What Is a BPO Company? Learn How They Work

What Is a BPO Company? Learn How They Work
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Outsourcing certain aspects of a business can be hugely beneficial, but what is business process outsourcing (BPO)? BPO is the contracting of a non-primary business activity to an external provider. It’s a type of business outsourcing that involves the transfer of specific, defined business processes to another company.

This article explores what a BPO company is, what business functions and outsourcing services they provide, and the advantages and disadvantages of BPO companies.

What is business process outsourcing (BPO)?

Business process outsourcing (BPO) is the contracting of non-core business processes to a third-party service provider. Essentially, BPO companies are outsourcing companies that work by establishing a relationship with the client company, and then taking over the management of the outsourced process or business operation. The service provider is responsible for hiring and training staff, ensuring quality control, and meeting targets.

The three main categories or types of BPO are:

  • Offshore. With offshore outsourcing, the service provider is based in a different, usually distant, country to the client company.
  • Nearshore. With nearshore outsourcing, the service provider is based in a neighboring country to the client company.
  • Onshore. With onshore outsourcing, the service provider is based in the same country as the client company.

The primary services offered by BPO companies include:

  • Customer-interaction services. These services include call center operations, customer experience, tech support, and sales.
  • Back-office processing. These services include data entry, accounts payable/receivable, and claims processing.
  • IT (information technology) and software solutions. These services include software development, technical support, web design and hosting, and database management.
  • Creative services. These services include graphic design, web development, and animation.
  • Financial services and accounting. These services include bookkeeping, auditing, and tax preparation.
  • Human resources services. These services include payroll, benefits administration, and recruiting.
  • Procurement services. These services include supply chain management, order processing, and inventory management.

BPO example

Let's explore an example. An e-commerce small business realizes it can't handle the call volume from customers during the busy holiday season. The business decides to use a BPO company in the Philippines to outsource their inbound calls to improve customer satisfaction.

In this case, the e-commerce company would be the client and the BPO company would be responsible for hiring customer service representatives (CSRs), providing training, and ensuring quality standards are met. The e-commerce business experiences significant cost savings by not having to hire and train its own staff, and can focus those resources on core business functions.

In another example, a health care startup hires a BPO outsourcing company to handle payment processing, market research, app development, and a myriad of other services they can’t finance in-house. In this case, the health care startup would be the client and the BPO company would be responsible for these various business processes.

BPO advantages and disadvantages

Here are some benefits and advantages that come with business process outsourcing:

  • Access to high-quality personnel. BPO companies have access to a large pool of skilled workers. They can also train employees to meet the specific needs of your business.
  • Cost-effective. BPO can help you save on labor costs. Sourcing business operations results in savings, especially when compared with financing in-house services like customer support, human resources, IT services, etc. The BPO service provider bears the costs of training and employee benefits.
  • Improved efficiency. BPO companies are experts in process management. They can help streamline your business processes to improve efficiency and productivity.
  • Increased task flexibility. BPO companies can scale up or down according to your business needs. You only pay for the services you need.

Here are some disadvantages and risks that come with business process outsourcing:

  • Loss of control. When you outsource a business process, you lose some degree of control over it.
  • Dependency on the service provider. Your business may become too reliant on BPO services. If the relationship ends, your business may struggle to function.
  • Communication difficulties. Communication difficulties can arise when working with a BPO company, especially if they are based in a different country or time zone.
  • Security breaches. There is a risk of data and security breaches when outsourcing to a BPO company.

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BPO vs. BPA

Business processing automation (BPA) is a similar concept to business process outsourcing (BPO), but with a few differences.

The main difference is the BPO industry involves the transfer of a business process to a third-party service provider, while BPA is the use of technology to automate a business process. For example, you could outsource your customer service to a BPO company, or use a chatbot to automate your customer service.

Some of the services offered by BPA companies include:

  • Automated data entry
  • Automated billing and invoicing
  • Automated order processing
  • Automated email marketing
  • Automated social media marketing
  • Automated lead generation
  • Automated customer relationship management (CRM)
  • Automated human resources (HR)

While BPO can be a cost-effective way to improve efficiency, it does come with some risks (as we’ve seen above). BPA, on the other hand, offers increased control and security but can be more expensive to implement.

Consider your specific needs and requirements to decide which is right for your business.

BPA might be right for you if:

  • You want to keep control of your business processes
  • You have the budget to implement BPA
  • You need a high degree of accuracy and security
  • You have complex business processes and workflows

BPO might be right for you if:

  • You want to increase cost efficiency and lower costs
  • You need increased task flexibility
  • You want to optimize efficiency
  • You have simple business processes

If you’re unsure which is right for you, we recommend talking to a BPO or BPA company. They can assess your needs and requirements and advise you on the best solution for your business process management.

H2: Find the perfect solution for your staffing needs

BPO services can be a great way to improve efficiency and productivity in your business, but you should weigh the risks and disadvantages before making a decision. BPA can also be a great option for businesses that want more control over their processes. Talk to a BPO or BPA company to find the perfect solution for your business. See our list of the top 50+ BPO companies.

As a business owner or decision-maker, you may want to consider telecommuting as a way to reduce costs but still keep your business operations "in-house."

Telecommuting is a work arrangement where employees don’t have to commute to a central workplace and can instead work from home or another remote location. This business model can save businesses money on office space and other overhead costs, as well as reduce employees’ commute time and carbon footprint. Read more about telecommuting.

Whatever your business strategy is when it comes to staffing, you should consider all your options to find the best solution for your company.

Upwork is not affiliated with and does not sponsor or endorse any of the tools or services discussed in this section. These tools and services are provided only as potential options, and each reader and company should take the time needed to adequately analyze and determine the tools or services that would best fit their specific needs and situation.

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What Is a BPO Company? Learn How They Work
The Upwork Team

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