Business Process Outsourcing (BPO) is a practice that has been around and growing in popularity for some time. Even though lean start-ups and multi-national enterprises leverage BPO, there is still a considerable amount of ambiguity as to what exactly it is, its benefits, the risks it presents, and how it interacts with robotic process automation (RPA).
What is Business Process Outsourcing?
BPO is a practice where an organization employs a third-party provider to execute business processes. Common business operations that are outsourced to BPO vendors include accounting, payroll, customer support, and marketing functions.
While the examples differ and are typically owned by different lines of business, the types of functions outsourced with Business Process Outsourcing can be divided into two buckets:
- Back office functions - Processes that primarily include internal operations like billing, purchasing, payment processing, and IT services.
- Front office functions - Operations that involve procuring and supporting an organization’s customers. Basic examples of front office processes include marketing and sales activities, technical support, and customer success.
Business Process Outsourcing can also be categorized depending on where the contracted third-party vendor is located according to the following:
- Offshore – BPO vendors that are located outside the organization’s country. For example, an American company that outsources business processes to a provider in India would be considered an offshore vendor.
- Nearshore – BPO vendors that are located in neighbouring countries.
- Onshore – BPO providers that are situated in the same country as the organizations outsourcing their business processes. For example, an organization located in Chicago, Illinois, that outsources its processes to a vendor in Austin, Texas, would be an onshore provider.
Why Do Companies Outsource their Business Processes?
There are a number of reasons why companies outsource their business processes, including:
By outsourcing business functions and processes to third-party providers, organizations can reduce operational overhead because they don’t need to invest in increased IT infrastructure, training, or more full-time employees to perform those tasks and functions.
BPO providers are specialists in performing the various business processes and functions they are tasked with. That means they’re able to execute those processes in less time and with a higher quality of output and accuracy.
For example, a large organization with a global workforce can outsource its payroll processes to a third-party provider that specializes in adapting to the various regulations and rules for payroll processing according to each country the organization operates in, removing the need for a large in-house team to manage that complexity.
Increased Focus on Core Functions
Business Process Outsourcing vendors are experts in executing non-core business functions like billing, purchasing, and payment processing. Transferring non-core business activities to third parties enables organizations to invest more time and attention to core functions like executing their vision.
This is particularly true of start-ups keen on hypergrowth who don’t want non-core functions and responsibilities slowing them down.
Increased Global Footprint
BPOs enable large organizations that operate in different international markets to more fluidly enter and operate in those markets. Adhering to local regulation and controls, operating in another language, obtaining legal support are examples of functions that can be outsourced to facilitate global expansion.
What are the Risks of Engaging in Business Process Outsourcing?
While there are a number of eye-catching benefits to Business Process Outsourcing, there also several risks that need to be weighed and considered before jumping in.
Outsourcing business processes and especially those that deal with customer and employee data, present heightened security and privacy risks. Security risks are especially heightened when BPO vendors are offshore and may have different security requirements and practices.
When business processes are outsourced, organizations may become complacent and overly accustomed to a third-party vendor performing those functions. Those vendors become a key component to essential workflows, and if there’s a lapse in performance, it can have severe impacts that lead to bottlenecks and increased costs as a result.
When BPO vendors are offshore, language barriers can become an issue that may increase risk. Also, contracting BPO vendors to outsource various processes introduces more stakeholders in key business functions that can increase complexity leading to miscommunications and costly mistakes downstream.
Increased cost is another significant risk of Business Process Outsourcing. Organizations can underestimate the operating costs of employing a BPO or incur the expensive by-product of too many mistakes from an under-performing vendor.
Conversely, the longer that BPOs remain as an organization’s third-party vendor, the higher the dependence becomes, leading to challenges when renewing or renegotiating contracts.
How Does Business Process Outsourcing Impact RPA?
There is a common misconception that robotic process automation (RPA) will replace business process outsourcing as companies re-absorb their business processes and automate them in-house.
The more realistic scenario that is already coming to fruition is that RPA is another service BPO vendors offer under their umbrella. Outsourcing the automation of business processes with a BPO vendor is seen as another avenue to combine the benefits of both BPO and RPA to realize even more value by adding the value propositions RPA promises like:
- Reduced operating costs
- Greater efficiency
- Higher quality of output and reduced errors
- Increased employee and customer experiences
As the world’s most powerful digital process and management solution, Blueprint’s Enterprise Automation Suite offers BPO vendors a unique solution with capabilities unavailable elsewhere.
With BPO service providers in mind, Blueprint delivers one centralized repository to store, manage, and digitize their clients’ business processes.
Digital Blueprints – a better, digital way to package and communicate automation design work – also offer Business Process Outsourcing vendors a much more effective way to develop bots. Digital Blueprints essentially replace slow, error-prone paper-based documents like process design documents (PDD) or solution design documents (SDD) that increase the risk for error.
In addition, Blueprint’s RPA migration solution allows BPOs to convert production bots between UiPath, Blue Prism, and Automation Anywhere to facilitate a client’s desire to switch platforms, or even migrate their Automation Anywhere bots from V11 to A2019.
To learn more, read the datasheet and discover how Blueprint enables cross-platform migrations 3x faster and at 25% of the cost.