A Guide to Business Process Outsourcing (BPO)

Jennifer L'Estrange
October 25, 2021

In the last 15 years or so since my first business process outsourcing project, things have changed, not in terms of the overall purpose of outsourcing part of an organization, but rather its accessibility and scope. Today, we are more creative in what we can outsource, how we can slice the processes between stakeholders, and where we can take advantage of labor arbitrage opportunities, including nearshore outsourcing. And BPO isn’t just for the multinationals anymore, scores of companies have popped up around the world, marketing BPO or fractional services to small businesses. 

What is Business Process Outsourcing?

Business Process Outsourcing (BPO) identifies one or more non-essential business functions or processes and outsources some or all of it to an external provider, usually in another location. The goal is to have the right people working on the right thing in the right place.  All types of BPO projects start with some sort of benchmarking exercise that identifies and evaluates opportunities to save on headcount and labor costs. Some BPO projects will look at ways to improve service levels by putting in place an external partner in place of hiring internally.

The Benefits of Business Process Outsourcing

There are many benefits to business process outsourcing. Straight up cost savings is top of mind for most executives when they think of BPO, but efficiency and flexibility are both benefits that can help navigate change and rapid growth more effectively.

Cost-Savings 

Cost reduction is the number one reason that large companies look to outsource. A good BPO partner will be able to manage your processes more efficiently and should save you money over internal personnel costs. For small businesses, the cost savings may be less because the internal headcount reduction may not be as significant. However, the real gain here is either in the expertise that’s coming from the partner or the ability to avoid hiring people for this work in the first place. For small business owners who are currently working with 1099 contractors for support, BPO is a more formalized arrangement, without the risk of employee misclassification.

Increased Efficiency

All types of BPO projects look to improve the quality of services provided through efficiency gains. Simply put, entrusting a specialist to manage the day-to-day operations for a function should accelerate delivery. If you’re looking to do something faster, for example recruiting, this is a great reason to consider outsourcing.

Increased Flexibility

This is sometimes undervalued by businesses looking at outsourcing for the first time, but seasoned business owners and CEOs know that the flexibility that comes from a good BPO partner is worth its weight in gold. A good BPO partner will take over functional responsibility, take a seat at the leadership table, and allow you to focus on the core resources that are truly essential for business growth. If you’re trying to scale, it will literally set you free.

Common Types of BPO Services

While there are many different types of BPO services the following are the most common.

Technology

Information Technology was the first function to leverage BPO as a model for efficiency gains and cost reduction and continues to take the lead as the function most likely to partially or fully outsource. With the ability to serve clients anywhere, anytime, IT BPO can range from level 1 helpdesk support to fully-fledged technical teams supporting everything from application development through to the most sophisticated network infrastructures for a digitally connected workforce.

Human Resources

HR BPO has been around for a while, ranging from PEO’s that take over the employment relationship to sophisticated BPOs that partners with clients to manage the end-to-end employee lifecycle. For small businesses, fractional HR services are the best solution, allowing them to tap into a fully-fledged, experienced HR team at a scale that fits their organizational size and budget requirements. More recently, RPO services have gained traction with organizations that are growing weary of the contingency fee model that is traditionally offered by agency recruiters but do not yet have the size and scale to hire internal recruiters and keep them busy year-round. The biggest win for HR is the flexibility that a BPO offers. The team will scale with you, offering the right skill mix at the right time, without the cost of restructuring as your business model and needs change.

Finance and Accounting

BPO vendors for finance and accounting offer services ranging from bookkeeping to fractional CFO services. For small business owners, this is often where the BPO conversation starts. Outsourced bookkeeping services, often provided through an accounting firm, can take over everything from general accounting and tax preparation to full-service accounts payable and accounts receivable services. Larger more formalized BPO contracts include offshore accounting and tax services, often yielding significant labor cost savings for companies with high transaction volume.

Marketing and More

Marketing and sales outsourcing is more of a recent player in the BPO landscape, however, the coming of age of digital marketing has opened the door to solutions that cover SEO services, digital marketing agencies, and more. Specifically for sales, call centers specializing in both inbound and outbound lead generation offer leverage for businesses looking to scale their sales force quickly and effectively. 

Ultimately, any function that is not directly related to the core business product or service is a possible candidate for BPO, providing a workforce ‘on tap’ that lets you focus on the core function or functions of the business and ultimately scale.

When Should You Look into BPO For Your Business?

There is no perfect time to consider BPO for your business. Most businesses that we work with wish that they had done it sooner, so with that in mind, we invite you to keep it in mind from the moment you make your first hire. Every job vacancy you create should be evaluated through the lens of BPO. Is this position designed to be an internal hire – or are we better served by looking for an external expert who will partner with us to grow?

Looking to Outsource Your HR? Red Clover Can Help!

If you’re considering outsourcing HR – or even hiring internal HR but struggling to find the right person for your business and culture, we can help. Our services range from highly affordable fractional HR support that is uniquely designed for startups and small businesses, to full-fledged HR teams to run the function, strategically and operationally for organizations of up to 500 employees. Contact us.

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