What is business process outsourcing (BPO)?

What is business process outsourcing? Essentially, business process outsourcing (BPO) is the practice of outsourcing key business tasks to a third party. Businesses can outsource a range of important functions, from customer support to IT management. In doing so, companies relieve their own administrative burden, streamline their operations, and even save money.

Business process outsourcing services are used by companies across industries. The practice can benefit companies at any stage of growth. By outsourcing vital business processes to an outside company, large global brands and small businesses alike can cut costs and achieve more efficient business practices. 

Companies that provide BPO services are equipped to handle a range of everyday functions that are integral to operating a modern business. These may be "back office" functions, or those that primarily comprise support and administrative tasks, or "front office" functions, which refer to business operations that, generally speaking, are customer- or public-facing. Understandably, the division between back-office and front-office functions is likely to vary from company to company. 

• Common back-office BPO services: Business process outsourcing services that fall under the back-office designation include administrative tasks like payroll, accounting, human resources, information technology, and procurement. 

• Common front-office BPO services: Processes that fall under the front-office designation include customer service and support, reception, sales, and marketing. In companies that operate in the financial sector, front-office responsibilities may also include advisory tasks such as wealth management and investment services.

Some companies that use third-party BPO choose to outsource the entirety of their administrative programs, while others elect to outsource only a single process. For example, a company might outsource its payroll responsibilities to a company that provides BPO services while keeping other processes — for example, HR or IT — in-house. Likewise, a company might outsource multiple functions while retaining others. 

There are several benefits to outsourcing business processes to a third party, whether you run a large or small business. For small businesses, it's an opportunity to offload important tasks to experts, eliminating the work of learning new skills or hiring employees to perform arcane administrative work. For larger businesses, it can be a shortcut to coordinating operations in an already-expansive company with multiple moving parts. 

Anytime a company outsources aspects of its workload to a third party — especially when that workload involves obligatory functions that are removed from or altogether irrelevant to the functions that keep the business profitable — it's bound to reap the benefits of reducing the workload of whichever departments would typically be responsible for the outsourced tasks. 

As such, those employees have more time to focus on the tasks that directly support the business's core competencies. This is especially true in departments such as payroll or human resources, which often feature monotonous and time-consuming administrative tasks that don't immediately service your company's bottom line.

Whether you run a Fortune 500 firm or a local mom-and-pop heating and cooling business, the benefits of business process outsourcing include: 

• Enhances flexibility and efficiency: Outsourcing processes can make your business more flexible when it comes to managing important day-to-day operations. Primarily, outsourcing means that processes no longer need to be handled in-house. This allows you to revise the way tasks are allocated among staff, which can free up time that can be redistributed to other departments throughout your company. Additionally, companies that provide business outsourcing services are staffed by experts who have an in-depth understanding of the best practices for managing business processes and access to newer tools and technologies for doing so. This can infuse your operations with innovative methods for handling the processes you've outsourced, making your business more efficient.

• Cuts costs: By outsourcing common business processes to a third party, you eliminate the need to perform those tasks in-house. Understandably, this eliminates the need to hire staff to perform those duties. Businesses can save money on employee salaries and benefits, as well as on hiring, onboarding, and training new employees, as BPO companies hire their own staff and handle the associated costs.

• Reduces in-house workload: Whether you use BPO services for all or only some of your business needs, the reduction of back-office and front-office work that must be handled in-house is a huge benefit for the relief it can bring to beleaguered departments. For example, partnering with a BPO company to manage your international hiring practices can lighten the workload for your HR department, enabling it to focus on your domestic hiring processes. Additionally, BPO companies will be up to date and well-versed on relevant laws and regulations regarding international hiring (to use the same example), alleviating the time and resources your in-house HR department typically would need to spend on those matters.

But what is BPO's biggest benefit? In short, business process outsourcing helps companies become more efficient so they can achieve their most important business goals. For that reason, if you're considering enlisting a company for business process outsourcing, it's important to choose one that offers services that align with the needs of your business. If bookkeeping is the only process you need to outsource, seek out a BPO company that specializes in accounting. If you're planning on outsourcing multiple processes, a larger company with more expansive offerings is the way to go.