What is Business Process Outsourcing? Advantages, Disadvantages

Business Process Outsourcing (BPO) is a kind of outsourcing in which the company outsources a specific activity/process related to its business to a third party service provider. The concept of Business Process Outsourcing (BPO) comes from the fact that the companies want to concentrate on the core competency and can outsource other important but non core processes to third party service providers. Knowledge process outsourcing (KPO) and Legal Process Outsourcing (LPO) are now emerging as important subsets of BPO.

Thus, Business process outsourcing, or BPO, is a business practice in which one organization hires another company to perform a task (i.e., process) that the hiring organization requires for its own business to successfully operate.

Advantages of Business Process Outsourcing

  • Focus on Core Competency.
  • Reduction in Costs.
  • Increase in efficiency of business process.
  • More Employment generation.
  • Focused teams solving problems.
  • Business process speed and efficiency are enhanced.
  • Employees may invest more time in core business strategies to bolster competitive advantage and enhance value chain engagement.
  • Organizational growth increases when capital resource and asset expenditures are not required, which averts problematic investment returns.
  • Organizations are not required to invest in unrelated primary business strategy assets, facilitating a shift in focus to specific competencies.

Disadvantages of Business Process Outsourcing

  • Over dependence on third party vendors.
  • Lack of complete knowledge of product/service offering leading to customer dissatisfaction.
  • Less focus on quality because of lower cost offerings through outsourcing.
  • Data privacy breaches

Examples of Business Process Outsourcing

There are many companies are using many outsourcing their requirements for improving their business successfully. In that some examples are:

  • Call Center Outsourcing.
  • Knowledge Process Outsourcing (KPO).
  • Data Entry Outsourcing.
  • Financial Services Outsourcing.