BPO: What is Business Process Outsourcing?
Managing a business is more complicated than people actually think. You might have started your own business because you were passionate about your core business products/service. However, outside the core business aspects, managing other operations such as bookkeeping, payroll, data, and service are also essential in the success of your business.
One of the reasons why people fail at their business is due to their failure to focus on aspects and operations that they are not specialized at. This is where Business Process Outsourcing (BPO) plays an important role. In this article, we will discuss more BPO, types of BPO, benefits, and drawbacks.
What is BPO?
BPO is a type of outsourcing where a company employs third-party businesses to do certain business functions and responsibilities. Outsourcing in general is defined as an agreement to hire other companies as a part of a business. In other words, outsourcing is broader than BPO as it also includes non-business functions and responsibilities. Business functions that are part of BPO include sales, customer service, marketing, and even HR.
BPO is divided into two aspects, which are front-office outsourcing and back-office outsourcing. Front-office outsourcing is outsourcing tasks that are related to managing customers (Email, Fax, Customer Service), and back-office outsourcing includes bookkeeping, data management, information management, etc.
Based on the location, BPO can also be divided into three types which are onshore, nearshore, and offshore. Onshore is when a company hires other companies domestically. Nearshore is hiring companies in the neighboring countries, and offshore is hiring companies from a different country.
BPO in recent years has become more flexible as well as the range of services that could be outsourced has been increasing as well. For example, it is possible to hire a website development company such as Tailbone to build and manage your E-commerce website.
Why is it essential for the success of your business?
BPO is essential to the success of a business as it contributes to a better service, lower price, and increase in efficiency.
As we have mentioned above, you might want to start or have started your business because you were passionate about your core products/service. In addition to this, you might have great knowledge about those products. Nonetheless, managing business is extremely complicated. You will need to find solutions for problems that you are not specialized in. This could result in the poor performance of your business.
Let’s say, I am managing a company that sells cooking utensils because I have great knowledge of cooking utensils and its market situation. That does not change the fact that I will still need to manage the bookkeeping and customer relation which are parts of doing a business. Failure in doing so due to a lack of knowledge in those areas could harm my business.
Regarding this, BPO is essential as you hire a company that has a better knowledge and technology to operate in those areas that you are not specialized in to create a better overall service of your business.
Price is also another factor you might want to think about. You might think that it is expensive to hire a company to be involved in your business process. Well, you might be right. However, the overhead costs that you need to spend to buy new technology and hire new employees are even more expensive. Therefore, BPO is used in this situation to reduce the costs which you could use for other important matters.
An increase in efficiency is the next benefit of using BPO. You could take care of those areas that you are not specialized in by yourself of course. Nevertheless, imagine how much time and money that you need to spend on that.
Was focusing on the core business that you were so passionate about is the reason that you started your own business? Then you want to focus on the core business and spending your time & money on it rather than focusing on things that you are not specialized at.
By outsourcing those areas to other companies, you will have more time to develop your core business to offer better overall performance to your customers. To sum up, BPO offers great benefits such as better performance, lower costs, and efficiency.
What are the drawbacks of BPO?
BPO is great, but you need to understand its drawbacks as well which are security problems and overly dependent on your third-party companies. Data security is always a problem when you hire another company to be involved in your business process as your sensitive data and information are exposed. Data breaches could harm your businesses in many ways. That is being said, having a clear contract at the beginning of the agreement is one way to avoid this risk.
Outsourcing the business functions and responsibilities that you are not specialized at is very comfortable. However, being overly dependent to the point that you have no control at all in the process is dangerous. It is still your business in the end and you need to have control of those functions.
Let’s say, you hire a company to manage your customer service and you have no control over the process. In the case that services are not being properly delivered, or there are miscommunications that cause mistakes by the company, it could harm your business and increase your costs. Related to this point, the existence of hidden costs and communication difficulties (especially if it is offshore) are also drawbacks of BPO.
Think about your plan carefully before outsourcing to other companies. Consider their price and reputations before choosing a company. You also need to internally plan as well to avoid being overly dependent on the companies you hire. After choosing which company to outsource, contact them and make a clear contract to avoid security problems.
BPO is great as it allows you to focus more on your core business, increase efficiency, and deliver better overall performance at a lower cost. However, do not forget to pay attention to the drawbacks of the BPO and manage them carefully. Security problems can be solved by setting up a clear contract at the beginning and having a solid plan is always essential.
We hope you have a better understanding of BPO after reading this article.