What is Business Process Outsourcing?
Business process outsourcing or BPO has been in existence since the 1990s. It primarily refers to the process of contracting certain business functions to a third-party service provider, particularly in areas where the labor cost is very high compared to other countries. In the U.S., it has become a common practice to outsource accounting, customer service, and human resources to third-party service providers. In fact, BPO in the U.S. has become so popular that there are now many well-known firms providing such services.
How Does Business Process Outsourcing Work?
Outsourcing is all about reducing the cost of doing business without sacrificing quality. When an organization undertakes to outsource the core business processes to an external third party, it reduces the overall operating cost by as much as 70%. This is possible because when you outsource your activities, you effectively delegate those tasks to someone else who can do them better or at a significantly lower cost. This is not to say that you offload everything to a third party. There are certain tasks that you can only delegate to your outsourcing partner.
A lot of big companies in the US, Canada, UK, Australia, and Europe outsource their human resources tasks to a third-party call center in India or in the Philippines. As you can imagine, human resources are the backbone of any organization as it enables the company to hire and fire employees, manage payrolls, train new employees, and perform a variety of other core business processes. Outsourcing your human resources allows you to focus on the more critical aspects of running your company. In most cases, the results of business process outsourcing are phenomenal as it enables you to cut expenses and increase profit margins while freeing up your human resources department to concentrate on other business aspects.
Why do companies prefer outsourcing?
The advantages of outsourcing are not only focused on core business functions. Companies can also use third-party organizations to handle things such as payroll administration, customer support, and data entry. Outsourcing these kinds of tasks allows your company to save a lot of money and because the company does not have to employ the services of human resources professionals, the company becomes more efficient and productive. This translates to increased profits and improved employee engagement levels.
Outsourcing takes a certain amount of preparation, planning, and training. For instance, if you want to outsource important accounting tasks, you’ll need to train accountants to be able to take care of complex accounts and information. It is also important that the outsourced company has experience in employing the latest technology, as many accounting tasks involve the use of different accounting software. No doubt, if you hire a highly experienced outsourcing provider, you can significantly reduce the costs associated with your business’ operation with the same quality (sometimes better) than having them in-house
Why do businesses outsource their processes?
Free Up Resources
Businesses, both large and small, have realized the importance of outsourcing their internal processes. This enables them to free up precious resources for other operational activities. For instance, when you operate a hotel or a restaurant, you will find that you spend a lot of your time dealing with the guests and the reservations. You need staff to take care of the reservations, to check on the rooms and to greet the visitors. If you have too many employees, it becomes difficult for you to perform these various tasks, leaving you with too much work and too little time.
By outsourcing some of these activities, you can free up valuable staff for other operational tasks.
Trim Down Expenses
In addition, you may also be able to trim down your operational expenses by outsourcing some of the non-strategic processes in your business. For example, if you have a number of accountants in your business, you may find that you are spending a lot of money hiring them each month to perform the bookkeeping functions. Instead of hiring new accountants every month, you can outsource some of these functions to firms specializing in outsourced accounting services.
Better Customer Satisfaction
Another reason why you should outsource your business processes is because it allows you to have better quality control over the results of your business operations. When you have a team of customer service representatives, you can be sure that the product or the service that you are offering will be backed by good customer support. When you outsource your customer service, you have more time to focus on developing the products and improving the services that you are providing. In turn, this will allow you to continue to innovate, invest in research and development, and while at the same time having a higher level of customer satisfaction. After all, most satisfied customers will tell others in your industry about your excellent service.
The reality is that there are numerous reasons why do businesses outsource their processes. However, it is important that you identify the process that you are in need of to be done. In addition, it is equally important that you contract the right BPO company to do the job.
6 Benefits of business process outsourcing?
Have you ever wondered why it is that most outsourcing companies are experiencing growth year by year? The global market size of services outsourced from the United States alone is expected to hit $212 billion by 2023. This is because outsourcing has become a sort of necessity now in the business world. Most small business owners think that outsourcing is very expensive and that only large companies can afford it. But, as you will read in this article, you will understand that outsourcing is not expensive and it actually benefits even small businesses.
1.) Outsourcing does not only mean cheaper costs for you (although this is true). But, more importantly, it means that you don’t need to have all the latest computer hardware or software installed in your office. That would be quite impractical and will require a bigger upfront cost. Instead, most outsourcing companies will already have all the necessary equipment and software needed.
2.) You don’t need to hire too many employees just to get the job done. In fact, when it comes to outsourcing, you will never need to hire any employee at all.
3.) Outsourcing will free up a lot of your time and you can focus on the more important aspects of your business which is growth.
4.) You probably know that you can save a lot of money when you outsource. Saving money is one of the most obvious ones.
5.) Outsourcing companies are always on the lookout for talented people who can really make your business succeed.
6.) Of course, another advantage that outsourcing offers is freedom and flexibility. As a matter of fact, outsourcing companies allow you to choose when and how much work you would like to have done. In addition, outsourcing companies are also very flexible so you can get to handle any project according to your current schedule.
All you need to do is to find a reputable company that can provide you with excellent service at an affordable price.
The Risks of Business Process Outsourcing
The idea of outsourcing away the responsibilities and processes of a company has seen many success stories over the years. However, for every success story there have also been several failures. This is due to many things, but primarily it has to do with the way that people approach outsourcing in the first place. The fact is that people have a tendency to look at the outsourcing companies as someone who will solve all their problems.
Business process outsourcing is not a bad thing per se, it does help to eliminate extra overhead and can really help to reduce the cost of running a business. However, it is important to understand that this strategy does involve some risk.
One of the main risks of business process outsourcing is when there is miscommunication involved. In other words, there may be communication problems that exist between the outsourcing company and the bpo services provider. Sometimes this is due to poor communication skills on the part of one or both parties. Other times there can be misunderstanding about how to go about outsourcing, or they can simply not be sure that the process is going to be successful. Either way, it is important for the outsourced company to ensure that all communication channels are running smoothly.
Poor Choice of BPO Service Provider
Another risk is that the quality of the output might suffer as a result of poor business process outsourcing. For example, a company may find that a particular aspect of their business process outsourcing project is not working out well and they cannot figure out a way to make it better. This then means that they have to spend more time and money trying to fix it than they would have if they had hired someone competent in the first place. The bottom line is that outsourcing might cost the company more in the long run if it is not done right.
Speed and Delivery
There are also problems that can come up due to the speed at which certain processes needs to happen. Again, this is something that depends on the outsourcing firm and how quickly they can get a project completed and meet deadlines. Some processes, such as data entry, can be a real issue if speed is not managed properly and deadlines are not met. This is one of the biggest risks of BPO and should be considered very carefully when you are choosing an outsourcing firm to handle your business processes.
Planning and Preparation
One of the biggest risks of business process outsourcing is simply that outsourcing can cost a company money if it is not done correctly. To be honest, companies should spend plenty of time planning for outsourcing so that they can figure out how to save money while still getting the services that they need. By outsourcing certain parts of their business operations to an outsourcing firm they will end up saving money, but they should also plan for these things so that they know that they can be successful. Many outsourcing firms are willing to work closely with a company so that they can learn how to improve the operations that they offer. If a company just outsources blindly then they are just throwing their money away.
List of Outsourcing Services and Solutions
In outsourcing, there are several services that you can choose from. These include:
- Customer Support
- Email and Chat Support
- Technical Support
- Back Office Support
- Help Desk Support
- Data Entry
- Content Moderation
- Photo Editing
- Video Editing
- Lead Generation
- Appointment Setting
- Ecommerce Customer Services
- Accounting and Bookkeeping
- Other Services
A lot of outsourcing services and solutions providers offer different package deals for their clients. Some of these packages include the use of software and systems, training videos, and other perks. If you want to be extra careful with the outsourcing services and solutions provider that you are going to hire, it would also be best if you could check out the background and reputation of the company or individual that offers the outsourcing services and solutions.
As outsourcing has become so much popular these days, the internet has provided many companies with the ease of access or entry to outsourcing services and solutions. You just need to make sure that you are going to hire the best possible service provider to ensure that you will get the best value for your money. You can also ask your friends or colleagues who have availed of outsourcing services and solutions to help you make your decision on hiring the right bpo service providers. These tips and suggestions should help you get the best out of your outsourcing service and solutions provider.
How to Choose the Right BPO Partner
One of the most important things that you need to do when looking for a good outsourcing company is to look for one that can give you a reasonable price for the outsourcing services and solutions that they are offering. The prices of outsourcing solutions vary from one company to another. In outsourcing, you don’t only look at the prices and the quality of the service but also at the reputation of the company or individual who is offering the outsourcing services and solutions. By doing this, you can always ensure that you will be getting a good deal from the outsourcing services and that you are in good hands of a reputable company.
There is no doubt that business process outsourcing is gaining rapid popularity all over the world. Every minute, there are new organizations coming up that claim to offer excellent customer service along with state of the art technology and state-of-the-art infrastructure. However, choosing the right company for outsourcing your business processes is not an easy task. You will require thorough research on the part of you and your team to find out whether the company is delivering the services as advertised. If your research states that your chosen company is not meeting its promise, then it would be a wise decision to hire another organization that is reliable, experienced, and well-established in this field.
Look for experience and expertise rather than price when considering who to outsource these processes. Ultimately, you want to get the results that you want at the best cost for your company.
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