Business Process Outsourcing or BPO refers to delegating business tasks and processes to a third-party service provider.
The provider is responsible for administering and managing said processes based on defined goals and KPIs (Key Performance Indicators).
If your organization has been considering outsourcing non-primary but equally essential tasks, it’s crucial to understand the many different BPO business models available.
Different BPO models provide your companies with ways of handling projects, operations, and non-core activities. Many models of outsourcing services have emerged throughout recent years. We’ll discuss each in this guide so you can choose a model that best fits your outsourcing needs.
Table of Contents
1. What Do BPO Companies Do?
- Marketing
- Accounting
- Data Processing
- IT (Information Technology) enabled services
- Customer service
- Payroll
BPO companies provide these services to businesses that can no longer keep up with daily demands. They may also want to focus on other core business functions.
Most businesses also find that outsourcing has made their work more efficient. Rather than building an in-house team or a new department from the ground up, BPO providers already have the staffing and software to get the job done.
As each client possesses varying requirements, BPO companies must provide ample training and upskilling to their agents.
The goal is to empower these agents to understand the client’s goals. Additionally, they help add value to the company.
2. What Are The Benefits Of Business Process Outsourcing?
More than 60% of US-based businesses outsource at least one department. If you’re wondering why companies choose to outsource work, then it’s thanks to a host of benefits:
- Improved Efficiency
- Cost-Effective
- Better Security
- Expert Advice From Industry Professionals
Improved Efficiency
Outsourcing allows companies to streamline non-core activities, like payroll services and IT.
Specialists will handle these responsibilities. This gives the business more time for research and development. Additionally, employees have more room to finish their tasks. They can also work on developing their knowledge and skills.
Cost-Effective
Developing an HR department or IT team from scratch takes up a huge chunk of resources. The costs of maintaining hardware and software operations may also be high.
But through BPO outsourcing, companies can divest fewer resources on:
- Training
- Buying software
- High-tech systems
- Peripherals
Administrative expenses are exponentially lowered. This gives companies more financial resources to focus on areas like:
- Manufacturing
- Production
- Main business trade
Lower costs spell good news for employees. Companies can incentivize them better and provide bonuses or higher pay grades based on performance.
Better Security
The IT department is one popularly outsourced service across companies globally. Systems are becoming increasingly complex. New cybersecurity threats are developing daily. So, there must also be a focus on improving IT security systems.
The BPO industry has also improved its IT security arsenal to combat the rise of cyber threats. An IT outsourcing company can recommend up-to-date cybersecurity solutions.
Moreover, they will handle:
- Troubleshooting
- Management
- Monitoring
All these ensure your data is kept safe against these cyber threats.
Expert Advice From Industry Professionals
Business success partially relies on the management’s ability to delegate tasks.
For example, a team of highly skilled salespeople can accomplish more than just filing documents online or inputting data on spreadsheets. It’s best to give them room for growth and develop their potential.
Fortunately, an external service provider like a BPO company can provide expert and actionable advice on improving your processes. Their specialists can take on these assignments, helping free up your employees’ time.
You also don’t have to worry about the agents’ familiarity with your company’s operations. They are trained to understand business-specific values, goals, and performance metrics. They may even better grasp the work and perform it more efficiently than your current team.
3. Types Of Business Process Outsourcing Models
A BPO business model defines how the outsourcing company operates. It also outlines the types of services it offers to its clients.
A BPO model is typically based on the client’s goals, needs, budget, and location.
Since companies require tailor-fit solutions, BPO models can intersect with one another. Doing so gives clients better flexibility and versatility. BPO services can also be customized to address almost every aspect the clients demand.
Global Outsourcing
Global outsourcing provides services across different continents.
BPO companies will set up office spaces in the world’s top outsourcing destinations in this model.
They will hire aspiring professionals looking to find stable and long-term employment in the outsourcing industry.
Seasonal Outsourcing
Seasonality plays a crucial factor in businesses. Unexplained increases or decreases in sales and leads can often be attributed to seasonality.
Sectors often affected by seasonal changes in demand include retail and e-Commerce.
For instance, demand spikes are frequent right around Christmas. Retail companies must plan for such upticks and plan their production and inventories accordingly.
Consumers generally buy more products around this time, which is why the above mentioned industries might benefit from seasonal outsourcing.
Seasonal outsourcing provides a temporary workforce for companies to keep up with surges in demand.
This allows more room to focus on production and improve customer satisfaction rates.
Additionally, outsourcing on a seasonal basis is cost-effective. There is no need to hire permanent staff. You can call your provider to give you BPO personnel only when the business demands it.
Offshore Outsourcing
Offshore outsourcing refers to recruiting a third party service provider to perform BPO tasks outside the country.
Many businesses have relied on this model mainly to lower costs. For instance, businesses may offshore IT software development to countries with low labor costs. Some of the world’s top IT destinations include:
- India
- China
- Vietnam
- Philippines
- Indonesia
- Poland
- Romania
- Ukraine
Nearshore Outsourcing
Nearshore outsourcing or nearshoring is similar to offshoring. The only difference is the geographical location.
Nearshoring enables businesses to transplant their operations to neighboring countries. For example, North American companies may nearshore all or part of their IT services to neighboring Latin American countries like:
- Mexico
- Brazil
- Argentina
Captive Business Process Outsourcing
In this model, another company manages the parent company’s core business functions. The parent company retains these functions, hence the term “captive”.
The captive model is generally more expensive than hiring a third party service provider or vendor for outsourcing.
However, more companies prefer to retain control rather than the cost benefits. If the company files for bankruptcy, the captive service will usually be sold separately.
Due to the expenses that could incur from this model, most companies simply choose an outside vendor or subsidiary. The vendor is entirely separate from the company and offers BPO services at a much lower cost.
Joint Venture Model
As the name suggests, a joint venture model sees the business and the third party vendor collaborating on the operations. They share equal capital, employees, assets, losses, profits, etc.
However, the parent company still manages core operations. They will delegate less crucial functions to the vendor.
Conclusion
Business process outsourcing is a lucrative industry for many companies. Even Fortune 500 companies have at least one service that they outsource to another vendor.
If you’re seriously considering outsourcing, understanding the various options and models available can help you make the right choice.
Assess your organization’s needs. If you have plans to scale and believe that a BPO service provider can help take the load off by doing non-essential functions, this is the perfect opportunity to outsource.
Gear Inc is the global business process outsourcing vendor committed to providing tailored solutions to each of our clients. Our services can be quickly scaled up or down as needed.
Get in touch with us now! We offer outsourced solutions like cocntent moderation, customer care, data entry, data labelling, and game management.
Frequently Asked Questions About BPO Business Models
BPO companies perform back office functions, such as accounting, finance, customer support, payroll, etc. Meanwhile, a call center handles mainly inbound and outbound calls.
Many businesses are still hesitant about outsourcing, but it’s worth keeping track of the following signs it may be time to consider doing so:
- Unable to keep up with business demand
- Employees are wearing several hats all at once. They’re getting burned out by the sheer amount of non-core work they’re pouring time and focus into.
- The company is almost always working on a tight budget.
- Routine activities take too much time to accomplish.
- Hiring the right talents for your in-house team is becoming challenging.
- There are more angry customers than usual, and it’s severely affecting your business.
You may want to consider these qualities before choosing a BPO service provider.
- Years of experience
- Security
- Scalability
- Infrastructure
- Cost-effectiveness
- Quality assurance
- Reliability
Your business should consider outsourcing HR if you face challenges completing HR tasks, hiring talents, or lacking human resources. It all depends on your organizational needs.
Gear Inc.
