What is BPO (Business Process Outsourcing)?
Do you know what the acronym BPO stands for? These 3 little letters stand for an expression that has become increasingly more important to a huge number of companies all around the world: business process outsourcing.
Now that you know what the letters stand for, let’s dig a little deeper and find out what it means.
What is Business Process Outsourcing?
Breaking it down, it means hiring someone else to take care of the processes and activities that don’t necessarily need to be dealt internally such as HR, customer helpdesk, accounting and many others.
Way back in the past, when outsourcing first emerged as an alternative, it was mainly applicable to the manufacturing of products but nowadays it’s more and more common to see outsourced services.
BPO encompasses back office processes such as internal business functions (HR processes, finances, accounting, etc.) as well as front office and customer care (customer helpdesk, contact centre, etc.).
Why do companies outsource their processes?
One of the most important reasons why companies choose to outsource their processes is because of the flexibility it gives them (in terms of cost and time).
When it comes to cost flexibility, outsourced processes allow companies to have pay-as-you-go subcontractors for specific processes instead of having an internal employee responsible for said processes. This is especially useful when it comes to seasonal processes that have a varied demand throughout time.
Adopting this variable cost structure companies became able to respond quickly when changes in capacity are needed as well as reduce the need of investing in assets.
Other very important reason why companies choose to outsource certain processes is that, by hiring someone else to take care of these parallel processes, they’re able to focus on their core competencies. It’s not uncommon to see key employees ‘wasting’ their times performing administrative processes that could easily be outsourced.
Through business process outsourcing, these employees become free to invest all their time and energy into building the company’s core business and making the product/service more competitive.
Outsourcing is also very useful for increasing the speed of business processes – by subcontracting third party service providers, companies are able to increase the speed of several business processes.
BPO makes it possible for companies to grow more, faster by removing the constraints that come with having a big team (and consequently spending a lot on people and equipment).