very low wages. Henceforth, outsourcing aids the organization in achieving the non-critical business operations at low investment. Thus, cost reduction is a critical reason for an organization choosing outsourcing options to execute its various business processes.
Availability of Skilled Experts
BPO employees are the skilled experts. Instead of recruiting and training the employee for a particular work. Most organizations make a contract with a BPO as BPO has the availability of experienced professionals. Thus, the organization focuses majorly on their primary work instead of involving into recruitment and training activities full of hassles.
Enable to focus on Core Business
Since a significant chunk of non-critical jobs like payroll, accounting, research, surveys are outsourced to the third party or vendor, it enables the senior management of the company to focus on its primary operation. It also assists in improving employee productivity to make fruitful decisions, which generates revenue for the company.
Source of Client Feedback and Reviews
First-hand feedback is very crucial for any flourishing business. Most BPO’s are in communication with the customers directly. It helps collect the reviews and feedback, which allows the company to work and improve its services and products.
Access to recent Technologies
For any small and middle-sized company, buying licensed software could be a risky proposition. Not just this, it is challenging to keep up with the latest technologies and developments. On the other hand, the BPO companies are up to date with all the technologies to serve their customers. Along with access to the latest technology stack, BPO has skilled employees who have the relevant knowledge, which proves to be a complementary benefit to any global organization.
Excellent Employment Prospects
The evolution of BPO helped in creating a vast number of job opportunities. BPO is ranked at second position for creating jobs in Asian countries. Not just the job opportunities, employees are paid a handsome amount for their work. It is the reason why most of the youngsters today are attracted to the BPO. BPO has alone helped to improve the GDP of the small countries.
With the above-confirmed paybacks, BPO has its flipside as well. Below are the few demerits of BPO.
Disadvantages of BPO
There can be gaps of communication between customer and vendor companies. The two companies in the contract may adhere to different ethics and standards of services, leading to friction between two companies.
BPO often leads to logistic issues, since both the companies work in different time zones. It could raise problems in attending the online meeting, interactions, etc. It is quite obvious that the vendor company employee has to adjust to its client's working hours.
Communication and time zone differences might give the impression of an inferior quality of service. Henceforth it is essential to keep continuous communication and transparency with BPO assignments.
Fun Facts
Do you know the business process outsourcing (BPO) industry has emerged at a fantastic rate? By 2023, it may be worth an estimated $52 billion worldwide.
Do you know Information Technology Enabled service, commonly called ITES, is a form of BPO, utilizing technology's strength to serve its various functions in finance, HR, administration, health care, telecommunication, manufacturing, etc.?
FAQs on Business Process Outsourcing (BPO) Overview
1. What exactly is Business Process Outsourcing (BPO)?
Business Process Outsourcing, or BPO, is a business practice where a company hires another firm to handle specific operational tasks. Instead of doing certain jobs in-house, the company delegates them to an external specialist. This is often done to reduce costs, increase efficiency, and allow the company to focus on its main goals.
2. What are the main categories of BPO services?
BPO services are generally divided into two main categories:
- Back-Office Outsourcing: This includes internal business functions that are not customer-facing, such as data entry, accounting, payment processing, and quality assurance.
- Front-Office Outsourcing: This involves customer-facing services like customer support, technical helpdesk, marketing, and sales calls.
3. Can you give some common examples of tasks outsourced to a BPO?
Certainly. Many everyday business tasks can be outsourced. Some common examples include:
- Customer service support via phone, email, or chat
- Technical support for software or products
- Payroll and accounting services
- Data entry and data management
- Human Resources (HR) tasks like recruitment and onboarding
4. What's the difference between onshore, offshore, and nearshore outsourcing?
The difference lies in the location of the BPO company relative to the client:
- Onshore Outsourcing: The service provider is located in the same country as the client.
- Offshore Outsourcing: The service provider is located in a distant country, often to take advantage of lower costs or different time zones.
- Nearshore Outsourcing: The service provider is located in a neighbouring country, which can offer a balance of cost savings and geographical proximity.
5. Why do companies choose to use BPO services instead of doing the work themselves?
Companies outsource for several key reasons. The primary motivation is often cost reduction, as BPO firms in other regions may have lower labour costs. It also allows a company to focus on its core competencies—the things it does best—while leaving administrative tasks to experts. Additionally, BPO gives access to specialised skills and technology without a huge upfront investment.
6. Is BPO just another name for a call centre?
No, this is a common misconception. While call centres are a very visible part of the BPO industry, they are only one type of service (front-office). BPO is a much broader concept that also includes many critical back-office functions like finance, accounting, data analysis, and human resources that do not involve direct customer interaction.
7. How is KPO different from BPO?
The main difference is the level of skill involved. BPO (Business Process Outsourcing) deals with outsourcing standardised, rule-based processes. In contrast, KPO (Knowledge Process Outsourcing) involves outsourcing tasks that require advanced knowledge, analytical skills, and expert judgement, such as market research, investment analysis, or legal services.
8. What are the potential disadvantages or risks of outsourcing business processes?
While BPO has many benefits, there are also risks to consider. A major concern is the security of confidential data when shared with a third party. Companies can also face a loss of direct managerial control over the outsourced function. Sometimes, communication gaps due to different cultures or time zones can also pose a challenge, particularly with offshore BPOs.
