The primary goal of every business is no doubt to streamline the business procedures and increase productivity at every end. To achieve this goal, business process outsourcing (BPO) is often considered the most preferred solution to scale the business process effectively.
The entire outsourcing process is not as simple as it may seem and covers a wide range of categories and types. BPO allows the business to adopt the new challenges upfront with the latest trends and conduct all the operations effectively and innovatively.
What is BPO?
Business process outsourcing is an essential business practice that allows you to outsource core business services to external service providers on a contractual basis. The concept of outsourcing has its roots in the manufacturing industry when the business hires third-party vendors for manufacturing and outsources its supply chain services.
As a result, the high-profit margin was significant with efficient quality work and lower costs. Later on, many other organisations also started to practice outsourcing in their business automation techniques. When it comes to understanding the core concepts of business process outsourcing, many companies get confused and miss this optimal business technique while defining their business strategies.
Business process outsourcing can be divided into five major subcategories:
- Front-Office BPO
- Back-Office BPO
- Offshore BPO
- Nearshore BPO
- Onshore/Domestic BPO
Major Types of Business Process Outsourcing: Supply Chain and Services
Back-office business process outsourcing is one kind of BPO. As the name suggests, this type of outsourcing is usually related to in-house contracting services which don’t involve any direct interaction with customers.
This may include several departments including human resources, IT, accounts, quality assurance, and much more. By outsourcing activities such as payroll, billing, etc., the companies can automate the overall business process and focus more on the productivity and profitability of the business.
Front-office business process outsourcing refers to the services customer-centric services. This includes services like sales, marketing, and customer services, technical or legal support.
Front-office BPO is widely adopted in any business because it reduces the cost and allows the companies to hunt the specialised talent for specified tasks.
Business Process Outsourcing Types: Location of Vendor
Offshore business process outsourcing means outsourcing the company’s services to overseas BPO service providers. The overseas outsourcing company can be from any part of the world.
This can significantly reduce the cost and the company easily gets potential talent across the world. However, a lot of factors are kept in mind like political stability, tax, and other costs but in the end, it generates lower labor costs and high profit for the companies.
Nearshore BPO refers to outsourcing services to geographically closer companies. In many cases, these companies originate from neighboring companies.
For example, if a Canadian company hires talent for specific services from the USA or vice versa. Nearshore BPO is comparatively a low-cost outsourcing, mostly done in need of specialized talent, and to avoid barriers such as language, time zones, or cultural differences.
As the name suggests, onshore or domestic business process outsourcing is the act of outsourcing contractual services and business responsibilities to the other city, province, or state of the country. The decision is made on several factors like cost reduction, availability of the specialised skills and talent in a specific region.
Need of Business Process Outsourcing:
Companies rely on BPO to lower income tax rates and receive the maximum benefit out of it. Every big giant trusts the outsourcing industry due to many reasons like cost reduction, accessibility, and much more.
Some of the benefits of business process outsourcing are listed down below:
- Lower labor costs, training, and accommodation costs
- Focus more the prime business values and ensure optimum growth of the business
- Able to get efficient performance in minor services
- Significant presence around the world
- High flexibility and performance
- Highly accurate business automation
Business process outsourcing helps companies of every size to accomplish their business goals with a strategical approach. Although BPO is still a new term for many organisations, there is a big ratio of businesses who are already following these in-demand business tactics and expanding their business across the globe.
Depending on what type of business you running and keeping the needs in mind, you should always consider outsourcing and scale the business toward better growth opportunities.