What Is Business Process Outsourcing (BPO)?

Introduction

Business process outsourcing (BPO) occurs when a business outsources departmental duties to an outside vendor. These third-party vendors fulfill the tasks based on the company’s requirements but don’t necessarily affect the company’s core value proposition. BPO may include human resources, accounting, or marketing services, to name a few. Outsourcing allows a business to get expert output without increasing its costs. It’s a hybrid business model that enables the company to best utilize resources to streamline operations and maximize profits.

History

Also known as subcontracting, BPO’s history dates back to the 19th century. It started in busy cities such as New York and London and was a strategy employed by local merchants. The goal was to use subcontracted labor outside the business to produce goods inexpensively. Cost was a significant factor in the choice between insourcing and outsourcing. Moving into the 20th century, major manufacturers realized the benefit of BPO when it came to business operations such as shipping, freight, and telecommunications. The term business process outsourcing was coined by IBM in the 1990s as the company outsourced data entry work to Asian third parties. 

Organizations have the option to outsource either back-office operations or front-office operations. It is up to the organization to determine which types of BPO services to employ. Front-office operations refer to anything that is client-facing or interacting with core customers. While most front-office operations were generally reserved for in-house departments, more and more companies are utilizing BPO services to handle certain customer interactions. For example, a doctor’s office may hire a virtual assistant to handle client scheduling and incoming calls to be properly routed for better customer service and operational efficiency. 

Back office operations support the front office. This is what the public doesn’t see and is part of the process of delivering the goods or services, starting with production. As seen with the Belamin ecommerce brand, outsourcing certain back-office operations, such as order fulfillment, helped the company turn a greater profit. In fact, a recent ISG study showed that outsourcing can help companies save an average of 15 percent more in costs.

How It Works

When a company utilizes BPO services, it is committed to outsourcing some of its business operations to a third-party source. This means that the company hires another individual or company to perform certain tasks. The third party is given access to necessary company documents and protocols and acts on behalf of the company. This allows the company to scale operations faster. 

MyOutDesk helps businesses do this by offering virtual assistants (VAs) capable of handling various business operations. VAs can handle customer service, administrative, and other tasks identified by the company as needed for operations. MyOutDesk utilizes skilled Filipino VAs who work the hours a U.S. company needs to operate effectively.  This means that many MyOutDesk VAs work a night shift to accommodate the normal business hours of a U.S. company that works standard business hours. 

Outsourcing means that the business owner doesn’t need to be an expert in every aspect of business operations or have the overhead associated with hiring and managing internal employees. A small business may only need one VA to streamline operations. At the same time, an enterprise may look to utilize VAs or other specialty firms to outsource entire business operations such as a call center. 

Benefits of BPO

There are many benefits to utilizing BPO:

• Cost reduction: Organizations only pay for the service provided. They no longer need to afford the cost of keeping internal employees to perform tasks that can be done by a specialist.
• Efficiency: Because a VA or specialist is used, the process can be streamlined and optimized for effectiveness. This system frees up internal resources to better work within the organization’s protocols. 
• Scalability: Using BPOs allows organizations to scale by devoting more resources to production and fulfillment. This means that output can be increased or decreased based on demand and needs. 
• Customer Experience: Because personnel are devoted to specific tasks, the customer experience is better. This leads to better reviews and reputations, giving companies an edge over competitors. 
• Data Security: BPOs follow strict data compliance standards, ensuring that customer data remains safe and secure. 
• 24/7 Coverage: Because BPOs and VAs are often found out of the country, it allows for around-the-clock coverage, improving the user experience. 

Risks & Challenges

While BPO offers many benefits, organizations must be aware of the risks and challenges when outsourcing tasks. A company needs to find a reputable vendor with the quality of talent that meets its needs. For example, medical offices must ensure that outsourced talent is HIPAA-compliant to ensure security and compliance with federal regulations. 

It’s important to understand that global call centers have a bad reputation for following scripts that don’t help consumers, being hard to understand, and generally a bad experience. This is why choosing a reputable provider is critical. Especially when it comes to front-office duties, organizations need to be aware of the customer experience and ensure a positive outcome.

While going international does help BPO organizations find the right talent, there can still be a talent shortage if not enough people are properly trained to perform the required tasks appropriately and according to company standards. 

Trends

The current business environment asks companies to do more with less, which is why outsourcing is so prominent in small and large companies. More and more companies are looking to AI-driven innovations. In fact, 2023 saw AI as the most significant business disruptor on the market. In addition to AI, companies are looking to save costs, as inflation affects every aspect of operational costs. 

More companies are looking to offshore solutions to address rising costs. These solutions may create language barriers and cultural differences. Despite the drawbacks, companies find the cost savings worth it as long as they can properly train workers. The Asia-Pacific market, including the Philippines, is helping companies source what they need for a price of less than $15 per hour. This reflects a huge savings on staff.  

How To Get Started

To get started with a BPO hybrid work model, a company wants to look for a reputable vendor to help them scale productivity. Look for companies with a history of providing reliable solutions to other organizations that can help streamline tasks and operations. Adopting a hybrid business model will give a company the resources it needs to fully function while saving on costs that might otherwise overprice it out of the market. 

Wrap Up

Outsourcing isn’t a new trend, and it’s here to stay for a long time with many companies. If you’re looking to get started with outsourcing, MyOutDesk can help. Talk to one of our business productivity experts to see what tasks you can outsource and how that can help your business improve its efficiency. Our experts will help you develop an organizational chart, implement new protocols, and ensure that a VA fits the business.