OI Blog

Author

Peter Iansek

CEO & Co-Founder

Peter Iansek

Date

Oct 2023
OI Blog
Oct 2023

What is Business Process Outsourcing (BPO)?

What is Business Process Outsourcing (BPO)?
Peter Iansek

Author

Peter Iansek

CEO & Co-Founder

What is Business Process Outsourcing?

Business Process Outsourcing is the practice of contracting a specific business task, such as payroll, accounting, customer service, or technical support, to a third-party provider. BPO enables companies to focus on core business activities while leveraging expertise and technology from the outsourcing partner. 

By outsourcing specialized processes, organizations can reduce costs, improve operational efficiency, and free up resources for their core competencies.

What is BPO Used For?

BPO can be used for both front and back-office services. Front office services are process-oriented activities that help organizations interact with their customers. These are often outsourced to call and contact centers for customer service support. 

Back office services are operational activities that are not directly related to the customer, such as HR services, data entry, accounting, and bookkeeping. Businesses may outsource all or part of their operations depending on their needs.

BPOs vs. Call Centers

employees working at a bpo

BPO vendors and call centers are both forms of outsourcing business tasks. But, they’re not the same. 

Call centers focus on telecommunication support for clients and customers. They serve as the primary line of contact for customers seeking help or information about products or services.  Call centers can be a type of BPO, while BPO vendors also provide support for finance, accounting, data processing, and IT services. BPOs can also require a larger team of professionals.

BPO Service Types

There are a few BPO service options. 

1. Off-shore BPOs

This involves transferring the management and execution of specific operations from an organization’s internal staff to a team located in another country. Businesses experience a range of incentives when outsourcing to off-shore BPOs, such as affordable labor costs, qualified personnel, and even tax benefits. 

2. On-shore BPOs

Onshore or domestic BPO is the transfer of certain business processes from an organization to another company in the same country. Onshore BPO provides local expertise, more control of operations, and a heightened sense of information security. They’re the most expensive option of the three. 

3. Nearshore BPOs

Nearshore outsourcing is the use of vendors located in nearby countries with similar time zones. A nearshore BPO can improve scalability and productivity while reducing overhead costs. However, compared to an off-shore BPO vendor, nearshore BPO services are more likely to have cultural and language familiarity, easy communication, and shorter travel times between the client and the BPO vendor. 

An example of nearshore BPO would be a Silicon Valley company outsourcing IT and coding services to specialists in Canada or when a Canadian company sends over marketing services from a company located in the U.S.

BPO Benefits

bpo workers

Business Process Outsourcing can provide several benefits to organizations. 

Cost Optimization

Organizations can realize significant savings on labor, office space, materials, equipment, and other operational costs by outsourcing certain business processes. Additionally, it allows businesses to save time and money associated with hiring and training new staff members. This creates a more efficient operation that requires fewer resources and maximizes cost savings. 

Global Reach 

Business process outsourcing provides organizations with access to global resources. Businesses can tap into a larger talent pool and benefit from the insights of local experts.  Global reach means a wider range of customer service capabilities, allowing companies to offer better support services, such as multilingual and 24/7 support, which can be very challenging to provide in-house.

Higher Efficiency

By outsourcing operations that aren’t perceived as mission-critical, companies avoid unnecessary costs and speed up production cycles. Organizations can also take advantage of an experienced team of professionals dedicated to optimizing the outsourced processes and systems. 

When BPO services are outsourced to countries with lower labor and capital costs, businesses can increase profit margins. 

Flexibility 

By outsourcing specific business processes, companies can tailor their operations to suit their needs and the customer experience with more flexibility. This is especially important when there are seasonal spikes in demand or sudden changes in industry trends. 

Companies have the freedom to scale their services up or down as necessary without having to commit to long-term commitments or hire additional staff. This helps businesses meet customer demands quickly and efficiently while staying within budget. 

BPO Challenges

Business Process Outsourcing can present some challenges for organizations to consider.

Varying Communication Styles

BPOs often work remotely and communicate over long distances. Different time zones and even inconsistent wifi can all impact communication. 

Cultural and language differences are also important to understand. Different countries have unique customs and cultural norms that must be respected to ensure successful collaborations. 

Frequent meetings, consistent documentation, and accessible data can help overcome these challenges. 

Dependency 

BPOs can be a great way to reduce costs and increase efficiency, but being dependent on outsourced services can add different operational challenges. 

There could also be significant financial implications if the BPO fails to deliver the expected outcomes. Fortunately, working with reputable BPOs that have optimized their business processes can reduce this risk. 

Impact of Distance

Working with BPOs inherently means there will be distance between central operations and the services being outsourced. This can result in communication delays, reduced project supervision, and a lack of an understanding of each other’s culture. 

These issues can result in lower customer satisfaction rates and decreased efficiency when resolving customer queries. Implementing sufficient systems, tools, and documentation can ensure better communication and results despite the geographic distances involved. 

Improve BPO Efficiencies with Operative Intelligence

Both BPOs and the companies outsourcing their work can find greater efficiency and improved productivity by using the right customer experience tools. 

Operative Intelligence has extensive experience working with both BPOs and organizations utilizing BPOs for their call and contact center needs. The Operative Intelligence platform provides a set of targeted, actionable customer service insights. These help both the BPOs and their clients collectively focus on the highest-impact opportunities to improve customer service every day.

Operative Intelligence analyzes 100% of inbound interactions and shares the root causes of overall inquiries using direct phrases from customer speech. It shows every inquiry's volume, cost, and sentiment, so contact center leaders know which changes will drive the highest impact improvements in their customer experience and operational and frontline performance.

For the BPO, Operative Intelligence ensures: 

  • Less manual analysis and reporting 
  • Scalability across varying clients
  • Proactive delivery of intelligence
  • Increased collaboration and problem-solving capabilities
  • Improved agent and team effectiveness

For the client using BPO services, Operative Intelligence provides:

  • Greater visibility into agent practices and results 
  • More real-time data 
  • Stronger partnership and collaboration with the BPO 
  • Deeper understanding of what is driving customer contacts
  • Opportunities for engineering teams to improve the product 

Ready to drive changes at all levels of your organization? 

Book a demo with Operative Intelligence today.

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