Business Process Outsourcing, famously abbreviated as BPO, is the business strategy where one company takes the services from another company to carry out a specific task for them, i.e., they outsource a particular job.
Say, for instance, a manufacturing company will get the services and products of its supply chain management from another company that specializes in the nuances of supply chain management. So it necessarily contains outsourcing one or more non-core business activities or processes from an external service provider, dealing in that specific area. Consequently, there are two parties- the client company (the outsourced) and the external service provider or the vendor (the outsourcer)-and those are involved.
One point should be taken here that only non-core business activities are usually outsourced. The companies do not segregate from their core competencies, as they maintain all their focus on these same manufacturing, marketing, etc.
However, non-core services like after-sales service, customer relations services, supply chain management, real-time accounting, etc. can be hired from a reliable BPO (business process outsourcing) externally, apart from hiring cosmetic BPO to deal with cosmetic-related outsourcing.
Benefits of a BPO (Business Process Outsourcing)
Obtaining the services for non-core activities from a BPO (Business Process Outsourcing) makes the business organization to be far more flexible. Firstly, the company doesn’t need to invest in additionally fixed assets to develop resources and can convert them to variable costs. It also accelerates the pace of flexibility with respect to resource management of the client company, thereby helping in assimilating the modifications in the environment much faster.
Economically Wise Proposition In the Wake of Outsourcing from An External Organization
Availing of some of the business processes services and activities can be very cost-effective, benefitting the client of the company. This strategy of saving money in fixed assets and fixed costs saves a lot of investments. In addition to that, garnering the services from developing countries proves to be very economical for these companies. For example, if any large MNC (multinational companies) were to outsource their IT(information technology) services to India, they would not squander down an average of 30% of the company’s expenses. This is quite a crucial difference.
An Excellent Speedy Resolution
One of the most significant advantages of BPO (Business Process Outsourcing)s is that they accelerate the speed of the business processes when it is obtaining services externally. They have a perfect response time, and the clients can concentrate on core activities. This fragmentation of activities accelerates the speed of the whole process. It plays a vital role in cases like customer service.
When you hire for one of your business activities from a BPO (business process outsourcing), you are dispensing the exemplary services provided by skilled human resources. So if you outsource your supply chain management, rest assured your supply chain will be tackled by skilled supply chain managers who are quite experts in their field of dealings. Similar rules are applicable to the IT (information technology) service or accounting or cosmetic-related dealings.
Drawbacks of BPO (Business Process Outsourcing)
There can also be a certain general disadvantage of utilizing a BPO to deal with your non-core activities.
The company can take effective steps to delete most of these drawbacks. Let us take a look on a couple of them:
At times, there might be the occurrence of the communication gap between the client and vendor companies as a result of several reasons. There might be misunderstandings and missed messages. Also, both parties may stick with different standards of services, and this can also create some issues between them.
Different Time Zones Because of Different Locations
This is yet another logistical related problems with BPO (business process outsourcing). The client and the vendor can attempt to operate in two different time zones that are far apart. This difference time can foment several bottlenecks like online meetings, communication, etc.