How does process outsourcing (BPO) work?
Ever since we’ve first published an article around the concept of business process outsourcing (BPO) here we’ve received a couple messages from readers asking us to dive a little deeper into the subject (check out the first post here) so here we are to explain in a little more detail how process outsourcing works.
Let’s kick things off with a quick recap, shall we?
What is Process Outsourcing (BPO)?
Process Outsourcing (also known by Business Process Outsourcing or simply BPO) is the process of hiring a third party (whether it’s an individual or another company) to handle specific business activities/processes in your place.
BPO has become increasingly popular due to the fact that it allows small and mid-sized business to expand their operations without having to hire more people (which would cost growing companies a lot more than they’d be able to invest).
It’s also essentially important because it allows companies of all sizes to focus internal efforts on the business’ core competencies and outsource all secondary activities.
What’s behind this growing popularity? Mostly the fact that process outsourcing allows companies to improve efficiency while cutting costs. It’s every administrator’s dream come true!
Over the past 10 years, BPO has expanded from manufacturing industries where it first appeared to all sources of industries and functions.
From the moment business owners realized they could increase their profit by outsourcing some of their activities, this practice has greatly expanded with many BPO big players surfacing on the market.
How does Process Outsourcing work?
How are Outsourcing providers able to offer certain services for a much lower cost than they’d have if they were performed internally? Well, for starters, these BPO companies often pay considerably less money to their employees and they don’t have to worry about providing them with benefits.
These companies, especially the ones based in non-western countries such as China, Philippines, Indonesia or India have much fewer overhead expenses.
Since we’re speaking about top countries to outsource to, check out this list with the top 10 outsourcing destinations (6 out of these 10 countries are located in Asia, 3 in Latin America and only one in Europe).
Other than the obvious benefit of allowing growing companies to do a lot more while spending less money, process outsourcing allows companies on focus their internal efforts on what really matters, their core business, the activities that demand specific technical expertise and couldn’t possibly be outsourced to a third party.
Outsourcing secondary activities frees up the time of these companies’ specialized professionals so they can focus on more important issues instead of worrying about menial tasks.
If we do a quick comparative of the hourly fee of an internal specialized employee versus one from an outsourcing company, the economic benefit becomes rather obvious.
That doesn’t mean, however, that the services provided by outsourcing companies are less than optimal.
These companies are normally specialized in the services they offer and, even though the value they charge for the services may sometimes seem too good to be true, they normally have high standards when it comes to their employees as well as access.
BPO is a cost-effective way for companies looking to expand as well as a great way for these growing companies to expand their operations to other countries without having to be physically present.
Most commonly outsourced activities
Nowadays there are outsourcing companies that offer almost any service you can think of (as long as you’re not too creative ????). There are, however, a few service categories that are most commonly outsourced, such as:
- Customer Service (such as technical support, help desk, etc.);
- Telemarketing (outbound calls to existing/prospect customers);
- Online Marketing (content production, SEO, etc.);
- Software Development;
- Accounting/HR management;
- Back Office support;
Outsourcing activities ultimately means hiring someone else to do some of your business tasks that don’t demand strategic knowledge and can easily be managed by a third party.
Not only does it make it a lot easier for business owners to focus on their core business, it also allows them to do that spending a lot less.