BUSINESS PROCESS OUTSOURCING (BPO) EXPLAINED
Business process outsourcing, or BPO, is a business practice in which one organization hires another company to perform a task (i.e., process) that the hiring organization requires for its own business to successfully operate.
BPO has its roots in the manufacturing industry, with manufacturers hiring other companies to handle specific processes, such as parts of their supply chains, that were unrelated to the core competencies required to make their end products.
However, organizations in other industries adopted the practice over the years. Now, the use of BPO has expanded so much that organizations of all kinds — for-profit businesses, nonprofits, and even government offices and agencies.
What BPO is used for!
Organizations engage in business process outsourcing for two main areas of work: back-office functions and front-office functions.
Organizations can outsource a range of back-office functions (also referred to as internal business functions) including accounting, IT services, human resources (HR), quality assurance (QA) and payment processing.
Similarly, they can outsource various front-office functions, such as customer relation services, marketing, and sales.
Organizations can also outsource specific functions (i.e., payroll) in those areas in addition to outsourcing an entire functional area (i.e., human resources).
Types of BPO
Because companies around the world provide BPO services to other organizations, BPO can be divided into different types based on the service provider’s location.
- Offshore outsourcing, or just offshoring, occurs when an organization contracts for services provided with a company in a foreign country.
- Onshore outsourcing, or domestic outsourcing, happens when an organization contracts for services provided by a company that operates in the same country as the hiring organization.
- Nearshore outsourcing is when an organization contracts for services provided by companies based in neighboring countries.
Business process outsourcing is also sometimes referred to as information technology-enabled services, or ITES — a name that recognizes that IT infrastructure enables outsourcing to happen.
KPO, LPO, and RPO
Business process outsourcing is also sometimes categorized by the types of services being provided. The three prevalent categories are:
- Knowledge process outsourcing, or KPO, in which the outsource service provider is hired not only for its capacity to perform a particular business process or function, but also to provide expertise around it.
- Legal process outsourcing, or LPO, is a type of KPO that — as the name states — is specific to legal services, ranging from drafting legal documents and performing legal research to offering advice.
- Research process outsourcing, or RPO, another type of KPO, refers to research and analysis functions; biotech companies, investment firms, and marketing agencies are among the types of organizations that would engage in RPO for services.
Benefits of BPO
Organizations engage in business process outsourcing because they expect to benefit from the arrangement.
The benefits typically cited by proponents of BPO include:
Financial benefits: Organizations often find that an outsourced provider can perform a business process at lower costs, or they often find that by contracting with an outsourced provider they can save money as a result of the relationship in other ways, such as in tax savings.
Flexibility: BPO contracts can allow organizations greater flexibility to adjust how it completes the outsourced business process, allowing them to better react to changing market dynamics.
Competitive advantage: BPO allows organizations to outsource those processes that don’t core to their businesses or missions, thereby allowing organizations to focus more of its resources on the operations that distinguish them in the marketplace.
Higher quality and better performance: Because the core business of BPO providers is performing the specific processes they’re hired to do, they are, in theory, able to focus on providing those processes at the highest levels, often with greater accuracy, efficiency, and speed.
Source : https://searchcio.techtarget.com/definition/business-process-outsourcing
July 21, 2019
November 24, 2017