Business Process Outsourcing – An Overview

Submitted on: 07 Jan 15

Category: Blog

Business Process Outsourcing (BPO) is the corporate practice of hiring an outside company to execute select business activities. This article informs the reader of the various types of BPO services available in the industry.

Business Process Outsourcing (BPO) is essentially a change in business model. It involves hiring a global services company to perform certain business tasks. Outsourcing companies are frequently employed as a corporate cost-saving measure. Generally, work outsourced to a third-party service provider is needed by the organization in order to make business processes for efficient, however is not a part of the company’s core operations.

In the infancy of BPO, outsourced tasks were limited (e.g., payroll, human resources, accounting). As time progressed, business process outsourcing services have grown to include additional business value solutions such as legal services, healthcare, insurance, telecommunications, utilities and energy, and many more.

BPO can be classified into two categories: shared back office and shared front office processes. Back office outsourcing involves internal business functions, such as finance, and accounting. Front office outsourcing encompasses tech support, marketing and customer-related services. Organizations also outsource processes healthcare, insurance, shipping and logistics.

Outsourcing can be categorized into three categories based on the location of the outsourcing company (relevant to the company’s primary place of operation). The three categories include: offshore, near-shore, and onshore outsourcing.

Offshore outsourcing is contracting business functions to a company located in another country. Many companies around the world continue to use offshore outsourcing to minimize overhead, to access the innovations and developments of more specialized suppliers, and to make internal process more efficient.

A task outsourced to a neighboring country, which often shares a border, is deemed as near-shore outsourcing. This is often preferred due to the closeness in geographic location, the culture similarities and the similar time zones. For example, companies in the United States frequently near-shore outsource to the adjoining countries such as Canada and Mexico.

Onshore outsourcing (also called domestic outsourcing) is contracting business responsibilities to another organization located within the same country. This option can be used for strategic reasons, including when very specialized expertise is needed that cannot be found elsewhere. The local proximity of onshore outsourcing also facilitates with in-person contact with contractors.

Regardless of the classification, outsourcing business solutions and services continue to increase, and the sky is the limit. Driven by marketing and operations performance, business executives strive to meet global productivity standards while minimizing costs. This results in more and more companies using outsourcing and business process strategy to use global services and increase business performance.

The savviest of companies have taken this great opportunity and have made global business process outsourcing part of their business strategy. If you would like to take part in this momentum of change and are looking for alternatives to implement within your business, contact a global services company for more information.

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