What Is Business Process Outsourcing (BPO)?

Hiring a business process outsourcing (BPO) company for your business can help you focus on your core value proposition, reduce costs, and scale faster. 

But what, exactly, are business process outsourcing companies? How did they come about? How do they work? How do they benefit your business? What are the challenges and risks involved? How do you start collaborating with a BPO company for your business?

You’ll find answers to these questions and more in this complete guide on business process outsourcing (BPO) companies. 

Read on for more.

What is the meaning of business process outsourcing (BPO)?

Business process outsourcing (BPO) is 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. 

Businesses have the option to outsource either back-office operations or front-office operations. 

Front-office operations refer to anything that is client-facing or interacting with core customers. While most front-office operations were traditionally 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. 

One of MyOutDesk’s clients, the Belami e-commerce brand, outsourced certain back-office operations, such as order fulfillment, which helped the company turn an additional $1.6 million in profits. 

A recent ISG study showed that outsourcing can help companies save an average of 15 percent more in costs.

What is the role of a BPO?

Business process 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.

What are examples of business process outsourcing?

Business process outsourcing may include, but are not limited to:

• Accounting services
• Back-office services
• Cloud BPO services
• Document management
• Healthcare
• Human resources
• Logistics services
• Marketing services
• Research
• Sales

Are BPOs and call centers the same?

No. BPOs have broader and more comprehensive functions than call centers. 

BPOs handle business processes, whether they are front- or back-office functions, like the examples listed above. 

Call centers are centralized departments in a company for managing incoming and outgoing phone calls involving customer service, sales or telemarketing, and technical support.

Then, there are BPO call centers, which are third-party providers focusing on phone-based processes such as help desks, customer service, and sales.

What is the history of BPO?

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. 

How does business process outsourcing work?

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. 

What are the benefits of BPOs?

There are many benefits to utilizing BPOs, with the main ones listed below:

• Cost reduction: Businesses 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. 
• 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 based out of the US, it allows for around-the-clock coverage, improving the user experience. 
• Scalability: Using BPOs allows businesses to scale by devoting more resources to production and fulfillment. This means that output can be increased or decreased based on demand and needs. 

What are the risks and challenges of BPO?

While BPO offers many benefits, businesses 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 Health Insurance Portability and Accountability Act (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 for customers. 

This is why choosing a reputable provider is critical. Especially when it comes to front-office duties, businesses need to focus on ensuring a good customer experience and a positive outcome.

While going international does help BPO companies 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. 

Business process outsourcing (BPO) 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, since 2023, AI has been 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. 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.  

More companies are looking to offshore solutions to address rising costs. Although these solutions may create language barriers and cultural differences, companies still find the cost savings worth it as long as they can properly train workers.  

How to hire a BPO

To get started with a BPO hybrid work model, a company must 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. 

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, watch this video to find out how MyOutDesk can help you:

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. 

Sign up for your free business strategy consultation today.