Globally businesses are concerned about the high costs of maintaining and managing their support divisions. In the modern world in order for companies to remain competitive the business model is one of reducing bureaucratic overheads and focussing on core competencies and innovation, with the cornerstone of achieving this being business process outsourcing (BPO), which concerns outsourcing specific business functions to dedicated offshore teams.
Many different kinds of business functions can be outsourced. These include back office functions such as the IT department, human resources (HR), accounting, database management, e-commerce and so forth. Alternatively BPO can involve front office functions such as help desks in which the vendor deals with the client’s customers directly. Globally BPO revenues for 2015 are predicted to reach over $93 billion.
One of the important advantages of BPO is that it is considerably more flexible than maintaining the function in-house and it has been a model adopted by companies for the last twenty years or so; however it is also about more than just cost saving.
For instance the technology that is provided is also seen as being very important by increasing numbers of companies who make substantial use of BPO, and which can give companies that take advantage of it a competitive advantage. Examples include analytics applications of various kinds that can provide important insights into performance as relating to customer retention, identification and segmentation of customer needs, and improvement of customer support experience; forecasting tools that can identify fluctuating demands across geographical locations; and other technologically innovative tools that are only available through BPO.
The cost model for BPO is based on fee for service, which is a variable cost rather than the fixed cost associated with maintaining the function in-house. Thus the company can respond to fluctuating capacity requirements without having to invest in assets and can also benefit from much more rapid response times.
Flexibility is also improved by being able to focus on core competencies free from the associated administrative functions which have been outsourced, while the speed and efficiency of the business processes themselves are improved. Essentially businesses can hold off bureaucratic burdens allowing it to grow more rapidly.
Cashflow is another important factor. As there is less need to invest in equipment and manpower for the business processes, more cash is available to power business growth. Furthermore, rather than running the risk of investing in technologies that can become outdated and fail to serve changing business goals and working practices, with BPO the very latest and relevant technologies are always available.
For BPO to work for you it is important that the fundamental qualities are maintained. These include achieving the correct service levels; clear contractual agreements; having in place procedures for dealing with change; and continual quality improvement measures.
How BPO should work
Not all BPO relationships are the same. For BPO to work at its best it is important to deal with a number of issues from the outset.
When planning BPO it is important to establish the answers to a number of questions. For instance it is important to have a clear understanding about what it is you wish to achieve, the risks that are involved, and the kind of relationship you are seeking with your provider. Are you looking for improvements to your current processes that will be achieved through the various enhancements that are offered by your provider? Are you seeking to change the business by freeing it from bureaucratic overheads?
Choosing to outsource your business processes is a significant commitment as it may make profound and enduring changes to your business strategy. It takes a certain investment in time to make it work, and taking the process back in house is also time consuming, so getting the length of the contract right is important. Typically contracts are from three to five years with a periodic review.
It is important to carry out a risk assessment of your BPO so that you are happy that the provider is able to deliver the process and that you are able to retain adequate oversight and control. You must be happy that the vendor will implement your policies and those for which you are responsible such as the Data Protection Act and other regulatory policies.
BPO – The Future
BPO has reduced the costs of operating businesses processes while providing organisations access to a highly talented and diverse workforce. With continued demand for cost reductions the global market for BPO is increasing and will continue to increase.