Business process outsourcing (BPO) is the delegation of one or more IT-intensive business processes to an external provider who, in turn, owns, administers, and manages the selected processes based on defined and measurable performance metrics. This Gartner definition identifies the main elements and also evidences the existence of BPO risks.
In this article, we present an introduction to BPO, with concrete examples, the typical benefits to be gained, as well as the risks faced and how to mitigate them.
Concrete examples of BPO
In general, BPO initiatives can be classified into two categories:
- Horizontal ones, which are applicable to a large number of different industries.
- A concrete example could be outsourcing the process of hiring people.
- An external company is hired, specialized in search, selection and onboarding of new employees.
- The whole process is carried out by a team of people external to the company, who initiate the process, carry out the searches, study the resumes, conduct the interviews, run the necessary tests, etc.
- Once the person has been chosen, they are also in charge of negotiating the working conditions, signing contracts, agreements, etc.
- Finally, they can also take care of onboarding, providing the necessary equipment, training, etc.
- At the end of the outsourced process, the result is a new employee, trained and operational in the workplace.
- Verticals, which require specific knowledge of a particular industry.
- A concrete example could be outsourcing the technical support of a software product to end customers.
- An external company, specialized in the use of that particular software, is hired. The company provides a help desk with trained people.
- The whole process of receiving queries and problems, their study, resolution, response and documentation, is performed by a team of people external to the company.
- At the end of the outsourced process, the result is a customer who has been served with specific software queries (and who is expected to be satisfied with that service).
Benefits of BPO
Some of the most common benefits of BPO are:
- Cost reduction. Hiring a company specialized in this service can reduce the associated costs.
- Improve results in non-core functions. Related to the previous point, having people specialized in a task can improve its effectiveness and efficiency.
- Ability to focus on the core of the business. Some processes are lateral to the core of the company’s operation, so outsourcing them avoids losing focus.
- Facilitate coverage of different time zones and regions, hiring companies that can provide people in different countries.
- Faster time to solve a specific problem, since instead of developing in-house capabilities, a company that already has them is hired.
- Improve or solve communication problems, since the entire team is hired to handle the outsourced process from start to finish.
The top three BPO risks identified in this interesting article from the University of North Carolina are:
- The hidden costs of outsourcing.
- The potential impact on customer satisfaction.
- The loss of visibility and control of processes.
Hidden costs are a relevant risk, which in many opportunities is not taken into consideration when evaluating the BPO initiative. Many times, informal or superficial analysis of the subject, yields very promising initial results, with cost savings and efficiency improvements. But then, when the service starts to be provided, unforeseen events, additional resources needed, need for more hours, etc., appear.
The impact on customer satisfaction is perhaps the risk that is most common to identify and try to mitigate. It is difficult to hide from the customer that you are dealing with a person who is in another country, and who may not share your customs, language, way of expressing yourself, etc. This risk can be mitigated with significant training and proper localization of outsourcing centers, which of course, can lead to cost overruns (and we return to the previous point).
The last point, which is the loss of process visibility and control, is a risk that is difficult to mitigate without the right tools. The only long-term solution is to have formal business process management tools (BPM – Business Process Management), which we will go into in more detail below.
Flokzu BPM mitigates visibility and control risks
For the last major risk identified (loss of visibility and control of processes), having a BPM Suite allows to mitigate it completely. This is because:
- The BPM tool allows the formal modeling of the process, in the standard BPMN notation. This is key, as it ensures that the process to be executed by the outsourced company is exactly the process we want to execute.
- In addition, the BPM engine, as it executes the processes, will generate audit trails, which will allow an auditor to analyze past executions, detect deviations and introduce corrections.
- Finally, having KPI’s (Key Performance Indicators) provides the necessary visibility, both in real time and historically, for the execution of the outsourced processes.
In short, BPO can be a great alternative for several situations. However, it induces some risks that need to be managed. One of the main ones, which is the lack of control and visibility over the outsourced processes, can be mitigated by using Flokzu BPM for their definition and execution.