Business process outsourcing or BPO offers entrepreneurs and start-ups a staffing solution to allow them to scale up to the next level. Especially 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 mean? To understand this you need to look at the role players and the processes that are involved. BPO is a business practice.
The business process outsourcing definition is a business practice in which a business contracts a third party to complete certain tasks for them. These tasks are normally essential business tasks but not necessarily the core work of the business.
The key here is that when a business outsources, the company needs a solid grasp of business process management.
Examples of essential tasks are accounting payroll, and HR work. Additionally, these tasks can occur horizontally (near similar businesses) or vertically (different businesses that can add knowledge to a business).
What business process outsourcing offers is additional skills, cost-saving, and faster scaling.
Business process outsourcing companies & tasks
There are several different types of businesses that make use of business process outsourcing. Some of the companies that make use of this sort of staffing include governmental agencies, non-profit organizations, and commercial enterprises.
Most of these outsourcing companies are located 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 include work such as marketing, sales, and customer relations services.
Back-office tasks include all the various internal company tasks, such as information technology services, accounting, human resources, payment processing, and quality assurance.
A company can choose to outsource all of its functional work to a third party. It is normal to see a business outsource its whole HR department or marketing department to another entity.
If a company chooses to outsource a specific process, then it would be, for example, to outsource the payroll tasks of the HR department to a third party.
Another example would be to outsource digital marketing to a third party while still maintaining an in-house marketing department.
Popular outsourced tasks
That said, the popular processes companies normally outsource are admin, accounting, HR, customer service, call centers, sales, research, logistics, but also 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.
Firstly, Apple obtains parts from companies like 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, namely 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.
Normally these reasons depend on the size and age of the business, the business 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 more economically friendly.
Outsourcing – the solution
Even though companies differ and their needs vary, some businesses face similar challenges. For example, in general, start-up ventures require both front and back-office tasks to be completed.
These businesses also lack the funds to hire onsite staff. More established businesses 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
An important contact person is the outsourcing expert. They will be able to identify which tasks can be outsourced and the process a business should follow. However, in general, an outsourcing expert would advise starting by identifying 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 type of change. There will be a solid change management program needed to counter and allay such qualms as the business migrates some tasks to a third party.
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 the process has been completed.
That said, even though there might be some investment in new technology, the venture that outsources will have financial benefits which 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:
BPO suppliers can frequently complete the tasks at a lower fee and therefore save the business hard cash while saving the company from paying staff benefits or taxes for such assistants.
BPO service providers can assist a business to increase its agility which means that the business can react faster and be more nimble. Such 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 makes use of these skills simply onboards such skills and can instantly and rapidly move 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:
If there are unethical workers, especially 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 engage Apps such as LastPass, which will code the password, thereby preventing the password from being misused by third parties.
Businesses sometimes find that they have not budgeted for their actual costs. They can, for instance, have to invest in new technology.
However, this can be managed by speaking to an outsourcing expert. Such an expert will be able to advise you on the actual costs, thereby helping you to budget correctly.
Bigger possibility for disruption
Businesses must be aware 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 where the outsourcing service is located.
Offshore outsourcing or offshoring describes business contracts for services conducted by an outsourcing company based outside their own country.
In onshore outsourcing or domestic outsourcing, a business makes use of an outsourcing company based in the same country they are in.
Nearshore outsourcing describes a business using an outsourcing company offering its services from neighboring countries.
How to select a BPO company
It is important that the business owner or manager choose BPO providers who can support their company’s objectives. Such providers will aid them to be more flexible, allowing them to react with greater speed 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 that you contact our outsourcing expert and book a complimentary call to discuss your needs. Let Aristo Sourcing be your first choice.