Business Process Outsourcing

Business Process Outsourcing (BPO) can be described as the trend of relocating some business functions to either self-owned or third-party service providers. This trend began with manufacturing companies outsourcing services such as HR and distribution, but it has since expanded and become very dynamic. Currently business functions can be outsourced from service providers typically in low-cost locations with the higher end more skilled BPO functions are also called Knowledge Process Outsourcing. Knowledge Process Outsourcing (KPO) is gaining popularity fast in the market segments financial analysis, market research and pharmaceuticals.

BPO that is contracted outside a company's own country is called offshore outsourcing; while that is contracted to a company's neighboring country is nearshore outsourcing. With the advancements in ICT, the BPO cross-border services have grown.

BPO is often divided into two categories:
1.Back office outsourcing which includes internal business functions such as billing or purchasing.
2.Front office outsourcing, which includes customer-related services such as marketing or technical support services.

Trends in BPO services
The trends in the BPO service industry have been positive over the past few decades. Reasons for this trend include:

1.Organizations are striving to become more efficient
2.Organizations are focusing on core business and outsourcing other functions
3.To be more competitive and create a strategic advantage for the organization.
4.Outsourcing enables a company to create cost reduction mechanisms.
5.Outsourcing helps the organization to increase productivity and institute innovative capabilities.

Key requirements for the BPO service provider
1.Reliable network and bandwidth 
2.Reliable Power source
3.Highly trained IT support
4.High level network monitoring
5.Security of data and privacy of client information
6.Physical Security of IT & equipment infrastructure
7.Crucial skills in human resources involving
a.Recruiting the proper staff
b.Training and development
c.Monitoring the productivity of staff

Selecting a BPO service or sector
The BPO services are very diverse and broad and it is advised to focus on one service or one sector within BPO.

1.Identify the strengths of your company that can be offered through BPO
2.Focus on the skills of your employees.
3.Identify a core competence that is not too broad. Specific expertise and the high quality of the service that is provided are becoming more and more important.
4.Market demand for the service is also important for the service provider. Before investing in the sector, it is vital to analyse the market thoroughly.

Probability to offshore a specific service
Some processes or services are considered too sensitive or too close to the core activities of the company to offshore or nearshore in some countries.

Other services, such as call/contact centres and web services, are often language and culture dependent. These factors influence the propensity to offshore / nearshore a specific service and should therefore be thoroughly studied.

The BPO Market Structure
The country currently leading in BPO offshore outsourcing is India. Other locations like Eastern Europe, Philippines, Morocco, Egypt and South Africa have emerged to take a share of the market. China is also trying to grow from a very small base in this industry.

Region/ Country200620072011Annual Growth Rate
Global demand202,300217,800323,60010%
NORTH AMERICA119,700127,500186,5009%
EUROPE, MIDEAST, ASIA (EMEA)60,70065,90097,600 10%
Other EMEA countries19,95021,80033,30011%
Asia Pacific14,00015,70026,00013%
Latin America8,0008,70013,60011%

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