Spend Matters welcomes this guest article by Sameer Bhatia, founder & CEO of ProProfs.
The word outsourcing used to leave a bad taste in many people’s mouths, but the growth of the Internet and advances in technology have led to a whole new type of outsourcing. Rather than outsourcing their manufacturing, which remains controversial in some circles, many companies are now taking advantage of business process outsourcing or BPO.
What is BPO?
The theory behind business process outsourcing is that companies will be more successful if they focus on their core product, rather than trying to do everything related not only to that product but also to running a business in-house.
Former General Electric CEO and chairman Jack Welch once famously said: “Don’t own a cafeteria: Let a food company do it. Don’t run a print shop: Let a printing company do that. It’s understanding where your real value added is and putting your best people and resources behind that. Back rooms by definition will never be able to attract your best. We converted ours into someone else’s front room and insisted on getting their best. This is what outsourcing is all about.”
What Types of Business Processes Can be Outsourced?
The business processes that can be outsourced run the gamut, from payroll, to food services, to arranging housing for corporate travelers and even to customer relationship management (CRM). You can hire a company or an individual to administer your HR benefits, manage your employee training programs, take care of your online technical support services and run your digital marketing campaigns.
In this business environment where talent is becoming harder to find and costs are rising, many companies find that they have difficulty accomplishing all of these types of activities at once. BPO allows them to spend less time, energy and money on non-core business activities so that they can put more time, energy and money toward improving their core activities.
What Are the Benefits of Business Process Outsourcing?
BPO has a wide variety of benefits for companies, beyond merely allowing them to concentrate more narrowly on their core mission.
Here are some of them:
- Increased productivity. When companies focus squarely on their core activities, their efficiency and productivity can’t help but increase, which positively impacts the bottom line.
- Cost savings. BPO can save companies a lot of money. Firms that use business process outsourcing can often get by with leaner teams because they no longer need to engage employees in non-core positions. This is similar to the idea of saving money on software applications by using web-based software-as-a-service rather than purchasing expensive installed software, as well as servers to run it and employees to maintain it. It’s estimated that business process outsourcing can save companies anywhere from 20% to 40% in increased efficiency and reduced labor costs alone.
- More flexibility and mobility. Business process outsourcing companies can often provide degrees of flexibility and mobility that firms on their own cannot. For example, a BPO company that does HR management might be able to provide mobile support solutions that would not be feasible for the outsourcing company.
- Improved business processes. Finally, BPO companies are often more knowledgeable about the business processes they specialize in than are the companies they serve. Indeed, those processes are their core business activities. Thus many firms find that outsourcing these functions results in the activities being performed better and more efficiently than when they were done in-house.
Business process outsourcing is rapidly growing in popularity as online technologies improve and more BPO companies enter into the market. For firms that are looking to reduce costs, increase productivity, and gain more focus, BPO can prove to be an excellent solution.