Everything you Need to Know about Business Process Outsourcing

Business Process Outsourcing (BPO) is a term used to describe businesses delegating essential business processes to various types of subcontractors. The term is used somewhat broadly, but it usually describes businesses redirecting their most tedious tasks to companies with a greater level of expertise or efficiency.

In the digital era, BPO has become a much more feasible option for many businesses. For example, if a business needs help with bookkeeping or other essential accounting practices, there will be plenty of digital firms available for them to choose from.

Over the past decade, most businesses have been increasing the number of tasks they outsource. According to Brandon Gaille,57 percent of American businesses have increased the use of outsourcing. 34 percent of businesses have maintained the same outsourcing practices and only 9 percent of businesses have made the decision to terminate previous agreements.

In a world that is becoming more globalized and connected, these numbers make sense. No longer do businesses have to subcontract someone who can physically come into the office—they can now compare multiple companies at once and then determine which one can most effectively meet their needs.

In this article, we will discuss the most important things for your business to know about BPO and related outsourcing processes. By understanding why this industry has been growing and the services that are available, you will be able to determine if BPO is right for you.

What is Business Process Outsourcing?

As the term suggests, Business Process Outsourcing involves redirecting essential business processes to experts or other third-party vendors. Historically, the term was only used to describe manufacturing firms making adjustments to their supply chains. However, as the global economy has shifted away from manufacturing, the term has become much more inclusive and can be applied to almost any type of business.

There are two different types of BPO. Back office BPO applies to the “behind the scenes” processes such as accounting, human resources, and other services that are not readily seen by clients. Front office BPO refers to processes that directly engage clients, such as customer support.

 

What types of processes can by business potentially outsource?

As you might imagine, almost any component of your business can potentially be outsourced. Many small businesses will outsource their entire accounting and financing department. Others will make smaller back office moves, such as hiring an accountant once per year in order to help with taxes and budgeting.

Other common varieties of BPO include:

• Information Technology (IT) Services
• Human Resources (HR)
• Quality Assurance
• Supply Chain Management
• Payment Processing
• Legal and Regulatory Compliance
• Others

According to Statista, the global value of outsourced services was over$89 billion in 2017. This figure represents a $12 billion increase compared to the year before. Both back office and front office tasks have contributed to this impressive growth.

 

What are the benefits of Business Process Outsourcing?

If you are considering outsourcing essential processes, you will first need to conduct a thorough cost-benefit analysis. Many businesses begin by outsourcing a single task at first and then expand their outsourcing efforts later.

Some of the benefits of BPO include:

• Access to already existing infrastructure
• Access to an increased level of expertise (this is especially needed for accounting, finance, legal, and other highly specialized departments)
• More time to focus on the profit-generating portions of the business
• Numerous cost-cutting opportunities
• Increased efficiency

Whether making the decision to outsource is right for you will depend entirely on the dynamics of your organization. However, in most cases, there will likely be at least one component of your business that would be better managed elsewhere.

 

How do I know if it’s time for my business to make a change?

One of the reasons why many businesses operate less efficiently than they could is because they are hesitant to make a change. These businesses might see the potential benefits of outsourcing, but are hesitant to do so because they are comfortable in the status quo. Once your business is able to escape its comfort zone, you will be able to make this decision through a much more objective lens.

If your business is unsure about whether it is the right time to outsource, ask yourself the following questions:

• Where are our primary bottlenecks? Could these bottlenecks be reduced with the help of another business?
• Which area(s) does our business have the least amount of expertise?
• What is our primary objective while outsourcing? Are we more concerned about cutting costs or improving the quality of our products (or services)?
• How do I envision my business changing over time?

Once the benefits of making a change—efficiency, expertise, reduced cost, etc.—outweigh the benefits of keeping these tasks in-house, it may be time for your business to make a change.

 

How can I determine which BPO partner is right for me?

Thebenefits of BPO are obvious. However, knowing which company is best for you can often be quite difficult. In order to avoid directing money and effort to a partner that can’t deliver, it will be important to compare multiple different options.

The first decision you will need to make is whether you hope to outsource domestically or internationally. Highly technical and regulated functions, such as accounting and legal, should probably remain domestic. Customer support, on the other hand, is something that can often be directed abroad (at a much lower price).

Reading reviews, speaking directly with a representative, and getting price quotes can help you narrow down your possible options. Your business should also address variables that are specific to your business, such as your pre-existing business structure. The more you can do to compare your available options, the more likely you’ll be able to find one that is right for you.

 

Conclusion

As a business owner, it is important to always be thinking of ways to operate more efficiently. Will increasing efficiency can often be done by making a few changes in-house, the best solutions might be found outside of your business. As the BPO industry continues to expand, the benefits of outsourcing will increase.