Business Process Outsourcing

Many companies choose to outsource some of their services to third party vendors. When this practice was introduced, it was mainly manufacturing companies that outsourced some of their supply chain. The practice has evolved and now companies across many industries use business process outsourcing (BPO) for a whole host of tasks and services.

BPO Services Categories

BPO services are frequently categorized into the type of service being provided. Some of the most common services are knowledge process outsourcing (KPO), legal process outsourcing (LPO), and research process outsourcing (RPO).  These broad categories encompass many specific functions; companies may outsource human resources management, quality assurance, or marketing and they may all be considered KPO.

BPO Types by Location

In many cases, companies outsource processes to other countries because of specific advantages that the country affords for that process. This may be considered offshore or nearshore outsourcing, depending on whether the country is near or far. If a process is outsourced within the company’s home country, it’s considered onshore outsourcing.

Benefits of BPO

Vendors that offer BPO services are experts in their field. Companies may benefit from the protection of receiving compliance aid from a company specializing in law, for example. The process being completed may also be handled faster and more efficiently, or in a superior way to what employees within the company would have been able to accomplish.

Additionally, companies may save money by outsourcing. Taxation may be different in the country handling the outsourced process, offering a financial advantage. It may also cost less for a company to pay for BPO services than to employ and train a worker.

In some cases, outsourcing certain processes may allow employers and employees to better focus on the core business tasks. This can serve to improve productivity and drive dollars to the bottom line.

Disadvantages of BPO

When processes are outsourced to other countries, companies run the risk of cultural barriers and misunderstandings that occur because of the differences in laws, language, and expressions. These issues are often inadvertent, but may still be difficult to resolve and can affect the quality of the service.

Allowing information to be shared with individuals outside of the organization also introduces potential security risks and breach threats. There are many more people that will be viewing a company’s sensitive data that can potentially misuse or mishandle it. Additionally, the security of the software being used may not be as much of a priority for the third party vendor as it is for the company doing the outsourcing.

If the contracts are unclear, companies may end up paying much more than expected for services or encountering hidden fees that can diminish cost savings. This may be intentional on the part of the vendor or it may be caused by a miscommunication.

Business process outsourcing may make sense for some companies, but isn’t always the best option. Some companies may fare better with software that helps automate many processes while still keeping the processes in-house.

For more information about automating human resources functions, call us today at 866-574-4968.

Authored by: Dave Rietsema