Business Process Outsourcing (BPO) is a fantastic way to cost-effectively scale a business. The ability to offload many recruitments and onboarding tasks is a significant timesaver that can free up focus time for your leadership team. With an outsourced model, the applicant pool is increased, and you don't have to struggle with tax or employment laws as you expand to new regions.
Your company still needs to consider security and customer apprehension around third parties accessing sensitive data and risks of attrition and loss of control over the team. Balancing these concerns will be the determining factor to success or failure with an outsourcing partner.
What is BPO?
Business process outsourcing (BPO) is a method of providing a variety of services using a third-party partner or vendor. BPO companies specialize in finding talent across multiple geographies and with various skills that allow you to focus on your business as they handle recruitment and logistics, such as scheduling and performance management.
Often associated with call centers or customer support, BPO services have expanded to cover many uses, including content creation, trust and safety, marketing, and lead generation, depending on the vendor you choose.
In this post, you'll learn everything you need to know about outsourcing — its advantages, disadvantages, and why you might consider using BPO software.
Types of BPO Companies
Cost is one of the first considerations when evaluating BPO companies. Although it's a determining factor, the types of these companies are distinguished by their location. The options are onshore, near-shore, and off-shore. Some companies offer three while others only offer one.
Also known as local outsourcing, onshore operates in the same country where you operate. This type of outsourcing usually costs more; however, its advantages include an easier find for culture and language fit.
Near-shore outsourcing operates in the same geographic region or in very close proximity. For example, Canadian or Mexican BPO companies would be near-shore outsourcing options to the United States. This approach might save you some money but often doesn't allow for expansion into other time zones.
Off-shore outsourcing is typically the first type discussed when exploring BPO options. This type of outsourcing has the advantages of lower cost, time zone expansion, and broader language availability but has the disadvantages of more complex communication and higher security requirements.
The Disadvantages of Business Process Outsourcing
Although BPO services will allow you to cut costs and free up time to focus on other tasks, they also come with some potential disadvantages to consider.
Security and Compliance
One of the most important considerations is ensuring the security of your data and the compliance of your processes. When choosing a BPO company, always ensure their standards meet your needs.
Depending on your business, you might require compliance with HIPAA, GDPR, SOC2, or other standards. Also, consider the internal data, system data, intellectual property (IP), or customers' personal identifiable information (PII) the team will access. Make sure there are clear answers to questions like:
- Can this data be given to a third party?
- Does it need to be obfuscated?
- What contractual obligations and penalties have to be in place to protect the business and customers?
Security should always be top-of-mind, especially when you involve a third party.
Customer Satisfaction and Quality
Outsourcing is often associated with impacting customer satisfaction and response quality. This sentiment often stems from BPO call centers used by large corporations — like telecom companies — because they are commonly used services. However, this is not the norm for all BPO services.
You've likely worked with multiple BPO employees without being aware. With the right BPO partner, the customer experience won't deteriorate by a noticeable amount. They achieve this through robust support ticket Q&A practices that adjust as you scale.
When transitioning to a BPO, increase your focus on customer feedback to ensure there are no glaring concerns. The best way to do this is to work in advance with your BPO vendor to ensure clear expectations of what service level agreements (SLAs) you want to see and who will measure them. Coupled with less direct control over your team, this alignment will significantly improve your chances of success.
Costs, Engagement, and Attrition
Low cost shouldn't be your only goal. Sure, low cost is attractive, but that means lower-paid employees, which may mean lower employee engagement and higher attrition. Outsourced teams may not know or even have access to your business or industry knowledge.
This discrepancy can cause a lack of motivation or reduce the ability to see the corporate vision. These aren't attractive traits to have, especially in customer-facing work. Consider more than the salary of the BPO employee compared to an internal employee. Look at the costs of recruitment, equipment, training, and management, as well as a vendor's expertise.
It's likely that even if you choose a vendor with higher rates, you will still see savings and avoid issues with attrition and engagement.
Another significant struggle is navigating the added complexity of a BPO vendor relationship. While the outsourced employees are working with you and your customers, it's crucial to recognize that they aren't your employees and don't report to anyone in your organization.
This structure means that coaching, discipline, promotions, and even team announcements need to include extra communication with your vendor. It's critical to protect yourself from co-employment concerns, where there's confusion over who the employee works for, as those can result in legal issues.
Of course, time zones and language barriers also may increase communication struggles. The importance of accessible, asynchronous communication increases when using BPOs. For example, Slack may not be a great choice to send an important team message if a portion of the team is not even awake when the message is sent. Each BPO company will have its guidelines for how communication should work and best practices to follow. Make sure you align on these as part of your research.
The Advantages of Business Process Outsourcing
There are many reasons why you would choose to use a BPO company to help grow your business. Each BPO company will offer solutions to some or all of the following:
The most often cited reason to outsource is cost-efficiency. By utilizing different labor markets, BPO companies specialize in hiring talented employees at a lower cost. Tasks like handling IT help desk calls, offering first-tier support, or content moderation have high repeatability but still require a human touch. Outsourcing these activities can allow your higher compensated team to focus on more complex, in-depth issues while providing a high-quality service across all functions.
As your company expands, you might require marketing materials or customer-facing services in multiple languages. BPO vendors are set up to quickly hire in many countries with locals who can provide services in their native language. The advantage to this approach is that you don't need to set up foreign entities or have recruitment staff or paid recruiters who can assess the language skills correctly. Instead, the BPO company will handle the hiring, language tests, and skills assessments on your behalf.
As with language, a scaling business often needs around-the-clock services. Services such as 24/7 support or business development in new geographic locations can be provided more quickly by a BPO. They also have a strong knowledge of staffing models to best cover different holiday schedules, redundancy for sick leave and vacations, and task hand-offs. This arrangement lets you have people working in their local hours instead of attempting shift work in your local teams. Leaning on a BPO partner can help your business thrive as you expand globally.
Seasonality and Flexibility
Depending on the nature of your business, you may need short-term staff to help you cover busy seasons or unforeseeable spikes in demand. Many BPO companies can quickly scale up temporary teams or provide shared services where employees aren't specific to your company but are available to help as required. Once again, this saves you recruitment costs, training costs, and other onboarding/offboarding inefficiencies.
When you're scaling rapidly, hiring never seems to end. The time taken to interview, onboard, and professionally develop these hires, and expand your leadership team to maintain a healthy leader-to-direct report ratio is significant.
Often, BPO vendors have people assessed and waiting for the right role or have internal hires looking for new opportunities that can transition in days. It's also in the best interest of a BPO to continually develop their employees and provide high-quality services so that you want them to scale along with you. Trusting a BPO company to handle these tasks will give you the same level of expertise, just faster.
What is BPO software?
To facilitate the process of using BPO call centers or services, your company might choose to integrate your system with a business process management software. BPO software like Kissflow, Pipefy, and Appian help companies streamline their workflows by defining, deploying, and managing automated business processes.
When evaluating BPO software, features to consider are:
- Automations - BPO software should enable your company to eliminate repetitive tasks to increase workflow speed and accuracy.
- Integrations - With the growing number of business apps and databases, integrations offer a seamless experience for employees and customers.
- Workflow views - Outsourcing business tasks and processes can create security issues; however, multiple workflow views give you more control and visibility over your company's progress.
- Scalability - As your business changes or grows, the scalability of BPO software allows your workflow to adapt.
The goal of implementing BPO software is to make outsourcing easier to manage while creating a constant, stable system for internal and external business parties.
Should you use BPO services?
Overall, if you're in a business that's expanding fast, needs to reduce cost, or needs to expand its scope, you should research BPO companies to see how they will deliver your desired business outcomes.