What is business process outsourcing (BPO)?

Business Process Outsourcing (BPO) is a common practice across many industries. It is a method of hiring third-party vendors for non-core business activities, that a company needs for functioning successfully. The BPO industry has seen tremendous growth in the last years, especially in the IT field. In some countries, it is even the fastest growing sector. Today, to have a successful business means to be efficient and have innovative processes in every activity, your company might lead. A modern approach to management and business processes can scale up your business. Business process outsourcing gives companies the possibility to distribute their non-core business activities to the quality and reliable vendors. As a result, companies can focus on their core activities, while the BPO vendor is running the other processes.

Due to this convenience, companies of all kind outsource their business functions. From newly established start-ups to the massive enterprises' businesses across different industries have BPO vendors. As the industry is growing, the BPO solutions and services are getting more innovative and essential. BPO vendors around the globe are providing HR, IT, customer service, data management, and many other crucial services. In this article, we will discuss everything you might want to know about the business process outsourcing. What is BPO, why do companies outsource crucial functionalities, what are BPO vendors and more.

Business Process Outsourcing explained

The story of business process outsourcing starts with the manufacturing entities. They started outsourcing supply chain, to focus their resources on the core activities. Quickly, companies in various industries saw the benefits of third-party outsourcing. The BPO industry was born. As time went by, the need for new outsourcing services grew. At the same time, the connected world we are living in created the possibility to outsource services across the seas. Based on services and vendor location, we can divide BPO services into two main types, and BPO industry into three categories.

Two types of BPO services are back office and front office. As you can guess, the back-office services include the internal processes of the business. It can be billing, payroll services and more. The front-office services include tech support, marketing, sales and other services. The BPO categories depend on the location where the BPO vendor is situated. Based on it, there are three categories of BPO: offshore business process outsourcing, nearshore outsourcing, and onshore outsourcing.

Offshore outsourcing is when a company is hiring a third-party vendor outside of the country where the company is itself situated. For example, Offshore BPO is when the company in the UK is hiring a vendor in Bulgaria.
BPO is nearshore when a vendor is in the neighbouring country of the company. For example, when a company in France, is outsourcing to the BPO vendor in Spain.
Last but not least, onshore BPO is when both the BPO vendor and the hiring company are in the same country. For example, when a company in London is hiring a BPO vendor in Manchester.

What do companies outsource

We mentioned that companies outsource the non-core business processes to focus on core activities. But it does not mean that the functionalities they outsource are less crucial for the business. On the contrary, without these processes, these companies cannot function properly. Today you can pretty much outsource everything if BPO vendor can do it remotely for you, be it back-office or front-office tasks. However, businesses usually outsource the following services more commonly.

IT and software operations

It is one of the most commonly outsourced services. Companies often hire BPO vendors to create and maintain software. Often, businesses hire devoted IT teams if they have a big project or need ongoing development and support. IT services also include quality assurance, project management, service implementation and more.

Customer services

Another BPO service in demand is customer service. Almost all big companies that need big customer support teams outsource it, especially the IT support department. BPO services also include call centre outsourcing, customer care, account management and more. It is why you might get assistance from the Indian tech support BPO company when calling to the company in the USA.

Sales

You might be surprised, but companies often outsource task as important as sales, to the BPO vendors too. Outsourcing inbound and outbound sales are very popular amongst many companies. They have a team of salespeople in a different country, who are initiating cold calls, are closing the sales deals, and more.

Data management

Data management is another service BPO vendors offer to their clients. Today, this service is essential for every company, as the data-driven approach is getting more and more popular. Businesses see the importance of the data and choose to outsource it to the companies with expertise in it.

Digital marketing

There are many reasons why companies outsource digital marketing. Many of them prefer to have a company responsible for it, rather than an in-house team. Outsourcing digital marketing gives them access to the talent pool of professionals and endless resources.

These are the most common outsourcing services that Flat Rock Outsourcing and other BPO vendors provide. However, the services are not limited to them. You can outsource everything, that is possible to do without physically being in your company’s office.

What is a BPO vendor?

We are talking about the clients and BPO vendors. But what is a BPO vendor? You would have guessed that it is a company that is providing BPO services to the businesses. It is true. However, BPO vendors can also be classified.

1. IT Outsourcing companies

IT is one of the most popular outsourcing services. Hence, many IT companies offer outsourcing solutions to leverage their experience and expertise. These companies serve as IT companies to their customers but also provide outsourcing solutions in the field. As they have long first-hand experience and knowledge in the industry, they are often the first choice for companies that want to outsource software development or IT support. Many such companies decided to widen their services and now offer other BPO services too.

2. Pure BPO vendors

These are the companies that were established with a sole purpose to be BPO vendors. They work only on the BPO contracts and as usual, provide services like call centers, e-accounts and similar services, as they are the most popular solutions.

Where are the BPO vendors located?

Since one of the reasons behind the popularity of business process outsourcing is cost reduction, mostly BPO companies are in countries, where operational costs are lower. It includes taxes, real estate rental prices, wages and similar expenditures. Hence, countries like India, China, Indonesia, and the Philippines are common outsourcing destinations.

At the same time, BPO companies must have English speaking employees, as they mostly serve clients from the USA and Western Europe. Besides that, more and more companies are considering to hire BPO vendors that follow the same guidelines when it comes to data usage and protection as themselves. It is why outsourcing destinations like Bulgaria are so popular, especially amongst companies in Europe.

Why do companies outsource business?

There are many different reasons why companies of all sizes choose to outsource their activities to BPO vendors. We will discuss some of the most important reasons. Let's start with the most obvious one.

Want to reduce costs

Companies turn to BPO vendors to reduce their operational and HR costs. Often, businesses outsource not one or two positions, but the whole department. It means that they do not have to pay for additional office space, work stations, and equipment. Also, as discussed above, in countries where outsourcing companies are located, the wages are lower. BPO vendors also conduct training and onboarding that is included in their rates. Meaning, that businesses don't have an additional cost.

Want to have access to the talent pool

Outsourcing is an enormous opportunity for businesses to have the best professionals working for them. BPO vendors have access to a large talent pool and will find the most suitable candidates for you. With them, you are not limited to hire someone in your city. You can have the best software developer, marketer and other professionals working for your company in a different country.

Need more flexibility

This advantage of outsourcing is often underrated but is very important. Sometimes, companies need to hire additional workforce on a certain project. Hiring people for a limited time only is more accepted in some fields, where project-based work is common. But in some departments, it is not an option. Apart from it, some countries make it very difficult for companies to let people go after the project is over. Another downside of it is that companies need to provide equipment and conduct training for people, they have to let go shortly. To avoid these complications, companies prefer to outsource the project or work for as long, as they need it.

Want to focus on other activities

Many companies simply do not want to deal with the operations, that obstruct them from focusing on their core functions. They choose to hand over some business activities to the professionals, and with it, hand over a big part of the responsibility too. Knowing that professionals are handling daily business operation, software development, sales, or other activities gives them more confidence and time to focus on their core activities.

There are many more reasons why companies might choose to outsource. Business process outsourcing has many advantages that companies cannot simply ignore. We will talk more about these advantages in our next articles. Above mentioned ones are some of the most common reasons why start-ups, small or medium businesses and even large enterprises turn to BPO.

Final Thoughts

Now you have the essential information on what is BPO, how it works and why so many companies choose it. The business process outsourcing is one of the fastest-growing industries and it will continue to be in demand. BPO can be a solution for many companies that seek cost-efficient, effective and tailored solutions for their business.

Thinking about outsourcing your business? Contact us for a free consultation and our experts will advise you on the BPO services field!

Written by: Polina Boynova on May 13, 2020

Similar Blogs

View All