Last Updated on: 22nd November 2023, 05:02 am
BPO, or Business Process Outsourcing, refers to delegating whole business functions to an external company – a BPO service provider responsible for managing, administering, and optimizing the selected processes based on defined performance metrics.
How does business process outsourcing (BPO) work?
The process of how BPO works can vary depending on the type of service and the service provider. However, in general, the basic process involves the following steps:
1. Define The Process To Be Outsourced
The organization identifies the specific business process or operation they wish to outsource.
2. Select A Service Provider
The organization selects a service provider based on expertise and experience in the chosen process or industry.
3. Negotiate a Contract
The organization and service provider negotiate a contract that outlines the scope of work, pricing, service level agreements, and other terms and conditions.
4. Transition the Process
The service provider sets up the necessary infrastructure, processes, and systems required to perform the outsourced process, including hiring and training staff, setting up technology and communication systems, and establishing workflows and procedures.
5. Deliver the Service
Once the process is transitioned, the service provider begins to deliver the service as outlined in the contract. They manage and optimize the process to meet the agreed-upon service level agreements.
6. Monitor and Evaluate Performance
The organization monitors the service provider’s key performance metrics and provides feedback as needed. The service provider delivers regular reports and updates on the process’s performance.
BPO: Benefits and Pitfalls
While outsourcing can offer several benefits, there are also potential pitfalls. Here’s a breakdown to carefully evaluate outsourcing needs, plan and execute outsourcing strategies effectively, and avoid common pitfalls to realize the benefits of BPO fully.
|
Benefits |
Pitfalls |
|
Outsourcing for Efficiency |
Loss of Control Leads to a need for more transparency, increased risk, and potential legal issues. |
|
Expertise without Infrastructure |
Communication Problems Language, time zone, and cultural differences lead to delays and mistakes |
|
Agile Scaling Support |
Hidden Costs Setup fees, training costs, and additional fees for services not included in the contract |
|
Flexibility for Adaptation |
Lack of Flexibility Changes may require renegotiation of the contract, delays and additional costs |
|
Remote Workforce Support |
Data Security Risks Risk of sensitive data shared with third-party vendors, data breaches, theft, or loss |
|
Operational Resiliency |
Quality Issues Lead to customer dissatisfaction, reputational damage and financial losses. |
Examples of BPO
BPO services can be classified into two categories: horizontal and vertical-specific services. Horizontal services, like back-office work for example, can be applied across various industries, whereas vertical-specific services require specialized knowledge of specific industry verticals. Many other types of BPO services fall into these categories. Below are just a few examples –
|
Horizontal BPO Services |
Vertical BPO Services |
|
Customer Service and Support Data Entry and Management Finance and Accounting Human Resources Management IT and Technical Support Marketing and Sales Support |
Insurance Claims Processing Legal Process Outsourcing Banking and Mortgage Processing Supply Chain Management Delivery and Logistics Manufacturing and Production |
|
Global companies that outsource back-office functions in HR, finance and IT support to horizontal BPO service providers ( Accenture, IBM, Infosys, Wipro ) IBM General Electric Procter & Gamble (P&G) |
Global companies that outsource logistics, manufacturing and production to vertical BPO service providers (Forbes, The Verge, CNBC ) Apple Nike Amazon |
Conclusion
The effectiveness of BPO may surprise you, as almost every sphere can benefit from the services of BPO providers. Whether you need to outsource banking, communication, transportation, retail, insurance, education, or IT, you can easily find a company with great BPO potential. This strategy applies to healthcare services, process manufacturing, consumer and recreational services, resource industries, state and local government, and many more. Even if your industry is not listed, you can still optimize your workflow by contacting the right BPO company.
