Business process outsourcing

Business process outsourcing is the method where a third party uses their resources to carry out a work
of a company by their own capability. Business Process Outsourcing, or BPO, refers to the process of
contracting standard business functions to be handled by a third party outside of the company. Third-
party providers set up for a dedicated task such as payroll perform more efficiently and can transfer
those cost savings to their clients. BPO offerings are categorized in two major categories: horizontal
offerings such as those that can be leveraged across specific industries and vertical-specific offerings
where those that demand specific industry vertical process knowledge.

From fledgling startups to massive Fortune 500 companies, businesses of all sizes outsource processes,
and the demand continues to grow, as new and innovative services are introduced, and businesses seek
advantages to get ahead of the competition. BPO can be an alternative to labor migration, allowing the
labor force to remain in their home country while contributing their skills abroad.

BPO lead the company to complete their task by someone or some group of individual working outside
the company. This will lead the company to have better efficiency and reduce the cost. Call center is kind
of BPO. A large company might need a call center where the customers can contact and have their
problems solved regarding the company. Also, they can have a better service then being physically
present. But having a call center will lead to huge cost. Recruiting the team, having all the technology
and software will cause lots of money and effort. Here comes the impact of BPO. The company can hire
a small company of call center to have their works done. As a result, both of the parties will be
benefited.

Business process outsourcing (BPO) is a type of outsourcing wherein a third-party service provider is
employed to carry out one or more business functions in a company. Organizations contract with BPO
vendors for back office and front office operations. BPO offers several benefits, such as lower costs,
global expansion, and higher efficiency, while some of the drawbacks include security issues, hidden
costs, and overdependence.

One of the main reasons organizations outsource is cost reduction. Instead of buying IT equipment and
hiring more employees to do different tasks, they can outsource the tasks to a service provider, reducing
or even eliminating overhead costs. BPO companies are experienced in different fields and perform at
the highest level. They also adopt best practices and use the latest technology. It naturally results in
higher efficiency and greater productivity. If an organization decides to enter an overseas market, some
activities that require local market knowledge, national law expertise, or fluency in a foreign language
can be assigned to a BPO company. It helps in boosting efficiency and quicker expansion.

BPO, isn’t only a method to hire a party to get the works done, it allows the company to get expanded.
There are basically 5 types of Business process outsourcing.

 Back-Office BPO: Back-office business process outsourcing involves contracting services that are
not customer-facing. These services include IT, accounting, business process automation, human
resources, quality assurance, and more.
 Front-Office BPO: This term refers to customer-facing services, including tech support, customer
service, sales, and marketing. These services are frequently outsourced due to technical
knowledge requirements ‘==nd can be accomplished off-premises.
  Offshore BPO: Offshoring occurs when services are outsourced overseas. This is incentivized by
available resources, political stability, lower labor costs, various tax savings, and more.
 Nearshore BPO: Nearshore business process outsourcing is the act of contracting the services of
vendors in countries that are geographically closer.
 Onshore/Domestic BPO: Domestic outsourcing is exactly as it sounds: the act of outsourcing and
receiving services within the boundaries of a country.

There is vast benefit of BPO. There are many reasons agencies decide to outsource their processes. For
a few of them, it is a strategic decision for gaining a competitive advantage. Some of the advantages are
pointed out below,

 Lowered Costs
 Enhanced Speed and Efficiency
 Gaining Competitive Advantage
 Greater Flexibility
 Time Zone Advantage
 Increased Security
 Global Expansion

There are also some risks on BPO. These risks can damage the reputation of the company and have
cause lots of issues. Some of the major risks are,

1. Security: In outsourcing, especially when information systems (IS) are involved, companies face
communication and privacy risks. Security is more difficult to maintain when the business taking
care of the IS that is not in the same country, especially one with different security
requirements.
2. Underestimating the costs of services: Companies that employ BPO vendors often
underestimate the running costs, especially in upgrades and contract renegotiation.
3. Overdependence on service providers: Once a company designates a vendor for specific
processes, the vendor becomes a part of the workflow. The company can incur extraneous costs
and decreased productivity when the vendor encounters problems or lapses in its work.
4. Communication issues: Language barriers can limit activities when your company hires
individual service providers spread across the globe.

Finding a right BPO isn’t much hard nowadays. There are lots of outsource company out there who are
willing to work and have better experience than any other local companies. There outsource company
can reduce unemployment rate. Business Process Outsourcing has allowed reputed organizations to
invest more resources in their critical processes while lowering their costs and be agile in their business
operations.