Business Process Outsourcing (BPO) refers to contracting some operations of the business to other organizations instead. These could be on-shore or off-shorevendors proficient and cost-effective in the handling of those specific tasks. From back office operations like Accounting and Information Technology (IT), to Front Office operations like Customer Care – many work areas of the business can be outsourced.
From pertaining to primarily the manufacturing sector, the BPO industry has since grown to almost any and all organizations of varying sectors, including the tertiary sector. There are many reasons which have contributed to the rapid rise of the BPO industry:
- It may not be wrong to say that perhaps the greatest reason for a business to adopt BPO is due to the cost effectiveness it offers.
- As the world becomes a global community, there has been a considerable reduction in trade barriers, with some countries even pursuing the idea of ‘Free Trade’. Consequently, there are no/less tariffs to pay, and no/less quotas to worry about. Thus, when a firm to another less-costly country, the idea appears as a win-win situation.
- Business practices can also be outsourced to proficient vendors with expansive operations. As large organizations, they may be enjoying economies of scale (lower average cost per unit of production), thus making the end product inexpensive.
- BPO also cuts down on fixed costs of organizations. The office space which would have been rented for perhaps the Customer Service department does not need to be rented anymore if the department’s operations are outsourced.
- Hiring specialized vendors for front/back office operations results in a combination of low costs and high quality. Such firms, albeit smaller, possess specialized knowledge and infrastructure to deal with the outsourcing organization’s operations. A primary example could be the rising trend of software outsourcing. Developing software or performing data mining (etc.) are not only costly, but also time-consuming and tedious tasks, requiring great investment. Thus, it is a good idea to outsource to such IT firms which are proficient in software development. Such firms will be able to adapt to newer technologies, while producing e overwhelming results in a lesser time.
- A highly popular BPO industry has meant budding graduates and people of various talents have begun to view working in an outsourced company as a good career choice. This has led to an influx of highly talented and educated individuals in the BPO industry. Such individuals possess a specialized skillset and are thus are better equipped to handling departments of an organization proficiently. An additional benefit when adopting near-shore, or off-shore outsourcing, is the diverse skillset of the labor in the countries they outsource to. Different from their home country, these workers may be able to produce work different and better than back home – thus giving the outsourcing organization an edge over its competitor firms.
- A rise of the BPO industry has meant increased employment, especially in areas with a large gap between available jobs, and number of candidates applying for the position. Outsourcing work has meant that especially such areas are catered, and their individuals given employment. Thus, the idea of BPO has gained governmental support in various countries. Programs and policies pertaining to BPO are developed, and costs of doing business in such countries reduced via reduction in registration fee, taxes, trade barriers, etc.
Increased Status and Global Presence
Although the firm is outsourcing, it is still expanding its operations to perhaps another country (in off-shore and near-shore BPO). This results in greater global recognition and status. Moreover, going global also has the benefit of penetrating language barriers which can especially come to a firm’s benefit when considering customer care and support.