business process outsourcing
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Business Process Outsourcing: A Guide for Companies in 2022

Discover How Business Process Outsourcing Can Help You Increase Your ROI

Efficiency has always been a critical factor in business. And with the connected world of today, companies have to compete in a highly saturated global market. That is where efficient work processes can be the difference between success and failure.

But just planning these smooth workflows isn’t enough. You need to shore it up with innovative mindsets and solid yet flexible management. However, not every business has the infrastructure required to implement and manage such business process services.

Business Process Outsourcing, also called BPO, allows businesses to implement high-quality processes without the necessary infrastructure. Let’s take a look at BPO, and learn what it does, the types of BPO services, and how it can benefit a company.

Business Process Outsourcing – What is it?

Business development officer  discussing the project with a developer

Business Process Outsourcing, or BPO, is a business process quickly rising in popularity in the market. In this process, businesses usually outsource a specific workflow or set of workflows to external BPO companies. The purpose is to hire professionals with the required infrastructure to fulfill those processes successfully when it is impossible to have an in-house team, such as hiring a software outsourcing company for your software development projects.

Usually, outsourced BPO services include telemarketing, data collection and entry, social media marketing, customer support, human resources, accounting, and more. However, if you look at the processes listed, you will notice that all of these business process services are supplementary to running a successful business.

Core business processes are and should never be assigned to outsourcing companies. Identifying which services need to be outsourced requires you to evaluate the cost-benefit analysis of each business process and discover which of them need to be outsourced and what requires an in-house team.

According to Statista, the US generated $26 billion in revenue via the global BPO industry in 2019. That shows the massive potential the business practice has in the world today.

The Benefits of Business Process Outsourcing

Today, the startup culture has given rise to people working together while hailing from different geographic regions. Similarly, even the big companies, including Fortune 500 brands, have realized the massive potential of an international talent pool and are outsourcing their services to teams globally.

In this scenario, business process outsourcing is an excellent solution for companies to get ahead of their competition. Suppose a company outsources its processes to a BPO services provider that offers software outsourcing services. In that case, they will have access to a broader range of talents, cut down on costs such as talent relocation, and even cut down on wage costs in some scenarios.

Types of Business Process Outsourcing

Website SEO outsourced to an SEO agency

Broadly categorized into two categories, BPO offers either front-office or back-office services. The back office deals with the internal processes required for a business to function correctly, such as purchasing, HR, accounting, etcetera. However, the front office covers the vast majority of BPO services such as marketing, customer support, tech support, and more.

Often, companies contract BPO companies to serve multiple roles, which could mean fulfilling both front office and back office duties at the same time to provide homogenous business process solutions.

When it comes to the different types of business process offshoring, there are three broad types. These categories are based on the geographical location of the company in question and the BPO services they hire.

  • Offshoring

As the name suggests, offshore service providers are those whose geographical location is different and far away from the company that hired them. It is the most common form of BPO service we see around us, with its most common use being to hire customer support teams from countries in Southeast Asia.

  • Nearshoring

Nearshoring is when the company hires BPO services from countries near it. An example can be an American company that has outsourced a few of its business processes to Mexico or Canada using a nearshore business process outsourcing technique.

  • Onshoring

Onshoring means hiring service providers who live in the same country as the contracting company but may be located in different cities or states. For example, an event management business in New York might have its floral suppliers’ in California.

While businesses commonly use a single type of BPO service, some companies have reached new heights of success by mixing these categories to cover all of their bases.

Why do Brands Require Business Process Outsourcing Companies?

Outsourcing maximizing profitability

There is a myriad of reasons that businesses choose to outsource their tasks. Most people believe that companies prefer outsourcing for the tax breaks provided by hiring skilled jobs overseas. However, that is primarily political propaganda.

According to Politifact, while moving the company overseas does offer some tax breaks, there are no laws that specify the same for outsourcing. The reality is that as the US corporate income tax rate is relatively high, businesses prefer to outsource as they are only liable to pay the tax rate of their host country.

That increases revenue, as well as several other reasons such as:

  • Decrease Costs and Expenses

As you outsource your work processes to countries with a lower cost of living, that means a company can save on labor costs. Moreover, as these workers live in their states, companies can save on moving and acclimatization costs for their talent. It is especially true for the US, where there’s an average of 39.1% corporate tax rate.

  • Focus on Primary Functions

Outsourcing the business processes that are not core yet affect your company’s day-to-day activities is the best way forward. For example, the company can easily outsource accounting and payroll functions without affecting its performance. Moreover, outsourcing them allows the company to be free of monitoring such tasks and focus on the ones that matter.

  • Improve the Efficiency of Supplementary Services

Outsourcing companies often provide services for additional or non-core business functionalities. And as it is their specialty, the quality of work far better than if the company had hired an in-house team. Moreover, they would need better and more extensive tools, which might be too expensive for their clients. For example, a business wants to know how to hire web developers for a project without wasting their precious resources. The best option for them, in this case, would be to go for a software outsourcing company that specializes in web development.

  • To Achieve a Global Expansion

Another positive of using outsourcing companies is that it allows businesses to expand and serve customers from various backgrounds and cultures. The locals are better suited to understand and communicate with their fellows, and outsourcing your customer support to countries like these can help you provide a better level of service.

Today, there are both benefits and drawbacks to using BPO companies. For one, you might be stuck during a critical time of your business if your BPO provider decides to terminate the contract due to any reason. On the other hand, the pros far outweigh the negatives.

There are a limited number of working hours in a day. Using business process outsourcing allows us to maximize the amount of work done in a day. Similarly, it will enable you to bring on board and manage various talents without hiring them yourself.

To succeed, you need to outsource your business process. But be sure to create contingency plans for the contracted service providers to protect your company in the long run.

What are the Services Usually Provided by Business Process Outsourcing Companies?

Software developer working on a project

Today, BPO companies provide a host of services to cater to a variety of business processes. Some prominent outsourcing and offshoring services users include the pharmaceuticals and chemical industry, power generation and energy, supplementary business services, manufacturing, e-commerce, supply chains, and much more.

These companies often require offshoring services providers who can help them fulfill the need for entire teams’ worth of people without hiring themselves. BPO has done far more than that. The advent of business process outsourcing has enabled new niches and markets to emerge in recent years. Let’s look at a few examples of industries affected by this phenomenon.

  • IT and Tech-related Services Outsourcing Companies

This is one of the most common and well-known versions of business process outsourcing. Software development, QA testing, UI/UX design, customer support, and more belong to this category. In the past decade or so, many companies have realized potential talent pools from southeast and central Asia and have started hiring them.

As the cost of living is lower in these countries, the company can hire larger teams for the same price.

  • Knowledge Process Business Process Solutions

This service category involves a few core business functions as well. Companies often hire these services for their labor and their technical expertise in that specific industry. Industries included in this category include Research and Analysis, as well as specialized data processing skills.

They are often allowed to make a few low-level executive decisions that do not conflict with higher priority orders. That will enable them to manage their tasks and duties successfully.

  • Legal Process Outsourcing

While this is often considered a subset of the knowledge process BPO, it can also be regarded as exceptional service. They manage a lot of high-end and upper clearance tasks and transactions.

They can even come up with new legal documents such as patent applications and contracts. Moreover, they can also be used in an advisory role to help the contracting company improve its business processes through legal consultancy.

  • Travel and Recreation BPO Companies

This process is one of the least known BPO services. Companies like airlines might outsource their flyer data and ticketing services to external data handling service providers. That would allow the BPO company to manage the day-to-day travel plans in a streamlined manner.

While these are the types of specific services that can be outsourced, these tasks can be categorized according to the kind of service they provide.

IT Operations

This category includes all tech-related services, including software and hardware development services, quality assurance testing, implementation, and more. Most companies tend to outsource these duties to countries like India and China due to their abundance of technical talent and low cost of living. C & .NET development is one service often outsourced to these countries due to the high level of expertise, low labor cost, and abundance of resources that make it perfect for businesses looking to maximize their ROI.

Finance and Accounting

Finance and accounting require skills and expertise, something that few companies need regularly. Their services include billing, payroll, account payable and receivable, audit, and financial compliance, and are usually outsourced to accounting firms.

Human Resources

Using BPO companies, brands can often bring on board a group of expert human resource teams who can streamline and manage their day-to-day work environment. Services often include healthcare management, hiring or recruitment, training and evaluation, insurance claims, and retirement benefits cases.

Knowledge Services

These services are characterized by tasks such as data mining, data processing, analytics, data management, research, extensive data usage and sharing policies, and addressing customer feedback issues that crop up from time to time.

Customer Interaction

One of the most popular applications of offshoring services, the customer interaction segment, is often used to manage customer complaints and customer handling tasks. Often outsourced to far-off countries in Asia and South America, these services can help you collect and address your consumer concerns.

What are the Risks I Might Have to Face When Offshoring to BPO Companies?

The first and most crucial issue that might crop up is that the countries are geographically far apart. That means that their work process would be different. The varying cultural norms and practices might be a hurdle when presenting a unified front in the market.

Secondly, there is the concern that hiring service providers so far from your country of residence might reduce your business efficiency and the quality of work provided. Other significant risks include:

  • Security of Your Corporate Secrets and Workflows

This is especially true for companies where trade secrets are the bread and butter for the company, such as the tech and finance industries. Outsourcing requires you to share a certain amount of information and data with your contracted service providers, such as the core idea and functional requirements of your software project.

However, it is tough to keep confidential data a secret from those who have no use for it. That is why there is always a chance of your corporate secrets reaching your competition when you use outsourced services.

  • Undervaluing the Cost Incurred

Often, businesses are under the false impression that using an offshore service would cost them relatively less. However, while it may be cheaper than hiring a team locally, the recurring costs can be somewhat more significant than what you imagined them to be.

It is an issue that often manages to rack up enormous costs for the contracting company and can often affect their business quite drastically.

  • Depending Too Much on Your Service Providers

Too much dependency on external service providers is always something to avoid. As they are not a part of your organization, there are times when the quality of work or adherence to strict timelines can be affected.

That can affect your entire workflow, and if the task in question is critical, it can affect your business quite drastically.

  • Issues Communicating Clearly

Outsourcing often means hiring teams from across borders. That might not be an issue if the cultures are similar. But if you plan to offshore, then the most common problem to rise might be the language barrier.

The communication issues that might arise due to this can mean the difference between success and failure. And the more critical the task you have outsourced, the more significant the impact of any failures caused by it.

Choosing Suitable Business Process Outsourcing or BPO Companies

Choosing the proper business process outsourcing services can be a long and complicated process. However, finding the right one can make a business a vastly successful and streamlined venture. To find the best-suited BPO companies for your business, you need to follow a simple process. Let’s take a look at what that entails.

1- Define what you need from a BPO company

2- Review the possible candidates that fit the brief

3- Create a request for proposal (RFP), and source the relevant vendors for it

4- Select the best-suited candidate for the job

5- Negotiate and agree to a contract with the appropriate party

6- Transfer the relevant tasks and data to the BPO services provider

7- Monitor and manage the relationship for continued growth.

Remember that as a business owner, you need to choose the best outsourcing companies for your brand. For that, you need to think and evaluate all candidates carefully, as it is a valuable and long-term business commitment.

What Does the Future Hold for Business Process Outsourcing?

As the world continues to grow connected and digital connections transcend borders, the future of business looks to be in business process outsourcing and offshoring. The flexibility provided by this business practice allows you to collect and work with a broader talent pool and improve your business.

However, while it allows the company to focus on the more critical task, you still need to focus on your outsourced services. If your company needs an experienced and result-driven IT offshoring company, then we have the solution to your problem. Our expert business development team is highly skilled in successfully implementing and managing BPO solutions tailored to suit your company.

FAQs

What is BPO in simple words?

BPO stands for Business Process Outsourcing. It refers to the process where businesses outsource some of their work processes to third-party contractors.

What is a BPO example?

Call centers are some of the most common types of BPO we find around us today, with most significant companies contracting BPO companies in far east Asia to fulfill these services for them.

What is the main function of BPO?

The primary function of BPO is to outsource tasks that cannot be performed efficiently to third parties who have the infrastructure, skill, and experience to do it on your behalf.

What is the difference between outsourcing and BPO?

Outsourcing is of many types, but essentially it means contracting third parties to perform a work process for you. However, BPO is a specific type of outsourcing where only non-essential tasks are outsourced.