Companies hire other companies to do some of their work. This common strategy to cut expenses and improve business operations is called Business Process Outsourcing (BPO).
With projections to reach US$29.31 billion in 2024 in the UK, understanding what BPO is can help you make informed decisions about business operations and avoid the common pitfalls associated with outsourcing. If you’ve found yourself googling ‘BPO meaning’, we’ve got you covered. This guide will answer ‘what is BPO?’, and will explain everything you need to know the different types, pros and cons, and how to choose a provider if you decide to get one.
What is Business Process Outsourcing (BPO)?
BPO is a technique of hiring third-party contractors to handle non-core business functions and covers a wide range of outsourcing tasks. The idea behind it is to offload some of your business operations to other providers. This process can save you time and money as a business, and can enhance the quality of your service for your customers.
If you’re wondering, small and even big companies like Google and Slack have been hiring BPO providers to focus on their core business. Commonly outsourced business functions of most big companies are customer support, human resources (HR), payroll, finance and marketing.
Types of BPO services
BPO can include outsourcing back-office or front-office functions. Back-office functions focus on non-customer-facing tasks like finance, human resources, and IT. This includes handling accounting, payroll, and IT support.
Meanwhile, front-office functions interact directly with customers, covering areas like customer support, sales, and marketing. Examples of this include answering customer enquiries, closing deals, promoting products or services and even IT-Enabled Services (ITES) such as technical support, data entry, and more.
To know more about specific BPO services, you’ll find a list of services in our business marketplace.
What are the advantages of BPO?
We’ve taken a look at the top reasons why companies are drawn to outsourcing. These four benefits are mostly why companies can redirect their time and assets towards their primary strengths and scale businesses.
Cost savings
BPO providers often operate abroad because the labour market grants them top talents at a reduced expense. By employing workers further afield, companies can often redirect the money saved to their outsourcing partners.
There are other expenses that can be reduced by choosing to work with a BPO company. Imagine cutting costs of leasing office space, the fees associated with software used by employees, and other general expenses. This is why cost savings remain one of the primary reasons businesses choose to outsource.
Improved efficiency
Hiring a professional chef to cook your meals gives you the same logic as hiring a BPO provider. They have the skills and experience to prepare food faster and at a higher quality than you could. In a similar way, BPO providers often have specialised expertise that can easily execute your processes and improve your organisation’s efficiency.
Access to global talent
You’ll be surprised by the skills people from all over the world could provide. By partnering with providers in different countries, companies can access a vast pool of skilled workers with diverse expertise. Digital Minds lists Philippines, India and Poland as some of the top BPO capitals to hire talented workers.
You can focus on your core business
Finally, BPO can help you focus on steering the ship towards your main business goals. For example, while you may think that dealing with customer complaints may not be core business, that doesn’t mean that this shouldn’t be taken care of as this could potentially lead to the business' downfall.
By outsourcing non-core functions, companies can free up their resources to concentrate on their core competencies and drive growth.
Are there any disadvantages to business process outsourcing?
While BPO offers many significant advantages, there are potential disadvantages to consider, including:
Dependency on others
When you outsource your critical functions, your business may become reliant on the performance and reliability of the BPO provider. If they mess up, it could impact your entire business - but that's the risk of outsourcing. A disruption in their operations could lead to delays, and errors, and potentially damage your reputation. With this in mind, it’s important to prioritise strong communication with your BPO provider to avoid any misunderstandings or delays.
Lack of control over quality
Many BPO providers in the market offer quality services but just as many don’t. While BPO providers have quality standards, there might be variations compared to doing things in-house. This could lead to inconsistencies and customer dissatisfaction.
Data security concerns
Outsourcing often means sharing sensitive information with a third-party. This opens the door to potential data breaches and security risks. If your company deals with sensitive information, you might need to follow specific regulations such as GDPR, or similar guidelines.
Should your company try business process outsourcing?
If you’re considering trying BPO, you must assess if the tasks are non-core, if money will be saved, if it can improve efficiency, and if you have the resources to manage an outsourcing relationship. For example, a start-up like yours may use BPO if you have limited back-office workers.
But while outsourcing benefits like reduced costs and access to specialised talent can certainly help companies, it still involves risks and may not be for everyone. The decision to outsource should be evaluated based on your specific needs and circumstances.
By weighing up the pros and cons mentioned in this article, you can make an informed decision about whether BPO is the right choice for your organisation.
How to choose a BPO provider
By conducting thorough research and due diligence, your organisation can increase its chances of selecting a quality BPO provider that aligns with your specific needs. Take the time to evaluate based on their expertise, experience, and track record. Here is a checklist you can use to help you find the right fit:
Evaluate capabilities and experience: Make sure to evaluate their skills, certifications, and technology. If you’re planning to outsource for automation, make sure the provider has the necessary technology infrastructure, such as cloud-based call centres and CRM systems.
Or if your company needs a BPO provider to handle customer support in multiple languages, look for a provider with experience in multilingual call centres.
Check security and compliance measures: A good BPO provider has strong data security and compliance with regulations. Otherwise, you may risk falling into pitfalls like what happened to Royal Bank of Scotland and its IT vendor where £56 million in compensation were paid due to massive IT issues that left millions of customers without access to their money.
Understand pricing models and contracts: Look into pricing, contract terms, and potential hidden costs. Some pricing models include fixed fees, hourly rates, or performance-based metrics. You must also carefully review the contract for terms like service level agreements (SLAs), dispute resolution, and termination clauses.
Check references and customer reviews: You can never go wrong with searching up references and reading reviews. This gives you valuable insight into the provider's reputation, quality of service, and customer satisfaction.
Find your ideal BPO provider with BSC
It’s not easy choosing a BPO provider to support your outsourcing needs. We recommend carefully reviewing the necessary details before committing to one company and getting an appropriate agreement in place. It’s all about making sure they can provide the solutions that your organisation needs.
BSC can help match you with the suppliers across the BPO industry to help you find the ideal BPO supplier. Join our marketplace today.