What is business process outsourcing (BPO), How it functions?
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BPO is the process of hiring another company for its services for your company.
BPO is distinct from information technology (IT) outsourcing, which focuses on hiring a third-party company or service provider to perform IT-related activities, such as application management and application development, data center operations, or testing and quality assurance.
In the beginning, BPO was only consisted of outsourcing payroll processes. But as the market demand changes it grew to include employee benefits management. Now it holds a number of functions that are considered "non-core" to the primary business strategy.
These days it is very usual for organizations to outsource financial, administration (F&A) processes, human resources (HR) functions, call center and customer chat support service activities as well as accounting and payroll processes.
These BPO deals commonly involve multi-year contracts that can run into hundreds of millions of dollars. during this process the people performing the work directly for the client/firm are transferred and become employees for the service provider. Dominant outsourcing service providers in the BPO fields include US companies Hewitt Associates and IBM as well as European and Asian companies Capgemini, Genpact, Wipro and amongst the list Beep technologies.
Mainly this process of BPO involve offshoring -- preferably companies based in another country -- to provide the services package. These days Pakistan is favorite for American and European clients/firms for BPO activities as the country distinctly developing in IT industry.
BPO is also referred to as ITES -- information technology-enabled services. As many business processes include some form of automation, IT "enables" these services to be performed.
An offshoot of BPO is KPO -- knowledge process outsourcing. KPO includes those activities that require greater skill, knowledge, education and expertise to handle. For example, whereas an insurance company might outsource data entry of its claims forms as part of a BPO initiative, it may also choose to use a KPO service provider to evaluate new insurance applications based on a set of criteria or business rules; this work would require the efforts of a more knowledgeable set of workers than the data entry would. The current definition of KPO encompasses R&D, product development and legal e-discovery, as well as a number of other business functions.
Also coming into use is the term BTO -- business transformation outsourcing. This refers to the idea of having service providers contribute to the effort of transforming a business into a leaner, more dynamic, agile and flexible operation.