Outsourced services have quickly grown into a set of best practices used by companies of all sizes. According to market research reports, the business process outsourcing (BPO) market was valued at $221.5 billion in 2019, with projections estimating a compound annual growth rate of 8% through 2027. But, what is business process outsourcing, exactly?
Business process outsourcing is a strategy wherein businesses hire third-party vendors, or service providers, to handle a specific part of their operations. It’s a broad term that encompasses a wide range of business workflows, from managing supply chains to customer service, sales, and accounting.
So, what are BPO services, their benefits and drawbacks – and how can companies make sure they find the right balance between quality services, and meeting overall business goals and strategy?
Businesses can easily partner with and outsource work to other companies from around the globe – and doing so comes with a list of advantages.
But before we dive into the benefits of outsourcing, let’s discuss the different types.
What Types of BPO Services Are There?
Business process outsourcing can be broken down into two categories: back office outsourcing and front office outsourcing.
- Back office outsourcing deals with outsourcing internal business functions like accounting, data entry, or quality assurance. Outsourcing your back-office functions will support your infrastructure and help your organization run like a well-oiled machine.
- Front office outsourcing includes any services that require customer interaction, such as marketing, tech support, or customer service. It can help you expand your business and increase service quality.
What Are the Benefits of BPO?
There are various benefits that outsourcing provides to businesses both large and small, usually related to cost reduction, quality assurance, or productivity.
When companies find the right business arrangement, outsourcing can provide all these benefits and more. Some of the most common reasons to outsource include the following:
- Achieve better results:
Outsourcing is a simple way to improve efficiency for processes that a business can’t manage on its own. For example, many businesses outsource tasks related to information technology design and management, as these require specialized knowledge that your internal team might not possess.
- Reduce costs:
Specialized service providers can often perform the same task more efficiently and at a lower cost.
For example, instead of handling customer service in-house using overextended personnel or inadequate phone systems, a business can outsource to a dedicated call center that already has thousands of phones and trained staff.
- Boost productivity:
By outsourcing tasks to a third-party, internal teams are freed up to focus on other workflows. Common examples of productivity-driving outsourcing arrangements include front office task outsourcing and human resources outsourcing.
- Drive growth:
Outsourcing helps companies expand by giving them access to new resources and international teams. This allows them to capitalize on opportunities they might not otherwise be equipped to take advantage of because of their size or workforce.
- Create better customer experiences:
The above benefits all contribute to a broader goal that most companies share: creating better experiences for customers. When companies are efficient, lean, and flexible, they’re well-positioned to focus on their customers and prioritize relationships instead of logistics management.
Types of BPO Strategies
Usually, BPO refers to one of three specific outsourcing strategies. These strategies are defined based on the location of the outsourced service provider and come with their own advantages. They are the following:
- Offshore outsourcing means transferring business processes to a vendor in a different country. This is a strong option when companies seek specialized service providers at a lower price point.
- Nearshore outsourcing involves offloading processes to a vendor in a neighboring country. This is often preferable for expanding a company’s footprint into adjacent markets or seeking specific features (unique services, lower prices, etc.) that the home country can’t provide.
- Onshore outsourcing means handing off workflows to a vendor in the same country. This is ideal when companies require regular, in-person communication with their providers or when regional culture/languages are a priority.
Are There Drawbacks to BPO Services?
While business process outsourcing trends have evolved to deliver significant advantages to the businesses that use them, there is some risk inherent to the process.
Companies may be wary of handing off important business operations to an unknown third-party, particularly important financial processes such as bookkeeping or payment processing.
Research into the risks of outsourcing highlights several key challenges that businesses may experience, such as:
- Risk of security breaches or inadequate IT systems in third-party vendor systems.
- Poor communication between vendor and client, leading to a disconnect in priorities and failure to deliver quality services.
- Feeling trapped by vendor “lock-in” when committing to long-term service contracts.
- Losing internal flexibility and growth capabilities compared to keeping things in-house.
- Increased admin burden of managing multiple vendors across several outsourced processes.
While outsourcing offers businesses clear advantages, these risks need to be addressed before any service arrangements begin.
Ensuring a Successful BPO Partnership
Companies looking to explore an outsourced business process or innovative technological solutions should perform their due diligence for choosing a provider. It is a good idea to do the following:
- Research all vendor options and perform a thorough assessment of each to identify benefits and risks.
- Ensure the vendor can perform the services your company needs.
- Ask the vendor to validate its IT security credentials.
- Note how readily you are able to coordinate details with a vendor and ensure smooth communication. Communication in the early planning stages will offer you insight into how well you will be able to work with the vendor in the future.
This planning will ensure that your chosen vendor can meet the company’s needs, expanding your business’s capabilities rather than restricting them.
When this due diligence is handled early in the process, businesses avoid feeling locked into service arrangements and stay free to focus on their business goals with a qualified BPO vendor behind them.
Find the Right Partner for Your Business Outsourcing Needs
What is BPO services? In short, it’s the easiest way to transition core business functions to third-parties that specialize in those core competencies. For most services, outsourcing represents a type of knowledge process outsourcing that yields direct benefits for companies.
For over 33 years, Humach has offered high-quality outsourcing services to leading brands all over the world. We specialize in BPO service, focusing on the crucial goal of customer experience management.
Humach’s innovative services and solutions leverage AI-powered digital agents alongside human agents to increase business efficiency, enhance the customer experience and increase your ROI.
When you work with Humach, you will be able to:
- Cut costs and increase efficiency by using a superior, all-in-one CX solution
- Take advantage of 24/7/365 customer and sales support throughout every channel
- Leverage digital agents that can automate 30% of customer interactions in 120 days or less
- Improve first contact resolution by 22%
- Have peace of mind knowing that all of our solutions are 100% PCI-DSS and HIPAA compliant
- Plus much more
If you’re ready to embark on an outsourcing partnership with Humach that will help you achieve your customer service goals, contact us today to get started!