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Business Process Outsourcing: Focus on Your Expertise

by Aaron Nelson on January 15, 2015

Business Process Outsourcing

The philosophy behind business process outsourcing is simple and elegant. As famed former General Electric CEO Jack Welch once put it, BPO is ultimately about “understanding where your real value added is and putting your best people and resources behind that.”

Outsourcing is perhaps the most significant and transformative business concept of the new millennium. Though the practice of using outside firms to handle work normally performed within a company has existed in some form since at least the Industrial Revolution, it was first formally identified as a business strategy in 1989. Offshore outsourcing exploded around the turn of the century as advances in technology and industrialization of underdeveloped countries made it an appealing and cost-effective prospect for businesses feeling the heat from the economic crises of the decade.

Business Process Outsourcing: A Flexible Solution

Once outsourcing became accepted as a routine aspect of modern business, derivatives and evolutions of the idea began to appear. Spinoff concepts like nearshoring, crowdsourcing, and multisourcing have garnered a lot of buzz in recent years, and one particular offshoot is skyrocketing in popularity as businesses come to understand the benefits it can bring.

Business Process Outsourcing (BPO) is simple in theory. Outsourcing began with manufacturing firms contracting out large segments on their supply chains or even their entire manufacturing process. BPO, conversely, contracts out the operations and responsibilities of specific business processes that are essential but ultimately unrelated to their core product or practice. These processes include both internal business functions like accounting, IT, finance, and human resources as well as customer-related services such as contact centers. By outsourcing these practices, your company can devote more focus and resources to its principal function instead of wasting time, energy, and manpower on the minutiae of running a business.

Enhance Your Core Competencies by Streamlining Your Business

The primary benefit of BPO is the strengthened focus on your core competencies. You and your key employees will have more time and resources to improve your primary business. As a direct result, by focusing directly on your core activities, your business’s efficiency and productivity is likely to increase. Further bolstering your bottom line, BPO can save your company money by enabling you to function with a smaller team. Efficiency gains from a streamlined process combined with the reduced labor costs of a leaner, tightly-knit team can generate anywhere from 20 to 40 percent savings.

Another major upside of BPO is an increase in organizational flexibility. Most BPO services are offered on a fee-for-service basis, which will allow your business to discard the fixed costs of internal business functions in favor of a more elastic variable cost structure. You’ll pay only for the services you need when you need them, allowing your business to be more equipped to respond to developments both foreseen and unexpected. Instead of investing in business bottlenecks and large capital expenditures for equipment or talent, BPO lets you use those resources for growth and expansion.

A recent trend in BPO engagements are smaller, shorter contracts that split the work among several specialist providers, placing a higher value on expertise and efficiency than simply the lowest price. Many business owners are expected to be proficient in a broad spectrum of business practices, most of which they simply can’t devote the time and resources to properly master. A BPO vendor will likely be as knowledgeable about the business process they specialize in as you are about your core business activity. Outsourcing these functions can result in better and more effective performance than any attempts to do so internally. BPO can provide your business a competitive edge against the established in-house support services maintained by larger companies, giving you access to the same economies of scale, efficiency, and expertise that could take decades to amass.

The BPO Boom

Over the last decade, the BPO industry has exploded in emerging markets. India, once dominant with a 5-6 percent share of the global BPO industry and revenues of $10.9 billion from offshore BPO alone, is predicted to take second place to the Philippines in 2015. After growing 20 percent in 2012, the Philippine BPO industry is on track to gross upwards of $25 billion by the year’s end. Countries such as China and South Africa are also seeing an increased market share, and Eastern Europe has also begun to emerge as a BPO hotspot. BPO is here to stay, and any business looking to expand into the international marketplace should at least consider it as a way to remain competitive in the global economy.

At D&S Global Solutions, we recognize the value of your business and the time and effort you’ve invested in it. Our comprehensive expertise, innovative resources, and customizable client-first solutions can offer your business the freedom it needs to focus on its core mission.

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Lonnie Larson, CEO, D&S Global Solutions