Business process outsourcing, or BPO, offers entrepreneurs and start-ups a staffing solution to scale up to the next level. Primarily focusing on new start-ups, the goal is to gain as much market share to become a dominant force and to beat any potential copycats from gaining a foothold on the market.
However − what is business process outsourcing, and how can it benefit a business?
What is business process outsourcing (BPO)?
What does business process outsourcing (BPO) mean? To understand it, you need to look at the role players and the processes involved. BPO is a business practice.
The definition of business process outsourcing is a business practice in which a business contracts a third party to complete specific tasks for them. These tasks are generally essential business tasks but not necessarily the company’s core work.
The key here is that when a business outsources, the company needs a solid grasp of business process management.
Accounting, payroll, and HR work are examples of essential tasks. Additionally, these tasks can occur horizontally (near similar businesses) or vertically (different businesses that can add knowledge to a business).
Business process outsourcing offers additional skills, cost-saving, and faster scaling.
Business process outsourcing companies & tasks
Several different types of businesses use business process outsourcing. Some of the companies that use this sort of staffing include governmental agencies, non-profit organizations, and commercial enterprises.
Most of these outsourcing companies are in developed economies, such as the United States of America, Canada, the United Kingdom, European Union countries, Japan, Australia, and New Zealand. Here, the business uses two main focus areas, namely front-office and back-office tasks.
Front-office tasks
Front-office tasks include marketing, sales, and customer relations services.
Back-office tasks
Back-office tasks include all the various internal company tasks, such as information technology services, accounting, human resources, payment processing, and quality assurance.
Outsourced tasks
A company can choose to outsource all of its functional work to a third party. It is normal for a business to outsource its whole HR or marketing department to another entity.
If a company chooses to outsource a specific process, it might outsource the payroll tasks of the HR department to a third party.
Another example would be outsourcing digital marketing to a third party while maintaining an in-house marketing department.
Popular outsourced tasks
The popular processes companies commonly outsource are admin, accounting, HR, customer service, call centers, sales, research, logistics, and manufacturing.
For example, Apple will create and design work in California relating to a new iPhone, such as the much-awaited iPhone 14. However, the manufacturing part of the production takes place in many different countries.
First, Apple obtains parts from LG, Samsung, Sony, and Toshiba. The battery is from China’s Sunwoda Electronics. The camera is from Qualcomm, whereas Corning, which has factories in Australia, Malaysia, and Japan, produces the glass screen.
Apple’s processors are from the tech manufacturing giant TSMC. Two companies, Taiwan-based Pegatron and Foxconn, assemble all the multiple parts.
How business process outsourcing works
Now that we have explained what business process outsourcing means, we need to explain how it works. This process starts with an entrepreneur or business executive who will want to outsource tasks for various reasons.
These reasons typically depend on the size and age of the business, its type, economic conditions, and market forces. For instance, with the war in Ukraine, inflation hitting a 40-year high in the United States, and the aftermath of the ‘great resignation,’ many business owners opt to change their staffing model to one that is more economically friendly.
Outsourcing – the solution
Even though companies differ and their needs vary, some businesses face similar challenges. For example, start-up ventures generally require both front- and back-office tasks to be completed.
These businesses also lack the funds to hire onsite staff. More established companies would outsource non-core tasks, allowing their teams to focus on their core function.
Moreover, it is generally better accomplished and at a considerably lower cost when the work is outsourced.
The outsourcing expert
A vital contact person is the outsourcing expert. They can identify which tasks can be outsourced and the process a business should follow. However, an outsourcing expert generally advises starting by placing one’s tasks.
After that, a virtual assistant can readily help with such tasks. After making it work, the business can then follow on with the second list of identified tasks, repeating the process. The most efficacious process is, therefore, a systematic approach.
The commitment to the process
Adopting a new approach is not always easy. Most people initially fear any change. As the business migrates some tasks to a third party, a solid change management program will be needed to counter and allay such qualms.
This may not daunt a start-up with no staff, but this can be a problem for more established businesses. However, it is much easier to onboard more virtual assistants and outsource additional tasks after completing the process.
That said, even though some investment in new technology might be made, the venture that outsources will have financial benefits that will pay for its investments. Over time, that business will thus reap the rewards of outsourcing.
But what are the benefits of BPO?
If you want to know the benefits of outsourcing, you need to look at the stats.
For example, research conducted by Deloitte found this information on businesses that make use of business process outsourcing: 70% reported cost savings, 40% found increased flexibility, 20% reported an increased speed in delivering their products to the market, and 15% had better access to processes and tools.
More details about the benefits of BPO
To explain further the benefits of business process outsourcing:
Monetary benefits.
BPO suppliers can frequently complete the tasks at a lower fee, saving the business hard cash while preventing the company from paying staff benefits or taxes for such assistants.
Better flexibility.
BPO service providers can assist a business in increasing its agility, which means that the business can react faster and be more nimble. This is useful if the business is in a highly competitive market.
‘Greater than before’ competitive gain
BPO allows a business to center its energy and resources on its core work, which means increased efficiency and accuracy. A better product can, therefore, be produced and presented more rapidly to the market.
This speed is partly ascribed to the core team performing better and producing a better quality product.
Access to great talent
BPO companies have teams of specialists who are highly skilled at their work. A business that uses these skills can onboard such skills and move instantly and rapidly to produce better quality services or products.
Potential risks of BPO
There will always be a risk with any process; BPO processes are not excluded. Here are some of the main risks that should be managed:
Security breaks
If there are unethical workers, primarily since virtual assistants work remotely, there is a risk that some sensitive data can be breached. To manage this, companies can use employee-task software, not sharing passwords with the workers.
The business can use Apps such as LastPass, which code the password, thereby preventing it from being misused by third parties.
Unexpected costs
Businesses sometimes find that they have not budgeted for their actual costs. For instance, they may have to invest in new technology.
However, this can be managed by speaking to an outsourcing expert. Such an expert can advise you on the actual costs and help you budget correctly.
Bigger possibility for disruption
Businesses must know that there could be some challenges with people working in different countries.
These challenges can include storms, power blackouts, and various economic circumstances. Again, an outsourcing expert would be able to assist with risk strategies that will work.
What are the different types of BPO?
Business process outsourcing falls into two types, based on the outsourcing service is location.
Offshore outsourcing
Offshore outsourcing or offshoring describes business contracts for services conducted by an outsourcing company based outside their country.
Onshore outsourcing
In onshore outsourcing or domestic outsourcing, a business uses an outsourcing company based in the same country as it.
Nearshore outsourcing
Nearshore outsourcing describes a business that uses an outsourcing company to offer services from neighboring countries.
How to select a BPO company
The business owner or manager must choose BPO providers who can support their company’s objectives. Such providers will aid them in being more flexible, allowing them to react faster and be more competitive. Moreover, the business owner must look beyond price and focus on quality when selecting an outsourcing provider.
Aristo Sourcing – Your outsourcing company
Aristo Sourcing was established in 2014 and has become one of the leading outsourcing providers globally. Aristo focuses on sourcing great talent – with the right skills to do the work.
We suggest you contact our outsourcing expert and book a complimentary call to discuss your needs. Let Aristo Sourcing be your first choice.