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Business process outsourcing (BPO) is the practice of sub-contracting an organisation to perform the essential functions or tasks of your company. Companies outsource some of their processes because they may not be a part of their core value proposition. In such a scenario, the company decides to outsource it to an external entity that has the necessary means and experience rather than hiring a team and spending on gaining expertise on that critical business process.
Businesses are now outsourcing their processes to other countries that offer skilled labour at lower rates. This is called ‘offshore outsourcing.’ For example, a US telecom company may outsource its process and solution designing to an Indian IT company for its lower rates and competitive, skilled labour. Outsourcing these processes results in better efficiency, cost savings, and results.
Business process outsourcing started with the manufacturing sector, but now it spans multiple industries. These include legal, finance and accounting, healthcare, software, and more, with added benefits such as:
Business process outsourcing works on two types of contracts: time and material and fixed-price contracts. In the first category, the company pays the sub-contractor for its time and skill. In the second category, the company agrees and pays upfront for the specified work. Common processes to outsource are:
The outsourcing models depend on the location of the sub-contractor or the service provider.
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