What a wonderful query! Numerous definitions of business process outsourcing (BPO) have been developed. I’d want to briefly discuss outsourcing’s history in order to explain how the phrase “business process outsourcing” came to be before I give you my definition.
Here is how I define outsourcing: It occurs when a buyer gives a supplier ownership of a non-core business process.
A core process is what? The foundation of a business is its key competencies. It is a procedure that sets the business apart from its rivals in the marketplace. It is a procedure that significantly affects the bottom line and pays the rent. The main process is what needs the majority of your time and money.
The complexity of computers and networks is generally beyond the comprehension of businesspeople. They don’t want to be concerned about network upkeep, software patching, or help desk services. So they outsourced their technical requirements to a company that was much more knowledgeable about technology than they were, getting their first experience of outsourcing.
Approximately ten years ago, boardroom executives who were happy with their IT outsourcing made the decision to try outsourcing other corporate operations. Why wouldn’t the concept apply to accounting or real estate if it worked with computers? Other areas of outsourcing were successful. Actually, outsourcing non-IT functions were more successful than outsourcing IT.
What additional tasks may a business contract out? Any procedure that is not core is a strong contender. Please be aware that non-core does not equate to “not important.” For instance, the foundation of any business is made up of finance and accounting. However, few businesses succeed in the marketplace as a result of their distinctive accounting capabilities. It is the ideal task to delegate to experts who enjoy working with numbers all day.
What non-core processes are suited for effective BPO? I’d add the following to finance and accounting:
- Human Resources. Today one of businesses’ most difficult challenges is to attract and retain talent.
- Logistics. Let them organize the warehouse and do the shipping. Inbound and outbound goods become their responsibility.
- Contract manufacturing. Someone else builds the plant and operates it.
- Supply chain management. Web exchanges are changing the way corporations buy goods. Outsourcers are assembling the participants of these sites.
- Medical underwriting. Outsourcers have experience handling risk.
- Real estate management. Let them mow the grass and recharge the air conditioning.
Why do these procedures outperform IT outsourcing in terms of quality of results? Since they are complete processes, buyers can precisely characterize and measure them. Additionally, businesses typically outsource the entire process; contrast this with IT outsourcing, where customers typically retain some of the IT processes inside. When the buyer outsources the entire process rather than just a portion of it, outsourcing always works better. Even if nothing else, outsourcing the entire process stops both sides from snapping at one another when something doesn’t work rather than getting their hands dirty and coming up with a solution.
Up until recently, businesses looking to boost their profitability through BPO outsourcing were those satisfied with their IT outsourcing. These non-core functions are now outsourced by new businesses right away.
Globalization Fuels BPO Growth
BPO’s rate of growth is currently being accelerated by two economic developments. Firstly, there is globalization. Trade restrictions are being reduced for the first time since the era of sailing ships. Of course, this trend is made possible by the Internet. Online business transactions are simple and getting simpler. A website makes your stuff accessible to customers nearby and halfway around the world. In a web browser, barriers between locations vanish.
The second economic trend that has an impact on firms is increased global competition thanks to the Internet. Month-long product cycle times can now be completed in a matter of hours. Companies must mobilize all of their resources to focus on their core capabilities as a result of this hectic pace. They can’t afford to because mistakes are less tolerated in today’s competitive society. In a world operating at Web speed, outsourcing is now the only way to prosper and succeed.
Successful businesses nowadays are required to have even better core procedures in order to just stay in the game, which complicates business. The only way a business can focus its limited time and financial resources on its core skills and still get superior results for its non-core operations is through outsourcing.
Suppliers Are More Capable
By giving a supplier control over a process, a buyer can benefit from the supplier’s experience, economies of scale, and power. A skilled supplier can frequently complete the task more quickly and more affordably than your in-house team. Suppliers can give you a long-term edge, which is something that today’s businesses require.
So, here is how I would define BPO outsourcing: BPO outsourcing includes giving a capable provider ownership of any non-IT process. And now for my forecast. As the Internet becomes a fundamental component of how every firm and consumer does business, BPO outsourcing will expand dramatically.
Lessons Learned from the Outsourcing Primer :
- BPO outsourcing is the transferring of a non-core, non-IT business process to a supplier.
- The Internet has sparked two trends that are causing BPO to grow exponentially: the globalization of the commerce and the compression of business cycles. These two trends are forcing companies to outsource their non-core processes just to stay competitive.
- Suppliers can complete the process faster, cheaper, and better than buyers can do it in-house. This type of service also helps companies compete in a Web-based marketplace.