May 18, 2024
Business Process Outsourcing

Business Process Outsourcing: An overview


Business Process Outsourcing or BPO has emerged as one of the most popular business strategies over the past few decades. Many large corporations and small businesses alike have leveraged BPO to enhance operational efficiencies and focus on their core competencies. This article aims to provide a comprehensive overview of the Business Process Outsourcing industry – including its evolution, key processes outsourced, business benefits and future outlook.

Emergence and evolution of the BPO sector

The origins of BPO can be traced back to the late 1970s and early 1980s when large multinationals started outsourcing some of their peripheral activities like data entry and back-office operations to third party vendors. However, it was during the 1990s that the BPO industry truly began taking shape with technological advancements reducing communication costs substantially. More functions like payroll processing, customer support, technical support started getting outsourced globally.

India emerged as one of the leading BPO destinations in the late 1990s and witnessed tremendous growth over the next decade due to availability of low-cost skilled workforce. Today, the global BPO industry is estimated to be worth over $300 billion with robust annual growth rates. Key sectors driving this growth include finance & accounting, human resources, knowledge processes, healthcare and education among others. The industry has also evolved from basic data entry jobs to more knowledge-based functions involving analytics, research and technical support in recent years.

Business Process Outsourcing

Some of the most commonly outsourced business processes include finance & accounting, human resource management, customer relationship management, procurement, supply chain management and knowledge processes.

Finance & accounting BPO includes services like accounts payable/receivable, general ledger, financial reporting and transaction processing which are outsourced to achieve cost savings.

Human resource management services like recruitment & payroll processing, benefits administration and training & development are also widely outsourced. This allows organizations to focus on strategic HR initiatives.

Customer relationship management Business Process Outsourcing of front-end and back-end customer support operations including lead management, trouble ticketing and resolving customer queries across multiple channels.

Procurement BPO involves supplier management, sourcing, purchase order processing and materials planning to drive efficiencies in procurement life cycle.

Supply chain management outsourcing includes demand forecasting, order fulfilment, inventory management, transportation & logistics to streamline supply chain operations.

Knowledge processes outsourcing encompasses research and analysis, content development, data mining and engineering services to leverage offshore talent pools and technologies.

Benefits of BPO

There are significant benefits that organizations accrue by leveraging Business Process Outsourcing which include:

– Cost savings up to 15-30% on outsourced processes by leveraging lower international wage rates.

– Access to world-class expertise and technologies which might not be available in-house otherwise.

– Variable cost structure and operational expenditure model instead of large capital investments.

– Allows organizations to focus on core competencies by transferring non-core support processes.

– Improved process efficiencies, standardization and adherence to best practices by BPO specialists.

– Flexible scalability of business operations both during high and low volume cycles.

– Around the clock service delivery through global delivery centers to cover all time-zones.

Future outlook

Going forward, Business Process Outsourcing industry is all set for robust 5-10% annual growth driven by increasing adoption across new sectors and processes. Some key trends include greater outsourcing of knowledge processes, Industry 4.0 technologies revolutionizing manufacturing BPO, growing demand from small and medium enterprises and BPO-as-a-Service delivery models such as outsourcing specific functions on an outcome-based pricing model. The BPO marketplace is also witnessing greater convergence of services across verticals with increased requirement for multi-process capabilities. India and Philippines will continue leading the global BPO landscape; however other emerging destinations in Latin America, Eastern Europe and Asia are strengthening their value proposition as well. Overall, BPO will remain integral to business operations helping companies unlock newer opportunities for growth.

1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it