Full Form of BPO
Business Process Outsourcing
BPO Full Form is Business Process Outsourcing. BPO is a practice that refers to the procedure of companies and businesses giving contracts to a third party in order to perform particular tasks or processes on their behalf.
BPO can be divided into two types – front office and back office. A back office process might involve in outsourcing logistics, billing, HR, payroll, etc. Front office outsource includes customer service, technical support, advertising, marketing, etc.
There could be various reasons why companies opt to use BPO services. It could be to cut down cost or due to the mere fact that they do not have a particular field of expertise for which they outsource specific tasks. Some of the segments of BPO include:
- ITES-BPO – Information Technology Enabled Service
- KPO – Knowledge Process Outsourcing
- LPO – Legal Process Outsourcing
Philippines recently surpassed India in 2010 and became the largest BPO industry in the globe.
BPO Full Form – Additional Information
One of the most common forms of activities that big companies, both national and multinational engage to provide a clearer and more effective mechanism of working is Business Process Outsourcing (abbreviated as BPO). These services are essential to regulate additional affairs of the company like bills, customer queries, marketing, etc.
These services take on the jobs that the core members of the company cannot discharge because of other tasks to undertake. While many people seem to undermine the potential of BPOs, there is no gainsaying that the functions discharged by BPOs have great relevance in the affairs of the company, in one way or another. However, before we engage ourselves in BPOs, we shall discuss briefly what outsourcing is.
A popular term in the business world, outsourcing refers to contractual obligations that arise when a business process is given to a third party to conduct. The term outsourcing is believed to have come from the term ‘outside resourcing’ and it supposedly finds its first mention in the year 1981. In outsourcing, employees are often transferred from one company or firm to another company or firm but this is not a necessary feature of the company.
Many understand outsourcing as a tool for transfer of control over public services to private for-profit institutions. One of the main reasons for outsourcing is to reduce the cost of labor. Outsourcing has been a subject of controversy in many countries, particularly developing countries from where a handsome amount of working population is outsourced.
Now that we have briefly dealt with outsourcing, it would be less complicated to understand the purpose of Business Process Outsourcing (abbreviated as BPO). Business process Outsourcing, hereinafter it shall be referred to as by its abbreviated term BPO, is a contracts based system wherein contractual obligations are appended to third party service providers, who, by virtue of this contract, carry out certain business related tasks of the main company.
A BPO is incorporated by a company not as a tool for strengthening their positions in market but certainly to carry out certain tasks that a company invariably needs. It is kind of a sub category of outsourcing in which specific business operations and related responsibilities are contracted to a third party service provider. It is often associated with multinational manufacturing companies like Coca-Cola, HCL, and many big technology firms etc. These companies conduct outsourcing operations in large numbers.
Generally, the BPO is characterized into two categories namely back office outsourcing and front office outsourcing. In back office outsourcing, the task is to perform internal business functions and other related operations and such operations include tasks involved in human resources, financing and accounting.
The latter, which is front office outsourcing, customer-specific services are provided and often these centers act as zones for advertisements and addressing of customer queries. There can be offshore outsourcing and nearshore outsourcing. In offshore outsourcing, the BPO is conducted from outside the country where the company’s main office is located. In nearshore outsourcing, the BPO is conducted a neighboring country of the country where the main office of the company is located.
While firms engaged in different types of business activities operate BPOs, the most common business processes are based on Information Technology (abbreviated as IT) which are known by the name ITES-BPO (which expands to Information Technology Enabled Industry Service), Legal process Outsourcing (abbreviated as LPO), and Knowledge Process Outsourcing (abbreviated as KPO). LPO, also known as Legal outsourcing, refers to a common practice that law firms engage themselves in where legal support is attained from outside the firm from a legal support service provider.
The most common works offered in LPOs are drafting of plaints, clerical works, research works, review of legal documents, etc. In KPO, high levels of specialized skills are needed, as it deals with outsourcing of crucial information specific business activities. Regions like Sri Lanka, India, Eastern Europe, have a large number of KPOs. KPO is understood as an extension of BPOs but with greater complexity in the discharge of functions accorded to them. For a successful stint in KPOs, tremendous support and guidance is required from inter-organizational system. In a jist, all these are the most commonly known outsourcing forms. Now let us explore certain aspects of BPOs and this discussion shall provide a clearer picture about this category of outsourcing.
The Benefit of BPOs
Let us begin with our core discussion with the benefits or advantages of having operations of BPOs. The primary benefit of any BPO is that a BPO is helpful in maintaining and improving the flexibility of a company. This is, however, subjected to the perception of organizational flexibility peculiar to every company.
Every company has its own distinct understanding of organizational flexibility. In the early 2000s, the companies engaged themselves with BPOs for the purpose of saving money. However, with dramatic improvements in technology, the companies have changed their outlook, with their focus more on quality controls and greater flexibility regime. Thus, the flexibility that BPO enhances depends upon the kind of organizational system of a company.
Many BPOs use models like fee-for-services, Remote-in-sourcing, and other prevalent models. The viability in switching from one model to another allows greater flexibility and reduction of expenditure of companies. It helps in the transformation from fixed to variable costs, which refers to a structure key in making an organizational system responsive to changes and this does not require the company to invest in assets.
With the help of BPOs, the organization is able to focus more on core competencies without being hurdled by the requirements and restraints coming from upper echelons. Having BPO operations relieves important employees from tasks, which are not core or essential to the administration of business, and this ensures investment in development of focus areas. Thus, a BPO is essential in segregation of core and non-core administrative functions of a company. BPOs, in turn, can utilize their resources in strengthening relations with customers, promoting business activities, and other functions that, though non-core, are still important.
Another way in which BPO benefits the company’s organizational flexibility is by improving the business processing speed. Adequate utilization of supply chain managers, partners help in increasing the business processing speed. This is particularly important in case of a BPO engaged with a manufacturing firm.
BPO can be credited to facilitate the companies to work upon their business capacity and speed. These core areas are often comprised with when the business of the company expands and key employees are overburdened with non-administrative tasks. This way BPO helps in developing managerial and greater administrative skills among key employees and contributes in the improvement of the health of the company.
Thus, BPO performs important functions, which, though often undermined by general public, have immense contribution in the development of the administration of the company. Flexibility is an asset to any organization and BPO are important in maintaining it.
Limitations with BPO
While there are many arguments that show that there are multifold advantages with BPO, there are also certain limitations with which BPOs work. Although BPOs contribute in enhancing the flexibility of the organizational structure, there are many issues that the management must keep in mind while handling BPOs.
Of all the issues that the management must keep in mind, some of them are that there can be instances that BPOs fail to meet the requisite levels of service, ambiguous issues arising from contractual obligations, unforeseeable changes for which the BPO is unprepared or poorly prepared, etc.
There can be regressive results as well, if the company relies too much upon BPOs. The flexibility for which the BPOs are conducted may be reduced. All these issues must be discussed upon and decided beforehand otherwise the future consequences would be detrimental to the financial health of the company. Manage it well and BPO is a boom.
Risks involved in BPOs
There are many risks involved when the companies are engaged with BPOs. For example, Outsourcing in Information-related areas may result in potential security risk both from a privacy and communication perspective. There could be underestimation of the total expenditure in this whole contractual adventure, which may cause constraint relationships between the company and third party service provider.
In the technological fields, the industrialists have indentified Robotic Process Automation (abbreviated as RPA) as one of the major threats to the BPO industry. Thus, it becomes important to minimize risks pertaining to engagement with BPOs.
To avoid any potential harm from such risks, a Business Continuity Management (abbreviated as BCM) is used. The model is based on step by step methods to control and minimize risks that result from outsourcing. This model helps in successful identification of risks and provides for mechanism for reduction or elimination for the same.
There is another model that provides a framework for reduction of such risks, which works on Analytic Hierarchy Process (abbreviated as AHP) and helps in streamlining and organizing complex decisions.
India is one of the countries where maximum number of BPOs function. The country generates revenue of about US$10.9 billion from offshore outsourcing (BPO) and about $30 billion from the Information Technology sector alone. This makes India as one of the greatest sharer of the BPO industry in the world, with about 6 to 6 percent share. Major BPO centers in the country are Gurgoan, Kolkata, Chennai, Bangalore, New Delhi, and Mumbai.
India controls about 63 percent of the offshore market. Other countries like South Africa and the Philippines are gradually becoming strong contenders to Indian stronghold. It is estimated that by the year 2016, the Philippines will have more 1 million employees in the BPOs and it is expected to generate revenues amounting to $25 billion.
While BPOs are not very popular in western countries, there has been a marked increase in the BPOs in Eastern Europe. Despite the shares of Eastern Europe is starkly low but there is marked increase in the BPOs as pointed by out many multinational companies.
There are many factors that contribute in the development of BPOs in that region such as high quality of academic educational facilities, knowledge in different languages like Italian, German, French, etc. China, too, is attempting to promote development of BPOs though the development is sluggish and not many significant improvements have been recorded as of now.