The difference between BPO and outsourcing:
In contrast to “normal” outsourcing, BPO refers not only to support but also to primary value-added chains. This is alternatively referred to as the “application service providing”, or an application server. The term BPO is therefore spongy and is understood rather as a holistic and not exactly distinguishable outsourcing business model. BPO can be recognized mainly by two constitutive features:
- Orientation of the BPO service provider to strategic objectives (e.g., optimization of the entrepreneurial service level or increase of the equity value)
- The individual business relationship between companies and service providers through appropriately adapted services.
An example of this is the outsourcing of the company’s call center projects to a specialized service company. With decreasing relevance, it can be said that a company is more likely to need a BPO partner if:
- One or complete business areas can be assigned to an external service provider
- This service provider assumes full responsibility for the process
- The service provider takes over the underlying infrastructure and applications
- The service provider takes over or places employees
- The concluded contract extends over a longer period
- Objectives of Business Process Outsourcing
The main focus of the BPO is to focus on business relevance, in particular, to focus on core business in order to maximize profits through efficiency gains. In addition, the risk for the outsourced processes is transferred to BPO Projects provider. For the service provider, of course, the corresponding processes are the core processes, which ultimately also leads to an efficiency increase by scalene effects — this creates a classic win-win situation for both companies. BPO industry can be beneficial for those who are looking for “Part time jobs” or “Work from home”, they can work in various domestic and international BPO projects.
It is sensible to outsource business processes that can be well-defined, that is to say, that the processes are very similar in all companies within these processes. Examples include the dispatch of goods, the call center outsourcing and the accountancy, as well as pay statements. Before the decision to bring a BPO partner on board, the company should ask:
What processes should be outsourced?
- Does the offer of the BPO service provider correspond to company policy?
- Is a more centralized or decentralized form of the organization more meaningful?
- Does the BPO service provider have sufficient human, technical and infrastructural competence to handle the order properly?
- What is the temporal and financial structure of the contractual relationship?
- Is it possible to create an additional balance of interests between companies and BPO service providers by shifting additional process responsibility?
The cost reduction by BPO can amount to more than 30 percent, according to a study by Siemens Business Services. This is so because the company can convert internal fixed costs to external, variable external costs from an accounting point of view. As a result, the company improves its profit and loss account while also increasing its financial freedom.
The three basic types of BPO:
The BPO methodology can be divided into three basic models, which are briefly described below.
Cooperation via a company-internal SSC
The shared service center (SSC) plays a central role, meaning a company-owned BPO company within the company. Within the framework of general corporate guidelines, the SSC largely acts independently. It takes care of the central administration of company-internal service processes, whereby the individual business sectors share the use and costs of the SSC.
Joint venture between companies and service providers
In this cooperative model, the core competencies and thus also the entrepreneurial risk between companies and service providers are divided according to their abilities. The advantage of this is that the respective competences are used optimally. The disadvantage, however, those partners often blame each other for problems. This is mainly due to the fact that a clear distinction between individual competencies is not always possible. The advantage of this type of cooperation is, on the other hand, that BPO service providers can use SSC significantly more effectively than companies. A competent BPO service provider, therefore, has the necessary human capital as well as the required infrastructure and is well informed about the process processes.
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