Business Process Outsourcing or BPO is assigning or outsourcing various operations and services related to the business to third-party dealers or vendors. There can be various reasons behind such decisions and various types of outsourcing, depending on varying circumstances.
Then again, the spectrum for Business Process Outsourcing is vast, which we will soon look into. We will also look at other aspects of BPO, at tools such as Scribe, and how they can help your business grow.
Let's get started!
Understanding business process outsourcing & its types
A company may outsource services for numerous reasons — lack of resources, funds, need for expert services, etc. As we mentioned earlier, the types of BPO can be determined through various circumstances and conditions.
In essence, the types of BPO can be roughly divided based on two factors: the kinds of services required and the location of vendors. Let us quickly look through the different types of BPO that a business may opt for.
Based on the kinds of services required
Outsourcing is mostly done for two main areas of operations — the front office and the back office. These types of outsourcing depend on the type of services a company seeks. Let's look into more details:
The front office operations outsourcing
These operations are the ones that are directly related to the customers. Marketing, tech services, and customer services are the main operations. The prime reason businesses outsource such services is the requirement for expert and technical knowledge.
The back office operations outsourcing
These types of operations are the kind that is not directly related to customers. IT service, accounting, human resources, payment processing, etc., are all operations that are not directly facing the customers.
Companies opt for outsourcing these operations because it allows them to focus on their core mission and goals. A company may assign such operations to third-party agencies or consultants or rely on online tools and software, whichever seems feasible.
Based on the location of the vendors
The next category of BPO is based on the location of the vendors. Thanks to the technologies and easier modes of communication, businesses can now opt to hire remote talents and services or in another country altogether. We can divide such outsourcing into three types:
When a company opts to outsource services from other states, provinces, and cities within the country, it is termed onshore or domestic outsourcing. This type of outsourcing allows accessing local region-specific talents. Companies may also benefit from the differences between local rates.
Offshore outsourcing is when a company opts to outsource services and talents internationally. There are various benefits to that decision, including the availability of talent, low labor cost, political stability, various savings on taxes, etc. Outsourcing services via contracts with call centers is a common example.
However, despite the advantages, there are also some downsides to this kind of outsourcing. No matter how well our technology is, there are bound to be communication troubles and cultural differences that may hinder work.
Nearshore outsourcing can be termed as a type of offshore outsourcing. Here, companies outsource services from countries that are geographically closer to their own country. Such outsourcing opportunities arise when neighboring countries offer specific specialized talents at much lower rates.
While it does increase the scope of human resources and services, the same drawbacks as offshore outsourcing prevail — communication issues, timezone, and cultural differences.
You may find these various types of BPO for your businesses. As we have outlined, each has its benefits and disadvantages.
Yet, many companies debate between onshore and offshore outsourcing and which may be the best. But the truth is, both have their own sets of impactful pros and cons. As a company, it is your lookout to tally the pros and cons of both outsourcing types and go along with the one that benefits your company the most.
How can business process outsourcing benefit your business?
Companies must ask themselves why they should adopt a practice and how they will benefit from it before adopting it. Similarly, now that we have a fair idea of what BPO is and its various types, we will look into the benefits that it brings along to a company.
All companies must consider a practice's economic efficiency before adopting it. For BPO, it is definitely the better economic alternative. Instead of bearing the cost of building an entirely new department or team, along with its required resources and sustaining it, it is better to outsource said services. It becomes much cheaper and a much-reliant option.
For example, it does not make sense for a small company to have an in-house HR department, considering they do not need to hire people frequently. Therefore, outsourcing HR services from an HR consultancy sounds like a better and more economical alternative.
Better focus on core operations
You can always focus better on your core operations when you have less on your plate. Similarly, when you outsource major supporting operations of your business, you can concentrate all your resources and efforts and focus on your core operations.
Say you outsource services of a PR consultancy; you need not worry about your PR and advertising front. Instead, your consultancy will handle most of your advertising and PR-related matters and present you with a report at the month's end for you to review. This allows you to focus all your attention on improving your services, improving your company's performance.
When you outsource services, you hire professionals for their skills, experience, and knowledge in their respective fields. Hence, the services you get are much better than what you could have done if you had an in-house team built.
For example, if you want to launch a new product in the market, you can outsource the services of a creative agency that will know how to work on the look, feel, and marketing strategy to enhance its features.
Outsourcing allows you to streamline your supporting business operations better, increasing efficiency by multifold. The BPO vendors, experts in their respective fields, will handle the tasks faster, better, and more efficiently.
Outsourcing services allow your company to save time on various fronts. Firstly, you will free up your human resources, whom you can employ on many other important tasks.
Secondly, your BPO vendors are experts at what they do and will get the job done much faster. With more time, you, as a business, can optimize your time allocation and improve your standard operating procedures.
What challenges does business process outsourcing bring?
While BPO is loaded with benefits that companies generally seek, it also carries a few challenges that a business must consider before adopting it. Let us take a quick look at them for a better idea.
Risks security breach
This is perhaps one of the main issues of outsourcing — the risk of a security breach. You may need to share sensitive data with your BPO vendors during outsourcing services. Given that you have little to no control over the BPO vendor's data protection systems or procedures, your data will always be at risk of a security breach.
To avoid this as much as possible, you may ask your vendors for proof of their data protection systems and what they do to ensure the safety of client information. You can offer them certain conditions, including adhering to their processes to ensure data protection, which they must meet to secure a partnership with your company.
No matter how advanced and efficient our technologies are, outsourcing always risks creating communication hurdles, especially for offshore outsourcing, where there may be a timezone difference.
Though such hurdles can be easily avoided by adhering to strict communication rules and regulations and creating training manuals for your employees, they can still be exhausting and require much effort. The language barrier is another hurdle that can give rise to miscommunication and errors.
Striking close to communication hurdles is cultural differences. For offshore outsourcing, various cultural differences may threaten the smooth functioning of operations. Different working cultures, human behaviors, and other nuances can make outsourcing difficult.
Such issues, however, can be solved by active HR departments continuously communicating and addressing employee grievances.
Chances of hidden costs
This circumstance is one of the few you may never see coming, so you should be well prepared. Many times, companies miscalculate the quantity of work that they would assign to the BPO vendors. Sometimes, it is too less when the BPO vendors need not do much work, but you still need to pay for their services.
The other case is when the work is too much, and you may have to pay more than expected. Delay in the delivery of work also adds to your indirect expenses. You may address these issues by drawing up well-built contracts highlighting and addressing such hidden costs.
Overdependence on BPO vendors
Sometimes you come across vendors perfect for your work and end up in a long-term contract with them. In such cases, the company establishes a certain sort of dependence on the BPO vendors, which, if left unchecked, can quickly convert into overdependence. Such overdependence deprives your company's flexibility in operations and sometimes leads to higher service charges if the BPO vendors demand so.
While these may be challenges, you must consider a well-made contract, an active HR department, and other measures and precautionary steps that can help you face these challenges.
Picking & managing the right outsourcing partner
We have nitpicked the pros and cons of BPO, but it is time to wonder how you can choose the right outsourcing partner for your company. Well, we have you covered on that part as well. Keep these few things in mind while choosing your outsourcing partner:
Experience in the matter
You are outsourcing because you need certain expert skills for your business, and that should be the first thing you look for. Look for their past projects, the results they bring to the table, their standard working procedures, and their performances. For technical services, look out for the equipment they have and how updated they are to the latest technologies.
Reputation in the market
The next thing to look out for is their reputation in the market. You want to avoid getting involved with a vendor known to never meet deadlines or with a reputation for delivering faulty work. Also, if it is offshore outsourcing, in case things go wrong with the vendors, there is no quick way of resolving it, and you may risk loss. Therefore, always consider the vendor's reputation before getting into a partnership.
Dedication towards customers
A vendor who is dedicated to their craft and treats their client well should be your goal. No matter what kind of human resources they have, or the latest technology they own, if their customer service is bad, it is a big factor for you to consider before striking a deal.
Data protection protocols
We have mentioned how outsourcing risks a security breach of information. When you are looking for the right vendors, this is another thing that you must always keep in mind. While selecting vendors, ask them about their privacy and security protocols. Make sure that they have solid security strategies in place to protect customer information.
How well is your strategy performing?
Once you get into the practice of outsourcing, you need to constantly manage and measure the progress and performance of your outsourcing strategies.
Here are a few tips on the same:
- Set up key performance indicators and keep checking to see the performance.
- Set up small milestones and check if they are being met on time.
- Check if all work deliveries are according to deadlines or not.
- Keep an eye on how responsive they are to your inquiries or complaints.
- Schedule regular meetings for performance briefings and other performance-based discussions.
- Do not compromise on communication, and stay in touch for regular updates.
You can also employ various tools to simplify your relationship with the BPO vendors and make things easier.
For example, you can use Scribe to automate process documentation so you can quickly build and share guides with your BPO vendors. Scribe and Scribe Pages are great software for process documentation and creating step-by-step guides for various functions and workflows.
Here's how it works.
Using Scribe will help you communicate better with your BPO vendors on various operation-based matters, making it more accessible. As Scribe creates step-by-step manuals by assessing your cursor clicks and motions, it is visually more accurate and will eliminate any errors or miscommunication.
As Naomi West tweeted,
"Scribe has completely changed how I document and educate remote colleagues…."
This tool can help enhance your BPO to another level with just a few clicks. You may also stack various processes together to make Scribe Pages and share them easily.
Scribe is also available as an app and a chrome extension for better accessibility.
Business process outsourcing: wrapping Up!
Business Process Outsourcing is simply hiring vendors to help with your supporting operations. There are three main types of BPO — onshore, offshore, and nearshore; each has pros and cons. While BPO offers various advantages, it also carries a few challenges which can be overcome by following strict rules and regulations.
While looking out for the right vendor, you need to keep certain things in mind, and once you have chosen the right vendors, put in proper strategies to manage their performances.
BPO is an excellent way to conduct business operations while allowing your company to focus on core activities.
BPO, enhanced with tools such as Scribe and Scribe Pages, can help your business take off in the right direction. So, try Scribe today for free and follow this blog to get on with BPO for the best of your company.