What Is BPO And How Does It Work In 2023?

What Is BPO?

The outsourcing market is seeing a significant rise over the past decade. Almost all small, medium and large-scale businesses have started leveraging BPOs and third-party service providers for outsourcing non-core business operations. If you are not aware of BPO, its types, or how it works, do not worry. Many people become a little fuzzy to understand what exactly this does. This article is a comprehensive guide on business process outsourcing (BPO), its types, and how it works.

 What Is Business Process Outsourcing (BPO)?

Business Process Outsourcing (BPO) is a sub-contracting method other companies use to contract with an external third-party service provider or specialized business to perform one or more critical business tasks. In other words, it encompasses a vast discipline of industries and functions in its fold that acts as a service-based business. Modern business process outsourcing companies rely heavily on Business Process Automation (BPA). Initially, the concept of BPO started solely to cater services to manufacturing entities. Companies like soft drink manufacturers had to outsource BPO services for their products through external supply chain businesses in different states and countries.

Gradually, the concept of outsourcing became popular across all industries for various products and services. Time plays a significant role in business. Every entrepreneur or business executive value time over anything else. So, enterprises typically opt for the business process outsourcing technique when they realize that another specialized institution can do better a particular task or set of tasks efficiently & in lesser time. Companies can outsource business processes to human resources, regulatory compliance, IT services, payroll processing, security services, quality assurance, accounting & tax management, other financial services, etc.

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Types Of Business Process Outsourcing (BPO)

Front-office BPO

These are the type of customer-facing services. Such services include customer service, call centre services, tech support, marketing, sales, etc. Companies need to hire or outsource these types of services because these services require domain expertise and technical proficiency. By outsourcing various services, companies can gain access to a pool of specialized talent.

Back office BPO

These are not customer-facing services. Services like human resources, accounting, tax management, process and manufacturing automation, quality assurance, etc., fall under this category. Businesses focus on their core tasks by sharing the work with outsourced service providers.

Offshore BPO

In this type of outsourcing, the company outsources the service overseas. It can be international talent acquisition, call centers, manufacturing services, etc.

Near-shore BPO

In this outsourcing technique, the service-providing vendors are in geographically closer countries. For example, an enterprise headquartered in Sri Lanka will outsource its services from India.

Domestic BPO

As the name suggests, outsourcing vendors are within the country’s boundaries. Companies prefer this when they want to reduce carrying or logistics costs.

 How Does Business Process Outsourcing Work?

When the company realizes they need expertise in one or more verticals and departments, the business executives & stakeholders decide to outsource the service from other third-party companies. Depending on the requirement, the provider can be domestic, offshore, or near-shore. Once the business decides which service provider to choose, they go for an agreement. It is essential to do thorough research about the outsourcing company.  After completing the agreement phase, the business handover the services & non-core operations to the third-party firm.

The service provider is responsible for monitoring its staff’s progress & performance for the company that became the service provider’s client. The monitoring and quality check comes under the service level agreements (SLAs). Other than that, both parties sign two levels of contracts. One is the general agreement, commonly known as a Master Service Agreement (MSA). It determines the primary or comprehensive contractual responsibilities of each party. The other contracts work under the MSA, commonly known as Statements of Work (SOWs) which explains the services in more detail.

Advantages of Business Process Outsourcing

  • Enhance Accuracy and Efficiency at Work
    Since specialists from third-party organizations or service providers handle the non-core business operations, they are experts in that service. Hence, they perform the work with precision and without errors.
  • Cost Saving
    Training in-house teams need constant focus on them. It often becomes costly to train and make them experts. So, it is better to outsource certain business operations where the company lacks core expertise.
  • Expanding Globally
    Most businesses want to expand overseas to reach more customers. For overseas expansion, companies require local knowledge about the market. So, they prefer outsourcing services from companies residing locally.

The Conclusion

We hope this article has provided a comprehensive idea of business process outsourcing, its types, and how it works. Outsourcing non-core business operations have become a standard business practice to seek expertise and increase operational efficiency through third-party service providers. Thus, enterprises should leverage such services to increase return on investment.

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