Originally published in Forbes by Mark Thacker, January 8, 2021
In business process outsourcing, or BPO, subcontractors perform essential business operations in lieu of using internal staff. While many businesses have used external service providers, including freelancers, independent contractors and large-scale third-party enterprises at some point, the use of BPO has continued to expand. I expect this trend to escalate year-over-year as businesses of all sizes experience the benefits of business outsourcing firsthand.
The Growing Scope Of Business Process Outsourcing
While it was once the domain of entry-level tasks or one-off projects, BPO continues to evolve. Outsourcing processes, such as data entry, call center operations and payroll, have long been accepted as budget-friendly operations and management alternatives, but larger-scale business operations are now expanding the BPO landscape to more senior positions. As the president of a company that provides outsourced sales consultants, I believe this adoption shift primarily comes down to the need for agility, connectivity and cost-containment.
Because businesses of all sizes, even smaller local businesses, now operate in a global environment, agility is a top priority. With competition as close as a few web clicks away, businesses must be responsive to the changing needs and expectations of their customers and prospects. When they quickly locate and engage a variety of service providers, businesses can make it easier to respond to changing market needs.
The advancement and integration of technology platforms has changed the way businesses interact and fulfill service obligations. The near-universal availability of connectivity and “cloud-based” data makes outsourced business processes accessible around the globe.
The reduction of logistical and geographical barriers has also helped reduce the cost of outsourcing business processes. Further cost reductions become possible when businesses largely eliminate the physical overhead of maintaining staff, office space and equipment.
Combined, these drivers have fueled the adoption of executive and managerial-level BPO, including financial operations, sales leadership and management, information and data technology, e-commerce front ends and fulfillment, and human resources management. Indeed, most business operations can now be outsourced to some degree.
Benefits Of Business Process Outsourcing
The drivers noted above can also be seen as benefits of business process outsourcing. But other benefits have also emerged as catalysts for BPO adoption:
Currency Of Technology
When businesses outsource, the service provider can largely bear the cost of maintaining current technology, including software and communications equipment, and they leverage that cost over multiple clients.
Expertise And Specialization
Businesses that choose BPO can stay on the leading edge with top talent without bearing the full brunt of overhead and embedded costs for recruiting, training and certification, and onboarding.
Smaller businesses can maintain room in their budgets by engaging the services of outsourced business process consultants on a fractional basis. That means they can acquire the necessary senior-level expertise on a part-time and lower-cost basis.
If performance falls short, it might be easier to migrate to new providers through business process outsourcing than to execute a performance management plan for internal staff, including terminations, recruiting, training and onboarding.
Outsourcing business processes empowers the company to maintain a strategic focus on its core competencies and competitive advantages. This can help the organization respond, adapt and lead within their market without being bogged down in supporting processes.
You can often more easily execute diversity initiatives and meet corporate goals when you utilize outsourced service providers from a different geographic area. It is important to note, however, that if outsourced workforce diversity is a key goal, that objective should be a prime factor in the selection and engagement of outsourced staff.
Are There Disadvantages To Outsourcing Business Processes?
Along with these benefits, there can be trade-offs. For example, despite the convenience of technology-based communications, distance-related challenges can arise. These can include cultural and communications barriers when you’re using globally remote service providers.
The general loss of oversight or control can also be a concern for company management. For smaller businesses that are used to micro-managing a close-knit workforce, this can prove to be a difficult operational philosophy shift.
Likewise, security concerns over the control and safekeeping of sensitive data can arise when outsourced services require remote access to confidential information. To mitigate data breaches, you might need to upgrade your security protocols; this, in turn, could negate a portion of the cost savings.
Tips For Choosing The Right BPO Provider
To choose the best outsourced provider, you should begin by asking key questions about your critical business problem: Is this a management or leadership issue? Will this problem benefit from an outsider’s experience and big-picture perspective, or is it more internal in nature? Is the problem (and its solution) likely to be short-term or long-term? What type of resource will the budget allow?
Naturally, your answers will guide the type of BPO engagement you need. If leadership — or both leadership and management — is a primary concern, your outsourced solution provider should bring a proven background in the area you need help with and execute a fresh vision. If your budget is tight, consider a fractional outsourced provider or consultant; with a fractional provider, you can engage a highly-skilled consultant part-time each week or for a shorter overall project duration.
Once you’ve defined your need, begin your search. Ask associates for referrals. Turn to professional industry groups or associations to find respected or certified providers. Do online research, too, by seeking thought leaders with published articles and demonstrated success. If you’ve done your homework, you’ll find a good fit for your needs, goals and company values.
The Future Of BPO
A report by global market research firm Technavio notes that “beneficial aspects of BPO services are driving the business process outsourcing market growth …” at an expected “…CAGR [compound annual growth rate] of over 7%” between 2020 and 2024. The report summary further notes that “the business process outsourcing market size has the potential to grow by US$76.90 billion during 2020–2024” and that its market growth momentum could accelerate.
Therefore, thanks to its many benefits and ease of access, I believe business process outsourcing is here to stay and will be adopted by businesses of all sizes.