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Home | Contact Center Metrics | What is BPO?

What is BPO?

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What is BPO

BPO stands for business process outsourcing, and BPO means a business implementation in which a particular process or processes are outsourced to an external service provider.  Outsourcing significant business tasks is preferred by a lot of companies because specialized agencies can present better performance and results.

What is BPO?

BPO, or Business Process Outsourcing, is a practice that many companies adopt to improve efficiency and reduce costs by delegating specific business functions to external service providers. So, what does BPO stand for?

Essentially, it stands for contracting out various business-related operations to third-party vendors. This is where BPO services come into play, offering solutions ranging from customer support to back-office functions like accounting and data entry.

The efficiency of BPOs can be significantly enhanced with robust communication systems such as PRI, or Primary Rate Interface. PRI is a telecommunication interface standard used in enterprise level telecommunications services to deliver multiple voice and data transmissions between a network and a user.

Integrating PRI into BPO operations facilitates the handling of high volumes of calls and data management, essential for customer service and support functions, thereby streamlining operations and enhancing service delivery.

Understanding how these technologies and services like PRI and BPO intersect can provide strategic insights into optimizing business processes and communications infrastructure.

BPO companies started with the manufacturing industry; firms which manufacture products hire third-party vendors to deal with the parts of their supply chains. Behind this situation, the consideration of cost and speed efficiency is found. Also, the firms think that third-party vendors can bring them together with essential skills for completing the tasks that are not the main concern of the firms. When other companies from different industries noticed the success of BPO, this practice started to apply in various industries.

Types of BPO

There are three main types of BPO, so every company should focus on their goal before determining a type of BPO. These types are nearshore, offshore, and onshore.

Nearshore outsourcing

If organizations prefer their adjacent companies for outsourcing, this process is called nearshore outsourcing. For example, an organization that is in the south of the USA can choose a company from Mexico to outsource, and this situation can show the existence of nearshore outsourcing. With nearshore outsourcing, organizations and providers can visit themselves frequently, thanks to the geographic proximity.

Offshore outsourcing

Offshore outsourcing can be thought of as the opposite of nearshore outsourcing. If an organization considers a far-off foreign country for outsourcing, the circumstance is called offshore outsourcing. With the type of BPO, market reach can be increased, and costs can be decreased due to the lower costs in offshore countries. On the other hand, the type of BPO can cause disagreements because there can be some cultural barriers between organizations and offshore service providers.

Onshore outsourcing

Onshore outsourcing depends on the choice of service providers from the same country, but these providers are generally found in different states or districts. With the type of BPO, organizations do not think about time zone differences, and people do not travel for a long time to access their service providers.

What is BPO used for?

Companies can prefer BPO services for two areas of work: back-office and front-office services.

Back-Office Services

Back-office services can also be known as internal business functions, and these services do not depend on customers. In other words, back-office employees and customers do not meet with each other.

At the beginning of the development of back-office outsourcing, there were only administrative tasks, but now BPOs offer different back-office services, in addition to administrative functions. For example, content writing, digital marketing, e-commerce, information technology services, human resources, accounting, and payment processing are considered in back-office outsourcing.

Front-Office Services

Front-office services are based on customers; employees deal with existing and potential customers. At that point, contact centers can be considered. BPO call center is a good example of front-office functions, so front-office employees should have effective communication and listening skills. In addition to contact center services, information technology-enabled services, sales, and marketing are found as front-office functions.

If you would like to improve your inbound and outbound calls, you should learn the necessary call center agent skills to reach successful front-office employees.

Categories of Back-office and Front-Office Services

Back-office and front-office services seem like their opposites, but they are very related to each other. Because of the situation, they are categorized in three:

Legal Process Outsourcing (LPO)

Some BPO employees deal with organizations’ legal tasks, like appointments, transcription services, documentation, and research, and the circumstance is called legal process outsourcing.

Research Process Outsourcing (RPO)

If service providers pay attention to an organization’s all research and development duties, the situation is called research process outsourcing. This type of outsourcing covers market research and analysis and financial reporting.

Knowledge Process Outsourcing (KPO)

If BPO employees focus on organizations’ knowledge-based services, such as education, healthcare, and insurance, the circumstance is called knowledge process outsourcing. For this type of outsourcing, service providers must know the areas of expertise, like leadership, communication, time management, and so on.

Call center representative wearing headphones and sitting at a desk with laptops

How does BPO work?

Firstly, organizations should describe the functions that are needed to outsource to an external agency. Then, they should conduct research into external service providers and choose the best one for their organizations. In the selection process, the logistical requirement of moving from in-house to agency and costs can be considered. Furthermore, the technologies that are offered by the external service providers should be thought. In other words, you should interrogate whether the agency provides you with new technologies, like artificial intelligence and automation.

After completing BPO contracts, external service providers consider the entire functional area, like inbound and outbound calls, and then, they start to offer their process.

Pros of BPO

Contribution to the performance and efficiency of organizations

According to the 2021 report of Deloitte, which is a management consulting company, BPO companies increase the efficiency of processes in organizations by 88%. Also, other studies about BPOs can show a similar result. We encounter the results because BPO employees are trained for outsourcing, so they have skills to offer BPO services. Furthermore, with BPOs, the accuracy and speed can increase, and organizations can make their clients happy easily.

Financial savings

BPOs can keep organizations from extra payments. In other words, companies do not have to pay money for necessary things, like retaining in-house staff and renting office stuff. The agreement with a BPO involves all equipment and staff, so companies, especially startups and small businesses with limited resources, can prefer to outsource. According to the 2021 report of Deloitte, cost savings are increased by 84%.

 High flexibility

If organizations prefer to work with a BPO company, they can reach their desired flexibility; they can save their time, and they do not have difficulty in managing their employees physically. According to the 2020 survey of Deloitte, 40% of companies prefer to outsource for the chance of flexibility in work processes.

Cons of BPO

Relationship problems

If organizations choose offshore outsourcing, this selection can cause some relationship problems. In offshore outsourcing, the company and BPO are not close to each other in terms of geographical location, and some cultural and language barriers appear due to the circumstance. Also, time zone differences might show themselves with offshore outsourcing. Because of time zone differences and cultural and language issues, the communication between organizations and BPOs cannot be effective. On the other hand, intimate relationship between organizations and BPOs can be created, and this situation can also affect organizations negatively. Organizations may get used to a particular way of working and quality because of long-term relationship with their BPOs. Then, the adaptation to BPOs can transform into over-dependence.

Security issues

In the BPO sector, there is too much data and information about companies, and these things must be protected in a good way. However, cyber-attacks can occur to reach the data and information. Because of this situation, companies should focus on BPO service providers’ data protection measures and incident response plans for data breach.

Higher costs

Organizations sometimes consider the processes that are outsourced unimportant, and then, they can encounter higher costs. Additional costs may arise later if you do not initially learn all the costs and fees of BPO services.

If you want to get into the BPO sector to improve your contact center and manage your call center agents working from home, you can contact us and request a demo!