BPO, or Business Process Outsourcing, is the process by which an organization hires a third-party service provider to perform some of its business functions. The concept of BPOs derives its roots in the manufacturing industry, where companies outsource their production and supply chain services. Building on that, nowadays, most companies contract BPO vendors for various back and front office operations.
Different types of BPOs
By understanding the different types of BPOs, businesses can determine which services to outsource. This helps them strategize how to cut costs by seeking specific roles and acquiring target-based skills.
Based on the services offered, organizations can enter into a contract with BPO vendors for two main service types:
These operations are not visible to the customer directly. This umbrella term includes employee wages processing, IT services, legal advisory, quality assurance, etc.
Front Office Operations
These operations are customer-facing. This type includes marketing and sales, customer relations, tech support, communications, grievance redressal, etc.
Types Of BPO Companies Based on Location
Depending on the location of the vendor, BPO services can be of the following types:
This process involves a business outsourcing segment of their workflow to a third-party company based in another country. From start-ups to billion-dollar corporates, companies prefer outsourcing their business functions to foreign partners outside their country.
Some of the most popular functions which are outsourced offshore are:
- Knowledge Process Outsourcing: This involves hiring a company specialising in local business legislations that govern your overseas business. For example, you can hire KPOs to provide legal advisory services if you’re running an export-import business. This will help your business wade through the local trade laws, tax regulations, vendor contracts, etc., of the exporting country.
- Research and Development: Countries that aren’t as technically advanced as others can employ BPOs from countries that offer R&D expertise within the scope of your business.
- Customer Support: BPO companies specializing in front-end customer support handle customer queries and provide support through call centre services. The biggest advantage of offshore call centres is for organizations that can avail of this service from another country where labour is relatively cheap.
- Sales and Marketing: Organizations again prefer outsourcing this function to offshore BPOs because it costs a lot more to get it done in their homeland.
This process involves outsourcing your functions to a vendor in a neighbouring country rather than a country farther away. A great example of a nearshore country for the US will be Canada or Mexico, and Ukraine or Poland for Germany. It has certain advantages over offshoring, like a slight difference in the time zone. Other advantages are easier travel and communication, making managing more convenient.
As the name suggests, onshore or domestic BPOs are used to outsource business responsibilities to other regions within the country. This decision is made because of the regional variations in production costs, tax laws, availability of specialized skill sets, etc. The benefits of this practice are minimal travel expenses, similar time zones, cultural expectations, etc. The only drawback of this model over the previous two is the relatively higher costs of the outsourced functions.
Benefits of the BPO process
BPO vendors now form an inseparable part of numerous businesses because they offer several benefits, such as:
- Lower operational costs: The core concept behind the emergence of BPOs was to lower expenses. Outsourced team members will always cost less money, do not require employee benefits, and come without additional payroll taxes.
- Global outreach: Reaching out to another country to get your jobs done leaves your footprint in their economic market. It also creates jobs, thus ensuring a synergy that promotes its global reputation.
- Higher efficiency: It reduces the expenses and the time spent on the cumbersome process of hiring. It also reduces management fatigue and enables businesses to focus on their core business ethos.
The Risks of BPO
The risks of BPO are plentiful and varied. The outsourcing of business processes can have a negative impact on the quality of work, employee morale, and efficiency. Additionally, faulty or incomplete process outsourcing can lead to lawsuits or even financial ruin for the companies involved.
Here are five key risks associated with BPO:
1) Quality of Work: Poorly executed BPO projects can lead to a decrease in the quality of work for employees who are responsible for executing the process. This can cause significant disruptions and impairments in the overall workflow.
2) Employee Morale: When employees feel like their job is in jeopardy or that their skillset is no longer being used effectively, they may become disgruntled and leave the company. This can ultimately have a negative impact on productivity and efficiency.
3) Efficiency: Failed BPO projects can result in decreased efficiency both within the company itself and across all departments that were involved in the project. Teams may be pulled apart and individual tasks may be delayed as a result of over-extending resources.
4) Legal Issues: botched BPO projects can often lead to legal issues either for the outsourcer themselves (due to inaccurate or faulty process instructions) or for those whose data was processed improperly (e.g., intellectual property infringement). In either case, costly litigation may ensue.
5) Financial Ruin: Companies that outsource their BPO processes without ensuring proper quality control or adequate safeguards may find themselves in financial difficulty. If the process is not properly executed, data can be lost or corrupted, costing companies both time and money in the long run.
With its growing presence, the BPO industry is here to stay. Business process outsourcing allows reputed organizations to invest more time and resources in their critical niches. It also helps in lowering costs and being flexible in their business operations.
Finding the right BPO provider isn’t rocket science anymore. This article informs about BPOs, their benefits, and the types of BPOs that you can choose from for your company.
Did you outsource any processes yet to ensure more efficiency and flexibility in your business model? If not, then it’s high time to consider hiring a BPO company that fits your needs.