What exactly is BPO and why do companies use them? A Call Center is a kind of BPO. For instance, a manufacturer might outsource some of their internal customer service to a large call center. However, business process outsourcing is not restricted to call centers, or even to customer support. There are many other business process outsourcing sectors that use BPO to their advantage.
For instance, think about what happens when an enterprise executive calls up an outside provider for help. This provider may be a consultant who specializes in helping organizations streamline their processes. The business process outsourcing expert will tell the enterprise executive the benefits of hiring this provider to help them with their internal processes. The consultant also might add that this particular business process outsourcing expert can provide access to an experienced pool of outside talent. The organization thus has a significant competitive advantage because it does not need to train its own management team. Instead, it can just hire an expert and let the expert do the training.
Consider also the other side of the business process outsourcing coin. What about the outsourcing costs involved? Most business processes are rather complex and involve a number of people, so it's not just the labor costs that come into play here. In most cases, an American company would need to outsource most if not all of its business processes to an offshore third-party provider.
Look at these two scenarios as parallel:
Of course, most observers would look at these two scenarios as parallel. But there is a lot more to the story. Let's start with the second example mentioned above. What happens if an American company wants to retain the services of a third-party provider for one of its business processes? Will the company still have to outsource those functions? And if so, does it gain anything by doing so?
In most cases, outsourcing business process outsourcing is done to minimize the overall costs of doing business. But the extent to which that optimization can be brought to bear in a specific instance depends on the specific circumstances. Take, for example, the case where an American company wants to continue employing its own in-house human resources department. In such a case, the reduction of costs to the extent of shutting down the department can be relatively significant. But when the function continues to be performed by a third-party provider, the impact to the organization's bottom line will be less.
One example of another business process outsourcing function is that of payroll functions. In most organizations, payroll is a separate department like customer service or accounting. But it is a very important function because it is perhaps the most important function in maintaining the health of the business. Payroll needs to be processed quickly and efficiently, and it has to have information from various employees' payroll systems. Outsourcing this kind of function is like outsourcing knowledge process outsourcing, where the knowledge of the payroll process is taken care of by another firm.
Different types of technology:
The two main areas in which business process outsourcing has its impact are the back office and front office operations. In the back office, a firm can save a lot of money by contracting with an external company to handle processes like accounting and payroll. It will allow the firm to concentrate on the core business processes. In the front office, however, there are several things to be done in order to maximize the productivity of a company. For instance, there should be enough and well-maintained storage space. A computer system must be updated regularly, and there must be a regular supply of software engineers, quality assurance personnel, and software testers.
Outsourcing these functions to non-core vendors has its own set of problems. For instance, there might be problems of incompatibility as both parties use different types of technology. Another problem is that the vendor might not have enough knowledge and skills to perform the job, which leads to partial failure of the project. But all these problems can be solved if the vendor is chosen carefully, and the organization thoroughly researches before deciding to outsource the business process outsourcing.
