The business industry has seen an increasing number of companies that resort to what is called business process outsourcing. Be them offshore, onshore or near shore, these types of 3rd party companies that provide outsourcing services cover different areas of the industry. Front desk, back office, or account administration are just some of the areas that BPO covers. And we’ll be going over these most important aspects, as well as its definition and main types.
The Main Types of Business Process Outsourcing
Business process outsourcing represents the practice of contracting the operations and responsibilities of a particular business process operations to a 3rd party service provider. In other words, it represents the subcontracting of A operations from company X to the service provider Y. This is done so taking into account aspects such as costs and labor capacity when a company starts expanding beyond its local area (be it regional or national).
There are three main types of business process outsourcing from a geographical point of view. These are offshore, near shore and onshore outsourcing. Think of it as an offshore bank account. Each of these types of outsourcing has its benefits. Depending on the costs of operations, some businesses will opt for offshore outsourcing because it implies lower costs and a higher profit. Lower costs from a labor point of view. Higher profit is a direct consequence.
Nearshore outsourcing means that a company subcontracts a 3rd party service provider near its mainland HQ, which ultimately means, again, lower costs. On-shore outsourcing means that some of its operations are handed to a service provider within the same country.
As far as service is concerned, there are two main types of services that business process outsourcing presupposes. These are back office outsourcing and front office outsourcing.
The first category includes internal business functions: billing, purchasing, accounts payable functions and HR services. Front office business process outsourcing mainly has to do with customer interaction. Think of phone conversations, emailing, faxing, telemarketing, appointment scheduling etc.
The second category includes customer-related services such as marketing or customer support. Back office mainly deals with data entry & management, surveying, QA (quality assurance) and accounting or tech support. Such services can be provided by call centers mostly.
Vertical or Niche Outsourcing
From a third point of view, business process outsourcing can be either vertical or niche. This means to say that it can be a multiple-department outsourcing process, or a specialized, niche department outsourcing.
For example, a business process outsourcing company can provide either multiple types of outsourcing services: financing, banking, insurance services across multiple industries. This would mean to say vertical.
The niche would mean to say that companies can provide inbound call center support, email support, chat support, data entry, forms processing, or scanning services that gear towards banking and financial services customers but not to another industry, but within a specific industry department.
As such, these are the main types of business process outsourcing, each of them has its benefits and downsides. Either one will help a company handle one or multiple of its operations for a more effective management of operations.
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