BPO (Business Process Outsourcing)

BPO (Business Process Outsourcing) is a practice that implies delegating a part of the company’s business processes to a third-party contractor [1]. Typically BPO meaning refers to non-profile services like recruitment, call centers, data management, payroll, etc [2]. It is one of the models of outsourcing that requires the most of communication between the client and the vendor.

Contents

1. Brief History of BPO
2. Main BPO Model Features
3. How to Apply BPO to a Business?
3.1 Front Office BPO
3.2 Back Office BPO
4. How Big Is The BPO Industry
5. Benefits and Limitations of Business Process Outsourcing
6. Companies That Successfully Used BPO Services
7. BPO Services Cost
8. References

Brief History of BPO

Initially, BPO was mainly used in the manufacturing industry and some of the main “processes” that were outsourced were different parts of the supply chain. Back in 1921 Coca-Cola [3] decided to outsource some of its processes to another company in the Philippines which was one of the first cases of BPO. However, what is a BPO today?

A business process outsourcing definition as we understand it now has begun gaining popularity in the late 1990s. The first case of BPO term was used in 1992 by a man named Frank Holz [4] who founded the first Philippinian call center and put a start to the BPO consulting industry. Now, BPO is acknowledged all over the world and is a common practice for many companies within a variety of industries.

Main BPO Model Features

A global business process outsourcing model may slightly vary from one business to another but in general, the following steps must be undertaken:

  • Making a decision about the necessity of getting some of the company’s processes outsourced.
  • Choosing a proper BPO services provider (including such factors as distance, price, reputation, previous clients’ recommendations, etc.).
  • After having chosen the vendor out of many BPO companies, the client has to discuss security terms, due diligence checks, system configuration, system integration, and other crucial factors of the cooperation.
  • Shifting the picked out processes to a chosen vendor.

How to Apply BPO to a Business?

Typically, there are two ways that your BPO services provider can assist you with – front and back office.

Front Office BPO

Business process outsourcing companies that deal with front office types of tasks are usually giving assistance with:

  • Accounting.
  • Information technology (IT) services.
  • Human resources (HR). In this case scenario, the vendor builds a team of the required specialists by conducting all the recruitment processes.
  • Quality assurance (QA). QA engineers are responsible for detecting any malfunctions – be it a human agent or a chat bot’s performance.
  • Payment processing.

Back Office BPO

As for the back-office business process outsourcing services they include the following:

  • Customer relation services. This would include handling call-center incoming calls, answering customers’ email inquiries, taking care of the company’s social media channels and online chats.
  • Marketing. Outsourcing routine marketing tasks such as lead generation to an outer vendor allows the company’s marketers to focus more on building a strategy.
  • Sales. One of the most popular sales outsourced tasks is lead management. The client’s sales representative will be there to lead the potential customer through the final stages of the deal while outsourced specialists will carry all the routine tasks.

How Big Is The BPO Industry

According to Grand View Research [5], the BPO market is growing at enormous speed and, by the year 2027, it is expected to reach $405 billion in revenue. The study also showed the increasing popularity of call centers and customer support services in general.

Currently, the most popular areas of business process outsourcing are human resources, finance, supply chain, accounting, and customer support. As for the most popular BPO destinations, they are China, Malaysia, Ukraine, Romania, Poland, and some of the Latin American countries such as Brazil and Mexico.

Benefits and Limitations of Business Process Outsourcing

BPO’s increasing popularity can be easily explained by the following benefits [6]:

  • Cost reduction. BPO cost is often lower compared to the same services performed by an in-house team.
  • Higher competitiveness. By outsourcing routine tasks the management of the company can focus on the core ones.
  • Better performance. BPO vendors are typically specialized at performing certain services at the top level.
  • 24/7 coverage. By outsourcing to vendors from a different time zone it is possible to expand the company services’ coverage.

However, there are also some limitations to consider:

  • Security breaches. New connections between companies are always a threat to data leakage, however, these could also be managed.
  • Relying too much on the contractor. It is important that the client constantly monitors the execution of all the agreements between them and the vendor.

Companies That Successfully Used BPO Services

Many companies are now using BPO services and one of the greatest examples is Ford [7]. As for now, they only produce around 30% of all the components independently, letting outsourced contractors take care of the rest.

Another example would be the Swedish company IKEA [8]. Not only they use BPO services, but they also stopped their own manufacturing completely and hired 2500 vendors instead. All the company’s logistics are also being taken care of by an outsourced vendor.

Google [9] is no stranger to BPO services either – each year thousands or temporary or outsourced employees perform various duties for the company, from testing its products to conducting events.

Finally, Virgin America [10] trusts outsourced companies with handling its booking, catering, baggage delivery and plenty of other functions.

BPO Services Cost

The cost of BPO services may vary from one country to the other, depending on the typical salary size of needed specialists, type of services being provided, tax policy, office rent prices and plenty of other factors. Below you can see the comparison of different countries’ BPO costs taken from Clutch [11].

USA UK Canada Australia Japan  Ukraine
$ per month $5600 $6400 $5600 $8800 $7800 $4000

See Also

References:

  1. https://www.investopedia.com/terms/b/business-process-outsourcing.asp
  2. https://www.forbes.com/sites/greatspeculations/2015/06/22/getting-a-piece-of-business-process-outsourcing/#95195402a649
  3. https://books.google.com.ua/books?id=NhJ0AwAAQBAJ&pg=PT91&lpg=PT91&dq=coca+cola+1921+outsource&source=bl&ots=hny6sWUn-6&sig=ACfU3U0A9LzY6ArcGJ1CWlMi9hY-EngG9g&hl=ru&sa=X&ved=2ahUKEwjlgIS099joAhUi7KYKHUY-AjUQ6AEwAXoECAwQNA#v=onepage&q=coca%20cola%201921%20outsource&f=false
  4. https://8list.ph/it-bpo-industry-philippines
  5. https://www.grandviewresearch.com/press-release/global-business-process-outsourcing-bpo-market
  6. https://mobilunity.com/blog/business-process-outsourcing
  7. https://www.nytimes.com/2017/06/20/business/ford-focus-china-production.html
  8. https://www.forbes.com/sites/walterloeb/2012/12/05/ikea-is-a-world-wide-wonder/#6870a43427b9
  9. https://economictimes.indiatimes.com/tech/ites/google-it-outsourcing-deal-search-may-become-more-rewarding-for-indian-firms/articleshow/51624112.cms?from=mdr
  10. https://www.fool.com/investing/general/2014/11/18/virgin-americas-secret-to-success-avoiding-jetblue.aspx
  11. https://clutch.co/bpo
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