Marshall McLuhan was the first to coin the idea of a “Global Village” that meant shrinking the modes of communication to bring the world closer. The use of this term expanded and took outgrew the initial sense of it. Today, the internet and digital world is opening doors of opportunities for businesses to grow big by the idea of outsourcing. Business process outsourcing is the new trend in the corporate world where big and small forms are outsourcing, that is contracting out their work to other parties that hold expertise in a particular area. This proves to be less expensive and also more creatively fruitful for those finding other parties to do the job.
What is ‘Business Process Outsourcing – BPO’
A process where companies hire a third party to look after a faction of business related operations is called Business Outsourcing. It was primarily started by the companies working in the manufacturing areas, like beverage manufacturers. Nevertheless, its exceeded this field and has been there in the form of different call centers and customer service centers too.
Parts of Business Process Outsourcing
Business process outsourcing can easily be split into two broad categories, offshore outsourcing, and nearshore outsourcing. Another parallel form of BPO is famous as information-technology-enabled service (ITES).
Offshore outsourcing is taking services from companies that are housed in other countries. It’s when contracts are given to companies in other countries due to several reasons. Some companies like their operations to continue 24/7, which can only be facilitated when services are being taken from companies working abroad. They provide better service at a cheaper labor rate.
This is the second category of outsourcing where the outsourcing company looks for an agency working in the neighboring country. Nearshore outsourcing is beneficial for companies as the neighboring states where they find business from themselves sit at physical proximity and usually are better aware of their cultures than a far situated land. This kind of outsourcing proves to be cheaper in many ways too and mostly benefit promote the message of solidarity within neighboring states and helps in strengthening diplomatic relations with an increase in the exchange of business.
The third category of outsourcing is when the outsourcing company chooses an agency inside its home country. This kind of outsourcing can prove to be beneficial in many respects. The outsourcing company can choose other companies that are not just aware of the culture but completely understand the dynamics of it. The resource used at the contracted company speak the same language as the contracting company. This gives immense profit, not only in an economic sense but also in a cultural sense too. This outsourcing furthers the cause of promoting the local industry and gives rise to the idea that business returns should be given to one’s own people and added to your states own economy.
Factors that insist on the need for outsourcing
Cost saving is one of the reasons companies housed in the US or UK look to outsource their business to BPOs operating in developing countries. Hiring a team for all fields can seriously dent the financial structure of the companies while taking services from BPOs save a good revenue to the outsourcing company.
Access to resource and knowledge
A dedicated team for the research and analysis process always has a good idea over the field of expertise. It’s not easy for a company to hire a resource for every job that they require but taking help from BPOs save them a good deal of work and effort. The resource that are experts in their field maintain all the relevant information and keep up with the latest developments taking in their area. This gives instant access to the company to the knowledge that it requires.
Focus on particular competency.
Through a BPO, companies get access to the particular competent field. They shift the decision making power to the BPO and let them be responsible for the management. All the companies demand in return is positive results.
Diffusion of knowledge.
With the development of technology and world becoming a global village, the transfer and sharing of information have become an easy process and hence has been triggered the system of innovation in the IT sector. It’s the diffusion of knowledge that has educated the resource even in remote areas and has utilized them as good employees at lower salaries.
What can be Outsourced?
The major field that companies often find suitable to be outsourced is the department of Accounting. Outsourcing this department helps companies to remain limited to the core area of their work and not hire extra resources to take services like bookkeeping, account management and bank documentation and etc. the hired company does this work for the outsourcing company and enable them to construct a more robust scope in their own field.
The financial services that are being outsourced include financial reporting, payroll processing, and tax payments. Many BPOs provide these services to the companies that want to outsource.
This is a common service that is often being announced to be outsourced, as not all companies have a resource to look into the legal matters of the business. Companies like start-ups and new enterprises are mostly on the lookout for BPOs that offer legal services like management of litigation matters and writing of legal contracts etc.
Insurance services like policy management, insurance accounting are also common services that are highly demanded by companies to be outsourced.
Data management services like data entry, data mining, form processing are most demanded services from BPOs by the outsourcing companies. It has been seen that most of the BPOs deal in the technology sector, therefore companies that do not have expertise in this area go to places where such services are provided.
Research and Analysis
Market research and analysis service is also being offered by many Business Process Outsourcing companies that immensely help enterprises grow their businesses.
The highest in demand services by companies from BPOs fall under the category of technology. BPOs that can help companies build their websites, software and networking system is most required in the world these days.
Common traps of BPOs
- Lack of commitment
- Insignificant knowledge of outsourcing methodologies.
- Lack of an outsourcing plan
- Failure to recognize outsourcing business risk.
- Not dedicating the best and right resource
- Failure to tap into external source of knowledge
- Rushing through the initiative
- Not keeping in view the cultural differences.
- Poor relationship management program