Business process outsourcing (BPO) is a strategy that has become a mainstay in modern-day trade. Due to the ease of remote working, software companies can outsource to any country worldwide. The primary benefit of outsourcing business processes is saving money. However, there are many other benefits to outsourcing business processes. There is a new outsource business process guide every company should have. Read on to find out more about outsourcing business processes.
What Is Outsourcing of Business Processes?
Outsourcing business process is where a firm moves a fraction of its business operations to a secondary location. A company typically hires an outsourcing services provider to perform a particular function or business process. It can help the business employees to focus on the company’s essential tasks like branding and investing while the outsourcing party handles the other business operations.
Businesses need to consider the business process they want to outsource seriously. Moreover, the firm’s managers must determine whether outsourcing offers the company enough value. If the returns are high, outsourcing business processes can be rewarding.
Types of Outsourcing
Business process outsourcing is a widely used term that covers many things. The following are some of the most common types of outsourcing:
Back Office Processes Outsourcing
Back office operations are usually the first to go whenever a software company outsources them. These are processes that do not include the customer. Back office processes may include IT services, accounting, payroll, and quality assurance.
Back office processes are typically tasked the firm must pay employees to perform. Since they are so simple, a company can save much money by outsourcing them to a location with cheaper labor. However, they can still get quality services while the firm’s employees focus on core tasks.
Front Office Processes Outsourcing
Front office processes are those that involve the firm’s customers. These processes can still be outsourced to a third-party vendor. These services may include customer care, tech support, and web development.
Companies will outsource front-office business processes when it is cheaper than having in-house employees do them. Cutting costs to increase profits is a priority of every business. They will also do it if the process requires technical expertise, which the company does not have.
Offshore Business Process Outsourcing
When most people think of outsourcing business processes, they think of offshore processing. Most software companies also engage in offshore outsourcing. Offshore outsourcing refers to outsourcing business processes to a third-party vendor in another country, often in Asia, where there is cheap labor. As long as you do not share a time zone with the vendor, it is offshore outsourcing.
Companies will outsource their business processes offshore because it is cheap due to low-cost labor, political instability, availability of resources, and tax incentives, among other reasons. Offshore outsourcing has its downsides, with the lack of control being the main one. Language, political and cultural barriers are also cons of offshore outsourcing.
Nearshore Business Process Outsourcing
Nearshore outsourcing is where a firm outsources its business process to a third-party vendor. However, the vendor is near the United States shores and in the same time zone. For example, a US software company can nearshore business processes to Mexico, Canada, or Puerto Rico.
Most companies use nearshoring to take advantage of specialized companies, offering them a competitive advantage in pricing. Nearshoring also gives companies more control over their operations than offshore outsourcing. Nearshoring will not be as cheap as offshore outsourcing, but it often has better results.
Companies need to consider outsourcing some of their business processes seriously. Doing so is beneficial in myriad ways, as you can see above, but there are also downsides. An evaluation of the company’s processes is necessary to determine which is the best to outsource.