Business Process Outsourcing is the full form of BPO. It refers to a business strategy where a company hires another company to perform its one or more non-core tasks- they simply outsource a certain job or jobs. So there are two parties involved in the process- the client company which outsources the task and the external service provider or the vendor.
BPO Full Form – What is Business Process Outsourcing
Uses of BPO
An organization engaged in business process outsource performs in two main areas of work- back office functions, and front office functions.
- Back office functions include accounting, Information Technology services, Human resource, surveys, Quality assurance and payment services.
- Front office functions include telemarketing, customer relation services, marketing and sales
Types of BPO
Business outsourcing companies, full form of BPO, has expanded its reach in the global market. Based on the service provider location, BPO can be divided into the following types-
- Offshore Outsourcing– It is a kind of business process outsourcing in which the services are exported from a foreign company.
- Onshore Outsourcing – It is also known as domestic outsourcing where a company contracts for services to be provided from the company operating in the same country as the hiring company.
- Nearshore Outsourcing– It includes the services which are performed by companies or contractors based in neighboring countries.
Business process outsourcing can also be divided based on types of services being provided-
- KPO– Known as Knowledge Process Outsourcing, KPO includes knowledge-based specialized work, providing expertise in a specific function.
- LPO– Known as Legal Process Outsourcing, it caters services specific to the legal area. It includes drafting legal document, performing legal research, offering advice etc.
- RPO– Known as Research Process Outsourcing, it refers to research, survey. and analysis functions. Organizations offering research in biotech, investment services, marketing ideas are some examples of research outsourcing activities.
Information Technology Enabled Service (ITES), a form of BPO leverages information technology over the internet or data network to radically reduces costs and improve service standards. This Internet service provider aims at providing B2B e-commerce solutions.
The major reason for which outsourcing is implemented is a significant and massive cost reduction.
- Decreased costs: Outsourcing cuts down on costs for required labors, particularly for staffing and training. It also cuts down the cost for the workspace to accommodate local employees.
- Concentration on key functions: Outsourcing allows businesses to excel in the core functions of company. Rather, it can focus its energies on highlighting its business competitiveness and maximizing overall growth thereby experiencing improved customer satisfaction and increased profits.
- Expansion of global presence: Outsourcing of services enables a business to stretch out its services to foreign countries that can serve the customers in local languages, thereby providing them with hassle-free customer service.
- Improved speed and efficiency: A business cannot excel in every functional domain. Companies outsource some of the functions to let specialists handle those tasks, thus saving time, improving accuracy, and increasing their capacity.
Risk associated with outsourcing processes-
- Security – Outsourcing of processes especially involving information systems may result In communication and data privacy risks
- Underestimating the costs of services: The costs of upgrading and renewal of contracts may be often underestimated by the outsourcing companies. Other hidden costs include currency fluctuations, hardware and software upgrades, layoffs, a potential decrease in individual worker productivity, etc.
- Overdependence on service: Any fluctuation in the efficiency of the vendors affects the outsourcing company, when the vendor designated with a specific process, becomes a part of the workflow.
- Communication issues: Language barriers faced while hiring individual service providers spread across the globe can result in delays in new processes and hinder the feedback mechanism from different departments, thereby affecting the overall business process.