Business Process Outsourcing (BPO)

Definition

What is Business Process Outsourcing?

Business Process Outsourcing (BPO) is the engagement of services from a third-party provider. BPO uses various technology-enabled services to hasten the delivery of services. The business activities could be back-office such as, but not limited to, payroll, accounting, human resources, or front office jobs like customer service, sales, and marketing, etc. In the case of content providers, these business activities could mean hiring writers, remote editors, or virtual assistants.

BPO speeds up processes and enhances efficiency. Companies that outsource some of their business activities use their time on core services and competencies. With this shift in focus, companies improve their current processes that may result in improved customer satisfaction. BPO helps companies divert their resources to more critical business strategies. Often, companies find it impractical to hire a full-time position in-house because of the cost associated with doing so.

How does Business Process Outsourcing work?

When a business engages an external specialist to manage and operate some of its internal processes, it’s referred to as business process outsourcing. Such ‘processes’ include customer service, accounting and finance, or sales. It is different from hiring an agency to do specific tasks, as the outsourcing provider (BPO) is more concerned with the ongoing production of labour-intensive tasks, instead of the higher-level strategy and guidance.

Now, business process outsourcing has broadened and is more akin to staff augmentation, or staff leasing.

What are the benefits of business process outsourcing?

There are many benefits to outsourcing, as well as some downsides and risks. The common benefits include:

  • Cost savings: significant savings of up to 70%, leveraging the lower global salaries
  • Global market: access to a bigger employment pool of talent
  • Global presence: having operational across the globe increases trade opportunities
  • Flexible workforce: reduces internal local labour and employment compliance obligations
  • Leverage skill: leveraging the skills of other specialist companies
  • Focus: enables the client company to focus on their core functions

 

Business Process Outsourcing (BPO)
Business Process Outsourcing (BPO)

Business process outsourcing examples

The business process outsourcing sector is a vast industry, generating over $200bn annually, and employing many millions of people worldwide. Some examples include:

Big enterprise

Facebook and Uber outsource many of their operational functions, including content moderation for Facebook, and customer service for Uber

Medium-size businesses

A medium business with 50-500 staff might outsource the labour-intensive accounting and finance functions to a team in the Philippines.

Small business and entrepreneur

It is common for small business owners to have a Virtual Assistant (VA) working for hem full time, remotely from the Philippines.

What are the different types of BPO?

The type of business process outsourcing can be characterised by their specialisation, location, and size.

Generalist or specialist BPOs

Business process outsourcing is in the human resources and professional services sector. However, their services extend across all industries. The majority of BPOs are generalist, in that they offer a full range of professional services, although some specialise in certain verticals (ie accounting, or animation).

Location

Business process outsourcing typically operates form developing nations such as the Philippines, India, and Colombia. They typically have cheaper cost-of-living and bigger populations. Different locations offer different advantages.

Size of BPO

The bigger BPOs employ more than 250,000 people. They are huge, global operations. Medium-sized BPOs range from 500-5,000 staff and offer a full range of services. The smaller BPOs might have 1-500 people.

Functions of business process outsourcing

Collectively, business process outsourcing provides any kind of staffing solution. Common functions of BPO include:

  • Finance and accounting: operational, technical and specialist functions
  • Healthcare: various functions of the backend of the healthcare and health-insurance industries
  • Creative and content: everything from post-production of Hollywood movies to newspaper and website content
  • Tech, IT and development: network management, web and app development and maintenance
  • Sales & customer support: ongoing sales and customer operational support and delivery
  • Marketing: ongoing marketing, communication and branding activities
  • Talent and HR: externalising the management of company HR, recruitment and compliance
  • Administration: general business administration and operational activities

Business Process Outsourcing (BPO) services

Outsource Accelerator is the most trusted source for independent information & advisory for Business Process Outsourcing (BPO). We have over 4,000 articles, 200+ podcast episodes, and a comprehensive directory with 700+ BPOs… all designed to make it easier for clients to learn about, and engage with, business process outsourcing.

Outsourcing FAQ

How does business process outsourcing work?

In business process outsourcing, a company delegates their services to a service provider. It can be a local firm, nearshore, or offshore company. Upon reaching an agreement, the service provider will then set up a team for their client. They will shoulder the costs and resources needed, including the office space, workplaces, connection, cloud storage, and IT infrastructure.

The providers are responsible for tracking the staff’s performance and progress. The clients, meanwhile, are responsible for providing the tasks, processes, and KPIs needed for their operation. In some instances, they are also allowed to incorporate their culture and values to their team and absorb them as a part of their company.

What is a BPO example?

Some of the well-known companies have been outsourcing their business processes to improve their services and reach their customers worldwide. For instance, Nike outsources product manufacturing to several countries in Asia, including China, Vietnam, and the Philippines. Apple also outsources its production to China for global distribution.

One of Alibaba’s secrets to success, meanwhile, is software development outsourcing. They hired developers in the US to create and maintain the website and its system. Its Western counterpart, Amazon, also geared up in outsourcing. To maintain their customer-first outlook, the company outsources its customer service and supply chain management to countries such as India and the Philippines. 

What is BPO in a call center?

A BPO is usually hired by a company to provide customer service, technical support, or lead generation assistance. Depending on the service provider, clients can customize their services, whether they choose a shared or dedicated team, and the volume of calls they receive or make each month. 

Call centers usually do voice and non-voice tasks, such as email response, data encoding, and doing market surveys. BPOs do these, along with a wider range of services such as contact center and helpdesk support. 

What are the benefits of business process outsourcing?

Outsourcing helps businesses save up to 70% on labor costs and resources. Outsourcing countries like the Philippines and India produce high-quality talents at a lower rate due to their low operational costs and full government support.

Since outsourcing companies hire and produce experts in the field, clients can assure better results in their operations, whether in customer service, accounting, or marketing. Their staff are trained to ensure that their clients achieve the outcome they expect.

Outsourcing also offers growth and flexibility. Companies may scale their staff depending on the demand and availability of their tasks. This also helps them improve their operations by letting their service providers contribute in streamlining their processes.

Related outsourcing resources

    Transform your business
    Icon
    CONSULT
    Icon
    3 QUOTES
    Icon
    START
    Icon
    FAST-TRACK
    Icon
    TOOLKIT
    X
    Shares