What is BPO?

If you have been in the business industry for long, an often-used term is BPO. As the usage, and popularity of BPO rises, we provide insight for those unaware, of BPO and its offerings for an entrepreneur wishing the best for their business.

BPO is an abbreviation for Business Process Outsourcing. In this, business contracts out some tasks of its operations to a third party, which could essentially be another business in another country. This is done primarily to ease functions for the outsourcing firm and establish a greater focus on their core departments.

BPO began as a phenomenon pursued in the manufacturing industry. Since the core departments were mainly production-related, all those unrelated (e.g. Supply chain) were then delegated to other companies. This ensured the workers’ focus remained on the main task of manufacturing at hand, while other work at the backend was outsourced. Since then, BPO has advanced and prospered to encompassing many other areas of work. From profitable firms to non-profitorganizations to even governmental agencies, all have begun to adopt BPO in their business practices.

 BPO can be applied to two main components of a company:

  • Back Office Operations
  • Front Office Operations

When we delve deeper into each of these components, are we able to figure out which operation type should our company outsource. Departments that can be outsourced continue to vary among organizations, and thus each has to decipher the best way of strengthening operations for itself, with no ‘one’ way proving apt.

Back Office Operations refer to, as the word ‘back’ suggests, those on the back of an organization, away from the end consumer. These can also be referred to as the internal business functions, and primarily contain departments such as: Accounting, Information Technology (IT) services, Payment Processing, Human Resources (HR), Quality Assurance (QA), etc.

On the other hand, Front Office Operations are active on the front of the organization and establish usual contact with the end consumer. This can be in the way of Customer Relations, Sales Department, the Marketing Department, and Tech Support.

BPO Categories

Business processes can be outsourced in 3 main categories:

  • Off-shore Outsourcing – This refers to contracting work to firms in a country other than that of the outsourcing organization.
  • Near-Shore Outsourcing – This is when work is contracted to firms in neighboring countries of the country of the outsourcing organization.
  • On-Shore Outsourcing – This refers to outsourcing work to firms and organizations in the same country as that of the outsourcing firm.

Deciding the best way to adopt BPO varies from one organization to another, and is greatly dependent upon availability of labor, resources, and level of costs, amongst other factors.

The Process of Outsourcing 

Although BPO sounds interesting and easy, it is a tedious process inculcating much work, research, and strategic decision-making. This is because when outsourcing a specific business department, or even portion of a department (e.g. Payroll), the business must initially weigh the advantages and disadvantages of outsourcing. If the pros outweigh the cons, only then is the 2nd part of the process look at: finding a vendor to outsource to.

After a suitable vendor has been chosen, there commences the process of transferring data and workload to the vendor. However, again, much easier said than done, the transference of data is risky and a long process, which could be enhanced by investment in, and use of, apt technology. After the vendor has been set up to resume operations, there is always the need to maintain communication with the outsourcing organization. 

It is important to understand that while BPO has become a popular way of conducting business, it does have its set of disadvantages. From aspects like an underestimation of costs to greater issues like data privacy breaches, BPO can prove troublesome. Therefore, before outsourcing, there is a need for extensive research on the process and vendor, and the need to consider; Do we need to outsource?