The COVID-19 crisis brought several changes in workplace culture within major organizations across the globe. From the decentralization of traditional offices to the rising trend of hiring remote resources, HR functions have undergone a major shift in 2020. Some of the enormous business challenges faced by companies post-pandemic include economic recession, the collapse of customer demand, supply chain interruptions, uncertainty, and significant regulatory modifications.

Nevertheless, there is also a bright side of the COVID-19 as it also elevated the global demand for ICT & digitalization as well as promoted innovation at various organizational levels. It provided entrepreneurs with an opportunity to lay the groundwork for their recoveries to bounce back successfully in a post-corona marketplace. Consequently, companies started looking for alternatives to mitigate the ongoing crisis and recapture their market share.

Business process outsourcing (BPO) has been the most effective and economically viable solution to ensure business continuity amid lockdown and uncertainty. As an integral part of organizational functions, BPO allows entrepreneurs to focus on core areas and outsource less critical tasks to third-party BPO vendors. The approach has played a key role in bringing firms back on their feet and effectively managing the challenges posed by the COVID-19.

This comprehensive guide covers everything about business process outsourcing and to help entrepreneurs better understand this technique and leverage it for their business.

What is Business Process Outsourcing?

Given modern corporate challenges like economic recession and digital transformation, business process outsourcing (BPO) has now become a necessity for companies of all sizes. From newly established startups to reputable tech-giants, businesses prefer working with trusted BPO vendors to stay ahead of the competition and gain long-term economic advantages.

To fully understand the usefulness of this technique, entrepreneurs must know what is BPO? Business Process Outsourcing (BPO) is a business practice that involves subcontracting standard organizational functions or specific work processes to a third-party vendor. Usually, organizations outsource less critical or supplementary business functions to a BPO company to focus on core areas. Outsourced processing can be an alternative to labor migration and help companies accomplish their desired objectives without stretching their budgets.

While some people might confuse business process outsourcing with managed services, these two are entirely different techniques. BPO meaning covers a broad range of organizational functions while managed services refer to specific tasks only. Experts define BPO as a cost-cutting and sustainable solution to organizational challenges. What BPO can bring to a firm’s productivity depends on the competence of external service providers and effective utilization of available resources. Outsourcing meaning is widely applicable to a wide range of sectors and industries.

Key Points

  • Business process outsourcing is a method of outsourcing standard organizational functions to an external service provider.

  • The technique is equally famous among newly established startups to reputable tech-giants.

  • BPO enables businesses to stay ahead of the competition and gain long-term economic advantages.

  • BPO is an economical and sustainable solution to counter modern corporate challenges like economic recession and digital transformation.

  • Companies can focus on core areas by outsourcing less critical or supplementary business functions to a BPO company.

  • BPO is different from managed services and applies to a wide range of sectors and industries.

Categories of Business Process Outsourcing

Based on the vendor’s geographical location, there are three major categories of business process outsourcing:

Offshore Outsourcing

Entrepreneurs need to comprehend the offshore outsourcing definition to gain long-term benefits and expanding their scope. This type of outsourcing is driven by technological transformation and the evolution of the internet. Offshore outsourcing refers to subcontracting corporate functions to third-party BPO vendors located outside the home country. For instance, organizations in the US can partner with offshoring companies operating in another country like Pakistan. However, entrepreneurs should choose their offshore business partners carefully to get the benefits of offshoring and maximize their profitability.

There is a little difference between offshoring and outsourcing. Offshoring involves subcontracting their functions to countries with lower labor costs to get an economic advantage, while outsourcing simply means subcontracting work to an external service provider irrespective of the vendor’s location. In other words, a company can outsource tasks to a BPO vendor without offshoring. The biggest advantage of BPO is that companies can achieve corporate excellence in all business areas without compromising the quality of their products or services. Besides, it can reduce operational expenses and increase organizational performance.

Nearshore Outsourcing

In nearshore outsourcing, companies delegate some of their tasks or business process to external service providers located in neighboring countries rather than the home country. Nearshoring offers better control over operational expenditures and allows firms to gain access to specialized skills and expertise. Nearshore countries for the US are Canada, Mexico, and Argentina, while businesses in South Asia prefer working with nearshore companies in Pakistan, China, Bangladesh, and India. For instance, nearshore IT outsourcing refers to subcontracting IT-related tasks to a trusted nearshore software development company in a neighboring country. Nearshore outsourcing has now become a buzzword in today’s highly dynamic and politically charged business environment where governments are increasing landed costs for their national benefit.

The primary advantage of IT nearshore services is that companies can reduce their IT costs by subcontracting their business functions to geographically well-positioned countries with a stable political situation. Other benefits of nearshoring include cultural integration, improved communication and access to the latest technologies, improved control of the intellectual property, and a reduction of cultural discrepancies. Similarly, nearshore outsourcing in IT enhances the quality of products or services, improves control of the supply chain, reduces digital disruption, and helps IT firms accomplish their corporate goals without bearing the liabilities of in-house teams.

Onshore Outsourcing

Onshore outsourcing, also called domestic outsourcing, refers to obtaining services from a BPO vendor operating within the same country as the contractor. Understanding the onshore outsourcing definition is necessary to get the maximum advantage from this technique because it is opposite to offshore outsourcing. Onshore outsourcing meaning has a limited scope and applies to organizations within a specific country only, while offshore outsourcing is a broad term referring to diverse geographical regions. Nevertheless, onshore outsourcing is a bit similar to nearshore outsourcing because both these techniques offer parallel advantages due to close proximity.

Outsourcing business functions to offshore vendors in the same country offers several exclusive benefits to contractors. Some of these include ease of communication, better responsiveness & reliability, enhanced control over the workforce due to fewer cultural differences, and respect for intellectual property. Besides, local workers possess domestically appropriate skills and better know the market than foreigners with limited understanding of national values. Similarly, an entrepreneur can effectively manage his or her company’s organizational functions with onshore outsourcing and gain marketing advantages by capitalizing on political and financial stability.

Key Points

  • Offshore outsourcing refers to subcontracting business operations to external service providers located outside the home country.

  • The approach allows companies to expand the scope of their business and maximize their productivity without stretching their budget.

  • Nearshore outsourcing involves delegating business processes to nearshore BPO vendors operating in neighboring countries rather than the home country.

  • Partnering with trusted and competent nearshore vendors offers better control over operational expenditures and gives access to specialized skills and expertise.

  • In onshore outsourcing, contractors obtain service from nearshore vendors located within the same country.

  • Companies can get control over the workforce due to fewer cultural differences with onshore outsourcing and gain a long-term competitive advantage over their rivals.

How Business Process Outsourcing Helps Business?

Experts define outsourced services as cost-effective and dynamic corporate solutions applicable to multiple sectors and industries. BPO Company meaning refers to external service providers having relevant skills and expertise required to complete an outsourced project effectively. Here is how business process outsourcing can help businesses become competitive.

Cost-Efficiency

One of the most obvious and primary reasons businesses prefer outsourcing staff management and organizational operations is cost-efficiency. Instead of establishing state-of-the-art infrastructure and recruiting specialized resources, organizations can use the facilities of BPO vendors. The approach allows contractors to eliminate overhead costs and get access to modern technologies. Similarly, outsourcing of work to reliable external service providers allows companies to get the job done economically and efficiently. For instance, companies that use outsourcing services from trusted BPO agencies in Pakistan can reduce their IT outsourcing costs due to the difference in wages. Additionally, the quality of services provided by service providers in Pakistan is the same as that offered by European BPO vendors.

Focus on Core Competencies

Managing organizational functions of startups or established companies is a challenging task. Sometimes, it becomes difficult for entrepreneurs to effectively supervise all aspects of their business. In this context, outsourcing services enable companies to focus on key areas and subcontract less critical tasks to third-party BPO vendors. Partnering with a competent IT outsource company allows firms to get the most from outsourcing benefits and maximize overall growth. Additionally, concentrating on core competencies can help an organization achieve higher levels of customer satisfaction, enhance its interactions with the value chain, increase profits, and gain a competitive advantage.

Access to Modern Technology

Another distinguished advantage of outsourcing is that it enables companies to transform their infrastructure and gain access to modern technology. Companies that outsource technology to experienced external service providers can work on high-value projects and get specialized in high-demand technologies. For instance, competent development outsources agencies equipped with state-of-the-art equipment and IT facilities offer top-class software and web development services catered to the organizational needs of diverse sectors. Outsourcing partial or complete functions to these business process outsourcing companies can improve the quality of products or services and increase profitability.

Hire Skilled Resources

The meaning of BPO not only applies to organizational functions but also to the recruitment of qualified resources. Outsourced employment is a form of business process outsourcing that enables companies to recruit talented and experienced professionals with their desired skills and expertise. Hiring competent workers and integrating them with in-house team results in a unique combination of diverse skills, cultural values, project-specific expertise, and experience. Getting access to skilled resources is one of the primary reasons for the rising popularity of outsourcing in the US. Even tech giants like Google, Facebook, Twitter, and Microsoft also employ remote talent to gain a long-term competitive advantage and achieve corporate excellence.

Enhanced Flexibility

Business process outsourcing allows companies to do more with limited resources and time, which in turn leads to better growth potential and contributes to organizational efficiency. Businesses that outsource processing to reliable third-party BPO vendors are likely to expand the scope of their organizational operations and achieve their desired objectives. Despite financial and outsourcing risks, business processing outsourcing companies can scale and ramp-up activities quickly. An effective business process outsource planning offers flexibility in expansion programs and helps businesses of all types, especially those in the growth phase. 

Time Zone Advantage

Scaling and expansion provide growth-oriented companies with potential opportunities to enter new markets and increase their customer base. However, effective management of worldwide operations is necessary to get benefits from the time zone difference. Business process outsourcing enables businesses to interact with customers & business partners across the globe and manage international working hours. For instance, US companies outsourcing operations to service providers in Pakistan can operate round-the-clock and work day and night without any interruption. Similarly, BPO IT solutions offer more work hours in a day by reducing the turnaround and allowing firms to get more activities done in less time.

Greater Productivity

Every entrepreneur wants to fully utilize the skills and expertise of his or her full-time workforce to maximize productivity and reduce costs. By delegating repetitive tasks to external service providers, full-time employees can take on more responsibilities, focus on organizational growth & development, and partake in training to polish their skills. All these factors contribute to increased profitability and provide staff members with a competitive work environment where they can coordinate with each other and improve their understanding of digital fields. This helps professionals build their portfolios and encourage them to strive for achieving corporate efficiency that results in greater productivity and better results.

Project-based Manpower

Some high-value and complicated projects demand specific skills and expertise. To fulfill their short-term project needs, companies cannot hire additional manpower or recruit new team members unless they are outside consultants. The approach can be time-consuming, costly, and can even affect overall performance. However, business process outsourcing allows companies to execute a short-term project by hiring qualified remote resources and devising a timeline and workflow. This way, companies can meet their temporary manpower needs and gain access to specialized resources. They can build their project portfolio and work on high-value projects as seamlessly as running their daily operations.

List of Services that can be Outsourced

There are various types of outsourcing depending on a company’s business needs and respective industry. Given below are four major types of outsourcing that can boost organizational growth and increase productivity along with outsource pros and cons:

Professional Outsourcing

Professional outsourcing refers to services that require specialized skills and expertise such as accounting, purchasing, administrative support, and accounting. Most of the tasks related to professional outsource services are repetitive and less critical. Therefore, companies prefer hiring external service providers to handle these operations as opposed to hiring an in-house team. Besides, professional outsource functions result in cost reduction as the company pays for particular tasks only and does not need to bear the liabilities of full-time employees.

Pros

  • Cost reduction;

  • Access to skilled professionals;

  • Reduction in overhead costs;

  • Ease of management;

  • Focus on critical functions

Cons

  • Lack of exclusivity

  • Unreliable

  • High turnover rates

  • Limited control over remote employees

  • Privacy issues

Manufacturing Outsourcing

Manufacturing outsourcing relates to industry-specific services that require specialized skill-set and high-tech equipment. This arrangement results in significant cost reduction and improvement in the quality of products being manufactured. Some manufacturing units also outsource business development to third-party vendors to expand their business and gain a long-term competitive advantage. Outsourcing manufacturing operations to the best BPO company in Pakistan helps entrepreneurs produce goods at a cheaper price and superior quality.

Pros

  • Improved product quality

  • Access to high-tech equipment and modern facilities

  • Cost-efficiency

  • Innovation & creativity

  • Enhanced customer satisfaction

Cons

  • Loss of jobs

  • Lack of workplace ethics

  • Transfer of technology

  • Increased tariffs and subsidies

  • Political & economic impacts

IT Outsourcing

Being one of the rapidly adopted services, IT outsourcing involves hiring competent and reliable BPO vendors to manage IT-related tasks. Even global tech giants like Google, WhatsApp, Skype, and BaseCamp have also outsourced their development tasks to offshore developers across the globe. Some of the prominent IT outsourcing services offered by external service providers are web & app development, software quality assurance, custom software development, maintenance & support, and testing.

Pros

  • Hire qualified and competent resources

  • Cost reduction

  • Implement modern technologies

  • Focus on multiple tasks simultaneously

  • Work on high-value IT projects

Cons

  • Limited support due to time zone difference

  • Intellectual property rights protection

  • Communication problems due to the language barrier

  • Privacy & confidentiality issues

  • Cybersecurity threats

Project-based Outsourcing

Project outsourcing involves subcontracting a portion of a project rather than hiring staff on a full-time basis. The approach enables companies to acquire specialized skills for a limited period to complete specific project tasks. Project-based outsourcing is useful to meet the short-term needs of organizations and ensure high-quality at a reasonable price. Hiring project-based staff helps entrepreneurs exceed their client’s expectations and accomplish their desired objectives without bearing the liabilities of full-time employees.

Pros

  • Specialized staff

  • Economical and efficient

  • Ideal to meet short-term needs

  • Quick turnaround

  • Superior quality

Cons

  • Limited control over resources

  • Time management issues

  • Lack of integration with the in-house team

  • Privacy and confidentiality problems

  • Communication barriers

Business Process Outsourcing Risks

Besides several benefits, several risks are also associated with Outsourcing BPO that could affect corporate growth and development. Given below are some of the risks involved in business process outsource services:

Inflexibility and Reputation

Some unreliable and inefficient outsourcing companies are notorious for being inflexible due to their poor track record and a bad reputation. Working with such vendors can prove to be disastrous and more devastating than beneficial. For instance, the lack of required skills & expertise is a common IT outsourcing risk that could compromise the quality of products or services. Similarly, some low-cost service providers do not meet the quality standards mentioned in their or service level agreements (SLAs). Hence, an entrepreneur should carefully choose the potential outsourcing partner to maximize productivity.

Privacy & Confidentiality

Remote employees hired from a staff augmentation agency may do not respect a company’s intellectual property and expose it to other vendors. There is a lack of physical interaction with these workers as they work in their BPO office located distantly. Consequently, outsourcing tasks to a third-party BPO company and hiring remote staff can compromise privacy and leave a business unprotected. Even if an outsourcing partner is found compromising organizational confidentiality, entrepreneurs cannot take any legal action due to distinct intellectual property laws. Therefore, one should think long and hard and take measures to protect sensitive data before outsourcing.

Lack of Control

While seeking BPO information from an external service provider is quite easy, managing remote employees effectively is difficult. Effective management of the workforce is essential to get the most from outsourcing. A major challenge faced by entrepreneurs while handling offshore workers is a lack of control due to the absence of physical interaction. Even after providing directions and clearly communicating the projected goals, companies often lose some control when hiring remote workers or outsourcing a particular task. To counter this problem, modern communication tools must be used to conduct virtual meetings and instantly share data with each other.

Language Barriers

One of the biggest disadvantages of BPO is a lack of communication between remote and in-house teams due to language barriers and cultural differences. Irrespective of the skills and expertise of remote staff, communication problems may arise if they cannot speak English fluently. As a result, completing a job effectively would become very difficult because the employees won’t be able to share information or understand technical terms. Hence, entrepreneurs must ensure during the interviews and emails that the employees they are hiring are fluent in English to prevent any communication problems.

Inaccurate Definition of Tasks

Insufficient or inaccurate definition of guidelines and rules for outsourced work can result in grave misunderstandings. Defining project-related information clearly and meticulously is essential to avoid processes being incorrectly performed. Hence, BPO company meaning not only includes the vendor’s ability to complete the assigned tasks but also to understand the critical information beforehand. An entrepreneur must share key details with an external service provider, particularly for the IT outsourcing process to get better results.

Lack of Transparency & Credibility

Consumers in the world’s highly developed regions take brand reputation very seriously. One drawback of the BPO industry is the lack of transparency and credibility in organizational operations. Checking the employees’ transparency or tracing the supply chain is very difficult when a company hires business process outsource services from a third-party. Sometimes, even the professional record of remote workers cannot be traced because all this information can be access by the external service provider only. Therefore, a company should verify the qualifications, background, and experience before recruiting outsourced workforces.

Security and Compliance

One of the biggest reasons for the lack of system security and regulatory compliance is BPO because some vendors fail to properly address the factors that affect safety and legal compliance. The risks of outsourcing manufacturing become more prominent if remote workers lack a passion for the organization. To avoid any hassle, an entrepreneur should communicate all details with remote staff when it decides to process outsource to an external agency.

Failure to Meet Deadlines

High-value and complicated projects in the IT outsourcing process are deadline-oriented and must be timely completed to get the desired results. Failure to meeting tight deadlines often intensifies IT outsourcing risks and negatively affects project efficiency. The issue is very common among incompetent and unreliable IT service providers that lack the required expertise and are unable to follow the timetables. Hence, it is essential to carefully check the vendor’s track record and ability to deliver a project on time.

The Future of Business Process Outsourcing

Given the modern organizational challenges like digital transformation and economic recession caused by the COVID-19 pandemic, outsourced processing has now become an essential part of corporate policies. The trend of working from home and hiring remote employees is becoming more and more prominent. A large number of companies are now acquiring support outsourcing services to resume their business activities amid the lockdown and uncertainty. The technique has contributed a lot to the firm’s growth and development during the pandemic.

At the same time, several steps need to be taken to ensure transparency in BPO functions and maximize the productivity of remote workforces. Companies must reorganize their BPO agreements and clearly communicate the projected goals with their outsourcing partners. Besides, the top business process outsourcing companies need to upgrade themselves with changing market demands and technological developments. The future outsourcing solutions should focus on the customers’ needs to make their workflows agile and resilient and streamlines operations.

Summary

  • BPO has now become an essential part of corporate policies;

  • More companies are now relying on a remote workforce than ever before;

  • ICT-based BPO solutions have played a key role in helping companies resume their business activities amid the lockdown and uncertainty;

  • Outsourced services contributed a lot to organizational growth and development during the pandemic;

  • Future outsourcing models must be customer-centric, innovative, and technology-based;

  • Top BPO companies should upgrade themselves with changing market demands and technological developments; and

  • Reorganization of BPO agreements and communicating projected goals is essential.

Khired Networks

Khired Networks is one of the world’s leading providers of cost-effective, dynamic, and full-spectrum business process outsourcing (BPO) solutions customized according to our client’s organizational needs. Empowered by state-of-the-art IT infrastructure and modern facilities, our highly qualified and experienced professionals strive to deliver result-oriented and innovative ICT-based solutions that drive engagement and help companies achieve corporate excellence. We have proudly served renowned businesses across the globe and helped them weather the ongoing storm induced by the pandemic. In the future, we aspire to improve the quality of our products and services, achieve higher levels of customer satisfaction, and contribute to our client’s growth and development.

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