Business Process Outsourcing (Definition, Benefits, and Guide)

Going back to more than twenty years ago, businesses were struggling. Having no power to expand from scratch, starting a business was daunting. Moving forward to the digital era, cost-cutting remains valuable. Through Business Process Outsourcing (BPO), operations in business sectors have dramatically reduced its cost. Let’s go back to your perspective. How can they assist in your business plan? Concerning that you are unfamiliar with how the business runs, we aid in expanding your knowledge by reading the following information.


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Business Process Outsourcing (Definition, Benefits, and Guide)

Defining Business Process Outsourcing

It started in the 1990s, with the focus on cutting transaction costs. Since then, companies began to outsource. Today, business process outsourcing remains to be real with its aim. Added with the reduction of costs, it also targets in handling a larger volume of and process efficiencies, there is no doubt, the business can expand so quickly. As the demand for outsourcing continues, the role of HR in managing the procedure becomes challenging. Some contracts and agreements that need compliance. Eventually, all of these are substantial factors for

What is the Purpose of Outsourcing a Business?

Organizations engage in outsourcing for practical and essential reasons. Consider these two aspects of your understanding.

Back Office functions

Back then, “back office” was a term invented by companies for the back portion of the office who do not have direct union with clients. A back-office function is also known as internal business functions. Its primary areas include accounting, operations, payroll, human resources, and IT personnels. This area of a business serves as the nerves that connect other sectors from maintenance, gathering workforce, overseeing cash flow, and many more.

Front Office Functions

If there is a back portion of the administration, the front office function does the opposite. It mainly serves as a service that has direct customer interaction. Customer service, sales, and telemarketing engage in customer relations. Generally, an excellent BPO customer service develops loyalty. Because of this, organizations can increase their revenue and save from expenses and time.

Types of Outsourcing

Today, most businesses outsource without careful consideration prior to the operation. But little did you know, attending outsourcing affects decisions, business proximity, and language considerations. Now, let’s try to define the three types of outsourcing to learn more about each.

Offshore Outsourcing

Most companies would prefer to reduce capital finances. Perhaps, who doesn’t want to cut the cost? If your business involves different departments, all employees entail additional in the capital cost. According to the Population Reference Bureau, IT firms’ often allot 70% of their gross costs to labor. This is where outsourcing offshore becomes handier. With this, you can significantly reduce the cost of labor and increase efficiency. To keep it simple, it’s a balance between investing to earn more and being competitive.

Onshore Outsourcing

Often, businesses involve competitive operations from competitors outside the country. This can pose several drawbacks that could affect marketing and production in general. This can be a real challenge. But onshore means assistance, such as IT services, from people not involved within the same organization. However, all services obtained must be within the boundary of the country. Onshore assists in secure communication, reliability, and responsiveness, especially when project management is involved. Although offshore outsourcing gives full potential, onshore could be ideal for your business in terms of cost and benefits.


Most companies today have grasped the potential of nearshore outsourcing. Unlike onshore, nearshore happens when an organization allows the involvement of workers from places outside the county. Basically, jobs are forwarded to company workers from various countries with minimum wage pay.

Benefits of BPO

Outsourcing is a demand these days. If you haven’t decided to outsource yet, learn more about its benefits.

Low Operating Cost

In business, budget capital is a crucial factor. As you invest in BPO, this can help you lower the cost. But how is this done? Generally, your provider assists you in splitting the tasks. They place individuals responsible for a particular job. This, however, demands potential and a skill set. Because more people are working on the operation and production, it saves more time, which means that you are reducing the cost of labor and other services as well.

Quality Equipment

Technology has provided BPO providers to use the latest devices and equipment. Don’t settle on low-quality resources. Instead, use the latest to finish the tasks conveniently and right on time. But of course, pair it by assigning expert individuals to do the job for you. Although the price of the latest deals in the market may shutter you, it’s worth the investment. Thus, it keeps your business running smoothly and efficiently.


When you combine an increase in labor and flexibility of time, it results in productivity. Outsourcing helps you in tracking the production. Since people responsible for every task are knowledgeable and experts, errors and pitfalls are rare. Although mistakes are unavoidable in the regular operation, it’s typically bearable.

Competitive Advantage

If you are familiar with the SWOT analysis, then that’s an additional advantage. Having a strategic plan by combining quality equipment, low-cost labor, and productivity assist your business in competing. Your timeline helps you set multiple priorities that engage in favorable circumstances.

Risks of BPO

Apart from the advantages, outsourcing also poses potential risks. Below are some of the challenges that you should look into.

Expose Confidential Data

BPO services include advertising, researching, and consulting. Often, these face recurring challenges, such as data breach. For example, meeting minutes usually holds private information, and yet this could still be disseminated. While this is inevitable, it also equates to losses of money. Not only that, but it could also target and tear down your company’s credibility. It could destroy entrepreneurs and employees too. At the core, it may take time for you to stand up and clean your reputation in the industry.

Lack of Control

When you outsource, you hire people from outside of your organization to do the tasks. This is challenging in terms of communication. While this is risky, the loss of control and visibility may also drop a higher price estimate. Without you knowing, you have already been losing a tremendous amount of money.

Dependency on External Provider

As you are connected to the outside sources, it may be risky. Being dependent on your provider will likely lose your sense of control in terms of operations. Once your provider may be experiencing difficulty in sending the communication, doubling the production, and inaccuracy in services, it could massively impact your business. Because of this, there is a higher proportion that your checklist would go to waste.

Increase in Potential Disruption

While you are driving the growth of your business, outsourcing provides a dramatic effect. If the arrangement with your provider fails, your stakeholders could potentially get affected as well. The domino effects could be a hit or miss situation. While this is a common pitfall, it can also kill your investments in a blink of an eye.

Outsourcing has its advantages and disadvantages. Perhaps, it could be a win-win solution for your business needs. While this remains confusing, consider making up your decisions from the list above. Go grab your business plan. Now, think about how BPO can help you in expanding your business. And perhaps, build a massive investment in the future. It can be daunting but take control, and you can take as many benefits as you think.