What Is the Difference between ITO and BPO?

Geri Terzo
Geri Terzo
ITO professionals must be skilled to recognize technology capabilities that are needed at a particular organization.
ITO professionals must be skilled to recognize technology capabilities that are needed at a particular organization.

Business process outsourcing (BPO) and information technology outsourcing (ITO) both represent ways that a business can reach beyond its own capabilities and introduce another provider for support. Each of these providers have unique roles, but there is some overlap as well. Essentially, a company turns to ITO and BPO providers to create more efficient work flows. An ITO provider should create cost savings tied to computer networks and other information technology systems, while a BPO provider's services should lead to greater operational efficiencies in most all areas of a business.

A business may turn to hire both ITO and BPO providers. The scope of services offered by both of these providers is different, and one does not eliminate the need for the other. Also, on average, there is no rivalry between the types of services offered by BPO and ITO providers.

Unless financial savings are uncovered relating to technology systems and procedures, an ITO provider has not made a difference. Once a BPO provider has been hired, improvements in business processes that may lead to greater financial results at a business must be realized in order for that service to be deemed a success. The efficiencies attained through a BPO provider could be tied to human resources, finance, or really any operational area of an organization that is part of a company's core business.

Although ITO and BPO services are designed to complement one another, it may make sense for an organization to adopt one before the other. Introducing an ITO provider first can lead to the quickest financial savings, which is a good place to begin. An ITO provider does not need to remain engaged over the long term, as after potential cost savings are identified, those changes can be appropriated by the business. Once any cost savings are realized, the conditions may be ripe for a BPO provider to enter the scenario and create greater operational efficiencies throughout the organization.

Other differentiating factors between ITO and BPO firms include the expertise behind each provider. ITO professionals are skilled to recognize the types of technology capabilities that are needed at an organization, ranging from storage to support to wireless services. Providers should be able to negotiate costs and terms or streamline services based on the knowledge that these industry professionals possess. BPO providers perform specific tasks on behalf of an organization, such as customer service, accounting, or personnel management.

What Are Examples of ITO and BPO Services?

Although they serve similar functions, ITO and BPO services are still quite different. Here are a few examples of ITO and BPO services.

ITO

With ITOs, the only parts of a business process that gets outsourced are the IT services.

Tech Support

An ITO service can provide you and your customers with the technical support necessary for using any programs or services you offer. This includes remote support, technical troubleshooting, and chat support.

Infrastructure

IT infrastructure includes all the hardware, software, and services required to keep your company up and running. For example, web servers, storage, software, and physical components would all fall under the umbrella of infrastructure, along with their necessary support.

Application or Software Development

If your company needs an app, database, or program designed, you can outsource to an IT developer who can handle it for you. Outsourcing development will let you put your content in the hands of professionals who can create the best solution for your purposes.

BPO

BPOs offer you the ability to outsource an entire business process. That includes any technology related to the process, including software, customer service, and so forth.

Payroll

Payroll is the most common area where companies choose to outsource. A payroll BPO will handle all of the financial aspects of paying your staff and free up time and funds in your organization to focus on business.

Customer Services

Some companies will utilize answering services to streamline inbound calls. In addition, BPOs that offer customer services can handle appointments, telemarketing, and order processing, among others.

HR Services

There are several human resource services that a BPO can help with. In addition to payroll, examples of HR services you can outsource are worker training, health and retirement benefits, hiring, and leave time.

How Many Types of BPO Are There?

There are five types of BPO:

Back Office BPO

Back office BPO services include the services that make a company run. These services include payroll, human resources, technical support, and so on.

Front Office BPO

Front office services include all outward-facing parts of a business. For example, answering services, customer support, and marketing services fall under the Front Office category.

Offshore BPO

Offshore services are BPO consultancies based overseas. Companies looking to cut costs or get certain tax benefits will use offshore BPOs.

Nearshore BPO

Nearshore BPO services are services offered in nearby countries. For example, Canada and Mexico would be likely options if you live in the US. Similarly, if you lived in England, you might outsource to France.

Onshore BPO

Onshore BPOs, or domestic BPOs, offer services to local clients. Local clients could be within the same city, state, or country.

How To Open a BPO Consultancy

There are a few steps you’ll need to take if you want to start your own BPO consultancy.

1. Find Your Speciality

Many BPOs offer dozens of services. However, that doesn’t necessarily mean your BPO should. Take a look at your sector, find which areas are lacking, and focus on those.

2. Create Your Business Plan

To acquire the funding you’ll need to start your consultancy, you’ll need to create a business plan. Your business plan will require a lot of research, and it must encompass every aspect of your BPO.

Just be aware that a business plan can and should evolve. Your industry, targeted customers, and company needs will change over time. Adjusting your business plan accordingly will help keep up with those changes.

3. Get Your Paperwork In Order

Starting up any business will require a lot of paperwork. Necessary paperwork will apply to laws, taxes, and specific registrations and regulations that will vary from country to country and one industry to the next.

4. Determine Your Needs

A BPO will require specific resources to run. Those resources might include:

  • IT hardware
  • Office space
  • Office furniture
  • Internet
  • Phone lines

In addition to the essential items listed here, you’ll also need equipment that’s specialized to your industry, such as software.

5. Choose Your Staff

Choosing your staff is perhaps the most critical part of starting your BPO.

First, you’ll need to determine what type of staff you need. What will your employees' roles, qualifications, and experience levels be?

Once you determine those things, you’ll need to determine how many people you can afford to hire and at what rate. If you want high-quality staff, you’ll need to be able to offer competitive rates.

6. Get the Word Out

Once you’ve submitted the necessary paperwork, purchased the required equipment, and hired your staff, it’ll be time to let people know about your business. This will involve a solid marketing plan and outreach. Still, marketing is the best way to get the word out that your business has entered the industry.

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Discussion Comments

Rotergirl

Outsourcing customer service has proven to be a terrible idea over and over again. I can't imagine a company in France, for example, turning over their customer service to a group of people who speak French as a third or fourth language. No, they want native French speakers to do their customer service.

I cringe when I get an "accent" on the other end. Not because I dislike people from other cultures -- far from it -- but there is inevitably a breakdown in communication. They don't quite understand what I'm asking, and won't go off-script to help me. Frustrating doesn't even begin to cover it.

Pippinwhite

Both of these are *bad* ideas, by and large, especially for a company with a local presence.

ITO is a terrible idea. Outsourcing technology is just a bad idea. It never works like it's supposed to. My company has another branch about 40 miles away, and the bulk of the technical support is in that office. We have a great IT guy, but it stinks when we have a real problem, he can't fix it and has to call one of the guys to make a 40-mile drive. I can't even imagine what it's like if the tech support is in another country! Sometimes, you have to get your hands on the machines to fix what's wrong.

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    • ITO professionals must be skilled to recognize technology capabilities that are needed at a particular organization.
      By: .shock
      ITO professionals must be skilled to recognize technology capabilities that are needed at a particular organization.