Benefits of Business Process Outsourcing

Organisations can gain a number of benefits by outsourcing or using a business process outsourcing company.

  • Saving money. Most companies that provide BPO services are able to be able to carry out the work for considerably less. This is generally achieved through having lower operational costs themselves because labour is less expensive, social costs are lower and they don’t have to provide benefits to their workers. Typically, BPO should save companies in the region of 40-50%.
  • Quality of service. It is also possible in some instances to improve the quality of service through being able to have more resources and better qualified personnel.
  • Productivity improvements. It allows executives and management to focus on critical functions of the business. For example, it will allow expensive and skilled personnel to focus on sales and marketing strategy rather than operational issues such as preparing a VAT return or payroll. You normally find that executives spend 80% of their time in management of day-to-day issues and only 20% on strategy. Outsourcing certain processes can in many instances reverse this statistic. Giving management time to carry out other functions can enable an organisation to become more profitable and find other ways of generating income.
  • Access to a wider array of skills. BPO enables an organisation to access different skills sets and expertise that their company would not normally have access to. Many BPO companies have skills and intellectual assets that take many, many years to generate.
  • Allocation of resources. Organisations that use BPO can effectively reallocate personnel into areas that will have a positive impact upon other projects, such as expansion or opening offices in new territories.
  • Operational expertise. BPO companies are able to provide the relevant expertise that most companies don’t have access to or would be difficult and expensive to develop in-house.
  • Flexibility. BPO can help organisations become more flexible, for example by speeding up key business processes such as purchasing, and thereby ensuring that not too much or indeed too little stock is held at any one time.
  • By allowing organisations to retain flexibility and agility, BPO also ensures that companies do not become too bureaucratic. This is a feature of smaller and younger companies but as they grow, more processes and procedures are put in place which while allowing for control, can stifle a company and the people working for it.

What type of companies would benefit from Business Process Outsourcing?

Most companies can benefit from some form of outsourcing but many are not inclined to do so because they feel uncomfortable with contracting key functions to a third party.

The key to understanding business process outsourcing is to ask these questions:

  • What business processes are critical to the business?
  • What are the areas or processes that do not work very well in-house?
  • Would using a business process outsourcing company improve or resolve any of these issues?
  • How?
  • What are the risks?

Service Level Agreements

It is important to agree upon a Service Level Agreement (or SLA) in order to ensure that any commitments made by the service provider are met. The SLA provides a framework that both customer and services provider agree to.

In broad terms, this may be that the business process outsourcing company must provide a response to an issue within a fixed time, and have specific processes in place to deal with problem management, issue resolution, and performance measurement. The SLA normally also list the services and objectives that the outsourcing company agrees to deliver.

If the SLA conditions are consistently not met, this can lead to termination of the agreement and / or call for penalties to be made. These penalties are more often than not financial but act as a deterrent of delivery of poor service unless there are extenuating circumstances.