Globalization dictates innovation and alternative ways of cooperation. The Business Process Outsourcing (BPO) is the precise example of todays’ model in the environment of business.
Business process outsourcing is a commercial approach of subcontracting external parties to hand over certain services for a company.
In the beginning, this practice was broadly used by the manufacturing industry, e.g. soft drink industries, but now it finds a wider application. In 2019, the global market size of BPOs’ reached the value of 92.5 billion U.S. dollars. The inclinations predict a positive increase, since compared to the previous year (2018) the market size has increased by seven billion U.S.
– The contracting party is the Company interested in a particular service.
– The contracted party is either a person or another company.
– The latter has an entire staff specialized in that service.
– Services offered might be of an internal or external nature.
Whether a Company is new or operating for years on the market, it might not have all the human resources to cover all the maintenance for the business. Reasons might be of different nature: the actual financial situation, the urgent need for a specific service- not yet offered by the company, or just because such a service is not yet part of the brands’ identity in the market. Anyhow, the reason is what matters the least. Important to know is that BPO facilitates business affairs. How?
At first, the company identifies its needs for a certain service. As mentioned before, it might have an internal or customer- related nature:
- Internal outsources example: accounting, HR, IT functions.
- Customer- related example: call centers.
The contracted party might perform only a specific task (e.g. conducts only the interviewing process for the new recruiters), or fully provide the outsourced service (e.g. announces the vacancies, conducts the interviews, tracks the working hours, calculates and distributes the payment).
- Customer services
- IT management
- Digital marketing
- Legal Research
- Data collection
- Data analytic
Another segmentation is made based on BPOs’ location:
- Domestic outsourcing: the contracted party is located in the same country as the contracting company.
- Neighbor outsourcing: the contracted party is located in a neighboring country to the contracting company’s country.
- Abroad outsourcing: the parties are in two different countries (unlike the above situations).
In business terms, the abroad outsourcing might also be found as ‘offshore outsourcing’. The concept remains the same.
Call Centers are the typical example of BPO. A company in Italy might outsource its customer service to a call center in Albania. The same company might hire a Principal Investigator (PI) in Kosovo to do the data collection, and another one in Hungary to analyze them.
A construction company in Tirana might subcontract a Real Estate Office (also in Tirana) to undertake its marketing and sell all the firms’ products.
BPO provides quite a few facilities.
- Tax saving. A company might decide to hire services from a person/ company placed in a country with lower income taxes and nominal labor costs.
- Cost reduction. Constituting an entire department might be expensive. It might require investment on equipment, office expansion, salaries for the employees and new recruiters for the process of HR. Instead, a company finds it easier to outsource certain tasks to a fully- equipped existing company, which will be paid for the handed over service.
- A subcontractor, by being specialized on its work, helps the company to be more focused on its position in the market, rather than concerning oneself for the transferred service.
- A high- pitched performance is reached thus, since the company is more focused on its strongest features.
- Flexibility on business- doing.
- Promotes innovation. The contracting person/ company might use the latest digital innovations to provide a certain service.
- Increase of market reach. This is reached by offshore sourcing.
While reading this article, to you – as a business – might have crossed in mind the idea of outsourcing. While outsourcing is beneficial and efficient as described above, take into consideration the other side of the coin – outsourcing drawbacks. In any case, make sure to:
- Scrutinize your business needs.
- Guardedly calculate the cost of a new employee-to-the subcontracting party.
- Always draft a contract and a NDA.
- Check if there are hidden costs.
- Verify if any business cultural barrier might affect the contractual relationship.
BPO might be a smart choice for the business. Regardless of the pros and cons as to your business needs, you can always refer to Legit for any legal solution to your business.