Business process outsourcing, or BPO services, was once restricted to major companies with huge budgets and thousands of employees.
However, as technology has improved and the processes of running a business have become more streamlined, BPO has become available to many more businesses than ever before. According to Grand View Research, the BPO service market share is projected to reach around 500 billion USD by 2030.
This guide covers everything you need to know about business process outsourcing, including how it works and why it’s beneficial for businesses of all sizes.
Table of Contents
What is Business Process Outsourcing (BPO)
Business process outsourcing (BPO)is the delegation of any business processes to a third party. The main goal of BPO is to reduce costs, increase efficiency and improve overall business performance in your organization.
BPO services allow you to offload your company’s operations to another company. With the right outsourcing partner, you can also work on managing the supply chain, human resources, finance, and other aspects of your business.
You can outsource any part of your business processes - from customer care to HR support and finance functions - to an experienced partner that specializes in these services.
This strategy allows you to focus on what matters most: growing your company's core operations while saving money on overhead expenses such as equipment maintenance or payroll taxes.
For example, if you ran an advertising agency and had in-house designers who created ads for clients, your design process would be one of your core business processes.
You could outsource this work to another firm with more resources or technical expertise than yours—like a BPO provider—and free up money and space at the agency so it can focus on other things like marketing strategy and brand building.
A lot of companies outsource their manufacturing or IT operations already; it's only fitting that they would also look into outsourcing customer services, accounting, HR management and legal support services too.
Small businesses are generally not suited to handle their own IT and HR operations as their limited resources can make it impossible for them to run efficiently without assistance.
The need for outsourced services may also rise due to seasonal or temporary demand - instead of hiring new staff members every six months, a business could send work overseas or hire temps through an agency so they only need temporary employees when they experience a spike in workload.
What Business Process Outsourcing Services Exist?
The BPO services industry has three categories, each depending on the vendor's location. You can choose one category or combine a few to achieve complete process optimization for your business.
1. Onshore
Onshore vendors are those who operate within the same area or country as the contractor. They may be from different cities or states.
An onshore BPO is one that performs its services at an office in your local area.
They won’t be as cheap as an offshore BPO but they are still significantly cheaper than using a US company because you don’t have to factor in shipping costs from another country and there won’t be any delays due to communication problems.
2. Offshore
A business process outsourcing company located offshore is one that performs its services on a different continent or in a different time zone.
An offshore BPO will be cheaper than a nearshore BPO but you will have to take into account time differences and potential communication issues which can delay your project.
In 2022, there was a major rise in demand for outsourcing outside of the U.S. and is expected to continue beyond.
3. Nearshore
Nearshore vendors are located in countries that neighbor the contracting company’s country.
Although that may seem like a small difference, it’s actually a huge deal for companies and their customers.
Let’s take India as an example. Although an Indian vendor might not be physically located in the same country as its potential client (as would be the case with a vendor based in, say, Mexico), it still offers all of the benefits of having an overseas business partner— with far fewer sacrifices on both ends.
Choosing a nearshore outsourcing service company can provide the best of both worlds: proximity for easier collaboration and overseas cost benefits. This makes it an attractive option for many businesses.
What are the Different Types of BPO Services?
Business process outsourcing is a highly flexible service and comes in all shapes and sizes. Every business process can be transformed into an outsourced project, ranging from digital marketing, customer support, supply chain management or even data analytics services.
As such, your initial goal should be to understand what needs your business has right now and which you might want to outsource in the future - each with its own distinct requirements and deliverables that need to be clearly defined in your research.
Check out the types of services below and see if your business needs one:
- Information technology-enabled services (ITES) BPO
- Research process outsourcing (RPO)
- Legal process outsourcing (LPO)
- Knowledge process outsourcing (KPO)
- Travel
- Customer interaction services
- Back-office transactions
- IT and software operations
- Finance and accounting services
- Human resource services
1. Information technology-enabled services (ITES) BPO
This type of BPO handles IT solutions over the internet. The services are usually:
- Technical Support
- Production Support Analyst
- Service Desk Analyst
In a competitive landscape, aligning with the best tech support companies can elevate the quality of ITES BPO services.
2. Research process outsourcing (RPO)
RPO specializes in research and analysis functions. RPO companies perform research and analysis work that supports business, investment, biotech, and marketing firms. The tasks include:
- Data Analytics
- Primary and secondary market research
- Investment Research
3. Legal process outsourcing (LPO)
This is a subset of KPO which encompasses a huge range of higher-level legal work, not merely lower-level legal transcription. LPO firms can draft patent applications and legal agreements as well as perform legal research.
4. Knowledge process outsourcing (KPO)
This is another category of BPO that involves providing advanced expertise around a particular business process. For example, if you need help with your accounting department's workflow or want to update your CRM system, then you might consider hiring a KPO firm. The services include:
- Accounting and financial analysis
- Web Design
- Legal processes
- Content Creation
5. Travel
Travel BPO Services pertain to all the operations a business needs to support its travel logistics, from reservations to hotel and vehicle bookings.
Travel BPO saves money for the company because it cuts costs while increasing customer satisfaction.
Airline and travel companies also engage in BPO for either front- or back-office process streamlining. For example, an airline could outsource its ticketing process.
6. Customer interaction services
Customer interaction services are the most common type of business process outsourcing. This cover:
- Business voicemail services
- Appointment schedules
- Email services
- Marketing program
- Telemarketing, surveys
- Customer support
- Warranty administration
- Other customer feedback
7. Back-office transactions
These include check and credit card processing. Other services are:
- Collection
- Receivables
- Direct and indirect procurement
- Transportation administration
- Logistics and dispatch
8. IT and software operations
These technical support functions include application development and helpdesk. For example, manual data entry can be replaced with automated data capture, increasing data intake and reducing cycle time.
9. Finance and accounting services
These functions include billing services, general accounting, auditing, and regulatory compliance.
10. Human resource services
BPOs can help address workforce challenges through HR services. They can also cover:
- Hiring and recruitment
- Workforce training
- Medical or Insurance processing
- Retirement benefits
What are the Benefits of Having BPO?
BPO is a great way to gain access to skills and resources that your company may not have. In addition, it can help you optimize certain processes, which improves the bottom line and creates more value for your customers. This form of outsourcing could save your company money while increasing your profits in the long run.
BPO services offer many benefits that can help your business gain a competitive edge in today's marketplace. While there are many other factors that contribute to success, these five main ones will get you started on the right track:
1. Better Customer Service
When it comes to customer service, it's easy to see why outsourcing can be beneficial. When someone calls with a question or complaint about your product or service that isn't related to billing or technical support (for example: "What color do you recommend?"), it would be difficult for your in-house staff to answer those questions at all times.
An outsourced team will be able to handle these requests without disrupting their own schedule because they're not expected to answer every question immediately in real-time like their internal counterparts are — they may have other responsibilities (such as answering emails) that take priority over the phone calls from customers who aren't frustrated with anything in particular.
2. Reduced Costs
By outsourcing certain tasks or projects to a third-party partner, you can save money on labor costs while still maintaining control over important business operations. You also have access to skilled professionals who can work faster than your internal team.
3. Increased Efficiency
Statista data shows that 57% of companies utilize business process outsourcing to focus on operations and core issues.
When done correctly, BPO helps streamline processes in an organization so that it operates more efficiently and effectively than before.
This leads directly toward better customer service since there's less waiting time involved when dealing with clients' inquiries; instead of waiting weeks for someone else within one's own company (or department), they'll be able to receive answers much faster thanks
4. Better Quality of Business Processes
Because outsourcing allows experts from other companies to take care of certain tasks such as answering phone calls or emails right away without having any prior experience working with those types of requests before--they're usually very responsive whenever someone needs something done quickly because they've been trained how best deal with these types of situations beforehand by their previous employers (which means no mistakes made!).
Five BPO Risks
The benefits of BPO are numerous — increased efficiency reduced costs and high-quality customer service. However, business process outsourcing can also face some downsides. Let’s take a look at BPO risks:
1. Security Breaches
BPO includes sharing the company's sensitive data with a third-party provider, which can lead to data breaches and other security issues. However, companies can prevent this risk by providing security awareness training, ensuring that BPO firm complies with privacy laws and regularly updating security software.
2. Legal and Regulatory Compliance
Companies are responsible for complying with regulatory requirements even when outsourcing part of their tasks to third-party providers. To avoid legal issues, ensure that the BPO agency you cooperate with follows the same laws and rules your company must follow.
3. Communication Challenges
Cultural differences between the company and the third-party provider could cause communication problems that could negatively impact business processes. To prevent this risk, test communication and understanding before committing to collaboration.
4. Quality Control
Maintaining consistently high-quality service is another challenge when outsourcing business processes. To avoid it, thoroughly research your hiring options, set clear expectations, provide detailed onboarding and ensure technology alignment.
5. Higher Costs
Although outsourcing is cost-effective,the third-party service can sometimes face more work than initially expected, which may increase your initial costs.
Companies should carefully choose their outsourcing partners and regularly monitor their performance to avoid these risks. If you're looking for reliable BPO services, take a look at our best BPO agencies that will take a piece of the burden from your back.
How to Choose a Business Process Outsourcing Company
To choose a BPO service provider from a crowded BPO market, you’ll have to consider several factors.
The first thing you need to look for is the experience of BPO service providers. You can do this by looking at their website for references and testimonials from past customers.
Another important factor when choosing a BPO company is whether they’re reliable and trustworthy. This means that they should be able to follow through with what they promise without letting customers down by providing poor services or equipment that doesn’t work properly.
These problems may come up if you choose an inexperienced BPO services provider so it's important that your brand has someone who will give them good advice about what needs doing before starting any projects together so there aren't any surprises later down line.
To help you choose the right BPO company that can provide fitting services to you, ask yourself these questions:
- Is their turnaround time reasonable?
- Do they communicate effectively and clearly?
- Do they have the resources necessary for your job or are you going to have issues regarding quality control?
- Are their technicians experienced enough or does it seem like they’re new at their job and trying it out?
- If so, will their inexperience affect performance standards or lead time?
With BPO, you can focus on what you do best while outsourcing the rest of your business processes, including customer service, human resources, payroll management and accounting.
BPO Services FAQ
What are BPO services examples?
There are many types of business process outsourcing services. Commonly outsourced processes include:
- Call centers
- Accounting services
- Payroll (payment processing)
- Digital marketing
- IT services
- Healthcare and insurance
- Human resource (HR) management.
Who is the largest BPO in the world?
The largest BPO in the world is Accenture, an IT company that operates in 120 countries and employs more than 500.000 people worldwide. Accenture’s revenue for the first quarter of fiscal 2023 was $15.75 billion.
However, several other BPO companies are also very large and have a significant global presence, including Cognizant, Concentrix, DOXA, Genpact, IBM Global Process Services, Teleperformance, Wipro, ADP, Sykes Enterprises and HCL Technologies.
BPO Services Takeaways
Business process outsourcing can be one of the smartest decisions you make for your small business or start-up if you do it right. By investing in an outsource partner who will provide the right expertise and talent to meet your needs, you'll have more time, energy and resources to focus on growing your business—all while bringing down costs. After all, time really is money.
