At SmartCapitalMind, we're committed to delivering accurate, trustworthy information. Our expert-authored content is rigorously fact-checked and sourced from credible authorities. Discover how we uphold the highest standards in providing you with reliable knowledge.
Business process outsourcing (BPO) is the practice of using a third party, contracted to perform specific, specialized processes on a company’s behalf. Although “outsourcing” in its most basic form has been used for decades, such as when a business uses an outside accountant to balance the books, it has become a practice used by the majority of businesses and large companies, on a much larger scale. By outsourcing certain aspects of “doing business,” the company can focus on its primary purpose, whatever that may be.
There are two primary types of BPO: back office and front office outsourcing. Typical back office processes that may be outsourced include payroll, billing, logistics and human resources. Some companies offer their services in collections, credit analysis and job recruitment. More than ever, processes that one would never think would be outsourced, such as claims processing at an insurance company, are being outsourced to separate companies. Examples of front office outsourcing include technical support, customer service, marketing and advertising.
The foreign call center has become one of the most reviled aspects of BPO, with many located in different parts of the world. Where most companies once touted their customer service as something they took pride in, many customers find themselves having to explain their problems to someone has little vested interest in the company. Outsourcing or “offshoring” customer service to countries such as India saves the company a lot of money and improves their bottom line. Some of the biggest complaints customers have with foreign call centers are heavy accents and obvious scripting.
A company may utilize BPO due to cost considerations, or simply because they do not have the expertise to deal with certain aspects of business. Many companies have come under criticism for using BPO to cut costs, especially in regards to call centers. Companies in western countries, particularly the United States, are finding that countries like India offer the services they need at an excellent price. This is due to the fact that many of these countries have a well educated labor pool, high unemployment rates and a low cost of living. In India, which had approximately 63% of the offshore BPO market in 2006, labor is cheap, and employees are sometimes better educated than higher-paid workers in the US.
Many opponents of BPO lament the fact that western workers are losing jobs to foreigners faster than they are being replaced. While many companies are improving their bottom line by outsourcing, they are facing harsh criticism by consumers for the decline in quality of customer service. Employees may find an outsourced human resources department less accessible than an in-house one. Although BPO may be profitable now, consumer and employee backlash coupled with government restrictions or taxation on the practice may reduce its popularity.