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Business process outsourcing (BPO)

What is business process outsourcing?

Business process outsourcing, or BPO, is the transfer of responsibility for a specific enterprise workflow or process to a business services provider. The provider manages the people, technology and assets involved in the process and is responsible for delivering business outcomes. Originally, BPO was used for cost reduction based on labor arbitrage. Modern BPO services heavily leverages technology and data to deliver better outcomes—faster and at a lower cost. Vendors use technologies like automation and AI, new talent models, redesign, and data and process simplification to support innovation and accelerate profitable growth.

Modern BPO services are rooted in a shared purpose between vendor and client, with contracts often incorporating risk-sharing aspects, outcome-based pricing, and joint go-to-market models.

How does BPO help during market uncertainty?

Turbulent times create opportunities for bold enterprises to get ahead of the competition by making strategic moves when others delay investments. Business process outsourcing (BPO) helps businesses accelerate through uncertainty with confidence. By modernizing processes, infusing them with new technologies and connecting the data across the enterprise, modern BPO enables them to anticipate and quickly act on emerging trends, as well as self-fund growth initiatives through efficiency.

What are the advantages/benefits of BPO?

Modern business process outsourcing services have many advantages ranging from process redesign and operating model simplification to flexibility, resilience, speed, innovation and direct impact on top and bottom lines. For example:

  • Increased revenue per transaction through the incorporation of AI into order systems for basket analysis
  • Improved customer and employee experiences through the utilization of design thinking in process redesign, multi-channel support—incorporating chat, phone, social media, email, data  and analytics-augmented processes to increase resolution speed
  • Increased profitability through cost reduction
  • Increased productivity through technology, data and process-redesign
  • Faster time to market for new services through specialized support to help businesses test, iterate and scale new ideas
  • Progress towards a circular economy through simplification and by incorporating reuse and recycling concepts into operations
  • Access to skilled experts and modern operational principles
  • Connection to other vendors within a specific ecosystem, and cross-pollination of innovation across domain areas
  • Access to skills in emerging tech areas like artificial intelligence and genAI
How does automation improve BPO?

In the context of processes, automation combined with process redesign and artificial intelligence (AI and GenAI) is often referred to as intelligent process automation (IPA). Among the most notable benefits of IPA is that it facilitates an end-to-end view of enterprise processes across silos—connecting data, insights and people to improve business outcomes.

Business process outsourcing providers leverage automation along with analytics and AI to reduce costs and dramatically improve customer and employee journeys.

What is the difference between BPS and BPO?

Business process services (BPS) is a broader term that includes business process outsourcing (BPO). While often used to avoid the notion of “outsourcing”—which elicited some trepidation from operations buyers in the past—BPS include process optimization, managed services and advisory services that are not accompanied by a transfer of staff to the vendor. The nature of business process outsourcing and business process services has evolved over the past 10 years, with leading vendors bringing significant value as partners for profitable, sustainable growth vs. blunt cost reduction.

Can a company outsource its core business processes?

Yes. While traditional business process outsourcing (BPO) mostly supported back-office processes, modern BPO services support both critical and non-critical processes. Examples include:

  • Finance and accounting
  • Marketing and sales operations
  • Employee experience
  • Customer care
  • Human Resources (HR)
  • Supply chain

Modern business process services are offering specialized support in industry-specific areas—benefits and claims management or revenue cycle in healthcare, asset and wealth management in banking, drug testing and development or regulatory and compliance in life sciences, retail analytics and order management in retail, etc.

Depth of industry knowledge, along with the availability of digital assets and platforms that can accelerate the speed of implementation, are important ways for BPO providers to differentiate themselves.

What are the steps in BPO?

Business process outsourcing (BPO) involves contracting with a service provider (time, material or outcome-based contract) to take over the operations and resources for specific processes.

Companies considering BPO should select a business provider that can be a partner for growth—one that provides technology-infused processes, industry-specific digital accelerators, talent and be well equipped to modernize their services over the time of the contract.

Agreements usually start with an assessment to understand the client’s current process needs and performance. Then a proposal that demonstrates the potential benefits to the client is provided. Parties then enter the contracting phase where the final terms, delivery locations and outcomes are agreed upon. Next, there will be a transition phase where existing processes and resources are migrated to the provider--this phase is either followed by or done concurrently with a transformation phase in which processes are being modernized—process redesign and simplification, automation and AI-infusion. Finally, ongoing governance and optimization of process performance is established.

In some cases, outsourced processes are transferred back to the client after a period of transformation and operation by the vendor.

What are modern business operations?

Modern business operations use cutting-edge technologies, data, talent and collaborative ecosystems to drive innovation, achieve operational efficiency and deliver value to a broad range of stakeholders in a rapidly evolving business landscape. They are built on simplicity, fluidity, creativity and cost-efficiency, and can deliver impact at high speed. 

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