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Business Process Outsourcing

What is Business Process Outsourcing (BPO)?

Business Process Outsourcing or BPO is a process that involves outsourcing the standard/specific business functions to a third-party company/contractor.

Companies usually opt for outsourcing when they feel a specialized company can handle the tasks of their business better. In other words, instead of having an in-house team, you use a third party to handle the non-primary business activities of your company.

In many instances outsourcing the work to a third-party company is more efficient compared to an in-house team.

There are quite a few different tasks that can be outsourced, but the most common ones include:

  • Customer service/call centre relations.
  • Accounting.
  • Payroll.
  • Human resources management.
  • Document management.
  • Social media marketing, etc.

What is BPO used for?

Organizations opt for BPO's for 2 main reasons:

  • Back-office functions
  • Front-office functions.


Back-office Functions:

It includes all the internal business functions such as:

  • Accounting.
  • Information Technology (IT).
  • Human Resources (HR).
  • Quality Assurance (QA).
  • Payment processing, etc.

Front-office Functions:

It includes functions such as:

  • Customer relation services.
  • Marketing & Sales.


Over the last few years, the business process outsourcing industry has grown significantly and now offers more services than ever. There is a wide range of services and functions for businesses to choose from.

Although most companies generally opt to outsource all the non-core functions, some opt for critical services like customer service, financial service and IT operations as well.

Organisations also prefer to outsource strategic tasks like Data mining and data analytics which are very essential elements of digital transformation. This allows them to get a competitive advantage in a digital economy.


What are the different types of Outsourcing?

Offshore outsourcing is the most common form of outsourcing, but it's not the only kind of BPO. The different types of outsourcing are:

  • Offshore Outsourcing: Offshore outsourcing happens when a company hires an overseas contractor to get their work done. A very good example of this would be a European country outsourcing to a company in India.
  • Nearshore Outsourcing: Nearshore outsourcing happens when a company hires a neighbouring country to outsource their work. A good example of nearshore outsourcing would be an American company outsourcing its work to a Mexican company.
  • Onshore Outsourcing: Onshore Outsourcing happens when a company hires a company from the same country to outsource their work. An example of onshore outsourcing would be a European company hiring a Europe-based outsourcing firm. 


What are the different categories in BPO? 

BPO is categorized into 3 types based on the services they offer. These 3 categories are:

  • Knowledge process outsourcing: KPO is when a company outsources a service provider not just to perform a particular business process or function, but to also provide an expert solution. A service provider is hired based on the knowledge he possesses.
  • Legal process outsourcing: LPO is similar to KPO, the only difference is that LPO, as the name suggests, deals specifically with legal services. It includes services like drafting legal documents and performing a legal search to offer advice.
  • Research process outsourcing: Research process outsourcing is another type of BPO which is similar to KPO but it deals with all the research and analysis functions. Biotech companies, investment firms and marketing agencies are the firms which engage themselves in RPO services.


What are the Benefits of BPO?

Organizations opt for business process outsourcing to get various benefits from it. It not only helps in the smooth functioning of the business but to also optimise their resources.


Benefits of opting for a BPO include the following:

  • Financial Benefits: Organizations have observed that an outsourced provider can perform the same activities at a much lower cost compared to in house teams. This helps in saving a lot of costs and also forms a relationship in other ways, in the form of tax savings.
  • Flexibility in operations: BPO's allow a great level of flexibility to organizations by enabling them to react to the changing dynamics of the market. Having a BPO in place can ensure that an organisation is on par with the market needs.
  • Competitive advantage over others: BPO allows organizations to outsource their non-core activities enabling them to completely focus on their core activities. This allows them to focus more of their resources on the operations that matter to them the most, to distinguish themselves from the market.
  • Enhancements in quality & improves performance: BPO's are specialized service providers. Having them by your side ensures that the work you have outsourced to them is of the highest quality and has greater accuracy. They also ensure efficiency and speed which improves the performance of the organization.
  • At par to the latest innovations & technology: BPO providers are usually up to date with the latest advancements and innovations happening in their industry. They are more likely to invest in new developments and technology to process automation. This in turn improves the speed, reduces cost and improves the quality of work, in turn benefiting the organization that has outsourced their work to them.
  • Better/Expanded coverage: BPO’s can help organizations to expand their working hours and geographical reach in a cost-effective manner. A good example of this would be, an organization outsourcing a partner to provide a 24/7 call centre operation. This ensures good customer support across the globe making it a good business model for many organizations.

Can Chatbots & Live chat replace BPO?

Well, the reality is that chatbots are both faster, cheaper and more reliable compared to an overseas call centre. 

As per research, chat-based customer service is 100 times faster than email communications and telecommunications, and also costs 50 times less compared to them. 

But the biggest blow for BPO customer service is the integration of chatbots and humans together. The rise of live chat as a well-integrated combination of chatbots and humans is a game-changer for customer service experience.

Combining live chat and chatbots would make companies provide instant and accurate results to their customers.

They would reduce the cost of the operations significantly while improving the results. As more and more companies move away from BPO, having inhouse customer service in the form of chatbots and live chat would be a really good alternative.

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