Business process outsourcing (BPO) is a method of conducting business in which a company hires an outside service provider to carry out a crucial duty or activity.
After identifying a procedure that, while important for its operations, is not part of its core value proposition, an organisation often contracts with another company for these services. Strong business process management and a thorough understanding of organisational processes are necessary for this level.
Payroll and accounting are two examples of procedures that are frequently considered to be ideal candidates for BPO by many organisations.
Enterprise executives frequently decide there is little value in having their own people do these commodity procedures because they typically do not distinguish one organisation from another.
BPO’s origins are in the manufacturing sector. After deciding that outside vendors could provide more expertise, speed, and cost efficiencies to certain processes than an internal staff could, manufacturers recruited them to manage several aspects of their supply chains. Organisations in other sectors eventually started using it.
What is BPO used for?
Businesses use business process outsourcing primarily for the front-office and back-office portions of their operations.
The term “back-office functions,” sometimes known as “internal business functions,” refers to support activities like accounting, IT services, HR, quality assurance, and payment processing.
Customer relationship management, marketing, and sales are a few examples of front-office activities and business operations that relate to or serve current and potential consumers.
Some businesses hire just one vendor to handle an entire function, like the HR division. Some businesses only outsource particular tasks within a functional area, such as payroll processing, and handle all other HR tasks in-house.
Commonly outsourced processes include the following:
- Payroll and accounting
- Administration
- Customer support
- IT management and services
- Manufacturing
- Marketing
- Research
- Sales
- Shipping and Logistics
