Business process outsourcing, often known as BPO, is a form of subcontracting out various business-related activities to third-party providers. BPO, which stood for “Business Process Outsourcing,” originally referred only to manufacturing businesses such as soft drink manufacturers that outsourced substantial portions of their supply chains. BPO now includes the outsourcing of services as well. But, how can we know if BPO is the solution that our company needs?
- Understanding The Outsourcing Method
- Outsourcing Statistics
- Different Types of Outsourcing
- Subcontracting Vs. Outsourcing
- Outsourcing Goals and What it Offers
- Outsourcing & Globality Net
Understanding The Outsourcing Method
Outsourcing processes are becoming increasingly popular among both small and large businesses, especially as new and unique services are continuously made available in today’s always changing, fiercely competitive business world.
In essence, businesses apply outsourcing techniques in back and front office domains. The term “back-office BPO” refers to a company outsourcing its core business support activities such as accounting, payment processing, IT services, human resources, regulatory compliance, and quality assurance to external professionals who guarantee that the company functions effectively.
Customer-oriented services such as technical support, sales, and marketing are more typical in the front office than back-office BPO activities.
Outsourced service business process outsourcing is on the rise, as evidenced by the fact that the worldwide market value of outsourced services was $92.5 billion in 2019, up from $82.9 billion in 2018. And, more than half of all global outsourcing revenue was generated in the United States, at $62 billion in 2019. But, why is outsourcing on the climb? What advantages are there?
Many outsourcing firms are frequently attracted to it for the same reason that many organizations gravitate toward it: because it allows them more operational flexibility. Outsourcing non-core and administrative services allow businesses to reallocate time and resources to their core competencies, such as customer service and product leadership, which leads to competitive advantages over rivals in the market.
Outsourcing has several benefits. One of the most significant advantages is that it lowers costs. Also, performing a certain job function internally costs a specific amount. But thanks to outsourcing, these costs can be reduced by passing along the job to an external party, often in a less cost-intensive country, reducing the overall cost of performing that job function.
The company may devote more time and resources to its core business activities, which are vital to its success. Instead of administrative duties or other elements of running a firm that isn’t crucial, this can mean a firm is able to focus on these areas.
Outsourcing also helps with growth, particularly in global expansion. When a business decides to establish an overseas location or engage in international trade, utilizing an outsourcing firm that has experience in the local market and speaks the language is quite useful.
Outsourcing also allows companies to tap into cutting-edge technology solutions that they may not otherwise have access to. Outsourcing partners and firms are always working to enhance their processes by adopting the most state-of-the-art technologies and procedures.
Because the corporate income tax in the United States is one of the highest in the developed world, American firms may benefit from outsourcing activities to countries with lower income taxes and less costly labor forces as a viable cost-cutting strategy.
With the improvement of technology and business processes, outsourcing helps to increase efficiency and productivity while reducing time spent on data entry and manual work. It also allows businesses to quickly shift their resources when required, which is especially advantageous for those with a high number of transactions in a given period.
Different Types of Outsourcing
Outsourcing firms may be divided into three categories: local outsourcing, offshore outsourcing, and nearshore outsourcing.
- Local outsourcing is a company that is in the same country as your business.
- Offshore outsourcing is a company that is in another country.
- Nearshore outsourcing is a company that is in a country that is not too far from your country.
The variety of outsourcing solutions available to a firm is determined by whether it outsources its operations within or outside its country’s boundaries. For example, outsourcing can be defined as “offshore outsourcing” if the contract is sent to a country with political stability, reduced labor costs, and/or tax benefits. An example of offshore outsourcing is a firm based in the United States that hires an offshore outsourcing company in Singapore.
When an outsourcing project is sent to a neighboring country, it’s known as “nearshore outsourcing.” For example, if a business in the United States contracts with a Canada-based outsourcing firm, then this is treated as “nearshore outsourcing”.
A third alternative, known as “onshore outsourcing” or “domestic sourcing,” is when a company’s work is outsourced inside the company’s home country even if its vendor partners are in different cities or states.
And these three outsourcing options are possible thanks to its information technology-enabled services (ITES). Because of this, outsourcing heavily relies on technology/infrastructure that enables external companies to efficiently perform their roles.
Subcontracting Vs. Outsourcing
In reality, many business executives frequently conflate outsourcing and subcontracting; nevertheless, the two activities are rather distinct. The most significant distinctions are in terms of how much control a firm has over the work process and whether the task may have been completed in-house.
- Outsourcing is the practice of hiring outside specialists to complete work that was previously done internally by employees or contractors. It’s typically used in a business to decrease labor costs and involves many areas within the company.
- Subcontracting is when a firm hires another person or business to accomplish a specialized operation that it cannot fulfill itself. Subcontracting does not imply permanently assigning whole tasks or divisions throughout the company, and the work is performed on a contract basis.
Outsourcing, which is still a contentious topic today, was once considered a buzzword because of its increasing popularity in the late 20th century. Subcontracting vs. outsourcing became a point of contention as people struggled to define what constitutes subcontracting and what qualifies as true outsourcing.
The difference between outsourcing and subcontracting is subtle, but it’s crucial to understand them when companies deal with stakeholders and clients.
Outsourcing Goals and What It Offers
The main objective or goal is to decrease expenses, increase time, and concentrate on the company’s fundamental operations. How is this done? outsourcing is divided into two separate categories: front office and back office.
- Back-office BPO refers to the internal workings of a firm, such as a payroll, purchasing of goods, and billing.
- Front-office BPO focuses on the external activities each company has, such as marketing and customer service.
Outsourcing and GlobalityNet
At GlobalityNet, outsourcing solutions mean more than just remote workers or having them handle your business. It means a reduced overhead, more options in terms of availability (8 to 5 vs. 24×7) and the opportunity to hire experienced and motivated people to meet your company goals.
From accounting and supply chain to customer service and technical support, we can be that business process outsourcing secret sauce that you’ve been looking for to get your business to the next level.
At Globality Net, we offer three different types of outsourcing solutions for your business:
1. Accounting Outsourcing
Outsourcing your accounting team means you can focus on managing your business while we handle your books. GlobalityNet provides accounting services for small/midsize companies and CPA firms. From data entry to experienced accounting teams, we can help you solve your accounting needs.
2. Supply Chain Outsourcing
Supply chain remote solutions are a key step in optimizing your operational efforts and coordination. Outsourcing key functions such as releasing POs to follow-ups, expedites and other back-office tasks are just some of the things that our experienced and trained team members can do for you.
3. Customer Service Outsourcing
24×7 email, chat, text and/or phone support for your customers at a fraction of the cost. Our extraordinary remote customer service specialists are ready to join your team and enhance your prospects and/or clients’ customer experience.
Get started with us today