What is Business Process Outsourcing?

Business process outsourcing is a method used by companies to subcontract other business entities to take responsibility for one of their activities that could otherwise be done internally. Sometimes the responsible company will send employees and assets to the outsourcing company to carry on the tasks.

How Does Business Process Outsourcing (BPO) Work?

The outsourcing may also be termed as the process of handing over public services control to private entities both on a long-term and short-term basis. Outsourcing applies to both domestic and foreign contracting. It may, from time to time, also include offshoring, where a firm may decide to relocate a business function to a faraway country. It may also engage in nearshoring where a business transfers its service to a neighboring nation. There is also onshore or domestic outsourcing, where an organization can opt for outsourcing from within the country. A good number of companies today, whether small, large, or new, opt for business process outsourcing. Outsourcing ensures that they remain competitive in the ever-increasing new innovative services and products in the market.

Services that Companies Outsource

There are two broad areas in which companies adopt BPO functions - the back office and front office. 

 Back office - The back office is when a company outsources for services from for its core business operations such as:

• Accounting/Bookkeeping
• Human resource
• Quality assurance
• Information technology services
• Payment process
• Regulatory compliance
• Manufacturing
• Product design

Front office - Services outsourced from office functions include customer services, sales, tech support, and marketing. Reasons for either outsourcing or operating in-house is based on the companys desire to achieve various things. 

• To lower the cost of production
• To properly utilize facilities including other resources like office space, furniture, and equipment
• To focus their efforts on the buyers key competencies
• Make good use of the labor

For those companies that opt for outsourcing services, they do this to achieve the following: 

Cost-saving: Outsourcing saves on cost by ensuring quality levels, cost restructuring, and work scope reduction. 

Cost restructuring: A company outsources so that it can achieve operating leverage. It can compare variable costs to fixed costs and work on balancing the two to ensure flexibility in its operations. 

Improved quality: Outsourcing ensures that the companys operations follow the specified and agreed on new service level to provide quality services.