Business Process Outsourcing: A Guide to BPO Types, Market Trends, & More

More and more companies entrust essential office functions to their business process outsourcing (BPO) partners as it allows them to focus on their organisation’s development strategies.

From startups to multinational corporations, companies of all sizes are discovering the benefits to outsourcing in both front and back-office operations. Because of its beneficial nature, the BPO industry keeps growing, from CAGR estimates of 3.53% this 2021 to 4% moving forward.

This shows that the industry has come a long way, with manufacturing companies being early adapters. Through BPO, manufacturers hired third-party vendors that had the resources to help them get their products to the market faster and at cheaper production costs.

Today, BPO has branched out to almost every industry or business, offering different services that include knowledge process outsourcing (KPO), legal process outsourcing (LPO), and research process outsourcing (RPO).

The BPO model can be fundamental to the growth of a company, including yours. You can learn more about BPO types, trends, and best practices from our infographic.

What is Business Process Outsourcing?

BPO or business process outsourcing is a strategy that companies use to accelerate their growth. It entails hiring third-party contractors to perform less critical business functions on their behalf.

In obtaining BPO services, you can either outsource the back or front-office functions of your company. Accounting, payroll, HR, and quality assurance fall under back-office, while customer service, sales, marketing, and the like comprise your company’s front-office functions.

The goal of BPO is to transfer to external service providers one or more of your processes that are part of your day-to-day operations but are not core areas of your business model. This approach enables your organisation to utilise resources on specific tasks or activities with the most value.

Top Benefits of BPO

Getting the services of a BPO company is beneficial in various areas, from finances to market expansion and overall business competitiveness. Here’s a closer look at those benefits:

• Higher Efficiency

  BPO makes operations more manageable. As experts in business processes, third-party providers come with specialised knowledge or skills that may otherwise not be immediately available to you.

• Experienced Professionals

  The BPO workforce is composed of industry practitioners with superior educational and professional backgrounds. They have the right combination of knowledge, skills, and values that make them highly qualified for your staffing needs. 

• Technology Upgrade

  BPO companies invest heavily in modern tools to enhance their services in process areas that you hire them for. As a result, your company can keep up with market trends and address potential challenges through technological innovations.

• Competitive Advantage

  As you delegate less critical processes to BPO services, your company’s capacity to market improves since you’re quick to turn ideas into products and services with high consumer demand.

• Lower Costs

  According to Deloitte, cost reduction is the main reason that 70% of BPO clients partner with third-party service providers. BPO can reduce your overhead expenses since labour-related costs are lower in developing countries where many BPO companies are located. BPO services also include using the provider’s office space and IT infrastructure, which translates to cost savings for your company.

• Global Expansion

  BPO eliminates the challenges commonly associated with starting a business in a new market, location, or environment. Through a BPO provider, you can establish your company in a new community while following legal and professional standards.

Types of BPO Services

BPO is generally classified into four types, depending on the services the contractor provides.

• KPO (Knowledge Process Outsourcing)

  In this BPO service, a third-party provider is tapped for its expertise in a particular field that’s highly knowledge-based such as education, finance, healthcare, insurance, and engineering.

• ITES (Information Technology Enabled Services)

  BPO is also sometimes referred to as information technology-enabled services (ITES), given that IT infrastructure plays a key role in outsourcing. ITES BPO specializes in providing support and services that can help companies process large volumes of data. Helpdesks, customer support centers, and data warehouses are some of the top uses for ITES.

• LPO (Legal Process Outsourcing)

  As the name suggests, this service involves performing legal functions for clients like legal research, preparation of documents, and legal advice. Back-office tasks like HR and regulatory compliance are also most likely to avail of LPO services.

• RPO (Research Process Outsourcing)

  This type of BPO specialises in research functions. Companies that might contract a BPO partner for RPO services include pharmaceuticals, investments, and marketing firms.

Must-Know BPO Market Trends

Technological shifts and the ever-evolving dynamics of business have paved the way for a new brand of BPO, one that is constantly improving to support companies in their goals. These trends describe the current state of BPO on a global scale.

• Increased Diversity in BPO Customer Base

  In the past, it was common to think that BPO was all about call centers, but that’s no longer the case. BPO has become a segmented industry with a diverse customer base that recognises the positive impact that BPO services offer. From private corporations to non-profit organisations and government agencies, various groups now outsource to third-party service providers.

• Investments in Emerging Technologies

  We now live in a digital world, and BPO companies are expected to keep abreast emerging technologies that can help businesses cut costs, improve productivity, and be responsive to customer needs. For instance, chatbot assistants enable automation in customer service, while call centers integrate social media services or programs to reach customers who are actively using this channel to communicate with organisations.

• Reskilling and Upskilling of Workforce

  As automation becomes prevalent, employees doing routine work should reinvent themselves to meet the demand for a more highly skilled workforce. Interestingly, although BPO automation can potentially displace low-skilled workers, new job roles are bound to be created. This time, the focus is on upgrading skills so that employees can perform creative and critical thinking processes to further accelerate business growth for BPO clients.  

• Startups and BPO Partnerships

  BPO has leveled the playing field for startups, providing them with the technology, expertise, or opportunities to grow their business that would have otherwise been more challenging without BPO services.

• More Outsourcing Destinations

  Asian countries like China, India, Malaysia, and the Philippines have dominated the BPO industry for years. For instance, in 2019, outsourcing in the Philippines was a multi-billion dollar industry as companies in the United States, Australia, and the United Kingdom partnered with BPO services in the country. Today, Middle Eastern, European, and Latin American countries have also established BPO offices to serve as an outsourcing alternative for growing businesses.

 

➜ Related blog: How to Manage Your Offshore Team

 

Tips for Choosing the Right BPO

An ideal BPO partner must meet several qualifications to be considered a top-caliber service provider. Taking the following steps can help you assess your potential partner:

• Check the BPO partner’s service capacity

  Learn the BPO firm’s capability to handle your account by discussing with them your service requirements. From there, the BPO service provider should develop a project management plan that will enable you to see how they intend to take on the job. 

• Consider your partner’s IT & infrastructure setup

  BPO companies equip their staff with smart tools and technologies not only to enhance work productivity but also to promote the privacy and security of their client’s data.

• Check your chosen provider’s global presence and industry expertise

  You need to have a basis for the BPO company’s in-depth knowledge and expertise of the industry, best practices, and proven track record. Some providers will offer references as they’re proud of contributing to their client’s success. 

• Assess the BPO partner’s recruitment process and HR support

  Your BPO provider must have the ability to rapidly hire and build an offshore team that complements and supports your onshore team, and the company’s business model.
  

• Ensure its financial stability and indemnity insurance

  A provider should be transparent in sharing their financial history with potential clients, and provide a level of indemnity insurance that clients would want to expect from an onshore supplier. Your BPO partner should be able to provide the necessary insurance to cover all jurisdictions in which you operate.

The Bottom Line

BPO has afforded companies of all shapes and sizes a great deal of flexibility in running their business. You can cut costs while maintaining productivity as you migrate part of your operations to a professional BPO provider. 

optiBPO has been helping companies analyse and streamline their processes for their staff, customers, and the organisation as a whole. Our next successful client could be you. Learn more about our outsourcing services and solutions.