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 Business process outsourcing (BPO) is one of the main sectors of the global offshore outsourcing industry. Next to information technology outsourcing (ITO), BPO is the fastest growing global outsourcing sector. BPO is the business strategy of engaging with a third party service provider, who operates various activities of the buyer company offshore. In BPO these activities are business functions as services as for instance from departments of finance and accounting or human resources. This article provides an overview of pros and cons for BPO.
BPO functions as an umbrella term for the outsourcing of back office operations, call center services, customer relationship management, payroll maintenance, telemarketing services, supply chain management, data base management, logistics services, and tax compliance services. Businesses outsource almost any imaginable service nowadays. That is why the sector of BPO is growing exponentially.
With help of BPO, buyers of outsourced services use a great cost advantage and the accomplishment of assignments in short time spans compared to in-house production. Suppliers from all parts of the worlds offer even complex, high-end services to comparably low prices. That leaves buyer companies with the opportunity to receive high-quality services while being able to focus on their core activities. Thus, BPO can improve the efficiency and productivity of a company. Offshore outsourcing delivers the additional advantage of making precious resources, infrastructure and innovations accessible for the buyer company. An acceleration of profit margins and a competitive advantage are therefore the ideal outcome of BPO engagements.
Besides numerous advantages, BPO can also be a risky endeavor. The service provider often operates from another continent. Communication errors are often cited as a major drawback of outsourcing. Depending on the complexity of the outsourced service or project, it might be the case that vendors cannot live up to buyer’s expectation. Sometimes, suppliers lack the specialization to manage highly complex processes in service segments such as health care for instance. Hidden costs, strategic failures or security threats are only three major risks that might occur especially when end-to-end processes are required.
In sum, BPO is an aspiring sector of the offshore industry that might result in successful business engagements for buyer and supplier companies. Cutting service production costs is only one of a list of many benefits that might be obtained from BPO. On the other hand, BPO might bear high risks especially in case the management fails to maintain parts of control over the outsourced services and connected responsibilities. Buyer companies are advised to find a trustable provider who is easy to manage and reliable when it come to service quality and delivery deadlines.
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