Business process outsourcing, also known as externalization or subcontracting, is a type of Outsourcing where there is a third-party service provider involved to act as the carrier for business functions in a company. Initially, Business outsourcing started with manufacturing companies and later took over several other business processes. The mechanism of BPO is such that there is a contract made between the organization and BPO vendors such as BPOs in the Philippines for back office and front office operations. Throughout the long term, the BPO business’ extended significantly and offers a wide scope of administrations and capacities to associations. It has been progressing as a domestic outsourcing business as well as in foreign countries.
FUNCTIONALITY OF BPO
Organizations sign a contract with BPO vendors for mainly two areas:
- Back Office Operations– Their work area includes payment processing, customer issue-resolving, information technology, quality assurance, documentation work.
- Front Office Operations– Their work site includes sales, end-to-end service provider, customer relations, complaint launching.
ADVANTAGES OF BPO
Business Process outsourcing has proven to be beneficial in many ways like:-
- Lower costs
- High efficiency
- Faster growth
- Business expansion
- Foreign ventures
TYPES OF BUSINESS OUTSOURCING
There are mainly two types of Business Outsourcing which are defined as:
– ONSHORE OUTSOURCING:
Onshore Outsourcing, also commonly known as Domestic Outsourcing, means where an organization signs a contract with a business outsourcing vendor which is located in the same country to operate the business and take full responsibility for it. It initially started with US-based companies for their internal business to expand at various regions and later have foreign ventures to it. Domestic Outsourcing helps a company maintain its team focus and understand their responsibilities, therefore reducing the worry of additional cost and equipment, workspace, saving cost to the company. Back office functions like customer service, information technology services, accounting, and operations are the core areas that are handled by Domestic Outsourcing.
Domestic Outsourcing is favorable in many ways to the company as it maintains the balance between costing and quality. It is especially beneficial for software companies, IT developments as they are mostly around US countries where the prices for the services are mostly higher as per the higher living cost and ruthless competition for resources. Now to handle this barrier, companies generally start outsourcing their business to foreign regions, but that is not the only option. Organizations can outsource their business within the country to some affordable vendors to fulfill the demands within the limited costing price.
– OFFSHORE OUTSOURCING:
Offshore Outsourcing is completely different from onshore Outsourcing. It does include the costings at times to the company, but on the other hand, a lot of manpower provided and good growth and increase in revenue can be witnessed. Offshore Outsourcing has stretched mainly to Southeast Asia countries like the Philippines, India, China, Singapore, and Malaysia.
Though offshore Outsourcing is a hectic little task for the company but simultaneously provides a low labour cost available overseas, most IT companies that require high skilled labours at a low cost often select offshore Outsourcing for their business process.