The ins and outs of business process outsourcing
What is business process outsourcing?
Business process outsourcing means handing a defined, non-core function to a specialist third-party provider for an agreed period.
- The main draws are cost savings, higher efficiency, and a sharper focus on core work.
- The risks to manage are data security and quality control, which a good contract covers.
- Provider choice matters more than location alone.
Plenty of companies now use business process outsourcing to run work they once kept in-house. You may be a startup, a small or midsize firm, or a large one. In each case, growth takes more than budget and headcount. It also takes a clear view of which tasks to keep and which to hand off.
Done well, outsourcing can be a real advantage. Done blindly, it can cost you time and trust. So this guide walks through what the model involves, where it helps, and where you need care.
What business process outsourcing means
Business process outsourcing is the practice of hiring a third party to run a set function for an agreed time. These functions are usually repeat tasks and non-core. For example, they include customer service, data entry, payroll, or accounting. Typically, the provider takes on the people, the process, and the tools behind the task.
Offshore outsourcing simply means that provider sits in another country, often to cut cost. For a deeper look, the Outsource Accelerator glossary entry on what business process outsourcing is breaks down the common pricing and delivery models.
The main advantages of outsourcing
Most companies start with cost. However, the gains run wider than the invoice. In fact, the full list of outsourcing benefits is long.
- Savings. You no longer carry the full weight of equipment, space, and benefits. Instead, the provider absorbs much of it. As a result, offshoring to the Philippines often trims labor costs by 50 to 70 percent against a US in-house team.
- Efficiency. A specialist provider brings trained staff and current tools. So the quality and speed of the work tend to rise.
- Focus. With routine tasks handled elsewhere, your own people can focus on strategy, products, and customers. In addition, legal exposure can shrink, since a good provider carries the employment duties for its own staff.
The risks worth managing
Outsourcing is not free of trade-offs. Pretending otherwise sets you up for trouble.
Data security is the big one. You give a provider access to customer or financial data. So a clear non-disclosure agreement and defined access controls are a must.
Quality control is the second. Your standards and the provider’s may not match on day one. For this reason, agree on clear, measurable expectations before work begins.
| What to weigh | Why it matters |
|---|---|
| Cost savings | Frees budget for core growth, but should not be the only factor |
| Efficiency and skills | Access to trained staff and current tools |
| Data security | Requires an NDA and least-privilege access |
| Quality control | Needs aligned standards and review checkpoints |
How to choose a reliable BPO partner
The provider matters far more than the country on the map. For scale, the Philippine sector alone was worth about $38.7 billion and employed roughly 1.3 million people, according to the Philippine Daily Inquirer. So you have no shortage of options to sort through. Many buyers study outsourcing to the Philippines before they shortlist firms.
In practice, check track record, client references, communication standards, and security before you sign. The Outsource Accelerator guide on how to choose a reliable outsourcing partner sets out the questions to ask. It also helps to match the provider to the work. For example, call center outsourcing and back-office outsourcing each call for a different skill set.
Strong English skills help too. In fact, the Philippines ranks #28 worldwide on the EF English Proficiency Index, which is part of why it edged ahead of other spots.
Frequently asked questions
A few points come up whenever a company weighs its first outsourcing move.
What is the difference between outsourcing and offshoring?
Outsourcing means you hire a third party to do the work. Offshoring means that party sits in another country. Many deals are both at once. For more detail, see this guide on offshoring versus outsourcing.
Which functions are safest to outsource first?
Well-defined, repeat tasks move most easily. For example, customer support, data entry, and back-office admin carry the least risk. So they make a good first step.
How do I protect confidential data?
Use a clear non-disclosure agreement. Next, limit access to only what each worker needs. Finally, confirm the provider’s security certifications before you share anything sensitive.
How long does it take to set up a BPO team?
It depends on the role and the provider. Simple tasks can start within a few weeks. However, larger or regulated functions may take a few months to staff, train, and test.
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