What is BPO?

Hannah Conway

Business process outsourcing (BPO) is the process whereby a business hires another company to undertake a process (services), that they require in order for their primary business to operate successfully.

This article will cover how BPO works, introduce you to cloud-sourcing, and take a look at some of the advantages and disadvantages of business process outsourcing.

Outsourcing allows you to access a global talent-pool to grow and scale your business - so, we’ll also explore how to send and receive international payments, with low fees and the mid-market exchange rate, with providers such as Wise.

Wise for Business can save you money on international payments

International bank transfers might feel like the natural and most ‘business-like’ way to make overseas business transactions, but it doesn’t always offer the best value. And while PayPal is the go-to payment gateway for many smaller BPO providers, it may not always be the most affordable.

You may want to consider an alternative, like Wise. Start saving with a Wise business account, to send and receive multiple currencies with the fair mid-market exchange rate. Do business without borders.

To see the real cost of cross-currency selling on PayPal, use our PayPal fee calculator.

What is BPO used for?

BPO is a subset of outsourcing normally associated with large corporations in service industries like banking, telecoms and insurance. Business process outsourcing companies might not be household names, but we’d certainly notice if they disappeared. Without them and companies like them, simple tasks like booking a doctor’s appointment¹ or using an app to order a pizza² wouldn’t be quite as straight forward.

That’s because the BPO industry has been quietly delivering ‘back-office’ services for years and - while we rarely stop to think about who actually designed the NHS booking system or developed the software that made it possible to order Domino's 18-inch Mighty Meaty pizza without leaving the sofa - it’s easy to see why BPO is a rapidly growing sector worth billions.³

Small businesses looking to outsource

But, now small businesses, freelancers and sole traders are getting in on the game too. Platforms like Fiverr and Upwork have opened up the BPO industry to anyone with an Internet connection, but they’ve been an absolute game changer for small businesses and freelancers both looking to outsource and to provide a range of third party services like information technology, software development and business support.⁴

So whether you want a full time virtual assistant to help your startup get off the ground, or you’re a software developer looking to win new clients - these freelancer-focused BPO services can make it happen.

So, what are some types of business process outsourcing services? We’ll take a look at two big outsourcing services, to help kick-start your research.

IT outsourcing services

When a business needs IT services, such as a new website, app or long term technical support, it can either hire more staff or outsource the entire project to a BPO company. Hiring more staff means the business needs to spend money on recruitment, training, national insurance, pensions and extra office space. Outsourcing it cuts those costs to zero while giving the business a ready-made team of highly qualified experts.

Customer service outsourcing

Customer service outsourcing works a little differently to IT services outsourcing. For a start, the people at the BPO company providing it are customer-facing, so need to speak the same language as the client’s customers. And they need to understand the product. For large companies with lots of customers, such as mobile phone networks, computer manufacturers and broadband providers, it often makes financial sense to offshore the entire customer service function to a location where overheads and wages are lower.

Is a cloud-sourcing approach to BPO the future?

More workers are ditching their 9-5 office based roles for more flexibility in the cloud. There are many benefits to this workforce that is taking the virtual by storm, including:

  • Lower overall cost: No operational costs associated with a physical workspace. This is also a benefit of traditional BPO models.
  • Fill talent gaps faster: Cloud-sourcing helps find talent 20x faster than traditional BPO channels. This increases efficiency and can lead to dynamic cost savings.
  • Faster set-up and scaling: Unlike traditional BPO models, you can set up a cloud-sourcing solution in just a few days.

So, what’s the difference between cloud-sourcing and traditional BPO models?

Essentially, traditional BPO models could hire, say 20 people to handle your calls, but those 20 people may work in the same location. Whereas cloud-sourcing treats the internet as your workspace - using freelancers all over the world to undertake key business processes. Providers like UpWork, can help small businesses find freelancers from this global pool to help you grow and scale your business.

Advantages and disadvantages of outsourcing

The great thing about outsourcing is that it works on any scale, whether you’re a bank looking for an army of IT experts or a bakery looking for someone to run your Instagram account. The principles are the same either way. You pay an expert to do something you can’t do, or don’t have the time to do. There are some disadvantages to consider too.

Benefits of BPO

  • Cost: The main advantages of BPO are to do with cost. No operational costs associated with a physical workspace, meaning that you can maximize profits.
  • Fixed Overheads: Outsourcing typically means you don’t hire permanent staff, but engage in a fixed term contract with the BPO supplier. So companies can better manage cash flow.
  • Expertise and experience: Why spend time and money training someone to do something when you can hire an expert - or team of 2,000 experts - instantly? Outsourcing allows you to tap into a global pool of talent.
  • Growth and Innovation: On a larger scale, BPO lets companies focus on growth and innovation. Domino’s are known for being great at making pizza, not for their coding skills. But Capgemini have decades’ of experience with software development, plus the infrastructure and facilities to do it for less.
  • Convenience: Work is no-longer restricted by your office’s working day. For example, a digital agency in Chelmsford can outsource a five-hour job to a developer in Chennai on Monday afternoon and it’ll be done by first thing Tuesday. While Chelmsford is sleeping, the Chennai developer is busy working.

Problems of outsourcing

  • Language barriers and time-zone differences: Having an IT team on the other side of the world when you really want a face-to-face meeting can all pose challenges. But with proper planning and a commitment to borderless supply chains, you can mitigate most of these issues.
  • Discourages businesses from hiring local talent: When looking at a global talent pool, it could lead you to overlook local expertise. It also discourages them from developing their own in-house capabilities, which could stifle innovation. If Evan Williams, boss of podcasting company Odeo hadn’t hired Jack Dorsey as a software developer in 2005, they wouldn’t have invented Twitter together in 2006.
  • Currency fluctuations: If the pound drops against the rupee or the dollar, the monthly outsourcing bill is going to cost more. There’s not much anyone can do about currency fluctuations, but you can make sure hidden currency transfer fees and rip-off exchange rates don’t add to the problem by using a payment provider that offers the mid-market exchange rate with no hidden fees, like Wise.

BPO is complex and requires a lot of planning. But with the right payment provider in place, and a realistic approach to outsourcing across borders, BPO can be great for both providers and buyers. BPO, or cloud-sourcing allows you to make use of a global pool of talent, so there are no limits on your business's level of innovation - but you’ll need to make sure that this doesn’t lead you to lose out on international payments. Consider using Wise to save on overseas payments.

Sources used:

1.NHS: About Us
2.Dominos Streamline: Outsourcing business processes
3.Business Process Outsourcing: Global Stats
4.UpWork: Cloud-Sourcing

Sources checked on 01-October 2019.

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