An Overview on Business Process Outsourcing

Business process outsourcing (BPO) is an outsourcing tactic in which a company sub-contracts its non-core activities to another company for services that it holds competitive advantage. Firms have been investing in many areas but only a few of these areas are of competitive advantage to them. Such firms would spend much of their resources on all these areas while only a handful of them are of competitive significance. The BPO concept shows these companies that it is only sensible to focus on the processes that it has competitive advantage. BPO implements specialization in that it encourages businesses to maximally indulge in activities that are of economic worth and leave the rest to other concerned parties. In a company’s structure, there are three main segments in which business processes can be divided into:• Core processes – Refers to processes that are of immense importance to a company and are competitively significant.• Non-core, critical processes – These are important processes that lack competitive significance.• Non-core, non-critical processes – Such processes are only required by the company because they are vital for the business environment to thrive.BPO has two main categories:· Front office outsourcing. Mainly includes customer-related services such as technical support.· Back office outsourcing. Deals with internal functions of the business such as purchases.Apart from the above mentioned categories, BPO can also be categorized into onshore, near shore and off shore outsourcing. Onshore outsourcing refers to businesses that have been contracted within the company’s country. At times, contracting businesses to a firm neighboring the company is alternatively referred to as near shore outsourcing or it may still be regarded as onshore outsourcing. Offshore outsourcing refers to business activities that have been contracted outside the company’s country.There are a number of benefits that befall a company once it has outsourced its business activities, but I will state a few:· BPO helps the business concentrate and invest its resources on its core business sectors. The company saves on its resources such as money, labor and time.· It is likely to lead to increased revenue. A company is more likely to be efficient when it concentrates on its core processes. This will lead to production of better quality goods and services resulting in higher returns.· BPO helps businesses use outside expertise. In off shore and near shore outsourcing the business is able to tap into the market of the destination country instead of recruiting experts and sending them to the country where the company operates from.A country experiences a variety of advantages when business activities are outsourced within its territories:· The infiltration of BPO activities in a country results in increased employment opportunities. Most businesses are outsourced to developing countries. This is good news bearing in mind that most developing countries have a high rate of unemployment. The influx in outsourced businesses creates a whole new sector that provides employment. These companies tap into the local skill market, reducing the rate of unemployment.· Continued indulgence in BPO activities may lead to greater reserves of foreign currency. The more a country attracts BPO activities, the greater its chances of having an influx in foreign exchange. This is good news particularly if the US Dollar is involved because it is the reserve currency of the world economy. Increase in US Dollar reserves increase the financial muscle of an economy especially when engaging in international trade.· It has mended relations and prior perceptions about developing countries. Most developed countries had bad perceptions regarding developing countries. They didn’t think that these countries had the skill to match their labor force. The ill prior perception has greatly changed with the impressive results and tremendous progress of BPO. It is even improving relations among these countries.· It is a chance for the country to scale the various levels of outsourcing. There are different aspects of outsourcing and they have an order. They are mainly categorized in reference to their degree of complexity. BPO is of a lower rank. If BPO companies are set up in a country and they are successful, that may be used as an indicator that the country is able to handle a much more complex form of outsourcing such as knowledge process outsourcing (KPO).