Business Process Outsourcing (BPO) Strategy

A Business Process Outsourcing (BPO) Strategy is an outsourcing strategy that overlaps with a business process reengineering strategy (uses outsourcing to delegate specific business operations and processes to external service providers).

• Context:
  • It can (typically) involve the outsourcing of routine business tasks such as payroll, accounting, customer service, and technical support.
  • It can (often) focus on non-core functions that allow a company to concentrate on its primary business activities and strategic initiatives.
  • It can (often) include both back-office tasks (e.g., human resources, accounting, and data processing) and front-office tasks (e.g., customer service, marketing, and sales).
  • ...
  • It can range from simple, transactional processes to more complex, IT-enabled services, often referred to as ITES-BPO (Information Technology Enabled Services).
  • ...
  • It can leverage cost advantages by outsourcing to regions with lower labor costs, such as India, the Philippines, and Eastern Europe.
  • It can involve service providers specializing in a particular function or industry, bringing expertise and efficiency to business operations.
  • It can be driven by a need to reduce costs, access specialized expertise, improve service quality, or increase scalability.
  • It can be categorized into offshore outsourcing, where the service provider is located in a different country, and nearshore outsourcing, where the provider is in a nearby country.
  • It can require high coordination and governance to ensure that the outsourced processes align with the company's goals and maintain quality standards.
  • It can involve strategic partnerships between the outsourcing firm and the client to deliver ongoing improvements and innovation.
  • It can result in significant cost savings, improved operational efficiency, and enhanced focus on core business functions.
  • It can be supported by communication and information technology advances, which facilitate seamless collaboration between the client and service provider.
  • ...
• Example(s):
  • Customer Service and Support BPO, such as:
    • A telecommunications company outsourcing its customer support services to a BPO provider in a different country, ensuring 24/7 service availability at a lower cost.
    • A large hotel chain outsourcing its reservation system management and customer service operations to a BPO provider, improving efficiency and allowing the hotel to focus on enhancing customer experiences.
    • An e-commerce company outsourcing its call center services to a BPO provider, ensuring multilingual customer support during peak shopping seasons and reducing the need for extensive in-house staffing.
    • A multinational technology company outsources its customer support operations to a specialized BPO firm in the Philippines, leveraging the country's English-speaking workforce and lower labor costs.
    • A software company outsources its technical support and bug tracking to a nearshore BPO in Mexico, allowing for real-time collaboration due to similar time zones.
  • Finance and Accounting BPO, such as:
    • A medium-sized accounting firm contracts with an Indian BPO provider to handle routine bookkeeping and data entry tasks, allowing its in-house accountants to focus on higher-value services like financial analysis and advisory.
    • A financial institution outsourcing its account reconciliation and data entry functions to a BPO provider, freeing up internal resources to focus on strategic financial management.
    • A global bank utilizes a BPO service for its back-office operations, including transaction processing and compliance reporting, to a BPO provider with expertise in financial services regulations.
  • Human Resources Management BPO, such as:
    • A multinational company outsourcing its payroll processing and human resource management to a BPO provider specializing in these functions, reducing internal administrative burdens.
    • A growing startup uses a BPO service for human resources management, including payroll processing and benefits administration, to scale its operations without significantly increasing its internal headcount.
  • Supply Chain and Logistics BPO, such as:
    • A retail company outsourcing its order fulfillment and inventory management processes to an external logistics firm to streamline its supply chain operations.
    • A large e-commerce retailer outsources its order processing and returns management to a BPO company in Eastern Europe, improving efficiency and reducing operational costs.
  • Healthcare Services BPO, such as:
    • A global healthcare provider outsourcing its medical billing and claims processing to a BPO provider, enabling quicker payment cycles and better compliance with regulations.
    • A healthcare provider partners with a specialized medical transcription BPO in India to handle the transcription of patient records and medical reports, ensuring quick turnaround times and accuracy.
  • IT and Software Development BPO, such as:
    • A technology firm outsourcing its software testing and quality assurance processes to a specialized BPO provider, ensuring high-quality software products while focusing its internal team on product development.
  • ...
• Counter-Example(s):
  • Business Process Automation, which focuses on automating internal processes rather than outsourcing them.
  • Knowledge Process Outsourcing (KPO), which deals with more complex, knowledge-intensive tasks like research, analysis, and consulting.
• See: Back Office, Human Resources, Finance, Accounting, Front Office, Contact Centre (Business)

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References

2024

• (Wikipedia, 2024) ⇒ https://en.wikipedia.org/wiki/Outsourcing#Business_Process_Outsourcing Retrieved:2024-9-5.
  • Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca-Cola that outsourced large segments of its supply chain.

    BPO is typically categorized into back office and front office outsourcing. BPO can help your business remain competitive and efficient by leveraging the expertise of other companies that are more specialized in certain functions.

    BPO can be offshore outsourcing, near-shore outsourcing to a nearby country, or onshore outsourcing to the same country. Information technology-enabled service (ITES-BPO), knowledge process outsourcing (KPO) and legal process outsourcing (LPO), a.k.a. legal outsourcing, are some of the sub-segments of BPO.

    Although BPO began as a cost-reducer, changes (specifically the move to more service-based rather than product-based contracts), companies now choose to outsource their back-office increasingly for time flexibility and direct quality control. Business process outsourcing enhances the flexibility of an organization in different ways:

  • BPO vendor charges are project-based or fee-for-service, using business models such as remote in-sourcing or similar software development and outsourcing models. This can help a company to become more flexible by transforming fixed into variable costs. A variable cost structure helps a company responding to changes in required capacity and does not require a company to invest in assets, thereby making the company more flexible.

    < BPO also permits focusing on a company's core competencies.

    Supply chain management with effective use of supply chain partners and business process outsourcing can increase the speed of several business processes.

2015

• (Wikipedia, 2015) ⇒ http://en.wikipedia.org/wiki/business_process_outsourcing Retrieved:2015-6-25.
  • Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain. BPO is typically categorized into back office outsourcing, which includes internal business functions such as human resources or finance and accounting, and front office outsourcing, which includes customer-related services such as contact centre services. BPO that is contracted outside a company's country is called offshore outsourcing. BPO that is contracted to a company's neighbouring (or nearby) country is called nearshore outsourcing. Often the business processes are information technology-based, and are referred to as ITES-BPO, where ITES stands for Information Technology Enabled Service. Knowledge process outsourcing (KPO) and legal process outsourcing (LPO) are some of the sub-segments of business process outsourcing industry. In 2010, the Philippines surpassed India as the largest business process outsourcing industry in the world. After growing 20 percent in 2012, the BPO industry of the Philippines is estimated to gross revenue of upwards to $25 billion by 2016. By these estimates, the Philippines' BPO industry will account for approximately 10 percent of the nation's GDP.

2014

• http://www.investopedia.com/terms/b/business-process-outsourcing.asp
  • QUOTE: A method of subcontracting various business-related operations to a third party. When business process outsourcing began, it applied chiefly to manufacturing entities, such as soft drink manufacturers. However, it is now applicable to the outsourcing of services.

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