Article
Business Process Outsourcing: How It Works
Business process outsourcing (BPO) is when a company hands a whole business process, such as customer service or claims handling, to an external provider. The provider runs it under a contract with agreed service levels.
You set the scope and the targets, and the provider hires and manages the team that meets them. You then review the results against the contract, usually in regular governance meetings.
This guide is written for customer experience (CX) and operations leaders at mid-sized US and UK companies. Insurers and travel companies are typical examples. The guide explains what BPO covers, how an engagement runs step by step, where the risks sit, and how pricing works.
If your main interest is customer service, see how a BPO call center works.
What is business process outsourcing?
BPO is a long-term contract under which an external provider runs a complete business process for you, with its own team and management.
It differs from task-based or project outsourcing. A BPO contract covers a whole process over the long term, with a budget and SLAs tracked through KPIs. Project outsourcing covers one deliverable with a fixed end date.
Outsourced processes fall into two groups. Front-office processes face your customers, such as customer support and sales. Back-office processes run behind the scenes, such as claims processing, document handling, accounting, and human resources (HR) administration.
Providers also differ by location. Onshore BPO uses a provider in your own country. Nearshore BPO uses a provider in a nearby country with a similar time zone, such as a UK company working with a team in Poland. Offshore BPO uses a provider in a distant region, usually with a larger time difference. For a detailed comparison, see our guide to nearshore and offshore BPO.
How business process outsourcing works
A BPO engagement moves through five stages, from scoping the process to running and improving it under a contract. Each stage has an owner and an output you can check.
- Scope the process and baseline metrics. Document the process steps along with current volumes and performance, so you can set realistic targets and compare bids on the same basis.
- Source and select a provider. Sourcing a BPO provider means building a shortlist, issuing a request for proposal (RFP), checking references, and running a pilot on real work.
- Sign the contract. The contract sets SLAs, KPIs, reporting, and exit terms. Typical SLA metrics are service level (the share of contacts answered within a set time), first contact resolution, customer satisfaction (CSAT), and quality score. If the provider processes personal data for you, UK General Data Protection Regulation (UK GDPR) Article 28(3) requires a written contract with the processor.
- Transfer knowledge and go live. The provider trains its agents on your policies and systems, then runs a pilot or a parallel run. Agree on the length and volume of the pilot in advance. Go-live follows only when the agreed criteria are met. Example criteria are agents passing knowledge checks, quality scores at target in the pilot, tested escalation paths, and working reports.
- Run and improve the service. The provider runs daily operations and quality assurance (QA). You hold regular governance reviews against the SLAs and agree on fixes when a target is missed. Set the cadence in the contract, for example a weekly operational review and a monthly business review.
In our standard model, recruitment, training design, IT support, and QA all sit with our team. Because one team owns all of it, a quality problem has one clear owner.
After go-live, responsibilities usually split between you and the provider as follows.
| Area | What you keep | What the provider runs |
| Policies and targets | You set the policies and the service levels | The provider applies your policies and reports against each target |
| Recruitment and training | You approve the agent profile and the training content | The provider hires and trains the agents |
| Tools and IT support | You decide which of your systems the team uses and grant access | The provider runs its own tools and supports the team's IT setup |
| Quality assurance | You agree on the scorecards and review sampled results | The provider scores interactions and runs calibration sessions |
| Reporting and governance | You chair governance reviews and approve changes | The provider prepares reports and action plans for each review |
The first and third stages set the reference points for the rest of the engagement. Without measured volumes and written targets, a governance review has nothing to compare results against.
Why companies outsource business processes
Companies outsource business processes for skilled talent and flexible capacity as well as for lower costs. Deloitte's 2024 Global Outsourcing Survey reports that "skilled talent and agility join cost reduction as key drivers for outsourcing."
- Access to trained agents and languages that you cannot hire quickly yourself
- Capacity that follows volume swings, such as seasonal peaks and product launches
- An internal team freed to focus on core work, such as product and policy decisions
- Service levels written into a contract, with reports that show results against each target
- Costs compared at the same quality bar, so savings do not come from lower standards
Examples of business process outsourcing
Business process outsourcing covers both front-office and back-office functions. Commonly outsourced functions include customer service, call center operations, claims and policy administration, document processing, data entry, billing, accounting, HR administration, and logistics.
The examples below show how five of these functions work when you outsource them.
Call centers and customer relationship management (CRM)
A common area of BPO is a business process outsourcing call center, which handles inbound calls and can provide 24/7 service. For Wizz Air, we built and scaled a multilingual contact center and reduced average handle time (AHT) by 30%.
When METRO, a wholesale retailer, moved its support to us, we set up a CRM that keeps customer profiles and contact history in one system. Agents see each customer's earlier requests, whichever channel they came through.
UK and Western European companies that outsource call centers can use nearshore teams in Europe for language coverage and time zone overlap. US companies can use the same teams to support their European customers in local languages. At Simply Contact, we serve both groups from our teams in Poznań, Poland, and Chișinău, Moldova. They are part of a nearshore footprint across Central and Eastern Europe (CEE), with native or near-native agents rather than English-only support.
A customer call can lead to back-office tasks, such as order processing or billing. Our business process outsourcing for front-office and back-office work covers both multilingual customer support and back-office support.
Document processing
Document processing outsourcing means a provider handles the intake, data entry, indexing, and verification of your documents. In large companies, high document volumes make this process complex and resource-intensive. The provider works against accuracy and turnaround targets that you set. An insurer, for example, can outsource claims intake and policy document processing while its own team keeps decisions on claims.
Human resources management
HR outsourcing covers payroll, benefits administration, recruitment, and onboarding, not just job ads and resume databases. Your own team keeps people decisions, such as final hiring calls and promotions.
If you outsource US payroll, the Internal Revenue Service (IRS) states that the employer stays ultimately responsible for depositing and paying federal employment taxes. The IRS suggests registering on the Electronic Federal Tax Payment System (EFTPS) to verify the payments a provider makes for you. The SLA for an outsourced payroll process can then track pay accuracy and on-time tax deposits.
Accounting services
Accounting outsourcing commonly covers accounts payable, accounts receivable, reconciliations, and payroll processing. Responsibility for the financial statements stays with your company. The contract sets the provider's liability for errors and any caps on it.
For processes that affect your financial reporting, ask the provider for a System and Organization Controls (SOC) 1 report. The American Institute of Certified Public Accountants (AICPA) describes SOC 1 as an examination of a service organization's controls likely relevant to your financial reporting. Billing and accounting tasks for a US healthcare provider can also involve patient data. That brings in the rules of the Health Insurance Portability and Accountability Act (HIPAA), covered under risks below.
Logistics
Logistics outsourcing hands specific tasks to firms with the necessary experience and infrastructure. Typical examples are transportation, warehousing, distribution, and customer support in logistics, such as delivery queries.
An agent who answers "where is my order?" needs access to tracking data across carriers. In ecommerce, peak sales put delivery networks under pressure, and delivery delays quickly raise complaint volumes. On our Volero account, agents follow the retailer's own guidance during delays, such as offering a discount, instead of improvising. Put response and resolution times for peak weeks into the SLA.
Risks of business process outsourcing and how to manage them
The main risks of business process outsourcing are loss of control, data exposure, quality drift, knowledge loss, and dependency on one provider. Each one has a control you can put in the contract or in governance.
- Loss of control. Write SLAs into the contract and hold governance reviews against them, so you can act on results early. Reports should show results for each queue and each target.
- Data and compliance risk. Ask for ISO/IEC 27001 certification, and for Payment Card Industry Data Security Standard (PCI DSS) v4.0.1 certification where the provider handles card data. For personal data, sign a processor contract that meets Article 28(3) of the EU GDPR or the UK GDPR. In the US, HIPAA covered entities include health plans and healthcare providers. A provider that handles protected health information (PHI) for one of them is a HIPAA business associate. The Department of Health and Human Services (HHS) says the client needs a business associate agreement (BAA) before it shares PHI. We are ISO/IEC 27001 certified and HIPAA compliant.
- Quality drift. Agree on QA scorecards and hold calibration sessions where both teams score the same interactions. Track the scores by queue, so a drop shows up before customers notice it.
- Knowledge loss during transition. Document each process before the move, and run a pilot before the provider takes full volume. Keep a named owner on your side who answers the provider's questions during the first weeks.
- Dependency on one provider. Set exit terms in the contract, including notice periods and the return of your data. Ask how the provider would hand the process back to you or to another provider.
Before you sign, test each provider against these risks with a structured set of questions. The checklist below groups such questions into eight areas, including security and exit terms.
How business process outsourcing pricing works
BPO pricing depends on the process, the volume, the languages, the hours of cover, and the quality targets in the contract. Providers usually charge per hour, per FTE agent, per transaction, or by outcome.
Deloitte's 2024 Global Outsourcing Survey found that "outcome-based delivery models have increased in adoption in favor of results-driven relationships."
| Pricing model | What you pay for | When it fits |
| Per hour | Agent time spent on your process | Work where handling time varies widely |
| Per FTE agent | Dedicated agents, whatever the volume | Stable volumes and complex processes |
| Per transaction | Each completed item, such as a ticket or a claim | Predictable tasks that are easy to count |
| Outcome-based (per resolved contact) | Contacts resolved rather than headcount | Buyers who want to pay for results |
We charge per resolved contact rather than for pure headcount. A client's procurement team can then compare our price with its own in-house cost per resolved contact.
Compare costs only at the same quality targets. For a UK patient transport client, our team cost 40–50% less than London staffing, and quality improved alongside the saving.
Frequently asked questions
What is the difference between BPO and outsourcing?
BPO is one type of outsourcing. Outsourcing can mean handing any task or project to an outside company, while BPO hands over a whole business process under a long-term contract. Hiring an agency to build a website is project outsourcing. Handing your claims intake to a provider that runs it daily against service levels is BPO. IT outsourcing and facility management are separate types that cover systems and buildings.
What does sourcing a BPO provider involve?
Sourcing a BPO provider means choosing and contracting the company that will run your process. A useful request for proposal states your volumes by channel, languages, hours of cover, target service levels, and data protection rules. Score every reply on the same criteria, and ask the finalists for references from clients in your industry.
Is a BPO the same as a call center?
No. A call center is one kind of BPO that handles customer contacts by phone, and often by chat and email as well. BPO also covers back-office processes, such as claims handling or accounting, which involve no direct customer contact.
Which processes should stay in-house?
Keep in-house the processes that define your strategy and the decisions that carry legal or financial responsibility. Examples are product decisions, final hiring calls, claim approvals, and sign-off on financial statements. Processes with clear rules and measurable output are better candidates for outsourcing.
Conclusion
Business process outsourcing moves a whole process to a provider that runs it under a contract. Before you sign, fix the scope and the service levels, and agree how often both sides will review results. Put the data-processing terms and the exit terms in the same contract.
At Simply Contact, we run front-office and back-office processes for companies in travel, fintech, ecommerce, and retail, with agents trained on each client's policies. If you are weighing the move, start with one process that has clear volumes and targets, and expand once it meets them.
Contact us to discuss which of your processes to outsource first.
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