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Business Process Outsourcing: How It Works

October 1, 2020
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The business process outsourcing definition is the version of outsourcing where a company gives over any business processes to a third-party organization to complete. Outsourcing of business processes (BPO) is the deepest form of outsourcing, which involves close interaction between the provider (outsourcer) and the customer.

Unlike task outsourcing, which involves individual projects with limited time and budget, business process outsourcing may not have time limits or a fixed budget. Within the BPO, the organization transfers to the outsourcer not only individual tasks but also a closed functional area within its business.

The abbreviation BPO often means outsourcing of high-level processes (the management of finances, personnel, marketing, or legal support of organizations).

Why Is Outsourcing Important?

  1. You save money. Outsourcing certain functions of the company (IT, PR, or call center) will help reduce operating costs and increase profits. Thus, you become more flexible, which means more competition.
  2. The delegation of certain functions saves time and enables development. When it comes to business, outsourcing helps to focus on key areas and spend human and financial resources more rationally.
  3. Access to high-quality and at the same time relatively inexpensive personnel, which improves the quality of tasks.
  4. Transfer of tasks reduces the company's dependence on individual employees. For outsourcing companies, their job is a business, not a profession. To remain competitive, they will monitor the quality of the provided services. Hired employees do not always approach work like this.
  5. Outsourcing certain areas also reduce management tasks. The fewer tasks the company performs, the fewer things the management needs to control. They can concentrate on developing the main areas of business better, which reduces costs.
  6. Risks reduce. All you have to do is have detailed terms of the contract.
  7. Outsourcing helps companies stay compact. It is very useful if you do not want to maintain a large staff and create a complex corporate structure. Outsourcing can also be used to reorganize a business or optimize operating expenses.

So in 90% of cases, outsourcing is useful. Its main advantages:

  • a higher level of quality;
  • unconditional economic benefit;
  • tasks are the contractor’s area of ​​responsibility without a needless headache for the customer.

Benefits of Business Outsourcing

Let's start with the obvious advantages that outsourcing processes provide:

  • It allows the company to significantly reduce costs. The company does not have to maintain an additional structure, expand the staff, or provide a social benefits package for full-time employees.
  • As for the strategic tasks, outsourcing makes it possible to concentrate resources on the main production, as well as improve operational control.
  • On the technological side, outsourcing opens up access to higher technologies. If the staff does not have the necessary specialists, they can be engaged. The quality of service significantly increases, as a third-party company is obliged to control the quality of the work provided under the contract.
  • You will have flexibility in cost allocation. No need to draw up a work schedule and reduce the permanent staff: just engage temporary labor, depending on need.

Of course, there is a flip side to the coin. The introduction of an outsourcing system is difficult to implement, it requires a serious preliminary analysis when choosing a contractor and a careful calculation of costs, comparing them with the expected economic effect.

Being the deepest form of outsourcing, the transfer of business processes can bring your organization maximum benefits, but you should carefully choose the contractor according to your interests.

Business Process Outsourcing Examples

There are many directions of outsourcing, and new ones continue to appear. People now outsource logistics, personnel selection, document management, repair work, service, processing of telephone calls (call centers), programming, bookkeeping, and so forth.

The processes can differ, depending on the specifics and industry of each organization. Nevertheless, there are several examples of BPO industry that are typical for almost all large enterprises:

  • The production of a large volume of documents at the scale of a large company is a complex process that requires dedicated resources, the use of specialized equipment and technologies. Document outsourcing can reduce the cost of document production by an average of 15%, with a significant increase in quality and productivity.
  • One of the fastest-growing segments of the UPS outsourcing market is call centers or the outsourcing of processes in customer relationship management (CRM). It allows the handling of incoming phone calls automatically or with the participation of an operator. Its use allows for optimization call processing, reducing the time it takes to find the information that the client needs and ensuring the constant availability of the service. The vast majority of Western companies use these types of BPO, placing expensive call centers in places with cheap labor. It is traditionally believed that the leading provider of call center outsourcing services is Eastern Europe, which is able to provide Western companies with high-quality service at the lowest possible prices. On the basis of the call center, you can have a number of services, such as information and reference support for customers; organization of technical support, etc. All these and many more services are provided by Simply Contact.
  • Outsourcing of personnel processes (human resources management) is one of the varieties of business process outsourcing. It is the full cycle of work related to the search and selection of personnel (recruitment, posting of job offers, and access to resume databases).
  • A rapidly developing form of outsourcing is the provision of accounting services. The main advantage of transferring accounting functions to an outsourcer is the liability factor for possible errors in accounting. The use of a specialized accounting organization implies the existence of contractual liability for damage, which is a more reliable form than the responsibility that the chief accountant bears under an employment contract.
  • Logistics outsourcing is currently being actively developed. This implies transferring individual logistics functions to a specialized company that has the experience and a wide infrastructure to carry out the relevant operations.

Business Process Outsourcing Companies

There are several examples of international large size enterprises that use business processes outsourcing:

  • Ford. Henry Ford was one of the first ones to understand that no company can be self-sufficient. The head of the automotive company wanted to control all stages of production personally but faced large costs that went into servicing all areas of the company’s activities. He turned help to independent companies that took over part of the tasks. Now Ford produces only 30% of its components independently, the rest of the production is outsourced.
  • IKEA. Another giant that knows the benefits of outsourcing is IKEA. IKEA does not really have its own production, instead, it cooperates with 2500 suppliers whose quality has been proven over the years. The logistic functions at IKEA are also delegated to a third-party organization.
  • Airplane repair and maintenance, baggage delivery, ticket booking, catering, and many other functions in Virgin America are performed not by full-time employees, but by temporary employees of third-party companies.
  • About 70,000 temporary employees test Google self-driving cars, draw up documents, improve company products, analyze data, and conduct marketing events.

Most major international companies such as Procter and Gamble, Levi Strauss, Cemex, Microsoft, Norway Post, Barclays use financial outsourcing (suppliers of IBM, HCL, Xerox, Capgemini, Cognizant, Accenture, Genpact, TCS). You can also check the full list of BPO companies that can help you to handle non-core business activities and operations.

Business Process Outsourcing Cost

The BPO cost depends on services, location, and client. Here are some hourly pricing averages according to geographical location:

  • Ukraine: $5 – $9
  • Pakistan: $6 – $10
  • Latin America: $8 – $18
  • Asia/Philippines: $8 – $14
  • Eastern Europe $12 – $25
  • Africa/Middle East: $15 – $20
  • United States/ Canada: $22 – $35
  • Western Europe: $40+
  • Australia: $35 – $55

Business Process Outsourcing Services

Outsourcing means freedom of choice. You can choose from a wide list of companies or specialists the one that is the most suitable for the task and get quality service for a certain price without additional costs and obligations. Simply Contact employees are active, young, and ambitious specialists with little to no accent. Our call center has 5 years of experience, 400 employee agents, 100 projects, makes 7,500 calls a day, and works 24/7. With our high level of expertise in the fields of telecommunications, financial services, aviation, e-commerce, and retail, we can handle projects of any complexity. Contact us to discuss your project today!

Read also: Pros and Cons  of Outsourcing Customer Service

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