What is BPO? – A Guide to the Ins and Outs
Whether you are just finding your feet or a multi-billion dollar corporation – everyone has busy work. In other words, you have the work you love doing – selling, designing, advising – then there is administration work, payrolls, and customer complaints – the work that takes your focus away from your main functions.
When your mind isn’t completely focused, your work suffers – both on an individual and enterprise level. This brings us to BPO (business process outsourcing) as a possible solution. Some may find themselves asking – ‘What is BPO?’, or ‘What does BPO mean for my business?’ – we are going to answer these questions.
What is BPO?
BPO is when you contract defined work processes to an external agency. As a general rule, BPO is used for auxiliary processes – that busy work we were talking about. By outsourcing your auxiliary functions, you create the space for your team to focus solely on core functions – the work that they love. Commonly outsourced business processes include:
- Personal administration via remote teams
- HR/Recruitment functions
- Customer Services
- Sales Support
We can further divide these processes into ‘front office’ and ‘back office’. Front office processes involve dealing with customers directly – such as telemarketing services, while back-office processes involve internal functions like IT support and accounting. BPO refers specifically to back-office functions.
When examining ‘What is BPO?’ we must distinguish it from FPO. We could say that ‘BPO’ is the external backup to help your team run as efficiently as possible.
What is BPO – The Different Types of BPO
The question ‘What is BPO?’ is too broad. We’ve just seen how many types of services can be outsourced – so we need to break things down even further. BPO can be categorized into three main groups:
- Knowledge Process Outsourcing (KPO) – these are outsourcers that have expertise and capacity to perform highly skilled functions – e.g. financial advisors, accountants, recruiters, etc.
- Legal Process Outsourcing – these are, as the name suggests, legal services such as contracting, documentation, and other legal concerns.
- Research Process Outsourcing (RPO) – research and analysis functions ranging from market research to biotech.
Where is BPO?
When answering the question – ‘What is BPO’, we also need to look at – ‘Where are we outsourcing to?’. BPO is divided into three categories
- On-shore – within the same country as you, for example, if you are a US-based company, on-shore agencies would be based in the US
- Near-shore – a country close to your location – so if you’re in the US, near-shore would be Mexico or Cuba. Normally, near-shore agencies are based in places with similar time zones.
- Off-shore – based in countries far away – vendors may be based in the Philippines or India.
On an important note, when choosing a near or off-shore-based agency, you need to bear two key features in mind. Choosing a country where the exchange rate is in your favor has obvious advantages of decreased labor costs. There is a trade-off here – where the currency is low, there may be great political instability and this could interrupt workflow. So, we need to balance between cost and politics.
Should I Consider BPO?
Now that we’ve answered the question, ‘What is BPO?’, we need to dive deeper into how BPO can help your business. Here are some of the main advantages of BPO
- Space to concentrate – BPO frees your talent from unnecessary work. This allows your core team to focus on the work that brings in money. This can help to improve your business growth. There is also an indirect cost advantage, here. If you are paying your top talent top dollar and they spend 40% of their time doing busy work – you’re wasting money. A low-level worker can perform that same work, at a much lower cost.
- Decreased costs– hiring in-house staff is expensive. Not only are you responsible for their pay but also benefits, sick leave, and training. In addition, in-house employees require facilities – office space, computers, etc, which carry their own costs. BPO cuts all these additional costs leaving you with only the cost of labor.
- Increased productivity – in-house personnel is able to give all their attention to core functions.
- Improved efficacy – you can choose to outsource to experts. Having your books done by an actual accountant instead of an overworked sales manager will improve quality and efficacy.
- Increased flexibility – with BPO, you can increase and decrease the size of your outsourced team on demand. Because you don’t have contracted employees, and talent is readily available, onboarding is much quicker. Additionally, because your remote team is contracted to your BPO agency, and not your business directly, you can decrease the size of your team without worrying about labor disputes.
- Expand your global presence – some outsourcing companies offer twenty-four-hour service in multiple different languages. This gives you the opportunity to service customers irrespective of language and time barriers.
As with all things, there are disadvantages to outsourcing, but there are often misconceptions as to the severity of these disadvantages. With the right provider, the pros far outweigh the cons. Believed downsides include:
- Myth -The BPO provider won’t understand my business
Fact – You want to pick an outsourcing partner that is familiar with your industry and one that has a comprehensive onboarding plan
- Myth -My BPO agency will steal my business ideas.
Fact – Your outsourcing partner has their own business to run, a reputable business will have non-disclosure clauses and other legal protection in their contracts.
- Myth – I will lose control if I outsource BPO.
Fact – Not true, with the right outsourcing partner you will be able to maintain the level of control you are comfortable with.
- Myth – My outsourcing partner will detract from my brand identity.
Fact – Outsourcing companies are experts in switching ‘voices’ to maintain the brand identity of their multiple clients. It’s what outsourcing companies are paid to do. Furthermore, BPO specifically refers to non-core business functions. so your identity remains the same because your core business stays the same.
So, When Does BPO Go Wrong?
Problems with outsourcing occur when there is a breakdown in communication between you and your BPO provider. Communication is key to avoid issues such as:
- Slow delivery
- Sudden changes in pricing
- Poor quality
These three problems can all be addressed with predefined outcomes (KPIs), explicit contracting, and constant open lines of communication. If your outsourcing partner can’t do that, they shouldn’t be your partner.
What is the BPO Industry Like?
When we consider our main question, ‘What is BPO?’, we need to consider it within the context of the global industry. In 2017, it was estimated to be worth $144.9 billion with a growth of roughly 2% per annum. If nothing else, this huge market shows that BPO works – otherwise so many people wouldn’t use it.
What is BPO – Take Home Points
‘What is BPO?’ is a multifaceted question, we can break it down into these core points.
- BPO saves your core team time and energy allowing them to focus on jobs that require their talent.
- You can outsource a variety of jobs – both front-office and back-office. Start small – outsource one function that puts a lot of pressure on your employees e.g. data capturing. See how this fits into your business culture. If it’s a hit, you can expand your outsourcing efforts. If you encounter obstacles, see if changing your outsourcing partner may help.
- The main purpose of outsourcing is to preserve your resources, in terms of both personnel and money. The beauty of this is that outsourcing doesn’t compromise efficiency, growth, or productivity – in fact, it enhances it.
- There are many myths around BPO but the truth is that a lot of these are born out of fear of losing control. With a good partner, you should be able to be as involved as you want to be.
It can be scary to start outsourcing – particularly when you have put the blood, sweat, and tears into building a successful business. Bringing outsourcing partners, such as Noon Dalton, onboard gives your business access to pools of talented workers to add value to your team. So, ‘What is BPO?’ – it’s growth, it’s potential, and it’s the way forward.