Business Process Outsourcing or BPO is when a company works with an external service provider to carry out various business processes. The BPO provider will take care of essential functions, tasks, and operations that are usually time-consuming, complex, and do not need to be completed by central figures.
The BPO industry comprises countless BPO companies that specialize in a wide range of BPO Services. Business process outsourcing aims to provide businesses with the tools to achieve maximum efficiency and the highest levels of performance and quality.
Since business process outsourcing began, various types of BPO companies and BPO services have emerged. Every BPO company has its specialties, expertise, and skills. Because of this, you must take the time to understand how BPO works fully, the different types of BPO, the range of BPO services available, and the different types of BPO companies.
How Does BPO Work?
A BPO provider works for businesses to help them achieve maximum efficiency by taking over operations. Enlisting BPO services from an experienced BPO company allows your company to have more time to carry out central functions and core processes.
BPO generally has two categories of processes:
- Front Office Functions – Front office functions for business process outsourcing refer to the functions that deal with clients and customers. These customer-facing functions can include customer relations management, logistics management, order fulfillment, and more.
- Back Office Functions – Back-office functions refer to more administrative tasks. This can include HR, Data entry Services, billing, purchasing, and more. These functions do not deal with any customers or clients.
In general, BPO can carry out a wide range of processes, including:
- Customer Service – Customer service is a popular process for businesses to outsource. A BPO company can take care of call center operations and handle customer support.
- IT – IT outsourcing helps companies manage their technology expertly and cost-efficiently. A BPO company will take care of all things technology.
- HR – A BPO company can handle human resources processes like payroll, hiring, recruiting, training, insurance processing, or benefits.
- Healthcare – Healthcare BPO refers to outsourcing for medical billing, medical record processing, medical data entry, medical coding, medical claim processing, and medical document digitization.
- Mortgage – Mortgage BPO helps with mortgage processing, underwriting, document examination, and more.
- Insurance – Insurance BPO refers to outsourcing for processes and tasks in the insurance industry like data entry, underwriting, claim management, billing, and policy checking.
- Accounting – Finance & Accounting BPO carries out the tasks of an accounting department for just a fraction of the price by handling accounts payable, tax processing, payroll processing, financial reporting, and bookkeeping.
- Logistics – BPO services for logistics can oversee the entire process for getting something from point A to B. A BPO company will take care of every detail.
What Are The Different Types Of BPO?
BPO has several different types that you can enlist. Listed below are some of the main types of business process outsourcing options to choose from:
- Offshore Outsourcing: Offshore outsourcing is for vendors located in a different country than the company enlisting their services.
- Onshore Outsourcing: Onshore outsourcing is when a company outsources to another company in the same country. This option often costs more, and it is increasingly losing ground to offshore firms.
- Nearshore Outsourcing: Nearshore outsourcing refers to outsourcing in a neighboring country. For example, a company located in the United States can nearshore outsource to Canada or Mexico.
- Knowledge Process Outsourcing (KPO): Knowledge process outsourcing or KPO is a more specialized area of BPO that allows an outsourcing provider to make low-level business decisions.
- Research Process Outsourcing (RPO): RPO refers to outsourcing research. Essentially, it encompasses research about any subject or field of endeavor.
- Legal Process Outsourcing (LPO): Legal process outsourcing refers to outsourcing for legal services and processes. An LPO provider can take on high-level legal work like drafting legal agreements and performing legal research.
The Benefits Of BPO
Business process outsourcing comes with several benefits that companies can take advantage of. Here are some examples of the benefits of BPO:
- Cost Reduction – Working with a BPO company can significantly reduce your overhead costs. A BPO vendor provides services and functions for a fraction of the price compared to compensating an employee or team.
- Focus On Core Activities – As your BPO vendor completes non-central tasks and operations, you have more time and energy to focus on core activities. As a result, you can get back to what matters most for your organization.
- Better results For Non-Core Functions – BPO providers have the best technology, skilled employees, and expertise to execute your functions with maximum accuracy and efficiency.
- Expand Coverage – Business process outsourcing gives you the resources to expand your business. When you have an expert team carrying out operations, you have more time to tend to more customers and/or clients. You can even take on global expansion.
- Efficiency, Quality, Performance – Business process outsourcing helps businesses improve their efficiency, quality, and performance. Their team of experts carries out tasks efficiently, accurately, and quickly.
- Flexibility – Working with a great BPO provider means you have flexibility at your fingertips. Your BPO company is used to accommodating last-minute changes, requests, and more.
The Risks Of Business Process Outsourcing
Because business process outsourcing requires bringing a third-party organization into your company, there are always risks involved. Understanding these risks is the key to actively minimizing them throughout your work with a BPO company. Here are some of the main risks of business process outsourcing:
- Security – Security can be compromised when working with an outside company. However, you can minimize these risks by adding security clauses, rules, and guidelines to your agreement with a BPO provider to ensure that anything confidential is protected.
- Underestimate Costs – One of the main benefits of BPO is that it is highly cost-efficient. However, the costs can add up if you need a myriad of BPO services. Therefore, be sure to thoroughly analyze what services you need and how much they will cost your organization.
- Quality Control – Quality control is one of the main risks of business process outsourcing. Someone from outside your company carrying out tasks might not be familiar with your expectations. Therefore, you must communicate quality standards.