What is BPO? BPO Examples, Categories, Types and Benefits.
We’re all familiar with the idea of outsourcing business processes. However, many people are a little fuzzy on exactly what Business Process Outsourcing (BPO) actually means. And even more aren’t quite sure how BPO could add value to their business.
Every successful business has the ability to adapt, problem solve, and find more efficient ways of conducting their daily operations. In fact, the ability to identify problems and find innovative solutions is key to business success.
However, it’s not enough to just fix problems when they come up. It’s also important that companies work to improve business processes before problems develop. You want to have continued growth and improvement within your company, not just maintain a status-quo.
Adopting a BPO Model for select functions is one of the most popular and effective methods of streamlining a business. If that sounds like something you might like to see in your business, keep reading for more information.
BPO = Business Process Outsourcing
BPO is an acronym that stands for business process outsourcing. Put simply, it is the practice of hiring another company to perform a process that your own business needs to operate. In other words, you’re using a third-party to handle non-primary business activities for your company.
Companies choose to outsource when they decide that another, more specialized company can handle a business task better than they can in-house. In many cases, companies find that outsourcing is more efficient than if they were to staff and pay a department within their company to handle business processing.
There are quite a few different tasks you can choose to outsource. These include accounts payable, customer/call center relations, document management, human resources (HR), payroll, and social media marketing.
Outsourcing is different than automation. There is some overlap, but outsourcing involves paying another company to run certain business processes. Automation involves using another company’s software to streamline your in-house business processes. If you’re trying to decide whether to automate or outsource your business processes, here are a couple of articles that can help:
- Should I Automate My Business Processes or Outsource Them?
- Answering Your Frequently Asked Questions about Business Process Outsourcing and Automation
An Example of BPO
Let’s look at an example of business process outsourcing in action. Payroll is one task that is routinely handled with BPO. It’s also one of the most common tasks that every business needs to perform.
Instead of paying to staff and operate an entire payroll department, you can choose to outsource to a company that specializes in managing payroll. Suppose, for example, your company specialized in making children’s toys. Instead of taking time away from your core business process to manage payroll in-house, you could outsource payroll responsibilities to another company.
By outsourcing, you can save money, resources, and valuable production time. Your company gets to focus on your specialty (making toys) while taking advantage of the outsourcing company’s specialty (streamlining core business processes for other companies).
When companies refer to business process outsourcing, they often sort the type of work that they’re outsourcing into two categories. These categories are back office outsourcing and front office outsourcing.
- Back office outsourcing is the form of BPO which deals primarily with in-house necessities of business. These include payroll, billing, or similar tasks.
- Front office BPO refers to outsourcing tasks that include customer services, such as marketing or tech support.
Your company might benefit from one or both types of outsourcing. The type of outsourcing that will be most beneficial depends on your company’s specific needs.
Types of Outsourcing
When most people hear the word “outsourcing” they think of offshore outsourcing. But this isn’t the only kind of BPO.
- Offshore outsourcing happens when your company hires a company located overseas to fulfill certain work requirements. One example is a company based in the United States outsourcing to a company in India.
- Nearshore outsourcing happens when you contract work to a neighboring country. An example of this is if your company is in the USA and you outsource to Mexico.
- Onshore outsourcing is when you outsource work to another company within your own country. An example is when a USA-based company hires a USA-based outsourcing firm.
Offshore outsourcing is the most common, but it’s not the only option. You can also find third-party outsourcing business in locations that are closer to home. NextProcess, for example, is located in Irving, Texas. We offer outsourcing for accounts payable, expense report audits, and document imaging.
Benefits of BPO
Now that you know what BPO means and some of the different options available, let’s look at what it can do for your business. The benefits of business process outsourcing include:
- Reduced costs – With outsourcing, you no longer need to pay in-house employees to handle your business processing tasks. In addition, the outsourcing company is responsible for any maintenance and upkeep expenses that go along with these business processes.
- Increased security – Outsourcing companies that are specialized to handle financial processes can often provide better security from cyber theft. This is especially true if you’re a small business.
- More efficiency – Because outsourcing companies specialize in streamlining core business processes, they can handle them much more efficiently than most in-house departments.
- Improve vendor relations – With outsourcing to speed-up business processes, your vendors receive faster turn-around.
- Better coverage – Outsourcing firms cross-train multiple employees for the same tasks. That means you never have to worry about falling behind if someone calls in sick.
- Further information – The Pros and Cons of Outsourcing Your Accounts Payable and 5 Great Reasons To Outsource Payment Processing
BPO And Your Business
Outsourcing common business practices to third-party companies is one of the many tools that modern businesses can use to find success. I hope you have a better idea of what BPO means now that we’ve taken a look at these examples, categories, and types of business process outsourcing. Maybe this article also gave you some ideas about how outsourcing could benefit your company.
Are you using BPO to optimize your business yet? If you’re not, then maybe it’s time to explore your options. NextProcess is a USA-based company that offers business process outsourcing as well as automation services. Click here to learn more, or here to contact us and request additional information.