What is business process outsourcing (BPO)?

Business process outsourcing (BPO) is the practice of contracting out business functions to a third party provider.

For example, if your business is launching a new product it may need to increase its customer support provision. Rather than recruit more calling agents, your business could outsource this to a BPO provider and have them run your support program.

Why use BPO?

There are many reasons businesses use BPO (reviewed below) but typically businesses have used it to cover processes that, while crucial, are not part of their core business offering. This might include: customer support, payroll, IT administration, etc.

In more recent years, the role of BPO providers has evolved to cover more in-depth processes such as scaling, business process transformation, strategic considerations, and customer experience program design. As a result, the relationship between BPO partners and businesses has also evolved.

What are the different types of BPO?

1. Front-office BPO

covers all customer-facing functions. This can include: customer service and support (including technical support), marketing, sales, etc.

2. Back-office BPO

covers all non customer-facing functions. This can include: IT, accounting, HR, payroll, IT-Enabled Services (ITES), business process automation, Legal Process Outsourcing (LPO), etc.

3. Off-shore BPO

involves a subcontractor being based in a different country to the business seeking its services. Off-shore BPO can be a great way to reduce the cost of certain processes and has often been used for customer service (to mixed success). It can also allow you to offer support in additional time zones and languages your customers need.

4. On-shore and domestic BPO

covers situations in which both the subcontractor and the business seeking its services are based in the same country. On-shore BPO is often used to access specialized skills and expertise or when local market knowledge is critical.

5. Near-shore BPO

involves a subcontractor being based in a neighboring country to the business seeking its services. For business in the U.S. this might be BPO providers in Mexico and Canada, for example. It’s possible to use near-shore BPO to offer support in additional time zones and languages your customers need. In certain situations it can also give you access to specialized skills at a cheaper rate than on-shore BPO.

6. Smart-shoring BPO

uses a combination of different shoring options in tandem. Processes are broken down into their constituent parts and the most appropriate shoring option (off-shore, near-shore, on-shore) is assigned to cover it. It’s typically managed and coordinated using a technology platform.

How is BPO changing?

BPO has typically been used to cover processes that differ very little from company to company (such as payroll) and the main driver was cost reduction. Unsurprisingly, this meant most BPO providers were selected purely on price.

This approach has big limitations. For example, using the cheapest available BPO for customer support or service provision often negatively impacts customer experience.

At a time when customers say that experiences are as important as products or services, this means that while the upfront cost is lower, it’s hard for businesses to get a return on their outsourcing investment.

In response, businesses are now using outsourcers in a much more intelligent way in areas that give them a critical business advantage and improve their core offering.

This includes: empathy-based customer support and service, business transformation, and business growth.

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Advantages and potential disadvantages of BPO

Businesses of all sizes can gain big advantages by working with the right BPO partner. But, the key is finding the right partner otherwise there can also be substantial risks.

Below is a snapshot of the advantages and potential disadvantages but you can explore them in more detail on the page on advantages and potential disadvantages of working with a BPO.

Advantages
Potential disadvantages
  • Better use of resources

By outsourcing non-core business functions, businesses have more resources (time, financial, and staff) to focus on their core business operations and strategic planning. To reach the next level, some businesses work with a BPO that can also help with these strategic considerations.

  • Improved scaling

When it comes to scaling your business or launching new products, an outsourcing partner can help you increase headcount more easily which can reduce time to market and increase the rate of transformation. By working with an outsourcer with a bespoke approach you can also ensure your specific needs are covered and your goals accounted for.

  • Increased business agility

Working with the right outsourcing partner can make you more adaptable to changing market conditions, customer expectations, and business requirements. Working with a BPO partner with a relationship-based approach is the key to ensuring this involves lasting changes that improve your business agility in the long term.

  • Access to technology

BPO partners can give businesses access to the latest technology or software without having to outlay major setup costs or ongoing maintenance costs.

  • Negative impact on CX

If managed badly, working with a BPO provider can negatively impact your CX. If your BPO partner has a transaction approach to customer service, it’s likely that customers will feel undervalued. This is bad news at a time when 86% of consumers say experience is as important as products and services, according to research by Salesforce.

  • Culture clash

Working with a BPO provider with a transactional approach to customers often means they have a transactional approach to partnership too. If you don’t choose the right BPO for your business needs you’ll likely experience a culture clash which can cause operational headaches and decrease time to market owing to a lack of alignment.

  • Lack of ROI

CX is a critical business concern. So working with a BPO that doesn’t prioritize CX can make it difficult to get ROI from outsourcing spend. How big a problem is this? According to Gartner, two-thirds of companies compete on customer experience, up from 36% in 2010.

See the full list on our advantages and potential disadvantages of working with a BPO page.

Is BPO worth it?

It all depends on which BPO you work with. If they have a transactional approach and compete mainly on price, you’re likely to be hit with some big downsides from working with a BPO partner.

However, working with a CX-first outsourcer can have a big positive influence on your business and will be well worth the investment.

What makes a good CX-first BPO partner?

One that can help you create agile and scalable CX programs. And if you’re outsourcing customer service functions, it’s also crucial that they nurture passionate, empowered agents that go the extra mile.

Want to test if your BPO partner is able to meet your expectations? Our insanely honest guide to customer experience outsourcing contains 26 questions to help you evaluate BPO providers.

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BPO and business transformation

Finding the right BPO partner can help you successfully launch and complete business transformation initiatives.

The first stage of outsourcing your business process transformation successfully is identifying the goal of your transformation—that’s the key to finding the right outsourcing partner for you.

Want to dive deeper into preparing for using a BPO provider for your business transformation? Check out our business process transformation readiness page.

By finding the right BPO partner, businesses can form much a deeper business relationship with them, working in parallel to transform business processes.

This enables agile business process transformation which involves transferring core responsibilities to your BPO partner rather than transferring operational delivery.

Agile business process transformation allows iterative, collaborative, and continuous transformation which is the cornerstone of staying competitive against the increasing number of new market entrants.

According to a recent survey by the Harvard Business Review, in some sectors up to 65% of CEOs predict that in five to seven years their firms’ main competitors will be different from their main competitors today.

Working with a BPO in this way can help you:

  • De-risk business process transformation
  • Develop bespoke industry solutions
  • Deploy of artificial intelligence, machine learning, and analytics across processes
  • Scale your business more effectively
  • Create customer support provision built on empathy

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What is Ubiquity’s approach to Business Process Outsourcing?

It’s been our experience that successful business process outsourcing is founded on a CX-first approach and a strategic partnership.

Whether you’ve worked with a BPO provider in the past or not, a huge amount of trust is needed to transfer responsibility of any of your business processes to a third party. That’s especially true when those processes are customer-facing.

It’s why we don’t think a one-size-fits-all approach works. So when we partner with you, we craft a unique strategy, service design, and KPIs to solve your business challenges.

We believe that’s the key to fueling growth, and driving superior customer experiences that increase loyalty. Our agile methods provide a meaningful return on your outsourcing investment, so you can Scale Fearlessly.

Want to find out more about how we help businesses Scale Fearlessly?

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Business Process Outsourcing industries

While the fundamentals of great Business Process Outsourcing are the same, each industry has its unique challenges, considerations, and requirements. That’s why we tailor our approach to the key sectors we operate in to ensure our clients (and our client’s customers) get exactly what they need.

Use the links below to find out more about our offerings: