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What Is Business Process Outsourcing?

2 min read
What Is Business Process Outsourcing?

Business process outsourcing (BPO) is a subset of outsourcing and involves using a third-party, contracted to perform specific, specialised processes on a company’s behalf. Thus it essentially means handing over operations and responsibilities of specific business functions to a third-party service provider. What would otherwise be the work of an internal system or service is now purely handled by an outsider.

Business process outsourcing traces its history back to the 1800s. America used Scottish workers to help build wagons and ships, thus outsourcing them. Another outsourcing practice is called ‘offshoring’, i.e., when foreign countries perform BPO services. Popular offshoring countries include India and the Philippines, where skilled labour is much cheaper.

Today, several large companies and a majority of businesses indulge in business process outsourcing. Usually, the business outsources the “less important” work so that it can concentrate on its primary area of work. BPO services like technical support, back office services, telemarketing services, inbound customer care services and outbound call centre services are among the few services that are outsourced by companies today.

The objective of business process outsourcing is to typically reduce the workload on the company and also hope to cut costs by handing over the work to a third-party. Sometimes even the labour costs involved are different in different countries, which is why several companies outsource work to far off countries. A good example of this would be a London based company outsourcing its brochure content work to India, since the labour is cheap yet creativity and good-quality work is available in abundance.

Usually, there are two types of BPOs, front office and back office outsourcing. Back office processes that are usually outsourced are billing, logistics and human resources. Nowadays, even claims processing at insurance companies are being outsourced to separate companies. Examples of front office outsourcing include technical support, customer service, marketing, and advertising.

BPO companies work in a similar fashion as a creative boutique. While they have a set of clients, their main revenue comes from work that is outsourced to them from larger companies and advertising agencies. Thus, when there are deadlines to meet or a huge proportion of work to be done, the easiest way to achieve this is to outsource it to a third-party. One of the biggest reasons that smaller outsourcing units thrive and earn a constant stream of revenue is because of the larger organisations that have reputed, large companies as clients.

With the IT industry booming in India and people recognising the numerous strengths of India, organisations throughout the world are outsourcing their services to outshore countries like India. It is also good to know that the Government of India has also taken positive steps and several initiatives to urge India into to recognising its true potential.

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