The Rise of Business Process Outsourcing

The majority of companies around the world are turning to business process outsourcing or BPO in order to combat escalating cost and performance costs. Outsourcing allows these companies to reduce costs, improve quality, free business resources and management attention. They can also become more agile in responding to new opportunities and changes in market volumes through business process outsourcing.

However, the practice of entrusting a business process to an external party carries a degree of risk. Nevertheless, it is possible to minimize these risks through effective organizational preparation and relationship management. That is why some corporations outsource only “non-core” processes like the hiring of an online marketer. These processes include support functions such as HR and IT, or commodity functions such as transportation and logistics.

The common practice for most companies is to keep processes that deploy a company’s special capabilities and differentiate it in the market. However, many companies are also rethinking what processes are truly “core” due to the current business process outsourcing option. Companies are usually motivated to try BPO because it offers flexibility, reduced costs, and improved focus.

A company will be able to scale activities up or down quickly, and to respond to unanticipated changes or new opportunities through outsourcing. Shifting strategies, revising or even canceling a service provider contract can often be less traumatic than divesting or restructuring internal resources.

Outsourcing also allows a company to focus its internal resources and management attention on the core business processes that deliver competitive differentiation. This is a better option than struggling to do too many things well. Offshore service providers can also manage and execute processes at a reduced cost because they are often better positioned to capture economies of scale and leverage expertise. For instance, a company may be able to reduce labor costs by acquiring the services of AOV Outsourcing service or other outsourcing services.

However, there are also some things that need to be considered when it comes to making BPO work for any company. A company should be clear on its objectives and become coherent about the strategy for achieving them. A company should also be adept at choosing partners and structuring and managing relationships. Nevertheless, it remains true that even though more companies are engaging in BPO only a few companies have mastered all of these challenges.

Nobody can deny that outsourcing has gained momentum over the last two decades despite the erratic BPO track record of many companies. Many companies today have migrated to business models that incorporate outsourcing as a fundamental business practice. It is easy to predict that the global sourcing of administrative and information-based processes is only going to increase due to decreasing variable costs of communication, rapid increase of bandwidth and the rise of standards-based process and technology integration.

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