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BPO (Business Process
Outsourcing)
Business process outsourcing (BPO) contains the
transmission of processes along with the associated operational activities
and responsibilities, to a third party with at least a guaranteed equal
service level and where the client contains a firm grip over the (activities
of the) vendor for mutual long term success. BPO is positively related to
the search for more efficient organizational designs: cost reduction,
productivity growth and innovative capabilities. Hence, a source for
strategic advantage.
Traditionally, BPO is undertaken by manufacturing firms. For instance Coca
Cola, where almost the entire supply chain is outsourced and the company is
essentially becoming a marketing organization. However, BPO is nowadays
rapidly conquering the service oriented firms as well. A well-known example
is provided by the Bank of America, who outsourced their entire HR function
to Exult, one of the leading Human Resources BPO vendors.
BPO is often divided into two categories: back office outsourcing, which
includes internal business functions such as billing or purchasing, and
front office outsourcing, which includes customer-related services such as
marketing or tech support. The endless opportunities IT provides, stimulates
(cross-border) BPO activities. BPO that is contracted outside a company's
own country is sometimes called offshore outsourcing. BPO that is contracted
to a company's neighboring country is sometimes called nearshore
outsourcing, and BPO that is contracted within the company's own country is
sometimes called onshore outsourcing. The most common examples of BPO are
call centers, human resources, accounting and payroll outsourcing.
Use of a BPO as opposed to an application service provider (ASP) usually
also means that a certain amount of risk is transferred to the company that
is running the process elements on behalf of the outsourcer. BPO includes
the software, the process management, and the people to operate the service,
while a typical ASP model includes only the provision of access to
functionalities and features provided or 'served up' through the use of
software, usually via web browser to the customer. BPO is a part of the
outsourcing industry. It is dependent on information technology, hence it is
also referred to as information technology enabled services or ITES.
Knowledge process outsourcing and legal process outsourcing are some of the
subsets of business process outsourcing.
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