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What Are the Different Types of BPO Models?

By Peter Hann
Updated May 16, 2024
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Business process outsourcing (BPO) models vary according to the BPO provider and the BPO customer. Enterprises outsourcing some functions have different goals and different expectations of the BPO models used. A company may not wish to outsource an entire function, such as customer service, but only particular tasks and transactions within that function, keeping management of the function in-house. Wider BPO models would involve a larger portion of the tasks within a particular function being outsourced to a specialist provider; the objective would be to gain the expertise of the outsourcing company in that area. Another type of outsourcing contract would involve a comprehensive BPO model in which whole functions are outsourced to the BPO provider.

In a limited outsourcing model, the BPO contract would limit the BPO service provider to specific tasks. The purpose of this limited transactional outsourcing might be to benefit from specialized skills offered by the outsourcing company or to reduce the costs associated with that task. In a wider BPO contract, the BPO provider would deal with a number of functions in areas such as customer service or central administration. The contract with the BPO service provider would outline the responsibilities of the BPO provider and the BPO customer in relation to those functions.

Much more comprehensive BPO models are possible in which the BPO provider takes over the responsibility for an entire function. This model is useful for an enterprise that is unable to perform these functions in-house and needs access to the skilled people and appropriate technology to perform the task. The company using this comprehensive BPO model can concentrate on its core functions without the distraction of non-core tasks and could benefit from the lower costs of the BPO service provider that result from economies of scale. This type of model is useful for a small enterprise or a start-up company that needs to develop its product and grow the business. This type of BPO arrangement might be put in place for a relatively long term of five years or more.

BPO models also could be categorized as offshore, near-shore or onshore models. An offshore model might offer advantages including low costs and specialized services and is often used by relatively large companies for sizeable customer functions such as call centers. An inshore model would involve a BPO service provider in the same country as its client enterprise and be of benefit to that client because of the specialization and infrastructure of the BPO provider. A variant of the onshore model would be a near-shore BPO contract, in which the service provider is in a nearby country.

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