Business Process Outsourcing (BPO)
Thousands of companies in the U.S. alone contract with a third party to handle specific areas of their business that are not the core focus of their company. The third party also referred as “providers” manage and run every aspect of the outsourced area.
Business Process Outsourcing also known as BPO has been around for quite some time. But in recent years, the growth of this industry has sky rocketed.
The Main Incentive For A Company To Outsource
The bottom line. Companies that contract with outsourcing providers save a substantial amount of money. The expense of hiring an in house staff consisting of several individuals generally includes high salaries, health insurance costs, contributions to retirement funds and taxes. All of these expenses are eliminated when a company chooses to outsource.
The provider hires and manages each person on the team. Plus the third party also oversees the entire area. When problems arise the provider deals with the situation. Now a company can focus all of its efforts on it’s most important area of business.
What Are The Most Outsourced Areas?
Business process outsourcing is used to manage several areas that are not considered a core part of a company’s business. But are needed in order to run their business. So these areas would include, bookkeeping and accounting, employee benefits, customer service call centers and other areas that typically provide support for a company’s infrastructure.
There Are Different Kinds Of Outsourcing
If a U.S. company outsources from India this would be called “offshore outsourcing.” If a U.S. company instead outsourced from a neighboring country like Canada, this would be called “near shore outsourcing.” Finally, “onshore outsourcing” would be when a company outsources from a provider within in the same country.
The key to success for any of the various types of outsourcing is finding the right provider and making sure they are experienced and competent in the area to be outsourced.
Downsides To Outsourcing
When a company opts to try business process outsourcing, it is taking on some risks. A company whose core business relies on keeping their customer information private or deals in some kind of sensitive data runs the risk of security issues. The idea of allowing a third party access to a company’s trade secrets and customer information is a genuine cause for concern.
To help minimize security issues, companies need to manage the “outsourcing process.” This can be achieved by taking a step by step look the process itself. Identify and make sure that specific needs and concerns are dealt with before outsourcing begins.
Outsourcing Trends
The future of outsourcing continues to grow at a record pace. The trend towards “offshore outsourcing” continues to grow worldwide. More and more companies, even very small companies are taking advantage of outsourcing non essential tasks. The trend for offshore outsourcing allows a company to hire top quality talent at extremely lower costs in countries where the costs of living is substantially lower than that of the U.S. for example.
In addition to lower costs, many outsourcing providers are also offering “one stop shopping.” Instead of a company hiring one provider to handle payroll and another to handle software development, many providers can offer both. Still at a substantially lower cost.
IT outsourcing of this type is not likely to slow down anytime soon. The comparative low costs, are simply to good not to consider. The list of providers continues to grow. So there is no shortage of providers to choose from. As the economy world wide continues to show no signs of a turnaround, businesses will continue to look for ways to save money and increase profits.
Competition can be fierce. For smaller companies, outsourcing may become mandatory. Without huge budgets to compete with bigger companies, they have to find a way to stay competitive without going bankrupt. Outsourcing can cut operating costs and free up more capital to reinvest in more important areas of their business.
Business process outsourcing has become an accepted way of doing business. Large corporations have outsourced for years. But now very small companies are recognizing the obvious advantages. A small company that hires a virtual personal assistant, can give the impression of a much bigger company without the price tag.