Business Process Outsourcing (BPO) & Outsourcing IT Offshore

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Business Process Outsourcing occurs when an organization turns over the management and optimization of a business function, such as accounts payable or purchasing, to a third party that conducts the activity based on a set of predetermined performance metrics.

Offshore IT Outsourcing firms and other offshore outsourcing service providers are generally familiar with the term business process outsourcing (BPO), but might still go under some scrutiny to know how to distinguish it from other types of outsourcing.

Generally, BPO services may include both IT management and business functions; yet the approach is basically about rotating over functions such as payroll, accounting, billing or even real estate management to a third party.

Even these business processes may depend to an extent on IT, but they are separate functions from core IT operations, such as e-commerce solutions development or application development, etc.

Varied Skill Sets

The skill sets necessary and available to manage the core IT functions are different from those to manage business processes. An IT outsourcer focuses on to a great extent on the Technical Infrastructure, Quality Assurance and the Offshore Outsourcing model that the vendor follows, whereas a BPO vendor manages people and processes.

Vendors need to concentrate strongly on the employee transitioning when they manage a firm's Outsourced business processes. The same holds true for the customer company.

Companies need to recognize their core competencies as compared to activities that could be handled more efficiently by a third party. For example, back-office functions such as payroll or accounts receivables aren't likely to "make or break" a company, so it might make sense to Outsource them if someone else can support them more effectively.

Mark Hodges, vice president of corporate development at Exult, says that Global 500 firms spend between $50 million and $100 million per year in a typical BPO deal.

Savings Unquantified!!!

Quantifying savings from BPO deals can be difficult. More often, companies outsource to streamline processes, save time or leverage the strengths of third-party specialists. If a company does find savings, they're usually in the 10% to 15% range.

Small and medium-sized companies generally choose to outsource business processes to cut costs and build a function like accounts receivables in a short time. In short, they need a back office cheaply and fast in the form of an Offshore IT Outsourcing partner.

Comparatively large companies choose BPO to improve their efficiencies. Certain trends may prompt firms within a given industry to outsource business processes. For instance, consolidation within the banking industry may make it easier for a bank to outsource its human resources activities rather than integrate data from the parties with which it merged or acquired.