The Ultimate Guide to BPO (Business Process Outsourcing)
The costs of running a business are high, the challenges of retaining qualified personnel are numerous, and the number of businesses turning to Business Process Outsourcing (BPO) partnerships for help is growing all the time. Indeed, BPO is one of the fastest growing global industries today. According to Statista, the worldwide Business Process Outsourcing sector is growing at a robust yearly rate of 4.67%. Current projections say that the BPO industry will top $490 billion in annual revenue by 2029.
So what is BPO exactly? How does Business Process Outsourcing differ from the standard mode of outsourcing? And why has this particular business strategy gained so much traction in recent years?
In the guide that follows, we’ll address these questions and we’ll provide additional insights into the role the BPO can play for your business. Here’s a quick look at everything included in the guide below:
Included in the Guide:
An overview of Business Process Outsourcing (BPO)- A breakdown of BPO categories
- A look at the role that geography plays in BPO
- A discussion on the key differences between BPO and traditional outsourcing
- Examples of businesses and industries that commonly use BPO
- Some tips on how to choose the right BPO for your business
- Checklist of questions to ask prospective BPOs when looking for ideal partners
In the guide that follows, we’ll take a deep dive into Business Process Outsourcing (BPO) and its growing role on the modern business landscape.
What is BPO?
Business Process Outsourcing (BPO) refers to the practice of contracting a third-party service provider to handle an array of designated business tasks or processes. External service providers may provide a wide range of functions including back-office tasks like payroll, accounting, and human resources (HR) and front-office functions such as customer support, sales, and marketing.
Businesses may choose to outsource these functions to BPO services in order to offset internal labor costs, tap specialized expertise, achieve rapid scalability and more.
Business Process Outsourcing can be broken down into two primary categories:
Back-Office Outsourcing- Front-Office Outsourcing
Back-Office Outsourcing
This largely refers to internal business functions–the routine tasks performed by members of your team to ensure administrative efficiency and operational continuity. These functions support day-to-day operations and do not typically require engagement with customers.
Back-office outsourcing may include functions such as:
Data Entry- IT Services
- Finance
- Accounting
- Human Resources
Front-Office Outsourcing
This category refers to customer-facing functions–the tasks and processes involved in customer acquisition, satisfaction, and retention. These activities typically include more direct communication and engagement with customers, and can have a direct impact on how your brand is perceived.
Front-office outsourcing may include such functions as:
Call Center Operation- Customer Service
- Technical Support
- Telemarketing
- Sales
Front-office outsourcing can also be broken out into subcategories based on geographical conditions.
Geographical Subcategories of Front-Office Outsourcing
You have several options when it comes to the geographical location of your BPO partner. There are advantages and disadvantages that come with each of the following options. This is one reason that many businesses will choose a BPO partner who employs some combination of these strategies.
Strategies Include:
Onshore Outsourcing: This describes Business Process Outsourcing in which the service provider is located in the same country as the client organization. This approach is advantageous to clients who require close collaboration, face-to-face engagement, cultural alignment and shared working hours with service providers.- Nearshore Outsourcing: This approach describes a partnership in which the service provider is in a neighboring country, typically one with a shared time zone, similar cultural tendencies, and a common language.This approach is advantageous to clients who seek a balance between the cost savings of sourcing from a more affordable labor market and the ease of collaboration that comes with shared geographical context.
- Offshore Outsourcing: This mode of outsourcing describes a partnership with a BPO provider located or operating in another country, usually one that is a significant distance away. This approach to outsourcing can be advantageous because it offers access to more affordable labor, less costly operating conditions, and the potential for business activity over a 24-hour working clock. This may be a preferred model for businesses that are seeking to outsource readily standardized activities and business processes that do not require direct face-to-face interaction.
As noted above, many businesses can benefit from some combination of outsourcing models. This is called hybrid business process outsourcing. A hybrid BPO partnership might, for example, offer an onshore base of operations, local leadership, and accessible project management alongside access to affordable offshore labor markets.
The right type of outsourcing partnership for your business will depend on your goals and needs. We’ll explore this decision in greater depth in a later section of our guide.
What are the differences between outsourcing and BPO?
Before proceeding with a deep discussion on the value and practical applications of BPO, it’s important to clarify a few key terms. Though we have used the terms BPO and outsourcing interchangeably throughout this guide, there are some important distinctions that we should address.
In short, outsourcing is an encompassing term used to broadly describe the practice of contracting out certain tasks in lieu of handling these activities in-house. Business Process Outsourcing refers to a specific type of outsourcing in which entire business functions are contracted out to third-party providers.
Let’s take a closer look at the key differences between general outsourcing and the more specific practice of BPO.
Key Differences Between BPO and Outsourcing
Scope of Services: Outsourcing may involve third-party contracts for the completion of individual tasks, participation in temporary projects, or for the long-term handling of entire business processes. By contrast, BPO rarely describes individual tasks or small projects, and instead focuses only on the outsourcing of entire business processes. So while outsourcing refers to a broader array of third-party service partnerships, BPO partnerships typically refer only to more comprehensive outsourcing arrangements.- Key Objectives: The objectives of outsourcing are typically to access specialized skills, reduce costs, and provide in-house personnel with the opportunity to focus on core activities. The objectives of BPO are similar, but often include more long-term aims such as improving operational efficiency and enhancing service quality by leveraging the expertise of specialized providers.
- Partnership Complexity: Because outsourcing is an umbrella term that encompasses BPO, it may refer to partnerships around more complex business activities. However, outsourcing may also refer to less complex contract arrangements. This might include the short-term addition of seasonal staff, provision of technical support while implementing new IT systems, or the contribution of specialized skills for a short- to medium-term project. By contrast, BPO will almost always refer to more complex and integrative relationships with external providers. BPO providers will typically take on entire processes such as customer services or technical support as part of an ongoing collaborative relationship with a given client.
What is the difference between BPO and BPA?
This guide is largely focused on Business Process Outsourcing (BPO). As we have noted throughout, BPO often includes a technical component. It is common for businesses to leverage third-party partnerships in order to access advanced technologies such as AI, machine learning, and automation.
In spite of this technical component, Business Process Outsourcing (BPO) should not be confused with Business Process Automation (BPA).
While BPO refers to the outsourcing of any major business processes, including certain tech-enabled tasks, BPA refers to the replacement of in-house human labor with automated technology. This automation may be implemented using in-house technology or it may be outsourced to a third-party provider with advanced technological capabilities.
In short, Business Process Automation (BPA) may be adopted as part of a Business Process Outsourcing (BPO) partnership; but it’s also possible to make this transition toward BPA without a BPO arrangement.
Why is BPO valuable?
Now that we understand exactly what BPO is, why are so many organizations choosing this strategy? What makes BPO valuable in today’s global marketplace?
Business Process Outsourcing offers businesses a way to enhance efficiency, scale up production, reduce costs, and access specialized skills and expertise without investing significantly in new technology, infrastructure, hiring, or training.
BPO gives organizations a way to delegate non-core functions to external service providers. This can offset a significant burden for your in-house operation, which gives your team members the freedom and bandwidth to focus on more strategic goals and core operational activities.
Let’s take a closer look at some of the key benefits of Business Process Outsourcing.
BPO is valuable to organizations in a wide variety of industries.
This Strategy Can:
Provide access to cost effective labor and operational conditions- Create scalability for organizations that experience seasonal or conditional fluctuations
- Offer access to specialized expertise and technical skills
- Open channels into new geographic markets and target demographics
- Reduce the burden of repetitive or routine tasks typically placed on your in-house team
- Improve productivity by providing coverage across a 24/7 timespan, which can be particularly valuable for functions like customer call center operation
- Offset the high costs of recruiting, hiring, and training
What are the risks of using BPO?
Business Process Outsourcing offers a number of clear benefits. However, outsourcing critical business processes to a third party does also come with some inherent risks.
These risks can include:
Quality control issues, which can occur when a vendor’s processes or output do not meet your company’s quality standards- Communication breakdowns, which can occur when language barriers and cultural differences impede offshore collaboration
- Data security concerns, which can arise when your outsourcing partner does not share your organization’s policies, procedures, or regulatory requirements for privacy protections, surveillance, and data security
- Reduced control over products and processes, which can make it difficult to ensure that outsourced processes are operating in accordance with company standards
- Dependency on external providers to deliver on service agreements and deadlines, which can place your reputation and customer satisfaction at the mercy of your vendor
Together, these risks offer an important cautionary note. While a BPO partnership can be beneficial to your business and your bottom line, it must be based on a relationship with a trusted, experienced, and reliable partner.
Advantages and disadvantages of BPO
As you decide whether BPO is right for your business, you’ll need to weigh the pros and cons of outsourcing key business operations to a third-party provider. Below, we highlight some of the potential advantages and disadvantages of partnering with a BPO.
What Are the Advantages of BPO?
Reduced costs for labor, operations, and technology- Deeper in-house focus on core business activities
- Access to specialized expertise in areas like production, engineering, data management, and technology
- Easy scalability to harmonize with upward and downward trends in demand
- Enhanced technological capabilities without the upfront costs of implementation and training
What Are the Disadvantages of a Subpar BPO?
Loss of control over outsourced activities and consequently, diminished direct oversight of processes, procedures, and policies- Heightened security risks including the potential exposure of sensitive data and vulnerability to cyberattacks
- Quality assurance issues, generally arising when an outsourcing partner adheres to a lower quality control standard than the client
- Communication breakdowns, which can occur when language barriers and differences in business culture impede collaboration between client and provider
- Compliance issues, which can occur when the provider operates in a market with less stringent regulatory conditions than the client
When should you outsource?
Deciding if and when to outsource certain business processes will depend on a number of factors. For instance, company size is often a major determinant of whether or not a business will employ outsourcing in some capacity.
According to recent outsourcing statistics, just 29% of small businesses–those with less than 50 employees–outsource key business processes. By contrast, 66% of businesses with 50 employees or more utilize outsourcing.
This prompts an important question. At what point in the growth of your company should you consider outsourcing? Whether you choose to outsource proactively–building BPO into your business plan from Day 1; or you choose reactive outsourcing–turning to BPO as the need arises, you’ll want to take the following factors into account:
It might be the right time to outsource if your business must:
Reduce labor costs- Focus in-house team members on core business activities
- Access skills, knowledge and expertise that are not available internally
- Scale to meet growing demand, seasonal shifts, and changes in market conditions
- Improve process efficiency by accessing experienced teams
BPO Best Practices to follow for successful BPO
Whether your outsourcing strategy works for your business or not will depend a great deal on how you approach this partnership. The processes of implementation, oversight, and evaluation are essential as you enter into and sustain any kind of outsourcing arrangement. While it is critical to begin with the right BPO partner, it is incumbent upon you as the client to continuously monitor this partnership and ensure that it delivers on your needs and goals.
In order to do so, you may want to incorporate the following best practices into your outsourcing strategy:
Define your objectives, identify your goals, and establish clear expectations of your provider.- Vet prospective BPO providers thoroughly and narrow your choices down to those with proven expertise, a strong industry reputation, and the resources to match your expectations.
- Establish strong lines of communication with your provider, ensuring that project managers and support personnel are available at all times to answer questions and manage issues.
- Monitor performance, using meaningful metrics and agreed-upon Key Performance Indicators (KPIs) to ensure that your outsourced processes are meeting expectations.
- Implement robust data protection measures to ensure security, privacy, and access controls.
- Be prepared to change course if your existing outsourcing arrangement is falling short of expectations.
How to outsource successfully
The Best Practices highlighted above are specific to Business Process Outsourcing–an arrangement which is inherently long-term in nature. But there are also preferred practices that can help improve your chances of success with any form of outsourcing–long- or short-term.
Follow these tips to enjoy greater success with your outsourcing strategy:
Conduct thorough research on potential vendors by speaking with past and current clients, seeking out online reviews, and requesting case studies on past projects that are similar to your own.- Identify clear deliverables, establishing the scope, goals, and timeline for meeting certain benchmarks and deadlines.
- Develop a transition plan in order to facilitate a smooth handover of outsourced responsibilities with minimal operational disruption.
- Maintain regular communication with lead contacts and project managers to ensure that your expectations have been effectively conveyed and are being implemented.
- Build strong collaborative partnerships with vendors, even those who are providing short-term project leadership. Short-term outsourcing projects can blossom into lasting and mutually beneficial business relationships.
Who Should Use BPO?
The benefits highlighted above apply across a wide range of organizations and industries. Moreover, BPO can be beneficial to businesses of all shapes and sizes. While it’s common to associate outsourcing with large multinational corporations, a BPO partnership can be just as sensible and valuable for a small start-up in need of affordable call center support, technical expertise, or skilled production labor.
Below, we’ll identify a few industries in which BPO partnerships can offer considerable benefits.
Information Technology (IT) businesses such as software development companies may partner with specialized BPO providers to commission technical tasks such as coding, testing, and systems maintenance.- Healthcare organizations such as hospitals and clinics might outsource medical billing, data entry, or patient scheduling in order to streamline operations and allow providers to better focus on the primary functions of patient care.
- Pharmaceutical companies may partner with BPO service providers for administrative tasks such as clinical data management, independent review tasks such as regulatory compliance audits, and functions requiring specialized knowledge and qualifications such as research and development
- Financial services organizations such as banks may partner with Business Process Outsourcing services in order to address functions such as customer service, loan processing, and fraud detection.
- Insurance companies may rely on partnerships with BPO providers for tasks such as claims processing, policy administration, and customer support.
- Online retailers often work with BPO services for support on order processing, payment processing, inventory management, and customer service.
- Brick-and-mortar stores may use BPOs to handle functions such as accounting, marketing, and supply chain management.
- Manufacturing businesses such as auto-makers and retail manufacturers may outsource procurement of parts, equipment maintenance, logistics, and more.
These examples only scratch the surface. BPO partnerships are commonplace in travel, hospitality, education, real estate, the media, and more. This underscores the versatility of BPO services. Leading edge BPO providers will typically leverage technology, resources, and personnel to tailor solutions for the specific needs of a given partner.
But how can you find the best BPO partner for your organization’s needs? In the next section, we offer some practical tips for finding the right BPO service provider for your business.
10 Tips for Finding a Good BPO Partner
Your BPO strategy is only as strong as the partnership on which it’s built. Your success depends on choosing the right BPO provider.
Below are ten tips to help businesses find a good BPO partner:
Define your objectives. Identify the processes you want to outsource, the goals you hope to achieve, and the benchmarks that you’ll use to define the success of your partnership.- Conduct thorough research on potential BPO providers, employing online research, reviewing industry reports, and seeking recommendations from peers. This step in the process should result in a solid list of reputable candidates with proven track records.
- Evaluate experience and expertise as they relate to your specific needs. Assess each candidate’s experience in your industry and their relevant expertise. You may even wish to request case studies detailing similar partnerships and demonstrating experience in your area of need.
- Request references from prospective partners, contact current or past clients, and gather feedback. You can also include online reviews and testimonials for insight into a provider’s reputation for reliability and performance.
- Assess technology to ensure that your prospective BPO partner has the systems, integrative capabilities, infrastructure, security protocols, and personnel to handle your processes. You’ll want to be sure that any prospective partner can provide assurances in areas such as data privacy, surveillance, and regulatory compliance.
- Evaluate cultural compatibility before entering into your BPO partnership. Consider the impact of differences in language, geography and business customs, and how these differences might impact communication and collaboration. These differences aren’t necessary dealbreakers, but you should have a plan for managing and navigating these issues before proceeding with any partnership.
- Consider scalability when evaluating prospective BPO partners. Your business may grow over the course of your relationship with this service provider. Be sure that you choose a partner with the flexibility, resources, and agility to grow with you.
- Conduct a cost analysis, comparing pricing models and assessing the value that each prospective provider offers. But remember, price isn’t everything. Consider the quality, expertise, and long-term potential that a given partnership might create and find the right balance between cost and quality.
- Evaluate the Quality Assurance system that each prospective BPO partner employs in its own operation. Seek out a partner that offers clearly defined key performance indicators (KPIs) and service level agreements (SLAs) so that you can get a clear and quantifiable understanding of how your partnership is aligning with your goals.
- Request a trial period before committing to a long-term contract with a given provider. A pilot project can help create trust, offer an opportunity for both parties to assess compatibility, and give your organization a chance to evaluate the BPO provider’s capabilities
How much does it cost to outsource your business processes?
The cost to outsource key business processes will depend on a number of factors. When you seek out prospective BPO partners, you will likely have options at a variety of price points. Each provider offers a different value proposition. Your objective should be to find the right balance between cost-effective pricing and proven value.
Before diving into some of the cost models you can expect to see as you choose a provider, be sure to do your due diligence in assessing the reputation, track record, and experience of your prospective partners. Take these factors into careful consideration as you determine the right price point for your partnership.
Cost Models
Once you’ve vetted potential providers based on the feature listed in the section above, you can expect to encounter some of the following cost models.
Cost Models:
Hourly rates, where charges are based on the number of total hours worked- Dedicated teams, where costs are determined by the personnel held on a retainer basis for your project
- Monthly minimums, where you’ll pay a minimum monthly fee for the life of the contract regardless of the volume of work completed
- Headcount minimums, where costs are based on the number of employees assigned to your task
Potential Additional Costs
In addition to the basic fees associated with these pricing models, you should be prepared to sustain several additional expenses.
Expenses include:
Hidden fees, often arising from unexpected project expenses that are not covered in the initial contract- Downtime as a result of service interruptions, and consequently, lost productivity
- Training costs both for in-house personnel and for outsourced teams requiring specific skills, knowledge, or certifications
How does TechSpeed support business process outsourcing for clients?
TechSpeed is highly conscious of the rising costs of doing business today, and the importance of taking steps to control unnecessary expenses. This is why TechSpeed employs transparent and personalized pricing models without hidden fees, prolonged downtime, or cross-training requirements.
TechSpeed offers fully customized pricing based on the services, solutions, and staffing needs specific to each client. TechSpeed works directly with its clients to create pricing plans that match their outsourcing budget.
TechSpeed offers BPO solutions tailored to the needs of individual businesses. With our team of experienced in-house data specialists, our local base of operation, and our access to offshore talent, TechSpeed offers customized data management solutions for a diverse set of clients.
Core services include AI Data Extraction, Data Mining, Back Office Support, Content Moderation, and much more.
TechSpeed supports BPO for clients by offering:
Customized solutions tailored to meet specific business needs- Rigorous quality assurance to ensure BPO service providers match your company’s high standards
- Advanced technology including emergent AI, machine learning, and automation tools
- Dedicated teams composed of experienced specialists, trained professionals, and designated leadership
- Transparent communication including regular client updates, meaningful performance metrics, and detailed progress reports
For a look at some of TechSpeed’s successful partnerships, check out these Case Studies.
Checklist for Evaluating BPO Partners
In addition to following the tips highlighted above, it may be helpful to use a checklist in order to seek out, evaluate, and vet possible BPO partners. Consider including the following questions as part of your review process:
Experience and Reputation:
Does the provider have demonstrable experience and a positive reputation in your industry?- Does the provider specialize in the specific processes you plan to outsource?
- Can the candidate provide case studies detailing similar projects?
- Can the candidate provide references from current or past clients?
- Are there positive reviews and testimonials available online?
Technology and Security
Is the provider’s tech stack and infrastructure current?- Can the provider’s systems be readily integrated with your organization’s existing systems (e.g. ERP, CMMS, POS, etc.)
- Can the provider demonstrate robust security measures?
- Are the provider's security measures compliant with relevant industry standards and regulations?
- How does the candidate handle data breaches and security incidents?
Communication and Cultural Compatibility
Is the provider transparent, clear, and easy to communicate with?- Are managers, project leaders, and other senior partners readily accessible and available?
- If the client is in a different time zone, what strategies will the provider employ to manage this logistical challenge?
- Is the prospective BPO provider’s team a good cultural fit with your in-house team?
- Does your provider’s language capabilities match your needs?
Quality Assurance and Training
Does the provider have established quality assurance processes and systems in place?- What are the key performance indicators (KPIs) and service level agreements (SLAs) used by your prospective partner to measure performance?
- What kind of reporting can you anticipate from your prospective partner on ongoing performance outcomes?
- Does your prospective partner provide continuous employee training and other measures to ensure their team is up to date on industry trends and best practices?
- What is the candidate’s employee retention rate?
Scalability and Support
Can the provider scale their services up to meet your growing needs?- Can the provider scale their services down to manage seasonal fluctuations or changing business conditions?
- What kind of support does the provider offer–24/7 live support, a dedicated account manager, or some other support model?
- Can you expect the provider to perform routine system maintenance and updates on any equipment or technology involved in the performance of your outsourced business functions?
- How does the provider handle issues, escalations, customer complaints, and technology failures?
Cost and Conditions
Is the provider’s pricing model competitive and transparent?- Is the basic cost of ownership affordable enough to ensure ROI?
- Are the contract terms clear and fair?
- What are the conditions for termination and renewal of a long-term contract?
- Is the provider willing to provide a trial period before entering into a long-term contract?
You can use the basic checklist of questions above to bring structure and focus to the process of choosing your BPO partner. You can also learn a bit more before making this important decision by jumping to our Complete Business Process Outsourcing (BPO) Evaluation checklist.