What Is BPO?
Despite the quite clear definition of BPO as the transfer of any processing activity to outsourcing, this term corresponds to narrower areas of outsourcing. For example, the company wants to outsource industrial production which is the fact that this type can be distinguished as a separate form of production, or simply out, industrial outsourcing.
Most often than not, the BPO refers to the outsourcing of high-level processes, which require more knowledge and experience from workers. Usually, such processes encompass personnel, accounting, marketing, logistics, financial management, or legal support of organizations.
What happens to market functions when outsourcing? Outsourcing as a form of business has a dual impact on market relations. On the one hand, outsourcing transfers the former internal processes that were not included in the system of commodity relations within the company into the market. On the other hand, outsourcing undermines market relations. In outsourcing, the price of a service is determined before the start of its provision and for a long period. In addition, with simple buying and selling, market transactions are free of charge, and with outsourcing, a contract must be entered into, hence there are contract costs. Thus, outsourcing is a symbiosis of the market and non-market relations.
Outsourcing as a business model involves the conclusion of long-term contracts, during which the economy manages to go through several cycles, and accordingly the business priorities of the customer's management change (for example, reducing the cost of increasing productivity).
The advantages of using BPO can be equal to the advantages of outsourcing specific tasks. Obviously, the main goal is to reduce costs which is the same for both forms of outsourcing. Basically, it is achieved by means of the contractor who is more experienced in business processes or tasks being transferred. However, unlike outsourcing of tasks, the cost savings are more significant in the case of BPO. Moreover, it is achieved in the long term and with more serious initial preparation.
Besides, cost reduction can be not the main incentive to use BPO. The desire to make controllable and predictable expenses can serve as the main reason to apply to BPO. Obviously, predictability of costs is achieved through clear financial terms set out in the contract and service level agreement (SLA).
Business Process Outsourcing Models
Business process outsourcing is the conclusion of a contract with a third party organization to transfer under its responsibility for the implementation of the business process in question.
Business process outsourcing is not new. Enterprises of various sizes and various forms of ownership acquire standard discrete processes from external suppliers: accounting, preparation of tax reports, factoring operations, etc.
Such models make it possible to reduce costs. Today, this is not enough, and therefore business process outsourcing is developing towards organizing a new business process model based on strategic partnership between an enterprise and an external organization.
There are three main models of outsourcing:
● Traditional outsourcing. The enterprise transfers its supporting processes to the responsibility of service providers in order to reduce costs and focus on the implementation of the main business processes.
● Joint outsourcing. Enterprise partners with a service provider to improve their business processes to reduce costs and increase the flexibility of the management system.
● Outsourcing with elements of the reorganization of the network of business processes. The company joins forces with partners to achieve sustainable improving the performance of the enterprise.
When considering business process outsourcing, four classes of tasks arise:
● selection of processes for outsourcing;
● choice of outsourcing model;
● choosing a service provider;
● organization of the process of transition from a traditional model of work to a model using outsourcing.
According to experts, 42% of enterprises outsource IT services, 31% ⏤ personnel training, 22% ⏤ supplies, 20% ⏤ personnel accounting, 18% ⏤ accounting and finance, retaining the function of monitoring the results.
What are BPO services for business? There are several classic examples of business process outsourcing for large enterprises:
● Outsourcing of HR processes ⏤ delegation of the functions of personnel selection (including outstaffing and personnel leasing), payroll accounting, tax reporting;
● Outsourcing of call centers, outsourcing of processes in the field of customer relations ⏤ the processing of telephone calls is transferred, etc.;
● Outsourcing of accounting processes ⏤ delegation of authority for calculating wages, issuing primary documents to counterparties, executing bank payments, etc.;
Thus, business process outsourcing is developing along the path of transferring the supporting (auxiliary) processes for external execution, while preference is given not to single processes and the network of business processes of the enterprise. Small businesses have been using the traditional outsourcing model for a long time. However, to form the competitive advantages of the enterprise, it is necessary to apply other models of business process outsourcing (for example, with the reorganization of all enterprise processes), and
consider the issues of outsourcing auxiliary business processes.