Concept of Business Process Outsourcing | Business Studies

Business Process Outsourcing explained

Business Process Outsourcing Explained|Should you go for it?

Business process outsourcing (BPO) can be defined as the act of giving a other party responsibility of performing what would otherwise be an internal system or service. For instance, an insurance company might outsource their claims processing program or a bank might outsource their loan processing system. Other common examples of BPO are call centers and payroll outsourcing. Typically, companies that are looking at business process outsourcing are hoping to achieve cost savings by handing over the work to a third-party that can take advantage of economies of scale by doing the same work for many companies. Or perhaps the cost savings can be achieved because labour costs are lower due to different costs of living in different countries Notes BPO is often divided into two categories: back office outsourcing which includes internal business functions such as billing or purchasing, and front office outsourcing which includes customer-related services such as marketing or technical support BPO. It provides wide range of tactical, powerful, flexible tools which in turn helps in achieving the business objectives in a cost effective and efficient manner. To put it in simple words a BPO (business process outsourcing) is a process in which a company delegates some of its business processes to a other party on payment of some fee by passing over total control of process to them. This in turn cuts the operational costs considerably resulting into huge profits. BPO's are inclined to provide better customer satisfaction leading to customer retention, increased productivity, deal with competition effectively and in turn increase profitability. 

There are many kinds of work that can be outsourced to BPO's for e.g. Call/Help Centers, Medical Transcription, Billing. Payroll Processing, Data Entry, IT Services, Human Resources (HR) functions, etc. Due to the proximity of IT industry to BPO, this industry is also termed as TES (Information Technology Enabled Service). But, BPO doesn't necessarily only provide IT Services. BPO will be time and again, simply defined as, taking over non-critical business processes or a function of those processes, as well as the people and systems associated with them, in order to achieve service level improvements and cost savings. It is useful in leveraging the process towards driven efficiency and achieving responsiveness,branding, customer relationships and organizational excellence. 

eg. of BPO a call centre

 Benefits of BPO 

An important aspect of business process outsourcing is its ability to free corporate executives from some of their day-to-day process management responsibilities. Once a process is successfully outsourced, they get more time to, explore new revenue generation activities, accelerate other projects, and focus on their customers.

 By outsourcing their back office operations to third world countries, companies have the following advantages: 

1.Achieve cost reductions-This is made possible through process  improvements, 1. , and use of technologies that reduce and bring administrative and other costs under control. 

 2.Key in on company's main business-With the day-to-day back office operations taken care of, the management is free to devote more time to building the company's core businesses 

 3.Obtain  outside expertise- BPO ensures that domain experts from another company provide the needed guidance and skills.

4. Meet constantly changing customer demands- Many BPO vendors provide the management with flexible and scalable services to meet the customers' changing requirements, and to support company acquisitions, consolidations, and joint ventures.

5. Achieving revenue increases- By outsourcing non-core processes, can focus on increasing their sales and market share, develop Achieving companies products, expand into new markets, and enhance customer service and satisfactions.

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