5 Main Types of Business Process Outsourcing (BPO) in 2022
The capacity and scope of global markets has seen some major influx in terms of outsourced services. This leaves us wondering, as to what could be the reason behind the business process outsourcing (BPO) industry growing at such a quick pace? A major chunk of this success can be accredited to the fact that this is a very cost effective way of covering up the existing skill gaps that also provides flexibility and ease in terms of global expansion.
Instead of engaging the in-house teams with specific tasks, businesses have found that it is much more profitable to simply hand over specific back-office and front-office processes to outsourcing providers considering the financial edge and expertise they offer. If an organisation wishes to outsource specific services, it is important to first understand the various types of BPO services that are currently being offered and how choosing them could affect the budget allotted to finding specific skills to fill particular roles.
Understanding The Concept of Business Process Outsourcing
BPO refers to the process of giving contracts to third-party vendors regarding various operations or services related to your business. There are a variety of other subcategories under the main category of BPO services, these subcategories mainly depend on the type of task at hand and in some cases even the place from where the service is being offered. These subcategories include:
- Back-Office BPO
- Front-Office BPO
- Nearshore BPO
- Offshore BPO
- Onshore/Domestic BPO
Based on Supply Chain and Services
Back-Office BPO
This process involves the outsourcing of selected services that are not in need of customer-facing solutions. Some services that fall under this category can include, business process automation, IT, quality assurance, accounting, human resources, etc. As time has gone by, many subcategories of BPO have come to light, that include IT-Enabled Services (ITES) BPO, like IT analysts, Knowledge Process Outsourcing (KPO), which involves outsourcing to a company that has the capacity to understand and implement a particular function, Legal Process Outsourcing (LPO), is the task of contracting requirements to advisors or paralegals, so that businesses can outsource tedious tasks that revolve around onboarding and internal training, and create more room to focus on much important tasks.
Front-Office BPO
This process involves offering solutions to ventures that are in need of customer-facing services, these mainly revolve around the likes of customer service, tech support assistance, marketing and sales. These services demand some level of technical expertise and because of this reason are often outsourced to other parties. So when it comes to contracting tasks around front office services or even web development, businesses can benefit from specialised talent who have in-depth knowledge regarding the space, eventually leading to major cost cuts involved in hiring new talent.
Based on the Vendor’s Location
Nearshore BPO
In this process, tasks are outsourced to vendors living or working in locations that are closer to the employer. For example, US businesses can outsource to countries closer to them geographically, like Mexico and Canada, including the likes of Central America. This type of outsourcing can be pretty beneficial as in Nearshore BPO services, specialised skills are contracted for very low prices in a nearby nation, but it is important to consider certain factors before opting for this service, like language proficiencies or timezones.
Offshore BPO
In this process, services are contracted to countries that are usually overseas. The motive behind such a move could be low costs for labour, good economic and political stability, variety of tax savings, accessible resources, etc. A simple way of explaining this is, companies contracting to call centre vendors living in other countries around the globe for their customer service requirements. This opens up options for businesses to obtain services without spending a lot of their budget, bringing down several overhead costs, eventually lowering the cost of the service for the end-user.
Onshore/Domestic BPO
There are several factors that could be responsible for Onshore/Domestic BPO such as the accessibility of skilled labour in certain regions, or even differences in rates and costs locally.
Domestic outsourcing basically involves outsourcing of services within the limits of a specific country. To put it simply, services can be contracted to a vendor located in one state by a business that could have its base set up in another state. There are several factors that could be driving this, major differences in cost locally, or the abundance of distinctive skills in specific regions.