Business Process Outsourcing: An Overview
Business Process Outsourcing (BPO) is the corporate practice of hiring an outside company to execute selected business activities. This article informs the reader of the various types of BPO services available in the industry.
Business Process Outsourcing (BPO) is essentially a business model change. It involves hiring a global service company to perform certain business tasks. Outsourcing companies are frequently employed as a corporate cost saving measure. In general, the organization needs the work to be outsourced to an external service provider for business processes to be efficient, however, it is not part of the core operations of the business.
In BPO’s infancy, outsourced tasks were limited (eg, payroll, HR, accounting). Over time, business process outsourcing services have grown to include additional business value solutions such as legal services, healthcare, insurance, telecommunications, utilities and energy, and many more.
BPO can be classified into two categories: shared back office and shared front office processes. Back office outsourcing involves internal business functions, such as finance and accounting. Front office outsourcing encompasses technical support, marketing, and customer-related services. Organizations also outsource healthcare, insurance, shipping, and logistics processes.
Outsourcing can be classified into three categories based on the location of the outsourcing company (relevant to the company’s principal place of operations). The three categories include: offshore, nearshore and onshore outsourcing.
Offshore outsourcing is the outsourcing of business functions to a company located in another country. Many companies around the world continue to turn to outsourcing to minimize overhead costs, access innovations and developments from more specialized suppliers, and make internal processes more efficient.
A task outsourced to a neighboring country, which often shares a border, is considered close subcontracting. This is often preferred due to closeness in geographic location, cultural similarities, and similar time zones. For example, companies in the United States frequently subcontract near the coast to neighboring countries such as Canada and Mexico.
Onshore outsourcing (also called domestic outsourcing) is outsourcing business responsibilities to another organization located within the same country. This option can be used for strategic reasons, even when very specialized expertise is needed that cannot be found anywhere else. The local proximity of onshore subcontracting also makes it easy to contact contractors in person.
Regardless of the classification, outsourcing business solutions and services continue to rise, and the sky is the limit. Driven by marketing and operations performance, business executives strive to meet global productivity standards and minimize costs. This results in more and more companies using business process outsourcing and strategy to use global services and increase business performance.
The savviest companies have seized this great opportunity and have made global business process outsourcing part of their business strategy. If you want to be a part of this drive for change and are looking for alternatives to implement within your business, contact a global services company for more information.