Business Process Outsourcing Solutions and Trends
Business Process Outsourcing (BPO) – is a method of delegating different business operations to third party vendors. It originates from food and drink manufacturers, but now it is used in almost any industry. BPO outsourcing means contracting non-core business activities to subcontractors to better and faster production. Companies can subcontract accounting, manufacturing, marketing, customer support, or finding highly skilled developers for a new app release. The business process outsourcing (BPO) brings innovation, quality, technology, and speed to every business.
It is popular in many industries, such as finances, accounting, insurance, and retail. But it is also extremely important for the software development industry. Outsourcing BPO gives companies access to a wider talent pool, it allows working on different processes simultaneously, and it is more affordable. It also helps to concentrate on the core activities, while other processes are taken care of.
For IT businesses, one of the ways of increasing productivity is building a Research and Development (R&D) center outside their main office, primarily in another state or country. R&D center helps to achieve several goals:
- Development and research of new products
- Evaluation and updating existing products
- Having an insight into the new market (by having an R&D center in the region of interest)
- Increasing competitiveness by innovation
- Attracting more investment and additional talent
Nowadays, the BPO business process outsourcing becomes almost a necessity for startups, mid-size, and large enterprises.
Business Process Outsourcing Models by Vendor’s Location
There are three types of business process outsourcing based on where the subcontractor is located, namely:
- Offshore – in a case of BPO offshore outsourcing the vendor is located in another country from the business. Usually, this country is far away or even on another continent. For example, a US company works with a vendor from the Philippines.
- Nearshore – in such a case, an enterprise subcontracts a vendor from another country, but it is a neighboring one or closely located. For example, a company in Germany works with Ukrainian vendors.
- Onshore – this way a business delegates the processes to a vendor in the same country, but in another city or state. For example, a company from New York City works with a vendor from Nashville.
Pros and Cons of Different BPO Types
|Offshoring||– Low prices|
– New talent
– Professional assistance
– Access to a new market
|– Different time zones|
– Possible communication issues
– Cultural differences
|Nearshoring||– Affordable rates|
– New talents
– Same time zone
– Similar business ethics
|– Rates are not as cheap as offshoring|
– Possible tax and legislation differences
|Onshoring||– Shared culture and language|
– Often easier meetings and control
– Same business ethics and values
|– This option is usually the least beneficial financially|
– There still can be a time difference (USA)
– Higher taxes
Advantages and Limitations of Business Process Outsourcing Solutions
The business process outsourcing industry has its benefits like any other. On the one hand, it gives a lot of opportunities for enterprises. At the same time, it comes with a couple of limitations. Let’s have a closer look at advantages at first:
- Cost reduction. IT BPO or outsourcing in other industries helps to save a decent amount of money. Outsourcing is cheaper than having an in-house team, recruiting, training, and providing workspace. Companies can also benefit from other payment models, like paying by project or using free-for-service plans.
- Focus on core activities. BPO allows the enterprise to concentrate on bettering its core functions and products, while things like payroll or customer support are provided by the vendor. It keeps the energy in one place, which benefits productivity.
- Professional help. Business process and IT outsourcing allow better efficiency of many operations. For example, you are not professional at payroll and don’t know how to do it. But the vendor is specialized in this particular field of knowledge. They are high-qualified professionals that will do it faster, better, and cheaper. And you don’t have to know “what is RPO” and how to find talents.
- Global presence. IT business process outsourcing helps large enterprises to enter the global market. For example, if you start on a new market in a distant region, it is better to have a customer support line locally with specialists that know the language and culture.
- Flexibility. A company and vendor can run several processes simultaneously and increase the productivity of a business.
- Increased security risk. BPO software and sharing valuable business information comes with the risk of data breaches.
- Underestimation of the costs. Companies do not always know what they are going to pay for and how much finding vendor costs.
- Dependence on a vendor. In case the vendor doesn’t want to prolong the contract, it might provoke issues and delays.
Importance of BPO Outsourcing for Different Enterprises
What is business process outsourcing for a small startup? Does it have the same benefits as for a huge corporation? Yes, overall, it is advantageous for the companies of all sizes, but in different ways. Look at this comparison table.
|Startups||Medium-size Companies||Large Corporations|
|Attracting new investment||Reducing costs||Huge cost reduction|
|Delegating the tasks to the professionals||Optimizing business processes||Tax relief in most of the times|
|Overcoming the shortage of talent in the startup, delegating tasks that otherwise couldn’t be done by its employees||Developing more new products simultaneously||Increasing innovation products|
|Significantly reducing expenses||Becoming more flexible||Entering the global market|
|Becoming more competitive on the market||Growing the company’s outreach||Building an international reputation (R&D centers)|
|Focus on the core activity||Access to new talents||Access to a wider pool of professionals|
BPO outsourcing is advantageous for companies of all sizes as it helps to solve particular problems they might have. Startups can overcome their financial and workforce limitations, medium-sized companies can increase their productivity and growth and large corporations can reduce their disbursements and enter the global market successfully.
Industries That Benefit the Most from Outsourcing BPO
Business process outsourcing consultants and solutions can be used in almost any industry. Yet, there are the ones that use such practices more, for example:
- Finance and accounting. Accounting business process outsourcing is popular as the finance and banking industry deals with a lot of tasks that can be delegated, such as payroll, financial analysis, or bookkeeping;
- IT. Business process outsourcing IT helps to develop, update, and release software products faster and cheaper. R&D centers help to bring innovation in technology;
- Insurance business process outsourcing also benefits from delegating marketing, customer support, and other front and back companies activities;
- Healthcare business process outsourcing helps to delegate transcription, research, and testing or claims adjudication. It is also essential for Pharmaceutical industry;
- Supply chain production allows cheaper production, support, and supply;
- Retail and e-commerce advantage from the vendor’s IT support and development on their resources.
Business Process Outsourcing Trends and Future of the Industry
Like any other constantly developing industry, BPO has a prominent future. The main focus will be on the automation of the services. One of the future trends is the robotic process automation (RPA). It uses artificial intelligence and bots to automate many tasks, like the user interface operating. RPA reduces the costs of BPO as it is cheaper to engage cognitive computing instead of the human workforce.
Another trend of automation is particularly important for the business process outsourcing software industry. It takes advantage of all arising technologies, such as cloud computing, social media management, and machine learning.
The next trend is that more startups start to use BPO services now. They are under pressure to release the product as fast as possible. They also usually have a shortage of finances and talent, so delegating tasks to professionals at affordable rates is hugely convenient for them.
BPO companies become more and more transparent. Due to competition, it is much more beneficial to be transparent about policies, employees, technology stack, and processes for BPO providers. It also happens due to governmental actions in this sphere, for example, the UK’s transparency outsourcing roadmap.
Overall, BPO is expected to continue its growth with the focus on automation and innovation.
Business Process Outsourcing Agreement: What to Include
Finding a BPO service provider can be complicated, but working on the agreement is the next level. Overall, such companies do have standard contacts as they work as vendors professionally. If you are working on something the vendor hasn’t done yet, you’ll have to design a new project-based agreement. And it is also necessary to run even a standard document with your lawyers and make sure that everything is in place.
What has to be in such a contract? Well, there are several things like:
- The scope of the project, deadline, acceptance of the work, price, and payment details.
- Intellectual property rights. It describes what intellectual property each party has and who will have the rights to the end product. It also goes about how the pre-existing intellectual property will be used in the process.
- No Intellectual property rights for the vendor. Even if they use the client’s IP, they hold no right to it and will not use it after the agreement has ended.
- Deliverables ownership. It defines who will be the owner of deliverables (products).
- Confidentiality. It describes what information is confidential, how it is used and protected.
- NDA – non-disclosure agreement. It goes on what information can and cannot be disclosed publicly.
- Conflicts of interest.
- Termination of the agreement.
- Force majeure, governing law, insurance.
One can also have a look at the business process outsourcing contract sample here. There are many templates, but it is always a must to consult with your lawyers before signing.
Find Experienced and Efficient BPO Partner
If you are interested in BPO software services, it is always better to work with qualified specialists. They can help eliminate such risks as underestimating the costs and increasing security risk. Professional service can also help with all parts of the process, starting with explaining terms like BOT meaning and up to finding the best professionals for the job.
Mobilunity has more than 9 years of experience in working with international companies of all sizes. We can recruit well-qualified and knowledgeable programmers to reach your business goals and get the most out of software services. The key benefits of Mobilunity are:
- Experienced team of more than 200 professionals. It allows us to work fast and efficient
- Strong business ethics and values with the focus on the result
- Access to a wide pool of programmer talent of Ukraine. We can find the best coders for your project at affordable rates
- Trustful and fruitful relations with more than 40 international business partners helped us to grow and get all the skills and knowledge to assist with the BPO project of any nature and complexity
- The team we’ll form for you will be focused on development working solely on your project. We bring together Ukrainian development and Western management