Business Process Outsourcing 101

Business process outsourcing (BPO) is a term widely used in almost all industries. It is practiced in the Information Technology and Communications industry, alongside contact centers and the health sector.

What is business process outsourcing?

Outsourcing is the act of turning to external service providers or suppliers for functions that were previously performed internally. This includes front- and back-office business solutions that are not classified as a company’s core strength. A company’s core competency is whatever it does best: for example, a marketing firm’s core competency lies on marketing per se while an IT company could count software development and testing among its core strengths.

One of the more prominent benefits of outsourcing is cost reduction since it has the ability to significantly minimize a company’s overhead and labor expenses. The business practice also touts tapping a highly professional and experienced workforce, as well as faster implementation, and better quality of service among its primary advantages.

Types of outsourcing

There are generally two types of outsourcing: onshore and offshore.
Onshore outsourcing refers to turning to service providers that are within the same country, but in different locations. An example of this would be a gaming company headquartered in San Francisco, California, that has numerous studios all over America. In this case, the jobs which could’ve been performed in San Francisco were transferred to other states.

On the other hand, offshore outsourcing refers to tapping service providers outside the country. A perfect example of this is Apple Inc., an American company that has manufacturing plants in China.

Both types of outsourcing have their own pros and cons. As an example, onshore outsourcing eliminates the language barrier as both parties speak the same language. However, the cost reduction would be minimal or non-existent as the American standard of living is still in place. Similarly, offshore outsourcing poses a delay on delivery due to the distance, but at significantly reduced costs.

Typically outsourced services

Most Western companies need contact center support in the form of voice- and non-voice-based call centers and technical support services. This refers to customer and technical support across the basic mediums: calls, emails, live chat, and social media interaction.

Also, a lot of business-to-business deals are focused on the IT industry. Many IT service and support functions are outsourced to offshore IT locations as labor expenses are considerably cheaper than they are in the United States. Similarly, many developing countries such as the Philippines, India, and Mexico are rapidly becoming competitive in the IT industry and could be counted upon to produce outstanding services.

These are just some of the commonly outsourced business processes. Some companies focus on providing e-commerce support, data services, content moderation, and a host of other business processes.

Conclusion

Outsourcing a business process helps companies realize their full potential by focusing their attention to their core competencies. After all, why should companies perform a mediocre task related to business processes that are not their specializations, if a highly experienced third party provider is willing to do the service for a minimal cost?