Business Process Outsourcing (BPO) is easily defined by the process of contracting business processes to a third party service provider. Such tasks include any process that a business must complete in order to operate their business on a daily basis, but are not the areas of a business’ core competencies. General areas of business that would fall into the potential outsourcing category would include HR, Marketing and business process automation of data entry and scanning/imaging needs, among others.
Although the majority of business processes are created in-house, once a business reaches a certain level of growth those processes need to grow and change as well in order to meet the growing needs of the process being performed. Many businesses are simply limited in the amount of capitol they can consistently invest in internal processes.
At this point, many business process managers will decide if it is cost-effective for their business to continue in-house processing or consider outsourcing their processing to a third part provider. In order to gain optimum success outsourcing business processes to a third party provider, you should consider the following:
1. Consider the reasons businesses choose to outsource business processes:
a. Reduction of Business Processing Costs. As industry experts, BPO or third party providers are able to leverage lower cost labor markets, use cutting-edge technology and software for processing and increase employee productivity by reassigning personnel involved with the outsourced area to perform other needs of the business.
b. Executive Management Focuses on Core Business Functions. By outsourcing non-core business competencies to a third party provider, officers and management are free to focus on the core areas of that business also requiring expert-level attention to succeed.
c. Improved Business Performance. Because BPO providers focus exclusively on processing business needs expertly, they are able to be proactive in processing your business processes accurately and with improved results. As experts, BPO businesses invest greatly in up-to-date technology, new and changing regulations and requirements and training staff for the new processes.
2. Identify which business processes to outsource and which ones to keep in-house:
Before you make a decision regarding the areas of your business to outsource, it is vital to understand exactly what your core business competencies are. It seems likely you have some idea of what you core business consists of however, to be clear, a core business competency is an area of your business that it does best. Once you identify your core business, it is then easy to identify the business processes that support your core functionality.
3. Identify the benefits of integrating outsourcing into your business:
Once you have done any research at all regarding outsourcing business processes to a third party, you will understand that once you do there will be a cost-savings. But, how do you know this is fact? How do you really know how much you will save? It’s very simple. Perform a cost analysis.
Don’t let the words “cost analysis” intimidate you. A cost analysis of business performance is a very smart and recommended first step to deciding future business directions. A cost analysis is not only a calculation of business costs, it is also a way to factually compare your business processing cost to that of a BPO third party provider proposal for services. Clearly, knowing what your processing costs are from a collective business perspective and also from an individual process perspective will afford you the knowledge of knowing the more cost-effective way to proceed with your business.
4. Consider the best location for your BPO third party provider. Once your business has decided to proceed with outsourcing options the next steps is to consider the physical location of that provider. Will you outsource offshore? Will you outsource onshore? You’ll need to consider the benefits and drawbacks of both. Cost, country regulations, service offerings, and language to name a few details.