What Exactly is Business Process Outsourcing?
To simplify the concept of business process outsourcing, we asked six CEOs and other business leaders to share their insights. From outsourcing tasks to other businesses to hiring experts instead of doing it yourself, discover the top six explanations that can help you understand this business strategy in the simplest terms.
- Outsourcing Tasks to Other Businesses
- Strategically Arranging Business Functions
- Delegating Tasks on a Larger Scale
- Assembling a Superhero Team
- Gaining Support in Software Companies
- Hiring Experts Instead of Doing It Yourself
Outsourcing Tasks to Other Businesses
This is where a business pays another business to do something on its behalf. This is very common in smaller businesses where they will pay an accountant to prepare and file tax and VAT returns, or run payroll. The business has outsourced its tax filing, VAT, and payroll processes to the accountant.
Larger enterprises will outsource entire processes to external organizations such as their customer call center, their recruitment, or even IT. The idea is that these specialist organizations can provide a better, more efficient service at a lower cost. Also, as they work across multiple businesses, they bring best practices from across different industries.
Problems with business process outsourcing include the work being done generically and/or not meeting the needs of the customer of the original organization.
Strategically Arranging Business Functions
Business Process Outsourcing (BPO) is an arrangement in which one company takes over a particular business function, or process, from another. An example would be when a large customer service organization outsources its email support center operations to a third party that specializes in this type of customer service.
By outsourcing this task, the primary company can focus on offering solutions that pertain to its strengths without adding significant overhead costs or losing productivity by having employees handle the day-to-day activities.
BPO can thus save money and leverage specialized competencies for businesses and realize higher efficiency and effectiveness for the operations outsourced.
Delegating Tasks on a Larger Scale
BPO is akin to delegating tasks, but on a larger scale. Consider this: you’re a business hiring an agency to handle your Facebook ads, or perhaps paying a freelancer to develop a GDPR policy. Now, imagine scaling this up and applying the same approach to entire processes, potentially intricate ones like manufacturing.
This is what business process outsourcing entails—contracting a third party to undertake processes that would traditionally be managed within your organization. The advantage? It allows your company to focus on its core competencies while offloading non-core processes to external experts.
This principle of specialization fuels the success of our modern economy. By letting each party concentrate on their area of expertise, it aids in identifying potential enhancements and cost reductions in these processes, fostering mutual benefits.
Assembling a Superhero Team
This practice is like assembling a team of superheroes for your business. Think of it this way: You’re the master chef at your pizza joint, but you need help with taking orders, deliveries, and finances.
With BPO, you can hire experts in those areas who handle tasks like order calls, hot deliveries, and number crunching. By outsourcing, you save time and money, while focusing on making delicious pizzas. In 2020, the global BPO market was valued at $92.5 billion, as per Statista.
So, join the superhero league of BPO and let the experts handle the superhero tasks while you run your business like a boss!
Gaining Support in Software Companies
Outsourcing is prevalent in today’s software companies and business sectors. Similar to BPO, it involves hiring another company or some of its employees to support your company’s work. This can be achieved in two ways: sharing a full project or a partial project with the team.
It’s beneficial to find a team that specializes in those tasks and has the expertise and resources to handle them efficiently. It’s like getting additional help from a specialized team outside of your own company to ensure smoother and more efficient operations.
Ida Phiyus, Marketing, Dinero Techlabs
Hiring Experts Instead of Doing It Yourself
If you’re a booming business, you are going to be lopsided. You might have all the salespeople you need, but maybe you don’t have anyone to handle customer service yet. Or maybe you’ve got plenty of developer talent, but no one to handle your front-line IT.
This is going to come up in most companies at one point or another, and you get a choice—try to upskill and hire enough to have that function in-house, or just go to a third party and have them handle it for you.
Sure, you can DIY the function, and eventually it will get up to snuff, but it makes more sense to pay an expert to do it and learn at your own pace when it isn’t as important.