What does BPO do?

Business Process Outsourcing refers to an enterprise examining business processes and corresponding functional departments, outsourcing these processes or functions to suppliers, and having the suppliers reorganize these processes.

BPO transfers all functions of functional departments (such as transaction processing, policy services, claims management, human resources, and finance) to suppliers. The outsourcing provider manages these functions in its own system under a service agreement. Some BPO contracts pay based on service levels, tying the supplier's revenue to business performance or cost savings.

BPO is to outsource part of the company's business, that is, to hand over some business that was originally handled internally to the company's external entities to complete. Therefore, the determination of outsourcing business and external contractors involves a matter of trade-off and selection.

The relationship between companies operating in the BPO model and external contractors is a "long-term contract". That is a long-term and stable relationship with clear responsibilities, rights and interests.

The starting point and ultimate goal of realizing BPO operation is only one, which is to increase the value of the company's stock, that is, to increase profits.

In one sense, outsourcing has been around for decades - particularly in the manufacturing sector, as a means of reducing costs. The earliest attempts at outsourcing activities were mainly carried out by large enterprises, focusing on the field of information technology services.

With advances in network technology, high-speed data networks, and increased bandwidth capabilities, the scope of outsourcing has expanded to include a range of management tasks, so that companies can "offload" entire business functions.

BPO services are provided in areas such as finance, insurance, healthcare, human resources, mortgage, credit cards, asset management, customer care, and sales and marketing.

For specific BPO services, the complexity varies, ranging from basic management functions such as data entry or billing to more complex matters that require decision-making and problem-solving capabilities. As transaction complexity increases, so does the skill level required to provide BPO services.

Advantages

Global labor arbitrage can result in significant savings from lower international labor costs, which may be the primary motivation for offshoring. Economies of scale and cost savings from specialization can also incentivize outsourcing, even if not offshoring. Since 2015, indirect revenue gains have increasingly become an additional driver.

Speed ??to market. For this purpose, a new process was developed: the “outsourced outsourcing process”. Detailed management of DuPont's CIO Cinda Holman's $4 billion, 10-year outsourcing contract with computer science firm Andersen Consulting to outsource the process to avoid 'inventing' it if we did it internally. ’?A term that later developed is middle-sourcing.

Outsourcing can provide greater budget flexibility and control by allowing organizations to pay for the services and business functions they need, when they need them. It is often thought to reduce hiring and training of professionals, provide expertise, and reduce capital, operating expenses [34] and risks.

“Do what you do best and outsource the rest” has become an internationally recognized business slogan, first “coined and developed” by management consultant Peter Drucker in the 1990s. The slogan is primarily used to advocate outsourcing as a viable business strategy.

As early as 1989, Drucker began to explain the concept of "outsourcing" in his Wall Street Journal article titled "Selling the Mailroom."