What is Business Process Outsourcing and Why?
Business Process Outsourcing or BPO refers to the business model where a firm chooses to hand over a part of its operation to a third party. In other words, it is the process where a firm purchases a service from another firm. Most often, it is adopted to improve the quality of work done. Companies generally opt for BPO either when they do not have qualified staff to handle the business processes or when they are well established and wish to hand over operations to a third party to reduce costs. The BPO industry offers a wide range of services, and the variety has grown over the years.
How Does BPO work?
Companies may choose to outsource either their back-end or front-end operations. Back-end operations include IT services, financial services, HR-related services, employee-training services, and so on. On the other hand, front-end services relate to customer relations and operations such as customer care helplines, marketing, advertising, and sales.
When a company purchases its services from a foreign firm, the process is Offshore Outsourcing or in one word, Offshoring. On the other hand, the process of procuring services from a company within the country is Onshore Outsourcing.
Business Process Outsourcing can also be categorized Knowledge, Legal and, Research Process Outsourcing namely, KPO, LPO, and RPO. KPO is when a company purchases not just services but also knowledge, whereas LPO enlists legal services and RPO is used to procure all kinds of research-related services.
One can attribute the growth of the BPO industry to a large number of benefits that it presents to a company. Since companies procure services from developing countries where they are a lot cheaper, the costs come down substantially. Additionally, the quality of work and the time taken for the completion of work also comes down, and clients enjoy better overall access.
Despite all the benefits that a company may avail from BPO, it puts the company at risk of data and information breaches that may end up costing a lot to resolve. Further, BPO may also make the company overly dependent on the external service provider, thus leading it to be affected by the geopolitical changes in the country of the provider and high costs if it tries to revert to handling operations on its own.