Business Process Outsourcing or BPO services in the contemporary competitive business world has ceased being an instrument of cost reduction, instead it has become an essential strategy of growth. Outsourcing some processes can be a game-changer like types of BPO, whether you are a startup that needs to scale fast or an established business organization that needs to streamline operations.
Using the types of business process outsourcing helps companies to concentrate on their core competencies and outsource repetitive or specific jobs to specialist providers. The scope of outsourcing has greatly expanded since the duties of managing payroll or even performing advanced data analytics are outsourced instead of being addressed internally when receiving customer calls.
In this article, the authors examine the different forms of business process outsourcing (BPO), the real life examples of outsourcing, and how businesses can gain by using the appropriate outsourcing strategy.
What is Business Process Outsourcing (BPO)?
Types of business process outsourcing has been defined as the act of outsourcing certain business processes to third parties who offer outsourcing services other than performing the same tasks internally. The concept is not complex – rather than spending on non-core activities as valuable internal resources, businesses can delegate their services to specialised outside vendors who can make the operations efficient, skilled, and even economical.
Business process outsourcing (BPO) industry has been venturing during the past 20 years. In the past, it used to be mostly related to call centers, but nowadays, it cuts across functions such as HR, IT, finance, legal and even, R&D. In-house processes are cheaper to operate, and may be more controllable, but can be expensive and may not scale as quickly. Conversely, BPO outsourcing is flexible, efficient and able to access international talent.
Main Types of BPO Services
Outsourcing is not a universal thing. Businesses have several types of BPO services to select depending on the need of the business. The major different types of BPO categories are as follows.
1. Front-Office BPO
Front-office BPO outsourcing is interested in customer facing activities. These include –
- Customer service (phone)
- Telemarketing
- Sales assistance
Example: A retail brand outsourcing its call center operations to manage order queries and complaints around the clock.
2. Back-Office BPO
Back-office outsourcing handles the behind-the-scenes processes critical to smooth operations. Common services include –
- HR and payroll processing
- Finance and accounting
- IT support and data management
Example – A lot of SMEs outsource their accounting services in order to save money they would have to spend on having an in-house finance team.
3. Offshore BPO
In this type of model, companies hire services of other companies that are based in the different country. Offshore BPO is well favored due to the benefits of cost and a broader talent pool.
Example – The example is software development that is outsourced by tech companies in U.S. to India or Philippines.
4. Onshore / Domestic BPO
Onshore outsourcing is employing services in the same country. It might not be as cost-effective as offshore models but it has an enhanced cultural fit, reduces time zone challenges, and improves communication.
Example – A Canadian bank that is outsourcing its IT support to a local vendor in Toronto.
5. Nearshore BPO
Nearshore outsourcing refers to collaborating with suppliers in the countries that are neighbouring or in the same time zone or region. This compromises the cost savings with easy cooperation.
Example – U.S. based organizations usually deal with outsourcing companies based in Mexico or Costa Rica.
6. IT-Enabled Services (ITES BPO)
With the increased pace of digitalization, one of the most rapidly expanding forms of BPO is composed of IT-enabled services. ITES includes –
- Cloud services
- Data management and data entry.
- Cybersecurity solutions
- Software support and troubleshooting.
Example – A medical organization contracts the cloud data security management service to secure the confidential patient data.
7. Knowledge Process Outsourcing (KPO)
The activities of KPO are not the simple ones and are coupled with specialized knowledge. Typical services include –
- Market research
- Data analytics
- Business and financial consultancy.
Example – A drug company with clinical data that is being analyzed by a research expert in a foreign country.
8. Legal Process Outsourcing (LPO).
LPO is involved in the legal activities, which tend to consume resources. Services include –
- Reviewing or drafting of contracts.
- Legal research
- Compliance management
Example – A multinational firm contracts the services of a legal process outsourcing firm in India to manage its contracts.
9. Research and Development Outsourcing
It is possible to outsource an innovation pipeline by some organizations. Their ability to access external R&D professionals enables them to speed up product creation, without spending a lot of money on labs.
Examples – Prototype testing and design-improvement by other consumer electronics companies.
Benefits of Different Types of BPO Services
The optimal selection of process outsourcing business model among different types of BPO services can provide the following tangible benefits –
- Cost Savings – Costs and overheads are lower through outsourcing. Offshore BPO particularly is cost-effective.
- Scalability – Businesses are able to scale up or down easily based on the level of demand.
- Availability of Global Talent – Outsourcing enables a company to deal with extremely competent and talented individuals across the world.
- Prioritize Core Activities – Leaders are able to devote their time and resources to the strategy and growth whereas routine works are outsourced.
- Quicker Responsiveness – Special types of BPO vendors tend to have superior tools, skills and infrastructure, resulting in faster completion of tasks.
How to Choose the Right BPO Service for Your Business
There are numerous types of BPO services and therefore choosing the right one should be chosen on a few important factors –
- Cost vs. Value – Price is not always good. Compromise between quality and savings.
- Knowledge – Select vendors that are knowledgeable and specialized in the industry.
- Time Zone and Communication – Offshore BPO is cost efficient, but might be associated with communication obstacles. This can be solved by nearshore or onshore outsourcing.
- Compliance & Security – In sensitive types of BPO such as HR or legal make sure that the provider maintains compliance standards.
- Scalability – Find a partner who is capable of scaling with your business requirements.
- Best practice – Before being fully committed to a process outsourcing business provider, do a pilot project. This aids in the assessment of performance without a lot of risk.
Future of the BPO Industry
Business process outsourcing solutions is a constantly changing industry due to technological advancement and shift in internal business demands. Emerging trends in types of BPO include –
- Automation, A.I – Data entry and other routine tasks are automated and human agents can now concentrate on complex processes.
- Cloud Outsourcing – Outsourcing solutions based on cloud have flexibility and improved security.
- Expansion of Specialty BPO – Specialty BPOs such as KPO, LPO and research and development are becoming a booming business due to the need of specialized skills in business.
- Hybrid Models – Organizations are combining offshore, near shore, and on shore BPO to have a tailor made approach.
Conclusion
The varieties of the BPO services in the contemporary world are much wider than the conventional call centers. There are front-office and back-office outsourcing, and further development models such as KPO, LPO and R&D outsourcing, the opportunities are unlimited.
Selecting the appropriate outsourcing strategy will help businesses to save money, get access to a global talent pool, and remain nimble in a rapidly evolving marketplace. Be it offshore, onshore or IT innovations, business process outsourcing solutions have become an essential element of growth strategies across the globe.
In need of customized outsourcing BPO services based on your industry? Check out our Outsourcing BPO Services page and find out how Nirvaana can service your operations.
