• 6 MIN READ
A Guide to Business Process Outsourcing (BPO)
August 16, 2022
Doing business is a complex process that consists of many large and small subprocesses. Each of them is important and must be performed at a high professional level. A business process commonly refers to interrelated tasks or activities aimed at creating a specific product or service for consumers or at completing a certain business goal. There are core and supplemental business processes.
The company does not always have the financial and organisational capabilities to hire employees who would cover all issues related to its business. When an enterprise is overwhelmed with time-consuming paperwork and monotonous tasks, or there are regular extra tasks that cannot be automated, the head of the company may decide to delegate them. This means that an organisation can outsource some processes to a third party in order to focus on the main aspects of the company's development. This is called Business Process Outsourcing (BPO).
What is Business Process Outsourcing?
Business outsourcing is the transfer of non-core activities. There are many such types of work in every business: maintenance of buildings, repair of equipment and vehicles, consulting services, social media marketing, system integration, installation and support of equipment and software, accounting, and many more. BPO can be technical or non-technical, and front or back office, depending on the business process it works with.
- The front office includes all types of customer-facing tasks, for example, social media marketing, sales, or customer service and support.
- Back office refers to the internal business processes. These are some regular tasks that customers do not interact with, for example, internal updating and maintenance of hardware and software, and cleaning company services.
What is the Role of Business Process Outsourcing?
The role of outsourcing has not always been the same as it is today. Like the business processes themselves, outsourcing has changed over the years. In the 19th century, in the UK, consulting specialists helped new firms with legal registration and accounting. The CEO of General Motors, Alfred Sloan, thanks to the distribution of business processes, managed to bring the company out of the great depression and successfully compete with Ford.
Previously, BPO was used for simple and routine tasks, but now organisations outsource complex and even strategic processes.
Companies use BPO to reduce costs, increase operational efficiency and focus on key tasks for the enterprise. Outsourcing can also be used to recruit new people from other countries, including world-class experts and their students, as well as to gain access to new markets.
Categories of BPO
Depending on where the BPO provider is located geographically, we can classify the industry into three categories:
- Offshore Outsourcing: A BPO provider is located outside a company’s country. For example, UK-based companies can hire IT specialists and developers located in the USA.
- Nearshore Outsourcing: Service provider is located in a neighbouring country: German companies can contract other organisations in Poland or Austria.
- Onshore Outsourcing refers to BPO providers located in the same home country as the contracted company. They can be situated in different states or cities.
Types of Services
BPO companies are most often used to provide repetitive services, the results of which can be measured. Some of the common services include:
- Financial and Accounting Services: Accounting and tax return processing, accounts receivable, and accounts payable are some of the services that fall under this category.
- Customer-related Services: Such processes as customer service, tech support, sales, social media, traditional marketing, etc.
- Human Resources-related Services: This category includes such services as payroll, recruitment, and training.
Classification Based On Services Offered
The two more common types of BPO services are:
- Horizontal Services: There are cases when a BPO provider can offer one service to a large number of customers in different industries at once. Customer support is the most popular type of horizontal service. We can see that a customer support specialist can provide services to e-commerce companies, retail, startups, banking and government organisations.
- Vertical Services: This is the case when a BPO provider offers different services to customers in the same industry. For example, back-office support for banks is considered a vertical service. The BPO banking division can process loans, be responsible for customer support and detect fraud.
Advantages of Outsourcing
Outsourcing helps to reduce costs, use highly qualified personnel and avoid the complications arising during hiring employees. Here are some of the advantages of such a business relationship:
How to Choose a BPO Provider?
For an employer, outsourcing begins with choosing a BPO provider. It is necessary to explore the offers of potential candidates, including pricing, cooperation options, customer experience, and reviews.
It is worth paying attention to the rights and obligations of the parties.
When you have hired an outsourcing company, the problem with charging salaries to its employees vanishes — all you need is to pay for services under the contract. However, you need to pay attention to the quality control of the tasks performed. Specifically, you can attract your own managers and specialists.
Business leaders should choose BPO providers that can support their business goals, and help them be more flexible and innovative. Ultimately, an organisation becomes more competitive. Thus, when choosing a provider, organisations should take into account not only the price of the BPO contract.
It should also consider how well a BPO can fulfil some other vital points. A head of the company should evaluate each provider to determine whether it has:
- An understanding of the business and industry of the organisation
- An ability to meet current requirements and even scale to meet future needs
- An ability to meet compliance, regulatory requirements and data privacy requirements
- Reporting metrics and indicators demonstrating compliance with contractual standards
- Geographical location to meet business needs and requirements.
Payrow offers tools for automating business processes, which greatly simplifies outsourcing for businesses. The Payrow platform will help you manage payments, create invoices and process taxes with a high level of security. We have optimised and simplified financial flow management to enhance the user experience. You will receive the necessary individual support at every stage of the business cycle. We offer you to look at our price offer and list of services and determine for yourself the prospects of cooperation with Payrow. Keep in mind that the use of BPO allows you to increase the efficiency of the company by focusing on the main business processes. Use business process outsourcing with Payrow.