What is What is business process outsourcing?
What is Business Process Outsourcing BPO?Business Process Outsourcing (BPO) is the delegation of business processes to an external service provider to a nearby or farther location. BPO uses various technology-enabled services to optimize the delivery of services.
Some of the usual outsourced business functions are the following.
Payroll
Accounting
Human resources
Customer service
Sales
MarketingIn the case of content providers, these could mean hiring writers, remote editors, or virtual assistants.
BPO speeds up processes and enhances efficiency. Companies that outsource some of their business processes use their time on core services and competencies.
With this shift in focus, companies improve their current processes which 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. Outsourcing services can also help them save costs and resources in hiring suitable employees.
How does Business Process Outsourcing work?Business process outsourcing happens when a business taps a third-party service provider to operate some of its internal processes. 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 savingsCompanies can enjoy savings of up to 70% by leveraging the salaries and costs in countries such as the Philippines and India.
Global marketBusinesses get to access a bigger pool of talent that can fit their requirements. They can have better options in hiring employees since they are not limited to what is available in their home countries.
Global presenceAt the same time, business process outsourcing opens clients to global trade opportunities. They can establish their global presence and expand more easily to other locations since they already have operations in the area.
Flexible workforceBPO reduces internal local compliance obligations including providing additional office spaces to employees. Instead, organizations can hold their business operations on a remote setup, most usually having their teams in an office provided by the BPO firm.
Leverage skillCompanies cannot always do everything on their own. BPO enables them to leverage the skills of other specialist companies on more complex tasks such as accounting and IT.
FocusLastly, BPO enables organizations to focus on their core business functions. This is since most of their non-core business operations are done with the help of a reliable service provider.
Business process outsourcing examplesThe business process outsourcing sector is a vast industry, generating over $200bn annually, and employing millions of people worldwide.
BPO can be seen in different forms and contexts, from hiring single staff to getting an offshore team. Some examples of BPO include:
Big enterpriseFacebook and Uber outsource many of their operational functions, including content moderation for Facebook, and customer service for Uber
Medium-size businessesA medium business with 50-500 staff might outsource the labour-intensive accounting and finance functions to a team in the Philippines.
Small business and entrepreneurIt is common for small business owners to have a Virtual Assistant (VA) working for them full time and 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 BPOsBusiness process outsourcing is in the human resources and professional services sector. However, their services extend across all industries. The majority of BPOs are generalists, in that they offer a full range of professional services.
Meanwhile, some specialise in certain verticals such as the following.
Legal process outsourcingLegal process outsourcing deals more with delegating legal processes and compliances to legal firms in another area.
Knowledge process outsourcing
Meanwhile, knowledge process outsourcing enables companies to outsource knowledge-related work including research and development, innovation, and creatives.
LocationBusiness process outsourcing typically operates from 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 BPOThe 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 outsourcingCollectively, business process outsourcing provides any kind of staffing solution. Common functions of BPO include:
Finance and accountingOutsourced finance and accounting services help businesses manage their books, monitor cash flow, and keep up with corporate income tax compliances without fuss.
HealthcareHealthcare outsourcing, meanwhile, organizes various back- and front-end functions done for the healthcare and insurance industries.
Creative and contentCreative services outsourcing covers everything from post-production of Hollywood movies to newspaper and website content.
Tech, IT and developmentIT outsourcing involves delegating network management, web and app development, and cybersecurity protection to IT firms in different countries.
Sales & customer supportSome BPO providers specialize in sales and customer support for pre- and post-sales transactions. This helps companies meet the expectations and demands of their customers, keeping them satisfied even after their purchase.
MarketingBPOs and marketing firms can help in ongoing marketing, communication and branding activities for their clients. This helps them attract more suitable leads in a cost-efficient way.
Talent and HRBusinesses can delegate HR, recruitment and compliance to professional employer organizations to maximize recruitment and workforce management.
AdministrationGeneralist BPOs help organizations accomplish general business administration and operational activities. This includes data entry, appointment setting, and other related functions.
Supply chain managementLastly, e-commerce stores benefit from outsourcing supply chain management to manage warehouse and delivery processes.
Top BPO companies in the world’s top outsourcing hubsA wide range of business process outsourcing companies in different parts of the world provide utmost services to their Western and local clients. Many of them even earned recognition by award-giving bodies due to their performance in both their roles and their level of care for the employees.
Check out the top BPO companies in several outsourcing destinations below.
Top BPO companies in the Philippines Top Indian BPO companies Top South African BPO companies Business Process Outsourcing (BPO) servicesWith the rise of new offshore outsourcing locations, companies can have better options in terms of location and services they can delegate. However, finding a suitable BPO company can be a daunting task to be done on their own.
Good thing advisory services such as Outsource Accelerator is there to help them.
Outsource Accelerator is the most trusted source for independent information & advisory for Business Process Outsourcing (BPO). We have over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 2,500+ BPOs from different locations.
Outsource Accelerator's offerings make it easier for clients to learn about, and engage with, business process outsourcing companies worldwide.
Want to learn more about outsourcing? Check out the Inside Outsourcing book as well as the Inside Outsourcing book review today!
What is a Service Level Agreement (SLA)?
What is a service level agreement (SLA)?A service level agreement (SLA) is a formal or informal document that outlines the expectations between a service provider and end-user. Originating from internet service providers, it has become a standard tool, not only in business process outsourcing but even within corporate structures.
The key benefit of an SLA is that it provides clear, measurable outcomes that are subject to periodic review by designated representatives. It ensures that a service provider's performance is at par with what is agreed upon by all parties involved.
Most service providers usually outline the service level agreement for their clients. However, the latter can also provide their set agreement when needed.
Characteristics of a good service level agreementA good service level agreement has the following characteristics.
Services to be provided by the vendor
Service expectations for reliability, availability, and responsiveness
Clear performance metrics for measuring and monitoring service levels
A standard reporting procedure such as weekly status reports
A timeframe for issue resolution
Penalties for failure to meet expectations or "service credits"
A timeframe for a periodic review of the service and the service level agreement Service level agreement vs key performance indicatorsA service level agreement (SLA) details in a paper how the relationship between the service provider and their client will go through.
Key performance indicators (KPIs), meanwhile, gauge how a company performs in line with its goals and objectives. At the same time, these are metrics used to measure a team's performance against the standards set in the SLA.
Usually, the SLA may indicate specific KPIs that both parties involved may use to monitor service levels.
Service level agreement call centerOutsource Accelerator is the most trusted source for independent information & advisory for Business Process Outsourcing (BPO).
We have over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 2500 BPOs… all designed to make it easier for clients to learn about, and engage with outsourcing and have effective service level agreements with companies or call centers.
SLA in BPOAn SLA is a measuring instrument that determines the BPO company’s baseline performance levels. It includes a description of the services to be delivered and the criteria by which the services will be measured.
In addition, the hiring and BPO company’s roles and obligations, the remedies and service credits, and instructions in the case that the agreed-upon SLA has to be amended or adjusted.
Both the service provider and the clients are responsible for making sure that the service levels indicated are met by their teams.
SLA call centerThe SLA call center is a set of internally defined criteria that management uses to make decisions. Decisions may be made and implemented based on these guiding factors to increase efficiency, save money, and improve customer satisfaction.
Each call center must determine its own SLAs and how to best meet them. The call center service level is the rate at which the goals are accomplished.
It might be difficult to determine the measurements. Each company must be able to identify abandoned calls, calculate realistic time intervals for each phase of the customer experience, and track everything.
What are the types of service level agreements?Here are the three main types of service level management:
Customer service level agreementA customer service level agreement is an agreement between a vendor and a particular customer to provide a certain level of service. It is also known as an external service agreement.
The vendor can outline a generalized service agreement for all customers (service-based SLA) or a tailored agreement for each client (customer-based SLA) depending on their offering and what certain customers will get.
Internal service level agreementAn internal SLA solely applies to corporate employees and does not apply to consumers. While a company may have an SLA in place with each of its customers, it can also have a separate SLA in place with its marketing and sales departments.
Aside from this, an internal SLA can also apply to other roles in a company, including their customer service team.
Multilevel service level agreementMultilevel service level agreements come in various shapes and sizes. Customers or other internal departments of a company can benefit from this type of agreement.
If there is more than one service provider and one end-user, Multilevel SLA is used to define the type of service expected from each party.
The importance of service level agreements in the customer service industryIn the customer service sector, a service level agreement (SLA) acts as a framework for the service the provider allows us to develop and safeguard the company’s assets and reputation, which are crucial.
Three reasons why your company should have a service level agreement in place with its technical customer support services provided are listed below.
Helps establish measurable guidelinesA Service Level Agreement is essential for ensuring that both parties involved are on the same page when it comes to standards and service.
You and your provider can figure out your needs and expectations and guarantee you receive what you invest for by drafting a service level agreement.
Setting clear and measurable standards is essential as it manages expectations and ensures that your technical support services provider is held accountable.
Provides protection for uncertaintyIf your service provider fails to fulfill its responsibilities, it can have a significant impact on your company’s reputation and results.
If performance indicators are not fulfilled, you should include a backup plan in your Service Level Agreement. You might implement monetary penalties that could help your company if it suffers losses. This will help you in protecting your company in times of uncertainty.
Helps manage customer expectationsThose seeking the services of a technical support service provider can have a sense of security with a contract in the form of a Service Level Agreement. It holds your service provider accountable and establishes the level of service you may demand.
If agreed-upon requirements aren’t met, you can reduce some of the consequences by requiring your supplier to make up the difference. SLAs are also preferred by service providers since they help retain consumers.
Excellent customer service supported by great SLAs is one method for service providers to distinguish from their competitors.
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