What is Business Process Outsourcing?

A company outsources a business function through business process outsourcing (BPO). In other words, you outsource your company’s non-core operations.

When a specialist can do a job better than the business, it’s outsourced. Outsourcing company processing is more efficient and cost-effective than hiring employees.

Types of BPO Based on Structure

Companies separate subcontract work into two groups when discussing business process outsourcing.

Back office outsourcing:

This outsourcing type deals with the backend needs of an organization. This includes administrative activities including accounts, documentation, HR, and payroll.

Front office outsourcing:

Front office outsourcing is contracting out of customer-facing tasks.  It includes standard services like marketing, customer service, and tech support.

Your company may enjoy one or both types of BPO. Your company’s best outsourcing solution depends on its needs. You may wish to control some business operations, but you can outsource non-core work.

Types of BPO Based on Location

You can organize BPO examples by vendor location. Companies can receive good outcomes from these three forms of business process outsourcing.

Offshore business process outsourcing:

Offshoring means sending work overseas. Businesses offshore seek cheaper labor, political stability, lower taxes, more resources, etc.

An e-commerce store in the US outsources business processes to a foreign call center. This can affect the bottom line by lowering the overhead costs of the e-commerce shop.

Nearshore business process outsourcing:

Nearshoring sends a business process to a provider in a nearby country. US corporations may use Mexican and Central American providers.

Language skills, time zones, and cultural differences are essential factors when considering outsourcing. Nearshoring is an excellent alternative when nearby nations have cheaper specialized expertise.

Domestic business process outsourcing:

Domestic outsourcing, or “onshore outsourcing,” implies using contractors in your own country. In other words, the service provider is in the same city, state, province, or country as the hiring company. Companies outsource for cultural familiarity and ease of collaboration.

Types of BPO Based on Service

You may also categorize BPO examples by the vendor’s service. Here are some examples of the most common BPO services:

Information Technology Enabled Services (ITES):

ITES manages tech solutions via the internet. This BPO uses it for production, technical, and service desk analysis.

Knowledge Process Outsourcing (KPO):

KPO involves employing experts to handle certain business operations. KPO services include writing, legal work, website design, and financial analysis.

There are two subsets to KPO:

Legal Process Outsourcing (LPO) involves a variety of high-level legal activities. Paralegals at LPOs undertake legal research, develop patent applications, and create legal agreements.

Research Process Outsourcing (RPO) focuses on research and data analysis tasks. Investment firms, marketing consultancies, and pharmaceutical companies use RPO. RPO is in charge of market research, data analysis, and research on investments.

Examples of business process outsourcing functions:

In the United States, businesses outsource around 300,000 jobs every year. Small and medium-sized enterprises can do more with outsourcing than with full-time personnel. This saves money and makes the business more productive.

Outsourcing can be an excellent idea for several business functions.

Here’s a list of the top business processes you could outsource.

Accounting:

Accounting makes a good candidate for outsourcing. Compliance practices and standards can cost time and money if your firm isn’t focused. Accounting outsourcing can save you time and money.

Marketing:

Your firm should outsource content generation and social media. This group of professionals takes your creative ideas and turns them into plans. They do your marketing for you, so you don’t have to worry about it.

Sales:

Your business might not have the skills or people to set up sales funnels and make calls to close deals.

With outsourcing, you can hand over those functions to experts who can bring in more clients.

IT Management:

Information technology is one of the most significant outsourcing sectors. In 2022, the global market for IT outsourcing could be worth $85.6 billion.

Companies can hire a BPO company to help them solve problems or deal with tech issues whenever they need to.

Customer Service:

If your business serves consumers online or by phone, a chat or call center can help. Tell your service provider how to handle client contacts.

Manufacturing:

Small enterprises may not be able to afford a separate production facility. That’s why many companies outsource this function.

But the US has 15.83% of the global manufacturing market. To stay local, engage a domestic manufacturing service provider.

Shipping and Logistics:

Companies outsource shipping, logistics, and consumer delivery. E-commerce firms that want to focus on sales and marketing should outsource this duty.

Research:

Is there something you need to know about your clients or your sector? Need proper research before entering new markets or releasing a new product.

If you don’t want to spend weeks or months polling customers, you can hire an RPO provider to do the research for you. They will have more informational resources and bring invaluable insights.

Human Resources:

Recruiting services are a common way to outsource HR by filling open positions.

Outsourcing includes payroll, benefits, training, and time and attendance issues.

These listed functions are often outsourced to a BPO company. A business can outsource any task that takes too much time so someone else can finish it quickly.

Reasons for Business Process Outsourcing

Decrease cost: Outsourcing saves 70% on costs, especially in recruitment, training, and renting. In-house infrastructure deployment and maintenance costs are also reduced.

Concentrate on primary functions: payroll, data entry, and email can divert your attention. Through outsourcing, you can concentrate on expanding your firm.

Meet better results in non-primary functions: BPOs increase non-primary results with administrative duties. A BPO may invest in the latest payroll system, whereas a software developer may not. Outsourcing provides superior solutions.

Improve efficiency and speed: The employing company increases capacity, accuracy, and time. A record management BPO can automate document indexing to save time. Plus, automation software is cheaper.

Expand global presence: Companies can use BPO for long-term planning. Businesses looking to expand can use BPO to tap into the global market. By outsourcing, businesses may serve customers 24/7 and in many languages.

Allow for flexibility: Outsourcing reduces launch risks and speeds up client response. They can scale the operation up or down depending on the situation.

Different Categories of Industries Using BPO

Legal:

A growing number of legal companies are using business process outsourcing. A BPO company can do things like transcription for law firms that aren’t very important. BPO firms can do patent applications and legal research.

Real Estate Management:

Facility managers and developers hire outside support for charge and benchmark analyses. BPO services can help real estate organizations with accounting, administration, and lease abstraction.

Information Technology:

Most companies have an IT department and need the support of a tech team. BPO helps companies manage network services and fix IT problems.

Healthcare:

The medical industry has many non-core activities to outsource. These activities include healthcare billing, coding, data entry services, and claims processing. Doctors and nurses should focus on patients, not administrative duties.

Mortgages:

Because there are so many things to do when collecting on a mortgage, lenders now use BPO services. Closing, document processing, underwriting, and other checks are loan approval steps. A BPO partner lets lenders pass on work that takes a lot of time and effort.

E-commerce:

E-commerce shops receive plenty of customer calls and messages in a day. If a shopper has a question about a product or the return/refund policy, they want an answer right away. A BPO company may handle all e-commerce customer care contacts.

Conclusion

As you’ve seen, there are several examples of BPO services that companies of all sizes can leverage. Employing a third-party service provider can launch endless business options.

Business process outsourcing improves efficiency and saves money. BPO helps you save money and focus on critical activities.