Business process outsourcing (BPO) is a widely used term in almost every industry. It is practiced in the Information and Communications Technology industry, along with contact centers and the healthcare sector.
What is business process outsourcing?
Outsourcing is the act of using third-party vendors or service providers for functions that were previously performed in-house. This includes front-office and back-office business solutions that are not classified as a company’s core strength. A company’s core competency is what it does best: for example, a marketing company’s core competency lies in marketing per se, while an IT company might count software development and testing among its core strengths. .
One of the most prominent benefits of outsourcing is cost reduction, as it has the ability to significantly minimize a company’s overhead and labor expenses. The business practice also touts leveraging a highly professional and experienced workforce, as well as faster implementation and better quality of service among its top benefits.
Types of outsourcing
In general, there are two types of outsourcing: onshore and offshore.
Onshore outsourcing refers to using service providers that are within the same country, but in different locations. An example of this would be a game company based in San Francisco, California that has numerous studios throughout the United States. In this case, jobs that could have been done in San Francisco were transferred to other states.
On the other hand, offshore outsourcing refers to exploitation service providers outside the country. A perfect example of this is Apple Inc., an American company that has manufacturing plants in China.
Both types of outsourcing have their pros and cons. As an example, onshore outsourcing removes the language barrier as both parties speak the same language. However, the cost reduction would be minimal to non-existent as the American standard of living still holds up. Similarly, offshore outsourcing means delayed delivery due to distance, but at significantly reduced costs.
Typically Outsourced Services
Most of the western companies need contact center support in the form of voice based and non-voice based call centers and help desk services. This refers to technical and customer support through basic means: calls, emails, live chat and interaction on social networks.
Additionally, many business-to-business agreements are focused on the IT industry. Many IT service and support functions are outsourced to overseas IT locations, as labor costs are considerably cheaper than in the United States. Similarly, many developing countries, such as the Philippines, India, and Mexico, are rapidly becoming competitive in the IT industry and can be counted on to produce outstanding services.
These are just some of the commonly outsourced business processes. Some companies focus on providing e-commerce support, data services, content moderation, and a host of other business processes.
Conclution
Business process outsourcing helps companies realize their full potential by focusing attention on their core competencies. After all, why should companies perform a mediocre task related to business processes that are not their specializations, if a highly experienced third-party provider is willing to provide the service for minimal cost?