A big part of strategic business operations is deciding how to use the resources at your disposal. This includes choosing which projects your internal team spends their time on, which ones you hire resources for, and which you decide to outsource.
You can outsource tasks — like a single marketing campaign — or you can outsource the entire business process, like your customer support. The latter is known as BPO.
When you outsource major business processes, you free up internal resources to focus on areas that are more critical.
It’s a popular strategy — the revenue of the global BPO industry amounted to $26 billion in 2019.
In this article, we’ll define BPO, discuss BPO meaning, and cover how to outsource business processes day-to-day.
What is BPO?
BPO is the process of delivering a business function through an external provider or contractor.
BPO often includes services like payroll, accounting, telemarketing, data recording, social media marketing, customer support, and more.
It’s most typically used to support supplementary business functions that don’t directly impact a business’s core output.
There are many reasons companies choose BPO over increasing internal resources to handle these tasks.
70% of executives cite lower cost as the number one reason they choose BPO, 40% say flexibility, 20% speed-to-market, 15% access to tools and processes, and 15% agility.
If you do choose BPO over increasing internal resources to accomplish a task, there are 3 different categories to choose from:
- Offshore outsourcing: hire a vendor, freelancer, or contractor company outside of your own country
- Nearshore outsourcing: hire a vendor, freelancer, or contractor company in a neighboring country
- Onshore outsourcing: hire a vendor, freelancer, or contractor company in your own country
Business teams can use monday.com’s Work Operating System (Work OS) to build a custom solution that suits their needs for any BPO provider.
Build a solid foundation using templates like our freelancer manager, ideal for managing multiple people in different time zones and at different rates.
When should you outsource business processes, and when should you not?
If your business operates in the United States (US), whether or not you choose to work with a BPO partner often comes down to taxes.
The US’s corporate income tax is one of the highest in the world at 21%, which leads many to determine that working with a company to outsource operations in countries with lower tax rates is financially beneficial.
If you choose to outsource a business function outside of your home country, you pay the tax rate of the country where your vendor or contractor resides.
Aside from taxes, there are several reasons you may or may not want to work with a third-party service provider, including:
- Cost-cutting: BPO cuts costs related to in-house labor, staffing and training, how much workspace you need to provide, employee benefits, and much more. When working with outsourced vendors in developing countries, for example, businesses don’t have to pay a fixed cost for labor and can instead determine fees by project or service type.
- Focus internal resources on core business functions: the employees you do staff internally will be able to focus more of their time on core functions if you outsource the others. For example, your in-house finance team might handle payroll, but they might also handle client billing. If you outsource payroll, more of their time can be spent on client billing, which is a core function of your business.
- Better results in non-core business functions: let’s take our finance team, for example. If we outsource payroll and focus their time on client billing, they’ve not only got increased capacity but their expertise and capability will grow. This should drive better results in this function.
- Expand globally: BPO can allow companies to serve customers abroad in multiple languages, in their time zones, with a local presence.
- Flexibility: having an external vendor to rely on means your internal employees can more easily shift focus as priorities change. For example, say you’re introducing a new product or service. You want your internal human resources to focus on those. So, you may want to outsource operations for established products or services that you already know run well.
- Improve task efficiency: BPO provides an added benefit of allowing you to hire specialists in certain tasks, which means accuracy and speed increase as well. For example, a vendor who specializes in managing company records might be able to automatically index documents in compliance with legal regulations, and your team can stop manual filing.
There are many benefits to BPO, but there’s also one major risk to take into account — when you outsource a business function, you give up some visibility and control over the processes, meaning a portion of your customer experience is no longer guaranteed to run the way you might expect.
Don’t outsource critical functions that make or break your customer experience, because it could hurt your business.
Types of BPO
BPO looks different depending on where you sit in your organization. We’ll walk through the most common types of BPO, and how to manage them.
Information technology-enabled services (ITES) BPO
ITES includes anything related to information technology (IT), internet connectivity, or your data network. It might include vendors that handle tasks like service desk analysis, production support, or the entire umbrella of IT operations.
Managing an outsourced IT function will include the ability to track and manage requests, security concerns, and the urgency of each, as well as facilitating smooth communication between your internal team and the vendor.
Business teams can use monday.com to build a custom IT operations help desk, which allows you to assign task owners, mark priority, add task descriptions, and much more.
Knowledge process outsourcing (KPO)
KPO covers a lot — it’s an umbrella term that describes any type of BPO that’s more than just process management, but also includes business and domain-based expertise.
This includes things like research and analysis, and vendors engaged in this type of work might be enabled to make low-level business decisions. KPO firms often hire people who are competent in a specific field.
To manage KPO vendors, you’ll need a reliable way to incorporate them into your internal processes and teams.
monday.com’s process management template allows you to plan processes in multiple phases, assign priorities and owners, and track progress based on timelines.
Research process outsourcing (RPO)
RPO is a subset of KPO, which specifically relies on research and analysis. These vendors support strategic business decisions, investment choices, and may also include marketing firms.
Some of this market research likely includes competitive analysis and the need to monitor competitor activities. Using monday.com’s competitor analysis template, RPO firms can track and communicate their findings seamlessly with internal teams.
Legal process outsourcing (LPO)
Another subset of KPO, LPO includes a wide range of legal services. It encompasses tasks from higher-level legal work all the way down to transcription.
LPO vendors might draft patent applications, draft and review contracts, perform legal research, provide legal advice, and much more.
monday.com’s due diligence template is just one example of how internal teams can work with outsourced legal vendors. The example below illustrates how internal teams could manage due diligence questionnaires, assign them to vendors, and track progress as they go.
Travel operations
Although business travel has slowed down in the past year or so, it’s common for businesses to outsource their travel operations and logistics.
This includes hiring a BPO company to manage hotel reservations, vehicle bookings, flights, and front or back-end processes. This helps businesses cut costs while also helping to improve employee satisfaction internally.
One way to manage outsourced travel operations could be with monday.com’s vendor list. Travel vendors might use this board to track and manage hotels and airlines through which they frequently book travel, all while providing visibility to your company’s internal team.
BPO frequently asked questions (FAQ)
When it comes to BPO, there are often a lot of questions about whether or not it’s a good strategy, how much it costs, and how and when it can be used.
Let’s look at a few common questions.
What is a BPO call center?
One of the most common functions that businesses outsource is their call centers. Call centers handle inbound and outbound calls related to customer service complaints or questions from prospective customers.
Call center BPO is the process of outsourcing these inbound and outbound customer calls. If your business relies heavily on telemarketing, an outsourced call center can also help handle these calls in support of your core business team. Also, call center outsourcing has many benefits, but it might not be the best fit for every business. It all depends on the needs and scale of your company. You may also want to consider setting up your own virtual call center.
Why choose BPO?
Outsourcing business operations can be beneficial by allowing businesses to cut costs and to ensure that their internal teams are focused on core business functions.
BPO also ensures non-core business functions are handled by specialists, allows companies to expand globally by offering support in local languages and time zones, and provides internal business teams with more flexibility.
Can BPO reduce your costs?
Yes, one of the potential benefits of BPO is the potential for lower costs relative to in-house labor, recruitment costs, and training, plus the need for a larger physical workspace.
Plus, hiring vendors in countries with lower corporate income tax requirements allows businesses to save when it comes to that expense, and hire vendors on a service-based plan as opposed to a fixed-price salary.
Manage your outsourced business processes with the right solution
Outsourced business processes can be great, as long as you keep a close eye on them. The risks associated with BPO lie in the resulting lack of control that can often come with working with outsourced vendors.
That’s why it’s important that your BPO vendors are integrated with internal operations, and that BPO processes are managed in a way that provides internal business teams with high amounts of visibility into the vendor’s operations.
The monday.com Work OS allows you to manage business processes, both outsourced and internal, all in one place.
Why not kick-start a review of your processes today — with our handy business process management template — and see if outsourcing could add value to your business.
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