Business Process Outsourcing (BPO)

By James Watson

Apr 16, 2022

Level: Beginner

Reading time: 5 min

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You may have heard about BPO and how companies outsource some of their jobs. But what is the full form of BPO, it’s meaning with examples, and how is the process carried out? This article will reveal the BPO definition and its advantages, goals, and types.

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What is Business Process Outsourcing (BPO)?

The abbreviation BPO stands for Business Process Outsourcing. It is a method of subcontracting various business tasks to third-party vendors. In essence, BPO means a company’s contract with an external provider of services or business processes.

What is the meaning of BPO?

The meaning of BPO or its entire definitions in English used to be totally related to customer service. This is because BPO mostly has its origins in call centers overseas. But as companies have realized the advantages of BPO in increasing efficiency, reducing costs, and generating more profits in a resource-limited environment, it has expanded significantly to include many services in various sectors of the economy.

Find out what services BPO companies offer today; it is data processing, electronic storage of important transactional documents, accounts payable processing, and others.

Which industry is an example of BPO?

Typical examples of BPO are functions and departments such as accounting, human resources, and call centers.

Special сonsiderations

The variety of BPO options depends on whether the company concludes an outsourcing contract at home or abroad:

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Onshore outsourcing. If a company enters a BPO contract in its own country, it is “onshore outsourcing”. And it doesn’t matter if the supplier partner is located in another city or state.
Nearshore outsourcing. In this case, the work is carried out under a contract with a neighboring country. For example, a US company is partnering with a BPO provider in Mexico.
Offshore outsourcing. It consists of entering into a contract with a supplier from another country with political stability, lower labor costs, and/or tax savings. An example of offshore outsourcing is a Canadian company using an offshore BPO provider in Germany.

Elasticity and Inelasticity of Demand

Today, BPO is a particular industry where companies specialize in facilitating BPO to companies worldwide.

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What is the goal of BPO?

The main goal of BPO is to reduce operating costs and free up the time of the company’s full-time employees. This way, employees can focus more on core business competencies while BPOs take care of non-essential business tasks.

The attraction of Business Process Outsourcing

Business process outsourcing is a fast-growing sector of the economy. Many companies and organizations are drawn to BPO because of several reasons, which include the following:

Improved work efficiency.
Cost reduction.
Ability to focus on the company’s core competencies.
Expansion of global presence.

Through BPO, a company can achieve greater operational flexibility. It can delegate non-core competencies to third-party vendors, allowing it to focus on the most critical aspects of the business. In addition, the company no longer needs to spend money on equipment and staff, which reduces overall costs.

Advantages of BPO

BPO is popular because of the many benefits it offers. Below are some of the most common:

Reducing the cost of maintaining staff.
Process optimization.
Access to competent workers worldwide.
More time to focus on more critical aspects of the business.

Thus, BPO can lead the company to extensive growth.

Disadvantages of BPO

While BPO offers several advantages that can highly improve a company’s operations, there are also disadvantages attached to its use:

Security issues. Data leakage is a common problem that occurs in the BPO industry. For example, hackers can access outsourced confidential company data and sell it to competitors.
Communication issues. When the BPO company you are hiring is located in another country, there may be communication problems due to language differences. It may lead to delays in operation.
Quality control issues. It can be challenging to control the quality of services when they are outsourced. Sometimes their methods of work and problem-solving may not suit the customer. As a result, the business will have to look for a new BPO company.

However, these problems can be avoided by working closely with the BPO company and constantly airing out expectations.

What is the BPO company?

Companies are implementing BPO practices in two main areas: back-office and front-office operations:

Front-office BPO is mostly customer-related. Workers of front-office BPO are primarily tasked with attending to customers. Examples include tech support, customer service, marketing, and sales.
Back-office BPO does not require workers to face customers. Its services include IT, accounting, quality assurance, HR, business process automation, and many more.

Many small and large companies choose business process outsourcing due to its affordability.

What is a BPO job?

BPO jobs are jobs in companies that provide outsourcing services to businesses. For example, a small company hires an accountant to file tax returns for the past year.

Today, the BPO industry is attractive to many professionals. According to industry research, the BPO market was valued at nearly $250 billion in 2021 and is projected to grow at 9% per year over the next decade.

The bottom line

As you can see, BPO affects different sectors of the economy. It is a good tool for improving the profitability of a business. Even though it has disadvantages, many companies still turn to it to enhance their business operations. Also, BPO is constantly evolving to cater to the needs of more industries in the future.

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