Before we get into the meaning of Business Process Outsourcing. Let define what's Outsourcing first. Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally, and sometimes involves transferring employees and assets from one firm to another.
Furthermore, Business Process Outsourcing, or BPO, refers to the process of contracting standard business functions to be handled by a party outside of the company. BPO functions most commonly outsourced include: customer service. accounting.
BPO has its roots in the manufacturing industry, with manufacturers hiring other companies to handle specific processes, such as the parts of their supply chains unrelated to the core competencies required to make their end products.
Benefits of BPO
Organizations engage in business process outsourcing because they expect to benefit from the arrangement.
The benefits typically cited by proponents of BPO include the following:
Financial benefits: Organizations often find that an outsourced provider can perform a business process at lower costs, or they often find that, by contracting with an outsourced provider, they can save money as a result of the relationship in other ways, such as in tax savings.
Flexibility: BPO contracts can allow organizations greater flexibility to adjust how it completes the outsourced business process, enabling them to better react to changing market dynamics.
Competitive advantage: BPO enables organizations to outsource those processes that aren't core to their businesses or missions, thereby enabling organizations to focus more of its resources on the operations that distinguish them in the marketplace.
Higher quality and better performance: Because the core business of BPO providers is performing the specific processes they're hired to do, they are, in theory, able to focus on providing those processes at the highest levels, often with greater accuracy, efficiency and speed.
Quicker access to innovations in the process: BPO providers are also more likely and better positioned to know about advances and innovations happening in the area they specialize in, and they are more likely to invest in new developments in process automation that can improve the speed, cost and/or quality of the work -- benefits that flow back to the organizations that contract with the provider.
Expanded coverage: Outsourced providers can expand the hours or geographical reach of an enterprise in a cost-effective manner. For example, an organization that wants to have 24/7 call center operations may be able to more quickly and more efficiently provide that capability by contracting with a partner which has existing around-the-clock capabilities, perhaps even in multiple geographic locations to enable a follow-the-sun business model.
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