What BPO is used for

Organizations engage in business process outsourcing for two main areas of work: back-office functions and front-office functions.

Types of BPO

Because companies around the world provide BPO services to other organizations, BPO can be divided into different types based on the service provider’s location.

Offshore outsourcing, or just offshoring, occurs when an organization contracts for services provided with a company in a foreign country.

Onshore outsourcing, or domestic outsourcing, happens when an organization contracts for services provided by a company that operates in the same country as the hiring organization. Nearshore outsourcing is when an organization contracts for services provided by companies based in neighboring countries. Business process outsourcing is also sometimes referred to as information technology-enabled services, or ITES — a name that recognizes that IT infrastructure enables outsourcing to happen.

Benefits of BPO

Organizations engage in business process outsourcing because they expect to benefit from the arrangement.

The benefits

Financial benefits: Organizations often find that an outsourced provider can perform a business process at lower costs, or they often find that by contracting with an outsourced provider they can save money as a result of the relationship in other ways, such as in tax savings.

Flexibility: BPO contracts can allow organizations greater flexibility to adjust how it completes the outsourced business process, allowing them to better react to changing market dynamics.

Competitive advantage: BPO allows organizations to outsource those processes that aren’t core to their businesses or missions, thereby allowing organizations to focus more of its resources on the operations that distinguish them in the marketplace.

Higher quality and better performance: Because the core business of BPO providers is performing the specific processes they’re hired to do, they are, in theory, able to focus on providing those processes at the highest levels, often with greater accuracy, efficiency and speed.