The Benefits of Business Process Outsourcing and Why Do You Need It?

Outsourcing is the process by which an enterprise delegates one or more Business Processes to another company.

04:44 10 March 2022

Business process outsourcing has become so common that businesses outsource even without thinking of the activity as outsourcing. Besides knowing what BPO is and how it works, an enterprise should consider the benefits they aim to win with outsourcing and the core services to the Business before contracting a BPO company. In this post, we will look at aspects of BPO to give you a complete guide to outsourcing various business processes.

 

Guide to Business Process Outsourcing - What is it?

Outsourcing is the process by which an enterprise delegates one or more Business Processes to another company. The company that the process is delegated to is called a subcontracted company, while the enterprise giving the process is called the subcontracted company. Administrative work such as IT, HR, payment processing, and accounting are commonly outsourced processes. These functions are called back-office operations. Front office functions that are commonly outsourced are marketing, customer service, and sales. To underline the growth of BPO, between 2013 and 2017, global revenue in the BPO industry grew by 3.3% to $144.9 billion.

 

The benefits of Business Process Outsourcing

 

Cost-saving

BPO saves the subcontracting company the costs associated with labor, management, infrastructure, and training. Such costs can be a barrier when an organization grows and scales its operations. By outsourcing the processes that do not core to the Business, it can meet its operational needs and objectives while minimizing the time commitments and internal costs.

 

Focus on the primary business competencies

During the growth and scaling of the company, there is a need to expand other areas in the Business. For instance, an eCommerce company may grow at a very high rate. Thus, it also requires upscale customer support capabilities to offer their customers quality help. Here, outsourcing staff to handle customer support allows the company to focus on its strengths and activities while addressing customer challenges that may affect its bottom line.

 

Improved efficiency and access to expertise

Business Process Outsourcing enables the vendors to have the required skills, expertise, personnel, and equipment necessary for project execution. With the expertise, the company is better positioned to provide groundbreaking, effective and compliant services.

 

What are the Reasons a Business should outsource its processes?

Companies decide to outsource their processes for various reasons. For some, it is a strategy to gain a competitive edge over their competitors. Below are some reasons for Business Process Outsourcing.

 

To enhance flexibility

Companies remain on their excellent tracks longer than they should whenever there are the winds of change blowing. Internal resistance and inertia slows down various strategic changes. When a Business outsources various processes, it becomes easy to adjust the operation direction and scale the used resources. If the current BPO service company has an issue with adjusting per the new requirements, you can always change the company.

 

To focus on its core capabilities

A business has to find and improve its most essential product, skills, and services to remain competitive in the global market. Through outsourcing, the Business keeps non-critical processes out of its way. Therefore, it can focus on the things that it can do best and are at its core.

 

Even if companies are within the same industry, they may have varying core activities. For instance, in IT, a business may be good at web design and then outsource the website development.

 

To gain a global presence

Outsourcing the front-end processes can help an enterprise reach customers worldwide. With video and voice calling APIs, the Business can set up a call center and connect with customers globally. It can also outsource the customer support tasks to BPO companies in the local regions or per country. With such a local presence, the Business can access new markets.

 

Companies can hire strategic partners in outsourcing to drive innovation. These companies can tap into various business clusters in those regions that are more advanced in science than any other place. A good example where the ecosystem, business structure, and talent allow access to various innovations that may be unavailable for Businesses in other parts of the world is Silicon Valley.

 

To Reduce various costs

Business Process Outsourcing aims to reduce costs for the processes that are not essential to a Business. Because of access to emerging economies and globalization, enterprises can have various processes done at a lesser cost offshore. Companies in markets having better tax conditions and cheap labor costs are more likely to offer reduced prices. Coupled with the competitive pressure of being a service supplier among many and the market working to lower the prices, outsourcing reduces the costs for the subcontracting company.

 

To enhance the efficiency and speed

Business Process Optimization companies invest a lot in perfecting their services. They train their staff on the best methods of service delivery and use the current technologies. Therefore, using their experience and specialized equipment, they can perform the processes efficiently and faster.

 

The complexity of Business Process Outsourcing relationships

Before setting up a BPO agreement, analyze the features that the partnership will bring before signing the contract. Complexity, strategic importance, and independence are the key dimensions to analyze. The two common archetypes of the above three dimensions are Hands-off and strategic BPOs.

 

Hands-Off BPO

In standard services, there is little need for coordination within the subcontracting partnership. The BPO services company understands what to do while the buyer also knows what to expect. Managerial and communication priorities revolve around price negotiations, ensuring quality standards, and adhering to the delivery dates.

 

This relationship can stay at arm’s length. Thus, the buyer incurs fewer costs since the Business Process Outsourcing company is independent, and there is little need for the companies to have a proper cultural fit.

 

Strategic BPO relationships

When a Business works with strategic BPO partners, there is a rich and nontrivial interaction around a business function. For instance, this can happen in manufacturing or in-service development where there is a need for mutual adaptations in product design and production.

 

You need to manage such strategically essential and highly complex partnerships carefully. Interactions between the two parties will focus on the coordination of activities like planning and development of processes.

 

Conclusion

Business Process Outsourcing services is a practice that is of age. It offers many benefits to companies that apply outsourcing in their various processes. As we have seen above, there are various reasons why a company may choose to outsource its processes, be they front office or back-office operations. Regardless of the industry or department, you can outsource any process.