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 how it relates to the concept of Business Process Automation (BPA). Even more aren’t quite sure how BPO or BPA could add value to their business.
Every successful business has the ability to adapt, problem-solve, and find more efficient ways of conducting its daily operations. The ability to identify problems and find innovative solutions is key to business success. However, it’s not enough to reactively 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 and or BPA model for select functions is one of the most popular and effective methods of streamlining a business. If that sounds like something you’d like to see in your business, keep reading to learn more about your options.
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.
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 the in-house necessities of a 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, and the type of outsourcing that could be most beneficial depends on your company’s specific needs. Alternately, you may decide you’d rather retain more direct control over your business processes. You can still streamline business processes that you don’t want to outsource by using business process automation.
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.
- Process automation from Software-as-a-Services (SaaS) companies is also a type of outsourcing. Rather than outsourcing the business processes themselves, these companies let you outsource the software used to run those processes.
Offshore outsourcing is the most common, but as you can see from this list it’s not the only option. You can also find third-party outsourcing businesses 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. We also offer a suite of BPA software that you can use to automate financial operations in your business.
BPA = Business Process Automation
BPA is an acronym that stands for business process automation. As you might suppose, it refers to automating your business processes such as accounting, purchasing, and expense reports. It relies on software to help simplify and streamline business processes using automation technology.
Automation is different than outsourcing, but there is more overlap than you might think. Basically, outsourcing involves paying another company to run certain business processes while automation involves streamlining your in-house business processes. The main place these two options overlap is that you have two options for BPA: build it or buy it. In other words, you can automate in-house or you can outsource your business process automation.
One example of in-house BPA is when an IT department reconfigures ERP software to handle accounts payable. While some in-house BPA solutions can work very well, in many cases they are outdated or based on software that’s being stretched beyond its original programming (such as when trying to use ERPs for accounts payable). For a simpler solution, you could outsource your BPA by using a Software-as-a-Service company like NextProcess to supply the programs you use to automate your business processes.
If you’re trying to decide whether to automate or outsource your business processes (or to use another company’s BPA software to streamline your business processes), check out these articles for more information:
- 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 makes 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 in this example) while taking advantage of the outsourcing company’s specialty, which is streamlining core business processes for other companies.
An Example of BPA
Now let’s look at an example of business process automation. Suppose you’re a manufacturing company that wants to streamline accounts payable and procurement, but you still want to maintain direct control over those operations. You could choose to implement an in-house BPA solution or outsource that automation to a software provider.
A software provider like NextProcess supplies your company with the software needed to effectively handle your own business processes in-house without worrying about creating or maintaining the software programs. We also offer a suite of programs to handle different business processes including accounts payable, procurement, expense reporting, and capital project management. These programs work together seamlessly and also integrate with your existing ERP software.
The manufacturing company in our example could use BPA software to align their accounts payable and purchasing departments in order to improve their supply chain management. NextProcess’s software makes it simple to manage complex order workflows while keeping track of invoices, purchase orders, and goods received documents.
Benefits of BPO and/or BPA
Now that you know what BPO and BPA mean, as well as some of the different options available, let’s look at what these things can do for your business. The benefits of both BPO and BPA include:
- Reduced costs – With outsourcing, you no longer need to pay in-house employees to handle your business processing tasks. With automation, your employees spend less time on paperwork and more time on value-added business tasks. In addition, the outsourcing company or BPA software supplier is responsible for many (and in some cases all) maintenance and upkeep expenses.
- Increased security – Outsourcing companies that are specialized to handle financial processes can often provide better security from cyber theft. This is true both for BPO companies and for BPA software. You’ll likely find this benefit especially noticeable if you’re a small business that doesn’t have the resources for in-house cybersecurity.
- More efficiency – Because outsourcing companies and BPA software suppliers specialize in streamlining core business processes, they can handle those processes much more efficiently than most in-house solutions.
- Improve vendor relations – With outsourcing and/or automation to speed up business processes, your vendors receive a 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. While business process automation doesn’t cover the tasks for you, it does make those tasks easier for employees to handle. BPA software like NextProcess’s can also be accessed remotely, if need be, to streamline processes such as invoice approval.
Check out our blog for more information on the many benefits of business process outsourcing and automation, including articles such as
- “The Pros and Cons of Outsourcing Your Accounts Payable”
- “5 Great Reasons To Outsource Payment Processing
- “10 Compelling Reasons To Automate Accounts Payable”
- “7 Reasons Why Automated Expense Reporting Makes Sense”
BPO, BPA, and Your Business
Outsourcing common business practices to third-party companies or using BPA provided by a third-party software supplier are among the many tools that modern businesses can use to find success. Now that we’ve looked at these examples, categories, and types of outsourcing and automation, I hope you have a better idea of what options are available with BPO and BPA. Perhaps this article also gave you some ideas about how outsourcing or automation could benefit your company in particular.
Are you using BPO or BPA 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.